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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM 10-Q
☒
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the
quarterly period ended
August 1, 2020
OR
☐ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the
transition period from
to
Commission
file number: 1-11893
GUESS?, INC.
(Exact name of
registrant as specified in its charter)
|
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Delaware
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95-3679695
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|
(State or other jurisdiction
of incorporation or organization)
|
(I.R.S. Employer
Identification No.)
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1444
South Alameda Street
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Los
Angeles,
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California
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90021
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(Address of principal
executive offices and zip code)
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(213)
765-3100
(Registrant’s
telephone number, including area code)
Securities registered pursuant
to Section 12(b) of the Act:
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Title of each
class
|
|
Trading
symbol(s)
|
|
Name of each
exchange on which registered
|
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|
|
|
|
|
Common Stock, par value
$0.01 per share
|
|
GES
|
|
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 o
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 x No o
Indicate by check
mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting
company” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
|
|
|
|
|
|
|
Large accelerated
filer
|
☒
|
|
Accelerated filer
|
☐
|
|
|
|
|
|
|
|
Non-accelerated
filer
|
☐
|
|
Smaller reporting
company
|
☐
|
|
|
|
|
|
|
|
|
|
|
Emerging growth
company
|
☐
|
|
|
|
|
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the
extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a)
of the Exchange Act.
|
o
|
Indicate by check
mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange
Act). Yes ☐ No x
As of
August 31,
2020, the
registrant had 63,610,474
shares of Common
Stock, $.01 par value per share, outstanding.
GUESS?, INC.
FORM 10-Q
TABLE OF
CONTENTS
PART I.
FINANCIAL INFORMATION
ITEM
1. Financial Statements.
|
GUESS?, INC.
AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(in
thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
Aug 1,
2020
|
|
Feb 1,
2020
|
|
|
(unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
327,970
|
|
|
$
|
284,613
|
|
|
Accounts receivable,
net
|
246,471
|
|
|
327,281
|
|
|
Inventories
|
419,427
|
|
|
393,129
|
|
|
Other current
assets
|
80,069
|
|
|
59,212
|
|
|
Total current
assets
|
1,073,937
|
|
|
1,064,235
|
|
|
Property and equipment,
net
|
240,081
|
|
|
288,112
|
|
|
Goodwill
|
36,232
|
|
|
34,777
|
|
|
Deferred tax
assets
|
62,444
|
|
|
63,555
|
|
|
Restricted cash
|
228
|
|
|
215
|
|
|
Operating lease right-of-use
assets
|
766,853
|
|
|
851,990
|
|
|
Other assets
|
130,954
|
|
|
126,078
|
|
|
|
$
|
2,310,729
|
|
|
$
|
2,428,962
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Current portion of borrowings
and finance lease obligations
|
$
|
42,321
|
|
|
$
|
9,490
|
|
|
Accounts payable
|
259,743
|
|
|
232,761
|
|
|
Accrued expenses and other
current liabilities
|
192,667
|
|
|
204,096
|
|
|
Current portion of operating
lease liabilities
|
235,749
|
|
|
192,066
|
|
|
Total current
liabilities
|
730,480
|
|
|
638,413
|
|
|
Convertible senior notes,
net
|
252,988
|
|
|
247,363
|
|
|
Long-term debt and finance
lease obligations
|
66,069
|
|
|
32,770
|
|
|
Long-term operating lease
liabilities
|
659,118
|
|
|
714,079
|
|
|
Other long-term
liabilities
|
143,225
|
|
|
130,259
|
|
|
|
1,851,880
|
|
|
1,762,884
|
|
|
Redeemable noncontrolling
interests
|
4,021
|
|
|
4,731
|
|
|
|
|
|
|
|
Commitments and contingencies
(Note 13)
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
Preferred stock, $.01 par
value. Authorized 10,000,000 shares; no shares issued and
outstanding
|
—
|
|
|
—
|
|
|
Common stock, $.01 par value.
Authorized 150,000,000 shares; issued 142,843,839 and 142,867,947
shares, outstanding 63,614,749 and 65,848,510 shares, as of August
1, 2020 and February 1, 2020, respectively
|
636
|
|
|
658
|
|
|
Paid-in capital
|
548,602
|
|
|
563,004
|
|
|
Retained
earnings
|
952,707
|
|
|
1,130,409
|
|
|
Accumulated other
comprehensive loss
|
(131,609
|
)
|
|
(139,910
|
)
|
|
Treasury stock, 79,229,090
and 77,019,437 shares as of August 1, 2020 and February 1,
2020, respectively
|
(932,068
|
)
|
|
(914,447
|
)
|
|
Guess?, Inc.
stockholders’ equity
|
438,268
|
|
|
639,714
|
|
|
Nonredeemable noncontrolling
interests
|
16,560
|
|
|
21,633
|
|
|
Total stockholders’
equity
|
454,828
|
|
|
661,347
|
|
|
|
$
|
2,310,729
|
|
|
$
|
2,428,962
|
|
See
accompanying notes to condensed consolidated financial
statements.
|
GUESS?, INC.
AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in
thousands, except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months
Ended
|
|
|
Aug 1,
2020
|
|
Aug 3,
2019
|
|
Aug 1,
2020
|
|
Aug 3,
2019
|
|
Product sales
|
$
|
386,392
|
|
|
$
|
664,678
|
|
|
$
|
633,709
|
|
|
$
|
1,182,551
|
|
|
Net royalties
|
12,147
|
|
|
18,542
|
|
|
25,081
|
|
|
37,360
|
|
|
Net revenue
|
398,539
|
|
|
683,220
|
|
|
658,790
|
|
|
1,219,911
|
|
|
Cost of product
sales
|
251,511
|
|
|
417,554
|
|
|
477,533
|
|
|
772,296
|
|
|
Gross profit
|
147,028
|
|
|
265,666
|
|
|
181,257
|
|
|
447,615
|
|
|
Selling, general and
administrative expenses
|
150,293
|
|
|
218,175
|
|
|
293,581
|
|
|
422,820
|
|
|
Asset impairment
charges
|
11,969
|
|
|
1,504
|
|
|
64,941
|
|
|
3,279
|
|
|
Net gains on lease
terminations
|
(885
|
)
|
|
—
|
|
|
(429
|
)
|
|
—
|
|
|
Earnings (loss) from
operations
|
(14,349
|
)
|
|
45,987
|
|
|
(176,836
|
)
|
|
21,516
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
(5,941
|
)
|
|
(4,951
|
)
|
|
(11,403
|
)
|
|
(6,210
|
)
|
|
Interest income
|
436
|
|
|
313
|
|
|
1,046
|
|
|
674
|
|
|
Other income (expense),
net
|
5,548
|
|
|
(6,355
|
)
|
|
(14,032
|
)
|
|
(4,284
|
)
|
|
|
43
|
|
|
(10,993
|
)
|
|
(24,389
|
)
|
|
(9,820
|
)
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income
tax expense (benefit)
|
(14,306
|
)
|
|
34,994
|
|
|
(201,225
|
)
|
|
11,696
|
|
|
Income tax expense
(benefit)
|
6,386
|
|
|
8,818
|
|
|
(19,995
|
)
|
|
6,101
|
|
|
Net earnings
(loss)
|
(20,692
|
)
|
|
26,176
|
|
|
(181,230
|
)
|
|
5,595
|
|
|
Net earnings (loss)
attributable to noncontrolling interests
|
(334
|
)
|
|
854
|
|
|
(3,206
|
)
|
|
1,647
|
|
|
Net earnings (loss)
attributable to Guess?, Inc.
|
$
|
(20,358
|
)
|
|
$
|
25,322
|
|
|
$
|
(178,024
|
)
|
|
$
|
3,948
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
(loss) per common share attributable to common stockholders
(Note 3):
|
|
Basic
|
$
|
(0.31
|
)
|
|
$
|
0.36
|
|
|
$
|
(2.72
|
)
|
|
$
|
0.05
|
|
|
Diluted
|
$
|
(0.31
|
)
|
|
$
|
0.35
|
|
|
$
|
(2.72
|
)
|
|
$
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding attributable to common
stockholders (Note 3):
|
|
Basic
|
65,177
|
|
|
70,508
|
|
|
65,446
|
|
|
75,216
|
|
|
Diluted
|
65,177
|
|
|
71,356
|
|
|
65,446
|
|
|
76,155
|
|
See
accompanying notes to condensed consolidated financial
statements.
|
GUESS?, INC.
AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE
INCOME (LOSS)
(in
thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months
Ended
|
|
|
Aug 1,
2020
|
|
Aug 3,
2019
|
|
Aug 1,
2020
|
|
Aug 3,
2019
|
|
Net earnings
(loss)
|
$
|
(20,692
|
)
|
|
$
|
26,176
|
|
|
$
|
(181,230
|
)
|
|
$
|
5,595
|
|
|
Other comprehensive income
(loss) (“OCI”):
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
|
|
|
|
|
|
|
|
Gains (losses)
arising during the period
|
32,802
|
|
|
(5,293
|
)
|
|
14,303
|
|
|
(17,360
|
)
|
|
Derivative
financial instruments designated as cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
Gains (losses)
arising during the period
|
(7,897
|
)
|
|
2,286
|
|
|
(4,361
|
)
|
|
6,722
|
|
|
Less income tax
effect
|
885
|
|
|
(308
|
)
|
|
529
|
|
|
(880
|
)
|
|
Reclassification
to net earnings (loss) for gains realized
|
(2,462
|
)
|
|
(1,801
|
)
|
|
(4,450
|
)
|
|
(2,077
|
)
|
|
Less income tax
effect
|
264
|
|
|
229
|
|
|
483
|
|
|
324
|
|
|
Defined benefit
plans
|
|
|
|
|
|
|
|
|
|
|
Foreign currency and other
adjustments
|
(236
|
)
|
|
(167
|
)
|
|
(236
|
)
|
|
(60
|
)
|
|
Less income tax
effect
|
25
|
|
|
16
|
|
|
24
|
|
|
5
|
|
|
Net actuarial loss
amortization
|
97
|
|
|
111
|
|
|
193
|
|
|
222
|
|
|
Prior service
credit amortization
|
(16
|
)
|
|
(9
|
)
|
|
(32
|
)
|
|
(19
|
)
|
|
Less income tax
effect
|
(10
|
)
|
|
(12
|
)
|
|
(19
|
)
|
|
(23
|
)
|
|
Total comprehensive income
(loss)
|
2,760
|
|
|
21,228
|
|
|
(174,796
|
)
|
|
(7,551
|
)
|
|
Less comprehensive income
(loss) attributable to noncontrolling interests:
|
|
|
|
|
|
|
|
|
|
|
Net earnings
(loss)
|
(334
|
)
|
|
854
|
|
|
(3,206
|
)
|
|
1,647
|
|
|
Foreign currency
translation adjustment
|
1,759
|
|
|
(452
|
)
|
|
(1,867
|
)
|
|
(142
|
)
|
|
Amounts attributable to
noncontrolling interests
|
1,425
|
|
|
402
|
|
|
(5,073
|
)
|
|
1,505
|
|
|
Comprehensive income (loss)
attributable to Guess?, Inc.
|
$
|
1,335
|
|
|
$
|
20,826
|
|
|
$
|
(169,723
|
)
|
|
$
|
(9,056
|
)
|
See
accompanying notes to condensed consolidated financial
statements.
|
GUESS?, INC.
AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in
thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six Months
Ended
|
|
|
Aug 1,
2020
|
|
Aug 3,
2019
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
Net earnings
(loss)
|
$
|
(181,230
|
)
|
|
$
|
5,595
|
|
|
Adjustments to reconcile net
earnings (loss) to net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
Depreciation and
amortization
|
32,250
|
|
|
37,225
|
|
|
Amortization of debt
discount
|
5,197
|
|
|
2,662
|
|
|
Amortization of debt issuance
costs
|
661
|
|
|
276
|
|
|
Share-based compensation
expense
|
9,789
|
|
|
9,454
|
|
|
Forward contract
gains
|
3,420
|
|
|
(34
|
)
|
|
Net loss on impairment and
disposition of property and equipment and long-term
assets
|
65,974
|
|
|
3,753
|
|
|
Other items, net
|
11,889
|
|
|
5,606
|
|
|
Changes in operating assets
and liabilities:
|
|
|
|
|
|
|
Accounts
receivable
|
94,373
|
|
|
24,492
|
|
|
Inventories
|
(16,002
|
)
|
|
(22,926
|
)
|
|
Prepaid expenses and other
assets
|
(20,550
|
)
|
|
(1,596
|
)
|
|
Operating lease assets and
liabilities, net
|
39,902
|
|
|
1,340
|
|
|
Accounts payable and accrued
expenses
|
(3,923
|
)
|
|
(87,423
|
)
|
|
Other long-term
liabilities
|
(1,065
|
)
|
|
(1,381
|
)
|
|
Net cash provided by (used
in) operating activities
|
40,685
|
|
|
(22,957
|
)
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
Purchases of property and
equipment
|
(10,099
|
)
|
|
(34,551
|
)
|
|
Proceeds from sale of
long-term assets
|
336
|
|
|
—
|
|
|
Net cash settlement of
forward contracts
|
(273
|
)
|
|
162
|
|
|
Purchases of
investments
|
(1,882
|
)
|
|
—
|
|
|
Other investing
activities
|
(52
|
)
|
|
521
|
|
|
Net cash used in investing
activities
|
(11,970
|
)
|
|
(33,868
|
)
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
Proceeds from
borrowings
|
274,594
|
|
|
90,136
|
|
|
Repayments on borrowings and
finance lease obligations
|
(218,267
|
)
|
|
(63,285
|
)
|
|
Proceeds from issuance of
convertible senior notes
|
—
|
|
|
300,000
|
|
|
Proceeds from issuance of
warrants
|
—
|
|
|
28,080
|
|
|
Purchase of convertible note
hedges
|
—
|
|
|
(60,990
|
)
|
|
Convertible debt issuance
costs
|
—
|
|
|
(5,068
|
)
|
|
Purchase of equity forward
contracts
|
—
|
|
|
(68,000
|
)
|
|
Dividends paid
|
(958
|
)
|
|
(26,901
|
)
|
|
Issuance of common stock, net
of tax withholdings on vesting of stock awards
|
(2,908
|
)
|
|
43
|
|
|
Purchase of treasury
stock
|
(38,876
|
)
|
|
(212,564
|
)
|
|
Net cash provided by (used
in) financing activities
|
13,585
|
|
|
(18,549
|
)
|
|
Effect of exchange rates on
cash, cash equivalents and restricted cash
|
1,070
|
|
|
(4,042
|
)
|
|
Net change in cash, cash
equivalents and restricted cash
|
43,370
|
|
|
(79,416
|
)
|
|
Cash, cash equivalents and
restricted cash at the beginning of the year
|
284,828
|
|
|
210,995
|
|
|
Cash, cash equivalents and
restricted cash at the end of the period
|
$
|
328,198
|
|
|
$
|
131,579
|
|
|
|
|
|
|
|
Supplemental cash flow
data:
|
|
|
|
|
|
|
Interest paid
|
$
|
5,277
|
|
|
$
|
1,535
|
|
|
Income taxes paid, net of
refunds
|
$
|
2,967
|
|
|
$
|
4,201
|
|
|
|
|
|
|
|
Non-cash investing and
financing activity:
|
|
|
|
|
Assets acquired under finance
lease obligations
|
$
|
276
|
|
|
$
|
3,055
|
|
|
Receivable and related
adjustments from sale of retail locations
|
$
|
(364
|
)
|
|
$
|
5,088
|
|
See
accompanying notes to condensed consolidated financial
statements.
GUESS?, INC.
AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in
thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three
and six months ended August 1, 2020
|
|
|
Guess?, Inc.
Stockholders’ Equity
|
|
|
|
|
|
|
Common
Stock
|
|
|
|
|
|
|
|
Treasury
Stock
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Paid-in
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other Comprehensive Loss
|
|
Shares
|
|
Amount
|
|
Nonredeemable
Noncontrolling
Interests
|
|
Total
|
|
Balance at
February 1, 2020
|
65,848,510
|
|
|
$
|
658
|
|
|
$
|
563,004
|
|
|
$
|
1,130,409
|
|
|
$
|
(139,910
|
)
|
|
77,019,437
|
|
|
$
|
(914,447
|
)
|
|
$
|
21,633
|
|
|
$
|
661,347
|
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(157,666
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,872
|
)
|
|
(160,538
|
)
|
|
Other comprehensive loss,
net of income tax of ($147)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,392
|
)
|
|
—
|
|
|
—
|
|
|
(3,626
|
)
|
|
(17,018
|
)
|
|
Issuance of common stock
under stock compensation plans including tax effect
|
1,763,311
|
|
|
18
|
|
|
(24,264
|
)
|
|
—
|
|
|
—
|
|
|
(1,770,223
|
)
|
|
21,017
|
|
|
—
|
|
|
(3,229
|
)
|
|
Issuance of stock under
Employee Stock Purchase Plan
|
32,427
|
|
|
—
|
|
|
(192
|
)
|
|
—
|
|
|
—
|
|
|
(32,427
|
)
|
|
385
|
|
|
—
|
|
|
193
|
|
|
Share-based
compensation
|
—
|
|
|
—
|
|
|
5,771
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,786
|
|
|
Dividends, net of
forfeitures on non-participating securities
|
—
|
|
|
—
|
|
|
—
|
|
|
248
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
248
|
|
|
Balance at
May 2, 2020
|
67,644,248
|
|
|
$
|
676
|
|
|
$
|
544,319
|
|
|
$
|
973,006
|
|
|
$
|
(153,302
|
)
|
|
75,216,787
|
|
|
$
|
(893,045
|
)
|
|
$
|
15,135
|
|
|
$
|
486,789
|
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(20,358
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(334
|
)
|
|
(20,692
|
)
|
|
Other comprehensive income,
net of income tax of $1,164
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,693
|
|
|
—
|
|
|
—
|
|
|
1,759
|
|
|
23,452
|
|
|
Issuance of common stock
under stock compensation plans including tax effect
|
(54,926
|
)
|
|
—
|
|
|
429
|
|
|
—
|
|
|
—
|
|
|
37,730
|
|
|
(448
|
)
|
|
—
|
|
|
(19
|
)
|
|
Issuance of stock under
Employee Stock Purchase Plan
|
25,427
|
|
|
—
|
|
|
(154
|
)
|
|
—
|
|
|
—
|
|
|
(25,427
|
)
|
|
301
|
|
|
—
|
|
|
147
|
|
|
Share-based
compensation
|
—
|
|
|
—
|
|
|
3,968
|
|
|
35
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,003
|
|
|
Dividends, net of
forfeitures on non-participating securities
|
—
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|
Share
repurchases
|
(4,000,000
|
)
|
|
(40
|
)
|
|
40
|
|
|
—
|
|
|
—
|
|
|
4,000,000
|
|
|
(38,876
|
)
|
|
—
|
|
|
(38,876
|
)
|
|
Balance at
August 1, 2020
|
63,614,749
|
|
|
$
|
636
|
|
|
$
|
548,602
|
|
|
$
|
952,707
|
|
|
$
|
(131,609
|
)
|
|
79,229,090
|
|
|
$
|
(932,068
|
)
|
|
$
|
16,560
|
|
|
$
|
454,828
|
|
GUESS?, INC.
AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in
thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three
and six months ended August 3, 2019
|
|
|
Guess?, Inc.
Stockholders’ Equity
|
|
|
|
|
|
|
Common
Stock
|
|
|
|
|
|
|
|
Treasury
Stock
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Paid-in
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other Comprehensive Loss
|
|
Shares
|
|
Amount
|
|
Nonredeemable
Noncontrolling
Interests
|
|
Total
|
|
Balance at
February 2, 2019
|
81,379,660
|
|
|
$
|
814
|
|
|
$
|
523,331
|
|
|
$
|
1,077,747
|
|
|
$
|
(126,179
|
)
|
|
61,327,640
|
|
|
$
|
(638,486
|
)
|
|
$
|
16,418
|
|
|
$
|
853,645
|
|
|
Cumulative adjustment from
adoption of new accounting guidance
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,684
|
)
|
|
1,981
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
297
|
|
|
Net earnings
(loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
(21,374
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
793
|
|
|
(20,581
|
)
|
|
Other comprehensive income
(loss), net of income tax of ($499)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,508
|
)
|
|
—
|
|
|
—
|
|
|
310
|
|
|
(8,198
|
)
|
|
Issuance of common stock
under stock compensation plans including tax effect
|
545,881
|
|
|
5
|
|
|
(3,042
|
)
|
|
—
|
|
|
—
|
|
|
(211,221
|
)
|
|
2,225
|
|
|
—
|
|
|
(812
|
)
|
|
Issuance of stock under
Employee Stock Purchase Plan
|
11,377
|
|
|
1
|
|
|
69
|
|
|
—
|
|
|
—
|
|
|
(11,377
|
)
|
|
120
|
|
|
—
|
|
|
190
|
|
|
Share-based
compensation
|
—
|
|
|
—
|
|
|
4,440
|
|
|
28
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,468
|
|
|
Dividends, net of
forfeitures on non-participating securities
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,331
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,331
|
)
|
|
Share
repurchases
|
(10,264,052
|
)
|
|
(103
|
)
|
|
103
|
|
|
—
|
|
|
—
|
|
|
10,264,052
|
|
|
(201,564
|
)
|
|
—
|
|
|
(201,564
|
)
|
|
Equity component value of
convertible note issuance, net
|
—
|
|
|
—
|
|
|
42,324
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
42,324
|
|
|
Sale of common stock
warrant
|
—
|
|
|
—
|
|
|
28,080
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
28,080
|
|
|
Purchase of convertible note
hedge
|
—
|
|
|
—
|
|
|
(46,440
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(46,440
|
)
|
|
Equity forward contract
issuance
|
—
|
|
|
—
|
|
|
(68,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(68,000
|
)
|
|
Balance at
May 4, 2019
|
71,672,866
|
|
|
$
|
717
|
|
|
$
|
480,865
|
|
|
$
|
1,036,386
|
|
|
$
|
(132,706
|
)
|
|
71,369,094
|
|
|
$
|
(837,705
|
)
|
|
$
|
17,521
|
|
|
$
|
565,078
|
|
|
Net earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
25,322
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
854
|
|
|
26,176
|
|
|
Other comprehensive loss,
net of income tax of ($75)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,496
|
)
|
|
—
|
|
|
—
|
|
|
(452
|
)
|
|
(4,948
|
)
|
|
Issuance of common stock
under stock compensation plans including tax effect
|
64,080
|
|
|
—
|
|
|
(852
|
)
|
|
—
|
|
|
—
|
|
|
(106,039
|
)
|
|
1,249
|
|
|
—
|
|
|
397
|
|
|
Issuance of stock under
Employee Stock Purchase Plan
|
19,538
|
|
|
—
|
|
|
38
|
|
|
—
|
|
|
—
|
|
|
(19,538
|
)
|
|
230
|
|
|
—
|
|
|
268
|
|
|
Share-based
compensation
|
—
|
|
|
—
|
|
|
4,928
|
|
|
58
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,986
|
|
|
Dividends, net of
forfeitures on non-participating securities
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,162
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,162
|
)
|
|
Share
repurchases
|
(749,252
|
)
|
|
(7
|
)
|
|
7
|
|
|
—
|
|
|
—
|
|
|
749,252
|
|
|
(11,000
|
)
|
|
—
|
|
|
(11,000
|
)
|
|
Balance at
August 3, 2019
|
71,007,232
|
|
|
$
|
710
|
|
|
$
|
484,986
|
|
|
$
|
1,053,604
|
|
|
$
|
(137,202
|
)
|
|
71,992,769
|
|
|
$
|
(847,226
|
)
|
|
$
|
17,923
|
|
|
$
|
572,795
|
|
See
accompanying notes to condensed consolidated financial
statements.
GUESS?, INC.
AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
August 1, 2020
(unaudited)
|
|
|
(1)
|
Basis of
Presentation and New Accounting Guidance
|
Description
of the Business
Guess?, Inc.
(the “Company” or “GUESS?”) designs, markets,
distributes and licenses a leading lifestyle collection of
contemporary apparel and accessories for men, women and children
that reflect the American lifestyle and European fashion
sensibilities. The Company’s designs are
sold in GUESS? owned stores, to a network of wholesale accounts
that includes better department stores, selected specialty
retailers and upscale boutiques and through the Internet. GUESS?
branded products, some of which are produced under license, are
also sold internationally through a series of retail store
licensees and wholesale distributors.
Basis of
Presentation
In the opinion
of management, the accompanying unaudited condensed consolidated
financial statements of the Company contain all adjustments,
consisting of normal recurring adjustments, considered necessary
for a fair presentation of the condensed consolidated balance
sheets as of August 1, 2020
and
February 1,
2020,
the condensed consolidated statements of income
(loss),
comprehensive income (loss)
and
stockholders’ equity for the three and six months ended
August 1, 2020 and August 3, 2019
and the
condensed consolidated statements of cash flows for the
six months
ended August 1, 2020 and August 3,
2019.
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with accounting
principles generally accepted in the U.S. (“GAAP”) for interim
financial information and the instructions to Rule 10-01 of
Regulation S-X of the Securities and Exchange Commission (the
“SEC”). Accordingly, they have been condensed and do not include
all of the information and footnotes required by GAAP for complete
financial statements. The results of operations for the
three and six
months ended August 1, 2020 are not necessarily
indicative of the results of operations to be expected for the full
fiscal year. These financial statements should be read in
conjunction with the Company’s Annual Report on Form 10-K for
the year ended February 1,
2020.
The
three and six
months ended August 1, 2020 had the same number of days
as the three and six months ended
August 3, 2019. All references herein to
“fiscal 2021,” “fiscal
2020” and “fiscal
2019” represent the results of
the 52-week fiscal year
ending January 30,
2021 and
the 52-week fiscal years
ended February 1,
2020 and February 2,
2019,
respectively.
Reclassifications
The Company has
made certain reclassifications to prior period amounts to conform
to the current period presentation within the accompanying notes to
the condensed consolidated financial statements.
Use of
Estimates
The preparation
of the financial statements in conformity with accounting
principles generally accepted in the U.S. requires management to
make estimates and assumptions that affect the amounts reported in
the financial statements and disclosed in the accompanying notes.
Significant areas requiring the use of management estimates relate
to the allowances for doubtful accounts, sales return and markdown
allowances, gift card and loyalty accruals, valuation of
inventories, share-based compensation, income taxes, recoverability
of deferred taxes, unrecognized tax benefits, the useful life of
assets for depreciation and amortization, evaluation of asset
impairment (including goodwill and long-lived assets, such as
property and equipment and operating lease right-of-use (“ROU”)
assets), pension obligations, workers’ compensation and medical
self-insurance expense and accruals, litigation reserves and
restructuring expense and accruals. Actual results could differ
from those estimates. Revisions in estimates could materially
impact the results of operations and financial
position.
As discussed
further below, the coronavirus (or “COVID-19”) pandemic has
materially impacted the Company’s results during the
three and six
months ended August 1, 2020. The Company’s operations
could continue to be impacted in ways we are not able to predict
today due to the developing situation. While the
Company
believes it has made reasonable accounting estimates based on the
facts and circumstances that were available as of the reporting
date, to
the extent there are differences between these estimates and actual
results, the Company’s results of operations and financial position
could be materially impacted.
COVID-19
Business Update
The COVID-19
pandemic has had and is continuing to have a material impact on the
Company’s financial performance. The pandemic is ongoing and
dynamic in nature and, to date, the Company has experienced
temporary closures in key regions globally. During the second quarter
of fiscal 2021, the Company gradually reopened most of its global
fleet of brick-and-mortar stores resulting in stores being closed
for approximately 30%
and
35%
of the total
days during the three and six months
ended August 1,
2020,
respectively. As of August 1,
2020,
approximately 95%
of the
Company’s stores were open, with the majority of closed stores
located primarily within interior malls in California. The Company
will continue to reopen stores (and/or close again, if
appropriate), as state and local guidelines and conditions permit
or require, taking an informed, measured approach based on a number
of factors. The Company’s e-commerce sites have remained open in
all regions. In addition, retail stores that are open have and
continue to experience significant reductions in traffic and
revenue. Many of the Company’s wholesale and licensing partners
have also substantially reduced their operations. The Company has
been bringing back furloughed store associates and support staff as
stores reopen. The extent and duration
of the global pandemic remains uncertain and may continue to impact
consumer purchasing activity into the foreseeable
future.
During the
first half of fiscal 2021, in addition to the negative
impact from lower net revenue, the Company’s operating results
reflected asset impairment charges as well as additional inventory
valuation reserves and higher allowances for markdowns and doubtful
accounts due to the ongoing effects of the COVID-19 pandemic. These
charges were partially offset by lower selling, general and
administrative (“SG&A”) expenses driven primarily
by expense savings, both one-time, such as furloughs and temporary
salary reductions, and permanent, such as headcount reductions and
lower discretionary spending. In addition, the Company benefited
from various government assistance programs related primarily to
the recovery of employee payroll costs as well as certain favorable
tax treatments.
During the
first half of fiscal 2021, the Company implemented a number of
measures to help mitigate the operating and financial impact of the
pandemic, including: (i) furloughing its U.S. and Canada store
associates and significant portions of its U.S. and Canada
corporate and distribution center associates and permanently
reducing U.S. corporate headcount; (ii) implementing temporary
tiered salary reductions for management level corporate employees,
including its executive officers; (iii) deferring annual merit
increases; (iv) executing substantial reductions in expenses, store
occupancy costs, capital expenditures and overall costs, including
through reduced inventory purchases; (v) working globally with
country management teams to maximize the Company’s participation in
all eligible government or other initiatives available to
businesses or employees impacted by the COVID-19 pandemic; (vi)
drawing down on certain credit facilities and entering into certain
term loans to ensure financial flexibility and maintain maximum
liquidity; (vii) engaging with landlords to negotiate rent
deferrals or other rent concessions; (viii) working with vendors to
extend payment terms; and (ix) postponing its decision related to
the payment of its quarterly cash dividend.
During the
second quarter of fiscal 2021, as the situation began to stabilize,
the Company repaid a significant portion of its previously drawn
down credit facilities, continued to bring back furloughed
employees, eliminated the temporary tiered salary reductions and
invested in share repurchases to return value to its shareholders.
Subsequent to the second quarter of fiscal 2021, the Company also
announced that it would resume paying its quarterly cash dividend
beginning in the third quarter of fiscal 2021, but decided to not
declare any cash dividends for the first and second quarters of
fiscal 2021.
In response to
the COVID-19 pandemic, governments in various jurisdictions have
implemented relief programs to provide assistance in the form of
wage subsidies and tax related payment deferrals (related to
payroll, income, sales and other taxes). The Company is leveraging
these relief initiatives where able to help mitigate expenses and
provide additional liquidity. An example of such an economic relief
program is the Coronavirus Aid, Relief, and Economic Security
(“CARES”) Act, which was enacted by the U.S. government in March
2020. The provisions of the CARES Act include the deferral of the
employer portion of social security taxes, creation
of refundable
employee retention tax credits, modification of net operating loss
carryback periods, relaxation of the net interest deduction
limitations and technical amendment for qualified improvement
property deduction.
In light of
store closures and reduced traffic in stores, the Company has taken
certain actions with respect to certain of its existing leases,
including engaging with landlords to discuss rent deferrals as well
as other rent concessions. Since April 2020,
the Company
has suspended rental payments
and/or paid reduced rental amounts with respect to
its
retail stores
that were closed or were experiencing drastically reduced customer
traffic as a result of the COVID-19 pandemic. The Company is
engaging in
discussions with the affected landlords in an effort to achieve
appropriate rent relief and other lease concessions and, in some
cases, to terminate existing leases. Consistent with updated
guidance from the Financial Accounting Standards Board (“FASB”) in
April 2020, the Company has elected to treat any such agreed-upon
payment deferrals related to the COVID-19 pandemic as if there were
no modifications to the lease contract and has accrued such amounts
within the current portion of operating lease liabilities in the
Company’s condensed consolidated balance sheet. The Company has
elected to treat other rent concessions which result in reduced
lease payments as variable lease payments if the concessions that
are provided are for a period of less than 12 months. For any rent
concessions which reduce the lease payments for a period of more
than 12 months or change the payment terms from minimum rental
amounts to amounts based on a percentage of sales volume for the
remainder of the lease term, the Company has elected to treat such
changes as lease modifications under the current lease
guidance.
Revenue
Recognition
The Company
recognizes the majority of its revenue from its direct-to-consumer
(brick-and-mortar retail stores and concessions as well as
e-commerce) and wholesale distribution channels at a point in time
when it satisfies a performance obligation and transfers control of
the product to the respective customer.
The Company
also recognizes royalty revenue from its trademark license
agreements. The Company’s trademark license agreements represent
symbolic licenses that are dependent on the Company’s continued
support over the term of the license agreement. The amount of
revenue that is recognized from the licensing arrangements is based
on sales-based royalty and advertising fund contributions as well
as specific fixed payments, where applicable. The Company’s
trademark license agreements customarily provide for a multi-year
initial term ranging from three to ten
years, and may contain options
to renew prior to expiration for an additional multi-year period.
The unrecognized portion of upfront payments is included in
deferred royalties in accrued expenses and other long-term
liabilities depending on the short or long-term nature of the
payments to be recognized. As of August 1,
2020,
the Company had $6.4
million and $15.7
million of deferred royalties
related to these upfront payments included in accrued expenses and
other long-term liabilities, respectively. This compares to
$6.7
million and $18.7
million of deferred royalties
related to these upfront payments included in accrued expenses and
other long-term liabilities, respectively, at February 1,
2020.
During the three and six months ended
August 1, 2020, the Company
recognized $3.1
million and $6.7
million in net royalties related to
the amortization of the deferred royalties, respectively. During
the three and six months ended
August 3, 2019, the Company
recognized $3.1
million and $6.1
million in net royalties related to
the amortization of the deferred royalties,
respectively.
Refer to Note 8
for further information on disaggregation of revenue by segment and
country.
Allowance
for Doubtful Accounts
During the
first quarter of fiscal 2021, the Company adopted authoritative
guidance related to the measurement of credit losses on financial
instruments. This guidance replaces the “as incurred” loss model
with an “expected loss” model which requires the recognition of an
allowance for credit losses expected to be incurred over an asset’s
lifetime. The adoption of this guidance did not have a material
impact on the Company’s allowance for doubtful
accounts.
In the normal
course of business, the Company grants credit directly to certain
wholesale customers after a credit analysis is performed based on
financial and other criteria. Accounts receivable are recorded net
of an allowance for doubtful accounts. The Company maintains
allowances for doubtful accounts for estimated losses that may
result from the inability of its wholesale customers and licensing
partners to make their required payments. The Company bases its
allowances on analysis of the aging of accounts receivable at the
date of the financial
statements,
assessments of historical and current collection trends, an
evaluation of the impact of current and future forecasted economic
conditions and whether the Company has obtained credit insurance or
other guarantees. Management performs regular evaluations
concerning the ability of its customers and records a provision for
doubtful accounts based on these evaluations.
As of
August 1,
2020,
approximately 58%
of the
Company’s total net trade accounts receivable and
68%
of its European
net trade receivables were subject to credit insurance coverage,
certain bank guarantees or letters of credit for collection
purposes. The Company’s credit insurance coverage contains certain
terms and conditions specifying deductibles and annual claim
limits. Management evaluates the creditworthiness of the
counterparties to the credit insurance, bank guarantees, and
letters of credit and records a provision for the risk of loss on
these instruments based on these evaluations as considered
necessary.
The Company’s
credit losses for the periods presented were not significant
compared to sales and did not significantly exceed management’s
estimates. Refer to Note 5 for further information on the Company’s
allowance for doubtful accounts.
Net Gains
on Lease Terminations
During
the three and six months
ended August 1,
2020,
the Company recorded net gains on lease terminations of
$0.9
million and $0.4
million, respectively, related
primarily to the early termination of certain lease
agreements.
Other
Assets
During fiscal
2019, the Company invested $8.3
million in a privately-held apparel
company. During the second quarter of fiscal 2021, the Company
invested an additional $1.9
million. The Company’s ownership
in this company (a 30%
minority
interest) is accounted for under the equity method of accounting.
The Company recognized its proportionate share of net losses of
this company of $2.0
million and $4.1
million in other income (expense)
in its condensed consolidated statements of income (loss) during
the three and six months ended
August 1, 2020, respectively. During the
three and six months ended August 3,
2019,
the Company recognized its proportionate share of net losses of
this company of $2.9
million in other income (expense)
in its condensed consolidated statements of income
(loss).
Sale of
Australian Stores
During fiscal
2020, the Company entered into a definitive agreement to sell its
Australian retail locations to the Company’s wholesale distributor
in the region for approximately AUD$7.1
million (US$4.9
million), subject to certain
adjustments, and recognized a loss on the sale of approximately
AUD$1.2
million (US$0.8
million). During the second
quarter of fiscal 2021, the Company recorded an adjustment of
AUD$0.5
million (US$0.4
million) to reduce the purchase
price. As per the terms of the agreement, the wholesale distributor
entered into a promissory note with the Company to make periodic
payments on the sale through August 2021. As of August 1,
2020,
the Company included AUD$2.0
million (US$1.4
million) and
AUD$2.6
million (US$1.9
million) in accounts receivable,
net and other assets, respectively, in its condensed consolidated
balance sheet based on the timing of the payments. This compares to
AUD$1.8
million (US$1.2
million) and
AUD$3.3
million (US$2.2
million) included in accounts
receivable, net and other assets, respectively, as of February 1,
2020.
New
Accounting Guidance
Recently
Adopted Accounting Guidance
In June 2016,
the FASB issued authoritative guidance related to the measurement
of credit losses on financial instruments. This guidance replaces
the “as incurred” loss model with an “expected loss” model which
requires the recognition of an allowance for credit losses expected
to be incurred over an asset’s lifetime. The measurement of
expected credit losses is based on relevant information about past
events, current conditions and reasonable and supportable forecasts
impacting the collectibility of the reported amounts. This guidance
was adopted as of February 2, 2020 on a modified retrospective
basis and did not have a material impact on the Company’s
consolidated financial statements or related
disclosures.
In August 2018,
the FASB issued authoritative guidance to modify the disclosure
requirements on fair value measurements. This guidance was adopted
as of February 2, 2020 on a prospective basis and did not have a
material impact on the Company’s related
disclosures.
In August 2018,
the FASB issued authoritative guidance to align the requirements
for capitalizing implementation costs incurred in a hosting
arrangement that is a service contract with the requirements for
capitalizing implementation costs incurred to develop or obtain
internal-use software (and hosting arrangements that include an
internal-use software license). The Company adopted this guidance
as of February 2, 2020 on a prospective basis. Prior to the
adoption of this guidance, the Company capitalized implementation
costs related to a hosting arrangement that is a service contract
to property and equipment, net in the Company’s consolidated
balance sheets and included such expenditures within the investing
section of the Company’s consolidated statements of cash flows.
These assets were amortized over their estimated useful life with
the related amortization included in depreciation and amortization
in either cost of product sales or SG&A expenses in the
Company’s consolidated statements of income (loss) depending on the
nature of how the assets were used. Subsequent to the adoption of
this guidance, these costs are included within other current assets
or other assets in the Company’s consolidated balance sheets
depending on the short or long-term nature of the underlying
hosting agreement with such expenditures included in the operating
section of the Company’s consolidated statements of cash flows.
These assets are now amortized over the shorter of the estimated
useful life or the term of the underlying hosting agreement,
including any probable renewal periods, with the related
amortization included in cost of product sales or SG&A expenses
in the Company’s consolidated statements of income (loss),
consistent with the presentation of the expense related to the
underlying hosting arrangement. The adoption of this guidance,
including the different classification requirements for the
implementation costs, did not have a material impact on the
Company’s consolidated financial statements or the related
disclosures.
In December
2019, the FASB issued authoritative guidance that simplifies the
accounting for income taxes by eliminating certain exceptions to
general principles related to intraperiod tax allocations,
ownership changes in foreign investments and calculating income
taxes in an interim period when year-to-date losses exceed total
anticipated losses. The new guidance also simplifies the accounting
for income taxes related to franchise taxes that are partially
based on income, the step up in the tax basis of goodwill,
allocation of current and deferred tax expense for certain legal
entities and enacted changes in tax laws or rates during interim
periods, among other improvements. This guidance was adopted during
the second quarter of fiscal 2021 on a prospective basis and did
not have a material impact on the Company’s consolidated financial
statements or related disclosures.
Recently
Issued Accounting Guidance
In August 2018,
the FASB issued authoritative guidance to modify the disclosure
requirements for employers that sponsor defined benefit pension or
other postretirement plans. This guidance is effective for fiscal
years beginning after December 15, 2020, which will be the
Company’s first quarter of fiscal 2022, with early adoption
permitted. The Company is currently evaluating the impact of the
adoption of this standard on its financial statement
disclosures.
In March 2020,
the FASB issued authoritative guidance to provide temporary
optional expedients and exceptions related to contract
modifications and hedge accounting to ease the financial reporting
burdens of the expected market transition from LIBOR and other
interbank offered rates to alternative reference rates, such as
SOFR. This guidance may be adopted as of March 12, 2020 through
December 31, 2022. This temporary relief cannot be applied to
contract modifications after December 31, 2022. The Company is
currently evaluating its election options and the impact on its
consolidated financial statements and related
disclosures.
In August 2020,
the FASB issued authoritative guidance to simplify the accounting
for convertible instruments and contracts in an entity’s own equity
and the diluted earnings per share computations for these
instruments. This guidance removes major separation models required
under current guidance which will enable more convertible debt
instruments to be reported as a single liability instrument with no
separate accounting for embedded conversion features. This guidance
also removes certain settlement conditions that are required for
equity contracts to qualify for the derivative scope exception. The
new guidance also requires the “if -converted” method to be applied
for all convertible instruments (the treasury stock method is no
longer available) and removes
the ability to
rebut the presumption of share settlement for contracts that may be
settled in cash or stock. In addition, expanded disclosures are
required on the terms and features of convertible instruments. This
guidance is effective for fiscal years beginning after December 31,
2021, which will be the Company’s first quarter of fiscal 2023, on
either a full or modified retrospective basis. Early adoption is
permitted for fiscal years beginning after December 31, 2020, which
will be the Company’s first quarter of fiscal 2022. The Company is
currently evaluating the impact of the adoption of this guidance on
its consolidated financial statements and related
disclosures.
(2) Lease
Accounting
The Company
primarily leases its showrooms, advertising, licensing, sales and
merchandising offices, remote distribution and warehousing
facilities and retail and factory outlet store locations under
operating lease agreements expiring on various dates through
January
2039.
The Company also leases some of its equipment as well as computer
hardware and software under operating and finance lease agreements
expiring on various dates through May 2027.
The Company’s
lease agreements primarily provide for lease payments based on a
minimum annual rental amount, a percentage of annual sales volume,
periodic adjustments related to inflation or a combination of such
lease payments. Certain retail store leases provide for lease
payments based upon the minimum annual rental amount and a
percentage of annual sales volume, generally ranging
from 3%
to
23%,
when specific sales volumes are exceeded. The Company’s retail
concession leases also provide for lease payments primarily based
upon a percentage of annual sales volume, which averages
approximately 35%.
In addition to
the amounts as disclosed below, the Company has estimated
additional operating lease commitments of approximately
$24.4
million for leases where the
Company has not yet taken possession of the underlying asset as
of August 1,
2020. As
such, the related operating lease ROU assets and operating lease
liabilities have not been recognized in the Company’s condensed
consolidated balance sheet as of August 1,
2020.
As
of August 1, 2020
and
February 1,
2020,
the components of leases are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Balance
Sheet Location
|
Aug 1,
2020
|
|
Feb 1,
2020
|
|
Assets
|
|
|
|
|
|
Operating
|
Operating lease right-of-use
assets
|
$
|
766,853
|
|
|
$
|
851,990
|
|
|
Finance
|
Property and equipment,
net
|
15,451
|
|
|
15,972
|
|
|
Total lease
assets
|
$
|
782,304
|
|
|
$
|
867,962
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Current:
|
|
|
|
|
|
Operating
|
Current portion of operating
lease liabilities
|
$
|
235,749
|
|
|
$
|
192,066
|
|
|
Finance
|
Current portion of borrowings
and finance lease obligations
|
2,524
|
|
|
2,273
|
|
|
Noncurrent:
|
|
|
|
|
|
Operating
|
Long-term operating lease
liabilities
|
659,118
|
|
|
714,079
|
|
|
Finance
|
Long-term debt and finance
lease obligations
|
13,729
|
|
|
14,262
|
|
|
Total lease
liabilities
|
$
|
911,120
|
|
|
$
|
922,680
|
|
As
of August 1, 2020
and
August 3,
2019,
the components of lease costs are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
Income
Statement Location
|
Aug 1,
2020
|
|
Aug 3,
2019
|
|
Aug 1,
2020
|
|
Aug 3,
2019
|
|
Operating lease
costs
|
Cost of product
sales
|
$
|
50,005
|
|
|
$
|
58,749
|
|
|
$
|
105,374
|
|
|
$
|
117,565
|
|
|
Operating lease
costs
|
Selling, general and
administrative expenses
|
5,355
|
|
|
5,720
|
|
|
10,531
|
|
|
10,984
|
|
|
Finance lease
costs
|
|
|
|
|
|
|
|
|
|
Amortization of leased
assets1,
2
|
Cost of product
sales
|
20
|
|
|
44
|
|
|
32
|
|
|
87
|
|
|
Amortization of leased
assets1,
2
|
Selling, general and
administrative expenses
|
474
|
|
|
637
|
|
|
1,338
|
|
|
1,180
|
|
|
Interest on lease
liabilities
|
Interest expense
|
208
|
|
|
286
|
|
|
490
|
|
|
573
|
|
|
Variable lease
costs3
|
Cost of product
sales
|
13,209
|
|
|
25,083
|
|
|
27,557
|
|
|
49,908
|
|
|
Variable lease
costs3
|
Selling, general and
administrative expenses
|
638
|
|
|
628
|
|
|
1,217
|
|
|
1,455
|
|
|
Short-term lease
costs
|
Cost of product
sales
|
181
|
|
|
—
|
|
|
420
|
|
|
—
|
|
|
Short-term lease
costs
|
Selling, general and
administrative expenses
|
170
|
|
|
183
|
|
|
1,959
|
|
|
395
|
|
|
Total lease
costs
|
$
|
70,260
|
|
|
$
|
91,330
|
|
|
$
|
148,918
|
|
|
$
|
182,147
|
|
____________________________________________________________________
Notes:
|
|
|
1
|
The Company has
made certain reclassifications to prior period amounts to conform
to the current period presentation.
|
|
|
|
2
|
Amortization of
leased assets related to finance leases are included in
depreciation expense within cost of product sales or selling,
general and administrative expenses depending on the nature of the
asset in the Company’s condensed consolidated statements of income
(loss).
|
|
|
|
3
|
During the three
and six months ended August 1,
2020,
variable lease costs included certain rent concessions received by
the Company, primarily in Europe, related to the COVID-19 pandemic
of approximately $7.7
million and $10.5
million, respectively. Refer to Note
1 for further information.
|
Maturities of
the Company’s operating and finance lease liabilities as of
August 1,
2020 are
as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity of
Lease Liabilities
|
Operating
Leases
|
|
Finance
Leases
|
|
Total
|
|
20211
|
$
|
155,961
|
|
|
$
|
1,618
|
|
|
$
|
157,579
|
|
|
2022
|
207,825
|
|
|
3,904
|
|
|
211,729
|
|
|
2023
|
172,592
|
|
|
3,483
|
|
|
176,075
|
|
|
2024
|
144,021
|
|
|
3,260
|
|
|
147,281
|
|
|
2025
|
99,851
|
|
|
2,446
|
|
|
102,297
|
|
|
After 2025
|
201,665
|
|
|
5,229
|
|
|
206,894
|
|
|
Total lease
payments
|
981,915
|
|
|
19,940
|
|
|
1,001,855
|
|
|
Less: Interest
|
87,048
|
|
|
3,687
|
|
|
90,735
|
|
|
Present value of lease
liabilities
|
$
|
894,867
|
|
|
$
|
16,253
|
|
|
$
|
911,120
|
|
______________________________________________________________________
Notes:
|
|
|
1
|
Represents the
maturity of lease liabilities for the remainder of fiscal 2021 and
also includes rent payments that have been deferred due to the
COVID-19 pandemic. This amount does not include payments made
during the six months ended August 1,
2020.
|
Other
supplemental information is as follows (dollars in
thousands):
|
|
|
|
Lease Term
and Discount Rate
|
Aug 1,
2020
|
|
Weighted-average remaining
lease term (years)
|
|
|
Operating leases
|
5.7
years
|
|
Finance leases
|
5.9
years
|
|
Weighted-average discount
rate
|
|
|
Operating leases
|
3.7%
|
|
Finance leases
|
7.0%
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
Ended
|
|
Supplemental
Cash Flow Information
|
Aug 1,
2020
|
|
Aug 3,
2019
|
|
Cash paid for amounts
included in the measurement of lease liabilities
|
|
|
|
|
Operating cash flows from
operating leases
|
$
|
70,890
|
|
|
$
|
124,687
|
|
|
New operating ROU assets
obtained in exchange for lease liabilities
|
$
|
19,566
|
|
|
$
|
99,951
|
|
Impairment
During
the three and six months ended
August 1, 2020, the Company recorded
asset impairment charges of $8.2
million and $36.5
million, respectively, related to
ROU assets at certain retail locations in North America and Europe.
The asset impairment charges were determined based on the excess of
carrying value over the fair value of the ROU assets. The Company
uses estimates of market participant rents to calculate fair value
of the ROU assets. There were no
asset
impairment charges recorded related to the Company’s ROU assets
during the three and six months
ended August 3,
2019.
Refer to Note 15 for more information on the Company’s impairment
testing.
|
|
|
(3)
|
Earnings
(Loss) per Share
|
Basic earnings
(loss) per share represents net earnings (loss) attributable to
common stockholders divided by the weighted average number of
common shares outstanding during the period. The Company considers
any restricted stock units with forfeitable dividend rights that
are issued and outstanding, but considered contingently returnable
if certain service conditions are not met, as common equivalent
shares outstanding. These restricted stock units are excluded from
the weighted average number of common shares outstanding and basic
earnings (loss) per share calculation until the respective service
conditions have been met. Diluted earnings per share represents net
earnings attributable to common stockholders divided by the
weighted average number of common shares outstanding, inclusive of
the dilutive impact of common equivalent shares outstanding during
the period, and the dilutive impact of the Company’s convertible
senior notes and related warrants, as applicable.
The Company
expects to settle the principal amount of its outstanding
convertible senior notes in cash and any excess in shares. As a
result, upon conversion of the convertible senior notes, only the
amounts in excess of the principal amount are considered in diluted
earnings per share under the treasury stock method, if applicable.
See Note 10 for more information regarding the Company’s
convertible senior notes.
In periods when
there is a net loss, the potentially dilutive impact of common
equivalent shares outstanding is not included in the computation of
diluted net loss per share as the impact of the shares would be
antidilutive. Nonvested restricted stock awards (referred to as
participating securities) are excluded from the dilutive impact of
common equivalent shares outstanding in accordance with
authoritative guidance under the two-class method since the
nonvested restricted stockholders are entitled to participate in
dividends declared on common stock as if the shares were fully
vested and hence are deemed to be participating securities. Under
the two-class method, distributed and undistributed earnings
attributable to nonvested restricted stockholders are excluded from
net earnings (loss) attributable to common stockholders for
purposes of calculating basic and diluted earnings (loss) per
common share. However, net losses are not allocated to nonvested
restricted stockholders because they are not contractually
obligated to share in the losses of the Company.
In addition,
the Company has granted certain nonvested stock units that are
subject to certain performance-based or market-based vesting
conditions as well as continued service requirements through the
respective vesting periods. These nonvested stock units are
included in the computation of diluted net earnings per common
share
attributable to
common stockholders only to the extent that the underlying
performance-based or market-based vesting conditions are satisfied
as of the end of the reporting period, or would be considered
satisfied if the end of the reporting period was the end of the
related contingency period, and the results would be dilutive under
the treasury stock method.
The computation
of basic and diluted net earnings (loss)
per common
share attributable to common stockholders is as follows (in
thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months
Ended
|
|
|
Aug 1,
2020
|
|
Aug 3,
2019
|
|
Aug 1,
2020
|
|
Aug 3,
2019
|
|
Net
earnings (loss)
attributable to
Guess?, Inc.
|
$
|
(20,358
|
)
|
|
$
|
25,322
|
|
|
$
|
(178,024
|
)
|
|
$
|
3,948
|
|
|
Less net earnings
attributable to nonvested restricted stockholders
|
—
|
|
|
233
|
|
|
—
|
|
|
235
|
|
|
Net (earnings) loss
attributable to common stockholders
|
$
|
(20,358
|
)
|
|
$
|
25,089
|
|
|
$
|
(178,024
|
)
|
|
$
|
3,713
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares used in basic computations
|
65,177
|
|
|
70,508
|
|
|
65,446
|
|
|
75,216
|
|
|
Effect of dilutive
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and restricted
stock units1
|
—
|
|
|
848
|
|
|
—
|
|
|
939
|
|
|
Weighted average common
shares used in diluted computations
|
65,177
|
|
|
71,356
|
|
|
65,446
|
|
|
76,155
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) per
common share attributable to common stockholders:
|
|
Basic
|
$
|
(0.31
|
)
|
|
$
|
0.36
|
|
|
$
|
(2.72
|
)
|
|
$
|
0.05
|
|
|
Diluted
|
$
|
(0.31
|
)
|
|
$
|
0.35
|
|
|
$
|
(2.72
|
)
|
|
$
|
0.05
|
|
______________________________________________________________________
Notes:
|
|
|
1
|
For the three
and six
months ended August 1, 2020, there were
262,086
and
382,222,
respectively, of potentially dilutive shares that were not included
in the computation of diluted weighted average common shares and
common equivalent shares outstanding because their effect would
have been antidilutive given the Company’s net loss.
|
For the
three months
ended August 1, 2020 and August 3,
2019,
equity awards granted for 4,121,433
and
3,258,910,
respectively, of the Company’s common shares and for the
six months
ended August 1, 2020 and August 3,
2019,
equity awards granted for 3,890,881
and
2,899,760,
respectively, of the Company’s common shares were outstanding but
were excluded from the computation of diluted weighted average
common shares and common equivalent shares outstanding because the
assumed proceeds, as calculated under the treasury stock method,
resulted in these awards being antidilutive. For the three
and six
months ended August 1, 2020, the Company also
excluded 525,875
nonvested stock
units which are subject to the achievement of performance-based
vesting conditions from the computation of diluted weighted average
common shares and common equivalent shares outstanding because
these conditions were not achieved as of August 1,
2020.
For the three and six months ended
August 3, 2019, the Company
excluded 1,228,017
nonvested stock
units which were subject to the achievement of performance-based
vesting conditions from the computation of diluted weighted average
common shares and common equivalent shares outstanding because
these conditions were not achieved as of August 3,
2019.
The conversion
spread on the Company’s convertible senior notes will have a
dilutive impact on diluted earnings per share when the average
market price of the Company’s common stock for a given period
exceeds the conversion price of $25.78
per share of
common stock. For the three and six months ended
August 1, 2020 and August 3,
2019,
the convertible senior notes have been excluded from the
computation of diluted earnings per share as the effect would be
antidilutive since the conversion price of the convertible senior
notes exceeded the average market price of the Company’s common
stock. Warrants to initially purchase 11.6
million shares
of the Company’s common shares at an initial strike price of
$46.88
per share were
outstanding as of August 1,
2020.
These warrants were excluded from the computation of diluted
earnings per share since the warrants’ adjusted strike price was
greater than the average market price of the Company’s common stock
during the three and six
months ended
August 1, 2020 and August 3,
2019.
See Note 10 for more information regarding the Company’s
convertible senior notes.
Share
Repurchase Program
On
June 26, 2012, the Company’s Board of Directors authorized a
program to repurchase, from time-to-time and as market and business
conditions warrant, up to $500
million of the Company’s common
stock. Repurchases under the program may be made on the open market
or in privately negotiated transactions, pursuant to
Rule 10b5-1 trading plans or other available means. There is
no minimum or maximum number of shares to be repurchased under the
program, which may be discontinued at any time, without prior
notice. There were
4,000,000
shares
repurchased at an aggregate cost of $38.8
million under the program during
the three and six months ended August 1,
2020.
During the six months ended August 3, 2019, the Company
repurchased 11,013,304
shares under
the program at an aggregate cost of $212.5
million, which is inclusive of the
shares repurchased under the accelerated share repurchase agreement
(the “ASR Contract”) as described below. The Company
repurchased 10,264,052
shares at an
aggregate cost of $201.5
million during the three months
ended May 4, 2019 and an additional 749,252
shares at an
aggregate cost of $11.0
million during the three months
ended August 3, 2019. As of August 1,
2020,
the Company had remaining authority under the program to purchase
$47.8
million of its common
stock.
On April 26,
2019, pursuant to existing stock repurchase authorizations, the
Company entered into an ASR Contract with JPMorgan Chase Bank,
National Association (in such capacity, the “ASR Counterparty”), to
repurchase an aggregate of $170
million of the Company’s common
stock. Under the ASR Contract, the Company made an initial payment
of $170
million to the ASR Counterparty and
received an initial delivery of approximately 5.2
million shares of common stock,
which represented approximately $102
million (or 60%)
of the ASR
Contract. The Company received a
final delivery of an additional 5.4
million shares, or
$68
million, under its ASR Contract
during the third quarter of fiscal 2020. The final share amount was
determined based on the daily volume-weighted average price since
the effective date of the ASR Contract, less the applicable
contractual discount. When combined with the 5.2
million upfront shares received at
the inception of the ASR in April 2019, the Company repurchased
approximately 10.6
million of its shares under the ASR
at an average repurchase price of $16.09
per share. All
shares were repurchased in accordance with the Company’s publicly
announced ASR program, which was completed during the third quarter
of fiscal 2020. The shares delivered under the ASR Contract reduced
the Company’s outstanding shares and its weighted average number of
common shares outstanding for purposes of calculating basic and
diluted earnings per share.
Dividends
During the
first quarter of fiscal 2021, the Company announced that its Board
of Directors had deferred the decision with respect to the payment
of its quarterly cash dividend. The Board of Directors decided to
continue to postpone its decision with respect to the payment of
its quarterly cash dividend during the second quarter of fiscal
2021 in order to preserve the Company’s cash position and provide
continued financial flexibility in light of the uncertainties
related to the COVID-19 pandemic. As a result, there
was no
cash dividend
declared during the three and six months ended
August 1, 2020. During the
three and six
months ended August 1, 2020, dividends paid related to
the vesting of restricted stock units that are considered
non-participating securities and are only entitled to dividend
payments once the respective awards vest. Subsequent to the second
quarter of fiscal 2021, the Company announced that it would resume
paying its quarterly cash dividend of $0.1125
per share
beginning in the third quarter of fiscal 2021, but decided to not
declare any cash dividends for the first and second quarters of
fiscal 2021.
During
the three and six months ended
August 3, 2019, the Company declared a
cash dividend of $0.1125
per share
and $0.3375
per share,
respectively.
During the
first quarter of fiscal 2020, the Company announced that its Board
of Directors reduced the future quarterly cash dividends that may
be paid to holders of the Company’s common stock, when, as and if
any such dividend is declared by the Company’s Board of Directors,
from $0.225
per share
to $0.1125
per share to
redeploy capital and return incremental value to shareholders
through share repurchases.
Decisions on
whether, when and in what amounts to continue making any future
dividend distributions will remain at all times entirely at the
discretion of the Company’s Board of Directors, which reserves the
right to change or terminate the Company’s dividend practices at
any time and for any reason without prior notice. The payment of
cash dividends in the future will be based upon a number of
business, legal and other considerations, including our cash flow
from operations, capital expenditures, debt service and covenant
requirements, cash paid for income taxes, earnings, share
repurchases, economic conditions and U.S. and global
liquidity.
Accumulated
Other Comprehensive Income (Loss)
The changes in
accumulated other comprehensive income (loss), net of related
income taxes, for the three and six months ended
August 1, 2020 and August 3, 2019
are as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended Aug 1, 2020
|
|
|
Foreign
Currency Translation Adjustment
|
|
Derivative
Financial Instruments Designated as Cash Flow Hedges
|
|
Defined
Benefit Plans
|
|
Total
|
|
Balance at May 2,
2020
|
$
|
(152,162
|
)
|
|
$
|
7,711
|
|
|
$
|
(8,851
|
)
|
|
$
|
(153,302
|
)
|
|
Gains (losses) arising during
the period
|
31,043
|
|
|
(7,012
|
)
|
|
(211
|
)
|
|
23,820
|
|
|
Reclassification to net
loss for
(gains) losses realized
|
—
|
|
|
(2,198
|
)
|
|
71
|
|
|
(2,127
|
)
|
|
Net other comprehensive
income (loss)
|
31,043
|
|
|
(9,210
|
)
|
|
(140
|
)
|
|
21,693
|
|
|
Balance at August 1,
2020
|
$
|
(121,119
|
)
|
|
$
|
(1,499
|
)
|
|
$
|
(8,991
|
)
|
|
$
|
(131,609
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
Ended Aug 1, 2020
|
|
|
Foreign
Currency Translation Adjustment
|
|
Derivative
Financial Instruments Designated as Cash Flow Hedges
|
|
Defined
Benefit Plans
|
|
Total
|
|
Balance at February 1,
2020
|
$
|
(137,289
|
)
|
|
$
|
6,300
|
|
|
$
|
(8,921
|
)
|
|
$
|
(139,910
|
)
|
|
Gains (losses) arising during
the period
|
16,170
|
|
|
(3,832
|
)
|
|
(212
|
)
|
|
12,126
|
|
|
Reclassification to net
loss for
(gains) losses realized
|
—
|
|
|
(3,967
|
)
|
|
142
|
|
|
(3,825
|
)
|
|
Net other comprehensive
income (loss)
|
16,170
|
|
|
(7,799
|
)
|
|
(70
|
)
|
|
8,301
|
|
|
Balance at August 1,
2020
|
$
|
(121,119
|
)
|
|
$
|
(1,499
|
)
|
|
$
|
(8,991
|
)
|
|
$
|
(131,609
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended Aug 3, 2019
|
|
|
Foreign
Currency Translation Adjustment
|
|
Derivative
Financial Instruments Designated as Cash Flow Hedges
|
|
Defined
Benefit Plans
|
|
Total
|
|
Balance at May 4,
2019
|
$
|
(131,923
|
)
|
|
$
|
8,663
|
|
|
$
|
(9,446
|
)
|
|
$
|
(132,706
|
)
|
|
Gains (losses) arising during
the period
|
(4,841
|
)
|
|
1,978
|
|
|
(151
|
)
|
|
(3,014
|
)
|
|
Reclassification to net
earnings for (gains) losses realized
|
—
|
|
|
(1,572
|
)
|
|
90
|
|
|
(1,482
|
)
|
|
Net other comprehensive
income (loss)
|
(4,841
|
)
|
|
406
|
|
|
(61
|
)
|
|
(4,496
|
)
|
|
Balance at August 3,
2019
|
$
|
(136,764
|
)
|
|
$
|
9,069
|
|
|
$
|
(9,507
|
)
|
|
$
|
(137,202
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
Ended Aug 3, 2019
|
|
|
Foreign
Currency Translation Adjustment
|
|
Derivative
Financial Instruments Designated as Cash Flow Hedges
|
|
Defined
Benefit Plans
|
|
Total
|
|
Balance at February 2,
2019
|
$
|
(119,546
|
)
|
|
$
|
2,999
|
|
|
$
|
(9,632
|
)
|
|
$
|
(126,179
|
)
|
|
Cumulative adjustment
reclassified from retained earnings due to adoption of new
accounting guidance1
|
—
|
|
|
1,981
|
|
|
—
|
|
|
1,981
|
|
|
Gains (losses) arising during
the period
|
(17,218
|
)
|
|
5,842
|
|
|
(55
|
)
|
|
(11,431
|
)
|
|
Reclassification to net
earnings for (gains) losses realized
|
—
|
|
|
(1,753
|
)
|
|
180
|
|
|
(1,573
|
)
|
|
Net other comprehensive
income (loss)
|
(17,218
|
)
|
|
4,089
|
|
|
125
|
|
|
(13,004
|
)
|
|
Balance at August 3,
2019
|
$
|
(136,764
|
)
|
|
$
|
9,069
|
|
|
$
|
(9,507
|
)
|
|
$
|
(137,202
|
)
|
______________________________________________________________________
Notes:
|
|
|
1
|
During the first
quarter of fiscal 2020, the Company adopted new authoritative
guidance which eliminated the requirement to separately measure and
report ineffectiveness for instruments that qualify for hedge
accounting and generally requires that the entire change in the
fair value of such instruments ultimately be presented in the same
line as the respective hedge item. As a result, there is no
interest component recognized for the ineffective portion of
instruments that qualify for hedge accounting, but rather all
changes in the fair value of such instruments are included in other
comprehensive income (loss). Upon adoption of this guidance, the
Company reclassified approximately $2.0
million in gains from retained
earnings to accumulated other comprehensive loss related to the
previously recorded interest component on outstanding instruments
that qualified for hedge accounting.
|
Details on
reclassifications out of accumulated other comprehensive income
(loss) to net earnings (loss) during the three and
six months
ended August 1, 2020 and August 3, 2019
are as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
Location of
(Gain) Loss Reclassified from Accumulated OCI into Earnings
(Loss)
|
|
|
Aug 1,
2020
|
|
Aug 3,
2019
|
|
Aug 1,
2020
|
|
Aug 3,
2019
|
|
|
Derivative financial
instruments designated as cash flow hedges:
|
|
|
|
Foreign
exchange currency contracts
|
$
|
(2,504
|
)
|
|
$
|
(1,757
|
)
|
|
$
|
(4,495
|
)
|
|
$
|
(1,987
|
)
|
|
Cost of product
sales
|
|
Interest
rate swap
|
42
|
|
|
(44
|
)
|
|
45
|
|
|
(90
|
)
|
|
Interest expense
|
|
Less
income tax effect
|
264
|
|
|
229
|
|
|
483
|
|
|
324
|
|
|
Income tax expense
(benefit)
|
|
|
(2,198
|
)
|
|
(1,572
|
)
|
|
(3,967
|
)
|
|
(1,753
|
)
|
|
|
|
Defined benefit
plans:
|
|
|
|
|
|
|
|
|
|
|
Net
actuarial loss amortization
|
97
|
|
|
111
|
|
|
193
|
|
|
222
|
|
|
Other income
(expense)
|
|
Prior
service credit amortization
|
(16
|
)
|
|
(9
|
)
|
|
(32
|
)
|
|
(19
|
)
|
|
Other income
(expense)
|
|
Less
income tax effect
|
(10
|
)
|
|
(12
|
)
|
|
(19
|
)
|
|
(23
|
)
|
|
Income tax expense
(benefit)
|
|
|
71
|
|
|
90
|
|
|
142
|
|
|
180
|
|
|
|
|
Total reclassifications
during the period
|
$
|
(2,127
|
)
|
|
$
|
(1,482
|
)
|
|
$
|
(3,825
|
)
|
|
$
|
(1,573
|
)
|
|
|
Accounts
receivable is summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Aug 1,
2020
|
|
Feb 1,
2020
|
|
Trade
|
$
|
237,399
|
|
|
$
|
309,508
|
|
|
Royalty
|
9,248
|
|
|
12,775
|
|
|
Other
|
14,224
|
|
|
13,429
|
|
|
|
260,871
|
|
|
335,712
|
|
|
Less
allowances1
|
14,400
|
|
|
8,431
|
|
|
|
$
|
246,471
|
|
|
$
|
327,281
|
|
______________________________________________________________________
Notes:
|
|
|
1
|
During the first
quarter of fiscal 2021, the Company adopted authoritative guidance
related to the measurement of credit losses on financial
instruments. This guidance replaces the “as incurred” loss model
with an “expected loss” model which requires the recognition of an
allowance for credit losses expected to be incurred over an asset’s
lifetime. The adoption of this guidance did not have a material
impact on the Company’s allowance for doubtful accounts. Refer to
Note 1 for further information.
|
Accounts
receivable consists of trade
receivables relating primarily to the Company’s wholesale business
in Europe and, to a lesser extent, to its wholesale businesses in
the Americas and Asia, royalty receivables relating to its
licensing operations, credit card and retail concession receivables
related to its retail businesses and certain other
receivables. Other receivables
generally relate to amounts due to the Company that result from
activities that are not related to the direct sale of the Company’s
products or collection of royalties.