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Discontinued Operations
 12 Months Ended
Feb. 01, 2020
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations
Discontinued Operations

On December 14, 2018, we entered into a definitive agreement for the sale of Lids Sports Group to FanzzLids Holdings, LLC (the "Purchaser"), a holding company controlled and operated by affiliates of Ames Watson Capital, LLC. The sale was completed on February 2, 2019 for $93.8 million cash which consisted of a sales price of $100.0 million and working capital adjustments of $6.2 million. Because the effective date of closing was a Saturday and the cash proceeds were not received by us until February 4, 2019, the purchase price is reflected in accounts receivable at February 2, 2019. We provided various transition services to the Purchaser for a period of up to six months under a separate agreement after the closing.

During the fourth quarter of Fiscal 2019, we recorded a loss on the sale of Lids Sports Group of $98.3 million, net of tax, on the sale of these assets, representing the sales price less the value of the Lids Sports Group assets sold and other miscellaneous charges, including divestiture transaction costs, offset by a tax benefit on the loss. Included in the loss on the sale is a $48.7 million write-off of trademarks. The tax benefit associated with discontinued operations differs from the effective rate due to the mix of earnings and loss in the various jurisdictions, the impact of permanent items and other factors.

As a result of the sale, we met the requirements of ASC 360 to report the results of Lids Sports Group as discontinued operations. We have presented operating results of Lids Sports Group and the loss on the sale of Lids Sports Group in loss from discontinued operations, net in our Consolidated Statements of Operations for Fiscal 2019 and 2018. Certain corporate overhead costs and other allocated costs previously allocated to the Lids Sports Group business for segment reporting purposes did not qualify for classification within discontinued operations and have been reallocated to continuing operations whereas bank fees and certain legal fees related to the Lids Sports Group business segment previously excluded from segment earnings were reclassified to discontinued operations. The costs of the Lids Sports Group headquarters building, which was not included in the sale, was reclassified to corporate and other in segment earnings. In addition, the third quarter Fiscal 2018 goodwill impairment charge of $182.2 million and the third quarter Fiscal 2019 trademark impairment charge of $5.7 million related to the Lids Sports Group business segment, that were both previously excluded from the calculation of segment earnings, were reclassified to discontinued operations.

As part of the Lids Sports Group sales transaction, the Purchaser has agreed to indemnify and hold us harmless in connection with continuing obligations and any guarantees of ours in place as of February 2, 2019 in respect of post-closing or assumed liabilities or obligations of the Lids Sports Group business. The Purchaser has agreed to use commercially reasonable efforts to have any guarantees by, or continuing obligations of, the Company released. However, we are contingently liable in the event of a breach by the Purchaser of any such obligation to a third-party. In addition, we are a guarantor for 36 Lids Sports Group leases with lease expirations through October of 2027 and estimated maximum future payments totaling $20.6 million as of February 1, 2020. We do not believe the fair value of the guarantees is material to our Consolidated Financial Statements.
 



















Note 16
Discontinued Operations, Continued

Components of amounts reflected in loss from discontinued operations, net of tax on the Consolidated Statements of Operations for the years ended February 2, 2019 and February 3, 2018 are as follows (in thousands):
 
Fiscal Year
 
2019
2018
Net sales
$
723,125

$
779,469

Cost of sales
348,038

374,730

Selling and administrative expenses
370,480

391,982

Goodwill and trademark impairment
5,736

182,211

Asset impairments and other, net
2,394

1,068

Loss on sale of Lids Sports Group
(126,321
)
—

Other components of net periodic benefit cost
(23
)
(128
)
Provision for discontinued operations(1)
(743
)
(552
)
Loss from discontinued operations before taxes
(130,610
)
(171,202
)
Income tax benefit
(27,456
)
(22,655
)
Loss from discontinued operations, net of tax
$
(103,154
)
$
(148,547
)

(1) Expenses primarily for anticipated costs of environmental remedial alternatives related to former facilities operated by us (see Note 14).

The cash flows related to discontinued operations have not been segregated, and are included in our Consolidated Statements of Cash Flows. The following table summarizes depreciation and amortization, capital expenditures and the significant operating noncash items from discontinued operations for each period presented:

 
Fiscal Year
(In thousands)
2019
2018
Depreciation and amortization
$
24,778

$
26,793

Capital expenditures
15,450

29,244

Impairment of intangible assets
5,736

182,211

Impairment of long-lived assets
1,670

1,007