What changed in this filing

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Item 1. Financial Statements

2021-09-03 compared with 2021-06-04 · 110 added, 63 removed, 450 unchanged (28% of the section changed)

3 unchanged sentences

(Amounts in thousands)

August 1, 2021

January 31, 2021

14 unchanged sentences

(Amounts in thousands)

August 1, 2021

January 31, 2021

15 unchanged sentences

Total liabilities

Commitments and contingencies

Shareholders'

1 unchanged sentence

10,000 shares authorized;

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

‎ issued or outstanding as of August 1, 2021 and January 31, 2021

Common stock (Class A), no par value;

10,000 shares authorized;

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

‎ 3,364 shares issued and outstanding as of August 1, 2021 and January 31, 2021

Common stock (Class B), no par value;

200,000 shares authorized;

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

‎ 29,771 shares issued and 29,693 shares outstanding as of August 1, 2021 and

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

Treasury stock, at cost;

78 and 53 shares as of May 2, 2021 and

78 and 53 shares as of August 1, 2021 and

‎ January 31, 2021, respectively

12 unchanged sentences

Three Months Ended

Six Months Ended

August 1, 2021

August 2, 2020

August 1, 2021

August 2, 2020

Cost of goods sold (excluding depreciation and amortization)

2 unchanged sentences

Interest expense

Other income, net

Other income (loss), net

Income (loss) before income taxes

14 unchanged sentences

Three Months Ended

Six Months Ended

August 1, 2021

August 2, 2020

August 1, 2021

August 2, 2020

Net income (loss)

5 unchanged sentences

Comprehensive income (loss)

Comprehensive income (loss) attributable to noncontrolling interest

Comprehensive loss attributable to noncontrolling interest

Comprehensive income (loss) attributable

4 unchanged sentences

(Amounts in thousands)

Three Months Ended May 2, 2021

Six Months Ended August 1, 2021

Noncontrolling

9 unchanged sentences

Other comprehensive loss

Net income (loss)

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 1, 2021

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

2 unchanged sentences

(Amounts in thousands)

Three Months Ended May 3, 2020

Six Months Ended August 2, 2020

Noncontrolling

10 unchanged sentences

Balance at May 3, 2020

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

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

2 unchanged sentences

(Amounts in thousands)

Three Months Ended

Six Months Ended

August 1, 2021

August 2, 2020

Cash flows from operating activities:

6 unchanged sentences

Changes in operating assets and liabilities:

Income taxes receivable

Prepaid expense & other current assets

21 unchanged sentences

Net cash (used in) provided by financing activities

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

(Decrease) increase in cash, cash equivalents

Cash, cash equivalents and restricted cash at beginning of period

30 unchanged sentences

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.

The three months of fiscal 2021 and fiscal 2020 represent the Company’s 13 week periods ended August 1, 2021 and August 2, 2020, respectively.

The accompanying condensed consolidated financial statements as of and for the three and six months ended August 1, 2021 and August 2, 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 months ended May 2, 2021 and May 3, 2020.

GAAP have been condensed or omitted pursuant to such SEC rules and regulations as of and for the three and six months ended August 1, 2021 and August 2, 2020.

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 January 31, 2021.

6 unchanged sentences

Impairment Analysis

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.

As of August 1, 2021 and for the three and six months then ended, no triggering events or indicators of asset impairment were noted.

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

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.

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

inventories below cost.

Inventory reserve for excess and obsolete items was $ 1.1 million and $ 1.6 million as of August 1, 2021 and January 31, 2021, respectively.

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.

Prepaid Expenses and Other Assets

Prepaid expenses and other assets consist of the following:

August 1, 2021

January 31, 2021

16 unchanged sentences

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.

Reclassifications

Certain reclassifications have been made to the 2020 financial statements in order to conform to the 2021 presentation.

There were no changes to previously reported shareholders’ equity or net income (loss) as a result of the reclassifications.

Significant Accounting Policies

7 unchanged sentences

Substantially all of these arrangements are store leases.

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

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

At the commencement of a lease, the Company includes only

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.

the initial lease term as the option to extend is not reasonably certain.

The Company does not record leases with a lease term of 12 months or less on the Company’s consolidated balance sheets.

3 unchanged sentences

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

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 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

Six Months Ended

of Operations

August 1, 2021

August 2, 2020

August 1, 2021

August 2, 2020

(in thousands)

20 unchanged sentences

Other information related to leases were as follows:

Three Months Ended

Six Months Ended

August 1, 2021

August 2, 2020

(in thousands)

9 unchanged sentences

Operating leases

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

Future minimum lease payments under the non-cancellable leases are as follows as of August 1, 2021:

(in thousands)

7 unchanged sentences

Debt consists of the following:

August 1, 2021

January 31, 2021

3 unchanged sentences

TRI long-term debt

Duluth Line of credit

Duluth Delayed draw term loan

15 unchanged sentences

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.

On May 14, 2021, the Company terminated the Credit Agreement, and entered into a new credit agreement (the “New Credit Agreement”), which was treated as a modification for accounting purposes.

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 revolving senior credit facility 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

DULUTH HOLDINGS INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

As of August 1, 2021 and for the six months then ended, the Company was in compliance with all financial and non-financial covenants contained within the New Credit Agreement.

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:

August 1, 2021

January 31, 2021

3 unchanged sentences

Product returns

Catalog costs

Unpaid purchases of property & equipment

11 unchanged sentences

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

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

During the six months ended August 1, 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:

August 1, 2021

(in thousands)

7 unchanged sentences

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.

No other-than-temporary impairment was recorded in the unaudited condensed consolidated statements of operations for the six months ended August 1, 2021 or August 2, 2020.

The following table presents future principal receipts related to the Company’s available-for-sale security by contractual maturity as of August 1, 2021.

(in thousands)

4 unchanged sentences

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

August 1, 2021

January 31, 2021

5 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 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.

As of January 31, 2021, the carrying value of the delayed draw term loan approximated its 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 May 2, 2021 and January 31, 2021.

The Company has determined that it was the primary beneficiary of one variable interest entity (“VIE”) as of August 1, 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 May 2, 2021 and January 31, 2021:

The condensed consolidated balance sheets include the following amounts as a result of the consolidation of TRI as of August 1, 2021 and January 31, 2021:

August 1, 2021

January 31, 2021

13 unchanged sentences

Three Months Ended

Six Months Ended

August 1, 2021

August 2, 2020

August 1, 2021

August 2, 2020

(in thousands, except per share data)

7 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Unaudited)

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.

The computation of diluted loss per share for the three and six months ended August 2, 2020 excluded ( 0.1 ) million and ( 0.1 ) million shares of unvested restricted stock, respectively, because their inclusion would be anti-dilutive.

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 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 three months ended May 2, 2021 is as follows:

Total stock compensation expense associated with restricted stock recognized by the Company was $ 0.6 million and $ 1.0 million for the three and six months ended August 1, 2021, respectively and $ 0.4 million and $ 0.8 million for the three and six months ended August 2, 2020, respectively.

The Company’s total stock compensation expense 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 six months ended August 1, 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.

Outstanding at August 1, 2021

At August 1, 2021, the Company had unrecognized compensation expense of $ 4.8 million related to the restricted stock awards, which is expected to be recognized over a weighted average period of 2.6 years.

PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

August 1, 2021

January 31, 2021

10 unchanged sentences

Revenue for merchandise that is shipped to our customers from our distribution centers and stores is recognized upon shipment.

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

Shipping and processing revenue generated from customer

Store revenue is

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.

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.

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

Six Months Ended

August 1, 2021

August 2, 2020

August 1, 2021

August 2, 2020

(in thousands)

6 unchanged sentences

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

August 1, 2021

January 31, 2021

5 unchanged sentences

Gift card breakage is recorded within Net sales on the Company’s consolidated statement of operations.

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

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

August 1, 2021

August 2, 2020

(in thousands)

6 unchanged sentences

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 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 effective tax rate related to controlling interest was 25 % for the six months ended August 1, 2021 and 26 % for the six months ended August 2, 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.

11 unchanged sentences

The Company is evaluating the level of impact adopting ASU 2016-13 will have on the Company’s consolidated financial statements.

SUBSEQUENT EVENTS

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”).

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

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