Discontinued Operations

12 Months Ended

Jan. 31, 2015

Discontinued Operations

15. Discontinued Operations

In Fiscal 2012, the Company exited the 77kids business. These Consolidated Financial Statements reflect the results of 77kids as a discontinued operation for all periods presented.

In connection with the exit of the 77kids business, the Company became secondarily liable for obligations under lease agreements for 21 store leases assumed by the third party purchaser. In Fiscal 2014, the third party purchaser did not fulfill its obligations under the leases, resulting in the Company becoming primarily liable. The Company was required to make rental and lease termination payments and received reimbursement from the $11.5 million stand-by letter of credit provided by the third party purchaser. The Company has incurred $13.7 million in expense above the letter of credit proceeds to terminate store leases. The cash outflow for termination costs are expected to be paid in the first quarter of Fiscal 2015.

In accordance with ASC 460, Guarantees (“ASC 460”), as the Company became primarily liable under the leases upon the third party purchaser’s default, the remaining amounts to exit the lease agreements have been accrued in our Consolidated Financial Statements related to these guarantees.

Costs associated with exit or disposal activities are recorded when incurred. A summary of the pre-tax exit and disposal costs recognized within Loss from Discontinued Operations on the Consolidated Income Statement for 77kids are as follows. There were no exit or disposal costs recognized in Fiscal 2013 related to 77kids.

	For the Years Ended
(In thousands)	January 31, 2015		February 1, 2014		February 2, 2013
Non-cash charges
Asset impairments	$	—	$	—	$	16,623
Cash charges
Lease-related charges	$	13,673	$	—	$	7,768
Inventory charges		—		—		10,237
Severence charges		—		—		3,439
Total charges	$	13,673	$	—	$	38,067

A rollforward of the liabilities for the exit of the 77kids brand recognized in the Consolidated Balance Sheets is as follows:

(In thousands)	January 31, 2015
Accrued liability as of February 1, 2014	$	—
Add: Costs incurred		25,173
Less: Cash payments		(10,537	)
Accrued liability as of January 31, 2015	$	14,636

The tables below present the significant components of 77kids’ results included in Loss from Discontinued Operations on the Consolidated Statements of Operations for the years ended January 31, 2015, February 1, 2014 and February 2, 2013.

	For the Years Ended
	January 31, 2015			February 1, 2014		February 2, 2013
Total net revenue	$	—		$	—	$	20,117
Loss from discontinued operations, before income taxes(1)	$	(13,673	)	$	—	$	(51,839	)
Income tax benefit		5,208			—		19,849
Loss from discontinued operations, net of tax	$	(8,465	)	$	—	$	(31,990	)
Loss per common share from discontinued operations:
Basic	$	(0.04	)	$	—	$	(0.16	)
Diluted	$	(0.04	)	$	—	$	(0.16	)

(1) Loss from discontinued operations is presented net of the reversal of non-cash lease credits for Fiscal 2012