PVH CORP. /DE/ | 2013 | FY | 3

GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill, by segment, were as follows:
 
Calvin Klein North America
 
Calvin Klein International
 
Tommy Hilfiger North America
 
Tommy Hilfiger International
 
Heritage Brands Wholesale
 
Heritage Brands Retail
 
Total
Balance as of January 29, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill, gross
$
181,578

 
$
174,457

 
$
198,501

 
$
1,112,797

 
$
155,142

 
$
—

 
$
1,822,475

Accumulated impairment losses
—

 
—

 
—

 
—

 
—

 
—

 
—

Goodwill, net
181,578

 
174,457

 
198,501

 
1,112,797

 
155,142

 
—

 
1,822,475

Contingent purchase price payments to Mr. Calvin Klein
25,505

 
26,210

 
—

 
—

 
—

 
—

 
51,715

Goodwill from acquisition of Netherlands franchisee
—

 
—

 
—

 
11,036

 
—

 
—

 
11,036

Goodwill from reacquisition of Tommy Hilfiger tailored apparel license

—

 
—

 
—

 
23,735

 
—

 
—

 
23,735

Currency translation
—

 
875

 
—

 
49,051

 
—

 
—

 
49,926

Balance as of February 3, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill, gross
207,083

 
201,542

 
198,501

 
1,196,619

 
155,142

 
—

 
1,958,887

Accumulated impairment losses
—

 
—

 
—

 
—

 
—

 
—

 
—

Goodwill, net
207,083

 
201,542

 
198,501

 
1,196,619

 
155,142

 
—

 
1,958,887

Contingent purchase price payments to Mr. Calvin Klein
25,158

 
25,853

 
—

 
—

 
—

 
—

 
51,011

Goodwill from acquisition of Russian franchisee
—

 
—

 
—

 
5,033

 
—

 
—

 
5,033

Goodwill from acquisition of Warnaco
456,032

 
658,575

 
5,900

 
296,500

 
84,265

 
11,900

 
1,513,172

Currency translation
(4,624
)
 
(8,213
)
 
—

 
(8,276
)
 
(219
)
 
—

 
(21,332
)
Balance as of February 2, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill, gross
683,649

 
877,757

 
204,401

 
1,489,876

 
239,188

 
11,900

 
3,506,771

Accumulated impairment losses
—

 
—

 
—

 
—

 
—

 
—

 
—

Goodwill, net
$
683,649

 
$
877,757

 
$
204,401

 
$
1,489,876

 
$
239,188

 
$
11,900

 
$
3,506,771



In accordance with FASB guidance, the goodwill acquired in the Warnaco acquisition was assigned as of the acquisition date to the Company’s reporting units that are expected to benefit from the synergies of the combination. For those reporting units that had not been assigned any of the assets acquired or liabilities assumed in the acquisition, the amount of goodwill assigned was determined by calculating the estimated fair value of such reporting units before the acquisition and their estimated fair values after the acquisition.
    
The Company is required to make contingent purchase price payments to Mr. Calvin Klein in connection with the Company’s acquisition in 2003 of all of the issued and outstanding stock of Calvin Klein, Inc. and certain affiliated companies (collectively, “Calvin Klein”). Such payments are based on 1.15% of total worldwide net sales, as defined in the acquisition agreement (as amended), of products bearing any of the Calvin Klein brands and are required to be made with respect to sales made through February 12, 2018. A significant portion of the sales on which the payments to Mr. Klein are made are wholesale sales by the Company and its licensees and other partners to retailers.



The Company’s intangible assets consisted of the following:
 
February 2, 2014
 
February 3, 2013
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Intangible assets subject to amortization:
 
 
 
 
 
 
 
 
 
 
 
Customer relationships(1)
$
335,688

 
$
(68,260
)
 
$
267,428

 
$
190,383

 
$
(41,158
)
 
$
149,225

Covenants not to compete
2,220

 
(2,220
)
 
—

 
2,220

 
(2,220
)
 
—

Order backlog(1)
104,392

 
(104,392
)
 
—

 
32,287

 
(32,287
)
 
—

Reacquired license rights(1)
578,634

 
(23,016
)
 
555,618

 
8,565

 
(3,636
)
 
4,929

Total intangible assets subject to amortization
1,020,934

 
(197,888
)
 
823,046

 
233,455

 
(79,301
)
 
154,154

 
 
 
 
 
 
 
 
 
 
 
 
Indefinite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
Tradenames(1)
3,010,274

 
—

 
3,010,274

 
2,413,809

 
—

 
2,413,809

Perpetual license rights(1)
205,953

 
—

 
205,953

 
—

 
—

 
—

Reacquired perpetual license rights
12,916

 
—

 
12,916

 
13,042

 
—

 
13,042

Total indefinite-lived intangible assets
3,229,143

 
—

 
3,229,143

 
2,426,851

 
—

 
2,426,851

Total intangible assets
$
4,250,077

 
$
(197,888
)
 
$
4,052,189

 
$
2,660,306

 
$
(79,301
)
 
$
2,581,005


(1) Change from February 3, 2013 to February 2, 2014 primarily relates to intangible assets recorded in connection with the Warnaco acquisition. The acquired customer relationships are amortized principally over 10 years, order backlog was amortized principally over 6 months and reacquired license rights are amortized principally over 33 years from the date of the acquisition. As of February 2, 2014, the weighted average life of the amortizable intangible assets recorded in connection with the acquisition of Warnaco was 27.8 years.

Amortization expense related to the Company’s amortizable intangible assets was $118,587 and $12,902 for 2013 and 2012, respectively.

Assuming constant exchange rates and no change in the gross carrying amount of the intangible assets, amortization expense for the next five years related to the Company’s intangible assets as of February 2, 2014 is expected to be as follows:

Fiscal Year
 
Amount
2014
 
$
45,358

2015
 
45,009

2016
 
45,009

2017
 
45,009

2018
 
45,009

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