Document and Entity Information
Document and Entity Information - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | May 15, 2019 | Jun. 29, 2018 | |
Document and Entity Information | |||
Entity Registrant Name | Centric Brands Inc. | ||
Entity Central Index Key | 0000844143 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Public Float | $ 42.9 | ||
Entity Common Stock, Shares Outstanding | 58,542,641 | ||
Document Fiscal Year Focus | 2018 | ||
Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Current assets | ||
Cash and cash equivalents | $ 29,519 | $ 8,250 |
Accounts receivable, net | 27,910 | 22,246 |
Sold receivables, net | 33,825 | |
Inventories | 342,952 | 31,733 |
Prepaid expenses and other current assets | 48,378 | 4,832 |
Total current assets | 482,584 | 67,061 |
Property and equipment, net | 93,044 | 8,417 |
Goodwill | 376,132 | 8,380 |
Intangible assets, net | 897,470 | 89,332 |
Other assets | 9,725 | 484 |
Total assets | 1,858,955 | 173,674 |
Current liabilities | ||
Accounts payable and accrued expenses | 525,863 | 22,204 |
Current portion of long-term debt | 11,602 | 16,507 |
Total current liabilities | 537,465 | 38,711 |
Line of credit | 21,254 | |
Convertible notes | 36,235 | 13,866 |
Long-term debt, net of current portion | 1,195,297 | 44,896 |
Deferred income taxes, net | 6,650 | |
Other non-current liabilities | 6,581 | 3,554 |
Total liabilities | 1,775,578 | 128,931 |
Commitments and contingencies (Note 11) | ||
Equity | ||
Series A convertible preferred stock, $0.10 par value: zero shares and 50,000 shares authorized, issued and outstanding at December 31, 2018 and 2017, respectively | 5 | |
Common stock, $0.10 par value: 100,000,000 shares authorized, 58,363,740 and 13,488,366 shares issued and outstanding at December 31, 2018 and 2017, respectively | 5,836 | 1,349 |
Additional paid-in capital | 218,240 | 61,314 |
Accumulated other comprehensive income | 487 | 271 |
Accumulated deficit | (141,186) | (18,196) |
Total equity | 83,377 | 44,743 |
Total liabilities and equity | $ 1,858,955 | $ 173,674 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2018 | Dec. 31, 2017 |
CONSOLIDATED BALANCE SHEETS | ||
Convertible preferred stock, par value (in dollars per share) | $ 0.10 | $ 0.10 |
Convertible preferred stock, shares authorized | 0 | 50,000 |
Convertible preferred stock, shares issued | 0 | 50,000 |
Convertible preferred stock, shares outstanding | 0 | 50,000 |
Common stock, par value (in dollars per share) | $ 0.10 | $ 0.10 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 58,363,740 | 13,488,366 |
Common stock, shares outstanding | 58,363,740 | 13,488,366 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) | ||
Net sales | $ 596,602 | $ 164,053 |
Cost of goods sold | 435,867 | 92,303 |
Gross profit | 160,735 | 71,750 |
Operating expenses | ||
Selling, general and administrative | 145,136 | 62,030 |
Depreciation and amortization | 19,351 | 6,061 |
Other operating expense, net | 87,807 | 2,583 |
Total operating expenses | 252,294 | 70,674 |
Operating income (loss) | (91,559) | 1,076 |
Interest expense | (38,327) | (8,844) |
Other expense (income), net | (193) | 21 |
Total other expense | 38,134 | 8,865 |
Loss before income taxes | (129,693) | (7,789) |
Income tax benefit | (5,927) | (5,331) |
Net loss | (123,766) | (2,458) |
Net loss attributable to common stockholders | (129,910) | (7,938) |
Net loss | (123,766) | (2,458) |
Other comprehensive income, net of tax: | ||
Foreign currency translation adjustment | 216 | 492 |
Other comprehensive income | 216 | 492 |
Comprehensive loss | $ (123,550) | $ (1,966) |
Loss per common share - basic | ||
Loss per common share - basic (in dollars per share) | $ (6.02) | $ (0.60) |
Loss per common share - diluted | ||
Loss per common share - diluted (in dollars per share) | $ (6.02) | $ (0.60) |
Weighted average shares outstanding | ||
Basic (in shares) | 21,569 | 13,313 |
Diluted (in shares) | 21,569 | 13,313 |
CONSOLIDATED STATEMENTS OF EQUI
CONSOLIDATED STATEMENTS OF EQUITY - USD ($) $ in Thousands | Common StockPreferred Series A | Common StockPreferred Series A-1 | Common Stock | Additional Paid-In CapitalPreferred Series A | Additional Paid-In CapitalPreferred Series A-1 | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Preferred Series A | Preferred Series A-1 | Total |
Balance at Dec. 31, 2016 | $ 1,324 | $ 59,154 | $ (221) | $ (15,738) | $ 5 | $ 44,524 | |||||
Balance (in shares) at Dec. 31, 2016 | 13,239,000 | 50,000 | |||||||||
Increase (Decrease) in Stockholders' Equity | |||||||||||
Stock-based compensation | 2,340 | 2,340 | |||||||||
Issuance of restricted common stock, net of taxes withheld | $ 25 | (180) | (155) | ||||||||
Issuance of restricted common stock, net of taxes withheld (in shares) | 249,000 | ||||||||||
Foreign currency translation | 492 | 492 | |||||||||
Net loss | (2,458) | (2,458) | |||||||||
Balance at Dec. 31, 2017 | $ 1,349 | 61,314 | 271 | (18,196) | $ 5 | $ 44,743 | |||||
Balance (in shares) at Dec. 31, 2017 | 13,488,000 | 50,000 | 13,488,366 | ||||||||
Increase (Decrease) in Stockholders' Equity | |||||||||||
Issuance of common stock | $ 3,309 | 140,342 | $ 143,651 | ||||||||
Issuance of common stock (in shares) | 33,095,000 | ||||||||||
Issuance of Series A-1 convertible preferred stock | 13,305 | $ 459 | 13,764 | ||||||||
Issuance of Series A-1 convertible preferred stock (in shares) | 4,588,000 | ||||||||||
Stock-based compensation | 5,096 | 5,096 | |||||||||
Issuance of restricted common stock, net of taxes withheld | $ 98 | (1,201) | (1,103) | ||||||||
Issuance of restricted common stock, net of taxes withheld (in shares) | 978,000 | ||||||||||
Conversion of preferred stock | $ 585 | $ 495 | $ (580) | $ (36) | $ (5) | $ (459) | |||||
Conversion of preferred stock (in shares) | 5,852,000 | 4,951,000 | (50,000) | (4,588,000) | |||||||
Foreign currency translation | 216 | 216 | |||||||||
Net loss | (123,766) | (123,766) | |||||||||
Balance at Dec. 31, 2018 | $ 5,836 | $ 218,240 | $ 487 | (141,186) | $ 83,377 | ||||||
Balance (in shares) at Dec. 31, 2018 | 58,364,000 | 58,363,740 | |||||||||
Increase (Decrease) in Stockholders' Equity | |||||||||||
Cumulative effect of adoption of ASC 606 | $ 776 | $ 776 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (123,766) | $ (2,458) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Amortization of inventory step up | 23,594 | |
Depreciation and amortization | 19,351 | 6,061 |
Deferred taxes | (6,250) | (4,547) |
Stock-based compensation | 5,096 | 2,340 |
Paid-in-kind interest | 4,817 | 1,662 |
Amortization of deferred financing costs and discounts | 4,334 | 1,127 |
Other operating activity | 704 | 562 |
Changes in operating assets and liabilities, net of acquisition: | ||
Accounts receivable | (286,661) | (2,342) |
Accounts payable and accrued expenses | (87,709) | 4,107 |
Inventories | 35,458 | (7,644) |
Prepaid expenses and other assets | 12,658 | (519) |
Other liabilities | 757 | (75) |
Net cash used in operating activities | (397,617) | (1,726) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Acquisition, net of cash acquired | (1,179,669) | |
Collections of sold receivables | 312,966 | |
Purchases of property and equipment | (1,456) | (1,127) |
Net cash used in investing activities | (868,159) | (1,127) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from issuance of common stock | 143,651 | |
Proceeds from issuance of long-term debt | 1,252,133 | |
Repayment of long-term debt | (47,935) | (938) |
Proceeds (repayment) from line of credit, net | (21,852) | 7,708 |
Proceeds from long-term convertible note | 25,000 | |
Payment of deferred financing costs | (62,772) | (124) |
(Repayment of) proceeds from customer cash advances | (1,707) | |
Taxes paid in lieu of shares issued for stock-based compensation | (1,103) | (270) |
Net cash provided by financing activities | 1,287,122 | 4,669 |
Effect of exchange rate changes on cash and cash equivalents | (77) | (42) |
NET CHANGE IN CASH AND CASH EQUIVALENTS | 21,269 | 1,774 |
CASH AND CASH EQUIVALENTS, at beginning of year | 8,250 | 6,476 |
CASH AND CASH EQUIVALENTS, at end of year | 29,519 | 8,250 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||
Interest paid | 8,125 | 4,768 |
Income taxes paid | 179 | $ 192 |
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||
Beneficial interest obtained in exchange for securitized trade receivables | 269,411 | |
Conversion of short-term convertible notes | $ 13,764 |
Business Description and Basis
Business Description and Basis of Presentation | 12 Months Ended |
Dec. 31, 2018 | |
Business Description and Basis of Presentation | |
Business Description and Basis of Presentation | 1. Business Description and Basis of Presentation Centric Brands Inc. ( “Centric” ) is a global leader in the design, marketing, and distribution of premium lifestyle products, including kid's, men's & women's apparel and accessories, and other licensed or private label product categories. The Company's distinctive image has been developed across an expanding number of products, brands, sales channels and markets. The Company's Owned Brands include Hudson®, Robert Graham®, and SWIMS®. Additionally, the Company licenses brands which are sold in various product categories primarily in North America. Licensed brands include Calvin Klein®, Tommy Hilfiger®, Nautica®, Under Armour®, BCBG®, Buffalo Jeans®, Joe’s Jeans®, and Michael Kors®. Centric and its subsidiaries are collectively referred to herein as the “Company,” “we,” “us,” “our,” and “ourselves,” unless the context indicates otherwise. On October 29, 2018, the Company acquired from Global Brands Group Holding Limited’s (“ GBG ”) and GBG USA Inc., a wholly-owned subsidiary of GBG (“ GBG USA ”) a significant part of GBG’s North American business (“ GBG Acquisition ”), including the wholesale, retail and e-commerce operations, comprising all of their North American kids business, all of their North American accessories business and a majority of their West Coast and Canadian fashion businesses. Effective upon the consummation of the GBG Acquisition, the Company changed its name from Differential Brands Group Inc. to Centric Brands Inc. and changed its trading symbol on The Nasdaq Stock Market LLC (“ NASDAQ ”) from DFBG to CTRC. Prior to the GBG Acquisition, the Company organized its business into the following three reportable segments: Wholesale, Consumer Direct and Corporate and other. Subsequent to the GBG Acquisition, the Company implemented organizational changes that have impacted the manner in which it manages the Company. Accordingly, the Company realigned its business into the following three reportable segments: Kids, Accessories, and Men’s & Women’s Apparel. See “Note 15 – Segment Reporting and Operations by Geographic Areas”. All prior period segment information has been reclassified to reflect the realignment of our segment reporting structure on a comparable basis. The Company continues to be a “smaller reporting company,” as defined under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”). The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2018 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company, including its wholly-owned and majority-owned subsidiaries. All material intercompany accounts and transactions have been eliminated. We do not have any investments in companies that represent less than 20% of the related ownership interests. Use of Estimates The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of estimates relate primarily to allowance for bad debts, returns, sales allowances, and customer chargebacks, inventory write-downs, valuation of goodwill, intangible and long-lived assets, and valuation of deferred income taxes. Actual results could differ from these estimates. Revenue Recognition The Company adopted Accounting Standards Codification ( “ASC 606” ), Revenue from Contracts with Customers , with a date of initial application of January 1, 2018. As a result, the Company has changed its accounting policy for revenue recognition as described below. The Company applied ASC 606 using the modified retrospective approach – i.e. by recognizing the cumulative effect of initially applying ASC 606 as an adjustment to the opening balance of equity at January 1, 2018. Therefore, the comparative information has not been adjusted and continues to be reported under ASC 605. The details of the significant changes and quantitative impact of the changes are set out below. The Company applied the modified retrospective approach only to contracts that were not complete as of the date of the initial application, January 1, 2018. Effective January 1, 2018, wholesale revenues are recorded when a contract with the customer is agreed to by both parties and product has been transferred, which generally occurs at the point of shipment from the Company’s warehouse, and recorded at the transaction price based on the amount the Company expects to receive. Collection is probable as the majority of shipments occur to reputable credit worthy businesses and through factored relationships which guarantee payment. Estimated reductions to revenue for customer allowances are recorded based upon history as a percentage of sales and current outstanding chargebacks. The Company may allow for returns based upon pre-approval or in the case of damaged goods. Such returns are estimated based on historical experience and also specific claims filed by the customer. Beginning January 1, 2018, a refund liability is included in accounts payable and accrued expenses within the accompanying consolidated balance sheet, which was previously recorded net of accounts receivable. Also, effective January 1, 2018, the Company records a return asset receivable in prepaid expenses and other current assets within the accompanying consolidated balance sheet. Prior to January 1, 2018, inventory expected to be returned was recorded within inventories. The return asset receivable is evaluated for impairment each period. The Company recorded a decrease of $569 thousand to opening accumulated deficit as of January 1, 2018 to record the return asset receivable and related impairment charge. Retail store revenue is recognized at the time the customer takes possession of the related merchandise. Revenue for ecommerce sales of products ordered through the Company’s retail internet sites are recognized at the point of shipment to the customer. Prior to January 1, 2018, revenue for ecommerce sales was recorded at the point of delivery to the customer. The Company recorded an adjustment to increase the opening accumulated deficit as of January 1, 2018 by $39 thousand, to reflect the impact on ecommerce shipments from adopting ASC 606. Ecommerce revenue was reduced by an estimate for returns based on the historical rate of return as a percent of sales. Retail store revenue and ecommerce revenue exclude sales taxes collected from the customer. Revenue from licensing arrangements is recognized based on actual sales when the Company expects royalties to exceed the minimum guarantee. For licensing arrangements in which the Company does not expect royalties to exceed the minimum guarantee, an estimate of the transaction price is recognized on a straight-line basis over the term of the contract. A contract asset is recorded for revenue recognized in advance of the contract payment terms, which is included in other assets within the accompanying consolidated balance sheet. Nonrefundable upfront fees are recorded as a contract liability and revenue is recognized straight-line over the term of the contract. Contract liabilities are included in other liabilities within the accompanying consolidated balance sheet. Prior to January 1, 2018, revenue from licensing arrangements was recognized when earned in accordance with the terms of the underlying agreements and deemed collectible, generally based upon the higher of (a) the contractually guaranteed minimum royalty or (b) actual net sales data received from licensees. The Company recorded an adjustment to increase the opening accumulated deficit as of January 1, 2018, by $1.3 million, to reflect the impact on licensing revenue from adopting ASC 606. Amounts related to shipping and handling that are billed to customers are considered to be activities to fulfill a promise to transfer the goods and are reflected in net sales, and the related costs are reflected in cost of goods sold within the accompanying consolidated statements of operations and comprehensive (loss) income. This accounting treatment is consistent with the Company’s treatment of shipping and handling revenue prior to January 1, 2018. The adoption of ASC 606 had no net impact on the Company's consolidated statement of cash flows for the year ended December 31, 2018. Business Combinations The Company accounts for business acquisitions under ASC 805, Business Combinations . The total purchase consideration for an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities assumed at the acquisition date. Costs that are directly attributable to the acquisition are expensed as incurred. Identifiable assets (including intangible assets), liabilities assumed (including contingent liabilities) and noncontrolling interests in an acquisition are measured initially at their fair values at the acquisition date. The Company recognizes goodwill if the fair value of the total purchase consideration and any noncontrolling interests is in excess of the net fair values of the identifiable assets acquired and the liabilities assumed. The Company recognizes a bargain purchase gain within other income (expense), net, on the consolidated statement of operations if the net fair value of the identifiable assets acquired and the liabilities assumed is in excess of the fair value of the total purchase consideration and any noncontrolling interests. The Company includes the results of operations of the acquired business in the consolidated financial statements beginning on the acquisition date. Cash Equivalents All highly liquid investments that are both readily convertible into known amounts of cash and mature within 90 days from their date of purchase are considered to be cash equivalents. Such investments are stated at cost, which approximates fair value. Accounts Receivable, Factored Accounts Receivable and Allowance for Bad Debts, Sales Allowances, and Customer Chargebacks The Company evaluates its ability to collect accounts receivable, factor accounts receivable with recourse and charge-backs (customer disputes) based upon a combination of factors. Reserves for chargebacks are recognized based on historical collection experience. A specific reserve for bad debts is taken against amounts due to reduce the net recognized receivable to the amount reasonably expected to be collected. Whether a receivable is past due is based on how recently payments have been received and in certain circumstances when the Company is aware of a specific customer’s inability to meet its financial obligations (e.g., bankruptcy filings, substantial downgrading of credit sources, etc.). Amounts are written off against the reserve once it is established that it is remote such amounts will be collected. The Company also reserves for potential sales returns and allowances based on historical trends. Inventories Inventory is valued at the lower of cost or net realizable value with cost determined by the first-in, first-out method. Inventory consists of finished goods, work-in-process and raw materials. The Company continually evaluates its inventory by assessing slow moving current product. Net realizable value of non-current inventory is estimated based on historical sales trends, the impact of market trends, an evaluation of economic conditions and the value of current orders relating to future sales. Inventory reserves establish a new cost basis for inventory. Such reserves are not reversed until the related inventory is sold or otherwise disposed of. Costs capitalized in inventory include the purchase price of raw materials, contract labor and production costs, plus in-bound transportation costs, and import fees and duties. Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation and amortization is calculated using the straight - line method over the following estimated useful lives of the assets: Computer and equipment: 3 to 7 years Furniture and fixtures: 3 to 7 years Leasehold improvements: Shorter of 10 years or term of lease Maintenance and repairs are charged to expense as incurred. Upon sale or retirement, the asset cost and related accumulated depreciation or amortization is removed from the accounts, and any related gain or loss is included within selling, general and administrative expenses within the accompanying consolidated statements of operations and comprehensive income (loss). Impairment of Long‑Lived Assets, Intangible Assets and Goodwill The Company assesses the impairment of long - lived assets, identifiable intangible assets and goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In addition, the Company assesses goodwill and indefinite lived intangible assets for impairment annually. Factors considered important that could trigger an impairment review other than on an annual basis include the following: · A significant underperformance relative to historical or projected future operating results; · A significant change in the manner of the use of the acquired asset or the strategy for the overall business; or · A significant negative industry or economic trend. The estimated cash flows used for this nonrecurring fair value measurement are considered a Level 3 input as defined in “Note 13 – Fair Value Measurement of Financial Instruments.” Impairment of Long‑Lived Assets and Intangible Assets Subject to Amortization When the Company determines that the carrying value of long‑lived assets, such as property and equipment, and intangible assets subject to amortization, may not be recoverable based upon the existence of one or more of the aforementioned factors and the carrying value exceeds the estimated undiscounted cash flows expected to be generated by the asset, impairment is measured based on a projected discounted cash flow method using a discount rate determined by management. These cash flows are calculated by netting future estimated sales against associated merchandise costs and other related expenses such as payroll, occupancy and marketing. The impairment loss calculations require management to apply judgment in estimating future cash flows and the discount rates that reflect the risk inherent in future cash flows. Future expected cash flows for retail store assets are based on management’s estimates of future cash flows over the remaining lease period or expected life, if shorter. The Company considers historical trends, expected future business trends and other factors when estimating each store’s future cash flow. The Company also considers factors such as: the local environment for each store location, including mall traffic and competition; the ability to successfully implement strategic initiatives; and the ability to control variable costs such as cost of sales and payroll, and in some cases, costs to renegotiate a lease. If actual results are not consistent with the assumptions and judgments used in estimating future cash flows and asset fair values, there may be additional exposure to future impairment losses that could be material to the Company’s results of operations. There were no impairment charges recorded during the year ended December 31, 2018 and an immaterial amount recorded during the year ended December 31, 2017. Intangible assets subject to amortization, such as customer relationships, are amortized over their estimated useful lives. There was no impairment charge recorded related to intangible assets subject to amortization during the years ended December 31, 2018 and 2017. Goodwill and Indefinite Lived Intangible Assets Goodwill and intangible assets with indefinite lives, such as trademarks, are not amortized, but are tested at least annually for impairment on December 31 of each year or when circumstances indicate their carrying value may not be recoverable. Goodwill is evaluated for impairment by determining the fair value of each reporting unit and comparing this value to its carrying value. If the fair value exceeds the carrying value, including goodwill, no further work is required and no impairment loss would be recognized. If the carrying value exceeds the fair value of the assets, goodwill impairment is recorded for the amount that the reporting unit's carrying amount exceeds its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The Company calculates the value of the indefinite lived intangible assets using a discounted cash flow method, based on the relief from royalty method. There was no impairment charge recorded related to indefinite lived intangible assets or goodwill during the years ended December 31, 2018 and 2017. Deferred Rent and Tenant Allowances When a lease includes lease incentives (such as a rent holiday) or requires fixed escalations of the minimum lease payments, rental expense is recognized on a straight‑line basis over the term of the lease starting from the date of possession and the difference between the average rental amount charged to expense and amounts payable under the lease is included in deferred rent in the accompanying consolidated balance sheets. Deferred rent also includes tenant allowances received from landlords which are amortized as a reduction to rent expense on a straight-line basis over the term of the lease starting at the date of possession. Deferred Financing Costs Deferred financing costs are amortized using the effective interest rate method over the term of the related agreements and recorded as a component of interest expense in the accompanying consolidated statements of operations and comprehensive income (loss). Amortization of deferred financing costs included in interest expense was approximately $3.1 million and $0.4 million for the years ended December 31, 2018 and 2017, respectively. Deferred financing costs are presented on the consolidated balance sheets as a direct reduction of the related debt or in other assets. Cost of Goods Sold Cost of goods sold includes the following: the cost of merchandise; customs related taxes and duties; production costs, including directly attributable overhead costs; delivery expense; in-bound and outbound freight; obsolescence and shrink provisions; design costs; warehousing and handling costs; and other inventory acquisition related costs. Under our license agreements, we are generally required to pay guaranteed minimum royalties and make specified additional royalty and advertising payments (usually based on a percentage of net sales). Such payments are recognized within costs of sales at the higher of royalties incurred or on a straight line basis over the period covered by the guaranteed minimums. Selling, General and Administrative Expenses Selling, general and administrative expenses include salaries and benefits, travel and entertainment, professional fees, advertising, marketing, facilities, and bad debt expense. Advertising Costs Advertising costs are charged to expense as incurred, except for direct to consumer advertising, which is capitalized and amortized over its expected period of future benefit. Advertising expenses included in selling, general and administrative expenses within the accompanying consolidated statements of operations and comprehensive income (loss) were $13.9 million and $9.5 million for the years ended December 31, 2018 and 2017, respectively. Prepaid advertising costs were $5.3 million and $0.9 million at December 31, 2018 and 2017, respectively. Stock‑Based Compensation The cost of all employee stock‑based compensation awards is measured based on the grant date fair value of those awards and recorded as compensation expense over the period during which the employee is required to perform service in exchange for the award (generally over the vesting period of the award). The cost of all non-employee stock‑based compensation awards is measured based on the grant date fair value of those awards and revalued each reporting period, and is recorded as compensation expense over the service period. For all stock based compensation awards that contain graded vesting based on service conditions, the Company has elected to apply a straight‑line recognition method to account for these awards. See “Note 14 – Equity.” Income Taxes The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred taxes are determined based on the temporary differences between the net book value and tax bases of assets and liabilities using enacted tax rates. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Quarterly, management reassesses the need for a valuation allowance. The likelihood of a material change in the expected realization of these assets depends on the Company’s ability to generate sufficient future taxable income. The ability to generate enough taxable income to utilize the deferred tax assets depends on many factors, among which is the Company’s ability to deduct tax loss carry‑forwards against future taxable income, the effectiveness of tax planning strategies and reversing deferred tax liabilities. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Act. See “Note 18 – Income Taxes” for the impact of the Tax Act. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based upon a full knowledge of the facts and the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based upon the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. The Company’s policy is to recognize interest and penalties that would be assessed in relation to the settlement value of unrecognized tax benefits as a component of income tax benefit within the accompanying consolidated statements of operations and comprehensive income (loss). Comprehensive Loss Comprehensive loss represents the change in equity resulting from transactions other than stockholder investments and distributions. Accumulated other comprehensive income includes changes in equity that are excluded from net loss, specifically, unrealized gains and losses on foreign currency translation adjustments and is presented within the consolidated statements of equity. The Company presents the components of comprehensive loss within the consolidated statements of operations and comprehensive loss. Foreign Currency Translation The Company’s wholly owned direct foreign operations present their financial reports in the currency used in the economic environment in which they mainly operate, known as the functional currency. Assets and liabilities in foreign subsidiaries are translated into U.S. dollars at the exchange rate as of the balance sheet date, while revenues and expenses are translated using the average monthly exchange rate. Gains and losses from these foreign currency translation adjustments are recognized within accumulated other comprehensive income/loss within the accompanying consolidated statements of equity. Loss per Share Basic loss per share, or EPS, is computed using net loss attributable to common stockholders and the weighted average number of common shares outstanding during the period. Diluted EPS is computed using the weighted average number of common and potentially dilutive common shares outstanding during the period except for periods of net loss for which no common share equivalents are included because their effect would be anti‑dilutive. Dilutive common equivalent shares consist of common stock issuable upon exercise of stock options, restricted stock and restricted stock units using the treasury stock method. Dilutive common stock equivalent shares issuable upon conversion of the Company’s outstanding convertible notes are calculated using the if‑converted method. The Company calculated basic and diluted loss per common share for the year ended December 31, 2017 using the two-class method. Under the two-class method, net earnings are allocated to each class of common stock and participating security as if all of the net earnings for the period had been distributed. The Company’s participating securities as of December 31, 2017 consisted of convertible preferred shares that contained a nonforfeitable right to receive dividends and therefore were considered to participate in undistributed earnings with common stockholders. Concentration of Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, cash equivalents, accounts receivable and factored accounts receivable. The Company maintains cash and cash equivalents with various financial institutions. The policy is designed to limit exposure to any one institution. Periodic evaluations are performed of the relative credit rating of those financial institutions that are considered in the Company’s investment strategy. The vast majority of trade receivables from sales to customers are subsequently sold to a financial institution pursuant to a trade receivables securitization facility. The sale of trade receivables are made on a recourse basis however are guaranteed through credit insurance purchased from an unrelated financial institution. When insured, the Company is not at risk if a customer fails to pay. For trade receivables not sold to a financial institution, the Company generally does not require collateral. As of December 31, 2018, the net deferred purchase price of trade receivables sold pursuant to the RPA (as defined below) totaled $33.8 million. The RPA was not in place as of December 31, 2017 (see “Note 4 – Factored Accounts and Receivables”). The Company provides an allowance for estimated losses to be incurred in the collection of accounts receivable based upon the aging of outstanding balances and other account monitoring analysis. The net carrying value approximates the fair value for these assets. Such losses have historically been within management’s expectations. Uncollectible accounts are written off once collection efforts are deemed by management to have been exhausted. For the years ended December 31, 2018 and 2017, sales to customers or customer groups representing 10 percent or greater of net sales are as follows: Year ended December 31, 2018 2017 Customer A 14 % 15 % Fair Value of Financial Instruments Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. ASC 820 , Fair Value Measurements and Disclosures also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value: Level 1—Quoted prices in active markets for identical assets or liabilities. Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The fair value of financial instruments held (which consist of cash and cash equivalents, accounts receivable, factored accounts receivable and accounts payable) do not differ materially from their recorded amounts because of the relatively short period of time between origination of the instruments and their expected realization. The carrying amounts of the line of credit and long-term debt approximate fair value because of the variable interest rates. The fair value of the Company’s outstanding convertible notes is based on the amount of future cash flows associated with the instrument discounted using the incremental borrowing rate, which are considered Level 3 liabilities. As a part of our working capital management, we sell certain accounts receivable through a third party financial institution in off-balance sheet arrangements. The amount sold varies each month based on the amount of underlying receivables and cash flow needs. As of December 31, 2018 and 2017, we had $424.2 million and zero, respectively, of receivables outstanding under receivable factoring agreements entered into by various entities. Expenses incurred on the sale of receivables were $1.7 million and $0.0 million for the years ended December 31, 2018 and 2017, respectively. These amounts are recorded in interest expense in the consolidated statements of operations. Financial Accounting Standards Recently Adopted In June 2018, the FASB Issued Accounting Standards Update ( “ASU” ) No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting . This update expands the scope of ASC 718 to include share-based payment transactions for acquiring goods and services from nonemployees. Under ASU No. 2018-07, Nonemployee share based payment awards are measured at grant-date fair value of the equity instruments that an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. Consistent with the accounting for employee share-based payment awards, an entity considers the probability of satisfying performance conditions when nonemployee share-based payment awards contain such conditions. Generally, the classification of equity-classified nonemployee share-based payment awards will continue to be subject to the requirements of ASC 718 unless modified after the good has been delivered, the service has been rendered, any other conditions necessary to earn the right to benefit from the instruments have been satisfied, and the nonemployee is no longer providing goods or services. This eliminates the requirement to reassess classification of such awards upon vesting. The Company adopted ASU No. 2018-07 in the fourth quarter of 2018 and there was no significant impact of adoption on the consolidated financial statements. In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments. ASU No. 2016-15 amends the guidance in ASC 230 on the classification of certain cash receipts and payments in the statement of cash flows. The primary purpose of ASU No. 2016-15 is to reduce the diversity in practice that has resulted from the lack of consistent principles on this topic. ASU No. 2016-15 is effective for annual and interim periods beginning after December 15, 2017, and early adoption is permitted for all entities. Entities must apply the guidance retrospectively to all periods presented but may apply it prospectively from the earliest date practicable if retrospective application would be impracticable. The Company adopted ASU No. 2016-15 in the first quarter of 2018 and there was no impact on the consolidated financial statements. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, ASC 606. This amendment prescribes that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The amendment supersedes the revenue recognition requirements in ASC 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Codification. For the Company’s annual and interim reporting periods, the mandatory adoption date of ASC 606 is January 1, 2018, and two methods of adoption are allowed, either a full retrospective adoption or a modified retrospective adoption. Between May 2014 and May 2017, the FASB issued many ASUs to amend ASU No. 2014-09. The effective dates for these ASUs were the same as the effective date for ASU No. 2014-09, for the Company’s annual and interim periods beginning January 1, 2018. These ASUs also require enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows. The Company adopted ASU No. 2014-09 standards and subsequent amendments in the first quarter of 2018 using the modified retrospective approach. Refer to Revenue Recognition above for a discussion regarding the impact on the Company’s financial statements. Recently Issued Financial Accounting Standards In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) , which modifies lease accounting for lessees to increase transparency and comparability by recording lease assets and liabilities for operating leases and disclosing key information about leasing arrangements. The Company plans to adopt ASC 842 on January 1, 2019 utilizing the modified retrospective transition method. The Company is currently evaluating the impact that ASU 2016-02 will have on its consolidated financial statements. While the Company continues to assess all of the effects of adoption based on the lease portfolio as of December 31, 2018, we currently expect to record lease liabilities of approximately $221 million with corresponding right-of-use assets of approximately $214 million. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses — Measurement of Credit Losses on Financial Instruments , an accounting standards update that introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. This includes accounts receivable, trade receivables, loans, held-to-maturity debt securities, net investments in leas |
GBG Acquisition
GBG Acquisition | 12 Months Ended |
Dec. 31, 2018 | |
GBG Acquisition | |
GBG Acquisition | 3. GBG Acquisition On October 29, 2018, the Company completed the GBG Acquisition. To finance the acquisition, the Company entered into the Credit Agreements. The First Lien Credit Agreement provides for a senior secured asset based revolving credit facility with commitments in an aggregate principal amount of $150 million and a senior secured term loan credit facility in an aggregate principal amount of $645 million. The Second Lien Credit Agreement provides for a second lien term loan facility in an aggregate principal amount of $668 million. See “Note 12 – Debt” for a discussion of the terms of the Credit Agreements. The GBG Acquisition qualified as a business combination and was accounted for under the acquisition method of accounting. Business acquisitions are accounted for under the acquisition method by assigning the purchase price to tangible and intangible assets acquired and liabilities assumed. Assets acquired and liabilities assumed are recorded at their fair values and the excess of the purchase price over the amounts assigned is recorded as goodwill. Purchased intangible assets with finite lives are amortized over their estimated useful lives. Goodwill and intangible assets with indefinite lives are not amortized but are tested at least annually for impairment or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The purchase price allocation is subject to adjustment until the Company has completed its analysis within the measurement period. The purchase price allocation is preliminary and the finalization of the Company's purchase price allocation may result in changes in the valuation of assets acquired and liabilities assumed. The Company will finalize the purchase price allocation as soon as practicable, but not to exceed one year following October 29, 2018. The following table summarizes the allocation of the preliminary purchase price for the GBG Acquisition as of October 29, 2018 (in thousands): Purchase Price Allocation Assets acquired and liabilities assumed: Accounts receivable $ 65,106 Inventories 371,605 Prepaid expenses and other current assets 56,380 Property and equipment 86,971 Other assets 41 Accounts payable and accrued expenses (589,849) Intangible assets and liabilities acquired: Goodwill 367,725 Leasehold interests (2,310) Customer relationships 824,000 Preliminary purchase price $ 1,179,669 The purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed in the GBG Acquisition based on their estimated fair values as of the acquisition date. The fair values of assets acquired and liabilities assumed represent management’s estimate of fair value based on information obtained from various sources, including management’s historical experience. As a result of the fair value assessment, inventory acquired was stepped up to fair value by the amount of $32.4 million. During the year ended December 31, 2018 we recognized $23.6 million within cost of goods sold related to the stepped up fair value of inventory acquired. The estimated fair value of the acquired tangible and intangible assets and liabilities assumed were determined using multiple valuation approaches depending on the type of tangible or intangible asset acquired, including but not limited to the income approach, the excess earnings method, the with versus without method, net realizable value method and the relief from royalty method approach. The amount of goodwill represents the excess of the GBG Acquisition purchase price over the net identifiable assets acquired and liabilities assumed. Goodwill primarily represents, among other factors, the value of synergies expected to be realized by integration with the Company and expected positive cash flow and return on capital projections from the integration. Goodwill arising from the acquisition of the GBG Business was determined as the excess of the purchase price over the net acquisition date fair values of the acquired assets and the liabilities assumed, and is not deductible for income tax purposes subject to certain tax elections that are currently being considered. The Company has determined the useful life of the acquired customer relationships are finite and will be amortized over their useful lives. However, the assets will be tested for impairment if events or changes in circumstances indicate that the assets might be impaired. The Company incurred $39.8 million in non-recurring acquisition-related transaction costs related to the acquisition of the GBG Business during the year ended December 31, 2018, which is included in selling, general, and administrative expense within the accompanying consolidated statement of operations and comprehensive loss. GBG USA, through various affiliates and third parties, currently provides a number of critical services to us, such as information technology services, financial systems, shared real estate and logistics support through a transition services agreement. Pro forma financial information (unaudited) The following table presents our unaudited pro forma results (in thousands, except per share data) for the years ended December 31, 2018 and 2017, respectively, as if the GBG Acquisition had occurred on January 1, 2017. The unaudited pro forma financial information presented includes the effects of adjustments related to the amortization of acquired tangible and intangible assets, and excludes other non-recurring transaction costs directly associated with the acquisition such as legal and other professional service fees. Statutory rates were used to calculate income taxes. Year ended December 31, 2018 2017 (in thousands) Net sales $ 2,302,195 $ 2,244,604 Cost of goods sold 1,785,871 1,691,199 Gross margin 516,324 553,405 Gross margin % of net sales 22.4 % 24.7 % Operating expenses Selling, general and administrative 569,726 423,392 Depreciation and amortization 90,241 92,554 Total operating expenses 659,967 515,946 Operating (loss) income (143,643) 37,459 Interest expense 156,329 152,082 Gain on contingent consideration (17,675) (18,687) Loss before income taxes (282,297) (95,936) Income tax benefit 5,927 5,331 Net loss $ (276,370) $ (90,605) Loss per common share – basic $ (4.75) $ (1.58) Loss per common share – diluted $ (4.75) $ (1.58) Weighted average shares outstanding basic and diluted 58,143 57,516 The unaudited pro forma financial information as presented above is for information purposes only and is not necessarily indicative of the actual results that would have been achieved had the GBG Acquisition occurred at the beginning of the earliest period presented or the results that may be achieved in future periods. |
Factored Accounts and Receivabl
Factored Accounts and Receivables | 12 Months Ended |
Dec. 31, 2018 | |
Factored Accounts and Receivables | |
Factored Accounts and Receivables | 4. Factored Accounts and Receivables PNC Receivables Facility In October 2018, in connection with the GBG Acquisition, the Company entered into a three-year trade receivables securitization facility (the “ PNC Receivables Facility ” ) pursuant to (i) a Purchase and Sale Agreement, among certain subsidiaries of the Company, as “ Originators, ” and Spring Funding, LLC (“ Spring ”), a wholly owned, bankruptcy-remote special purpose subsidiary of the Company, as “ Buyer ” (the “ PSA ”) and (ii) a Receivables Purchase Agreement among Spring, as “ Seller ”, the Company, as initial “ Servicer ”, certain purchasers party thereto, PNC Bank, National Association, as Administrative Agent, and PNC Capital Markets LLC, as Structuring Agent (the “ RPA ”). Other subsidiaries of the Company may later enter into the Receivables Facility. At the end of the initial three year term, the Purchasers may elect to renew their commitments under the RPA. Under the terms of the PSA, the Originators sell or contribute certain of their trade accounts receivable, related collections and security interests to Spring on a revolving basis. Under the terms of the RPA, Spring sells to the Purchasers an undivided ownership interest in the Receivables for up to $450 million in cash proceeds. The proceeds from the Purchasers’ investment are used to finance Spring’s purchase of the Receivables from the Originators. Spring may also use the proceeds from a subordinated loan made by the Originators to Spring to finance purchases of the Receivables from the Originators. Rather than remitting to the Purchasers the amount received upon payment of the Receivables, Spring reinvests such Receivables payments to purchase additional Receivables from the Originators through the term of the agreement, subject to the Originators generating sufficient eligible Receivables to sell to Spring in replacement of collected balances. Advances under the RPA will accrue interest based on a variable rate plus a margin. CIT Factoring Agreement In January 2016, the Company entered into the amended and restated deferred purchase factoring agreement with CIT, through our subsidiaries, Robert Graham Designs LLC and Hudson (the “ CIT Factoring Agreement ”) pursuant to which the Company sells or assigns to CIT certain of the Company’s accounts receivable, including accounts arising from or related to sales of inventory and the rendering of services. Under the CIT Factoring Agreement, the Company pays factoring rates based on service type and credit profile of our customers. In connection with the GBG Acquisition, we amended the CIT Factoring Agreement to, among other things, extend the term of the CIT Factoring Agreement. The CIT Factoring Agreement may be terminated by either party upon 60 days’ written notice prior to October 29, 2023, annually with 60 days’ written notice prior to December 31 of each year thereafter, or immediately upon the occurrence of an event of default as defined in the agreement. SWIMS Factoring Agreement In August 2013, the Company entered into the amended and restated Credit Assurance and Factoring Agreement with DNB Bank ASA (“ DNB ”) through our subsidiary SWIMS (the “ SWIMS Factoring Agreement ”). The SWIMS Factoring Agreement is a combined credit assurance and factoring agreement, pursuant to which SWIMS is granted financing of up to 80% of its preapproved outstanding invoiced receivables. DNB receives an annual commission based on invoiced revenues and a quarterly commission of the maximum financing amount plus other administrative costs. The SWIMS Factoring Agreement is secured with (a) first-priority lien on SWIMS’ (i) machinery and plant (up to NOK 10.0 million) and (ii) inventory (up to NOK 10.0 million) and (b) additional liens on SWIMS’ factoring in the amount of NOK 1.0 million (first lien), NOK 4.0 million (second lien), NOK 7.0 million (third lien) and NOK 2.5 million (fourth lien). The SWIMS Factoring Agreement may be terminated by SWIMS upon 14 days’ prior written notice for any reason and by DNB upon 14 days’ prior written notice for just cause. DNB may also terminate the SWIMS Factoring Agreement without any prior written notice in the event of a material breach by SWIMS. Accounts receivables consisted of the following (in thousands): December 31, 2018 December 31, 2017 Non-recourse receivables sold $ 380,595 $ — Recourse receivables sold 43,630 — Total receivables sold 424,225 — Purchase price of sold receivables (364,900) — Allowances and bad debt (25,500) — Sold receivables, net $ 33,825 $ — Accounts receivable, net 27,910 27,013 Allowances and bad debt — (4,767) Total accounts receivable, net $ 27,910 $ 22,246 |
Inventories
Inventories | 12 Months Ended |
Dec. 31, 2018 | |
Inventories | |
Inventories | 5. Inventories Inventories are valued at the lower of cost or net realizable value with cost determined by the first‑in, first‑out method. Inventories consisted of the following (in thousands): December 31, 2018 December 31, 2017 Finished goods $ 315,484 $ 31,245 Raw materials and work in progress 27,468 488 Total inventories $ 342,952 $ 31,733 |
Prepaid expenses and other curr
Prepaid expenses and other current assets | 12 Months Ended |
Dec. 31, 2018 | |
Prepaid expenses and other current assets | |
Prepaid expenses and other current assets | 6. Prepaid expenses and other current assets Prepaid expenses and other current assets consist of the following (in thousands): December 31, 2018 December 31, 2017 Prepaid expenses $ 21,547 $ 4,740 Prepaid royalty 12,645 — Non-trade receivable 8,935 — Prepaid marketing and advertising 5,251 92 Total prepaid expenses and other current assets $ 48,378 $ 4,832 |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2018 | |
Property and Equipment | |
Property and Equipment | 7. Property and Equipment Property and equipment consisted of the following (in thousands): December 31, 2018 December 31, 2017 Computer and equipment $ 9,638 $ 6,214 Furniture and fixtures 14,580 6,245 Leasehold improvements 77,817 9,302 102,035 21,761 Less: accumulated depreciation and amortization (17,885) (13,639) Construction in progress 8,894 295 Property and equipment, net $ 93,044 $ 8,417 Depreciation expense related to Property and Equipment totaled $3.5 million and $3.1 million for the years ended December 31, 2018 and 2017, respectively. |
Intangible Assets and Liabiliti
Intangible Assets and Liabilities Goodwill | 12 Months Ended |
Dec. 31, 2018 | |
Intangible Assets and Liabilities Goodwill | |
Intangible Assets and Liabilities Goodwill | 8. Intangible Assets and Liabilities Goodwill Intangible assets are recorded at cost, less accumulated amortization. Amortization of intangible assets with finite lives is provided for over their estimated useful lives on a straight-line basis. The life of the trade names are indefinite. Intangible assets as of December 31, 2018 consisted of the following (in thousands): Amortization Accumulated Period Gross Amount Amortization Net Amount Trade names Indefinite $ 65,887 $ — $ 65,887 Customer relationships 7 to 20 Years 859,101 27,543 831,558 Non-compete agreements 3 Years 135 110 25 Total $ 925,123 $ 27,653 $ 897,470 Intangible assets as of December 31, 2017 consisted of the following (in thousands): Amortization Accumulated Period Gross Amount Amortization Net Amount Trade names Indefinite $ 65,812 $ — $ 65,812 Customer relationships 7 to 15 Years 35,081 11,629 23,452 Non-compete agreements 3 Years 133 65 68 Total $ 101,026 $ 11,694 $ 89,332 Amortization expense related to intangible assets amounted to approximately $15.8 million and $3.0 million for the years ended December 31, 2018 and 2017, respectively. As of December 31, 2018, future amortization expense related to the finite-lived intangible assets is as follows (in thousands): 2019 $ 77,911 2020 77,889 2021 77,887 2022 77,887 2023 77,887 Thereafter 442,122 Total $ 831,583 Goodwill consisted of the following as of December 31, 2018 and December 31, 2017 (in thousands): December 31, 2018 December 31, 2017 Beginning balance $ 8,380 $ 8,271 Goodwill created by the GBG Acquisition 367,725 — Other 27 109 Ending balance $ 376,132 $ 8,380 There was no impairment charge recorded related to intangible assets or goodwill during the years ended December 31, 2018 and 2017. The purchase price allocation and calculation of goodwill created by the GBG Acquisition are still preliminary and subject to further adjustments. Accordingly, the Company has not finalized the allocation of acquired goodwill to its underlying reporting units and the final acquired goodwill may be different from the preliminary calculation of acquired goodwill presented herein. |
Other assets
Other assets | 12 Months Ended |
Dec. 31, 2018 | |
Other assets | |
Other assets | 9. Other assets Other assets consist of the following as of December 31, 2018 and December 31, 2017 (in thousands): December 31, 2018 December 31, 2017 Deferred debt financing fees $ 8,901 $ — Other receivables and deposits long-term 824 484 Total other assets $ 9,725 $ 484 |
Accounts Payable and Accrued Ex
Accounts Payable and Accrued Expenses | 12 Months Ended |
Dec. 31, 2018 | |
Accounts Payable and Accrued Expenses | |
Accounts Payable and Accrued Expenses | 10. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consisted of the following (in thousands): December 31, 2018 December 31, 2017 Accounts payable $ 290,104 $ 7,384 Accrued expenses 128,990 5,922 Accrued royalty 56,595 — Accrued payroll and other benefits 20,814 2,236 Accrued interest 22,128 1,768 Other 7,232 4,894 Total $ 525,863 $ 22,204 |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies | |
Commitments and Contingencies | 11. Commitments and Contingencies Operating Leases The Company leases retail stores, corporate offices and showrooms under operating lease agreements expiring on various dates through July 2029. Some of these leases require us to make periodic payments for property taxes, utilities and common area operating expenses. Certain retail store leases provide for rents based upon the minimum annual rental amount and a percentage of annual sales volume. Some leases include lease incentives, rent abatements and fixed rent escalations, which are amortized and recorded over the initial lease term on a straight-line basis from the possession date. As of December 31, 2018, the future minimum rental payments under non‑cancelable operating leases with lease terms in excess of one year were as follows (in thousands): 2019 $ 44,295 2020 39,771 2021 37,722 2022 35,554 2023 31,110 Thereafter 125,863 Total $ 314,315 Rent expense was $14.2 million and $9.4 million for the years ended December 31, 2018 and 2017, respectively. Capital Leases The Company leases certain equipment under capital lease agreements expiring on various dates through March 2022. As of December 31, 2018, the future minimum rental payments under non-cancelable capital leases with lease terms in excess of one year were as follows (in thousands): 2019 $ 3,522 2020 1,033 2021 654 2022 165 2023 — Thereafter — Total $ 5,374 License Agreements Under our license agreements, we are generally required to achieve minimum net sales of licensed products, pay guaranteed minimum royalties, and make specified royalty and advertising payments, usually based on a percentage of net sales of licensed products, recognized within cost of goods sold. As of December 31, 2018, our contractual obligations to pay minimum guaranteed royalty and relating advertising commitments were as follows (in thousands): 2019 $ 121,843 2020 98,597 2021 78,061 2022 36,567 2023 30,396 Thereafter 119,655 Total $ 485,119 Royalty expense and license related advertising expense were $34.5 million and $4.1 million for the year ended December 31, 2018, respectively. The Company did not incur any royalty expense or license related expense for the year ended December 31, 2017. Letter of Credit The Company enters into letters of credit in the ordinary course of business including irrevocable standby and documentary trade letters of credit. The Company had $15.9 million and $130 thousand of outstanding letters of credit as of December 31, 2018 and December 31, 2017, respectively. Employment Agreements Certain of the Company’s officers are under employment agreements with minimum required payments. Future minimum payments under these employment agreements total $2.5 million in 2019 and $2.1 million in 2020. Litigation In the ordinary course of business, the Company is subject to periodic claims, investigations and lawsuits. Although the Company cannot predict with certainty the ultimate resolution of claims, investigations and lawsuits, asserted against the Company, it does not believe that any currently pending legal proceeding or proceedings to which it is a party could have a material adverse effect on its business, financial condition or results of operations. |
Debt
Debt | 12 Months Ended |
Dec. 31, 2018 | |
Debt | |
Debt | 12. Debt The five-year payment schedule of the Company’s debt as of December 31, 2018 is as follows (in thousands): Original Deferred Issue Payment Due by Period Financing Discount Carrying 2019 2020 2021 2022 2023 Thereafter Total Costs, Net (Premium), Net Value Revolving facilities $ 315 $ — $ — $ — $ — $ — $ 315 $ — $ — $ 315 1L Term Loan 11,287 32,250 32,250 32,250 536,963 — 645,000 (29,438) 11,437 626,999 2L Term Loan — — — — — 671,513 671,513 (20,663) (71,265) 579,585 Convertible notes — — 17,979 — — 25,000 42,979 (1,355) (5,389) 36,235 Total $ 11,602 $ 32,250 $ 50,229 $ 32,250 $ 536,963 $ 696,513 $ 1,359,807 $ (51,456) $ (65,217) $ 1,243,134 New Term Loans On October 29, 2018 (the “ Closing Date ”), the Company and certain of its subsidiaries entered into a (i) first lien credit agreement with Ares Capital Corporation (“ Ares ”), as administrative agent, ACF FinCo I LP, as collateral agent, and certain other lenders party thereto (the “ First Lien Credit Agreement ”) and (ii) second lien credit agreement with U.S. Bank National Association, as administrative agent and collateral agent, and certain lenders party thereto (the “ Second Lien Credit Agreement ”, and together with the First Lien Credit Agreement, the “ Credit Agreements ”). The First Lien Credit Agreement provides for a senior secured asset based revolving credit facility with commitments in an aggregate principal amount of $150 million, which matures on April 29, 2023 (the “ New Revolving Facility ”) and a senior secured term loan credit facility in an aggregate principal amount of $645 million, which matures on October 29, 2023 (the “ First Lien Term Loan Facility ”, and together with the New Revolving Facility, are collectively referred to herein as “ First Lien Facilities ”). The Second Lien Credit Agreement provides for a second lien term loan facility in an aggregate principal amount of $668 million, which matures on October 29, 2024 (the “ Second Lien Term Loan Facility ”, and together with the First Lien Term Loan Facility are collectively referred to herein as the “ Term Loan Facilities ”). The obligations under the Credit Agreements are guaranteed by certain domestic subsidiaries of the Company and are secured by substantially all assets of the Company and its domestic subsidiaries. The First Lien Term Loan Facility will be subject to quarterly payments of principal as follows: (i) 0.25% of the initial principal amount for each of the fiscal quarters ending March 31, 2019 and June 30, 2019; (ii) 0.625% of the initial principal amount for each of the fiscal quarters ending September 30, 2019 and December 31, 2019; and (iii) 1.25% of the initial principal amount or each fiscal quarter thereafter, with the balance payable at maturity. There are no scheduled periodic payments under the Second Lien Term Loan Facility or the New Revolving Facility. The Term Facilities include mandatory prepayments customary for credit facilities of their nature. Subject to certain exceptions, prepayments of loans under the First Lien Term Loan Facility is subject to a prepayment premium of (i) 3.00% during the first year after the Closing Date, (ii) 2.00% during the second year after the Closing Date and (iii) 1.00% during the third year after the Closing Date, plus, if applicable, customary “breakage” costs with respect to LIBOR rate loans. Subject to certain exceptions, prepayments of loans under the Second Lien Term Loan Facility are subject to a prepayment premium of (i) with respect to the first $175 million of aggregate prepayments (the “ Initial Prepayment Amount ”), (a) 3.00% during the first year after the Closing Date, (b) 2.00% during the second year after the Closing Date and (c) 1.00% during the third year after the Closing Date and (ii) with respect to any amount in excess of the Initial Prepayment Amount, (a) subject to certain exceptions, a customary make-whole amount during the first or second year after the Closing Date, (b) 4.00% during the third year after the Closing Date, (c) 2.00% during the fourth year after the Closing Date and (d) 1.00% during the fifth year after the Closing Date. The annual interest rates for the Term Loan Facilities are as follows: · For the First Lien Term Facility: ABR (with a 2.50% floor) plus 5.00% for base rate loans or adjusted LIBOR (with a 1.50% floor) plus 6.00% for LIBOR Rate Loans, with two 0.25% step downs upon achieving and maintaining a first lien leverage ratio equal to or less than 2.75 to 1.00 and 2.25 to 1.00, respectively. · For the Second Lien Facility: ABR (with a 2.50% floor) plus 6.00% for base rate loans or adjusted LIBOR (with a floor of 1.50%) plus 7.00%, plus 2.75% payment-in-kind interest (“PIK”) from the Closing Date until December 31, 2019, and ABR (with a 2.50% floor) plus 7.00% for base rate loans or adjusted LIBOR (with a 1.50% floor) plus 8.00%, plus 1.25% PIK thereafter (subject to certain adjustments and compliance with certain leverage ratios). The Credit Agreements contain customary representations and warranties, events of default and covenants, including, among other things and subject to certain exceptions, covenants that restrict the ability of the Company and its subsidiaries to incur additional indebtedness, create or permit liens on assets, engage in mergers or consolidations, dispose of assets, make prepayments of certain indebtedness, pay certain dividends and other restricted payments, make investments, and engage in transactions with affiliates. The Term Loan Facilities require the Company to comply with financial maintenance covenants to be tested quarterly (beginning with the fiscal quarter ending March 31, 2019), consisting of a maximum net first lien leverage ratio, a maximum net total leverage ratio and a minimum fixed charge coverage ratio. As of December 31, 2018, the Company was in compliance with these covenants. The Company incurred debt issuance costs totaling $51.5 million related to the Term Loan Facilities. In accordance with ASU No. 2015-15, the debt issuance costs have been deferred and are presented as a contra-liability, offsetting the outstanding balance of the Term Loan, and are amortized using the effective interest method over the remaining life of the Term Loan Facilities. The Company used the proceeds from the Credit Agreements to consummate the GBG Acquisition and pay out existing debt. On April 17, 2019, the Company amended its Credit Facilities to, among other things, increase the amount of indebtedness under the First Lien Credit Agreement and amend the Company's consolidated fixed charge ratio covenant; see "Notes to Consolidated Financial Statements-Note 21-Subsequent Events" for additional information. New Revolving Facility In addition to the First Lien Term Loan, the First Lien Credit Agreement provides for a senior secured asset based revolving credit facility with commitments in an aggregate principal amount of $150 million, which matures on April 29, 2023 (the “ New Revolving Facility ”). The amount available to be drawn under the New Revolving Facility is based on the borrowing base values attributed to eligible inventory. There are no scheduled periodic payments under the New Revolving Facility. The obligations under the Credit Agreements, including the New Revolving Facility, are guaranteed by certain domestic subsidiaries of the Company (the “ Guarantors ”) and are secured by substantially all assets of the Company and its domestic subsidiaries. The availability under the Revolving Facility as of December 31, 2018 was $150.0 million. There were no borrowings under the Revolving Facility as of December 31, 2018. See “Note 12—Debt.” The annual interest rates for the Revolving Credit Facility is the lender’s alternate base rate (“ ABR ”) (with a 1.00% floor) plus 4.50% for base rate loans and adjusted LIBOR (with a 0.00% floor) plus 5.50% for LIBOR rate loans. The New Revolving Facility includes mandatory prepayments customary for credit facilities of this nature. Subject to certain exceptions, permanent reductions of the commitments under the New Revolving Facility are subject to a prepayment premium of (i) 3.00% during the first year after the GBG Closing Date, (ii) 2.00% during the second year after the GBG Closing Date and (iii) 1.00% during the third year after the GBG Closing Date, plus, if applicable, customary “breakage” costs with respect to LIBOR rate loans. The New Revolving Facility, contains customary representations and warranties, events of default and covenants, including, among other things and subject to certain exceptions, covenants that restrict the ability of the Company and its subsidiaries to incur additional indebtedness, create or permit liens on assets, engage in mergers or consolidations, dispose of assets, make prepayments of certain indebtedness, pay certain dividends and other restricted payments, make investments, and engage in transactions with affiliates. The Credit Agreements, inclusive of the provisions of the New Revolving Facility, require the Company to comply with financial maintenance covenants to be tested quarterly (beginning with the fiscal quarter ending March 31, 2019), consisting of a maximum net first lien leverage ratio, a maximum net total leverage ratio and a minimum fixed charge coverage ratio. As of December 31, 2018 the Company was in compliance with these covenants. The Company incurred debt issuance costs totaling $6.8 million related to the New Revolving Facility. The debt issuance costs have been deferred and are presented in Other Assets and are amortized using the effective interest method over the life of the New Revolving Facility. On April 17, 2019, the Company amended its New Revolving Facility to, among other things, increase the aggregate commitments; see “Notes to Consolidated Financial Statements—Note 21—Subsequent Events” for additional information. Prior Term Loan On January 28, 2016, we and certain of our subsidiaries entered into a Term Credit Agreement and accompanying security agreement with TCW Asset Management Company, as agent, and the lenders thereto (“ Prior Term Facility ”). The Prior Term Facility provided for a senior secured term loan with commitments in an aggregate principal amount of $50.0 million. The Prior Term Loan along with the Prior Revolving Facility (collectively, “Prior Credit Agreements” ) were guaranteed by all of our domestic subsidiaries and were secured by substantially all of our assets. Borrowings under the Prior Term Facility were subject to interest at a rate equal to either, at the Company’s option, an adjusted base rate or LIBOR, in each case plus an applicable margin and subject to a 0.50% floor for borrowings. The applicable margins for borrowing (which varied based the Company’s senior leverage ratio) ranged from 6.00% to 9.75% for base rate loans and 7.00% to 10.75% for LIBOR loans. On October 29, 2018, in connection with the GBG Acquisition and entry into the Credit Agreements, the outstanding principal balance of $46.4 million was repaid. In addition, the Company also incurred and paid $2.6 million of related fees relating to the retirement of the Prior Term Facility. Prior Revolving Credit Facility On January 28, 2016, we and certain of our subsidiaries entered into a secured asset-based revolving credit facility and accompanying security agreement with TCW Asset Management Company, as agent, and the lenders thereto ( “Prior Revolving Facility” ). The amount available to be drawn under the Prior Revolving Facility was based on borrowing base values attributed to eligible accounts receivable and eligible inventory. The Prior Credit Agreement was guaranteed by all of our domestic subsidiaries and was secured by substantially all of our assets. Borrowings under the Prior Revolving Facility were subject to interest at a rate equal to either, at the Company’s option, an adjusted base rate or LIBOR in each case plus an applicable margin. The applicable margin for borrowings under the Prior Revolving Facility was 0.50% for base rate loans and 1.75% for LIBOR loans. An unused commitment fee equal to 0.25% per annum of the average daily amount by which the total commitments under the Prior Revolving Facility exceeded the outstanding usage under the Prior Revolving Facility was payable monthly in arrears. On October 29, 2018, in connection with the GBG Acquisition and entry into the Credit Agreements, the outstanding balance of $23.1 million under the Prior Revolving Facility was repaid. In addition, the Company also incurred and paid approximately $80 thousand of related fees relating to the retirement of the Prior Revolving Facility. The Receivables Facility On October 29, 2018, the Company entered into the PNC Receivables Facility. Other subsidiaries of the Company may later enter into the PNC Receivables Facility. At the end of the initial three year term, the Purchasers may elect to renew their commitments under the RPA. Under the terms of the PSA, the Originators sell or contribute certain of their trade accounts receivable, related collections and security interests to Spring on a revolving basis. Under the terms of the RPA, Spring sells to the Purchasers an undivided ownership interest in the Receivables for up to $450 million in cash proceeds. The proceeds from the Purchasers’ investment are used to finance Spring’s purchase of the Receivables from the Originators. Spring may also use the proceeds from a subordinated loan made by the Originators to Spring to finance purchases of the Receivables from the Originators. Rather than remitting to the Purchasers the amount received upon payment of the Receivables, Spring reinvests such Receivables payments to purchase additional Receivables from the Originators through the term of the agreement, subject to the Originators generating sufficient eligible Receivables to sell to Spring in replacement of collected balances. Advances under the RPA will accrue interest based on a variable rate plus a margin. In connection with the PNC Receivables Facility, the Company incurred $2.4 million in deferred financing fees, including $1.6 million related to securitization closing fees, $470 thousand in legal Fees, and $350 thousand in other fees. These deferred financing fees are included in Other Assets on the Consolidated Balance Sheet as of December 31, 2018. On April 17, 2019, the Company amended its PNC Receivables Facility to, among other things, increase the aggregate commitments under the New Revolving Facility under the First Lien Credit Agreement; see "Notes to Consolidated Financial Statements-Note 21-Subsequent Events" to our consolidated financial statements in "Part II, Item 8" of this Annual Report for additional information. Convertible Notes 2024 Convertible Notes On October 29, 2018, the Company issued convertible promissory notes (the “2024 Convertible Notes” ) in an aggregate principal amount of $25.0 million to funds managed by GSO Capital Partners LP (“ GSO ”)and funds managed by Blackstone Tactical Opportunities Advisors L.L.C. (collectively, the “GSO/BTO Affiliates” ). The 2024 Convertible Notes are convertible at the holder’s option beginning on or after October 29, 2019 until the earlier of (i) repayment in full of all principal and interest outstanding under the Second Lien Credit Agreement and (ii) October 29, 2024 (such earlier date, the “2024 Convertible Note Maturity Date” ), into shares of the Company’s common stock at a conversion price of $8.00 per share, subject to customary adjustments as described in agreement. The 2024 Convertible Notes shall not initially bear interest. From and after April 29, 2019, the 2024 Convertible Notes shall bear interest at the rate of 12.0% per annum multiplied by the principal amount as of the previous interest payment date. From and after October 29, 2019, the 2024 Convertible Notes shall bear interest at the rate of 16.0% per annum multiplied by the principal amount as of the previous interest payment date. Interest payments are due each January 31, April 30, July 31, and October 31. To the extent that the Company is unable to pay cash interest on the 2024 Convertible Notes on each interest payment date because of restrictions in the Credit Agreements or other debt agreements of the Company, an amount equal to the unpaid interest then due shall be added to the principal amount of this Note (such additional amount, the “PIK Principal” ), without any action by the Company or a holder of a 2024 Convertible Note. The Company may, at any time and at its sole option, elect to prepay the entirety of aggregate then-outstanding PIK Principal, plus any accrued and unpaid interest on such PIK Principal, at any time (an “Optional PIK Prepayment” ). Optional PIK Prepayments may be paid in cash. From and after the GBG Closing Date until October 29, 2019, upon consummation of any sales of common stock by the Company for cash, the Company may, on at least ten (10) days’ prior written notice to the holder of a 2024 Convertible Note, prepay such 2024 Convertible Note in whole but not in part solely with the net proceeds of such sale of common stock in an amount equal to the greater of (i) the principal amount, together with accrued interest through and including the date of prepayment, or (ii) the value equal to (a) the number of shares of common stock that would be received upon conversion of the 2024 Convertible Note on the repayment date multiplied by the market value of the common stock as of such date, plus (b) any accrued but unpaid interest that has not been added to the principal amount of the 2024 Convertible Note on the date of such prepayment (such greater amount, the “Prepayment Amount” ). Also, the 2024 Convertible Notes shall be prepayable in whole but not in part at the Prepayment Amount: (i) from October 29, 2019 through October 29, 2021 only upon a change in control or a liquidation of the Company, or (ii) from October 29, 2021 until the Note Maturity Date, in each case on at least ten (10) day’s prior written notice to the holder. Also, on the GBG Closing Date, the Company and the Guarantors entered into a Subordinated Convertible Promissory Notes Guaranty Agreement pursuant to which those subsidiaries agreed to guarantee the obligations due under the 2024 Convertible Notes. The following table is a summary of the recorded value of the 2024 Convertible Notes as of December 31, 2018 (in thousands). December 31, 2018 2024 Convertible Notes - face value $ 25,000 Less: Original issue discount (4,522) Short-term convertible note recorded value on issue date 20,478 PIK interest issued — Accumulated accretion of original issue debt discount 534 2024 Convertible Notes value $ 21,012 RG Hudson Convertible Notes Modified Convertible Notes On January 18, 2016, in partial satisfaction of certain outstanding convertible notes, the Company issued an aggregate principal amount of approximately $16.5 million of modified convertible notes (the “ Modified Convertible Notes ”). The Modified Convertible Notes are structurally and contractually subordinated to our senior debt and will mature on July 28, 2021. The Modified Convertible Notes accrue interest quarterly on the outstanding principal amount at a rate of 6.5% per annum (which increased to 7% as of October 1, 2016, with respect to the Modified Convertible Notes issued to Fireman Capital CPF Hudson Co-Invest LP (“ Fireman ”) only), which is payable 50% in cash and 50% in additional paid-in-kind notes. However, the Company may elect to pay 100% of such interest in cash at its sole discretion. The Modified Convertible Notes are convertible at the option of the holders into either shares of the Company’s common stock, cash, or a combination thereof, at the Company’s election. If the Company elects to issue only shares of common stock upon conversion of the Modified Convertible Notes, each of the Modified Convertible Notes would be convertible, in whole but not in part into a number of shares of the Company’s common stock equal to the “conversion amount” divided by the “market price”. The “conversion amount” is (a) the product of (i) the “market price”, multiplied by (ii) the quotient of (A) the principal amount, divided by (B) the conversion price, minus (b) the aggregate optional prepayment amounts paid to the holder. The “market price” is the average of the closing prices for our common stock over the 20-trading-day period immediately preceding the notice of conversion. If the Company elects to pay cash with respect to a conversion of the Modified Convertible Notes, the amount of cash to be paid per share will be equal to the conversion amount. The Company will have the right to prepay all or any portion of the principal amount of the Modified Convertible Notes at any time so long as the Company makes a pro rata prepayment on all of the Modified Convertible Notes. The following table is a summary of the recorded value of the Modified Convertible Notes as of December 31, 2018 and December 31, 2017 (in thousands). The value of the Modified Convertible Notes reflects the present value of the contractual cash flows from the Modified Convertible Notes and resulted in an original issue discount of $4.7 million that was recorded on January 28, 2016, the issuance date. December 31, 2018 December 31, 2017 Modified convertible notes - face value $ 16,473 $ 16,473 Less: original issue discount (4,673) (4,673) Modified convertible notes recorded value on issue date 11,800 11,800 PIK interest issued 1,505 925 Accumulated accretion of original issue debt discount 1,918 1,141 Modified convertible notes value $ 15,223 $ 13,866 Short-Term Convertible Note In connection with the acquisition of SWIMS® on July 18, 2016, the Company entered into certain financing arrangements with Tengram Partners Fund II, L.P. (“ Tengram II ”), including a convertible note issued to Tengram II on July 18, 2016 (the “ SWIMS Convertible Note ”). The SWIMS Convertible Note accrued interest at a rate of 3.75% per annum, compounding on the first day of each month starting August 1, 2016, and was convertible, at Tengram II’s option or on the revised maturity date of January 18, 2018, which had an original maturity date of January 18, 2017, if not already repaid in cash on or prior to that date, into newly issued shares of our Series A-1 Preferred Stock at a conversion price of $3.00 per share. On January 18, 2018, the SWIMS Convertible Note matured and automatically converted into newly issued shares of the Company’s Series A-1 Preferred Stock, at a conversion price of $3.00 per share. The outstanding balance of the Convertible Note, together with any accrued and unpaid interest thereon, converted into 4,587,964 shares of Series A-1 Preferred Stock. Upon the issuance of such shares of Series A-1 Preferred Stock by the Company to Tengram II, the SWIMS Convertible Note was settled in its entirety. The Series A-1 Preferred Stock was convertible into shares of the Company’s common stock, par value $0.10 per share, at an initial price of $3.00 per share (subject to adjustment), was entitled to dividends at a rate of 10% per annum payable quarterly in arrears, was senior to the common stock upon liquidation and had voting rights on an as-converted basis alongside its common stock. On October 29, 2018, the 4,587,964 shares of the Company’s Series A-1 Preferred Stock converted into 4,951,177 newly issued shares of common stock in accordance with the terms of the Series A-1 Preferred Stock. For additional information, see “Note 14 – Equity.” SWIMS Overdraft Agreement In connection with the acquisition of SWIMS, SWIMS has maintained a preexisting Overdraft Facility Agreement between SWIMS and DNB, dated January 27, 2016 (the “ Overdraft Agreement ”). The Overdraft Agreement is an overdraft facility that provides SWIMS with access to up to NOK 6.0 million (approximately $0.7 million as of December 31, 2018) in total, divided between (a) an ordinary credit of NOK 3.5 million at an interest rate of 7.4% plus an additional quarterly fee of 0.4% on the outstanding principal in frame commissions and (b) an additional credit of NOK 2.5 million at an interest rate of 4.9% plus an additional quarterly fee of 0.5% on the outstanding principal in frame commissions. The Overdraft Agreement is secured with (a) first-priority liens on SWIMS’ (i) machinery and plant (up to NOK 10.0 million) and (ii) inventory (up to NOK 10.0 million) and (b) additional liens on SWIMS’ factoring in the amount of NOK 1.0 million (first lien), NOK 4.0 million (second lien), NOK 7.0 million (third lien) and NOK 2.5 million (fourth lien). For more information on the SWIMS Factoring Agreement, see “Note 4 – Factored Accounts and Receivables.” The Overdraft Agreement may be terminated by SWIMS upon fourteen days’ prior written notice for any reason and by DNB upon fourteen days’ prior written notice for just cause. DNB may also terminate the Overdraft Agreement without any prior written notice in the event of a material breach by SWIMS. As of December 31, 2018, there was $0.4 million outstanding on the facility governed by the Overdraft Agreement. Total Interest Expense The following table is a summary of total interest expense recognized (in thousands): Year ended December 31, 2018 2017 Contractual coupon interest $ 29,176 $ 7,716 Non-cash interest expense (including amortization of discounts and deferred financing costs) 9,151 1,128 Total interest expense $ 38,327 $ 8,844 |
Fair Value Measurement of Finan
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Fair Value Measurement of Financial Instruments | 13. Fair Value Measurement of Financial Instruments The Company’s assets measured at fair value on a nonrecurring basis include long-lived assets. The Company reviews the carrying amounts of such assets when events indicate that their carrying amounts may not be recoverable. Any resulting asset impairment would require that the asset be recorded at its fair value. The resulting fair value measurements of the assets are considered to be Level 3 inputs. Long-lived assets, primarily comprised of property and equipment, held and used with a carrying amount of zero and $0.2 million were fully impaired during the years ended December 31, 2018 and 2017, respectively. The carrying value of the Convertible Notes at December 31, 2018 was $36.2 million which approximates their fair value at December 31, 2018. The Company estimates the fair value of the Convertible Notes using commonly accepted valuation methodologies and unobservable inputs based on the low volume of similar market activity (Level 3 ). The Company carries the Convertible Notes at face value less unamortized debt discount and issuance costs on its condensed consolidated balance sheets. For further information on the Convertible Notes, see “Note 12—Debt". |
Equity
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Equity | 14. Equity Stock Incentive Plans Amended and Restated 2004 Stock Incentive Plan In 2004, the Board of Directors adopted, and the Company’s shareholders approved the 2004 Stock Incentive Plan. In October 2011, the Board of Directors adopted, and the Company’s shareholders approved, the Amended and Restated 2004 Stock Incentive Plan (the “ Amended and Restated Plan ”) to update the 2004 Stock Incentive Plan with respect to certain provisions and changes in the tax code since its original adoption. 2016 Stock Incentive Plan On October 5, 2016, the Board of Directors adopted the 2016 Stock Incentive Compensation Plan (the “ 2016 Stock Incentive Plan ”) which was approved by the Company’s shareholders on November 7, 2016. Under the 2016 Stock Incentive Plan, 3,529,109 shares of common stock have been reserved for issuance in connection with grants of nonqualified stock options, incentive stock options, stock appreciation rights (“ SARs ”), restricted stock, restricted stock units (“ RSUs ”), performance-based compensation awards, other stock-based awards, dividend equivalents and cash-based awards. Effective October 29, 2018, the 2016 Stock Incentive Plan was amended to increase the reservation of the total shares available for issuance to 12,725,963 shares of common stock. The maximum number of shares with respect to which awards may be granted to any participant in any calendar year under the 2016 Stock Incentive Plan may not exceed 500,000 shares. Management Incentive Plan On October 29, 2018, the Company entered into a letter agreement with GSO (the “ MIP Letter ”). Under the MIP Letter, the Company agreed to create a new stock incentive compensation plan for the amount of 1,776,500 shares of common stock (the “ MIP Plan ”), which will be allocated by the Board in accordance with the Stockholder Agreement. The parties are in process of finalizing an amendment to the MIP Letter, pursuant to which the Company expects the shares to be allocated under its 2016 Stock Incentive Plan instead of a newly created plan and such grants would be subject to the same terms as the 2016 Stock Incentive Plan. Upon the forfeit of any awards granted at the direction of the Special Committee under the 2016 Stock Incentive Plan, the Company expects to issue the equivalent amount of shares of common stock to GSO for no additional consideration. 2016 Stock Incentive Plan In 2018, the Company granted RSUs, performance stock units (“ PSUs ”) and stock options to its officers, non-employee directors and employees pursuant to the 2016 Stock Incentive Plan or as “inducement grants,” as permitted under NASDAQ rules. The RSUs, PSUs and stock options represent the right to receive one share of common stock for each unit on the vesting date provided that the individual meets the applicable vesting criteria. The exercise price of stock options granted under the 2016 Stock Incentive Plan are determined by the Compensation and Stock Option Committee (the “ Compensation Committee ”) of the Board of Directors or by any other committee designated by the Board of Directors, but may not be less than the fair market value of the Company’s shares of common stock on the date the option is granted. In general, unvested stock options are forfeited when a participant terminates employment or service with the Company or its affiliates. Shares underlying awards that are forfeited, cancelled, terminated or expire unexercised, or settled in cash in lieu of issuance of shares, shall be available for issuance pursuant to future awards to the extent that such shares are forfeited, repurchased or not issued under any such award. Any shares tendered to pay the exercise price of an option or other purchase price of an award, or withholding tax obligations with respect to an award, shall be available for issuance pursuant to future awards. In addition, if any shares subject to an award are not delivered to a participant because (i) such shares are withheld to pay the exercise price or other purchase price of such award, or withholding tax obligations with respect to such award (or other award), or (ii) a payment upon exercise of an SAR is made in shares, the number of shares subject to the exercised or purchased portion of any such award that are not delivered to the participant shall be available for issuance pursuant to future awards. As of December 31, 2018, shares reserved for future issuance under the incentive plans include: (i) 444 shares of common stock issuable upon exercise of stock options granted under the Amendedand Restated Plan; (ii) 2,364,393 shares of common stock issuable upon vesting of RSUs, PSUs and exercise of stock options granted under the 2016 Stock Incentive Plan, (ii) 5,200,000 shares of common stock issuable upon vesting of RSUs and PSUs granted pursuant to “inducement grants” to certain of our officers, and 8,435,562 shares of common stock available for future grant under the 2016 Stock Incentive Plan. As of December 31, 2018, the Company no longer granted shares under the Amended and Restated Plan. Stock Options The following table summarizes stock option activity by incentive plan for the years ended December 31, 2018 and December 31, 2017 (in actual amounts): Amended and 2016 Stock Total Number Restated Plan Incentive Plan of Shares Outstanding at January 1, 2017 444 150,000 150,444 Granted — — — Exercised — — — Forfeited / Expired — (79,723) (79,723) Outstanding at December 31, 2017 444 70,277 70,721 Outstanding at January 1, 2018 444 70,277 70,721 Granted — 250,000 250,000 Exercised — — — Forfeited / Expired — — — Outstanding at December 31, 2018 444 320,277 320,721 The following table summarizes stock option activity for all incentive plans for the years ended December 31, 2018 and 2017 (in actual amounts): Weighted Weighted Average Aggregate Average Remaining Contractual Intrinsic Options Exercise Price Life (Years) Value Outstanding at January 1, 2018 70,721 $ 4.07 4.55 $ — Granted 250,000 4.22 2.81 Exercised — — Expired — — Forfeited — — Outstanding at December 31, 2018 320,721 $ 4.19 8.45 $ — Exercisable at December 31, 2018 70,721 $ 4.07 3.55 $ — There were no options exercised during the years ended December 31, 2018 and 2017, respectively. The following table summarizes exercise prices for options exercisable as of December 31, 2018 (in actual amounts): Options Exercisable Exercise Price Number of Shares Weighted-Average $ 4.02 70,277 5.4 $ 11.40 444 6.0 70,721 For all stock compensation awards that contain graded vesting with time‑based service conditions, the Company has elected to apply a straight‑line recognition method to account for these awards. Stock-based compensation expense related to stock options was immaterial during the years ended December 31, 2018 and 2017, respectively. As of December 31, 2018, there was $0.7 million of unrecognized compensation cost related to unvested stock options. The stock option awards were measured at fair value on the grant date using the Black-Scholes option valuation model. Stock options granted to non-employees are revalued at each reporting period. The Company recognizes forfeitures as they occur. Shares of common stock will be issued when the options are exercised. The following table summarizes the assumptions used to estimate the fair value of stock options granted during the years ending December 31, 2018 and December 31, 2017: 2018 2017 Stock Price on Grant Date $ 4.22 $ 1.85 Expected Dividend Rate 0.00 % 0.00 % Expected Volatility 60.00 % 60.00 % Exercise Price $ 4.22 $ 4.02 Risk Free Rate 3.08 % 1.75 % Average expected stock option term (in years) 8.45 5.00 Restricted Stock Units The following table summarizes RSU activity for the year ended December 31, 2018 (in actual amounts): Restricted Stock Units Number Of Weighted Average Grant Outstanding at January 1, 2017 800,843 $ 4.65 Granted 510,000 2.24 Vested 350,141 4.54 Forfeited 215,000 2.46 Outstanding at December 31, 2017 745,702 3.68 Outstanding at January 1, 2018 745,702 $ 3.68 Granted 6,473,484 3.75 Vested 1,278,626 2.50 Forfeited 120,000 1.42 Outstanding at December 31, 2018 5,820,560 $ 4.06 A total of $3.8 million and $2.3 million of stock-based compensation expense was recognized related to RSUs during the years ended December 31, 2018 and 2017, respectively. As of December 31, 2018, there was $21.8 million of total unrecognized compensation cost related to unvested RSUs. The unrecognized compensation cost is expected to be recognized over a weighted‑average of 2.8 years. Performance Share Units In Fiscal 2018, the Company granted 1,405,556 PSUs, which vest over three years if the performance targets set by the Compensation Committee are met. For certain PSUs, unvested PSUs in any completed year will be eligible for vesting in subsequent years if the subsequent year performance target is exceeded and the excess is sufficient to make up for the prior year shortfall. 308,122 PSUs were forfeited during the year ended December 31, 2018 and 1,405,556 unvested PSUs are outstanding as of December 31, 2018. 150,000 PSUs vested during the year ended December 31, 2018 and $633 thousand of stock compensation expense was recognized in connection with the vested shares during the year ended December 31, 2018. No PSUs were granted or vested during the year ended December 31, 2017. Series A Preferred Stock In connection with the acquisition of all of the outstanding equity interests of RG Parent LLC and its subsidiaries on January 28, 2016 (the “ RG Merger ”), the Company issued and sold to TCP Denim, LLC an aggregate of 50,000 shares of the Company’s Series A Convertible Preferred Stock, par value $0.10 per share (the “ Series A Preferred Stock ”) for an aggregate purchase price of $50.0 million in cash. The proceeds from the sale of Series A Preferred Stock were used to consummate the RG Merger in 2016. Under the certificate of designation for the Series A Preferred Stock, each share of Series A Preferred Stock entitled the holder to receive cumulative dividends when, as and if declared by the Board of Directors or a duly authorized committee thereof, payable quarterly, at an annual rate of 10%, plus accumulated and accrued dividends thereon through such date. Additionally, if the Board of Directors declared or paid a dividend on the common stock, then each holder of the Series A Preferred Stock was entitled to receive a cash dividend on an as-converted basis. Each holder of the Series A Preferred Stock was entitled to vote on an as-converted basis and together with the holders of common stock as a single class, subject to certain limitations. For so long as a to-be-determined percentage of the shares of the Series A Preferred Stock remained outstanding, the holders of the Series A Preferred Stock, exclusively and as a separate class, were entitled to elect three members of the Board of Directors, each of whom could only have been removed without cause by the affirmative vote of the holders of a majority of the shares of Series A Preferred Stock. The holders of the Series A Preferred Stock had separate class voting rights with respects to certain matters affecting their rights. Upon any liquidation event, holders of the Series A Preferred Stock were entitled to receive the greater of the liquidation preference and the amount that would be payable to the holders of the Series A Preferred Stock had such holders converted their shares of Series A Preferred Stock into shares of common stock immediately prior to such liquidation event. Each share of the Series A Preferred Stock was convertible at the option of the holder at any time and without the payment of additional consideration by the holder at an initial conversion price of $11.16. On October 29, 2018, the 50,000 shares of the Company’s Series A Preferred Stock converted into 5,852,142 shares of common stock in accordance with the terms of the Series A Preferred Stock. The conversion was for no consideration. Series A-1 Preferred Stock On January 18, 2018, the SWIMS Convertible Note originally issued on July 18, 2016 to Tengram II, as amended, with a principal amount of $13.0 million, matured and automatically converted into newly issued shares of 10% Series A-1 Preferred Stock, $0.10 par value per share, at a conversion price of $3.00 per share. The outstanding balance of the SWIMS Convertible Note, together with any accrued and unpaid interest thereon, converted into 4,587,964 shares of Series A-1 Preferred Stock. The Series A-1 Preferred Stock was convertible on a one-to-one basis into shares of common stock. Each share of Series A-1 Preferred Stock entitled the holder to receive cumulative dividends when, as and if declared by the Board of Directors or a duly authorized committee thereof, payable quarterly, at an annual rate of 10%, plus accumulated and accrued dividends thereon through such date. Additionally, if the Board of Directors declared or paid a dividend on the common stock, then each holder of the Series A-1 Preferred Stock was entitled to receive a cash dividend on an as-converted basis. Each holder of the Series A-1 Preferred Stock was entitled to vote on an as-converted basis and together with the holders of common stock as a single class, subject to certain limitations. The Series A-1 Preferred Stock was senior to the common stock upon a liquidation. On October 29, 2018, the 4,587,964 shares of the Company's Series A-1 Preferred Stock converted into 4,951,177 shares of common stock in accordance with the terms of the Series A-1 Preferred Stock. The conversion was for no consideration. Warrants The Company issued warrants in conjunction with the acquisition and financing of SWIMS that are currently exercisable and have been classified as equity. In connection with the SWIMS acquisition, the Company issued to Tengram II a warrant for the purchase of 500,000 shares of common stock at an exercise price of $3.00 per share and has an estimated fair value of $465 thousand (the “ SWIMS Warrant ”). The Company determined the fair value of the warrant at the date of grant using the Black-Scholes option pricing model based on the market value of the underlying common stock, an exercise price of $3.00 per share, an expected life (term) of 5 years, a volatility rate of 50%, based upon the expected volatility in market traded stock over the same period as the remaining term of the warrants, zero dividends, and a risk free interest rate of 1.14%. In addition, a 20% discount for lack of marketability was applied based upon the Rule 144 six-month restriction period. The SWIMS Warrant expires on July 18, 2021. Also in connection with the SWIMS acquisition, the Company issued to the shareholders of SWIMS (the “SWIMS Sellers”) warrants for the purchase of 150,000 shares of common stock with an exercise price of $5.47 per share that have an estimated fair value of $45 thousand. The Company determined the fair value of the warrants at the date of grant using the Black-Scholes option pricing model based on the market value of the underlying common stock, an exercise price of $5.47 per share, an expected life (term) of 3 years, a volatility rate of 45%, based upon the expected volatility in market traded stock over the same period as the remaining term of the warrants, zero dividends, and a risk free interest rate of 0.85%. In addition, a 10% discount for lack of marketability was applied based upon the Rule 144 six-month restriction period. The SWIMS Sellers warrants expire on July 18, 2019. The Private Placement On October 29, 2018, the Company completed a private placement of 10 million shares of common stock to certain members of management, affiliates of Ares and the GSO/BTO Affiliates at $8.00 per share for total consideration of $80.0 million. Additionally, in connection with an in consideration of the GSO/BTO Affiliates entering into the Second Lien Term Facility and providing loans to the Company thereunder, the Company issued to the GSO/BTO Affiliates 23,094,501 shares of common stock for no additional consideration. |
Segment Information
Segment Information | 12 Months Ended |
Dec. 31, 2018 | |
Segment Information | |
Segment Information | 15. Segment Information Segment Reporting Prior to the GBG Acquisition, the Company organized its business into the following three reportable segments: Wholesale, Consumer Direct and Corporate and other. Upon completing the GBG Acquisition, it resegmented its reportable segments to reflect the organizational structure of the Company, including the operations of the GBG Business. Accordingly, it realigned its business into the following three reportable segments: Kids, Accessories, and Men’s & Women’s Apparel. This new segment structure is consistent with how the Company establishes our overall business strategy, allocate resources, and assess performance. All prior period segment information has been recast to reflect the realignment of our segment reporting structure on a comparable basis. Year ended December 31, 2018 2017 (in thousands) Net sales: Kids $ 216,298 $ — Accessories 97,299 — Men's & Women's Apparel 283,005 164,053 $ 596,602 $ 164,053 Gross profit: Kids $ 33,530 $ — Accessories 10,246 — Men's & Women's Apparel 116,959 71,750 $ 160,735 $ 71,750 Selling, general and administrative Kids $ 20,482 $ — Accessories 10,954 — Men's & Women's Apparel 113,700 62,030 $ 145,136 $ 62,030 Depreciation & amortization Kids $ 5,018 $ — Accessories 5,772 — Men's & Women's Apparel 8,561 6,061 $ 19,351 $ 6,061 Other operating expense Kids $ 32,903 $ — Accessories 37,722 — Men's & Women's Apparel 17,182 2,583 $ 87,807 $ 2,583 Operating income (loss) Kids $ (24,872) $ — Accessories (44,202) — Men's & Women's Apparel (22,485) 1,076 $ (91,559) $ 1,076 Operations by Geographic Area Currently, we do not have any material reportable operations outside of the United States. |
Disaggregation of Revenue
Disaggregation of Revenue | 12 Months Ended |
Dec. 31, 2018 | |
Disaggregation of Revenue | |
Disaggregation of Revenue | 16. Disaggregation of Revenue In accordance with ASC 606, the Company elected to disclose its Net Sales by segment. Each segment presents its own characteristics with respect to the timing of revenue recognition and type of customer. As disclosed above, prior to the GBG Acquisition, the Company organized its business into the following three reportable segments: (1) Wholesale, (2) Consumer Direct and (3) Corporate and other. Following the GBG Acquisition, the Company implemented significant organizational changes that have impacted the manner in which it manages the Company, and realigned its business into the following three reportable segments: (1) Kids, (2) Accessories, and (3) Men’s & Women’s Apparel, to better reflect its internal organization, management and oversight structure. The following tables disaggregate our operating segment Net Sales by product category and sales channel, which the Company believes provides a meaningful depiction of how the nature, timing and uncertainty of Net Sales are affected by economic factors: Year Ended December 31, 2018 Year ended December 31, 2017 Wholesale & Wholesale & Licensing Retail Total Licensing Retail Total Kids $ $ — $ 216,298 $ — $ — $ — Accessories — 97,299 — — — Men’s & Women’s Apparel 107,964 283,005 121,958 42,095 164,053 $ $ 107,964 $ 596,602 $ 121,958 $ 42,095 $ 164,053 International sales were $29.8 million and $15.7 million for the years ended December 31, 2018 and 2017, respectively. |
Loss Per Share
Loss Per Share | 12 Months Ended |
Dec. 31, 2018 | |
Loss Per Share | |
Loss per Share | 17. Loss Per Share Loss per share is computed using weighted average common shares and dilutive common equivalent shares outstanding. Potentially dilutive securities consist of outstanding stock options, unvested RSUs, unvested PSUs, warrants, convertible Series A Preferred Stock and shares issuable upon the assumed conversion of the 2024 Convertible Notes, the Modified Convertible Notes and the SWIMS Convertible Note , as applicable. A reconciliation of the numerator and denominator of basic and diluted loss per share is as follows (in thousands, except per share data). December 31 2018 2017 Basic loss per share computation Numerator: Loss from continuing operations $ (123,766) $ (2,458) Less: preferred dividends (6,144) (5,480) Loss from continuing operations attributable to common stockholders (129,910) (7,938) Denominator: Weighted average common shares outstanding 21,569 13,313 Loss per common share - basic Loss from continuing operations $ (6.02) $ Loss per common share - basic $ (6.02) $ (0.60) Diluted loss per share computation Numerator: Loss from continuing operations $ (123,766) $ (2,458) Less: preferred dividends (6,144) (5,480) Loss from continuing operations attributable to common stockholders (129,910) (7,938) Denominator: Weighted average common shares outstanding 21,569 13,313 Effect of dilutive securities: Options, RSUs, PSUs, warrants, Series A, convertible notes — — Dilutive common shares 21,569 13,313 Loss per common share - diluted Loss from continuing operations $ (6.02) $ Loss per common share - diluted $ (6.02) $ (0.60) The following potential shares of common stock were excluded from diluted EPS as the Company had a net loss as of the years ended (in thousands): December 31, 2018 December 31, 2017 Outstanding stock options 321 71 Unvested RSUs 5,821 746 Unvested PSUs 1,406 458 Outstanding warrants 650 650 Convertible Series A preferred stock — 4,480 Convertible Series A-1 preferred stock — — Modified Convertible Notes 1,278 1,247 SWIMS Convertible Note — 4,565 2024 Convertible Notes 3,125 — Loss per Share under Two−Class Method The Series A Preferred Stock had the non-forfeitable right to participate on an as converted basis at the conversion rate then in effect in any common stock dividends declared and as such, was considered a participating security. The Series A Preferred Stock was included in the computation of basic and diluted loss per share for the year ended December 31, 2017 pursuant to the two-class method. Holders of the Series A Preferred Stock did not participate in undistributed net losses because they were not contractually obligated to do so. The computation of diluted loss per share attributable to common stockholders reflects the potential dilution that could occur if securities or other contracts to issue shares of common stock that are dilutive were exercised or converted into shares of common stock (or resulted in the issuance of shares of common stock) and would then share in the Company’s earnings. During the periods in which the Company record a loss from continuing operations attributable to common stockholders, securities would not be dilutive to net loss per share and conversion into shares of common stock is assumed not to occur. The following table provides a reconciliation of net loss to preferred shareholders and common stockholders for purposes of computing net loss per share for the years ended December 31, 2018 and 2017 (in thousands, except per share data): December 31, 2018 2017 Net loss $ (123,766) $ (2,458) Less: preferred dividends (6,144) (5,480) Net loss attributable to common stockholders $ (129,910) $ (7,938) Denominator: Weighted average common shares outstanding 21,569 13,313 Loss per common share - basic and diluted under two-class method $ (6.02) $ (0.60) |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2018 | |
Income Taxes | |
Income Taxes | 18. Income Taxes The Company accounts for income taxes under the asset and liability method; under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax reporting bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when these differences reverse. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain. For financial reporting purposes, loss before income taxes, includes the following components (in thousands): For the year ended December 31, 2018 December 31, 2017 Domestic $ (130,609) $ (7,352) Foreign 916 (437) Loss before income taxes $ (129,693) $ (7,789) Benefit for Income Taxes The benefit for income taxes is as follows (in thousands): For the year ended December 31, 2018 December 31, 2017 Current: Federal $ — $ (1,056) State 712 229 Foreign — 43 712 (784) Deferred: Federal (3,415) (4,425) State (1,100) (178) Foreign (2,124) 56 (6,639) (4,547) Total $ (5,927) $ (5,331) Income tax benefit for the years ended December 31, 2018 and 2017, respectively, differ from the amounts computed by applying the U.S. statutory income tax rate of 21% (in 2018) and 34% (in 2017) to pretax loss as follows (in thousands): Year ended December 31, 2018 2017 U.S. Federal (benefit) provision At statutory rate $ (27,235) $ (2,649) State taxes (358) 34 Federal Valuation allowance 23,792 (8,431) Foreign tax adjustments (2,332) 81 Disallowed interest expense — 190 Federal tax rate change — 7,338 Permanent Adjustments 236 — Effect of uncertain tax positions (30) 10 Book income from pre-transaction period — (1,932) Other — 28 Total $ (5,927) $ (5,331) The effective tax rate from continuing operations was a benefit of 4.6% of pre tax loss for the year ended December 31, 2018 compared to a benefit of 68.4% for the year ended December 31, 2017. The difference in the effective tax rate for the year ended December 31, 2018, as compared to the year ended December 31, 2017, was primarily due to the impact of the Tax Act recorded in 2017 as discussed below and valuation allowance movement in 2018. US Tax Reform On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “ Tax Act ”). The Tax Act made broad and complex changes to the U.S. tax code that affected the Company’s financial results for the year ended December 31, 2017, including, but not limited to: (1) requiring a one-time transition tax (payable over eight years) on certain un-repatriated earnings of foreign subsidiaries; (2) a future reduction of the U.S. federal corporate tax rate from 34% to 21% effective January 1, 2018, that reduced the current value of the Company’s deferred tax assets and liabilities; (3) bonus depreciation that allows for full expensing of qualified property placed in service after September 27, 2017. In addition, the Tax Act established new tax laws that may affect the Company’s financial results for the years ending after December 31, 2017, including, but not limited to: (1) a reduction of the U.S. federal income tax rate from 34% to 21%; (2) limitation of the deduction for interest expense; (3) a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries; (4) a new provision designed to tax global intangible low-taxed income; (5) limitations on the deductibility of certain executive compensation; and (6) limitations on the use of Foreign Income Tax Credit to reduce the U.S. income tax liability. Pursuant to the Staff Accounting Bulletin published by the Securities and Exchange Commission on December 22, 2017, addressing the challenges in accounting for the effects of the Tax Act in the period of enactment, companies reported provisional amounts for those specific income tax effects of the Tax Act for which the accounting was incomplete, but a reasonable estimate could be determined. Those provisional amounts were subject to adjustment during a measurement period of up to one year from the enactment date (measurement-period adjustment). Pursuant to this guidance, the estimated impact of the Tax Act was based on a preliminary review of the new tax law and projected future financial results and was subject to revision based upon further analysis and interpretation of the Tax Act and to the extent that actual results differed from projections available at that time. In 2018, the Company completed its accounting with respect to the Tax Act and did not make any measurement period adjustments to the initial tax benefit of $6.3 million recorded in 2017. · Reduction of U.S. Federal Corporate Tax Rate: The Tax Act reduced the corporate tax rate to 21%, effective January 1, 2018. Consequently, we recorded a decrease related to deferred tax assets and liabilities with a corresponding net adjustment to deferred income tax benefit for the year ended December 31, 2017. We did not make any measurement-period adjustments related to this item in 2018. Our accounting for this element of the Tax Act is complete. · Valuation Allowances: The Company must assess whether its valuation allowance analyses are affected by the various aspects of the Tax Act. We did not make any measurement-period adjustments related to this item in 2018. Our accounting for this element of the Tax Act is complete. · Global Intangible Low-Taxed Income (GILTI) Policy Election: The FASB allows companies to adopt an accounting policy to either recognize deferred tax for GILTI or treat such tax cost as a current period expense when incurred. The Company has adopted an accounting policy to treat taxes due on GILTI as a current period expense. GILTI is a part of the enacted tax reform where U.S. Shareholders of controlled foreign corporations (“CFCs”) are required to include in income the aggregate amount of “tested income” generated by its CFCs. In addition, a deduction of 50% of GILTI inclusion is available to offset taxable income after the use of net operating losses. The Company has CFCs operating in foreign jurisdictions that would be impacted by this aspect of tax reform. For the year ended December 31, 2018, the Company’s CFCs had a net “tested income” of approximately $0.8 million. As a result, there is $0.8 million GILTI inclusion in the current year. As a part of the enacted tax reform, changes were made to the current deductibility of business interest expense. Under the Tax Act, generally interest expense is limited to 30% of adjusted taxable income (taxable income adjusted for depreciation, amortization, or interest). Starting in 2022, depreciation and amortization are no longer removed to arrive at adjusted taxable income, which will serve to lower the allowable deduction of interest expense. An analysis was performed and it is estimated that this limitation will continue in future years, which may limit the Company’s ability to utilize the carried forward disallowed interest deductions. As such, a valuation allowance was recorded against the carryforward amount. Deferred Tax Assets and Liabilities Deferred income taxes represent the future tax benefits and expense associated with the utilization or reversal of loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets for federal and state income taxes are as follows (in thousands): As of December 31, 2018 2017 Deferred tax assets: Federal and state NOL carryforward $ 31,157 $ 9,889 Fixed assets 3 462 Accruals 27,946 682 Stock-based compensation 1,639 454 Inventory 667 835 Other intangibles 18,566 9,151 Allowance for customer credits and doubtful accounts — 843 Deferred rent — 985 Contribution carryforward 103 — Business interest limitation 9,844 — Deferred state income tax 309 231 Other 1,032 186 Total gross deferred tax assets 91,266 23,718 Less: valuation allowance (77,864) (19,975) Total deferred tax assets $ 13,402 $ 3,743 Deferred tax liabilities: Indefinite lived intangibles $ (10,696) $ (9,382) Fixed Assets (2,586) — Prepaids (120) (90) Debt discount — (921) Total gross deferred tax liabilities (13,402) (10,393) Net deferred tax liabilities $ — $ (6,650) Realization of our deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain. Because of our lack of U.S. earnings history, the net U.S. deferred tax assets have been fully offset by a valuation allowance. In 2018, this included a full valuation allowance against its indefinite lived assets, including non-expiring net operating losses and disallowed interest expense, which are in excess of its indefinite lived intangibles. The valuation allowance increased by $57.9 million during the year ended December 31, 2018. In general, it is the practice and intention of the Company to reinvest the earnings of its non-U.S. subsidiaries in those operations. Historically, the Company has not made a provision for U.S. income tax with respect to accumulated earnings of foreign subsidiaries where the foreign investment of such earnings is essentially permanent in duration. Generally, such amounts would become subject to U.S. taxation upon the remittance of dividends and under certain other circumstances. The Company has not provided U.S. taxes on unremitted earnings of its foreign subsidiaries as it has an accumulated deficit in earnings and profits and thus, no earnings to remit. Net Operating Loss and Tax Credit Carryforwards As of December 31, 2018, the Company had a net operating loss carryforward for federal income tax purposes of approximately $102.8 million, portions of which will begin to expire in 2018. Federal NOLs generated in 2018 and beyond have no expiration and can be carried forward indefinitely. We had a total state net operating loss carryforward of approximately $90.4 million, which will begin to expire in 2019. We had a foreign net operating loss carryforward of $13.7 million that has no expiration date. Utilization of some of the federal and state net operating loss and credit carryforwards are subject to annual limitations due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitations may result in the expiration of net operating losses and credits before utilization. The net operating losses are presented net of any expirations associated with such limitations. Unrecognized Tax Benefits The Company utilizes a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon tax authority examination, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. The Company’s unrecognized tax benefits were acquired as part of purchase accounting in Fiscal 2016. The Company’s policy is to include interest and penalties related to unrecognized tax benefits, if any, within the income tax benefit in the consolidated statements of operations and comprehensive income (loss). If the Company is eventually able to recognize the uncertain positions, the Company’s effective tax rate would be reduced. The Company currently has a full valuation allowance against the net deferred tax assets which would impact the timing of the effective tax rate benefit should any of these uncertain tax positions be favorably settled in the future. Any adjustments to the uncertain tax positions would result in an adjustment to the net operating income (loss) or tax credit carry forwards rather than resulting in a cash outlay. At December 31, 2018 and 2017, the Company had $0.1 million and $0.1 million of certain unrecognized tax benefits, included as a component of accounts payable and accrued expenses within the accompanying consolidated balance sheets, respectively. The Company has the following activity relating to unrecognized tax benefits (in thousands): Year Ended December 31, 2018 2017 Beginning balance $ 119 $ 81 Gross increase - tax positions in prior periods — 38 Lapse in statutes of limitations (30) — Ending balance $ 89 $ 119 Although it is reasonably possible that certain unrecognized tax benefits may increase or decrease within the next twelve months due to tax examination changes, settlement activities, expirations of statute of limitations, or the impact on recognition and measurement considerations related to the results of published tax cases or other similar activities, we do not anticipate any significant changes to unrecognized tax benefits over the next 12 months. The Company files income tax returns in the U.S. federal jurisdiction and in various state and local jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state or local income tax examination by taxing authorities for years prior to 2014. The Company is currently under examination by the Internal Revenue Service for the pre-acquisition years ended November 30, 2015 and December 31, 2015. The Company believes that any adjustments expected to result from this examination have been adequately reserved for. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions | |
Related Party Transactions | 19. Related Party Transactions Jason Rabin On October 29, 2018, the Company entered into an employment agreement with Jason Rabin in connection with the employment of Mr. Rabin as its Chief Executive Officer. The employment agreement provides that Mr. Rabin is employed for a term beginning on October 29, 2018 and ending December 31, 2021, subject to earlier termination or extension as specified in the employment agreement. The employment agreement provides for Mr. Rabin to receive an annual base salary of not less than $1,275,000 per year (to be prorated for any partial calendar year of employment) and for certain other benefits consistent with those provided to other of our senior executives. The employment agreement provides that for each year during his term (prorated for 2018), Mr. Rabin is entitled to the use of a Company car, a clothing allowance, reimbursement for fees and expenses for tax and financial planning, legal and accounting, and reimbursement of membership fees and dues up to $200,000. In addition, Mr. Rabin is eligible to receive an annual cash bonus of up to 300% of his annual base salary, subject to the achievement of the applicable performance goals (the “ EBITDA Bonus ”), and an annual cash bonus up to $4,000,000 in the aggregate over its term, subject to the achievement of the applicable performance goals (the “ Leverage-Based Bonus ”). The employment agreement also references that Mr. Rabin purchased from us 3,125,000 shares of our common stock at a price of $8 per share. Mr. Rabin’s employment agreement provides for an inducement grant of 4,100,000 RSUs with respect to our common stock and 500,000 PSUs with respect to our common stock, subject to vesting requirements. This inducement grant was made as an inducement award and was not granted under our 2016 Stock Incentive Compensation Plan, but is subject to the same terms and conditions as provided in the 2016 Stock Incentive Compensation Plan. In addition, Mr. Rabin is entitled to accelerated vesting or forfeiture of his RSUs and PSUs as well as separation payments upon the occurrence of certain events, as set forth in his employment agreement. Arthur Rabin Arthur Rabin, the father of Jason Rabin, our Chief Executive Officer and member of our Board of Directors, is our President of Sourcing. Mr. Rabin has been employed by us since the GBG Acquisition and prior to that, he was employed by GBG. Mr. Rabin is employed by us as an at-will employee at an annual salary of $1,000,000 and is entitled to participate in all company sponsored employee benefits consistent with other senior executives with similar titles. Anurup S. Pruthi On October 30, 2018, we entered into an employment agreement with Anurup S. Pruthi in connection with our employment of Mr. Pruthi as our Chief Financial Officer. The employment agreement provides that Mr. Pruthi will be employed for a term beginning on November 5, 2018 and ending December 31, 2021, subject to earlier termination as specified in the employment agreement. If Mr. Pruthi remains an employee of us following expiration of the term and his employment agreement is not extended, Mr. Pruthi will be an employee “at will.” The employment agreement provides for Mr. Pruthi to receive an annual base salary of not less than $650,000 per year (to be prorated for any partial calendar year of employment) and for certain other benefits consistent with those provided to other of our senior executives. The employment agreement provides for a cash signing bonus of $250,000 to be paid promptly following November 5, 2018, travel allowance of $1,500 per month during the term of the agreement, and legal fees in connection with the negotiation and drafting of his employment agreement up to $15,000. In addition, Mr. Pruthi is eligible to receive an annual cash bonus of up to 100% of his annual base salary, subject to the achievement of the applicable performance goals; provided that for calendar years 2018 and 2019, his will be equal to at least 100% of Mr. Pruthi’s base salary. Mr. Pruthi’s employment agreement provides for an inducement grant of 600,000 RSUs with respect to our common stock, subject to vesting requirements. His inducement grant was made as an inducement award and was not granted under our 2016 Stock Incentive Compensation Plan, but is subject to the same terms and conditions as provided in the 2016 Stock Incentive Compensation Plan. In addition, Mr. Pruthi is entitled to accelerated vesting or forfeiture of his RSUs as well as separation payments upon the occurrence of certain events, as set forth in his employment agreement. Andrew Tarshis On October 29, 2018, the Company entered into a consulting agreement with Andrew Tarshis, former director of the Company, and an employee of Tengram Capital Partners (as defined below), pursuant to which Mr. Tarshis is entitled to receive $25,000 a month for a fixed term of 36 months. This consulting agreement may be terminated upon 30 days written notice by either party. Agreements Related to the RG Merger RG Stock Purchase Agreement On January 28, 2016, we entered into a Stock Purchase Agreement with TCP Denim, LLC, one of our significant stockholders, pursuant to which we issued and sold to TCP Denim, LLC an aggregate of 50,000 shares of Series A Preferred Stock, for an aggregate purchase price of $50 million in cash (the “ RG Stock Purchase Agreement ”). Under the form of certificate of designation for the Series A Preferred Stock, each share of Series A Preferred Stock entitled the holder thereof to receive cumulative cash dividends, payable quarterly, at an annual rate of 10%, plus accumulated and accrued dividends thereon through such date. Additionally, if our Board of Directors declared or paid a dividend on the common stock, then each holder of the Series A Preferred Stock would have been entitled to receive a cash dividend on an as-converted basis. Each holder of the Series A Preferred Stock was entitled to vote on an as-converted basis and together with the holders of common stock as a single class, subject to certain limitations. For so long as a to-be-determined percentage of the shares of the Series A Preferred Stock were outstanding, the holders of the Series A Preferred Stock, exclusively and as a separate class, were entitled to elect three members of the board of directors, each of whom may only be removed without cause by the affirmative vote of the holders of a majority of the shares of Series A Preferred Stock. The holders of the Series A Preferred Stock had separate class voting rights with respects to certain matters affecting their rights. Upon any liquidation event, holders of the Series A Preferred Stock were entitled to receive the greater of the liquidation preference on the date of determination and the amount that would be payable to the holders of the Series A Preferred Stock had such holders converted their shares of Series A Preferred Stock into shares of common stock immediately prior to such liquidation event. Each share of the Series A Preferred Stock was convertible, at the option of the holder thereof, at any time and without the payment of additional consideration by the holder, at an initial conversion price of $11.16 (after taking into account the Reverse Stock Split (as defined below)). All of the outstanding Series A Preferred Stock was converted into shares of our common stock in accordance with its terms on October 29, 2018. See “ Agreements Related to the GBG Acquisition—Conversion ” below. Registration Rights Agreement On January 28, 2016, we entered into a registration rights agreement (the “ Tengram Registration Rights Agreement ”) with TCP Denim, LLC and certain of its affiliates, who are one of our significant stockholders, the noteholders party to the Rollover Agreement and Michael Buckley, our former Chief Executive Officer. Pursuant to the Tengram Registration Rights Agreement, and subject to certain limitations described therein, we are required to provide certain demand and piggyback registration rights to the parties to the Tengram Registration Rights Agreement. In particular, if demanded, we are required to prepare and file a registration statement on Form S-1 or S-3 (or any similar form or successor thereto) for the registration under the Securities Act of shares of our common stock issued to the parties to the Tengram Registration Rights Agreement. The Tengram Registration Rights Agreement was amended on October 29, 2018, in connection with the consummation of the GBG Acquisition. Employment Agreements with Officers The Company entered into employment agreements with Mr. Buckley, our former Chief Executive Officer and Bob Ross, our former Chief Financial Officer. On October 29, 2018, the Company entered into a separation and release agreement with Mr. Buckley, pursuant to which Mr. Buckley resigned as a director on the Board of Directors and from all positions with us and any of our subsidiaries. Pursuant to this separation agreement, Mr. Buckley received (i) continuation of his base salary due under his employment agreement through December 31, 2018, (ii) a lump sum cash payment of $200,000 to be paid as soon as practicable following October 29, 2018, (iii) full payment towards the cost of COBRA continuation coverage for himself and any covered dependents for 18 months following October 29, 2018 (unless he becomes eligible to receive substantially similar coverage from another employer), (iv) accelerated vesting of 144,588 restricted stock units and (v) accelerated vesting of 150,000 performance stock units. Also, Bob Ross ceased to serve as our Chief Financial Officer, effective November 5, 2018. Mr. Ross remained an employee of the Company until January 4, 2019. See “Note 21 – Subsequent Events” below for additional detail on Mr. Ross’ separation from the Company. Payments to Tengram Capital Partners, LP From time to time, the Company expects to reimburse Tengram Capital Partners, LP, an entity that is affiliated with one of the Company’s largest stockholders, for certain travel and other related expenses of its employees related to services performed on the Company’s behalf and at the Company’s request. For the year ended December 31, 2018, the Company incurred expenses of $5.5 million related to reimbursement of expenses, which included (i) $5 million paid in connection with services performed by Tengram Capital Partners and its affiliates on behalf of the Company related to the GBG Acquisition, and (ii) $469 thousand of out of expenses and travel reimbursement. For the year ended December 31, 2017, the Company incurred expenses of $62 thousand related to reimbursement of expenses. SWIMS® Transaction In connection with the acquisition of SWIMS® in July 2016, the Company entered into certain financing arrangements with Tengram II, an entity affiliated with the holder of the Series A Preferred Stock, TCP Denim, LLC. On January 18, 2018, the SWIMS Convertible Note matured and automatically converted into newly issued shares of the Company’s Series A-1 Preferred Stock, par value $0.10 per share, at a conversion price of $3.00 per share. The outstanding balance of the SWIMS Convertible Note, together with any accrued and unpaid interest thereon, converted into 4,587,964 shares of Series A-1 Preferred Stock. Upon the issuance of such shares of Series A-1 Preferred Stock by the Company to Tengram II, the SWIMS Convertible Note was settled in its entirety. SWIMS Warrant In connection with the SWIMS acquisition, we issued to Tengram II a warrant for the purchase of 500,000 shares of common stock at an exercise price of $3.00 per share. The SWIMS Warrant expires on July 18, 2021. The 2024 Convertible Notes On October 29, 2018, we issued convertible promissory notes in an aggregate principal amount of $25.0 million to GSO/ BTO Affiliates. The 2024 Convertible Notes are convertible at the holder’s option beginning on or after October 29, 2019 until the earlier to occur of (x) repayment in full of all principal and interest outstanding under the Second Lien Credit Agreement and (y) October 29, 2024, into shares of the Company’s common stock at a conversion price of $8.00 per share, subject to adjustment. The 2024 Convertible Notes do not initially bear interest. From and after April 29, 2019, the 2024 Convertible Notes shall bear interest at the rate of 12.0% per annum. From and after October 29, 2019, the 2024 Convertible Notes shall bear interest at the rate of 16.0% per annum. Interest payments are due each January 31, April 30, July 31, and October 31. To the extent that we are unable to pay cash interest on the 2024 Convertible Notes on an interest payment date because of restrictions in our credit agreements or our other debt agreements, an amount equal to the unpaid interest then due shall be added to the principal amount of the 2024 Convertible Notes. From and after October 29, 2018 until October 29, 2019, upon consummation of any sales of common stock by us for cash, we may, on at least ten (10) days’ prior written notice to the holder of a 2024 Convertible Note, prepay such 2024 Convertible Note in whole but not in part solely with the net proceeds of such sale of common stock in an amount equal to the greater of (x) the principal amount of such 2024 Convertible Note, together with accrued interest through and including the date of prepayment, or (y) the value equal to (i) the number of shares of common stock that would be received upon conversion of such 2024 Convertible Note on the repayment date multiplied by the market value of the common stock as of such date, plus (ii) any accrued but unpaid interest that has not been added to the principal amount of such 2024 Convertible Note on the date of such prepayment. Also, the 2024 Convertible Notes are prepayable in whole but not in part at the Prepayment Amount: (A) from October 29, 2019 through October 29, 2021 only upon a change in control or a liquidation of us, or (B) from October 29, 2021 until the 2024 Convertible Note Maturity Date, in each case on at least ten (10) days’ prior written notice to the holder. The Private Placement On October 29, 2018, we completed a private placement of 10,000,000 shares of common stock to certain members of management, including Jason Rabin, our CEO, affiliates of Ares and the GSO/BTO Affiliates at $8.00 per share for total consideration of $80.0 million, of which $25.0 million was received from the GSO/BTO Affiliates (in the aggregate) and Jason Rabin. Additionally, in connection with and in consideration of the GSO/BTO Affiliates entering into the Second Lien Term Facility and providing loans to us thereunder, we issued to the GSO/BTO Affiliates 23,094,501 shares of common stock for no additional consideration in a private placement. Stockholder Agreement On October 29, 2018, TCP Denim, LLC, Tengram Capital Partners Fund II, L.P., Tengram Capital Partners Gen2 Fund, L.P., Tengram Capital Associates, LLC and RG II Blocker, LLC (collectively, with TCP Denim, LLC, Tengram Capital Partners Fund II, L.P., Tengram Capital Partners Gen2 Fund, L.P. and Tengram Capital Associates, LLC, the “Tengram Stockholders”) entered into a stockholder agreement (the “Stockholder Agreement”) by and among the Tengram Stockholders, the Company, the GSO/BTO Affiliates (together with the Tengram Stockholders, the “Stockholders”). The Stockholder Agreement contains a number of agreements and restrictions with respect to our securities held by the Stockholders and our obligations. Pursuant to the Stockholder Agreement, our Board of Directors will have eight members. For so long as the Tengram Stockholders beneficially own (i) at least 50% of the shares held by the Tengram Stockholders on a fully diluted basis as of October 29, 2018, the Tengram Stockholders may nominate two directors to our Board of Directors; and (ii) at least 5% of the shares held by the Tengram Stockholders on a fully diluted basis as of October 29, 2018, the Tengram Stockholders may nominate one director to our Board of Directors. The Tengram Stockholders appointed directors are Mr. Eby and Mr. Sweedler (collectively, with their respective successors and replacements, the “ Tengram Directors ”). Similarly, for so long as the GSO/BTO Affiliates beneficially own (i) at least 50% of the shares held by the GSO/BTO Affiliates on a fully diluted basis as of October 29, 2018, GSO Capital Partners LP (on behalf of the GSO/BTO Affiliates) may nominate two directors to our Board of Directors; and (ii) at least 5% of the shares held by the GSO/BTO Affiliates on a fully diluted basis as of October 29, 2018, GSO Capital Partners LP (on behalf of the GSO/BTO Affiliates) may nominate one director to our Board of Directors. The GSO Capital Partners LP appointed directors are Randall Kessler and Robert Petrini (collectively, with their respective successors and replacements, the “ GSO Directors ”). The Stockholders also agreed to cause the removal of the GSO Directors upon the request of GSO Capital Partners LP and the Tengram Directors upon the request of the Tengram Stockholders. Upon the written request of the Tengram Stockholders to GSO Capital Partners LP (on behalf of the GSO/BTO Affiliates) or to the Tengram Stockholders, respectively, to remove one of our independent directors, the Stockholders will use their best efforts to cause such independent director to be removed as one of our directors. Subject to the qualifications discussed below, the Nominating and Governance Committee will consist of one member appointed by the Tengram Stockholders, one member appointed by GSO Capital Partners LP (on behalf of the GSO/BTO Affiliates), and one independent director. For so long as the Tengram Stockholders beneficially own at least 5% of the outstanding shares of our common stock on a fully diluted basis held by the Tengram Stockholders as of October 29, 2018, the Tengram Stockholders may nominate one member of the Nominating Committee. For so long as the GSO/BTO Affiliates beneficially own at least 5% of the outstanding shares of common stock of the Company on a fully diluted basis held by the GSO/BTO Affiliates as of October 29, 2018, GSO Capital Partners LP (on behalf of the GSO/BTO Affiliates) may nominate one member of the Nominating Committee. The Stockholders agreed that they will not support the election of any independent director unless that individual is mutually acceptable to the Tengram Stockholders and the GSO/BTO Affiliates and to support the election of our Chief Executive Officer to the Board of Directors. The Stockholders also agreed that, prior to the “Restriction Expiration Time,” which is defined as the earliest to occur of October 29, 2020, the date of a change of control of the Centric Brands Inc. and otherwise by agreement between us and the Stockholders, subject to certain limited exceptions described in the Stockholder Agreement, the Stockholders may not transfer their shares of common stock or securities convertible into common stock (the “ Restriction Shares ”) or enter into voting arrangement or grant a proxy on their Restriction Shares other than in accordance with the Stockholder Agreement. The Tengram Stockholders also granted each of Ares and HPS Investment Partners, LLC a lockup on the Tengram Stockholders’ holdings of common stock prior to the Restriction Expiration Time, subject to certain limited exceptions described therein. The Stockholders agreed to grant the other Stockholders a binding right of first offer on the sale of their holdings of common stock until October 29, 2020 (subject to certain limited exceptions). Also, the Stockholders agreed to give the Company prior written notice of the transfer of Restricted Securities prior to certain transfers of such Restricted Securities. Registration Rights Agreement On October 29, 2018, in connection with the GBG Acquisition, we entered into a registration rights agreement with the GSO/BTO Affiliates (the “ GSO RRA ”). Also on such date, we entered into a registration rights agreement with Ares Capital Corporation and its certain of its affiliates (the “ Ares RRA ”, and, together with the GSO RRA, the “ RRAs ”). Pursuant to the RRAs, and subject to the limitations described therein, the Company will provide certain demand and piggy back registration rights with respect to shares of our common stock (or securities convertible into common stock) held by the GSO/BTO Affiliates and by Ares and its affiliates who hold our securities. Additionally, pursuant to Jason Rabin’s subscription agreement with us to purchase common stock in the Private Placement, dated as of October 29, 2018, we agreed to provide certain piggy back registration rights with respect to shares of common stock (or securities convertible into common stock) held by Mr. Rabin. Conversion On October 29, 2018, (i) fifty thousand (50,000) shares of the Company’s Series A Preferred Stock were converted at the election of the holders hereof into 5,852,142 shares of common stock in accordance with the terms of the Series A Preferred Stock, and (ii) 4,587,964 shares of the Company’s Series A-1 Preferred Stock were converted at the election of the holders thereof into 4,951,177 shares of common stock in accordance with the terms of the Series A-1 Preferred Stock. Management Incentive Plan On October 29, 2018, we entered into a letter agreement with the GSO/BTO Affiliates. Under the MIP Letter, we agreed to create a new stock incentive compensation plan for the amount of 1,776,500 shares of our common stock, which will be allocated by a Special Committee of the Board of Directors in accordance with the Stockholder Agreement. The parties are in process of finalizing an amendment to the MIP Letter, pursuant to which the Company expects the shares to be allocated under our existing 2016 Stock Incentive Plan instead of a newly created plan and such grants would be subject to the same terms as the 2016 Stock Incentive Plan. Upon the forfeit of any awards granted at the direction of the Special Committee under the 2016 Stock Incentive Plan, the Company expects to issue the equivalent amount of shares of common stock to GSO for no additional consideration. |
Employee Benefit Plans
Employee Benefit Plans | 12 Months Ended |
Dec. 31, 2018 | |
Employee Benefit Plans | |
Employee Benefit Plans | 20. Employee Benefit Plans The Hudson Clothing LLC 401(k) Plan (the “ Hudson Plan ”), covers employees employed by Hudson. All employees who have worked for Hudson after 30 days may participate in the Hudson Plan and may contribute up to the maximum amount allowed by law of their salary to the plan. The Company may make matching contributions on a discretionary basis. The Differential Brands Group Inc. 401(k) Plan (the “ DBG Plan ”), covers employees employed by Differential Brands Group, Inc. All employees who have worked for Differential Brands Group Inc. after 6 months may participate in the DBG Plan and may contribute up to the maximum amount allowed by law of their salary to the plan. The Company may make matching contributions on a discretionary basis. All employees who have worked 1,000 hours qualify for profit sharing in the event at the end of each year the Company decides to do so. The Robert Graham Design 401(k) Plan (the “ RG Plan ”), covers employees employed by Robert Graham and SWIMS. After completing 90 days of service, all employees who have worked for Robert Graham or SWIMS become eligible to participate in the RG Plan from the first day of each calendar quarter and may contribute up to the maximum amount allowed by law of their salary to the plan. The Company may make matching contributions on a discretionary basis. All employees who have worked 1,000 hours qualify for profit sharing in the event at the end of each year the Company decides to do so. Administrative expense for these plans totaled $24 thousand and $36 thousand for the years ended December 31, 2018 and 2017, respectively, included in selling, general and administrative expenses within the accompanying consolidated statements of operations and comprehensive income (loss). Matching contributions were $156 thousand and $238 thousand for the years ended December 31, 2018 and 2017, respectively, included in selling, general and administrative expenses within the accompanying consolidated statements of operations and comprehensive income (loss). |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2018 | |
Subsequent Events | |
Subsequent Events | 21. Subsequent Events New Credit Agreements Amendments On April 17, 2019, the Company entered into the first amendment and waiver (the “ 1L Amendment ”) to the First Lien Credit Agreement to, among other things: (i) increase the aggregate commitments under the New Revolving Facility under the First Lien Credit Agreement from $150.0 million aggregate principal amount to $200.0 million; (ii) increase the amount of the permitted securitization facility under the RPA from $550.0 million to $600.0 million; (iii) increase the borrowing base of the First Lien Credit Agreement as set forth in the 1L Amendment; and (iv) amend and restate the Company’s consolidated fixed charge ratio covenant. On April 17, 2019, the Company entered into the first amendment and waiver (the “ 2L Amendment ”) to the Second Lien Credit Agreement to, among other things, increase the amount of amount of indebtedness under the First Lien Credit Agreement from $795.0 million to $845.0 million. In connection with the 1L Amendment, the Company paid the lenders under the New Revolving Facility a fee of $1.5 million. Also, on or around April 15, 2019, the Company received consents under the First Lien Credit Agreement, the Second Lien Credit Agreement and under the RPA to, among other things, extend the deadline for the Company to complete and publicly file its 2018 year-end financial statements until May 15, 2019. RPA/PSA Amendments On April 25, 2019, the Company entered an amendment to its trade receivables securitization facility (the “Receivables Facility” ) pursuant to (i) an amendment to (the “PSA Amendment” ) the PSA and (ii) an amendment to (the “RPA Amendment” ) the RPA. Under the terms of the PSA Amendment, the Originators sell or contribute certain of their trade accounts receivable, related collections and security interests (the “Receivables” ) to Spring on a revolving basis. Under the terms of the RPA Amendment, Spring sells to the Purchasers an undivided ownership interest in the Receivables for up to $600 million in cash proceeds, an increase of $150 million. Ross Separation Agreement Mr. Ross ceased to serve as Chief Financial Officer of the Company, effective November 5, 2018. Mr. Ross remained an employee of the Company until January 4, 2019. On April 9, 2019, the Company and Mr. Ross entered into a separation agreement and release, effective as of April 16, 2019 (the “Ross Separation Agreement” ), whereby Mr. Ross will receive certain separation payments and includes customary waiver and release provisions. The entry into the Separation Agreement effectively terminated the employment agreement, dated as of January 30, 2017 previously entered into by and between the Company and Mr. Ross (the “Ross Employment Agreement” ). Pursuant to the Ross Separation Agreement, Mr. Ross resigned from all positions with the Company and any of its subsidiaries effective as of January 4, 2019. Pursuant to the Ross Separation Agreement, Mr. Ross received (i) the continuation of his base salary due under the Ross Employment Agreement through January 4, 2020, (ii) a lump sum cash payment of $10,000 as reimbursement for legal fees incurred in connection with the Ross Separation Agreement, (iii) the full payment towards the cost of COBRA continuation coverage for himself and any covered dependents for 18 months following January 4, 2019 (unless he becomes eligible to receive substantially similar coverage from another employer) and (iv) accelerated vesting of 133,333 RSUs. NASDAQ Notice On April 18, 2019, the Company received a notice (the “ Notice ”) from NASDAQ stating that because the Company had not yet filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the “ Form 10-K ”), the Company is no longer in compliance with NASDAQ Listing Rule 5250(c)(1). NASDAQ Listing Rule 5250(c)(1) requires listed companies to timely file all required periodic financial reports with the Securities and Exchange Commission. The Notice states that the Company has 60 calendar days, or until June 17, 2019, to submit to NASDAQ a plan to regain compliance with the NASDAQ Listing Rules. If NASDAQ accepts the Company’s plan, then NASDAQ may grant the Company up to 180 days from the prescribed due date for filing the Form 10-K (as extended pursuant to Rule 12b-25 under the Securities Exchange Act of 1934, as amended), or until October 14, 2019, to regain compliance. If NASDAQ does not accept the Company’s plan, then the Company will have the opportunity to appeal that decision to a NASDAQ Hearings Panel. The Company filed this Form 10-K with the Securities and Exchange Commission prior to the due date of such plan to regain compliance with the NASDAQ Listing Rules. Bylaws Amendment Effective May 15, 2019, the Company amended and restated its Bylaws to, among other things, update its name and to add Section 3.6, requiring the Company to consult with its board of directors prior to voluntarily commencing bankruptcy proceedings. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Summary of Significant Accounting Policies | |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company, including its wholly-owned and majority-owned subsidiaries. All material intercompany accounts and transactions have been eliminated. We do not have any investments in companies that represent less than 20% of the related ownership interests. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of estimates relate primarily to allowance for bad debts, returns, sales allowances, and customer chargebacks, inventory write-downs, valuation of goodwill, intangible and long-lived assets, and valuation of deferred income taxes. Actual results could differ from these estimates. |
Revenue Recognition | Revenue Recognition The Company adopted Accounting Standards Codification ( “ASC 606” ), Revenue from Contracts with Customers , with a date of initial application of January 1, 2018. As a result, the Company has changed its accounting policy for revenue recognition as described below. The Company applied ASC 606 using the modified retrospective approach – i.e. by recognizing the cumulative effect of initially applying ASC 606 as an adjustment to the opening balance of equity at January 1, 2018. Therefore, the comparative information has not been adjusted and continues to be reported under ASC 605. The details of the significant changes and quantitative impact of the changes are set out below. The Company applied the modified retrospective approach only to contracts that were not complete as of the date of the initial application, January 1, 2018. Effective January 1, 2018, wholesale revenues are recorded when a contract with the customer is agreed to by both parties and product has been transferred, which generally occurs at the point of shipment from the Company’s warehouse, and recorded at the transaction price based on the amount the Company expects to receive. Collection is probable as the majority of shipments occur to reputable credit worthy businesses and through factored relationships which guarantee payment. Estimated reductions to revenue for customer allowances are recorded based upon history as a percentage of sales and current outstanding chargebacks. The Company may allow for returns based upon pre-approval or in the case of damaged goods. Such returns are estimated based on historical experience and also specific claims filed by the customer. Beginning January 1, 2018, a refund liability is included in accounts payable and accrued expenses within the accompanying consolidated balance sheet, which was previously recorded net of accounts receivable. Also, effective January 1, 2018, the Company records a return asset receivable in prepaid expenses and other current assets within the accompanying consolidated balance sheet. Prior to January 1, 2018, inventory expected to be returned was recorded within inventories. The return asset receivable is evaluated for impairment each period. The Company recorded a decrease of $569 thousand to opening accumulated deficit as of January 1, 2018 to record the return asset receivable and related impairment charge. Retail store revenue is recognized at the time the customer takes possession of the related merchandise. Revenue for ecommerce sales of products ordered through the Company’s retail internet sites are recognized at the point of shipment to the customer. Prior to January 1, 2018, revenue for ecommerce sales was recorded at the point of delivery to the customer. The Company recorded an adjustment to increase the opening accumulated deficit as of January 1, 2018 by $39 thousand, to reflect the impact on ecommerce shipments from adopting ASC 606. Ecommerce revenue was reduced by an estimate for returns based on the historical rate of return as a percent of sales. Retail store revenue and ecommerce revenue exclude sales taxes collected from the customer. Revenue from licensing arrangements is recognized based on actual sales when the Company expects royalties to exceed the minimum guarantee. For licensing arrangements in which the Company does not expect royalties to exceed the minimum guarantee, an estimate of the transaction price is recognized on a straight-line basis over the term of the contract. A contract asset is recorded for revenue recognized in advance of the contract payment terms, which is included in other assets within the accompanying consolidated balance sheet. Nonrefundable upfront fees are recorded as a contract liability and revenue is recognized straight-line over the term of the contract. Contract liabilities are included in other liabilities within the accompanying consolidated balance sheet. Prior to January 1, 2018, revenue from licensing arrangements was recognized when earned in accordance with the terms of the underlying agreements and deemed collectible, generally based upon the higher of (a) the contractually guaranteed minimum royalty or (b) actual net sales data received from licensees. The Company recorded an adjustment to increase the opening accumulated deficit as of January 1, 2018, by $1.3 million, to reflect the impact on licensing revenue from adopting ASC 606. Amounts related to shipping and handling that are billed to customers are considered to be activities to fulfill a promise to transfer the goods and are reflected in net sales, and the related costs are reflected in cost of goods sold within the accompanying consolidated statements of operations and comprehensive (loss) income. This accounting treatment is consistent with the Company’s treatment of shipping and handling revenue prior to January 1, 2018. The adoption of ASC 606 had no net impact on the Company's consolidated statement of cash flows for the year ended December 31, 2018. |
Business Combinations | Business Combinations The Company accounts for business acquisitions under ASC 805, Business Combinations . The total purchase consideration for an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities assumed at the acquisition date. Costs that are directly attributable to the acquisition are expensed as incurred. Identifiable assets (including intangible assets), liabilities assumed (including contingent liabilities) and noncontrolling interests in an acquisition are measured initially at their fair values at the acquisition date. The Company recognizes goodwill if the fair value of the total purchase consideration and any noncontrolling interests is in excess of the net fair values of the identifiable assets acquired and the liabilities assumed. The Company recognizes a bargain purchase gain within other income (expense), net, on the consolidated statement of operations if the net fair value of the identifiable assets acquired and the liabilities assumed is in excess of the fair value of the total purchase consideration and any noncontrolling interests. The Company includes the results of operations of the acquired business in the consolidated financial statements beginning on the acquisition date. |
Cash Equivalents | Cash Equivalents All highly liquid investments that are both readily convertible into known amounts of cash and mature within 90 days from their date of purchase are considered to be cash equivalents. Such investments are stated at cost, which approximates fair value. |
Accounts Receivable, Factored Accounts Receivable and Allowance for Bad Debts, Sales Allowances, and Customer Chargebacks | Accounts Receivable, Factored Accounts Receivable and Allowance for Bad Debts, Sales Allowances, and Customer Chargebacks The Company evaluates its ability to collect accounts receivable, factor accounts receivable with recourse and charge-backs (customer disputes) based upon a combination of factors. Reserves for chargebacks are recognized based on historical collection experience. A specific reserve for bad debts is taken against amounts due to reduce the net recognized receivable to the amount reasonably expected to be collected. Whether a receivable is past due is based on how recently payments have been received and in certain circumstances when the Company is aware of a specific customer’s inability to meet its financial obligations (e.g., bankruptcy filings, substantial downgrading of credit sources, etc.). Amounts are written off against the reserve once it is established that it is remote such amounts will be collected. The Company also reserves for potential sales returns and allowances based on historical trends. |
Inventories | Inventories Inventory is valued at the lower of cost or net realizable value with cost determined by the first-in, first-out method. Inventory consists of finished goods, work-in-process and raw materials. The Company continually evaluates its inventory by assessing slow moving current product. Net realizable value of non-current inventory is estimated based on historical sales trends, the impact of market trends, an evaluation of economic conditions and the value of current orders relating to future sales. Inventory reserves establish a new cost basis for inventory. Such reserves are not reversed until the related inventory is sold or otherwise disposed of. Costs capitalized in inventory include the purchase price of raw materials, contract labor and production costs, plus in-bound transportation costs, and import fees and duties. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation and amortization is calculated using the straight - line method over the following estimated useful lives of the assets: Computer and equipment: 3 to 7 years Furniture and fixtures: 3 to 7 years Leasehold improvements: Shorter of 10 years or term of lease Maintenance and repairs are charged to expense as incurred. Upon sale or retirement, the asset cost and related accumulated depreciation or amortization is removed from the accounts, and any related gain or loss is included within selling, general and administrative expenses within the accompanying consolidated statements of operations and comprehensive income (loss). |
Impairment of Long-Lived Assets, Intangible Assets and Goodwill | Impairment of Long‑Lived Assets, Intangible Assets and Goodwill The Company assesses the impairment of long - lived assets, identifiable intangible assets and goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In addition, the Company assesses goodwill and indefinite lived intangible assets for impairment annually. Factors considered important that could trigger an impairment review other than on an annual basis include the following: · A significant underperformance relative to historical or projected future operating results; · A significant change in the manner of the use of the acquired asset or the strategy for the overall business; or · A significant negative industry or economic trend. The estimated cash flows used for this nonrecurring fair value measurement are considered a Level 3 input as defined in “Note 13 – Fair Value Measurement of Financial Instruments.” Impairment of Long‑Lived Assets and Intangible Assets Subject to Amortization When the Company determines that the carrying value of long‑lived assets, such as property and equipment, and intangible assets subject to amortization, may not be recoverable based upon the existence of one or more of the aforementioned factors and the carrying value exceeds the estimated undiscounted cash flows expected to be generated by the asset, impairment is measured based on a projected discounted cash flow method using a discount rate determined by management. These cash flows are calculated by netting future estimated sales against associated merchandise costs and other related expenses such as payroll, occupancy and marketing. The impairment loss calculations require management to apply judgment in estimating future cash flows and the discount rates that reflect the risk inherent in future cash flows. Future expected cash flows for retail store assets are based on management’s estimates of future cash flows over the remaining lease period or expected life, if shorter. The Company considers historical trends, expected future business trends and other factors when estimating each store’s future cash flow. The Company also considers factors such as: the local environment for each store location, including mall traffic and competition; the ability to successfully implement strategic initiatives; and the ability to control variable costs such as cost of sales and payroll, and in some cases, costs to renegotiate a lease. If actual results are not consistent with the assumptions and judgments used in estimating future cash flows and asset fair values, there may be additional exposure to future impairment losses that could be material to the Company’s results of operations. There were no impairment charges recorded during the year ended December 31, 2018 and an immaterial amount recorded during the year ended December 31, 2017. Intangible assets subject to amortization, such as customer relationships, are amortized over their estimated useful lives. There was no impairment charge recorded related to intangible assets subject to amortization during the years ended December 31, 2018 and 2017. Goodwill and Indefinite Lived Intangible Assets Goodwill and intangible assets with indefinite lives, such as trademarks, are not amortized, but are tested at least annually for impairment on December 31 of each year or when circumstances indicate their carrying value may not be recoverable. Goodwill is evaluated for impairment by determining the fair value of each reporting unit and comparing this value to its carrying value. If the fair value exceeds the carrying value, including goodwill, no further work is required and no impairment loss would be recognized. If the carrying value exceeds the fair value of the assets, goodwill impairment is recorded for the amount that the reporting unit's carrying amount exceeds its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The Company calculates the value of the indefinite lived intangible assets using a discounted cash flow method, based on the relief from royalty method. There was no impairment charge recorded related to indefinite lived intangible assets or goodwill during the years ended December 31, 2018 and 2017. |
Deferred Rent and Tenant Allowances | Deferred Rent and Tenant Allowances When a lease includes lease incentives (such as a rent holiday) or requires fixed escalations of the minimum lease payments, rental expense is recognized on a straight‑line basis over the term of the lease starting from the date of possession and the difference between the average rental amount charged to expense and amounts payable under the lease is included in deferred rent in the accompanying consolidated balance sheets. Deferred rent also includes tenant allowances received from landlords which are amortized as a reduction to rent expense on a straight-line basis over the term of the lease starting at the date of possession. |
Deferred Financing Costs | Deferred Financing Costs Deferred financing costs are amortized using the effective interest rate method over the term of the related agreements and recorded as a component of interest expense in the accompanying consolidated statements of operations and comprehensive income (loss). Amortization of deferred financing costs included in interest expense was approximately $3.1 million and $0.4 million for the years ended December 31, 2018 and 2017, respectively. Deferred financing costs are presented on the consolidated balance sheets as a direct reduction of the related debt or in other assets. |
Costs of Goods Sold | Cost of Goods Sold Cost of goods sold includes the following: the cost of merchandise; customs related taxes and duties; production costs, including directly attributable overhead costs; delivery expense; in-bound and outbound freight; obsolescence and shrink provisions; design costs; warehousing and handling costs; and other inventory acquisition related costs. Under our license agreements, we are generally required to pay guaranteed minimum royalties and make specified additional royalty and advertising payments (usually based on a percentage of net sales). Such payments are recognized within costs of sales at the higher of royalties incurred or on a straight line basis over the period covered by the guaranteed minimums. |
Selling, General and Administrative Expenses | Selling, General and Administrative Expenses Selling, general and administrative expenses include salaries and benefits, travel and entertainment, professional fees, advertising, marketing, facilities, and bad debt expense. |
Advertising Costs | Advertising Costs Advertising costs are charged to expense as incurred, except for direct to consumer advertising, which is capitalized and amortized over its expected period of future benefit. Advertising expenses included in selling, general and administrative expenses within the accompanying consolidated statements of operations and comprehensive income (loss) were $13.9 million and $9.5 million for the years ended December 31, 2018 and 2017, respectively. Prepaid advertising costs were $5.3 million and $0.9 million at December 31, 2018 and 2017, respectively. |
Stock-Based Compensation | Stock‑Based Compensation The cost of all employee stock‑based compensation awards is measured based on the grant date fair value of those awards and recorded as compensation expense over the period during which the employee is required to perform service in exchange for the award (generally over the vesting period of the award). The cost of all non-employee stock‑based compensation awards is measured based on the grant date fair value of those awards and revalued each reporting period, and is recorded as compensation expense over the service period. For all stock based compensation awards that contain graded vesting based on service conditions, the Company has elected to apply a straight‑line recognition method to account for these awards. See “Note 14 – Equity.” |
Income Taxes | Income Taxes The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred taxes are determined based on the temporary differences between the net book value and tax bases of assets and liabilities using enacted tax rates. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Quarterly, management reassesses the need for a valuation allowance. The likelihood of a material change in the expected realization of these assets depends on the Company’s ability to generate sufficient future taxable income. The ability to generate enough taxable income to utilize the deferred tax assets depends on many factors, among which is the Company’s ability to deduct tax loss carry‑forwards against future taxable income, the effectiveness of tax planning strategies and reversing deferred tax liabilities. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Act. See “Note 18 – Income Taxes” for the impact of the Tax Act. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based upon a full knowledge of the facts and the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based upon the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. The Company’s policy is to recognize interest and penalties that would be assessed in relation to the settlement value of unrecognized tax benefits as a component of income tax benefit within the accompanying consolidated statements of operations and comprehensive income (loss). |
Comprehensive Loss | Comprehensive Loss Comprehensive loss represents the change in equity resulting from transactions other than stockholder investments and distributions. Accumulated other comprehensive income includes changes in equity that are excluded from net loss, specifically, unrealized gains and losses on foreign currency translation adjustments and is presented within the consolidated statements of equity. The Company presents the components of comprehensive loss within the consolidated statements of operations and comprehensive loss. |
Foreign Currency Translation | Foreign Currency Translation The Company’s wholly owned direct foreign operations present their financial reports in the currency used in the economic environment in which they mainly operate, known as the functional currency. Assets and liabilities in foreign subsidiaries are translated into U.S. dollars at the exchange rate as of the balance sheet date, while revenues and expenses are translated using the average monthly exchange rate. Gains and losses from these foreign currency translation adjustments are recognized within accumulated other comprehensive income/loss within the accompanying consolidated statements of equity. |
Earnings per Share | Loss per Share Basic loss per share, or EPS, is computed using net loss attributable to common stockholders and the weighted average number of common shares outstanding during the period. Diluted EPS is computed using the weighted average number of common and potentially dilutive common shares outstanding during the period except for periods of net loss for which no common share equivalents are included because their effect would be anti‑dilutive. Dilutive common equivalent shares consist of common stock issuable upon exercise of stock options, restricted stock and restricted stock units using the treasury stock method. Dilutive common stock equivalent shares issuable upon conversion of the Company’s outstanding convertible notes are calculated using the if‑converted method. The Company calculated basic and diluted loss per common share for the year ended December 31, 2017 using the two-class method. Under the two-class method, net earnings are allocated to each class of common stock and participating security as if all of the net earnings for the period had been distributed. The Company’s participating securities as of December 31, 2017 consisted of convertible preferred shares that contained a nonforfeitable right to receive dividends and therefore were considered to participate in undistributed earnings with common stockholders. |
Concentration of Risk | Concentration of Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, cash equivalents, accounts receivable and factored accounts receivable. The Company maintains cash and cash equivalents with various financial institutions. The policy is designed to limit exposure to any one institution. Periodic evaluations are performed of the relative credit rating of those financial institutions that are considered in the Company’s investment strategy. The vast majority of trade receivables from sales to customers are subsequently sold to a financial institution pursuant to a trade receivables securitization facility. The sale of trade receivables are made on a recourse basis however are guaranteed through credit insurance purchased from an unrelated financial institution. When insured, the Company is not at risk if a customer fails to pay. For trade receivables not sold to a financial institution, the Company generally does not require collateral. As of December 31, 2018, the net deferred purchase price of trade receivables sold pursuant to the RPA (as defined below) totaled $33.8 million. The RPA was not in place as of December 31, 2017 (see “Note 4 – Factored Accounts and Receivables”). The Company provides an allowance for estimated losses to be incurred in the collection of accounts receivable based upon the aging of outstanding balances and other account monitoring analysis. The net carrying value approximates the fair value for these assets. Such losses have historically been within management’s expectations. Uncollectible accounts are written off once collection efforts are deemed by management to have been exhausted. For the years ended December 31, 2018 and 2017, sales to customers or customer groups representing 10 percent or greater of net sales are as follows: Year ended December 31, 2018 2017 Customer A 14 % 15 % |
Fair Value of Financial Instruments | Year ended December 31, 2018 2017 Customer A 14 % 15 % Fair Value of Financial Instruments Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. ASC 820 , Fair Value Measurements and Disclosures also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value: Level 1—Quoted prices in active markets for identical assets or liabilities. Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The fair value of financial instruments held (which consist of cash and cash equivalents, accounts receivable, factored accounts receivable and accounts payable) do not differ materially from their recorded amounts because of the relatively short period of time between origination of the instruments and their expected realization. The carrying amounts of the line of credit and long-term debt approximate fair value because of the variable interest rates. The fair value of the Company’s outstanding convertible notes is based on the amount of future cash flows associated with the instrument discounted using the incremental borrowing rate, which are considered Level 3 liabilities. As a part of our working capital management, we sell certain accounts receivable through a third party financial institution in off-balance sheet arrangements. The amount sold varies each month based on the amount of underlying receivables and cash flow needs. As of December 31, 2018 and 2017, we had $424.2 million and zero, respectively, of receivables outstanding under receivable factoring agreements entered into by various entities. Expenses incurred on the sale of receivables were $1.7 million and $0.0 million for the years ended December 31, 2018 and 2017, respectively. These amounts are recorded in interest expense in the consolidated statements of operations. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Sales | |
Schedule of sales to customers or customer groups representing greater than 10 percent of net sales | Year ended December 31, 2018 2017 Customer A 14 % 15 % |
GBG Acquisition (Tables)
GBG Acquisition (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
GBG Acquisition | |
Schedule of allocation of the preliminary purchase price | The following table summarizes the allocation of the preliminary purchase price for the GBG Acquisition as of October 29, 2018 (in thousands): Purchase Price Allocation Assets acquired and liabilities assumed: Accounts receivable $ 65,106 Inventories 371,605 Prepaid expenses and other current assets 56,380 Property and equipment 86,971 Other assets 41 Accounts payable and accrued expenses (589,849) Intangible assets and liabilities acquired: Goodwill 367,725 Leasehold interests (2,310) Customer relationships 824,000 Preliminary purchase price $ 1,179,669 |
Schedule of unaudited pro forma results | Year ended December 31, 2018 2017 (in thousands) Net sales $ 2,302,195 $ 2,244,604 Cost of goods sold 1,785,871 1,691,199 Gross margin 516,324 553,405 Gross margin % of net sales 22.4 % 24.7 % Operating expenses Selling, general and administrative 569,726 423,392 Depreciation and amortization 90,241 92,554 Total operating expenses 659,967 515,946 Operating (loss) income (143,643) 37,459 Interest expense 156,329 152,082 Gain on contingent consideration (17,675) (18,687) Loss before income taxes (282,297) (95,936) Income tax benefit 5,927 5,331 Net loss $ (276,370) $ (90,605) Loss per common share – basic $ (4.75) $ (1.58) Loss per common share – diluted $ (4.75) $ (1.58) Weighted average shares outstanding basic and diluted 58,143 57,516 |
Factored Accounts and Receiva_2
Factored Accounts and Receivables (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Factored Accounts and Receivables | |
Schedule of accounts receivables | Accounts receivables consisted of the following (in thousands): December 31, 2018 December 31, 2017 Non-recourse receivables sold $ 380,595 $ — Recourse receivables sold 43,630 — Total receivables sold 424,225 — Purchase price of sold receivables (364,900) — Allowances and bad debt (25,500) — Sold receivables, net $ 33,825 $ — Accounts receivable, net 27,910 27,013 Allowances and bad debt — (4,767) Total accounts receivable, net $ 27,910 $ 22,246 |
Inventories (Tables)
Inventories (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Inventories | |
Schedule of inventories | Inventories are valued at the lower of cost or net realizable value with cost determined by the first‑in, first‑out method. Inventories consisted of the following (in thousands): December 31, 2018 December 31, 2017 Finished goods $ 315,484 $ 31,245 Raw materials and work in progress 27,468 488 Total inventories $ 342,952 $ 31,733 |
Prepaid expenses and other cu_2
Prepaid expenses and other current assets (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Prepaid expenses and other current assets | |
Schedule of prepaid expenses and other current assets | December 31, 2018 December 31, 2017 Prepaid expenses $ 21,547 $ 4,740 Prepaid royalty 12,645 — Non-trade receivable 8,935 — Prepaid marketing and advertising 5,251 92 Total prepaid expenses and other current assets $ 48,378 $ 4,832 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Property and Equipment | |
Schedule of property and equipment | Property and equipment consisted of the following (in thousands): December 31, 2018 December 31, 2017 Computer and equipment $ 9,638 $ 6,214 Furniture and fixtures 14,580 6,245 Leasehold improvements 77,817 9,302 102,035 21,761 Less: accumulated depreciation and amortization (17,885) (13,639) Construction in progress 8,894 295 Property and equipment, net $ 93,044 $ 8,417 |
Intangible Assets and Liabili_2
Intangible Assets and Liabilities Goodwill (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Intangible Assets and Liabilities Goodwill | |
Schedule of intangible assets | Intangible assets as of December 31, 2018 consisted of the following (in thousands): Amortization Accumulated Period Gross Amount Amortization Net Amount Trade names Indefinite $ 65,887 $ — $ 65,887 Customer relationships 7 to 20 Years 859,101 27,543 831,558 Non-compete agreements 3 Years 135 110 25 Total $ 925,123 $ 27,653 $ 897,470 Intangible assets as of December 31, 2017 consisted of the following (in thousands): Amortization Accumulated Period Gross Amount Amortization Net Amount Trade names Indefinite $ 65,812 $ — $ 65,812 Customer relationships 7 to 15 Years 35,081 11,629 23,452 Non-compete agreements 3 Years 133 65 68 Total $ 101,026 $ 11,694 $ 89,332 |
Schedule of future amortization expense related to finite-lived intangible assets | As of December 31, 2018, future amortization expense related to the finite-lived intangible assets is as follows (in thousands): 2019 $ 77,911 2020 77,889 2021 77,887 2022 77,887 2023 77,887 Thereafter 442,122 Total $ 831,583 |
Schedule of goodwill | Goodwill consisted of the following as of December 31, 2018 and December 31, 2017 (in thousands): December 31, 2018 December 31, 2017 Beginning balance $ 8,380 $ 8,271 Goodwill created by the GBG Acquisition 367,725 — Other 27 109 Ending balance $ 376,132 $ 8,380 |
Other assets (Tables)
Other assets (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Other assets | |
Schedule of other assets | December 31, 2018 December 31, 2017 Deferred debt financing fees $ 8,901 $ — Other receivables and deposits long-term 824 484 Total other assets $ 9,725 $ 484 |
Accounts Payable and Accrued _2
Accounts Payable and Accrued Expenses (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accounts Payable and Accrued Expenses | |
Schedule of accounts payable and accrued expenses | Accounts payable and accrued expenses consisted of the following (in thousands): December 31, 2018 December 31, 2017 Accounts payable $ 290,104 $ 7,384 Accrued expenses 128,990 5,922 Accrued royalty 56,595 — Accrued payroll and other benefits 20,814 2,236 Accrued interest 22,128 1,768 Other 7,232 4,894 Total $ 525,863 $ 22,204 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies | |
Schedule of future minimum rental payments under non-cancelable retail operating leases with lease terms in excess of one year | As of December 31, 2018, the future minimum rental payments under non‑cancelable operating leases with lease terms in excess of one year were as follows (in thousands): 2019 $ 44,295 2020 39,771 2021 37,722 2022 35,554 2023 31,110 Thereafter 125,863 Total $ 314,315 |
Schedule of future minimum rental payments under non-cancelable capital leases with lease terms in excess of one year | As of December 31, 2018, the future minimum rental payments under non-cancelable capital leases with lease terms in excess of one year were as follows (in thousands): 2019 $ 3,522 2020 1,033 2021 654 2022 165 2023 — Thereafter — Total $ 5,374 |
Schedule of contractual obligations to pay minimum guaranteed royalty and relating advertising commitments | As of December 31, 2018, our contractual obligations to pay minimum guaranteed royalty and relating advertising commitments were as follows (in thousands): 2019 $ 121,843 2020 98,597 2021 78,061 2022 36,567 2023 30,396 Thereafter 119,655 Total $ 485,119 |
Debt (Tables)
Debt (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Schedule of five year payment of term debt and line of credit and modified convertible notes | The five-year payment schedule of the Company’s debt as of December 31, 2018 is as follows (in thousands): Original Deferred Issue Payment Due by Period Financing Discount Carrying 2019 2020 2021 2022 2023 Thereafter Total Costs, Net (Premium), Net Value Revolving facilities $ 315 $ — $ — $ — $ — $ — $ 315 $ — $ — $ 315 1L Term Loan 11,287 32,250 32,250 32,250 536,963 — 645,000 (29,438) 11,437 626,999 2L Term Loan — — — — — 671,513 671,513 (20,663) (71,265) 579,585 Convertible notes — — 17,979 — — 25,000 42,979 (1,355) (5,389) 36,235 Total $ 11,602 $ 32,250 $ 50,229 $ 32,250 $ 536,963 $ 696,513 $ 1,359,807 $ (51,456) $ (65,217) $ 1,243,134 |
Schedule of interest expense | Year ended December 31, 2018 2017 Contractual coupon interest $ 29,176 $ 7,716 Non-cash interest expense (including amortization of discounts and deferred financing costs) 9,151 1,128 Total interest expense $ 38,327 $ 8,844 |
2024 Convertible Notes | |
Schedule of summary of recorded value of convertible debt | The following table is a summary of the recorded value of the 2024 Convertible Notes as of December 31, 2018 (in thousands). December 31, 2018 2024 Convertible Notes - face value $ 25,000 Less: Original issue discount (4,522) Short-term convertible note recorded value on issue date 20,478 PIK interest issued — Accumulated accretion of original issue debt discount 534 2024 Convertible Notes value $ 21,012 |
Modified Convertible Notes | |
Schedule of summary of recorded value of convertible debt | The following table is a summary of the recorded value of the Modified Convertible Notes as of December 31, 2018 and December 31, 2017 (in thousands). The value of the Modified Convertible Notes reflects the present value of the contractual cash flows from the Modified Convertible Notes and resulted in an original issue discount of $4.7 million that was recorded on January 28, 2016, the issuance date. December 31, 2018 December 31, 2017 Modified convertible notes - face value $ 16,473 $ 16,473 Less: original issue discount (4,673) (4,673) Modified convertible notes recorded value on issue date 11,800 11,800 PIK interest issued 1,505 925 Accumulated accretion of original issue debt discount 1,918 1,141 Modified convertible notes value $ 15,223 $ 13,866 |
Equity (Tables)
Equity (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Equity | |
Summary of stock option activity by plan | The following table summarizes stock option activity by incentive plan for the years ended December 31, 2018 and December 31, 2017 (in actual amounts): Amended and 2016 Stock Total Number Restated Plan Incentive Plan of Shares Outstanding at January 1, 2017 444 150,000 150,444 Granted — — — Exercised — — — Forfeited / Expired — (79,723) (79,723) Outstanding at December 31, 2017 444 70,277 70,721 Outstanding at January 1, 2018 444 70,277 70,721 Granted — 250,000 250,000 Exercised — — — Forfeited / Expired — — — Outstanding at December 31, 2018 444 320,277 320,721 |
Schedule of stock option activity in the aggregate | The following table summarizes stock option activity for all incentive plans for the years ended December 31, 2018 and 2017 (in actual amounts): Weighted Weighted Average Aggregate Average Remaining Contractual Intrinsic Options Exercise Price Life (Years) Value Outstanding at January 1, 2018 70,721 $ 4.07 4.55 $ — Granted 250,000 4.22 2.81 Exercised — — Expired — — Forfeited — — Outstanding at December 31, 2018 320,721 $ 4.19 8.45 $ — Exercisable at December 31, 2018 70,721 $ 4.07 3.55 $ — |
Schedule of exercise prices for options outstanding and exercisable | The following table summarizes exercise prices for options exercisable as of December 31, 2018 (in actual amounts): Options Exercisable Exercise Price Number of Shares Weighted-Average $ 4.02 70,277 5.4 $ 11.40 444 6.0 70,721 |
Schedule of key input assumptions used to estimate the fair value of stock options | 2018 2017 Stock Price on Grant Date $ 4.22 $ 1.85 Expected Dividend Rate 0.00 % 0.00 % Expected Volatility 60.00 % 60.00 % Exercise Price $ 4.22 $ 4.02 Risk Free Rate 3.08 % 1.75 % Average expected stock option term (in years) 8.45 5.00 |
Summary of the status of restricted common stock and RSUs and changes | The following table summarizes RSU activity for the year ended December 31, 2018 (in actual amounts): Restricted Stock Units Number Of Weighted Average Grant Outstanding at January 1, 2017 800,843 $ 4.65 Granted 510,000 2.24 Vested 350,141 4.54 Forfeited 215,000 2.46 Outstanding at December 31, 2017 745,702 3.68 Outstanding at January 1, 2018 745,702 $ 3.68 Granted 6,473,484 3.75 Vested 1,278,626 2.50 Forfeited 120,000 1.42 Outstanding at December 31, 2018 5,820,560 $ 4.06 |
Segment Information (Tables)
Segment Information (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Segment Information | |
Summary of financial information concerning reportable segments | All prior period segment information has been recast to reflect the realignment of our segment reporting structure on a comparable basis. Year ended December 31, 2018 2017 (in thousands) Net sales: Kids $ 216,298 $ — Accessories 97,299 — Men's & Women's Apparel 283,005 164,053 $ 596,602 $ 164,053 Gross profit: Kids $ 33,530 $ — Accessories 10,246 — Men's & Women's Apparel 116,959 71,750 $ 160,735 $ 71,750 Selling, general and administrative Kids $ 20,482 $ — Accessories 10,954 — Men's & Women's Apparel 113,700 62,030 $ 145,136 $ 62,030 Depreciation & amortization Kids $ 5,018 $ — Accessories 5,772 — Men's & Women's Apparel 8,561 6,061 $ 19,351 $ 6,061 Other operating expense Kids $ 32,903 $ — Accessories 37,722 — Men's & Women's Apparel 17,182 2,583 $ 87,807 $ 2,583 Operating income (loss) Kids $ (24,872) $ — Accessories (44,202) — Men's & Women's Apparel (22,485) 1,076 $ (91,559) $ 1,076 |
Disaggregation of Revenue (Tabl
Disaggregation of Revenue (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Disaggregation of Revenue | |
Summary of disaggregation of our operating segment Net Sales by product category and sales channel | Year Ended December 31, 2018 Year ended December 31, 2017 Wholesale & Wholesale & Licensing Retail Total Licensing Retail Total Kids $ $ — $ 216,298 $ — $ — $ — Accessories — 97,299 — — — Men’s & Women’s Apparel 107,964 283,005 121,958 42,095 164,053 $ $ 107,964 $ 596,602 $ 121,958 $ 42,095 $ 164,053 |
Loss Per Share (Tables)
Loss Per Share (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Loss Per Share | |
Schedule of reconciliation of the numerator and denominator of basic and diluted loss per share | A reconciliation of the numerator and denominator of basic and diluted loss per share is as follows (in thousands, except per share data). December 31 2018 2017 Basic loss per share computation Numerator: Loss from continuing operations $ (123,766) $ (2,458) Less: preferred dividends (6,144) (5,480) Loss from continuing operations attributable to common stockholders (129,910) (7,938) Denominator: Weighted average common shares outstanding 21,569 13,313 Loss per common share - basic Loss from continuing operations $ (6.02) $ Loss per common share - basic $ (6.02) $ (0.60) Diluted loss per share computation Numerator: Loss from continuing operations $ (123,766) $ (2,458) Less: preferred dividends (6,144) (5,480) Loss from continuing operations attributable to common stockholders (129,910) (7,938) Denominator: Weighted average common shares outstanding 21,569 13,313 Effect of dilutive securities: Options, RSUs, PSUs, warrants, Series A, convertible notes — — Dilutive common shares 21,569 13,313 Loss per common share - diluted Loss from continuing operations $ (6.02) $ Loss per common share - diluted $ (6.02) $ (0.60) |
Schedule of potential shares of common stock | The following potential shares of common stock were excluded from diluted EPS as the Company had a net loss as of the years ended (in thousands): December 31, 2018 December 31, 2017 Outstanding stock options 321 71 Unvested RSUs 5,821 746 Unvested PSUs 1,406 458 Outstanding warrants 650 650 Convertible Series A preferred stock — 4,480 Convertible Series A-1 preferred stock — — Modified Convertible Notes 1,278 1,247 SWIMS Convertible Note — 4,565 2024 Convertible Notes 3,125 — |
Schedule of reconciliation of basic and diluted (loss) earnings per share, two class method | The following table provides a reconciliation of net loss to preferred shareholders and common stockholders for purposes of computing net loss per share for the years ended December 31, 2018 and 2017 (in thousands, except per share data): December 31, 2018 2017 Net loss $ (123,766) $ (2,458) Less: preferred dividends (6,144) (5,480) Net loss attributable to common stockholders $ (129,910) $ (7,938) Denominator: Weighted average common shares outstanding 21,569 13,313 Loss per common share - basic and diluted under two-class method $ (6.02) $ (0.60) |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Taxes | |
Schedule of loss before income taxes | For financial reporting purposes, loss before income taxes, includes the following components (in thousands): For the year ended December 31, 2018 December 31, 2017 Domestic $ (130,609) $ (7,352) Foreign 916 (437) Loss before income taxes $ (129,693) $ (7,789) |
Schedule of benefit for income taxes | The benefit for income taxes is as follows (in thousands): For the year ended December 31, 2018 December 31, 2017 Current: Federal $ — $ (1,056) State 712 229 Foreign — 43 712 (784) Deferred: Federal (3,415) (4,425) State (1,100) (178) Foreign (2,124) 56 (6,639) (4,547) Total $ (5,927) $ (5,331) |
Schedule of effective income tax rate reconciliation | Income tax benefit for the years ended December 31, 2018 and 2017, respectively, differ from the amounts computed by applying the U.S. statutory income tax rate of 21% (in 2018) and 34% (in 2017) to pretax loss as follows (in thousands): Year ended December 31, 2018 2017 U.S. Federal (benefit) provision At statutory rate $ (27,235) $ (2,649) State taxes (358) 34 Federal Valuation allowance 23,792 (8,431) Foreign tax adjustments (2,332) 81 Disallowed interest expense — 190 Federal tax rate change — 7,338 Permanent Adjustments 236 — Effect of uncertain tax positions (30) 10 Book income from pre-transaction period — (1,932) Other — 28 Total $ (5,927) $ (5,331) |
Deferred tax assets and liabilities | Significant components of the Company’s deferred tax assets for federal and state income taxes are as follows (in thousands): As of December 31, 2018 2017 Deferred tax assets: Federal and state NOL carryforward $ 31,157 $ 9,889 Fixed assets 3 462 Accruals 27,946 682 Stock-based compensation 1,639 454 Inventory 667 835 Other intangibles 18,566 9,151 Allowance for customer credits and doubtful accounts — 843 Deferred rent — 985 Contribution carryforward 103 — Business interest limitation 9,844 — Deferred state income tax 309 231 Other 1,032 186 Total gross deferred tax assets 91,266 23,718 Less: valuation allowance (77,864) (19,975) Total deferred tax assets $ 13,402 $ 3,743 Deferred tax liabilities: Indefinite lived intangibles $ (10,696) $ (9,382) Fixed Assets (2,586) — Prepaids (120) (90) Debt discount — (921) Total gross deferred tax liabilities (13,402) (10,393) Net deferred tax liabilities $ — $ (6,650) |
Schedule of roll forward of unrecognized tax benefits | The Company has the following activity relating to unrecognized tax benefits (in thousands): Year Ended December 31, 2018 2017 Beginning balance $ 119 $ 81 Gross increase - tax positions in prior periods — 38 Lapse in statutes of limitations (30) — Ending balance $ 89 $ 119 |
Business Description and Basi_2
Business Description and Basis of Presentation (Details) | 12 Months Ended |
Dec. 31, 2018segment | |
Business Description and Basis of Presentation | |
Number of Reportable Segments | 3 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Revenue Recognition (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Jan. 01, 2018 | Dec. 31, 2017 |
Equity | |||
Accumulated deficit | $ (141,186) | $ (18,196) | |
Wholesale | |||
Equity | |||
Accumulated deficit | $ (569) | ||
Retail | |||
Equity | |||
Accumulated deficit | 39 | ||
Licensing | |||
Equity | |||
Accumulated deficit | $ 1,300 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Property and Equipment (Details) | 12 Months Ended |
Dec. 31, 2018 | |
Computer and equipment | Maximum | |
Property and Equipment | |
Property and equipment estimated useful live | P7Y |
Computer and equipment | Minimum | |
Property and Equipment | |
Property and equipment estimated useful live | P3Y |
Furniture and fixtures | Maximum | |
Property and Equipment | |
Property and equipment estimated useful live | P7Y |
Furniture and fixtures | Minimum | |
Property and Equipment | |
Property and equipment estimated useful live | P3Y |
Leasehold improvements | Maximum | |
Property and Equipment | |
Property and equipment estimated useful live | P10Y |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Impairment of Long Lived Assets and Intangible Assets Subject to Amortization (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Impairment of Long Lived Assets, Intangible Assets and Goodwill | ||
Asset impairment charge | $ 0 | $ 0 |
Impairment charge related to intangible assets subject to amortization | 0 | 0 |
Goodwill, Impairment Loss | 0 | 0 |
impairment charge related to indefinite lived intangible assets | $ 0 | $ 0 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Deferred Financing Costs (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Deferred Financing Costs | ||
Amortization of Financing Costs and Discounts | $ 4,334 | $ 1,127 |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Advertising Costs (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Advertising Costs | ||
Advertising Expense | $ 13.9 | $ 9.5 |
Prepaid advertising costs | $ 5.3 | $ 0.9 |
Summary of Significant Accoun_9
Summary of Significant Accounting Policies - Concentration of Risk (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Concentration of Credit Risk | ||
Sold Receivables Net | $ 33,825 | |
Costs on Sale of Receivables | 1,700 | $ 0 |
Factoring Agreement | ||
Concentration of Credit Risk | ||
Total Accounts Receivable | $ 424,200 | $ 0 |
Sales | Customer A | ||
Concentration of Credit Risk | ||
Concentration risk (as a percent) | 14.00% | 15.00% |
Summary of Significant Accou_10
Summary of Significant Accounting Policies - Accounting Standards Recently Adopted (Details) - ASU No. 2016-02 - Restatement $ in Millions | Jan. 01, 2019USD ($) |
New Accounting Pronouncement, Early Adoption [Line Items] | |
Lease liabilities | $ 221 |
Right-of-use assets | $ 214 |
GBG Acquisition - Acquisition (
GBG Acquisition - Acquisition (Details) $ in Millions | Oct. 29, 2018USD ($) |
First Lien Credit Agreement | |
Business Acquisition | |
Face value | $ 645 |
New Revolving Facility | |
Business Acquisition | |
Face value | 150 |
Second Lien Credit Agreement | |
Business Acquisition | |
Face value | $ 668 |
GBG Acquisition - Allocation an
GBG Acquisition - Allocation and Proforma (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Oct. 29, 2018 | Dec. 31, 2016 | |
Intangible assets and liabilities acquired: | ||||
Goodwill | $ 376,132 | $ 8,380 | $ 8,271 | |
GBG and its subsidiaries | ||||
Business Acquisition | ||||
Inventory adjustment to fair value | 32,400 | |||
Assets acquired and liabilities assumed: | ||||
Accounts receivable | $ 65,106 | |||
Inventories | 371,605 | |||
Prepaid expenses and other current assets | 56,380 | |||
Property and equipment | 86,971 | |||
Other assets | 41 | |||
Accounts payable and accrued expenses | (589,849) | |||
Intangible assets and liabilities acquired: | ||||
Preliminary purchase price | 1,179,669 | |||
Unaudited pro forma results | ||||
Net sales | 2,302,195 | 2,244,604 | ||
Cost of goods sold | 1,785,871 | 1,691,199 | ||
Gross margin | $ 516,324 | $ 553,405 | ||
Gross margin % of net sales | 22.40% | 24.70% | ||
Operating expenses | ||||
Selling, general and administrative | $ 569,726 | $ 423,392 | ||
Depreciation and amortization | 90,241 | 92,554 | ||
Total operating expenses | 659,967 | 515,946 | ||
Operating (loss) income | (143,643) | 37,459 | ||
Interest expense | 156,329 | 152,082 | ||
Gain on contingent consideration | (17,675) | (18,687) | ||
Loss before income taxes | (282,297) | (95,936) | ||
Income tax benefit | 5,927 | 5,331 | ||
Net loss | $ (276,370) | $ (90,605) | ||
Loss per common share - basic (in dollars per share) | $ (4.75) | $ (1.58) | ||
Loss per common share - diluted (in dollars per share) | $ (4.75) | $ (1.58) | ||
Weighted average shares outstanding basic and diluted (in shares) | 58,143 | 57,516 | ||
Cost of goods sold | GBG and its subsidiaries | ||||
Business Acquisition | ||||
Inventory adjustment to fair value | $ 23,600 | |||
Selling, general and administrative expenses | GBG and its subsidiaries | ||||
Business Acquisition | ||||
Amortization expense | $ 39,800 | |||
Goodwill | GBG and its subsidiaries | ||||
Intangible assets and liabilities acquired: | ||||
Goodwill | 367,725 | |||
Leasehold interests | GBG and its subsidiaries | ||||
Intangible assets and liabilities acquired: | ||||
Leasehold interests | (2,310) | |||
Customer relationships | GBG and its subsidiaries | ||||
Intangible assets and liabilities acquired: | ||||
Customer relationships | $ 824,000 |
Factored Accounts and Receiva_3
Factored Accounts and Receivables - New Receivables Facility (Details) - USD ($) $ in Millions | Oct. 29, 2018 | Oct. 31, 2018 |
Accounts receivable, inventory advances and due from factor | ||
Trade Receivables Securitization Facility Term | 3 years | |
Maximum sale of undivided ownership interest | $ 450 | |
New Receivables Facility | ||
Accounts receivable, inventory advances and due from factor | ||
Trade Receivables Securitization Facility Term | 3 years | |
Maximum sale of undivided ownership interest | $ 450 |
Factored Accounts and Receiva_4
Factored Accounts and Receivables - CIT Factoring Agreement (Details) - CIT Factoring Agreement | 12 Months Ended |
Dec. 31, 2018 | |
Accounts receivable, inventory advances and due from factor | |
Required notice period for termination of the agreement by factor | 60 days |
Required written notice period for termination of the agreement prior to October 29, 2023 | 60 days |
Factored Accounts and Receiva_5
Factored Accounts and Receivables - SWIMS Factoring Agreement (Details) $ in Thousands, kr in Millions | 12 Months Ended | ||
Dec. 31, 2018NOK (kr) | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | |
Accounts receivable, inventory advances and due from factor | |||
Non-recourse receivables sold | $ 380,595 | ||
Recourse receivables sold | 43,630 | ||
Total receivables sold | 424,225 | ||
Purchase price of sold receivables | (364,900) | ||
Allowances and bad debt | (25,500) | ||
Sold receivables, net | 33,825 | ||
Accounts receivable | $ 27,013 | ||
Allowance and bad debt | (4,767) | ||
Accounts receivable, net | 27,910 | $ 22,246 | |
Total accounts receivable, net | $ 27,910 | ||
Factoring Agreement | DNB Bank | |||
Accounts receivable, inventory advances and due from factor | |||
Required notice period for termination of the agreement by factor | 14 days | ||
DFBG Swims | Factoring Agreement | DNB Bank | |||
Accounts receivable, inventory advances and due from factor | |||
Required notice period for termination of the agreement by factor | 14 days | ||
DFBG Swims | Factoring Agreement | DNB Bank | Maximum | |||
Accounts receivable, inventory advances and due from factor | |||
Financing Percentage on preapproved outstanding invoiced receivables | 80.00% | 80.00% | |
DFBG Swims | Factoring Agreement | DNB Bank | Machinery and Plant Lien | |||
Accounts receivable, inventory advances and due from factor | |||
Collateral amount | kr | kr 10 | ||
DFBG Swims | Factoring Agreement | DNB Bank | Machinery and Plant Lien | Maximum | |||
Accounts receivable, inventory advances and due from factor | |||
Collateral amount | kr | 10 | ||
DFBG Swims | Factoring Agreement | DNB Bank | Inventory Lien | Maximum | |||
Accounts receivable, inventory advances and due from factor | |||
Collateral amount | kr | 10 | ||
DFBG Swims | Factoring Agreement | DNB Bank | Factoring, First Lien | |||
Accounts receivable, inventory advances and due from factor | |||
Collateral amount | kr | 1 | ||
DFBG Swims | Factoring Agreement | DNB Bank | Factoring, Second Lien | |||
Accounts receivable, inventory advances and due from factor | |||
Collateral amount | kr | 4 | ||
DFBG Swims | Factoring Agreement | DNB Bank | Factoring, Third Lien | |||
Accounts receivable, inventory advances and due from factor | |||
Collateral amount | kr | 7 | ||
DFBG Swims | Factoring Agreement | DNB Bank | Factoring, Fourth Lien | |||
Accounts receivable, inventory advances and due from factor | |||
Collateral amount | kr | kr 2.5 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Inventories | ||
Finished goods | $ 315,484 | $ 31,245 |
Raw materials and work in progress | 27,468 | 488 |
Total inventories | $ 342,952 | $ 31,733 |
Prepaid expenses and other cu_3
Prepaid expenses and other current assets (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Prepaid expenses and other current assets | ||
Prepaid expenses | $ 21,547 | $ 4,740 |
Prepaid royalty | 12,645 | |
Non-trade receivable | 8,935 | |
Prepaid marketing and advertising | 5,251 | 92 |
Prepaid expenses and other current assets | $ 48,378 | $ 4,832 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Property and equipment | ||
Gross property and equipment | $ 102,035 | $ 21,761 |
Less: accumulated depreciation and amortization | (17,885) | (13,639) |
Construction in progress | 8,894 | 295 |
Property and equipment, net | 93,044 | 8,417 |
Depreciation and amortization expenses related to Property and Equipment | 3,500 | 3,100 |
Computer and equipment | ||
Property and equipment | ||
Gross property and equipment | 9,638 | 6,214 |
Furniture and fixtures | ||
Property and equipment | ||
Gross property and equipment | 14,580 | 6,245 |
Leasehold improvements | ||
Property and equipment | ||
Gross property and equipment | $ 77,817 | $ 9,302 |
Intangible Assets and Liabili_3
Intangible Assets and Liabilities Goodwill - Intangibles (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Intangible assets | ||
Intangible assets, Gross Amount | $ 925,123 | $ 101,026 |
Finite-lived intangible assets, Accumulated Amortization | 27,653 | 11,694 |
Finite-Lived Intangible Assets, Net | 831,583 | |
Intangible assets, Net Amount | 897,470 | 89,332 |
Amortization expense related to the intangible assets | 15,800 | 3,000 |
Trade names | ||
Intangible assets | ||
Indefinite-lived intangible assets, Amount | 65,887 | 65,812 |
Customer relationships | ||
Intangible assets | ||
Finite-lived intangible assets, Gross Amount | 859,101 | 35,081 |
Finite-lived intangible assets, Accumulated Amortization | 27,543 | 11,629 |
Finite-Lived Intangible Assets, Net | 831,558 | $ 23,452 |
Non-compete agreements | ||
Intangible assets | ||
Amortization period | 3 years | |
Finite-lived intangible assets, Gross Amount | 135 | $ 133 |
Finite-lived intangible assets, Accumulated Amortization | 110 | 65 |
Finite-Lived Intangible Assets, Net | $ 25 | $ 68 |
Minimum | Customer relationships | ||
Intangible assets | ||
Amortization period | 7 years | 7 years |
Maximum | Customer relationships | ||
Intangible assets | ||
Amortization period | 20 years | 15 years |
Intangible Assets and Liabili_4
Intangible Assets and Liabilities Goodwill - Future Amortization Expense (Details) $ in Thousands | Dec. 31, 2018USD ($) |
Future amortization expense related to finite-lived intangibles | |
2019 | $ 77,911 |
2020 | 77,889 |
2021 | 77,887 |
2022 | 77,887 |
2023 | 77,887 |
Thereafter | 442,122 |
Total | $ 831,583 |
Intangible Assets and Liabili_5
Intangible Assets and Liabilities Goodwill - Goodwill (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Goodwill | ||
Goodwill, Beginning Balance | $ 8,380 | $ 8,271 |
Other | 27 | 109 |
Goodwill, Ending Balance | 376,132 | 8,380 |
Impairment charge | 0 | $ 0 |
GBG and its subsidiaries | ||
Goodwill | ||
Goodwill created | $ 367,725 |
Other assets (Details)
Other assets (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Other assets | ||
Deferred debt financing fees | $ 8,901 | |
Other receivables and deposits long term | 824 | $ 484 |
Total other assets | $ 9,725 | $ 484 |
Accounts Payable and Accrued _3
Accounts Payable and Accrued Expenses (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Accounts Payable and Accrued Expenses | ||
Accounts payable | $ 290,104 | $ 7,384 |
Accrued expenses | 128,990 | 5,922 |
Accrued royalty | 56,595 | |
Accrued payroll and other benefits | 20,814 | 2,236 |
Accrued interest | 22,128 | 1,768 |
Other | 7,232 | 4,894 |
Total | $ 525,863 | $ 22,204 |
Commitments and Contingencies -
Commitments and Contingencies - Agreements (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Future Lease Obligations | ||
2019 | $ 44,295 | |
2020 | 39,771 | |
2021 | 37,722 | |
2022 | 35,554 | |
2023 | 31,110 | |
Thereafter | 125,863 | |
Future minimum rental payments under non-cancelable operating leases | 314,315 | |
Rent expense | 14,200 | $ 9,400 |
Future minimum rental payments under non-cancelable capital leases | ||
2019 | 3,522 | |
2020 | 1,033 | |
2021 | 654 | |
2022 | 165 | |
Future minimum rental payments under non-cancelable capital leases | 5,374 | |
2019 | 2,500 | |
2020 | 2,100 | |
Advertising Expense | 13,900 | 9,500 |
Letters of Credit | ||
Outstanding letters of credit | 15,900 | $ 130 |
License Agreements | ||
Future minimum rental payments under non-cancelable capital leases | ||
2019 | 121,843 | |
2020 | 98,597 | |
2021 | 78,061 | |
2022 | 36,567 | |
2023 | 30,396 | |
Thereafter | 119,655 | |
Total | 485,119 | |
Royalty Expense | 34,500 | |
Advertising Expense | $ 4,100 |
Debt (Details)
Debt (Details) $ / shares in Units, $ in Thousands | Oct. 29, 2018USD ($)$ / sharesshares | Jan. 18, 2018USD ($)$ / sharesshares | Jan. 28, 2016USD ($)D | Dec. 31, 2018USD ($)$ / sharesshares | Dec. 31, 2017USD ($)$ / shares | Apr. 17, 2019USD ($) | Apr. 16, 2019USD ($) | Oct. 01, 2016 | Jan. 18, 2016USD ($) |
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
2019 | $ 11,602 | ||||||||
2020 | 32,250 | ||||||||
2021 | 50,229 | ||||||||
2022 | 32,250 | ||||||||
2023 | 536,963 | ||||||||
Thereafter | 696,513 | ||||||||
Total | 1,359,807 | ||||||||
Deferred Financing Costs, Net | (51,456) | ||||||||
Original Issue Premium, Net | (65,217) | ||||||||
Carrying Value | 1,243,134 | ||||||||
Initial prepayment amount | $ 46,400 | ||||||||
Deferred financing costs, accrued | 2,400 | ||||||||
Securitization Closing Fees | 1,600 | ||||||||
Legal Fees | 470 | ||||||||
Other fees | $ 350 | ||||||||
Long-term Debt, Gross | $ 1,359,807 | ||||||||
Receivables facility period (in years) | 3 years | ||||||||
Maximum sale of undivided ownership interest | $ 450,000 | ||||||||
Preferred Stock, par value (in dollars per share) | $ / shares | $ 0.10 | $ 0.10 | |||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.10 | $ 0.10 | |||||||
Recorded value of the convertible note | |||||||||
Total | $ 1,359,807 | ||||||||
Modified Convertible Notes value | $ 36,235 | $ 13,866 | |||||||
Tengram Capital Partners, LP | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
New shares issued upon conversion | shares | 4,951,177 | ||||||||
Global Brands Group Holding Limited (“GBG”) | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Aggregate principal amount | $ 23,100 | ||||||||
Cash payment | $ 80 | ||||||||
Preferred Series A | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
New shares issued upon conversion | shares | 5,852,142 | ||||||||
Shares converted from issuance | shares | 50,000 | 50,000 | |||||||
Series A-1 preferred stock | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
New shares issued upon conversion | shares | 4,951,177 | 4,587,964 | |||||||
Shares converted from issuance | shares | 4,587,964 | ||||||||
Private placement | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Shares issued (in shares) | shares | 10,000,000 | ||||||||
First Year After The Closing Date | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Prepayment premium (in percent) | 3.00% | ||||||||
Second Year After The Closing Date | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Prepayment premium (in percent) | 2.00% | ||||||||
Third Year After The Closing Date | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Prepayment premium (in percent) | 1.00% | ||||||||
New Revolving Facility | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Carrying Value | $ 150,000 | ||||||||
Aggregate principal amount | $ 150,000 | ||||||||
Debt Issuance Cost | $ 6,800 | ||||||||
Recorded value of the convertible note | |||||||||
Face value | 150,000 | ||||||||
New Revolving Facility | Base Rate | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Floor rate (in percent) | 1.00% | ||||||||
Margin on variable rate basis (as a percent) | 4.50% | ||||||||
New Revolving Facility | LIBOR rate loans | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Floor rate (in percent) | 0.00% | ||||||||
Margin on variable rate basis (as a percent) | 5.50% | ||||||||
New Revolving Facility | First Year After The Closing Date | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Prepayment premium (in percent) | 3.00% | ||||||||
New Revolving Facility | Second Year After The Closing Date | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Prepayment premium (in percent) | 2.00% | ||||||||
New Revolving Facility | Third Year After The Closing Date | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Prepayment premium (in percent) | 1.00% | ||||||||
First Lien Credit Agreement | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Carrying Value | $ 645,000 | ||||||||
Step one first lien leverage ratio | 2.75 | ||||||||
Step two first lien leverage ratio | 2.25 | ||||||||
Percent of step downs | 0.25% | ||||||||
Number of step downs | 2 | ||||||||
Recorded value of the convertible note | |||||||||
Face value | 645,000 | ||||||||
First Lien Credit Agreement | Subsequent Events | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Aggregate principal amount | $ 200,000 | $ 150,000 | |||||||
First Lien Credit Agreement | Base Rate | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Floor rate (in percent) | 2.50% | ||||||||
Margin on variable rate basis (as a percent) | 5.00% | ||||||||
First Lien Credit Agreement | LIBOR rate loans | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Floor rate (in percent) | 1.50% | ||||||||
Margin on variable rate basis (as a percent) | 6.00% | ||||||||
First Lien Credit Agreement | Fiscal Quarters Ending March 31, 2019 and June 30, 2019 | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Percentage Of Principal Payments | 0.25% | ||||||||
First Lien Credit Agreement | Fiscal Quarters Ending September 30, 2019 and December 31, 2019 | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Percentage Of Principal Payments | 0.625% | ||||||||
First Lien Credit Agreement | Fiscal Quarter Thereafter | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Percentage Of Principal Payments | 1.25% | ||||||||
Second Lien Credit Agreement | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Initial prepayment amount | $ 175,000 | ||||||||
Recorded value of the convertible note | |||||||||
Face value | 668,000 | ||||||||
Second Lien Credit Agreement | Subsequent Events | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Borrowings | $ 845,000 | $ 795,000 | |||||||
Second Lien Credit Agreement | First Year After The Closing Date | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Prepayment premium (in percent) | 3.00% | ||||||||
Second Lien Credit Agreement | Second Year After The Closing Date | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Prepayment premium (in percent) | 2.00% | ||||||||
Second Lien Credit Agreement | Third Year After The Closing Date | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Prepayment premium (in percent) | 1.00% | ||||||||
Percent of debt excess of initial prepayment amount | 4.00% | ||||||||
Second Lien Credit Agreement | Fourth Year After The Closing Date | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Percent of debt excess of initial prepayment amount | 2.00% | ||||||||
Second Lien Credit Agreement | Fifth Year After The Closing Date | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Percent of debt excess of initial prepayment amount | 1.00% | ||||||||
Second Lien Credit Agreement | Closing Date until December 31, 2019 | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Percent of Payment-in-kind interest (PIK) | 2.75% | ||||||||
Second Lien Credit Agreement | Closing Date until December 31, 2019 | Base Rate | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Floor rate (in percent) | 2.50% | ||||||||
Margin on variable rate basis (as a percent) | 6.00% | ||||||||
Second Lien Credit Agreement | Closing Date until December 31, 2019 | LIBOR rate loans | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Floor rate (in percent) | 1.50% | ||||||||
Margin on variable rate basis (as a percent) | 7.00% | ||||||||
Second Lien Credit Agreement | Thereafter December 31, 2019 | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Percent of Payment-in-kind interest (PIK) | 1.25% | ||||||||
Second Lien Credit Agreement | Thereafter December 31, 2019 | Base Rate | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Floor rate (in percent) | 2.50% | ||||||||
Margin on variable rate basis (as a percent) | 7.00% | ||||||||
Second Lien Credit Agreement | Thereafter December 31, 2019 | LIBOR rate loans | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Floor rate (in percent) | 1.50% | ||||||||
Margin on variable rate basis (as a percent) | 8.00% | ||||||||
Revolving Facility | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
2019 | $ 315 | ||||||||
Total | 315 | ||||||||
Carrying Value | 315 | ||||||||
Availability | 150,000 | ||||||||
Long-term Debt, Gross | 315 | ||||||||
Recorded value of the convertible note | |||||||||
Total | 315 | ||||||||
Term Loan Credit Agreement | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
2019 | 11,287 | ||||||||
2020 | 32,250 | ||||||||
2021 | 32,250 | ||||||||
2022 | 32,250 | ||||||||
2023 | 536,963 | ||||||||
Total | 645,000 | ||||||||
Deferred Financing Costs, Net | (29,438) | ||||||||
Original Issue Discount, Net | 11,437 | ||||||||
Carrying Value | 626,999 | ||||||||
Long-term Debt, Gross | 645,000 | ||||||||
Recorded value of the convertible note | |||||||||
Less: Original issue discount | (11,437) | ||||||||
Total | 645,000 | ||||||||
Long-term Debt | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Thereafter | 671,513 | ||||||||
Total | 671,513 | ||||||||
Deferred Financing Costs, Net | (20,663) | ||||||||
Original Issue Premium, Net | (71,265) | ||||||||
Carrying Value | 579,585 | ||||||||
Long-term Debt, Gross | 671,513 | ||||||||
Recorded value of the convertible note | |||||||||
Total | 671,513 | ||||||||
Convertible notes | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
2021 | 17,979 | ||||||||
Thereafter | 25,000 | ||||||||
Total | 42,979 | ||||||||
Deferred Financing Costs, Net | (1,355) | ||||||||
Original Issue Premium, Net | (5,389) | ||||||||
Carrying Value | 36,235 | ||||||||
Long-term Debt, Gross | 42,979 | ||||||||
Recorded value of the convertible note | |||||||||
Total | 42,979 | ||||||||
Term Facility | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Total | 46,400 | ||||||||
Carrying Value | 2,600 | 668,000 | |||||||
Aggregate principal amount | $ 50,000 | ||||||||
Floor rate (in percent) | 0.50% | ||||||||
Long-term Debt, Gross | 46,400 | ||||||||
Recorded value of the convertible note | |||||||||
Total | $ 46,400 | ||||||||
Term Facility | Base Rate | Minimum | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Margin on variable rate basis (as a percent) | 6.00% | ||||||||
Term Facility | Base Rate | Maximum | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Margin on variable rate basis (as a percent) | 9.75% | ||||||||
Term Facility | LIBOR rate loans | Minimum | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Margin on variable rate basis (as a percent) | 7.00% | ||||||||
Term Facility | LIBOR rate loans | Maximum | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Margin on variable rate basis (as a percent) | 10.75% | ||||||||
Credit Facilities | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Commitment fee (as a percent) | 0.25% | ||||||||
Debt Issuance Cost | 51,500 | ||||||||
Credit Facilities | Base Rate | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Margin on variable rate basis (as a percent) | 0.50% | ||||||||
Credit Facilities | LIBOR rate loans | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Margin on variable rate basis (as a percent) | 1.75% | ||||||||
Modified Convertible Notes | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Total | 11,800 | 11,800 | |||||||
Original Issue Discount, Net | 4,673 | 4,673 | |||||||
Amount of interest payable in cash (as a percent) | 50.00% | ||||||||
Amount of interest payable in kind (as a percent) | 50.00% | ||||||||
Amount of interest payable in cash, discretionary (as a percent) | 100.00% | ||||||||
Long-term Debt, Gross | 11,800 | 11,800 | |||||||
Recorded value of the convertible note | |||||||||
Face value | 16,473 | 16,473 | $ 16,500 | ||||||
Less: Original issue discount | (4,673) | (4,673) | |||||||
Total | 11,800 | 11,800 | |||||||
PIK interest issued | 1,505 | 925 | |||||||
Accumulated accretion of original issue debt discount | 1,918 | 1,141 | |||||||
Modified Convertible Notes value | 15,223 | $ 13,866 | |||||||
Modified Convertible Notes | Conversion of Convertible Notes into Common Stock | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Annual rate on outstanding principal amount (as a percent) | 6.50% | 7.00% | |||||||
Trading days immediately preceding the notice of conversion used for calculation of average of the closing prices for the common stock | D | 20 | ||||||||
Convertible Notes Due January 2018 | Tengram Capital Partners, LP | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Annual rate on outstanding principal amount (as a percent) | 3.75% | ||||||||
Convertible Notes Due January 2018 | Series A-1 preferred stock | Tengram Capital Partners, LP | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Dividend rate (as a percent) | 10.00% | ||||||||
Number of shares issuable upon conversion of the debt | shares | 4,587,964 | ||||||||
Conversion price (in dollars per share) | $ / shares | $ 3 | ||||||||
Preferred Stock, par value (in dollars per share) | $ / shares | $ 0.10 | ||||||||
Recorded value of the convertible note | |||||||||
Face value | $ 13,000 | ||||||||
2024 Convertible Notes | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Total | 20,478 | ||||||||
Original Issue Discount, Net | 4,522 | ||||||||
Prior written notice (in days) | 10 days | ||||||||
Conversion price (in dollars per share) | $ / shares | $ 8 | ||||||||
Long-term Debt, Gross | 20,478 | ||||||||
Recorded value of the convertible note | |||||||||
Face value | $ 25,000 | 25,000 | |||||||
Less: Original issue discount | (4,522) | ||||||||
Total | 20,478 | ||||||||
Accumulated accretion of original issue debt discount | 534 | ||||||||
Modified Convertible Notes value | $ 21,012 | ||||||||
2024 Convertible Notes | From and after April 29, 2019 To October 29, 2019 | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Prior written notice (in days) | 10 days | ||||||||
Interest rate (in percent) | 12.00% | ||||||||
2024 Convertible Notes | From and after October 29, 2019 | |||||||||
Four year payment schedule of debt for convertible notes, line of credit and ling-term debt | |||||||||
Prior written notice (in days) | 10 days | ||||||||
Interest rate (in percent) | 16.00% |
Debt - Overdraft and Factoring
Debt - Overdraft and Factoring Agreement (Details) kr in Millions, $ in Millions | 12 Months Ended | |
Dec. 31, 2018NOK (kr) | Dec. 31, 2018USD ($) | |
Factoring Agreement | DNB Bank | ||
Line of Credit Facility [Line Items] | ||
Required notice period for termination of the agreement by factor | 14 days | |
DFBG Swims | Overdraft Agreement | DNB Bank | Maximum | ||
Line of Credit Facility [Line Items] | ||
Maximum borrowing capacity | kr 6 | $ 0.7 |
DFBG Swims | Overdraft Agreement | Factoring, Second Lien | DNB Bank | ||
Line of Credit Facility [Line Items] | ||
Collateral amount | kr 0.4 | |
DFBG Swims | Ordinary Credit | ||
Line of Credit Facility [Line Items] | ||
Number of days notice required for termination of agreement | 14 days | |
DFBG Swims | Ordinary Credit | DNB Bank | ||
Line of Credit Facility [Line Items] | ||
Maximum borrowing capacity | kr 3.5 | |
Annual rate on outstanding principal amount (as a percent) | 7.40% | 7.40% |
Quarterly fee percent | 0.40% | 0.40% |
DFBG Swims | Additional Credit | DNB Bank | ||
Line of Credit Facility [Line Items] | ||
Maximum borrowing capacity | $ | $ 2.5 | |
Annual rate on outstanding principal amount (as a percent) | 4.90% | 4.90% |
Quarterly fee percent | 0.50% | 0.50% |
DFBG Swims | Factoring Agreement | DNB Bank | ||
Line of Credit Facility [Line Items] | ||
Required notice period for termination of the agreement by factor | 14 days | |
DFBG Swims | Factoring Agreement | DNB Bank | Maximum | ||
Line of Credit Facility [Line Items] | ||
Financing Percentage on preapproved outstanding invoiced receivables | 80.00% | 80.00% |
DFBG Swims | Factoring Agreement | Machinery and Plant Lien | DNB Bank | ||
Line of Credit Facility [Line Items] | ||
Collateral amount | kr 10 | |
DFBG Swims | Factoring Agreement | Machinery and Plant Lien | DNB Bank | Maximum | ||
Line of Credit Facility [Line Items] | ||
Collateral amount | 10 | |
DFBG Swims | Factoring Agreement | Inventory Lien | DNB Bank | Maximum | ||
Line of Credit Facility [Line Items] | ||
Collateral amount | 10 | |
DFBG Swims | Factoring Agreement | Factoring, First Lien | DNB Bank | ||
Line of Credit Facility [Line Items] | ||
Collateral amount | 1 | |
DFBG Swims | Factoring Agreement | Factoring, Second Lien | DNB Bank | ||
Line of Credit Facility [Line Items] | ||
Collateral amount | 4 | |
DFBG Swims | Factoring Agreement | Factoring, Third Lien | DNB Bank | ||
Line of Credit Facility [Line Items] | ||
Collateral amount | 7 | |
DFBG Swims | Factoring Agreement | Factoring, Fourth Lien | DNB Bank | ||
Line of Credit Facility [Line Items] | ||
Collateral amount | kr 2.5 |
Debt - Interest Expense (Detail
Debt - Interest Expense (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Components of interest expense | ||
Contractual coupon interest | $ 29,176 | $ 7,716 |
Non-cash interest expense (including amortization of discounts and deferred financing costs) | 9,151 | 1,128 |
Total interest expense | $ 38,327 | $ 8,844 |
Fair Value Measurement of Fin_2
Fair Value Measurement of Financial Instruments (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Fair value disclosures | ||
Carrying amount | $ 102,035 | $ 21,761 |
Convertible notes | 36,235 | 13,866 |
Nonrecurring | Level 3 | ||
Fair value disclosures | ||
Carrying amount | 0 | $ 200 |
Convertible notes | $ 36,200 |
Equity - Incentive Plan (Detail
Equity - Incentive Plan (Details) - $ / shares | Oct. 29, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Nov. 07, 2016 |
Stock Incentive Plans and Plan Amendment | ||||
Granted (in shares) | 250,000 | |||
Common stock, par value (in dollars per share) | $ 0.10 | $ 0.10 | ||
RSUs | Officer | ||||
Stock Incentive Plans and Plan Amendment | ||||
Number of shares of common stock authorized for issuance | 5,200,000 | |||
2016 Plan | ||||
Stock Incentive Plans and Plan Amendment | ||||
Number of shares reserved for future issuance | 3,529,109 | |||
Granted (in shares) | 250,000 | |||
Maximum number of shares that can be awarded to any employee in one year | 500,000 | |||
Shares Reserved For Future Issuance | ||||
Stock options granted under the incentive plans reserved for future issuance (in shares) | 8,435,562 | |||
Shares of common stock issuable | 12,725,963 | |||
2016 Plan | RSUs | ||||
Shares Reserved For Future Issuance | ||||
Shares of common stock issuable | 2,364,393 | |||
Management Incentive Plan | ||||
Stock Incentive Plans and Plan Amendment | ||||
Number of shares of common stock authorized for issuance | 1,776,500 | |||
Amended And Restated Plan | ||||
Shares Reserved For Future Issuance | ||||
Number of shares available for issuance | 444 |
Equity - Plan Activity (Details
Equity - Plan Activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Options Outstanding and Exercisable | ||
Exercise Price (in dollars per share) | $ 4.07 | $ 4.07 |
Number of shares | 70,721 | |
Stock option activity | ||
Outstanding at the beginning of the period (in shares) | 70,721 | 150,444 |
Granted (in shares) | 250,000 | |
Exercised (in shares) | 0 | 0 |
Forfeited / Expired (in shares) | (79,723) | |
Outstanding at the end of the year (in shares) | 320,721 | 70,721 |
Exercisable at the end of the period (in shares) | 70,721 | |
Weighted average exercise price | ||
Granted (in dollars per share) | $ 4.22 | |
Outstanding at the end of the period (in dollars per share) | 4.19 | |
Exercisable at the end of the period (in dollars per share) | $ 4.07 | $ 4.07 |
Additional Disclosures | ||
Outstanding at the end of the period, Weighted Average Remaining Contractual Life (Years) | 8 years 5 months 12 days | 4 years 6 months 18 days |
Granted, Weighted Average Remaining Contractual Life (Years) | 2 years 9 months 22 days | |
Exercisable at the end of the period, Weighted Average Remaining Contractual Life (Years) | 3 years 6 months 18 days | |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract] | ||
Stock Price on Grant Date | $ 4.22 | $ 1.85 |
Expected Dividend Rate | 0.00% | 0.00% |
Expected Volatility | 60.00% | 60.00% |
Exercise Price | $ 4.22 | $ 4.02 |
Risk Free Rate | 3.08% | 1.75% |
Average expected stock option term (in years) | 8 years 5 months 12 days | 5 years |
Expected annual dividend | 0.00% | 0.00% |
Stock options | ||
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract] | ||
Total unrecognized compensation cost | $ 0 | |
Amended And Restated Plan | ||
Stock option activity | ||
Outstanding at the beginning of the period (in shares) | 444 | 444 |
Outstanding at the end of the year (in shares) | 444 | 444 |
2016 Plan | ||
Stock option activity | ||
Outstanding at the beginning of the period (in shares) | 70,277 | 150,000 |
Granted (in shares) | 250,000 | |
Forfeited / Expired (in shares) | (79,723) | |
Outstanding at the end of the year (in shares) | 320,277 | 70,277 |
4.02 | ||
Options Outstanding and Exercisable | ||
Exercise Price (in dollars per share) | $ 4.02 | |
Number of shares | 70,277 | |
Weighted-Average Remaining Contractual Life (Years) | 5 years 4 months 24 days | |
Weighted average exercise price | ||
Exercisable at the end of the period (in dollars per share) | $ 4.02 | |
11.40 | ||
Options Outstanding and Exercisable | ||
Exercise Price (in dollars per share) | $ 11.40 | |
Number of shares | 444 | |
Weighted-Average Remaining Contractual Life (Years) | 6 years | |
Weighted average exercise price | ||
Exercisable at the end of the period (in dollars per share) | $ 11.40 |
Equity - Restricted Stock Units
Equity - Restricted Stock Units (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
RSUs | ||
Restricted Stock Units | ||
Outstanding at the beginning of the period (in shares) | 745,702 | 800,843 |
Granted (in shares) | 6,473,484 | 510,000 |
Vested (in shares) | 1,278,626 | 350,141 |
Forfeited (in shares) | 120,000 | 215,000 |
Outstanding at the end of the period (in shares) | 5,820,560 | 745,702 |
Weighted-Average Grant-Date Fair Value | ||
Outstanding at the beginning of the period (in dollars per share) | $ 3.68 | $ 4.65 |
Granted (in dollars per share) | 3.75 | 2.24 |
Vested (in dollars per share) | 2.50 | 4.54 |
Forfeited (in dollars per share) | 1.42 | 2.46 |
Outstanding at the end of the period (in dollars per share) | $ 4.06 | $ 3.68 |
Unrecognized compensation cost | ||
Weighted-average period for recognition of unrecognized compensation cost | 2 years 9 months 18 days | |
Stock based compensation expense recognized | $ 3,800 | $ 2,300 |
Total unrecognized compensation | $ 21,800 | |
PSUs | ||
Restricted Stock Units | ||
Granted (in shares) | 1,405,556 | 0 |
Vested (in shares) | 0 | |
Unrecognized compensation cost | ||
Vesting period (in years) | 3 years | |
Stock based compensation expense recognized | $ 633 | |
PSUs | Michael Buckley, former CEO | ||
Restricted Stock Units | ||
Granted (in shares) | 308,122 | |
Vested (in shares) | 1,405,556 | |
Forfeited (in shares) | 150,000 |
Equity - Preferred Stock (Detai
Equity - Preferred Stock (Details) $ / shares in Units, $ in Millions | Oct. 29, 2018shares | Jan. 18, 2018USD ($)$ / sharesshares | Jan. 28, 2016USD ($)item$ / sharesshares | Dec. 31, 2018$ / sharesshares | Dec. 31, 2017$ / shares |
Preferred Stock, par value (in dollars per share) | $ / shares | $ 0.10 | $ 0.10 | |||
Common stock, par value (in dollars per share) | $ / shares | 0.10 | $ 0.10 | |||
Preferred Series A | |||||
Conversion price | $ / shares | $ 11.16 | ||||
Shares converted from issuance | 50,000 | 50,000 | |||
New shares issued upon conversion | 5,852,142 | ||||
Series A-1 preferred stock | |||||
Shares converted from issuance | 4,587,964 | ||||
New shares issued upon conversion | 4,951,177 | 4,587,964 | |||
TCP Denim, LLC | Preferred Series A | |||||
Shares issued (in shares) | 50,000 | ||||
Aggregate amount | $ | $ 50 | ||||
Dividend rate (as a percent) | 10.00% | ||||
Number of Board of Directors that the preferred stockholders can elect | item | 3 | ||||
Preferred Stock, par value (in dollars per share) | $ / shares | $ 0.10 | ||||
Tengram Capital Partners, LP | |||||
New shares issued upon conversion | 4,951,177 | ||||
Convertible Notes Due January 2018 | Tengram Capital Partners, LP | Series A-1 preferred stock | |||||
Convertible notes face value | $ | $ 13 | ||||
Dividend rate (as a percent) | 10.00% | ||||
Conversion price (in dollars per share) | $ / shares | $ 3 | ||||
Number of shares issuable upon conversion of the debt | 4,587,964 | ||||
Conversion ratio | 1 | ||||
Preferred Stock, par value (in dollars per share) | $ / shares | $ 0.10 |
Equity - Warrants (Details)
Equity - Warrants (Details) - SWIMS - USD ($) $ / shares in Units, $ in Thousands | Jul. 18, 2016 | Dec. 31, 2018 |
Class of Warrant or Right [Line Items] | ||
Shares of common stock | 500,000 | |
Exercise price (in dollars per share) | $ 3 | |
Warrants | ||
Class of Warrant or Right [Line Items] | ||
Shares of common stock | 150,000,000 | |
Fair value of warrants issued | $ 45 | |
Exercise price (in dollars per share) | $ 5.47 | |
Fair value assumptions | ||
Time to maturity (in years) | 3 years | |
Volatility rate (as a percent) | 45.00% | |
Dividend rate | 0.00% | |
Risk-free interest rate (as a percent) | 0.85% | |
Discount rate | 10.00% | |
Restriction period | 6 months | |
Warrants | Tengram Capital Partners, LP | ||
Class of Warrant or Right [Line Items] | ||
Shares of common stock | 500,000,000 | |
Fair value of warrants issued | $ 465 | |
Exercise price (in dollars per share) | $ 3 | |
Fair value assumptions | ||
Time to maturity (in years) | 5 years | |
Volatility rate (as a percent) | 50.00% | |
Dividend rate | 0.00% | |
Risk-free interest rate (as a percent) | 1.14% | |
Discount rate | 20.00% | |
Restriction period | 6 months |
Equity - Private Placement (Det
Equity - Private Placement (Details) - USD ($) $ / shares in Units, $ in Thousands | Oct. 29, 2018 | Dec. 31, 2018 | Dec. 31, 2017 |
The Private Placement | |||
Share price (in dollars per share) | $ 4.22 | $ 1.85 | |
Consideration in private placement | $ 143,651 | ||
Private placement | |||
The Private Placement | |||
Shares issued (in shares) | 10,000,000 | ||
Share price (in dollars per share) | $ 8 | ||
Consideration in private placement | $ 80,000 | ||
Private Placement For Affiliates Entering In to Second Lien Term Facility | |||
The Private Placement | |||
Shares issued (in shares) | 23,094,501 | ||
Consideration in private placement | $ 0 |
Segment Information (Details)
Segment Information (Details) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018USD ($)segment | Dec. 31, 2017USD ($) | |
Segment information | ||
Number of reportable business segments | segment | 3 | |
Net sales | $ 596,602 | $ 164,053 |
Gross profit | 160,735 | 71,750 |
Selling, general and administrative | 145,136 | 62,030 |
Depreciation and amortization | 19,351 | 6,061 |
Other operating expense, net | 87,807 | 2,583 |
Operating income (loss) | (91,559) | 1,076 |
Men’s & Women’s Apparel | ||
Segment information | ||
Net sales | 283,005 | 164,053 |
Gross profit | 116,959 | 71,750 |
Selling, general and administrative | 145,136 | 62,030 |
Depreciation and amortization | 8,561 | 6,061 |
Other operating expense, net | 17,182 | 2,583 |
Operating income (loss) | (22,485) | 1,076 |
Kids | ||
Segment information | ||
Net sales | 216,298 | |
Gross profit | 33,530 | |
Selling, general and administrative | 20,482 | |
Depreciation and amortization | 5,018 | |
Other operating expense, net | 32,903 | |
Operating income (loss) | (24,872) | |
Accessories | ||
Segment information | ||
Net sales | 97,299 | |
Gross profit | 10,246 | |
Selling, general and administrative | 10,954 | |
Depreciation and amortization | 5,772 | |
Other operating expense, net | 37,722 | |
Operating income (loss) | (44,202) | |
Accessories | Men’s & Women’s Apparel | ||
Segment information | ||
Selling, general and administrative | $ 113,700 | $ 62,030 |
Disaggregation of Revenue (Deta
Disaggregation of Revenue (Details) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018USD ($)segment | Dec. 31, 2017USD ($) | |
Disaggregation of Revenue [Line Items] | ||
Number of reportable segments | segment | 3 | |
Net sales | $ 596,602 | $ 164,053 |
International | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 29,800 | 15,700 |
Kids | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 216,298 | |
Accessories | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 97,299 | |
Men's & Women's Apparel | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 283,005 | 164,053 |
Wholesale and licensing | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 488,638 | 121,958 |
Wholesale and licensing | Kids | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 216,298 | |
Wholesale and licensing | Accessories | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 97,299 | |
Wholesale and licensing | Men's & Women's Apparel | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 175,041 | 121,958 |
Retail | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 107,964 | 42,095 |
Retail | Men's & Women's Apparel | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | $ 107,964 | $ 42,095 |
Loss Per Share (Details)
Loss Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Numerator: | ||
Loss from continuing operations | $ (123,766) | $ (2,458) |
Less: preferred dividends | (6,144) | (5,480) |
Loss from continuing operations attributable to common stockholders | $ (129,910) | $ (7,938) |
Denominator: | ||
Weighted average common shares outstanding (in shares) | 21,569 | 13,313 |
Loss from continuing operations (in dollars per share) | $ (6.02) | $ (0.60) |
Loss per common share - basic (in dollars per share) | $ (6.02) | $ (0.60) |
Numerator: | ||
Loss from continuing operations | $ (123,766) | $ (2,458) |
Less: preferred dividends | (6,144) | (5,480) |
Loss from continuing operations attributable to common stockholders | $ (129,910) | $ (7,938) |
Denominator: | ||
Weighted average common shares outstanding (in shares) | 21,569 | 13,313 |
Dilutive common shares | 21,569 | 13,313 |
Loss from continuing operations (in dollars per share) | $ (6.02) | $ (0.60) |
Loss per common share - diluted (in dollars per share) | $ (6.02) | $ (0.60) |
Modified Convertible Notes | ||
Denominator: | ||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 1,278 | 1,247 |
Convertible Notes Due January 2018 | ||
Denominator: | ||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 4,565 | |
2024 Convertible Notes | ||
Denominator: | ||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 3,125 | |
Preferred Series A | ||
Denominator: | ||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 4,480 | |
Warrants | ||
Denominator: | ||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 650 | 650 |
Stock options | ||
Denominator: | ||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 321 | 71 |
RSUs | ||
Denominator: | ||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 5,821 | 746 |
PSUs | ||
Denominator: | ||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 1,406 | 458 |
Loss Per Share - Two Class Meth
Loss Per Share - Two Class Method (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Loss Per Share | ||
Net loss | $ (123,766) | $ (2,458) |
Less: preferred dividends | (6,144) | (5,480) |
Net loss attributable to common stockholders | $ (129,910) | $ (7,938) |
Denominator: | ||
Weighted average common shares outstanding (in shares) | 21,569 | 13,313 |
Loss per common share - basic and diluted under two-class method (in dollars per share) | $ (6.02) | $ (0.60) |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Continuing operations before income taxes | ||
Domestic | $ (130,609) | $ (7,352) |
Foreign | 916 | (437) |
Loss before income taxes | (129,693) | (7,789) |
Current: | ||
Federal | (1,056) | |
State | 712 | 229 |
Foreign | 43 | |
Total current | 712 | (784) |
Deferred: | ||
Federal | (3,415) | (4,425) |
State | (1,100) | (178) |
Foreign | (2,124) | 56 |
Deferred income taxes | (6,639) | (4,547) |
Total | $ (5,927) | $ (5,331) |
Income Taxes - Income Tax Provi
Income Taxes - Income Tax Provision (Benefit) (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Taxes | ||
Statutory income tax rate (as a percent) | 21.00% | 34.00% |
U.S. Federal (benefit) provision | ||
At statutory rate | $ (27,235) | $ (2,649) |
State taxes | (358) | 34 |
Federal Valuation allowance | 23,792 | (8,431) |
Foreign tax adjustments | (2,332) | 81 |
Disallowed interest expense | 190 | |
Federal tax rate change | 7,338 | |
Permanent Adjustments | 236 | |
Effect of uncertain tax positions | (30) | 10 |
Book income from pre-transaction period | (1,932) | |
Other | 28 | |
Total | $ (5,927) | $ (5,331) |
Effective tax rate from continuing operations (as a percent) | 4.60% | |
Benefit due to the impact of the Tax Act (as a percent) | 68.40% |
Income Taxes - Tax Cuts and Job
Income Taxes - Tax Cuts and Jobs Act (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Taxes | ||
Period of payment (in years) | 8 years | |
Statutory income tax rate (as a percent) | 21.00% | 34.00% |
Provision tax benefit adjusted | $ 6.3 | |
CFC, Net tested income | 0.8 | |
Global Intangible Low-Taxed Income | $ 0.8 |
Income Taxes - Deferred Tax Ass
Income Taxes - Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Deferred tax assets: | ||
Federal and state NOL carryforward | $ 31,157 | $ 9,889 |
Fixed assets | 3 | 462 |
Accruals | 27,946 | 682 |
Stock-based compensation | 1,639 | 454 |
Inventory | 667 | 835 |
Other intangibles | 18,566 | 9,151 |
Allowance for customer credits and doubtful accounts | 843 | |
Deferred rent | 985 | |
Contribution carryforward | 103 | |
Business interest limitation | 9,844 | |
Deferred state income tax | 309 | 231 |
Other | 1,032 | 186 |
Total gross deferred tax assets | 91,266 | 23,718 |
Less: valuation allowance | (77,864) | (19,975) |
Total deferred tax assets | 13,402 | 3,743 |
Deferred tax liabilities: | ||
Indefinite lived intangibles | (10,696) | (9,382) |
Fixed Assets | (2,586) | |
Prepaids | (120) | (90) |
Debt discount | (921) | |
Total gross deferred tax liabilities | (13,402) | (10,393) |
Net deferred tax liabilities | $ (6,650) | |
Increase in valuation allowance | $ (57,900) |
Income Taxes - Net Operating Lo
Income Taxes - Net Operating Loss and Tax Credit Carryforwards (Details) $ in Millions | Dec. 31, 2018USD ($) |
Federal tax | |
Net Operating Loss and Tax Credit Carryforwards | |
Net operating loss carryforwards | $ 102.8 |
State | |
Net Operating Loss and Tax Credit Carryforwards | |
Net operating loss carryforwards | 90.4 |
Foreign | |
Net Operating Loss and Tax Credit Carryforwards | |
Net operating loss carryforwards | $ 13.7 |
Income Taxes - Unrecognized tax
Income Taxes - Unrecognized tax benefits (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Unrecognized tax benefits | $ 119 | $ 81 |
Unrecognized tax benefits | ||
Beginning balance | 119 | 81 |
Gross increase - tax positions in prior periods | 38 | |
Lapse in statutes of limitations | (30) | |
Ending balance | 89 | 119 |
Accounts payable and accrued expenses | ||
Unrecognized tax benefits | 100 | 100 |
Unrecognized tax benefits | ||
Beginning balance | 100 | |
Ending balance | $ 100 | $ 100 |
Related Party Transactions - Em
Related Party Transactions - Employment and Stock purchase agreements (Details) | Oct. 30, 2018USD ($)shares | Oct. 29, 2018USD ($)$ / sharesshares | Jan. 28, 2016USD ($)item$ / sharesshares | Dec. 31, 2018USD ($)$ / sharesshares | Dec. 31, 2017$ / sharesshares |
Related party transactions | |||||
Share price (in dollars per share) | $ / shares | $ 4.22 | $ 1.85 | |||
Aggregate purchase price in cash | $ 143,651,000 | ||||
RSUs | |||||
Related party transactions | |||||
Granted (in shares) | shares | 6,473,484 | 510,000 | |||
Stock Purchase Agreement | Preferred Series A | |||||
Related party transactions | |||||
Annual rate of dividend | 10.00% | ||||
Number of board of directors entitled to be elected by preference shareholders | item | 3 | ||||
Initial conversion price | $ / shares | $ 11.16 | ||||
Jason Rabin | Employment Agreement and Inducement Grant | |||||
Related party transactions | |||||
Annual base salary | $ 1,275,000 | ||||
Annual cash bonuses | 300.00% | ||||
Maximum amount of bonus upon achieving performance goals | $ 4,000,000 | ||||
Number of shares of common stock authorized to be purchased | shares | 3,125,000 | ||||
Share price (in dollars per share) | $ / shares | $ 8 | ||||
Jason Rabin | Employment Agreement and Inducement Grant | RSUs | |||||
Related party transactions | |||||
Granted (in shares) | shares | 4,100,000 | ||||
Jason Rabin | Employment Agreement and Inducement Grant | PSUs | |||||
Related party transactions | |||||
Granted (in shares) | shares | 500,000 | ||||
Jason Rabin | Employment Agreement and Inducement Grant | Maximum | |||||
Related party transactions | |||||
Management allowances | $ 200,000 | ||||
Arthur Rabin | |||||
Related party transactions | |||||
Annual salary | $ 1,000,000 | ||||
Anurup S. Pruthi | Employment Agreement and Inducement Grant | |||||
Related party transactions | |||||
Annual base salary | $ 650,000 | ||||
Annual cash bonuses | 100.00% | ||||
Annual cash bonus | $ 250,000 | ||||
Travel allowance | $ 1,500 | ||||
Minimum annual cash bonus percentage for first two years | 100.00% | ||||
Anurup S. Pruthi | Employment Agreement and Inducement Grant | RSUs | |||||
Related party transactions | |||||
Granted (in shares) | shares | 600,000 | ||||
Anurup S. Pruthi | Employment Agreement and Inducement Grant | Maximum | |||||
Related party transactions | |||||
Legal fees for negotiation and drafting of employment agreement | $ 15,000 | ||||
Andrew Tarshis | Consulting agreement | |||||
Related party transactions | |||||
Compensation per month | $ 25,000 | ||||
Compensation period (in months) | 36 months | ||||
Agreement termination period 9in days) | 30 days | ||||
TCP Denim | Stock Purchase Agreement | |||||
Related party transactions | |||||
Shares issued (in shares) | shares | 50,000 | ||||
Aggregate purchase price in cash | $ 50,000,000 | ||||
Mr. Buckley | |||||
Related party transactions | |||||
Lump sum cash payment | $ 200,000 | ||||
Full payments towards cost of COBRA continuation coverage for himself and any covered dependents (in months) | 18 months | ||||
Mr. Buckley | RSUs | |||||
Related party transactions | |||||
Accelerated vesting on restricted shares (in shares) | shares | 144,588 | ||||
Mr. Buckley | PSUs | |||||
Related party transactions | |||||
Accelerated vesting on restricted shares (in shares) | shares | 150,000 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ / shares in Units, $ in Thousands | Oct. 29, 2018 | Jan. 18, 2018 | Dec. 31, 2018 | Dec. 31, 2017 |
Related party transactions | ||||
Preferred Stock, par value (in dollars per share) | $ 0.10 | $ 0.10 | ||
SWIMS | ||||
Related party transactions | ||||
Warrants to purchase shares of common stock | 500,000 | |||
Exercise price of warrants | $ 3 | |||
Tengram Capital Partners, LP | ||||
Related party transactions | ||||
Total related party expenses | $ 5,500 | $ 62 | ||
Related party expenses, component professional fees and travel reimbursement. | 469 | |||
GBG acquisition related costs | $ 5,000 | |||
New shares issued upon conversion | 4,951,177 | |||
Preferred Series A | ||||
Related party transactions | ||||
Shares converted from issuance | 50,000 | 50,000 | ||
New shares issued upon conversion | 5,852,142 | |||
Series A-1 preferred stock | ||||
Related party transactions | ||||
Shares converted from issuance | 4,587,964 | |||
New shares issued upon conversion | 4,951,177 | 4,587,964 | ||
Series A-1 preferred stock | Tengram Capital Partners, LP | Convertible Notes Due January 2018 | ||||
Related party transactions | ||||
Preferred Stock, par value (in dollars per share) | $ 0.10 | |||
Conversion price (in dollars per share) | $ 3 | |||
Number of shares issuable upon conversion of the debt | 4,587,964 |
Related Party Transactions - Th
Related Party Transactions - The 2024 Convertible Notes (Details) - 2024 Convertible Notes - USD ($) $ / shares in Units, $ in Thousands | Oct. 29, 2018 | Dec. 31, 2018 |
The 2024 Convertible Notes | ||
Aggregate principal amount | $ 25,000 | $ 25,000 |
Conversion price (in dollars per share) | $ 8 | |
Prior written notice (in days) | 10 days | |
From and after April 29, 2019 To October 29, 2019 | ||
The 2024 Convertible Notes | ||
Interest rate (in percent) | 12.00% | |
Prior written notice (in days) | 10 days | |
From and after October 29, 2019 | ||
The 2024 Convertible Notes | ||
Interest rate (in percent) | 16.00% | |
Prior written notice (in days) | 10 days |
Related Party Transactions - _2
Related Party Transactions - The Private Placement (Details) - USD ($) $ / shares in Units, $ in Thousands | Oct. 29, 2018 | Dec. 31, 2018 | Dec. 31, 2017 |
The Private Placement | |||
Share price (in dollars per share) | $ 4.22 | $ 1.85 | |
Consideration in private placement | $ 143,651 | ||
Private placement | |||
The Private Placement | |||
Shares issued (in shares) | 10,000,000 | ||
Share price (in dollars per share) | $ 8 | ||
Consideration in private placement | $ 80,000 | ||
Private placement | GSO/BTO and Jason Rabin | |||
The Private Placement | |||
Consideration in private placement | $ 25,000 | ||
Private Placement For Affiliates Entering In to Second Lien Term Facility | |||
The Private Placement | |||
Shares issued (in shares) | 23,094,501 | ||
Consideration in private placement | $ 0 |
Related Party Transactions - St
Related Party Transactions - Stockholder Agreement (Details) - Stockholder Agreement | Oct. 29, 2018itemdirector |
Stockholder Agreement | |
Minimum percentage of outstanding shares of common stock to nominate one member | 5.00% |
Number of independent director | 1 |
Tengram Stockholders | |
Stockholder Agreement | |
Number of members in the Board | 8 |
Percent of outstanding shares to nominate two directors | 50.00% |
Number of directors nominated on 50% shareholding | 2 |
Percent of outstanding shares to nominate one director | 5.00% |
Number of directors nominated on 5% shareholding | 1 |
Number of independent directors removed | 1 |
Number of Director appointed by Shareholders | item | 1 |
GSO Stockholders | |
Stockholder Agreement | |
Percent of outstanding shares to nominate two directors | 50.00% |
Number of directors nominated on 5% shareholding | 1 |
Number of Director appointed by Shareholders | item | 1 |
Related Party Transactions - _3
Related Party Transactions - The Conversion (Details) - shares | Oct. 29, 2018 | Jan. 18, 2018 | Dec. 31, 2018 |
Preferred Series A | |||
The Conversion | |||
Shares converted from issuance | 50,000 | 50,000 | |
New shares issued upon conversion | 5,852,142 | ||
Series A-1 preferred stock | |||
The Conversion | |||
Shares converted from issuance | 4,587,964 | ||
New shares issued upon conversion | 4,951,177 | 4,587,964 |
Related Party Transactions - Ma
Related Party Transactions - Management Incentive Plan (Details) | Oct. 29, 2018shares |
Management Incentive Plan | |
Management Incentive Plan | |
Number of shares of common stock authorized for issuance | 1,776,500 |
Employee Benefit Plans (Details
Employee Benefit Plans (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Selling, general and administrative expenses | ||
Plan expenses | $ 24 | $ 36 |
Matching contributions | $ 156 | $ 238 |
Hudson Plan | ||
Period of service required in order to participate in plan | 30 days | |
DBG Plan | ||
Period of service required in order to participate in plan | 6 months | |
Hours of service required in order to receive employer contribution | 1,000 | |
RG Plan | ||
Period of service required in order to participate in plan | 90 days | |
Hours of service required in order to receive employer contribution | 1,000 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) | Apr. 25, 2019 | Jan. 04, 2019 | Oct. 29, 2018 | Dec. 31, 2018 | Apr. 17, 2019 | Apr. 16, 2019 |
Subsequent Event [Line Items] | ||||||
Receivables Purchase Agreement, Maximum Sale Of Undivided Ownership Interest | $ 450,000,000 | |||||
Period within which company should file annual reports | 60 years | |||||
Expected filing duration that might be granted if Nasdaq accepts the plan | 180 years | |||||
Ross Separation Agreement | ||||||
Subsequent Event [Line Items] | ||||||
Period of insurance coverage payment to be made | 18 years | |||||
Ross Separation Agreement | Subsequent Events | ||||||
Subsequent Event [Line Items] | ||||||
Lumpsum cash payment | $ 10,000 | |||||
Ross Separation Agreement | RSUs | ||||||
Subsequent Event [Line Items] | ||||||
Accelerated vesting | 133,333 | |||||
First Lien Credit Agreement | Subsequent Events | ||||||
Subsequent Event [Line Items] | ||||||
Maximum borrowing capacity | $ 200,000,000 | $ 150,000,000 | ||||
Fee amount | 1,500,000 | |||||
Trade Receivables Securitization Facility Under R P A | Subsequent Events | ||||||
Subsequent Event [Line Items] | ||||||
Maximum borrowing capacity | 600,000,000 | 550,000,000 | ||||
Receivables Purchase Agreement, Maximum Sale Of Undivided Ownership Interest | $ 600,000,000 | |||||
Increase in undivided ownership interest | $ 150,000,000 | |||||
Second Lien Credit Agreement | Subsequent Events | ||||||
Subsequent Event [Line Items] | ||||||
Long-term Line of Credit | $ 845,000,000 | $ 795,000,000 |