What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-25 compared with 2021-03-26 · 156 added, 198 removed, 646 unchanged (35% of the section changed)

1 unchanged sentence

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of January 31, 2021 and February 2, 2020

Consolidated Statements of Operations for Fiscal Years Ended January 31, 2021 and February 2, 2020

Consolidated Statements of Comprehensive Income for Fiscal Years Ended January 31, 2021 and February 2, 2020

Consolidated Statements of Shareholders’ Equity for Fiscal Years Ended January 31, 2021 and February 2, 2020

Consolidated Statements of Cash Flows for Fiscal Years Ended January 31, 2021 and February 2, 2020

Report of Independent Registered Public Accounting Firm s ( KPMG LLP , PCAOB ID No.

185 and Grant Thornton LLP , PCAOB ID No.

Consolidated Balance Sheets as of January 30, 2022 and January 31, 202 1

Consolidated Statements of Operations for Fiscal Years Ended January 30, 2022 and January 31, 202 1

Consolidated Statements of Comprehensive Income for Fiscal Years Ended January 30, 2022 and January 31, 2021

Consolidated Statements of Shareholders’ Equity for Fiscal Years Ended January 30, 2022 and January 31, 2021

Consolidated Statements of Cash Flows for Fiscal Years Ended January 30, 2022 and January 31, 2021

Notes to Consolidated Financial Statements

1 unchanged sentence

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

To the Shareholders and Board of Directors

Duluth Holdings Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Duluth Holdings Inc, a Wisconsin corporation, and affiliate (collectively, the “Company”) as of January 31, 2021 and February 2, 2020, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for each of the two years in the period ended January 31, 2021, and the related notes and financial statement schedule included under Item 15 (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2021 and February 2, 2020, and the results of its operations and its cash flows for each of the two years in the period ended January 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of January 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 26, 2021 expressed an unqualified opinion.

We have audited the accompanying consolidated balance sheet of Duluth Holdings Inc.

(the Company) as of January 30, 2022, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for the year ended January 30, 2022, and the related notes and financial statement schedule II - Valuation and Qualifying Accounts (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of January 30, 2022, and the results of its operations and its cash flows for the year ended January 30, 2022, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 30, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission , and our report dated March 25, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting .

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Segment reporting

As described in Note 1 to the consolidated financial statements, the Company has historically disclosed two reportable segments, direct and retail.

As a result of the Company’s continued growth of its omnichannel distribution network, resulting in a consistent online and in-store customer experience, and in conjunction with an assessment of the similarities of qualitative and quantitative characteristics between the two former reportable segments, the Company has determined that the historical structure of separate reportable segments for direct and retail is no longer representative.

Therefore, as of February 3, 2020, the Company updated its segment reporting to one reportable segment.

We identified the aggregation of reportable segments as a critical audit matter.

The principal considerations for our determination that the aggregation of reportable segments is a critical audit matter are the qualitative and economic aggregation criteria and the appropriate period in which to reflect the change, which involved significant management judgment.

As such, auditing this change required a high degree of auditor judgment when performing audit procedures and evaluating the results of those procedures.

Our audit procedures related to the aggregation of reportable segments included the following, among others:

 We tested the Company’s internal control specific to management’s periodic assessment of the identification and disclosure of reportable segments.

Following management’s conclusion that an updated assessment was necessary relative to reportable segments, we tested the Company’s accounting analysis control that included the factors specified below.

 In consultation with our national office resources, we evaluated the time period in which management concluded it was appropriate to aggregate and disclose the two previously disclosed reportable segments.

This included evaluating the continued maturation of the Company as an omni-store business, as well as the evolution of various omni-store initiatives that have been implemented by the Company including buy online and pick up in-store and ship from store.

Our consultation included the following:

o We considered our experience as the Company’s auditor of record in evaluating management’s identification of the Chief Executive Officer as the Chief Operating Decision Maker (“CODM”).

o We corroborated management’s conclusion that the Company’s operating segments consist of direct and retail through the report that is periodically provided to the CODM to assist with business decisions.

o We evaluated management’s assessments related to the qualitative and economic aggregation criteria that were considered to aggregate two previously disclosed reportable segments.

The qualitative criteria we evaluated included (i) the nature of the Company’s products and services, (ii) the nature of the Company’s production process, (iii) the type of customer that the Company targets, and (iv) the methods used to distribute the Company’s products.

The quantitative criteria we evaluated included (i) the mix of product sales between the aggregated components, and (ii) the similarity of long-term gross margins of the aggregated components.

We corroborated management’s conclusions through our understanding of the Company’s products and customers and audited historical financial data.

o We assessed management’s presentation and disclosure against the objectives and principles outlined in relevant accounting literature.

/s/ GRANT THORNTON LLP

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Product returns reserve

As discussed in Note 5 to the consolidated financial statements, the Company recorded $5.4 million as of January 30, 2022 in reserves for product returns within accrued expenses and other current liabilities.

Management estimates the product returns reserve using its own historical sales and product returns information.

We identified the assessment of the product returns reserve as a critical audit matter.

There was a high degree of auditor judgment required to assess whether the historical return rate used to estimate the accrual for product returns is indicative of future returns.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the product returns reserve.

This included a control related to management’s assumption that the historical return rate will reflect future returns and a control related to the completeness, accuracy, and relevance of underlying data used in the estimate.

We assessed the Company’s ability to accurately estimate the product return rate by comparing prior period estimates to actual product return rates experienced.

We analyzed the product return rate assumption by evaluating the consistency of the

assumption with the trend of actual historical product return rates and comparing the product return reserve to actual product returns received after the balance sheet date but prior to the issuance of the consolidated financial statements.

We have served as the Company’s auditor since 2021.

Chicago, Illinois

Milwaukee, Wisconsin

March 25, 2022

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

To the Shareholders and Board of Directors

Duluth Holdings Inc.

Opinion on Internal Control Over Financial Reporting

We have audited the internal control over financial reporting of Duluth Holdings Inc., a Wisconsin corporation, and affiliate (the “Company”) as of January 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended January 31, 2021, and our report dated March 26, 2021 expressed an unqualified opinion on those financial statements.

We have audited Duluth Holdings Inc.’s (the Company) internal control over financial reporting as of January 30, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 30, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of January 30, 2022, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for the year ended January 30, 2022, and the related notes and financial statement schedule II – Valuation and Qualifying Accounts (collectively, the consolidated financial statements), and our report dated March 25, 2022 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Milwaukee, Wisconsin

March 25, 2022

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Duluth Holdings Inc.

Opinion on the financial statements

We have audited the consolidated balance sheet of Duluth Holdings Inc., a Wisconsin corporation, and affiliate (the “Company”) as of January 31, 2021, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for the year then ended, and the related notes and financial statement schedule included under Item 15 (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2021, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ GRANT THORNTON LLP

We served as the Company’s auditor from 2002 to 2021.

Chicago, Illinois

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January 30, 2022

February 2, 2020

January 31, 2021

Current Assets:

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Finance lease right-of-use assets, net

Restricted cash

Available-for-sale security

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10,000 shares authorized;

‎ issued or outstanding as of January 31, 2021 and February 2, 2020

‎ issued or outstanding as of January 30, 2022 and January 31, 2021

Common stock (Class A), no par value;

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‎ 3,364 shares issued and outstanding as of January 30, 2022 and

‎ February 2, 2020

‎ January 31, 2021

Common stock (Class B), no par value;

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‎ 29,786 shares issued and 29,707 shares outstanding as of January 30, 2022 and

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

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

Treasury stock, at cost;

79 and 53 shares as of January 30, 2022 and

‎ February 2, 2020, respectively

‎ January 31, 2021, respectively

Capital stock

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January 30, 2022

February 2, 2020

January 31, 2021

Cost of goods sold (excluding depreciation and amortization)

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January 30, 2022

February 2, 2020

January 31, 2021

Other comprehensive income

Securities available-for-sale:

Unrealized security (loss) income

Income tax (benefit) expense

Other comprehensive (loss) income

Unrealized security income (loss)

Income tax expense (benefit)

Other comprehensive income (loss)

Comprehensive income

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Balance at February 2, 2020

Cumulative effect from adoption of

Issuance of common stock

Consolidation of TRI Holdings, LLC

Restricted stock forfeitures

Stock-based compensation

Restricted stock forfeitures

Restricted stock surrendered

Other comprehensive income

Balance at February 2, 2020

Balance at January 31, 2021

Issuance of common stock

10 unchanged sentences

January 30, 2022

February 2, 2020

January 31, 2021

Cash flows from operating activities:

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Changes in operating assets and liabilities:

Income taxes receivable

Prepaid expense & other assets

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Principal receipts from available-for-sale security

Change in other assets

Proceeds from disposal of PP&E

Net cash used in investing activities

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Shares withheld for tax payments on vested restricted stock

Net cash provided by financing activities

Increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

Net cash (used in) provided by financing activities

Increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental disclosure of cash flow information:

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The Company’s products are marketed under the Duluth Trading Company 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.

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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 has one reportable external segment, consistent with the Company’s omnichannel business approach.

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

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The Company’s fiscal year ends on the Sunday nearest to January 31 of the following year.

Fiscal 2020 and Fiscal 2019 ended on January 31, 2021 and February 2, 2020, respectively.

Fiscal 2021 and Fiscal 2020 ended on January 30 , 2022 and January 31, 2021, respectively.

Fiscal 2021 and Fiscal 2020 were a 52-week period.

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

This pandemic has negatively affected the U.S.

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 year ended January 31, 2021 were impacted by COVID-19.

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

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

Given the uncertainty, we cannot reasonably estimate the continued impact on our business and whether that impact will be different than what we have already experienced.

Seasonality of Business

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Inventory shrinkage and inventory adjustments due to obsolescence

Third party logistics ("3PL")

Inbound freight

Occupancy expenses related to stores and operations at the Company's headquarters, including utilities

Freight from the Company's distribution centers to its stores

Inbound freight

Depreciation and amortization

Freight from the Company's distribution centers to its stores

Advertising expenses including:

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Shipping and processing expense, including handling expense, has been classified as a component of selling, general and administrative expenses.

Shipping and handling expenses increased in fiscal 2020 due to the shift to online shopping, as well as additional surcharges during our peak holiday season resulting from the strained distribution network.

Shipping and handling expenses increased in fiscal 2021 and fiscal 2020 due to the shift to online shopping, particularly in 2020, as well as additional surcharges during our peak holiday season resulting from the strained distribution network.

The Company incurred shipping and processing expenses of $ 44.3 million and $ 46.9 million for fiscal 2021 and fiscal 2020, respectively.

The Company accounts for income taxes and related accounts using the liability method in accordance with ASC Topic 740, Income Taxes (“ASC 740”).

The Company accounts for income taxes and related accounts using the asset/liability method in accordance with ASC Topic 740, Income Taxes (“ASC 740”).

Under ASC 740, the Company accrues income taxes payable or refundable and recognizes deferred tax assets and liabilities based on differences between U.S.

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The Company has not experienced any losses in such accounts and management believes it is not exposed to any significant credit risk.

Restricted Cash and Reconciliation of cash and cash equivalents and restricted cash to the 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 January 31, 2021.

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.

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the Consolidated Balance Sheet that sum to the total of the same such amounts shown in the Consolidated Statement of Cash Flows.

January 31, 2021

February 2, 2020

(in thousands)

Cash and cash equivalents

Restricted Cash

Total cash, cash equivalents and restricted cash shown in the

‎ consolidated statement of cash flows

Significant Suppliers

1 unchanged sentence

The Company also had a second supplier that accounted for 8 % and 10 % of total inventory expenditures in fiscal 2021 and fiscal 2020, respectively.

DULUTH HOLDINGS INC.

Notes to Consolidated Financial Statements

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 $ 1.6 million and $ 1.8 million as of January 31, 2021 and February 2, 2020, respectively.

Inventory reserve for excess and obsolete items was $ 2.4 million and $ 1.6 million as of January 30, 2022 and January 31, 2021, respectively.

DULUTH HOLDINGS INC.

Notes to Consolidated Financial Statements

Property and Equipment

1 unchanged sentence

January 30, 2022

February 2, 2020

January 31, 2021

(in thousands)

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January 30, 2022

February 2, 2020

January 31, 2021

(in thousands)

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Indicators such as unexpected adverse business conditions, economic factors, competitive activities, loss of key personnel and acts by governments may signal that an asset has become impaired.

The Company determined that the effects of COVID-19 may represent indicators of asset impairment, and as a result performed an interim qualitative assessment for the Company’s goodwill at May 3, 2020.

The Company determined that it was more likely than not that the fair value was greater than its carrying value and no impairment loss had been incurred.

There were no triggering events subsequent to the quarter ended May 3, 2020 and through the year ended January 31, 2021.

Management performed its annual qualitative assessment of goodwill as of December 31, 2021 and 2020 and determined that it was more likely than not that the fair value of the Company was greater than its carrying amount;

as such, no further evaluation of goodwill was deemed necessary.

No impairment was recognized for the years ended January 31, 2021 or February 2, 2020.

No impairment was recognized for the years ended January 30, 2022 or January 31, 2021.

Intangible Assets and Other Assets

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Other assets also include security deposits required by certain of the Company’s lease agreements and prepaid expenses.

Amortization expense was $ 0.2 million for fiscal 2020 and $ 0.1 million for fiscal 2019.

Accumulated amortization was $ 0.7 million and $ 0.5 million as of January 31, 2021 and February 2, 2020, respectively.

DULUTH HOLDINGS INC.

Notes to Consolidated Financial Statements

Amortization expense was $ 0.2 million for fiscal 2021 and fiscal 2020.

Accumulated amortization was $ 0.6 million and $ 0.7 million as of January 30, 2022 and January 31, 2021, respectively.

Scheduled future amortization of amortizable other assets are as follows as of January 30, 2022:

(in thousands)

DULUTH HOLDINGS INC.

Notes to Consolidated Financial Statements

Impairment of Long-Lived Assets

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Such analyses necessarily involve judgment.

The Company determined that the effects of COVID-19 may represent indicators of asset impairment, and as a result, performed an interim impairment assessment at May 3, 2020.

In the first fiscal quarter of 2020, the 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.

There were no triggering events subsequent to the quarter ended May 3, 2020 and through the year ended January 31, 2021.

Consequently, there were no long-lived asset impairment charges recorded for fiscal 2020.

For fiscal 2019, management did not identify any events or changes in circumstances that indicated the potential impairment of long-lived assets.

For fiscal 2021 and 2020, management did not identify any events or changes in circumstances that indicated the potential impairment of long-lived assets.

Store Pre-opening Costs

9 unchanged sentences

Total stock compensation expense associated with restricted stock recognized by the Company was $ 2.0 million and $ 1.5 million for fiscal 2021 and fiscal 2020, respectively, and is included in selling, general and administrative expenses on the Consolidated Statements of Operations.

DULUTH HOLDINGS INC.

Notes to Consolidated Financial Statements

The following is a summary of the activity in the Company’s unvested restricted stock during the years ended January 31, 2021 and February 2, 2020:

The following is a summary of the activity in the Company’s unvested restricted stock during the years ended January 30, 2022 and January 31, 2021:

Weighted average

Outstanding at February 2, 2020

Outstanding at January 31, 2021

Outstanding at January 30, 2022

At January 30, 2022, the Company had unrecognized compensation expense of $ 3.6 million related to the restricted stock awards, which is expected to be recognized over a weighted average period of 2.3 years.

1 unchanged sentence

Treasury stock consists of shares withheld in lieu of tax payments when restricted stock vests using the treasury cost method and is classified in the Consolidated Balance Sheets as a reduction to shareholders’ equity.

DULUTH HOLDINGS INC.

Notes to Consolidated Financial Statements

Taxes Collected from Customers

2 unchanged sentences

Other comprehensive income or loss represents the change in equity from non-shareholder or non-member transactions, which is not included in the statements of earnings but is reported as a separate component of shareholders’ equity.

For fiscal 2020 and fiscal 2019, other comprehensive income consists of changes in unrealized gains and losses on available-for-sale securities, net of taxes.

For fiscal 2021 and fiscal 2020, other comprehensive income consists of changes in unrealized gains and losses on the Company’s available-for-sale securities, net of taxes.

Fair Value Measurements

19 unchanged sentences

Corporate trust

February 2, 2020

January 31, 2021

(in thousands)

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January 30, 2022

February 2, 2020

January 31, 2021

(in thousands)

2 unchanged sentences

TRI Long-term debt, including short-term portion

The above long-term debt, including short-term portion is attributable to the consolidation of TRI in accordance with ASC Topic 810, Consolidation .

The above long-term debt, including the short-term portion is attributable to the consolidation of TRI in accordance with ASC Topic 810, Consolidation .

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 January 31, 2021, and February 2, 2020, the carrying values of the long-term delayed draw term loan and long-term line of credit both approximated its fair value.

As of January 30, 2022, and January 31, 2021, the carrying values of the long-term delayed draw term loan and long-term line of credit both approximated their fair value.

DULUTH HOLDINGS INC.

2 unchanged sentences

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 as a result of the reclassifications.

There were no changes to previously reported controlling shareholders’ equity and net income as a result of the reclassifications.

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.

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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 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 January 31, 2021 the Company has deferred rent of approximately $ 0.8 million which was recorded within accrued expenses and other current liabilities and will be paid in accordance with the concession arrangements.

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

As of January 31, 2021 the Company had deferred rent of $ 0.8 million, which was recorded within accrued expenses and other current liabilities and will be paid in accordance with the concession arrangements.

The Company had no deferred rent as of January 30, 2022.

The expense components of the Company’s leases reflected on the Company’s Consolidated Statement of Operations were as follows:

1 unchanged sentence

January 30, 2022

February 2, 2020

January 31, 2021

(in thousands)

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January 30, 2022

February 2, 2020

January 31, 2021

(in thousands)

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January 30, 2022

February 2, 2020

January 31, 2021

(in thousands)

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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 and associated swing line (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 16, 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.

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.

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 fiscal year ended January 31, 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 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 January 31, 2021).

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.

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.

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.

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 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 January 30, 2022, and for the fiscal year then ended, the Company was in compliance with all financial and non-financial covenants for all debts discussed above.

1 unchanged sentence

Notes to Consolidated Financial Statements

Future principal maturities of all TRI debt, excluding financing fees of $ 1.3 million associated with the TRI debt, and the Company’s Credit Agreement, are as follows as of January 31, 2021:

Future principal maturities of all TRI debt, excluding unamortized financing fees of $ 1.2 million associated with the TRI debt, and the Company’s Credit Agreement, are as follows as of January 30, 2022:

(in thousands)

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January 30, 2022

February 2, 2020

January 31, 2021

(in thousands)

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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 VIE as of January 31, 2021 and February 2, 2020.

The Company has determined that it was the primary beneficiary of one VIE as of January 30, 2022 and January 31, 2021.

The Company leases the Company’s headquarters in Mt.

7 unchanged sentences

Notes to Consolidated Financial Statements

The Consolidated Balance Sheets include the following amounts as a result of the consolidation of TRI as of January 31, 2021 and February 2, 2020.

The Consolidated Balance Sheets include the following amounts as a result of the consolidation of TRI as of January 30, 2022 and January 31, 2021.

January 30, 2022

February 2, 2020

January 31, 2021

(in thousands)

9 unchanged sentences

Diluted earnings per share is based on the weighted average number of common shares plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method.

Dilutive potential common shares include outstanding restricted stock and are considered only for dilutive earnings per share unless considered anti-dilutive.

Dilutive potential common shares include outstanding restricted stock and are considered only for dilutive earnings per share.

The reconciliation of the numerator and denominator of the basic and diluted earnings per share calculation is as follows:

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January 30, 2022

February 2, 2020

January 31, 2021

(in thousands, except per share data)

10 unchanged sentences

January 30, 2022

February 2, 2020

January 31, 2021

(in thousands)

9 unchanged sentences

January 30, 2022

February 2, 2020

January 31, 2021

(in thousands)

6 unchanged sentences

January 30, 2022

February 2, 2020

January 31, 2021

(in thousands)

3 unchanged sentences

Gift card breakage

Gift card escheat

Balance as of End of Period

DULUTH HOLDINGS INC.

Notes to Consolidated Financial Statements

The components of income tax expense were as follows:

1 unchanged sentence

January 30, 2022

February 2, 2020

January 31, 2021

(in thousands)

1 unchanged sentence

The tax effects of unrealized gains and losses on securities are components of other comprehensive income and therefore excluded from deferred tax expense.

Realization of the deferred tax asset over time is dependent upon the Company generating sufficient taxable earnings in future periods.

In making the determination that the realization of the deferred tax was more likely than not, the Company considered several factors including its recent earnings history, its expected earnings in the future, and appropriate tax planning strategies.

The Company believes it will be able to fully utilize its established deferred tax assets and therefore no valuation allowance has been established as of January 30, 2022 and January 31, 2021.

DULUTH HOLDINGS INC.

Notes to Consolidated Financial Statements

The reconciliation of income tax expense to the amount computed at the federal statutory rate was as follows:

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January 30, 2022

February 2, 2020

January 31, 2021

(in thousands)

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Total income tax expense

DULUTH HOLDINGS INC.

Notes to Consolidated Financial Statements

Deferred income taxes reflect the net tax effects of temporary differences between U.S.

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January 30, 2022

February 2, 2020

January 31, 2021

(in thousands)

3 unchanged sentences

Deferred rent

Lease liability

Stock-based compensation

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Prepaid expenses

Right-of-use asset

Goodwill and intangibles

Capital lease

Revenue recognition method adjustment

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January 30, 2022

February 2, 2020

January 31, 2021

(in thousands)

Balance beginning of year

Additions for tax positions in prior year

Additions for tax positions in prior years

Additions for tax positions in current year

Statue of limitations

Balance at end of year

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The Company does not anticipate that there will be a material change in the balance of the unrecognized tax benefits in the next 12 months.

Any interest and penalties related to uncertain tax positions are recorded in income tax expense.

There were no amounts recorded as tax expense for interest or penalties for the years ended February 2, 2020.

The Company files income tax returns in the United States federal jurisdiction and in various state jurisdictions.

Federal tax returns for tax years beginning January 1, 2017 , and state tax returns for tax years beginning January 1, 2016 , are open for examination.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed.

The CARES Act, among other things, included provisions relating to refundable payroll tax credits, deferment of employer social security payments, alternative minimum tax credit refunds and modifications to net interest deduction limitations.

The Company has concluded the analysis of these provisions as of year-end and the CARES Act did not have a material impact on the Company’s income taxes for the year ended January 31, 2021.

Any interest and penalties related to uncertain tax positions are recorded in

DULUTH HOLDINGS INC.

Notes to Consolidated Financial Statements

income tax expense.

There were no material amounts recorded as tax expense for interest or penalties for the years ended January 30, 2022 and January 31, 2021.

The Company files income tax returns in the United States federal jurisdiction and in various state jurisdictions.

Federal tax returns for tax year 2018 , and state tax returns for tax year 2017 , are open for examination.

RETIREMENT PLAN

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However, because of the unpredictable nature of these matters, the Company cannot provide any assurances regarding the outcome of any litigation or claim to which it is a party or the impact on it of an adverse ruling in such matters.

QUARTERLY FINANCIAL DATA (UNAUDITED)

(in thousands, except earnings per share)

Operating (loss) income

Net (loss) income attributable to

‎ controlling interest

Basic (loss) earnings per share

‎ attributable to controlling interest

‎ (Class A and Class B)

Diluted (loss) earnings per share

‎ attributable to controlling interest

‎ (Class A and Class B)

DULUTH HOLDINGS INC.

Notes to Consolidated Financial Statements

(in thousands, except earnings per share)

Operating (loss) income

Net (loss) income attributable to

‎ controlling interest

Basic (loss) earnings per share

‎ attributable to controlling interest

‎ (Class A and Class B)

Diluted (loss) earnings per share

‎ attributable to controlling interest

‎ (Class A and Class B)

Subsequent to the issuance of the May 5, 2019 interim financial statements, the Company identified a reclass error for disclosure purposes between selling, general and administration and interest expense, which had no impact on net income for the May 5, 2019 unaudited Consolidated Statement of Operations.

The reclass error has been corrected in the above table.

The Company assessed the reclass error and determined it is immaterial to the interim financial statements.

RECENT ACCOUNTING PRONOUNCEMENTS

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Financial Instruments – Credit Losses – Measurement of Credit Losses on Financial Instruments

DULUTH HOLDINGS INC.

Notes to Consolidated Financial Statements

In June 2016, the FASB issued Accounting Standards Update No.

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VALUATION AND QUALIFYING ACCOUNTS

For the Years Ended January 31, 2021 and February 2, 2020

For the Years Ended January 30, 2022 and January 31, 2021

(Amounts in thousands)

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Year ended January 30, 2022

Year ended February 2, 2020

Year ended January 31, 2021

Product returns reserve

Year ended January 30, 2022

Year ended February 2, 2020

Year ended January 31, 2021

See accompanying Report of Independent Registered Public Accounting Firm.

1 unchanged sentence

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-K

Item 8. Financial Statements and Supplementary Data