Assets and Liabilities Held for Sale

12 Months Ended

Dec. 31, 2022

Discontinued Operations and Disposal Groups [Abstract]

Assets and Liabilities Held for Sale, Disclosure

Assets and Liabilities Held for Sale

Assets and liabilities classified as held for sale in the Consolidated Balance Sheets as of December 31, 2022 and January 1, 2022 consist of the following:


	December 31, 2022		January 1, 2022
U.S. Sheer Hosiery business - continuing operations	$	13,327	$	5,426
European Innerwear business - discontinued operations	—		321,731
Total current assets held for sale	$	13,327	$	327,157

U.S. Sheer Hosiery business - continuing operations	$	13,327	$	5,426
European Innerwear business - discontinued operations	—		311,476
Total current liabilities held for sale	$	13,327	$	316,902

U.S. Sheer Hosiery Business - Continuing Operations

In 2020, the Company determined that there was a triggering event associated with its U.S. Sheer Hosiery reporting unit due to a significant decline in performance below management’s expectations and loss of a future wholesale sheer hosiery program. As a result, the Company recorded impairment charges for the full amount of goodwill related to the U.S. Sheer Hosiery reporting unit of $25,173, which are reflected in the “Selling, general and administrative expenses” line in the Consolidated Statements of Income in 2020. In the fourth quarter of 2021, the Company reached the decision to divest its U.S. Sheer Hosiery business, including the L’eggs brand, as part of its strategy to streamline its portfolio under its Full Potential plan and determined that this business met held-for-sale accounting criteria. The related assets and liabilities are presented as held for sale in the Consolidated Balance Sheets at December 31, 2022 and January 1, 2022. The Company recorded a non-cash charge of $38,364 in the fourth quarter of 2021 to record a valuation allowance against the net assets held for sale to write down the carrying value of the disposal group to the estimated fair value less costs of disposal. In 2022, the Company recognized a non-cash gain of $3,535 to adjust the valuation allowance resulting from a decrease in carrying value due to changes in working capital. These valuation allowance adjustments are reflected in the “Selling, general and administrative expenses” line in the Consolidated Statements of Income. The operations of the U.S. Sheer Hosiery business are reported in “Other” for all periods presented in Note “Business Segment Information”. The Company is currently exploring potential purchasers for this business and expects to complete the sale within the next 12 months.

European Innerwear Business - Discontinued Operations

In the first quarter of 2021, the Company announced that it reached the decision to exit its European Innerwear business as part of its strategy to streamline its portfolio under its Full Potential plan and determined that this business met held-for-sale and discontinued operations accounting criteria. Accordingly, the Company began to separately report the results of its European Innerwear business as discontinued operations in its Consolidated Statements of Income, and to present the related assets and liabilities as held for sale in the Consolidated Balance Sheets. On November 4, 2021, the Company announced that it had reached an agreement to sell its European Innerwear business to an affiliate of Regent, L.P. and completed the sale on March 5, 2022. Under the agreement, the purchaser received all the assets and operating liabilities of the European Innerwear business. The operations of the European Innerwear business were previously reported primarily in the International segment.

Upon meeting the criteria for held-for-sale classification in the first quarter of 2021, which qualified as a triggering event, the Company performed a full impairment analysis of the disposal group's indefinite-lived intangible assets and goodwill. As a result of the strategic decision to exit the European Innerwear business, forecasts were revised to include updated market conditions and the removal of strategic operating decisions that would no longer occur under the Company's ownership. The revised forecasts indicated impairment of certain indefinite-lived trademarks and license agreements as well as the full goodwill balance attributable to the European Innerwear business. As a result of this impairment analysis, a non-cash charge of $155,745 was recorded as "Impairment of intangible assets and goodwill" in the summarized discontinued operations financial information in 2021. In addition, the Company recorded a valuation allowance against the net assets held for sale to write down the carrying value of the disposal group to the estimated fair value less costs of disposal, resulting in non-cash charges of $7,253 and $273,995 for the quarter and year ended January 1, 2022, respectively, as "Loss on sale of business and classification of assets held for sale" in the summarized discontinued operations financial information. The non-cash charge recorded in the quarter ended January 1, 2022 primarily resulted from changes in working capital balances and foreign exchange rates. In the year ended December 31, 2022, the Company recorded the final loss on the sale of the European Innerwear business of $373 primarily resulting from changes in working capital balances and foreign exchange rates.

Additionally, the Company recorded an impairment charge of $7,302 in continuing operations on an indefinite-lived trademark in 2021 which is reflected in the “Selling, general and administrative expenses” line in the Consolidated Statements of Income. This charge relates to the full impairment of an indefinite-lived trademark related to a specific brand within the European Innerwear business that was excluded from the disposal group as it was not marketed for sale.

During the second quarter of 2020, the Company completed a quantitative impairment analysis for certain indefinite-lived intangible assets as a result of the significant impact of the COVID-19 pandemic on their performance. Based on this analysis, the Company recorded impairment charges of $20,319 on certain indefinite-lived trademarks and other intangible assets within the European Innerwear business which are reflected in the “Impairment of intangible assets and goodwill” line in the summarized discontinued operations financial information in 2020.

The Company has continued certain sales from its supply chain to the European Innerwear business on a transitional basis after the sale of the business. Under the terms of the Manufacturing and Supply Agreement that was signed as part of closing the transaction, the Company will provide these services for periods up to 34 months from the closing date of the transaction. Additionally, the Company entered into a Transitional Services Agreement pursuant to which the Company will provide transitional services including information technology, human resources, facilities management, and limited finance and accounting services for periods up to 12 months from the closing date of the transaction. The sales and the related profit are included in continuing operations in the Consolidated Statements of Income and in “Other” in Note “Business Segment Information” in all periods presented and have not been eliminated as intercompany transactions in consolidation for the period when the European Innerwear business was owned by the Company. The related receivables from the European Innerwear business are included in “Trade accounts receivable, net” in the Consolidated Balance Sheets for all periods presented.

The operating results of the discontinued operations only reflect revenues and expenses that are directly attributable to the European Innerwear business. Discontinued operations does not include any allocation of corporate overhead expense or interest expense. The key components from discontinued operations related to the European Innerwear business are as follows:


	Years Ended
	December 31, 2022		January 1, 2022		January 2, 2021
Net sales	$	101,314	$	546,558	$	598,322
Cost of sales	60,415		294,383		352,758
Gross profit	40,899		252,175		245,564
Selling, general and administrative expenses	54,689		274,408		261,410
Impairment of intangible assets and goodwill	—		155,745		20,319
Loss on sale of business and classification of assets held for sale	373		273,995		—
Operating loss	(14,163)		(451,973)		(36,165)
Other expenses	283		2,178		2,477
Interest expense, net	10		613		2,253
Loss from discontinued operations before income tax expense (benefit)	(14,456)		(454,764)		(40,895)
Income tax expense (benefit)	(18,421)		(11,020)		2,397
Net income (loss) from discontinued operations, net of tax	$	3,965	$	(443,744)	$	(43,292)

Assets and liabilities of discontinued operations classified as held for sale in the Consolidated Balance Sheets as of December 31, 2022 and January 1, 2022 consist of the following:


	December 31, 2022		January 1, 2022
Cash and cash equivalents	$	—	$	24,352
Trade accounts receivable, net	—		87,353
Inventories	—		141,653
Other current assets	—		21,926
Property, net	—		62,659
Right-of-use assets	—		32,603
Trademarks and other identifiable intangibles, net(1)	—		205,204
Deferred tax assets	—		4,174
Other noncurrent assets	—		4,127
Allowance to adjust assets to estimated fair value, less costs of disposal	—		(262,320)
Total assets of discontinued operations	$	—	$	321,731

Accounts payable	$	—	$	84,327
Accrued liabilities	—		122,620
Lease liabilities	—		6,562
Notes payable	—		329
Lease liabilities - noncurrent	—		27,426
Pension and postretirement benefits	—		38,325
Other noncurrent liabilities	—		31,887
Total liabilities of discontinued operations	$	—	$	311,476

(1)The “Trademarks and other identifiable intangibles, net” line in the table above includes $161,693 of indefinite-lived trademarks as of January 1, 2022.

The cash flows related to discontinued operations have not been segregated and are included in the Consolidated Statements of Cash Flows. The following table presents cash flow and non-cash information related to discontinued operations:


	Years Ended
	December 31, 2022		January 1, 2022		January 2, 2021
Depreciation	$	—	$	2,608	$	11,650
Amortization	$	—	$	1,460	$	5,829
Capital expenditures	$	715	$	8,462	$	4,160
Impairment of intangible assets and goodwill	$	—	$	155,745	$	20,319
Loss on sale of business and classification of assets held for sale	$	373	$	273,995	$	—
Capital expenditures included in accounts payable at end of period	$	—	$	1,079	$	3,767
Right-of-use assets obtained in exchange for lease obligations	$	—	$	8,672	$	3,738