Company Quick10K Filing
J.Jill
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 44 $102
10-Q 2019-12-12 Quarter: 2019-11-02
10-Q 2019-09-11 Quarter: 2019-08-03
10-Q 2019-06-11 Quarter: 2019-05-04
10-K 2019-04-08 Annual: 2019-02-02
10-Q 2018-12-13 Quarter: 2018-11-03
10-Q 2018-09-18 Quarter: 2018-08-04
10-Q 2018-06-14 Quarter: 2018-05-05
10-K 2018-04-13 Annual: 2018-02-03
10-Q 2017-12-12 Quarter: 2017-10-28
10-Q 2017-09-12 Quarter: 2017-07-29
10-Q 2017-06-12 Quarter: 2017-04-29
10-K 2017-04-28 Annual: 2017-01-28
8-K 2020-01-13 Regulation FD, Exhibits
8-K 2019-12-05 Earnings, Exhibits
8-K 2019-12-04 Officers, Regulation FD, Exhibits
8-K 2019-08-27 Earnings, Exhibits
8-K 2019-06-12 Other Events
8-K 2019-06-06 Shareholder Vote
8-K 2019-05-30 Earnings, Exhibits
8-K 2019-04-15 Officers, Regulation FD, Exhibits
8-K 2019-04-02 Officers, Regulation FD, Exhibits
8-K 2019-03-06 Earnings, Regulation FD, Exhibits
8-K 2019-01-04 Officers
8-K 2018-12-06 Officers
8-K 2018-11-27 Earnings, Officers, Regulation FD, Exhibits
8-K 2018-08-21 Earnings, Exhibits
8-K 2018-06-07 Shareholder Vote
8-K 2018-05-31 Earnings, Exhibits
8-K 2018-04-09 Officers, Exhibits
8-K 2018-03-15 Earnings, Exhibits
8-K 2018-03-13 Officers, Regulation FD, Exhibits
JILL 2019-11-02
Part I-Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part Ii-Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 jill-ex311_6.htm
EX-31.2 jill-ex312_8.htm
EX-32.1 jill-ex321_9.htm
EX-32.2 jill-ex322_7.htm

J.Jill Earnings 2019-11-02

JILL 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
DLA 162 381 231 417 81 8 24 292 20% 12.4 2%
JILL 102 695 623 702 445 -84 -34 317 63% -9.3 -12%
JRSH 88 61 9 89 19 8 11 71 21% 6.7 12%
TLF 54 72 13 84 50 2 6 41 60% 7.2 2%
EVK 43 266 147 432 140 10 22 9 32% 0.4 4%
SQBG 34 772 559 153 0 -138 -142 471 0% -3.3 -18%
NAKD 14 5 1 3 1 -3 -3 12 34% -4.6 -54%
CHKE 12 95 83 23 0 -4 8 66 0% 8.6 -4%
KBSF 8 61 7 0 0 0 0 8 0%
CTRC

10-Q 1 jill-10q_20191102.htm 10-Q jill-10q_20191102.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended November 2, 2019

OR

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

For the transition period from _____________________ to _____________________

Commission File Number: 001-38026

 

J.Jill, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

 

45-1459825

(State or other jurisdiction of

incorporation or organization)

 

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

 

 

 

4 Batterymarch Park,

Quincy, MA 02169

 

02169

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (617) 376-4300

 

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

 

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

JILL

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

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

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

Securities registered pursuant to Section 12(g) of the Act: None

As of December 12, 2019, the registrant had 44,034,608 shares of common stock, $0.01 par value per share, outstanding.

 

 

 

 


Table of Contents

 

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

 

Item 1.

Financial Statements

 

 

 

Consolidated Balance Sheets (Unaudited)

 

2

 

Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)

 

3

 

Consolidated Statement of Shareholders’ Equity (Unaudited)

 

4

 

Consolidated Statements of Cash Flows (Unaudited)

 

5

 

Notes to Consolidated Financial Statements (Unaudited)

 

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

22

Item 4.

Controls and Procedures

 

22

PART II.

OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

 

23

Item 1A.

Risk Factors

 

23

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

23

Item 3.

Defaults Upon Senior Securities

 

23

Item 4.

Mine Safety Disclosures

 

23

Item 5.

Other Information

 

23

Item 6.

Exhibits

 

23

Exhibit Index

 

24

Signatures

 

25

 

 

 

 

 

1


Table of Contents

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

J.Jill, Inc.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share data)

 

 

 

November 2, 2019

 

 

February 2, 2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash

 

$

16,958

 

 

$

66,204

 

Accounts receivable

 

 

7,684

 

 

 

4,007

 

Inventories, net

 

 

81,420

 

 

 

77,349

 

Prepaid expenses and other current assets

 

 

26,391

 

 

 

27,734

 

Total current assets

 

 

132,453

 

 

 

175,294

 

Property and equipment, net

 

 

113,224

 

 

 

118,044

 

Intangible assets, net

 

 

120,730

 

 

 

136,177

 

Goodwill

 

 

108,597

 

 

 

197,026

 

Operating lease assets, net

 

 

218,008

 

 

 

 

Other assets

 

 

1,544

 

 

 

447

 

Total assets

 

$

694,556

 

 

$

626,988

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

50,966

 

 

$

55,012

 

Accrued expenses and other current liabilities

 

 

44,639

 

 

 

45,306

 

Current portion of long-term debt

 

 

2,799

 

 

 

2,799

 

Current portion of operating lease liabilities

 

 

31,372

 

 

 

 

Total current liabilities

 

 

129,776

 

 

 

103,117

 

Long-term debt, net of discount and current portion

 

 

236,450

 

 

 

237,464

 

Deferred income taxes

 

 

33,934

 

 

 

41,842

 

Operating lease liabilities, net of current portion

 

 

216,324

 

 

 

 

Other liabilities

 

 

2,000

 

 

 

30,770

 

Total liabilities

 

 

618,484

 

 

 

413,193

 

Commitments and contingencies (see Note 9)

 

 

 

 

 

 

 

 

Shareholders’ Equity

 

 

 

 

 

 

 

 

Common stock, par value $0.01 per share; 250,000,000 shares authorized; 44,034,608 and 43,672,418 shares issued and outstanding at November 2, 2019 and February 2, 2019, respectively

 

 

440

 

 

 

437

 

Additional paid-in capital

 

 

123,986

 

 

 

121,635

 

Accumulated (deficit) earnings

 

 

(48,354

)

 

 

91,723

 

Total shareholders’ equity

 

 

76,072

 

 

 

213,795

 

Total liabilities and shareholders’ equity

 

$

694,556

 

 

$

626,988

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

2


Table of Contents

 

J.Jill, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(in thousands, except share and per share data)

 

 

 

For the Thirteen Weeks Ended

 

 

For the Thirty-Nine Weeks Ended

 

 

 

November 2, 2019

 

 

November 3, 2018

 

 

November 2, 2019

 

 

November 3, 2018

 

Net sales

 

$

166,085

 

 

$

174,106

 

 

$

523,281

 

 

$

535,360

 

Costs of goods sold

 

 

59,137

 

 

 

58,643

 

 

 

194,736

 

 

 

182,901

 

Gross profit

 

 

106,948

 

 

 

115,463

 

 

 

328,545

 

 

 

352,459

 

Selling, general and administrative expenses

 

 

97,972

 

 

 

101,589

 

 

 

308,115

 

 

 

299,248

 

Impairment of goodwill

 

 

 

 

 

 

 

 

88,428

 

 

 

 

Impairment of indefinite-lived intangible assets

 

 

 

 

 

 

 

 

7,000

 

 

 

 

Operating income (loss)

 

 

8,976

 

 

 

13,874

 

 

 

(74,998

)

 

 

53,211

 

Interest expense, net

 

 

4,826

 

 

 

4,698

 

 

 

14,852

 

 

 

14,368

 

Income (loss) before provision for income taxes

 

 

4,150

 

 

 

9,176

 

 

 

(89,850

)

 

 

38,843

 

Income tax provision

 

 

1,763

 

 

 

2,488

 

 

 

132

 

 

 

10,412

 

Net income (loss) and total comprehensive income (loss)

 

$

2,387

 

 

$

6,688

 

 

$

(89,982

)

 

$

28,431

 

Net income (loss) per common share attributable to common shareholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.05

 

 

$

0.16

 

 

$

(2.06

)

 

$

0.67

 

Diluted

 

$

0.05

 

 

$

0.15

 

 

$

(2.06

)

 

$

0.64

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

43,838,667

 

 

 

42,953,173

 

 

 

43,653,178

 

 

 

42,674,957

 

Diluted

 

 

43,950,702

 

 

 

44,475,793

 

 

 

43,653,178

 

 

 

44,199,800

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

3


Table of Contents

 

J.Jill, Inc.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (UNAUDITED)

(in thousands, except common share data)

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Earnings

 

 

Shareholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Deficit)

 

 

Equity

 

Balance, February 2, 2019

 

 

43,672,418

 

 

$

437

 

 

$

121,635

 

 

$

91,723

 

 

$

213,795

 

Adoption of ASU 2016-02 (1)

 

 

 

 

 

 

 

 

 

 

 

59

 

 

 

59

 

Special cash dividend ($1.15 per share)

 

 

 

 

 

 

 

 

 

 

 

(50,154

)

 

 

(50,154

)

Vesting of restricted stock units

 

 

734,474

 

 

 

7

 

 

 

(7

)

 

 

 

 

 

 

Shares withheld for net-share settlement of equity-based compensation

 

 

(239,117

)

 

 

(2

)

 

 

(1,266

)

 

 

 

 

 

(1,268

)

Forfeiture of restricted stock awards

 

 

(69,978

)

 

 

(1

)

 

 

1

 

 

 

 

 

 

 

Equity-based compensation

 

 

 

 

 

 

 

 

1,202

 

 

 

 

 

 

1,202

 

Net income

 

 

 

 

 

 

 

 

 

 

 

4,366

 

 

 

4,366

 

Balance, May 4, 2019

 

 

44,097,797

 

 

$

441

 

 

$

121,565

 

 

$

45,994

 

 

$

168,000

 

Vesting of restricted stock units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeitable dividend

 

 

 

 

 

 

 

 

107

 

 

 

 

 

 

107

 

Forfeiture of restricted stock awards

 

 

(92,685

)

 

 

(1

)

 

 

1

 

 

 

 

 

 

 

Equity-based compensation

 

 

 

 

 

 

 

 

1,214

 

 

 

 

 

 

1,214

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(96,735

)

 

 

(96,735

)

Balance, August 3, 2019

 

 

44,005,112

 

 

$

440

 

 

$

122,887

 

 

$

(50,741

)

 

$

72,586

 

Vesting of restricted stock units

 

 

50,434

 

 

 

0

 

 

 

(0

)

 

 

 

 

 

 

Shares withheld for net-share settlement of equity-based compensation

 

 

(14,829

)

 

 

(0

)

 

 

(35

)

 

 

 

 

 

(35

)

Forfeitable dividend

 

 

 

 

 

 

 

 

7

 

 

 

 

 

 

7

 

Forfeiture of restricted stock awards

 

 

(6,109

)

 

 

(0

)

 

 

0

 

 

 

 

 

 

 

Equity-based compensation

 

 

 

 

 

 

 

 

1,128

 

 

 

 

 

 

1,128

 

Net income

 

 

 

 

 

 

 

 

 

 

 

2,387

 

 

 

2,387

 

Balance, November 2, 2019

 

 

44,034,608

 

 

$

440

 

 

$

123,986

 

 

$

(48,354

)

 

$

76,072

 

 

(1)

See Note 2 for additional detail regarding adoption of new accounting standards.

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Shareholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Equity

 

Balance, February 3, 2018

 

 

43,752,790

 

 

$

437

 

 

$

117,393

 

 

$

61,486

 

 

$

179,316

 

Adoption of ASU 2014-09

 

 

 

 

 

 

 

 

 

 

 

(288

)

 

 

(288

)

Vesting of restricted stock units

 

 

6,410

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Equity-based compensation

 

 

 

 

 

 

 

 

760

 

 

 

 

 

 

760

 

Net income

 

 

 

 

 

 

 

 

 

 

 

11,258

 

 

 

11,258

 

Balance, May 5, 2018

 

 

43,759,200

 

 

$

438

 

 

$

118,153

 

 

$

72,456

 

 

$

191,047

 

Vesting of restricted stock units

 

 

3,192

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeiture of restricted stock awards

 

 

(18,359

)

 

 

(1

)

 

 

 

 

 

 

 

 

(1

)

Equity-based compensation

 

 

 

 

 

 

 

 

1,083

 

 

 

 

 

 

1,083

 

Net income

 

 

 

 

 

 

 

 

 

 

 

10,485

 

 

 

10,485

 

Balance, August 4, 2018

 

 

43,744,033

 

 

$

437

 

 

$

119,236

 

 

$

82,941

 

 

$

202,614

 

Vesting of restricted stock units

 

 

3,724

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity-based compensation

 

 

 

 

 

 

 

 

1,111

 

 

 

 

 

 

1,111

 

Net income

 

 

 

 

 

 

 

 

 

 

 

6,688

 

 

 

6,688

 

Balance, November 3, 2018

 

 

43,747,757

 

 

$

437

 

 

$

120,347

 

 

$

89,629

 

 

$

210,413

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

4


Table of Contents

 

J.Jill, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 

 

 

For the Thirty-Nine Weeks Ended

 

 

 

November 2, 2019

 

 

November 3, 2018

 

Net (loss) income

 

$

(89,982

)

 

$

28,431

 

Operating activities:

 

 

 

 

 

 

 

 

Adjustments to reconcile net income to net cash provided by operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

28,301

 

 

 

27,397

 

Impairment of goodwill and indefinite-lived intangible assets

 

 

95,428

 

 

 

 

Impairment of long-lived assets

 

 

2,064

 

 

 

 

Loss on disposal of fixed assets

 

 

85

 

 

 

87

 

Gain on liquidation of inventory

 

 

(1,274

)

 

 

 

Noncash amortization of deferred financing and debt discount costs

 

 

1,250

 

 

 

1,196

 

Equity-based compensation

 

 

3,544

 

 

 

2,954

 

Deferred rent liability

 

 

(133

)

 

 

(99

)

Deferred income taxes

 

 

(7,908

)

 

 

(3,812

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(3,677

)

 

 

(2,777

)

Inventories

 

 

(4,797

)

 

 

1,747

 

Prepaid expenses and other current assets

 

 

(1,662

)

 

 

(4,958

)

Accounts payable

 

 

(4,102

)

 

 

(3,032

)

Accrued expenses

 

 

(60

)

 

 

44

 

Operating lease assets and liabilities

 

 

718

 

 

 

 

Other noncurrent assets and liabilities

 

 

(108

)

 

 

2,850

 

Net cash provided by operating activities

 

 

17,687

 

 

 

50,028

 

Investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(13,493

)

 

 

(14,017

)

Net cash used in investing activities

 

 

(13,493

)

 

 

(14,017

)

Financing activities:

 

 

 

 

 

 

 

 

Repayments on long-term debt

 

 

(2,099

)

 

 

(2,099

)

Payments of withholding tax on net-share settlement of equity-based compensation plans

 

 

(1,301

)

 

 

 

Special dividend paid to shareholders

 

 

(50,154

)

 

 

 

Forfeitable dividend

 

 

114

 

 

 

 

Net cash used in financing activities

 

 

(53,440

)

 

 

(2,099

)

Net change in cash

 

 

(49,246

)

 

 

33,912

 

Cash:

 

 

 

 

 

 

 

 

Beginning of Period

 

 

66,204

 

 

 

25,978

 

End of Period

 

$

16,958

 

 

$

59,890

 

 

The accompanying notes are an integral part of these consolidated financial statements.

5


Table of Contents

 

J.Jill, Inc.

NOTES TO 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 more than 280 stores nationwide and a robust E-commerce platform. J.Jill is headquartered outside Boston.

2. Summary of Significant Accounting Policies

Basis of Presentation

Our interim 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”). In the opinion of management, these interim 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 February 2, 2019 is derived from the audited consolidated balance sheet as of that date. The unaudited results of operations for the thirteen and thirty-nine weeks ended November 2, 2019 are not necessarily indicative of future results or results to be expected for the full year ending February 1, 2020 (“Fiscal Year 2019”). You should read these statements in conjunction with our audited consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended February 2, 2019.

Significant changes to our accounting policies as a result of adopting Accounting Standards Update (“ASU”) 2016-02 – Leases (Topic 842) are discussed below in “Significant Accounting Policies Update” and Note 10.

Recently Adopted Accounting Policies

In February 2016, the FASB issued ASU 2016-02 – Leases (Topic 842), which supersedes FASB Accounting Standards Codification (“ASC”) Topic 840 – Leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. The standard was adopted using the modified retrospective approach as of February 3, 2019 with an immaterial cumulative adjustment to retained earnings. See “Significant Accounting Policies Update” and Note 13 for a discussion of our updated policies related to leases and disclosures related to the impact of this standard.

In July 2018, the FASB issued ASU 2018-09 – Codification Improvements, which facilitates amendments to a variety of topics to clarify, correct errors in, or make minor improvements to the accounting standards codification. The effective date of the standard is dependent on the facts and circumstances of each amendment. Some amendments do not require transition guidance and will be effective upon the issuance of this standard. The standard was adopted as of February 3, 2019, and it had no material impact on our consolidated financial statements and related disclosures.

In June 2018, the FASB issued ASU 2018-07 – Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The Company adopted the standard as of February 3, 2019, and it had no impact on our consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements

In November 2018, the FASB issued ASU 2018-18 – Collaborative Arrangements (Topic 808), which clarifies the interaction between Topic 808 and Topic 606, Revenue from Contracts with Customers. The provisions of ASU 2018-18 are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company will be required to adopt this standard in the first quarter of Fiscal Year 2020. This standard is not expected to have a material impact on our consolidated financial statements and related disclosures.

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In September 2018, the FASB issued ASU 2018-15Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendment is intended to address aspects of the guidance issued in the amendments in ASU 2015-05Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. ASU 2018-15 intends to improve an entities ability to evaluate the accounting for fees paid by a customer in a cloud computing arrangement that is a service contract. The provisions of ASU 2018-15 are effective for fiscal years beginning after December 15, 2019. The Company plans to adopt these standards using a prospective approach and is evaluating the impact that adopting ASU 2018-15 will have on its consolidated financial statements and related disclosures.

Significant Accounting Policies Update

Adoption of ASC Topic 842: Leases

The Company adopted ASU 2016-02- Leases (Topic 842) and related amendments, as of February 3, 2019, using the modified retrospective approach. The modified retrospective approach provides a method for recording existing leases at adoption with a cumulative adjustment to retained earnings. The Company elected the package of practical expedients which permits the Company to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) any initial direct costs for any expired or existing leases as of the effective date.

The Company applied a portfolio approach to effectively account for the operating lease liabilities and operating lease assets; the Company did not have financing leases. The Company excludes leases with an initial term of 12 months or less from the application of Topic 842. The Company did not elect the hindsight practical expedient; therefore, upon adoption, the Company used the remaining lease term of the current lease, option or extension.

Adoption of the new standard resulted in the recording of operating lease assets and operating lease liabilities of $223.3 million and $250.5 million, respectively, on the Company’s consolidated balance sheet as of February 3, 2019. The difference between the approximate value of the operating lease assets and liabilities is attributable to deferred rent, deferred rent incentives, leasehold interests and prepaid rent. There was no material impact on the Company’s consolidated statement of operations and comprehensive income or consolidated statements cash flows. The Company’s comparative periods continue to be presented and disclosed in accordance with legacy guidance in Topic 840.

Operating Leases

The Company determines if an arrangement is a lease at inception. Lease agreements will typically exist with lease and non-lease components, which are generally accounted for separately.

The Company recognizes operating lease liabilities equal to the present value of the lease payments and operating lease assets representing the right to use the underlying asset for the lease term. The lease expense for lease payments is recognized on a straight-line basis over the lease term.

As the Company’s leases do not provide an implicit rate, the Company will use an incremental borrowing rate based on the information available at lease commencement in determining the present value of lease payments. The operating lease assets include any lease payments made prior to lease commencement and are reduced by any lease incentives.

Under Topic 842, for any new leases entered into, the Company will assess if it is reasonably certain to exercise lease options to extend or terminate the lease for inclusion (or exclusion) in the lease term when the Company measures the lease liability. The depreciable life of any assets and leasehold improvements are limited by the expected lease term.

Certain of the Company’s retail operating leases include variable rental payments based on a percentage of retail sales over contractual levels. Variable rental payments are recognized in the consolidated statement of operations and comprehensive income in the period in which the obligation for those payments are incurred. If such variable operating leases arise that include incentives from landlords in the form of cash, the Company will record the full amount of the incentive when specific performance criteria are met as a deferred liability. The deferred liability is amortized into income as a reduction of rent expense over the term of the applicable lease, including options to extend if they are reasonably certain to be exercised. The Company recognized those liabilities to be amortized within a year as a current liability and those greater than a year as a long-term liability. For purposes of recognizing these incentives and rental expenses on a straight-line basis, the Company uses the date it obtains the legal right to use and control the lease asset to begin amortization, which is generally when the Company takes possession of the asset.

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3. Revenues

Disaggregation of Revenue

The Company sells its products directly to consumers and the Company earns royalties under its credit card agreement. The following table presents disaggregated revenues by source (in thousands):

 

 

 

For the Thirteen Weeks Ended

 

 

For the Thirty-Nine Weeks Ended

 

 

 

November 2, 2019

 

 

November 3, 2018

 

 

November 2, 2019

 

 

November 3, 2018

 

Retail

 

$

94,748

 

 

$

104,840

 

 

$

301,008

 

 

$

319,080

 

Direct

 

 

71,337

 

 

 

69,266

 

 

 

222,273

 

 

 

216,280

 

Net revenues

 

$

166,085

 

 

$

174,106

 

 

$

523,281

 

 

$

535,360

 

 

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):

 

 

 

November 2, 2019

 

 

February 2, 2019

 

Contract liabilities:

 

 

 

 

 

 

 

 

Signing bonus

 

$

541

 

 

$

647

 

Unredeemed gift cards

 

 

4,934

 

 

 

7,081

 

Total contract liabilities(1)

 

$

5,475

 

 

$

7,728

 

 

(1)

Included in accrued expenses and other current liabilities on the Company's consolidated balance sheet. The short-term portion of the signing bonus is included in accrued expenses on the consolidated balance sheet as of November 2, 2019.

For the thirteen and thirty-nine weeks ended November 2, 2019, the Company recognized approximately $2.0 million and $8.5 million of revenue related to gift card redemptions and breakage, respectively. For the thirteen and thirty-nine weeks ended November 3, 2018, the Company recognized approximately $2.1 million and $8.2 million of revenue related to gift card redemptions and breakage, respectively. 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 during the period.

Performance Obligations

The Company has a remaining performance obligation of $0.5 million for a signing bonus related to the private label credit card agreement. The Company will recognize revenue over the remaining life of the contract as follows (in thousands):

 

 

Fiscal Year 2019

 

 

Fiscal Year 2020

 

 

Thereafter

 

Signing bonus

$

35

 

 

$

141

 

 

$

365

 

 

This disclosure does not include revenue related to performance obligations from unredeemed gift cards, as substantially all gift cards are redeemed in the first year of issuance.

 

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4. Other Income

The Company filed an insurance claim as a result of a cargo vessel fire on or about January 8, 2019, where contents of two containers carried J.Jill inventory. In July 2019, it was determined that the inventory onboard the cargo vessel was nonsalable and the insurance claim was settled for $3.3 million. The Company recorded a gain of $2.4 million on insurance proceeds in selling, general and administrative expenses in the consolidated statement of operations and comprehensive income (loss) for the thirty-nine weeks ended November 2, 2019.  

5. Asset Impairments

Long-lived Asset Impairments

In the second quarter of Fiscal Year 2019, the Company reduced the net carrying value of certain long-lived assets to their estimated fair value, determined using a discounted cash flows method. These impairment charges arose from the Company’s decision to vacate and sublease one floor of the corporate headquarters located in Quincy, Massachusetts. The Company incurred impairment charges of $0.3 million on leasehold improvements and $1.8 million on the right-of-use asset. The impairment charges were recorded in selling, general and administrative expenses in the consolidated statement of operations and comprehensive income (loss).

Goodwill and Other Indefinite-lived Intangible Asset Impairments

In the second quarter of Fiscal Year 2019, the Company reduced comparable sales outlook for the second quarter that led to a reduced full year forecast of earnings for Fiscal Year 2019. The Company concluded that these factors, as well as the decrease in stock price represented indicators of impairment and required the Company to test goodwill and indefinite-lived intangible assets for impairment during the second quarter of Fiscal Year 2019 (the “Impairment Test”).

The Company performed the Impairment Test using a quantitative approach with the assistance of an independent valuation firm. The Impairment Test was performed using the income approach (or discounted cash flows method) for goodwill and the relief-from-royalty method for indefinite-lived intangible assets. The estimated fair values of goodwill and indefinite-lived intangible asset were below carrying values resulting in an $88.4 million impairment of goodwill and a $7.0 million impairment of the Company’s tradename (indefinite-lived intangible asset). The Company will perform their annual impairment assessment during the fourth quarter of Fiscal Year 2019 and may incur further impairments based on the results of that assessment which may be material.

6. Restructuring Costs

In July 2019, the Company implemented a restructuring plan (the “2019 Restructuring Plan”) focused on cost reduction initiatives designed to execute against long-term strategies. The 2019 Restructuring Plan included headcount reductions primarily at the Company’s corporate headquarters in Quincy, Massachusetts and at the facility in Tilton, New Hampshire.

As a result of the 2019 Restructuring Plan, the Company recorded $1.6 million of restructuring costs in selling, general and administrative expenses in the consolidated statements of operations and comprehensive income. All restructuring costs have been incurred in the second quarter of Fiscal Year 2019 and payments are anticipated to be complete in the fourth quarter of Fiscal Year 2020, ending on January 30, 2021.

The following table summarizes the activity of the restructuring costs discussed above and related accruals recorded in accrued other and other current liabilities on the consolidated balance sheet (in thousands):

 

 

 

February 3, 2019

 

 

Charges

Incurred

 

 

Cash

Payments

 

 

Adjustments

 

 

November 2, 2019

 

Employee separation costs

 

$

 

 

$

1,402

 

 

$

828

 

 

$

 

 

$

574

 

Other

 

 

 

 

 

195

 

 

 

101

 

 

 

 

 

 

94

 

Total restructuring costs

 

$

 

 

$

1,597

 

 

$

929

 

 

$

 

 

$

668

 

 

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7. Debt

The components of the Company’s outstanding Term Loan were as follows (in thousands):

 

 

 

November 2, 2019

 

 

February 2, 2019

 

Term Loan

 

$

243,278

 

 

$

245,378

 

Discount on debt and debt issuance costs

 

 

(4,030

)

 

 

(5,115

)

Less: Current portion

 

 

(2,799

)

 

 

(2,799

)

Net long-term debt

 

$

236,450

 

 

$

237,464

 

 

The Company was in compliance with all financial covenants as of November 2, 2019.

8. Income Taxes

The Company recorded an income tax expense of $1.8 million and $0.1 million for the thirteen and thirty-nine weeks ended November 2, 2019, respectively, and income tax expense of $2.5 million and $10.4 million during the thirteen and thirty-nine weeks ended November 3, 2018, respectively. The effective tax rates were 42.5% and (0.1)% in the thirteen and thirty-nine weeks ended November 2, 2019, respectively, and 27.1% and 26.8% in the thirteen and thirty-nine weeks ended November 3, 2018, respectively.

The effective tax rate for the thirteen and thirty-nine weeks ended November 2, 2019 differs from the federal statutory rate of 21% primarily due to the impact of recurring items including §162(m) officer compensation limitation, stock compensation and state income taxes. The effective tax rate for the thirty-nine weeks ended November 2, 2019 was also impacted by the goodwill impairment charge of $88.4 million. The effective tax rate for the thirteen and thirty-nine weeks ended November 3, 2018 exceeded the federal statutory rate of 21.0% primarily due to §162(m) officer compensation limitation, stock compensation and state income taxes.

9. Earnings Per Share

The following table summarizes the computation of basic and diluted net income per share attributable to common shareholders (in thousands, except share and per share data):

 

 

 

For the Thirteen Weeks Ended

 

 

For the Thirty-Nine Weeks Ended

 

 

 

November 2, 2019

 

 

November 3, 2018

 

 

November 2, 2019

 

 

November 3, 2018

 

Numerator

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common shareholders:

 

$

2,387

 

 

$

6,688

 

 

$

(89,982

)

 

$

28,431

 

Denominator

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding, basic:

 

 

43,838,667

 

 

 

42,953,173

 

 

 

43,653,178

 

 

 

42,674,957

 

Dilutive effect of stock options and restricted shares:

 

 

112,035

 

 

 

1,522,620

 

 

 

 

 

 

1,524,843

 

Weighted average number of common shares outstanding, diluted:

 

 

43,950,702

 

 

 

44,475,793

 

 

 

43,653,178

 

 

 

44,199,800

 

Net (loss) income per common share attributable to common shareholders, basic:

 

$

0.05

 

 

$

0.16

 

 

$

(2.06

)

 

$

0.67

 

Net (loss) income per common share attributable to common shareholders, diluted:

 

$

0.05

 

 

$

0.15

 

 

$

(2.06

)

 

$

0.64

 

 

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. There were 4,000,014 and 3,183,761 for the thirteen and thirty-nine weeks ended November 2, 2019, and 1,083,876 and 847,600 for the thirteen and thirty-nine weeks ended November 3, 2018, such awards excluded.

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10. Equity-Based Compensation

Equity-based compensation expense was $1.1 million and $3.5 million for the thirteen and thirty-nine weeks ended November 2, 2019, and $1.1 million and $2.9 million for the thirteen and thirty-nine weeks ended November 3, 2018.

Special Dividend

On March 6, 2019, the Company’s Board of Directors declared a special cash dividend (the “Special Dividend”) of $1.15 per share payable to shareholders of record as of March 19, 2019, of which $50.2 million was paid on April 1, 2019 to shareholders.

In connection with the Special Dividend, pursuant to anti-dilution provisions in the 2017 Omnibus Equity Incentive Plan (the “2017 Plan”), the Company adjusted outstanding equity awards in order to prevent dilution of such awards. Accordingly, the Company adjusted the number of outstanding unvested restricted stock units (“RSUs”) as of the payment date of the dividend with an additional number of RSUs (“Dividend Equivalent Units” or “DEUs”) equal to the quotient obtained by dividing (x) the product of the number of unvested RSUs as of the record date by the amount of the dividend per share, by (y) the fair market value of share on the payment date of the Special Dividend. The DEUs will follow the same vesting pattern as the RSUs. For holders of outstanding options as of March 19, 2019, the option strike price on such options was reduced by the per share amount of the Special Dividend. Holders of unvested Restricted Stock Awards (“RSAs”) received a forfeitable $1.15 per share dividend on unvested RSAs as of March 19, 2019.

11. Related Party Transactions

For both the thirteen and thirty-nine weeks ended November 2, 2019 and November 3, 2018, the Company incurred an immaterial amount of related party transactions.

12. Commitments and Contingencies

Legal Proceedings

The Company is subject to variou