Market Overview

PVH Corp. Reports 2018 Second Quarter Revenue and EPS above Guidance and Raises Full Year Outlook

Share:
  • Second quarter revenue increased 13% (increased 11% on a constant
    currency basis) compared to the prior year period and exceeded guidance
  • Second quarter EPS exceeded guidance and was:
    • GAAP basis: $2.12 compared to guidance of $1.98 to $2.03
    • Non-GAAP basis: $2.18 compared to guidance of $2.05 to $2.10
  • Full year 2018 EPS outlook raised despite reduced foreign currency
    benefit:
    • GAAP basis: Raised to $8.96 to $9.01 from $8.81 to $8.91 previously
    • Non-GAAP basis: Raised to $9.20 to $9.25 from $9.05 to $9.15
      previously
    • The strengthening U.S. dollar lowered the estimated positive
      impact of foreign currency translation to $0.07 per share, from
      $0.12 previously

PVH Corp. (NYSE:PVH) reported 2018 second quarter results.

Non-GAAP Amounts:
Amounts stated to be on a non-GAAP basis
exclude the items that are described below under the heading "Non-GAAP
Exclusions." Amounts stated on a constant currency basis are also deemed
to be on a non-GAAP basis. Reconciliations of amounts on a GAAP basis to
amounts on a non-GAAP basis are presented later in this release and
identify and quantify all excluded items.

CEO Comments:
Commenting on these results, Emanuel Chirico,
Chairman and Chief Executive Officer, noted, "Our better than expected
second quarter revenue and earnings reflected continued broad-based
strength across our businesses and further underscored the momentum in
our global designer lifestyle brands, CALVIN KLEIN and TOMMY
HILFIGER
, and the power of our diversified business model."

Mr. Chirico continued, "We are increasingly evolving our business model
and investing across our brands, our people and our platforms, while
finding innovative ways to engage consumers. We have made great progress
in enhancing our consumer insights capabilities, increasing our efforts
around online and offline consumer experiences, and driving engagement
with the next generation of consumers. As we execute on our strategic
priorities, we believe that we can continue to grow our global
footprint, while delivering a sustainable trajectory of long-term growth
and stockholder value creation."

Mr. Chirico concluded, "We are increasing our revenue and earnings
guidance for the year, while continuing to take a prudent approach to
planning our business in the second half of the year, as we experience
increasing macroeconomic and geopolitical volatility around the world."

Second Quarter Business Review:
Due to the 53rd week in
2017, second quarter 2018 comparable store sales are more appropriately
compared with the thirteen week period ended August 6, 2017, instead of
the period ended July 30, 2017. All comparable store sales discussed in
this release are presented on this one week shifted basis.

Calvin Klein
Revenue in the Calvin
Klein business for the quarter increased 18% to $925 million (increased
16% on a constant currency basis) compared to the prior year period.
Calvin Klein International revenue increased 16% to $458 million
(increased 13% on a constant currency basis) compared to the prior year
period, driven by strong performance in Europe and Asia, including a 5%
increase in comparable store sales. Calvin Klein North America revenue
increased 19% to $467 million compared to the prior year period
primarily as a result of strong wholesale performance and a 2% increase
in comparable store sales.

Earnings before interest and taxes for the quarter increased to $105
million from $96 million in the prior year period. The earnings increase
was primarily attributable to the revenue increase noted above,
partially offset by the impact of aggressively clearing inventory in
connection with the Fall 2018 global denim relaunch.

Tommy Hilfiger
Revenue in the Tommy
Hilfiger business for the quarter increased 15% to $1.0 billion
(increased 13% on a constant currency basis) compared to the prior year
period. Tommy Hilfiger International revenue increased 20% to $592
million (increased 16% on a constant currency basis) compared to the
prior year period, driven by continued strong performance across all
regions and channels, including an 11% increase in comparable store
sales. Tommy Hilfiger North America revenue increased 9% to $437 million
compared to the prior year period, principally attributable to continued
strong performance in the wholesale business and a 5% increase in
comparable store sales.

Earnings before interest and taxes on a GAAP basis for the quarter
increased to $134 million from $91 million in the prior year period.
Included in earnings before interest and taxes for the current quarter
were costs of $7 million related to the April 2016 acquisition of the
55% interest in the Company's former Tommy Hilfiger joint venture in
China ("TH China") that it did not already own (the "TH China
acquisition"), consisting of noncash amortization of short-lived assets.
Included in earnings before interest and taxes for the prior year period
were costs of (i) $7 million related to the TH China acquisition,
primarily consisting of noncash amortization of short-lived assets, and
(ii) $7 million in connection with the relocation of the Tommy Hilfiger
office in New York, including noncash depreciation expense. Earnings
before interest and taxes on a non-GAAP basis discussed below excludes
these amounts.

Earnings before interest and taxes on a non-GAAP basis for the quarter
increased to $141 million from $105 million in the prior year period.
The earnings increase was principally due to the revenue increase noted
above, as well as gross margin improvements, particularly in North
America, and a leveraging of expenses.

Heritage Brands
Revenue in the
Heritage Brands business for the quarter decreased 3% to $380 million
compared to the prior year period. Comparable store sales increased 3%.

Earnings before interest and taxes for the quarter decreased to $33
million from $35 million in the prior year period, driven by the
decrease in revenue noted above.

Second Quarter Consolidated Results:
Second quarter revenue
increased 13% to $2.3 billion (increased 11% on a constant currency
basis) compared to the prior year period.

Earnings per share on a GAAP basis was $2.12 for the second quarter of
2018 compared to $1.52 in the prior year period. These results include
the amounts with respect to the applicable period described under the
heading "Non-GAAP Exclusions" later in this release. Earnings per share
on a non-GAAP basis for these periods, as discussed below, exclude these
amounts.

Earnings per share on a non-GAAP basis was $2.18 for the second quarter
of 2018 compared to $1.69 in the prior year period. Earnings per share
on both a GAAP and non-GAAP basis for the second quarter of 2018
included a $0.03 positive impact related to foreign currency translation.

Earnings before interest and taxes on a GAAP basis for the quarter
increased to $231 million from $181 million in the prior year period.
Included in earnings before interest and taxes for the current quarter
were costs of $7 million related to the TH China acquisition. Included
in earnings before interest and taxes for the prior year period were $19
million of costs consisting of (i) $7 million related to the TH China
acquisition, (ii) $7 million in connection with the relocation of the
Tommy Hilfiger office in New York, including noncash depreciation
expense, and (iii) $6 million in connection with the consolidation
within the Company's warehouse and distribution network in North
America. Earnings before interest and taxes on a non-GAAP basis for
these periods, as discussed below, exclude these amounts.

Earnings before interest and taxes on a non-GAAP basis for the quarter
was $238 million compared to $200 million in the prior year period. The
improvement in earnings was primarily driven by growth in the Tommy
Hilfiger and Calvin Klein businesses.

Net interest expense of $29 million was relatively flat as compared to
the prior year period. The effective tax rate on a GAAP basis was 18.6%
as compared to 20.8% in the prior year period. The effective tax rate on
a non-GAAP basis was 18.8% as compared to 21.9% in the prior year period.

Six Months Consolidated Results:
Revenue for the first six
months of 2018 increased 15% to $4.6 billion (increased 11% on a
constant currency basis) compared to the prior year period. The revenue
increase was due to:

  • An 18% increase (14% increase on a constant currency basis) in the
    Calvin Klein business compared to the prior year period, driven by
    strong performance in Europe and Asia, as well as in the North America
    wholesale business. International comparable store sales increased 7%.
    North America comparable store sales increased 4%.
  • An 18% increase (12% increase on a constant currency basis) in the
    Tommy Hilfiger business compared to the prior year period, driven
    principally by continued strong performance across all regions and
    channels. Tommy Hilfiger International comparable store sales
    increased 10%. North America comparable store sales increased 7%.
  • A 1% increase in the Heritage Brands business compared to the prior
    year period. Comparable store sales increased 2%.

Earnings per share on a GAAP basis was $4.42 for the first six months of
2018 compared to $2.41 in the prior year period. These results
include the amounts with respect to the applicable period described
under the heading "Non-GAAP Exclusions" later in this release. Earnings
per share on a non-GAAP basis for these periods, as discussed below,
exclude these amounts.

Earnings per share on a non-GAAP basis was $4.55 for the first six
months of 2018 compared to $3.34 in the prior year period. Earnings per
share on both a GAAP and non-GAAP basis for the first six months of 2018
included a $0.23 positive impact related to foreign currency translation.

Earnings before interest and taxes on a GAAP basis for the first six
months of 2018 increased to $476 million, inclusive of a $21 million
positive impact due to foreign currency translation, from $294 million
in the prior year period. Included in earnings before interest and taxes
for the first six months of 2018 were costs of $14 million related to
the TH China acquisition. Included in earnings before interest and taxes
for the prior year period were $99 million of costs consisting of (i)
$54 million in connection with the agreements to restructure the
Company's supply chain relationship with Li & Fung Trading Limited ("Li
& Fung"), under which the Company terminated its non-exclusive buying
agency agreement with Li & Fung during 2017 (the "Li & Fung
termination"), (ii) $14 million related to the TH China acquisition,
(iii) $14 million in connection with the relocation of the Tommy
Hilfiger office in New York, including noncash depreciation expense,
(iv) $9 million in connection with the noncash settlement of certain of
the Company's retirement plan benefit obligations, and (v) $7 million in
connection with the consolidation within the Company's warehouse and
distribution network in North America. Earnings before interest and
taxes on a non-GAAP basis for these periods, as discussed below, exclude
these amounts.

Earnings before interest and taxes on a non-GAAP basis for the first six
months of 2018 was $489 million, inclusive of a $21 million positive
impact due to foreign currency translation, compared to $392 million in
the prior year period. The improvement in earnings was driven by strong
growth across all businesses.

Net interest expense of $58 million for the first six months of 2018 was
relatively flat as compared to the prior year period. The effective tax
rate on a GAAP basis for the first six months of 2018 was 17.8% as
compared to 19.5% in the prior year period. The effective tax rate on a
non-GAAP basis for the first six months of 2018 was 18.0% as compared to
21.3% in the prior year period.

Inventory levels increased 16% as compared to the prior year period due
to a shift in the timing of inventory receipts as a result of the 53rd
week in 2017 and an expected increase in third quarter of 2018 sales as
compared to the prior year period.

Stock Repurchase Program:
During the first six months of
2018, the Company repurchased approximately 900,000 shares of its common
stock for $137 million (7.7 million shares for $829 million since
inception) under the $1.250 billion stock repurchase program authorized
by the Board of Directors through June 3, 2020. Stock repurchases under
the program may be made from time to time over the period through open
market purchases, accelerated share repurchase programs, privately
negotiated transactions or other methods, as the Company deems
appropriate. Purchases are made based on a variety of factors, such as
price, corporate requirements and overall market conditions, applicable
legal requirements and limitations, restrictions under the Company's
debt arrangements, trading restrictions under the Company's insider
trading policy and other relevant factors. The program may be modified
by the Board, including to increase or decrease the repurchase
limitation or extend, suspend, or terminate the program, at any time,
without prior notice.

2018 Outlook:
The Company's effective tax rate
projections for 2018 include estimates of the impacts of the U.S. Tax
Cuts and Jobs Act of 2017 (the "Tax Legislation") enacted on December
22, 2017, including (i) the reduction of the corporate income tax rate
from 35% to 21%, (ii) the implementation of a modified territorial tax
system, (iii) the introduction of a tax on foreign income in excess of a
deemed return on tangible assets of foreign corporations (known as
"GILTI") and (iv) the introduction of a base erosion anti-abuse tax
measure (known as "BEAT") that taxes certain payments between U.S.
corporations and their subsidiaries. These projections are subject to
adjustment in 2018, including as a result of changes in the provisional
net tax benefit of $53 million recorded in the fourth quarter of 2017,
during the measurement period allowed by the Securities and Exchange
Commission as regulatory guidance needs to be issued in regard to the
Tax Legislation and as the Company completes its final analysis of the
impacts of the Tax Legislation.

Please see the section entitled "Full Year and Quarterly Reconciliations
of GAAP to Non-GAAP Amounts" at the end of this release for further
detail and reconciliations of GAAP to non-GAAP amounts discussed in this
section.

Full Year Guidance
Revenue in the
second half of 2018 will be negatively impacted compared to the prior
year period as a result of an additional week of revenue (a 53rd week)
in 2017. The total negative impact in the second half of 2018 compared
to the prior year period is approximately $150 million, comprised of (i)
approximately $80 million due to the reduction of one week of revenue in
the fourth quarter of 2018 as compared to the fourth quarter of 2017 and
(ii) approximately $70 million that shifted into the first half of 2018
and out of the second half of 2018 as compared to the prior year periods
due to the fiscal calendar misalignment in 2018 as compared to 2017, as
illustrated below.

(In millions)       2018 vs. 2017 Revenue Impact
First Half     Second Half     Full Year
(i) Reduction of One Week of Revenue $ $ (80 ) $ (80 )
(ii) Fiscal Calendar Misalignment 70   (70 )  
Total Revenue Impact $ 70 $ (150 ) $ (80 )
 

In addition, the Company continues to plan that the second half of
2018 will include an increase of approximately $15 million in marketing
expenditures compared to the prior year period, principally related to
CALVIN KLEIN. Marketing expenditures as a percentage of full year
revenue in 2018 remains consistent as compared to the prior year.

The Company currently projects that 2018 earnings per share on a GAAP
basis will be in a range of $8.96 to $9.01 compared to $6.84 in 2017.
The Company currently projects that 2018 earnings per share on a
non-GAAP basis will be in a range of $9.20 to $9.25 compared to $7.94 in
2017. Both the GAAP and non-GAAP projections include the estimated
positive impact of approximately $0.07 per share related to foreign
currency translation, consisting of the positive impact of $0.23 in the
first half of 2018, partially offset by an estimated negative impact of
$0.16 in the second half of 2018.

Revenue in 2018 is projected to increase approximately 7% (increase
approximately 6% on a constant currency basis) as compared to 2017.
Revenue for the Calvin Klein business is projected to increase
approximately 8% (also on a constant currency basis). Revenue for the
Tommy Hilfiger business is projected to increase approximately 9%
(increase approximately 8% on a constant currency basis). Revenue for
the Heritage Brands business is projected to increase approximately 1%.

Net interest expense in 2018 is projected to decrease to approximately
$117 million from $122 million in 2017. The Company estimates that the
2018 effective tax rate will be in a range of 13.5% to 14.5%, which
includes the estimated impact of the Tax Legislation.

The Company's estimate of 2018 earnings per share on a non-GAAP basis
excludes approximately $25 million of pre-tax costs to be incurred
related to the TH China acquisition, consisting of noncash amortization
of short-lived assets, and the resulting estimated tax effect.

Third Quarter Guidance
The Company
currently projects that third quarter 2018 earnings per share on a GAAP
basis will be in a range of $3.03 to $3.06 compared to $3.05 in the
prior year period. The Company projects that third quarter 2018 earnings
per share on a non-GAAP basis will be in a range of $3.10 to $3.13
compared to $3.02 in the prior year period. Both the GAAP and non-GAAP
projections include an estimated negative impact of approximately $0.09
per share related to foreign currency translation.

Revenue in the third quarter of 2018 is projected to increase
approximately 7% (increase approximately 9% on a constant
currency basis) compared to the prior year period. Revenue for the
Calvin Klein business in the third quarter is projected to increase
approximately 5% (increase approximately 7% on a constant currency
basis). Revenue for the Tommy Hilfiger business in the third quarter is
projected to increase approximately 10% (increase approximately 12% on a
constant currency basis). Revenue for the Heritage Brands business in
the third quarter is projected to increase approximately 8%.

Net interest expense in the third quarter of 2018 is projected to
decrease to approximately $30 million compared to $31 million in the
prior year period. The Company estimates that the third quarter 2018
effective tax rate will be in a range of 4% to 5%.

The Company's estimate of third quarter 2018 earnings per share on a
non-GAAP basis excludes approximately $7 million of pre-tax costs
to be incurred related to the TH China acquisition, consisting of
noncash amortization of short-lived assets, and the resulting estimated
tax effect.

Non-GAAP Exclusions:
The discussions in this release that
refer to non-GAAP amounts exclude the following:

  • Pre-tax costs of approximately $25 million incurred and to be incurred
    in 2018 related to the TH China acquisition, consisting of noncash
    amortization of short-lived assets, of which $7 million was incurred
    in the first quarter, $7 million was incurred in the second quarter
    and approximately $7 million is to be incurred in the third quarter.
  • Pre-tax costs of $83 million incurred in the fourth quarter of
    2017 in connection with an amendment to Mr. Tommy Hilfiger's
    employment agreement pursuant to which the Company made a cash buyout
    of a portion of the future payments to Mr. Hilfiger.
  • Pre-tax costs of $54 million incurred in the first quarter of 2017 in
    connection with the Li & Fung termination.
  • Pre-tax costs of $28 million incurred in the fourth quarter of 2017 in
    connection with the Company's redemption and issuance of senior notes,
    including $24 million related to the early redemption of the $700
    million 4 1/2% senior notes and $4 million related to the issuance of
    €600 million 3 1/8% senior notes.
  • Pre-tax costs of $27 million incurred in 2017 related to the TH China
    acquisition, primarily consisting of noncash amortization of
    short-lived assets, of which $7 million was incurred in the first
    quarter, $7 million was incurred in the second quarter, $6 million was
    incurred in the third quarter and $7 million was incurred in the
    fourth quarter.
  • Pre-tax costs of $19 million incurred in 2017 in connection with the
    relocation of the Tommy Hilfiger office in New York, including noncash
    depreciation expense, of which $7 million was incurred in the first
    quarter, $7 million was incurred in the second quarter and $5 million
    was incurred in the third quarter.
  • Pre-tax costs of $9 million incurred in the first quarter of 2017 in
    connection with the noncash settlement of certain of the Company's
    benefit obligations related to its retirement plans as a result of an
    annuity purchased for certain participants, under which such
    obligations were transferred to an insurer.
  • Pre-tax net costs of $8 million incurred in 2017 in connection with
    the consolidation within the Company's warehouse and distribution
    network in North America, of which $2 million of costs were incurred
    in the first quarter, $6 million of costs were incurred in the second
    quarter, $3 million of costs were incurred in the third quarter and a
    net gain of $2 million was recorded in the fourth quarter, which
    included the impact of the sale of a warehouse and distribution center.
  • Pre-tax loss of $3 million recorded in the fourth quarter of 2017
    related to the recognized actuarial loss on retirement plans.
  • Discrete tax benefits of $23 million recorded in 2017 primarily
    related to the resolution of uncertain tax positions, of which $13
    million was recorded in the third quarter and $10 million was recorded
    in the fourth quarter.
  • Discrete net tax benefit of $53 million recorded in the fourth quarter
    of 2017 in connection with the Tax Legislation, consisting of a $265
    million benefit primarily from the remeasurement of the Company's net
    deferred tax liabilities, partially offset by a $38 million valuation
    allowance on the Company's foreign tax credits and a $174 million
    transition tax on earnings of foreign subsidiaries deemed to be
    repatriated.
  • Discrete tax benefit of $15 million recorded in the fourth quarter of
    2017 related to an excess tax benefit from the exercise of stock
    options by the Company's Chief Executive Officer.
  • Estimated tax effects associated with the above pre-tax items, which
    are based on the Company's assessment of deductibility. In making this
    assessment, the Company evaluated each item that it had identified
    above as a non-GAAP exclusion to determine if such item is taxable or
    tax deductible, and if so, in what jurisdiction the tax expense or tax
    deduction would occur. All items above were identified as either
    primarily taxable or tax deductible, with the tax effect taken at the
    statutory income tax rate of the local jurisdiction, or as non-taxable
    or non-deductible, in which case the Company assumed no tax effect.

As a supplement to the Company's GAAP results, the Company presents
constant currency revenue information, which is a non-GAAP financial
measure. The Company presents results in this manner because it is a
global company that transacts business in multiple currencies but
reports financial information in U.S. dollars. Foreign currency exchange
rate fluctuations affect the amounts reported by the Company in U.S.
dollars with respect to its foreign revenues. Exchange rate fluctuations
can have a significant effect on reported revenues. The Company believes
presenting constant currency revenue information provides useful
information to investors, as it provides information to assess how its
businesses performed excluding the effects of changes in foreign
currency exchange rates and assists investors in evaluating the
effectiveness of the Company's operations and underlying business trends
in a manner that is consistent with management's evaluation of business
performance.

The Company calculates constant currency revenue information by
translating its foreign revenues for the current year period into U.S.
dollars at the average exchange rates in effect during the comparable
prior year period (rather than at the actual exchange rates in effect
during the current year period).

Constant currency performance should be viewed in addition to, and not
in lieu of or as superior to, the Company's operating performance
calculated in accordance with GAAP. The constant currency revenue
information presented may not be comparable to similarly described
measures reported by other companies.

Please see Tables 1 through 6 and the sections entitled "Reconciliations
of 2018 Constant Currency Revenue" and "Full Year and Quarterly
Reconciliations of GAAP to Non-GAAP Amounts" later in this release for
reconciliations of GAAP to non-GAAP amounts.

The Company webcasts its conference calls to review its earnings
releases. The Company's conference call to review its second quarter
earnings release is scheduled for Thursday, August 30, 2018 at 9:00 a.m.
EDT.
Please log on to the Company's web site at www.PVH.com
and go to the Events page included in the Investors section to listen to
the live webcast of the conference call. The webcast will be available
for replay for one year after it is held, commencing approximately two
hours after the live broadcast ends. Please log on to www.PVH.com
as described above to listen to the replay. In addition, an audio replay
of the conference call is available for 48 hours starting approximately
two hours after it is held. The replay of the conference call can be
accessed by calling (domestic) 888-203-1112 and (international)
719-457-0820 and using passcode 9172811. The conference call and webcast
consist of copyrighted material. They may not be re-recorded,
reproduced, re-transmitted, rebroadcast or otherwise used without the
Company's express written permission. Your participation represents your
consent to these terms and conditions, which are governed by New York
law.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995: Forward-looking statements in this press release and made
during the conference call/webcast, including, without limitation,
statements relating to the Company's future revenue and earnings, plans,
strategies, objectives, expectations and intentions are made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. Investors are cautioned that such forward-looking
statements are inherently subject to risks and uncertainties, many of
which cannot be predicted with accuracy and some of which might not be
anticipated, including, without limitation, (i) the Company's plans,
strategies, objectives, expectations and intentions are subject to
change at any time at the discretion of the Company; (ii) the Company
may be considered to be highly leveraged and uses a significant portion
of its cash flows to service its indebtedness, as a result of which the
Company might not have sufficient funds to operate its businesses in the
manner it intends or has operated in the past; (iii) the levels of sales
of the Company's apparel, footwear and related products, both to its
wholesale customers and in its retail stores, the levels of sales of the
Company's licensees at wholesale and retail, and the extent of discounts
and promotional pricing in which the Company and its licensees and other
business partners are required to engage, all of which can be affected
by weather conditions, changes in the economy, fuel prices, reductions
in travel, fashion trends, consolidations, repositionings and
bankruptcies in the retail industries, repositionings of brands by the
Company's licensors, and other factors; (iv) the Company's ability to
manage its growth and inventory, including the Company's ability to
realize benefits from acquisitions; (v) quota restrictions, the
imposition of safeguard controls and the imposition of duties or tariffs
on goods from the countries where the Company or its licensees produce
goods under its trademarks, any of which, among other things, could
limit the ability to produce products in cost-effective countries, or in
countries that have the labor and technical expertise needed; (vi) the
availability and cost of raw materials; (vii) the Company's ability to
adjust timely to changes in trade regulations and the migration and
development of manufacturers (which can affect where the Company's
products can best be produced); (viii) changes in available factory and
shipping capacity, wage and shipping cost escalation, civil conflict,
war or terrorist acts, the threat of any of the foregoing, or political
or labor instability in any of the countries where the Company's or its
licensees' or other business partners' products are sold, produced or
are planned to be sold or produced; (ix) disease epidemics and health
related concerns, which could result in closed factories, reduced
workforces, scarcity of raw materials and scrutiny or embargoing of
goods produced in infected areas, as well as reduced consumer traffic
and purchasing, as consumers become ill or limit or cease shopping in
order to avoid exposure; (x) acquisitions and divestitures and issues
arising with acquisitions, divestitures and proposed transactions,
including, without limitation, the ability to integrate an acquired
entity or business into the Company with no substantial adverse effect
on the acquired entity's, the acquired business's or the Company's
existing operations, employee relationships, vendor relationships,
customer relationships or financial performance, and the ability to
operate effectively and profitably the Company's continuing businesses
after the sale or other disposal of a subsidiary, business or the assets
thereof; (xi) the failure of the Company's licensees to market
successfully licensed products or to preserve the value of the Company's
brands, or their misuse of the Company's brands; (xii) significant
fluctuations of the U.S. dollar against foreign currencies in which the
Company transacts significant levels of business; (xiii) the Company's
retirement plan expenses recorded throughout the year are calculated
using actuarial valuations that incorporate assumptions and estimates
about financial market, economic and demographic conditions, and
differences between estimated and actual results give rise to gains and
losses, which can be significant, that are recorded immediately in
earnings, generally in the fourth quarter of the year; (xiv) the impact
of new and revised tax legislation and regulations, particularly the
recently enacted U.S. Tax Cuts and Jobs Act and the still to-be-issued
regulations with respect thereto that might disproportionately affect
the Company as compared to some of its peers due to the specific tax
structure of the Company and its greater percentage of revenues and
income generated outside of the U.S.; and (xv) other risks and
uncertainties indicated from time to time in the Company's filings with
the Securities and Exchange Commission ("SEC").

This press release includes, and the conference call/webcast will
include, certain non-GAAP financial measures, as defined under SEC
rules. Reconciliations of these measures are included in the financial
information later in this release, as well as in the Company's Current
Report on Form 8-K furnished to the SEC in connection with this earnings
release, which is available on the Company's website at www.PVH.com
and on the SEC's website at www.sec.gov.

The Company does not undertake any obligation to update publicly any
forward-looking statement, including, without limitation, any estimate
regarding revenue or earnings, whether as a result of the receipt of new
information, future events or otherwise.

                 
PVH CORP.
Consolidated GAAP Income Statements
(In millions, except per share data)
 
                           
Quarter Ended Six Months Ended

8/5/18

7/30/17

8/5/18

7/30/17

 
Net sales $ 2,223.2 $ 1,963.5 $ 4,416.7 $ 3,838.5
Royalty revenue 81.5 81.4 170.9 168.7
Advertising and other revenue 29.0   25.0   60.7   51.7  
Total revenue $ 2,333.7   $ 2,069.9   $ 4,648.3   $ 4,058.9  
 
Gross profit on net sales $ 1,186.5 $ 1,040.9 $ 2,356.4 $ 2,007.7
Gross profit on royalty, advertising and other revenue 110.5   106.4   231.6   220.4  
Total gross profit 1,297.0 1,147.3 2,588.0 2,228.1
 
Selling, general and administrative expenses 1,071.5 971.0 2,124.5 1,931.9
 
Non-service related pension and postretirement (income) cost (2.6 ) (2.5 ) (5.1 ) 4.6
 
Equity in net income of unconsolidated affiliates 3.3   1.7   7.1 2.1  
 
Earnings before interest and taxes 231.4 180.5 475.7 293.7
 
Interest expense, net 29.1   29.7   57.5   58.4  
 
Pre-tax income 202.3 150.8 418.2 235.3
 
Income tax expense 37.6   31.4   74.6   45.8  
 
Net income 164.7 119.4 343.6 189.5
 
Less: Net loss attributable to redeemable non-controlling interest (1) (0.5 ) (0.3 ) (1.0 ) (0.6 )
 
Net income attributable to PVH Corp. $ 165.2   $ 119.7   $ 344.6   $ 190.1  
     

 

       
Diluted net income per common share attributable to PVH Corp. (2) $ 2.12       $ 1.52   $ 4.42       $ 2.41  
 
Quarter Ended Six Months Ended

8/5/18

7/30/17

8/5/18

7/30/17

 
Depreciation and amortization expense       $ 83.0       $ 80.6       $ 166.2       $ 157.8  
Please see following pages for information related to non-GAAP
measures discussed in this release.
(1)     The Company and Arvind Limited have a joint venture in Ethiopia in
which the Company owns a 75% interest.
 
(2) Please see Note A in the Notes to Consolidated GAAP Income
Statements for the reconciliations of GAAP diluted net income per
common share to diluted net income per common share on a non-GAAP
basis.
 

PVH CORP.
Non-GAAP Measures
(In
millions, except per share data)

The Company believes it is useful to investors to present its results
for the periods ended August 5, 2018 and July 30, 2017 excluding (i) the
costs incurred in the first and second quarters of 2018 and 2017 related
to the acquisition of the 55% interest in TH Asia, Ltd. ("TH China"),
its former joint venture for TOMMY HILFIGER in China, that it did
not already own (the "TH China acquisition"), primarily consisting of
noncash amortization of short-lived assets; (ii) the costs incurred in
the first quarter of 2017 in connection with agreements to restructure
its supply chain relationship with Li & Fung Trading Limited ("Li &
Fung"), under which the Company terminated its non-exclusive buying
agency agreement with Li & Fung in 2017 (the "Li & Fung termination");
(iii) the costs incurred in the first quarter of 2017 in connection with
the noncash settlement of certain of its benefit obligations related to
its retirement plans as a result of an annuity purchased for certain
participants, under which such obligations were transferred to an
insurer; (iv) the costs incurred in the first and second quarters of
2017 in connection with the relocation of the Tommy Hilfiger office in
New York, including noncash depreciation expense; (v) the costs incurred
in the first and second quarters of 2017 in connection with the
consolidation within its warehouse and distribution network in North
America; and (vi) the tax effects associated with the foregoing pre-tax
items, which are on a non-GAAP basis. The Company excludes these amounts
because it deems them to be non-recurring or non-operational and
believes that their exclusion (i) facilitates comparing current results
against past and future results by eliminating amounts that it believes
are not comparable between periods, thereby permitting management to
evaluate performance and investors to make decisions based on the
ongoing operations of the Company and (ii) assists investors in
evaluating the effectiveness of the Company's operations and underlying
business trends in a manner that is consistent with management's
evaluation of business performance. The Company believes that investors
often look at ongoing operations of an enterprise as a measure of
assessing performance. The Company uses its results excluding these
amounts to evaluate its operating performance and to discuss its
business with investment institutions, the Company's Board of Directors
and others. The Company's results excluding the items described above
are also the basis for certain incentive compensation calculations. The
non-GAAP measures should be viewed in addition to, and not in lieu of or
superior to, the Company's operating performance measures calculated in
accordance with GAAP. The information presented on a non-GAAP basis may
not be comparable to similarly titled measures reported by other
companies.

The following table presents the non-GAAP measures that are discussed in
this release. Please see Tables 1 through 6 for the reconciliations of
the GAAP amounts to amounts on a non-GAAP basis.

               
      Quarter Ended     Six Months Ended

8/5/18

   

7/30/17

8/5/18

   

7/30/17

 
Non-GAAP Measures
Selling, general and administrative expenses (1) $ 1,064.8 $ 951.8 $ 2,110.9 $ 1,842.8
Non-service related pension and postretirement income (2) (4.8 )
Earnings before interest and taxes (3) 238.1 199.7 489.3 392.2
Income tax expense (4) 39.4 37.2 77.9 71.1
Net income attributable to PVH Corp. (5) 170.1 133.1 354.9 263.3
Diluted net income per common share attributable to PVH Corp. (6) $ 2.18 $ 1.69 $ 4.55 $ 3.34
 
Depreciation and amortization expense (7) $ 76.3       $ 69.6   $ 152.6       $ 136.0  
                                           
(1)     Please see Table 3 for the reconciliations of GAAP selling, general
and administrative ("SG&A") expenses to SG&A expenses on a non-GAAP
basis.
(2) Please see Table 4 for the reconciliation of GAAP non-service
related pension and postretirement cost to non-service related
pension and postretirement income on a non-GAAP basis.
(3) Please see Table 2 for the reconciliations of GAAP earnings before
interest and taxes to earnings before interest and taxes on a
non-GAAP basis.
(4) Please see Table 5 for the reconciliations of GAAP income tax
expense to income tax expense on a non-GAAP basis and an explanation
of the calculation of the tax effects associated with the pre-tax
items identified as non-GAAP exclusions.
(5) Please see Table 1 for the reconciliations of GAAP net income to net
income on a non-GAAP basis.
(6) Please see Note A in the Notes to Consolidated GAAP Income
Statements for the reconciliations of GAAP diluted net income per
common share to diluted net income per common share on a non-GAAP
basis.
(7) Please see Table 6 for the reconciliations of GAAP depreciation and
amortization expense to depreciation and amortization expense on a
non-GAAP basis.
 
       
PVH CORP.
Reconciliations of GAAP to Non-GAAP Amounts
(In millions, except per share data)
             

Table 1 - Reconciliations of GAAP net income
to net income on a non-GAAP basis

         
Quarter Ended Six Months Ended

8/5/18

7/30/17

8/5/18

7/30/17

 
Net income attributable to PVH Corp. $ 165.2 $ 119.7 $ 344.6 $ 190.1
 
Diluted net income per common share attributable to PVH Corp.(1) $ 2.12 $ 1.52 $ 4.42 $ 2.41
 
Pre-tax items excluded:
 
SG&A expenses associated with the Li & Fung termination 54.2
 
SG&A expenses associated with the relocation of the Tommy Hilfiger
office in New York (including noncash depreciation expense)
7.1 14.1
 
SG&A expenses associated with the TH China acquisition (primarily
consisting of noncash amortization of short-lived assets)
6.7 6.6 13.6 13.5
 
SG&A expenses associated with the consolidation within the Company's
warehouse and distribution network in North America
5.5 7.3
 
Expenses associated with the noncash settlement of certain of the
Company's retirement plan benefit obligations (recorded in
non-service related pension and postretirement (income) cost)
9.4
 
Tax effects of the above pre-tax items(2) (1.8 ) (5.8 ) (3.3 ) (25.3 )
 
Net income on a non-GAAP basis attributable to PVH Corp. $ 170.1 $ 133.1 $ 354.9 $ 263.3
 
Diluted net income per common share on a non-GAAP basis attributable
to PVH Corp.(1)
$ 2.18       $ 1.69       $ 4.55       $ 3.34  
                           
(1)     Please see Note A in the Notes to the Consolidated GAAP Income
Statements for the reconciliations of GAAP diluted net income per
common share to diluted net income per common share on a non-GAAP
basis.
(2) Please see Table 5 for an explanation of the calculation of the tax
effects of the above items.
 
 

Table 2 - Reconciliations of GAAP earnings
before interest and taxes to earnings before interest and taxes on
a non-GAAP basis

                 
Quarter Ended Six Months Ended

8/5/18

7/30/17

8/5/18

7/30/17

 
Earnings before interest and taxes $ 231.4 $ 180.5 $ 475.7 $ 293.7
 
Items excluded:
 
SG&A expenses associated with the Li & Fung termination 54.2
 
SG&A expenses associated with the relocation of the Tommy Hilfiger
office in New York (including noncash depreciation expense)
7.1 14.1
 
SG&A expenses associated with the TH China acquisition (primarily
consisting of noncash amortization of short-lived assets)
6.7 6.6 13.6 13.5
 
SG&A expenses associated with the consolidation within the Company's
warehouse and distribution network in North America
5.5 7.3
 
Expenses associated with the noncash settlement of certain of the
Company's retirement plan benefit obligations (recorded in
non-service related pension and postretirement (income) cost)
      9.4
 
Earnings before interest and taxes on a non-GAAP basis $ 238.1       $ 199.7   $ 489.3       $ 392.2
                                         
 
PVH CORP.
Reconciliations of GAAP to Non-GAAP Amounts (continued)
(In millions)
 

Table 3 - Reconciliations of GAAP SG&A
expenses to SG&A expenses on a non-GAAP basis

                 
Quarter Ended Six Months Ended

8/5/18

7/30/17

8/5/18

7/30/17

 
SG&A expenses $ 1,071.5 $ 971.0 $ 2,124.5 $ 1,931.9
 
Items excluded:
 
Expenses associated with the Li & Fung termination (54.2 )
 
Expenses associated with the relocation of the Tommy Hilfiger office
in New York (including noncash depreciation expense)
(7.1 ) (14.1 )
 
Expenses associated with the TH China acquisition (primarily
consisting of noncash amortization of short-lived assets)
(6.7 ) (6.6 ) (13.6 ) (13.5 )
 
Expenses associated with the consolidation within the Company's
warehouse and distribution network in North America
  (5.5 )   (7.3 )
 
SG&A expenses on a non-GAAP basis $ 1,064.8       $ 951.8   $ 2,110.9       $ 1,842.8  
                                           
 

Table 4 - Reconciliation of GAAP non-service
related pension and postretirement cost to non-service related
pension and postretirement income on a non-GAAP basis

     
Six Months Ended

7/30/17

 
Non-service related pension and postretirement cost $ 4.6
 
Item excluded:
 
Expenses associated with the noncash settlement of certain of the
Company's retirement plan benefit obligations
(9.4 )
 
Non-service related pension and postretirement income on a non-GAAP
basis
$ (4.8 )
             
 

Table 5 - Reconciliations of GAAP income tax
expense to income tax expense on a non-GAAP basis

                 
Quarter Ended Six Months Ended

8/5/18

7/30/17

8/5/18

7/30/17

 
Income tax expense $ 37.6 $ 31.4 $ 74.6 $ 45.8
 
Item excluded:
 
Tax effects of pre-tax items identified as non-GAAP exclusions (1) 1.8   5.8   3.3   25.3
 
Income tax expense on a non-GAAP basis $ 39.4       $ 37.2   $ 77.9       $ 71.1
                           
(1)     The estimated tax effects associated with the Company's exclusions
on a non-GAAP basis are based on the Company's assessment of
deductibility. In making this assessment, the Company evaluated each
pre-tax item that it had identified above as a non-GAAP exclusion to
determine if such item is taxable or tax deductible and, if so, in
what jurisdiction the tax expense or tax deduction would occur. All
of the pre-tax items identified as non-GAAP exclusions were
identified as either primarily taxable or tax deductible, with the
tax effect taken at the statutory income tax rate of the local
jurisdiction, or as non-taxable or non-deductible, in which case the
Company assumed no tax effect.
 
 
PVH CORP.
Reconciliations of GAAP to Non-GAAP Amounts (continued)
(In millions)
 

Table 6 - Reconciliations of GAAP
depreciation and amortization expense to depreciation and
amortization expense on a non-GAAP basis

                 
Quarter Ended Six Months Ended

8/5/18

7/30/17

8/5/18

7/30/17

 
Depreciation and amortization expense $ 83.0 $ 80.6 $ 166.2 $ 157.8
 
Items excluded:
 
Amortization of short-lived assets associated with the TH China
acquisition
(6.7 ) (6.4 ) (13.6 ) (12.7 )
 
Depreciation associated with the relocation of the Tommy Hilfiger
office in New York
  (4.6 )   (9.1 )
 
Depreciation and amortization expense on a non-GAAP basis $ 76.3       $ 69.6   $ 152.6       $ 136.0  
                                           
         
PVH CORP.
Notes to Consolidated GAAP Income Statements

(In millions, except per share data)

 

A. The Company computed its diluted net income per common share as
follows:

 
Quarter Ended Quarter Ended
8/5/18 7/30/17
GAAP         Non-GAAP GAAP         Non-GAAP

Results

Adjustments

(1)

Results

Results

Adjustments

(2)

Results

 
Net income attributable to PVH Corp. $ 165.2 $ (4.9 ) $ 170.1 $ 119.7 $ (13.4 ) $ 133.1
 
Weighted average common shares 77.0 77.0 77.8 77.8
Weighted average dilutive securities 0.9   0.9   0.9   0.9
Total shares 77.9   77.9   78.7   78.7
 
Diluted net income per common share attributable to PVH Corp. $ 2.12   $ 2.18   $ 1.52   $ 1.69
                               
 
Six Months Ended Six Months Ended
8/5/18 7/30/17
GAAP Non-GAAP GAAP Non-GAAP

Results

Adjustments

(1)

Results

Results

Adjustments

(2)

Results

 
Net income attributable to PVH Corp. $ 344.6 $ (10.3 ) $ 354.9 $ 190.1 $ (73.2 ) $ 263.3
 
Weighted average common shares 77.0 77.0 78.0 78.0
Weighted average dilutive securities 1.0   1.0   0.8   0.8
Total shares 78.0   78.0   78.8   78.8
 
Diluted net income per common share attributable to PVH Corp. $ 4.42   $ 4.55   $ 2.41   $ 3.34
                                             
(1)     Represents the impact on net income in the periods ended August 5,
2018 from the elimination of the costs related to the TH China
acquisition, consisting of noncash amortization of short-lived
assets, and the resulting tax effect. Please see Table 1 for the
reconciliation of GAAP net income to net income on a non-GAAP basis.
(2) Represents the impact on net income in the periods ended July 30,
2017 from the elimination of (i) the costs related to the TH China
acquisition, primarily consisting of noncash amortization of
short-lived assets; (ii) the costs in connection with the Li & Fung
termination; (iii) the costs in connection with the noncash
settlement of certain of the Company's benefit obligations related
to its retirement plans as a result of an annuity purchased for
certain participants, under which such obligations were transferred
to an insurer; (iv) the costs in connection with the relocation of
the Tommy Hilfiger office in New York, including noncash
depreciation expense; (v) the costs in connection with the
consolidation within the Company's warehouse and distribution
network in North America; and (vi) the tax effects associated with
the foregoing pre-tax items. Please see Table 1 for the
reconciliation of GAAP net income to net income on a non-GAAP basis.
 
         
PVH CORP.
Consolidated Balance Sheets
(In millions)
 
8/5/18 7/30/17
ASSETS
Current Assets:
Cash and Cash Equivalents $ 431.1 $ 559.4
Receivables 731.6 672.6
Inventories 1,731.0 1,498.6
Other 272.3   204.9
Total Current Assets 3,166.0 2,935.5
Property, Plant and Equipment 881.3 805.8
Goodwill and Other Intangible Assets 7,284.6 7,348.7
Other Assets 365.8   363.9
$ 11,697.7   $ 11,453.9
 
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND STOCKHOLDERS'
EQUITY
Accounts Payable and Accrued Expenses $ 1,750.3 $ 1,615.2
Short-Term Borrowings 85.4 18.0
Current Portion of Long-Term Debt
Other Liabilities 1,402.1 1,536.7
Long-Term Debt 2,893.5 3,185.7
Redeemable Non-Controlling Interest 1.0 3.1
Stockholders' Equity 5,565.4   5,095.2
$ 11,697.7   $ 11,453.9
 
Note: Year over year balances are impacted by changes in foreign
currency exchange rates.
 
         
PVH CORP.
Segment Data
(In millions)
 

REVENUE BY SEGMENT

Quarter Ended Quarter Ended
8/5/18 7/30/17

Calvin Klein North America

Net sales $ 425.0 $ 348.3
Royalty revenue 32.0 31.6
Advertising and other revenue 10.5   12.3
Total 467.5 392.2
 

Calvin Klein International

Net sales 435.3 370.0
Royalty revenue 16.0 17.3
Advertising and other revenue 6.3   7.0
Total 457.6 394.3
               

Total Calvin Klein

Net sales 860.3 718.3
Royalty revenue 48.0 48.9
Advertising and other revenue 16.8   19.3
Total       925.1       786.5
 

Tommy Hilfiger North America

Net sales 417.8 380.8
Royalty revenue 14.5 15.3
Advertising and other revenue 4.3   3.7
Total 436.6 399.8
 

Tommy Hilfiger International

Net sales 572.3 479.1
Royalty revenue 13.0 11.7
Advertising and other revenue 6.7   1.0
Total 592.0 491.8
               

Total Tommy Hilfiger

Net sales 990.1 859.9
Royalty revenue 27.5 27.0
Advertising and other revenue 11.0   4.7
Total       1,028.6       891.6
 

Heritage Brands Wholesale

Net sales 302.0 316.7
Royalty revenue 5.0 4.7
Advertising and other revenue 1.1   0.9
Total 308.1 322.3
 

Heritage Brands Retail

Net sales 70.8 68.6
Royalty revenue 1.0 0.8
Advertising and other revenue 0.1   0.1
Total 71.9 69.5
               

Total Heritage Brands

Net sales 372.8 385.3
Royalty revenue 6.0 5.5
Advertising and other revenue 1.2   1.0
Total       380.0       391.8
 

Total Revenue

Net sales 2,223.2 1,963.5
Royalty revenue 81.5 81.4
Advertising and other revenue 29.0   25.0
Total $ 2,333.7   $ 2,069.9
 
 
PVH CORP.
Segment Data (continued)
(In millions)
                         

EARNINGS BEFORE INTEREST AND TAXES BY
SEGMENT

 
Quarter Ended Quarter Ended
8/5/18 7/30/17
Results Results
Under Non-GAAP Under Non-GAAP

GAAP

Adjustments(1)

Results

GAAP

Adjustments(2)

Results

 
Calvin Klein North America $ 59.8 $ 59.8 $ 48.0 $ 48.0
 
Calvin Klein International 45.2   45.2   47.5   47.5  
                                       
Total Calvin Klein       105.0             105.0       95.5             95.5  
 
Tommy Hilfiger North America 74.2 74.2 53.2 $ (7.1 ) 60.3
 
Tommy Hilfiger International 59.8   $ (6.7 ) 66.5   38.2   (6.6 ) 44.8  
                                       
Total Tommy Hilfiger       134.0       (6.7 )     140.7       91.4       (13.7 )     105.1  
 
Heritage Brands Wholesale 26.5 26.5 30.5 30.5
 
Heritage Brands Retail 6.1   6.1   4.5   4.5  
                                       
Total Heritage Brands       32.6             32.6       35.0             35.0  
 
Corporate (40.2 ) (40.2 ) (41.4 ) (5.5 ) (35.9 )
 
Total earnings before interest and taxes $ 231.4   $ (6.7 ) $ 238.1   $ 180.5   $ (19.2 ) $ 199.7  
                                                   
(1)     The adjustment for the quarter ended August 5, 2018 represents the
elimination of the costs related to the TH China acquisition,
consisting of noncash amortization of short-lived assets.
(2) The adjustments for the quarter ended July 30, 2017 represent the
elimination of (i) the costs related to the TH China acquisition,
primarily consisting of noncash amortization of short-lived assets;
(ii) the costs in connection with the relocation of the Tommy
Hilfiger office in New York, including noncash depreciation expense;
and (iii) the costs in connection with the consolidation within the
Company's warehouse and distribution network in North America.
 
         
PVH CORP.
Segment Data (continued)
(In millions)
 

REVENUE BY SEGMENT

Six Months Ended Six Months Ended
8/5/18 7/30/17

Calvin Klein North America

Net sales $ 792.3 $ 678.4
Royalty revenue 66.0 66.7
Advertising and other revenue 23.7   22.5
Total 882.0 767.6
 

Calvin Klein International

Net sales 884.1 724.8
Royalty revenue 34.5 36.9
Advertising and other revenue 14.5   13.0
Total 933.1 774.7
               

Total Calvin Klein

Net sales 1,676.4 1,403.2
Royalty revenue 100.5 103.6
Advertising and other revenue 38.2   35.5
Total       1,815.1       1,542.3
 

Tommy Hilfiger North America

Net sales 756.7 678.9
Royalty revenue 32.9 31.8
Advertising and other revenue 8.2   7.6
Total 797.8 718.3
 

Tommy Hilfiger International

Net sales 1,209.5 986.9
Royalty revenue 25.0 21.8
Advertising and other revenue 12.1   6.6
Total 1,246.6 1,015.3
               

Total Tommy Hilfiger

Net sales 1,966.2 1,665.8
Royalty revenue 57.9 53.6
Advertising and other revenue 20.3   14.2
Total       2,044.4       1,733.6
 

Heritage Brands Wholesale

Net sales 642.8 643.5
Royalty revenue 10.4 9.7
Advertising and other revenue 2.0   1.8
Total 655.2 655.0
 

Heritage Brands Retail

Net sales 131.3 126.0
Royalty revenue 2.1 1.8
Advertising and other revenue 0.2 0.2
Total 133.6 128.0
               

Total Heritage Brands

Net sales 774.1 769.5
Royalty revenue 12.5 11.5
Advertising and other revenue 2.2   2.0
Total       788.8       783.0
 

Total Revenue

Net sales 4,416.7 3,838.5
Royalty revenue 170.9 168.7
Advertising and other revenue 60.7   51.7
Total $ 4,648.3   $ 4,058.9
         
 
                         
PVH CORP.
Segment Data (continued)
(In millions)
 

EARNINGS BEFORE INTEREST AND TAXES BY
SEGMENT

 
Six Months Ended Six Months Ended
8/5/18 7/30/17
Results Results
Under Non-GAAP Under Non-GAAP

GAAP

Adjustments(1)

Results

GAAP

Adjustments(2)

Results

 
Calvin Klein North America $ 103.3 $ 103.3 $ 89.9 $ 89.9
 
Calvin Klein International 110.3   110.3   99.1   99.1  
                                       
Total Calvin Klein       213.6             213.6       189.0             189.0  
 
Tommy Hilfiger North America 115.0 115.0 34.4 $ (45.4 ) 79.8
 
Tommy Hilfiger International 151.0   $ (13.6 ) 164.6   90.3   (36.4 ) 126.7  
                                       
Total Tommy Hilfiger       266.0       (13.6 )     279.6       124.7       (81.8 )     206.5  
 
Heritage Brands Wholesale 66.3 66.3 60.8 60.8
 
Heritage Brands Retail 7.9   7.9   6.0   6.0  
                                       
Total Heritage Brands       74.2             74.2       66.8             66.8  
 
Corporate (78.1 ) (78.1 ) (86.8 ) (16.7 ) (70.1 )
 
Total earnings before interest and taxes $ 475.7   $ (13.6 ) $ 489.3   $ 293.7   $ (98.5 ) $ 392.2  
                                                   
(1)     The adjustment for the six months ended August 5, 2018 represents
the elimination of the costs related to the TH China acquisition,
consisting of noncash amortization of short-lived assets.
(2) The adjustments for the six months ended July 30, 2017 represent the
elimination of (i) the costs related to the TH China acquisition,
primarily consisting of noncash amortization of short-lived assets;
(ii) the costs in connection with the Li & Fung termination; (iii)
the costs in connection with the noncash settlement of certain of
the Company's benefit obligations related to its retirement plans as
a result of an annuity purchased for certain participants, under
which such obligations were transferred to an insurer; (iv) the
costs in connection with the relocation of the Tommy Hilfiger office
in New York, including noncash depreciation expense; and (v) the
costs in connection with the consolidation within the Company's
warehouse and distribution network in North America.
 

PVH CORP.
Reconciliations of 2018 Constant
Currency Revenue

(In millions)

As a supplement to the Company's reported operating results, the Company
presents constant currency revenue information, which is a non-GAAP
financial measure. The Company presents results in this manner because
it is a global company that transacts business in multiple currencies
but reports financial information in U.S. dollars. Foreign currency
exchange rate fluctuations affect the amounts reported by the Company in
U.S. dollars with respect to its foreign revenues. Exchange rate
fluctuations can have a significant effect on reported revenues. The
Company believes presenting constant currency revenue information
provides useful information to investors, as it provides information to
assess how its businesses performed excluding the effects of changes in
foreign currency exchange rates and assists investors in evaluating the
effectiveness of the Company's operations and underlying business trends
in a manner that is consistent with management's evaluation of business
performance.

The Company calculates constant currency revenue information by
translating its foreign revenues for the current year period into U.S.
dollars at the average exchange rates in effect during the comparable
prior year period (rather than at the actual exchange rates in effect
during the current year period).

Constant currency performance should be viewed in addition to, and not
in lieu of or as superior to, the Company's operating performance
calculated in accordance with GAAP. The constant currency revenue
information presented may not be comparable to similarly described
measures reported by other companies.

         
GAAP Revenue % Change
Quarter Ended GAAP    

Positive Impact of
Foreign Exchange

   

Constant
Currency

8/5/18     7/30/17
 
Calvin Klein North America $ 467.5 $ 392.2 19.2 % 0.2 % 19.0 %
Calvin Klein International 457.6 394.3 16.1 % 2.8 % 13.3 %
Total Calvin Klein 925.1 786.5 17.6 % 1.4 % 16.2 %
 
Tommy Hilfiger North America $ 436.6 $ 399.8 9.2 % 0.2 % 9.0 %
Tommy Hilfiger International 592.0 491.8 20.4 % 4.2 % 16.2 %
Total Tommy Hilfiger 1,028.6 891.6 15.4 % 2.4 % 13.0 %
 
Total Revenue $ 2,333.7 $ 2,069.9 12.7 % 1.6 % 11.1 %
 
GAAP Revenue % Change
Six Months Ended GAAP

Positive Impact of
Foreign Exchange

Constant
Currency

8/5/18 7/30/17
 
Total Calvin Klein $ 1,815.1 $ 1,542.3 17.7 % 3.5 % 14.2 %
 
Total Tommy Hilfiger $ 2,044.4 $ 1,733.6 17.9 % 5.8 % 12.1 %
 
Total Revenue $ 4,648.3 $ 4,058.9 14.5 % 3.8 % 10.7 %
 

PVH CORP.
Full Year and Quarterly
Reconciliations of GAAP to Non-GAAP Amounts

The Company is presenting its 2018 estimated results excluding the costs
incurred and to be incurred related to the TH China acquisition,
consisting of noncash amortization of short-lived assets and the
resulting estimated tax effect. The 2018 estimated results are presented
on both a GAAP and non-GAAP basis. The Company believes presenting these
results on a non-GAAP basis provides useful additional information to
investors. The Company excludes such amounts because it deems them to be
non-recurring or non-operational and believes that excluding them (i)
facilitates comparing current results against past and future results by
eliminating amounts that it believes are not comparable between periods,
thereby permitting management to evaluate performance and investors to
make decisions based on the ongoing operations of the Company, and (ii)
assists investors in evaluating the effectiveness of the Company's
operations and underlying business trends in a manner that is consistent
with management's evaluation of business performance. The Company has
provided the reconciliations set forth below to present its estimates on
a GAAP basis and excluding these amounts. The Company uses its results
excluding these amounts to evaluate its operating performance and to
discuss its business with investment institutions, the Company's Board
of Directors and others. The Company's results excluding the item
described above are also the basis for certain incentive compensation
calculations. The non-GAAP measures should be viewed in addition to, and
not in lieu of or as superior to, the Company's operating performance
measures calculated in accordance with GAAP. The information presented
on a non-GAAP basis may not be comparable to similarly titled measures
reported by other companies. The estimated tax effect associated with
the above pre-tax item is based on the Company's assessment of
deductibility. In making this assessment, the Company evaluated the item
identified above as a non-GAAP exclusion to determine if such item is
taxable or tax deductible, and if so, in what jurisdiction the tax
expense or tax deduction would occur. The item is identified as tax
deductible, with the tax effect taken at the statutory income tax rate
of the local jurisdiction.

2018 Net Income Per Common Share
Reconciliations

      Current Guidance     Previous Guidance

Full Year
2018
(Estimated)

    Third Quarter
2018
(Estimated)

Full Year
2018
(Estimated)

    Second Quarter
2018
(Estimated)
       
GAAP net income per common share attributable to PVH Corp. $8.96 - $9.01 $3.03 - $3.06 $8.81 - $8.91 $1.98 - $2.03
Estimated per common share impact of item identified as a non-GAAP
exclusion
$(0.24) $(0.07) $(0.24) $(0.07)
Net income per common share attributable to PVH Corp. on a non-GAAP
basis
$9.20 - $9.25 $3.10 - $3.13 $9.05 - $9.15 $ 2.05 - $2.10
 

The GAAP net income per common share attributable to PVH Corp. amounts
presented in the above table, as well as the amounts excluded in
providing non-GAAP earnings guidance, would be expected to change as a
result of (i) acquisition, restructuring, divestment or similar
transactions or activities, (ii) the timing and strategy of
restructuring and integration initiatives or other one-time events, if
any, that the Company engages in or suffers during the period, (iii) any
market or other changes affecting the Company's expected actuarial gain
or loss on retirement plans, (iv) the imposition of significant tariffs
on apparel, footwear and accessories imported from China or any of the
Company's other significant sourcing countries, (v) adjustments to the
Company's income tax provision related to the U.S. Tax Cuts and Jobs Act
of 2017 (the "Tax Legislation"), including as a result of changes in the
provisional amounts recorded in 2017 during the permitted measurement
period, as regulatory guidance may be issued related to the Tax
Legislation and as the Company completes its final analysis of the
impacts of the Tax Legislation, or (vi) any discrete tax events
including changes in tax rates or tax law and events arising from audits
or the resolution of uncertain tax positions. The Company has no current
understanding or agreement regarding any such transaction or definitive
plans regarding any such activity that has not been announced or
completed.

 
PVH CORP.
Full Year and Quarterly Reconciliations of GAAP to Non-GAAP
Amounts (continued)
 

2018 Estimated Revenue on a Constant
Currency Basis Reconciliation

 
     

Full Year 2018
(Estimated)
(Consolidated)

   

Full Year 2018
(Estimated)
(Calvin Klein)

   

Full Year 2018
(Estimated)
(Tommy Hilfiger)

   

Third Quarter
2018
(Estimated)
(Consolidated)

   

Third Quarter
2018
(Estimated)
(Calvin Klein)

   

Third Quarter
2018
(Estimated)
(Tommy Hilfiger)

               
GAAP revenue increase 7% 8% 9% 7% 5% 10%
Positive (negative) impact of foreign exchange 1%     —%     1% (2)%     (2)%     (2)%
Non-GAAP revenue increase on a constant currency basis 6% 8% 8% 9% 7% 12%
 
Please refer to the section entitled "Reconciliations of 2018
Constant Currency Revenue" for a description of the presentation of
constant currency amounts.
 

Reconciliation of GAAP Diluted Net Income
Per Common Share to Diluted Net Income Per Common Share on a
Non-GAAP Basis

 
      Full Year 2017     Third Quarter 2017
(Actual) (Actual)

(In millions, except per share data)

Results Under GAAP     Adjustments (1)   Non-GAAP Results Results Under GAAP     Adjustments (2)   Non-GAAP Results
 
Net income $ 537.8 $ (86.6 ) $ 624.4 $ 239.2 $ 1.8 $ 237.4
Total weighted average shares 78.6   78.6   78.5   78.5
 
Diluted net income per common share $ 6.84   $ 7.94   $ 3.05   $ 3.02
 
(1)     Represents the impact on net income in the year ended February 4,
2018 from the elimination of (i) a $2.5 million recognized actuarial
loss on retirement plans; (ii) $26.9 million of costs related to the
TH China acquisition, primarily consisting of noncash amortization
of short-lived assets; (iii) $54.2 million of costs in connection
with the Li & Fung termination; (iv) $19.2 million of costs in
connection with the relocation of the Tommy Hilfiger office in New
York, including noncash depreciation expense; (v) $9.4 million of
costs in connection with the noncash settlement of certain of the
Company's benefit obligations related to its retirement plans as a
result of an annuity purchased for certain participants, under which
such obligations were transferred to an insurer; (vi) $8.0 million
of net costs in connection with the consolidation within the
Company's warehouse and distribution network in North America, which
included a gain recorded on the sale of a warehouse and distribution
center; (vii) $82.9 million of costs in connection with an amendment
to Mr. Tommy Hilfiger's employment agreement pursuant to which the
Company made a cash buyout of a portion of future payments to Mr.
Hilfiger; (viii) $23.9 million of costs in connection with the early
redemption of the Company's $700 million 4 1/2% senior notes; (ix)
$4.2 million of costs in connection with the issuance of the
Company's €600 million 3 1/8% senior notes; (x) $54.0 million of tax
benefits associated with the foregoing pre-tax items; (xi) $22.6
million of discrete tax benefits related to the resolution of
uncertain tax positions; (xii) a $52.8 million discrete net tax
benefit associated with the Tax Legislation; and (xiii) a $15.2
million discrete tax benefit related to an excess tax benefit from
the exercise of stock options by the Company's Chief Executive
Officer.
(2) Represents the impact on net income in the quarter ended October 29,
2017 from the elimination of (i) $6.4 million of costs related to
the TH China acquisition, primarily consisting of noncash
amortization of short-lived assets; (ii) $5.1 million of costs in
connection with the relocation of the Tommy Hilfiger office in New
York, including noncash depreciation expense; (iii) $2.5 million of
costs in connection with the consolidation within the Company's
warehouse and distribution network in North America; (iv) $3.0
million of tax benefits associated with the foregoing pre-tax items;
and (v) $12.8 million of discrete tax benefits related to the
resolution of uncertain tax positions.

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