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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended May 5, 2018 or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                   to                  

 

Commission file number 1-16097

 

TAILORED BRANDS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Texas

 

47-4908760

(State or Other Jurisdiction of

 

(I.R.S. Employer

Incorporation or Organization)

 

Identification Number)

 

 

 

6380 Rogerdale Road

 

 

Houston, Texas

 

77072-1624

(Address of Principal Executive Offices)

 

(Zip Code)

 

(281) 776-7000

(Registrant's telephone number, including area code)

 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ☒. No ☐.

 

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

 

Large accelerated filer  ☒

Accelerated filer  ☐

Non-accelerated filer  ☐
(Do not check if a smaller reporting company)

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 Exchange Act).Yes ☐. No ☒.

 

The number of shares of common stock of the Registrant, par value $.01 per share, outstanding at June 1, 2018 was 49,799,176.

 

 

 


 

Table of Contents

REPORT INDEX

 

 

 

 

Part and Item No.

    

Page No.

 

 

 

PART I — Financial Information 

 

 

 

 

 

Item 1 — Condensed Consolidated Financial Statements (unaudited) 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of May 5, 2018, April 29, 2017 and February 3, 2018 

 

2

 

 

 

Condensed Consolidated Statements of Earnings for the Three Months Ended May 5, 2018 and April 29, 2017 

 

3

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended May 5, 2018 and April 29, 2017 

 

4

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended May 5, 2018 and April 29, 2017 

 

5

 

 

 

Notes to Condensed Consolidated Financial Statements 

 

6

 

 

 

Item 2 — Management's Discussion and Analysis of Financial Condition and Results of Operations 

 

34

 

 

 

Item 3 — Quantitative and Qualitative Disclosures about Market Risk 

 

43

 

 

 

Item 4 — Controls and Procedures 

 

43

 

 

 

PART II — Other Information 

 

44

 

 

 

Item 1 — Legal Proceedings 

 

44

 

 

 

Item 6 — Exhibits 

 

44

 

 

 

SIGNATURES 

 

46

 

 

 

 

 


 

Table of Contents

Forward-Looking Statements

 

Certain statements made in this Quarterly Report on Form 10‑Q or in other materials we have filed or will file with the Securities and Exchange Commission (“SEC”) (as well as information included in oral statements or other written statements made or to be made by us) contains or may contain forward‑looking statements (as defined in the Private Securities Litigation Reform Act of 1995), including, but not limited to, statements regarding our future financial performance and financial condition.  Words such as “expects,” “anticipates,” “envisions,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements.  Forward‑looking statements reflect our current views regarding certain events that could affect our financial condition or results of operations and may include, but are not limited to, references to future sales, comparable sales, margins, costs, earnings, number and costs of store openings, closings, remodels, refreshes, relocations and expansions, capital expenditures, potential acquisitions or divestitures, synergies from acquisitions, business strategies, demand for clothing or rental product, economic conditions, market trends in the retail and corporate apparel clothing business, currency fluctuations, inflation and various political, legal, regulatory, social, economic and business trends. Forward‑looking statements are based upon management’s current beliefs or expectations and are inherently subject to significant business, economic and competitive risks, uncertainties and contingencies and third party approvals, many of which are beyond our control.

Any forward‑looking statements that we make herein and in future reports are not guarantees of future performance, and actual results may differ materially from those in such forward‑looking statements as a result of various factors. Factors that might cause or contribute to such differences include, but are not limited to: actions or inactions by governmental entities; domestic and international macro‑economic conditions; inflation or deflation; the loss of, or changes in, key personnel; success, or lack thereof, in formulating or executing our internal strategies and operating plans including new store and new market expansion plans; cost reduction initiatives and revenue enhancement strategies; changes in demand for clothing or rental product; market trends in the retail business; customer confidence and spending patterns; changes in traffic trends in our stores; customer acceptance of our merchandise strategies, including custom clothing; performance issues with key suppliers; disruptions in our supply chain; severe weather; foreign currency fluctuations; government export and import policies; advertising or marketing activities of competitors; the impact of cybersecurity threats or data breaches and legal proceedings.

Forward‑looking statements are intended to convey the Company’s expectations about the future, and speak only as of the date they are made.  We undertake no obligation to publicly update or revise any forward‑looking statements that may be made from time to time, whether as a result of new information, future developments or otherwise, except as required by applicable law. However, any further disclosures made on related subjects in our subsequent reports on Forms 10-K, 10-Q and 8-K should be consulted.  This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995, and all written or oral forward-looking statements that are made by or attributable to us are expressly qualified in their entirety by the cautionary statements contained or referenced in this section.

 

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PART I – FINANCIAL INFORMATION

 

ITEM 1 – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

TAILORED BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

    

May 5,

    

April 29,

    

February 3,

 

 

 

2018

 

2017

 

2018

 

ASSETS

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

93,166

 

$

66,580

 

$

103,607

 

Accounts receivable, net

 

 

87,411

 

 

84,016

 

 

79,783

 

Inventories

 

 

843,671

 

 

984,221

 

 

851,931

 

Other current assets

 

 

69,937

 

 

69,288

 

 

78,252

 

Total current assets

 

 

1,094,185

 

 

1,204,105

 

 

1,113,573

 

PROPERTY AND EQUIPMENT, net

 

 

437,944

 

 

467,661

 

 

460,674

 

RENTAL PRODUCT, net

 

 

128,744

 

 

147,495

 

 

123,730

 

GOODWILL

 

 

104,802

 

 

117,585

 

 

120,292

 

INTANGIBLE ASSETS, net

 

 

167,320

 

 

170,966

 

 

168,987

 

OTHER ASSETS

 

 

12,827

 

 

6,423

 

 

12,699

 

TOTAL ASSETS

 

$

1,945,822

 

$

2,114,235

 

$

1,999,955

 

LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

192,878

 

$

171,886

 

$

145,106

 

Accrued expenses and other current liabilities

 

 

350,414

 

 

303,602

 

 

285,537

 

Income taxes payable

 

 

1,740

 

 

2,861

 

 

6,121

 

Current portion of long-term debt

 

 

9,000

 

 

13,379

 

 

7,000

 

Total current liabilities

 

 

554,032

 

 

491,728

 

 

443,764

 

LONG-TERM DEBT, net

 

 

1,277,508

 

 

1,574,486

 

 

1,389,808

 

DEFERRED TAXES, net AND OTHER LIABILITIES

 

 

151,503

 

 

161,600

 

 

164,191

 

Total liabilities

 

 

1,983,043

 

 

2,227,814

 

 

1,997,763

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS' (DEFICIT) EQUITY:

 

 

 

 

 

 

 

 

 

 

Preferred stock

 

 

 —

 

 

 —

 

 

 —

 

Common stock

 

 

496

 

 

490

 

 

492

 

Capital in excess of par

 

 

494,849

 

 

474,369

 

 

491,648

 

Accumulated deficit

 

 

(510,441)

 

 

(546,230)

 

 

(479,166)

 

Accumulated other comprehensive loss

 

 

(22,125)

 

 

(42,208)

 

 

(10,782)

 

Total shareholders' (deficit) equity

 

 

(37,221)

 

 

(113,579)

 

 

2,192

 

TOTAL LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY

 

$

1,945,822

 

$

2,114,235

 

$

1,999,955

 

 

See Notes to Condensed Consolidated Financial Statements.

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TAILORED BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

 

    

May 5, 2018

    

April 29, 2017

 

Net sales:

 

 

    

    

 

    

 

Retail clothing product

 

$

613,644

 

$

583,585

 

Rental services

 

 

100,227

 

 

94,820

 

Alteration and other services

 

 

40,972

 

 

46,900

 

Total retail sales

 

 

754,843

 

 

725,305

 

Corporate apparel clothing product

 

 

63,121

 

 

57,601

 

Total net sales

 

 

817,964

 

 

782,906

 

Cost of sales:

 

 

 

 

 

 

 

Retail clothing product

 

 

276,220

 

 

252,879

 

Rental services

 

 

14,657

 

 

16,168

 

Alteration and other services

 

 

34,178

 

 

34,472

 

Occupancy costs

 

 

101,019

 

 

105,089

 

Total retail cost of sales

 

 

426,074

 

 

408,608

 

Corporate apparel clothing product

 

 

46,666

 

 

41,858

 

Total cost of sales

 

 

472,740

 

 

450,466

 

Gross margin:

 

 

 

 

 

 

 

Retail clothing product

 

 

337,424

 

 

330,706

 

Rental services

 

 

85,570

 

 

78,652

 

Alteration and other services

 

 

6,794

 

 

12,428

 

Occupancy costs

 

 

(101,019)

 

 

(105,089)

 

Total retail gross margin

 

 

328,769

 

 

316,697

 

Corporate apparel clothing product

 

 

16,455

 

 

15,743

 

Total gross margin

 

 

345,224

 

 

332,440

 

Advertising expense

 

 

41,233

 

 

42,252

 

Selling, general and administrative expenses

 

 

251,094

 

 

259,186

 

Operating income

 

 

52,897

 

 

31,002

 

Interest income

 

 

85

 

 

67

 

Interest expense

 

 

(21,981)

 

 

(25,621)

 

(Loss) gain on extinguishment of debt, net

 

 

(12,711)

 

 

715

 

Earnings before income taxes

 

 

18,290

 

 

6,163

 

Provision for income taxes

 

 

4,381

 

 

4,324

 

Net earnings

 

$

13,909

 

$

1,839

 

Net earnings per common share:

 

 

 

 

 

 

 

Basic

 

$

0.28

 

$

0.04

 

Diluted

 

$

0.27

 

$

0.04

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

Basic

 

 

49,458

 

 

48,808

 

Diluted

 

 

50,720

 

 

49,151

 

Cash dividends declared per common share

 

$

0.18

 

$

0.18

 

 

See Notes to Condensed Consolidated Financial Statements.

 

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TAILORED BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

 

    

May 5,

    

April 29,

 

 

 

2018

 

2017

 

 

 

 

 

 

 

 

 

Net earnings

 

$

13,909

 

$

1,839

 

Currency translation adjustments

 

 

(14,143)

 

 

1,341

 

Unrealized gain (loss) on cash flow hedges, net of tax

 

 

2,800

 

 

(3,466)

 

Comprehensive income (loss)

 

$

2,566

 

$

(286)

 

 

See Notes to Condensed Consolidated Financial Statements.

 

 

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TAILORED BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

 

    

May 5, 2018

    

April 29, 2017

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net earnings

 

$

13,909

 

$

1,839

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

26,679

 

 

26,426

 

Rental product amortization

 

 

8,756

 

 

7,878

 

Loss (gain) on extinguishment of debt, net

 

 

12,711

 

 

(715)

 

Amortization of deferred financing costs and discount on long-term debt

 

 

1,333

 

 

1,849

 

Loss on disposition of assets

 

 

3,618

 

 

1,437

 

Asset impairment charges

 

 

269

 

 

2,867

 

Share-based compensation

 

 

4,581

 

 

4,735

 

Deferred tax expense (benefit)

 

 

748

 

 

(269)

 

Deferred rent expense and other

 

 

73

 

 

210

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

 

(10,871)

 

 

(17,432)

 

Inventories

 

 

(11,886)

 

 

(27,831)

 

Rental product

 

 

(14,377)

 

 

(4,833)

 

Other assets

 

 

8,124

 

 

3,888

 

Accounts payable, accrued expenses and other current liabilities

 

 

82,755

 

 

32,943

 

Income taxes payable

 

 

(4,301)

 

 

1,529

 

Other liabilities

 

 

(1,893)

 

 

(1,170)

 

Net cash provided by operating activities

 

 

120,228

 

 

33,351

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Capital expenditures

 

 

(10,980)

 

 

(17,786)

 

Proceeds from divestiture of business

 

 

17,732

 

 

 —

 

Acquisition of business, net of cash

 

 

 —

 

 

(457)

 

Proceeds from sales of property and equipment

 

 

 —

 

 

12

 

Net cash provided by (used in) investing activities

 

 

6,752

 

 

(18,231)

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Payments on original term loan

 

 

(993,420)

 

 

(1,750)

 

Proceeds from new term loan

 

 

895,500

 

 

 —

 

Payments on new term loan

 

 

(2,250)

 

 

 —

 

Proceeds from asset-based revolving credit facility

 

 

1,500

 

 

137,650

 

Payments on asset-based revolving credit facility

 

 

(1,500)

 

 

(137,650)

 

Repurchase and retirement of senior notes

 

 

(18,240)

 

 

(6,601)

 

Deferred financing costs

 

 

(5,576)

 

 

 —

 

Cash dividends paid

 

 

(9,618)

 

 

(9,131)

 

Proceeds from issuance of common stock

 

 

3,649

 

 

467

 

Tax payments related to vested deferred stock units

 

 

(5,025)

 

 

(1,632)

 

Net cash used in financing activities

 

 

(134,980)

 

 

(18,647)

 

Effect of exchange rate changes

 

 

(2,441)

 

 

(782)

 

DECREASE IN CASH AND CASH EQUIVALENTS

 

 

(10,441)

 

 

(4,309)

 

Balance at beginning of period

 

 

103,607

 

 

70,889

 

Balance at end of period

 

$

93,166

 

$

66,580

 

 

See Notes to Condensed Consolidated Financial Statements.

 

 

 

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TAILORED BRANDS, INC. AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1. Significant Accounting Policies  

 

Basis of Presentation — The condensed consolidated financial statements herein include the accounts of Tailored Brands, Inc. and its subsidiaries (the "Company") and have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC").  As applicable under such regulations, certain information and footnote disclosures have been condensed or omitted.  We believe the presentation and disclosures herein are adequate to make the information not misleading, and the condensed consolidated financial statements reflect all elimination entries and normal recurring adjustments which are necessary for a fair presentation of the financial position, results of operations and cash flows at the dates and for the periods presented.

 

Our business results historically have fluctuated throughout the year and, as a result, the operating results of the interim periods presented are not necessarily indicative of the results that may be achieved for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended February 3, 2018.

 

Unless the context otherwise requires, "Company", "we", "us" and "our" refer to Tailored Brands, Inc. and its subsidiaries.

 

The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts and related disclosures.  Actual amounts could differ from those estimates.

 

Recent Accounting Pronouncements — We have considered all new accounting pronouncements and have concluded there are no new pronouncements that may have a material impact on our financial position, results of operations, or cash flows, based on current information, except for those listed below. 

 

In August 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities. ASU 2017-12 amends the existing hedge accounting model in order to enable entities to better portray the economics of their risk management activities in their financial statements. ASU 2017-12 is effective for public companies for annual reporting periods beginning after December 15, 2018, and interim periods within those fiscal years.  The guidance must be applied on a modified retrospective basis, while presentation and disclosure requirements set forth under ASU 2017-12 are required prospectively in all interim periods and fiscal years ending after the date of adoptionEarly adoption of ASU 2017-12 is permitted.  We are currently evaluating the impact ASU 2017-12 will have on our financial position, results of operations and cash flows.

In February 2016, the FASB issued ASU No. 2016-02, Leases.  ASU 2016-02 increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.  The main difference between previous U.S. GAAP and ASU 2016-02 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. ASU 2016-02 is effective for public companies for annual reporting periods beginning after December 15, 2018, and interim periods within those fiscal years.  Early adoption of ASU 2016-02 is permitted.  The guidance is required to be adopted using the modified retrospective approach, with optional practical expedients.  We are currently evaluating the impact ASU 2016-02 will have on our financial position, results of operations and cash flows but expect that it will result in a significant increase in our long-term assets and liabilities given we have a considerable number of operating leases. We are in the process of implementing changes to our business processes, systems and controls to support the adoption of ASU 2016-02 in fiscal 2019.

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TAILORED BRANDS, INC. AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

2.  Divestiture of MW Cleaners

 

On February 28, 2018, we entered into a definitive agreement to divest our MW Cleaners business for approximately $18.0 million, subject to certain adjustments, and the transaction closed on March 3, 2018.  During the first quarter of fiscal 2018, we received cash proceeds of $17.7 million and recorded a loss on the divestiture totaling $3.6 million which is included within selling, general and administrative expenses (“SG&A”) in the condensed consolidated statement of earnings, and relates to our retail segment. 

We determined that the sale of the MW Cleaners business did not represent a strategic shift and will not have a major effect on our consolidated results of operations, financial position or cash flows.  Accordingly, we have not presented the sale as a discontinued operation in the condensed consolidated financial statements. 

 

3.  Termination of Tuxedo Rental License Agreement with Macy's

 

During the first quarter of fiscal 2017, we reached an agreement with Macy's to wind down operations under the tuxedo rental license agreement established between Macy's and The Men's Wearhouse, Inc. ("The Men's Wearhouse") in 2015. The winding down of our tuxedo shops within Macy's was completed in fiscal 2017 and all tuxedo shops within Macy's closed in the second quarter of 2017. 

 

As a result of the agreement, during the first quarter of fiscal 2017, we incurred $17.2 million of termination-related costs, of which $14.6 million were cash charges.  These costs included $12.3 million related to contract termination, $1.4 million of rental product write-offs, $1.2 million of asset impairment charges and $2.3 million of other costs, all of which relate to our retail segment. Of the $17.2 million in termination-related costs, $15.8 million is recorded in SG&A and $1.4 million is included in cost of sales in the condensed consolidated statement of earnings.  All termination-related costs were paid in fiscal 2017.

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TAILORED BRANDS, INC. AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

4.  Earnings Per Share    

 

Basic earnings per common share is computed by dividing net earnings by the weighted-average common shares outstanding during the period.  Diluted earnings per common share reflect the more dilutive earnings per common share amount calculated using the treasury stock method or the two-class method.  In the first quarter of 2018 and 2017, the treasury stock method is used to calculate diluted earnings per common share.

 

Basic and diluted earnings per common share are computed using the actual net earnings and the actual weighted-average common shares outstanding rather than the rounded numbers presented within our condensed consolidated statement of earnings and the accompanying notes.  As a result, it may not be possible to recalculate earnings per common share in our condensed consolidated statement of earnings and the accompanying notes. The following table sets forth the computation of basic and diluted earnings per common share (in thousands, except per share amounts):

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

 

 

May 5,

 

April 29,

 

 

    

2018

    

2017

 

Numerator

 

 

 

 

 

 

 

Net earnings

 

$

13,909

 

$

1,839

 

Denominator

 

 

 

 

 

 

 

Basic weighted-average common shares outstanding

 

 

49,458

 

 

48,808

 

Dilutive effect of share-based awards

 

 

1,262

 

 

343

 

Diluted weighted-average common shares outstanding

 

 

50,720

 

 

49,151

 

Net earnings per common share:

 

 

 

 

 

 

 

Basic

 

$

0.28

 

$

0.04

 

Diluted

 

$

0.27

 

$

0.04

 

 

For the three months ended May 5, 2018, and April 29, 2017, 0.4 million and 1.6 million anti-dilutive shares of common stock were excluded from the calculation of diluted earnings per common share, respectively.

 

5.  Debt

 

In 2014, The Men's Wearhouse entered into a term loan credit agreement that provided for a senior secured term loan in the aggregate principal amount of $1.1 billion (the "Original Term Loan") and a $500.0 million asset-based revolving credit agreement (the "ABL Facility", and together with the Original Term Loan, the "Credit Facilities") with certain of our U.S. subsidiaries and Moores the Suit People Inc., one of our Canadian subsidiaries, as co-borrowers. Proceeds from the Original Term Loan were reduced by an $11.0 million original issue discount ("OID"), which was presented as a reduction of the outstanding balance on the Original Term Loan on the balance sheet and amortized to interest expense over the contractual life of the Original Term Loan. In addition, in 2014, The Men's Wearhouse issued $600.0 million in aggregate principal amount of 7.00% Senior Notes due 2022 (the "Senior Notes").

 

In October 2017, The Men’s Wearhouse amended the ABL Facility in part to increase the principal amount available to $550.0 million and extend the maturity date to October 2022.  In April 2018, The Men’s Wearhouse refinanced its Original Term Loan.  See Credit Facilities section below for additional information. 

 

The Credit Facilities and the Senior Notes contain customary non-financial and financial covenants, including fixed charge coverage ratios, total leverage ratios and secured leverage ratios.  Should our total leverage ratio and secured leverage ratio exceed certain thresholds specified in the agreements, we would be subject to certain additional restrictions, including limitations on our ability to make significant acquisitions and incur additional indebtedness. As of May 5, 2018, our total leverage ratio and secured leverage ratio are below these thresholds and we believe these ratios will remain below the thresholds specified in the agreements for the foreseeable future, which results in the elimination of these additional restrictions. In addition, as a result of the refinancing of our Original Term Loan and amending of our ABL Facility, our

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

ability to pay dividends on our common stock has increased from a maximum of $10.0 million per quarter to a maximum of $15.0 million per quarter.

 

Credit Facilities

 

In April 2018, we refinanced our Original Term Loan.  Immediately prior to the refinancing, the Original Term Loan consisted of $593.4 million in aggregate principal amount with an interest rate of LIBOR plus 3.50% (with a floor of 1.0%) and $400.0 million in aggregate principal amount with a fixed rate of 5.0% per annum.  Upon entering into the refinancing, we made a prepayment of $93.4 million on the Original Term Loan using cash on hand.

 

As a result, we refinanced $900.0 million in aggregate principal amount of term loans then outstanding with a new Term Loan totaling $900.0 million (the “New Term Loan”).  Additionally, we may continue to request additional term loans or incremental equivalent debt borrowings, all of which are uncommitted, in an aggregate amount up to the greater of (1) $250.0 million and (2) an aggregate principal amount such that, on a pro forma basis (giving effect to such borrowings), our senior secured leverage ratio will not exceed 2.5 to 1.0. 

 

The New Term Loan will bear interest at a rate per annum equal to an applicable margin plus, at the Company’s option, either LIBOR (with a floor of 1.0%) or the base rate (with a floor of 2.0%).  The margins for borrowings under the New Term Loan are 3.50% for LIBOR and 2.50% for the base rate.  The New Term Loan will amortize in an annual amount equal to 1.0% of the principal amount of the New Term Loan, payable quarterly commencing on May 1, 2018.  Proceeds from the New Term Loan were reduced by a $4.5 million OID, which is presented as a reduction of the outstanding balance on the New Term Loan on the balance sheet and will be amortized to interest expense over the contractual life of the New Term Loan. 

 

The New Term Loan extends the maturity date of the Original Term Loan from June 18, 2021 until April 9, 2025, subject to a springing maturity provision that would accelerate the maturity of the New Term Loan to April 1, 2022 if any of the Company’s obligations under its Senior Notes remain outstanding on April 1, 2022.

 

The interest rate on the New Term Loan is based on 1-month LIBOR, which was 1.93% at May 5, 2018, plus the applicable margin of 3.50%, resulting in a total interest rate of 5.43%.  We have two interest rate swap agreements where the variable rates due under the New Term Loan have been exchanged for a fixed rate.  At May 5, 2018, the total notional amount under these interest rate swaps is $400.0 million.  Please see Note 15 for additional information on our interest rate swaps.

 

As a result of our interest rate swaps, approximately 45% of the variable interest rate under the New Term Loan has been converted to a fixed rate.  As of May 5, 2018, the New Term Loan had a weighted average interest rate of 5.45%.

 

In connection with the refinancing of the New Term Loan, we incurred deferred financing costs of $5.6 million, which will be amortized over the life of the New Term Loan using the interest method.  In addition, as a result of the refinancing, we recorded a loss on extinguishment of debt totaling $11.9 million consisting of the elimination of unamortized deferred financing costs and OID related to the Original Term Loan, which is included as a separate line in the condensed consolidated statement of earnings.

 

In October 2017, we amended our ABL Facility, which now provides for a senior secured revolving credit facility of $550.0 million, with possible future increases to $650.0 million under an expansion feature, that matures in October 2022, and is guaranteed, jointly and severally, by Tailored Brands, Inc. and certain of our U.S. subsidiaries. The ABL Facility has several borrowing and interest rate options including the following indices:  (i) adjusted LIBOR, (ii) Canadian Dollar Offered Rate ("CDOR") rate, (iii) Canadian prime rate or (iv) an alternate base rate (equal to the greater of the prime rate, the New York Federal Reserve Bank (“NYFRB”) rate plus 0.5% or adjusted LIBOR for a one-month interest period plus 1.0%). Advances under the ABL Facility bear interest at a rate per annum using the applicable indices plus a varying interest rate margin of up to 1.75%.  The ABL Facility also provides for fees applicable to amounts available to be drawn under outstanding letters of credit which range from 1.25% to 1.75%, and a fee on unused commitments of 0.25%.  As of

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

May 5, 2018, there were no borrowings outstanding under the ABL Facility.  During the three months ended May 5, 2018, the maximum borrowing outstanding under the ABL Facility was $1.5 million.

 

The obligations under the Credit Facilities are secured on a senior basis by a first priority lien on substantially all of the assets of the Company, The Men’s Wearhouse and its U.S. subsidiaries and, in the case of the ABL Facility, Moores The Suit People Inc. The Credit Facilities and the related guarantees and security interests granted thereunder are senior secured obligations of, and will rank equally with all present and future senior indebtedness of the Company, the co-borrowers and the respective guarantors. 

We utilize letters of credit primarily as collateral for workers compensation claims and to secure inventory purchases.  At May 5, 2018, letters of credit totaling approximately $35.7 million were issued and outstanding. Borrowings available under the ABL Facility as of May 5, 2018 were $490.2 million.

 

Senior Notes

 

The Senior Notes are guaranteed, jointly and severally, on an unsecured basis by Tailored Brands, Inc. and certain of our U.S. subsidiaries. The Senior Notes and the related guarantees are senior unsecured obligations of the Company and the guarantors, respectively, and will rank equally with all of the Company's and each guarantor's present and future senior indebtedness. The Senior Notes will mature in July 2022.  Interest on the Senior Notes is payable in January and July of each year.

 

Long-Term Debt

 

During the first quarter of 2018, we repurchased and retired $17.6 million in face value of Senior Notes through open market transactions.  As a result, we recorded a net loss on extinguishment totaling $0.9 million, which is included as a separate line in the condensed consolidated statement of earnings.  The net loss on extinguishment reflects a $0.6 million loss upon repurchase and the elimination of unamortized deferred financing costs totaling $0.3 million related to the Senior Notes. 

 

The following table provides details on our long-term debt as of May 5, 2018, April 29, 2017 and February 3, 2018 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May 5,

 

April 29,

 

February 3,

 

 

    

2018

    

2017

    

2018

 

Term Loan (net of unamortized OID of $4.5 million at May 5, 2018, $3.9 million at April 29, 2017, and $3.0 million at February 3, 2018)

 

$

893,299

 

$

1,041,147

 

$

990,465

 

Senior Notes

 

 

403,607

 

 

567,570

 

 

421,209

 

Less: Deferred financing costs related to the Term Loan and Senior Notes

 

 

(10,398)

 

 

(20,852)

 

 

(14,866)

 

Total long-term debt, net

 

 

1,286,508

 

 

1,587,865

 

 

1,396,808

 

Current portion of long-term debt

 

 

(9,000)

 

 

(13,379)

 

 

(7,000)

 

Total long-term debt, net of current portion

 

$

1,277,508

 

$

1,574,486

 

$

1,389,808

 

 

 

6.  Revenue Recognition

 

Adoption of ASC 606

 

Effective February 4, 2018, we adopted ASC 606, Revenue from Contracts with Customers and all related amendments (“ASC 606”), to all contracts using the modified retrospective approach.  We recognized the cumulative effect of initially applying ASC 606 as an adjustment to the opening balance of retained earnings.  The adoption had no impact to our previously reported results of operations or cash flows.  The comparative period information has not been restated and continues to be reported under the accounting standards in effect for the period presented. 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

The following table depicts the cumulative effect of the changes made to our February 3, 2018 balance sheet for the adoption of ASU 606 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported

 

 

 

Adjusted

 

 

 

Balance at

 

Impact of

 

Balance at

 

 

 

February 3,

 

Adoption of

 

February 3,

 

 

    

2018

    

ASU 606

    

2018

 

Assets:

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

79,783

 

$

(303)

 

$

79,480

 

Inventories

 

 

851,931

 

 

(17,837)

 

 

834,094

 

Other current assets

 

 

78,252

 

 

2,753

 

 

81,005

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

Accrued expenses and other current liabilities

 

 

285,537

 

 

32,378

 

 

317,915

 

Deferred taxes, net and other liabilities

 

 

164,191

 

 

(11,941)

 

 

152,250

 

Equity:

 

 

 

 

 

 

 

 

 

 

Accumulated deficit

 

 

(479,166)

 

 

(35,824)

 

 

(514,990)

 

 

The adoption of ASC 606 primarily impacted the timing of revenue recognition related to our customer loyalty program, gift cards and e-commerce sales within our retail segment, as discussed in more detail below.  In addition, for our corporate apparel segment, certain deferred revenue balances along with related inventory amounts were eliminated as part of the cumulative adjustment to opening retained earnings.  Also, for estimated sales returns, we now recognize allowances for estimated sales returns on a gross basis rather than a net basis on the condensed consolidated balance sheets.

 

Revenues

 

The following table depicts the disaggregation of revenue by major source (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

 

    

May 5, 2018

    

April 29, 2017

 

Net sales:

 

 

    

 

 

    

 

Men's tailored clothing product

 

$

355,737

 

$

332,630

 

Men's non-tailored clothing product

 

 

235,606

 

 

228,699

 

Women's clothing product

 

 

19,582

 

 

19,827

 

Other (1)

 

 

2,719

 

 

2,429

 

Total retail clothing product

 

 

613,644

 

 

583,585

 

Rental services

 

 

100,227

 

 

94,820

 

Alteration services

 

 

38,421

 

 

38,386

 

Retail dry cleaning services (2)

 

 

2,551

 

 

8,514

 

Total alteration and other services

 

 

40,972

 

 

46,900

 

Total retail sales

 

 

754,843

 

 

725,305

 

Corporate apparel clothing product

 

 

63,121

 

 

57,601

 

Total net sales

 

$

817,964

 

$

782,906

 

 

(1)Other consists of franchise and licensing revenues and gift card breakage.  Franchise revenues are generally recognized at a point in time while licensing revenues consist primarily of minimum guaranteed royalty amounts recognized over an elapsed time period.

 

(2)On March 3, 2018, we completed the divestiture of our MW Cleaners business.  Please see Note 2 for additional information.

 

Please see Note 16 for additional information regarding our reporting segments.

 

 

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Retail Segment

For retail clothing product revenue, we transfer control and recognize revenue at a point in time, upon sale or shipment of the merchandise, net of actual sales returns and a provision for estimated sales returns.  For rental and alteration services, we transfer control and recognize revenue at a point in time, upon receipt by the customer.  Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services.  Sales, use and value added taxes we collect from our customers and are remitted to governmental agencies are excluded from revenue.   

 

Loyalty Program

 

We maintain a customer loyalty program for our Men’s Wearhouse, Men’s Wearhouse and Tux, Jos. A. Bank and Moores brands in which customers receive points for purchases. Points are generally equivalent to dollars spent on a one‑to‑one basis, excluding any sales tax dollars, and do not expire. Upon reaching 500 points, customers are issued a $50 rewards certificate which they may redeem for purchases at our stores or online. Generally, reward certificates earned must be redeemed no later than six months from the date of issuance.  We believe our loyalty program represents a customer option that is a material right and, accordingly, is a performance obligation in the contract with our customer.  Therefore, we will record our obligation for future point redemptions using a deferred revenue model.  In prior periods, we used an incremental cost approach where we accrued the estimated costs of the anticipated certificate redemptions when the certificates were issued and charged such costs to cost of sales.

 

When loyalty program members earn points, we recognize a portion of the transaction as revenue for merchandise product sales or services and defer a portion of the transaction representing the value of the related points. The value of the points is recorded in deferred revenue on our condensed consolidated balance sheet and recognized into revenue when the points are converted into a rewards certificate and the certificate is used.

 

We account for points earned and certificates issued that will never be redeemed by loyalty members, which we refer to as breakage. We review our breakage estimates at least annually based upon the latest available information regarding redemption and expiration patterns.

 

Our estimate of the expected expiration of points and certificates requires significant management judgment. Current and future changes to our assumptions or to loyalty program rules may result in material changes to the deferred revenue balance as well as recognized revenues from the loyalty program.  For example, during fiscal 2018, we plan to test potential changes to our loyalty program in order to improve the effectiveness of the program.

 

Gift Card Breakage

 

Proceeds from the sale of gift cards are recorded as a liability and are recognized as net sales from products and services when the cards are redeemed.  Our gift cards do not have expiration dates.  In addition, we recognize revenue for gift cards for which the likelihood of redemption is deemed to be remote and for which there is no legal obligation to remit the value of such unredeemed gift cards to any relevant jurisdictions (commonly referred to as gift card breakage) under the redemption recognition method. This method records gift card breakage as revenue on a proportional basis over the redemption period based on our historical gift card breakage rate. We review our gift card breakage estimate based on our historical redemption patterns.  In prior periods, we recognized income from breakage of gift cards as a reduction of SG&A when the likelihood of redemption of the gift card was remote.

 

Sales Returns

 

Revenue from merchandise product sales and services is reported net of sales returns, which includes an estimate of future returns based on historical return rates, with a corresponding reduction to cost of sales. Our refund liability for sales returns was $7.8 million at May 5, 2018, which is included in accrued and other current liabilities and represents the expected value of the refund that will be due to our customers.  We also have a corresponding asset included in other current assets

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

that represents the right to recover products from customers associated with sales returns of $3.3 million at May 5, 2018.  In prior periods, we recognized a provision for estimated sales returns on a net basis.

 

Corporate Apparel Segment

 

For our corporate apparel segment, we sell corporate clothing and uniforms to workforces under a contract or by purchase order.  We transfer control and recognize revenue at a point in time, generally upon delivery of the product to the customer.  Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services.  Sales, use and value added taxes we collect from our customers and are remitted to governmental agencies are excluded from revenue.   

 

Contract Liabilities

 

The following table summarizes the opening and closing balances of our contract liabilities (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at

 

Increase

 

Balance at

 

 

    

February 3, 2018

    

(Decrease)

    

May 5, 2018

 

 

 

As Adjusted

 

 

 

 

 

 

 

Contract liabilities

 

$

141,552

 

$

46,791

 

$

188,343

 

 

Contract liabilities include cash payments received from customers in advance of our performance, including amounts which are refundable.  These liabilities primarily consist of customer deposits related to rental product or custom clothing transactions since we typically receive payment from our customers prior to our performance and deferred revenue related to our loyalty programs and unredeemed gift cards.  These amounts are included as “Customer deposits, prepayments and refunds payable,” “Loyalty program liabilities” and “Unredeemed gift cards,” respectively, within the accrued expenses and other current liabilities line item on our consolidated balance sheet.  Please see Note 10 for additional information on our accrued expenses and other current liabilities.

 

The amount of revenue recognized in the first quarter of 2018 that was included in the opening contract liability balance was $41.7 million.  This revenue primarily consists of recognition of deposits for completed transactions as well as redeemed certificates related to our loyalty program and gift card redemptions.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

Practical Expedients and Impact on Fiscal 2018 Results

 

Due to the short term nature of a significant portion of our contracts with customers, we have elected to apply the practical expedients under ASC 606 to:  (1) not adjust the consideration for the effects of a significant financing component, (2) recognize incremental costs of obtaining a contract as expense when incurred and (3) not disclose the value of our unsatisfied performance obligations for contracts with an original expected duration of one year or less. 

 

In accordance with ASC 606, the following tables reflect the impact on our fiscal 2018 condensed consolidated statement of earnings and balance sheet as if we had continued to apply accounting standards in effect last year (“Legacy GAAP”) (amounts in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

Statement of Earnings

 

For the Three Months Ended May 5, 2018

 

 

 

As

 

Amounts Under

 

Effect of Change

 

 

    

Reported

    

Legacy GAAP

    

Increase/(Decrease)

 

Net sales:

 

 

 

 

 

 

 

 

 

 

Total retail sales

 

$

754,843

 

$

758,088

 

$

3,245

 

Corporate apparel clothing product

 

 

63,121

 

$

66,502

 

$

3,381

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

Total retail cost of sales

 

 

426,074

 

 

426,326

 

 

252

 

Total corporate apparel clothing product cost of sales

 

 

46,666

 

 

49,475

 

 

2,809

 

Selling, general and administrative expenses

 

 

251,094

 

 

250,757

 

 

(337)

 

Provision for income taxes

 

 

4,381

 

 

5,316

 

 

935

 

Net earnings

 

$

13,909

 

$

16,876

 

$

2,967

 

Diluted net earnings per common share

 

$

0.27

 

$

0.33

 

$

0.06

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet

 

May 5, 2018

 

 

 

As

 

Amounts Under

 

Effect of Change

 

 

    

Reported

    

Legacy GAAP

    

Increase/(Decrease)

 

Assets:

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

87,411

 

$

92,232

 

$

4,821

 

Inventories

 

 

843,671

 

 

857,857

 

 

14,186

 

Other current assets

 

 

69,937

 

 

66,639

 

 

(3,298)

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

Accrued expenses and other current liabilities

 

 

350,414

 

 

294,129

 

 

(56,285)

 

Deferred taxes, net and other liabilities

 

 

151,503

 

 

139,536

 

 

(11,967)

 

Equity:

 

 

 

 

 

 

 

 

 

 

Accumulated deficit

 

 

(510,441)

 

 

(471,649)

 

 

38,792

 

 

 

 

 

 

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

7.  Supplemental Cash Flows

 

Supplemental disclosure of cash flow information is as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

 

 

May 5,

 

April 29,

 

 

    

2018

    

2017

 

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

13,380

 

$

16,389

 

Cash paid for income taxes, net

 

$

2,128

 

$

1,483

 

 

We had unpaid capital expenditure purchases included in accounts payable and accrued expenses and other current liabilities of approximately $4.7 million and $7.1 million at May 5, 2018 and April 29, 2017, respectively.  Capital expenditure purchases are recorded as cash outflows from investing activities in the condensed consolidated statement of cash flows in the period they are paid.  

 

8.  Inventories

 

The following table provides details on our inventories as of May 5, 2018, April 29, 2017 and February 3, 2018 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May 5,

 

April 29,

 

February 3,

 

 

    

2018

    

2017

    

2018

 

Finished goods

 

$

749,746

 

$

915,065

 

$

739,668

 

Raw materials and merchandise components

 

 

93,925

 

 

69,156

 

 

112,263

 

Total inventories

 

$

843,671

 

$

984,221

 

$

851,931

 

 

9.  Income Taxes

 

In December 2017, the U.S. enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Reform Act”). The changes included in the Tax Reform Act are broad and complex, including, but not limited to reducing the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018.  Our federal income tax expense for fiscal 2018 is based on the new rate. 

 

Our effective income tax rate decreased to 24.0% for the first quarter of 2018 from 70.2% for the first quarter of 2017.  Our effective income tax rate for the first quarter of 2018 is lower than the effective income tax rate for the first quarter of 2017 primarily from enactment of the Tax Reform Act and anniversarying last year’s $2.2 million of tax deficiencies related to the vesting of stock-based awards recorded in the first quarter of 2017 resulting from the adoption of new accounting guidance related to stock-based compensation.

 

Shortly after the Tax Reform Act was enacted, the SEC issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) which provides guidance on accounting for the Tax Reform Act’s impact. SAB 118 provides a measurement period, which in no case should extend beyond one year from the Tax Reform Act enactment date, during which a company acting in good faith may complete the accounting for the impacts of the Tax Reform Act. In accordance with SAB 118, a company must reflect the income tax effects of the Tax Reform Act in the reporting period in which the accounting is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Reform Act is incomplete, a company can determine a reasonable estimate for those effects and record a provisional estimate in the financial statements in the first reporting period in which a reasonable estimate can be determined.

At the end of fiscal 2017, we recorded a provisional discrete net tax benefit of $0.3 million related to the Tax Reform Act.  During the first quarter of 2018, there have been no updates to this provisional amount. While we have made a reasonable

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

estimate of the impact of the Tax Reform Act, we are continuing to finalize the consequences of tax reform, including the temporary differences that existed on the date of enactment. 

 

Additionally, we are currently undergoing several audits; however, we currently do not believe these audits will result in any material charge to tax expense in the future.

 

10.  Other Current Assets, Accrued Expenses and Other Current Liabilities and Deferred Taxes, net and Other Liabilities 

 

The following table provides details on our other current assets as of May 5, 2018, April 29, 2017 and February 3, 2018 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May 5,

 

April 29,

 

February 3,

 

 

    

2018

    

2017

    

2018

 

Prepaid expenses

 

$

44,438

 

$

44,584

 

$

47,545

 

Tax receivable

 

 

12,814

 

 

14,055

 

 

20,368

 

Other

 

 

12,685

 

 

10,649

 

 

10,339

 

Total other current assets

 

$

69,937

 

$

69,288

 

$

78,252

 

 

The following table provides details on our accrued expenses and other current liabilities as of May 5, 2018, April 29, 2017 and February 3, 2018 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

    

May 5,

    

April 29,

    

February 3,

 

 

 

2018

 

2017

 

2018

 

Customer deposits, prepayments and refunds payable

 

$

87,849

 

$

72,411

 

$

59,633

 

Loyalty program liabilities

 

 

65,597

 

 

8,720

 

 

9,106

 

Accrued salary, bonus, sabbatical, vacation and other benefits

 

 

56,066

 

 

58,373

 

 

84,767

 

Sales, value added, payroll, property and other taxes payable

 

 

37,605

 

 

36,878

 

 

29,409

 

Unredeemed gift cards

 

 

29,921

 

 

37,434

 

 

39,609

 

Accrued workers compensation and medical costs

 

 

24,639

 

 

27,194

 

 

25,244

 

Accrued dividends

 

 

10,870

 

 

9,957

 

 

11,128

 

Accrued interest

 

 

10,608

 

 

22,871

 

 

3,281

 

Accrued royalties

 

 

4,009

 

 

1,806

 

 

5,032

 

Lease termination and other store closure costs

 

 

297

 

 

4,106

 

 

427

 

Other

 

 

22,953

 

 

23,852

 

 

17,901

 

Total accrued expenses and other current liabilities

 

$

350,414

 

$

303,602

 

$

285,537

 

 

The increase in loyalty program liabilities and the decrease in unredeemed gift cards is primarily driven by the adoption of ASC 606.  Please see Note 6 for additional information.

 

The following table provides details on our deferred taxes, net and other liabilities as of May 5, 2018, April 29, 2017 and February 3, 2018 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May 5,

    

April 29,

 

February 3,

 

 

    

2018

    

2017

    

2018

 

Deferred and other income tax liabilities, net

 

$

83,357

 

$

90,772

 

$

95,314

 

Deferred rent and landlord incentives

 

 

58,957

 

 

60,542

 

 

60,136

 

Unfavorable lease liabilities

 

 

2,631

 

 

4,224

 

 

2,910

 

Other

 

 

6,558

 

 

6,062

 

 

5,831

 

Total deferred taxes, net and other liabilities

 

$

151,503

 

$

161,600

 

$

164,191

 

 

16


 

Table of Contents

TAILORED BRANDS, INC. AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

11.  Accumulated Other Comprehensive (Loss) Income

 

The following table summarizes the components of accumulated other comprehensive (loss) income for the three months ended May 5, 2018 (in thousands and net of tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign

 

 

 

 

 

 

 

 

 

 

 

 

Currency