Quarterly report pursuant to Section 13 or 15(d)

Restructuring and Management Transition

v3.20.2
Restructuring and Management Transition
3 Months Ended
May 02, 2020
Restructuring and Related Activities [Abstract]  
Restructuring and Management Transition Restructuring and Management Transition
As of May 2, 2020, in connection with the anticipated commencement of the Chapter 11 Cases (see Note 14), the Company identified certain leased stores it considered more likely than not would be permanently closed significantly before the end of their respective estimated useful lives. Consequently, the potential closing of these stores was considered an indicator of impairment. In accordance with ASC 360, long-lived assets, including right-of-use lease assets, with indicators of impairment, are evaluated for recoverability. Assets that are not determined to be recoverable are assessed for impairment based on their current fair values. As a result of this evaluation, the Company recorded impairment charges of $97 million during the first quarter of 2020, consisting of $49 million related to long-lived assets and $48 million related to right-of-use lease assets.

Similarly, the Company determined that the combination of the macro economic impact of the COVID-19 pandemic, the contemplation of bankruptcy, and the expectations of permanent store closures represented an indicator of impairment related to the Company’s indefinite-lived intangible assets primarily associated with the Liz Claiborne family of trademarks and related intellectual property. As a result, the Company recorded an impairment of the intangible assets of $42 million during the first quarter of 2020.

In the first quarter of 2020, the Company also incurred expenses related to reorganization advisory fees in the amount of $16 million.

In the first quarter of 2019, the Company finalized plans to close 18 full-line stores and 9 ancillary home and furniture stores, further aligning the Company's brick-and-mortar presence with its omnichannel network and enabling capital resources to be reallocated to locations and initiatives that offer the greatest long-term value potential. The planned store closures resulted in a $14 million asset impairment charge for store assets with limited future use and a $1 million severance charge for the expected displacement of store associates.
The components of Restructuring and management transition include:
Home office and stores — charges for actions to reduce our store and home office expenses including impairments, employee termination benefits, store lease terminations and other restructuring/reorganization advisory costs;
Management transition — charges related to implementing changes within our management leadership team for both incoming and outgoing members of management; and
Other — charges related primarily to costs related to the closure of certain supply chain locations.

The composition of Restructuring and management transition charges was as follows: 
  Three Months Ended Cumulative
Amount From Program Inception Through
May 2, 2020
($ in millions) May 2,
2020
May 4,
2019
Home office and stores $ 155    $ 19    $ 684   
Management transition —      269   
Other —    —    186   
Total $ 155    $ 20    $ 1,139   
Activity for the Restructuring and management transition liability for the three months ended May 2, 2020 was as follows:
($ in millions) Home Office
and Stores
Management
Transition
Total
February 1, 2020 $   $   $  
Charges 16    —    16   
Cash payments (13)   (1)   (14)  
May 2, 2020 $   $   $ 10