Discontinued Operations and Subsequent Event

On February 24, 2017, the Company completed the sale of its JackRabbit division to affiliates of CriticalPoint Capital, LLC (the “Buyers”). The transaction took the form of a sale by the Company of its entire membership interest in its affiliated company, which owns JackRabbit, and a payment of $10.1 million. The Buyers acquired all JackRabbit assets, inventory, leasehold interests, customary liabilities, intellectual property, and the JackRabbit trademark and name pursuant to the purchase agreement. On June 23, 2017, the Company and the Buyers entered into a settlement agreement whereby the Company agreed to an adjustment of $1.0 million to the purchase price related to the closing net working capital balances of JackRabbit. This change in purchase price is payable in two installments during the thirteen weeks ending August 26, 2017.

The sale of Jackrabbit resulted in an aggregate loss of $34.2 million, which represented the total cash payments to the Buyers on the date of sale of $10.1 million, additional purchase price agreed to on June 23, 2017 of $1.0 million, net assets assumed by the Buyers of $18.3 million, and one-time costs of approximately $4.8 million associated with the transaction.

Net income from discontinued operations for the thirteen weeks ended May 27, 2017 represents one-time benefits recorded that were associated with the JackRabbit division.

The following table presents key financial results of the Company included in “Net loss from discontinued operations, net of tax” for the thirteen weeks ended May 28, 2016 (in thousands):



Net sales	$	23,471
Cost of sales (including occupancy costs)	16,837
Gross profit	6,634
Selling, general, and administrative expenses	7,350
Impairment charges and store closing costs	35
Loss from discontinued operations before income tax benefit	(751		)
Income tax benefit	289
Net loss from discontinued operations, net of tax	$	(462	)

The following table presents the major classes of assets and liabilities presented as held for sale as of May 28, 2016 related to JackRabbit (in thousands):



ASSETS
Current assets:
Accounts receivable, net	$	943
Merchandise inventories, net	27,582
Other	208
Total current assets	28,733
Property and equipment, net	4,129
Goodwill	44,029
Other assets, net	908
Total assets	$	77,799



LIABILITIES
Current liabilities:
Accounts payable	$	8,309
Employee compensation	874
Accrued property and sales tax	601
Other liabilities and accrued expenses	2,838
Total current liabilities	12,622
Deferred credits from landlords	1,902
Other long-term liabilities	56
Total liabilities	$	14,580