Discontinued Operations

12 Months Ended

Feb. 28, 2017

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

(6) Discontinued Operations

On April 1, 2016, the Company entered into a Unit Purchase Agreement (the “Initial Purchase Agreement”) with Alstyle Operations, LLC (the “Initial Buyer”) and, for the limited purpose set forth in the Initial Purchase Agreement, Steve S. Hong. Under the Initial Purchase Agreement, the Initial Buyer agreed to acquire Alstyle Apparel, LLC and its subsidiaries (the “Apparel Segment”) from the Company for an aggregate purchase price of $88.0 million, consisting of $76.0 million in cash to be paid at closing, subject to a working capital adjustment, and an additional $12.0 million to be paid pursuant to a capital lease covering certain equipment utilized by the Apparel Segment that would have been retained by the Company. The Initial Purchase Agreement contemplated post-closing transition services for up to 18 months.

Under the Initial Purchase Agreement, the Company retained the right to terminate the agreement in the event that the Company received an unsolicited purchase offer for the Apparel Segment that was not matched by the Initial Buyer, which, in the judgment of the Board of Directors of the Company (the “Board”) in the exercise of its fiduciary duties

on behalf of the Company’s shareholders, deemed such offer to be a superior offer to the transactions contemplated by the Initial Purchase Agreement.

On May 4, 2016, the Company received what the Board determined to be a superior offer from Gildan Activewear Inc. (“Gildan”). In connection therewith, the Company terminated the Initial Purchase Agreement and paid the required $3.0 million termination fee to the Initial Buyer. In connection with the superior offer, the Company and Gildan entered into a Unit Purchase Agreement, dated May 4, 2016 (the “Gildan Purchase Agreement”), pursuant to which on May 25, 2016 Gildan acquired the Apparel Segment from the Company for an all-cash purchase price of $110.0 million, subject to a working capital adjustment, customary indemnification arrangements, and the other terms of the Gildan Purchase Agreement. Since the consummation of the sale, the Company has been providing transition assistance to Gildan for administrative, financial, human resource, and information technology matters which the Company expects to cease during the fourth quarter of this fiscal year, and has been subleasing from Gildan a portion of real property located in Anaheim, California. As part of the $110.0 million purchase price, Gildan funded the Company’s payment of the $3.0 million termination fee payable to the Initial Buyer as result of the termination of the Initial Purchase Agreement.

Balance sheet information for the Apparel Segment presented as discontinued operations is summarized as follows (in thousands):

	February 29,
	2016
Current assets:
Cash	$	2,468
Accounts receivable, net		18,325
Prepaid expenses and income taxes		3,859
Inventories		72,691
Deferred income taxes		3,151
Total current assets	$	100,494
Long-term assets:
Property, plant and equipment, net	$	30,543
Trademarks and trade names		9,170
Customer lists		5,499
Other assets		1,125
Total long-term assets	$	46,337
Current liabilities:
Accounts payable	$	8,050
Employee compensation and benefits		4,065
Other current liabilities		380
Total current liabilities	$	12,495

The operating results of these discontinued operations only reflect revenues and expenses that are directly attributable to the Apparel Segment and that has been eliminated from ongoing operations. The following tables show the key components on the sale and discontinued operations related to the Apparel Segment that was completed on May 25, 2016 (in thousands):

Sales price	$	110,000
Expenses related to disposal of business		(130,174	)
Expenses related to sales (1)		(4,365	)
Loss on sale before write-off of foreign currency translation adjustment		(24,539	)
Write-off of foreign currency translation adjustments recorded in other comprehensive income		(16,109	)
Loss on sale of sale of discontinued operations	$	(40,648	)

(1) The termination fee, in the amount of $3.0 million, paid as a result of the termination of the Initial Purchase Agreement is included in this amount.

	2017			2016		2015
Net sales	$	41,038		$	183,027	$	199,861
Income (loss) from discontinued operations before income taxes		3,873			5,531		(93,587	)
Loss on sale of discontinued operations before income taxes		(40,648	)		—		—
Income (loss) on discontinued operations before income taxes		(36,775	)		5,531		(93,587	)
Income tax expense (benefit)		(12,138	)		2,053		(14,584	)
Net earnings (loss) from discontinued operations	$	(24,637	)	$	3,478	$	(79,003	)