EXIT AND DISPOSAL ACTIVITIES

12 Months Ended

Feb. 03, 2018

Restructuring and Related Activities [Abstract]

EXIT AND DISPOSAL ACTIVITIES

NOTE 13 – EXIT AND DISPOSAL ACTIVITY

Fixed Assets

The Company’s policy is to review the carrying value of all long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. We measure impairment losses of fixed assets and leasehold improvements as the amount by which the carrying amount of a long-lived asset exceeds its fair value as prescribed by FASB ASC 360, “Impairment or Disposal of Long-Lived Assets.” If a long-lived asset is found to be impaired, the amount recognized for impairment is equal to the difference between the carrying value and the asset’s fair value. The fair value is based on estimated market values for similar assets or other reasonable estimates of fair market value based upon a discounted cash flow model.

In 2015, the Company recorded an additional charge of $0.3 million for fixed assets and leasehold improvements related to the 2014 store closures. In 2016, the Company utilized $0.2 million related to the 2014 store closures, leaving $0.5 million of impairment charges for fixed assets recorded pertaining to fiscal 2014 store closures. None of the remaining impairment was utilized in 2017, leaving $0.5 million of impairment charges pertaining to fiscal 2014 store closures as of February 3, 2018.

During fiscal 2016, a decision was made to close 39 underperforming stores, which included 18 underperforming pharmacies. As a result, the Company recorded charges in the amount of $2.0 million in selling, general and administrative expense for the impairment of fixed assets associated with the closing stores and pharmacies and $2.3 million for the accelerated recognition of amortization of intangible assets associated with the closing pharmacies of which $0.1 million was utilized during 2016. Additional impairment charges of $3.6 million were for fixed asset impairments related to the corporate headquarters. During the first quarter of 2017, the locations were closed and the Company utilized the remaining balance of $4.2 million of impairment charges relating to the 2016 planned store closures. None of the impairment charges relating to the corporate headquarters were utilized as of February 3, 2018.

In the second quarter of 2017, in association with the planned closure of additional underperforming stores and pharmacies, the Company recorded charges in the amount of $0.8 million in selling, general and administrative expense for the impairment of fixed assets associated with the closing stores and pharmacies and $1.4 million for the accelerated recognition of amortization of intangible assets associated with the closing pharmacies. None of these charges were utilized as of February 3, 2018.

In the third quarter of 2017, a decision was made to sell the Company-owned airplane. The sale was completed in the fourth quarter, and an impairment charge of $2.6 million recorded in the third quarter related to the sale of this asset was fully utilized in the fourth quarter of 2017.

In the fourth quarter of 2017, the Company recorded a charge of $1.1 million in selling, general and administrative expense for the impairment of fixed assets associated with several underperforming locations. None of the impairment charges relating to these assets were utilized as of February 3, 2018.

Inventory

We adjust inventory values on a consistent basis to reflect current market conditions. In accordance with FASB ASC 330, “Inventories,” we write down inventory to net realizable value in the period in which conditions giving rise to the write-downs are first recognized.

Lease Termination

For lease obligations related to closed stores, we record the estimated future liability associated with the rental obligation on the cease use date (when the stores were closed). The lease obligations are established at the cease use date for the present value of any remaining operating lease obligations, net of estimated sublease income, and at the communication date for severance and other exit costs, as prescribed by FASB ASC 420, “Exit or Disposal Cost Obligations.” Key assumptions in calculating the liability include the timeframe expected to terminate lease agreements, estimates related to the sublease potential of closed locations, and estimates of other related exit costs. If actual timing and potential termination costs or realization of sublease income differ from our estimates, the resulting liabilities could vary from recorded amounts. These liabilities are reviewed periodically and adjusted when necessary.

During fiscal 2016, the Company increased the lease liability for stores closed between 2014 and 2016 by $0.5 million and utilized $0.3 million, leaving a liability of $0.2 million. This reserve was utilized during fiscal year 2017 in full.

In the first quarter of 2017, the Company recorded a lease liability relating to the 39 underperforming store closures in fiscal 2017 of $8.2 million. Additional $0.2 million reserve was recorded in the fourth quarter of 2017 and $2.1 million of reserve was utilized during the year, leaving $6.3 million reserve balance as of February 3, 2018.

The following table illustrates the impairment charges for fixed assets and inventory related to planned closures and inventory strategic initiatives along with the lease liability related to the planned store closures discussed in the previous paragraphs (in millions):

	Balance at January 28, 2017		Additions		Utilization			Ending Balance February 3, 2018
Impairment charge for the disposal of fixed assets for 2014 planned closures		0.5		—		—			0.5
Inventory markdowns for 2016 planned closures		3.0		—		(3.0	)		—
Inventory provision for freight capitalization expense, 2016 planned closures		1.1		—		(1.1	)		—
Impairment charge for the disposal of fixed assets for 2016 planned closures		2.0		—		(2.0	)		—
Impairment charge for the disposal of intangible assets for 2016 planned closures		2.2		—		(2.2	)		—
Impairment charge for the disposal of fixed assets for corporate office		3.6		—		—			3.6
Impairment charge for the sale of the Company-owned airplane		—		2.6		(2.6	)		—
Impairment charge for the disposal of fixed assests for 2017 planned closures		—		0.8		—			0.8
Impairment charge for the disposal of intangible assests for 2017 planned closures		—		1.4		—			1.4
Impairment charge for the write down of fixed assets for underperforming stores		—		1.1		—			1.1
Subtotal	$	12.4	$	5.9	$	(10.9	)	$	7.4
Lease contract termination liability, 2014-2016 closures		0.2		—		(0.2	)		—
Lease contract termination liability, 2017 closures		—		8.4		(2.1	)		6.3
Total	$	12.6	$	14.3	$	(13.2	)	$	13.7