Discontinued Operations

3 Months Ended

May 04, 2013

Discontinued Operations

12. Discontinued Operations

During Fiscal 2012, the Company exited the 77kids business which included all 22 stores and related e-commerce operations. These Consolidated Financial Statements reflect the results of 77kids as a discontinued operation for all periods presented.

Additionally, the third party purchaser assumed certain liabilities associated with the 77kids business and paid the Company an amount equal to 65% of the cost of the acquired inventory. A $9.0 million inventory balance for 77kids has been recorded as a component of assets held-for-sale on the Company’s Consolidated Balance Sheets as of April 28, 2012. There were no inventory balances for 77kids included in assets held-for-sale as of May 4, 2013 or February 2, 2013.

In connection with the exit of the 77kids business, the Company is secondarily liable for obligations under the lease agreements for 21 store leases assumed by the third party purchaser. These obligations will remain in effect until the leases expire through 2022, unless the Company otherwise is released by the applicable landlord. In the event that the third party purchaser does not fulfill its obligations under any of the leases and the Company is required to make any such payments, the Company would seek full reimbursement from the third party purchaser in accordance with the asset purchase agreement. The third party purchaser has provided a stand-by letter of credit to the Company in order to secure payment of obligations under the leases.

In accordance with ASC 460, Guarantees (“ASC 460”), as we became secondarily liable under the leases at the time that we transferred them to the third party, no amounts have been accrued in our Consolidated Financial Statements related to these guarantees.

The table below presents the significant components of 77kids’ results included in Loss from Discontinued Operations on the Consolidated Statement of Operations for the 13 weeks ended April 28, 2012:

	13 Weeks Ended
(In thousands)	April 28, 2012
Total net revenue	$	10,398
Loss from discontinued operations, before income taxes		(7,048	)
Income tax benefit		2,710
Loss from discontinued operations, net of tax	($	4,338	)
Loss per common share from discontinued operations:
Basic		(0.02	)
Diluted		(0.02	)

There were no assets or liabilities included in the Consolidated Balance Sheets for 77kids as of May 4, 2013 or February 2, 2013. The major classes of assets and liabilities included in the Consolidated Balance Sheet for 77kids as of April 28, 2012 are as follows:

(In thousands)	April 28, 2012
Current assets	$	10,077
Non-current assets		15,647
Total assets (1)	$	25,724
Total current liabilities	$	6,166
Total non-current liabilities		2,686
Total liabilities	$	8,852

(1) Current assets primarily relate to merchandise inventory classified as an asset held-for-sale on the Company’s Consolidated Balance Sheets. Non-current assets relate primarily to property and equipment at cost, net of, accumulated depreciation.