Annual report [Section 13 and 15(d), not S-K Item 405]

FAIR VALUE MEASUREMENTS

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FAIR VALUE MEASUREMENTS
 12 Months Ended
Jan. 03, 2026
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS FAIR VALUE MEASUREMENTS
Financial assets and liabilities measured and reported at fair value are classified in a three-level hierarchy that prioritizes the inputs used in the valuation process. Categorization within the valuation hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The hierarchy is based on the observability and objectivity of the pricing inputs, as follows:
•Level 1 — Quoted prices in active markets for identical assets or liabilities.
•Level 2 — Significant directly observable data (other than Level 1 quoted prices) or significant indirectly observable data through corroboration with observable market data. Inputs would normally be (i) quoted prices in active markets for similar assets or liabilities, (ii) quoted prices in inactive markets for identical or similar assets or liabilities or (iii) information derived from or corroborated by observable market data.
•Level 3 — Prices or valuation techniques that require significant unobservable data inputs. These inputs would normally be the Company's own data and judgments about assumptions that market participants would use in pricing the asset or liability.
Recurring Fair Value Measurements
The following tables present financial assets and financial liabilities that are measured and recorded in the Company's financial statements at fair value on a recurring basis:
    Fair Value Measurement Using
(In thousands) Total Fair Value Level 1 Level 2 Level 3
December 2025
Financial assets:
Cash equivalents:
Money market funds $ 49,253  $ 49,253  $ —  $ — 
Time deposits 2,886  2,886  —  — 
Foreign currency exchange contracts 11,373  —  11,373  — 
Interest rate swap agreements 279  —  279  — 
Investment securities 51,717  51,717  —  — 
Financial liabilities:
Foreign currency exchange contracts 9,896  —  9,896  — 
Deferred compensation 55,222  —  55,222  — 
    Fair Value Measurement Using
(In thousands) Total Fair Value Level 1 Level 2 Level 3
December 2024
Financial assets:
Cash equivalents:
Money market funds $ 263,637  $ 263,637  $ —  $ — 
Time deposits 2,575  2,575  —  — 
Foreign currency exchange contracts 7,720  —  7,720  — 
Interest rate swap agreements 5,390  —  5,390  — 
Investment securities 48,976  48,976  —  — 
Financial liabilities:
Foreign currency exchange contracts 11,620  —  11,620  — 
Deferred compensation 53,333  —  53,333  — 
The Company's cash equivalents include money market funds and short-term time deposits that approximate fair value based on Level 1 measurements. The fair value of derivative financial instruments, which consist of foreign currency exchange contracts and interest rate swap agreements, is determined based on observable market inputs (Level 2), including spot and forward exchange rates for foreign currencies and observable interest rate yield curves for interest rate swap agreements. Investment securities are held in the Company's deferred compensation plans as an economic hedge of the related deferred compensation liabilities and are comprised of mutual funds that are valued based on quoted prices in active markets (Level 1). Liabilities related to the Company's deferred compensation plans are recorded at amounts due to participants, based on the fair value of the participants' selection of hypothetical investments (Level 2).
Additionally, at December 2025, the carrying value of the Company's long-term debt was $1,143.3 million compared to a fair value of $1,125.3 million. At December 2024, the carrying value of the Company's long-term debt was $740.3 million compared to a fair value of $710.8 million. The fair value of long-term debt is a Level 2 estimate based on quoted market prices or values of comparable borrowings.
All other financial assets and financial liabilities are recorded in the Company's financial statements at cost. These other financial assets and financial liabilities include cash held as demand deposits, accounts receivable, short-term borrowings, accounts payable and accrued liabilities. At December 2025 and December 2024, their carrying values approximated fair value due to the short-term nature of these instruments.
Nonrecurring Fair Value Measurements
Helly Hansen Acquisition
In accounting for the Helly Hansen acquisition, the Company applied the acquisition method of accounting. The purchase price was allocated to the assets acquired, liabilities assumed and the noncontrolling interest based on their estimated fair values as of the Closing Date. Any excess purchase price over the fair value of the net assets acquired was recorded as goodwill. We engaged a third-party valuation specialist to assist in the fair value determination of certain tangible and intangible assets. Valuation techniques include the relief-from-royalty method, the multi-period excess earnings method, and the replacement cost and income methods. The process of assigning fair values, particularly to acquired intangible assets, is highly subjective and requires the use of significant estimates including future expected cash inflows and outflows, growth rates, expected lives, discount rates, royalty rates and income tax rates. The Company's estimates of fair value were based on assumptions believed to be reasonable, but are inherently uncertain and actual results may differ from estimates used. Additionally, the purchase price allocation is preliminary and subject to revision as additional information is obtained about the facts and circumstances that existed as of the Closing Date. Refer to Note 2 to the Company's financial statements in this Form 10-K for additional details regarding the Acquisition and the preliminary purchase price allocation.
The preliminary estimate of the fair value of Helly Hansen's trademark and customer relationship intangible assets was determined using the income approach, which requires a forecast of expected future cash flows either through the use of the relief-from-royalty method or the multi-period excess earnings method. The fair value measurements were primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement of the fair value hierarchy.
Management uses the income-based relief-from-royalty method to value trademark intangible assets. Under this method, revenues expected to be generated by the trademark are multiplied by a selected royalty rate, based on consideration of (i) royalty rates included in active license agreements, if applicable, (ii) royalty rates received by market participants in the apparel industry, and (iii) the current performance of the reporting unit. The estimated after-tax royalty revenue stream is then discounted to present value using the reporting unit’s discount rate plus a spread that factors in the risk of the intangible asset.
Management uses the multi-period excess earnings method to value customer relationship intangible assets. Under this method, the Company calculates the present value of the after-tax cash flows expected to be generated by the customer relationship assets after deducting contributory asset charges.
Certain non-financial assets, primarily property, plant and equipment, capitalized computer software, operating lease assets and definite-lived intangible assets, are not required to be measured at fair value on a recurring basis and are reported at carrying value. However, these assets are required to be assessed for impairment whenever events or circumstances indicate that the carrying value may not be recoverable. Additionally, goodwill and indefinite-lived intangible assets are required to be assessed for impairment at least annually and quantitatively tested for impairment within the first 12 months of acquisition.
Finite-lived Intangible Assets Impairment Analysis
During the years ended December 2025, December 2024 and December 2023, no triggering events were identified that required an impairment assessment of finite-lived intangible assets.
Retail Store Asset Impairment Analysis
During the years ended December 2025, December 2024 and December 2023, the Company recorded impairment charges of $3.9 million, $1.7 million and $1.4 million, respectively, related to retail store assets. All impairment charges were reflected within "selling, general and administrative expenses" in the Company's statements of operations.
Other Long-lived Asset Impairment Analysis
During the year ended December 2025, the Company recorded impairment charges of $4.3 million primarily related to property, plant and equipment from the closure of a portion of our manufacturing facilities. During the years ended December 2024 and December 2023, the Company recorded impairment charges of $3.6 million and $0.8 million, respectively, related to property, plant and equipment resulting from business optimization activities associated with the continued execution of Project Jeanius. Additionally, during the year ended December 2023, the Company recorded impairment charges of $2.3 million related to a right-of-use operating lease asset resulting from business optimization activities associated with the continued execution of Project Jeanius. All impairment charges were reflected within "cost of goods sold" in the Company's statements of operations.
Annual Goodwill and Indefinite-lived Intangible Assets Impairment Analysis
Management performs its annual impairment testing of goodwill and indefinite-lived intangible assets as of the beginning of the fourth quarter. Based on results of testing, there were no goodwill impairment charges for the years ended December 2025, 2024, and 2023.
For the years ended December 2025 and December 2024, for the Wrangler® and Lee® reporting units, management elected to perform a qualitative impairment assessment to determine whether it is more likely than not that the goodwill in the reporting units was impaired. In performing qualitative impairment assessments, management considered relevant events and circumstances for each reporting unit, including (i) current year results, (ii) financial performance versus management's annual and five-year strategic plans, (iii) changes in the reporting unit carrying value since prior year, (iv) industry and market conditions in which the reporting unit operates, (v) macroeconomic conditions, including discount rate changes and (vi) changes in products or services offered by the reporting unit. If applicable, performance in recent years was compared to forecasts included in prior valuations. Based on results of the qualitative assessments performed, further testing was not considered necessary.
For the year ended December 2023, management elected to perform a quantitative impairment assessment for goodwill to determine whether the estimated fair values of the Wrangler® and Lee® reporting units exceeded their carrying values. The fair value of each reporting unit was estimated based on a combination of two valuation methods: an income approach and a market approach. The income approach was based on the present value of projected discounted cash flows for each reporting unit. The discount rate is based on the reporting unit's weighted average cost of capital that takes market participant assumptions into consideration. The market approach was based on the guideline company method, which analyzed market multiples of revenue and earnings before interest, taxes, depreciation and amortization for a group of comparable companies, as well as the similar transaction method. Based on results of the quantitative impairment assessment performed, the fair value of goodwill exceeded the carrying value for both reporting units.
Refer to Part II, Item 7 - Critical Accounting Policies and Estimates for additional discussion regarding fair value measurements, including significant assumptions utilized.