Basis of Presentation

9 Months Ended

May 02, 2020

Basis of Consolidation

These unaudited interim condensed consolidated financial statements present all the assets, liabilities, revenues, expenses and cash flows of entities in which the Company has a controlling financial interest and is determined to be the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation.

Fiscal Period

Fiscal 2020 will end on August 1, 2020 and will be a 52-week period. Fiscal year 2019 ended on August 3, 2019 and was a 52-week period. The three and nine months ended May 2, 2020 and May 4, 2019 were 13 and 39-week periods, respectively.

Interim Financial Statements

These interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and are unaudited. In the opinion of management, such condensed consolidated financial statements contain all normal and recurring adjustments necessary to present fairly the condensed consolidated financial condition, results of operations, comprehensive income, cash flows and equity of the Company for the interim periods presented. In addition, certain information and footnote disclosures normally included in financial statements prepared in accordance with the accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted from this report as permitted by the SEC’s rules and regulations. However, the Company believes that the disclosures herein are adequate to ensure that the information is fairly presented.

The condensed consolidated balance sheet data as of August 3, 2019 is derived from the audited consolidated financial statements included in the Company’s Fiscal 2019 10-K, which should be read in conjunction with these interim financial statements. Reference is made to the Fiscal 2019 10-K for a complete set of financial statements.

Common Stock Split

On December 19, 2019, the Company announced that the Board of Directors (the “Board”) has approved a reverse stock split of the Company’s common stock at a ratio of 1-for-20. Refer to Note 15 for additional information. As a result, the applicable equity and shares information related to prior periods has been restated to reflect this reverse stock split.

Discontinued Operations

Dressbarn Wind Down

In May 2019, the Company announced the wind down of its Dressbarn brand, which was completed in the second quarter of Fiscal 2020. All Dressbarn store locations were closed as of December 31, 2019. Activities during the first and second quarter of Fiscal 2020 include additional employee related accruals, the closure of stores and the negotiation of lease terminations. In addition, during the first quarter of Fiscal 2020, the Company sold the direct channel rights to Dressbarn intellectual property to a third-party for approximately $5 million, which was treated as a reduction of the wind down costs. In connection with the Dressbarn wind down, we have incurred cumulative costs of approximately $62 million of which $9 million was incurred during the nine months ending May 2, 2020 and have been included in the results disclosed below. No material amounts were incurred during the three months ending May 2, 2020 and May 4, 2019, respectively.

The following table summarizes the results of Dressbarn reclassified as discontinued operations:


	Three Months Ended						Nine Months Ended
	May 2, 2020		May 4, 2019		May 2, 2020		May 4, 2019
	(millions, unaudited)
Net sales	$	—	$	177.3	$	326.6	$	532.0
Depreciation and amortization expense	—		(4.1)		(10.9)		(12.9)
Operating (loss) income	(0.8)		(18.8)		59.4		(34.9)
Pretax (loss) income from discontinued operations	(0.8)		(18.8)		59.4		(34.9)
Income tax provision	—		(7.0)		—		(4.5)
(Loss) income from discontinued operations, net of tax	$	(0.8)	$	(25.8)	$	59.4	$	(39.4)

The major components of Dressbarn assets and liabilities related to discontinued operations are summarized below:


	May 2, 2020		August 3, 2019
	(millions, unaudited)
Cash and cash equivalents	$	—	$	4.2
Inventories	—		57.0
Prepaid expenses and other current assets	6.1		37.0
Property and equipment, net	—		11.5




Total assets related to discontinued operations	$	6.1	$	109.7

Accounts payable and other current liabilities	$	35.8	$	94.7

Lease-related liabilities	—		29.6
Other liabilities	5.5		5.9
Total liabilities related to discontinued operations	$	41.3	$	130.2

Sale of maurices

In the fourth quarter of Fiscal 2019, the Company and Maurices Incorporated, a Delaware corporation (“maurices”) and wholly owned subsidiary of ascena, completed the transaction contemplated by the previously-announced Stock Purchase Agreement with Viking Brand Upper Holdings, L.P., a Cayman Islands exempted limited partnership (“Viking”) and an affiliate of OpCapita LLP (“OpCapita”), providing for, among other things, the sale by ascena of maurices to Viking (the “Transaction”).

Effective upon the closing of the Transaction, ascena received cash proceeds of approximately $210 million and a 49.6% ownership interest in the operations of maurices through its investment in Viking, consisting of interests in Viking preferred and common stock. Reference is made to Note 10 for more information about the Company’s investment in Viking.

As the sale of maurices represented a major strategic shift, as well as the Company's determination that it did not have a significant continuing involvement in the business, the Company's maurices business was classified as a discontinued operations within the condensed consolidated financial statements.

The following table summarizes the results of maurices reclassified as discontinued operations:


	Three Months Ended						Nine Months Ended
	May 2, 2020		May 4, 2019		May 2, 2020		May 4, 2019
	(millions, unaudited)
Net sales	$	—	$	238.3	$	—	$	749.4
Depreciation and amortization expense	—		(6.6)		—		(21.1)
Operating income	—		32.0		—		97.8
Pretax income from discontinued operations	—		32.2		—		98.3
Income tax provision	—		(25.9)		—		(39.6)
Income from discontinued operations, net of tax	$	—	$	6.3	$	—	$	58.7

Cash Flow Information Related to Discontinued Operations

The major components of cash flows related to discontinued operations are summarized below:


	Nine Months Ended
	May 2, 2020		May 4, 2019
	(millions, unaudited)
Cash provided by operations of discontinued operations	$	57.0	$	38.0
Cash provided by (used by) investing activities of discontinued operations	4.9		(5.0)

Condensed Consolidated Statements of Cash Flows Reconciliation

A reconciliation of cash, cash equivalents and restricted cash in the condensed consolidated balance sheets to the amounts shown on the condensed consolidated statements of cash flows is shown below:


Reconciliation of cash, cash equivalents and restricted cash:	May 2, 2020		August 3, 2019		May 4, 2019		August 4, 2018
Cash and cash equivalents	$	438.7	$	323.8	$	97.9	$	230.2
Restricted cash included in other current assets	1.2		1.2		1.2		1.2
Cash included in discontinued operations	—		4.2		9.5		8.7
Total cash, cash equivalents and restricted cash	$	439.9	$	329.2	$	108.6	$	240.1