Assets and Liabilities Held for Sale

3 Months Ended

Apr. 01, 2023

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure

Assets and Liabilities Held for Sale

Total current assets and current liabilities classified as held for sale in the Condensed Consolidated Balance Sheets as of April 1, 2023, December 31, 2022 and April 2, 2022 consist of the following:


	April 1, 2023		December 31, 2022		April 2, 2022
Total current assets held for sale - U.S. Sheer Hosiery business	$	4,986	$	13,327	$	7,959

Total current liabilities held for sale - U.S. Sheer Hosiery business	$	4,986	$	13,327	$	7,959

U.S. Sheer Hosiery Business - Continuing Operations

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 Condensed Consolidated Balance Sheets at April 1, 2023, December 31, 2022 and April 2, 2022. The Company recorded a non-cash charge 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 the quarters ended April 1, 2023 and April 2, 2022, the Company recognized non-cash gains of $2,139 and $6,528, respectively, to adjust the valuation allowance resulting primarily 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 Condensed 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 expects to complete the sale of this business 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 Condensed Consolidated Statements of Income, and to present the related assets and liabilities as held for sale in the Condensed 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 which resulted in a non-cash charge to impair certain indefinite-lived trademarks and license agreements as well as the full goodwill balance attributable to the European Innerwear business. Additionally, 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 a non-cash charge in the first quarter of 2021. In the quarter ended April 2, 2022, the Company recorded a gain on the sale of the European Innerwear business of $187 as "Gain on sale of business and classification of assets held for sale" in the summarized discontinued operations financial information below primarily resulting from changes in working capital balances and foreign exchange rates.

The Company 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 provided transitional services including information technology, human resources, facilities management, and limited finance and accounting services which expired in March of 2023. The sales and the related profit are included in continuing operations in the Condensed 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 Condensed 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:


	Quarters Ended
	April 1, 2023		April 2, 2022
Net sales	$	—	$	101,314
Cost of sales	—		60,415
Gross profit	—		40,899
Selling, general and administrative expenses	—		54,689
Gain on sale of business and classification of assets held for sale	—		(187)
Operating loss	—		(13,603)
Other expenses	—		283
Interest expense, net	—		10
Loss from discontinued operations before income tax benefit	—		(13,896)
Income tax benefit	—		(18,421)
Net income from discontinued operations, net of tax	$	—	$	4,525

There were no assets and liabilities of discontinued operations classified as held for sale in the Condensed Consolidated Balance Sheets as of April 1, 2023, December 31, 2022 and April 2, 2022.

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


	Quarters Ended
	April 1, 2023		April 2, 2022
Capital expenditures	$	—	$	715

Gain on sale of business and classification of assets held for sale	$	—	$	(187)