As described in Note 2 to the Consolidated Financial Statements, in 1996 the Company recorded a $12 million pre-tax, special and nonrecurring charge in connection with the early 1997 sale of Penhaligon's, a U.K.-based subsidiary of IBI.
In the fourth quarter of 1995, a sale of a 60% interest in the Company's wholly-owned credit card bank, WFNNB, to the New York investment firm of Welsh, Carson, Anderson & Stowe ("WCAS") was completed. The venture, which is 40% owned by the Company, focuses on providing private-label and bank card transaction processing and database management services to the Company's private-label credit card operations and other retailers. WCAS purchased its interest for $135 million and also made a $30 million capital contribution to the venture. The Company recognized a $73.2 million pre-tax gain from the sale of WFNNB.
In addition, WFNNB's outstanding debt to the Company of approximately $1.2 billion was repaid in January 1996 from the proceeds realized from the securitization of WFNNB's credit card receivables.
Along with the sale of the 60% interest in WFNNB, the Company recognized a special and nonrecurring charge during the fourth quarter of 1995 of approximately $71.9 million. Of this amount, $25.8 million was provided for the closing of 26 stores and $19.8 million was provided for the downsizing of 33 stores, primarily at Limited Stores and Lerner New York. These stores were identified based on store profit performance and assessment of the quality of the real estate. The provision included the net present value of rent payments through lease expiration, lease termination payments and approximately $15 million representing the net book value of fixed assets. The remaining charge of approximately $26.3 million represented the write-down to market or net realizable value of certain assets arising from nonoperating activities. The net pre-tax gain from these special and nonrecurring items was $1.3 million. At February 1, 1997, substantially all of the planned closings and downsizings were completed, with two closings and downsizings expected to be completed shortly.