2.	Discontinued Operations

Gymboree Play & Music

On July 15, 2016, we closed a transaction to sell all of the equity and certain intellectual property attributable to Gymboree Play Programs, Inc. (“Play & Music” or “GPPI”), the Company’s global Play & Music business, to Zeavion Holding Pte. Ltd. (“Zeavion”) for consideration of $127.5 million prior to certain purchase price adjustments pursuant to the Share Purchase Agreement (“SPA”). Upon closing, the Company received consideration of $128.1 million which includes a purchase price adjustment of $0.6 million related to the excess of GPPI’s net working capital over a certain target pursuant to the SPA. In connection with the sale, the Company also entered into a License and Assignment Agreement (“License Agreement”), which became effective upon the closing of the transaction. The License Agreement includes the transfer of ownership of intellectual properties attributed to Gymboree Play & Music to Zeavion and the grant of a royalty-free and perpetual license of Company-owned trade names (e.g., “Gymboree” when used in connection with the “Play & Music” trade name) to Zeavion, an unrelated third party. We also entered into a transition services agreement and an employee lease agreement with Zeavion at the closing of the transaction, which were not significant.

Of the $128.1 million of proceeds received upon closing, approximately $127.1 million was attributed to the sale of GPPI and approximately $1.0 million was attributed to the transition services agreement, which will be recognized as income over a period of 1 year as services are performed. During the 26 weeks ended July 30, 2016, the Company recognized a $70.0 million gain on sale of GPPI and included such amount in income from discontinued operations in the consolidated statements of operations.

Of the $128.1 million of proceeds received upon closing, approximately $109.9 million of is restricted under the Term Loan to reduce the Term Loan, fund capital expenditures or pay income taxes associated with the gain on the sale of GPPI. As of July 30, 2016, the remaining balance of the restricted cash was $107.1 million.

Variable Interest Entities (Gymboree Tianjin and Gymboree China)

Concurrent with the July 15, 2016 sale of GPPI, our Variable Interest Entities (“VIEs”), Gymboree Tianjin (master franchisee of Gymboree Play & Music in China) and Gymboree China (operator of Gymboree retail stores in China), indirectly controlled by Gymboree Holding, Ltd. and investment funds sponsored by Bain Capital, were also sold to Zeavion.

In accordance with ASC 205-20, Presentation - Discontinued Operations, the sale of our global Play & Music business (including GPPI and Gymboree Tianjin) was determined to represent a strategic shift to the Company’s business and therefore, the financial results of GPPI and Gymboree Tianjin as of and for the 26 weeks ended July 30, 2016, and for all historical periods presented, have been reported as discontinued operations in the accompanying consolidated financial statements. Due to its insignificance to our consolidated financial statements, Gymboree China has not been reported as discontinued operations. However, pursuant to ASC 810-10, Consolidation, we have deconsolidated Gymboree China’s financial results as of July 15, 2016, the date of sale, as we are no longer the primary beneficiary. Gymboree Play & Music, Gymboree Tianjin and Gymboree China were previously reported under the Gymboree Play & Music and VIEs reportable segments, respectively, in our segment footnote disclosure.

Below is the composition of income from discontinued operations for the periods ended (in thousands):


	26 Weeks Ended July 30, 2016			Year Ended
	26 Weeks Ended July 30, 2016			January 30, 2016			January 31, 2015			February 1, 2014
Net Sales	$	20,317		$	41,212		$	30,908		$	25,685
Cost of goods sold, including occupancy expenses		(3,907	)		(8,350	)		(6,331	)		(5,678	)
Selling, general and administrative expenses		(9,482	)		(16,611	)		(13,263	)		(12,807	)
Other (expense) income, net		532			(29	)		(42	)		267

Income from discontinued operations, before tax		7,460			16,222			11,272			7,467
Gain on sale of Gymboree Play & Music, before tax		70,008			—			—			—

Total income from discontinued operations, before tax		77,468			16,222			11,272			7,467
Income tax expense		(14,429	)		(3,209	)		(2,514	)		(424	)

Income from discontinued operations, net tax		63,039			13,013			8,758			7,043
Income from discontinued operations attributable to noncontrolling interest		(4,006	)		(6,433	)		(133	)		(1,674	)

Income from discontinued operations attributable to The Gymboree Corporation	$	59,033		$	6,580		$	8,625		$	5,369

Total income from discontinued operations, before tax, consists of (in thousands):


	26 Weeks Ended July 30, 2016		Year Ended
	26 Weeks Ended July 30, 2016		January 30, 2016		January 31, 2015		February 1, 2014
Income from discontinued operations attributable to The Gymboree Corporation, before tax	$	72,334	$	7,217	$	9,388	$	6,150
Income from discontinued operations attributable to noncontrolling interest, before tax		5,134		9,005		1,884		1,317

Total income from discontinued operations, before tax	$	77,468	$	16,222	$	11,272	$	7,467

Below is a summary of the assets and liabilities of discontinued operations as of the periods ended (in thousands):


	January 30, 2016		January 31, 2015
ASSETS:
Cash and cash equivalents	$	8,390	$	7,429
Accounts receivable, net		5,589		3,421
Merchandise inventories		3,810		2,542
Other current assets		421		1,720

Total current assets of discontinued operations		18,210		15,112

Net property and equipment		2,928		3,304
Goodwill		16,389		16,389
Other intangible assets, net		37,403		37,533
Other assets		1,625		857

Total other assets of discontinued operations		58,345		58,083

Total assets of discontinued operations	$	76,555	$	73,195

LIABILITIES:
Accounts payable and accrued liabilities	$	13,300	$	9,224
Other long-term liabilities		310		704

Total liabilities of discontinued operations	$	13,610	$	9,928

Below is a summary of cash flows from operating and investing activities attributable to continuing and discontinued operations for the periods ended (in thousands):


	26 Weeks Ended July 30, 2016			Year Ended
	26 Weeks Ended July 30, 2016			January 30, 2016			January 31, 2015			February 1, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash (used in) provided by operating activities of continuing operations	$	(11,062	)	$	12,571		$	(33,320	)	$	67,444
Net cash (used in) provided by operating activities of discontinued operations		(14,651	)		16,569			11,562			7,427

Net cash (used in) provided by operating activities	$	(25,713	)	$	29,140		$	(21,758	)	$	74,871

CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash (used in) provided by investing activities of continuing operations	$	(118,300	)	$	(20,333	)	$	(29,438	)	$	(51,766	)
Net cash provided by (used in) investing activities of discontinued operations		128,305			(2,267	)		(2,504	)		(1,360	)

Net cash provided by (used in) investing activities	$	10,005		$	(22,600	)	$	(31,942	)	$	(53,126	)