DSW 2011 Annual Report Download - page 77

Table of Contents DSW INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Filene’s Basement - On April 21, 2009, RVI disposed of Filene’
s Basement, Inc. and certain related entities to FB II Acquisition Corp., a newly
formed entity owned by Buxbaum Holdings, Inc. (“Buxbaum”).
RVI agreed to indemnify Buxbaum, FB II Acquisition Corp. and their owners
against certain liabilities. On May 4, 2009, Filene’
s Basement filed for bankruptcy protection. On June 18, 2009, following bankruptcy court
approval, SYL LLC, a subsidiary of Syms Corp (“Syms”), purchased certain assets of Filene’s Basement. In this note, all references to “Filene’
s
Basement” refer to the debtor, formerly known as Filene’
s Basement Inc., and its debtor subsidiaries remaining after the asset purchase by a
subsidiary of Syms.
On November 3, 2009, the Bankruptcy Court for the District of Delaware approved a settlement agreement that RVI and DSW entered into with
Filene's Basement and the Official Committee of Unsecured Creditors. In connection with the settlement agreement, RVI’s claims against Filene’
s
Basement for notes receivables of $52.6 million
were released. RVI also assumed the rights and obligations related to and agreed to indemnify
Filene’s Basement with regard to certain matters arising out of the Filene’s Basement defined benefit pension plan. Filene’
s Basement and the
creditors’
committee agreed to allow certain general unsecured claims for amounts owed to RVI and DSW. The parties also agreed to certain
provisions affecting the proper allocation of proceeds paid to RVI or Filene’
s Basement in connection with specified third party litigation and to
certain provisions related to the debtors’
recovery from third parties that are the beneficiaries of letters of credit or hold collateral related to
workers’ compensation claims. The settlement agreement also provides for certain mutual releases among the debtors, the creditors’
committee,
RVI, DSW and other parties. The combined companies received distributions from the debtors’
estates of $1.2 million and $6.3 million in fiscal
2011 and 2010, respectively.
As of January 28, 2012
, the Company recorded a liability of $9.0 million under lease obligations related to leases assumed by Syms Corp, the
purchaser of certain Filene’s Basement assets and a liability of less than $0.1 million related to leases not assumed by Syms.
As of January 28, 2012 , the gain on disposition of Filene's Basement is comprised of the following (in thousands):
Changes in the carrying value of assets with residual interest in the discontinued business are classified within continuing operations. The other
accounts receivable from Filene’s Basement existed prior to the disposition of Filene’
s Basement and the notes receivable and related interest
receivable from Filene’s Basement were not forgiven pursuant to the disposition transaction, but as a result of the Filene’
s Basement filing for
bankruptcy after the disposition transaction.
The following table presents the significant components of Filene’s Basement operating results included in discontinued operations:
F-33
Fiscal years ended
January 28, 2012
January 29, 2011 January 30, 2010
(in thousands)
Gain on sale
$
183
$
2,733
$
9,513
Income from discontinued operations, net of tax – Value City
$
183
$
2,733
$
9,513
RVI's Total Investment in Filene’s Basement as of April 21, 2009
$
90,026
Disposition costs:
Selling costs to dispose of Filene's Basement
(4,661
)
Estimated outstanding guarantees
(9,030
)
Impairment of fixed assets not sold
(1,666
)
Total disposition costs
(15,357
)
Pre-tax gain on disposition of Filene's Basement
74,669
Less: tax effect
6,095
After tax gain on disposition of Filene's Basement
$
80,764