le-10q_20210430.htm
--01-28 false 0000799288 Q1 Yes Yes true true 0.0050 P3Y 0.0050 P3Y P4Y 0000799288 2021-01-30 2021-04-30 xbrli:shares 0000799288 2021-05-25 iso4217:USD 0000799288 2020-02-01 2020-05-01 iso4217:USD xbrli:shares 0000799288 2021-04-30 0000799288 2020-05-01 0000799288 2021-01-29 0000799288 2020-01-31 0000799288 us-gaap:CommonStockMember 2021-01-29 0000799288 us-gaap:AdditionalPaidInCapitalMember 2021-01-29 0000799288 us-gaap:RetainedEarningsMember 2021-01-29 0000799288 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-01-29 0000799288 us-gaap:RetainedEarningsMember 2021-01-30 2021-04-30 0000799288 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-01-30 2021-04-30 0000799288 us-gaap:AdditionalPaidInCapitalMember 2021-01-30 2021-04-30 0000799288 us-gaap:CommonStockMember 2021-01-30 2021-04-30 0000799288 us-gaap:CommonStockMember 2021-04-30 0000799288 us-gaap:AdditionalPaidInCapitalMember 2021-04-30 0000799288 us-gaap:RetainedEarningsMember 2021-04-30 0000799288 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-04-30 0000799288 us-gaap:CommonStockMember 2020-01-31 0000799288 us-gaap:AdditionalPaidInCapitalMember 2020-01-31 0000799288 us-gaap:RetainedEarningsMember 2020-01-31 0000799288 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-31 0000799288 us-gaap:RetainedEarningsMember 2020-02-01 2020-05-01 0000799288 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-02-01 2020-05-01 0000799288 us-gaap:AdditionalPaidInCapitalMember 2020-02-01 2020-05-01 0000799288 us-gaap:CommonStockMember 2020-02-01 2020-05-01 0000799288 us-gaap:CommonStockMember 2020-05-01 0000799288 us-gaap:AdditionalPaidInCapitalMember 2020-05-01 0000799288 us-gaap:RetainedEarningsMember 2020-05-01 0000799288 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-05-01 xbrli:pure 0000799288 le:OtherSeniorManagementMember le:COVID19Member 2020-10-30 0000799288 srt:ChiefExecutiveOfficerMember le:COVID19Member 2020-10-30 0000799288 srt:PresidentMember le:COVID19Member 2020-10-30 0000799288 le:COVID19Member 2020-03-28 2020-04-13 0000799288 le:COVID19Member le:BusinessOutfittersRevenueMember 2020-02-01 2020-05-01 0000799288 le:COVID19Member 2021-01-30 2021-04-30 0000799288 le:COVID19Member le:JapanECommerceMember 2020-02-01 2020-05-01 0000799288 us-gaap:AccountingStandardsUpdate201912Member 2021-04-30 0000799288 le:ABLFacilityMember 2017-11-16 0000799288 le:ABLFacilityMember 2021-01-29 0000799288 le:ABLFacilityMember 2020-03-19 0000799288 le:ABLFacilityMember 2020-09-09 0000799288 le:ABLFacilityMember us-gaap:LetterOfCreditMember 2021-04-30 0000799288 le:ABLFacilityMember 2021-04-30 0000799288 le:ABLFacilityMember 2020-05-01 0000799288 le:CurrentTermLoanFacilityMember 2020-09-09 0000799288 le:CurrentTermLoanFacilityMember 2020-09-08 2020-09-09 0000799288 le:FormerTermLoanFacilityMember 2020-05-01 0000799288 le:CurrentTermLoanFacilityMember 2021-04-30 0000799288 le:CurrentTermLoanFacilityMember 2021-01-29 0000799288 le:ABLFacilityMember 2021-01-30 2021-04-30 0000799288 le:ABLFacilityMember 2020-02-01 2020-05-01 0000799288 le:ABLFacilityMember 2020-02-01 2021-01-29 0000799288 us-gaap:LondonInterbankOfferedRateLIBORMember le:ABLFacilityMember us-gaap:SecuredDebtMember srt:MinimumMember 2021-01-30 2021-04-30 0000799288 us-gaap:LondonInterbankOfferedRateLIBORMember le:ABLFacilityMember us-gaap:SecuredDebtMember 2021-01-30 2021-04-30 0000799288 us-gaap:BaseRateMember le:ABLFacilityMember us-gaap:SecuredDebtMember 2021-01-30 2021-04-30 0000799288 le:AdjustedLondonInterbankOfferedRateLIBORMember le:CurrentTermLoanFacilityMember us-gaap:SecuredDebtMember 2021-01-30 2021-04-30 0000799288 le:AlternateBaseRateMember le:CurrentTermLoanFacilityMember us-gaap:SecuredDebtMember 2021-01-30 2021-04-30 0000799288 srt:MinimumMember le:CurrentTermLoanFacilityMember us-gaap:SecuredDebtMember 2021-01-30 2021-04-30 0000799288 le:FederalFundsRateMember le:CurrentTermLoanFacilityMember us-gaap:SecuredDebtMember 2021-01-30 2021-04-30 0000799288 le:OneMonthLondonInterbankOfferedRateLIBORMember le:CurrentTermLoanFacilityMember us-gaap:SecuredDebtMember 2021-01-30 2021-04-30 0000799288 le:ABLFacilityMember us-gaap:SecuredDebtMember srt:MinimumMember 2021-01-30 2021-04-30 0000799288 le:ABLFacilityMember us-gaap:SecuredDebtMember srt:MaximumMember 2021-01-30 2021-04-30 0000799288 le:ABLFacilityMember us-gaap:SecuredDebtMember 2021-04-30 0000799288 le:FortressCreditCorpMember srt:MinimumMember us-gaap:SecuredDebtMember le:CurrentTermLoanFacilityMember 2020-09-08 2020-09-09 0000799288 le:FortressCreditCorpMember srt:MaximumMember us-gaap:SecuredDebtMember le:CurrentTermLoanFacilityMember 2020-09-08 2020-09-09 0000799288 le:FortressCreditCorpMember le:CurrentTermLoanFacilityMember 2020-09-09 0000799288 le:ABLFacilityMember us-gaap:SecuredDebtMember 2021-01-30 2021-04-30 0000799288 le:TimeVestingStockAwardsMember 2021-01-30 2021-04-30 0000799288 srt:MinimumMember 2021-01-30 2021-04-30 0000799288 srt:MaximumMember 2021-01-30 2021-04-30 0000799288 us-gaap:PerformanceSharesMember 2021-01-30 2021-04-30 0000799288 2019-02-02 2020-01-31 0000799288 us-gaap:EmployeeStockOptionMember 2021-01-30 2021-04-30 0000799288 le:TimeVestingStockAwardsMember 2020-02-01 2020-05-01 0000799288 us-gaap:EmployeeStockOptionMember 2020-02-01 2020-05-01 0000799288 le:TimeVestingStockAwardsMember 2021-01-29 0000799288 le:TimeVestingStockAwardsMember 2021-04-30 0000799288 us-gaap:PerformanceSharesMember 2021-01-29 0000799288 us-gaap:PerformanceSharesMember 2021-04-30 0000799288 us-gaap:EmployeeStockOptionMember 2021-01-29 0000799288 us-gaap:EmployeeStockOptionMember 2021-04-30 0000799288 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueInputsLevel1Member 2021-04-30 0000799288 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueInputsLevel1Member 2020-05-01 0000799288 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueInputsLevel1Member 2021-01-29 0000799288 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2020-05-01 0000799288 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueInputsLevel2Member 2020-05-01 0000799288 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2021-04-30 0000799288 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueInputsLevel3Member 2021-04-30 0000799288 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2021-01-29 0000799288 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueInputsLevel3Member 2021-01-29 0000799288 us-gaap:FairValueMeasurementsNonrecurringMember 2021-04-30 0000799288 us-gaap:FairValueMeasurementsNonrecurringMember 2020-05-01 0000799288 us-gaap:FairValueMeasurementsNonrecurringMember 2021-01-29 le:Lawsuit le:Plaintiff 0000799288 2019-12-31 0000799288 2020-03-04 0000799288 le:FormerParentMember le:SourcingMember 2021-01-30 2021-04-30 0000799288 le:FormerParentMember le:SourcingMember 2020-02-01 2020-05-01 le:Segment le:Channel 0000799288 le:USeCommerceMember 2021-01-30 2021-04-30 0000799288 le:USeCommerceMember 2020-02-01 2020-05-01 0000799288 le:InternationalMember 2021-01-30 2021-04-30 0000799288 le:InternationalMember 2020-02-01 2020-05-01 0000799288 le:BusinessOutfittersRevenueMember 2021-01-30 2021-04-30 0000799288 le:BusinessOutfittersRevenueMember 2020-02-01 2020-05-01 0000799288 le:ThirdPartyMember 2021-01-30 2021-04-30 0000799288 le:ThirdPartyMember 2020-02-01 2020-05-01 0000799288 us-gaap:RetailMember 2021-01-30 2021-04-30 0000799288 us-gaap:RetailMember 2020-02-01 2020-05-01 0000799288 country:US 2021-01-30 2021-04-30 0000799288 country:US 2020-02-01 2020-05-01 0000799288 srt:EuropeMember 2021-01-30 2021-04-30 0000799288 srt:EuropeMember 2020-02-01 2020-05-01 0000799288 srt:AsiaMember 2021-01-30 2021-04-30 0000799288 srt:AsiaMember 2020-02-01 2020-05-01 0000799288 le:OtherGeographicalLocationMember 2021-01-30 2021-04-30 0000799288 le:OtherGeographicalLocationMember 2020-02-01 2020-05-01 0000799288 us-gaap:OtherCurrentLiabilitiesMember 2021-04-30 0000799288 us-gaap:OtherCurrentLiabilitiesMember 2020-05-01 0000799288 us-gaap:OtherCurrentLiabilitiesMember 2021-01-29

 

 

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 April 30, 2021

-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 May 25, 2021, the registrant had 32,979,988 shares of common stock, $0.01 par value, outstanding.

 

 


 

 

 

LANDS’ END, INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED APRIL 30, 2021

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

 

27

 

 

 

 

Item 4.

Controls and Procedures

 

28

 

 

 

 

 

PART II OTHER INFORMATION

 

29

 

 

 

 

Item 1.

Legal Proceedings

 

29

 

 

 

 

Item 1A.

Risk Factors

 

29

 

 

 

 

Item 6.

Exhibits

 

30

 

 

 

 

 

Signatures

 

31

 

 

 


Table of Contents

 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

LANDS’ END, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

13 Weeks Ended

 

(in thousands, except per share data)

 

April 30,

2021

 

 

May 1,

2020

 

Net revenue

 

$

321,297

 

 

$

217,008

 

Cost of sales (excluding depreciation and amortization)

 

 

173,560

 

 

 

122,853

 

Gross profit

 

 

147,737

 

 

 

94,155

 

 

 

 

 

 

 

 

 

 

Selling and administrative

 

 

125,522

 

 

 

105,796

 

Depreciation and amortization

 

 

9,904

 

 

 

8,786

 

Other operating expense, net

 

 

443

 

 

 

4,285

 

Operating income (loss)

 

 

11,868

 

 

 

(24,712

)

Interest expense

 

 

9,060

 

 

 

5,311

 

Other income, net

 

 

(167

)

 

 

(173

)

Income (loss) before income taxes

 

 

2,975

 

 

 

(29,850

)

Income tax expense (benefit)

 

 

336

 

 

 

(9,207

)

NET INCOME (LOSS)

 

$

2,639

 

 

$

(20,643

)

NET INCOME (LOSS) PER COMMON SHARE

 

 

 

 

 

 

 

 

Basic:

 

$

0.08

 

 

$

(0.64

)

Diluted:

 

$

0.08

 

 

$

(0.64

)

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

 

32,769

 

 

 

32,448

 

Diluted weighted average common shares outstanding

 

 

33,712

 

 

 

32,448

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

1


Table of Contents

 

 

LANDS’ END, INC.

Condensed Consolidated Statements of Comprehensive Operations

(Unaudited)

 

 

 

13 Weeks Ended

 

(in thousands)

 

April 30, 2021

 

 

May 1, 2020

 

NET INCOME (LOSS)

 

$

2,639

 

 

$

(20,643

)

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

311

 

 

 

(1,259

)

COMPREHENSIVE INCOME (LOSS)

 

$

2,950

 

 

$

(21,902

)

 

See accompanying Notes to Condensed Consolidated Financial Statements.

2


Table of Contents

 

LANDS’ END, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

 

(in thousands, except per share data)

 

April 30, 2021

 

 

May 1, 2020

 

 

January 29, 2021

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

36,181

 

 

$

59,134

 

 

$

33,933

 

Restricted cash

 

 

2,327

 

 

 

1,953

 

 

 

1,861

 

Accounts receivable, net

 

 

41,350

 

 

 

35,381

 

 

 

37,574

 

Inventories, net

 

 

394,287

 

 

 

383,163

 

 

 

382,106

 

Prepaid expenses and other current assets

 

 

36,527

 

 

 

46,221

 

 

 

40,356

 

Total current assets

 

 

510,672

 

 

 

525,852

 

 

 

495,830

 

Property and equipment, net

 

 

139,991

 

 

 

155,511

 

 

 

145,288

 

Operating lease right-of-use asset

 

 

34,258

 

 

 

38,621

 

 

 

35,475

 

Goodwill

 

 

106,700

 

 

 

106,700

 

 

 

106,700

 

Intangible asset, net

 

 

257,000

 

 

 

257,000

 

 

 

257,000

 

Other assets

 

 

4,056

 

 

 

4,651

 

 

 

5,215

 

TOTAL ASSETS

 

$

1,052,677

 

 

$

1,088,335

 

 

$

1,045,508

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Current borrowings on ABL Facility

 

$

 

 

$

75,000

 

 

$

 

Current portion of long-term debt

 

 

13,750

 

 

 

382,858

 

 

 

13,750

 

Accounts payable

 

 

105,597

 

 

 

101,445

 

 

 

134,007

 

Lease liability - current

 

 

4,962

 

 

 

5,867

 

 

 

5,183

 

Other current liabilities

 

 

145,206

 

 

 

82,904

 

 

 

161,982

 

Total current liabilities

 

 

269,515

 

 

 

648,074

 

 

 

314,922

 

Long-term borrowings on ABL Facility

 

 

80,000

 

 

 

 

 

 

25,000

 

Long-term debt, net

 

 

242,790

 

 

 

 

 

 

245,632

 

Lease liability - long-term

 

 

36,693

 

 

 

41,388

 

 

 

37,811

 

Deferred tax liabilities

 

 

47,441

 

 

 

65,446

 

 

 

47,346

 

Other liabilities

 

 

6,085

 

 

 

5,529

 

 

 

5,094

 

TOTAL LIABILITIES

 

 

682,524

 

 

 

760,437

 

 

 

675,805

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, par value $0.01 authorized: 480,000 shares;

   issued and outstanding: 32,977, 32,596 and 32,614, respectively

 

 

330

 

 

 

326

 

 

 

326

 

Additional paid-in capital

 

 

366,868

 

 

 

362,072

 

 

 

369,372

 

Retained earnings (accumulated deficit)

 

 

13,865

 

 

 

(20,253

)

 

 

11,226

 

Accumulated other comprehensive loss

 

 

(10,910

)

 

 

(14,247

)

 

 

(11,221

)

TOTAL STOCKHOLDERS' EQUITY

 

 

370,153

 

 

 

327,898

 

 

 

369,703

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

1,052,677

 

 

$

1,088,335

 

 

$

1,045,508

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

3


Table of Contents

 

LANDS’ END, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

13 Weeks Ended

 

(in thousands)

 

April 30, 2021

 

 

May 1, 2020

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income (loss)

 

$

2,639

 

 

$

(20,643

)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

9,904

 

 

 

8,786

 

Amortization of debt issuance costs

 

 

775

 

 

 

429

 

Loss on property and equipment

 

 

443

 

 

 

842

 

Stock-based compensation

 

 

2,513

 

 

 

1,828

 

Deferred income taxes

 

 

8

 

 

 

8,132

 

Goodwill impairment

 

 

 

 

 

3,300

 

Other

 

 

276

 

 

 

821

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(3,915

)

 

 

15,568

 

Inventories

 

 

(11,932

)

 

 

(8,502

)

Accounts payable

 

 

(28,545

)

 

 

(54,084

)

Other operating assets

 

 

4,820

 

 

 

(8,666

)

Other operating liabilities

 

 

(15,688

)

 

 

(28,009

)

Net cash used in operating activities

 

 

(38,702

)

 

 

(80,198

)

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(4,942

)

 

 

(10,789

)

Net cash used in investing activities

 

 

(4,942

)

 

 

(10,789

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from borrowings under ABL Facility

 

 

75,000

 

 

 

75,000

 

Payments of borrowings under ABL Facility

 

 

(20,000

)

 

 

 

Principal payments on long-term debt, net

 

 

(3,438

)

 

 

(1,288

)

Payments of employee withholding taxes on share-based compensation

 

 

(5,013

)

 

 

(410

)

Payment of debt-issuance costs

 

 

(35

)

 

 

 

Net cash provided by financing activities

 

 

46,514

 

 

 

73,302

 

Effects of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(156

)

 

 

(525

)

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

2,714

 

 

 

(18,210

)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH,

      BEGINNING OF PERIOD

 

 

35,794

 

 

 

79,297

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD

 

$

38,508

 

 

$

61,087

 

SUPPLEMENTAL CASH FLOW DATA

 

 

 

 

 

 

 

 

Unpaid liability to acquire property and equipment

 

$

3,227

 

 

$

4,707

 

Income taxes paid, net of refunds

 

$

(5,152

)

 

$

(1,210

)

Interest paid

 

$

7,911

 

 

$

4,667

 

Lease liabilities arising from obtaining Operating lease right-of-use assets

 

$

 

 

$

3,074

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

4


Table of Contents

 

LANDS' END, INC.

Condensed Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)

 

 

Common Stock Issued

 

 

Additional

Paid-in

 

 

Retained

 

 

Accumulated

Other

Comprehensive

 

 

Total

Stockholders'

 

(in thousands)

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Equity

 

Balance at January 29, 2021

 

 

32,614

 

 

$

326

 

 

$

369,372

 

 

$

11,226

 

 

$

(11,221

)

 

$

369,703

 

Net income

 

 

 

 

 

 

 

 

 

 

 

2,639

 

 

 

 

 

 

2,639

 

Cumulative translation adjustment, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

311

 

 

 

311

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,513

 

 

 

 

 

 

 

 

 

2,513

 

Vesting of restricted shares

 

 

553

 

 

 

4

 

 

 

(4

)

 

 

 

 

 

 

 

 

 

Restricted stock shares surrendered for taxes

 

 

(190

)

 

 

 

 

 

(5,013

)

 

 

 

 

 

 

 

 

(5,013

)

Balance at April 30, 2021

 

 

32,977

 

 

$

330

 

 

$

366,868

 

 

$

13,865

 

 

$

(10,910

)

 

$

370,153

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

5


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 its own Company Operated stores, as well as, third-party retail locations.  Lands’ End is a classic American lifestyle brand with a passion for quality, legendary service and real value and seeks to deliver timeless style for women, men, kids and home.

 

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, providing for a revolving facility, dated as of November 16, 2017, with Wells Fargo Bank, N.A. and certain other lenders, as amended to date

 

 

Adjusted EBITDA - Net income (loss) appearing on the Condensed Consolidated Statements of Operations net of Income tax expense/(benefit), Interest expense, Depreciation and amortization and certain significant items

 

 

ASC – Financial Accounting Standards Board Accounting Standards Codification, which serves as the source for authoritative GAAP, as supplemented by rules and interpretive releases by the SEC which are also sources of authoritative GAAP for SEC registrants

 

 

ASU – Financial Accounting Standards Board Accounting Standards Update

 

 

CARES Act – The Coronavirus Aid, Relief and Economic Security Act signed into law on March 27, 2020

 

 

Company Operated stores – Lands’ End retail stores in the Retail channel

 

 

Current Term Loan Facility – Term loan credit agreement, dated as of September 9, 2020, among the Company, Fortress Credit Corp., as Administrative Agent and Collateral Agent, and the lenders party thereto

 

 

Debt Facilities - Collectively, the Current Term Loan Facility and ABL Facility

 

 

Deferred Awards - Time vesting stock awards

 

 

EPS - Earnings per share

 

 

ESL - ESL Investments, Inc. and its investment affiliates, including Edward S. Lampert

 

 

FASB - Financial Accounting Standards Board

 

 

First Quarter 2021 – The 13 weeks ended April 30, 2021

 

 

First Quarter 2020 - The 13 weeks ended May 1, 2020

 

 

Fiscal 2019 - The 52 weeks ended January 31, 2020

 

 

Fiscal 2020 - The 52 weeks ended January 29, 2021

 

 

Former Term Loan Facility - Term loan credit agreements, dated as of April 4, 2014, with Bank of America, N.A. and certain other lenders, and replaced by the Current Term Loan Facility on September 9, 2020

 

 

GAAP - Accounting principles generally accepted in the United States

 

 

LIBOR - London inter-bank offered rate

 

6


Table of Contents

 

 

 

Option Awards - Stock option awards

 

 

Performance Awards - Performance-based stock awards

 

 

Sears Holdings - Sears Holdings Corporation, a Delaware corporation, and its consolidated subsidiaries

 

 

SEC – United States Securities and Exchange Commission

 

 

Second Quarter 2020 – The 13 weeks ended July 31, 2020

 

 

Separation - On April 4, 2014 Sears Holdings distributed 100% of the outstanding common stock of Lands' End to its shareholders

 

 

Third Quarter 2020 – The 13 weeks ended October 30, 2020

 

 

Transform Holdco - Transform Holdco LLC, an affiliate of ESL, which on February 11, 2019 acquired from Sears Holdings substantially all of the go-forward retail footprint, and other assets and component businesses of Sears Holdings as a going concern

 

 

Year-to-Date 2021 - The 13 weeks ended April 30, 2021

 

 

Year-to-Date 2020 - The 13 weeks ended May 1, 2020

 

Basis of Presentation

 

The Condensed Consolidated Financial Statements include the accounts of Lands' End, Inc. and its subsidiaries. All intercompany transactions and balances have been eliminated.

 

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all material adjustments which are of a normal and recurring nature necessary for a fair presentation of the results for the periods presented have been reflected. Dollar amounts are reported in thousands, except per share data, unless otherwise noted. Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with information included in the Lands' End Annual Report on Form 10-K filed with the SEC on March 25, 2021.

 

Impact of the COVID-19 Pandemic

 

COVID-19 surfaced in late 2019 and in March 2020, the World Health Organization declared COVID-19 a pandemic. During First Quarter 2020 the COVID-19 pandemic had a disruptive impact on the Company’s business operations and an unfavorable impact on the Company’s results of operations.

 

Health and Safety of Employees and Consumers

 

From the beginning of the COVID-19 pandemic, the Company’s priority has been the safety of employees and customers. On March 16, 2020, the Company temporarily closed its U.S. stores. These stores remained closed at the end of First Quarter 2020 with a phased reopening in Second Quarter 2020. Additionally, the Company has implemented extra precautions in its offices and distribution centers. These precautions were developed in line with guidance from global, federal and state health authorities, including COVID-19 retail guidelines, work-from-home policies, social distancing, thermal scanning and partitions in all facilities.

 

Supply Chain

 

The COVID-19 pandemic continues to cause supply chain disruptions across all industries, and the Company continually monitors its supply chain for manufacturing and transportation delays caused or exacerbated by the pandemic. The Company continues to place a priority on business continuity and contingency planning. The Company may experience disruptions in the supply chain as the COVID-19 pandemic continues, though the Company cannot reasonably estimate the potential impact or timing of those events, and the Company may not be able to mitigate such impact.

7


Table of Contents

 

 

Expense Reduction

 

Beginning in First Quarter 2020, the Company took the following actions to reduce overall expenses as a response to decreased customer demand due to the COVID-19 pandemic:

 

 

Temporarily reduced base salaries, including a reduction of 50% in the base salary of its Chief Executive Officer, 20% reductions in the base salaries of the Company’s other senior management members and scaled salary reductions throughout the Company. All salaries were reinstated during the Third Quarter 2020.

 

Furloughed approximately 70% of corporate employees beginning on March 28, 2020. Some personnel returned to work on April 13, 2020 and as work demand increased, the remaining workforce returned to work on an as needed basis with all work furloughs ending by mid-Second Quarter 2020. When the Company Operated stores temporarily closed, nearly 100% of the Company Operated store employees were furloughed until reopening.

 

 Fiscal 2020 merit increases were eliminated.

 

The Board of Directors compensation was temporarily reduced.

 

The Company's 401(k) matching contribution was suspended temporarily.

 

Other discretionary operating expenses were significantly reduced.

 

In response to the COVID-19 pandemic, the Company’s planned capital expenditures for Fiscal 2020 were significantly reduced.  

 

Goodwill and Indefinite-Lived Intangible Asset

 

The Company considered the COVID-19 pandemic to be a triggering event in First Quarter 2020 for the Company’s Outfitters and Japan eCommerce reporting units and therefore completed an interim test for impairment of goodwill for these reporting units as of May 1, 2020. The testing resulted in no impairment of the Company’s Outfitters reporting unit and full impairment of the $3.3 million of goodwill allocated to the Company’s Japan eCommerce reporting unit. There was not a triggering event or impairment charge in First Quarter 2021.

 

NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS

 

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): “Simplifying the Accounting for Income Taxes”, which is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and by clarifying and amending existing guidance to improve consistent application. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Certain amendments within this ASU are required to be applied on a retrospective basis, certain other amendments are required to be applied on a modified retrospective basis and all other amendments on a prospective basis.  The Company adopted this standard in First Quarter 2021 and the adoption did not have a material impact on the Company’s Condensed Consolidated Financial Statements and related disclosures.

 

NOTE 3. EARNINGS (LOSS) PER SHARE

 

The numerator for both basic and diluted EPS is net income (loss). The denominator for basic EPS is based upon the number of weighted average shares of Lands’ End common stock outstanding during the reporting periods. The denominator for diluted EPS is based upon the number of weighted average shares of Lands' End common stock and common stock equivalents outstanding during the reporting periods using the treasury stock method in accordance with U.S. GAAP. Potentially dilutive securities for the diluted EPS calculations consist of non-vested equity shares of common stock and in-the-money outstanding options where the current stock price exceeds the option strike price.

 

8


Table of Contents

 

 

The following table summarizes the components of basic and diluted EPS:

 

 

 

13 Weeks Ended

 

(in thousands, except per share amounts)

 

April 30, 2021

 

 

May 1, 2020

 

Net income (loss)

 

$

2,639

 

 

$

(20,643

)

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

 

32,769

 

 

 

32,448

 

Dilutive effect of stock awards

 

 

943

 

 

 

 

Diluted weighted average common shares outstanding

 

 

33,712

 

 

 

32,448

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share

 

$

0.08

 

 

$

(0.64

)

Diluted earnings (loss) per share

 

$

0.08

 

 

$

(0.64

)

 

Stock awards are considered anti-dilutive based on the application of the treasury stock method or in the event of a net loss. There were 115,345 and 1,205,821 anti-dilutive shares excluded from the diluted weighted average shares outstanding for First Quarter 2021 and First Quarter 2020, respectively.

 

NOTE 4. OTHER COMPREHENSIVE LOSS

 

Other comprehensive loss encompasses all changes in equity other than those arising from transactions with stockholders and is comprised solely of foreign currency translation adjustments.

 

 

13 Weeks Ended

 

(in thousands)

 

April 30, 2021

 

 

May 1, 2020

 

Beginning balance: Accumulated other

      comprehensive loss (net of tax of $2,987

       and $3,453, respectively)

 

$

(11,221

)

 

$

(12,988

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

Foreign currency translation adjustments (net of tax of $87 and tax benefit of $337, respectively)

 

 

311

 

 

 

(1,259

)

Ending balance: Accumulated other

      comprehensive loss (net of tax of $2,900 and $3,790, respectively)

 

$

(10,910

)

 

$

(14,247

)

 

No amounts were reclassified out of Accumulated other comprehensive loss during any of the periods presented.

 

9


Table of Contents

 

 

NOTE 5. DEBT

 

ABL Facility

 

During Fiscal 2020, the Company exercised the “accordion” feature under the ABL Facility increasing the maximum borrowings available under the facility from $175 million to $275 million, subject to a borrowing base (the “Loan Cap”). This was completed in two separate transactions. The first was a $25 million increase effective March 19, 2020 and the second was a $75 million increase effective September 9, 2020. The latter was completed through the Second Amendment to the ABL Facility executed on August 12, 2020.  

 

The ABL Facility includes a $70 million sublimit for letters of credit and is available for working capital and other general corporate liquidity needs. The balance outstanding on April 30, 2021 and May 1, 2020 was $80 million and $75 million, respectively. The balance of outstanding letters of credit was $16.9 million and $8.7 million on April 30, 2021 and May 1, 2020, respectively.

 

Long-Term Debt

 

On September 9, 2020, the Company entered into the Current Term Loan Facility which provides a term loan facility of $275 million, the proceeds of which were used, along with borrowings of $125 million under the ABL Facility, to repay all of the indebtedness under the Former Term Loan Facility and to pay fees and expenses in connection with the financing. Origination costs, including an Original Issue Discount (“OID”) of 3% and $5.0 million in debt origination fees, were paid upon entering into the Current Term Loan Facility. The OID and the debt origination fees are presented as a direct deduction from the carrying value of the Current Term Loan Facility and are amortized over the term of the loan to Interest expense in the Condensed Consolidated Statements of Operations.

 

The Company's long-term debt consisted of the following:

 

 

 

 

April 30, 2021

 

 

May 1, 2020

 

 

January 29, 2021

 

(in thousands)

 

 

Amount

 

 

 

Interest Rate

 

 

Amount

 

 

 

Interest Rate

 

 

Amount

 

 

 

Interest Rate

 

Former Term Loan Facility

 

 

$

 

 

 

 

%

 

$

384,100

 

 

 

 

4.25

%

 

$

 

 

 

 

%

Current Term Loan Facility, maturing September 9, 2025

 

 

 

268,125

 

 

 

 

10.75

%

 

 

 

 

 

 

%

 

 

271,563

 

 

 

 

10.75

%

 

 

 

 

268,125

 

 

 

 

 

 

 

 

384,100

 

 

 

 

 

 

 

 

271,563

 

 

 

 

 

 

Less: Current portion of long-term debt

 

 

 

13,750

 

 

 

 

 

 

 

 

382,858

 

 

 

 

 

 

 

 

13,750

 

 

 

 

 

 

Less: Unamortized debt issuance costs

 

 

 

11,585

 

 

 

 

 

 

 

 

1,242

 

 

 

 

 

 

 

 

12,181

 

 

 

 

 

 

Long-term debt, net

 

 

$

242,790

 

 

 

 

 

 

 

$

 

 

 

 

 

 

 

$

245,632