What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-06-04 compared with 2020-12-04 · 115 added, 211 removed, 398 unchanged (45% of the section changed)

3 unchanged sentences

(Amounts in thousands)

November 1, 2020

February 2, 2020

January 31, 2021

Current Assets:

Cash and cash equivalents

Income taxes receivable

Inventory, less reserves of $ 1,834 and $ 1,600 , respectively

5 unchanged sentences

Finance lease right-of-use assets, net

Restricted cash

Available-for-sale security

4 unchanged sentences

(Amounts in thousands)

November 1, 2020

February 2, 2020

January 31, 2021

LIABILITIES AND SHAREHOLDERS'

18 unchanged sentences

10,000 shares authorized;

issued or outstanding as of November 1, 2020 and February 2, 2020

issued or outstanding as of May 2, 2021 and January 31, 2021

Common stock (Class A), no par value;

10,000 shares authorized;

3,364 shares issued and outstanding as of November 1, 2020 and February 2, 2020

3,364 shares issued and outstanding as of May 2, 2021 and January 31, 2021

Common stock (Class B), no par value;

200,000 shares authorized;

29,517 shares issued and 29,464 shares outstanding as of November 1, 2020 and

29,191 shares issued and 29,172 shares outstanding as of February 2, 2020

29,631 shares issued and 29,553 shares outstanding as of May 2, 2021 and

29,530 shares issued and 29,477 shares outstanding as of January 31, 2021

Treasury stock, at cost;

53 and 19 shares as of November 1, 2020 and

February 2, 2020, respectively

78 and 53 shares as of May 2, 2021 and

January 31, 2021, respectively

Capital stock

Retained earnings

Accumulated other comprehensive (loss) income

Accumulated other comprehensive income

Total shareholders'

8 unchanged sentences

Three Months Ended

Nine Months Ended

November 1, 2020

November 3, 2019

November 1, 2020

November 3, 2019

Cost of goods sold (excluding depreciation and amortization)

2 unchanged sentences

Interest expense

Other income (loss), net

Other income, net

Income (loss) before income taxes

14 unchanged sentences

Three Months Ended

Nine Months Ended

November 1, 2020

November 3, 2019

November 1, 2020

November 3, 2019

Net income (loss)

5 unchanged sentences

Comprehensive income (loss)

Comprehensive loss attributable to noncontrolling interest

Comprehensive income (loss) attributable to noncontrolling interest

Comprehensive income (loss) attributable

4 unchanged sentences

(Amounts in thousands)

Nine Months Ended November 1, 2020

Three Months Ended May 2, 2021

Noncontrolling

3 unchanged sentences

shareholders'

Balance at February 2, 2020

Balance at January 31, 2021

Issuance of common stock

4 unchanged sentences

Balance at May 2, 2021

Issuance of common stock

Stock-based compensation

Restricted stock forfeitures

Restricted stock surrendered for taxes

Other comprehensive income

Net income (loss)

Balance at August 2, 2020

Issuance of common stock

Stock-based compensation

Restricted stock surrendered for taxes

Other comprehensive income

Net income (loss)

Balance at November 1, 2020

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

2 unchanged sentences

(Amounts in thousands)

Nine Months Ended November 3, 2019

Three Months Ended May 3, 2020

Noncontrolling

4 unchanged sentences

Balance at February 2, 2020

Cumulative effect from

‎ adoption of ASC 842

Issuance of common stock

2 unchanged sentences

Restricted stock surrendered for taxes

Other comprehensive loss

Balance at May 3, 2020

Issuance of common stock

Stock-based compensation

Restricted stock forfeitures

Restricted stock surrendered for taxes

Net income (loss)

Balance at August 4, 2019

Issuance of common stock

Stock-based compensation

Restricted stock forfeitures

Restricted stock surrendered for taxes

Other comprehensive income

Net income (loss)

Balance at November 3, 2019

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

2 unchanged sentences

(Amounts in thousands)

Nine Months Ended

November 1, 2020

November 3, 2019

Three Months Ended

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization

3 unchanged sentences

Changes in operating assets and liabilities:

Income taxes receivable

Prepaid expense & other current assets

Software hosting implementation costs, net

Deferred catalog costs

3 unchanged sentences

Noncash lease impacts

Net cash used in operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

2 unchanged sentences

Principal receipts from available-for-sale security

Change in other assets

Proceeds from disposals

Net cash used in investing activities

6 unchanged sentences

Payments on finance lease obligations

Shares withheld for tax payments on vested restricted shares

Net cash provided by financing activities

Increase in cash, cash equivalents and restricted cash

Payments of tax withholding on vested restricted shares

Net cash (used in) provided by financing activities

(Decrease) increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

11 unchanged sentences

Duluth Holdings Inc.

(“Duluth Trading” or the “Company”), a Wisconsin corporation, is a lifestyle brand of men’s and women’s casual wear, workwear and accessories sold exclusively through the Company’s own direct and retail channels.

(“Duluth Trading” or the “Company”), a Wisconsin corporation, is a lifestyle brand of men’s and women’s casual wear, workwear and accessories sold primarily through the Company’s own omnichannel platform.

The Company’s products are marketed under the Duluth Trading brand, with the majority of products being exclusively developed and sold as Duluth Trading branded merchandise.

The Company has historically identified two operating segments, direct and retail.

The direct segment, consisting of the Company’s website and catalogs, offers products nationwide.

In 2010, the Company initiated its omnichannel platform with the opening of its first store.

Since then, Duluth Trading has expanded its retail presence, and as of November 1, 2020, the Company operated 62 retail stores and three outlet stores.

The Company identifies its operating segments according to how its business activities are managed and evaluated.

The Company continues to grow its omnichannel distribution network which allows the consumer to interact with the Company through a consistent customer experience whether on the Company website or at Company stores.

As the Company expands its distribution network, and in conjunction with assessing the similar nature of products sold, production process, distribution process, target customers and economic characteristics between the two segments, the Company determined that the historical structure of separate reporting segments for direct and retail was no longer representative.

Therefore, as of February 3, 2020, the Company updated its segment reporting to one reportable external segment, consistent with the Company’s omnichannel business approach.

The Company continues to report one reportable external segment, consistent with the Company’s omnichannel business approach.

The Company’s revenues generated outside the United States were insignificant.

12 unchanged sentences

Fiscal 2021 is a 52-week period and ends on January 30, 2022 .

Fiscal 2019 was a 52-week period and ended on February 2, 2020.

The three and nine months of fiscal 2020 and fiscal 2019 represent the Company’s 13 and 39-week periods ended November 1, 2020 and November 3, 2019, respectively.

The accompanying condensed consolidated financial statements as of and for the three and nine months ended November 1, 2020 and November 3, 2019 have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of the Company, include all adjustments (which are normal and recurring in nature) necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented.

Fiscal 2020 was a 52-week period and ended on January 31, 2021.

The three months of fiscal 2021 and fiscal 2020 represent the Company’s 13 week periods ended May 2, 2021 and May 3, 2020, respectively.

The accompanying condensed consolidated financial statements as of and for the three months ended May 2, 2021 and May 3, 2020 have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of the Company, include all adjustments (which are normal and recurring in nature) necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted pursuant to such SEC rules and regulations as of and for the three and nine months ended November 1, 2020 and November 3, 2019.

These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s annual report on Form 10-K for the fiscal year ended February 2, 2020.

GAAP have been condensed or omitted pursuant to such SEC rules and regulations as of and for the three months ended May 2, 2021 and May 3, 2020.

In March 2020, a novel strain of coronavirus (“COVID-19”) was declared a global pandemic by the World Health Organization.

1 unchanged sentence

and global economies, disrupted global supply chains and financial markets, led to significant travel and transportation restrictions, including mandatory business closures and orders to shelter in place.

The Company’s business operations and financial performance for the three and nine months ended November 1, 2020 were impacted by COVID-19.

These impacts are discussed within these notes to the condensed consolidated financial statements.

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The ultimate impact of COVID-19 on our operational and financial performance still depends on future developments outside of our control.

1 unchanged sentence

Impairment Analysis

The Company determined that the effects of COVID-19 may represent indicators of asset impairment, and as a result, performed interim impairment assessments for the Company’s intangible assets, long-lived assets and goodwill at May 3, 2020.

As of May 2, 2021 and for the three months then ended, no triggering events or indicators of asset impairment were noted.

At May 3, 2020, the Company determined that the effects of COVID-19 represented indicators of asset impairment, and as a result, performed interim impairment assessments for the Company’s intangible assets, long-lived assets and goodwill.

Due to the nature of the Company’s intangible assets balance, the Company concluded that no indicators of impairment were present.

In the first fiscal quarter of 2020, t he Company performed undiscounted cash flow analyses on certain long-lived assets, including retail stores at the individual store level and determined that the estimated undiscounted future cash flows exceeded the net carrying values.

The Company also performed an additional qualitative assessment of goodwill as of May 3, 2020 and determined that it was more likely than not that the fair value of these assets was greater than their carrying value.

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Based on these assessments, the Company concluded that no impairment losses had been incurred.

However, the Company cannot predict the future impact or duration of the negative effect of COVID-19 and as a result, cannot reasonably predict the probability or amount of impairment losses that may be incurred in future periods.

There were no triggering events subsequent to the quarter ended May 3, 2020 and no long-lived asset impairment charges recorded for the nine months ended November 1, 2020.

Inventory Valuation

Inventory, consisting of purchased product, is valued at the lower of cost or net realizable value, under the first-in, first-out method.

The significant estimates used in inventory valuation are obsolescence (including excess and slow-moving inventory and lower of cost or market reserves) and estimates of inventory shrinkage.

Both estimates have calculations that require the Company to make assumptions and apply judgement regarding a number of factors, including market conditions, the selling environment, historical results and current inventory trends.

Inventory is adjusted periodically to reflect current market conditions, which requires management’s judgement that may significantly affect the ending inventory valuation, as well as gross margin.

The reserve for inventory shrinkage is adjusted to reflect the trend of historical physical inventory count results.

The Company performs its retail store physical inventory counts in July and the difference between actual and estimated shrinkage, recorded in Cost of goods sold, may cause fluctuations in second fiscal quarter results.

There were no triggering events subsequent to the quarter ended May 3, 2020.

Inventory consists of finished goods stated at the lower of cost or net realizable value, with cost determined using the first-in, first-out valuation method.

The Company records an inventory reserve for the anticipated loss associated with selling inventories below cost.

Inventory reserve for excess and obsolete items was $ 1.8 million and $ 1.6 million as of May 2, 2021 and January 31, 2021, respectively

Prepaid Expenses and Other Assets

Prepaid expenses and other assets consist of the following:

January 31, 2021

(in thousands)

Prepaid expenses & other current assets

Pending returns inventory, net

Current software hosting implementation costs, net

Other prepaid expenses

Prepaid expenses & other current assets

Other assets, net

Other assets, net includes goodwill, loan origination fees, trade names, security deposits and prepaid expenses.

Goodwill was $ 0.4 million as of November 1, 2020 and February 2, 2020.

The Company’s other intangible asset, net of accumulated amortization was $ 0.3 million as of November 1, 2020 and February 2, 2020.

Accumulated amortization was $ 0.3 million as of November 1, 2020 and February 2, 2020.

Intangible assets, net

Non-current software hosting implementation costs

Other assets, net

Seasonality of Business

1 unchanged sentence

Historically, the Company has recognized a significant portion of its revenue and operating profit in the fourth fiscal quarter of each year as a result of increased sales during the holiday season.

Restricted Cash and Reconciliation of cash and cash equivalents and restricted cash to the condensed statement of cash flows

The Company’s restricted cash is held in escrow accounts and is used to pay a portion of the construction loans entered into by third party landlords (the “Landlords”) in connection with the Company’s retail store leases.

The restricted cash is disbursed based on the escrow agreements entered into by and among the Landlords, the Company and the escrow agent.

There was no restricted cash held in escrow accounts as of November 1, 2020.

Cash and cash equivalents

The Company considers short-term investments with original maturities of three months or less when purchased to be cash equivalents.

Amounts receivable from credit card issuers are typically converted to cash within 2 to 4 days of the original sales transaction and are considered to be cash equivalents.

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheet that sum the total of the same such amounts shown in the condensed consolidated statement of cash flows.

November 1, 2020

February 2, 2020

(in thousands)

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents and restricted cash shown in the

‎ condensed consolidated statement of cash flows

Reclassifications

Certain reclassifications have been made to the 2019 financial statements in order to conform to the 2020 presentation.

There were no changes to previously reported shareholders'

equity or net income (loss) as a result of the reclassifications.

Significant Accounting Policies

Except as disclosed below, there have been no significant changes to the Company’s significant accounting policies as described in the Company’s Annual Report on Form 10-K for the year ended February 2, 2020.

Recently Adopted Accounting Pronouncements

On February 3, 2020, the Company adopted Accounting Standards Update (“ASU”) No.

2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40) (“ASU 2018-15”) which provides additional guidance on the accounting for costs of implementation activities performed in a cloud computing arrangement that is a service contract.

ASU 2018-15 requires a customer in a cloud computing arrangement that is a service contract to follow the new internal-use software guidance to determine which implementation costs to capitalize as assets or expense as incurred.

The new internal-use software guidance requires that certain costs incurred during the application development stage be capitalized and other costs incurred during the preliminary project and post-implementation stages be expensed as they are incurred.

The Company adopted ASU 2018-15 using the prospective method.

The adoption of ASU 2018-15 did not have a material impact on the Company’s condensed consolidated financial statements.

There have been no significant changes to the Company’s significant accounting policies as described in the Company’s Annual Report on Form 10-K for the year ended January 31, 2021.

Based on the criteria set forth in ASC Topic 842, Leases (“ASC 842”), the Company recognizes ROU assets and lease liabilities related to leases on the Company’s consolidated balance sheets.

5 unchanged sentences

Substantially all of these arrangements are store leases.

Store leases generally have initial lease terms ranging from five years to fifteen years with renewal options and rent escalation provisions.

Store leases generally have initial lease terms ranging from five years to

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

fifteen years with renewal options and rent escalation provisions.

At the commencement of a lease, the Company includes only the initial lease term as the option to extend is not reasonably certain.

4 unchanged sentences

The Company accounts for these costs as variable payments and does not include such costs as a lease component.

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Due to the adverse impacts of COVID-19, the Company has negotiated rent deferral and payback periods with a number of the Company’s store landlords for the months of April and May 2020.

Due to the adverse impacts of COVID-19, the Company negotiated rent deferral and payback periods with a number of the Company’s store landlords for the months of April and May 2020.

Based on the guidance set forth in the Financial Accounting Standards Board (“FASB”) issued Staff Q&A “Topic 842 and Topic 840:

Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic” the Company has accounted for these deferrals as if no changes to the lease contract were made and will not elect to apply the lease modification guidance under ASC 842.

As of November 1, 2020 the Company has deferred rent of approximately $ 1.0 million which was recorded within accrued expenses and other current liabilities and will be paid in accordance with the concession arrangements.

As of May 2, 2021 the Company has deferred rent of approximately $ 0.4 million which was recorded within accrued expenses and other current liabilities and will be paid in accordance with the concession arrangements.

The expense components of the Company’s leases reflected on the Company’s consolidated statement of operations were as follows:

1 unchanged sentence

Three Months Ended

Nine Months Ended

of Operations

November 1, 2020

November 3, 2019

November 1, 2020

November 3, 2019

(in thousands)

17 unchanged sentences

Total lease expense

1 Total lease expense in the above table was overstated by $ 3.9 million for the three and six months ended August 2, 2020.

There was no impact to the Condensed Consolidated Financial Statement of Operations or any other disclosures for the three and six months ended August 2, 2020.

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Other information related to leases were as follows:

Nine Months Ended

November 1, 2020

November 3, 2019

Three Months Ended

(in thousands)

3 unchanged sentences

Operating cash flows from operating leases

Right-of-use assets obtained in exchange for lease liabilities:

Finance leases

Operating leases

Weighted-average remaining lease term (in years):

4 unchanged sentences

Operating leases

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Future minimum lease payments under the non-cancellable leases are as follows as of November 1, 2020:

Future minimum lease payments under the non-cancellable leases are as follows as of May 2, 2021:

(in thousands)

3 unchanged sentences

Lease liability

DEBT AND LINE OF CREDIT

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

DEBT AND CREDIT AGREEMENT

Debt consists of the following:

November 1, 2020

February 2, 2020

January 31, 2021

(in thousands)

13 unchanged sentences

While the above notes are consolidated in accordance with ASC Topic 810, Consolidation , the Company is not the guarantor nor obligor of these notes.

Line of Credit

On May 17, 2018, the Company entered into a credit agreement (the “Credit Agreement”) which provides for borrowing availability of up to $ 80.0 million in revolving credit (the “Revolver”), and borrowing availability of up to $ 50.0 million in a delayed draw term loan (“DDTL”), for a total credit facility of $ 130.0 million.

The $ 80.0 million revolving credit matures on May 17, 2023 .

The $50.0 million DDTL was available to draw upon in differing amounts through May 17, 2020 and matures on May 17, 2023 .

Outstanding balances under the DDTL require quarterly principal payments with a final balloon payment at maturity.

The Credit Agreement is secured by essentially all Company assets and requires the Company to maintain compliance with certain financial and non-financial covenants, including a maximum rent adjusted leverage ratio and a minimum fixed charge coverage ratio as defined in the Credit Agreement.

Credit Agreement

On May 17, 2018, the Company entered into a credit agreement (the “Credit Agreement”) which provided for borrowing availability of up to $ 80.0 million in revolving credit (the “Revolver”), and borrowing availability of up to $ 50.0 million in a delayed draw term loan (“DDTL”), for a total credit facility of $ 130.0 million.

The $ 80.0 million revolving credit facility was scheduled to mature on May 17, 2023 .

The $ 50.0 million DDTL was available to draw upon in differing amounts through May 17, 2020 and was scheduled to mature on May 17, 2023 .

Outstanding balances under the DDTL required quarterly principal payments with a final balloon payment at maturity.

The Credit Agreement was secured by essentially all Company assets and required the Company to maintain compliance with certain financial and non-financial covenants, including a maximum rent adjusted leverage ratio and a minimum fixed charge coverage ratio as defined in the Credit Agreement.

On April 30, 2020, the Credit Agreement was amended to include an incremental DDTL of $ 20.5 million (the “Incremental DDTL”) that was available to draw upon before March 31, 2021, and matured on April 29, 2021 , for a total credit facility of $ 150.5 million.

As of and for the three months ended May 2, 2021, no amount of the Incremental DDTL was funded.

The loan covenants were also amended to allow for greater flexibility during the Company’s peak borrowing periods in fiscal 2020.

The interest rate applicable to the Revolver or DDTL was a fixed rate for a one-, two-, three- or six-month interest period equal to LIBOR (with a 1 % floor) for such interest period plus a margin of 225 to 300 basis points, based upon the Company’s rent adjusted leverage ratio (effective rate of 3.5 % for the Revolver and the DDTL at May 2, 2021).

The interest rate applicable to the Incremental DDTL was also a fixed rate over the aforementioned interest periods equal to LIBOR (with a 1 % floor) for such interest period plus a margin of 275 to 350 basis points.

As of May 2, 2021 and for the three months then ended, the Company was in compliance with all financial and non-financial covenants for all debts discussed above.

Subsequent to the May 2, 2021 quarter end, the Company refinanced the above credit agreement.

See Note 13 “Subsequent Events” for further information.

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

On April 30, 2020, the Credit Agreement was amended to include an incremental DDTL of $ 20.5 million (the “Incremental DDTL”) that is available to draw upon before March 31, 2021, and matures on April 29, 2021 , for a total credit facility of $ 150.5 million.

As of and for the nine months ended November 1, 2020, no amount of the Incremental DDTL was funded.

The loan covenants were also amended to allow for greater flexibility during the Company’s peak borrowing periods in fiscal 2020.

The interest rate applicable to the Revolver or DDTL will be a fixed rate for a one-, two-, three- or six-month interest period equal to LIBOR (with a 1 % floor) for such interest period plus a margin of 225 to 300 basis points, based upon the Company’s rent adjusted leverage ratio (effective rate of 3.5 % for the Revolver and the DDTL at November 1, 2020).

The interest rate applicable to the Incremental DDTL will also be a fixed rate over the aforementioned interest periods equal to LIBOR (with a 1 % floor) for such interest period plus a margin of 275 to 350 basis points.

As of November 1, 2020 and for the nine months then ended, the Company was in compliance with all financial and non-financial covenants for all debts discussed above.

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:

November 1, 2020

February 2, 2020

January 31, 2021

(in thousands)

16 unchanged sentences

Treasury yield curve, credit information and an estimate of future cash flows.

During the nine months ended November 1, 2020, certain changes in the inputs did impact the fair value of the available-for-sale security.

During the three months ended May 2, 2021, certain changes in the inputs did impact the fair value of the available-for-sale security.

The calculated fair value is based on estimates that are subjective in nature and involve uncertainties and matters of significant judgement and, therefore, cannot be determined with precision.

3 unchanged sentences

The amortized cost and fair value of the Company’s available-for-sale security and the corresponding amount of gross unrealized gains and losses recognized in accumulated other comprehensive income are as follows:

November 1, 2020

(in thousands)

1 unchanged sentence

Corporate trust

The Company does not intend to sell the available-for-sale-security in the near term and does not believe that it will be required to sell the security.

The Company reviews its securities on a quarterly basis to monitor its exposure to other-than-temporary impairment.

The Company assessed the unrealized loss position as of November 1, 2020 and determined that the Company is expected to recover the entire amortized cost basis of the available-for-sale security.

Accordingly, no other-than-temporary impairment was recorded in the unaudited condensed consolidated statements of operations for the nine months ended November 1, 2020.

February 2, 2020

January 31, 2021

(in thousands)

1 unchanged sentence

Corporate trust

The following table presents future principal receipts related to the Company’s available-for-sale security by contractual maturity as of November 1, 2020.

The Company does not intend to sell the available-for-sale-security in the near term and does not believe that it will be required to sell the security.

The Company reviews its securities on a quarterly basis to monitor its exposure to other-than-temporary impairment.

No other-than-temporary impairment was recorded in the unaudited condensed consolidated statements of operations for the three months ended May 2, 2021 or May 3, 2020.

The following table presents future principal receipts related to the Company’s available-for-sale security by contractual maturity as of May 2, 2021.

(in thousands)

4 unchanged sentences

The carrying values and fair values of other financial instruments in the Consolidated Balance Sheets are as follows:

November 1, 2020

February 2, 2020

January 31, 2021

Carrying Amount

4 unchanged sentences

The fair value was also based on a discounted cash flow method (Level 3) based on credit information and an estimate of future cash flows.

As of November 1, 2020 and February 2, 2020, the carrying values of the long-term delayed draw term loan and long-term line of credit both approximated their fair value.

As of May 2, 2021 and January 31, 2021, the carrying value of the delayed draw term loan and line of credit both approximated their fair value.

DULUTH HOLDINGS INC.

5 unchanged sentences

and (b) the obligation to absorb the VIE losses and the right to receive benefits that are significant to the VIE.

The Company has determined that it was the primary beneficiary of one variable interest entity (“VIE”) as of November 1, 2020 and February 2, 2020.

The Company has determined that it was the primary beneficiary of one variable interest entity (“VIE”) as of May 2, 2021 and January 31, 2021.

The Company leases the Company’s headquarters in Mt.

5 unchanged sentences

The Company does not consolidate the trust as the Company is not the primary beneficiary.

The condensed consolidated balance sheets include the following amounts as a result of the consolidation of TRI as of November 1, 2020 and February 2, 2020:

November 1, 2020

February 2, 2020

The condensed consolidated balance sheets include the following amounts as a result of the consolidation of TRI as of May 2, 2021 and January 31, 2021:

January 31, 2021

(in thousands)

12 unchanged sentences

Three Months Ended

Nine Months Ended

November 1, 2020

November 3, 2019

November 1, 2020

November 3, 2019

(in thousands, except per share data)

7 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Unaudited)

The computation of diluted earnings (loss) per share excluded ( 0.1 ) million shares of unvested restricted stock for the three months ended November 3, 2019, because their inclusion would be anti-dilutive due to the amount of forfeitures.

The computation of diluted earnings (loss) per share excluded 0.1 million shares of unvested restricted stock for both the nine months ended November 1, 2020 and November 3, 2019 because their inclusion would be anti-dilutive due to a net loss.

The Computation of diluted loss per share for the three months ended May 3, 2020 excluded 0.1 million shares of unvested restricted stock respectively, because their inclusion would be anti-dilutive due to a net loss.

STOCK-BASED COMPENSATION

The Company accounts for its stock-based compensation plan in accordance with ASC 718, Stock Compensation , which requires the Company to measure all share-based payments at grant date fair value and recognize the cost over the requisite service period of the award.

Total stock compensation expense (benefit) associated with restricted stock recognized by the Company was $ 0.3 million and $ 1.1 million for the three and nine months ended November 1, 2020, respectively and $( 0.8 ) million and $ 0.2 million for the three and nine months ended November 3, 2019, respectively.

Total stock compensation expense associated with restricted stock recognized by the Company was $ 0.4 million for the three months ended May 2, 2021 and May 3, 2020.

The Company’s total stock compensation expense (benefit) is included in selling, general and administrative expenses on the Condensed Consolidated Statements of Operations.

A summary of the activity in the Company’s unvested restricted stock during the nine months ended November 1, 2020 is as follows:

Outstanding at February 2, 2020

Outstanding at November 1, 2020

At November 1, 2020, the Company had unrecognized compensation expense of $ 2.5 million related to the restricted stock awards, which is expected to be recognized over a weighted average period of 2.5 years.

A summary of the activity in the Company’s unvested restricted stock during the three months ended May 2, 2021 is as follows:

Outstanding at January 31, 2021

Outstanding at May 2, 2021

At May 2, 2021, the Company had unrecognized compensation expense of $ 3.2 million related to the restricted stock awards, which is expected to be recognized over a weighted average period of 2.9 years.

PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

November 1, 2020

February 2, 2020

January 31, 2021

(in thousands)

7 unchanged sentences

Property and equipment, net

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The Company’s revenue primarily consists of the sale of apparel, footwear and hard goods.

1 unchanged sentence

Store revenue is recognized at the point of sale, net of returns, and excludes taxes.

Shipping and processing revenue generated from customer orders are included as a component of net sales and shipping and processing expense, including handling expense, is included as a component of selling, general and administrative expenses.

Shipping and processing revenue generated from customer

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

orders are included as a component of net sales and shipping and processing expense, including handling expense, is included as a component of selling, general and administrative expenses.

Sales tax collected from customers and remitted to taxing authorities is excluded from revenue and is included in accrued expenses.

1 unchanged sentence

Three Months Ended

Nine Months Ended

November 1, 2020

November 3, 2019

November 1, 2020

November 3, 2019

(in thousands)

6 unchanged sentences

Contract assets and liabilities on the Company’s consolidated balance sheets are presented in the following table:

November 1, 2020

February 2, 2020

January 31, 2021

(in thousands)

5 unchanged sentences

The following table provides the reconciliation of the contract liability related to gift cards for the nine months ended:

November 1, 2020

November 3, 2019

(in thousands)

4 unchanged sentences

Balance as of end of period

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The provision for income taxes for the interim period is based on an estimate of the annual effective tax rate adjusted to reflect the impact of discrete items.

Management judgment is required in projecting ordinary income to estimate the Company’s annual effective tax rate.

The effective tax rate related to controlling interest was 29 % for the three months ended November 1, 2020, which was impacted by changes to certain discrete items during the quarter, and 26 % for the nine months ended November 1, 2020.

The effective tax rate related to controlling interest, which was not meaningful for the three months ended November 3, 2019 was impacted by discrete items related to stock compensation activity.

The effective tax rate was 29 % for the nine months ended November 3, 2019.

The effective tax rate related to controlling interest was 16 % for the three months ended May 2, 2021, which was impacted by changes to certain discrete items during the quarter.

Excluding these non-recurring discrete items, the effective tax rate related to controlling interest was 25 % for both the three months ended May 2, 2021 and May 3, 2020.

The income from TRI was excluded from the calculation of the Company’s effective tax rate, as TRI is a limited liability company and not subject to income taxes.

On March 27, 2020 the United States enacted the CARES Act (the “Act”) to combat the negative economic impact of COVID-19.

The CARES Act includes several provisions aimed at assisting corporate taxpayers, including correcting the drafting error from the Tax Cuts and Jobs Act related to the tax life for qualified improvement property, loosening of the interest deduction limitation in the 2019 and 2020 tax years and including the allowance of a five year carryback for net operating losses originating in the 2018, 2019 and 2020 tax years.

The effective tax rate for the three and nine months ended November 1, 2020 was not materially impacted by the Act, but the Company continues to evaluate the Act’s provisions and how certain decisions may impact the Company’s financial position, results of operations and disclosures in future periods.

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

RECENT ACCOUNTING PRONOUNCEMENTS

9 unchanged sentences

SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date which these condensed consolidated financial statements were available to be issued and has determined that it does not have any material subsequent events to disclose in these condensed consolidated financial statements.

On May 14, 2021, the Company terminated the aforementioned Credit Agreement, dated as of May 17, 2018, as amended, and entered into a new credit agreement (the “New Credit Agreement”).

The New Credit Agreement matures on May 14, 2026 and provides for borrowings of up to $ 150.0 million that are available under a revolving senior credit facility, with a $ 5.0 million sublimit for issuance of standby letters of credit, as well as a $ 10.0 million sublimit for swing line loans.

At the Company’s option, the interest rate applicable to the Revolver will be a floating rate equal to:

(i) the Bloomberg Short-Term Bank Yield Index rate (“BSBY”) plus the applicable rate of 1.25 % to 2.00 % determined based on the Company’s rent adjusted leverage ratio, or (ii) the base rate plus the applicable rate of 0.25 % to 1.00 % based on the Company’s rent adjusted leverage ratio.

The New Credit Agreement is secured by essentially all Company assets and requires the Company to maintain compliance with certain financial and non-financial covenants, including a maximum rent adjusted leverage ratio and a minimum fixed charge coverage ratio as defined in the New Credit Agreement.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements