# PVH CORP. /DE/ (PVH) FY 2025 MD&A Verbatim Item 7 Management's Discussion and Analysis from PVH CORP. /DE/'s 10-K for fiscal year 2025. SEC filing source: https://www.sec.gov/Archives/edgar/data/78239/000007823925000018/pvh-20250202.htm Accession: 0000078239-25-000018 Filing date: 2025-04-01 Report date: 2025-02-02 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture. Confidence: high Company profile: /company/PVH/ All MD&A years: /company/PVH/mda/ Previous year: /company/PVH/mda/fy2024/ (FY 2024) Next year: /company/PVH/mda/fy2026/ (FY 2026) Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW The following discussion and analysis is intended to help you understand us, our operations and our financial performance. It should be read in conjunction with our consolidated financial statements and the accompanying notes, which are included elsewhere in this report. We are one of the largest global apparel companies in the world, with a history going back over 140 years. We have been listed on the New York Stock Exchange for over 100 years. We generated revenue of $8.7 billion, $9.2 billion, and $9.0 billion in 2024, 2023 and 2022 respectively, with over 70% of our revenue in 2024 and 2023, and over 65% of our revenue in 2022 generated outside of the United States. Our global iconic lifestyle brands, TOMMY HILFIGER and Calvin Klein, together generated over 90% of our revenue during each of the last three years. In addition to TOMMY HILFIGER and Calvin Klein, which are owned, we previously owned a portfolio of other brands, which primarily consisted of Warner’s, Olga and True&Co., which we owned until November 27, 2023. We also license Van Heusen, Nike and other brands for certain product categories. PVH+ Plan The PVH+ Plan is our multi-year, strategic plan to build Calvin Klein and TOMMY HILFIGER into the most desirable lifestyle brands in the world and make PVH the leading brand building group in our sector. A description of the plan can be seen in Item 1 of this report under the heading “Our Business Strategy.” RESULTS OF OPERATIONS Investigation by China’s Ministry of Commerce In September 2024, MOFCOM announced that it had initiated an investigation into our business under the UEL Provisions. In October 2024, we submitted a written response to MOFCOM and, in December 2024, we submitted a supplementary response. In January 2025, MOFCOM issued a preliminary finding that PVH Corp. had violated normal market trading principles and in February it announced its determination and placed PVH Corp. on the UEL. We do not know if or when MOFCOM will implement any measures as a result of the listing or what they will be if any are imposed. Approximately 6% and 20% of our revenue and income before interest and taxes, respectively, were generated in China in 2024. Furthermore, if, as a result of any such measures, it is necessary for us to cease certain or all operations in China, it may result in charges related to excess inventory and difficulty collecting trade receivables, among other things. We may also incur material non-cash impairment charges if we are unable to recover the carrying value of our goodwill, other indefinite-lived intangible assets and long-lived assets. Please see our risk factor “China’s Ministry of Commerce (“MOFCOM”) conducted an investigation into our business which resulted in PVH Corp. being placed on the List of Unreliable Entities (“UEL”) and could result in fines or restrictions on our ability to do business in China, which could have a material adverse effect on our revenue and results of operations” in Part I, Item 1A. Risk Factors of this report for additional information. Israel-Hamas War, Supply Chain Disruptions and War in Ukraine The Israel-Hamas war, which began in October 2023, did not have a material impact on our business in 2023 and 2024 and is not expected to have a material impact on our business in 2025. Less than 1% of our revenue in 2024 was generated in Israel, and less than 2% of our revenue in 2024 was generated in the Middle East, including Israel. Attacks on commercial shipping vessels in the Red Sea that began in the fourth quarter of 2023 have led to disruption and instability in global supply chains, which have resulted in shipment delays that are impacting, and could continue to impact, our inventory and sales volume. Shipping delays have also resulted in, and may continue to result in, increased freight costs, for reasons including the need to rely on more expensive shipping routes and shipping methods (such as air freight). Such impacts did not have a material impact on our business in 2023 and 2024 and are not expected to have a material impact on our business in 2025. 34 As a result of the war in Ukraine, we announced in March 2022 that we were temporarily closing stores and pausing commercial activities in Russia and Belarus. In the second quarter of 2022, we made the decision to exit from our Russia business, including the closure of our retail stores in Russia and the cessation of our wholesale operations in Russia and Belarus. Additionally, while we have no direct operations in Ukraine, virtually all of our wholesale customers and franchisees in Ukraine were impacted, which resulted in a reduction in shipments to these customers. We recorded net pre-tax costs of $43 million in 2022 in connection with our decision to exit from the Russia business, consisting of (i) $44 million of noncash asset impairments, (ii) $5 million of contract termination and other costs and (iii) $2 million of severance, partially offset by (iv) an $8 million gain related to the early termination of certain store lease agreements in Russia. Please see Note 16, “Exit Activity Costs,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion. The war in Ukraine has not had a material impact on our business in 2023 and 2024 and is not expected to have a material impact on our business in 2025. Inflationary pressures Inflationary pressures negatively impacted our revenue and earnings in 2022 and 2023 and, to a lesser extent, in 2024. These impacts included (i) increased product costs in 2022 and for the first half of 2023, (ii) increased labor costs across all years and (iii) beginning late in the second quarter of 2022, a slowdown in consumer demand for apparel and related products, as consumers have reduced discretionary spending and certain wholesale customers have taken a more cautious approach, particularly in North America beginning in the first half of 2023 and in Europe beginning in the second half of 2023. We implemented price increases in certain regions and for certain product categories beginning in the first quarter of 2022, and more extensively in the second half of 2022, to mitigate the higher costs. We expect inflationary pressures will continue to negatively impact us in 2025, particularly in North America where the consumer environment remains challenging. Outlook Uncertainty There continues to be uncertainty in the current macroeconomic environment due to the above-mentioned items and foreign currency volatility. Our 2025 outlook assumes no material worsening of current conditions. In addition, new and additional tariffs have been imposed recently and there is uncertainty as to whether any additional new or increased tariffs may be imposed on our products in 2025, which could have an adverse impact on our sales or increase our costs of goods sold. Our revenue and earnings in 2025 may be subject to significant material change as a result of these and other macroeconomic factors. Operations Overview We generate net sales from (i) the wholesale distribution to traditional retailers (both for stores and digital operations), pure play digital commerce retailers, franchisees, licensees and distributors of branded sportswear (casual apparel), jeanswear, performance apparel, intimate apparel, underwear, swimwear, dress shirts, handbags, accessories, footwear and other related products under owned and licensed trademarks, and (ii) the sale of certain of these products through (a) approximately 1,400 Company-operated free-standing store locations worldwide under our TOMMY HILFIGER and Calvin Klein trademarks, (b) approximately 1,500 Company-operated shop-in-shop/concession locations worldwide under our TOMMY HILFIGER and Calvin Klein trademarks, and (c) digital commerce sites worldwide, under our TOMMY HILFIGER and Calvin Klein trademarks. Additionally, we generate royalty, advertising and other revenue from fees for licensing the use of our trademarks. Through the end of 2024, we managed our operations through our operating divisions, which are presented as the following reportable segments: (i) Tommy Hilfiger North America; (ii) Tommy Hilfiger International; (iii) Calvin Klein North America; (iv) Calvin Klein International; and (v) Heritage Brands Wholesale. Our discussion and disclosures within this report reflect these reportable segments. As discussed in Part I, Item I of this report under the heading “Reportable Segments,” we changed our reportable segments effective February 3, 2025, the first day of 2025. Our new reportable segments are: (i) Americas, (ii) Europe, the Middle East and Africa, (iii) Asia-Pacific, and (iv) Licensing. The new reportable segments reflect the way the Company is currently being managed and for which separate financial information is available and evaluated regularly by the CODM in deciding how to allocate resources and assess performance. Our historical segment reporting will be recast in future filings to reflect the new organizational structure. 35 The following actions, transactions and events, in addition to the exit from our Russia business discussed above, have impacted our results of operations and the comparability among the years, including our full year 2025 expectations, as discussed below: •We amended in September 2024 Mr. Tommy Hilfiger’s employment agreement, pursuant to which we made a cash buyout of a portion of the future payment obligation (the “Mr. Hilfiger amendment”). We recorded pre-tax costs of $51 million during the third quarter of 2024 in connection with the Mr. Hilfiger amendment. •We embarked on a multi-year initiative beginning in the second quarter of 2024 to simplify our operating model through the Growth Driver 5 Actions. The initiative is expected to result in annual cost savings of approximately $200 million to $300 million, net of continued strategic investments by 2026, with the actions to support it largely completed by the end of 2025. We recorded pre-tax costs of $24 million during 2024 in connection with this initiative, including (i) $33 million of costs consisting principally of severance and (ii) a $10 million gain on the sale of a warehouse and distribution center. We expect to incur additional costs in 2025, however the additional costs cannot be quantified at this time. Please see Note 16, “Exit Activity Costs,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion. •We completed the sale of our women’s intimates businesses conducted under the Warner’s, Olga and True&Co. trademarks, including net assets with a carrying value of $140 million, to Basic Resources on November 27, 2023 for net proceeds of $156 million. We utilized the net proceeds from the Heritage Brands intimates transaction to repurchase shares of our common stock during the fourth quarter of 2023. We recorded an aggregate net pre-tax gain of $13 million in the fourth quarter of 2023 in connection with the closing of the transaction, consisting of (i) a gain of $15 million, which represented the excess of the amount of consideration received over the carrying value of the net assets, less costs to sell, partially offset by (ii) $2 million of pre-tax severance and other termination benefits associated with the transaction. We recorded an incremental gain of $10 million in the first quarter of 2024 due to the accelerated realization of the earnout provided for in the agreement with Basic Resources. Please see Note 3, “Divestitures,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion. •We announced in August 2022 plans to reduce people costs in our global offices by approximately 10% by the end of 2023 to drive efficiencies and enable continued strategic investments to fuel growth, including in digital, supply chain and consumer engagement (the “2022 cost savings initiative”), which has resulted in annual cost savings of over $100 million, net of continued strategic people investments. We recorded pre-tax costs of $20 million during 2022, consisting principally of severance related to initial actions taken under the plans. We recorded pre-tax costs of $61 million during 2023, consisting principally of severance related to additional actions taken in July and September 2023. All costs related to these actions were incurred by the end of 2023. Please see Note 16, “Exit Activity Costs,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion. •We recorded a pre-tax noncash goodwill impairment charge of $417 million during 2022 in conjunction with our annual goodwill and other indefinite-lived intangible asset impairment testing. The impairment was non-operational and driven primarily by a significant increase in discount rates as a result of then-current economic conditions. Please see Note 6, “Goodwill and Other Intangible Assets,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion. •We completed the sale of our approximately 8% economic interest in Karl Lagerfeld Holding B.V. (“Karl Lagerfeld”) to a subsidiary of G-III on May 31, 2022 for approximately $20 million in cash, of which $19 million was received in 2022 and the remaining $1 million which was previously held in escrow was received in 2023 (the “Karl Lagerfeld transaction”). We recorded a pre-tax gain of $16 million during 2022 in connection with the transaction. Please see Note 5, “Investments in Unconsolidated Affiliates,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion. We extended in 2022 most of our licensing agreements with G-III for Calvin Klein and TOMMY HILFIGER in the United States and Canada, largely pertaining to the women’s apparel product categories sold at wholesale in North America. These agreements now have staggered expirations through 2027, the first of which occurred at the end of calendar 2023. Upon expiration, we have been bringing and intend to continue to bring in house a significant portion of the licensed product categories and directly operate these businesses. The expiration of these licenses and the transition of previously licensed product categories in house did not have a material impact on our revenue and net income in 2024. In 2025, the transition of previously licensed product categories in house is expected to result in a less than 1% increase to our revenue and an approximately 50 basis point decline in our gross margin. 36 Our Tommy Hilfiger and Calvin Klein businesses each have substantial international components that expose us to significant foreign exchange risk. Our results of operations in local foreign currencies are translated into United States dollars using an average exchange rate over the representative period. Accordingly, our results of operations are unfavorably impacted during times of a strengthening United States dollar against the foreign currencies in which we generate significant revenue and earnings and favorably impacted during times of a weakening United States dollar against those currencies. Over 70% of our 2024 revenue was subject to foreign currency translation. During 2023, the United States dollar weakened against the euro, which is the foreign currency in which we transact the most business, and strengthened against key currencies in which we transact business in the Asia Pacific region. This trend generally continued during the first nine months of 2024, but in the fourth quarter of 2024, the United States dollar began to strengthen against the euro, as well as most major currencies. The trend shifted again in March 2025 with the United States dollar weakening against most major currencies including the euro. Our 2024 revenue and net income decreased by approximately $70 million and $10 million, respectively, as compared to 2023 due to the impact of foreign currency translation. We currently expect the translational impact of foreign currency on our 2025 revenue and net income as compared to 2024 will be immaterial. There also is a transactional impact of foreign exchange because our foreign subsidiaries purchase inventory in a currency other than their functional currency. We use foreign currency forward contracts to hedge against a portion of the exposure related to this transactional impact. We enter into these contracts up to 15 months in advance for a portion of the projected inventory purchases and may enter into incremental contracts leading up to the time the inventory purchases occur. The impact of foreign currency fluctuations on the cost of inventory purchases covered by these contracts is then realized in our results of operations as the underlying inventory hedged by the contracts is sold. The transactional impact of foreign currency on our 2024 net income as compared to 2023 was immaterial. We currently expect the transactional impact of foreign currency on our 2025 net income as compared to 2024 also will be immaterial. We also have exposure to changes in foreign currency exchange rates related to our €1.125 billion aggregate principal amount of senior notes that are held in the United States. The strengthening of the United States dollar against the euro would require us to use a lower amount of our cash flows from operations to pay interest and make long-term debt repayments, whereas the weakening of the United States dollar against the euro would require us to use a greater amount of our cash flows from operations to pay interest and make long-term debt repayments. We designated the par value of these senior notes issued by PVH Corp., a U.S.-based entity, as net investment hedges of our investments in certain of our foreign subsidiaries that use the euro as their functional currency. In addition, we entered into multiple fixed-to-fixed cross-currency swap contracts in 2023, which, in aggregate, economically convert our $500 million principal amount of 4 5/8% senior notes due 2025 from a United States dollar-denominated obligation to a euro-denominated obligation of €457.2 million. We also designated these cross-currency swap contracts as net investment hedges of our investments in certain of our foreign subsidiaries that use the euro as their functional currency. As a result, the remeasurement of these foreign currency borrowings and cross-currency swaps at the end of each period is recorded in equity. Please see Note 9, “Derivative Financial Instruments,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion. 37 The following table summarizes our statements of operations in 2024, 2023 and 2022: [[GREPCENT_TABLE]] [["","2024","","2023","","2022"],["(Dollars in millions)"],["Net sales","$","8,203","","","$","8,752","","","$","8,545"],["Royalty revenue","361","","","368","","","372"],["Advertising and other revenue","89","","","98","","","107"],["Total revenue","8,653","","","9,218","","","9,024"],["Gross profit","5,143","","","5,363","","","5,123"],["% of total revenue","59.4","%","","58.2","%","","56.8","%"],["SG&A expenses","4,411","","","4,543","","","4,377"],["% of total revenue","51.0","%","","49.3","%","","48.5","%"],["Goodwill impairment","\u2014","","","\u2014","","","417"],["Non-service related pension and postretirement (cost) income","(27)","","","47","","","92"],["Other gain","20","","","15","","","\u2014"],["Equity in net income of unconsolidated affiliates","48","","","46","","","50"],["Income before interest and taxes","772","","","929","","","471"],["Interest expense","90","","","99","","","90"],["Interest income","23","","","11","","","7"],["Income before taxes","706","","","841","","","388"],["Income tax expense","107","","","177","","","188"],["Net income","$","599","","","$","664","","","$","200"]] [[/GREPCENT_TABLE]] Total Revenue Total revenue was $8.653 billion in 2024, $9.218 billion in 2023, and $9.024 billion in 2022. The decrease in revenue of $565 million, or 6%, in 2024 compared to 2023 included (i) a 2% decline due to the Heritage Brands intimates transaction, (ii) a 1% decline from the 53rd week in 2023 and (iii) a 1% negative impact of foreign currency translation, with the following revenue changes in our segments: •The reduction of an aggregate $235 million of revenue, or a 5% decrease compared to the prior year, attributable to our Tommy Hilfiger International and Tommy Hilfiger North America segments, which included a negative impact of $32 million, or 1%, related to foreign currency translation. Tommy Hilfiger International segment revenue decreased 7% (including a 1% negative foreign currency impact). Revenue in our Tommy Hilfiger North America segment was flat. •The reduction of an aggregate $58 million of revenue, or a 1% decrease compared to the prior year, attributable to our Calvin Klein International and Calvin Klein North America segments, which included a negative impact of $40 million or 1%, related to foreign currency translation. Calvin Klein International segment revenue decreased 2% (including a 1% negative foreign currency impact). Revenue in our Calvin Klein North America segment decreased 1%. •The reduction of $272 million of revenue, or a 57% decrease compared to the prior year, attributable to our Heritage Brands Wholesale segment, which included a 45% decline resulting from the Heritage Brands intimates transaction. Our 2024 revenue through our direct-to-consumer distribution channel decreased 2% compared to 2023, including a 1% decline from the 53rd week in 2023 and a 1% negative foreign currency impact. Revenue in our owned and operated stores decreased 1%, including a 1% negative foreign currency impact. Sales through our directly operated digital commerce businesses decreased 7%, including a 1% negative foreign currency impact, primarily due to our planned strategic reduction of sales in Europe to drive overall higher quality of sales in the region. Our revenue through our wholesale distribution channel decreased 10%, primarily due to (i) a 5% reduction resulting from the Heritage Brands intimates transaction and (ii) the planned strategic reduction of sales in Europe to drive overall higher quality of sales in the region. The impact in 2024 of foreign currency translation on our wholesale distribution channel revenue was not significant. 38 The increase in revenue of $194 million, or 2% in 2023 compared to 2022 included (i) a 1% benefit from the 53rd week in 2023 and (ii) a 1% positive impact of foreign currency translation, with the following revenue changes in our segments: •The addition of an aggregate $167 million of revenue, or a 4% increase compared to the prior year, attributable to our Tommy Hilfiger International and Tommy Hilfiger North America segments, which included a positive impact of $51 million, or 1%, related to foreign currency translation. Tommy Hilfiger International segment revenue increased 3% (including a 2% positive foreign currency impact). Revenue in our Tommy Hilfiger North America segment increased 6%. •The net addition of an aggregate $131 million of revenue, or a 3% increase compared to the prior year, attributable to our Calvin Klein International and Calvin Klein North America segments. Calvin Klein International segment revenue increased 10%. Revenue in our Calvin Klein North America segment decreased 7%, as an increase in revenue through its direct-to-consumer distribution channel was more than offset by a decrease in revenue through the wholesale distribution channel. The impact of foreign currency translation on our Calvin Klein segments’ revenue for the year was not significant. •The reduction of $105 million of revenue, or an 18% decrease compared to the prior year, attributable to our Heritage Brands Wholesale segment, which included a 7% decline resulting from the Heritage Brands intimates transaction. Our 2023 revenue through our direct-to-consumer distribution channel increased 9% compared to 2022, including a 1% benefit from the 53rd week, as revenue in our owned and operated stores increased 9% and sales through our directly operated digital commerce businesses increased 10%. The impact of foreign currency translation on our direct-to-consumer distribution channel revenue was not significant. Our revenue through our wholesale distribution channel decreased 3% inclusive of a 1% positive foreign currency impact and a 1% reduction resulting from the Heritage Brands intimates transaction. We currently expect revenue for the full year 2025 will be flat to increase slightly compared to 2024. The impact of foreign currency translation on our revenue for full year 2025 is expected to be immaterial. Gross Profit Gross profit is calculated as total revenue less cost of goods sold, and gross margin is calculated as gross profit divided by total revenue. Included as cost of goods sold are costs associated with the production and procurement of product, such as inbound freight costs, purchasing and receiving costs and inspection costs. Also included as cost of goods sold are the amounts recognized on foreign currency forward contracts as the underlying inventory hedged by such forward contracts is sold. Warehousing and distribution expenses are included in selling, general and administrative (“SG&A”) expenses. All of our royalty, advertising and other revenue from licensing the use of our trademarks is included in gross profit because there is no cost of goods sold associated with such revenue. As a result, our gross profit may not be comparable to that of other entities. The following table shows our revenue mix between net sales and royalty, advertising and other revenue, as well as our gross margin for 2024, 2023 and 2022: [[GREPCENT_TABLE]] [["","2024","","2023","","2022"],["Components of revenue:"],["Net sales","94.8","%","","94.9","%","","94.7","%"],["Royalty, advertising and other revenue","5.2","","","5.1","","","5.3"],["Total","100.0","%","","100.0","%","","100.0","%"],["Gross margin","59.4","%","","58.2","%","","56.8","%"]] [[/GREPCENT_TABLE]] Gross profit in 2024 was $5.143 billion, or 59.4% of total revenue, compared to $5.363 billion, or 58.2% of total revenue, in 2023. The 120 basis point gross margin increase was primarily driven by (i) lower product costs as compared to 2023, which benefited us more significantly in the first half of the year, (ii) the impact of a change in the revenue mix between our direct-to-consumer distribution channel and our wholesale distribution channel, as our direct-to-consumer distribution channel was a larger proportion of total revenue in 2024 than in 2023 and carries higher gross margins, and (iii) the impact of the reduction in revenue as a result of the Heritage Brands intimates transaction, as the revenue from the Heritage Brands intimates business carried lower gross margins. These increases were partially offset by increased promotional selling in the fourth quarter of 2024 due to continued softness in the consumer environment particularly in North America. 39 Gross profit in 2023 was $5.363 billion, or 58.2% of total revenue, compared to $5.123 billion, or 56.8% of total revenue, in 2022. The 140 basis point gross margin increase was primarily driven by (i) price increases that were implemented in certain regions and for certain product categories during 2022, (ii) lower freight and other logistics costs as compared to the prior year, (iii) the impact of a change in the revenue mix between our International and North America segments as compared to 2022, as our International segments’ revenue was a larger proportion of total revenue in 2023 than in 2022 and these segments carried higher gross margins, and (iv) the impact of a change in the revenue mix between our direct-to-consumer distribution channel and our wholesale distribution channel, as our direct-to-consumer distribution channel was a larger proportion of total revenue in 2023 than in 2022 and carries higher gross margins. These increases were partly offset by (i) higher product costs as a result of inflationary pressures as compared to the prior year and (ii) an approximately 100 basis point decline due to the unfavorable transactional impact of foreign exchange on our international businesses, particularly our European businesses, that purchase inventory in a currency other than their functional currency, as the increased local currency value of inventory results in higher cost of goods in local currency when the goods are sold. We currently expect that gross margin in 2025 will decrease by approximately 100 basis points compared to 2024 primarily as a result of (i) the approximately 50 basis point decline expected in connection with the transition of certain product categories previously licensed to G-III into our directly operated wholesale business, as revenue through our wholesale distribution channel carries lower gross margins and (ii) the impact of a change in the revenue mix between our International and North America segments as compared to 2024, as our North America segments’ revenue is expected to be a larger proportion of total revenue in 2025 than in 2024 and these segments carry lower gross margins. SG&A Expenses Our SG&A expenses were as follows: [[GREPCENT_TABLE]] [["","2024","","2023","","2022"],["(In millions)"],["SG&A expenses","$","4,411","","","$","4,543","","","$","4,377"],["% of total revenue","51.0","%","","49.3","%","","48.5","%"]] [[/GREPCENT_TABLE]] SG&A expenses in 2024 were $4.411 billion, or 51.0% of total revenue, compared to $4.543 billion, or 49.3% of total revenue in 2023. The $132 million decrease in SG&A expenses was primarily driven by cost efficiencies across the business as we continue to take a disciplined approach to managing expenses. The 170 basis point increase in SG&A as a percentage of revenue was primarily driven by (i) the impact of a change in the revenue mix between our direct-to-consumer distribution channel and our wholesale distribution channel as compared to 2023, as our direct-to-consumer distribution channel was a larger proportion of our total revenue in 2024 than in 2023 and carries higher SG&A expenses as a percentage of total revenue, (ii) the impact from the deleveraging of expenses resulting from the decline in revenue in 2024, (iii) costs incurred in connection with the Mr. Hilfiger amendment, and (iv) restructuring costs incurred in connection with the Growth Driver 5 Actions. These increases were partially offset by the favorable impact of (i) the 2022 costs savings initiative and (ii) cost efficiencies across the business as we continue to take a disciplined approach to managing expenses. SG&A expenses in 2023 were $4.543 billion, or 49.3% of total revenue, compared to $4.377 billion, or 48.5% of total revenue in 2022. The 80 basis point increase was primarily driven by (i) the impact of the change in the revenue mix between our International and North America segments as compared to 2022, as our International segments’ revenue was a larger proportion of our total revenue in 2023 than in 2022 and these segments carried higher SG&A expenses as percentages of total revenue, (ii) the impact of a change in the revenue mix between our direct-to-consumer distribution channel and our wholesale distribution channel as compared to 2022, as our direct-to-consumer distribution channel was a larger proportion of our total revenue in 2023 than in 2022 and carries higher SG&A expenses as a percentage of total revenue, and (iii) an increase in marketing and other investments to drive our strategic initiatives. These increases were partially offset by (i) the absence in 2023 of costs incurred in 2022 in connection with the exit from our Russia business, (ii) the net favorable impact of the 2022 cost savings initiative and (iii) cost efficiencies across the business as we take a disciplined approach to managing expenses. We currently expect that SG&A expenses as a percentage of revenue in 2025 will decrease approximately 200 basis points compared to 2024. Our expectation for 2025 includes decreases primarily as a result of (i) the favorable impact of the Growth Driver 5 Actions and (ii) the absence of costs incurred in connection with the Mr. Hilfiger amendment. Our expectation for 2025 does not include restructuring costs expected to be incurred in 2025 in connection with Growth Driver 5 Actions as these costs cannot be quantified at this time. 40 Goodwill Impairment We recorded a pre-tax noncash goodwill impairment charge of $417 million during 2022 in conjunction with our annual goodwill and other indefinite-lived intangible asset impairment testing. The impairment was non-operational and driven primarily by a significant increase in discount rates, as a result of then-current economic conditions. Please see Note 6, “Goodwill and Other Intangible Assets,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion of this impairment. Non-Service Related Pension and Postretirement (Cost) Income Non-service related pension and postretirement (cost) income was $(27) million, $47 million, and $92 million in 2024, 2023 and 2022, respectively. Non-service related pension and postretirement cost in 2024 included an actuarial loss on our retirement plans of $28 million. Non-service related pension and post retirement income in 2023 and 2022 included actuarial gains on our retirement plans of $46 million, inclusive of a $20 million pre-tax curtailment gain recorded in connection with a change to our defined benefit pension plans, and $78 million, respectively. Please see Note 11, “Retirement and Benefit Plans,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion of our pension and postretirement plans, including the 2023 change to freeze our defined benefit pension plans. Non-service related pension and postretirement (cost) income recorded throughout the year is calculated using actuarial valuations that incorporate assumptions and estimates about financial market, economic and demographic conditions. Differences between estimated and actual results give rise to gains and losses that are recorded immediately in earnings, generally in the fourth quarter of the year, which can create volatility in our results of operations. We currently expect that non-service related pension and postretirement income for 2025 will be immaterial. However, our expectation of 2025 non-service related pension and post-retirement income does not include the impact of an actuarial gain or loss. As a result of the recent volatility in the financial markets, there is significant uncertainty with respect to the actuarial gain or loss we may record on our retirement plans in 2025. We may record a significant actuarial gain or loss in 2025 if there is a significant increase or decrease in discount rates, respectively, or if there is a difference between the actual and expected return on plan assets. As such, our actual 2025 non-service related pension and postretirement income may be significantly different than our projections. Other Gain We recorded a gain of $10 million related to the sale of a warehouse and distribution center in the third quarter of 2024 in connection with the Growth Driver 5 Actions. Please see Note 16, “Exit Activity Costs,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion. We recorded a gain of $15 million in the fourth quarter of 2023 in connection with the closing of the Heritage Brands intimates transaction and an incremental gain of $10 million in the first quarter of 2024 due to the accelerated realization of the earnout provided in the agreement with Basic Resources. Please see Note 3, “Divestitures,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion. Equity in Net Income of Unconsolidated Affiliates The equity in net income of unconsolidated affiliates was $48 million, $46 million, and $50 million of income in 2024, 2023, and 2022 respectively. These amounts relate to our share of income (loss) from (i) our joint venture for the TOMMY HILFIGER and Calvin Klein brands, and certain licensed trademarks in Mexico, (ii) our joint venture for the TOMMY HILFIGER and Calvin Klein brands in India, (iii) our joint venture for the TOMMY HILFIGER brand in Brazil, (iv) our PVH Legwear LLC joint venture for the TOMMY HILFIGER and Calvin Klein brands and certain licensed trademarks in the United States and Canada, and (v) our investment in Karl Lagerfeld prior to the closing of the Karl Lagerfeld transaction during 2022. The equity in net income of unconsolidated affiliates for 2022 also included a $16 million pre-tax gain in connection with the Karl Lagerfeld transaction. Please see Note 5, “Investments in Unconsolidated Affiliates,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion. 41 The equity in net income of unconsolidated affiliates for 2024 was relatively flat compared to 2023. The equity in net income of unconsolidated affiliates for 2023 decreased as compared to 2022 primarily due to the absence in 2023 of the $16 million pre-tax gain recorded in 2022 in connection with the Karl Lagerfeld transaction, partly offset by an increase in income attributable to our joint venture in Mexico and our PVH Legwear LLC joint venture. We currently expect that our equity in net income of unconsolidated affiliates for the full year 2025 will be relatively flat as compared to 2024. Interest Expense, Net Interest expense, net decreased to $67 million in 2024 from $88 million in 2023 primarily due to (i) an increase in interest income resulting from higher levels of invested cash and higher interest rates as compared to the prior year period and (ii) the impact of the repayment of the $100 million 7 3/4% debentures in November 2023. Interest expense, net increased to $88 million in 2023 from $83 million in 2022 primarily due to an increase in interest rates as compared to 2022. Please see the section entitled “Financing Arrangements” within “Liquidity and Capital Resources” below for further discussion. Interest expense, net for the full year 2025 is currently expected to increase to approximately $85 million compared to $67 million in 2024, primarily due to the impacts of accelerated share repurchase (“ASR”) agreements we intend to enter into in April 2025 to repurchase $500 million of shares of our common stock. Please see the section entitled “Acquisition of Treasury Shares” within “Liquidity and Capital Resources” below for further discussion. Income Taxes Income tax expense was as follows: [[GREPCENT_TABLE]] [["","2024","","2023","","2022"],["(Dollars in millions)"],["Income tax expense","$","107","","","$","177","","","$","188"],["Income tax as a % of pre-tax income","15.2","%","","21.1","%","","48.4","%"]] [[/GREPCENT_TABLE]] Significant items which have caused our tax rate to fluctuate each year include the items discussed below. The effect that discrete tax amounts have on the effective income tax rate in each year is not comparable due to changes in our pre-tax income. Our effective income tax rate for 2024 was 15.2% primarily due to (i) a favorable change in our uncertain tax positions including a benefit to our effective tax rate of 4.7% from the settlement of a multi-year audit in an international jurisdiction in the second quarter of 2024 and (ii) the favorable tax impacts of the foreign derived intangible income deduction and the generation of certain foreign tax credits, partially offset by (iii) an unfavorable change in our jurisdictional mix of earnings. Our effective income tax rate for 2023 was 21.1% primarily due to the favorable tax impacts of the foreign derived intangible income deduction and the generation of certain foreign tax credits, offset by our jurisdictional mix of earnings. Our effective income tax rate for 2022 was 48.4%. Our 2022 effective income tax rate included the impact of the $417 million noncash goodwill impairment charge recorded in 2022, which was non-deductible and resulted in an increase to our effective income tax rate of 22.3%. We currently expect that our effective income tax rate in 2025 will be approximately 22%. We file income tax returns in more than 40 international jurisdictions each year. Our tax rate is influenced by several factors, including the mix of international and domestic pre-tax earnings, specific discrete transactions and events, new regulations, audits by tax authorities, and new information received, These elements may lead to adjustments in both our estimate for uncertain tax positions and the overall effective tax rate. Please see Note 8, “Income Taxes,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion. 42 The Organization for Economic Cooperation and Development released the Pillar Two framework which includes transition and safe harbor guidelines around the implementation of a global minimum effective tax rate of 15%. Pillar Two legislation was enacted in certain jurisdictions where we operate and was effective in 2024. The global minimum effective tax rate did not have a material impact on our 2024 effective tax rate and based on our current analysis of the Pillar Two provisions, we do not expect it to have a material impact on our 2025 effective tax rate. We continue to monitor and reflect the impact of such legislative changes in future financial statements as appropriate. LIQUIDITY AND CAPITAL RESOURCES Cash Flow Summary and Trends Cash and cash equivalents at February 2, 2025 was $748 million, an increase of $40 million from $708 million at February 4, 2024. The change in cash and cash equivalents included the impact of (i) approximately $500 million of common stock repurchases under the stock repurchase program (please see section entitled “Acquisition of Treasury Shares” below for further discussion), (ii) $553 million of net proceeds from the issuance of €525 million principal amount of 4 1/8% senior notes due 2029 and (iii) the $562 million redemption of €525 million principal amount of 3 5/8% senior notes due 2024. We ended 2024 with approximately $1.4 billion of borrowing capacity available under our various debt facilities. Cash flow in 2025 will be impacted by various factors, including, as discussed further below in this “Liquidity and Capital Resources” section, (i) common stock repurchases pursuant to ASR agreements of $500 million, (ii) projected capital expenditures of approximately $200 million and (iii) mandatory long-term debt repayments on our term loan under our 2022 senior unsecured credit facilities of approximately $11 million, subject to exchange rate fluctuations. Additionally, we are exploring alternatives, including refinancing, to fund the repayment of our $500 million senior unsecured notes due in 2025. As of February 2, 2025, $353 million of cash and cash equivalents was held by international subsidiaries. Our intent is to reinvest indefinitely substantially all of our historical earnings in foreign subsidiaries outside of the United States in jurisdictions which we would expect to incur material tax costs upon the distribution of such amounts. It is not practicable to estimate the amount of tax that might be payable if these earnings were repatriated due to the complexities associated with the hypothetical calculation. Operations Cash provided by operating activities was $741 million in 2024 compared to $969 million in 2023. The decrease in cash provided by operating activities as compared to 2023 was primarily driven by changes in our working capital, including (i) changes to trade receivables primarily as a result of (a) an increase in trade receivables in the current year period, primarily driven by the timing of sales to our wholesale customers and (b) a decrease in trade receivables during the prior year period, primarily driven by a decrease in our wholesale revenue in the fourth quarter of 2023 as compared to the fourth quarter of 2022, and (ii) changes in inventories net of the related change in payables. Supply Chain Finance Program We have a voluntary supply chain finance program (the “SCF program”) administered through a third party platform that provides our inventory suppliers with the opportunity to sell their receivables due from us to participating financial institutions in advance of the invoice due date, at the sole discretion of both the suppliers and the financial institutions. We are not a party to the agreements between the suppliers and the financial institutions and have no economic interest in a supplier’s decision to sell a receivable. Our payment obligations, including the amounts due and payment terms, which generally do not exceed 90 days, are not impacted by suppliers’ participation in the SCF program. Please see Note 21, “Other Comments,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion of our SCF program. Investments in Unconsolidated Affiliates Dividends received from our investments in unconsolidated affiliates of $42 million, $30 million and $16 million during 2024, 2023 and 2022, respectively, are included in our net cash provided by operating activities in our Consolidated Statements of Cash Flows for the respective period. Please see Note 5, “Investments in Unconsolidated Affiliates,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion. 43 Heritage Brands Intimates Transaction We completed the sale of our women’s intimates businesses conducted under the Warner’s, Olga and True&Co. trademarks to Basic Resources on November 27, 2023 for net proceeds of $156 million, of which $160 million of gross proceeds are presented as investing cash flows and $4 million of transaction costs are presented as operating cash flows in the Consolidated Statement of Cash Flows for 2023. Due to the accelerated realization of the earnout provided for in the agreement with Basic Resources that occurred during the first quarter of 2024, we are receiving additional proceeds of $10 million, which is being paid to us in installments through the first quarter of 2025. We received $7.5 million of the earnout during 2024. Please see Note 3, “Divestitures,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion. Sale of Warehouse and Distribution Center We completed the sale of a warehouse and distribution center in the third quarter of 2024 for net proceeds of $10 million in connection with our multi-year initiative to simplify our operating model by centralizing certain processes, and improving systems and automation to drive more efficient and cost-effective ways of working across the organization. Please see Note 16, “Exit Activity Costs,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion. Karl Lagerfeld Transaction We completed the sale of our approximately 8% economic interest in Karl Lagerfeld to a subsidiary of G-III on May 31, 2022 for $20 million in cash, of which $19 million was received in 2022 and the remaining $1 million which was previously held in escrow was received in 2023. Please see Note 5, “Investments in Unconsolidated Affiliates,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion. Capital Expenditures Our capital expenditures in 2024 were $159 million compared to $245 million in 2023. The capital expenditures in 2024 primarily consisted of (i) investments in (a) new stores and store renovations and (b) our information technology infrastructure worldwide, including information security, (ii) upgrades and enhancements to platforms and systems worldwide, including our digital commerce platforms, and (iii) enhancements to our warehouse and distribution network in Europe and North America. We currently project that capital expenditures for 2025 will increase to approximately $200 million and will primarily consist of continued investments in these same categories. Dividends Cash dividends paid on our common stock totaled $9 million, $9 million and $10 million in 2024, 2023 and 2022, respectively. We currently project that cash dividends paid on our common stock in 2025 will be approximately $8 million based on our current dividend rate, the number of shares of our common stock outstanding as of February 2, 2025, our estimate of stock to be issued during 2025 under our stock incentive plan and our estimate of stock repurchases during 2025. Acquisition of Treasury Shares The Board of Directors has authorized over time beginning in 2015 an aggregate $5 billion stock repurchase program through July 30, 2028. Repurchases under the program may be made from time to time over the period through open market purchases, accelerated share repurchase programs, privately negotiated transactions or other methods, as we deem appropriate. Purchases are made based on a variety of factors, such as price, corporate requirements and overall market conditions, applicable legal requirements and limitations, trading restrictions under our insider trading policy and other relevant factors. The program may be modified by the Board of Directors, including to increase or decrease the repurchase limitation or extend, suspend, or terminate the program, at any time, without prior notice. Beginning January 1, 2023, our share repurchases in excess of issuances are subject to a 1% excise tax enacted by the Inflation Reduction Act. We intend to enter into ASR agreements in April 2025 to repurchase $500 million of shares of our common stock. The ASR agreements will be included under our current $5 billion stock repurchase authorization approved by the Board of Directors. We intend to fund the ASR agreements with cash on hand and additional borrowings. 44 During 2024, 2023 and 2022, we purchased 4.7 million shares, 5.7 million shares and 6.2 million shares, respectively, of our common stock under the program in open market transactions for $501 million (excluding excise taxes of $5 million), $550 million (excluding excise taxes of $5 million) and $399 million, respectively. Purchases of $4 million were accrued for in our Consolidated Balance Sheet as of February 2, 2025. Purchases of $2 million that were accrued for in our Consolidated Balance Sheet as of February 4, 2024 were paid in 2024. As of February 2, 2025, the repurchased shares were held as treasury stock and $1.773 billion of the authorization remained available for future share repurchases, excluding excise taxes, as the excise taxes do not reduce the authorized amount remaining. Treasury stock activity also includes shares that were withheld principally in conjunction with the settlement of restricted stock units and performance share units to satisfy tax withholding requirements. Financing Arrangements Our capital structure was as follows: [[GREPCENT_TABLE]] [["(In millions)","2/2/25","","2/4/24"],["Short-term borrowings","$","\u2014","","","$","\u2014"],["Current portion of long-term debt","511","","","578"],["Finance lease obligations","6","","","10"],["Long-term debt","1,580","","","1,592"],["Stockholders\u2019 equity","5,141","","","5,119"]] [[/GREPCENT_TABLE]] In addition, we had $748 million and $708 million of cash and cash equivalents as of February 2, 2025 and February 4, 2024, respectively. Short-Term Borrowings We have the ability to draw revolving borrowings under the senior unsecured credit facilities discussed below in the section entitled “2022 Senior Unsecured Credit Facilities.” We had no revolving borrowings outstanding under these facilities as of February 2, 2025 and February 4, 2024. Additionally, we have the ability to borrow under short-term lines of credit, overdraft facilities and short-term revolving credit facilities denominated in various foreign currencies. These facilities provided for borrowings of up to $196 million based on exchange rates in effect on February 2, 2025 and are utilized primarily to fund working capital needs. We had no borrowings outstanding under these facilities as of February 2, 2025 and February 4, 2024. Commercial Paper We have the ability to issue unsecured commercial paper notes with maturities that vary but do not exceed 397 days from the date of issuance primarily to fund working capital needs. Borrowings under the commercial paper note program, when taken together with the revolving borrowings outstanding under the multicurrency revolving credit facility included in the 2022 facilities (as defined below), cannot exceed $1.150 billion. We had no borrowings outstanding under the commercial paper note program as of February 2, 2025 and February 4, 2024. Finance Lease Obligations Our cash payments for finance lease obligations totaled $4 million, $5 million and $5 million in 2024, 2023 and 2022, respectively. 2022 Senior Unsecured Credit Facilities On December 9, 2022 (the “Closing Date”), we entered into senior unsecured credit facilities (the “2022 facilities”), the proceeds of which, along with cash on hand, were used to repay all of the outstanding borrowings under the 2019 facilities (as defined below), as well as the related debt issuance costs. The 2022 facilities consist of (a) a €441 million euro-denominated Term Loan A facility (the “Euro TLA facility”), (b) a $1.150 billion United States dollar-denominated multicurrency revolving credit facility (the “multicurrency revolving credit 45 facility”), which is available in (i) United States dollars, (ii) Australian dollars (limited to A$50 million), (iii) Canadian dollars (limited to C$70 million), or (iv) euros, yen, pounds sterling, Swiss francs or other agreed foreign currencies (limited to €250 million), and (c) a $50 million United States dollar-denominated revolving credit facility available in United States dollars or Hong Kong dollars (together with the multicurrency revolving credit facility, the “revolving credit facilities”). The 2022 facilities are due on December 9, 2027. In connection with the refinancing in 2022 of the 2019 facilities, we paid debt issuance costs of $9 million (of which $1 million was expensed as debt modification costs and $8 million is being amortized over the term of the 2022 facilities) and recorded debt extinguishment costs of $1 million to write off previously capitalized debt issuance costs. The multicurrency revolving credit facility also includes amounts available for letters of credit and has a portion available for the making of swingline loans. The issuance of such letters of credit and the making of any swingline loan reduces the amount available under the multicurrency revolving credit facility. So long as certain conditions are satisfied, we may add one or more senior unsecured term loan facilities or increase the commitments under the revolving credit facilities by an aggregate amount not to exceed $1.5 billion. The lenders under the 2022 facilities are not required to provide commitments with respect to such additional facilities or increased commitments. The terms of the Euro TLA facility require us to make quarterly repayments of amounts outstanding, which commenced with the calendar quarter ending March 31, 2023. Such required repayment amounts equal 2.50% per annum of the principal amount outstanding on the Closing Date, paid in equal installments and subject to certain customary adjustments, with the balance due on the maturity date of the Euro TLA facility. The outstanding borrowings under the 2022 facilities are prepayable at any time without penalty (other than customary breakage costs). Any voluntary repayments made by us would reduce the future required repayment amounts. The outstanding principal balance for the Euro TLA facility was €419 million as of February 2, 2025. We made payments totaling $12 million on our term loan under the 2022 facilities in each of 2024 and 2023. We made payments of $488 million on our term loan under the 2019 facilities during 2022, which included $23 million of mandatory payments and the $465 million repayment of the 2019 facilities in connection with the refinancing of the senior credit facilities. The euro-denominated borrowings under the Euro TLA facility and multicurrency revolving credit facility bear interest at a rate per annum equal to a euro interbank offered rate (“EURIBOR”) and the euro-denominated swing line borrowings under the 2022 facilities bear interest at a rate per annum equal to an adjusted daily simple euro short term rate (“ESTR”), calculated in a manner set forth in the 2022 facilities, plus in each case an applicable margin. The United States dollar-denominated borrowings under the 2022 facilities bear interest at a rate per annum equal to, at our option, either a base rate or an adjusted term secured overnight financing rate (“SOFR”), calculated in a manner set forth in the 2022 facilities, plus an applicable margin. The borrowings denominated in other foreign currencies under the 2022 facilities bear interest at various indexed rates specified in the 2022 facilities and are calculated in a manner set forth in the 2022 facilities, plus an applicable margin. The applicable margin with respect to the Euro TLA facility as of February 2, 2025 was 1.250%. The applicable margin with respect to the revolving credit facilities as of February 2, 2025 was 0.125% for loans bearing interest at the base rate, Canadian prime rate or daily simple ESTR and 1.125% for loans bearing interest at the EURIBOR or any other rate specified in the 2022 facilities. The applicable margin for borrowings under the Euro TLA facility and each revolving credit facility is subject to adjustment (i) after the date of delivery of the compliance certificate and financial statements, with respect to each of our fiscal quarters, based upon our net leverage ratio or (ii) after the date of delivery of notice of a change in our public debt rating by Standard & Poor’s or Moody’s. The 2022 facilities contain customary events of default, including but not limited to nonpayment; material inaccuracy of representations and warranties; violations of covenants; certain bankruptcies and liquidations; cross-default to material indebtedness; certain material judgments; certain events related to the Employee Retirement Income Security Act of 1974, as amended; and a change in control (as defined in the 2022 facilities). The 2022 facilities require us to comply with customary affirmative, negative and financial covenants, including a maximum net leverage ratio. A breach of any of these operating or financial covenants would result in a default under the 2022 facilities. If an event of default occurs and is continuing, the lenders could elect to declare all amounts then outstanding, together with accrued interest, to be immediately due and payable, which would result in acceleration of our other debt. 46 2019 Senior Unsecured Credit Facilities On April 29, 2019, we entered into senior unsecured credit facilities (as amended, the “2019 facilities”). We replaced the 2019 facilities with the 2022 facilities on December 9, 2022 as discussed above in the section entitled “2022 Senior Unsecured Credit Facilities.” The 2019 facilities included a €500 million euro-denominated Term Loan A facility, of which €441 million was outstanding as of the date it was replaced, and senior unsecured revolving credit facilities. 7 3/4% Debentures Due 2023 We had $100 million of debentures due November 15, 2023 that accrued interest at the rate of 7 3/4%. We repaid these debentures at maturity. 3 5/8% Euro Senior Notes Due 2024 We had outstanding €525 million principal amount of 3 5/8% senior notes due July 15, 2024. We redeemed these notes on April 25, 2024 utilizing the net proceeds from the issuance of the €525 million principal amount of 4 1/8% senior notes due July 16, 2029 together with other available funds, as discussed below. We recorded an immaterial amount of debt extinguishment costs to write-off previously capitalized debt issuance costs associated with these notes during the first quarter of 2024. 4 5/8% Senior Notes Due 2025 We have outstanding $500 million principal amount of 4 5/8% senior notes due July 10, 2025. The interest rate payable on the notes is subject to adjustment if either Standard & Poor’s or Moody’s, or any substitute rating agency, as defined in the indenture governing the notes, downgrades the credit rating assigned to the notes. We may redeem some or all of these notes at any time prior to June 10, 2025 by paying a “make whole” premium plus any accrued and unpaid interest. In addition, we may redeem some or all of these notes on or after June 10, 2025 at their principal amount plus any accrued and unpaid interest. We entered into multiple fixed-to-fixed cross-currency swap contracts in 2023, which, in aggregate, economically convert our $500 million principal amount of 4 5/8% senior notes due 2025 from a United States dollar-denominated obligation to a euro-denominated obligation of €457.2 million. As part of these swap contracts, we will receive fixed-rate United States dollar-denominated interest at a weighted average rate of 1.405% and pay fixed-rate euro-denominated interest at a rate of 0%. 3 1/8% Euro Senior Notes Due 2027 We have outstanding €600 million principal amount of 3 1/8% senior notes due December 15, 2027. We may redeem some or all of these notes at any time prior to September 15, 2027 by paying a “make whole” premium plus any accrued and unpaid interest. In addition, we may redeem some or all of these notes on or after September 15, 2027 at their principal amount plus any accrued and unpaid interest. 4 1/8% Euro Senior Notes Due 2029 We issued on April 15, 2024, €525 million principal amount of 4 1/8% senior notes due July 16, 2029. We paid €5 million ($6 million based on exchange rates in effect on the payment date) of fees in connection with the issuance of the notes, which are being amortized over the term of the notes. We intend to allocate an amount equal to the net proceeds of the offering to finance or refinance new or existing environmental Eligible Projects (as defined in the prospectus relating to the notes offering) focused mainly on the use of sustainable materials and packaging and circularity. Pending allocation to Eligible Projects, we utilized the net proceeds of the offering, together with other available funds, to redeem the €525 million principal amount of 3 5/8% senior notes due July 15, 2024, as discussed above. We may redeem some or all of these notes at any time prior to April 16, 2029 by paying a “make whole” premium, plus any accrued and unpaid interest. In addition, we may redeem some or all of these notes on or after April 16, 2029, or all of these notes at any time in the event of certain developments affecting taxation, at their principal amount plus any accrued and unpaid interest. 47 Our ability to create liens on our assets or engage in sale/leaseback transactions is restricted under the indentures governing our senior notes. As of February 2, 2025, we were in compliance with all applicable financial and non-financial covenants under our financing arrangements. As of February 2, 2025, our issuer credit was rated BBB- by Standard & Poor’s with a positive outlook and our corporate credit was rated Baa3 by Moody’s with a positive outlook, and our commercial paper was rated A-3 by Standard & Poor’s and P-3 by Moody’s. In assessing our credit strength, we believe that both Standard & Poor’s and Moody’s considered, among other things, our capital structure and financial policies, our consolidated balance sheet, our historical acquisition activity and other financial information, as well as industry and other qualitative factors. Please see Note 7, “Debt,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion of our debt. Additional Cash Requirements The following table summarizes current and long-term cash requirements as of February 2, 2025, which we expect to fund primarily with cash generated from operating cash flows and continued access to financial and credit markets: [[GREPCENT_TABLE]] [["","","Cash Requirements"],["Description","","Total","","2025","","2026-2027","","2028-2029","","Thereafter"],["(In millions)"],["Long-term debt(1)","","$","2,099","","","$","511","","","$","1,044","","","$","544"],["Interest payments on long-term debt","","236","","","72","","","119","","","45"],["Operating and finance leases(2)","","1,613","","","350","","","551","","","341","","","$","371"],["Inventory purchase commitments(3)","","796","","","796"],["Other cash requirements(4)","","193","","","100","","","85","","","8"],["Total","","$","4,937","","","$","1,829","","","$","1,799","","","$","938","","","$","371"]] [[/GREPCENT_TABLE]] ______________________ (1)At February 2, 2025, the outstanding principal balance under our senior unsecured Term Loan A facility was $434 million, which requires mandatory payments through December 9, 2027 (according to the mandatory repayment schedules). We also had outstanding $500 million of 4 5/8% senior unsecured notes due July 10, 2025, $622 million of 3 1/8% senior unsecured euro notes due December 15, 2027 and $544 million of 4 1/8% senior unsecured euro notes due July 16, 2029. (2)We lease Company-operated free-standing retail store locations, warehouses, distribution centers, showrooms, office space, and certain equipment and other assets. Please see Note 15, “Leases,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further information. (3)Represents contractual commitments that are enforceable and legally binding for goods on order and not received or paid for as of February 2, 2025. Inventory purchase commitments also include fabric commitments with our suppliers, which secure a portion of our material needs for future seasons. Substantially all of these goods are expected to be received and the related payments are expected to be made in 2025. This amount does not include foreign currency forward contracts that we have entered into to manage our exposure to exchange rate changes with respect to certain of these purchases. Please see Note 9, “Derivative Financial Instruments,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further information. (4)Represents cash requirements primarily related to (i) information-technology service agreements, (ii) minimum contractual royalty payments under several license agreements we have with third parties, and (iii) advertising and sponsorship agreements. Not included in the above table are contributions to our qualified defined benefit pension plans, or payments in connection with our unfunded non-qualified supplemental defined benefit pension plans and our unfunded postretirement health care and life insurance benefits plans. These cash requirements cannot be determined due to the number of assumptions required to estimate our future benefit obligations, including return on assets and discount rate. The liabilities associated with these plans are presented in Note 11, “Retirement and Benefit Plans,” in the Notes to Consolidated Financial Statements 48 included in Item 8 of this report. Currently, we do not expect to make any material contributions to our pension plans in 2025. Our actual contributions may differ from our planned contributions due to many factors, including changes in tax and other benefit laws, or significant differences between expected and actual pension asset performance or interest rates. Not included in the above table are $52 million of net potential cash obligations associated with uncertain tax positions due to the uncertainty regarding the future cash outflows associated with such obligations. Please see Note 8, “Income Taxes,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further information related to uncertain tax positions. Not included in the above table are $36 million of asset retirement obligations related to our obligation to dismantle or remove leasehold improvements from leased office, retail store or warehouse locations at the end of a lease term in order to restore a facility to a condition specified in the lease agreement due to the uncertainty of timing of future cash outflows associated with such obligations. Please see Note 21, “Other Comments,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further information related to asset retirement obligations. Not included in the above table are the cash flows associated with fixed-to-fixed cross-currency swap contracts that expire on July 10, 2025 due to the uncertainty regarding the future cash settlements associated with these contracts. Please see Note 9, “Derivative Financial Instruments” included in Item 8 of this report for further information related to these cross-currency swap contracts. MARKET RISK Financial instruments held by us as of February 2, 2025 primarily include cash and cash equivalents, short-term borrowings, long-term debt, foreign currency forward contracts and cross-currency swap contracts. Note 10, “Fair Value Measurements,” in the Notes to Consolidated Financial Statements included in Item 8 of this report outlines the fair value of our financial instruments as of February 2, 2025. Cash and cash equivalents held by us are affected by short-term interest rates. Given our balance of cash and cash equivalents at February 2, 2025, the effect of a 10 basis point change in short-term interest rates on our interest income would be approximately $0.7 million annually. Borrowings under our senior unsecured term loan facility bear interest at a rate equal to an applicable margin plus a variable rate. As such, our senior unsecured term loan facility exposes us to market risk for changes in interest rates. As of February 2, 2025, approximately 80% of our long-term debt was at a fixed interest rate, with the remaining (euro-denominated) balance at a variable interest rate. Interest on the euro-denominated debt is subject to change based on fluctuations in the one-month EURIBOR. The effect of a 10 basis point change in the current one-month EURIBOR on our variable interest expense would be approximately $0.4 million annually. Please see “Liquidity and Capital Resources” in the Management’s Discussion and Analysis section included in Part II, Item 7 of this report for further discussion of our credit facilities. Our Tommy Hilfiger and Calvin Klein businesses each have substantial international components that expose us to significant foreign exchange risk. Over 70% of our $8.7 billion of revenue in 2024 and $9.2 billion of revenue in 2023, and over 65% of our $9.0 billion of revenue in 2022 was generated outside of the United States. Changes in exchange rates between the United States dollar and other currencies can impact our financial results in two ways: a translational impact and a transactional impact. The translational impact refers to the impact that changes in exchange rates can have on our results of operations and financial position. The functional currencies of our foreign subsidiaries are generally the applicable local currencies. Our consolidated financial statements are presented in United States dollars. The results of operations in local foreign currencies are translated into United States dollars using an average exchange rate over the representative period and the assets and liabilities in local foreign currencies are translated into United States dollars using the closing exchange rate at the balance sheet date. Foreign exchange differences that arise from the translation of our foreign subsidiaries’ assets and liabilities into United States dollars are recorded as foreign currency translation adjustments in other comprehensive (loss) income. Accordingly, our results of operations and other comprehensive (loss) income will be unfavorably impacted during times of a strengthening United States dollar, particularly against the euro, the Japanese yen, the Korean won, the British pound, the Australian dollar, the Canadian dollar, the Mexican peso, the Brazilian real and the Chinese yuan, and favorably impacted during times of a weakening United States dollar against those currencies. Our 2024 revenue and net income decreased by approximately $70 million and $10 million, respectively, as compared to 2023 due to the impact of foreign currency translation. We currently expect the translational impact of foreign currency on our 2025 revenue and net income as compared to 2024 will be immaterial. 49 In 2024, we recognized unfavorable foreign currency translation adjustments of $173 million within other comprehensive (loss) income principally driven by a strengthening of the United States dollar since February 4, 2024 against the euro of 4%, certain currencies in the Asia-Pacific region (primarily the Australian dollar of 5% and the Korean won of 9%), the Mexican peso of 17% and the Brazilian real of 15%. Our foreign currency translation adjustments recorded in other comprehensive (loss) income are significantly impacted by the substantial amount of goodwill and other intangible assets denominated in the euro, which represented 39% of our $5.3 billion total goodwill and other intangible assets as of February 2, 2025. This translational impact was partially mitigated by the change in the fair value of our net investment hedges discussed below. There is also a transactional impact of foreign exchange because our foreign subsidiaries purchase inventory in a currency other than their functional currency. We also have exposure to changes in foreign currency rates related to certain intercompany transactions and SG&A expenses. We currently use and plan to continue to use foreign currency forward contracts or other derivative instruments to mitigate the cash flow or market value risks associated with these inventory and intercompany transactions, but we are unable to entirely eliminate these risks. We enter into foreign currency forward contracts pertaining to these inventory transactions up to 15 months in advance for a portion of the projected purchases and may enter into incremental contracts leading up to the time the inventory purchases occur. The transactional impact of foreign currency on our 2024 net income as compared to 2023 was immaterial. We currently expect the transactional impact of foreign currency on our 2025 net income as compared to 2024 also will be immaterial. Given our foreign currency forward contracts outstanding at February 2, 2025, the effect of a 10% change in foreign currency exchange rates against the United States dollar would result in a change in the fair value of these contracts of approximately $95 million. Any change in the fair value of these contracts would be substantially offset by a change in the fair value of the underlying hedged items. In order to mitigate a portion of our exposure to changes in foreign currency exchange rates related to the value of our investments in foreign subsidiaries denominated in the euro, we use both non-derivative instruments (the par value of certain of our foreign-denominated debt) and derivative instruments (cross-currency swap contracts), which we designate as net investment hedges. We designated the par value of our €1.125 billion aggregate principal amount of senior notes issued by PVH Corp., a U.S.-based entity, as net investment hedges of our investments in certain of our foreign subsidiaries that use the euro as their functional currency. In addition, we entered into multiple receive fixed-rate United States dollar-denominated interest and pay fixed-rate euro-denominated interest cross-currency swap contracts in 2023, which we also designated as net investment hedges of our investments in certain of our foreign subsidiaries that use the euro as their functional currency. Please see Note 9, “Derivative Financial Instruments,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion. The effect of a 10% change in the euro against the United States dollar would result in a change in the fair value of the net investment hedges of approximately $165 million. Any change in the fair value of the net investment hedges would be more than offset by a change in the value of our investments in certain of our European subsidiaries. Additionally, during times of a strengthening United States dollar against the euro, we would be required to use a lower amount of our cash flows from operations to pay interest and make long-term debt repayments on our euro-denominated senior notes and to settle our cross-currency swap contracts, whereas during times of a weakening United States dollar against the euro, we would be required to use a greater amount of our cash flows from operations to pay interest and make long-term debt repayments on these notes and to settle our cross-currency swap contracts. Included in the calculations of expense and liabilities for our pension plans are various assumptions, including return on assets, discount rates and mortality rates. Actual results could differ from these assumptions, which would require adjustments to our balance sheet and could result in volatility in our future pension expense. Holding all other assumptions constant, a 1% change in the assumed rate of return on assets would result in a change to 2025 net benefit cost related to the pension plans of approximately $4 million. Likewise, a 0.25% change in the assumed discount rate would result in a change to 2025 net benefit cost of approximately $16 million. 50 SEASONALITY Our business generally follows a seasonal pattern. Our wholesale businesses tend to generate higher levels of sales in the first and third quarters, while our retail businesses tend to generate higher levels of sales in the fourth quarter. Royalty, advertising and other revenue tends to be earned somewhat evenly throughout the year, although the third quarter tends to have the highest level of royalty revenue due to higher sales by licensees in advance of the holiday selling season. Working capital requirements vary throughout the year to support these seasonal patterns and business trends. RECENT ACCOUNTING PRONOUNCEMENTS Please see Note 1, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for a discussion of recently issued and adopted accounting standards. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our consolidated financial statements are based on the selection and application of significant accounting policies, which require management to make significant estimates and assumptions. Our significant accounting policies are outlined in Note 1, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements included in Item 8 of this report. We believe that the following are the more critical judgmental areas in the application of our accounting policies that currently affect our financial position and results of operations: Sales allowances and returns—We have arrangements with many of our department and specialty store customers to support their sales of our products. We establish accruals we believe will be required to satisfy our sales allowance obligations based on a review of the individual customer arrangements, which may be a predetermined percentage of sales in certain cases or may be based on the expected performance of our products in their stores. We also establish accruals, which are based on historical experience, an evaluation of current sales trends and market conditions, and authorized amounts, that we believe are necessary to provide for sales allowances and inventory returns. It is possible that the accrual estimates could vary from actual results, which would require adjustment to the allowance and returns accruals. Inventories—Inventories are comprised principally of finished goods and are stated at the lower of cost or net realizable value, except for certain retail inventories in North America that are stated at the lower of cost or market using the retail inventory method. Cost for all wholesale inventories in North America and certain wholesale and retail inventories in Asia is determined using the first-in, first-out method. Cost for all other inventories is determined using the weighted average cost method. We review current business trends and forecasts, inventory aging and discontinued merchandise categories to determine adjustments which we estimate will be needed to liquidate existing clearance inventories and record inventories at either the lower of cost or net realizable value or the lower of cost or market using the retail inventory method, as applicable. We believe that all inventory write-downs required at February 2, 2025 have been recorded. Our historical estimates of inventory reserves have not differed materially from actual results. If market conditions were to change, including as a result of inflationary pressures globally, supply chain disruptions, and the war in Ukraine and the Israel-Hamas war and their broader macroeconomic implications, it is possible that the required level of inventory reserves would need to be adjusted. Income taxes—Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent we believe a portion will not be realized. We consider many factors when assessing the likelihood of future realization of our deferred tax assets, including our recent earnings experience and expectations of future taxable income by taxing jurisdiction, the carryforward periods available to us for tax reporting purposes and other relevant factors. The actual realization of deferred tax assets may differ significantly from the amounts we have recorded. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. Accounting for income taxes requires a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if available evidence indicates it is more likely than not that the tax position will be fully sustained upon review by taxing authorities, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount with a greater than 50 percent likelihood of being realized upon ultimate settlement. For tax positions that are 50 percent or less likely of being sustained upon audit, we do not recognize any portion of that benefit in the financial statements. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which 51 may not accurately anticipate actual outcomes. Our actual results have differed materially in the past and could differ materially in the future from our current estimates. Goodwill and other intangible assets—Goodwill and other indefinite-lived intangible assets are tested for impairment annually, at the beginning of the third quarter of each fiscal year, and between annual tests if an event occurs or circumstances change that would indicate that it is more likely than not that the carrying amount may be impaired. Impairment testing for goodwill is done at the reporting unit level. A reporting unit is defined as an operating segment or one level below the operating segment, called a component. However, two or more components of an operating segment will be aggregated and deemed a single reporting unit if the components have similar economic characteristics. Impairment testing for other indefinite-lived intangible assets is done at the individual asset level. We assess qualitative factors to determine whether it is necessary to perform a more detailed quantitative impairment test for goodwill and other indefinite-lived intangible assets. We may elect to bypass the qualitative assessment and proceed directly to the quantitative test for any reporting units or indefinite-lived intangible assets. Qualitative factors that we consider as part of our assessment include a change in our market capitalization and its implied impact on reporting unit fair value, a change in our weighted average cost of capital, industry and market conditions, macroeconomic conditions, trends in product costs and financial performance of our businesses. If we perform the quantitative test for any reporting units or indefinite-lived intangible assets, we generally use a discounted cash flow method to estimate fair value. The discounted cash flow method is based on the present value of projected cash flows. Assumptions used in these cash flow projections are generally consistent with our internal forecasts and include revenue growth rate, gross margin, operating expenses and earnings before interest, taxes, depreciation and amortization margin. The estimated cash flows are discounted using a rate that represents our weighted average cost of capital. The weighted average cost of capital is based on a number of variables, including the equity-risk premium and risk-free interest rate. Management believes the assumptions used for the impairment tests are consistent with those that would be utilized by a market participant performing similar analysis and valuations. Adverse changes in future market conditions or weaker operating results compared to our expectations may impact our projected cash flows and estimates of weighted average cost of capital, which could result in a potential impairment charge if we are unable to recover the carrying value of our goodwill and other indefinite-lived intangible assets. For goodwill, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. For indefinite-lived intangible assets, an impairment loss is recognized to the extent the carrying amount of the asset exceeds its fair value. Goodwill Impairment Testing For the 2024 annual goodwill impairment test performed as of the beginning of the third quarter of 2024, we elected to bypass the qualitative assessment and proceeded directly to the quantitative impairment test using a discounted cash flow method to estimate the fair value of our reporting units. Our annual goodwill impairment test for 2024 yielded estimated fair values in excess of the carrying amounts for all of our reporting units with assigned goodwill and therefore no impairment of goodwill was identified. The Tommy Hilfiger International reporting unit had an estimated fair value that exceeded its carrying amount of $2,875 million by approximately 10%. The carrying amount of goodwill allocated to this reporting unit as of the date of the test was $1,556 million. The fair value of the Tommy Hilfiger International reporting unit was determined using an income approach based on discounted projected future (debt-free) cash flows. The discount rate applied to these cash flows was based on the weighted average cost of capital for the reporting unit, which takes market participant assumptions into consideration. Estimated future operating cash flows were discounted at a rate of 13% to account for the relative risks of the estimated future cash flows. Holding all other assumptions constant, a 100 basis point change in the annual revenue growth rate assumption for this business would result in a change to the estimated fair value of the reporting unit of approximately $161 million. Likewise, a 100 basis point change in the weighted average cost of capital would result in a change to the estimated fair value of the reporting unit of approximately $281 million. While the Tommy Hilfiger International reporting unit was not determined to be impaired, it may be at risk of future impairment if the related business does not perform as projected, or if market factors utilized in the impairment analysis deteriorate, including an unfavorable change in the long-term growth rate or the weighted average cost of capital. 52 As a result of our 2022 annual impairment test, we recorded $417 million of noncash impairment charges during the third quarter of 2022, which were included in goodwill impairment in our Consolidated Statement of Operations. The impairments were driven primarily by a significant increase in discount rates. No impairment of goodwill resulted from our annual impairment test in 2023. Please see Note 6, “Goodwill and Other Intangible Assets,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion. Indefinite-Lived Intangible Assets Impairment Testing For the 2024 annual indefinite-lived intangible assets impairment test performed as of the beginning of the third quarter of 2024, we elected to bypass the qualitative assessment and proceeded directly to the quantitative impairment test for all indefinite-lived intangible assets, using a discounted cash flow method to estimate fair value. We determined that the fair values for all indefinite-lived intangible assets exceeded their carrying amounts and, therefore, the assets were not impaired. The indefinite-lived intangible asset with the least excess fair value had an estimated fair value that exceeded its carrying amount by 19%. No impairment of indefinite-lived intangible assets resulted from our annual impairment tests in 2023 or 2022. Please see Note 6, “Goodwill and Other Intangible Assets,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion. Considerations Since the 2024 Annual Impairment Tests There have been no significant events or change in circumstances since the date of the 2024 annual impairment tests that would indicate the remaining carrying amounts of our goodwill and indefinite-lived intangible assets may be impaired as of February 2, 2025. If different assumptions for our goodwill and other indefinite-lived intangible assets impairment tests had been applied, significantly different outcomes could have resulted. There continues to be significant uncertainty in the current macroeconomic environment due to inflationary pressures globally, supply chain disruptions, the war in Ukraine and the Israel-Hamas war and their broader macroeconomic implications, and foreign currency volatility. In addition, there is significant uncertainty surrounding how our business may be impacted in the future as a result of MOFCOM’s decision to place us on the UEL. If economic conditions or market factors utilized in the impairment analysis deteriorate or otherwise vary from current assumptions (including those resulting in changes in the weighted average cost of capital), industry conditions deteriorate, or business conditions or strategies for a specific reporting unit change from current assumptions, our businesses do not perform as projected, or there is an extended period of a significant decline in our stock price, we could incur additional goodwill and indefinite-lived intangible asset impairment charges in the future. Pension and Benefit Plans—Pension and benefit plan expenses are recorded throughout the year based on calculations using actuarial valuations that incorporate estimates and assumptions that depend in part on financial market, economic and demographic conditions, including expected long-term rate of return on assets, discount rate and mortality rates. These assumptions require significant judgment. Actuarial gains and losses, which occur when actual experience differs from our actuarial assumptions, are recognized in the year in which they occur and could have a material impact on our operating results. These gains and losses are measured at least annually at the end of our fiscal year and, as such, are generally recorded during the fourth quarter of each year. The expected long-term rate of return on assets is based on historical returns and the level of risk premium associated with the asset classes in which the portfolio is invested as well as expectations for the long-term future returns of each asset class. The expected long-term rate of return for each asset class is then weighted based on the target asset allocation to develop the expected long-term rate of return on assets assumption for the portfolio. The expected return on plan assets is recognized quarterly and determined at the beginning of the year by applying the long-term expected rate of return on assets to the actual fair value of plan assets adjusted for expected benefit payments, contributions and plan expenses. At the end of the year, the fair value of the assets is remeasured and any difference between the actual return on assets and the expected return is recorded in earnings as part of the actuarial gain or loss. The discount rate is determined based on current market interest rates. It is selected by constructing a hypothetical portfolio of high quality corporate bonds that matches the cash flows from interest payments and principal maturities of the portfolio to the timing of benefit payments to participants. The yield on such a portfolio is the basis for the selected discount rate. Service and interest cost is measured using the discount rate as of the beginning of the year, while the projected benefit obligation is measured using the discount rate as of the end of the year. The impact of the change in the discount rate on our projected benefit obligation is recorded in earnings as part of the actuarial gain or loss. 53 The mortality assumptions used to determine our benefit obligations are based on the most recently published actuarial mortality tables. We also periodically review and revise, as necessary, other plan assumptions such as rates of compensation increases, retirement and termination based on historical experience and anticipated future management actions. Changes in life expectancy and other plan assumptions can impact benefit obligations and future expense. Actual results could differ from our assumptions, which would require adjustments to our balance sheet and could result in volatility in our future net benefit cost. Holding all other assumptions constant, a 1% change in the assumed rate of return on assets would result in a change to our 2025 net benefit cost related to the pension plans of approximately $4 million. Likewise, a 0.25% change in the assumed discount rate would result in a change to our 2025 net benefit cost of approximately $16 million. In the fourth quarter of 2023, our Board of Directors approved changes to our pension plans to freeze the pensionable compensation and credited service amounts used to calculate participants’ benefits, which became effective June 30, 2024. After the effective date, in lieu of participation in these pension plans, employees receive an additional Company contribution to their savings and retirement plans. Employees near retirement age that meet a specified service requirement are included in a transition group that will continue to accrue benefits under these pension plans for two years after the effective date of the freeze in addition to receiving the additional Company contribution to their savings and retirement plans. In connection with the pension plans freeze, we recorded a curtailment gain of $20 million in 2023. Note 11, “Retirement and Benefit Plans,” in the Notes to Consolidated Financial Statements included in Item 8 of this report sets forth certain significant rate assumptions and information regarding our target asset allocation, which are used in performing calculations related to our pension plans.