SEC Filing | Lands' End, Inc.

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le-10q_20200731.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended July 31, 2020

-OR-

☐	Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to to .

Commission File Number: 001-09769

Lands’ End, Inc.

(Exact name of registrant as specified in its charter)


Delaware		36-2512786

(State or Other Jurisdiction of Incorporation of Organization)		(I.R.S. Employer Identification No.)

1 Lands’ End Lane

Dodgeville, Wisconsin

53595

(Address of Principal Executive Offices)

(Zip Code)

(608) 935-9341

(Registrant’s Telephone Number Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.01 per share		LE		The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐ NO ☒

As of September 4, 2020 the registrant had 32,603,664 shares of common stock, $0.01 par value, outstanding.

LANDS’ END, INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED JULY 31, 2020

TABLE OF CONTENTS

		Page

	PART I FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	1

	Condensed Consolidated Statements of Operations	1

	Condensed Consolidated Statements of Comprehensive Operations	2

	Condensed Consolidated Balance Sheets	3

	Condensed Consolidated Statements of Cash Flows	4

	Condensed Consolidated Statements of Changes in Stockholders' Equity	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	29

Item 4.	Controls and Procedures	30

	PART II OTHER INFORMATION	31

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 6.	Exhibits	32

	Signatures	33

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LANDS’ END, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

	13 Week Period Ended					26 Week Period Ended
(in thousands, except per share data)	July 31, 2020		August 2, 2019			July 31, 2020			August 2, 2019
Net revenue	$	312,083	$	298,267		$	529,091		$	560,700
Cost of sales (excluding depreciation and amortization)		176,661		169,182			299,514			311,741
Gross profit		135,422		129,085			229,577			248,959

Selling and administrative		111,478		122,260			217,276			239,104
Depreciation and amortization		9,378		7,408			18,164			15,026
Other operating expense (income), net		3,373		(22	)		7,656			126
Operating income (loss)		11,193		(561	)		(13,519	)		(5,297	)
Interest expense		4,916		6,235			10,227			14,069
Other expense (income), net		1,333		(608	)		1,160			(1,475	)
Income (loss) before income taxes		4,944		(6,188	)		(24,906	)		(17,891	)
Income tax expense (benefit)		568		(3,174	)		(8,639	)		(8,059	)
NET INCOME (LOSS)	$	4,376	$	(3,014	)	$	(16,267	)	$	(9,832	)
NET INCOME (LOSS) PER COMMON SHARE
Basic:	$	0.13	$	(0.09	)	$	(0.50	)	$	(0.30	)
Diluted:	$	0.13	$	(0.09	)	$	(0.50	)	$	(0.30	)

Basic weighted average common shares outstanding		32,600		32,368			32,524			32,314
Diluted weighted average common shares outstanding		32,838		32,368			32,524			32,314

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

LANDS’ END, INC.

Condensed Consolidated Statements of Comprehensive Operations

(Unaudited)

	13 Week Period Ended					26 Week Period Ended
(in thousands)	July 31, 2020		August 2, 2019			July 31, 2020			August 2, 2019
NET INCOME (LOSS)	$	4,376	$	(3,014	)	$	(16,267	)	$	(9,832	)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments		1,382		(2,234	)		123			(2,468	)
COMPREHENSIVE INCOME (LOSS)	$	5,758	$	(5,248	)	$	(16,144	)	$	(12,300	)

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

LANDS’ END, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except per share data)	July 31, 2020			August 2, 2019			January 31, 2020
ASSETS
Current assets
Cash and cash equivalents	$	62,624		$	82,616		$	77,148
Restricted cash		1,843			1,826			2,149
Accounts receivable, net		24,367			24,632			50,953
Inventories, net		441,510			405,793			375,670
Prepaid expenses and other current assets		48,095			39,391			39,458
Total current assets		578,439			554,258			545,378
Property and equipment, net		153,003			153,933			157,665
Operating lease right-of-use asset		37,882			28,980			38,665
Goodwill		106,700			110,000			110,000
Intangible asset, net		257,000			257,000			257,000
Other assets		4,300			5,333			4,921
TOTAL ASSETS	$	1,137,324		$	1,109,504		$	1,113,629
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current borrowings on Term Loan	$	—		$	5,150		$	5,150
Accounts payable		202,629			230,158			158,436
Lease liability - current		5,676			6,997			5,864
Other current liabilities		99,016			87,807			114,116
Total current liabilities		307,321			330,112			283,566
Long-term debt, net		381,909			380,555			378,657
Lease liability - long-term		40,588			26,911			39,841
Deferred tax liabilities		65,619			55,516			57,651
Other liabilities		5,530			4,145			5,532
TOTAL LIABILITIES		800,967			797,239			765,247
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Common stock, par value $0.01 authorized: 480,000 shares; issued and outstanding: 32,604, 32,370 and 32,382, respectively		326			324			324
Additional paid-in capital		364,773			356,324			360,656
(Accumulated deficit) Retained earnings		(15,877	)		(28,732	)		390
Accumulated other comprehensive loss		(12,865	)		(15,651	)		(12,988	)
TOTAL STOCKHOLDERS' EQUITY		336,357			312,265			348,382
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,137,324		$	1,109,504		$	1,113,629

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

LANDS’ END, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	26 Week Period Ended
(in thousands)	July 31, 2020			August 2, 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(16,267	)	$	(9,832	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		18,164			15,026
Amortization of debt issuance costs		858			864
Loss (gain) on property and equipment		887			(141	)
Stock-based compensation		4,542			4,303
Deferred income taxes		7,936			(1,877	)
Goodwill impairment		3,300			—
Other		1,115			830
Change in operating assets and liabilities:
Inventories		(65,553	)		(86,350	)
Accounts payable		48,858			111,427
Other operating assets		15,605			6,358
Other operating liabilities		(11,461	)		(23,570	)
Net cash provided by operating activities		7,984			17,038
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(19,758	)		(24,843	)
Net cash used in investing activities		(19,758	)		(24,843	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowing under ABL Facility		75,000			—
Payments of borrowings under ABL Facility		(75,000	)		—
Payments of term-loan		(2,575	)		(102,575	)
Payments of employee withholding taxes on share-based compensation		(423	)		(708	)
Net cash used in financing activities		(2,998	)		(103,283	)
Effects of exchange rate changes on cash, cash equivalents and restricted cash		(58	)		177
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(14,830	)		(110,911	)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD		79,297			195,353
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	64,467		$	84,442
SUPPLEMENTAL CASH FLOW DATA
Unpaid liability to acquire property and equipment	$	2,303		$	5,222
Income taxes paid, net of refunds	$	(47	)	$	3,036
Interest paid	$	9,087		$	12,702
Lease liabilities arising from obtaining Operating lease right-of-use assets	$	3,525		$	6,705

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

LANDS' END, INC.

Condensed Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)

	Common Stock Issued					Additional Paid-in			Retained Earnings/ (Accumulated			Accumulated Other Comprehensive			Total Stockholders'
(in thousands)	Shares			Amount		Capital			Deficit)			Loss			Equity
Balance at January 31, 2020		32,382		$	324	$	360,656		$	390		$	(12,988	)	$	348,382
Net loss		—			—		—			(20,643	)		—			(20,643	)
Cumulative translation adjustment, net of tax		—			—		—			—			(1,259	)		(1,259	)
Stock-based compensation expense		—			—		1,828			—			—			1,828
Vesting of restricted shares		275			2		(2	)		—			—			—
Restricted stock shares surrendered for taxes		(61	)		—		(410	)		—			—			(410	)
Balance at May 1, 2020		32,596		$	326	$	362,072		$	(20,253	)	$	(14,247	)	$	327,898
Net income		—			—		—			4,376			—			4,376
Cumulative translation adjustment, net of tax		—			—		—			—			1,382			1,382
Stock-based compensation expense		—			—		2,714			—			—			2,714
Vesting of restricted shares		10			—		—			—			—			—
Restricted stock shares surrendered for taxes		(2	)		—		(13	)		—			—			(13	)
Balance at July 31, 2020		32,604		$	326	$	364,773		$	(15,877	)	$	(12,865	)	$	336,357

	Common Stock Issued					Additional Paid-in			Accumulated			Accumulated Other Comprehensive			Total Stockholders'
(in thousands)	Shares			Amount		Capital			Deficit			Loss			Equity
Balance at February 1, 2019		32,220		$	320	$	352,733		$	(17,159	)	$	(13,183	)	$	322,711
Net loss		—			—		—			(6,818	)		—			(6,818	)
Cumulative translation adjustment, net of tax		—			—		—			—			(234	)		(234	)
Change in accounting principle related to lease accounting, net of tax		—			—		—			(1,741	)		—			(1,741	)
Stock-based compensation expense		—			—		1,974			—			—			1,974
Vesting of restricted shares		185			4		(4	)		—			—			—
Restricted stock shares surrendered for taxes		(42	)		—		(687	)		—			—			(687	)
Balance at May 3, 2019		32,363		$	324	$	354,016		$	(25,718	)	$	(13,417	)	$	315,205
Net loss		—			—		—			(3,014	)		—			(3,014	)
Cumulative translation adjustment, net of tax		—			—		—			—			(2,234	)		(2,234	)
Stock-based compensation expense		—			—		2,329			—			—			2,329
Vesting of restricted shares		9			—		—			—			—			—
Restricted stock shares surrendered for taxes		(2	)		—		(21	)		—			—			(21	)
Balance at August 2, 2019		32,370		$	324	$	356,324		$	(28,732	)	$	(15,651	)	$	312,265

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

LANDS’ END, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BACKGROUND AND BASIS OF PRESENTATION

Description of Business

Lands' End, Inc. ("Lands' End" or the "Company") is a leading uni-channel retailer of casual clothing, accessories, footwear and home products. Lands’ End offers products online at www.landsend.com, on third party online marketplaces and through retail locations.

Terms that are commonly used in the Company's notes to Condensed Consolidated Financial Statements are defined as follows:

•

ABL Facility - Asset-based senior secured credit agreements, dated as of November 16, 2017, with Wells Fargo Bank, N.A. and certain other lenders