UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____________________ to _____________________
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer |
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(Address of principal executive offices) |
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(Zip Code) |
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 |
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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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Securities registered pursuant to Section 12(g) of the Act: None
As of September 1, 2021, the registrant had
Table of Contents
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PART I. |
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Item 1. |
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Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) |
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Condensed Consolidated Statements of Shareholders’ Deficit (Unaudited) |
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Notes to Condensed Consolidated Financial Statements (Unaudited) |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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1
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
J.Jill, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share data)
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July 31, 2021 |
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January 30, 2021 |
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Assets |
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Current assets: |
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Cash |
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$ |
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$ |
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Accounts receivable |
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Inventories, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Intangible assets, net |
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Goodwill |
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Operating lease assets, net |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Shareholders’ Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Current portion of long-term debt |
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Current portion of operating lease liabilities |
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Borrowings under revolving credit facility |
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— |
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Total current liabilities |
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Long-term debt, net of discount and current portion |
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Long-term debt, net of discount - related party |
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Deferred income taxes |
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Operating lease liabilities, net of current portion |
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Warrants - related party (Note 8) |
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— |
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Derivative liability (Note 8) |
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— |
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Other liabilities |
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Total liabilities |
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Commitments and contingencies (see Note 11) |
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Shareholders’ Equity |
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Common stock, par value $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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Total shareholders’ deficit |
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( |
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( |
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Total liabilities and shareholders’ deficit |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
J.Jill, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS (UNAUDITED)
(in thousands, except share and per share data)
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For the Thirteen Weeks Ended |
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For the Twenty-Six Weeks Ended |
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July 31, 2021 |
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August 1, 2020 |
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July 31, 2021 |
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August 1, 2020 |
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Net sales |
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$ |
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$ |
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$ |
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$ |
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Costs of goods sold (exclusive of depreciation and amortization) |
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Gross profit |
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Selling, general and administrative expenses |
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Impairment of long-lived assets |
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— |
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( |
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— |
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Impairment of goodwill |
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— |
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— |
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— |
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Impairment of intangible assets |
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— |
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— |
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— |
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Operating income (loss) |
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( |
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( |
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Fair value adjustment of derivative |
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— |
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— |
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Fair value adjustment of warrants - related party |
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— |
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— |
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Interest expense, net |
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Interest expense, net - related party |
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— |
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— |
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Loss before provision (benefit) for income taxes |
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( |
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( |
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( |
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( |
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Income tax provision (benefit) |
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( |
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( |
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Net loss and total comprehensive loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Per share data (Note 8): |
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Net loss per common share: |
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Basic |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Diluted |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted average common shares: |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
J.Jill, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT (UNAUDITED)
(in thousands, except common share data)
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Additional |
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Total |
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Common Stock |
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Paid-in |
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Accumulated |
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Shareholders’ |
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Shares |
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Amount |
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Capital |
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Deficit |
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Deficit |
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Balance, January 30, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Vesting of restricted stock units |
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( |
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— |
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— |
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Surrender of shares to pay withholding taxes |
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( |
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— |
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( |
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— |
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( |
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Equity-based compensation |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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( |
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Balance, May 1, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Vesting of restricted stock units |
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— |
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— |
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— |
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— |
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Surrender of shares to pay withholding taxes |
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( |
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— |
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( |
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— |
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( |
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Withholding tax on net share settlement of equity-based compensation plans |
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— |
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— |
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( |
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— |
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( |
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Equity-based compensation |
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— |
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— |
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— |
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Shares issued to Priming lenders (See Note 8) |
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— |
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Reclass of warrants to equity (See Note 8) |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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( |
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Balance, July 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Common Stock |
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Paid-in |
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Accumulated |
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Shareholders’ |
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Shares |
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Amount |
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Capital |
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Deficit |
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Deficit |
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Balance, February 1, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
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Vesting of restricted stock units |
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( |
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— |
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— |
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Surrender of shares to pay withholding taxes |
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( |
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— |
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( |
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— |
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( |
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Equity-based compensation |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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( |
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Balance, May 2, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Vesting of restricted stock units |
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— |
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— |
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— |
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— |
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Surrender of shares to pay withholding taxes |
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( |
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— |
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( |
) |
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— |
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( |
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Equity-based compensation |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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( |
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Balance, August 1, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
J.Jill, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
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For the Twenty-Six Weeks Ended |
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July 31, 2021 |
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August 1, 2020 |
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Net loss |
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$ |
( |
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$ |
( |
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Operating activities: |
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Adjustments to reconcile net loss to net cash (used in) provided by operating activities |
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Depreciation and amortization |
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Impairment of goodwill and intangible assets |
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— |
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Impairment of long-lived assets |
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— |
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Adjustment for exited retail stores |
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( |
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( |
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Loss on disposal of fixed assets |
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Noncash interest expense, net |
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Noncash change in fair value of derivative |
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- |
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Noncash change in fair value of warrants - related party |
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- |
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Equity-based compensation |
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Deferred rent incentives |
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( |
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( |
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Deferred income taxes |
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( |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Inventories |
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Prepaid expenses and other current assets |
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( |
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( |
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Accounts payable |
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( |
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Accrued expenses |
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Operating lease assets and liabilities |
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( |
) |
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( |
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Other noncurrent assets and liabilities |
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( |
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( |
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Net cash provided by (used in) operating activities |
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( |
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Investing activities: |
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Purchases of property and equipment |
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( |
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( |
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Net cash used in investing activities |
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( |
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( |
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Financing activities: |
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Borrowings under revolving credit facility |
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Repayments of revolving credit facility |
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( |
) |
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( |
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Repayments on debt |
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( |
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( |
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Surrender of shares to pay withholding taxes |
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( |
) |
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( |
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Net cash (used in) provided by financing activities |
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( |
) |
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Net change in cash |
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Cash: |
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Beginning of Period |
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End of Period |
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$ |
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$ |
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Supplemental cash flow information: |
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Noncash financing activity: |
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Reclass of warrant and derivative liabilities to equity (Note 8) |
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$ |
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$ |
— |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
J.Jill, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Description of Business
J.Jill, Inc., “J.Jill” or the “Company”, is a premier omnichannel retailer and nationally recognized women’s apparel brand committed to delighting customers with great wear-now product. The brand represents an easy, thoughtful and inspired style that reflects the confidence of remarkable women who live life with joy, passion and purpose. J.Jill offers a guiding customer experience through
2. Summary of Significant Accounting Policies
Basis of Presentation
Our interim condensed consolidated financial statements are unaudited. All significant intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted, in accordance with the rules of the Securities and Exchange Commission (the “SEC”) associated with reporting of interim period financial information. We consistently applied the accounting policies described in our Annual Report on Form 10-K (the “2020 Annual Report”) for the fiscal year ended January 30, 2021 (“Fiscal Year 2020”) in preparing these unaudited interim condensed consolidated financial statements. In the opinion of management, these interim condensed consolidated financial statements contain all normal and recurring adjustments necessary to state fairly the financial position and results of operations of the Company. The consolidated balance sheet as of January 30, 2021 is derived from the audited consolidated balance sheet as of that date. The unaudited results of operations for the thirteen and twenty-six weeks ended July 31, 2021 are not necessarily indicative of future results or results to be expected for the full year ending January 29, 2022 (“Fiscal Year 2021”). You should read these statements in conjunction with our audited consolidated financial statements and related notes in our 2020 Annual Report.
Prior year shares and per share amounts on the condensed consolidated statements of operations and comprehensive income and condensed consolidated statements of shareholders’ equity have been restated to reflect the reverse stock split on November 9, 2020.
Going Concern
In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Presentation of Financial Statements - Going Concern,” we are required to evaluate whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of issuance of the financial statements. As discussed in our Annual Report on Form 10-K for the Fiscal Year ended January 30, 2021 (“2021 Form 10-K”), during 2020 our revenues, results of operations, cash flows and financing arrangements were materially adversely impacted by the COVID-19 pandemic. As a result, despite the fact that conditions had significantly improved by April 12, 2021 and that we had taken substantial actions to improve our liquidity and financial performance, due to remaining risks and uncertainties relating to the future impacts of COVID-19, we concluded at the time that our liquidity and capital may not be sufficient to finance our continued operations for at least the next 12 months.
In response to the impacts of COVID-19, we immediately took actions to improve our liquidity and financial flexibility by restructuring our debt with an extended maturity. We also took actions to reduce expenses, and, to maximize cash on hand, we continue to closely manage working capital (primarily inventory levels) and capital expenditures. Additionally, on August 27, 2021 we made a $
While the Company and the retail industry in general have recovered significantly and current projections are favorable, we still could experience potential negative COVID-19 impacts including, but not limited to, additional charges from potential adjustments to the carrying amount of our inventory, goodwill, intangible assets, right-of-use assets, and long-lived assets as well as additional store closures. Actual results may differ materially from the Company’s current estimates as considerable risk remains related to the performance of stores, the resilience of the customer in an uncertain economic climate, the possibility of a resurgence of COVID-19, and emergence of severe variants, with its potential for future business disruption and the related impacts on the U.S. economy. If one or more of these risks materialize, we believe it is still possible that our current liquidity and capital could be impacted and may not be sufficient to finance our continued operations for at least the next year. These risks raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date these condensed consolidated financial statements have been issued.
6
Cost of Goods Sold
Cost of goods sold (“COGS”) consist of all costs of sold merchandise (net of purchase discounts and vendor allowances). These costs include:
|
• |
Direct costs of purchased merchandise; |
|
• |
Adjustments to the carrying value of inventory related to realizability and shrinkage; and |
|
• |
Inbound freight to our distribution center. |
Our COGS and Gross margin may not be comparable to other entities. Some entities, like us, exclude costs related to shipping products to their customers, as well as costs of their distribution network, buying function, store occupancy costs and depreciation and amortization expenses from COGS and include them in Selling, general and administrative expenses, whereas other entities include these costs in their COGS.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of:
|
• |
Payroll and payroll-related expenses; |
|
• |
Store Occupancy expenses related to stores, distribution center and our headquarters location, including utilities; |
|
• |
Depreciation of property and equipment and amortization of intangibles; |
|
• |
Advertising expenses: print, digital and social media advertising and catalog production and distribution; |
|
• |
Information technology and communication costs; |
|
• |
Freight associated with shipping products to customers; |
|
• |
Insurance costs; and |
|
• |
Consulting and professional fees. |
Out-of-Period Item
During the second quarter of Fiscal Year 2021, the Company recorded an adjustment to correct prior period overstatements of inventory and understatements of COGS totaling $
Recently Issued Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes”. The pronouncement is effective for a public company’s annual reporting periods beginning after December 15, 2020, and interim periods within those annual periods. As an emerging growth company, the Company has elected to adopt the pronouncement following the effective date for private companies beginning with annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact that this standard will have on the condensed consolidated financial statements. The Company plans to adopt the pronouncement in Fiscal Year 2022.
In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform”, which provides temporary optional guidance to companies impacted by the transition away from the London Interbank Offered Rate (“LIBOR”). The guidance provides certain expedients and exceptions to applying GAAP in order to lessen the potential accounting burden when contracts, hedging relationships, and other transactions that reference LIBOR as a benchmark rate are modified. The guidance is currently effective and may be applied prospectively at any point through December 31, 2022. The Company is assessing what impact this guidance will have on the Company’s condensed consolidated financial statements.
7
3. Revenues
Disaggregation of Revenue
Net sales consists primarily of revenues, net of merchandise returns and discounts, generated from the sale of apparel and accessory merchandise through retail stores (“Retail”) and through its website and catalog orders (“Direct”). Net sales also include shipping and handling fees collected from customers and royalty revenues and marketing reimbursements related to our private label credit card agreement. Retail revenue is recognized at the time of sale and Direct revenue is recognized upon shipment of merchandise to the customer.
|
|
For the Thirteen Weeks Ended |
|
|
For the Twenty-Six Weeks Ended |
|
||||||||||
|
|
July 31, 2021 |
|
|
August 1, 2020 |
|
|
July 31, 2021 |
|
|
August 1, 2020 |
|
||||
Retail |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Direct |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Contract Liabilities
The Company recognizes a contract liability when it has received consideration from the customer and has a future obligation to the customer.
|
|
July 31, 2021 |
|
|
January 30, 2021 |
|
||
Contract liabilities: |
|
|
|
|
|
|
|
|
Signing bonus |
|
$ |
|
|
|
$ |
|
|
Unredeemed gift cards |
|
|
|
|
|
|
|
|
Total contract liabilities (1) |
|
$ |
|
|
|
$ |
|
|
(1) |
The short-term portion of the signing bonus is included in Accrued expenses and other current liabilities on the Company’s condensed consolidated balance sheets. The long-term portion of the signing bonus is included in Other long-term liabilities on the Company’s condensed consolidated balance sheets. |
For the thirteen and twenty-six weeks ended July 31, 2021, the Company recognized approximately $
Performance Obligations
The Company has a remaining performance obligation of $
Unredeemed gift cards also require a performance obligation for revenue to be recognized, but substantially all gift cards are redeemed in the first year of issuance.
Practical Expedients and Policy Elections
The Company excludes from its transaction price all amounts collected from customers for sales taxes that are remitted to taxing authorities.
Shipping and handling activities that occur after control of related goods transfers to the customer are accounted for as fulfillment activities rather than assessing these activities as performance obligations.
The Company does not disclose remaining performance obligations that have an expected duration of one year or less.
4. Asset Impairments
Long-lived Asset Impairments
The Company did
8
In the first quarter of Fiscal Year 2020, the Company reduced the net carrying value of certain long-lived assets to their estimated fair value, which was determined using a discounted cash flows method. These impairment charges arose from the material adverse effect COVID-19 had on our results of operations, particularly with our store fleet. The Company incurred impairment charges of $
Goodwill and Other Intangible Asset Impairments
In the first quarter of Fiscal Year 2020, the Company temporarily closed its retail locations due to COVID-19, which had a material adverse effect on our results of operations, financial position and liquidity and led to a significant decline in our net sales for the first half of Fiscal Year 2020. The Company incurred impairment charges of $
The Company performed the impairment tests in the first quarter of Fiscal Year 2020 using the income approach (or discounted cash flows method) for goodwill, the relief-from-royalty method for indefinite-lived intangible assets and a recoverability analysis for definite-lived intangible assets. Key assumptions included future revenue growth and profitability trends over a period of
The following table displays a rollforward of the carrying amount of goodwill from February 1, 2020 to July 31, 2021 (in thousands):
Goodwill at February 1, 2020 |
|
$ |
|
|
Impairment losses (first quarter) |
|
|
( |
) |
Balance, January 30, 2021 |
|
|
|
|
Impairment losses |
|
|
|
|
Balance, July 31, 2021 |
|
$ |
|
|
The accumulated goodwill impairment losses as of July 31, 2021 are $
A summary of intangible assets as of July 31, 2021 and January 30, 2021 is as follows (in thousands):
|
|
|
|
July 31, 2021 |
|
|||||||||||||
|
|
Weighted Average Useful Life (Years) |
|
Gross |
|
|
Accumulated Amortization |
|
|
Accumulated Impairment |
|
|
Carrying Amount |
|
||||
Indefinite-lived: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade name |
|
N/A |
|
$ |
|
|
|
$ |
- |
|
|
$ |
|
|
|
$ |
|
|
Definite-lived: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 30, 2021 |
|
|||||||||||||
|
|
Weighted Average Useful Life (Years) |
|
Gross |
|
|
Accumulated Amortization |
|
|
Accumulated Impairment |
|
|
Carrying Amount |
|
||||
Indefinite-lived: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade name |
|
N/A |
|
$ |
|
|
|
$ |
- |
|
|
$ |
|
|
|
$ |
|
|
Definite-lived: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
9
Total amortization expense for these amortizable intangible assets was $
The estimated amortization expense for each of the next five years and thereafter is as follows (in thousands):
Fiscal Year |
|
Estimated Amortization Expense |
|
|
2021 |
|
$ |
|
|
2022 |
|
|
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
5. Debt
The components of the Company’s outstanding long-term debt were as follows (in thousands):
|
|
Carrying Value of Debt |
|
|||||
|
|
July 31, 2021 |
|
|
January 30, 2021 |
|
||
Term Loan (principal of $ |
|
$ |
|
|
|
$ |
|
|
Priming Loan (principal of $ |
|
|
|
|
|
|
|
|
Subordinated Facility (principal and paid-in kind interest of $ |
|
|
|
|
|
|
|
|
Less: Current portion |
|
|
( |
) |
|
|
( |
) |
Net long-term debt |
|
$ |
|
|
|
$ |
|
|
Term Loan
The Company is party to a term loan credit agreement, dated as of May 8, 2015, by and among Jill Holdings, Inc. (as successor to Jill Holdings LLC), Jill Acquisition LLC, a wholly owned subsidiary of us, and the various lenders party thereto, as amended on May 27, 2016 by Amendment No. 1 thereto, as further amended by Amendment No. 2 thereto (the “Term Loan”).
Priming Loan
The Company is party to a senior secured priming term loan facility, dated August 31, 2020 (the “Priming Loan” and, the lenders thereunder, the “Priming Lenders”). The Priming Loan provides for a principal paydown of at least $
In accordance with the Priming Credit Agreement, the Company issued to the Priming Lenders
10
Subordinated Facility
On September 30, 2020, in accordance with the TSA, the Company entered into a subordinated facility, with the Subordinated Lenders (as defined below), that provides for a secured term loan facility in an aggregate principal amount equal to $
In accordance with the Subordinated Facility, the Company issued penny warrants to the Subordinated Lenders. See Note 8 for additional information regarding the warrants.
Asset-Based Revolving Credit Agreement
The Company is party to a secured $
During the thirteen weeks ended July 31, 2021, the company paid down the outstanding short-term borrowings under the ABL Facility. The Company had short-term borrowings of $
6. Fair Value Measurements
Certain assets and liabilities are carried at fair value in accordance with GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
Valuation techniques used to measure fair value require the Company to maximize the use of observable inputs and minimize the use of unobservable inputs. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
|
• |
Level 1 - Quoted prices in active markets for identical assets or liabilities. |
|
• |
Level 2 - Observable inputs, other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets; quoted prices for similar assets or liabilities in markets that are not active; or other inputs other than quoted prices that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities, including interest rates and yield curves, and market corroborated inputs. |
|
• |
Level 3 - Unobservable inputs for the assets or liabilities that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. These are valued based on management’s estimates and assumptions that market participants would use in pricing the asset or liabilities. |
The following table presents the carrying value and fair value hierarchy for debt as of July 31, 2021 (in thousands):
|
|
|
|
|
|
Fair Value |
|
|||||||||
|
|
Carrying Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Financial instruments not carried at fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
Total financial instruments not carried at fair value |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
11
The following table presents the carrying value and fair value hierarchy for financial assets and liabilities measured at fair value on a recurring basis as of January 30, 2021 and for debt which is not carried at fair value (in thousands). Effective May 31, 2021, the warrants and derivative liabilities were transferred to equity and are no longer measured at fair value on a recurring basis (see Note 8 for additional information):
|
|
|
|
|
|
Fair Value |
|
|||||||||
|
|
Carrying Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Recurring fair value measurements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
Derivative liability |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
Total recurring fair value measurements |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
Financial instruments not carried at fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
Total financial instruments not carried at fair value |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
The Company determines the fair value of its financial assets and liabilities using the following methodologies:
|
• |
Warrants - The fair value is determined based on a pricing model that uses share prices from actively quoted stock markets that are readily accessible and observable. |
|
• |
Derivative Liability - The fair value is determined using an option pricing model with a Monte Carlo simulation. Key assumptions include the Company’s stock price, |
|
• |
Debt - These debt instruments include the Term Loan, Priming Loan and subordinated term loan. The debt instruments are recorded at cost, net of debt issuance costs and any related discount. The fair value of the debt instruments is obtained based on observable market prices quoted on public exchanges for similar instruments. |
The methodology used by the Company to determine the fair value of its financial assets and liabilities at July 31, 2021, is the same as that used at January 30, 2021.
The Company believes that the carrying amounts of its other financial instruments, including cash, accounts receivable, accounts payable and any amounts drawn on its revolving credit facilities, consisting primarily of instruments without extended maturities, based on management’s estimates, approximates their fair value due to the short-term maturities of these instruments.
Assets and Liabilities with Recurring Fair Value Measurements - Certain assets and liabilities may be measured at fair value on an ongoing basis. We did not elect to apply the fair value option for recording financial assets and financial liabilities. Other than the warrants, derivative liability and total debt, we do not have any assets or liabilities which we measure at fair value on a recurring basis.
Assets and Liabilities with Nonrecurring Fair Value Measurements - Certain assets and liabilities are not measured at fair value on an ongoing basis. These assets and liabilities, which include long-lived assets, goodwill, and intangible assets, are subject to fair value adjustment in certain circumstances. From time to time, the fair value is determined on these assets as part of related impairment tests. Other than impairment accounting adjustments, no adjustments to fair value or fair value measurements were required for non-financial assets and liabilities for all periods presented. See Note 4, Assets Impairments, for additional information.
7. Income Taxes
The Company recorded an income tax provision of $
The effective tax rate for the thirteen and twenty-six weeks ended July 31, 2021 differs from the federal statutory rate of
12
8. Net Loss Per Share
The following table summarizes the computation of basic and diluted net income (loss) per common share (“EPS”) (in thousands, except share and per share data):
|
|
For the Thirteen Weeks Ended |
|
|
For the Twenty-Six Weeks Ended |
|
||||||||||
|
|
July 31, 2021 |
|
|
August 1, 2020 |
|
|
July 31, 2021 |
|
|
August 1, 2020 |
|
||||
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common shareholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumed exercise of warrants |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
Weighted average common shares, basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of stock options and restricted shares |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Weighted average common shares, diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share, basic |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss per common share, diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The weighted average common shares for the diluted earnings per share calculation exclude the impact of outstanding equity awards if the assumed proceeds per share of the award is in excess of the related fiscal period’s average price of the Company’s common stock. Such awards are excluded because they would have an antidilutive effect due to the Company having a net loss for the thirteen and twenty-six weeks ended July 31, 2021 and August 1, 2020. There were
Warrants
On May 31, 2021, and within the terms of the Priming Loan, the Company chose to issue
Effective May 31, 2021 the warrants issued to the Subordinated Facility holders have been included in the denominator for basic and diluted EPS calculations as the exercise of the warrants is near certain because the exercise price is non substantive in relation to the fair value of the common shares to be issued upon exercise.
9. Equity-Based Compensation
Equity-based compensation expense was $
10. Related Party Transactions
On September 30, 2020, the Company entered into the Subordinated Facility, with a group of lenders that includes certain affiliates of TowerBrook and our Chairman of the board of directors. In accordance with the Subordinated Facility, the Company issued penny warrants to the Subordinated Lenders. For the thirteen weeks ended July 31, 2021 the Company incurred $
13
and Fair value adjustment of warrants – related party associated with the Subordinated Facility in the condensed consolidated statements of operations and comprehensive income.
For the thirteen and twenty-six weeks ended August 1, 2020, the Company incurred an immaterial amount of other related party transactions.
11. Commitments and Contingencies
Legal Proceedings
The Company is subject to various legal proceedings that arise in the ordinary course of business. Although the outcome of such proceedings cannot be predicted with certainty, management does not believe that the Company is presently party to any legal proceedings the resolution of which management believes would have a material adverse effect on the Company’s business, financial condition, operating results or cash flows. The Company establishes reserves for specific legal matters when the Company determines that the likelihood of an unfavorable outcome is probable, and the loss is reasonably estimable.
12. Operating Leases
During the twenty-six weeks ended July 31, 2021, the Company recorded non-cash gains of $
During the first quarter of Fiscal Year 2020, the Company reduced the net carrying value of right-of-use assets to their estimated fair value, which was determined using a discounted cash flows method. These impairment charges arose from the material adverse effect that COVID-19 had on our results of operations, particularly with our store fleet. The Company recognized non-cash impairment charges of $
The Company did not incur any impairment charges on its right-of-use assets during the twenty-six weeks ended July 31, 2021.
13. Subsequent Event
On August 27, 2021, the Company made a $
14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and related notes thereto included elsewhere in this quarterly report on Form 10-Q (the “Quarterly Report”). The following discussion contains forward-looking statements that reflect our plans, estimates and assumptions. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause such differences are discussed in the sections of this Quarterly Report on Form 10-Q titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements”.
We operate on a 52- or 53-week fiscal year that ends on the Saturday that is closest to January 31. Each fiscal year generally is comprised of four 13-week fiscal quarters, although in the years with 53 weeks, the fourth quarter represents a 14-week period. The Fiscal Year 2021 and fiscal year ended January 30, 2021 (“Fiscal Year 2020”) are both comprised of 52 weeks.
Overview
J.Jill is a premier omnichannel retailer and nationally recognized women’s apparel brand committed to delighting customers with great wear-now product. The brand represents an easy, thoughtful and inspired style that reflects the confidence of remarkable women who live life with joy, passion and purpose. J.Jill offers a guiding customer experience through 261 stores nationwide and a robust ecommerce platform. J.Jill is headquartered outside Boston.
Following the significant impacts on Fiscal Year 2020 from the COVID-19 pandemic, we achieved significant improvements in sales growth and gross margin expansion in the first and second quarters of Fiscal Year 2021 due to our focus on driving full price sales as customer traffic trends improved. The pandemic began to affect our business in the first quarter of Fiscal Year 2020 as our stores were temporarily closed beginning in mid-March 2020 and remained closed through portions of the second quarter of Fiscal Year 2020.
The COVID-19 global pandemic and resulting temporary store closures and changes in customer behavior toward in-store shopping have had a material adverse effect on our operations, cash flows and liquidity. We have made significant progress reducing cash expenditures and maximizing cash receipts from our direct-to-consumer business channel such that our current base forecast projects sufficient liquidity over the coming 12 months; however, considerable risk remains related to the performance of stores, the resilience of the customer in an uncertain economic climate, the possibility of a prolonged market impact from COVID-19 in the coming 12 months. If one or more of these risks materialize, we believe that our current sources of liquidity and capital may not be sufficient to finance our continued operations for at least the next 12 months.
Factors Affecting Our Operating Results
Various factors are expected to continue to affect our results of operations going forward, including the following:
Overall Economic Trends. Consumer purchases of clothing and other merchandise generally decline during recessionary periods and other periods when disposable income is adversely affected, and consequently our results of operations may be affected by general economic conditions. For example, reduced consumer confidence, lower availability and higher cost of consumer credit may reduce demand for our merchandise and may limit our ability to increase or sustain prices. The growth rate of the market could be affected by macroeconomic conditions in the United States.
Consumer Preferences and Fashion Trends. Our ability to maintain our appeal to existing customers and attract new customers depends on our ability to anticipate fashion trends. During periods in which we have successfully anticipated fashion trends, we have generally had more favorable results.
Competition. The retail industry is highly competitive and retailers compete based on a variety of factors, including design, quality, price and customer service. Levels of competition and the ability of our competitors to more accurately predict fashion trends and otherwise attract customers through competitive pricing or other factors may impact our results of operations.
Our Strategic Initiatives. The ongoing implementation of strategic initiatives will continue to have an impact on our results of operations. These initiatives include our ecommerce platform and our initiative to upgrade and enhance our information systems. Although initiatives of this nature are designed to create growth in our business and continuing improvement in our operating results, the timing of expenditures related to these initiatives, as well as the achievement of returns on our investments, may affect our results of operations in future periods.
Pricing and Changes in Our Merchandise Mix. Our product offering changes from period to period, as do the prices at which goods are sold and the margins we are able to earn from the sales of those goods. The levels at which we are able to price our merchandise are influenced by a variety of factors, including the quality of our products, cost of production, prices at which our competitors are selling similar products and the willingness of our customers to pay for products.
15
Potential Changes in Tax Laws and/or Regulations. Changes in tax laws in any of the multiple jurisdictions in which we operate, or adverse outcomes from tax audits that we may be subject to in any of the jurisdictions in which we operate, could adversely affect our business, financial condition and operating results. Additionally, any potential changes with respect to tax and trade policies, tariffs and government regulations affecting trade between the U.S. and other countries could adversely affect our business, as we source the majority of our merchandise from manufacturers located outside of the U.S.
How We Assess the Performance of Our Business
In assessing the performance of our business, we consider a variety of financial and operating metrics, including GAAP and non-GAAP measures, including the following:
Net sales consist primarily of revenues, net of merchandise returns and discounts, generated from the sale of apparel and accessory merchandise through our Retail channel and Direct channel. Net sales also include shipping and handling fees collected from customers and royalty revenues and marketing reimbursements related to our private label credit card agreement. Revenue from our Retail channel is recognized at the time of sale and revenue from our Direct channel is recognized upon shipment of merchandise to the customer.
Net sales are impacted by the size of our active customer base, product assortment and availability, marketing and promotional activities and the spending habits of our customers. Net sales are also impacted by the migration of single-channel customers to omnichannel customers who, on average, spend nearly three times more than single-channel customers.
Number of stores reflects all stores open at the end of a reporting period. In connection with opening new stores, we incur pre-opening costs. Pre-opening costs include expenses incurred prior to opening a new store and primarily consist of payroll, travel, training, marketing, initial opening supplies and costs of transporting initial inventory and fixtures to retail stores, as well as occupancy costs incurred from the time of possession of a store site to the opening of that store. These pre-opening costs are included in selling, general and administrative expenses and are generally incurred and expensed within 30 days of opening a new store.
Gross profit is equal to our net sales less costs of goods sold. Gross profit as a percentage of our net sales is referred to as gross margin.
Costs of goods sold includes the direct costs of sold merchandise, inventory shrinkage, and adjustments and reserves for excess, aged and obsolete inventory. We review our inventory levels on an ongoing basis to identify slow-moving merchandise and use product markdowns to liquidate these products. Changes in the assortment of our products may also impact our gross profit. The timing and level of markdowns are driven by customer acceptance of our merchandise. The Company’s COGS, and consequently gross profit, may not be comparable to those of other retailers, as inclusion of certain costs vary across the industry.
The primary drivers of the costs of goods sold are raw materials, which fluctuate based on certain factors beyond our control, including labor conditions, transportation or freight costs, energy prices, currency fluctuations and commodity prices. We place orders with merchandise suppliers in United States dollars and, as a result, are not exposed to significant foreign currency exchange risk.
Selling, general and administrative expenses include all operating costs not included in costs of goods sold. These expenses include all payroll and related expenses, occupancy costs, information systems costs and other operating expenses related to our stores and to our operations at our headquarters, including utilities, depreciation and amortization. These expenses also include marketing expense, including catalog production and mailing costs, warehousing, distribution and shipping costs, customer service operations, consulting and software services, professional services and other administrative costs.
Our historical revenue growth has been accompanied by increased selling, general and administrative expenses. The most significant increases were in occupancy costs associated with retail store expansion, and in marketing and payroll investments.
Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA represents net (loss) income plus net interest expense, provision (benefit) for income taxes, depreciation and amortization, equity-based compensation expense, goodwill and indefinite-lived intangible assets impairment, write-off of property and equipment and other non-recurring expenses, primarily consisting of outside legal and professional fees associated with certain non-recurring transactions and events. We present Adjusted EBITDA on a consolidated basis because management uses it as a supplemental measure in assessing our operating performance, and we believe that it is helpful to investors, securities analysts and other interested parties as a measure of our comparative operating performance from period to period. We also use Adjusted EBITDA as one of the primary methods for planning and forecasting overall expected performance of our business and for evaluating on a quarterly and annual basis actual results against such expectations. Further, we recognize Adjusted EBITDA as a commonly used measure in determining business value and as such, use it internally to report results. Adjusted EBITDA margin represents, for any period, Adjusted EBITDA as a percentage of net sales.
16
While we believe that Adjusted EBITDA is useful in evaluating our business, Adjusted EBITDA is a non-GAAP financial measure that has limitations as an analytical tool. Adjusted EBITDA should not be considered an alternative to, or substitute for, net income (loss), which is calculated in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate Adjusted EBITDA differently or not at all, which reduces the usefulness of Adjusted EBITDA as a tool for comparison. We recommend that you review the reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure, and the calculation of the resultant Adjusted EBITDA margin below and not rely solely on Adjusted EBITDA or any single financial measure to evaluate our business.
Reconciliation of Net Loss to Adjusted EBITDA and Calculation of Adjusted EBITDA Margin
The following table provides a reconciliation of net loss to Adjusted EBITDA and the calculation of Adjusted EBITDA margin for the periods presented.
|
|
For the Thirteen Weeks Ended |
|
|
For the Twenty-Six Weeks Ended |
|
||||||||||
(in thousands) |
|
July 31, 2021 |
|
|
August 1, 2020 |
|
|
July 31, 2021 |
|
|
August 1, 2020 |
|
||||
Statements of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(24,648 |
) |
|
$ |
(19,034 |
) |
|
$ |
(42,956 |
) |
|
$ |
(89,303 |
) |
Fair value adjustment of derivative |
|
|
625 |
|
|
|
— |
|
|
|
2,775 |
|
|
|
— |
|
Fair value adjustment of warrants – related party (a) |
|
|
38,338 |
|
|
|
— |
|
|
|
56,984 |
|
|
|
— |
|
Interest expense, net |
|
|
4,217 |
|
|
|
4,244 |
|
|
|
8,563 |
|
|
|
8,887 |
|
Interest expense, net - related party |
|
|
529 |
|
|
|
— |
|
|
|
990 |
|
|
|
— |
|
Income tax provision (benefit) |
|
|
4,446 |
|
|
|
(7,034 |
) |
|
|
5,838 |
|
|
|
(31,151 |
) |
Depreciation and amortization |
|
|
7,295 |
|
|
|
8,277 |
|
|
|
14,871 |
|
|
|
17,313 |
|
Equity-based compensation expense (b) |
|
|
649 |
|
|
|
615 |
|
|
|
1,092 |
|
|
|
1,291 |
|
Write-off of property and equipment (c) |
|
|
630 |
|
|
|
244 |
|
|
|
716 |
|
|
|
256 |
|
Impairment of goodwill and intangible assets |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
24,520 |
|
Adjustment for exited retail stores (d) |
|
|
9 |
|
|
|
(402 |
) |
|
|
(710 |
) |
|
|
(402 |
) |
Impairment of long-lived assets (e) |
|
|
— |
|
|
|
(893 |
) |
|
|
— |
|
|
|
26,587 |
|
Other non-recurring items (f) |
|
|
616 |
|
|
|
7,523 |
|
|
|
1,468 |
|
|
|
9,707 |
|
Adjusted EBITDA |
|
$ |
32,706 |
|
|
$ |
(6,460 |
) |
|
$ |
49,631 |
|
|
$ |
(32,295 |
) |
Net sales |
|
$ |
159,236 |
|
|
$ |
92,636 |
|
|
$ |
288,322 |
|
|
$ |
183,605 |
|
Adjusted EBITDA margin |
|
|
20.5 |
% |
|
|
(7.0 |
)% |
|
|
17.2 |
% |
|
|
(17.6 |
)% |
|
(a) |
The fair value adjustment of warrants increased due to the increase in J.Jill’s stock price since January 30, 2021. |
|
(b) |
Represents expenses associated with equity incentive instruments granted to our management and board of directors. Incentive instruments are accounted for as equity-classified awards with the related compensation expense recognized based on fair value at the date of the grant. |
|
(c) |
Represents net gain or loss on the disposal of fixed assets. |
|
(d) |
Represents non-cash gains associated with exiting store leases earlier than anticipated. |
|
(e) |
Represents impairment of long-lived assets related to the right-of-use assets and leasehold improvements. For the thirteen weeks ended August 1, 2020, the Company recognized a benefit (or reversal of prior period impairment) caused by the adjustment of the operating lease liability related to stores that were permanently closed. |
|
(f) |
Represents items management believes are not indicative of ongoing operating performance, including professional fees, retention expenses and costs related to the COVID-19 pandemic. |
Items Affecting Comparability of Financial Results
COVID-19 impact. Our second quarter of Fiscal Year 2020 financial results were significantly impacted by COVID-19 as our stores were temporarily closed beginning in mid-March 2020 through most of the second quarter of Fiscal Year 2020 in efforts to stop the spread of the virus. Although the stores were temporarily closed and the Company lost revenues as a result, we continued to incur certain expenses, such as payroll and rent; therefore, ratios and other items may not be comparable to our second quarter of Fiscal Year 2021 financial results.
Impairment losses. Our Fiscal Year 2020 year to date results include impairment charges of $52.0 million for long-lived assets (operating lease right-of-use asset and leasehold improvements), goodwill and intangible assets. See Note 4, Asset Impairments, in Item I, Financial Statements, for additional information on these impairment losses.
17
Fair value adjustments. Fair value adjustments consist of the mark-to-market of warrants and derivative liabilities related to the debt restructuring consummated on September 30, 2020. These fair value adjustments were driven by the increase in J.Jill’s stock price since January 30, 2021. Our Fiscal Year 2021 results include negative fair value adjustments totaling $39.0 million and $59.8 million for the thirteen and twenty-six week periods, respectively. Effective May 31, 2021, these liabilities were reclassified to equity because from that date they can only be settled by exercise of the warrants into common stock. See Note 8, Net Loss per Share, in Item 1, Financial Statements, for additional information on these fair value adjustments.
Results of Operations
Thirteen weeks ended July 31, 2021 Compared to Thirteen weeks ended August 1, 2020
The following table summarizes our consolidated results of operations for the periods indicated:
|
|
For the Thirteen Weeks Ended |
|
|
Change from the Thirteen Weeks Ended August 1, 2020 to the Thirteen Weeks |
|
||||||||||||||||||
|
|
July 31, 2021 |
|
|
August 1, 2020 |
|
|
Ended July 31, 2021 |
|
|||||||||||||||
(in thousands) |
|
Dollars |
|
|
% of Net Sales |
|
|
Dollars |
|
|
% of Net Sales |
|
|
$ Change |
|
|
% Change |
|
||||||
Net sales |
|
$ |
159,236 |
|
|
|
100.0 |
% |
|
$ |
92,636 |
|
|
|
100.0 |
% |
|
$ |
66,600 |
|
|
|
71.9 |
% |
Costs of goods sold |
|
|
49,883 |
|
|
|
31.3 |
% |
|
|
37,616 |
|
|
|
40.6 |
% |
|
|
12,267 |
|
|
|
32.6 |
% |
Gross profit |
|
|
109,353 |
|
|
|
68.7 |
% |
|
|
55,020 |
|
|
|
59.4 |
% |
|
|
54,333 |
|
|
|
98.8 |
% |
Selling, general and administrative expenses |
|
|
85,846 |
|
|
|
53.9 |
% |
|
|
77,737 |
|
|
|
83.9 |
% |
|
|
8,109 |
|
|
|
10.4 |
% |
Impairment of long-lived assets |
|
|
— |
|
|
|
— |
|
|
|
(893 |
) |
|
|
-1.0 |
% |
|
|
893 |
|
|
|
100.0 |
% |
Impairment of goodwill |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.0 |
% |
|
|
— |
|
|
|
100.0 |
% |
Impairment of other intangible assets |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.0 |
% |
|
|
— |
|
|
|
100.0 |
% |
Operating income (loss) |
|
|
23,507 |
|
|
|
14.8 |
% |
|
|
(21,824 |
) |
|
|
(23.6 |
)% |
|
|
45,331 |
|
|
|
(207.7 |
)% |
Fair value adjustment of derivative |
|
|
625 |
|
|
|
0.4 |
% |
|
|
— |
|
|
|
— |
|
|
|
625 |
|
|
|
— |
|
Fair value adjustment of warrants - related party |
|
|
38,338 |
|
|
|
24.1 |
% |
|
|
— |
|
|
|
— |
|
|
|
38,338 |
|
|
|
— |
|
Interest expense, net |
|
|
4,217 |
|
|
|
2.6 |
% |
|
|
4,244 |
|
|
|
4.6 |
% |
|
|
(27 |
) |
|
|
(0.6 |
)% |
Interest expense, net - related party |
|
|
529 |
|
|
|
0.3 |
% |
|
|
— |
|
|
|
— |
|
|
|
529 |
|
|
|
100.0 |
% |
Loss before provision for income taxes |
|
|
(20,202 |
) |
|
|
(12.7 |
)% |
|
|
(26,068 |
) |
|
|
(28.1 |
)% |
|
|
5,866 |
|
|
|
(22.5 |
)% |
Income tax provision (benefit) |
|
|
4,446 |
|
|
|
2.8 |
% |
|
|
(7,034 |
) |
|
|
(7.6 |
)% |
|
|
11,480 |
|
|
|
(163.2 |
)% |
Net loss |
|
$ |
(24,648 |
) |
|
|
(15.5 |
)% |
|
$ |
(19,034 |
) |
|
|
(20.5 |
)% |
|
$ |
(5,614 |
) |
|
|
29.5 |
% |
Net Sales
Net sales for the thirteen weeks ended July 31, 2021 increased $66.6 million, or 71.9%, to $159.2 million from $92.6 million for the thirteen weeks ended August 1, 2020. Net sales benefited from strong full-price sales and lower levels of promotions as compared to the second quarter of Fiscal Year 2020; however, the increase was primarily driven by the reopening of our stores near the end of the second quarter of Fiscal Year 2020. Our stores were temporarily closed during the second quarter of Fiscal Year 2020 as a response to the COVID-19 pandemic. All stores were open during the second quarter of Fiscal Year 2021.
Our Retail channel contributed 53.6% of our net sales in the thirteen weeks ended July 31, 2021 and 28.4% in the thirteen weeks ended August 1, 2020. Our Direct channel contributed 46.4% of our net sales in the thirteen weeks ended July 31, 2021 and 71.6% in the thirteen weeks ended August 1, 2020. We operated 261 and 281 retail stores at the end of these same periods, respectively.
Gross Profit and Costs of Goods Sold
Gross profit for the thirteen weeks ended July 31, 2021 increased $54.3 million, or 98.8%, to $109.4 million from $55.0 million for the thirteen weeks ended August 1, 2020. The gross margin for the thirteen weeks ended July 31, 2021 was 68.7% compared to 59.4% for the thirteen weeks ended August 1, 2020. The gross margin for the thirteen weeks ended July 31, 2021 benefited from better full price selling and a lower level of promotional discounts, while the gross margin for the thirteen weeks ended August 1, 2020 was negatively impacted by added promotions, markdowns and liquidation actions to stimulate customer demand, particularly after the temporary closure of our stores.
18
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the thirteen weeks ended July 31, 2021 increased $8.1 million, or 10.4%, to $85.8 million from $77.7 million for the thirteen weeks ended August 1, 2020. The increase is driven by a $10.5 million increase in compensation and benefits, a $3.5 million increase in marketing expense, a $1.0 million increase in credit card fees, a $0.7 million increase in costs to exit retail stores, and a $0.8 million increase in shipping expense, partially offset by a $6.2 million decrease in professional services expenses, a $0.7 million decrease in occupancy expense, and a $1.0 million decrease in depreciation and amortization expense. The increase in compensation and benefits was primarily due to a $3.1 million increase in hourly and part-time wages, a $5.0 million increase in incentive expenses a $0.5 million increase in salaries and a $1.9 million increase in other benefits. The increase in marketing costs was primarily due to a $1.3 million increase in catalog costs and a $1.3 million increase in digital media expenses. Professional services expenses were higher in the second quarter of Fiscal Year 2020 due to costs associated with the debt restructuring agreement which was executed in the third quarter of Fiscal Year 2020. The decrease in occupancy costs is due to decreased rental expense from closing twenty stores since August 1, 2020 and favorable lease renegotiations.
As a percentage of net sales, selling, general and administrative expenses were 53.9% for the thirteen weeks ended July 31, 2021 compared to 83.9% for the thirteen weeks ended August 1, 2020.
Fair Value Adjustments
Fair value adjustments consist of the mark-to-market of warrants and derivative liabilities related to the debt restructuring consummated on September 30, 2020. These fair value adjustments were driven by the increase in J.Jill’s stock price since January 30, 2021.
Interest Expense, Net
Interest expense, net, consists of interest expense on the Term Loan, Priming Loan, Subordinated Facility and ABL Facility, partially offset by interest earned on cash. Interest expense, net was $4.2 million for each of the thirteen weeks ended July 31, 2021 and August 1, 2020.
Income Tax Provision (Benefit)
The income tax provision was $4.4 million for the thirteen weeks ended July 31, 2021 compared to a benefit for income taxes of $7.0 million for the thirteen weeks ended August 1, 2020, while our effective tax rates for the same periods were (22.0%) and 27.0%, respectively. The effective tax rate during the thirteen weeks ended July 31, 2021 is a negative rate due to the nondeductible fair value adjustments of the warrants and embedded derivative, as well the impact of executive compensation limitations and state and local income taxes. The effective tax rate during the thirteen weeks ended August 1, 2020 was impacted by a benefit from the CARES Act, which was partially offset by the nondeductible goodwill impairment charge.
19
Twenty-six weeks ended July 31, 2021 Compared to Twenty-six weeks ended August 1, 2020
The following table summarizes our consolidated results of operations for the periods indicated
|
|
For the Twenty-Six Weeks Ended |
|
|
Change from the Twenty-Six Weeks Ended August 1, 2020 to the Thirty-Nine Weeks |
|
||||||||||||||||||
(in thousands) |
|
July 31, 2021 |
|
|
August 1, 2020 |
|
|
Ended July 31, 2021 |
|
|||||||||||||||
|
|
Dollars |
|
|
% of Net Sales |
|
|
Dollars |
|
|
% of Net Sales |
|
|
$ Change |
|
|
% Change |
|
||||||
Net sales |
|
$ |
288,322 |
|
|
|
100.0 |
% |
|
$ |
183,605 |
|
|
|
100.0 |
% |
|
$ |
104,717 |
|
|
|
57.0 |
% |
Costs of goods sold |
|
|
91,143 |
|
|
|
31.6 |
% |
|
|
78,420 |
|
|
|
42.7 |
% |
|
|
12,723 |
|
|
|
16.2 |
% |
Gross profit |
|
|
197,179 |
|
|
|
68.4 |
% |
|
|
105,185 |
|
|
|
57.3 |
% |
|
|
91,994 |
|
|
|
87.5 |
% |
Selling, general and administrative expenses |
|
|
164,985 |
|
|
|
57.2 |
% |
|
|
165,645 |
|
|
|
90.2 |
% |
|
|
(660 |
) |
|
|
(0.4 |
)% |
Impairment of long-lived assets |
|
|
— |
|
|
|
— |
|
|
|
26,587 |
|
|
|
14.5 |
% |
|
|
(26,587 |
) |
|
|
(100.0 |
)% |
Impairment of goodwill |
|
|
— |
|
|
|
— |
|
|
|
17,900 |
|
|
|
9.7 |
% |
|
|
(17,900 |
) |
|
|
100.0 |
% |
Impairment of indefinite-lived intangible assets |
|
|
— |
|
|
|
— |
|
|
|
6,620 |
|
|
|
3.6 |
% |
|
|
(6,620 |
) |
|
|
100.0 |
% |
Operating income (loss) |
|
|
32,194 |
|
|
|
11.2 |
% |
|
|
(111,567 |
) |
|
|
(60.8 |
)% |
|
|
143,761 |
|
|
|
(128.9 |
)% |
Fair value adjustment of derivative |
|
|
2,775 |
|
|
|
1.0 |
% |
|
|
— |
|
|
|
— |
|
|
|
2,775 |
|
|
|
100.0 |
% |
Fair value adjustment of warrants - related party |
|
|
56,984 |
|
|
|
19.8 |
% |
|
|
— |
|
|
|
— |
|
|
|
56,984 |
|
|
|
100.0 |
% |
Interest expense, net |
|
|
8,563 |
|
|
|
3.0 |
% |
|
|
8,887 |
|
|
|
4.8 |
% |
|
|
(324 |
) |
|
|
(3.6 |
)% |
Interest expense, net - related party |
|
|
990 |
|
|
|
0.3 |
% |
|
|
— |
|
|
|
— |
|
|
|
990 |
|
|
|
100.0 |
% |
Loss before provision for income taxes |
|
|
(37,118 |
) |
|
|
(12.9 |
)% |
|
|
(120,454 |
) |
|
|
(65.6 |
)% |
|
|
83,336 |
|
|
|
(69.2 |
)% |
Income tax provision (benefit) |
|
|
5,838 |
|
|
|
2.0 |
% |
|
|
(31,151 |
) |
|
|
(17.0 |
)% |
|
|
36,989 |
|
|
|
(118.7 |
)% |
Net loss |
|
$ |
(42,956 |
) |
|
|
(14.9 |
)% |
|
$ |
(89,303 |
) |
|
|
(48.6 |
)% |
|
$ |
46,347 |
|
|
|
(51.9 |
)% |
Net Sales
Net sales for the twenty-six weeks ended July 31, 2021 increased $104.7 million, or 57.0%, to $288.3 million from $183.6 million for the twenty-six weeks ended August 1, 2020. Net sales benefited from strong full-price sales and lower levels of promotions as compared to the first twenty-six weeks of Fiscal Year 2020; however, the increase was primarily driven by the reopening of our stores near the end of the second quarter of Fiscal Year 2020. Our stores were temporarily closed during the second quarter of Fiscal Year 2020 as a response to the COVID-19 pandemic. All stores were open during the first twenty-six weeks of Fiscal Year 2021.
Our Retail channel contributed 48.7% of our net sales in the twenty-six weeks ended July 31, 2021 and 33.4% in the twenty-six weeks ended August 1, 2020. Our Direct channel contributed 51.3% of our net sales in the twenty-six weeks ended July 31, 2021 and 66.6% in the twenty-six weeks ended August 1, 2020. We operated 261 and 281 retail stores at the end of these same periods, respectively.
Gross Profit and Costs of Goods Sold
Gross profit for the twenty-six weeks ended July 31, 2021 increased $92.0 million, or 87.5%, to $197.2 million from $105.2 million for the twenty-six weeks ended August 1, 2020. The gross margin for the twenty-six weeks ended July 31, 2021 was 68.4% compared to 57.3% for the twenty-six weeks ended August 1, 2020. The gross margin for the twenty-six weeks ended July 31, 2021 benefited from better full price selling and a lower level of promotional discounts, while the gross margin for the twenty-six weeks ended August 1, 2020 was negatively impacted by added promotions, markdowns and liquidation actions to stimulate customer demand, particularly after the temporary closure of our stores.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the twenty-six weeks ended July 31, 2021 decreased $0.7 million, or 0.4%, to $165.0 million from $165.6 million for the twenty-six weeks ended August 1, 2020. The decrease is driven by a $7.9 million decrease in professional services expenses, a $2.4 million decrease in depreciation and amortization, a $3.5 million decrease in occupancy expense and a $0.7 million decrease in marketing costs, offset by a $12.2 million increase in compensation and benefits and a $1.7 million increase in shipping costs. Professional services expenses were higher during the twenty-six weeks ended August 1, 2020 due to costs associated with the debt restructuring agreement which was executed in the third quarter of Fiscal Year 2020. The decrease in marketing costs was primarily due to a $2.1 million decrease in catalog costs. The decrease in occupancy costs is due to decreased rental expense from closing twenty-five stores since May 2, 2020 and favorable lease renegotiations. The increase in compensation
20
and benefits was primarily due to a $6.2 million increase in hourly and part-time wages as the stores were open in Fiscal Year 2021 and a $7.1 million increase in incentive expenses offset by a $3.3 million decrease in salaries expense.
As a percentage of net sales, selling, general and administrative expenses were 57.2% for the twenty-six weeks ended July 31, 2021 compared to 90.2% for the twenty-six weeks ended August 1, 2020.
Fair Value Adjustments
Fair value adjustments consist of the mark-to-market of warrants and derivative liabilities related to the debt restructuring consummated on September 30, 2020. These fair value adjustments were driven by the increase in J.Jill’s stock price since January 30, 2021.
Interest Expense, Net
Interest expense, net, consists of interest expense on the Term Loan, Priming Loan, Subordinated Facility and ABL Facility, partially offset by interest earned on cash. Interest expense, net for the twenty-six weeks ended July 31, 2021 increased $0.4 million, or 3.6%, to $8.6 million from $8.9 million for the twenty-six weeks ended August 1, 2020.
Income Tax Provision (Benefit)
The income tax provision was $5.8 million for the twenty-six weeks ended July 31, 2021 compared to a benefit for income taxes of $31.2 million for the twenty-six weeks ended August 1, 2020, while our effective tax rates for the same periods were (15.7)% and 25.9%, respectively. The effective tax rate during the twenty-six weeks ended July 31, 2021 is a negative rate due to the nondeductible fair value adjustments of the warrants and embedded derivative, as well the impact of executive compensation limitations and state and local income taxes. The effective tax rate during the twenty-six weeks ended August 1, 2020 was impacted by a benefit from the CARES Act, which was partially offset by the nondeductible goodwill impairment charge.
Liquidity and Capital Resources
General
In response to the material adverse effect that the COVID-19 global pandemic had on our operations during Fiscal Year 2020, we improved our financial flexibility by restructuring our existing debt, issuing additional debt, reducing our expenses and maximizing cash receipts from our direct-to-consumer business channel. While we are encouraged by our progress as the retail industry continues to recover, COVID-19 remains present in the United States and around the world as new variants arise that may have an adverse effect on our operations, cash flows and liquidity. While our current base forecast projects sufficient liquidity over the coming 12 months, there is considerable risk that remains related to the performance of stores, the resilience of the customer in an uncertain economic climate, and the possibility of disruptions in our operations from the pandemic in the coming 12 months. If one or more of these risks materialize, we believe that our current sources of liquidity and capital may not be sufficient to finance our continued operations for at least the next 12 months. These risks raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date these condensed consolidated financial statements have been issued.
As part of the Transactions that were consummated on September 30, 2020, key financial covenants have been waived until the fourth quarter of Fiscal Year 2021, and the covenant requiring the delivery of an audit opinion without a “going concern” or similar qualification has been waived until the fourth quarter of Fiscal Year 2021; however, this covenant is waived for the fourth quarter of Fiscal Year 2021 with respect to any such qualification relating solely to our ability to satisfy the minimum liquidity covenant in our debt facilities.
As of July 31, 2021, we had $18.1 million in cash and $29.8 million of total availability under our ABL Facility. Our primary sources of liquidity and capital resources are cash generated from operating activities and availability under our ABL Facility, which has a maturity of May 8, 2023 so long as certain conditions related to the maturity of the term loan are met. Our primary requirements for liquidity and capital are working capital and general corporate needs, including merchandise inventories, marketing, including catalog production and distribution, payroll, store occupancy costs and capital expenditures associated with opening new stores, remodeling existing stores and upgrading information systems and the costs of operating as a public company.
21
We have filed a preliminary tax return for Fiscal Year 2020 and expect a refund in excess of $25 million. The tax refund amount benefited from the provisions under the CARES Act enacted in March 2020 most significantly from the provision that allows for net operating losses in Fiscal Year 2020 to be carried back to earlier tax years with higher tax rates than the current year.
Under the Priming Credit Agreement, the Company has certain payment obligations during Fiscal Year 2021. On May 31, 2021, the Company had the choice to either (i) repay $4.9 million in aggregate principal amount of the loans under the Priming Credit Agreement, together with accrued and unpaid interest thereon or (ii) issue additional shares of Common Stock to the Priming Lenders in an amount equal to the greater of (I) 9.79% of the fully diluted shares of Common Stock as of October 1, 2020 less 656,717 shares and (II) a number of shares of Common Stock with an aggregate value of $0.5 million at the time of such issuance; provided, that the Priming Lenders shall not receive on such date shares of Common Stock having a value greater than $4.75 million (based on the volume-weighted average stock price of the preceding five trading days) at the time of such issuance. On May 31, 2021, the Company issued 272,097 shares to the Priming Lenders, with a value of approximately $5.2 million (based on the value of those shares as of close on that date), rather than repaying the $4.9 million since the minimum liquidity covenant would have increased to $25.0 million from $15.0 million if the Company had chosen to repay the $4.9 million of principal. In addition, the Priming Credit Agreement provides for a principal paydown of at least $25.0 million by August 30, 2021. The principal payment of $25.0 million, which was generated by operating cash flows, was made on August 27, 2021, avoiding additional PIK interest and fees. See Note 13.
Cash Flow Analysis
The following table shows our cash flows information for the periods presented:
|
|
For the Twenty-Six Weeks Ended |
|
|||||
(in thousands) |
|
July 31, 2021 |
|
|
August 1, 2020 |
|
||
Net cash provided by (used in) operating activities |
|
$ |
27,862 |
|
|
$ |
(17,340 |
) |
Net cash used in investing activities |
|
|
(1,326 |
) |
|
|
(2,675 |
) |
Net cash (used in) provided by financing activities |
|
|
(12,842 |
) |
|
|
30,250 |
|
Net Cash provided by (used in) Operating Activities
Net cash provided by operating activities increased by $45.2 million dollars as compared to the prior year primarily due to cash generated from operating income as compared to cash being used by an operating loss during the prior year. The higher cash generated by operating income was partially offset by the return to more normalized vendor payment terms during the quarter as well as the repayments of vendor liabilities that had been extended, including rents that were deferred during Fiscal Year 2020 by landlords due to the pandemic.
Net cash provided by operating activities during the twenty-six weeks ended July 31, 2021 was $27.9 million. Key elements of cash provided operating activities were (i) net loss of $43.0 million, (ii) adjustments to reconcile net income to net cash provided by operating activities of $77.1 million, primarily driven by the noncash change in fair value of warrants, depreciation and amortization, deferred income taxes and noncash interest expense, partially offset by deferred rent incentives and adjustment for exited retail stores, and (iii) a use of cash from net operating assets and liabilities of $6.3 million, primarily driven by higher payments of accounts payable, partially due to payments for merchandise inventory and rents for retail stores that were deferred into Fiscal Year 2021 from Fiscal Year 2020.
Net cash used in operating activities during the twenty-six weeks ended August 1, 2020 was $17.3 million. Key elements of cash provided by operating activities were (i) net loss of $89.3 million, (ii) adjustments to reconcile net income to net cash provided by operating activities of $55.5 million, primarily driven by impairment of goodwill and intangible assets, impairment of long-lived assets and depreciation and amortization, partially offset by deferred income taxes, and (iii) source of cash from net operating assets and liabilities of $16.4 million, primarily driven by decreases in accounts payable and accrued expenses partially offset by increase in prepaid expense and other current assets.
Net Cash used in Investing Activities
Net cash used in investing activities during the twenty-six weeks ended July 31, 2021 was $1.3 million, representing purchases of property and equipment. Purchases were lower in the first quarter of Fiscal Year 2021 than the first quarter of Fiscal Year 2020 due to our focus on conserving cash and there being no new store openings in Fiscal Year 2021.
Net cash used in investing activities during the twenty-six weeks ended August 1, 2020 was $2.7 million, representing purchases of property and equipment related investments in stores and information systems.
22
Net Cash (used in) provided by Financing Activities
Net cash used in financing activities declined $43.1 million as compared to the prior year as net borrowings under the ABL Facility decreased due to the lessened impact of the COVID-19 pandemic.
Net cash used in financing activities during the twenty-six weeks ended July 31, 2021 was $12.8 million, which was driven by the repayment of borrowings under the ABL Facility.
Net cash provided by financing activities during the twenty-six weeks ended August 1, 2020 was $30.3 million, which was driven primarily by increased borrowings under the ABL Facility.
Dividends
The payment of cash dividends in the future, if any, will be at the discretion of our board of directors and will depend upon such factors as earnings levels, capital requirements, restrictions imposed by applicable law, our overall financial condition, restrictions in our debt agreements and any other factors deemed relevant by our board of directors. As a holding company, our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries, which may further restrict our ability to pay dividends as a result of restrictions on their ability to pay dividends to us, under our debt agreements and under future indebtedness that we or they may incur.
Credit Facilities
There were no short-term borrowings outstanding under the Company’s ABL Facility as of July 31, 2021 and $11.1 million of short-term borrowings outstanding as of January 30, 2021. At both July 31, 2021 and January 30, 2021, the Company had outstanding letters of credit in the amounts of $2.9 million, and had a maximum additional borrowing capacity of $32.1 million and $23.8 million, respectively.
Contractual Obligations
The Company’s contractual obligations consist primarily of debt obligations, interest payments, operating leases and purchase orders for merchandise inventory. These contractual obligations impact the Company’s short-term and long-term liquidity and capital resource needs.
Contingencies
We are subject to various legal proceedings that arise in the ordinary course of business. Although the outcome of such proceedings cannot be predicted with certainty, management does not believe that we are presently party to any legal proceedings the resolution of which management believes would have a material adverse effect on our business, financial condition, operating results or cash flows. We establish reserves for specific legal matters when we determine that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable.
Off-Balance Sheet Arrangements
We are not a party to any off-balance sheet arrangements.
Critical Accounting Policies and Significant Estimates
The most significant accounting estimates involve a high degree of judgment or complexity. Management believes the estimates and judgments most critical to the preparation of our condensed consolidated financial statements and to the understanding of our reported financial results include those made in connection with revenue recognition, including accounting for gift card breakage and estimated merchandise returns; estimating the value of inventory; impairment assessments for goodwill and other indefinite-lived intangible assets, and long-lived assets; and estimating equity-based compensation expense. Management evaluates its policies and assumptions on an ongoing basis.
Our significant accounting policies related to these accounts in the preparation of our condensed consolidated financial statements are described under the heading “Management Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Estimates” in our 2020 Annual Report. As of the date of this filing, there were no significant changes to any of the critical accounting policies and estimates previously described in our 2020 Annual Report.
23
Recent Accounting Pronouncements
Refer to Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report, for recently adopted accounting standards, including the dates of adoption and estimated effects on our results of operations, financial position or cash flows.
Special Note Regarding Forward-Looking Statements
This Quarterly Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements.
These forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. All written and oral forward-looking statements made in connection with this Quarterly Report that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by the Risk Factors set forth in our 2020 Annual Report and other cautionary statements included therein and herein.
These forward-looking statements reflect our views with respect to future events as of the date of this Quarterly Report on Form 10-Q and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q and, except as required by law, we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. We qualify all of our forward-looking statements by these cautionary statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market Risk
There have been no material changes in our exposure to market risk during the first quarter of 2021. For a discussion of the Company’s exposure to market risk, refer to Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” contained in the Company’s 2020 Annual Report.
Item 4. Controls and Procedures
The Company’s management, including its Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded as of July 31, 2021, that the disclosure controls and procedures are effective in ensuring that all material information required to be filed in this Quarterly Report on Form 10-Q has been recorded, processed, summarized and reported when required and the information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
There have not been any changes in the Company’s internal control over financial reporting that occurred during the second quarter of Fiscal Year 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
24
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
We are subject to various legal proceedings that arise in the ordinary course of business. Although the outcome of such proceedings cannot be predicted with certainty, management does not believe that we are presently party to any legal proceedings the resolution of which management believes would have a material adverse effect on our business, financial condition, operating results or cash flows. We establish reserves for specific legal matters when we determine that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable.
Item 1A. Risk Factors
Factors that could cause our actual results to differ materially from those in this report are described under the heading “Risk Factors” in our 2020 Annual Report. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. As of the date of this Quarterly Report, there have been no material changes to the risk factors previously disclosed in our 2020 Annual Report. However, additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations and we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
The exhibits listed on the Exhibit Index are filed or furnished as part of this Quarterly Report.
25
Exhibit Index
Exhibit Number |
|
Description |
|
3.1 |
|
||
|
|
|
|
3.2 |
|
||
|
|
|
|
3.3 |
|
||
|
|
|
|
31.1* |
|
||
|
|
|
|
31.2* |
|
||
|
|
|
|
32.1* |
|
||
|
|
|
|
32.2* |
|
||
|
|
|
|
101.INS |
|
Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
|
|
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
|
|
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
|
|
104 |
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibits 101) |
* |
Furnished herewith. |
26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
J.Jill, Inc. |
|
|
|
|
|
Date: September 9, 2021 |
|
By: |
/s/ Claire Spofford |
|
|
|
Claire Spofford |
|
|
|
Chief Executive Officer |
|
|
|
|
Date: September 9, 2021 |
|
By: |
/s/ Mark Webb |
|
|
|
Mark Webb |
|
|
|
Executive Vice President, Chief Financial Officer/Chief Operating Officer |
27
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Claire Spofford, certify that:
1. |
I have reviewed this Quarterly Report of J.Jill, Inc. (the “Company”) on Form 10-Q for the period ended July 31, 2021; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Securities Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
(c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: September 9, 2021 |
|
By: |
|
/s/ Claire Spofford |
|
|
|
|
Claire Spofford |
|
|
|
|
Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Mark Webb, certify that:
1. |
I have reviewed this Quarterly Report of J.Jill, Inc. (the “Company”) on Form 10-Q for the period ended July 31, 2021; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Securities Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
(c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: September 9, 2021 |
|
By: |
|
/s/ Mark Webb |
|
|
|
|
Mark Webb |
|
|
|
|
Executive Vice President, Chief Financial Officer/Chief Operating Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of J.Jill, Inc. (the “Company”) on Form 10-Q for the period ended July 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
|
(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: September 9, 2021 |
|
By: |
|
/s/ Claire Spofford |
|
|
|
|
Claire Spofford |
|
|
|
|
Chief Executive Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of J.Jill, Inc. (the “Company”) on Form 10-Q for the period ended July 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
|
(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: September 9, 2021 |
|
By: |
|
/s/ Mark Webb |
|
|
|
|
Mark Webb |
|
|
|
|
Executive Vice President, Chief Financial Officer/Chief Operating Officer |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Jul. 31, 2021 |
Jan. 30, 2021 |
---|---|---|
Statement Of Financial Position [Abstract] | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 9,984,564 | 9,631,633 |
Common stock, shares outstanding | 9,984,564 | 9,631,633 |
Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 31, 2021 |
Aug. 01, 2020 |
Jul. 31, 2021 |
Aug. 01, 2020 |
|
Income Statement [Abstract] | ||||
Net sales | $ 159,236 | $ 92,636 | $ 288,322 | $ 183,605 |
Costs of goods sold (exclusive of depreciation and amortization) | 49,883 | 37,616 | 91,143 | 78,420 |
Gross profit | 109,353 | 55,020 | 197,179 | 105,185 |
Selling, general and administrative expenses | 85,846 | 77,737 | 164,985 | 165,645 |
Impairment of long-lived assets | (893) | 0 | 26,587 | |
Impairment of goodwill | 17,900 | 0 | 17,900 | |
Impairment of intangible assets | 6,620 | |||
Operating income (loss) | 23,507 | (21,824) | 32,194 | (111,567) |
Fair value adjustment of derivative | 625 | 2,775 | ||
Fair value adjustment of warrants - related party | 38,338 | 56,984 | ||
Interest expense, net | 4,217 | 4,244 | 8,563 | 8,887 |
Interest expense, net - related party | 529 | 990 | ||
Loss before provision (benefit) for income taxes | (20,202) | (26,068) | (37,118) | (120,454) |
Income tax provision (benefit) | 4,446 | (7,034) | 5,838 | (31,151) |
Net loss and total comprehensive loss | $ (24,648) | $ (19,034) | $ (42,956) | $ (89,303) |
Net loss per common share: | ||||
Basic | $ (1.98) | $ (2.13) | $ (3.88) | $ (10.01) |
Diluted | $ (1.98) | $ (2.13) | $ (3.88) | $ (10.01) |
Weighted average common shares: | ||||
Basic | 12,450,351 | 8,953,431 | 11,058,351 | 8,917,807 |
Diluted | 12,450,351 | 8,953,431 | 11,058,351 | 8,917,807 |
Description of Business |
6 Months Ended |
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Jul. 31, 2021 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Description of Business |
1. Description of Business J.Jill, Inc., “J.Jill” or the “Company”, is a premier omnichannel retailer and nationally recognized women’s apparel brand committed to delighting customers with great wear-now product. The brand represents an easy, thoughtful and inspired style that reflects the confidence of remarkable women who live life with joy, passion and purpose. J.Jill offers a guiding customer experience through 261 stores nationwide and a robust ecommerce platform. J.Jill is headquartered outside Boston. |
Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies |
2. Summary of Significant Accounting Policies Basis of Presentation Our interim condensed consolidated financial statements are unaudited. All significant intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted, in accordance with the rules of the Securities and Exchange Commission (the “SEC”) associated with reporting of interim period financial information. We consistently applied the accounting policies described in our Annual Report on Form 10-K (the “2020 Annual Report”) for the fiscal year ended January 30, 2021 (“Fiscal Year 2020”) in preparing these unaudited interim condensed consolidated financial statements. In the opinion of management, these interim condensed consolidated financial statements contain all normal and recurring adjustments necessary to state fairly the financial position and results of operations of the Company. The consolidated balance sheet as of January 30, 2021 is derived from the audited consolidated balance sheet as of that date. The unaudited results of operations for the thirteen and twenty-six weeks ended July 31, 2021 are not necessarily indicative of future results or results to be expected for the full year ending January 29, 2022 (“Fiscal Year 2021”). You should read these statements in conjunction with our audited consolidated financial statements and related notes in our 2020 Annual Report. Prior year shares and per share amounts on the condensed consolidated statements of operations and comprehensive income and condensed consolidated statements of shareholders’ equity have been restated to reflect the reverse stock split on November 9, 2020. Going Concern
In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Presentation of Financial Statements - Going Concern,” we are required to evaluate whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of issuance of the financial statements. As discussed in our Annual Report on Form 10-K for the Fiscal Year ended January 30, 2021 (“2021 Form 10-K”), during 2020 our revenues, results of operations, cash flows and financing arrangements were materially adversely impacted by the COVID-19 pandemic. As a result, despite the fact that conditions had significantly improved by April 12, 2021 and that we had taken substantial actions to improve our liquidity and financial performance, due to remaining risks and uncertainties relating to the future impacts of COVID-19, we concluded at the time that our liquidity and capital may not be sufficient to finance our continued operations for at least the next 12 months.
In response to the impacts of COVID-19, we immediately took actions to improve our liquidity and financial flexibility by restructuring our debt with an extended maturity. We also took actions to reduce expenses, and, to maximize cash on hand, we continue to closely manage working capital (primarily inventory levels) and capital expenditures. Additionally, on August 27, 2021 we made a $25 million debt payment, which was generated by operating cash flows, in order to avoid additional fees and interest that would have commenced if the payment was not made (see Note 13).
While the Company and the retail industry in general have recovered significantly and current projections are favorable, we still could experience potential negative COVID-19 impacts including, but not limited to, additional charges from potential adjustments to the carrying amount of our inventory, goodwill, intangible assets, right-of-use assets, and long-lived assets as well as additional store closures. Actual results may differ materially from the Company’s current estimates as considerable risk remains related to the performance of stores, the resilience of the customer in an uncertain economic climate, the possibility of a resurgence of COVID-19, and emergence of severe variants, with its potential for future business disruption and the related impacts on the U.S. economy. If one or more of these risks materialize, we believe it is still possible that our current liquidity and capital could be impacted and may not be sufficient to finance our continued operations for at least the next year. These risks raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date these condensed consolidated financial statements have been issued.
Cost of Goods Sold Cost of goods sold (“COGS”) consist of all costs of sold merchandise (net of purchase discounts and vendor allowances). These costs include:
Our COGS and Gross margin may not be comparable to other entities. Some entities, like us, exclude costs related to shipping products to their customers, as well as costs of their distribution network, buying function, store occupancy costs and depreciation and amortization expenses from COGS and include them in Selling, general and administrative expenses, whereas other entities include these costs in their COGS. Selling, General and Administrative Expenses Selling, general and administrative expenses consist of:
Out-of-Period Item During the second quarter of Fiscal Year 2021, the Company recorded an adjustment to correct prior period overstatements of inventory and understatements of COGS totaling $1.5 million ($1.1 million after taxes). The errors were primarily caused by an overstatement of inventory transferred from certain locations. Management evaluated the impacts of the out-of-period adjustment to correct the errors for the thirteen and twenty-six weeks ended July 31, 2021 and for prior periods, both individually and in the aggregate, and concluded that the adjustment was not material to the Company’s consolidated annual or interim financial statements for all impacted periods.
Recently Issued Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes”. The pronouncement is effective for a public company’s annual reporting periods beginning after December 15, 2020, and interim periods within those annual periods. As an emerging growth company, the Company has elected to adopt the pronouncement following the effective date for private companies beginning with annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact that this standard will have on the condensed consolidated financial statements. The Company plans to adopt the pronouncement in Fiscal Year 2022. In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform”, which provides temporary optional guidance to companies impacted by the transition away from the London Interbank Offered Rate (“LIBOR”). The guidance provides certain expedients and exceptions to applying GAAP in order to lessen the potential accounting burden when contracts, hedging relationships, and other transactions that reference LIBOR as a benchmark rate are modified. The guidance is currently effective and may be applied prospectively at any point through December 31, 2022. The Company is assessing what impact this guidance will have on the Company’s condensed consolidated financial statements. |
Revenues |
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Revenue From Contract With Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues |
3. Revenues Disaggregation of Revenue Net sales consists primarily of revenues, net of merchandise returns and discounts, generated from the sale of apparel and accessory merchandise through retail stores (“Retail”) and through its website and catalog orders (“Direct”). Net sales also include shipping and handling fees collected from customers and royalty revenues and marketing reimbursements related to our private label credit card agreement. Retail revenue is recognized at the time of sale and Direct revenue is recognized upon shipment of merchandise to the customer. The following table presents disaggregated revenues by source (in thousands):
Contract Liabilities The Company recognizes a contract liability when it has received consideration from the customer and has a future obligation to the customer. Total contract liabilities consisted of the following (in thousands):
For the thirteen and twenty-six weeks ended July 31, 2021, the Company recognized approximately $2.6 million and $5.0 million, respectively, of revenue related to gift card redemptions and breakage. For the thirteen and twenty-six weeks ended August 1, 2020, the Company recognized approximately $1.8 million and $4.0 million, respectively, of revenue related to gift card redemptions and breakage. Revenue recognized consists of gift cards that were part of the unredeemed gift card balance at the beginning of the period as well as gift cards that were issued and earned during the period. Performance Obligations The Company has a remaining performance obligation of $0.3 million for a signing bonus related to the private label credit card agreement that is being amortized to revenue evenly through the third quarter of Fiscal Year 2023. Unredeemed gift cards also require a performance obligation for revenue to be recognized, but substantially all gift cards are redeemed in the first year of issuance. Practical Expedients and Policy Elections The Company excludes from its transaction price all amounts collected from customers for sales taxes that are remitted to taxing authorities. Shipping and handling activities that occur after control of related goods transfers to the customer are accounted for as fulfillment activities rather than assessing these activities as performance obligations. The Company does not disclose remaining performance obligations that have an expected duration of one year or less. |
Asset Impairments |
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Income Statement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset Impairments |
4. Asset Impairments Long-lived Asset Impairments The Company did not record any impairments on long-lived assets during the twenty-six weeks ended July 31, 2021. In the first quarter of Fiscal Year 2020, the Company reduced the net carrying value of certain long-lived assets to their estimated fair value, which was determined using a discounted cash flows method. These impairment charges arose from the material adverse effect COVID-19 had on our results of operations, particularly with our store fleet. The Company incurred impairment charges of $6.7 million on leasehold improvements and $20.8 million on the right-of-use asset. During the second quarter of Fiscal Year 2020, the Company recorded a $1.3 million non-cash gain on the operating leases liabilities due to its decision to close certain retail stores. Approximately $0.9 million of the benefit related to leases that were included in the impairment on right-of-use assets recorded in the first quarter of Fiscal Year 2020; therefore, the benefit was recorded as a reduction of the previously recorded impairment. See Note 12 for additional information. Goodwill and Other Intangible Asset Impairments In the first quarter of Fiscal Year 2020, the Company temporarily closed its retail locations due to COVID-19, which had a material adverse effect on our results of operations, financial position and liquidity and led to a significant decline in our net sales for the first half of Fiscal Year 2020. The Company incurred impairment charges of $17.9 million on goodwill, $4.0 million on trade name and $2.6 million on customer relationships during the thirteen and twenty-six weeks ended August 1, 2020. All stores were open during the twenty-six weeks ended July 31, 2021 and the Company did not record any impairments on goodwill or other intangible assets for this period. The Company performed the impairment tests in the first quarter of Fiscal Year 2020 using the income approach (or discounted cash flows method) for goodwill, the relief-from-royalty method for indefinite-lived intangible assets and a recoverability analysis for definite-lived intangible assets. Key assumptions included future revenue growth and profitability trends over a period of 5-10 years with a terminal value, a discount rate based on an estimated weighted average cost of capital within a range of 23.5% to 34.0% and royalty rates within a range of 1% to 4%. These assumptions are classified as Level 3 inputs. The following table displays a rollforward of the carrying amount of goodwill from February 1, 2020 to July 31, 2021 (in thousands):
The accumulated goodwill impairment losses as of July 31, 2021 are $137.3 million.
A summary of intangible assets as of July 31, 2021 and January 30, 2021 is as follows (in thousands):
Total amortization expense for these amortizable intangible assets was $2.0 million and $4.9 million for the thirteen weeks ended July 31, 2021 and August 1, 2020, respectively, and $4.1 million and $7.3 million for the twenty-six weeks ended July 31, 2021 and August 1, 2020, respectively. The estimated amortization expense for each of the next five years and thereafter is as follows (in thousands):
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Debt |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt |
5. Debt The components of the Company’s outstanding long-term debt were as follows (in thousands):
Term Loan The Company is party to a term loan credit agreement, dated as of May 8, 2015, by and among Jill Holdings, Inc. (as successor to Jill Holdings LLC), Jill Acquisition LLC, a wholly owned subsidiary of us, and the various lenders party thereto, as amended on May 27, 2016 by Amendment No. 1 thereto, as further amended by Amendment No. 2 thereto (the “Term Loan”). Priming Loan The Company is party to a senior secured priming term loan facility, dated August 31, 2020 (the “Priming Loan” and, the lenders thereunder, the “Priming Lenders”). The Priming Loan provides for a principal paydown of at least $25.0 million by August 30, 2021; otherwise, there will be a paid-in-kind (“PIK”) interest rate increase and a PIK fee based on the level of payment below the $25.0 million. See Note 13. In accordance with the Priming Credit Agreement, the Company issued to the Priming Lenders 656,717 shares, as adjusted for the Company’s 1-for-5 stock split that occurred during the fourth quarter of Fiscal Year 2020, of the Company’s Common Stock (the “Equity Consideration”). On May 31, 2021, the Company had the choice (the “May 31, 2021 Option”) to either (i) repay $4.9 million in aggregate principal amount of the loans under the Priming Credit Agreement, together with accrued and unpaid interest thereon or (ii) issue additional shares of Common Stock to the Priming Lenders in an amount equal to the greater of (I) 9.79% of the fully diluted shares of Common Stock as of October 1, 2020 less 656,717 shares and (II) a number of shares of Common Stock with an aggregate value of $0.5 million at the time of such issuance; provided, that the Priming Lenders shall not receive on such date shares of Common Stock having a value greater than $4.75 million (based on the volume-weighted average stock price of the preceding five trading days) at the time of such issuance. The May 31, 2021 Option was considered an embedded derivative within the Priming Loan that was required to be adjusted to fair value each period while it was outstanding, with the adjustment being recorded in income. On May 31, 2021, and within the terms of the Priming Loan, the Company chose to issue 272,097 additional shares of Common Stock to the Priming Lenders with a value of approximately $5.2 million (based on the value of those shares as of close on that date). Subordinated Facility On September 30, 2020, in accordance with the TSA, the Company entered into a subordinated facility, with the Subordinated Lenders (as defined below), that provides for a secured term loan facility in an aggregate principal amount equal to $15.0 million with an additional incremental capacity subject to certain customary conditions (the “Subordinated Facility”). The Subordinated Lenders are a group of related parties that includes certain affiliates of TowerBrook and our Chairman of the board of directors. In accordance with the Subordinated Facility, the Company issued penny warrants to the Subordinated Lenders. See Note 8 for additional information regarding the warrants. Asset-Based Revolving Credit Agreement The Company is party to a secured $40.0 million asset-based revolving credit facility agreement (the “ABL Facility”) with a maturity date of May 8, 2023. During the thirteen weeks ended July 31, 2021, the company paid down the outstanding short-term borrowings under the ABL Facility. The Company had short-term borrowings of $11.1 million under the Company’s ABL Facility as of January 30, 2021. The Company’s available borrowing capacity under the ABL Facility as of July 31, 2021 and January 30, 2021 was $32.1 million and $23.8 million, respectively. As of July 31, 2021 and January 30, 2021, there were outstanding letters of credit of $2.9 million which reduced the availability under the ABL Facility. As of July 31, 2021, the maximum commitment for letters of credit was $10.0 million. |
Fair Value Measurements |
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Fair Value Measurements |
6. Fair Value Measurements Certain assets and liabilities are carried at fair value in accordance with GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value require the Company to maximize the use of observable inputs and minimize the use of unobservable inputs. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
The following table presents the carrying value and fair value hierarchy for debt as of July 31, 2021 (in thousands):
The following table presents the carrying value and fair value hierarchy for financial assets and liabilities measured at fair value on a recurring basis as of January 30, 2021 and for debt which is not carried at fair value (in thousands). Effective May 31, 2021, the warrants and derivative liabilities were transferred to equity and are no longer measured at fair value on a recurring basis (see Note 8 for additional information):
The Company determines the fair value of its financial assets and liabilities using the following methodologies:
The methodology used by the Company to determine the fair value of its financial assets and liabilities at July 31, 2021, is the same as that used at January 30, 2021. The Company believes that the carrying amounts of its other financial instruments, including cash, accounts receivable, accounts payable and any amounts drawn on its revolving credit facilities, consisting primarily of instruments without extended maturities, based on management’s estimates, approximates their fair value due to the short-term maturities of these instruments. Assets and Liabilities with Recurring Fair Value Measurements - Certain assets and liabilities may be measured at fair value on an ongoing basis. We did not elect to apply the fair value option for recording financial assets and financial liabilities. Other than the warrants, derivative liability and total debt, we do not have any assets or liabilities which we measure at fair value on a recurring basis. Assets and Liabilities with Nonrecurring Fair Value Measurements - Certain assets and liabilities are not measured at fair value on an ongoing basis. These assets and liabilities, which include long-lived assets, goodwill, and intangible assets, are subject to fair value adjustment in certain circumstances. From time to time, the fair value is determined on these assets as part of related impairment tests. Other than impairment accounting adjustments, no adjustments to fair value or fair value measurements were required for non-financial assets and liabilities for all periods presented. See Note 4, Assets Impairments, for additional information. |
Income Taxes |
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Income Tax Disclosure [Abstract] | |
Income Taxes |
7. Income Taxes The Company recorded an income tax provision of $4.4 million for the thirteen weeks ended July 31, 2021 and an income tax benefit of $7.0 million during the thirteen weeks ended August 1, 2020. The Company recorded an income tax provision of $5.8 million for the twenty-six weeks ended July 31, 2021 and an income tax benefit of $31.2 million for the twenty-six weeks ended August 1, 2020. The effective tax rate for the thirteen and twenty-six weeks ended July 31, 2021 differs from the federal statutory rate of 21% primarily due to the nondeductible fair value adjustment of the warrants and the Priming Loan embedded derivative, the impact of executive compensation limitations and the impact of state and local income taxes. The effective tax rate for the thirteen and twenty-six weeks ended August 1, 2020 differs from the federal statutory rate of 21% primarily due to the impact on the effective tax rate from goodwill impairment, which has no associated tax benefit, which was partially offset by a benefit from the CARES Act as well as the impact of state income taxes. |
Net Loss Per Share |
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Net Loss Per Share |
8. Net Loss Per Share The following table summarizes the computation of basic and diluted net income (loss) per common share (“EPS”) (in thousands, except share and per share data):
The weighted average common shares for the diluted earnings per share calculation exclude the impact of outstanding equity awards if the assumed proceeds per share of the award is in excess of the related fiscal period’s average price of the Company’s common stock. Such awards are excluded because they would have an antidilutive effect due to the Company having a net loss for the thirteen and twenty-six weeks ended July 31, 2021 and August 1, 2020. There were 104,108 antidilutive shares for the thirteen and twenty-six weeks ended July 31, 2021, and 520,521 antidilutive shares for the thirteen and twenty-six weeks ended August 1, 2020, of such awards excluded.
Warrants
On May 31, 2021, and within the terms of the Priming Loan, the Company chose to issue 272,097 additional shares of Common Stock to the Priming Lenders with a value of approximately $5.2 million based upon the preceding 5-day volume weighted average share price rather than repay $4.9 million of principal. As a result of this choice and because of the antidilution provision under the warrant agreement, the penny warrants became exercisable into 3,820,748 shares of common stock for an aggregate exercise price of $186,000. Through May 31, 2021, the Company recognized approximately $39.0 million and $59.8 million of non-cash charges recorded within Fair value adjustments – derivative and Fair value adjustments – warrants, respectively, in the condensed consolidated statements of operations and comprehensive income during the thirteen and twenty-six weeks ended July 31, 2021, respectively. Effective May 31, 2021, the remaining derivative and warrants liabilities totaling $78.2 million were reclassed to Additional paid-in capital because from that date they can only be settled by exercise of the warrants into common stock (i.e., cash is no longer a settlement option).
Effective May 31, 2021 the warrants issued to the Subordinated Facility holders have been included in the denominator for basic and diluted EPS calculations as the exercise of the warrants is near certain because the exercise price is non substantive in relation to the fair value of the common shares to be issued upon exercise. |
Equity-Based Compensation |
6 Months Ended |
---|---|
Jul. 31, 2021 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Equity-Based Compensation |
9. Equity-Based Compensation Equity-based compensation expense was $0.7 million and $1.1 million for the thirteen and twenty-six weeks ended July 31, 2021, respectively, and $0.6 million and $1.3 million for the thirteen and twenty-six weeks ended August 1, 2020, respectively, |
Related Party Transactions |
6 Months Ended |
---|---|
Jul. 31, 2021 | |
Related Party Transactions [Abstract] | |
Related Party Transactions |
10. Related Party Transactions On September 30, 2020, the Company entered into the Subordinated Facility, with a group of lenders that includes certain affiliates of TowerBrook and our Chairman of the board of directors. In accordance with the Subordinated Facility, the Company issued penny warrants to the Subordinated Lenders. For the thirteen weeks ended July 31, 2021 the Company incurred $0.5 million and $38.3 million, respectively, of Interest expense, net – related party and Fair value adjustment of warrants – related party associated with the Subordinated Facility in the condensed consolidated statements of operations and comprehensive income. For the twenty-six weeks ended July 31, 2021 the Company incurred $1.0 million and $57.0 million, respectively, of Interest expense, net – related party and Fair value adjustment of warrants – related party associated with the Subordinated Facility in the condensed consolidated statements of operations and comprehensive income. For the thirteen and twenty-six weeks ended August 1, 2020, the Company incurred an immaterial amount of other related party transactions. |
Commitments and Contingencies |
6 Months Ended |
---|---|
Jul. 31, 2021 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies |
11. Commitments and Contingencies
Legal Proceedings The Company is subject to various legal proceedings that arise in the ordinary course of business. Although the outcome of such proceedings cannot be predicted with certainty, management does not believe that the Company is presently party to any legal proceedings the resolution of which management believes would have a material adverse effect on the Company’s business, financial condition, operating results or cash flows. The Company establishes reserves for specific legal matters when the Company determines that the likelihood of an unfavorable outcome is probable, and the loss is reasonably estimable. |
Operating Leases |
6 Months Ended |
---|---|
Jul. 31, 2021 | |
Leases [Abstract] | |
Operating Leases |
12. Operating Leases
During the twenty-six weeks ended July 31, 2021, the Company recorded non-cash gains of $0.7 million associated with exiting store leases earlier than expected and non-cash gains of $0.6 million related to favorable lease renegotiations. During the thirteen weeks ended July 31, 2021, the Company recorded immaterial non-cash activity related to these transactions. During the first quarter of Fiscal Year 2020, the Company reduced the net carrying value of right-of-use assets to their estimated fair value, which was determined using a discounted cash flows method. These impairment charges arose from the material adverse effect that COVID-19 had on our results of operations, particularly with our store fleet. The Company recognized non-cash impairment charges of $6.7 million on leasehold improvements and non-cash impairment charges associated with right-of-use assets of $20.8 million during the first quarter of Fiscal Year 2020. During the second quarter of Fiscal Year 2020, the Company recorded a $1.3 million non-cash gain on the operating lease liability due to its decision to close certain retail stores. Approximately $0.9 million of the benefit related to leases that were included in the impairment on right-of-use assets recorded in the first quarter of Fiscal Year 2020; therefore, the benefit was recorded as a reduction of the previously recorded impairment. Approximately $0.4 million of the benefit related to the adjustment to the right-of-use asset and operating lease liability of leases not previously impaired and was recorded in Selling, General and Administrative expenses. |
Subsequent Event |
6 Months Ended |
---|---|
Jul. 31, 2021 | |
Subsequent Events [Abstract] | |
Subsequent Event |
13. Subsequent Event On August 27, 2021, the Company made a $25.0 million voluntary principal payment on the Priming Loan, which was generated by operating cash flows. This payment was made to avoid increased PIK interest and fees. See Note 5. |
Summary of Significant Accounting Policies (Policies) |
6 Months Ended | |||||||||||||||||||||
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Jul. 31, 2021 | ||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||
Basis of Presentation |
Basis of Presentation Our interim condensed consolidated financial statements are unaudited. All significant intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted, in accordance with the rules of the Securities and Exchange Commission (the “SEC”) associated with reporting of interim period financial information. We consistently applied the accounting policies described in our Annual Report on Form 10-K (the “2020 Annual Report”) for the fiscal year ended January 30, 2021 (“Fiscal Year 2020”) in preparing these unaudited interim condensed consolidated financial statements. In the opinion of management, these interim condensed consolidated financial statements contain all normal and recurring adjustments necessary to state fairly the financial position and results of operations of the Company. The consolidated balance sheet as of January 30, 2021 is derived from the audited consolidated balance sheet as of that date. The unaudited results of operations for the thirteen and twenty-six weeks ended July 31, 2021 are not necessarily indicative of future results or results to be expected for the full year ending January 29, 2022 (“Fiscal Year 2021”). You should read these statements in conjunction with our audited consolidated financial statements and related notes in our 2020 Annual Report. Prior year shares and per share amounts on the condensed consolidated statements of operations and comprehensive income and condensed consolidated statements of shareholders’ equity have been restated to reflect the reverse stock split on November 9, 2020. |
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Going Concern |
Going Concern
In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Presentation of Financial Statements - Going Concern,” we are required to evaluate whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of issuance of the financial statements. As discussed in our Annual Report on Form 10-K for the Fiscal Year ended January 30, 2021 (“2021 Form 10-K”), during 2020 our revenues, results of operations, cash flows and financing arrangements were materially adversely impacted by the COVID-19 pandemic. As a result, despite the fact that conditions had significantly improved by April 12, 2021 and that we had taken substantial actions to improve our liquidity and financial performance, due to remaining risks and uncertainties relating to the future impacts of COVID-19, we concluded at the time that our liquidity and capital may not be sufficient to finance our continued operations for at least the next 12 months.
In response to the impacts of COVID-19, we immediately took actions to improve our liquidity and financial flexibility by restructuring our debt with an extended maturity. We also took actions to reduce expenses, and, to maximize cash on hand, we continue to closely manage working capital (primarily inventory levels) and capital expenditures. Additionally, on August 27, 2021 we made a $25 million debt payment, which was generated by operating cash flows, in order to avoid additional fees and interest that would have commenced if the payment was not made (see Note 13).
While the Company and the retail industry in general have recovered significantly and current projections are favorable, we still could experience potential negative COVID-19 impacts including, but not limited to, additional charges from potential adjustments to the carrying amount of our inventory, goodwill, intangible assets, right-of-use assets, and long-lived assets as well as additional store closures. Actual results may differ materially from the Company’s current estimates as considerable risk remains related to the performance of stores, the resilience of the customer in an uncertain economic climate, the possibility of a resurgence of COVID-19, and emergence of severe variants, with its potential for future business disruption and the related impacts on the U.S. economy. If one or more of these risks materialize, we believe it is still possible that our current liquidity and capital could be impacted and may not be sufficient to finance our continued operations for at least the next year. These risks raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date these condensed consolidated financial statements have been issued. |
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Cost of Goods Sold |
Cost of Goods Sold Cost of goods sold (“COGS”) consist of all costs of sold merchandise (net of purchase discounts and vendor allowances). These costs include:
Our COGS and Gross margin may not be comparable to other entities. Some entities, like us, exclude costs related to shipping products to their customers, as well as costs of their distribution network, buying function, store occupancy costs and depreciation and amortization expenses from COGS and include them in Selling, general and administrative expenses, whereas other entities include these costs in their COGS. |
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Selling, General and Administrative Expenses |
Selling, General and Administrative Expenses Selling, general and administrative expenses consist of:
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Recently Issued Accounting Pronouncements |
Recently Issued Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes”. The pronouncement is effective for a public company’s annual reporting periods beginning after December 15, 2020, and interim periods within those annual periods. As an emerging growth company, the Company has elected to adopt the pronouncement following the effective date for private companies beginning with annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact that this standard will have on the condensed consolidated financial statements. The Company plans to adopt the pronouncement in Fiscal Year 2022. In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform”, which provides temporary optional guidance to companies impacted by the transition away from the London Interbank Offered Rate (“LIBOR”). The guidance provides certain expedients and exceptions to applying GAAP in order to lessen the potential accounting burden when contracts, hedging relationships, and other transactions that reference LIBOR as a benchmark rate are modified. The guidance is currently effective and may be applied prospectively at any point through December 31, 2022. The Company is assessing what impact this guidance will have on the Company’s condensed consolidated financial statements. |
Revenues (Tables) |
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Jul. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue From Contract With Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Disaggregated Revenues by Source | The following table presents disaggregated revenues by source (in thousands):
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Schedule of Contract Liabilities | Total contract liabilities consisted of the following (in thousands):
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Asset Impairments (Tables) |
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Income Statement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Roll-Forward of Carrying Amount of Goodwill |
The following table displays a rollforward of the carrying amount of goodwill from February 1, 2020 to July 31, 2021 (in thousands):
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Schedule of Gross Carrying Amount of Finite-lived Intangible Assets Amortization Expense |
A summary of intangible assets as of July 31, 2021 and January 30, 2021 is as follows (in thousands):
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Summary of Estimated Amortization Expense |
The estimated amortization expense for each of the next five years and thereafter is as follows (in thousands):
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Debt (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Outstanding Long term debt |
The components of the Company’s outstanding long-term debt were as follows (in thousands):
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Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis |
The following table presents the carrying value and fair value hierarchy for debt as of July 31, 2021 (in thousands):
The following table presents the carrying value and fair value hierarchy for financial assets and liabilities measured at fair value on a recurring basis as of January 30, 2021 and for debt which is not carried at fair value (in thousands). Effective May 31, 2021, the warrants and derivative liabilities were transferred to equity and are no longer measured at fair value on a recurring basis (see Note 8 for additional information):
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Net Loss Per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of Basic and Diluted Net Income (Loss) Per Common Share |
The following table summarizes the computation of basic and diluted net income (loss) per common share (“EPS”) (in thousands, except share and per share data):
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Description of Business - Additional Information (Detail) |
Jul. 31, 2021
Store
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Minimum [Member] | |
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |
Number of stores | 261 |
Summary of Significant Accounting Policies - Additional Information (Detail) - USD ($) $ in Millions |
6 Months Ended | |
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Aug. 27, 2021 |
Jul. 31, 2021 |
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Accounting Policies [Abstract] | ||
Voluntary principal payment | $ 25.0 | |
Cost of goods and services sold | $ 1.5 | |
(Loss) income of cost of goods and service sold after taxes | $ 1.1 |
Revenues - Schedule of Disaggregated Revenues by Source (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 31, 2021 |
Aug. 01, 2020 |
Jul. 31, 2021 |
Aug. 01, 2020 |
|
Disaggregation Of Revenue [Line Items] | ||||
Net revenues | $ 159,236 | $ 92,636 | $ 288,322 | $ 183,605 |
Retail [Member] | ||||
Disaggregation Of Revenue [Line Items] | ||||
Net revenues | 85,428 | 26,304 | 140,344 | 61,397 |
Direct [Member] | ||||
Disaggregation Of Revenue [Line Items] | ||||
Net revenues | $ 73,808 | $ 66,332 | $ 147,978 | $ 122,208 |
Revenues - Schedule of Contract Liabilities (Detail) - USD ($) $ in Thousands |
Jul. 31, 2021 |
Jan. 30, 2021 |
---|---|---|
Contract liabilities: | ||
Signing bonus | $ 294 | $ 365 |
Unredeemed gift cards | 5,485 | 6,818 |
Total contract liabilities | $ 5,779 | $ 7,183 |
Revenues - Additional Information (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 31, 2021 |
Aug. 01, 2020 |
Jul. 31, 2021 |
Aug. 01, 2020 |
|
Revenue From Contract With Customer [Abstract] | ||||
Revenue recognized related to gift card redemptions and breakage | $ 2.6 | $ 1.8 | $ 5.0 | $ 4.0 |
Signing bonus | $ 0.3 | $ 0.3 |
Asset Impairments - Schedule of Rollforward of Carrying Amount of Goodwill (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | |
---|---|---|---|---|
Aug. 01, 2020 |
Jul. 31, 2021 |
Aug. 01, 2020 |
Jan. 30, 2021 |
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Income Statement [Abstract] | ||||
Goodwill, Beginning Balance | $ 59,697 | $ 77,597 | $ 77,597 | |
Impairment losses | $ (17,900) | 0 | $ (17,900) | (17,900) |
Goodwill, Ending Balance | $ 59,697 | $ 59,697 |
Asset Impairments - Summary of Intangible Assets (Detail) - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended |
---|---|---|
Jul. 31, 2021 |
Jan. 30, 2021 |
|
Definite-lived Intangible Assets, Accumulated Amortization | $ 80,737 | $ 76,604 |
Definite-lived Intangible Assets, Accumulated Impairment | 26,720 | 26,720 |
Definite-lived Intangible Assets, Carrying Amount | 84,843 | 88,976 |
Total Intangible Assets, Gross | 192,300 | 192,300 |
Trade Name [Member] | ||
Indefinite-lived, Gross | 58,100 | 58,100 |
Indefinite-lived, Accumulated Impairment | 24,100 | 24,100 |
Indefinite-lived, Accumulated Impairment | $ 34,000 | $ 34,000 |
Customer Relationships [Member] | ||
Useful Life | 13 years 2 months 12 days | 13 years 2 months 12 days |
Definite-lived Intangible Assets, Gross | $ 134,200 | $ 134,200 |
Definite-lived Intangible Assets, Accumulated Amortization | 80,737 | 76,604 |
Definite-lived Intangible Assets, Accumulated Impairment | 2,620 | 2,620 |
Definite-lived Intangible Assets, Carrying Amount | $ 50,843 | $ 54,976 |
Asset Impairments - Summary of Estimated Amortization Expense (Detail) $ in Thousands |
Jul. 31, 2021
USD ($)
|
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Fiscal Year | |
2021 | $ 4,131 |
2022 | 7,523 |
2023 | 6,942 |
2024 | 5,231 |
2025 | 4,693 |
Thereafter | 22,323 |
Total | $ 50,843 |
Debt - Components of Outstanding Term Loan (Detail) - USD ($) $ in Thousands |
Jul. 31, 2021 |
Jan. 30, 2021 |
---|---|---|
Debt Instrument [Line Items] | ||
Term Loan (principal of $4,978 and $5,007, respectively) | $ 4,951 | $ 4,904 |
Subordinated Facility (principal and paid-in kind interest of $16,713 and $15,666, respectively) | 4,301 | 3,311 |
Less: Current portion | (7,690) | (2,799) |
Net long-term debt | 224,354 | 228,712 |
Secured Debt [Member] | ||
Debt Instrument [Line Items] | ||
Priming Loan (principal of $228,403 and $229,773, respectively) | $ 222,792 | $ 223,296 |
Debt - Components of Outstanding Long term debt (Parenthetical) (Detail) - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended |
---|---|---|
Jul. 31, 2021 |
Jan. 30, 2021 |
|
Debt Instrument [Line Items] | ||
Principal amount of term loan | $ 4,978 | $ 5,007 |
Principal and paid-in kind interest | 16,713 | 15,666 |
Secured Debt [Member] | ||
Debt Instrument [Line Items] | ||
Principal amount of priming loan | $ 228,403 | $ 229,773 |
Debt - Subordinated Facility (Detail) - USD ($) $ in Thousands |
Jul. 31, 2021 |
Jan. 30, 2021 |
Sep. 30, 2020 |
---|---|---|---|
Debt Instrument [Line Items] | |||
Principal amount of term loan | $ 4,978 | $ 5,007 | |
Subordinated facility [member] | |||
Debt Instrument [Line Items] | |||
Principal amount of term loan | $ 15,000 |
Debt - Asset-Based Revolving Credit Agreement (Detail) - USD ($) |
3 Months Ended | ||
---|---|---|---|
May 01, 2021 |
Jul. 31, 2021 |
Jan. 30, 2021 |
|
Debt Instrument [Line Items] | |||
Credit facility maximum borrowing capacity | $ 10,000,000.0 | ||
Letter of Credit [Member] | |||
Debt Instrument [Line Items] | |||
Credit Facility drawn or outstanding | 2,900,000 | $ 2,900,000 | |
ABL Facility [Member] | |||
Debt Instrument [Line Items] | |||
Credit facility maximum borrowing capacity | $ 40,000,000.0 | ||
Debt instrument, initial maturity date | May 08, 2023 | ||
Credit Facility drawn or outstanding | 11,100,000 | ||
Credit Facility available borrowing capacity | $ 32,100,000 | $ 23,800,000 |
Fair Value Measurements - Additional Information (Details) |
6 Months Ended |
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Jul. 31, 2021 | |
Volatility [Member] | |
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |
Fair value assumptions expected rate | 90.60% |
Risk-free Rate [Member] | |
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |
Fair value assumptions expected rate | 0.01% |
Dividend Yield [Member] | |
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | |
Fair value assumptions expected rate | 0.00% |
Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 31, 2021 |
Aug. 01, 2020 |
Jul. 31, 2021 |
Aug. 01, 2020 |
|
Income Tax Disclosure [Abstract] | ||||
Income tax provision (benefit) | $ 4,446 | $ (7,034) | $ 5,838 | $ (31,151) |
U.S. Federal corporate income tax rate | 21.00% | 21.00% | 21.00% | 21.00% |
Net Loss Per Share - Computation of Basic and Diluted Net Income (Loss) Per Share Attributable to Common Shareholders (Detail) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 31, 2021 |
Aug. 01, 2020 |
Jul. 31, 2021 |
Aug. 01, 2020 |
|
Numerator | ||||
Net loss attributable to common shareholders | $ (24,648) | $ (19,034) | $ (42,956) | $ (89,303) |
Denominator | ||||
Weighted average number of common shares outstanding | 9,895,314 | 8,953,431 | 9,780,833 | 8,898,049 |
Assumed exercise of warrants | 2,555,037 | 1,277,518 | 19,758 | |
Weighted average common shares, basic | 12,450,351 | 8,953,431 | 11,058,351 | 8,917,807 |
Weighted average common shares, diluted | 12,450,351 | 8,953,431 | 11,058,351 | 8,917,807 |
Net loss per common share, basic | $ (1.98) | $ (2.13) | $ (3.88) | $ (10.01) |
Net loss per common share, diluted | $ (1.98) | $ (2.13) | $ (3.88) | $ (10.01) |
Net Loss Per Share - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
May 31, 2021 |
Jul. 31, 2021 |
Aug. 01, 2020 |
Jul. 31, 2021 |
Aug. 01, 2020 |
Jan. 30, 2021 |
|
Antidilutive equity awards excluded from the computation of diluted earnings per share | 104,108 | 520,521 | 104,108 | 520,521 | ||
Principal amount of term loan | $ 4,978 | $ 4,978 | $ 5,007 | |||
Fair value adjustment of derivative | (625) | (2,775) | ||||
Fair value adjustment of warrants - related party | $ 38,338 | 56,984 | ||||
Priming Term Loan Credit Agreement [Member] | ||||||
Common shares issued to lenders | 272,097 | 656,717 | ||||
Issuance of shares value | $ 5,200 | |||||
Principal amount of term loan | $ 4,900 | |||||
Conversion of warrants into common share | 3,820,748 | |||||
Warrants exercise price | $ 186,000 | |||||
Fair value adjustment of derivative | $ 39,000 | 39,000 | ||||
Fair value adjustment of warrants - related party | $ 59,800 | $ 59,800 | ||||
Warrant liabilities | $ 78,200 |
Equity-Based Compensation - Additional Information (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 31, 2021 |
Aug. 01, 2020 |
Jul. 31, 2021 |
Aug. 01, 2020 |
|
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | ||||
Equity based compensation expense | $ 0.7 | $ 0.6 | $ 1.1 | $ 1.3 |
Related Party Transactions - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended |
---|---|---|
Jul. 31, 2021 |
Jul. 31, 2021 |
|
Related Party Transaction [Line Items] | ||
Interest expense, net - related party | $ 529 | $ 990 |
Fair value adjustment of warrants - related party | 38,338 | 56,984 |
TowerBrook Capital Partners L.P [Member] | ||
Related Party Transaction [Line Items] | ||
Interest expense, net - related party | 500 | 1,000 |
Fair value adjustment of warrants - related party | $ 38,300 | $ 57,000 |
Operating Leases - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Aug. 01, 2020 |
May 02, 2020 |
Jul. 31, 2021 |
Aug. 01, 2020 |
|
Leases [Line Items] | ||||
Non-cash gains associated with exiting leases | $ 700 | |||
Non-cash gains from renegotiations | 600 | |||
Impairment of long-lived assets | $ (893) | $ 0 | $ 26,587 | |
Non cash gains on operating leases | $ 1,300 | |||
Operating lease benefit | $ 900 | |||
Selling General and Administrative Expenses [Member] | ||||
Leases [Line Items] | ||||
Operating lease benefit | 400 | |||
Right-of-Use Asset [Member] | ||||
Leases [Line Items] | ||||
Impairment of long-lived assets | 20,800 | |||
Leasehold Improvements [Member] | ||||
Leases [Line Items] | ||||
Impairment of long-lived assets | $ 6,700 |
Subsequent Event - Additional Information (Detail) $ in Millions |
Aug. 27, 2021
USD ($)
|
---|---|
Priming Loan [Member] | Subsequent Event [Member] | |
Subsequent Event [Line Items] | |
Voluntary principal payment of tem loan | $ 25.0 |
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