Company Quick10K Filing
Tilly's
Price9.62 EPS1
Shares30 P/E11
MCap286 P/FCF35
Net Debt-68 EBIT34
TEV219 TEV/EBIT6
TTM 2019-11-02, in MM, except price, ratios
10-Q 2020-08-01 Filed 2020-09-08
10-Q 2020-05-02 Filed 2020-06-15
10-K 2020-02-01 Filed 2020-04-01
10-Q 2019-11-02 Filed 2019-12-10
10-Q 2019-08-03 Filed 2019-09-10
10-Q 2019-05-04 Filed 2019-06-03
10-K 2019-02-02 Filed 2019-03-29
10-Q 2018-11-03 Filed 2018-12-10
10-Q 2018-08-04 Filed 2018-08-30
10-Q 2018-05-05 Filed 2018-06-13
10-K 2018-02-03 Filed 2018-03-30
10-Q 2017-10-28 Filed 2017-12-05
10-Q 2017-06-29 Filed 2017-08-31
10-Q 2017-04-29 Filed 2017-05-31
10-K 2017-01-28 Filed 2017-03-20
10-Q 2016-10-29 Filed 2016-12-05
10-Q 2016-07-30 Filed 2016-09-06
10-Q 2016-04-30 Filed 2016-06-08
10-K 2016-01-30 Filed 2016-03-30
10-Q 2015-10-31 Filed 2015-12-08
10-Q 2015-08-01 Filed 2015-09-09
10-Q 2015-05-02 Filed 2015-06-11
10-K 2015-01-31 Filed 2015-04-01
10-Q 2014-11-01 Filed 2014-12-09
10-Q 2014-08-02 Filed 2014-09-09
10-Q 2014-05-03 Filed 2014-06-11
10-K 2014-02-01 Filed 2014-04-01
10-Q 2013-08-03 Filed 2013-09-11
10-Q 2013-05-04 Filed 2013-06-13
10-K 2013-02-02 Filed 2013-04-03
10-Q 2012-10-27 Filed 2012-12-04
10-Q 2012-07-28 Filed 2012-09-07
10-Q 2012-04-28 Filed 2012-06-11
8-K 2020-09-03 Earnings, Exhibits
8-K 2020-07-15 Earnings, Exhibits
8-K 2020-06-10
8-K 2020-06-03
8-K 2020-05-08
8-K 2020-03-17
8-K 2020-03-12
8-K 2020-02-24
8-K 2020-01-24
8-K 2020-01-13
8-K 2019-12-04
8-K 2019-09-30
8-K 2019-09-03
8-K 2019-08-28
8-K 2019-06-12
8-K 2019-05-29
8-K 2019-03-29
8-K 2019-03-14
8-K 2019-01-31
8-K 2019-01-14
8-K 2018-11-28
8-K 2018-09-11
8-K 2018-09-06
8-K 2018-09-04
8-K 2018-08-29
8-K 2018-06-12
8-K 2018-05-30
8-K 2018-03-12
8-K 2018-01-24

TLYS 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Note 1: Description of The Company and Basis of Presentation
Note 2: Summary of Significant Accounting Policies
Note 3: Marketable Securities
Note 4: Line of Credit
Note 5: Commitments and Contingencies
Note 6: Fair Value Measurements
Note 7: Share - Based Compensation
Note 8: Income (Loss) per Share
Note 9: Subsequent Events
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 6. Exhibits
EX-31.1 q22020ex311.htm
EX-31.2 q22020ex312.htm
EX-32.1 q22020ex321.htm

Tilly's Earnings 2020-08-01

Balance SheetIncome StatementCash Flow
54543632721810902012201420172020
Assets, Equity
1751391036832-22012201420172020
Rev, G Profit, Net Income
35229-4-17-302012201420172020
Ops, Inv, Fin

Document
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The financial covenants require certain levels of leverage and profitability, such as (i) income before income taxes not to be less than $1.0 million (calculated at the end of each fiscal quarter on a trailing 12-month basis), (ii) a maximum ratio of 4.00 to 1.00 as of each quarter end for “Funded Debt to EBITDAR”, defined as the sum of total debt, capital leases and annual rent expense multiplied by six divided by the sum of net income, interest expense, taxes, depreciation, amortization and annual rent expense on a trailing 12-month basis, and (iii) requires minimum eligible inventory, cash, cash equivalents and marketable securities totaling $50.0 million as of the end of each quarter. 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
__________________________________________________ 
FORM 10-Q 
 __________________________________________________ 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 1, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-35535 
__________________________________________________ 
TILLY’S, INC.
(Exact name of Registrant as specified in its charter) 
__________________________________________________ 
 
Delaware
 
45-2164791
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
10 Whatney
Irvine, CA 92618
(Address of principal executive offices)
(949) 609-5599
(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
Class A Common Stock, $0.001 par value per share
TLYS
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  x 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 and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
 
¨

  
Accelerated Filer
 
x
 

 
 
 
 
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 Exchange Act Rule 12b-2)    Yes      No  x
As of September 3, 2020, the registrant had the following shares of common stock outstanding:
Class A common stock $0.001 par value
22,413,589

Class B common stock $0.001 par value
7,366,108

 
 
 
 
 



TILLY’S, INC.
FORM 10-Q
For the Quarterly Period Ended August 1, 2020
Index
 
 
 
Page
 
Item 1.
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 6.
 
 
 
 


3


EXPLANATORY NOTE
As of the date of filing of this Quarterly Report on Form 10-Q (this “Report”), there continue to be many uncertainties regarding the current novel coronavirus (“COVID-19”) pandemic, including the scope of scientific and health issues, the anticipated duration of the pandemic, and the extent of local and worldwide economic, social, and political disruption it may continue to cause. To date, and as described throughout this Report, the COVID-19 pandemic has had far-reaching adverse impacts on many aspects of the business of Tilly’s, Inc. (the “Company, “we,” “our” or “us”), both directly and indirectly, including on our operations generally, consumer behavior, store traffic, demands on our information technology and e-commerce capabilities, inventory and expense management, production capabilities, timing of deliveries, managing our workforce, our store configurations and operations upon reopening, and the market generally. The scope and nature of these impacts continue to evolve each day. The COVID-19 pandemic has resulted in, and may continue to result in, regional quarantines, labor stoppages and shortages, changes in consumer purchasing patterns, mandatory or elective shut-downs of retail locations, disruptions to supply chains, including the inability of our suppliers and service providers to deliver materials and services on a timely basis, or at all, severe market volatility, liquidity disruptions, and overall economic instability, which, in many cases, have had, and we expect will continue to have, material adverse impacts on our business, financial condition and results of operations. This situation is changing rapidly, and additional impacts may arise that we are not aware of currently.
In light of these uncertainties, for purposes of this Report, except where otherwise indicated, the descriptions of our business, our strategies, our risk factors, and any other forward-looking statements, including regarding us, our business and the market generally, do not reflect the potential impact of the COVID-19 pandemic or our responses thereto. In addition, the disclosures contained in this Report are made only as of the date hereof, and we undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. For further information, please see “Risk Factors” within our most recently filed Annual Report on Form 10-K and “Forward-Looking Statements” below.
For a detailed summary of recent and anticipated impacts of the COVID-19 pandemic on our business and our actions taken in response thereto, please see "Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations - Known and Anticipated Trends".


4


Forward-Looking Statements
This Report contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical or current fact included in this Report are forward-looking statements. Forward-looking statements refer to our current expectations and projections relating to our financial condition, results of operations, plans, objectives, strategies, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate”, “estimate”, “expect”, “project”, “plan”, “intend”, “believe”, “may”, “might”, “will”, “should”, “can have”, “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected earnings, revenues, comparable store sales, operating income, earnings per share, costs, expenditures, cash flows, growth rates and financial results, our plans and objectives for future operations, growth or initiatives, strategies or the expected outcome or impact of pending or threatened litigation are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including: 
the impacts of the COVID-19 pandemic generally, and on our operations, or our future financial or operational results, including with respect to our ability to reopen and keep stores open, e-commerce operations, cash and liquidity, payroll and inventory management, and our ability to realize any cost savings and manage expected capital expenditures;
our ability to successfully open new stores and profitably operate our existing stores;
our ability to attract customers to our e-commerce website;
our ability to efficiently utilize our e-commerce fulfillment center;
effectively adapting to new challenges associated with our expansion into new geographic markets;
our ability to establish, maintain and enhance a strong brand image;
generating adequate cash from our stores to support our growth;
identifying and responding to new and changing customer fashion preferences and fashion-related trends;
competing effectively in an environment of intense competition both in stores and online;
containing the increase in the cost of mailing catalogs, paper and printing;
the success of the malls, power centers, neighborhood and lifestyle centers, outlet centers and street-front locations in which our stores are located;
our ability to attract customers in the various retail venues and geographies in which our stores are located;
our ability to adapt to downward trends in traffic for our stores and changes in our customers' purchasing patterns;
adapting to declines in consumer confidence and decreases in consumer spending;
our ability to adapt to significant changes in sales due to the seasonality of our business;
our ability to compete in social media marketing platforms;
price reductions or inventory shortages resulting from failure to purchase the appropriate amount of inventory in advance of the season in which it will be sold;
natural disasters, unusually adverse weather conditions, boycotts and unanticipated events;
changes in the competitive environment in our industry and the markets we serve, including increased competition from other retailers;
our dependence on third-party vendors to provide us with sufficient quantities of merchandise at acceptable prices;
increases in costs of energy, transportation or utility costs and in the costs of labor and employment;
our ability to balance proprietary branded merchandise with the third-party branded merchandise we sell;
most of our merchandise is made in foreign countries, making price and availability of our merchandise susceptible to international trade conditions;
failure of our vendors and their manufacturing sources to use acceptable labor or other practices;
our dependence upon key executive management or our inability to hire or retain the talent required for our business;
our ability to effectively adapt to our rapid expansion in recent years and our planned expansion;
failure of our information technology systems to support our current and growing business;
disruptions in our supply chain and distribution center;
our indebtedness and lease obligations, including restrictions on our operations contained therein;
our reliance upon independent third-party transportation providers for certain of our product shipments;


5


our ability to increase comparable store sales or sales per square foot, which may cause our operations and stock price to be volatile;
disruptions to our information systems in the ordinary course or as a result of systems upgrades;
our inability to protect our trademarks or other intellectual property rights;
epidemics, pandemics, acts of war, terrorism or civil unrest;
the impact of governmental laws and regulations and the outcomes of legal proceedings;
our ability to secure the personal financial information of our customers and comply with the security standards for the credit card industry;
our failure to maintain adequate internal controls over our financial and management systems; and
continuing costs incurred as a result of being a public company.
We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results.
See “Risk Factors” within our most recent Annual Report on Form 10-K for a more complete discussion of the risks and uncertainties mentioned above and for discussion of other risks and uncertainties. All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements as well as others made in this Report and hereafter in our other SEC filings and public communications. You should evaluate all forward-looking statements made by us in the context of these risks and uncertainties.
We caution you that the risks and uncertainties identified by us may not be all of the factors that are important to you. Furthermore, the disclosures and forward-looking statements included in this Report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.


6


Part I. Financial Information
 
Item 1. Financial Statements (Unaudited)
TILLY’S, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)
 
 
August 1,
2020
 
February 1,
2020
 
August 3,
2019
ASSETS
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
132,955

 
$
70,137

 
$
62,388

Marketable securities
15,939

 
69,780

 
62,413

Receivables
13,287

 
7,485

 
11,758

Merchandise inventories
68,067

 
56,901

 
72,635

Prepaid expenses and other current assets
3,956

 
4,561

 
4,845

Total current assets
234,204

 
208,864

 
214,039

Operating lease assets
244,040

 
263,649

 
256,048

Property and equipment, net
56,805

 
66,176

 
68,010

Other assets
8,458

 
7,951

 
2,194

Total assets
$
543,507

 
$
546,640

 
$
540,291

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Accounts payable
$
48,710

 
$
20,562

 
$
39,475

Accrued expenses
19,416

 
20,755

 
23,112

Line of credit
23,675

 

 

Deferred revenue
9,443

 
11,761

 
8,330

Accrued compensation and benefits
6,891

 
7,190

 
6,132

Dividends payable

 
29,677

 

Current portion of operating lease liabilities
64,470

 
55,321

 
53,744

Total current liabilities
172,605

 
145,266

 
130,793

Noncurrent operating lease liabilities
222,015

 
240,755

 
233,876

Other
319

 
718

 
1,182

Total liabilities
394,939

 
386,739

 
365,851

Commitments and contingencies (Notes 2 and 5)

 

 

Stockholders’ equity:
 
 
 
 
 
Common stock (Class A), $0.001 par value; 100,000 shares authorized; 22,414, 22,323 and 21,980 shares issued and outstanding, respectively
22

 
22

 
22

Common stock (Class B), $0.001 par value; 35,000 shares authorized; 7,366, 7,406 and 7,586 shares issued and outstanding, respectively
8

 
8

 
8

Preferred stock, $0.001 par value; 10,000 shares authorized; no shares issued or outstanding

 

 

Additional paid-in capital
154,386

 
153,377

 
150,877

(Accumulated deficit) Retained earnings
(5,849
)
 
6,280

 
23,296

Accumulated other comprehensive income
1

 
214

 
237

Total stockholders’ equity
148,568

 
159,901

 
174,440

Total liabilities and stockholders’ equity
$
543,507

 
$
546,640

 
$
540,291

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


7


TILLY’S, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands, except per share data)
(Unaudited)
 
 
Thirteen Weeks Ended
 
Twenty-Six Weeks Ended
 
August 1,
2020
 
August 3,
2019
 
August 1,
2020
 
August 3,
2019
Net sales
$
135,845

 
$
161,738

 
$
213,134

 
$
292,041

Cost of goods sold (includes buying, distribution, and occupancy costs)
94,171

 
110,019

 
169,866

 
204,638

Gross profit
41,674

 
51,719

 
43,268

 
87,403

Selling, general and administrative expenses
33,965

 
39,609

 
63,960

 
75,147

Operating income (loss)
7,709

 
12,110

 
(20,692
)
 
12,256

Other income, net
311

 
572

 
720

 
1,401

Income (loss) before income taxes
8,020

 
12,682

 
(19,972
)
 
13,657

Income tax expense (benefit)
2,754

 
3,398

 
(7,843
)
 
3,696

Net income (loss)
$
5,266

 
$
9,284

 
$
(12,129
)
 
$
9,961

Basic income (loss) per share of Class A and Class B common stock
$
0.18

 
$
0.31

 
$
(0.41
)
 
$
0.34

Diluted income (loss) per share of Class A and Class B common stock
$
0.18

 
$
0.31

 
$
(0.41
)
 
$
0.33

Weighted average basic shares outstanding
29,694

 
29,505

 
29,686

 
29,487

Weighted average diluted shares outstanding
29,700

 
29,678

 
29,686

 
29,739

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


8


TILLY’S, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
 
 
Thirteen Weeks Ended
 
Twenty-Six Weeks Ended
 
August 1,
2020
 
August 3,
2019
 
August 1,
2020
 
August 3, 2019
Net income (loss)
$
5,266

 
$
9,284

 
$
(12,129
)
 
$
9,961

Other comprehensive (loss) income, net of tax:
 
 
 
 
 
 
 
Net change in unrealized (loss) gain on available-for-sale securities, net of tax
(200
)
 
80

 
(213
)
 
11

Other comprehensive (loss) income, net of tax
(200
)
 
80

 
(213
)
 
11

Comprehensive income (loss)
$
5,066

 
$
9,364

 
$
(12,342
)
 
$
9,972

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


9


TILLY’S, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)

 
Number of Shares
 
 
 
 
 
 
 
 
 
 
 
Common
Stock
(Class A)
 
Common
Stock
(Class B)
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income
 
Total
Stockholders’
Equity
Balance at May 2, 2020
22,363

 
7,366

 
$
30

 
$
153,878

 
$
(11,115
)
 
$
201

 
$
142,994

Net income

 

 

 

 
5,266

 

 
5,266

Restricted stock
51

 

 

 

 

 

 

Share-based compensation expense

 

 

 
508

 

 

 
508

Net change in unrealized gain on available-for-sale securities

 

 

 

 

 
(200
)
 
(200
)
Balance at August 1, 2020
22,414

 
7,366

 
$
30

 
$
154,386

 
$
(5,849
)
 
$
1

 
$
148,568


 
Number of Shares
 
 
 
 
 
 
 
 
 
 
 
Common
Stock
(Class A)
 
Common
Stock
(Class B)
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income
 
Total
Stockholders’
Equity
Balance at May 4, 2019
21,816

 
7,706

 
$
30

 
$
150,331

 
$
14,012

 
$
157

 
$
164,530

Net income

 

 

 

 
9,284

 

 
9,284

Restricted stock
44

 

 

 

 

 

 

Class B common stock converted to Class A common stock
120

 
(120
)
 

 

 

 

 

Stock-based compensation expense

 

 

 
546

 

 

 
546

Net change in unrealized gain on available-for-sale securities

 

 

 

 

 
80

 
80

Balance at August 3, 2019
21,980

 
7,586

 
$
30

 
$
150,877

 
$
23,296

 
$
237

 
$
174,440


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



















10


TILLY’S, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (continued)
(In thousands)
(Unaudited)

 
Number of Shares
 
 
 
 
 
 
 
 
 
 
 
Common
Stock
(Class A)
 
Common
Stock
(Class B)
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income
 
Total
Stockholders’
Equity
Balance at February 1, 2020
22,323

 
7,406

 
$
30

 
$
153,377

 
$
6,280

 
$
214

 
$
159,901

Net loss

 

 

 

 
(12,129
)
 

 
(12,129
)
Restricted stock
51

 

 

 

 

 

 

Class B common stock converted to Class A common stock
40

 
(40
)
 

 

 

 

 

Share-based compensation expense

 

 

 
1,009

 

 

 
1,009

Net change in unrealized gain on available-for-sale securities

 

 

 

 

 
(213
)
 
(213
)
Balance at August 1, 2020
22,414

 
7,366

 
$
30

 
$
154,386

 
$
(5,849
)
 
$
1

 
$
148,568


 
Number of Shares
 
 
 
 
 
 
 
 
 
 
 
Common
Stock
(Class A)
 
Common
Stock
(Class B)
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income
 
Total
Stockholders’
Equity
Balance at February 2, 2019
21,642

 
7,844

 
$
29

 
$
149,737

 
$
13,335

 
$
226

 
$
163,327

Net income

 

 

 

 
9,961

 

 
9,961

Restricted stock
70

 

 

 

 

 

 

Taxes paid in lieu of shares issued for stock-based compensation
(8
)
 

 

 
(85
)
 

 

 
(85
)
Class B common stock converted to Class A common stock

258

 
(258
)
 

 

 

 

 

Stock-based compensation expense

 

 

 
1,075

 

 

 
1,075

Exercises of stock options
18

 

 
1

 
150

 

 

 
151

Net change in unrealized gain on available-for-sale securities

 

 

 

 

 
11

 
11

Balance at August 3, 2019
21,980

 
7,586

 
$
30

 
$
150,877

 
$
23,296

 
$
237

 
$
174,440


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





11


TILLY’S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Twenty-Six Weeks Ended
 
August 1,
2020
 
August 3,
2019
Cash flows from operating activities
 
 
 
Net (loss) income
$
(12,129
)
 
$
9,961

Adjustments to reconcile net (loss) income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
9,987

 
10,286

Share-based compensation expense
1,009

 
1,075

Impairment of assets
903

 

Loss on disposal of assets
64

 
145

Gain on sales and maturities of marketable securities
(677
)
 
(848
)
Deferred income taxes
(490
)
 
(218
)
Changes in operating assets and liabilities:
 
 
 
Receivables
(5,802
)
 
(3,605
)
Merchandise inventories
(11,166
)
 
(16,826
)
Prepaid expenses and other current assets
2,107

 
717

Accounts payable
28,376

 
15,055

Accrued expenses
701

 
4,243

Deferred revenue
(2,318
)
 
(2,043
)
Accrued compensation and benefits
(299
)
 
(2,798
)
Operating lease liabilities
8,577

 
(1,059
)
Net cash provided by operating activities
18,843

 
14,085

Cash flows from investing activities
 
 
 
Purchases of property and equipment
(4,250
)
 
(4,848
)
Purchases of marketable securities
(15,968
)
 
(62,079
)
Maturities of marketable securities
70,195

 
76,457

Net cash provided by investing activities
49,977

 
9,530

Cash flows from financing activities
 
 
 
Line of credit
23,675

 

Dividends paid
(29,677
)
 
(29,453
)
Proceeds from exercise of stock options

 
151

Taxes paid in lieu of shares issued for share-based compensation

 
(85
)
Net cash used in financing activities
(6,002
)
 
(29,387
)
Change in cash and cash equivalents
62,818

 
(5,772
)
Cash and cash equivalents, beginning of period
70,137

 
68,160

Cash and cash equivalents, end of period
$
132,955

 
$
62,388

Supplemental disclosures of cash flow information
 
 
 
Interest paid
$
128

 
$

Income taxes paid
$
828

 
$
4,647

Supplemental disclosure of non-cash activities
 
 
 
Unpaid purchases of property and equipment
$
1,845

 
$
2,012

Leased assets obtained in exchange for new operating lease liabilities
$
7,168

 
$
313,602

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


12



TILLY’S, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Description of the Company and Basis of Presentation
Tillys is a leading destination specialty retailer of casual apparel, footwear and accessories for young men, young women, boys and girls with an extensive assortment of iconic global, emerging, and proprietary brands rooted in an active and social lifestyle. Tillys is headquartered in Irvine, California and operated 238 stores, including one RSQ-branded pop-up store, in 33 states (of which 33 stores in California were temporarily closed due to government response to the COVID-19 pandemic) as of August 1, 2020. Our stores are located in malls, lifestyle centers, ‘power’ centers, community centers, outlet centers and street-front locations. Customers may also shop online, where we feature the same assortment of products as carried in our brick-and-mortar stores, supplemented by additional online-only styles. Our goal is to serve as a destination for the latest, most relevant merchandise and brands important to our customers.
The Tillys concept began in 1982, when our co-founders, Hezy Shaked and Tilly Levine, opened their first store in Orange County, California. Since 1984, the business has been conducted through World of Jeans & Tops, a California corporation, or “WOJT”, which operates under the name “Tillys”. In May 2011, Tilly’s, Inc., a Delaware corporation, was formed solely for the purpose of reorganizing the corporate structure of WOJT in preparation for an initial public offering. As part of the initial public offering in May 2012, WOJT became a wholly owned subsidiary of Tilly's, Inc.
As used in these Notes to the Consolidated Financial Statements, except where the context otherwise requires or where otherwise indicated, the terms "the Company", "World of Jeans and Tops", "WOJT", "we", "our", "us" and "Tillys" refer to WOJT before our initial public offering, and to Tilly's, Inc. and its subsidiary after our initial public offering.
We have prepared the accompanying unaudited consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial reporting. These unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted from this Quarterly Report on Form 10-Q as is permitted by SEC rules and regulations.
In the opinion of management, the accompanying unaudited consolidated financial statements contain all normal and recurring adjustments necessary to present fairly the financial condition, results of operations and cash flows for the interim periods presented. The results of operations for the thirteen and twenty-six week periods ended August 1, 2020 are not necessarily indicative of results to be expected for the full fiscal year, especially in light of the uncertainties surrounding the impacts of the COVID-19 pandemic. The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended February 1, 2020 ("fiscal 2019").
Fiscal Periods
Our fiscal year ends on the Saturday closest to January 31. References to fiscal 2020 refer to the fiscal year ending January 30, 2021. References to the fiscal quarters or first halves ended August 1, 2020 and August 3, 2019 refer to the thirteen and twenty-six week periods ended as of those dates, respectively.
Note 2: Summary of Significant Accounting Policies
Information regarding our significant accounting policies is contained in Note 2, “Summary of Significant Accounting Policies”, of the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended February 1, 2020.
Revenue Recognition
Revenue is recognized for store sales when the customer receives and pays for the merchandise at the register, net of estimated returns. Taxes collected from our customers are recorded on a net basis. For e-commerce sales, we recognize revenue, net of sales taxes and estimated sales returns, and the related cost of goods sold at the time the merchandise is shipped to the customer. Amounts related to shipping and handling that are billed to customers are reflected in net sales, and the related costs are reflected in cost of goods sold in the Consolidated Statements of Income (Loss).





13


The following table summarizes net sales from our retail stores and e-commerce (in thousands):
 
Thirteen Weeks Ended
 
Twenty-Six Weeks Ended
 
August 1,
2020
 
August 3,
2019
 
August 1,
2020
 
August 3,
2019
Retail stores
$
83,858

 
$
138,918

 
$
130,811

 
$
249,554

E-commerce
51,987

 
22,820

 
82,323

 
42,487

Total net sales
$
135,845

 
$
161,738

 
$
213,134

 
$
292,041

The following table summarizes the percentage of net sales by department:
 
Thirteen Weeks Ended
 
Twenty-Six Weeks Ended
 
August 1,
2020
 
August 3,
2019
 
August 1,
2020
 
August 3,
2019
Mens
35
%
 
33
%
 
35
%
 
33
%
Womens
27
%
 
25
%
 
27
%
 
26
%
Accessories
16
%
 
19
%
 
16
%
 
18
%
Footwear
13
%
 
12
%
 
13
%
 
13
%
Boys
5
%
 
6
%
 
5
%
 
5
%
Girls
4
%
 
5
%
 
4
%
 
5
%
Total net sales
100
%
 
100
%
 
100
%
 
100
%
The following table summarizes the percentage of net sales by third-party and proprietary branded merchandise:
 
Thirteen Weeks Ended
 
Twenty-Six Weeks Ended
 
August 1,
2020
 
August 3,
2019
 
August 1,
2020
 
August 3,
2019
Third-party
77
%
 
74
%
 
77
%
 
74
%
Proprietary
23
%
 
26
%
 
23
%
 
26
%
Total net sales
100
%
 
100
%
 
100
%
 
100
%

We accrue for estimated sales returns by customers based on historical sales return results. As of August 1, 2020, February 1, 2020 and August 3, 2019, our reserve for sales returns was $2.1 million, $1.4 million and $3.3 million, respectively.
We recognize revenue from gift cards as they are redeemed for merchandise. Prior to redemption, we maintain a current liability for unredeemed gift card balances. The customer liability balance was $7.7 million, $9.3 million and $6.6 million as of August 1, 2020, February 1, 2020 and August 3, 2019, respectively, and is included in deferred revenue on the accompanying Consolidated Balance Sheets. Our gift cards do not have expiration dates and in most cases there is no legal obligation to remit unredeemed gift cards to relevant jurisdictions. Based on actual historical redemption patterns, we determined that a small percentage of gift cards are unlikely to be redeemed (which we refer to as gift card “breakage”). Based on our historical gift card breakage rate, we recognize breakage revenue over the redemption period in proportion to actual gift card redemptions. Revenue recognized from gift cards was $2.7 million and $5.4 million for the thirteen and twenty-six week periods ended August 1, 2020, respectively and $3.8 million and $8.0 million for the thirteen and twenty-six week periods ended August 3, 2019, respectively.
We have a customer loyalty program where customers accumulate points based on purchase activity. Once a loyalty member achieves a certain point level, the member earns awards that may be redeemed for merchandise. Unredeemed awards and accumulated partial points are accrued as deferred revenue and awards redeemed by the member for merchandise are recorded as an increase to net sales. Our loyalty program includes the ability for customers to redeem their awards instantly rather than build up to an award over time. We currently expire unredeemed awards and accumulated partial points 365 days after the last purchase activity. A liability is estimated based on the standalone selling price of awards and partial points earned and estimated redemptions. The deferred revenue for this program was $1.8 million, $2.4 million and $1.8 million as of August 1, 2020, February 1, 2020 and August 3, 2019, respectively. Revenue recognized from our loyalty program was $1.5 million and $2.4 million for the thirteen and twenty-six week periods ended August 1, 2020, respectively, and $1.4 million and $1.7 million for the thirteen and twenty-six week periods ended August 3, 2019, respectively.


14


Leases
We conduct all of our retail sales and corporate operations in leased facilities. Lease terms for our stores are generally for ten years (subject to elective extensions) and provide for escalations in base rents. Many of our store leases contain one or more options to renew the lease at our sole discretion. Generally, we do not consider any additional renewal periods to be reasonably certain of being exercised.
Most store leases include tenant allowances from landlords, rent escalation clauses and/or contingent rent provisions. Certain leases provide for additional rent based on a percentage of sales and annual rent increases generally based upon the Consumer Price Index. In addition, most of our store leases are net leases, which typically require us to be responsible for certain property operating expenses, including property taxes, insurance, common area maintenance, in addition to base rent. Many of our store leases contain certain co-tenancy provisions that permit us to pay rent based on a pre-determined percentage of sales when the occupancy of the retail center falls below minimums established in the lease. For non-cancelable operating lease agreements, operating lease assets and operating lease liabilities are established for leases with an expected term greater than one year and we recognize lease expense on a straight-line basis. Contingent rent, determined based on a percentage of sales in excess of specified levels, is recognized as rent expense when the achievement of the specified sales that triggers the contingent rent is probable.
In response to stores being closed to the public as a result of the COVID-19 pandemic, we have elected to withhold payment of our contractual lease obligations with respect to certain stores for the periods we were and are unable to operate such stores. As of August 1, 2020, withheld contractual lease payments totaled $13.9 million in the aggregate. We are currently in the process of negotiating COVID-19-related lease concessions for these stores. With respect to all of our stores, we continue to have ongoing conversations with our landlords generally regarding what we believe to be commercially reasonable lease concessions given the current environment. We have reached agreements in principle with respect to lease concessions covering approximately 70% of our total stores at this time. These agreements have generally resulted in a combination of rent abatements and/or rent deferrals. We have considered the Financial Accounting Standards Board's (“FASB”) recent guidance regarding COVID-19 lease concessions and have elected to account for the lease concessions that have been granted as lease modifications.
We lease approximately 172,000 square feet of office and warehouse space (10 and 12 Whatney, Irvine, California) from a company that is owned by the co-founders of Tillys. The lease expires on December 31, 2027. During the thirteen and twenty-six week periods ended August 1, 2020, we incurred rent expense of $0.6 million and $1.1 million, respectively, related to this lease. During the thirteen and twenty-six week periods ended August 3, 2019, we incurred rent expense of $0.5 million and $1.1 million, respectively, related to this lease.
We lease approximately 26,000 square feet of office and warehouse space (11 Whatney, Irvine, California) from a company that is owned by one of the co-founders of Tillys. During each of the thirteen and twenty-six week periods ended August 1, 2020, and August 3, 2019, we incurred rent expense of $0.1 million and $0.2 million, respectively, related to this lease. Pursuant to the lease agreement, the lease payment adjusts annually based upon the Los Angeles/Anaheim/Riverside Urban Consumer Price Index, with the adjustment not to be below 3% nor exceed 7% in any one annual increase. The lease expires on June 30, 2022.
We lease approximately 81,000 square feet of office and warehouse space (17 Pasteur, Irvine, California) from a company that is owned by one of the co-founders of Tillys. We use this property as our e-commerce distribution center. During the thirteen and twenty-six week periods ended August 1, 2020, we incurred rent expense of $0.3 million and $0.5 million, respectively, related to this lease. During the thirteen and twenty-six week periods ended August 3, 2019, we incurred rent expense of $0.2 million and $0.4 million, respectively, related to this lease. Pursuant to the lease agreement, the lease payment adjusts annually based upon the Los Angeles/Anaheim/Riverside Urban Consumer Price Index, with the adjustment not to be below 3% nor exceed 7% in any one annual increase. The lease expires on October 31, 2021.


15


The maturity of operating lease liabilities as of August 1, 2020 were as follows (in thousands):
Fiscal Year
 
2020
$
43,239

2021
62,782

2022
56,447

2023
47,159

2024
36,199

Thereafter
77,534

Total minimum lease payments
323,360

Less: Amount representing interest
36,875

Present value of operating lease liabilities
$
286,485



As of August 1, 2020, additional operating lease contracts that have not yet commenced are approximately $14 million.

Lease expense for the thirteen and twenty-six week periods ended August 1, 2020 and August 3, 2019 was as follows (in thousands):
 
 
Thirteen Weeks Ended
August 1, 2020
 
Thirteen Weeks Ended
 August 3, 2019
 
 
Cost of goods sold
 
SG&A
 
Total
 
Cost of goods sold
 
SG&A
 
Total
Fixed operating lease expense
 
$
14,886

 
$
402

 
$
15,288

 
$
15,482

 
$
381

 
$
15,863

Variable lease expense
 
4,425

 
28

 
4,453

 
4,080

 
(2
)
 
4,078

Total lease expense
 
$
19,311

 
$
430

 
$
19,741

 
$
19,562

 
$
379

 
$
19,941


 
 
Twenty-Six Weeks Ended
August 1, 2020
 
Twenty-Six Weeks Ended
 August 3, 2019
 
 
Cost of goods sold
 
SG&A
 
Total
 
Cost of goods sold
 
SG&A
 
Total
Fixed operating lease expense
 
$
30,400

 
$
803

 
$
31,203

 
$
30,941

 
$
766

 
$
31,707

Variable lease expense
 
8,244

 
50

 
8,294

 
7,945

 
41

 
7,986

Total lease expense
 
$
38,644

 
$
853

 
$
39,497

 
$
38,886

 
$
807

 
$
39,693


For the thirteen and twenty-six weeks ended August 3, 2019, we corrected an immaterial error of $3.1 million and $6.3 million, respectively, which consisted solely of an understatement of amounts disclosed for fixed operating lease expense and an overstatement of amounts disclosed for variable lease expense with no changes in reported total lease expense.   

Supplemental lease information for the thirteen weeks ended August 1, 2020 was as follows:
Cash paid for amounts included in the measurement of operating lease liabilities (in thousands)
$20,446
Weighted average remaining lease term (in years)
5.9 years
Weighted average interest rate (1)
4.26%
(1) Since our leases do not provide an implicit rate, we used our incremental borrowing rate on date of adoption or at lease inception in determining the present value of future minimum payments.
Income Taxes
Our income tax benefit was $(7.8) million, or 39.3% of loss before taxes, compared to $3.7 million, or 27.1% of income before taxes for the twenty-six weeks ended August 1, 2020 and August 3, 2019, respectively. The increase in the effective income tax rate is primarily due to the anticipated benefit from the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") enacted on March 27, 2020, which provides for net operating losses in fiscal 2020 to be carried back to earlier tax years with higher tax rates than the current year. As a result of the operating losses being carried back, an income tax receivable of $2.3 million is included in receivables on the accompanying Consolidated Balance Sheet as of August 1, 2020.


16


New Accounting Standards Not Yet Adopted
In June 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-13, Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which modifies or replaces existing models for impairment of trade and other receivables, debt securities, loans, beneficial interests held as assets, purchased-credit impaired financial assets and other instruments. The new standard requires entities to measure expected losses over the life of the asset and recognize an allowance for estimated credit losses upon recognition of the financial instrument. ASU 2016-13 will become effective for us in the first quarter of fiscal 2023, with early adoption permitted and must be adopted using the modified retrospective method. We expect the new rules to apply to our fixed income securities recorded at amortized cost and classified as held-to-maturity and our trade receivables. We do not expect the adoption of this new standard to have a material impact on our consolidated financial statements and related disclosures.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The new rules reduce complexity by removing specific exceptions to general income tax accounting methodology including an exception for interim periods showing operating losses in excess of anticipated operating losses for the year. The new rules will be effective for us in the first quarter of 2021. We are currently evaluating the impact this guidance may have on our consolidated financial statements and related disclosures.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. We are currently evaluating the impact this guidance may have on our consolidated financial statements and related disclosures.
Note 3: Marketable Securities
Marketable securities as of August 1, 2020 consisted of commercial paper, classified as available-for-sale, and fixed income securities, classified as held-to-maturity as we have the intent and ability to hold them to maturity. Our investments in commercial paper and fixed income securities are recorded at fair value and amortized cost, respectively, which approximates fair value. All of our marketable securities are less than one year from maturity.
The following table summarizes our investments in marketable securities at August 1, 2020, February 1, 2020 and August 3, 2019 (in thousands):
 
August 1, 2020
 
Cost or
Amortized Cost
 
Gross Unrealized
Holding Gains
 
Estimated
Fair Value
Commercial paper
$
9,973

 
$
1

 
$
9,974

Fixed income securities
5,965

 

 
5,965

 
$
15,938

 
$
1

 
$
15,939

 
 
 
 
 
 
 
February 1, 2020
 
Cost or
Amortized Cost
 
Gross Unrealized
Holding Gains
 
Estimated
Fair Value
Commercial paper
$
54,463

 
$
293

 
$
54,756

Fixed income securities
15,024

 

 
15,024

 
$
69,487

 
$
293

 
$
69,780

 
 
 
 
 
 
 
August 3, 2019
 
Cost or
Amortized Cost
 
Gross Unrealized
Holding Gains
 
Estimated
Fair Value
Commercial paper
$
49,411

 
$
325