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not

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 2, 2020 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)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $.01 per share

TLRD

New York Stock Exchange

Preferred Stock Purchase Rights

TLRD

New York Stock Exchange

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, smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  

Accelerated filer  

Non-accelerated filer  

Smaller reporting company  

Emerging growth company  

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes . No .

The number of shares of common stock of the Registrant, par value $.01 per share, outstanding at July 4, 2020 was 48,899,867.

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EXPLANATORY NOTE

Tailored Brands, Inc. and its subsidiaries (the "Company", "we", "us" and "our") is filing this Quarterly Report on Form 10-Q for the period ended May 2, 2020 (this “Quarterly Report”) after the original filing deadline of June 11, 2020 (the “Original Due Date”) in reliance on the 45-day extension provided by the Securities and Exchange Commission’s Order under Section 36 of the Securities Exchange Act of 1934 Modifying Exemptions From the Reporting and Proxy Delivery Requirements for Public Companies dated March 25, 2020 (Release No. 34-88465) (the “Order”).  

On June 10, 2020, we filed a Current Report on Form 8-K to indicate our intention to rely on the Order for such extension. Consistent with the statements made in the Current Report on Form 8-K, we were unable to file this Quarterly Report by the Original Due Date because the Company’s day-to-day operations and business have experienced significant disruptions due to the unprecedented conditions surrounding the COVID-19 pandemic.  These disruptions include, but are not limited to, the temporary closure of all corporate offices, the Company’s decision to furlough or temporarily layoff a significant portion of its employees, and work from home orders, all of which slowed the Company’s routine quarterly close process.  In addition, the Company’s management team had to devote considerable time and resources to manage emerging issues impacting its operations, which also impacted the progress of the Company’s quarterly close process.

The Quarterly Report is hereby filed before the extended due date permitted under the Order, i.e., 45 days after the Original Due Date of June 11, 2020, or July 27, 2020.

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 2, 2020, May 4, 2019 and February 1, 2020

3

Condensed Consolidated Statements of (Loss) Earnings for the Three Months Ended May 2, 2020 and May 4, 2019

4

Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended May 2, 2020 and May 4, 2019

5

Condensed Consolidated Statements of Shareholders’ (Deficit) Equity for the Three Months Ended May 2, 2020 and May 4, 2019

6

Condensed Consolidated Statements of Cash Flows for the Three Months Ended May 2, 2020 and May 4, 2019

7

Notes to Condensed Consolidated Financial Statements

8

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

35

Item 3 — Quantitative and Qualitative Disclosures about Market Risk

49

Item 4 — Controls and Procedures

49

PART II — Other Information

50

Item 1 — Legal Proceedings

50

Item 1A — Risk Factors

50

Item 6 — Exhibits

53

SIGNATURES

55

1

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Forward-Looking Statements

Certain statements made in this Quarterly Report 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, store reopenings, closings, remodels, refreshes, relocations and expansions, impact of employee furloughs, workforce reductions, capital expenditures, potential acquisitions or divestitures, synergies from acquisitions, business strategies, demand for our retail clothing or rental products, willingness of our customer to shop in our stores, economic conditions, changes in demand resulting from remote working arrangements, market trends in the retail 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: the results of management’s plans to evaluate several alternatives, including seeking a restructuring, amendment or refinancing of our debt through a private restructuring or reorganization under applicable bankruptcy laws, which may result in the total loss of shareholder value; the potential closure of up to 500 stores as well as associated opportunities to reduce and realign our store organization and supply chain infrastructure; the effects of the COVID-19 pandemic and uncertainties about its depth and duration, including the health and well-being of our employees and customers, temporary or permanent store closures, additional periods of increases in the number of COVID-19 cases, increases in the unemployment rate, furlough or temporary layoffs of our employees, our ability to increase our liquidity and preserve financial flexibility, social distancing measures and changes in consumer spending behaviors; 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; cost reduction initiatives and revenue enhancement strategies; changes to our capital allocation policy; changes in demand for our retail clothing or rental products, including changes in apparel trends and changing consumer preferences; market trends in the retail or rental business; customer confidence and spending patterns; changes in traffic trends in our stores; customer acceptance of our merchandise strategies, including custom clothing and polished casual attire; performance issues with key suppliers; disruptions in our supply chain; severe weather; regional or national civil unrest or acts of civil disobedience; public health crises, including COVID-19; foreign currency fluctuations; government export and import policies, including the enactment of duties or tariffs; advertising or marketing activities of competitors; the impact of cybersecurity threats or data breaches; legal proceedings and the impact of climate change.

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 2,

    

May 4,

    

February 1,

 

2020

2019

2020

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

244,170

$

12,928

$

14,420

Restricted cash

94,450

Accounts receivable, net

 

13,242

 

40,760

 

39,973

Inventories

 

734,379

 

767,694

 

696,657

Assets held for sale

 

2,944

 

 

34,935

Other current assets

 

72,258

 

46,187

 

49,130

Current assets - discontinued operations

167,119

Total current assets

 

1,161,443

 

1,034,688

 

835,115

PROPERTY AND EQUIPMENT, net

 

355,324

 

413,635

 

395,812

OPERATING LEASE RIGHT-OF-USE ASSETS

 

842,088

 

944,531

 

880,291

RENTAL PRODUCT, net

 

99,826

 

103,895

 

92,897

GOODWILL

 

 

78,964

 

79,271

INTANGIBLE ASSETS, net

 

26,896

 

146,983

 

116,843

OTHER ASSETS

 

14,838

 

6,917

 

18,730

NON-CURRENT ASSETS - DISCONTINUED OPERATIONS

 

35,840

TOTAL ASSETS

$

2,500,415

$

2,765,453

$

2,418,959

LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES:

Accounts payable

$

248,684

$

202,095

$

183,897

Accrued expenses and other current liabilities

 

236,205

 

300,689

 

246,110

Current portion of operating lease liabilities

 

209,434

 

180,492

 

186,304

Income taxes payable

 

 

13,949

 

3,416

Current portion of long-term debt

 

1,434,064

 

9,000

 

9,000

Current liabilities - discontinued operations

 

37,022

Total current liabilities

 

2,128,387

 

743,247

 

628,727

LONG-TERM DEBT, net

 

 

1,151,196

 

1,094,398

OPERATING LEASE LIABILITIES

 

689,264

 

795,837

 

726,327

DEFERRED TAXES, net AND OTHER LIABILITIES

 

61,089

 

64,791

 

67,813

NON-CURRENT LIABILITIES - DISCONTINUED OPERATIONS

 

14,428

Total liabilities

 

2,878,740

 

2,769,499

 

2,517,265

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' DEFICIT:

Preferred stock

 

 

 

Common stock

 

510

 

504

 

508

Capital in excess of par

 

516,459

 

507,039

 

514,397

Accumulated deficit

 

(838,553)

 

(470,411)

 

(568,697)

Accumulated other comprehensive loss

 

(46,741)

 

(41,178)

 

(34,514)

Treasury stock

(10,000)

(10,000)

Total shareholders' deficit

 

(378,325)

 

(4,046)

 

(98,306)

TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT

$

2,500,415

$

2,765,453

$

2,418,959

See Notes to Condensed Consolidated Financial Statements.

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TAILORED BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) EARNINGS

(In thousands, except per share data)

(Unaudited)

For the Three Months Ended

    

May 2, 2020

    

May 4, 2019

 

Net sales:

    

    

    

Retail clothing product

$

249,142

$

594,779

Rental services

 

22,253

 

93,740

Alteration and other services

 

15,308

 

36,143

Total net sales

 

286,703

 

724,662

Cost of sales:

Retail clothing product

 

131,892

 

269,191

Rental services

 

4,674

 

13,017

Alteration and other services

 

19,338

 

33,847

Occupancy costs

 

101,113

 

103,732

Total cost of sales

 

257,017

 

419,787

Gross margin:

Retail clothing product

 

117,250

 

325,588

Rental services

 

17,579

 

80,723

Alteration and other services

 

(4,030)

 

2,296

Occupancy costs

 

(101,113)

 

(103,732)

Total gross margin

 

29,686

 

304,875

Advertising expense

 

22,747

 

44,669

Selling, general and administrative expenses

 

154,082

 

231,018

Goodwill and intangible asset impairment charges

 

167,966

 

Asset impairment charges

 

26,319

 

184

Gain on sale of trademarks, net

(82,690)

Operating (loss) income

(258,738)

29,004

Interest income

 

59

 

96

Interest expense

 

(17,726)

 

(18,663)

(Loss) earnings before income taxes

 

(276,405)

 

10,437

(Benefit) provision for income taxes

 

(6,517)

 

3,957

Net (loss) earnings from continuing operations

 

(269,888)

 

6,480

Earnings from discontinued operations, net of tax

 

 

662

Net (loss) earnings

$

(269,888)

$

7,142

Net (loss) earnings from continuing operations per common share:

Basic

$

(5.55)

$

0.13

Diluted

$

(5.55)

$

0.13

Net earnings from discontinued operations per common share:

Basic

$

$

0.01

Diluted

$

$

0.01

Net (loss) earnings per common share:

Basic

$

(5.55)

$

0.14

Diluted

$

(5.55)

$

0.14

Weighted-average common shares outstanding:

Basic

 

48,596

 

50,280

Diluted

 

48,596

 

50,587

See Notes to Condensed Consolidated Financial Statements.

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TAILORED BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

 

For the Three Months Ended

    

May 2,

    

May 4,

 

 

2020

2019

Net (loss) earnings

$

(269,888)

$

7,142

Currency translation adjustments

 

(3,902)

 

(1,585)

Unrealized loss on cash flow hedges, net of tax

 

(8,325)

 

(5,614)

Comprehensive loss

$

(282,115)

$

(57)

See Notes to Condensed Consolidated Financial Statements.

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TAILORED BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ (DEFICIT) EQUITY

(In thousands)

(Unaudited)

Accumulated

 

Capital

Other

Treasury

 

Common

in Excess

Accumulated

Comprehensive

Stock, at

Total

Stock

of Par

Deficit

Loss

Cost

Deficit

 

BALANCES — February 1, 2020

 

$

508

 

$

514,397

 

$

(568,697)

 

$

(34,514)

 

$

(10,000)

 

$

(98,306)

Net loss

 

(269,888)

 

(269,888)

Other comprehensive loss

 

(12,227)

 

(12,227)

Reduction of dividends accrued upon cancellation of unvested equity awards

 

32

 

32

Share-based compensation

 

1,967

 

1,967

Common stock issued — 178,261 shares

 

2

160

 

162

Tax payments related to vested deferred stock units

 

(65)

 

(65)

BALANCES — May 2, 2020

$

510

$

516,459

$

(838,553)

$

(46,741)

$

(10,000)

$

(378,325)

Accumulated

 

Capital

Other

Total

 

Common

in Excess

Accumulated

Comprehensive

Equity

Stock

of Par

Deficit

Loss

(Deficit)

 

BALANCES — February 2, 2019

 

$

501

 

$

505,157

 

$

(468,048)

 

$

(33,979)

 

$

3,631

Net earnings

 

7,142

7,142

Other comprehensive loss

 

(7,199)

(7,199)

Cumulative adjustment upon ASC 842 adoption (see Note 15)

(402)

(402)

Cash dividends — $0.18 per share

 

(9,103)

(9,103)

Share-based compensation

 

2,398

2,398

Common stock issued — 306,505 shares

 

3

424

427

Tax payments related to vested deferred stock units

 

(940)

(940)

BALANCES — May 4, 2019

$

504

$

507,039

$

(470,411)

$

(41,178)

$

(4,046)

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TAILORED BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

For the Three Months Ended

 

May 2,

May 4,

    

2020

    

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) earnings

$

(269,888)

$

7,142

Adjustments to reconcile net (loss) earnings to net cash (used in) provided by operating activities:

Depreciation and amortization

 

25,511

 

26,695

Non-cash lease expense

 

48,675

 

49,969

Rental product amortization

 

2,285

 

8,348

Goodwill and intangible asset impairment charges

 

167,966

 

Asset impairment charges

 

26,319

 

184

Amortization of deferred financing costs

447

486

Gain on sale of trademarks, net

(82,690)

Gain on disposition of assets, net

 

(10)

 

Share-based compensation

 

1,967

 

2,398

Deferred tax expense

 

23,931

 

1,599

Other

 

50

 

85

Changes in operating assets and liabilities:

Accounts receivable

 

20,692

 

(7,504)

Inventories

 

(40,304)

 

(44,900)

Rental product

 

(9,759)

(12,831)

Other assets

 

(24,062)

 

(269)

Accounts payable, accrued expenses and other current liabilities

 

17,494

 

30,872

Income taxes payable

(3,416)

(28)

Operating lease and other liabilities

 

(26,572)

 

(50,452)

Net cash (used in) provided by operating activities

 

(121,364)

 

11,794

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures

 

(9,003)

 

(21,691)

Proceeds from sale of trademarks

 

115,000

 

Proceeds from divestiture of business, net

5,944

Proceeds from sales of property and equipment

 

2,082

 

Net cash provided by (used in) investing activities

 

114,023

 

(21,691)

CASH FLOWS FROM FINANCING ACTIVITIES:

Payments on term loan

(4,500)

 

(4,870)

Proceeds from asset-based revolving credit facility

357,500

399,500

Payments on asset-based revolving credit facility

(22,500)

 

(399,500)

Cash dividends paid

(112)

 

(9,590)

Proceeds from issuance of common stock

162

427

Tax payments related to vested deferred stock units

(65)

 

(940)

Net cash provided by (used in) financing activities

330,485

 

(14,973)

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

 

1,056

 

(812)

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

 

324,200

 

(25,682)

Cash, cash equivalents and restricted cash at beginning of period

 

14,420

 

55,431

Cash, cash equivalents and restricted cash at end of period(1)

$

338,620

$

29,749

(1)Includes restricted cash of $94.5 million at May 2, 2020.

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.  Certain prior period amounts have been reclassified to conform to the current period presentation.

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 1, 2020.

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.”) requires management to make estimates and assumptions that affect the reported amounts and related disclosures.  Actual amounts could differ from those estimates.

As discussed in Note 4, during the third quarter of 2019, we completed the sale of our corporate apparel business.    Amounts presented on the condensed consolidated balance sheet and condensed consolidated statements of (loss) earnings for all prior periods related to the corporate apparel business have been reclassified as discontinued operations.  Unless noted otherwise, discussion in these notes to the condensed consolidated financial statements pertain to our continuing operations.

Impact of the COVID-19 Pandemic — The outbreak of the novel coronavirus (“COVID-19”) had a significant impact on our business, financial condition, results of operations and cash flows for the three months ended May 2, 2020.  On March 17, 2020, we announced the temporary closure of our retail locations in the U.S. and Canada which continued through the end of our first quarter.  In conjunction with our decision to extend the temporary closure of our stores, we also furloughed all of our U.S. store employees, most of our U.S. distribution network and the majority of our office employees, and we implemented the temporary layoff of all Canadian store employees and a significant portion of Canadian employees in our Canadian distribution network and offices.

During the three months ended May 2, 2020, we recorded a total of $194.3 million of non-cash impairment charges related to goodwill, intangible and long-lived assets.  See Notes 3 and 16 for additional information.

Also, we took steps to increase our liquidity and preserve financial flexibility including borrowings of $310.0 million under our $550 million asset-based credit facility (the “ABL Facility”), significantly reducing inventory purchases, capital expenditures, advertising spend and store and other general and administrative costs, as well as furloughing a significant portion of our employees and implementing temporary salary reductions.  Also, during the first quarter of fiscal 2020, we suspended rent payments under our operating leases for April and May and negotiated rent deferrals for some of our stores, with repayment of such deferred amounts, beginning at the end of 2020 into 2021. See Note 15 for additional information related to the accounting for these rent deferrals.

The extent to which COVID-19 impacts our operations will depend on future developments, which are highly uncertain, including, among others, the duration of the outbreak, additional periods of increases in the number of COVID-19 cases, new information that may emerge concerning the severity of COVID-19 and the actions, especially those taken by governmental authorities, to contain the pandemic or reduce its impact.  We currently expect the impact of COVID-19 on our business and results of operations, including our net sales, earnings and cash flows will be significantly negative for the remainder of fiscal 2020.

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TAILORED BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Going Concern — The accompanying condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”) applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

In accordance with the accounting guidance related to the presentation of financial statements, when preparing financial statements for each annual and interim period, management evaluates whether there are conditions or events that, when considered in the aggregate, raise substantial doubt about a company’s ability to continue as a going concern within one year after the date the financial statements are issued.  In making its assessment, management considered our current financial condition and liquidity sources, including current funds available, forecasted future cash flows and obligations due over the next twelve months.

We have considered the projected impact of COVID-19 on our cash flows and analyzed our future compliance with the financial covenants under our ABL Facility, including an additional discretionary reserve imposed against our borrowing base, as described in Note 19, and based on such projections and analysis, we will not remain in compliance with the fixed charge coverage ratio covenant under the ABL Facility beginning in the fourth quarter of fiscal 2020.  If we violate this covenant and are unable to obtain an amendment or waiver from our lenders, we will be in default under the ABL Facility and our debt could be accelerated by the lenders under the ABL Facility. Because of cross-default provisions in the agreements and instruments governing our indebtedness, a default under the ABL Facility would result in a default under, and could result in the acceleration of, our other indebtedness unless we are able to obtain an amendment or waiver from our lenders.  See Note 6 for additional information on our ABL Facility.

In addition, as described in Note 19, we elected not to make the approximate $6.1 million interest payment due and payable on July 1, 2020, with respect to our 7.00% Senior Notes due 2022 (the "Senior Notes").  We elected to enter into the 30-day grace period with respect to this interest payment. During the grace period, we may elect to pay the interest and thereby remain in compliance with the provisions of our Senior Notes.  If an event of default under the indenture governing the Senior Notes occurs as a result of such non-payment, it would result in a cross-event of default under both the Company’s term loan facility and the ABL Facility unless we are able to obtain an amendment or waiver from our lenders.  As of the date of this filing, we have determined it is not probable that we will make the approximate $6.1 million interest payment; however, we may decide to make the interest payment prior to expiration of the grace period. See Note 6 for additional information on our Senior Notes.

Absent obtaining a waiver from our lenders or negotiating an agreement to avoid acceleration of our indebtedness, we will be in default on all of our indebtedness and we do not have sufficient liquidity to repay the amounts due under our indebtedness, consisting of our term loan, Senior Notes and ABL Facility.  Furthermore, our current forecast for our financial condition and liquidity sources also raises doubt as to our ability to meet other obligations, including interest payments related to our indebtedness and operating lease obligations over the next twelve months.  These conditions raise substantial doubt about our ability to continue as a going concern within one year after these condensed consolidated financial statements are issued.  As of May 2, 2020, our outstanding indebtedness has been classified as current on our condensed consolidated balance sheets.  

As a result of the conditions described above, we have engaged advisors to assist with management’s plans to evaluate several alternatives, including seeking a restructuring, amendment or refinancing of our debt through a private restructuring or reorganization under applicable bankruptcy laws.  Management is also evaluating various alternatives to improve our liquidity, including but not limited to, lease concessions and deferrals, further reductions of operating and capital expenditures, and raising additional capital.  However, there can be no assurances that we will be able to successfully restructure our indebtedness or improve our financial position and liquidity.  Management’s plans are not yet finalized and are subject to numerous uncertainties including negotiations with our lenders and conditions in the credit and capital markets.   As a result, we have concluded that management’s plans do not alleviate substantial doubt about our ability to continue as a going concern.

Accordingly, these condensed consolidated financial statements do not reflect any adjustments related to the recoverability of assets and satisfaction of liabilities that might be necessary should we be unable to continue as a going concern.

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TAILORED BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Recent Accounting Pronouncements AdoptedIn December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes. The guidance removes certain exceptions for recognizing deferred taxes for equity method investments, performing intra-period allocation, and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for goodwill and allocating taxes to members of a consolidated group, among others. This guidance is effective for interim and annual reporting periods beginning after December 15, 2020. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. The transition requirements are dependent upon each amendment within this update and will be applied either prospectively or retrospectively. We adopted ASU 2019-12 in the first quarter of fiscal 2020 on a prospective basis.  The adoption of ASU 2019-12 did not have a material impact on our financial position, results of operations, or cash flows. 

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 is effective for public companies for annual reporting periods beginning after December 15, 2019, and interim periods within those fiscal years.  Early adoption of ASU 2018-15 is permitted.  We adopted ASU 2018-15 in the first quarter of fiscal 2020 and the adoption did not have a material impact on our financial position, results of operations or cash flows.

During the first quarter of fiscal 2020, we adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which required us to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. This replaced the existing incurred loss model and is applicable to the measurement of credit losses on financial assets, including trade receivables. The adoption of ASU 2016-13 did not have a material impact on our financial position, results of operations or cash flows.

In March 2020, the SEC adopted amendments to reduce and simplify the financial disclosure requirements for guarantors and issuers of guaranteed registered securities, and affiliates of such issuers whose securities are collateralized. The amendments will be effective January 4, 2021, but voluntary compliance with the amendments in advance of January 4, 2021 is permitted.  As a result of these amendments, starting with this Quarterly Report, we have elected to provide the simplified financial disclosure requirements, within "Management's Discussion and Analysis of Financial Condition and Results of Operations" herein.

Recent Accounting Pronouncements Not Yet Adopted — We have considered all new accounting pronouncements not yet adopted 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 as disclosed below:

In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which aims to address accounting consequences that could result from the global markets’ anticipated transition away from the use of the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The amendments in this update provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The optional amendments are effective for all entities as of March 12, 2020 and through December 31, 2022. We intend to elect to apply certain of the optional expedients when evaluating the impact of reference rate reform on our debt and derivative instruments that reference LIBOR.

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TAILORED BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2. Sale of Joseph Abboud Trademarks

On March 4, 2020, we closed on our previously announced transaction to sell the Joseph Abboud trademarks to WHP Global (“WHP”) for $115.0 million. We also entered into a licensing agreement with WHP for the exclusive rights to sell and rent Joseph Abboud branded apparel and related merchandise in the U.S. and Canada. As of February 1, 2020, the book value of the Joseph Abboud trademarks was $30.0 million and was included within assets held for sale.  

During the three months ended May 2, 2020, we received cash proceeds of $115.0 million and recorded a gain on the sale of the Joseph Abboud transaction totaling $82.7 million, which reflects the excess of the sale price over the book value, less approximately $2.3 million in related transaction costs, and is included as a separate line in the condensed consolidated statement of (loss) earnings.

Per the provisions of the credit agreement governing our term loan, we plan to reinvest these proceeds in our business over a 365-day period commencing on March 4, 2020.  As a result, the proceeds of the sale, reduced by estimated taxes payable related to the sale and transaction related costs, were deposited in a separate account administered by the term loan agent and are presented as restricted cash on the condensed consolidated balance sheet as of May 2, 2020.  As of May 2, 2020, the restricted cash balance totaled $94.5 million and is primarily restricted for the purchase of property, equipment and other tangible assets to be used in the operations of the business, such as capital expenditures and purchase of rental product.

3.  Goodwill and Other Intangible Assets

Goodwill

Changes in the net carrying amount of goodwill for the three months ended May 2, 2020 are as follows (in thousands):

    

Total

Balance at February 1, 2020

$

79,271

Goodwill impairment charge

(78,029)

Translation adjustment

 

(1,242)

Balance at May 2, 2020

$

Goodwill is evaluated for impairment at least annually. A more frequent evaluation is performed if events or circumstances indicate that impairment could have occurred. Such events or circumstances could include, but are not limited to, new significant negative industry or economic trends, unanticipated changes in the competitive environment, decisions to significantly modify or dispose of operations and a significant sustained decline in the market price of our stock.  As of February 1, 2020, goodwill totaled $79.3 million, with $58.3 million allocated to our Men’s Wearhouse reporting unit and $21.0 million allocated to our Moores reporting unit.  

During the first quarter of 2020, we determined that a triggering event occurred as we concluded that the length of time that the market price of our common stock had been depressed constituted a significant sustained decline in our market capitalization.  In addition, the impact of COVID-19 on our sales, profitability and cash flows resulted in a reduction to our operating forecasts reflecting the uncertainty of the current environment.  As a result, we performed an interim goodwill impairment test.

After completion of the interim goodwill impairment test, we concluded that goodwill was fully impaired and recorded a non-cash goodwill impairment charge of $78.0 million during the first quarter of 2020, which is included as a separate line on the condensed consolidated statement of (loss) earnings.  As of May 2, 2020, May 4, 2019, and February 1, 2020, accumulated goodwill impairment totaled $858.0 million, $780.0 million and $780.0 million, respectively.  

Consistent with the procedures followed in our annual impairment test, we estimated the fair values of each of our reporting units using a combined income and market comparable approach.  Our income approach uses projected future cash flows

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that are discounted using a weighted-average cost of capital analysis that reflects current market conditions.  The market comparable approach primarily considers earnings and other multiples of comparable companies and applies those multiples to certain key drivers of the reporting unit.  We believe these two approaches are appropriate valuation techniques and we weighted the two approaches equally as an estimate of reporting unit fair value for the purposes of our impairment testing.  

Management judgment is a significant factor in the goodwill impairment evaluation process. The computations require management to make estimates and assumptions. Critical assumptions used in the interim impairment test included:

The potential future cash flows of the reporting unit.  The income approach relies on the timing and estimates of future cash flows. The projections use management’s estimates of economic and market conditions over the projected period, including growth rates in revenue, gross margin and expense (all Level 3 inputs in the fair value hierarchy).  During the first quarter of 2020, our estimates of the potential future cash flows for our reporting units were significantly reduced reflecting the impact of COVID-19.  
Selection of an appropriate discount rate.  The income approach requires the selection of an appropriate discount rate, which is based on a weighted-average cost of capital analysis. The discount rate is affected by changes in short-term interest rates and long-term yield as well as variances in the typical capital structure of marketplace participants. The weighted-average cost of capital used to discount the cash flows for the interim goodwill impairment test was 10.0% for the Men’s Wearhouse reporting unit and 10.5% for the Moores reporting unit, which are 100 and 50 basis points, respectively, higher than the last annual test, reflecting the increasing uncertainty resulting from COVID-19.
Selection of comparable companies within the industry.  The determination of the market comparable involves a degree of judgment. Historically, for purposes of the market comparable approach, valuations were determined by calculating average earnings multiples of relevant key drivers from a group of companies that are comparable to the reporting unit being tested and applying those earnings multiples to the key drivers of the reporting unit. For the interim goodwill impairment test, based on our estimates of the future cash flows of the reporting units, we determined that revenue multiples should also be used for the market comparable approach.  For the Men’s Wearhouse reporting unit, a revenue multiple of 0.2 and an earnings multiple of 2.2 were used.  For the Moores reporting unit, a revenue multiple of 0.2 was used.  The decrease in the market multiples of comparable companies within the industry also primarily reflects the impact of COVID-19 and an increasingly uncertain environment.
Reconciliation of the total fair values of our reporting units to our market capitalization.  After completing an estimate of the fair value of each reporting unit, we also compared the total fair value of all of our reporting units to our market capitalization, including consideration of a control premium. As a result of the significant sustained decline in our market capitalization, the implied control premium identified in this reconciliation process was not within a reasonable range.  

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Intangible Assets

The gross carrying amount and accumulated amortization of our identifiable intangible assets are as follows (in thousands):

    

May 2,

    

May 4,

February 1,

    

2020

    

2019

    

2020

 

Amortizable intangible assets:

Carrying amount:

Trademarks, tradenames and franchise agreements

$

13,506

$

13,506

$

13,506

Accumulated amortization:

Trademarks, tradenames and franchise agreements

 

(9,910)

 

(9,723)

 

(9,863)

Total amortizable intangible assets, net

 

3,596

 

3,783

 

3,643

Indefinite-lived intangible assets:

Trademarks and tradename

 

23,300

 

143,200

 

113,200

Total intangible assets, net

$

26,896

$

146,983

$

116,843

During the first quarter of 2020, based on the impact of COVID-19 on the performance of the Jos. A. Bank brand, we determined that a triggering event occurred related to our Jos. A. Bank tradename, an indefinite-lived intangible asset.  As a result, we completed an interim impairment test, which resulted in a non-cash impairment charge of $89.9 million, which is included together with the goodwill impairment charge in a separate line on the condensed consolidated statement of (loss) earnings.  As of May 2, 2020, the book value of the Jos. A. Bank tradename is $23.3 million.

If events or circumstances change that would more likely than not reduce the fair value of our Jos. A. Bank tradename, we may be required to record additional impairment charges, which could have a material effect on our results of operations and financial condition.  

We estimated the fair value of the Jos. A. Bank tradename based on an income approach using the relief-from-royalty method.  This approach is dependent upon a number of factors, including estimates of future growth and trends, royalty rates, discount rates and other variables.  For the interim impairment test, our estimates of the revenues and profitability associated with the Jos. A. Bank brand were significantly reduced, primarily reflecting the impact of COVID-19.  In addition, we reduced the royalty rate used to estimate the fair value of the Jos. A. Bank tradename to 0.5%, reflecting the impact of the uncertain environment resulting from COVID-19.  The weighted-average cost of capital used to discount the cash flows for the interim goodwill impairment test was 14.0%, which is 100 basis points higher than the last annual test, also reflecting the increasing uncertainty resulting from COVID-19.

Amortization expense associated with intangible assets subject to amortization totaled less than $0.1 million for the three months ended May 2, 2020 and May 4, 2019. Amortization expense associated with intangible assets subject to amortization at May 2, 2020 is estimated to be $0.1 million for the remainder of fiscal 2020, and $0.2 million each year for fiscal years 2021-2025.

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4. Discontinued Operations

On August 16, 2019, we completed the sale of MWUK Limited, our UK corporate apparel operations conducted under the Dimensions, Alexandra, and Yaffy brand names to Project Dart Bidco Limited, pursuant to a Share Purchase Agreement entered into on August 16, 2019.  In addition, we also completed the sale of Twin Hill Acquisition Company, Inc. (“Twin Hill”), our U.S. corporate apparel operation, to TH Holdco Inc., pursuant to a Stock Purchase Agreement entered into on August 16, 2019.  The aggregate consideration for all of the outstanding equity of MWUK Limited and Twin Hill (collectively, the “corporate apparel business”) was approximately $62 million, subject to certain working capital adjustments. After consideration of working capital adjustments and other related items, we received $49.3 million in cash during the third quarter of 2019 and $5.9 million in cash in the first quarter of fiscal 2020.  

We determined that the sale of the corporate apparel business represents a strategic shift that will have a major effect on our results of operations and, as a result, have reported the disposal as discontinued operations.  We have presented the results of the corporate apparel business within discontinued operations in the condensed consolidated statement of (loss) earnings for all periods presented.  Certain costs previously allocated to the corporate apparel business for segment reporting purposes do not qualify for classification within discontinued operations and have been reallocated to continuing operations.  

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The related assets and liabilities of the corporate apparel business are presented as current and non-current assets and liabilities of discontinued operations in the condensed consolidated balance sheet as of May 4, 2019. The following table provides details of the carrying amounts of major classes of assets and liabilities related to discontinued operations as of May 4, 2019 (in thousands):

May 4,

2019

ASSETS

Cash and cash equivalents

$

16,821

Accounts receivable, net

39,863

Inventories

106,718

Other current assets

3,717

Total current assets

167,119

Property and equipment, net

14,745

Other assets

21,095

Total assets

$

202,959

LIABILITIES

Accounts payable

$

16,397

Accrued expenses and other current liabilities

20,625

Total current liabilities

37,022

Other liabilities

14,428

Total liabilities

$

51,450

The following table provides details of the amounts reflected in earnings from discontinued operations, net of tax in the condensed consolidated statements of (loss) earnings for the three months ended May 4, 2019 (in thousands):

For the Three

Months Ended

    

May 4, 2019

    

Net sales

$

56,725

Cost of sales

41,044

Selling, general and administrative expenses

14,383

Earnings from discontinued operations before taxes

1,298

Income tax expense

636

Earnings from discontinued operations, net of tax

$

662

The cash flows related to discontinued operations have not been segregated, and are included in the condensed consolidated statement of cash flows. The following table provides selected information on cash flows related to discontinued operations for the three months ended May 4, 2019 (in thousands):

For the Three

Months Ended

    

May 4, 2019

Depreciation and amortization

$

1,442

Capital expenditures

$

1,155

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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5. (Loss) Earnings Per Share

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

For the Three Months Ended

May 2,

May 4,

    

2020

    

2019

 

Numerator

Net (loss) earnings from continuing operations

$

(269,888)

$

6,480

Earnings from discontinued operations, net of tax

 

 

662

Net (loss) earnings

$

(269,888)

$

7,142

Denominator

Basic weighted-average common shares outstanding

 

48,596

 

50,280

Dilutive effect of share-based awards

 

 

307

Diluted weighted-average common shares outstanding

 

48,596

 

50,587

Net (loss) earnings from continuing operations per common share:

Basic

$

(5.55)

$

0.13

Diluted

$

(5.55)

$

0.13

Net earnings from discontinued operations per common share:

Basic

$

$

0.01

Diluted

$

$

0.01

Net (loss) earnings per common share:

Basic

$

(5.55)

$

0.14

Diluted

$

(5.55)

$

0.14

For the three months ended May 2, 2020 and May 4, 2019, 4.0 million and 2.0 million anti-dilutive shares of common stock were excluded from the calculation of diluted (loss) earnings per common share, respectively.

6. Debt

In 2014, our subsidiary The Men's Wearhouse, Inc. (“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 facility (the “Original ABL Facility”) with certain of our other U.S. subsidiaries and Moores the Suit People Corp. (“Moores the Suit People” or “Moores”), one of our Canadian subsidiaries, as co-borrowers. In addition, in 2014, Men's Wearhouse issued $600.0 million in aggregate principal amount of Senior Notes.

In October 2017, Men’s Wearhouse amended the Original 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, Men’s Wearhouse refinanced the Original Term Loan, and in October 2018, amended its term loan (the term loan, as so refinanced and amended, the “Term Loan” and, together with the ABL Facility, the “Credit Facilities”) to reduce the interest rate margin. 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

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(Unaudited)

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 2, 2020, our total leverage and secured leverage ratios are above the maximum thresholds specified therefor in the agreement governing the Term Loan.  As a result, we are subject to additional restrictions, primarily related to the size of any incremental term loan facilities being limited to a maximum of $250.0 million.  

In addition, our ABL Facility contains certain covenants and restrictions, including instances where lenders could assume control of our cash (commonly referred to as cash dominion) and the imposition of a financial maintenance covenant, which would become effective if availability falls below various thresholds.  The requirement for cash dominion is triggered when Availability (as defined in the ABL Facility) is less than the greater of (1) 12.5% of the Line Cap (as defined in the ABL Facility), which as of May 2, 2020 was $62.1 million, or (2) $60.5 million.  The requirement to comply with the financial maintenance covenant (a fixed charge coverage ratio) is triggered when Availability is less than the greater of (1) 10% of the Line Cap, which as of May 2, 2020 was $49.7 million, or (2) $44.0 million.  

On March 16, 2020, in an abundance of caution and as a proactive measure, due to uncertainty regarding the potential impact of COVID-19 and our liquidity projections, we borrowed $260.0 million under our ABL Facility. Furthermore, after assessing the remaining Availability under the ABL Facility and determining that additional borrowings were prudent to maximize cash on hand, on each of March 19, 2020 and March 31, 2020, respectively, we borrowed an additional $25.0 million under the ABL Facility.

As of May 2, 2020, $385.0 million in borrowings were outstanding under the ABL Facility (which was also the maximum borrowing outstanding during the first quarter of 2020) with a weighted average interest rate of approximately 1.9%. In addition, at May 2, 2020, letters of credit totaling approximately $22.9 million were issued and outstanding primarily as collateral for workers’ compensation claims. Availability under the ABL Facility as of May 2, 2020 was $88.8 million, which exceeds the cash dominion and fixed charge coverage ratio minimum thresholds (such that cash dominion and fixed charge coverage testing did not apply).  Availability under the ABL Facility may decrease in the event the agent under our ABL Facility imposes reserves against borrowing base.  See Note 19 for additional information about the imposition of a reserve after May 2, 2020.

Credit Facilities

In April 2018, we refinanced the Original Term Loan, resulting in our Term Loan facility totaling $900.0 million.  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.  As noted above, we are currently limited to a maximum of $250.0 million for such incremental borrowings.

The Term Loan amortizes in an annual amount equal to 1.0% of the principal amount of the Term Loan, payable quarterly (which commenced on May 1, 2018).  The Term Loan matures on April 9, 2025, subject to a maturity provision that would accelerate the maturity of the Term Loan to April 1, 2022 if any of the Company’s obligations under its Senior Notes remain outstanding on April 1, 2022.

The Term Loan bears 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%).  In October 2018, we amended the Term Loan resulting in a reduction in the interest rate margin of 25 basis points.  As a result of the amendment, the margins for borrowings under the Term Loan are 3.25% for LIBOR and 2.25% for the base rate.  In connection with the October 2018 amendment of the Term Loan, we incurred deferred financing costs of $1.1 million, which will be amortized over the life of the Term Loan using the interest method.  The maturity date for the Term Loan remains April 9, 2025, and all other material provisions of the Term Loan remain unchanged.

The interest rate on the Term Loan is based on 1-month LIBOR, which was 0.30% at May 2, 2020. However, the Term Loan interest rate is subject to a LIBOR floor of 1%, plus the applicable margin of 3.25%, results in a total interest rate of

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4.25%.  We have two interest rate swap agreements where the variable rates due under the Term Loan have been exchanged for a fixed rate. At May 2, 2020, the total notional amount under these interest rate swaps is $705.0 million.  Please see Note 17 for additional information on our interest rate swaps.

As a result of our interest rate swaps, 80% of the variable interest rate under the Term Loan has been converted to a fixed rate and, as of May 2, 2020, the Term Loan had a weighted average interest rate of 5.62%.

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, which 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%.  

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, Men’s Wearhouse and its U.S. subsidiaries and, in the case of the ABL Facility, Moores The Suit People. 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.  

Senior Notes

The Senior Notes are guaranteed, jointly and severally, on an unsecured basis by Tailored Brands, Inc. and each of our U.S. subsidiaries (collectively, the “Guarantors”). The Senior Notes and the related guarantees are senior unsecured obligations of Men’s Wearhouse, as issuer, and the Guarantors, respectively, and will rank equally with all of Men’s Wearhouse’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 on January 1 and July 1 of each year.  See Note 19 for additional information related to the payment of interest on the Senior Notes.

We may redeem some or all of the Senior Notes at any time on or after July 1, 2017 at the redemption prices set forth in the indenture governing the Senior Notes (the “Indenture”).  Upon the occurrence of certain specific changes of control, we may be required to offer to purchase the Senior Notes at 101% of their aggregate principal amount plus accrued and unpaid interest thereon to the date of purchase.

Long-Term Debt

As discussed in Note 1, there is substantial doubt about our ability to continue as a going concern within one year after these condensed consolidated financial statements are issued.   As we have determined it is not probable that we will make the interest payment on our Senior Notes described in Note 1, all debt has been reclassified to current on the condensed consolidated balance sheets as of May 2, 2020.  The following table provides details on our long-term debt as of May 2, 2020, May 4, 2019 and February 1, 2020 (in thousands):

May 2,

May 4,

February 1,

    

2020

    

2019

    

2020

 

Term Loan

$

877,130

$

886,130

$

881,630

Senior Notes

 

173,816

 

228,607

 

173,816

ABL Facility

 

385,000

 

48,500

 

50,000

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

 

(1,882)

 

(3,041)

 

(2,048)

Total long-term debt, net

 

1,434,064

 

1,160,196

 

1,103,398

Current portion of long-term debt

 

(1,434,064)

 

(9,000)

 

(9,000)

Total long-term debt, net of current portion

$

$

1,151,196

$

1,094,398

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7. Revenue Recognition

Revenues

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