Quarterly report pursuant to Section 13 or 15(d)

Restructuring and Management Transition

v2.4.0.8
Restructuring and Management Transition
9 Months Ended
Nov. 02, 2013
Restructuring and Related Activities [Abstract]  
Restructuring and Management Transition
Restructuring and Management Transition
The composition of restructuring and management transition charges was as follows:
 
 
Three Months Ended
 
Nine Months Ended
 
Cumulative
Amount Through
November 2, 2013
($ in millions)
November 2,
2013
 
October 27,
2012
 
November 2,
2013
 
October 27,
2012
 
Supply chain
$

 
$
3

 
$

 
$
19

 
$
60

Home office and stores
(6
)
 
4

 
26

 
105

 
180

Software and systems

 

 

 
36

 
36

Store fixtures
10

 
18

 
55

 
60

 
133

Management transition
3

 
6

 
32

 
36

 
203

Other
39

 
3

 
52

 
13

 
100

Total
$
46

 
$
34

 
$
165

 
$
269

 
$
712


Supply chain
As a result of consolidating and streamlining our supply chain organization as part of a restructuring program that began in 2011, during the three and nine months ended October 27, 2012 we recorded charges of $3 million and $19 million, respectively, related to increased depreciation, termination benefits and unit closing costs. This restructuring activity was completed during the third quarter of 2012.
Home office and stores
During the three months ended November 2, 2013 and October 27, 2012, we recorded a $6 million credit and $4 million of net charges, respectively, associated with employee termination benefits for actions to reduce our store and home office expenses. The $6 million credit for the third quarter of 2013 resulted from termination benefits paid that were lower than expected primarily because employees found other positions within the Company and revisions were made to the restructuring plan. During the third quarter of 2012, when substantially all employee exits were completed, we recorded a net curtailment gain of $7 million (see Note 8). The net curtailment gain was more than offset by charges associated with employee termination benefits of $11 million. During the nine months ended November 2, 2013 and October 27, 2012, we recorded net charges of $26 million and $105 million, respectively, related to store and home office employee termination benefits.
Software and systems
During the nine months ended October 27, 2012, we recorded a charge of $36 million related to the disposal of software and systems that based on our evaluation no longer supported our then current strategy.  Included in this amount is $3 million of consulting fees related to that evaluation.
Store fixtures
During the three months ended November 2, 2013, we recorded $2 million for the impairment of certain store fixtures related to our former shops strategy that were used in our prototype department store and $8 million of increased depreciation as a result of shortening the useful lives of fixtures in our department stores that were replaced during the first nine months of 2013. During the nine months ended November 2, 2013, we recorded $7 million of charges for the write-off of store fixtures related to the renovations in our home department and $37 million of increased depreciation as a result of shortening the useful lives of fixtures in our department stores that were replaced during the first nine months of 2013. In addition, during the nine months ended November 2, 2013, we recorded $11 million of charges for the impairment of certain store fixtures related to our former shops strategy that were used in our prototype department store.
During the three months ended October 27, 2012, we recorded $11 million of charges related to the removal of store fixtures in our department stores. In addition, we recorded $7 million of increased depreciation as a result of shortening the useful lives of fixtures in our department stores that were replaced throughout 2013 with the build out of additional attractions. During the nine months ended October 27, 2012, we recorded charges of $60 million related to the write-off and increased depreciation for store fixtures that were replaced with new store attraction fixtures.
Management transition
During the three months ended November 2, 2013 and October 27, 2012, we implemented several changes within our management leadership team that resulted in management transition costs of $3 million and $6 million, respectively, for both incoming and outgoing members of management. During the nine months ended November 2, 2013 and October 27, 2012, we recorded management transition charges of $32 million and $36 million, respectively.
Other
During the three months ended November 2, 2013 and October 27, 2012, we recorded $39 million and $3 million, respectively, of miscellaneous restructuring charges. During the nine months ended November 2, 2013 and October 27, 2012, we recorded $52 million and $13 million, respectively, of miscellaneous restructuring charges. The charges during 2013 were primarily related to contract termination costs and other costs associated with our previous marketing and shops strategy, including a non-cash charge of $36 million during the third quarter relating to the return of shares of Martha Stewart Living Omnimedia Inc. previously acquired by the Company, which was accounted for as a cost investment (Note 5). The charges in the first quarter of 2012 were primarily related to the exit of our specialty websites CLAD and Gifting Grace™, and the charges in the second quarter of 2012 were primarily related to costs associated with the closing of our Pittsburgh, Pennsylvania customer call center.

Activity for the restructuring and management transition liability for the nine months ended November 2, 2013 was as follows:
 
($ in millions)
Supply
Chain
 
Home Office
and Stores
 
Store
Fixtures
 
Management
Transition
 
Other
 
Total
February 2, 2013
$
2

 
$
4

 
$

 
$

 
$
12

 
$
18

Charges

 
26

(1) 
55

 
32

 
52

 
165

Cash payments
(2
)
 
(27
)
 

 
(16
)
 
(15
)
 
(60
)
Non-cash

 
(2
)
 
(55
)
 
(16
)
 
(36
)
 
(109
)
November 2, 2013
$

 
$
1

 
$

 
$

 
$
13

 
$
14

(1) Includes the $6 million credit in the third quarter of 2013 resulting from termination benefits paid that were lower than expected primarily because employees found other positions within the Company and revisions were made to the restructuring plan.
Non-cash amounts represent charges that do not result in cash expenditures including increased depreciation, write-off of store fixtures and a cost investment and stock-based compensation expense for accelerated vesting related to terminations.