±«ÓãÖ±²¥

Annual report pursuant to Section 13 and 15(d)

DISCONTINUED OPERATIONS

v3.22.1
DISCONTINUED OPERATIONS
 12 Months Ended
Apr. 02, 2022
Discontinued Operations and Disposal Groups [Abstract] Ìý
DISCONTINUED OPERATIONS DISCONTINUED OPERATIONS
The Company continuously assesses the composition of its portfolio to ensure it is aligned with its strategic objectives and positioned to maximize growth and return to shareholders.
Occupational Workwear Business
On January 21, 2020, ±«ÓãÖ±²¥ announced its decision to explore the divestiture of its Occupational Workwear business. The Occupational Workwear business was comprised primarily of the following brands and businesses: Red Kap®, ±«ÓãÖ±²¥ Solutions®, Bulwark®, Workrite®, Walls®, Terra®, Kodiak®, Work Authority® and Horace Small®. The business also included the license of certain Dickies® occupational workwear products that have historically been sold through the business-to-business channel. As of March 28, 2020, the Occupational Workwear business met the held-for-sale and discontinued operations accounting criteria. Accordingly, the Company has reported the results of the Occupational Workwear business and the related cash flows as discontinued operations in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows, respectively, through the date of sale. The related held-for-sale assets and liabilities have been reported as assets and liabilities of discontinued operations in the Consolidated Balance Sheets, through the date of sale.
On June 28, 2021, ±«ÓãÖ±²¥ completed the sale of the Occupational Workwear business. The Company received proceeds of $616.9 million, net of cash sold, resulting in an estimated after-tax gain on sale of $146.0 million, which is included in the income from discontinued operations, net of tax line item in the Consolidated
Statement of Operations for the year ended March 2022, and is subject to adjustment for certain income tax matters.
The results of the Occupational Workwear business were previously reported in the Work segment. The results of the Occupational Workwear business recorded in the income from discontinued operations, net of tax line item in the Consolidated Statements of Operations were income of $170.7Ìýmillion (including an estimated after-tax gain on sale of $146.0 million), income of $53.0 million and income of $91.2 million (including goodwill and intangible asset impairment charges of $11.1 million) for the years ended March 2022, 2021 and 2020, respectively.
During the year ended March 2020, management performed quantitative impairment analysis over the Kodiak and Terra reporting unit goodwill and the indefinite-lived trademark intangible assets. Based on the analysis, management recorded a goodwill impairment charge of $6.1 million and an impairment charge of $5.0 million on the indefinite-lived intangible assets.
Under the terms of a transition services agreement, the Company will provide certain support services for periods generally between 12 and 24 months from the closing date of the transaction.
Certain corporate overhead costs and segment costs previously allocated to the Occupational Workwear business for segment reporting purposes did not qualify for classification within discontinued operations and have been reallocated to continuing operations.
Jeans Business
On May 22, 2019, ±«ÓãÖ±²¥ completed the spin-off of its Jeans business, which included the Wrangler®, Lee® and Rock & Republic® brands, as well as the ±«ÓãÖ±²¥ OutletTM business, into an independent, publicly traded company now operating under the name Kontoor Brands, Inc. ("Kontoor Brands") and trading under the symbol "KTB" on the New York Stock Exchange. Accordingly, the Company has reported the results of the Jeans business and the related cash flows as discontinued operations in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows, respectively, through the date of sale.
The results of the Jeans business recorded in the income from discontinued operations, net of tax line item in the Consolidated Statement of Operations was a loss of $40.9 million for the year ended March 2020, which included $59.5 million of separation and related expenses.
In connection with the spin-off of the Jeans business, the Company entered into several agreements with Kontoor Brands that govern the relationship of the parties following the spin-off. Under the terms of the agreements, the Company and Kontoor Brands agreed to provide each other certain transitional services including information technology, information management, human resources, employee benefits administration, supply chain, facilities, and other limited finance and accounting related services for periods up to 24 months. ±«ÓãÖ±²¥ and Kontoor Brands agreed to continue certain services on commercial terms, primarily related to information technology services, for various periods but no longer than through May 31, 2022. Payments and operating expense reimbursements for transition services are recorded within the reportable segments or within the corporate and other expenses line item, in the reconciliation of segment profit in Note 20, based on the function providing the service.
Summarized Discontinued Operations Financial Information
The following table summarizes the major line items included for the Occupational Workwear business and the Jeans business that are included in the income from discontinued operations, net of tax line item in the Consolidated Statements of Operations:
Year Ended March
(In thousands) 2022 2021 2020
Net revenues $ 181,424Ìý $ 671,574Ìý $ 1,199,524Ìý
Cost of goods sold 117,193Ìý 471,652Ìý 773,418Ìý
Selling, general and administrative expenses 38,735Ìý 143,259Ìý 320,462Ìý
Impairment of goodwill and intangible assets —Ìý —Ìý 11,100Ìý
Interest income, net 194Ìý 312Ìý 1,601Ìý
Other income (expense), net 6Ìý 365Ìý (687)
Income from discontinued operations before income taxes 25,696Ìý 57,340Ìý 95,458Ìý
Gain on the sale of discontinued operations before income taxes 133,970Ìý —Ìý —Ìý
Total income from discontinued operations before income taxes 159,666Ìý 57,340Ìý 95,458Ìý
Income tax expense (benefit) (a)
(11,006) 4,377Ìý 45,155Ìý
Income from discontinued operations, net of tax $ 170,672Ìý $ 52,963Ìý $ 50,303Ìý
(a)Income tax benefit for the year ended March 2022 includes $12.0Ìýmillion of deferred tax benefit related to capital and other losses realized upon the sale of the Occupational Workwear business. Income tax expense for the year ended March 2020 includes additional tax expense on nondeductible transaction costs and uncertain tax positions related to the Jeans business.
The following table summarizes the carrying amounts of major classes of assets and liabilities of discontinued operations as of March 2021.
(In thousands) March 2021
Cash and equivalents $ 34,132Ìý
Accounts receivable, net 103,835Ìý
Inventories 245,227Ìý
Other current assets 8,208Ìý
Property, plant and equipment, net 49,394Ìý
Intangible assets, net 54,471Ìý
Goodwill 43,530Ìý
Operating lease right-of-use assets 43,220Ìý
Other assets 5,561Ìý
Total assets of discontinued operations $ 587,578Ìý
Accounts payable $ 59,965Ìý
Accrued liabilities 38,956Ìý
Operating lease liabilities 31,301Ìý
Other liabilities 3,863Ìý
Deferred income tax liabilities (a)
(8,828)
Total liabilities of discontinued operations $ 125,257Ìý
(a)Deferred income tax balances reflect ±«ÓãÖ±²¥'s consolidated netting by jurisdiction.