Quarterly report pursuant to Section 13 or 15(d)

Discontinued Operations

v3.19.3.a.u2
Discontinued Operations
9 Months Ended
Nov. 02, 2019
Discontinued Operations  
Discontinued Operations

2. Discontinued Operations

On August 15, 2019, our Board of Directors approved and on August 16, 2019, we completed the sale of MWUK Limited, our UK corporate apparel operations conducted under the Dimensions, Alexandra, and Yaffy brand names to Project Dart Bidco Limited, pursuant to a Share Purchase Agreement entered into on August 16, 2019.  In addition, we also completed the sale of Twin Hill Acquisition Company, Inc. (“Twin Hill”), our U.S. corporate apparel operation, to TH Holdco Inc., pursuant to a Stock Purchase Agreement entered into on August 16, 2019.  The aggregate consideration for all of the outstanding equity of MWUK Limited and Twin Hill (collectively, the “corporate apparel business”) was approximately $62 million, subject to certain working capital adjustments. After consideration of working capital adjustments and other related items, we received $49.3 million in cash during the third quarter of 2019 and approximately $6.0 million will be received in the first quarter of fiscal 2020.  Prior to its sale, the corporate apparel business was its own reportable segment.

We determined that the sale of the corporate apparel business represents a strategic shift that will have a major effect on our results of operations and, as a result, have reported the disposal as discontinued operations.  We have presented the results of the corporate apparel business including the loss on the sale of the corporate apparel business within loss from discontinued operations, net in the condensed consolidated statement of (loss) earnings for all periods presented.  Certain costs previously allocated to the corporate apparel business for segment reporting purposes do not qualify for classification within discontinued operations and have been reallocated to continuing operations.  In addition, the goodwill impairment charge of $24.0 million recorded during the third quarter of 2018 and related to the corporate apparel business has been reclassified to discontinued operations.

Also, U.S. GAAP requires cumulative foreign currency translation adjustment balances to be released into earnings once the sale or liquidation of the net assets of a foreign entity occurs.  As we have sold the operating entities associated with the corporate apparel business during the third quarter of 2019, we determined the cumulative foreign currency translation adjustment balance totaling $26.9 million should be released to earnings and classified within loss from discontinued operations.

The related assets and liabilities of the corporate apparel business are presented as current and non-current assets and liabilities of discontinued operations in the condensed consolidated balance sheets as of November 3, 2018 and February 2, 2019.  The following table provides details of the carrying amounts of major classes of assets and liabilities related to discontinued operations as of November 3, 2018 and February 2, 2019 (in thousands):

November 3,

February 2,

2018

2019

ASSETS

Cash and cash equivalents

$

12,132

$

22,760

Accounts receivable, net

46,059

38,387

Inventories

102,797

106,340

Other current assets

4,370

3,889

Total current assets

165,358

171,376

Property and equipment, net

14,817

14,856

Other assets

10,714

10,215

Total assets

$

190,889

$

196,447

LIABILITIES

Accounts payable

$

17,844

$

24,204

Accrued expenses and other current liabilities

15,817

15,821

Total current liabilities

33,661

40,025

Other liabilities

4,452

5,477

Total liabilities

$

38,113

$

45,502

 

The following table provides details of the amounts reflected in loss from discontinued operations, net of tax in the condensed consolidated statements of (loss) earnings for the three and nine months ended November 2, 2019 and November 3, 2018 (in thousands):

For the Three Months Ended

For the Nine Months Ended

    

November 2, 2019

    

November 3, 2018

    

November 2, 2019

    

November 3, 2018

Net sales

$

7,376

$

61,006

$

117,444

$

179,643

Cost of sales

5,507

43,765

85,042

130,112

Selling, general and administrative expenses

2,200

13,427

30,049

41,812

Goodwill impairment charge

23,991

23,991

Loss on sale of corporate apparel business

83,723

82,808

Loss on release of cumulative foreign currency translation adjustment

26,885

26,885

Loss from discontinued operations before taxes

(110,939)

(20,177)

(107,340)

(16,272)

Income tax expense

6,439

735

4,766

1,503

Loss from discontinued operations, net of tax

$

(117,378)

$

(20,912)

$

(112,106)

$

(17,775)

The cash flows related to discontinued operations have not been segregated, and are included in the condensed consolidated statement of cash flows.  The following table provides selected information on cash flows related to discontinued operations for the nine months ended November 2, 2019 and November 3, 2018 (in thousands):

For the Nine Months Ended

    

November 2, 2019

    

November 3, 2018

Depreciation and amortization

$

3,102

$

4,382

Capital expenditures

2,677

3,198

Significant non-cash operating and investing items:

Goodwill impairment charge

23,991

Loss on divestiture of business

82,808

Loss on release of cumulative foreign currency translation adjustment

26,885

Receivable related to sale of corporate apparel business

$

6,048

$