SEC Filing | Lands' End, Inc.

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le-10q_20201030.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 October 30, 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 December 1, 2020 the registrant had 32,607,757 shares of common stock, $0.01 par value, outstanding.

LANDS’ END, INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED OCTOBER 30, 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	17

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28

Item 4.	Controls and Procedures	29

	PART II OTHER INFORMATION	30

Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	30

Item 6.	Exhibits	31

	Signatures	32

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LANDS’ END, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

	13 Weeks Ended						39 Weeks Ended
(in thousands, except per share data)	October 30, 2020			November 1, 2019			October 30, 2020			November 1, 2019
Net revenue	$	359,982		$	340,023		$	889,073		$	900,723
Cost of sales (excluding depreciation and amortization)		196,527			185,848			496,041			497,589
Gross profit		163,455			154,175			393,032			403,134

Selling and administrative		134,890			135,417			352,164			374,521
Depreciation and amortization		9,627			8,076			27,791			23,101
Other operating expense (income), net		255			(225	)		7,913			(99	)
Operating income		18,683			10,907			5,164			5,611
Interest expense		9,005			6,121			19,232			20,190
Other (income) expense, net		(250	)		(166	)		910			(1,640	)
Income (loss) before income taxes		9,928			4,952			(14,978	)		(12,939	)
Income tax expense (benefit)		2,752			1,346			(5,887	)		(6,713	)
NET INCOME (LOSS)	$	7,176		$	3,606		$	(9,091	)	$	(6,226	)
NET INCOME (LOSS) PER COMMON SHARE
Basic:	$	0.22		$	0.11		$	(0.28	)	$	(0.19	)
Diluted:	$	0.22		$	0.11		$	(0.28	)	$	(0.19	)

Basic weighted average common shares outstanding		32,605			32,371			32,551			32,333
Diluted weighted average common shares outstanding		33,248			32,398			32,551			32,333

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

LANDS’ END, INC.

Condensed Consolidated Statements of Comprehensive Operations

(Unaudited)

	13 Weeks Ended					39 Weeks Ended
(in thousands)	October 30, 2020			November 1, 2019		October 30, 2020			November 1, 2019
NET INCOME (LOSS)	$	7,176		$	3,606	$	(9,091	)	$	(6,226	)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments		(794	)		2,290		(671	)		(178	)
COMPREHENSIVE INCOME (LOSS)	$	6,382		$	5,896	$	(9,762	)	$	(6,404	)

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)	October 30, 2020			November 1, 2019			January 31, 2020
ASSETS
Current assets
Cash and cash equivalents	$	56,137		$	15,859		$	77,148
Restricted cash		2,135			1,830			2,149
Accounts receivable, net		34,238			38,125			50,953
Inventories, net		499,759			499,855			375,670
Prepaid expenses and other current assets		52,731			47,538			39,458
Total current assets		645,000			603,207			545,378
Property and equipment, net		149,342			155,051			157,665
Operating lease right-of-use asset		36,699			31,380			38,665
Goodwill		106,700			110,000			110,000
Intangible asset, net		257,000			257,000			257,000
Other assets		5,413			5,204			4,921
TOTAL ASSETS	$	1,200,154		$	1,161,842		$	1,113,629
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current borrowings on ABL Facility	$	—		$	80,000		$	—
Short-term portion of long-term debt		13,750			5,150			5,150
Accounts payable		174,061			174,312			158,436
Lease liability - current		5,359			6,344			5,864
Other current liabilities		147,903			103,396			114,116
Total current liabilities		341,073			369,202			283,566
Long-term borrowings on ABL Facility		155,000			—			—
Long-term debt, net		248,700			379,606			378,657
Lease liability - long-term		39,169			30,971			39,841
Deferred tax liabilities		65,800			56,109			57,651
Other liabilities		5,487			5,469			5,532
TOTAL LIABILITIES		855,229			841,357			765,247
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Common stock, par value $0.01 authorized: 480,000 shares; issued and outstanding: 32,608, 32,373 and 32,382, respectively		326			324			324
Additional paid-in capital		366,959			358,648			360,656
(Accumulated deficit) Retained earnings		(8,701	)		(25,126	)		390
Accumulated other comprehensive loss		(13,659	)		(13,361	)		(12,988	)
TOTAL STOCKHOLDERS' EQUITY		344,925			320,485			348,382
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,200,154		$	1,161,842		$	1,113,629

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

LANDS’ END, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	39 Weeks Ended
(in thousands)	October 30, 2020			November 1, 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(9,091	)	$	(6,226	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		27,791			23,101
Amortization of debt issuance costs		2,291			1,293
Loss (gain) on property and equipment		994			(99	)
Stock-based compensation		6,743			6,632
Deferred income taxes		7,979			(1,899	)
Goodwill impairment		3,300			—
Other		326			1,837
Change in operating assets and liabilities:
Inventories		(123,811	)		(178,016	)
Accounts payable		20,104			50,173
Other operating assets		1,138			(14,755	)
Other operating liabilities		36,172			(6,992	)
Net cash used in operating activities		(26,064	)		(124,951	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(25,638	)		(28,487	)
Net cash used in investing activities		(25,638	)		(28,487	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowing under ABL Facility		230,000			95,000
Payments of borrowings under ABL Facility		(75,000	)		(15,000	)
Proceeds from issuance of Term Loan Credit Agreement		266,750			—
Payments of Term Loan Facility		(385,388	)		(103,863	)
Payment of debt issuance costs		(5,080	)		—
Payments of employee withholding taxes on share-based compensation		(438	)		(713	)
Net cash provided by (used in) financing activities		30,844			(24,576	)
Effects of exchange rate changes on cash, cash equivalents and restricted cash		(167	)		350
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(21,025	)		(177,664	)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD		79,297			195,353
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	58,272		$	17,689
SUPPLEMENTAL CASH FLOW DATA
Unpaid liability to acquire property and equipment	$	2,620		$	5,494
Income taxes paid, net of refunds	$	257		$	3,225
Interest paid	$	11,334		$	18,455
Lease liabilities arising from obtaining Operating lease right-of-use assets	$	3,525		$	12,083

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
Net income		—			—		—			7,176			—			7,176
Cumulative translation adjustment, net of tax		—			—		—			—			(794	)		(794	)
Stock-based compensation expense		—			—		2,201			—			—			2,201
Vesting of restricted shares		5			—		—			—			—			—
Restricted stock shares surrendered for taxes		(1	)		—		(15	)		—			—			(15	)
Balance at October 30, 2020		32,608		$	326	$	366,959		$	(8,701	)	$	(13,659	)	$	344,925

	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	)		—		(