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 for Residents of the Commonwealth of Puerto Rico (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 and hourly retail field workers of PVH Corp. (the “Company”) who
are residents of the Commonwealth of Puerto Rico, at least age 21 or older, and 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 Employer Retirement Income Security Act of 1974 (“ERISA”).
Trustee and Recordkeeper
The Plan’s trustee is Banco Popular. The Plan’s Directed Employee Benefit custodian and recordkeeper through November 25,
2018 were Charles Schwab Bank and Milliman, Inc., respectively. Effective November 26, 2018, the plan custodian and recordkeeper are Great-West Trust Company and Empower Retirement, respectively.
Contributions
Each year, participants may contribute up to 10% of pre-tax annual compensation, as defined by the Plan, limited to
$15,000 per annum for the 2018 and 2017 plan years. In addition, eligible participants who have attained age 50 before the close of the plan year shall be eligible to make catch-up contributions up to $1,500 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 FOR RESIDENTS
OF THE COMMONWEALTH OF PUERTO RICO
NOTES TO FINANCIAL STATEMENTS
Vesting
Amounts attributable to employee contributions and the allocated earnings thereon are immediately vested. 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. Participant notes receivable are measured as the unpaid principal balance plus any accrued but unpaid interest.
At December 31, 2018, outstanding notes receivable from participants totaled $81,068, with maturity dates through 2023 at
interest rates ranging from 4.25% to 6.25%.
Forfeitures
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 $722 and $734, respectively, were used to reduce the Company’s matching contributions. At December 31, 2018 and 2017, forfeited non-vested accounts
totaled $673 and $600, respectively.
PVH ASSOCIATES INVESTMENT PLAN FOR RESIDENTS
OF THE COMMONWEALTH OF PUERTO RICO
NOTES TO FINANCIAL STATEMENTS
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.
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.
PVH ASSOCIATES INVESTMENT PLAN FOR RESIDENTS
OF THE COMMONWEALTH OF PUERTO RICO
NOTES TO FINANCIAL STATEMENTS
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 Plan custodian and are segregated from the assets of the Company.
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 years ended December 31, 2018 and 2017, the Plan purchased 57 and 73 shares, respectively, and sold 13 and 66
shares of the Company’s common stock, respectively. The Plan also received $170 and $131 during 2018 and 2017, respectively 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 FOR RESIDENTS
OF THE COMMONWEALTH OF PUERTO RICO
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 participant 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)
|
|
$1,008,183
|
|
$1,008,183
|
|
$ -
|
|
$ -
|
|
PVH Corp. common stock
(2)
|
|
86,844
|
|
86,844
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Total investments measured at fair value
|
|
$1,095,027
|
|
$1,095,027
|
|
$ -
|
|
$ -
|
|
Common collective trust fund measured at
|
|
|
|
|
|
|
|
|
|
net asset value
(3)
|
|
241,828
|
|
|
|
|
|
|
|
Total participant-directed investments
|
|
$1,336,855
|
|
|
|
|
|
|
PVH ASSOCIATES INVESTMENT PLAN FOR RESIDENTS
OF THE COMMONWEALTH OF PUERTO RICO
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)
|
|
$ 983,135
|
|
$ 983,135
|
|
$ -
|
|
$ -
|
|
PVH Corp. common stock
(2)
|
|
122,117
|
|
122,117
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Total investments measured at fair value
|
|
$1,105,252
|
|
$1,105,252
|
|
$ -
|
|
$ -
|
|
Common collective trust fund measured at
|
|
|
|
|
|
|
|
|
|
net asset value
(3)
|
|
216,139
|
|
|
|
|
|
|
|
Total participant-directed investments
|
|
$1,321,391
|
|
|
|
|
|
|
|
(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 a pricing vendor or 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.
6.
Income Tax Status
The Puerto Rico Department of the Treasury has determined and informed the Company by letter dated February 24, 2014 and
effective January 1, 2011, that the Plan and related trust is designed in accordance with the applicable sections of the Internal Revenue Code for a New Puerto Rico (“IRC”). Once qualified, the Plan is required to operate in conformity with the
Code to maintain its qualification. The Plan Administrator believes that the Plan is designed and 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.
SUPPLEMENTAL SCHEDULE
EIN: 13-1166910
Plan No: 014
PVH ASSOCIATES INVESTMENT PLAN FOR RESIDENTS
OF THE COMMONWEALTH OF PUERTO RICO
|
|
|
(c)
|
|
|
|
|
(b)
|
Description of investment
|
|
(e)
|
|
|
Identity of issuer, borrower,
|
including maturity date, rate of
|
(d)
|
Current
|
|
(a)
|
lessor or similar party
|
interest, collateral, par or
maturity value
|
Cost
|
Value
|
|
|
|
|
|
|
|
|
American Beacon Funds
|
American Beacon Large Cap Value Fund;
|
|
|
|
|
|
1,473.659 shares
|
**
|
$ 31,581
|
|
|
Dimensional Fund Advisors
|
DFA U.S. Targeted Value Portfolio Institutional;
|
|
|
|
|
|
525.581 shares
|
**
|
10,422
|
|
|
American Funds
|
Europacific Growth Fund R5; 358.291 shares
|
**
|
16,105
|
|
|
Fidelity Funds
|
Fidelity Balanced Fund; 1,330.224 shares
|
**
|
23,339
|
|
|
Metropolitan West
|
Metropolitan West Total Return Bond Fund;
|
|
|
|
|
|
4,777.078 shares
|
**
|
49,634
|
|
|
T. Rowe Price
|
T. Rowe Price Blue Chip Growth Fund;
|
|
|
|
|
|
374.875 shares
|
**
|
35,999
|
|
|
Vanguard
|
Vanguard Target Retirement 2025; 646.856 shares
|
**
|
13,694
|
|
|
Vanguard
|
Vanguard Target Retirement 2030; 1,140.612 shares
|
**
|
24,227
|
|
|
Vanguard
|
Vanguard Target Retirement 2035; 2,293.829 shares
|
**
|
48,859
|
|
|
Vanguard
|
Vanguard Target Retirement 2040; 2,617.331 shares
|
**
|
55,932
|
|
|
Vanguard
|
Vanguard Target Retirement 2045; 12,126.433 shares
|
**
|
259,627
|
|
|
Vanguard
|
Vanguard Target Retirement 2050; 9,291.127 shares
|
**
|
199,202
|
|
|
Vanguard
|
Vanguard Target Retirement 2055; 8,282.474 shares
|
**
|
178,073
|
|
|
Vanguard
|
Vanguard Target Retirement 2060; 260.993 shares
|
**
|
5,611
|
|
|
Vanguard
|
Vanguard Institutional Index Fund;
|
|
|
|
|
|
157.006 shares
|
**
|
35,727
|
|
|
Vanguard
|
Vanguard Total Bond Market Index
|
|
|
|
|
|
Institutional; 938.846 shares
|
**
|
9,811
|
|
|
Vanguard
|
Vanguard Total International Stock Index
|
|
|
|
|
|
Institutional; 11.620 shares
|
**
|
1,179
|
|
|
Wells Fargo Funds
|
Wells Fargo Stable Return Fund U; 4,681.146 shares
|
**
|
241,828
|
|
|
William Blair Funds
|
William Blair Mid Cap Growth I; 414.163 shares
|
**
|
9,161
|
|
*
|
PVH Corp.
|
PVH Corp. Common Stock; 934.307 shares
|
**
|
86,844
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$1,336,855
|
|
|
|
|
|
|
|
*
|
Notes receivable from participants
|
Participant notes receivable; loans maturing at various dates through 2023 and bearing interest at rates ranging
from 4.25% to 6.25%
|
**
|
$ 81,068
|
SCHEDULE H, LINE 4i--SCHEDULE OF ASSETS (HELD AT END OF YEAR) December 31, 2018
*
Party-in-interest
** Cost information is not required for participant-directed investments and therefore is not included.