Report of Independent Registered Public Accounting Firm
Administrative Committee of the Plan
PVH Associates Investment Plan
Opinion on the Financial Statements
We have audited the accompanying statements of net assets available for plan benefits of the PVH Associates Investment Plan
(the “Plan”) as of December 31, 2018 and 2017, the related statements of changes in net assets available for plan benefits for the year ended December 31, 2018, and the related notes (collectively, the financial statements). In our opinion, the
financial statements present fairly, in all material respects, the net assets available for plan benefits of the Plan as of December 31, 2018 and 2017, and the changes in net assets available for plan benefits for the ended December 31, 2018, in
conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on
the Plan’s financial statements based on our audits. We are a public accounting firm
registered with the Public Company Accounting Oversight Board (United States) (PCAOB)
and are required to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Accompanying Supplemental Information
The supplemental information in the accompanying Schedule H, line 4i - schedule of assets (held at end of year) as of
December 31, 2018, has been subjected to audit procedures performed in conjunction with the audit of the Plan’s financial statements. The supplemental information is the responsibility of the Plan’s management. Our audit procedures included
determining whether the supplemental information reconciles to the financial statements or the underlying accounting and other records, as applicable and performing procedures to test the completeness and accuracy of the information presented in the
supplemental information. In forming our opinion on the supplemental information, we evaluated whether the supplemental information, including its form and content, is presented in conformity with the Department of Labor’s Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental information is fairly stated, in all material respects, in relation to the financial statements as a whole.
We have served as the Plan’s auditor since 2005.
Spielman, Koenigsberg & Parker, LLP
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2018 and 2017
1.
Description of the Plan
The following description of the PVH Associates Investment Plan (the “Plan”) provides only general information. Participants
should refer to the Plan Document for a more complete description of the Plan’s provisions.
General
The Plan is a defined contribution plan covering salaried or hourly clerical, warehouse, distribution, and United States
retail field employees of PVH Corp. (the “Company”) who are at least age 21 or older, have completed the earlier of; at least three consecutive months of service and are regularly scheduled to work at least 20 hours per week; or have completed at
least 1,000 hours of service during the first 12 months of employment or in any subsequent calendar year. The Plan is subject to the reporting and disclosure requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”).
Trustee and Recordkeeper
Through November 25, 2018, the Plan’s trustee and recordkeeper were Charles Schwab Bank and Milliman, Inc., respectively.
Effective November 26, 2018, the Plan’s recordkeeper and trustee services were Empower Retirement and Great-West Trust Company, respectively.
Contributions
Participants may contribute up to 25% of pre-tax annual compensation, as defined by the Plan, limited to $18,500 and $18,000
per annum for the 2018 and 2017 plan years, respectively. In addition, eligible participants who have attained the age of 50 before the close of the plan year are eligible to make catch-up contributions up to $6,000 for the 2018 and 2017 plan
years. The Company matches 100% of the first 1% of eligible compensation that a participant contributes to the Plan, plus 50% of the next 5% of eligible compensation contributed by the participant.
Participant Accounts
Each participant’s account is credited with the participant’s contributions and allocations of (a) the Company’s
contributions and (b) Plan earnings. Forfeited balances of terminated participants’ nonvested accounts are used to reduce future Company contributions.
PVH ASSOCIATES INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
Vesting
Amounts attributable to participant contributions and the allocated earnings thereon are immediately vested. All
participants become 100% vested in Company contributions and the allocated earnings thereon after two years of service. Upon death, permanent disability, or reaching age 65, participants or their beneficiaries become 100% vested in Company
contributions.
Investment Options
Upon enrollment in the Plan, a participant may direct employee or Company contributions into any of the various investment
options. A participant may contribute a maximum of 25% of contributions in PVH Corp. common stock.
Notes Receivable from Participants
Participants may borrow from the Plan, with certain restrictions, using their vested account balance as collateral. The
minimum loan amount is $1,000 and the maximum loan amount is the lesser of (i) $50,000 reduced by the participant’s highest outstanding loan balance during the previous 12 months, or (ii) 50% of the vested value of the participant’s account. Interest
is fixed for the term of the loan at the prime rate plus 1%. Loan repayments are made through payroll deductions, which may be specified for a term of 1 to 5 years or up to 15 years for the purchase of a primary residence. Upon termination of
employment, a participant is given 90 days to repay the loan in full or to establish loan repayments through an ACH debit origination before it is considered to be in default. Delinquent loans are considered to be distributions based on the terms of
the Plan document. Notes receivable from participants are measured as the unpaid principal balance plus any accrued but unpaid interest.
At December 31, 2018, outstanding notes receivable from participants totaled $10,939,989, with maturity dates through 2033
at interest rates ranging from 4.25% to 9.25%.
Forfeitures
Company contributions made on behalf of non-vested or partially vested employees who have terminated are retained by the
Plan and are used to reduce the Company’s future matching contributions. In 2018 and 2017, forfeitures of $352,940 and $916,553, respectively, were used by the Plan to reduce the Company’s matching contributions. At December 31, 2018 and 2017,
cumulative forfeited non-vested accounts totaled $173,663 and $178,743, respectively.
Payment of Benefits
Participants electing final distributions will receive payment in the form of a lump sum amount or installment payments
equal to the value of their vested account unless the participant notifies the Company of their intent to receive all or a portion of their investment balance in PVH Corp. common stock in the form of shares.
PVH ASSOCIATES INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
Plan Termination
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions
at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested in their accounts.
2.
Significant Accounting Policies
Basis of Accounting
The accompanying financial statements of the Plan were prepared using the accrual basis of accounting.
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States
of America requires the Plan administrator to make estimates and assumptions that affect the reported amounts of assets and liabilities therein, and disclosures of contingent assets and liabilities. Accordingly, actual results may differ from those
estimates.
Administrative Expenses
In general, costs and expenses of administering the Plan are paid and absorbed by the Plan or the Plan Sponsor. The Plan's
administrative expenses may be paid for through offsets and/or payments associated with one or more of the Plan's investment options. Investment management or related fees associated with certain investment fund options are paid by participants.
Investments
Investments are recorded in the accompanying financial statements at fair value. Purchases and sales of securities are
reflected on a settlement date basis. All assets of the Plan are held by the Trustee and are segregated from the assets of the Company.
PVH ASSOCIATES INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
Recent Accounting Guidance
In August 2018, the FASB issued ASU 2018-13,
Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement
. The objective of this guidance is to improve the effectiveness of disclosure for fair value measurements by adding, eliminating and
modifying certain disclosure requirements. The ASU should be applied retrospectively and is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Plan early
adopted this standard in 2018 and adoption had no impact on the Plan financial statements.
3.
Party-In-Interest Transactions
During the year ended December 31, 2018, the Plan purchased 22,494 and sold 29,046 shares of the Company’s common stock and
received $78,271 during 2018 from the Company as payment of dividends on its common stock. During the year ended December 31, 2017, the Plan purchased 24,502 and sold 45,630 shares of the Company’s common stock and received $65,763 from the Company
as payment of dividends on its common stock. Certain legal and accounting fees, and administrative expenses relating to the maintenance of participant eligibility records are paid by the company participating in the plan, and accordingly, are not
included in the financial statements of the Plan.
4.
Fair Value Measurements
The FASB defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the
principal or most advantageous market in an orderly transaction between market participants at the measurement date. The guidance establishes a three level fair value hierarchy that prioritizes the inputs used to measure fair value. The three
levels of the hierarchy are defined as follows:
Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Plan has the
ability to access at the measurement date.
PVH ASSOCIATES INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
Level 2 – Observable inputs other than quoted prices included in Level 1, including quoted prices for identical assets or
liabilities in inactive markets, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability, and inputs derived principally from or corroborated by observable
market data.
Level 3 – Unobservable inputs reflecting the Plan’s own assumptions about the inputs that market participants would use in
pricing the asset or liability based on the best information available.
If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is
based on the lowest level input that is significant to the fair value measurement of the instrument.
The following tables set forth the financial assets of the Plan by level within the fair value hierarchy, as of December 31,
2018 and 2017:
|
|
|
|
Fair Value Measurements at
|
|
|
|
|
December 31, 2018
|
|
Asset Category
|
|
Total
|
|
Quoted Prices
In Active
Markets for
Identical Assets
(Level 1)
|
|
Significant
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds
(1)
|
|
$524,883,525
|
|
$524,883,525
|
|
$ -
|
|
$ -
|
|
PVH Corp. common stock
(2)
|
|
38,710,702
|
|
38,710,702
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Total investments measured at fair value
|
|
$563,594,227
|
|
$563,594,227
|
|
$ -
|
|
$ -
|
|
Common collective trust fund measured at
|
|
|
|
|
|
|
|
|
|
net asset value
(3)
|
|
$ 35,967,196
|
|
|
|
|
|
|
|
Total participant-directed investments
|
|
$599,561,423
|
|
|
|
|
|
|
PVH ASSOCIATES INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
|
|
|
|
Fair Value Measurements at
|
|
|
|
|
December 31, 2017
|
|
Asset Category
|
|
Total
|
|
Quoted Prices
In Active
Markets for
Identical Assets
(Level 1)
|
|
Significant
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds
(1)
|
|
$ 547,677,054
|
|
$ 547,677,054
|
|
$ -
|
|
$ -
|
|
PVH Corp. common stock
(2)
|
|
58,150,421
|
|
58,150,421
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Total investments measured at fair value
|
|
$ 605,827,475
|
|
$ 605,827,475
|
|
$ -
|
|
$ -
|
|
Common collective trust fund measured at
|
|
|
|
|
|
|
|
|
|
net asset value
(3)
|
|
$ 33,837,885
|
|
|
|
|
|
|
|
Total participant-directed investments
|
|
$ 639,665,360
|
|
|
|
|
|
|
|
(1)
|
Valued at the net asset value of the fund(s), as determined by the closing price in the active market in which the individual fund is traded.
|
|
(2)
|
Valued at the closing price of PVH Corp. common stock as determined by the closing price in the active market in which the securities are traded.
|
|
(3)
|
Valued at the net asset value of the fund, as determined by the fund family. The Plan has no unfunded commitments related to this common collective trust
fund. This fund invests in guarantee contracts and instruments and is redeemable on a daily basis without restriction.
|
5.
Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest
rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could
materially affect participants’ account balances and the amount reported in the Statements of Net Assets Available for Benefits.
PVH ASSOCIATES INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
6.
Income Tax Status
The IRS has determined and informed the Company by a letter dated April 25, 2017, that the Plan and related trust are designed
in accordance with the applicable sections of the Internal Revenue Code (“IRC”) and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the IRC to maintain its qualification. The
Plan Administrator believes that the Plan is currently designed and is currently being operated in compliance with the applicable requirements of the IRC and therefore believes that the Plan is qualified and the related trust is tax-exempt.
7.
Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500 at
December 31, 2017:
|
|
|
|
|
2017
|
|
Net assets available for benefits per the financial
|
|
|
|
|
statements
|
|
|
|
$651,787,518
|
|
Amounts allocated to withdrawing participants
|
|
|
|
(85,297
)
|
|
|
|
|
|
|
|
Net assets available for benefits per the Form 5500
|
|
|
|
$651,702,221
|
|
|
|
|
|
|
The following is a reconciliation of benefits paid to participants per the financial statements to the Form 5500 for the year
ended December 31, 2017:
|
|
|
2017
|
|
|
|
|
|
Benefits paid to participants per the financial statements
|
|
$ 42,210,323
|
|
Add: Amounts allocated to withdrawing participants at
|
|
|
|
December 31, 2017
|
|
85,297
|
|
Less: Amount allocated to withdrawing participants at
|
|
|
|
December 31, 2016
|
|
142,258
|
|
Benefits paid to participants per the Form 5500
|
|
$ 42,153,362
|
Amounts allocated to withdrawing participants are recorded on the Form 5500 for benefit claims that have been processed and
approved for payment prior to December 31, 2017, but not yet paid as of that date.
SUPPLEMENTAL SCHEDULE
EIN: 13-1166910
Plan No: 007