UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended
-OR-
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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:
(Exact name of registrant as specified in its charter)
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(State or Other Jurisdiction of |
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(I.R.S. Employer |
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(Address of Principal Executive Offices) |
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(Registrant’s Telephone Number Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
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The |
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.
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Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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
As of May 25, 2021, the registrant had
LANDS’ END, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED APRIL 30, 2021
TABLE OF CONTENTS
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Page |
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Item 1. |
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1 |
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1 |
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Condensed Consolidated Statements of Comprehensive Operations |
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3 |
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4 |
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Condensed Consolidated Statements of Changes in Stockholders' Equity |
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6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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27 |
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Item 4. |
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28 |
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29 |
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Item 1. |
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29 |
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Item 1A. |
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29 |
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Item 6. |
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30 |
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31 |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LANDS’ END, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
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13 Weeks Ended |
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(in thousands, except per share data) |
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April 30, 2021 |
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May 1, 2020 |
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Net revenue |
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$ |
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$ |
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Cost of sales (excluding depreciation and amortization) |
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Gross profit |
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Selling and administrative |
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Depreciation and amortization |
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Other operating expense, net |
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Operating income (loss) |
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Interest expense |
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Other income, net |
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Income (loss) before income taxes |
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Income tax expense (benefit) |
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NET INCOME (LOSS) |
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$ |
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$ |
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NET INCOME (LOSS) PER COMMON SHARE |
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Basic: |
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$ |
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$ |
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Diluted: |
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$ |
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$ |
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Basic weighted average common shares outstanding |
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Diluted weighted average common shares outstanding |
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See accompanying Notes to Condensed Consolidated Financial Statements.
1
LANDS’ END, INC.
Condensed Consolidated Statements of Comprehensive Operations
(Unaudited)
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13 Weeks Ended |
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(in thousands) |
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April 30, 2021 |
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May 1, 2020 |
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NET INCOME (LOSS) |
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$ |
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$ |
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Other comprehensive income (loss), net of tax |
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Foreign currency translation adjustments |
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COMPREHENSIVE INCOME (LOSS) |
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$ |
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$ |
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See accompanying Notes to Condensed Consolidated Financial Statements.
2
LANDS’ END, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
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(in thousands, except per share data) |
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April 30, 2021 |
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May 1, 2020 |
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January 29, 2021 |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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$ |
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Restricted cash |
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Accounts receivable, net |
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Inventories, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use asset |
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Goodwill |
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Intangible asset, net |
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Other assets |
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TOTAL ASSETS |
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$ |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities |
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Current borrowings on ABL Facility |
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$ |
— |
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$ |
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$ |
— |
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Current portion of long-term debt |
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Accounts payable |
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Lease liability - current |
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Other current liabilities |
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Total current liabilities |
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Long-term borrowings on ABL Facility |
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— |
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Long-term debt, net |
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— |
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Lease liability - long-term |
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Deferred tax liabilities |
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Other liabilities |
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TOTAL LIABILITIES |
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Commitments and contingencies |
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STOCKHOLDERS’ EQUITY |
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Common stock, par value $ issued and outstanding: |
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Additional paid-in capital |
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Retained earnings (accumulated deficit) |
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Accumulated other comprehensive loss |
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TOTAL STOCKHOLDERS' EQUITY |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
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$ |
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$ |
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$ |
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See accompanying Notes to Condensed Consolidated Financial Statements.
3
LANDS’ END, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
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13 Weeks Ended |
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(in thousands) |
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April 30, 2021 |
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May 1, 2020 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net income (loss) |
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$ |
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$ |
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Adjustments to reconcile net income (loss) to net cash used in operating activities: |
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Depreciation and amortization |
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Amortization of debt issuance costs |
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Loss on property and equipment |
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Stock-based compensation |
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Deferred income taxes |
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Goodwill impairment |
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— |
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Other |
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Change in operating assets and liabilities: |
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Accounts receivable |
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Inventories |
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Accounts payable |
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Other operating assets |
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Other operating liabilities |
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Net cash used in operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Purchases of property and equipment |
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Net cash used in investing activities |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Proceeds from borrowings under ABL Facility |
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Payments of borrowings under ABL Facility |
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— |
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Principal payments on long-term debt, net |
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Payments of employee withholding taxes on share-based compensation |
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Payment of debt-issuance costs |
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— |
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Net cash provided by financing activities |
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Effects of exchange rate changes on cash, cash equivalents and restricted cash |
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NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
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CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD |
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CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD |
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$ |
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$ |
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SUPPLEMENTAL CASH FLOW DATA |
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Unpaid liability to acquire property and equipment |
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$ |
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$ |
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Income taxes paid, net of refunds |
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$ |
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$ |
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Interest paid |
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$ |
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$ |
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Lease liabilities arising from obtaining Operating lease right-of-use assets |
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$ |
— |
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$ |
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See accompanying Notes to Condensed Consolidated Financial Statements.
4
LANDS' END, INC.
Condensed Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
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Common Stock Issued |
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Additional Paid-in |
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Retained |
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Accumulated Other Comprehensive |
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Total Stockholders' |
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(in thousands) |
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Shares |
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Amount |
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Capital |
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Earnings |
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Loss |
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Equity |
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Balance at January 29, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Cumulative translation adjustment, net of tax |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Vesting of restricted shares |
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— |
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— |
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— |
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Restricted stock shares surrendered for taxes |
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— |
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— |
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— |
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Balance at April 30, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Common Stock Issued |
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Additional Paid-in |
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Retained Earnings/ (Accumulated |
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Accumulated Other Comprehensive |
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Total Stockholders' |
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(in thousands) |
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Shares |
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Amount |
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Capital |
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Deficit) |
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Loss |
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Equity |
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Balance at January 31, 2020 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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Cumulative translation adjustment, net of tax |
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— |
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— |
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— |
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— |
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( |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Vesting of restricted shares |
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( |
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— |
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— |
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— |
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Restricted stock shares surrendered for taxes |
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( |
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— |
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( |
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— |
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— |
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( |
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Balance at May 1, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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See accompanying Notes to Condensed Consolidated Financial Statements.
5
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:
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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 |
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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 |
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• |
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 |
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• |
ASU – Financial Accounting Standards Board Accounting Standards Update |
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• |
CARES Act – The Coronavirus Aid, Relief and Economic Security Act signed into law on March 27, 2020 |
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Company Operated stores – Lands’ End retail stores in the Retail channel |
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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 |
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• |
Debt Facilities - Collectively, the Current Term Loan Facility and ABL Facility |
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Deferred Awards - Time vesting stock awards |
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EPS - Earnings per share |
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ESL - ESL Investments, Inc. and its investment affiliates, including Edward S. Lampert |
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FASB - Financial Accounting Standards Board |
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First Quarter 2021 – The 13 weeks ended April 30, 2021 |
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First Quarter 2020 - The 13 weeks ended May 1, 2020 |
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Fiscal 2019 - The 52 weeks ended January 31, 2020 |
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Fiscal 2020 - The 52 weeks ended January 29, 2021 |
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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 |
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GAAP - Accounting principles generally accepted in the United States |
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LIBOR - London inter-bank offered rate |
6
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Option Awards - Stock option awards |
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Performance Awards - Performance-based stock awards |
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Sears Holdings - Sears Holdings Corporation, a Delaware corporation, and its consolidated subsidiaries |
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SEC – United States Securities and Exchange Commission |
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Second Quarter 2020 – The 13 weeks ended July 31, 2020 |
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Separation - On April 4, 2014 Sears Holdings distributed 100% of the outstanding common stock of Lands' End to its shareholders |
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Third Quarter 2020 – The 13 weeks ended October 30, 2020 |
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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 |
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Year-to-Date 2021 - The 13 weeks ended April 30, 2021 |
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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
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:
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Temporarily reduced base salaries, including a reduction of |
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Furloughed approximately |
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Fiscal 2020 merit increases were eliminated. |
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The Board of Directors compensation was temporarily reduced. |
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The Company's 401(k) matching contribution was suspended temporarily. |
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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
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
The following table summarizes the components of basic and diluted EPS:
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13 Weeks Ended |
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(in thousands, except per share amounts) |
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April 30, 2021 |
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May 1, 2020 |
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Net income (loss) |
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$ |
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$ |
( |
) |
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Basic weighted average common shares outstanding |
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Dilutive effect of stock awards |
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— |
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Diluted weighted average common shares outstanding |
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Basic earnings (loss) per share |
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$ |
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$ |
( |
) |
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Diluted earnings (loss) per share |
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$ |
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$ |
( |
) |
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
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.
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13 Weeks Ended |
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(in thousands) |
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April 30, 2021 |
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May 1, 2020 |
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Beginning balance: Accumulated other comprehensive loss (net of tax of $ and $ |
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$ |
( |
) |
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$ |
( |
) |
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Other comprehensive loss: |
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Foreign currency translation adjustments (net of tax of $ |
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( |
) |
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Ending balance: Accumulated other comprehensive loss (net of tax of $ |
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$ |
( |
) |
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$ |
( |
) |
9
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 $
The ABL Facility includes a $
Long-Term Debt
On September 9, 2020, the Company entered into the Current Term Loan Facility which provides a term loan facility of $
The Company's long-term debt consisted of the following:
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April 30, 2021 |
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May 1, 2020 |
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January 29, 2021 |
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(in thousands) |
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Amount |
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Interest Rate |
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Amount |
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Interest Rate |
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Amount |
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Interest Rate |
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Former Term Loan Facility |
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$ |
— |
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— |
% |
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$ |
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% |
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$ |
— |
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— |
% |
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Current Term Loan Facility, maturing September 9, 2025 |
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% |
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— |
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— |
% |
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% |
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Less: Current portion of long-term debt |
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Less: Unamortized debt issuance costs |
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Long-term debt, net |
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$ |
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$ |
— |
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$ |
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