ÂÒÂ×°ÍÊ¿

Quarterly report pursuant to Section 13 or 15(d)

DISCONTINUED OPERATIONS

v3.20.2
DISCONTINUED OPERATIONS
 3 Months Ended
Jun. 27, 2020
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.
Discontinued Operations

Occupational Workwear Business
On January 21, 2020, ÂÒÂ×°ÍÊ¿ announced its decision to explore the divestiture of its Occupational Workwear business. The Occupational Workwear business is comprised primarily of the following brands and businesses: Red Kap®, ÂÒÂ×°ÍÊ¿ Solutions®, Bulwark®, Workrite®, Walls®, Terra®, Kodiak®, Work Authority® and Horace Small®. The business also includes certain Dickies® occupational workwear products that have historically been sold through the business-to-business channel.
During the three months ended March 2020, the Company determined the Occupational Workwear business met the held-for-sale and discontinued operations accounting criteria and expects to divest this business during Fiscal 2021. 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. The related held-for-sale assets and liabilities have been reported as assets and liabilities of discontinued operations in the Consolidated Balance Sheets.
The results of the Occupational Workwear business were previously reported in the Work segment. The results of the Occupational Workwear business recorded in the loss from discontinued operations, net of tax line item in the Consolidated Statements of Operations were a loss of $7.9 million and income of $32.0 million for the three months ended June 2020 and June 2019, respectively.
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, ÂÒÂ×°ÍÊ¿ completed the spin-off its Jeans business, which included the Wrangler®, Lee® and Rock & Republic® brands, as well as the ÂÒÂ×°ÍÊ¿ 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. The spin-off was effected through a distribution to ÂÒÂ×°ÍÊ¿ shareholders of one share of Kontoor Brands common stock for every seven shares of ÂÒÂ×°ÍÊ¿ common stock held on the record date of May 10, 2019. 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.
In connection with the spin-off, Kontoor Brands entered into a credit agreement with respect to $1.55 billion in senior secured credit facilities consisting of a senior secured five-year $750.0 million term loan A facility, a senior secured seven-year $300.0 million term loan B facility and a five-year $500.0 million senior secured revolving credit facility (collectively, the "Kontoor Credit Facilities"). Prior to the effective date of the spin-off, Kontoor Brands incurred $1.05 billion of indebtedness under the Kontoor Credit Facilities, which was primarily used to fund a transfer of $906.1 million to ÂÒÂ×°ÍÊ¿ and its subsidiaries, net of $126.8 million of cash received from ÂÒÂ×°ÍÊ¿. As a result of the spin-off, ÂÒÂ×°ÍÊ¿ divested net assets of $54.9 million, including the indebtedness under the Kontoor Credit Facilities. Also included in the net assets divested was $75.3 million of net accumulated other comprehensive losses attributable to the Jeans business, primarily related to foreign currency translation.
The results of the Wrangler®, Lee® and Rock & Republic® brands were previously reported in the Jeans segment, the results of the Wrangler® RIGGS brand were previously reported in the Work segment, and the results of the non-ÂÒÂ×°ÍÊ¿ products sold in ÂÒÂ×°ÍÊ¿ OutletTM stores were previously reported in the Other category included in the reconciliation of segment revenues and segment profit. The results of the Jeans business recorded in the loss from discontinued operations, net of tax line item in the Consolidated Statement of Operations were a loss of $48.0 million for the three months ended June 2019, including $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
including the Separation and Distribution Agreement, the Tax Matters Agreement, the Transition Services Agreement, the ÂÒÂ×°ÍÊ¿ Intellectual Property License Agreement and the Employee Matters Agreement. Under the terms of the Transition Services Agreement, 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. 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 14, 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 loss from discontinued operations, net of tax line item in the Consolidated Statements of Operations:
Ìý Three Months Ended June
(In thousands) 2020 2019
Net revenues
 $ 125,333Ìý Ìý $ 556,028Ìý Ìý
Cost of goods sold
 101,470Ìý Ìý 342,954Ìý Ìý
Selling, general and administrative expenses
 33,256Ìý Ìý 196,466Ìý Ìý
Interest income, net
 293Ìý Ìý 33Ìý Ìý
Other income (expense), net
 —Ìý Ìý (623) Ìý
Income (loss) from discontinued operations before income taxes
 (9,100) Ìý 16,018Ìý Ìý
Income tax expense (benefit) (a)
(1,229) Ìý 32,070Ìý Ìý
Loss from discontinued operations, net of tax
 $ (7,871) Ìý $ (16,052) Ìý
(a)Income tax expense for the three months ended June 2019 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 for each of the periods presented:
(In thousands) June 2020 March 2020 June 2019
Cash and equivalents
 $ 42,986Ìý Ìý $ 39,752Ìý Ìý $ 45,198Ìý Ìý
Accounts receivable, net
 64,065Ìý Ìý 83,650Ìý Ìý 94,923Ìý Ìý
Inventories
 258,632Ìý Ìý 294,000Ìý Ìý 283,619Ìý Ìý
Other current assets
 10,027Ìý Ìý 6,701Ìý Ìý 8,168Ìý Ìý
Property, plant and equipment, net
 46,697Ìý Ìý 44,863Ìý Ìý 38,571Ìý Ìý
Intangible assets, net
 54,471Ìý Ìý 54,471Ìý Ìý 63,404Ìý Ìý
Goodwill
 43,530Ìý Ìý 43,530Ìý Ìý 49,630Ìý Ìý
Operating lease right-of-use assets
 39,452Ìý Ìý 38,941Ìý Ìý 34,121Ìý Ìý
Other assets
 5,275Ìý Ìý 5,231Ìý Ìý 4,534Ìý Ìý
Total assets of discontinued operations
 $ 565,135Ìý Ìý $ 611,139Ìý Ìý $ 622,168Ìý Ìý
Accounts payable
 $ 27,810Ìý Ìý $ 63,380Ìý Ìý $ 80,842Ìý Ìý
Accrued liabilities
 31,134Ìý Ìý 29,699Ìý Ìý 31,585Ìý Ìý
Operating lease liabilities
 34,462Ìý Ìý 35,867Ìý Ìý 32,082Ìý Ìý
Other liabilities
 2,284Ìý Ìý 2,270Ìý Ìý 3,442Ìý Ìý
Deferred income tax liabilities (a)
(4,407) Ìý (4,435) Ìý (10,248) Ìý
Total liabilities of discontinued operations
 $ 91,283Ìý Ìý $ 126,781Ìý Ìý $ 137,703Ìý Ìý
(a)Deferred income tax balances reflect ÂÒÂ×°ÍÊ¿'s consolidated netting by jurisdiction