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 during the fourth quarter of 2013. At that time, we recorded a severance charge for this exit activity. During the fourth quarter of 2013, we closed the leased facilities in which we operated our wholesale business, recorded contract termination costs, and fully paid those obligations.

In the fourth quarter of 2013 we established a liability of $0.5 million for severance related cost associated with the wind down of our wholesale business. During the six months ended August 2, 2014 we paid $0.5 million in severance cost reducing the liability to zero at August 2, 2014. 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 12 to the consolidated financial statements for further information regarding this discontinued operation.

Canadian Operations

During the fourth quarter of 2013, we announced our intention to wind down the operations of our former Canadian segment. We conducted detailed evaluations of our long range strategic objectives and performed a preliminary review of our 2014 financial plan. As a result of this evaluation and review, we determined our Canadian operations did not fit into our strategic plan for maximizing long-term shareholder returns based on our expectations of the required investments necessary to improve our Canadian operations’ 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 revalued our inventory at our net realizable value based on estimated cash proceeds prior to closing, which represents our estimate of its market value. During the fourth quarter of 2013, 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. Additionally, we conducted an impairment review of our goodwill associated with our Canadian operations, determined that the goodwill had been fully impaired, and we recorded an impairment charge.

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

During the first quarter of 2014, we closed all of our stores, ceased their operations, and closed our Canadian corporate office. We recorded severance and contract termination costs of approximately $2.2 million and $23.0 million relating to the closure of our stores and our remaining administrative activities, respectively. In addition, in connection with the substantial completion of the wind down activities, we recorded a foreign currency translation loss of $5.1 million, which related to the realization of the cumulative translation adjustment on our investment in our Canadian operations.

The following table summarizes the components of our wind down activities associated with our Canadian operations and the activities within the related liabilities during 2014:



(In thousands)	Severance			Contract Termination Costs			Total
Balance at February 1, 2014	$	2,420		$	1,276		$	3,696
Charges	2,206			22,984			25,190
Adjustments	—			553			553
Payments	(3,997		)	(15,577		)	(19,574		)
Foreign currency translation	(38		)	74			36
Period change	(1,829		)	8,034			6,205
Balance at May 3, 2014	$	591		$	9,310		$	9,901
Charges	—			28			28
Adjustments	—			(335		)	(335		)
Payments	(591		)	(7,942		)	(8,533		)
Foreign currency translation	—			95			95
Period change	(591		)	(8,154		)	(8,745		)
Balance at August 2, 2014	$	—		$	1,156		$	1,156
Charges	—			114			114
Adjustments	—			—			—
Payments	—			(1,012		)	(1,012		)
Foreign currency translation	—			(8		)	(8		)
Period change	—			(906		)	(906		)
Balance at November 1, 2014	$	—		$	250		$	250

During February 2014, we closed all of our Canadian stores, terminated all remaining Canadian employees, and accrued an obligation for the associated severance and contract termination costs. As of November 1, 2014, we anticipate any future charges associated with the wind down of our Canadian operations will be immaterial. As our Canadian operations had ceased as of May 3, 2014, the results of our Canadian operations were reclassified to discontinued operations. Please see the Canadian Operations section of note 12 to the consolidated financial statements for further information regarding this discontinued operation.