Restructuring Costs

6 Months Ended

Aug. 02, 2014

On April 30, 2014, following an assessment of changing consumer patterns, management and the Board of Directors approved a comprehensive plan to both restructure the P.S. from Aéropostale business and to reduce costs. We plan to close approximately 125 mall-based P.S. from Aéropostale stores and streamline and improve the Company's expense structure. We plan to focus on sales channels with higher expectations for growth, including off-mall locations (including outlets), e-commerce and international licensing of P.S. from Aéropostale. We anticipate that substantially all of the planned store closures will be completed on or around the end of fiscal 2014. As of August 2, 2014, four stores have been closed. The cost reduction program will also target both direct and indirect spending across the organization. This has included the reduction of corporate headcount by eliminating approximately 100 open or occupied positions to align with our current business strategies.

We estimate that we will incur pre-tax restructuring and impairment charges related to these actions totaling approximately $40.0 million to $65.0 million throughout fiscal 2014, of which approximately $25.0 million to $40.0 million are estimated to be cash expenses. Included in the estimate of total pre-tax charges are approximately:


•	$5.0 million of consulting and severance expenses resulting from the announced corporate cost reduction initiatives, of which $1.7 million were recorded during the second quarter of 2014 and $4.7 million during the first twenty-six weeks of 2014.


•	$30.5 million of store asset impairments resulting primarily from the expected closures of the P.S. from Aéropostale stores, all of which were recorded during the the first quarter of 2014.


•	$4.0 million of additional severance resulting from the store closures, of which $1.3 million was recorded during the second quarter of 2014 and the first twenty-six weeks of 2014. These costs are expected to be recorded by or around the remainder of fiscal 2014.


•	The remainder of the charges relate to estimated lease costs in conjunction with the store closures, which are expected to be recorded during the remainder of fiscal 2014. We cannot yet estimate when the remaining lease charges will be paid.

The charges will be recognized in restructuring charges in the statement of operations.

The following is a summary of expenses incurred during the second quarter of 2014 and the first twenty-six weeks of 2014 associated with the above ongoing actions:



	13 weeks ended		26 weeks ended
	August 2, 2014
Severance	$	1,453	$	2,513
Lease costs	6		1,052
Impairment	—		30,497
Other exit costs	1,560		3,446
Total	$	3,019	$	37,508

The Company accrued liabilities for the above mentioned restructuring charges as of August 2, 2014, which are expected to be paid during fiscal 2014 as follows:



	Impairments			Severance			Lease Costs			Other Exit Costs			Total
	(In thousands)
Liability/Charge at Program Inception	$	30,497		$	1,060		$	1,046		$	1,886		$	34,489
Additions	—			1,453			6			1,560			3,019
Paid or Utilized	(30,497		)	(1,176		)	(77		)	(3,420		)	(35,170		)
Adjustments	—			—			—			—			—
Liability as of August 2, 2014	$	—		$	1,337		$	975		$	26		$	2,338

Of the above liabilities, $1.7 million is recorded in accrued expenses and other current liabilities and the balance is included in non-current liabilities.

- Definition

The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled.

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