The financial results of
Musicland included in discontinued operations were as follows:
For the Fiscal
Years Ended
March 1, 2003
March 2, 2002
March 3,2001
Revenue
$ 1,727
$ 1,886
$ 138
Cost of goods
sold
1,114
1,226
91
Gross profit
613
660
47
Selling,
general and administrative expenses
685
631
54
Long-lived
asset impairment charge
166
—
—
Operating
(loss) income
(238)
29
(7)
Interest
expense
(6)
(19)
(1)
(Loss)
earnings before income taxes
(244)
10
(8)
Income tax
(benefit) expense(1)
(119)
10
(3)
Loss before
cumulative effect of change in accounting principles
(125)
—
(5)
Cumulative
effect of change in accounting principle for goodwill (note
1), net of
$0 tax
(308)
—
—
Cumulative
effect of change in accounting principle for vendor allowances (note
1),
net of $5 tax
(8)
—
—
Loss from
discontinued operations, net of tax
$ (441)
$ —
$ (5)
(1)Fiscal 2003 includes
a $25 tax benefit as described below.
The current and noncurrent
assets and liabilities of Musicland as of March 1, 2003, and March 2,
2002, were as follows:
March 1, 2003
March
2,2002
Cash and cash
equivalents
$ 2
$ —
Receivables
3
9
Merchandise inventories
316
383
Other current assets
76
56
Current assets of
discontinued operations
$ 397
$ 448
Net property and
equipment
$ 69
$236
Other assets
88
325
Noncurrent assets of
discontinued operations
$ 157
$ 561
Accounts payable
$ 208
$ 282
Accrued compensation and
related expenses
14
31
Accrued liabilities
98
105
Current liabilities of
discontinued operations
$ 320
$ 418
Long-term liabilities
$ 20
$ 16
Long-term debt
5
5
Noncurrent liabilities
of discontinued operations
$ 25
$ 21
We recorded a deferred
tax asset of $25 as of March 1, 2003, in conjunction with the
classification of Musicland as discontinued operations. This tax
benefit resulted from differences between the basis of assets and
liabilities for financial reporting and income tax purposes arising at
acquisition, which will be realized upon the disposition of Musicland.
Although realization is not assured, we believe it is more likely than
not that this deferred tax asset will be realized. Such differences
also gave rise to a $41 deferred tax asset associated with a capital
loss carryover. We have provided a full valuation allowance against
this $41 deferred tax asset because of the uncertainties regarding
realization of the benefit. >>
