PVH Corp. Reports 2012 Fourth Quarter and Full Year Results

PVH Corp. Reports 2012 Fourth Quarter and Full Year Results

• Fourth Quarter Results Driven by Increased Earnings across All Businesses

• Full Year Non-GAAP EPS Was $6.58, Which Includes a $0.15 Favorable Impact Related to Change in Method of Accounting for Retirement Plans, and $6.43 Absent the Change

• Full Year GAAP EPS Was $5.87, Which Includes a $0.09 Unfavorable Impact Related to Change in Method of Accounting for Retirement Plans

• Company Provides Preliminary 2013 Non-GAAP EPS Guidance of $7.00

NEW YORK--(BUSINESS WIRE)-- PVH Corp. [NYSE: PVH] reported 2012 fourth quarter and full year results.

Non-GAAP Amounts:

The discussions of historical results in this release that refer to non-GAAP amounts exclude the items which are described in this release under the heading "Non-GAAP Exclusions." Reconciliations of GAAP to non-GAAP amounts are presented later in this release and identify and quantify all excluded items.

Overview of Fourth Quarter Results:

• Earnings per share was $1.60 on a non-GAAP basis, which includes a favorable impact related to the change in the Company's method of accounting for retirement plans and represents a 34% increase over the prior year period's non-GAAP earnings per share of $1.19 (as adjusted for the change). Absent the change in accounting method, non-GAAP earnings per share would have been $1.54 for the fourth quarter, which exceeds the top end of the Company's previous guidance by $0.05, and compares to $1.18 for the fourth quarter of 2011.

• GAAP earnings per share was $1.09, which includes a negative impact related to the change in the Company's method of accounting for retirement plans and represents a 127% increase over the prior year period's GAAP earnings per share of $0.48 (as adjusted for the change). The negative impact of the change was $0.17 in 2012 and $0.63 in 2011.

• Revenue of $1.636 billion increased 7% as compared to the prior year, including a 3% negative impact attributable to the exit from the Izod women's and Timberland wholesale sportswear businesses and foreign currency translation and a 3% benefit from an additional week of revenue, as the 2012 fiscal year included 53 weeks of operations.

• Operating margin on a non-GAAP basis increased 250 basis points due to a 320 basis point gross margin increase, driven by continued faster growth in the higher-margin Calvin Klein and Tommy Hilfiger businesses, combined with decreased product costs across all of the Company's businesses. GAAP operating margin increased 440 basis points due to the gross margin increase discussed above, combined with a decrease in pension expense.

Change in Method of Accounting for Retirement Plans:

During the fourth quarter of 2012, the Company changed its method of accounting for its retirement plans to (i) calculate expected return on plan assets using the fair value of plan assets; and (ii) immediately recognize actuarial gains and losses in its operating results in the year in which they occur. The Company believes this change improves the transparency of its operational performance by recognizing the effects of current economic and interest rate trends on plan investments and assumptions in current period earnings, thus allowing the Company to highlight this impact to investors. In addition, this change aligns the Company's method of accounting for its retirement plans with the method used by The Warnaco Group, Inc. ("Warnaco"), which the Company acquired on February 13, 2013. This change avoids the post-acquisition Company having two methods of accounting for its retirement plans. The financial data for all prior periods presented has been retrospectively adjusted to reflect the effect of this accounting change. Refer to Appendix A later in this release for a summary of the impact of this change and the adjusted prior period quarterly financial results.

Fourth Quarter Business Review:

The Company's calculations of the comparable store sales percentages throughout this press release are based on comparable weeks and, therefore, exclude the extra week in 2012. The extra week in 2012 was worth approximately $40 million of revenue and approximately $0.05 of earnings per share.

Tommy Hilfiger

Revenue in the Tommy Hilfiger business increased 9% to $891.1 million from $815.8 million in the prior year's fourth quarter, including a negative impact of approximately $10 million, or 1%, related to foreign currency translation. Revenue in the Tommy Hilfiger North America business increased 11%, with strong results in its retail business primarily attributable to (i) 5% comparable store sales growth; (ii) additional square footage expansion; and (iii) an increase due to the 53rd week of revenue (which increased overall Tommy Hilfiger North America revenue by 4%). Revenue in the Tommy Hilfiger International business increased 8%, driven by (i) a European retail comparable store sales increase of 9%; (ii) strength in the European wholesale business; and (iii) a 3% increase due to the extra week of revenue, partially offset by continued weakness in Japan, where the Company is currently in the process of strategically repositioning and investing in the brand, and a negative impact of 2% related to foreign currency translation.

On a non-GAAP basis, earnings before interest and taxes for the Tommy Hilfiger business increased 45% to $101.8 million from $70.2 million in the prior year's fourth quarter, driven by the net revenue increase discussed above and a 290 basis point improvement in gross margin, driven by an increase in average unit retail selling prices and a decrease in product costs.

On a GAAP basis, earnings before interest and taxes for the Tommy Hilfiger business increased 73% to $96.1 million, as compared to $55.6 million in the prior year's fourth quarter. This increase was due principally to the net impact of the overall revenue and gross margin increases noted above, combined with a decrease in integration and restructuring costs.

Calvin Klein

Revenue in the Calvin Klein business increased 14% to $317.4 million from $278.5 million in the prior year's fourth quarter, driven primarily by (i) strong growth in the North American wholesale business; (ii) new store openings and store expansions within the Company's Calvin Klein outlet retail business; and (iii) a benefit of approximately 2% due to the extra week of revenue. These increases were partially offset by a 2% comparable store sales decline in the Company's Calvin Klein North American outlet retail business. Calvin Klein royalty revenue increased 5% from continued global growth in women's sportswear, dresses and handbags, which was partially offset by a decline in royalty revenue due to a reduction in the European bridge apparel and accessories business (relating to the Company's announcement in the first quarter of 2012 that it would bring the business back in-house) and continued weakness in jeans in the United States and women's underwear in Europe and the United States.

Earnings before interest and taxes for the Calvin Klein business increased 5% to $73.8 million as compared to the prior year's fourth quarter amount of $70.1 million, driven principally by the revenue increases discussed above and increased gross margin in the North American apparel business due to product cost decreases. These increases were partially offset by increased advertising expense due, in large part, to the Calvin Klein Concept underwear commercial that was aired during the Super Bowl broadcast.

Heritage Brands

Total revenue for the Heritage Brands business decreased 2% to $427.7 million as compared to $438.5 million in the prior year's fourth quarter due to a $30 million, or 7%, negative impact related to the exit from the Izod women's and Timberland wholesale sportswear businesses. Excluding the impact of exited businesses, revenue for the Heritage Brands business increased 4%, due principally to strong growth in the Company's ongoing wholesale sportswear businesses and a benefit of approximately 2% due to the extra week of revenue. Comparable store sales for the Heritage Brands retail business were relatively flat to the prior year.

Earnings before interest and taxes for the Heritage Brands business was $26.6 million, an increase of 152% as compared to the prior year's fourth quarter of $10.5 million on a non-GAAP basis and an increase of 178% as compared to the prior year's fourth quarter of $9.6 million on a GAAP basis. The significant increase in earnings before interest and taxes was attributable to increases across the Company's Heritage Brands Dress Furnishings, Sportswear and Retail businesses, driven principally by an overall operating margin increase of 380 basis points that was fueled by strong gross margin improvement. The strong gross margin increase was driven by the Company's exit of the lower-margin Izod women's and Timberland wholesale sportswear businesses, coupled with an increase in average unit retail selling prices and lower product costs. The increase in earnings before interest and taxes on a GAAP basis was also attributable to the absence of approximately $1.0 million of costs incurred in the fourth quarter of 2011 in connection with the exit of businesses mentioned above.

Fourth Quarter Consolidated Earnings:

On a non-GAAP basis, earnings before interest and taxes increased 38% to $180.3 million from $130.3 million in the prior year's fourth quarter. Driving the overall increase in non-GAAP earnings before interest and taxes was (i) an increase of $31.5 million in the Tommy Hilfiger business; (ii) an increase of $16.0 million in the Heritage Brands business; and (iii) an increase of $3.7 million in the Calvin Klein business.

On a GAAP basis, earnings before interest and taxes increased 217% to $109.9 million as compared to $34.7 million in the prior year's fourth quarter. The increase was due principally to the net effect of the changes discussed above, combined with the net effect of (i) a $48.0 million decrease in recognized actuarial losses on retirement plans; (ii) a $13.4 million decrease in integration and restructuring costs associated with the Tommy Hilfiger acquisition and exit costs associated with the Izod women's and Timberland wholesale sportswear businesses; and (iii) $36.2 million of costs incurred in the current year's fourth quarter related to the acquisition of Warnaco.

Full Year 2012 Consolidated Results:

• Earnings per share on a non-GAAP basis was $6.58, which includes a $0.15 favorable impact related to the retirement plan accounting change and represents an increase of 21% as compared to the prior year's earnings per share of $5.44 (as adjusted for the change). Absent the accounting change, non-GAAP earnings per share would have been $6.43 for 2012, which exceeded the top end of the Company's previous guidance by $0.05, and $5.38 for 2011.

• GAAP earnings per share was $5.87, which includes a negative impact related to the accounting change and represents an increase of 55% as compared to the prior year's earnings per share of $3.78 (as adjusted for the change). The negative impact of the change was $0.09 per share in 2012 and $0.58 per share in 2011.

• Revenue increased 3% to $6.043 billion, including a negative impact of 4% attributable to foreign currency translation and the exited sportswear businesses. The overall increase in revenue was due to the net impact of:

  • A 5%, or $166.2 million, increase in the Tommy Hilfiger business, including a negative impact of approximately $110 million, or 4%, related to foreign currency translation. Within the Tommy Hilfiger North America business, revenue increased 10%, principally driven by retail comparable store sales growth of 10%. Revenue in the Tommy Hilfiger International business increased 2%, including a negative impact of 6% related to foreign currency translation. On a constant currency basis, revenue for the Tommy Hilfiger International business increased 8%, driven by European retail comparable store sales growth of 11% and strength in the European wholesale business, partially offset by continued weakness in Japan, where the Company is currently in the process of strategically repositioning and investing in the brand.

  • An 8%, or $85.1 million, increase in the Calvin Klein business, driven primarily by (i) a 12% increase in the Company's Calvin Klein outlet retail business, which was attributable to new store openings, store expansions and a 5% increase in comparable store sales; and (ii) a 16% increase in the North American wholesale business. Royalty revenue increased 2% as compared to the prior year period, including a negative impact of 1% related to foreign currency translation. Continued global growth in women's sportswear, dresses, footwear and handbags was partially offset by a decline in royalty revenue related to a reduction in the European bridge apparel and accessories business (relating to the Company's announcement in the first quarter of 2012 that it would bring the business back in-house) and continued weakness in jeans and women's underwear in Europe and the United States.

  • A 6%, or $98.9 million, decrease in the Heritage Brands business, including the negative impact of 6% related to the exited sportswear businesses. The Company's ongoing Heritage Brands wholesale sportswear businesses experienced strong growth, while the dress furnishings business experienced a 7% decline due principally to a reduction in sales to J.C. Penney. Comparable store sales in the Heritage Brands retail business were relatively flat.

• On a non-GAAP basis, earnings before interest and taxes increased $69.7 million to $751.6 million. This change resulted from:

  • An $84.1 million increase in the Tommy Hilfiger business due principally to the revenue increase mentioned above combined with gross margin improvement due primarily to higher average unit retail selling prices globally. Partially offsetting this increase was the negative impact of approximately $15 million related to foreign currency translation.

  • A $6.9 million increase in the Calvin Klein business attributed to the revenue increase discussed above, partially offset by a planned gross margin decline resulting principally from the impact of higher product costs experienced in the first half of the year.

  • A $12.0 million decrease in the Heritage Brands business due principally to the revenue decline mentioned above, combined with the negative impact of higher product costs principally in the first half of the year.

• GAAP earnings before interest and taxes increased $169.2 million to $660.4 million. This change resulted from:

  • An increase of $139.1 million in the Tommy Hilfiger business due to the items described above, combined with the absence of $20.7 million of expenses incurred in connection with the Company's buyout of the perpetual license for Tommy Hilfiger in India and a $34.3 million decrease in integration and restructuring costs.

  • An increase of $6.9 million in the Calvin Klein business as described above.

  • A $27.1 million decrease in corporate expenses due principally to the net impact of (i) a decrease of $48.0 million in recognized actuarial losses on retirement plans and (ii) a net $30.9 million decrease in integration, restructuring and debt modification costs; partially offset by (iii) $42.6 million of costs incurred in the current year related to the acquisition of Warnaco.

  • A $3.9 million decrease in the Heritage Brands business due to the items described above, partially offset by the absence of $8.1 million of business exit costs.

• On a non-GAAP basis, the effective tax rate was 23.8% as compared to 28.3% in the prior year period. The GAAP effective tax rate was 20.1% as compared to 24.1% for the prior year period. The Company's 2012 tax rates were positively impacted by an increase in the proportion of earnings attributable to foreign jurisdictions that are subject to favorable tax rates, as well as the continuation of the tax synergies achieved from the Tommy Hilfiger acquisition. In addition, positively impacting the 2012 GAAP effective tax rate was a benefit resulting from the recognition of previously unrecognized net operating loss assets and tax credits. Positively impacting the 2011 GAAP effective tax rate was the revaluation of certain deferred tax liabilities in connection with a fourth quarter decrease in the statutory tax rate in Japan.

CEO Comments:

Commenting on these results, Emanuel Chirico, Chairman and Chief Executive Officer, noted, "2012 marked another year of strong performance and sustained growth for PVH, exceeding our expectations. The strength of our brand portfolio, led by Calvin Klein and Tommy Hilfiger, enabled us to navigate successfully through the global macroeconomic pressures and associated difficult consumer spending environment, which also included higher product costs and foreign currency volatility during the first half of the year."

Mr. Chirico continued, "We completed our acquisition of Warnaco on February 13, 2013, and believe that the long term opportunities from this acquisition are significant. Having now owned the business for about 45 days, we believe that additional investments above our initial expectations are required to achieve our goal of rebuilding the global Calvin Klein jeanswear and underwear businesses. Therefore, we see 2013 as a year of investment and transition for the Warnaco business. These investments include: (i) enhancing the existing infrastructure (systems and supply chain), (ii) upgrading Calvin Klein jeanswear product design and quality with an emphasis on geographic differentiation, (iii) investing in in-store marketing and the in-store customer experience, (iv) adding appropriate talent to fill key design, marketing and merchandising positions, (v) rationalizing global excess inventory levels, and (vi) reducing and restructuring the off-price and club sales distribution in Europe and North America. Given these additional investments, we now project that the overall impact of the Warnaco transaction will be dilutive to 2013 earnings per share on a non-GAAP basis by approximately $0.25."

Mr. Chirico concluded, "At the core of our success and our opportunity is the power of our global designer lifestyle brands, Calvin Klein and Tommy Hilfiger. 2013 will be a transitional year for PVH, during which we will build the foundation for long-term sustainable growth for our businesses across the world. I believe we will emerge stronger and the investments we will make this year will help drive the Calvin Klein business going forward. Further, we believe they will pave the way for enhanced profitability and stockholder value, translating into expected earnings per share growth in excess of 15% per year for 2014 and beyond."

2013 Preliminary Guidance:

Please see the section entitled "2013 Full Year and First Quarter 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.

Warnaco Acquisition

On February 13, 2013, the Company completed its acquisition of Warnaco. The following provides guidance for the Company's full year and first quarter 2013, inclusive of the operations of the acquired Warnaco business starting from the acquisition date.

Preliminary Full Year Guidance

Revenue in 2013 is currently projected to be approximately $8.2 billion. This amount reflects the elimination of approximately $200 million of revenue generated, in the aggregate, by the Company and Warnaco in 2012 through transactions between each other and approximately $100 million of additional lost revenue from the absence of the 53rd week in 2013 and the revenue generated by Warnaco for the first ten days of the Company's 2013 fiscal year, since the acquisition did not close until February 13, 2013. The Company's expectation for revenue from the acquired Warnaco businesses is approximately $2.15 billion, which is relatively flat as compared to Warnaco's 2012 revenue (excluding approximately $230 million of revenue related to the Chaps men's sportswear business, which Ralph Lauren Corporation is reacquiring).

Non-GAAP earnings per share is currently projected to be approximately $7.00, as compared to the $6.58 in 2012, reflecting approximately $0.25 per share of dilution as a result of the Warnaco acquisition.

The Company estimates the earnings before interest and taxes on a non-GAAP basis from the acquired Warnaco businesses will be approximately 20% lower than the Company's original plan, driven by the incremental investments required in the business as discussed above. The Company projects synergies to be realized in 2013 to be approximately $25 million versus the initial expectation of approximately $50 million as a result of additional time needed to realize some of the projected savings. Given the additional time required to effect the upgrade of Warnaco's systems and supply chain, overall synergies of approximately $100 million are now expected to be realized over the next four years. The Company now believes the overall impact of the transaction will be dilutive to 2013 earnings per share on a non-GAAP basis by approximately $0.25.

Additionally, the Calvin Klein licensing business is contending with approximately $20 million of reduced revenue and operating income in 2013 as a direct result of the expiration or termination of certain long-term contractual agreements that guaranteed revenue relating to the European bridge business, the North American women's sportswear business and the Calvin Klein Collection business.

The Company currently projects that 2013 interest expense will be approximately $200 million and that the 2013 full year tax rate will be approximately 25.5% to 26.5%.

The Company's 2013 earnings per share estimate excludes approximately $125 million of pre-tax costs associated with the acquisition and integration of Warnaco. (Please see section entitled "Non-GAAP Exclusions" for details on these pre-tax costs.)

Preliminary First Quarter Guidance

Revenue in the first quarter of 2013 is expected to be approximately $1.9 billion. On a non-GAAP basis, earnings per share for the first quarter is currently projected to be relatively flat as compared to $1.33 in the prior year's first quarter. The Company's first quarter 2013 earnings per share estimate excludes approximately $50 million of pre-tax costs associated with the acquisition and integration of Warnaco. (Please see section entitled "Non-GAAP Exclusions" for details on these pre-tax costs.)

Non-GAAP Exclusions:

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

• Pre-tax costs of approximately $125 million expected to be incurred in 2013 in connection with the acquisition of Warnaco, of which $50 million is expected to be incurred in the first quarter.

• Pre-tax costs of $20.5 million incurred in 2012 principally in connection with the integration of Tommy Hilfiger and the related restructuring, of which $3.3 million was incurred in the first quarter, $4.5 million was incurred in the second quarter, $6.6 million was incurred in the third quarter, and $6.1 million was incurred in the fourth quarter.

• Pre-tax costs of $42.6 million incurred in 2012 in connection with the acquisition of Warnaco, of which $6.4 million was incurred in the third quarter and $36.2 million was incurred in the fourth quarter.

• A pre-tax expense of $28.1 million recorded in the fourth quarter of 2012 related to recognized actuarial losses on retirement plans.

• Pre-tax interest expense of $3.7 million recorded in the fourth quarter of 2012 related to $700 million of new senior notes, which were issued during the fourth quarter to fund a portion of the purchase price for the Warnaco acquisition.

• A tax benefit of $14.0 million in 2012 related to the recognition of previously unrecognized net operating loss assets and tax credits, of which $4.5 million was recorded in the third quarter and $9.5 million was recorded in the fourth quarter.

• Pre-tax costs of $69.5 million incurred in 2011 in connection with the integration of Tommy Hilfiger and the related restructuring, of which $30.5 million was incurred in the first quarter, $11.2 million was incurred in the second quarter, $9.3 million was incurred in the third quarter, and $18.6 million was incurred in the fourth quarter.

• Pre-tax costs of $16.2 million incurred in the first quarter of 2011 in connection with the amendment and restatement of the Company's credit facility.

• Pre-tax costs of $8.1 million incurred in 2011 in connection with the Company's negotiated early termination of its license to market sportswear under the Timberland brand and the Company's 2012 exit from the Izod women's wholesale sportswear business, of which $6.7 million was incurred in the second quarter, $0.5 million was incurred in the third quarter and $1.0 million was incurred in the fourth quarter.

• A pre-tax expense of $20.7 million incurred in the third quarter of 2011 in connection with the Company's reacquisition of the rights in India to the Tommy Hilfiger trademarks that had been subject to a perpetual license, as under accounting rules, the Company was required to record an expense due to settling the preexisting license agreement, which was unfavorable to the Company.

• A pre-tax expense of $76.1 million recorded in the fourth quarter of 2011 related to recognized actuarial losses on retirement plans.

• A tax benefit of $5.4 million recorded in the fourth quarter of 2011 resulting from revaluing certain deferred tax liabilities in connection with a decrease in the statutory tax rate in Japan.

• Estimated tax effects associated with the above pre-tax costs, which are based on the Company's assessment of deductibility. In making this assessment, the Company evaluated each item that it has recorded as an acquisition, integration, restructuring or debt modification cost or actuarial loss on retirement plans immediately recognized in earnings to determine if such cost is tax deductible, and if so, in what jurisdiction the deduction would occur. All items above were identified as either primarily tax deductible in the United States, in which case the Company assumed a combined federal and state tax rate of 38.0%, or as non-deductible, in which case the Company assumed no tax benefit.

Please see Tables 1 through 6 and the sections entitled "2013 Full Year and First Quarter Reconciliations of GAAP to Non-GAAP Amounts" and "Appendix A" 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 year end earnings release is scheduled for Thursday, March 28, 2013 at 9:00 a.m. EDT. Please log on either to the Company's web site atwww.pvh.com and go to the Press Releases page under the Investors tab or to www.companyboardroom.com 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 or www.companyboardroom.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 #5764063. 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, including, without limitation, statements relating to the Company's acquisition of The Warnaco Group, Inc. ("Warnaco"), 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, the following: (i) the Company's plans, strategies, objectives, expectations and intentions are subject to change at any time at the discretion of the Company; (ii) in connection with the acquisition of Warnaco, the Company borrowed significant amounts, may be considered to be highly leveraged, and will have to use a significant portion of its cash flows to service such 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 plans and results of operations will be affected by the Company's ability to manage its growth and inventory, including the Company's ability to realize benefits from Warnaco; (v) the Company's operations and results could be affected by quota restrictions and the imposition of safeguard controls (which, among other things, could limit the Company's ability to produce products in cost-effective countries that have the labor and technical expertise needed), the availability and cost of raw materials, 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), changes in available factory and shipping capacity, wage and shipping cost escalation, and civil conflict, war or terrorist acts, the threat of any of the foregoing, or political and 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; (vi) 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; (vii) acquisitions and issues arising with acquisitions and proposed transactions, including, without limitation, the ability to integrate an acquired entity, such as Warnaco, into the Company with no substantial adverse effect on the acquired entity's or the Company's existing operations, employee relationships, vendor relationships, customer relationships or financial performance; (viii) 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; and (ix) 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. A reconciliation of these measures is 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.

Please see following pages for information related to non-GAAP measures discussed in this release.

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

The Company believes presenting its results excluding (i) the costs incurred in 2012 and 2011 in connection with its integration of Tommy Hilfiger B.V. and certain affiliated companies (collectively, "Tommy Hilfiger") and the related restructuring; (ii) the costs incurred in 2012 in connection with its acquisition of Warnaco, which closed on February 13, 2013; (iii) the interest expense incurred in 2012 in connection with the issuance of $700 million of senior notes related to the Company's acquisition of The Warnaco Group, Inc. ("Warnaco"); (iv) the expense incurred in 2011 associated with settling the unfavorable preexisting license agreement in connection with its buyout of the perpetual license for Tommy Hilfiger in India; (v) the costs incurred in 2011 in connection with the modification of its credit facility; (vi) the costs incurred in 2011 in connection with the negotiated early termination of its license to market sportswear under the Timberland brand and its exit from the Izod women's wholesale sportswear business; (vii) the recognized actuarial losses on retirement plans in 2012 and 2011; (v