Restructuring and Management Transition
|6 Months Ended|
Aug. 01, 2020
|Restructuring and Related Activities [Abstract]|
|Restructuring and Management Transition||Restructuring and Management Transition, NetDuring the second quarter of 2020, the Company accrued severance costs related to store associates at announced closing stores and a reduction in workforce for home office, field management and international associates. Severance costs for the approximately 7,700 associates impacted totaled $28 million.
In connection with the anticipated commencement of the Chapter 11 Cases, the Company identified in the first quarter of 2020 certain leased stores it considered more likely than not would be permanently closed significantly before the end of their respective estimated useful lives. During the second quarter of 2020, the stores identified for permanent closure continued to evolve through the Chapter 11 Cases. The potential closing of stores is considered an indicator of impairment in accordance with ASC 360 Property, Plant and Equipment; accordingly, 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 test for impairment during both first quarter 2020 and second quarter 2020, the Company recorded impairment charges of $97 million during first quarter of 2020, consisting of $49 million related to long-lived assets and $48 million related to right-of-use lease assets and the Company recorded impairment charges of $28 million during second quarter of 2020, consisting of $26 million related to long-lived assets and $2 million related to right-of-use lease assets.
In connection with store and other facility closures, during the second quarter of 2020, the Company wrote-off certain supply chain and field office lease related long-lived assets resulting in a charge of $16 million.
Similarly, during first quarter 2020, 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 first quarter of 2020.
The Company also incurred expenses related to pre-petition debt restructuring advisory fees in the amount of $16 million and $8 million in the first and second quarters of 2020, respectively. The Company also recognized a gain of $20 million related to the remeasurement of certain operating lease assets and liabilities (see Note 11).
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:
Activity for the restructuring and management transition liability for the six months ended August 1, 2020 was as follows: