Quarterly report pursuant to Section 13 or 15(d)

Discontinued Operations

v3.5.0.2
Discontinued Operations
 6 Months Ended
Jul. 02, 2016
Discontinued Operations

Note B – Discontinued Operations

On June 29, 2016, VF signed a definitive agreement to sell the businesses in our Contemporary Brands coalition to Delta Galil Industries, Ltd. for $120.0 million in cash, subject to working capital adjustments. The Contemporary Brands coalition includes the businesses of the 7 For All Mankind®, Splendid® and Ella Moss® brands (the “Businesses”), and was previously disclosed as a separate reportable segment of VF. The transaction is expected to close in the third quarter of 2016 upon the satisfaction of customary closing conditions.

Management determined that the expected disposal met the criteria for presentation as discontinued operations in the second quarter of 2016. Accordingly, the results of the Businesses have been presented as discontinued operations in VF’s Consolidated Statements of Income beginning in the second quarter of 2016, and thus have been excluded from continuing operations and segment results for all periods presented. In addition, the related assets and liabilities of the Businesses have been classified as held for sale on VF’s Consolidated Balance Sheets for all periods presented. Certain corporate overhead costs and interest expense previously allocated to the Contemporary Brands coalition for segment reporting purposes do not qualify for classification within discontinued operations and have been reallocated to continuing operations. In addition, goodwill and intangible asset impairment charges related to the Contemporary Brands coalition, previously excluded from the calculation of coalition profit, have been reallocated to discontinued operations. VF’s preliminary estimate of the after-tax loss on the sale of the Businesses is $100.6 million, which has been included in the loss from discontinued operations for the second quarter of 2016.

Under the terms of a delayed transfer provision, the Company will continue to operate the assets and liabilities of the 7 For All Mankind® brand in Europe for a limited period of time from the closing date of the transaction. In addition, the Company expects to provide certain support services pursuant to transition services agreements for a limited period of time from the closing date of the transaction.

 

The following table summarizes the major line items included in the income (loss) from discontinued operations for each of the periods presented.

 

     Three Months Ended June      Six Months Ended June  
In thousands    2016      2015      2016      2015  

Revenues

    $ 70,279       $ 86,874       $ 144,635       $ 174,411   

Cost of goods sold

      29,507         39,408         65,104         78,003   

Selling, general and administrative expenses

      38,473         43,419         73,233         85,875   

Interest income (expense), net

      —           (163 )       (108 )       (322 ) 

Other income (expense), net

      (2 )       (2 )       (4 )       3   
  

 

 

     

 

 

     

 

 

     

 

 

  

Pre-tax income from discontinued operations

      2,297         3,882         6,186         10,214   

Pre-tax estimated loss on the disposal of discontinued operations

      (149,836 )       —           (149,836 )       —     
  

 

 

     

 

 

     

 

 

     

 

 

  

Total pre-tax income (loss) from discontinued operations

      (147,539 )       3,882         (143,650 )       10,214   

Income tax benefit (expense)

      50,260         (913 )       49,774         (1,661 ) 
  

 

 

     

 

 

     

 

 

     

 

 

  

Income (loss) from discontinued operations

    $ (97,279 )     $ 2,969       $ (93,876 )     $ 8,553   
  

 

 

     

 

 

     

 

 

     

 

 

  

The following table summarizes the carrying amounts of major classes of assets and liabilities classified as held for sale for each of the periods presented.

 

In thousands    June
2016 		     December
2015 		     June
2015 		 

Accounts receivable, net

    $ 24,656       $ 29,596       $ 30,091   

Inventories

      58,450         56,634         67,618   

Other current assets, including cash and equivalents

      3,408         2,946         5,106   

Property, plant and equipment

      38,716         42,668         48,532   

Intangible assets

      164,659         164,008         308,833   

Other assets

      3,114         3,355         3,302   

Allowance to reduce assets to estimated fair value, less costs of disposal

      (149,836 )       —           —     
  

 

 

     

 

 

     

 

 

  

Total assets held for sale(a)

    $ 143,167       $ 299,207       $ 463,482   
  

 

 

     

 

 

     

 

 

  

Current portion of long-term debt

    $ —         $ 9,928       $ 10,035   

Accounts payable

      8,289         8,988         8,650   

Accrued liabilities

      7,262         7,102         7,747   

Other liabilties

      10,552         10,915         11,703   
  

 

 

     

 

 

     

 

 

  

Total liabilities held for sale(a)

    $ 26,103       $ 36,933       $ 38,135   
  

 

 

     

 

 

     

 

 

  

 

(a)  Amounts at December 2015 and June 2015 have been classified as current and long-term in the Consolidated Balance Sheets.

Because the cash flows of the Businesses were not material for any of the periods presented, we have not segregated them in our Consolidated Statements of Cash Flows.