COSTS ASSOCIATED WITH WIND DOWN ACTIVITIES

Wholesale Business

During the third quarter of 2013, we announced our intention to wind down the operations of our wholesale business, within our U.S. segment, during the fourth quarter of 2013. In conjunction with our decision to wind down the operations of our wholesale business, we reviewed the valuation of the inventory associated with the wholesale business and based on the composition of the merchandise, we recorded an impairment of $3.7 million, which reduced the value of the inventory to our estimate of its market value. Additionally, we recorded a severance charge for this exit activity of approximately $1.1 million. The severance accrual was adjusted during the fourth quarter based on the final execution of severance agreements.

During the fourth quarter of 2013, we closed the leased facilities in which we operated our wholesale business and recorded contract termination costs of approximately $0.2 million.

The following table summarizes the components of our wind down activities associated with our wholesale business and the related liabilities for 2013:



(In thousands)	Severance			Contract Termination Costs			Total
Balance at February 2, 2013	$	—		$	—		$	—
Charges	1,078			212			1,290
Adjustments	(302		)	—			(302		)
Payments	(254		)	(212		)	(466		)
Period change	522			—			522
Balance at February 1, 2014	$	522		$	—		$	522

We anticipate no additional charges associated with the wind down of the operations of our wholesale business. As the operations of the wholesale business had ceased as of February 1, 2014, the results of operations of the wholesale business were reclassified to discontinued operations. Please see the Wholesale Business section of note 14 to the consolidated financial statements for further information.

Canadian Segment

During the fourth quarter of 2013, we announced our intention to wind down the operations of our Canadian segment. We conducted detailed evaluations of our long range strategic objectives as well as performed a preliminary review of our 2014 financial plan. As a result of this evaluation and review, we determined the Canadian segment does not fit into our strategic plan for maximizing long-term shareholder returns based on our expectations of the required investments necessary to improve the Canadian segment’s financial performance, both in the near and long-term. During the fourth quarter of 2013, we began a markdown strategy with the intent to liquidate our inventory prior to closing our stores. At February 1, 2014, we re-valued our inventory at our net realizable value based on estimated cash proceeds prior to closing, which represents our estimate of its market value. The cost associated with the revaluation of inventory was recorded in our cost of sales. We, also, conducted a review of our long lived assets. We determined that the elimination of future cash flows from our operations beyond the first quarter of 2014 resulted in the impairment of our property and equipment and our tradename intangible assets; therefore, we recorded a $6.5 million impairment charge for property and equipment, in order to reduce its value to estimated salvage value, and recorded a $0.5 million charge to fully impair our Canadian tradenames. Please see the third paragraph of note 2 to the consolidated financial statements for further discussion. Additionally, we conducted an impairment review of our goodwill associated with our Canadian segment, determined that the goodwill had been impaired, and we recorded a $12.7 million impairment charge. Please see the final paragraph of note 12 to the consolidated financial statements for further discussion.

The wind down of our Canadian operations has been separated into two phases: our distribution centers and our stores. During the fourth quarter of 2013, we ceased the operations in our distribution centers, as receiving, processing, and distributing activities were completed. Associated with the closure of our distribution centers and certain administrative activities, we recorded a severance charge of approximately $2.7 million in our selling and administrative expenses. Additionally, with the closure of certain leased distribution centers, we recorded contract termination costs of approximately $1.3 million.

The following table summarizes the components of our wind down activities associated with our Canadian segment and the related liabilities for 2013:



(In thousands)	Severance			Contract Termination Costs		Total
Balance at February 2, 2013	$	—		$	—	$	—
Charges	2,739			1,276		4,015
Adjustments	—			—		—
Payments	(319		)	—		(319		)
Period change	2,420			1,276		3,696
Balance at February 1, 2014	$	2,420		$	1,276	$	3,696

During February 2014, we closed all stores in our Canadian segment, which will result in an estimated additional severance charge associated with this exit activity in the range of $1.0 million to $2.0 million. In addition, contract termination costs, primarily associated with our stores operating leases, will be recorded upon the cessation of our Canadian segment's operations during the first quarter of 2014, which we estimate will be in the range of $28.0 million to $31.0 million.