| News Release |
Contact: | |
Investor Relations | |
(281) 776-7575 | |
ir@tailoredbrands.com | |
| |
Julie MacMedan, VP, Investor Relations | |
Tailored Brands, Inc. |
FOR IMMEDIATE RELEASE
TAILORED BRANDS, INC. REPORTS
FISCAL 2019 SECOND QUARTER RESULTS
· | Q2 2019 GAAP diluted EPS of $0.68 and adjusted diluted EPS(1) of $0.82 |
· | Company expects Q3 2019 adjusted diluted EPS(1) of $0.40 to $0.45 |
· | Company to redeploy capital to accelerated debt repayment and share repurchases; suspends quarterly cash dividend starting in Q4 2019 |
FREMONT, CA — September 11, 2019 — Tailored Brands, Inc. (NYSE: TLRD) today announced consolidated financial results for the fiscal second quarter ended August 3, 2019.
For the second quarter ended August 3, 2019, the Company reported GAAP diluted earnings per share of $0.68 and adjusted diluted earnings per share(1) of $0.82, compared to GAAP diluted earnings per share of $0.97 and adjusted diluted earnings per share(1) of $1.07 last year.
Second quarter 2019 results exclude net charges of $10.4 million comprised of $11.3 million of charges related to our multi-year cost savings and operational excellence programs (consisting of $6.1 million in consulting costs, $2.9 million related to the closure of a distribution center in Canada, $2.2 million in severance costs and $0.1 million in lease termination costs), offset by a $0.9 million net favorable adjustment primarily related to a derivative instrument entered into for the corporate apparel business.
“We were pleased to deliver second quarter comparable sales in line with our guidance and adjusted earnings per share above our guidance,” said Tailored Brands President and CEO Dinesh Lathi. “We are also seeing early customer response to our initiatives, which gives us confidence that unleashing the potential for this business to generate healthy positive comps lies in our transformational strategies of providing i) personalized products and services, ii) inspiring and seamless experiences in and across every channel, and iii) brands that stand for more than just price.”
Lathi added, “On our year-end call, we indicated that we had work ahead of us to transform our customer-facing experience to one that can generate sustainable and profitable growth. We also said that, while we transform the experience, we would execute and invest in a focused manner with a clear goal of continuing to generate cash that we would deploy responsibly. Our sale of the corporate apparel business is consistent with our commitment to focused execution and investment. The Board of Directors’ unanimous decision to suspend the quarterly cash dividend for reallocation to debt repayment and share repurchases is consistent with our commitment to responsible allocation of capital. And while our Q2 results and Q3 guidance reflect what we’ve previously shared about the need to transform our customer experience and the fact that transformations take time, the early signs of customer response to our strategies indicate that we are making healthy progress on our journey.”
(1) | In the second quarter of fiscal 2019, adjusted items consist of $11.3 million in costs related to our multi-year cost savings and operational excellence programs including consulting, the closure of a distribution center in Canada, severance and lease termination costs, offset by a $0.9 million net favorable adjustment primarily related to a derivative instrument entered into for the corporate apparel business. In the second quarter of fiscal 2018, adjusted items consist of a loss on extinguishment of debt related to the partial redemption of $175 million of the Company’s senior notes, costs related to the closure of a rental product distribution center and an unfavorable final working capital adjustment related to the divestiture of the MW Cleaners business. See Use of Non-GAAP Financial Measures for additional information on items excluded from adjusted EPS for the second quarter of fiscal 2019 and with respect to the Company’s outlook for the third quarter of fiscal 2019. |
1
Second Quarter Fiscal 2019 Results
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Net Sales Summary(1) |
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| Net Sales |
| % Total Sales |
| Comparable Sales |
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| (U.S. dollars in millions) |
| Change |
| Change(2) |
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Retail | $ | 736.1 |
| (4.1) | % |
| (3.6) | % |
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Men's Wearhouse | $ | 423.5 |
| (4.9) | % |
| (4.3) | % |
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Jos. A. Bank | $ | 166.1 |
| (3.7) | % |
| (3.3) | % |
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K&G | $ | 82.7 |
| (1.1) | % |
| (1.3) | % |
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Moores(3) | $ | 63.9 |
| (4.1) | % |
| (2.5) | % |
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Corporate Apparel | $ | 53.3 |
| (3.9) | % |
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Total Company | $ | 789.5 |
| (4.1) | % |
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(1) | Amounts may not sum due to rounded numbers. |
(2) | Comparable sales is defined as net sales from stores open at least 12 months at period end and includes e-commerce sales. |
(3) | The Moores comparable sales change is based on the Canadian dollar. |
Net Sales
Total net sales decreased 4.1% to $789.5 million. Retail net sales decreased 4.1% primarily due to a decrease in retail segment comparable sales of 3.6%. Corporate apparel net sales decreased 3.9%, or $2.2 million, primarily due to the impact of a weaker British pound this year compared to last year.
Comparable Sales
Men’s Wearhouse comparable sales decreased 4.3%. Comparable sales for clothing decreased due to a decrease in transactions, average unit retail and units per transaction. Comparable rental services revenue decreased 3.1%, primarily reflecting the continuing trend to purchase suits for special occasions.
Jos. A. Bank comparable sales decreased 3.3% primarily from a decrease in average unit retail partially offset by an increase in both transactions and units per transaction.
K&G comparable sales decreased 1.3% primarily due to a decrease in both units per transaction and transactions partially offset by an increase in average unit retail.
Moores comparable sales decreased 2.5% primarily due to a decrease in both transactions and average unit retail partially offset by an increase in units per transaction.
Gross Margin
On a GAAP basis, consolidated gross margin was $333.7 million, a decrease of $35.2 million, primarily due to the decrease in net sales. As a percent of sales, consolidated gross margin decreased 250 basis points to 42.3%. On an adjusted basis, consolidated gross margin decreased 260 basis points to 42.6% primarily due to a lower retail gross margin rate.
On a GAAP basis, retail gross margin was $319.1 million, a decrease of $34.9 million. As a percent of sales, retail gross margin decreased 270 basis points to 43.4%. On an adjusted basis, retail gross margin decreased $35.9 million and the retail gross margin rate decreased 290 basis points to 43.7%, primarily due to increased promotional activities, as well as deleveraging of occupancy costs.
2
Advertising Expense
Advertising expense decreased $5.5 million to $33.2 million primarily driven by reductions in television advertising reflecting a shift to digital advertising as well as the timing of marketing spend. As a percent of sales, advertising expense decreased 50 basis points to 4.2%.
Selling, General and Administrative Expenses (“SG&A”)
On a GAAP basis, SG&A decreased $2.3 million to $240.0 million and increased 100 basis points as a percent of sales. On an adjusted basis, SG&A decreased $9.3 million to $232.5 million primarily due to lower incentive and share-based compensation. As a percent of sales, adjusted SG&A was flat at 29.4% primarily due to deleveraging from lower sales.
Operating Income
On a GAAP basis, operating income was $60.6 million compared to $88.0 million last year and operating margin decreased 300 basis points. On an adjusted basis, operating income was $71.0 million compared to $92.5 million last year. As a percent of sales, adjusted operating margin decreased 220 basis points to 9.0%.
Net Interest Expense and Net Loss on Extinguishment of Debt
Net interest expense was $18.1 million compared to $20.7 million last year. The decrease in interest expense was due to the reduction of our outstanding debt.
On a GAAP basis, there was no net loss on extinguishment of debt this year compared to an $8.1 million loss on extinguishment of debt last year. Last year’s net loss on extinguishment of debt consisted of the 3.5% premium on the $175 million partial redemption of the Company’s senior notes as well as the write-off of related deferred financing costs. On an adjusted basis, there was no net loss on extinguishment of debt this year or last year.
Effective Tax Rate
On a GAAP basis, the effective tax rate was 19.4% compared to 16.7% last year. On an adjusted basis, the effective tax rate was 21.2% compared to 23.9% last year.
Net Earnings and EPS
On a GAAP basis, net earnings were $34.3 million compared to net earnings of $49.2 million last year. Diluted EPS was $0.68 compared to diluted EPS of $0.97 last year.
On an adjusted basis, net earnings were $41.7 million compared to net earnings of $54.6 million last year. Adjusted diluted EPS was $0.82 compared to adjusted diluted EPS of $1.07 last year.
3
Balance Sheet Highlights
Cash and cash equivalents at the end of the second quarter of 2019 were $19.5 million, a decrease of $48.7 million compared to the end of the second quarter of 2018 primarily due to the decrease in sales and the use of cash on hand for costs related to our multi-year cost savings and operational excellence programs and debt reduction. At the end of the second quarter of 2019, there were $45.0 million of borrowings outstanding on our revolving credit facility. Total liquidity at the end of the second quarter was $421.3 million, comprised of availability on our revolving credit facility and cash and cash equivalents.
Inventories increased $60.4 million, or 7.7%, to $847.0 million at the end of the second quarter of 2019 compared to the end of the second quarter of 2018. The increase was primarily driven by higher levels of raw materials including fabric in support of basic, replenishment product.
Total debt at the end of the second quarter of 2019 was approximately $1.2 billion, down $61.7 million compared to the end of the second quarter of 2018. During the second quarter of 2019, the Company made its scheduled $2.3 million payment on its term loan and repaid $3.5 million on its revolving credit facility.
Cash flow from operating activities for the six months ended August 3, 2019 was $33.3 million compared to $198.0 million last year. The decrease was driven by lower net earnings after adjusting for non-cash items, an increase in inventories, and fluctuations in accounts payable and accrued liabilities primarily due to timing.
Capital expenditures for the six months ended August 3, 2019 were $39.1 million compared to $24.6 million last year.
Sale of Corporate Apparel Business
As previously announced, on August 16, 2019, the Company closed the sale of its corporate apparel business for total cash consideration of $62 million, subject to certain working capital adjustments. The Company will use cash proceeds from the transaction to reinvest in its business in accordance with the provisions of its term loan. This will free up funds previously slated for capital expenditures for debt reduction. The Company expects to present the sale as a discontinued operation beginning in the third quarter of fiscal 2019.
Capital Allocation Policy Update
After extensive review, the Board of Directors approved an update to the Company’s capital allocation policy. Effective in the fourth quarter, the Company’s quarterly cash dividend will be suspended and redeployed for accelerated debt repayment and share repurchases. This does not impact the previously approved quarterly cash dividend of $0.18 per share payable on September 27, 2019, to shareholders of record at the close of business on September 17, 2019.
Suspending the quarterly cash dividend of $0.18 per share is expected to make available approximately $36.5 million on an annualized basis. The Company has $48.0 million available for share repurchases under its previously authorized 2013 share repurchase program.
4
Q3 FISCAL 2019 OUTLOOK
The Company’s outlook for the third quarter of fiscal 2019 is as follows:
· | Earnings per Share: The Company expects to achieve adjusted diluted EPS in the range of $0.40 to $0.45, excluding the impact of any share repurchases. |
· | Comparable Sales: The Company expects comparable sales for: |
o | Men’s Wearhouse to be down 3% to 5% |
o | Jos. A. Bank to be down 2% to 4% |
o | K&G to be down 2% to 4% |
o | Moores to be down 4% to 6%. |
· | Effective Tax Rate: The Company expects an effective tax rate of 23% to 24%. |
· | Real Estate: The Company expects net closures of seven stores, across Men’s Wearhouse and Jos. A. Bank. |
· | The Company’s outlook excludes expected costs for third party domain experts and other actions associated with its cost savings and operational excellence programs. |
STORE INFORMATION
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| August 3, 2019 |
| August 4, 2018 |
| February 2, 2019 |
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| Number |
| Sq. Ft. |
| Number |
| Sq. Ft. |
| Number |
| Sq. Ft. |
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| of Stores |
| (000's) |
| of Stores |
| (000's) |
| of Stores |
| (000's) |
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Men's Wearhouse(a) | 720 |
| 4,038.8 |
| 719 |
| 4,036.3 |
| 720 |
| 4,035.5 |
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Men's Wearhouse and Tux | 45 |
| 66.3 |
| 49 |
| 73.3 |
| 46 |
| 68.8 |
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Jos. A. Bank(b) | 476 |
| 2,244.4 |
| 487 |
| 2,293.7 |
| 484 |
| 2,280.2 |
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K&G(c) | 88 |
| 2,028.4 |
| 88 |
| 2,028.4 |
| 88 |
| 2,028.4 |
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Moores | 126 |
| 787.4 |
| 126 |
| 787.5 |
| 126 |
| 787.4 |
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Total | 1,455 |
| 9,165.3 |
| 1,469 |
| 9,219.2 |
| 1,464 |
| 9,200.3 |
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(a) | Includes one Joseph Abboud store. |
(b) | Excludes 14 franchise stores. |
(c) | 84 stores offering women’s apparel at the end of each period, respectively. |
Conference Call and Webcast Information
At 5:00 p.m. Eastern time on Wednesday, September 11, 2019, management will host a conference call and webcast to discuss fiscal 2019 second quarter results. To access the conference call, please dial 201-689-8029. To access the live webcast, visit the Investor Relations section of the Company’s website at http://ir.tailoredbrands.com. A webcast archive will be available free on the website for approximately 90 days.
About Tailored Brands, Inc.
As the leading specialty retailer of men’s tailored clothing and largest men’s formalwear provider in the U.S. and Canada, Tailored Brands helps men love the way they look for work and special occasions. We serve our customers through an expansive omni-channel network that includes over 1,400 locations in the U.S. and Canada as well as our branded e-commerce websites. Our brands include Men's Wearhouse, Jos. A. Bank, Joseph Abboud, Moores Clothing for Men and K&G.
For additional information on Tailored Brands, please visit the Company’s websites at www.tailoredbrands.com, www.menswearhouse.com, www.josbank.com, www.josephabboud.com, www.mooresclothing.com, and www.kgstores.com.
5
This press release contains forward-looking information, including the Company’s statements regarding its Q3 2019 outlook for adjusted earnings per share, comparable sales, effective tax rate and store closures. In addition, words such as “expects,” “anticipates,” “envisions,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “guidance,” “may,” “projections,” and “business outlook,” variations of such words and similar expressions are intended to identify such forward-looking statements. The forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any forward-looking statements that we make herein are not guarantees of future performance and actual results may differ materially from those in such forward-looking statements as a result of various factors. Factors that might cause or contribute to such differences include, but are not limited to: actions or inactions by governmental entities; domestic and international macro-economic conditions; inflation or deflation; the loss of, or changes in, key personnel; success, or lack thereof, in formulating or executing our internal strategies and operating plans including new store and new market expansion plans; cost reduction initiatives and revenue enhancement strategies; changes to our capital allocation policy; changes in demand for clothing or rental product; market trends in the retail business; customer confidence and spending patterns; changes in traffic trends in our stores; customer acceptance of our merchandise strategies, including custom clothing; performance issues with key suppliers; disruptions in our supply chain; severe weather; foreign currency fluctuations; government export and import policies, including the enactment of duties or tariffs; advertising or marketing activities of competitors; the impact of cybersecurity threats or data breaches; legal proceedings and the impact of climate change.
Forward-looking statements are intended to convey the Company’s expectations about the future, and speak only as of the date they are made. We undertake no obligation to publicly update or revise any forward-looking statements that may be made from time to time, whether as a result of new information, future developments or otherwise, except as required by applicable law. However, any further disclosures made on related subjects in our subsequent reports on Forms 10-K, 10-Q and 8-K should be consulted. This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995, and all written or oral forward-looking statements that are made by or attributable to us are expressly qualified in their entirety by the cautionary statements contained or referenced in this section.
(Tables Follow)
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TAILORED BRANDS, INC. | ||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS | ||||||||||
(Unaudited) | ||||||||||
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For the Three Months Ended August 3, 2019 and August 4, 2018 | ||||||||||
(In thousands, except per share data) | ||||||||||
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| Three Months Ended |
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| % of |
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| % of |
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| 2019 | Sales |
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| 2018 | Sales |
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Net sales: |
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Retail clothing product | $ | 580,900 | 73.6 | % |
| $ | 605,788 | 73.6 | % |
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Rental services |
| 120,329 | 15.2 | % |
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| 125,095 | 15.2 | % |
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Alteration and other services |
| 34,916 | 4.4 | % |
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| 37,031 | 4.5 | % |
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Total retail sales |
| 736,145 | 93.2 | % |
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| 767,914 | 93.3 | % |
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Corporate apparel clothing product |
| 53,343 | 6.8 | % |
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| 55,516 | 6.7 | % |
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Total net sales |
| 789,488 | 100.0 | % |
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| 823,430 | 100.0 | % |
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Total cost of sales |
| 455,761 | 57.7 | % |
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| 454,528 | 55.2 | % |
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Gross margin (a): |
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Retail clothing product |
| 321,853 | 55.4 | % |
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| 346,763 | 57.2 | % |
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Rental services |
| 100,556 | 83.6 | % |
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| 105,729 | 84.5 | % |
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Alteration and other services |
| 1,302 | 3.7 | % |
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| 3,282 | 8.9 | % |
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Occupancy costs |
| (104,585) | (14.2) | % |
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| (101,772) | (13.3) | % |
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Total retail gross margin |
| 319,126 | 43.4 | % |
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| 354,002 | 46.1 | % |
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Corporate apparel clothing product |
| 14,601 | 27.4 | % |
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| 14,900 | 26.8 | % |
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Total gross margin |
| 333,727 | 42.3 | % |
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| 368,902 | 44.8 | % |
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Advertising expense |
| 33,164 | 4.2 | % |
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| 38,661 | 4.7 | % |
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Selling, general and administrative expenses |
| 239,973 | 30.4 | % |
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| 242,255 | 29.4 | % |
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Operating income |
| 60,590 | 7.7 | % |
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| 87,986 | 10.7 | % |
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Interest expense, net |
| (18,101) | (2.3) | % |
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| (20,742) | (2.5) | % |
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Loss on extinguishment of debt, net |
| — | — | % |
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| (8,122) | (1.0) | % |
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Earnings before income taxes |
| 42,489 | 5.4 | % |
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| 59,122 | 7.2 | % |
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Provision for income taxes |
| 8,223 | 1.0 | % |
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| 9,884 | 1.2 | % |
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Net earnings | $ | 34,266 | 4.3 | % |
| $ | 49,238 | 6.0 | % |
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Net earnings per diluted common share | $ | 0.68 |
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| $ | 0.97 |
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Weighted-average diluted common shares outstanding |
| 50,624 |
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| 50,851 |
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(a) | Gross margin percent of sales is calculated as a percentage of related sales. |
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TAILORED BRANDS, INC. |
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CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS |
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(Unaudited) |
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For the Six Months Ended August 3, 2019 and August 4, 2018 | ||||||||||
(In thousands, except per share data) | ||||||||||
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| Six Months Ended |
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| % of |
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| % of |
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| 2019 | Sales |
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| 2018 | Sales |
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Net sales: |
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Retail clothing product | $ | 1,175,679 | 74.8 | % |
| $ | 1,219,432 | 74.3 | % |
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Rental services |
| 214,069 | 13.6 | % |
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| 225,322 | 13.7 | % |
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Alteration and other services |
| 71,059 | 4.5 | % |
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| 78,003 | 4.8 | % |
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Total retail sales |
| 1,460,807 | 93.0 | % |
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| 1,522,757 | 92.8 | % |
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Corporate apparel clothing product |
| 110,068 | 7.0 | % |
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| 118,637 | 7.2 | % |
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Total net sales |
| 1,570,875 | 100.0 | % |
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| 1,641,394 | 100.0 | % |
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Total cost of sales |
| 916,592 | 58.3 | % |
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| 927,268 | 56.5 | % |
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Gross margin (a): |
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Retail clothing product |
| 647,988 | 55.1 | % |
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| 684,187 | 56.1 | % |
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Rental services |
| 181,279 | 84.7 | % |
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| 191,299 | 84.9 | % |
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Alteration and other services |
| 3,598 | 5.1 | % |
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| 10,076 | 12.9 | % |
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Occupancy costs |
| (208,317) | (14.3) | % |
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| (202,791) | (13.3) | % |
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Total retail gross margin |
| 624,548 | 42.8 | % |
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| 682,771 | 44.8 | % |
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Corporate apparel clothing product |
| 29,735 | 27.0 | % |
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| 31,355 | 26.4 | % |
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Total gross margin |
| 654,283 | 41.7 | % |
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| 714,126 | 43.5 | % |
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Advertising expense |
| 78,207 | 5.0 | % |
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| 79,894 | 4.9 | % |
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Selling, general and administrative expenses |
| 485,184 | 30.9 | % |
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| 493,349 | 30.1 | % |
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Operating income |
| 90,892 | 5.8 | % |
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| 140,883 | 8.6 | % |
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Interest expense, net |
| (36,668) | (2.3) | % |
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| (42,638) | (2.6) | % |
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Loss on extinguishment of debt, net |
| — | — | % |
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| (20,833) | (1.3) | % |
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Earnings before income taxes |
| 54,224 | 3.5 | % |
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| 77,412 | 4.7 | % |
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Provision for income taxes |
| 12,816 | 0.8 | % |
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| 14,265 | 0.9 | % |
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Net earnings | $ | 41,408 | 2.6 | % |
| $ | 63,147 | 3.8 | % |
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Net earnings per diluted common share | $ | 0.82 |
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| $ | 1.24 |
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Weighted-average diluted common shares outstanding: |
| 50,606 |
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| 50,785 |
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(a) | Gross margin percent of sales is calculated as a percentage of related sales. |
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TAILORED BRANDS, INC. | |||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(Unaudited) | |||||||
(In thousands) | |||||||
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| August 3, |
| August 4, |
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| 2019 |
| 2018 |
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ASSETS |
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| |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
| |
| Cash and cash equivalents | $ | 19,476 |
| $ | 68,215 |
|
| Accounts receivable, net |
| 65,176 |
|
| 65,099 |
|
| Inventories |
| 846,952 |
|
| 786,510 |
|
| Other current assets |
| 63,882 |
|
| 87,491 |
|
| Total current assets |
| 995,486 |
|
| 1,007,315 |
|
|
|
|
|
|
|
|
|
Property and equipment, net |
| 421,188 |
|
| 427,107 |
| |
Operating lease right-of-use assets |
| 918,541 |
|
| - |
| |
Rental product, net |
| 99,085 |
|
| 111,345 |
| |
Goodwill |
| 79,283 |
|
| 103,686 |
| |
Intangible assets, net |
| 155,309 |
|
| 165,881 |
| |
Other assets |
| 5,806 |
|
| 13,497 |
| |
| Total assets | $ | 2,674,698 |
| $ | 1,828,831 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
| |
| Accounts payable | $ | 187,946 |
| $ | 145,981 |
|
| Accrued expenses and other current liabilities |
| 289,810 |
|
| 313,319 |
|
| Current portion of operating lease liabilities |
| 185,800 |
|
| - |
|
| Income taxes payable |
| 10,102 |
|
| 6,659 |
|
| Current portion of long-term debt |
| 9,000 |
|
| 9,000 |
|
| Total current liabilities |
| 682,658 |
|
| 474,959 |
|
|
|
|
|
|
|
|
|
Long-term debt, net |
| 1,145,651 |
|
| 1,207,377 |
| |
Operating lease liabilities |
| 763,865 |
|
| - |
| |
Deferred taxes and other liabilities |
| 77,961 |
|
| 146,484 |
| |
| Total liabilities |
| 2,670,135 |
|
| 1,828,820 |
|
|
|
|
|
|
|
|
|
Shareholders' equity: |
|
|
|
|
|
| |
| Preferred stock |
| - |
|
| - |
|
| Common stock |
| 506 |
|
| 498 |
|
| Capital in excess of par |
| 510,021 |
|
| 498,670 |
|
| Accumulated deficit |
| (445,392) |
|
| (470,377) |
|
| Accumulated other comprehensive loss |
| (60,572) |
|
| (28,780) |
|
| Total shareholders' equity |
| 4,563 |
|
| 11 |
|
| Total liabilities and shareholders' equity | $ | 2,674,698 |
| $ | 1,828,831 |
|
9
|
|
|
|
|
|
|
|
TAILORED BRANDS, INC. | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(Unaudited) | |||||||
|
| ||||||
For the Six Months Ended August 3, 2019 and August 4, 2018 | |||||||
(In thousands) | |||||||
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| ||||
|
|
| 2019 |
|
| 2018 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| |
| Net earnings | $ | 41,408 |
| $ | 63,147 |
|
| Adjustments to net earnings: |
|
|
|
|
|
|
| Depreciation and amortization |
| 53,810 |
|
| 52,719 |
|
| Non-cash lease expense |
| 98,683 |
|
| - |
|
| Rental product amortization |
| 19,047 |
|
| 19,755 |
|
| Asset impairment charges |
| 184 |
|
| 269 |
|
| Loss on extinguishment of debt, net |
| - |
|
| 20,833 |
|
| Amortization of deferred financing costs and discount on long-term debt |
| 972 |
|
| 2,228 |
|
| Loss on disposition of assets |
| 2,946 |
|
| 7,768 |
|
| Other |
| 8,004 |
|
| 7,423 |
|
| Changes in operating assets and liabilities: |
|
|
|
|
|
|
| Accounts receivable |
| 5,952 |
|
| 10,461 |
|
| Inventories |
| (22,507) |
|
| 42,186 |
|
| Rental product |
| (21,450) |
|
| (12,102) |
|
| Other assets |
| (15,621) |
|
| (9,372) |
|
| Accounts payable, accrued expenses and other current liabilities |
| (30,928) |
|
| (3,497) |
|
| Income taxes payable |
| (5,789) |
|
| 697 |
|
| Other liabilities |
| (101,388) |
|
| (4,524) |
|
| Net cash provided by operating activities |
| 33,323 |
|
| 197,991 |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
| |
| Capital expenditures |
| (39,092) |
|
| (24,645) |
|
| Proceeds from divestiture of business |
| - |
|
| 17,755 |
|
| Net cash used in investing activities |
| (39,092) |
|
| (6,890) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
| |
| Payments on old term loan |
| - |
|
| (993,420) |
|
| Proceeds from new term loan |
| - |
|
| 895,500 |
|
| Payments on new term loan |
| (7,120) |
|
| (4,500) |
|
| Proceeds from asset-based revolving credit facility |
| 673,500 |
|
| 199,500 |
|
| Payments on asset-based revolving credit facility |
| (677,000) |
|
| (95,000) |
|
| Repurchase and retirement of senior notes |
| - |
|
| (199,365) |
|
| Deferred financing costs |
| - |
|
| (5,644) |
|
| Cash dividends paid |
| (18,784) |
|
| (18,744) |
|
| Proceeds from issuance of common stock |
| 879 |
|
| 4,113 |
|
| Tax payments related to vested deferred stock units |
| (1,052) |
|
| (6,501) |
|
| Net cash used in financing activities |
| (29,577) |
|
| (224,061) |
|
| Effect of exchange rate changes |
| (609) |
|
| (2,432) |
|
|
|
|
|
|
|
|
|
DECREASE IN CASH AND CASH EQUIVALENTS |
| (35,955) |
|
| (35,392) |
| |
| Balance at beginning of period |
| 55,431 |
|
| 103,607 |
|
| Balance at end of period | $ | 19,476 |
| $ | 68,215 |
|
10
TAILORED BRANDS, INC.
UNAUDITED NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts)
Use of Non-GAAP Financial Measures
In addition to providing financial results in accordance with GAAP, we have provided adjusted information for the fiscal second quarters and six months ended August 3, 2019 and August 4, 2018. This non-GAAP financial information is provided to enhance the user’s overall understanding of the Company’s financial performance by removing the impacts of large, unusual or unique transactions that we believe are not indicative of our core business results. For the second quarter of fiscal 2019, these items consist of costs related to our multi-year cost savings and operational excellence programs, offset by a net favorable adjustment related to the corporate apparel business. For the second quarter of fiscal 2018, adjusted items consisted of a loss on extinguishment of debt related to the partial redemption of $175 million of the Company’s senior notes, costs related to the closure of a rental product distribution center and an unfavorable final working capital adjustment related to the divestiture of our MW Cleaners business.
Management uses these adjusted results to assess the Company’s performance, to make decisions about how to allocate resources and to develop expectations for future performance. In addition, adjusted EPS is used as a performance measure in the Company’s executive compensation program to determine the number of performance units that are ultimately earned for certain equity awards.
The non-GAAP financial information should be considered in addition to, not as a substitute for or as being superior to, financial information prepared in accordance with GAAP. Management strongly encourages investors and shareholders to review the Company’s financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.
A reconciliation of third quarter fiscal 2019 adjusted EPS, which is a forward-looking non-GAAP financial measure, to the most directly comparable GAAP financial measure, is not provided because the Company is unable to provide such reconciliation without unreasonable effort. The inability to provide this reconciliation is due to the uncertainty and inherent difficulty predicting the occurrence, the financial impact and the periods in which the non-GAAP adjustments may be recognized. These GAAP measures may include the impact of items such as costs related to our multi-year cost savings and operational excellence programs and the tax effect of such items. Historically, the Company has excluded these types of items from non-GAAP financial measures. The Company currently expects to continue to exclude these items in future disclosures of non-GAAP financial measures and may also exclude other items that may arise. The decisions and events that typically lead to the recognition of non-GAAP adjustments are inherently unpredictable as to if or when they may occur. For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could be material to future results.
Reconciliations of non-GAAP information to our actual results follow and amounts may not sum due to rounded numbers. In addition, only the line items affected by adjustments are shown in the tables.
11
GAAP to Non-GAAP Adjusted Consolidated Statements of Earnings Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP to Non-GAAP Adjusted - Three Months Ended August 3, 2019 | ||||||||||||||||
| ||||||||||||||||
|
|
|
| Multi-Year Cost |
| Divestiture of |
|
|
|
|
| |||||
|
| GAAP |
| Savings and Operational |
| Corporate |
| Total |
| Non-GAAP |
| |||||
Consolidated Results |
| Results |
| Excellence Program(1) |
| Apparel(2) |
| Adjustments |
| Adjusted Results |
| |||||
Rental services gross margin |
| $ | 100,556 |
| $ | 2,938 |
| $ | - |
| $ | 2,938 |
| $ | 103,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total retail gross margin |
|
| 319,126 |
|
| 2,938 |
|
| - |
|
| 2,938 |
|
| 322,064 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross margin |
|
| 333,727 |
|
| 2,938 |
|
| - |
|
| 2,938 |
|
| 336,665 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
| 239,973 |
|
| (8,404) |
|
| 915 |
|
| (7,489) |
|
| 232,484 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income(3) |
|
| 60,590 |
|
| 11,342 |
|
| (915) |
|
| 10,427 |
|
| 71,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes(4) |
|
| 8,223 |
|
|
|
|
|
|
|
| 3,001 |
|
| 11,224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
| 34,266 |
|
|
|
|
|
|
|
| 7,426 |
|
| 41,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per diluted common share |
| $ | 0.68 |
|
|
|
|
|
|
| $ | 0.14 |
| $ | 0.82 |
|
(1) | Consists of $6.1 million in consulting costs, $2.9 million of rental product write-offs related to the closure of a distribution center in Canada, $2.2 million in severance costs and $0.1 million in lease termination costs. |
(2) | Consists of a $1.3 million favorable adjustment related to a derivative instrument entered into for the corporate apparel business offset by $0.4 million in transaction costs. |
(3) | Of the $10.4 million in adjustments to operating income, $7.3 million relates to the retail segment and $3.1 million relates to shared services. |
(4) | The tax effect of the excluded items is computed as the difference between tax expense on a GAAP basis and tax expense on an adjusted non-GAAP basis. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP to Non-GAAP Adjusted - Six Months Ended August 3, 2019 | ||||||||||||||||
| ||||||||||||||||
|
|
|
| Multi-Year Cost |
| Divestiture of |
|
|
|
|
| |||||
|
| GAAP |
| Savings and Operational |
| Corporate |
| Total |
| Non-GAAP |
| |||||
Consolidated Results |
| Results |
| Excellence Program(1) |
| Apparel(2) |
| Adjustments |
| Adjusted Results |
| |||||
Rental services gross margin |
| $ | 181,279 |
| $ | 2,938 |
| $ | - |
| $ | 2,938 |
| $ | 184,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alteration and other services gross margin |
|
| 3,598 |
|
| 213 |
|
| - |
|
| 213 |
|
| 3,811 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total retail gross margin |
|
| 624,548 |
|
| 3,151 |
|
| - |
|
| 3,151 |
|
| 627,699 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross margin |
|
| 654,283 |
|
| 3,151 |
|
| - |
|
| 3,151 |
|
| 657,434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
| 485,184 |
|
| (12,575) |
|
| 915 |
|
| (11,660) |
|
| 473,524 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income(3) |
|
| 90,892 |
|
| 15,726 |
|
| (915) |
|
| 14,811 |
|
| 105,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes(4) |
|
| 12,816 |
|
|
|
|
|
|
|
| 3,842 |
|
| 16,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
| 41,408 |
|
|
|
|
|
|
|
| 10,969 |
|
| 52,377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per diluted common shares |
| $ | 0.82 |
|
|
|
|
|
|
| $ | 0.22 |
| $ | 1.04 |
|
(1) | Consists of $9.1 million in consulting costs, $3.3 million in severance costs, $2.9 million of rental product write-offs related to the closure of a distribution center in Canada and $0.4 million in lease termination costs. |
(2) | Consists of a $1.3 million favorable adjustment related to a derivative instrument entered into for the corporate apparel business offset by $0.4 million in transaction costs. |
(3) | Of the $14.8 million in adjustments to operating income, $10.6 million relates to the retail segment and $4.2 million relates to shared services. |
(4) | The tax effect of the excluded items is computed as the difference between tax expense on a GAAP basis and tax expense on an adjusted non-GAAP basis. |
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP to Non-GAAP Adjusted - Three Months Ended August 4, 2018 | |||||||||||||||||||
| |||||||||||||||||||
|
|
|
|
|
| Partial |
| Closure of U.S. Rental |
|
|
|
|
| ||||||
|
| GAAP |
| Divestiture of |
| Redemption of |
| Product Distribution |
| Total |
| Non-GAAP |
| ||||||
Consolidated Results |
| Results |
| MW Cleaners(1) |
| Senior Notes(2) |
| Center(3) |
| Adjustments |
| Adjusted Results |
| ||||||
Rental services gross margin |
| $ | 105,729 |
| $ | - |
| $ | - |
| $ | 4,010 |
| $ | 4,010 |
| $ | 109,739 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total retail gross margin |
|
| 354,002 |
|
| - |
|
| - |
|
| 4,010 |
|
| 4,010 |
|
| 358,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross margin |
|
| 368,902 |
|
| - |
|
| - |
|
| 4,010 |
|
| 4,010 |
|
| 372,912 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
| 242,255 |
|
| (154) |
|
| - |
|
| (365) |
|
| (519) |
|
| 241,736 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
| 87,986 |
|
| 154 |
|
| - |
|
| 4,375 |
|
| 4,529 |
|
| 92,515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt |
|
| (8,122) |
|
| - |
|
| 8,122 |
|
| - |
|
| 8,122 |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes(4) |
|
| 9,884 |
|
|
|
|
|
|
|
|
|
|
| 7,263 |
|
| 17,147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
| 49,238 |
|
|
|
|
|
|
|
|
|
|
| 5,388 |
|
| 54,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per diluted common share |
| $ | 0.97 |
|
|
|
|
|
|
|
|
|
| $ | 0.10 |
| $ | 1.07 |
|
(1) | Consists of a $0.2 million true up loss for the MW Cleaners business related to the retail segment. |
(2) | Consists of the $6.1 million premium and elimination of unamortized deferred financing costs totaling $2.0 million related to the partial redemption of senior notes. |
(3) | Consists of $4.0 million of rental product write-offs, $0.2 million of accelerated depreciation and $0.2 million of severance costs, all related to the retail segment. |
(4) | The tax effect of the excluded items is computed as the difference between tax expense on a GAAP basis and tax expense on an adjusted non-GAAP basis. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP to Non-GAAP Adjusted - Six Months Ended August 4, 2018 | ||||||||||||||||||||||
| ||||||||||||||||||||||
|
|
|
|
|
|
|
| Partial |
| Closure of U.S. Rental |
|
|
|
|
| |||||||
|
| GAAP |
| Divestiture of |
| Refinancing of |
| Redemption of |
| Product Distribution |
| Total |
| Non-GAAP |
| |||||||
Consolidated Results |
| Results |
| MW Cleaners(1) |
| Term Loan(2) |
| Senior Notes(3) |
| Center(4) |
| Adjustments |
| Adjusted Results |
| |||||||
Rental services gross margin |
| $ | 191,299 |
| $ | - |
| $ | - |
| $ | - |
| $ | 4,010 |
| $ | 4,010 |
| $ | 195,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total retail gross margin |
|
| 682,771 |
|
| - |
|
| - |
|
| - |
|
| 4,010 |
|
| 4,010 |
|
| 686,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross margin |
|
| 714,126 |
|
| - |
|
| - |
|
| - |
|
| 4,010 |
|
| 4,010 |
|
| 718,136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
| 493,349 |
|
| (3,766) |
|
| - |
|
| - |
|
| (365) |
|
| (4,131) |
|
| 489,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
| 140,883 |
|
| 3,766 |
|
| - |
|
| - |
|
| 4,375 |
|
| 8,141 |
|
| 149,024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt |
|
| (20,833) |
|
| - |
|
| 11,858 |
|
| 8,122 |
|
| - |
|
| 19,980 |
|
| (853) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes(5) |
|
| 14,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11,316 |
|
| 25,581 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
| 63,147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 16,806 |
|
| 79,953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per diluted common share |
| $ | 1.24 |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 0.33 |
| $ | 1.57 |
|
(1) | Consists of a $3.8 million loss upon divestiture of MW Cleaners business related to the retail segment. |
(2) | Consists of the elimination of unamortized deferred financing costs and original issue discount related to the refinancing of the Term Loan totaling $11.9 million. |
(3) | Consists of the $6.1 million premium and elimination of unamortized deferred financing costs totaling $2.0 million related to the partial redemption of senior notes. |
(4) | Consists of $4.0 million of rental product write-offs, $0.2 million of accelerated depreciation and $0.2 million of severance costs, all related to the retail segment. |
(5) | The tax effect of the excluded items is computed as the difference between tax expense on a GAAP basis and tax expense on an adjusted non-GAAP basis. |
13