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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended August 1, 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: 1-4365

OXFORD INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Georgia

   

58-0831862

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

999 Peachtree Street, N.E., Suite 688, Atlanta, Georgia 30309

(Address of principal executive offices)                               (Zip Code)

(404) 659-2424

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $1 par value

OXM

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, a smaller reporting company or an 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

As of August 28, 2020, there were 16,875,836 shares of the registrant’s common stock outstanding.

Table of Contents

OXFORD INDUSTRIES, INC.

INDEX TO FORM 10-Q

For the Second Quarter of Fiscal 2020

Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets (Unaudited)

5

Condensed Consolidated Statements of Operations (Unaudited)

6

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

7

Condensed Consolidated Statements of Cash Flows (Unaudited)

8

Notes to Condensed Consolidated Financial Statements (Unaudited)

9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3. Quantitative and Qualitative Disclosures About Market Risk

45

Item 4. Controls and Procedures

45

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

46

Item 1A. Risk Factors

46

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

46

Item 3. Defaults Upon Senior Securities

46

Item 4. Mine Safety Disclosures

46

Item 5. Other Information

46

Item 6. Exhibits

47

SIGNATURES

48

2

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CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

Our SEC filings and public announcements may include forward-looking statements about future events. Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "will" and similar expressions identify forward-looking statements, which typically are not historical in nature. We intend for all forward-looking statements contained herein, in our press releases or on our website, and all subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf, to be covered by the safe harbor provisions for forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (which Sections were adopted as part of the Private Securities Litigation Reform Act of 1995). Such statements are subject to a number of risks, uncertainties and assumptions including, without limitation, the impact of the current coronavirus (COVID-19) pandemic (which among other things, may affect many of the following risks); demand for our products, which may be impacted by competitive conditions and/or evolving consumer shopping patterns; macroeconomic factors that may impact consumer discretionary spending for apparel and related products; costs of products as well as the raw materials used in those products; expected pricing levels; costs of labor; the timing of shipments requested by our wholesale customers; changes in international, federal or state tax, trade and other laws and regulations, including the potential imposition of additional duties; weather; fluctuations and volatility in global financial markets; retention of and disciplined execution by key management; the timing and cost of store and restaurant openings and remodels as well as other capital expenditures; acquisition and disposition activities, including our ability to timely recognize expected synergies from acquisitions; expected outcomes of pending or potential litigation and regulatory actions; the impact of any restructuring initiatives we may undertake in one or more of our business lines; access to capital and/or credit markets; the impact of the CARES Act and other legislation; changes in accounting standards and related guidance; and factors that could affect our consolidated effective tax rate, including estimated Fiscal 2020 taxable losses eligible for carry back to pre-U.S. Tax Reform periods. Forward-looking statements reflect our expectations at the time such forward-looking statements are made, based on information available at such time, and are not guarantees of performance. Although we believe that the expectations reflected in such forward-looking statements are reasonable, these expectations could prove inaccurate as such statements involve risks and uncertainties, many of which are beyond our ability to control or predict. Should one or more of these risks or uncertainties, or other risks or uncertainties not currently known to us or that we currently deem to be immaterial, materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Important factors relating to these risks and uncertainties include, but are not limited to, those described in Part I. Item 1A. Risk Factors contained in our Annual Report on Form 10-K for Fiscal 2019, as updated in Part II, Item 1A. Risk Factors contained in this report, and those described from time to time in our future reports filed with the SEC. We caution that one should not place undue reliance on forward-looking statements, which speak only as of the date on which they are made. We disclaim any intention, obligation or duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

3

Table of Contents

DEFINITIONS

As used in this report, unless the context requires otherwise, "our," "us" or "we" means Oxford Industries, Inc. and its consolidated subsidiaries; "SG&A" means selling, general and administrative expenses; "SEC" means the United States Securities and Exchange Commission; "FASB" means the Financial Accounting Standards Board; "ASC" means the FASB Accounting Standards Codification; "GAAP" means generally accepted accounting principles in the United States; "TBBC" means The Beaufort Bonnet Company; “CARES Act” means the Coronavirus Aid, Relief and Economic Security Act; and “U.S. Tax Reform” means the United States Tax Cuts and Jobs Act as enacted on December 22, 2017. Additionally, the terms listed below reflect the respective period noted:

Fiscal 2021

    

52 weeks ending January 29, 2022

Fiscal 2020

    

52 weeks ending January 30, 2021

Fiscal 2019

52 weeks ended February 1, 2020

Fourth Quarter Fiscal 2020

13 weeks ending January 30, 2021

Third Quarter Fiscal 2020

13 weeks ending October 31, 2020

Second Quarter Fiscal 2020

13 weeks ended August 1, 2020

First Quarter Fiscal 2020

13 weeks ended May 2, 2020

Fourth Quarter Fiscal 2019

13 weeks ended February 1, 2020

Third Quarter Fiscal 2019

13 weeks ended November 2, 2019

Second Quarter Fiscal 2019

13 weeks ended August 3, 2019

First Quarter Fiscal 2019

13 weeks ended May 4, 2019

First Half Fiscal 2020

26 weeks ended August 1, 2020

First Half Fiscal 2019

26 weeks ended August 3, 2019

4

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par amounts)

(unaudited)

    

August 1,

    

February 1,

    

August 3,

2020

2020

2019

ASSETS

Current Assets

Cash and cash equivalents

$

97,089

$

52,460

$

30,756

Receivables, net

 

28,920

 

58,724

 

59,176

Inventories, net

 

148,578

 

152,229

 

152,672

Prepaid expenses and other current assets

 

23,830

 

25,413

 

22,440

Total Current Assets

$

298,417

$

288,826

$

265,044

Property and equipment, net

 

180,284

 

191,517

 

189,410

Intangible assets, net

 

156,739

 

175,005

 

175,591

Goodwill

 

23,866

 

66,578

 

66,585

Operating lease assets

254,230

287,181

288,928

Other assets, net

 

39,013

 

24,262

 

24,636

Total Assets

$

952,549

$

1,033,369

$

1,010,194

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

  

 

  

 

  

Current Liabilities

 

  

 

  

 

  

Accounts payable

$

47,904

$

65,491

$

48,998

Accrued compensation

 

14,332

 

19,363

 

19,195

Current portion of operating lease liabilities

 

65,653

 

50,198

 

54,044

Accrued expenses and other liabilities

 

45,812

 

42,727

 

41,882

Total Current Liabilities

$

173,701

$

177,779

$

164,119

Long-term debt

 

65,000

 

 

Non-current portion of operating lease liabilities

 

255,935

 

291,886

 

290,133

Other liabilities

 

18,471

 

18,566

 

17,077

Deferred income taxes

 

7,892

 

16,540

 

19,916

Commitments and contingencies

 

 

 

Shareholders’ Equity

 

 

 

  

Common stock, $1.00 par value per share

 

16,876

 

17,040

 

17,035

Additional paid-in capital

 

151,720

 

149,426

 

145,123

Retained earnings

 

267,273

 

366,793

 

362,407

Accumulated other comprehensive loss

 

(4,319)

 

(4,661)

 

(5,616)

Total Shareholders’ Equity

$

431,550

$

528,598

$

518,949

Total Liabilities and Shareholders’ Equity

$

952,549

$

1,033,369

$

1,010,194

See accompanying notes.

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OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

    

Second Quarter

    

First Half

Fiscal 2020

Fiscal 2019

Fiscal 2020

Fiscal 2019

Net sales

$

191,988

$

302,000

$

352,331

$

583,973

Cost of goods sold

 

87,251

 

122,175

 

153,520

 

238,379

Gross profit

$

104,737

$

179,825

$

198,811

$

345,594

SG&A

 

115,663

 

143,403

 

238,664

 

283,217

Impairment of goodwill and intangible assets

60,452

Royalties and other operating income

 

2,909

 

3,837

 

6,799

 

7,624

Operating (loss) income

$

(8,017)

$

40,259

$

(93,506)

$

70,001

Interest expense, net

 

676

 

419

 

1,334

 

1,090

(Loss) earnings before income taxes

$

(8,693)

$

39,840

$

(94,840)

$

68,911

Income tax (benefit) provision

 

(2,606)

 

10,004

 

(21,969)

 

17,418

Net (loss) earnings

$

(6,087)

$

29,836

$

(72,871)

$

51,493

Net (loss) earnings per share:

 

  

 

  

 

  

 

  

Basic

$

(0.37)

$

1.78

$

(4.40)

$

3.08

Diluted

$

(0.37)

$

1.76

$

(4.40)

$

3.05

Weighted average shares outstanding:

 

  

 

  

 

  

 

  

Basic

 

16,547

 

16,760

 

16,580

 

16,736

Diluted

 

16,547

 

16,907

 

16,580

 

16,878

Dividends declared per share

$

0.25

$

0.37

$

0.50

$

0.74

See accompanying notes.

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OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

    

Second Quarter

    

First Half

Fiscal 2020

Fiscal 2019

Fiscal 2020

Fiscal 2019

Net (loss) earnings

$

(6,087)

$

29,836

$

(72,871)

$

51,493

Other comprehensive income (loss), net of taxes:

 

  

 

  

 

  

 

  

Net foreign currency translation adjustment

 

933

 

(133)

 

342

 

(521)

Comprehensive (loss) income

$

(5,154)

$

29,703

$

(72,529)

$

50,972

See accompanying notes.

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OXFORD INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

First Half

    

Fiscal 2020

    

Fiscal 2019

Cash Flows From Operating Activities:

 

  

 

  

 

Net (loss) earnings

$

(72,871)

$

51,493

Adjustments to reconcile net earnings (loss) to cash flows from operating activities:

 

  

 

  

Depreciation

 

23,092

 

19,402

Amortization of intangible assets

 

559

 

584

Impairment of goodwill and intangible assets

60,452

Equity compensation expense

 

3,566

 

3,791

Amortization of deferred financing costs

 

172

 

212

Deferred income taxes (benefit) expense

 

(8,648)

 

1,274

Changes in operating assets and liabilities, net of acquisitions and dispositions:

 

  

 

  

Receivables, net

 

30,227

 

10,131

Inventories, net

 

3,986

 

7,680

Prepaid expenses and other current assets

 

1,584

 

3,825

Current liabilities

 

(3,609)

 

(31,983)

Other balance sheet changes

 

(14,186)

 

858

Cash provided by operating activities

$

24,324

$

67,267

Cash Flows From Investing Activities:

 

  

 

  

Purchases of property and equipment

 

(13,722)

 

(15,976)

Other investing activities

 

(3,000)

 

Cash used in investing activities

$

(16,722)

$

(15,976)

Cash Flows From Financing Activities:

 

  

 

  

Repayment of revolving credit arrangements

 

(170,312)

 

(122,241)

Proceeds from revolving credit arrangements

 

235,312

 

109,248

Repurchase of common stock

(18,053)

(894)

Proceeds from issuance of common stock

 

766

 

885

Repurchase of equity awards for employee tax withholding liabilities

 

(1,870)

 

(2,453)

Cash dividends declared and paid

 

(8,429)

 

(12,601)

Other financing activities

 

(459)

 

(1,033)

Cash provided by (used in) financing activities

$

36,955

$

(29,089)

Net change in cash and cash equivalents

$

44,557

$

22,202

Effect of foreign currency translation on cash and cash equivalents

 

72

 

227

Cash and cash equivalents at the beginning of year

 

52,460

 

8,327

Cash and cash equivalents at the end of the period

$

97,089

$

30,756

See accompanying notes.

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OXFORD INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

SECOND QUARTER OF FISCAL 2020

1.    Basis of Presentation:  The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial reporting and the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. We believe the accompanying unaudited condensed consolidated financial statements reflect all normal, recurring adjustments that are necessary for a fair presentation of our financial position and results of operations as of the dates and for the periods presented. Results of operations for the interim periods presented are not necessarily indicative of results to be expected for our full fiscal year.

The preparation of our unaudited condensed consolidated financial statements in conformity with GAAP requires us to make certain estimates and assumptions that affect the amounts reported as assets, liabilities, revenues and expenses in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. We assessed certain accounting matters, including the carrying value of goodwill, intangible assets and long-lived assets, provisions for credit losses, inventory markdowns and the estimated effective tax rate, that require consideration of forecasted financial information based on information reasonably available to us as well as the uncertain future impacts of the novel coronavirus (COVID-19) pandemic. These assessments resulted in the recognition of certain charges in the First Half of Fiscal 2020, as discussed below. Future changes in the business environment, our expectations and assumptions as compared to the information at the time of this filing regarding the actual magnitude and duration of the COVID-19 pandemic and other factors could have a material impact on our consolidated financial statements in future periods.

COVID-19 Pandemic

In March 2020, the World Health Organization characterized the outbreak of COVID-19 as a pandemic. COVID-19 had a significant effect on overall economic conditions and our operations, resulting in a significant net sales reduction and a net loss in the First Half of Fiscal 2020. While our mission remains the enhancement of long-term shareholder value, our focus during this crisis has been, and will continue to be, (1) the health and well-being of our employees, customers and communities, (2) protecting the reputation, value and image of our brands and (3) preserving liquidity.

Due to the COVID-19 pandemic, we saw reduced consumer traffic starting in early March 2020 and temporarily closed all our retail and restaurant locations in North America on March 17, 2020. Subsequent to those closures, we also temporarily closed all our retail locations in Australia. We began reopening our stores and restaurants in a phased approach on May 3, 2020 with additional stores and restaurants reopening throughout the Second Quarter of Fiscal 2020.

The COVID-19 pandemic is expected to continue to have a material adverse impact on our business, financial condition, results of operations and cash flows for the foreseeable future, due to decreased consumer traffic in stores and restaurants; uncertainty as to the continued strength of our brands’ e-commerce websites during the pendency of the pandemic; overall changes in consumer confidence and consumer spending habits; reduced demand from our wholesale customers, several of which have filed for bankruptcy or are undergoing restructurings and closures; any potential disruptions to our supply chain; and a slowdown in the U.S. and global economies.

For many reasons, including those identified above, the full magnitude of the COVID-19 pandemic continues to be difficult to predict at this time, and its ultimate duration and severity will depend on future developments. We believe that cash on hand and our credit facility provide adequate funds to support our operating, capital expenditure and debt service requirements for Fiscal 2020 and the near term. We could experience other potential adverse impacts in the future as a result of the COVID-19 pandemic including additional charges resulting from adjustments to the carrying amount of goodwill, intangible assets and long-lived assets, provisions for credit losses and inventory markdowns as well as potential changes to our estimated effective tax rate.

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Due to the COVID-19 pandemic in the First Quarter of Fiscal 2020, net sales in each of our operating groups decreased from prior periods resulting in significantly lower operating results, including operating losses in each group other than Lilly Pulitzer. As a result of the COVID-19 impact on our First Quarter of Fiscal 2020 operating results, as well as lower operating results projected for future periods, we concluded that a goodwill impairment test triggering event had occurred during the First Quarter of Fiscal 2020 for the goodwill associated with our Lilly Pulitzer, Southern Tide and TBBC reporting units. Further, we determined that an intangible asset impairment test triggering event had occurred in the First Quarter of Fiscal 2020 for our indefinite-lived Tommy Bahama, Lilly Pulitzer and Southern Tide trademarks. These goodwill and indefinite-lived intangible asset triggering events required the need for a quantitative interim impairment assessment in accordance with our accounting policies as described in Note 1 to our consolidated financial statements included in our Annual Report on Form 10-K for Fiscal 2019. These assessments in the First Quarter of Fiscal 2020 concluded that the fair values of the Southern Tide goodwill and indefinite-lived intangible assets as of May 2, 2020 did not exceed their respective carrying values, resulting in impairment charges as discussed in Note 4. These impairment charges, which totaled $60 million, were recorded in impairment of goodwill and intangible assets in our consolidated statements of operations in the First Quarter of Fiscal 2020. We determined there were no additional triggering events that occurred in the Second Quarter of Fiscal 2020 that would require an additional interim impairment test for our goodwill and intangible assets during the Second Quarter of Fiscal 2020.

In the First Quarter of Fiscal 2020, due to the lower operating results and lower projected operating results, we performed recoverability tests for certain other non-current assets, including property and equipment, finite-lived intangible assets and operating lease assets, and we determined that the amounts included in the asset group were recoverable, except for a small charge related to a finite-lived intangible asset in Lanier Apparel. In the Second Quarter of Fiscal 2020, due to changes in the planned use of certain assets, including notice of termination of certain retail store leases, we recognized impairment charges of $3 million for certain fixed assets and operating lease assets, with about half of the amounts included in SG&A and the remainder included in cost of goods sold in our consolidated statements of operations.

The significant accounting policies applied during the interim periods presented are consistent with the significant accounting policies described in our Annual Report on Form 10-K for Fiscal 2019, except for the adoption of the credit losses and income tax guidance discussed below.

Accounting Standards Adopted in Fiscal 2020

In June 2016, the FASB issued guidance, as amended, related to the measurement of credit losses on financial instruments. This guidance amended the previous incurred loss model by requiring that companies use a forward-looking current expected loss approach to estimate credit losses on certain financial instruments, including trade and other receivables, as well as other financial assets and instruments. We estimate current expected credit losses based on our historical collection experience, the financial condition of our customers, an evaluation of current economic conditions and anticipated trends. We adopted the guidance on the first day of Fiscal 2020 resulting in a charge to retained earnings of $0.5 million and a reduction to various asset amounts included in our consolidated balance sheet.

In December 2019, the FASB amended its guidance related to accounting for income taxes. This guidance amended and simplified the accounting for income taxes by removing certain exceptions in existing guidance to reduce complexity in certain areas. On the first day of Fiscal 2020, we adopted the provisions related to classification of franchise taxes partially based on income and changes in ownership of foreign equity method investments or foreign subsidiaries on a modified retrospective basis while we adopted the other provisions on a prospective basis. The adoption of the new guidance did not have a material impact on our consolidated financial statements.

Other recently issued guidance that was adopted in Fiscal 2020 did not have a material impact on our consolidated financial statements upon adoption.

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Recently Issued Accounting Standards Applicable to Future Periods

Recent accounting pronouncements pending adoption are either not applicable or not expected to have a material impact on our consolidated financial statements.

2.    Operating Group Information:   We identify our operating groups based on the way our management organizes the components of our business for purposes of allocating resources and assessing performance. Our operating group structure reflects a brand-focused management approach, emphasizing operational coordination and resource allocation across each brand’s direct to consumer, wholesale and licensing operations, as applicable. Our business is primarily operated through our Tommy Bahama, Lilly Pulitzer, Lanier Apparel and Southern Tide operating groups.

Tommy Bahama, Lilly Pulitzer and Southern Tide each design, source, market and distribute apparel and related products bearing their respective trademarks and license their trademarks for other product categories, while Lanier Apparel designs, sources and distributes branded and private label men’s tailored clothing, sportswear and other products. Corporate and Other is a reconciling category for reporting purposes and includes our corporate offices, substantially all financing activities, the elimination of inter-segment sales and any other items that are not allocated to the operating groups, including LIFO inventory accounting adjustments. Because our LIFO inventory pool does not correspond to our operating group definitions, LIFO inventory accounting adjustments are not allocated to the operating groups. Corporate and Other also includes the operations of other businesses which are not included in our operating groups, including the operations of TBBC, Duck Head and our Lyons, Georgia distribution center. As a result of certain organizational and management reporting changes in the First Quarter of Fiscal 2020, our Duck Head operations, which were previously included in Lanier Apparel, are considered part of and included in Corporate and Other. All prior period amounts for Lanier Apparel and Corporate and Other have been restated to conform to the presentation in the current period.

The table below presents certain financial information (in thousands) about our operating groups, as well as Corporate and Other. For a more extensive description of our operating groups, see Part I, Item 1. Business included in our Annual Report on Form 10-K for Fiscal 2019.

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Table of Contents

    

Second Quarter

First Half

    

Fiscal 2020

    

Fiscal 2019

    

Fiscal 2020

    

Fiscal 2019

Net sales

 

  

 

  

 

  

 

  

 

Tommy Bahama

$

95,254

$

188,870

$

182,238

$

353,600

Lilly Pulitzer

 

73,860

 

75,555

 

123,009

 

148,150

Lanier Apparel

 

8,450

 

20,466

 

19,175

 

46,620

Southern Tide

 

8,812

 

12,468

 

17,113

 

26,602

Corporate and Other

 

5,612

 

4,641

 

10,796

 

9,001

Consolidated net sales

$

191,988

$

302,000

$

352,331

$

583,973

Depreciation and amortization

 

  

 

  

 

  

 

  

Tommy Bahama

$

9,194

$

6,907

$

16,994

$

13,747

Lilly Pulitzer

 

3,015

 

2,381

 

5,331

 

5,064

Lanier Apparel

 

247

 

141

 

349

 

281

Southern Tide

 

169

 

135

 

313

 

269

Corporate and Other

 

333

 

285

 

664

 

625

Consolidated depreciation and amortization

$

12,958

$

9,849

$

23,651

$

19,986

Operating income (loss)

 

  

 

  

 

  

 

  

Tommy Bahama

$

(12,712)

$

23,218

$

(36,074)

$

38,410

Lilly Pulitzer

 

16,264

 

20,449

 

20,410

 

35,701

Lanier Apparel

 

(6,134)

 

400

 

(8,771)

 

1,767

Southern Tide

 

(979)

 

1,834

 

(64,345)

 

4,351

Corporate and Other

 

(4,456)

 

(5,642)

 

(4,726)

 

(10,228)

Consolidated operating (loss) income

 

(8,017)

 

40,259

$

(93,506)

$

70,001

Interest expense, net

 

676

 

419

 

1,334

 

1,090

(Loss) earnings before income taxes

$

(8,693)

$

39,840

$

(94,840)

$

68,911

    

August 1, 2020

 

February 1, 2020

    

August 3, 2019

Assets

 

  

  

 

  

Tommy Bahama (1)

$

605,448

$

668,197

$

655,836

Lilly Pulitzer (2)

 

191,099

 

199,913

 

208,121

Lanier Apparel (3)

 

31,740

 

43,533

 

43,545

Southern Tide (4)

 

32,918

 

99,667

 

98,036

Corporate and Other (5)

 

91,344

 

22,059

 

4,656

Consolidated Total Assets

$

952,549

$

1,033,369

$

1,010,194

(1)Decrease in Tommy Bahama total assets from February 1, 2020 was primarily due to lower operating lease assets, receivables, fixed assets and inventories. Decrease in Tommy Bahama total assets from August 3, 2019 was primarily due to the same reasons except that inventories increased from August 3, 2019.
(2)Decrease in Lilly Pulitzer total assets from February 1, 2020 was primarily due to lower operating lease assets and fixed assets. Decrease in Lilly Pulitzer total assets from August 3, 2019 was primarily due to lower inventories, operating lease assets and fixed assets.
(3)Decrease in Lanier Apparel total assets from February 1, 2020 and August 3, 2019 was primarily due to lower receivables.
(4)Decrease in Southern Tide total assets from February 1, 2020 and August 3, 2019 was primarily due to the $60 million impairment charge for goodwill and intangible assets as well as lower inventories and receivables.
(5)Increase in Corporate and Other total assets from February 1, 2020 and August 3, 2019 was primarily due to increased cash and cash equivalents, as well as increased non-current income tax receivables, investments in unconsolidated entities and inventories.

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The tables below quantify, for each operating group and in total, the amount of net sales (in thousands) and net sales by distribution channel as a percentage of net sales for each period presented.

Second Quarter Fiscal 2020

 

    

Net Sales

    

Retail

    

E-commerce

    

Restaurant

    

Wholesale

    

Other

 

Tommy Bahama

$

95,254

 

33

%  

48

%  

9

%  

10

%  

%

Lilly Pulitzer

 

73,860

 

14

%  

71

%  

%  

15

%  

%

Lanier Apparel

 

8,450

 

%  

1

%  

%  

99

%  

%

Southern Tide

 

8,812

 

5

%  

43

%  

%  

52

%  

%

Corporate and Other

 

5,612

 

%  

78

%  

%  

16

%  

6

%

Total

$

191,988

 

22

%  

56

%  

4

%  

18

%  

%

Second Quarter Fiscal 2019

 

    

Net Sales

    

Retail

    

E-commerce

    

Restaurant

    

Wholesale

    

Other

 

Tommy Bahama

$

188,870

 

50

%  

23

%  

11

%  

16

%  

%

Lilly Pulitzer

 

75,555

 

51

%  

29

%  

%  

20

%  

%

Lanier Apparel

 

20,466

 

%  

%  

%  

100

%  

%

Southern Tide

 

12,468

 

%  

22

%  

%  

78

%  

%

Corporate and Other

 

4,641

 

%  

61

%  

%  

31

%  

8

%

Total

$

302,000

 

44

%  

23

%  

7

%  

26

%  

%

First Half Fiscal 2020

 

    

Net Sales

    

Retail

    

Ecommerce

    

Restaurant

    

Wholesale

    

Other

 

Tommy Bahama

$

182,238

 

35

%  

39

%  

11

%  

15

%  

%

Lilly Pulitzer

 

123,009

 

18

%  

62

%  

%  

20

%  

%

Lanier Apparel

 

19,175

 

%  

%  

%  

100

%  

%

Southern Tide

 

17,113

 

3

%  

32

%  

%  

65

%  

%

Corporate and Other

 

10,796

 

%  

70

%  

%  

24

%  

6

%

Consolidated net sales

$

352,331

 

25

%  

45

%  

6

%  

24

%  

%

    

First Half Fiscal 2019

 

    

Net Sales

    

Retail

    

Ecommerce

    

Restaurant

    

Wholesale

    

Other

 

Tommy Bahama

$

353,600

 

49

%  

19

%  

13

%  

19

%  

%

Lilly Pulitzer

 

148,150

 

46

%  

27

%  

%  

27

%  

%

Lanier Apparel

 

46,620

 

%  

%  

%  

100

%  

%

Southern Tide

 

26,602

 

%  

17

%  

%  

83

%  

%

Corporate and Other

 

9,001

 

%  

62

%  

%  

29

%  

9

%

Consolidated net sales

$

583,973

 

41

%  

20

%  

8

%  

31

%  

%

3.    Revenue Recognition and Receivables: Our revenue consists of direct to consumer sales, including our retail store, e-commerce and restaurant operations, and wholesale sales, as well as royalty income, which is included in royalties and other income in our consolidated statements of operations. We recognize revenue when performance obligations under the terms of the contracts with our customers are satisfied. Our accounting policies related to revenue recognition for each type of contract with customers, including a description of the related performance obligations, return rights, allowances, discounts, credit terms and other information, is described in the significant accounting policies described in our Annual Report on Form 10-K for Fiscal 2019.

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The table below quantifies the amount of net sales by distribution channel (in thousands) for each period presented.

    

Second Quarter

    

First Half

    

Fiscal 2020

    

Fiscal 2019

    

Fiscal 2020

    

Fiscal 2019

Retail

$

41,783

$

133,250

$

87,286

$

241,256

E-commerce

 

106,789

 

70,437

 

160,483

 

118,426

Restaurant

 

8,528

 

20,531

 

20,291

 

44,132

Wholesale

 

34,489

 

77,273

 

83,547

 

179,199

Other

 

399

 

509

 

724

 

960

Net sales

$

191,988

$

302,000

$

352,331

$

583,973

In the ordinary course of our wholesale operations, we offer discounts, allowances and cooperative advertising support to some of our wholesale customers for certain products. We record these discounts, returns and allowances as a reduction to net sales in our consolidated statements of operations and as a reduction to receivables, net in our consolidated balance sheets. As of August 1, 2020, February 1, 2020 and August 3, 2019, reserve balances recorded as a reduction to receivables related to these items were $9 million, $9 million and $7 million, respectively.

We extend credit to certain wholesale customers based on an evaluation of the customer’s financial capacity and condition, usually without requiring collateral. In circumstances where we become aware of a specific wholesale customer’s inability to meet its financial obligations, a specific provision for credit losses is taken as a reduction to accounts receivable to reduce the net recognized receivable to the amount reasonably expected to be collected. Such amounts are ultimately written off at the time that the amounts are not considered collectible. For all other wholesale customer receivable amounts, we recognize estimated provisions for credit losses based on our historical collection experience, the financial condition of our customers, an evaluation of current economic conditions, anticipated trends and the risk characteristics of the receivables, each of which is subjective and requires certain assumptions. As discussed in Note 1, during Fiscal 2020, we estimated these losses using the current expected loss approach including consideration of the expected impact of the ongoing COVID-19 pandemic on our receivables, while in Fiscal 2019, we estimated these losses using the incurred loss model under the previous guidance. We include such charges for credit losses and write-offs in SG&A in our consolidated statements of operations and as a reduction to receivables, net in our consolidated balance sheets. As of August 1, 2020, February 1, 2020 and August 3, 2019, our provision for credit losses related to receivables was $4 million, $1 million and $1 million, respectively. Provisions for credit losses expense for the Second Quarter of Fiscal 2020 and the First Half of Fiscal 2020 was $2 million and $4 million, respectively. Provisions for credit losses expense for both the Second Quarter of Fiscal 2019 and the First Half of Fiscal 2019 were $0 million.

Substantially all amounts recognized in receivables, net represent trade receivables related to contracts with customers. In addition to trade and other receivables, income tax receivables of $1 million, $1 million and $1 million and tenant allowances due from landlord of $2 million, $1 million and $2 million are included in receivables, net in our consolidated balance sheet as of August 1, 2020, February 1, 2020 and August 3, 2019, respectively. As of August 1, 2020, February 1, 2020 and August 3, 2019, prepaid expenses and other current assets included $6 million, $3 million and $2 million, respectively, representing the estimated value of inventory for expected wholesale and direct to consumer sales returns. We did not have any significant contract assets related to contracts with customers, other than trade receivables and the value of inventory associated with expected sales returns, as of August 1, 2020, February 1, 2020 and August 3, 2019.

An estimated sales return liability of $12 million, $3 million and $5 million for expected direct to consumer returns is classified in other accrued expenses and liabilities in our consolidated balance sheet as of August 1, 2020, February 1, 2020 and August 3, 2019, respectively. Contract liabilities for gift cards purchased by consumers and merchandise credits received by customers but not yet redeemed, less any breakage income recognized to date, is included in accrued expenses and other liabilities in our consolidated balance sheets and totaled $12 million, $12 million and $11 million as of August 1, 2020, February 1, 2020, and August 3, 2019, respectively.

4.    Intangible Assets and Goodwill: As discussed in Note 1, the COVID-19 pandemic has had, and is expected to continue to have, a significant negative impact on each of our operating groups. Thus, certain goodwill and

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Table of Contents

indefinite-lived intangible asset impairment testing was required in the First Quarter of Fiscal 2020 and resulted in significant impairment charges in Southern Tide as shown in the tables below.

Intangible assets by category are summarized below (in thousands):

    

August 1,

 

February 1,

    

August 3,

2020

 

2020

2019

Intangible assets with finite lives

$

51,929

$

51,929

$

51,929

Accumulated amortization and impairment

 

(42,690)

 

(41,924)

 

(41,338)

Total intangible assets with finite lives, net

 

9,239

 

10,005

 

10,591

Intangible assets with indefinite lives:

 

  

 

  

 

  

Tommy Bahama Trademarks

$

110,700

$

110,700

$

110,700

Lilly Pulitzer Trademarks

 

27,500

 

27,500

 

27,500

Southern Tide Trademarks

 

9,300

 

26,800

 

26,800

Total intangible assets, net

$

156,739

$

175,005

$

175,591

Intangible assets by operating group and in total, for Fiscal 2019 and the First Half of Fiscal 2020 are as follows (in thousands):

    

Tommy

    

Lilly

    

Lanier

    

Southern

    

Corporate 

    

Bahama

Pulitzer

Apparel

Tide

and Other

Total

Balance February 2, 2019

$

110,700

$

29,216

$

246

$

29,401

$

6,613

$

176,176

Impairment

 

 

 

 

 

 

Amortization

 

 

(475)

 

(31)

 

(291)

 

(374)

 

(1,171)

Balance, February 1, 2020

 

110,700

 

28,741

 

215

 

29,110

 

6,239

 

175,005

Impairment

 

 

 

(207)

 

(17,500)

 

 

(17,707)

Amortization

 

 

(213)

 

(8)

 

(144)

 

(194)

 

(559)

Balance, August 1, 2020

$

110,700

$

28,528

$

$