ÂÒÂ×°ÍÊ¿

Quarterly report pursuant to Section 13 or 15(d)

DISCONTINUED OPERATIONS

v3.24.3
DISCONTINUED OPERATIONS
 6 Months Ended
Sep. 28, 2024
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.
Supreme
On July 16, 2024, ÂÒÂ×°ÍÊ¿ entered into a Purchase Agreement with EssilorLuxottica S.A. to sell Supreme for an aggregate base purchase price of $1.5Ìýbillion, subject to customary adjustments for cash, indebtedness, working capital and transaction expenses as more fully set forth in the Purchase Agreement. On October 1, 2024, ÂÒÂ×°ÍÊ¿ completed the sale of Supreme. ÂÒÂ×°ÍÊ¿ received proceeds of $1.5Ìýbillion, subject to post closing adjustments, and recognized an after-tax estimated loss on sale of Supreme of $124.8Ìýmillion, which is included in the income (loss) from discontinued operations, net of tax line item in the Consolidated Statements of Operations for the three and six months ended September 2024. ÂÒÂ×°ÍÊ¿ used a portion of the net cash proceeds to prepay $1.0Ìýbillion of its delayed draw Term Loan ("DDTL") pursuant to the terms of the DDTL Agreement, as amended, which required repayment within ten business days of ÂÒÂ×°Íʿ’s receipt of the net cash proceeds from the sale of Supreme.
During the three months ended September 2024, the Company determined that Supreme met the held-for-sale and discontinued operations accounting criteria. Accordingly, beginning in the second quarter of Fiscal 2025, ÂÒÂ×°ÍÊ¿ has reported the results of Supreme 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. These changes have been applied to all periods presented.
The results of Supreme were previously reported in the Active segment. The results of Supreme recorded in the income (loss) from discontinued operations, net of tax line item in the
Consolidated Statements of Operations were losses of $150.3 million (including an after-tax estimated loss on sale of $124.8 million) and $257.2 million (including an after-tax estimated loss on sale of $124.8 million and goodwill and intangible asset impairment charges of $145.0 million) for the three and six months ended September 2024, respectively, and income of $0.9 million and $6.5 million for the three and six months ended September 2023, respectively.
During the three months ended June 2024, ÂÒÂ×°ÍÊ¿ determined that a triggering event had occurred requiring impairment testing of the Supreme reporting unit goodwill and indefinite-lived trademark intangible asset. As a result of the impairment testing performed, ÂÒÂ×°ÍÊ¿ recorded impairment charges of $94.0Ìýmillion and $51.0Ìýmillion to the Supreme reporting unit goodwill and indefinite-lived trademark intangible asset, respectively.
Under the terms of a transition services agreement, the Company will provide certain post-closing accounting, tax, treasury, digital technology, supply chain and human resource services on a transitional basis for periods generally up to 12 months from the closing date of the transaction. Under the terms of a secondment agreement, certain employees associated with the Supreme business will remain employees of ÂÒÂ×°ÍÊ¿ and work exclusively in support of Supreme, and at Supreme's expense, through the end of Fiscal 2025.
Certain corporate overhead costs and segment costs previously allocated to the Supreme brand for segment reporting purposes did not qualify for classification within discontinued operations and have been allocated to continuing operations. In addition, interest expense and the related interest rate swap impact for the DDTL were reallocated to discontinued operations due to the requirement within the DDTL Agreement, as amended, that the DDTL be prepaid upon the receipt of the net cash proceeds from the sale of Supreme.
Summarized Discontinued Operations Financial Information
The following table summarizes the major line items for Supreme that are included in the income (loss) from discontinued operations, net of tax line item in the Consolidated Statements of Operations:
Ìý Three Months Ended September Six Months Ended September
(In thousands) 2024 2023 2024 2023
Net revenues $ 101,253Ìý $ 114,116Ìý $ 239,494Ìý $ 232,389Ìý
Cost of goods sold 41,688Ìý 48,834Ìý 93,949Ìý 94,469Ìý
Selling, general and administrative expenses 50,700Ìý 52,894Ìý 108,553Ìý 104,675Ìý
Impairment of goodwill and intangible assets —Ìý —Ìý 145,000Ìý —Ìý
Interest expense, net (a)
(16,037) (14,533) (30,767) (28,676)
Other income (expense), net 447Ìý (1,327) (17) (1,251)
Income (loss) from discontinued operations before income taxes (6,725) (3,472) (138,792) 3,318Ìý
Estimated loss on the sale of discontinued operations before income taxes (132,538) —Ìý (132,538) —Ìý
Total income (loss) from discontinued operations before income taxes (139,263) (3,472) (271,330) 3,318Ìý
Income tax expense (benefit) 11,068Ìý (4,417) (14,140) (3,177)
Income (loss) from discontinued operations, net of tax $ (150,331) $ 945Ìý $ (257,190) $ 6,495Ìý
(a)As noted above, interest expense and the related interest rate swap impact for the DDTL were reallocated to discontinued operations.
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) September 2024 March 2024 September 2023
Cash and equivalents $ 20,188Ìý $ 18,229Ìý $ 14,087Ìý
Accounts receivable, net 13,066Ìý 10,636Ìý 8,273Ìý
Inventories 89,779Ìý 68,543Ìý 75,760Ìý
Other current assets 18,910Ìý 18,817Ìý 15,671Ìý
Property, plant and equipment, net 36,166Ìý 34,894Ìý 30,689Ìý
Intangible assets, net 801,000Ìý 852,000Ìý 852,000Ìý
Goodwill 724,800Ìý 815,058Ìý 815,351Ìý
Operating lease right-of-use assets 86,465Ìý 75,287Ìý 59,119Ìý
Other assets 19,157Ìý 19,882Ìý 28,348Ìý
Deferred income tax assets (a)
(86,009) (87,479) (89,515)
Allowance to reduce assets to estimated fair value, less costs to sell (132,538) —Ìý —Ìý
Total assets of discontinued operations $ 1,590,984Ìý $ 1,825,867Ìý $ 1,809,783Ìý
Accounts payable $ 27,665Ìý $ 28,651Ìý $ 31,244Ìý
Accrued liabilities 38,872Ìý 51,210Ìý 40,923Ìý
Operating lease liabilities 78,723Ìý 69,554Ìý 54,725Ìý
Other liabilities 2,531Ìý 2,387Ìý 10,682Ìý
Total liabilities of discontinued operations $ 147,791Ìý $ 151,802Ìý $ 137,574Ìý
(a)ÌýÌýÌýÌýDeferred income tax balances reflect ÂÒÂ×°Íʿ’s consolidated netting by jurisdiction.