Capital Allocation

Our capital allocation strategy is focused on
positioning our business for long-term growth,
while also delivering solid financial returns to
our stockholders.

Global Supply Chain

Financial accountability and solid balance sheet management remain key priorities for us. Our businesses have historically generated significant free cash flow which we use to strategically invest in our businesses to drive sustainable long-term growth and stockholder returns. We also pride ourselves on solid management of our working capital. Our capital allocation methodology is predicated on the following uses of our free cash flow:

  • Investing in products, marketing, infrastructure and the shopping experience to position our Calvin Klein, Tommy Hilfiger and Heritage Brands businesses for long-term growth.
  • Assuming more direct control over Calvin Klein and Tommy Hilfiger licensed businesses where we believe that we can leverage our core competencies to increase sales and profitability.
  • Repaying debt, with a target gross leverage ratio of approximately 2.5x.
  • Repurchasing shares of our stock under our current stock repurchase program.

GAAP to Non-GAAP Cash Flow Reconciliations

(Dollars in Millions)

2013 2014 2015           2016              
 
Cash Flow from Operations $412 $789 $900           $955                
Less:



Capital Expenditures $237 $257 $264           $247                 
Contingent Payments to Mr. Klein $53 $51 $51             $53                 
Dividends $12 $12             $12            $12                 
Free Cash Flow $110 $469 $573           $643               

GAAP to Non-GAAP Gross Debt/Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) Reconciliations

(Dollars in Millions, Except Ratios)


2013 (1) 2014 (2) 2015 (3) 2016 (4)
GAAP Net Income $144 $439 $572 $549
Pre-Tax Items Deemed Non-recurring or Non-operational $454 $391 $81 $5
GAAP Interest and Taxes $370 $91 $188 $241
GAAP Depreciation and Amortization $314 $245 $257 $322
Interest Items Deemed Non-recurring or Non-operational $(1) - - -
Depreciation and Amortization Items Deemed Non-recurring or Non-operational $(83) $(6) $(6) $(50)
Non-GAAP EBITDA as presented $1,198 $1,160 $1,092 $1,067
         
Debt, Including Current Portion and Short-term Borrowings $3,982 $3,557 $3,225 $3,242
Capital Lease Obligations $25 $18 $15 $16
Total Debt $4,007 $3,575 $3,240 $3,258
Gross Leverage Ratio 3.3 3.1 3.0 3.1
Total Cash $593 $479 $556 $730
  • (1) Amounts that were deemed non-recurring or non-operational for 2013 were (i) the costs incurred in connection with our acquisition and integration of The Warnaco Group, Inc. (“Warnaco”) and the related restructuring; (ii) the loss incurred in connection with the sale of substantially all of the assets of the G.H. Bass & Co. ("Bass") business, including related costs; (iii) the income recorded due to the amendment of an unfavorable contract, which resulted in the reduction of a liability recorded at the time of the Tommy Hilfiger acquisition; (iv) the costs incurred in connection with our debt modification and extinguishment; (v) the interest expense incurred prior to the Warnaco acquisition closing date related to the $700 of senior notes issued in 2012; and (vi) the recognized actuarial gain on retirement plans.
  • (2) Amounts that were deemed non-recurring or non-operational for 2014 were (i) the costs incurred in connection with our integration of Warnaco and the related restructuring; (ii) the costs incurred in connection with our exit from the Izod retail business, including noncash impairment charges; (iii) the costs incurred in connection with our exit from a discontinued product line in the Tommy Hilfiger Japan business; (iv) the impairment of certain Tommy Hilfiger stores in North America; (v) the costs incurred related to the sale of the Bass business; (vi) the costs incurred in connection with the amendment and restatement of our credit facility and the related redemption of our 7 3/8% senior notes due 2020; (vii) the net gain on the deconsolidation of certain Calvin Klein subsidiaries in Australia and New Zealand and the previously consolidated Calvin Klein joint venture in India; and (viii) the recognized actuarial loss on retirement plans.
  • (3) Amounts that were deemed non-recurring or non-operational for 2015 were (i) the costs incurred in connection with our integration of Warnaco and the related restructuring; (ii) the costs incurred in connection with the operation of and exit from the Izod retail business; (iii) the costs incurred principally in connection with the discontinuation of several licensed product lines in the Heritage Brands dress furnishings business; (iv) the costs incurred in connection with the licensing to G-III Apparel Group, Ltd. of the Tommy Hilfiger womenswear wholesale business in the U.S. and Canada (the “G-III license”), which resulted in the discontinuation of our directly operated Tommy Hilfiger North America womenswear wholesale business in the fourth quarter of 2016; (v) the gain recorded on our equity investment in the parent company of the Karl Lagerfeld brand ("Karl Lagerfeld"); and (vi) the recognized actuarial gain on retirement plans.
  • (4) Amounts that were deemed non-recurring or non-operational for 2016 were (i) the costs incurred in connection with our integration of Warnaco and the related restructuring; (ii) the costs incurred in connection with the discontinuation of several licensed product lines in the Heritage Brands dress furnishings business; (iii) the costs incurred in connection with the G-III license; (iv) the costs incurred in connection with the restructuring associated with the new global creative strategy for CALVIN KLEIN; (v) the noncash gain recorded to write-up our equity investment in TH Asia Ltd. ("TH China"), our former joint venture for Tommy Hilfiger in China, to fair value in connection with the acquisition of the 55% interest that we did not already own (the "TH China acquisition"); (vi) the one-time costs recorded on our equity investment in TH China prior to the TH China acquisition closing; (vii) the costs incurred in connection with the TH China acquisition, primarily consisting of noncash valuation adjustments and amortization of short-lived assets; (viii) the costs incurred in connection with the amendment of our credit facility; (ix) the noncash costs recorded in connection with the deconsolidation of our subsidiary that principally operated and managed our Calvin Klein business in Mexico (the "Mexico deconsolidation") in connection with the formation of a joint venture in Mexico to operate that and other businesses; (x) the gain recorded in connection with a payment made to us to exit a Tommy Hilfiger flagship store in Europe; (xi) the costs incurred in connection with the early termination of the license agreement for the Tommy Hilfiger men's tailored clothing business in North America (the "TH men's tailored license termination") in order to consolidate under a different licensee the men's tailored businesses for all brands in North America; and (xii) the recognized actuarial gain on retirement plans.

GAAP to Non-GAAP Net Income Reconciliations

(Dollars in Millions)

2013
GAAP Adjustments (1) Non-GAAP
Net Income (Loss) Attributable to PVH Corp. $144 $(437) $581
2014
GAAP Adjustments (2) Non-GAAP
Net Income (Loss) Attributable to PVH Corp. $439 $(169) $608
2015
GAAP Adjustments (3) Non-GAAP
Net Income (Loss) Attributable to PVH Corp. $572 $(14) $586
 2016 
GAAP Adjustments (4) Non-GAAP
Net Income (Loss) Attributable to PVH Corp. $549 $(1) $550
  • (1)Adjustments for 2013 from the elimination of (i) the costs incurred in connection with our acquisition and integration of Warnaco and the related restructuring; (ii) the loss incurred in connection with the sale of substantially all of the assets of the Bass business, including related costs; (iii) the income recorded due to the amendment of an unfavorable contract, which resulted in the reduction of a liability recorded at the time of the Tommy Hilfiger acquisition; (iv) the costs incurred in connection with our debt modification and extinguishment; (v) the interest expense incurred prior to the Warnaco acquisition closing date related to the $700 of senior notes issued in 2012; (vi) the recognized actuarial gain on retirement plans; (vii) the tax effects associated with the foregoing items; (viii) discrete tax items related to the Warnaco integration; and (ix) a non-recurring discrete tax item attributable to an increase in our previously-established liability for an uncertain tax position related to European and U.S. transfer pricing arrangements.
  • (2)Adjustments for 2014 from the elimination of (i) the costs incurred in connection with our integration of Warnaco and the related restructuring; (ii) the costs incurred in connection with our exit from the Izod retail business, including noncash impairment charges; (iii) the costs incurred in connection with our exit from a discontinued product line in the Tommy Hilfiger Japan business; (iv) the impairment of certain Tommy Hilfiger stores in North America; (v) the costs incurred related to the sale of the Bass business; (vi) the costs incurred in connection with the amendment and restatement of our credit facility and the related redemption of our 7 3/8% senior notes due 2020; (vii) the net gain on the deconsolidation of certain Calvin Klein subsidiaries in Australia and New Zealand and the previously consolidated Calvin Klein joint venture in India; (viii) the recognized actuarial loss on retirement plans; (ix) the tax effects associated with the foregoing items; and (x) the tax benefits associated with discrete items primarily related to the resolution of uncertain tax positions and various Warnaco integration activities.
  • (3)Adjustments for 2015 from the elimination of (i) the costs incurred in connection with our integration of Warnaco and the related restructuring; (ii) the costs incurred in connection with the operation of and exit from the Izod retail business; (iii) the costs incurred principally in connection with the discontinuation of several licensed product lines in the Heritage Brands dress furnishings business; (iv) the costs incurred in connection with the G-III license; (v) the gain recorded on our equity investment in Karl Lagerfeld; (vi) the recognized actuarial gain on retirement plans; (vii) the tax effects associated with the foregoing items; and (viii) the tax benefits associated with discrete items primarily related to the resolution of uncertain tax positions and the impact of enacted tax law and tax rate changes on deferred taxes.
  • (4)Adjustments for 2016 from the elimination of (i) the costs incurred in connection with our integration Warnaco and the related restructuring; (ii) the costs incurred in connection with the discontinuation of several licensed product lines in the Heritage Brands dress furnishings business; (iii) the costs incurred in connection with the G-III license; (iv) the costs incurred in connection with the restructuring associated with the new global creative strategy for CALVIN KLEIN; (v) the noncash gain recorded to write-up our equity investment in TH China to fair value in connection with the TH China acquisition; (vi) the one-time costs recorded on our equity investment in TH China prior to the TH China acquisition closing; (vii) the costs incurred in connection with the TH China acquisition, primarily consisting of noncash valuation adjustments and amortization of short-lived assets; (viii) the costs incurred in connection with the amendment of our credit facility; (ix) the noncash costs recorded in connection with the Mexico deconsolidation; (x) the gain recorded in connection with a payment made to us to exit a Tommy Hilfiger flagship store in Europe; (xi) the costs incurred in connection with the TH men's tailored license termination; (xii) the recognized actuarial gain on retirement plans; (xiii) the tax effects associated with the foregoing pre-tax items; and (xiv) the tax benefits associated with discrete items related to the resolution of uncertain tax positions.
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  • Figures exclude certain amounts that were deemed non-recurring or non-operational.