Picture 2

News Release

 

    Contact:

 Investor Relations

 (281) 776-7575

 ir@tailoredbrands.com

 

 Julie MacMedan, VP, Investor Relations

 Tailored Brands, Inc.

 

   FOR IMMEDIATE RELEASE

 

TAILORED BRANDS, INC. REPORTS

FISCAL 2019 SECOND QUARTER RESULTS

 

·

Q2 2019 GAAP diluted EPS of $0.68 and adjusted diluted EPS(1) of $0.82

·

Company expects Q3 2019 adjusted diluted EPS(1) of $0.40 to $0.45

·

Company to redeploy capital to accelerated debt repayment and share repurchases; suspends quarterly cash dividend starting in Q4 2019

 

FREMONT, CA — September 11, 2019 — Tailored Brands, Inc. (NYSE: TLRD) today announced consolidated financial results for the fiscal second quarter ended August 3, 2019.

For the second quarter ended August 3, 2019, the Company reported GAAP diluted earnings per share of $0.68 and adjusted diluted earnings per share(1) of $0.82, compared to GAAP diluted earnings per share of $0.97 and adjusted diluted earnings per share(1) of $1.07 last year. 

 

Second quarter 2019 results exclude net charges of $10.4 million comprised of $11.3 million of charges related to our multi-year cost savings and operational excellence programs (consisting of $6.1 million in consulting costs, $2.9 million related to the closure of a distribution center in Canada, $2.2 million in severance costs and $0.1 million in lease termination costs), offset by a $0.9 million net favorable adjustment primarily related to a derivative instrument entered into for the corporate apparel business.

 

“We were pleased to deliver second quarter comparable sales in line with our guidance and adjusted earnings per share above our guidance,” said Tailored Brands President and CEO Dinesh Lathi.  “We are also seeing early customer response to our initiatives, which gives us confidence that unleashing the potential for this business to generate healthy positive comps lies in our transformational strategies of providing i) personalized products and services, ii) inspiring and seamless experiences in and across every channel, and iii) brands that stand for more than just price.”

 

Lathi added, “On our year-end call, we indicated that we had work ahead of us to transform our customer-facing experience to one that can generate sustainable and profitable growth.  We also said that, while we transform the experience, we would execute and invest in a focused manner with a clear goal of continuing to generate cash that we would deploy responsibly.  Our sale of the corporate apparel business is consistent with our commitment to focused execution and investment.  The Board of Directors’ unanimous decision to suspend the quarterly cash dividend for reallocation to debt repayment and share repurchases is consistent with our commitment to responsible allocation of capital.  And while our Q2 results and Q3 guidance reflect what we’ve previously shared about the need to transform our customer experience and the fact that transformations take time, the early signs of customer response to our strategies indicate that we are making healthy progress on our journey.” 


(1)

In the second quarter of fiscal 2019,  adjusted items consist of $11.3 million in costs related to our multi-year cost savings and operational excellence programs including consulting, the closure of a distribution center in Canada, severance and lease termination costs, offset by a $0.9 million net favorable adjustment primarily related to a derivative instrument entered into for the corporate apparel business.  In the second quarter of fiscal 2018, adjusted items consist of a loss on extinguishment of debt related to the partial redemption of $175 million of the Company’s senior notes, costs related to the closure of a rental product distribution center and an unfavorable final working capital adjustment related to the divestiture of the MW Cleaners business.  See Use of Non-GAAP Financial Measures for additional information on items excluded from adjusted EPS for the second quarter of fiscal 2019 and with respect to the Company’s outlook for the third quarter of fiscal 2019.

1

 

Second Quarter Fiscal 2019 Results

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales Summary(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

% Total Sales

 

Comparable Sales

 

 

 

(U.S. dollars in millions)

 

Change

 

Change(2)

 

 

Retail

$

736.1

 

(4.1)

%

 

(3.6)

%

 

Men's Wearhouse 

$

423.5

 

(4.9)

%

 

(4.3)

%

 

Jos. A. Bank

$

166.1

 

(3.7)

%

 

(3.3)

%

 

K&G

$

82.7

 

(1.1)

%

 

(1.3)

%

 

Moores(3) 

$

63.9

 

(4.1)

%

 

(2.5)

%

 

Corporate Apparel

$

53.3

 

(3.9)

%

 

 

 

 

Total Company

$

789.5

 

(4.1)

%

 

 

 

 


(1)

Amounts may not sum due to rounded numbers.

(2)

Comparable sales is defined as net sales from stores open at least 12 months at period end and includes e-commerce sales.

(3)

The Moores comparable sales change is based on the Canadian dollar.

 

Net Sales

 

Total net sales decreased 4.1% to $789.5 million. Retail net sales decreased 4.1% primarily due to a decrease in retail segment comparable sales of 3.6%.  Corporate apparel net sales decreased 3.9%, or $2.2 million, primarily due to the impact of a weaker British pound this year compared to last year.

 

Comparable Sales

 

Men’s Wearhouse comparable sales decreased 4.3%. Comparable sales for clothing decreased due to a decrease in transactions,  average unit retail and units per transaction. Comparable rental services revenue decreased 3.1%, primarily reflecting the continuing trend to purchase suits for special occasions.  

 

Jos. A. Bank comparable sales decreased 3.3% primarily from a decrease in average unit retail partially offset by an increase in both transactions and units per transaction.    

 

K&G comparable sales decreased 1.3% primarily due to a decrease in both units per transaction and transactions partially offset by an increase in average unit retail. 

 

Moores comparable sales decreased 2.5% primarily due to a decrease in both transactions and average unit retail partially offset by an increase in units per transaction.

 

Gross Margin

 

On a GAAP basis, consolidated gross margin was $333.7 million, a decrease of $35.2 million, primarily due to the decrease in net sales.  As a percent of sales, consolidated gross margin decreased 250 basis points to 42.3%.  On an adjusted basis, consolidated gross margin decreased 260 basis points to 42.6% primarily due to  a lower retail gross margin rate.

 

On a GAAP basis, retail gross margin was $319.1 million, a decrease of $34.9 million.  As a percent of sales, retail gross margin decreased 270 basis points to 43.4%.  On an adjusted basis, retail gross margin decreased $35.9 million and the retail gross margin rate decreased 290 basis points to 43.7%,  primarily due to increased promotional activities, as well as deleveraging of occupancy costs.

 

 

 

2

Advertising Expense

 

Advertising expense decreased $5.5 million to $33.2 million primarily driven by reductions in television advertising reflecting a shift to digital advertising as well as the timing of marketing spend.  As a percent of sales, advertising expense decreased 50 basis points to 4.2%. 

 

Selling, General and Administrative Expenses (“SG&A”)

 

On a GAAP basis, SG&A decreased $2.3 million to $240.0 million and increased 100 basis points as a percent of sales.  On an adjusted basis, SG&A decreased $9.3 million to $232.5 million primarily due to lower incentive and share-based compensation.  As a percent of sales, adjusted SG&A was flat at 29.4% primarily due to deleveraging from lower sales.

 

Operating Income

 

On a GAAP basis, operating income was $60.6 million compared to $88.0 million last year and operating margin decreased 300 basis points.  On an adjusted basis, operating income was $71.0 million compared to $92.5 million last year.  As a percent of sales, adjusted operating margin decreased 220 basis points to 9.0%.

 

Net Interest Expense and Net Loss on Extinguishment of Debt

 

Net interest expense was $18.1 million compared to $20.7 million last year.  The decrease in interest expense was due to the reduction of our outstanding debt. 

 

On a GAAP basis, there was no net loss on extinguishment of debt this year compared to an $8.1 million loss on extinguishment of debt last year.  Last year’s net loss on extinguishment of debt consisted of the 3.5% premium on the $175 million partial redemption of the Company’s senior notes as well as the write-off of related deferred financing costs.  On an adjusted basis, there was no net loss on extinguishment of debt this year or last year. 

 

Effective Tax Rate

 

On a GAAP basis, the effective tax rate was 19.4% compared to 16.7% last year.  On an adjusted basis, the effective tax rate was 21.2% compared to 23.9% last year.

 

Net Earnings and EPS 

 

On a GAAP basis, net earnings were $34.3 million compared to net earnings of $49.2 million last year.  Diluted EPS was $0.68 compared to diluted EPS of $0.97 last year.

 

On an adjusted basis, net earnings were $41.7 million compared to net earnings of $54.6 million last year.  Adjusted diluted EPS was $0.82 compared to adjusted diluted EPS of $1.07 last year.

 

 

 

3

Balance Sheet Highlights

 

Cash and cash equivalents at the end of the second quarter of 2019 were $19.5 million, a decrease of $48.7 million compared to the end of the second quarter of 2018 primarily due to the decrease in sales and the use of cash on hand for costs related to our multi-year cost savings and operational excellence programs and debt reduction.  At the end of the second quarter of 2019, there were $45.0 million of borrowings outstanding on our revolving credit facility.  Total liquidity at the end of the second quarter was $421.3 million, comprised of availability on our revolving credit facility and cash and cash equivalents.

 

Inventories increased $60.4 million, or 7.7%, to $847.0 million at the end of the second quarter of 2019 compared to the end of the second quarter of 2018.  The increase was primarily driven by higher levels of raw materials including fabric in support of basic, replenishment product.

 

Total debt at the end of the second quarter of 2019 was approximately $1.2 billion, down $61.7 million compared to the end of the second quarter of 2018.  During the second quarter of 2019, the Company made its scheduled $2.3 million payment on its term loan and repaid $3.5 million on its revolving credit facility. 

 

Cash flow from operating activities for the six months ended August 3, 2019 was $33.3 million compared to $198.0 million last year.  The decrease  was driven by lower net earnings after adjusting for non-cash items, an increase in inventories, and fluctuations in accounts payable and accrued liabilities primarily due to timing.

 

Capital expenditures for the six months ended August 3, 2019 were $39.1 million compared to $24.6 million last year.

 

Sale of Corporate Apparel Business

 

As previously announced, on August 16, 2019, the Company closed the sale of its corporate apparel business for total cash consideration of $62 million, subject to certain working capital adjustments.  The Company will use cash proceeds from the transaction to reinvest in its business in accordance with the provisions of its term loan. This will free up funds previously slated for capital expenditures for debt reduction.  The Company expects to present the sale as a discontinued operation beginning in the third quarter of fiscal 2019.

 

Capital Allocation Policy Update

 

After extensive review, the Board of Directors approved an update to the Company’s capital allocation policy.  Effective in the fourth quarter, the Company’s quarterly cash dividend will be suspended and redeployed for accelerated debt repayment and share repurchases.  This does not impact the previously approved quarterly cash dividend of $0.18 per share payable on September 27, 2019, to shareholders of record at the close of business on September 17, 2019.

 

Suspending the quarterly cash dividend of $0.18 per share is expected to make available approximately $36.5 million on an annualized basis.  The Company has $48.0 million available for share repurchases under its previously authorized 2013 share repurchase program.

 

 

 

 

 

 

 

 

 

 

 

 

4

Q3 FISCAL 2019 OUTLOOK

 

The Company’s outlook for the third quarter of fiscal 2019 is as follows:

 

·

Earnings per Share: The Company expects to achieve adjusted diluted EPS in the range of $0.40 to $0.45, excluding the impact of any share repurchases.

·

Comparable Sales: The Company expects comparable sales for:

o

Men’s Wearhouse to be down 3% to 5%

o

Jos. A. Bank to be down 2% to 4%  

o

K&G to be down 2% to 4%

o

Moores to be down 4% to 6%.

·

Effective Tax Rate: The Company expects an effective tax rate of 23% to 24%. 

·

Real Estate: The Company expects net closures of seven  stores, across Men’s Wearhouse and Jos. A. Bank.

·

The Company’s outlook excludes expected costs for third party domain experts and other actions associated with its cost savings and operational excellence programs. 

 

 

STORE INFORMATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

August 3, 2019

 

August 4, 2018

 

February 2, 2019

 

 

Number

 

Sq. Ft.

 

Number

 

Sq. Ft.

 

Number

 

Sq. Ft.

 

 

of Stores

 

(000's)

 

of Stores

 

(000's)

 

of Stores

 

(000's)

 

Men's Wearhouse(a)

720

 

4,038.8

 

719

 

4,036.3

 

720

 

4,035.5

 

Men's Wearhouse and Tux

45

 

66.3

 

49

 

73.3

 

46

 

68.8

 

Jos. A. Bank(b)

476

 

2,244.4

 

487

 

2,293.7

 

484

 

2,280.2

 

K&G(c)

88

 

2,028.4

 

88

 

2,028.4

 

88

 

2,028.4

 

Moores

126

 

787.4

 

126

 

787.5

 

126

 

787.4

 

Total

1,455

 

9,165.3

 

1,469

 

9,219.2

 

1,464

 

9,200.3

 


(a)

Includes one Joseph Abboud store.

(b)

Excludes 14 franchise stores.

(c)

84 stores offering women’s apparel at the end of each period, respectively.

Conference Call and Webcast Information

 

At 5:00 p.m. Eastern time on Wednesday, September 11, 2019, management will host a conference call and webcast to discuss fiscal 2019 second quarter results.  To access the conference call, please dial 201-689-8029.  To access the live webcast, visit the Investor Relations section of the Company’s website at http://ir.tailoredbrands.com.  A webcast archive will be available free on the website for approximately 90 days.

 

About Tailored Brands, Inc.

 

As the leading specialty retailer of men’s tailored clothing and largest men’s formalwear provider in the U.S. and Canada, Tailored Brands helps men love the way they look for work and special occasions.  We serve our customers through an expansive omni-channel network that includes over 1,400 locations in the U.S. and Canada as well as our branded e-commerce websites.  Our brands include Men's Wearhouse, Jos. A. Bank, Joseph Abboud,  Moores Clothing for Men and K&G. 

 

For additional information on Tailored Brands, please visit the Company’s websites at www.tailoredbrands.com,  www.menswearhouse.com,  www.josbank.comwww.josephabboud.com,  www.mooresclothing.com,  and www.kgstores.com

5

This press release contains forward-looking information, including the Company’s statements regarding its Q3 2019 outlook for adjusted earnings per share, comparable sales, effective tax rate and store closures. In addition, words such as “expects,” “anticipates,” “envisions,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “guidance,” “may,” “projections,” and “business outlook,” variations of such words and similar expressions are intended to identify such forward-looking statements.  The forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.  Any forward-looking statements that we make herein 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 to our capital allocation policy; 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, 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.

(Tables Follow)

6

 

 

 

 

 

 

 

 

 

 

 

 

 

TAILORED BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

 

For the Three Months Ended August 3, 2019 and August 4, 2018

(In thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

% of

 

 

 

 

% of

 

 

 

 

2019

Sales

 

 

 

2018

Sales

 

 

Net sales:

 

 

 

 

 

 

 

 

 

 

         Retail clothing product

$

580,900

73.6

%

 

$

605,788

73.6

%

 

         Rental services

 

120,329

15.2

%

 

 

125,095

15.2

%

 

         Alteration and other services   

 

34,916

4.4

%

 

 

37,031

4.5

%

 

              Total retail sales

 

736,145

93.2

%

 

 

767,914

93.3

%

 

              Corporate apparel clothing product

 

53,343

6.8

%

 

 

55,516

6.7

%

 

                   Total net sales

 

789,488

100.0

%

 

 

823,430

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

                  Total cost of sales

 

455,761

57.7

%

 

 

454,528

55.2

%

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin (a):

 

 

 

 

 

 

 

 

 

 

       Retail clothing product

 

321,853

55.4

%

 

 

346,763

57.2

%

 

       Rental services

 

100,556

83.6

%

 

 

105,729

84.5

%

 

       Alteration and other services

 

1,302

3.7

%

 

 

3,282

8.9

%

 

       Occupancy costs

 

(104,585)

(14.2)

%

 

 

(101,772)

(13.3)

%

 

              Total retail gross margin

 

319,126

43.4

%

 

 

354,002

46.1

%

 

              Corporate apparel clothing product

 

14,601

27.4

%

 

 

14,900

26.8

%

 

                  Total gross margin

 

333,727

42.3

%

 

 

368,902

44.8

%

 

 

 

 

 

 

 

 

 

 

 

 

Advertising expense

 

33,164

4.2

%

 

 

38,661

4.7

%

 

Selling, general and administrative expenses

 

239,973

30.4

%

 

 

242,255

29.4

%

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

60,590

7.7

%

 

 

87,986

10.7

%

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(18,101)

(2.3)

%

 

 

(20,742)

(2.5)

%

 

Loss on extinguishment of debt, net

 

 —

 —

%

 

 

(8,122)

(1.0)

%

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before income taxes

 

42,489

5.4

%

 

 

59,122

7.2

%

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

8,223

1.0

%

 

 

9,884

1.2

%

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

$

34,266

4.3

%

 

$

49,238

6.0

%

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per diluted common share

$

0.68

 

 

 

$

0.97

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average diluted common shares outstanding

 

50,624

 

 

 

 

50,851

 

 

 


(a)

Gross margin percent of sales is calculated as a percentage of related sales.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

 

 

 

TAILORED BRANDS, INC.

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

 

 

 

(Unaudited)

 

 

 

 

 

 

 

For the Six Months Ended August 3, 2019 and August 4, 2018

(In thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

 

 

% of

 

 

 

 

% of

 

 

 

 

2019

Sales

 

 

 

2018

Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales:

 

 

 

 

 

 

 

 

 

 

         Retail clothing product

$

1,175,679

74.8

%

 

$

1,219,432

74.3

%

 

         Rental services

 

214,069

13.6

%

 

 

225,322

13.7

%

 

         Alteration and other services   

 

71,059

4.5

%

 

 

78,003

4.8

%

 

              Total retail sales

 

1,460,807

93.0

%

 

 

1,522,757

92.8

%

 

              Corporate apparel clothing product

 

110,068

7.0

%

 

 

118,637

7.2

%

 

                   Total net sales

 

1,570,875

100.0

%

 

 

1,641,394

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

                   Total cost of sales

 

916,592

58.3

%

 

 

927,268

56.5

%

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin (a):

 

 

 

 

 

 

 

 

 

 

       Retail clothing product

 

647,988

55.1

%

 

 

684,187

56.1

%

 

       Rental services

 

181,279

84.7

%

 

 

191,299

84.9

%

 

       Alteration and other services

 

3,598

5.1

%

 

 

10,076

12.9

%

 

       Occupancy costs

 

(208,317)

(14.3)

%

 

 

(202,791)

(13.3)

%

 

              Total retail gross margin

 

624,548

42.8

%

 

 

682,771

44.8

%

 

              Corporate apparel clothing product

 

29,735

27.0

%

 

 

31,355

26.4

%

 

                  Total gross margin

 

654,283

41.7

%

 

 

714,126

43.5

%

 

 

 

 

 

 

 

 

 

 

 

 

Advertising expense

 

78,207

5.0

%

 

 

79,894

4.9

%

 

Selling, general and administrative expenses

 

485,184

30.9

%

 

 

493,349

30.1

%

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

90,892

5.8

%

 

 

140,883

8.6

%

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(36,668)

(2.3)

%

 

 

(42,638)

(2.6)

%

 

Loss on extinguishment of debt, net

 

 —

 —

%

 

 

(20,833)

(1.3)

%

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before income taxes

 

54,224

3.5

%

 

 

77,412

4.7

%

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

12,816

0.8

%

 

 

14,265

0.9

%

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

$

41,408

2.6

%

 

$

63,147

3.8

%

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per diluted common share

$

0.82

 

 

 

$

1.24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average diluted common shares outstanding:

 

50,606

 

 

 

 

50,785

 

 

 


(a)

Gross margin percent of sales is calculated as a percentage of related sales.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

 

 

 

 

 

 

 

 

 

 

TAILORED BRANDS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

 

August 3,

 

August 4,

 

 

 

2019

 

2018

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

19,476

 

$

68,215

 

 

Accounts receivable, net

 

65,176

 

 

65,099

 

 

Inventories

 

846,952

 

 

786,510

 

 

Other current assets

 

63,882

 

 

87,491

 

 

  Total current assets

 

995,486

 

 

1,007,315

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

421,188

 

 

427,107

 

Operating lease right-of-use assets

 

918,541

 

 

 -

 

Rental product, net

 

99,085

 

 

111,345

 

Goodwill

 

79,283

 

 

103,686

 

Intangible assets, net

 

155,309

 

 

165,881

 

Other assets

 

5,806

 

 

13,497

 

 

  Total assets

$

2,674,698

 

$

1,828,831

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

187,946

 

$

145,981

 

 

Accrued expenses and other current liabilities

 

289,810

 

 

313,319

 

 

Current portion of operating lease liabilities

 

185,800

 

 

 -

 

 

Income taxes payable

 

10,102

 

 

6,659

 

 

Current portion of long-term debt

 

9,000

 

 

9,000

 

 

  Total current liabilities

 

682,658

 

 

474,959

 

 

 

 

 

 

 

 

 

Long-term debt, net

 

1,145,651

 

 

1,207,377

 

Operating lease liabilities

 

763,865

 

 

 -

 

Deferred taxes and other liabilities

 

77,961

 

 

146,484

 

 

  Total liabilities

 

2,670,135

 

 

1,828,820

 

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

Preferred stock

 

 -

 

 

 -

 

 

Common stock

 

506

 

 

498

 

 

Capital in excess of par

 

510,021

 

 

498,670

 

 

Accumulated deficit

 

(445,392)

 

 

(470,377)

 

 

Accumulated other comprehensive loss

 

(60,572)

 

 

(28,780)

 

 

  Total shareholders' equity

 

4,563

 

 

11

 

 

   Total liabilities and shareholders' equity

$

2,674,698

 

$

1,828,831

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

 

TAILORED BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

For the Six Months Ended August 3, 2019 and August 4, 2018

(In thousands)

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

 

 

2019

 

 

2018

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net earnings

$

41,408

 

$

63,147

 

 

Adjustments to net earnings:

 

 

 

 

 

 

 

  Depreciation and amortization

 

53,810

 

 

52,719

 

 

  Non-cash lease expense

 

98,683

 

 

 -

 

 

  Rental product amortization

 

19,047

 

 

19,755

 

 

  Asset impairment charges

 

184

 

 

269

 

 

  Loss on extinguishment of debt, net

 

 -

 

 

20,833

 

 

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

 

972

 

 

2,228

 

 

  Loss on disposition of assets

 

2,946

 

 

7,768

 

 

  Other

 

8,004

 

 

7,423

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

5,952

 

 

10,461

 

 

Inventories

 

(22,507)

 

 

42,186

 

 

Rental product

 

(21,450)

 

 

(12,102)

 

 

Other assets

 

(15,621)

 

 

(9,372)

 

 

Accounts payable, accrued expenses and other current liabilities

 

(30,928)

 

 

(3,497)

 

 

Income taxes payable

 

(5,789)

 

 

697

 

 

Other liabilities

 

(101,388)

 

 

(4,524)

 

 

       Net cash provided by operating activities

 

33,323

 

 

197,991

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Capital expenditures

 

(39,092)

 

 

(24,645)

 

 

Proceeds from divestiture of business

 

 -

 

 

17,755

 

 

       Net cash used in investing activities

 

(39,092)

 

 

(6,890)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Payments on old term loan

 

 -

 

 

(993,420)

 

 

Proceeds from new term loan

 

 -

 

 

895,500

 

 

Payments on new term loan

 

(7,120)

 

 

(4,500)

 

 

Proceeds from asset-based revolving credit facility

 

673,500

 

 

199,500

 

 

Payments on asset-based revolving credit facility

 

(677,000)

 

 

(95,000)

 

 

Repurchase and retirement of senior notes

 

 -

 

 

(199,365)

 

 

Deferred financing costs

 

 -

 

 

(5,644)

 

 

Cash dividends paid

 

(18,784)

 

 

(18,744)

 

 

Proceeds from issuance of common stock

 

879

 

 

4,113

 

 

Tax payments related to vested deferred stock units

 

(1,052)

 

 

(6,501)

 

 

       Net cash used in financing activities

 

(29,577)

 

 

(224,061)

 

 

Effect of exchange rate changes

 

(609)

 

 

(2,432)

 

 

 

 

 

 

 

 

 

DECREASE IN CASH AND CASH EQUIVALENTS

 

(35,955)

 

 

(35,392)

 

 

Balance at beginning of period

 

55,431

 

 

103,607

 

 

Balance at end of period

$

19,476

 

$

68,215

 

 

 

 

 

 

10

TAILORED BRANDS, INC.

UNAUDITED NON-GAAP FINANCIAL MEASURES

(In thousands, except per share amounts)

 

Use of Non-GAAP Financial Measures

 

In addition to providing financial results in accordance with GAAP, we have provided adjusted information for the fiscal second quarters and six months ended August 3, 2019 and August 4, 2018.  This non-GAAP financial information is provided to enhance the user’s overall understanding of the Company’s financial performance by removing the impacts of large, unusual or unique transactions that we believe are not indicative of our core business results.  For the second quarter of fiscal 2019, these items consist of costs related to our multi-year cost savings and operational excellence programs, offset by a net favorable adjustment related to the corporate apparel business.   For the second quarter of fiscal 2018, adjusted items consisted of a loss on extinguishment of debt related to the partial redemption of $175 million of the Company’s senior notes, costs related to the closure of a rental product distribution center and an unfavorable final working capital adjustment related to the divestiture of our MW Cleaners business.

 

Management uses these adjusted results to assess the Company’s performance, to make decisions about how to allocate resources and to develop expectations for future performance.  In addition, adjusted EPS is used as a performance measure in the Company’s executive compensation program to determine the number of performance units that are ultimately earned for certain equity awards.

 

The non-GAAP financial information should be considered in addition to, not as a substitute for or as being superior to, financial information prepared in accordance with GAAP.  Management strongly encourages investors and shareholders to review the Company’s financial statements and publicly filed reports in their entirety and not to rely on any single financial measure. 

 

A reconciliation of third quarter fiscal 2019 adjusted EPS, which is a forward-looking non-GAAP financial measure, to the most directly comparable GAAP financial measure, is not provided because the Company is unable to provide such reconciliation without unreasonable effort.  The inability to provide this reconciliation is due to the uncertainty and inherent difficulty predicting the occurrence, the financial impact and the periods in which the non-GAAP adjustments may be recognized.  These GAAP measures may include the impact of items such as costs related to our multi-year cost savings and operational excellence programs and the tax effect of such items. Historically, the Company has excluded these types of items from non-GAAP financial measures.  The Company currently expects to continue to exclude these items in future disclosures of non-GAAP financial measures and may also exclude other items that may arise. The decisions and events that typically lead to the recognition of non-GAAP adjustments are inherently unpredictable as to if or when they may occur. For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could be material to future results.

 

Reconciliations of non-GAAP information to our actual results follow and amounts may not sum due to rounded numbers.  In addition, only the line items affected by adjustments are shown in the tables.

 

 

 

 

 

 

 

 

 

 

 

 

 

11

GAAP to Non-GAAP Adjusted Consolidated Statements of Earnings Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP to Non-GAAP Adjusted - Three Months Ended August 3, 2019

 

 

 

 

 

Multi-Year Cost

 

Divestiture of

 

 

 

 

 

 

 

GAAP

 

Savings and Operational

 

Corporate

 

Total

 

Non-GAAP

 

Consolidated Results

 

Results

 

Excellence Program(1)

 

Apparel(2)

 

Adjustments

 

Adjusted Results

 

Rental services gross margin

 

$

100,556

 

$

2,938

 

$

 -

 

$

2,938

 

$

103,494

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total retail gross margin

 

 

319,126

 

 

2,938

 

 

 -

 

 

2,938

 

 

322,064

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total gross margin

 

 

333,727

 

 

2,938

 

 

 -

 

 

2,938

 

 

336,665

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

239,973

 

 

(8,404)

 

 

915

 

 

(7,489)

 

 

232,484

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income(3)

 

 

60,590

 

 

11,342

 

 

(915)

 

 

10,427

 

 

71,017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes(4)

 

 

8,223

 

 

 

 

 

 

 

 

3,001

 

 

11,224

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

34,266

 

 

 

 

 

 

 

 

7,426

 

 

41,692