April 3, 2020
Elizabeth Mu oz
Chief Executive Officer
Torrid Holdings Inc.
18501 East San Jose Avenue
City of Industry, California 91748
Re: Torrid Holdings Inc.
Draft Registration Statement on Form S-1
Submitted March 9, 2020
CIK 0001792781
Dear Ms. Mu oz:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so we may
better
understand your disclosure.
Please respond to this letter by providing the requested information and
either submitting
an amended draft registration statement or publicly filing your registration
statement on
EDGAR. If you do not believe our comments apply to your facts and circumstances
or do not
believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these comments
and your
amended draft registration statement or filed registration statement, we may
have additional
comments.
Draft Registration Statement on Form S-1
Prospectus Cover Page, page i
1. Please revise your prospectus cover page to disclose the underwriter and
the nature of the
underwriting arrangement. Refer to Item 501 of Regulation S-K.
Prospectus Summary, page 1
2. We note your statement that you have an industry-leading net promoter
score of 55.
Please revise your disclosure in an appropriate place in your prospectus
to explain how
you calculate this score, whether it is calculated similarly for the
entire industry, and how
you define industry for these purposes.
Elizabeth Mu oz
FirstName LastNameElizabeth Mu oz
Torrid Holdings Inc.
Comapany NameTorrid Holdings Inc.
April 3, 2020
Page 3,
April 2 2020 Page 2
FirstName LastName
3. We note that according to a third party study, plus-size consumers
consistently rank your
fit as #1 among your peers. Please tell us whether you commissioned
the third party
study for use in the registration statement. If so, please tell us
what consideration you
gave to filing the third party's consent as an exhibit to the
registration statement as
required by Section 7 of the Securities Act and Securities Act Rule
436.
4. You state that your return rate is less than half the industry average
return rate. On page
75, you disclose that this is "according to United States government
statistics." Please
indicate how the industry is defined for this purpose, whether apparel
in general, plus-size
apparel, etc. Please also disclose the industry average return rate
and the year represented
by this data, and your return rate for a comparable period.
Reorganization and Stock Split, page 12
5. Your disclosure indicates you plan to complete a reorganization
transaction and a stock
split prior to the completion of the planned public offering. Please
consider revising your
filing to include pro forma financial information prepared in
accordance with Article 11 of
Regulation S-X giving effect to the reorganization transaction or
explain why you do not
believe this is required. Refer to the guidance in Rule 11-01(a)(2)
and (a)(8) of
Regulation S-X.
Risk Factors
Our amended and restated certificate of incorporation will designate the Court
of Chancery of the
State of Delaware . . ., page 40
6. We note that your forum selection provision identifies the Court of
Chancery of the State
of Delaware as the exclusive forum for certain litigation, including
any "derivative
action." Please disclose whether this provision applies to actions
arising under the
Securities Act or Exchange Act. In that regard, we note that Section
27 of the Exchange
Act creates exclusive federal jurisdiction over all suits brought to
enforce any duty or
liability created by the Exchange Act or the rules and regulations
thereunder, and Section
22 of the Securities Act creates concurrent jurisdiction for federal
and state courts over all
suits brought to enforce any duty or liability created by the
Securities Act or the rules and
regulations thereunder. If the provision applies to Securities Act
claims, please also revise
your prospectus to state that there is uncertainty as to whether a
court would enforce such
provision and that investors cannot waive compliance with the federal
securities laws and
the rules and regulations thereunder. If this provision does not apply
to actions arising
under the Securities Act or Exchange Act, please also ensure that the
exclusive forum
provision in the governing documents states this clearly.
Use of Proceeds, page 43
7. We note that you disclose on page 13 in the Prospectus Summary that a
portion of
proceeds will be used to repay indebtedness. Please revise your Use of
Proceeds section
for consistency. If any material part of the proceeds is to be used to
discharge
Elizabeth Mu oz
Torrid Holdings Inc.
April 3, 2020
Page 3
indebtedness, set forth the interest rate and maturity of such
indebtedness. Refer to Item
504 of Regulation S-K.
Management's Discussion and Analysis of Financial Condition and Results of
Operations, page
50
8. Please explain the basis for the statement that "Torrid is the
largest, fastest-
growing direct-to-consumer brand of women's plus-size apparel in North
America."
Results of Operations, page 57
9. We note you discuss "adjusted gross profit" and "adjusted selling,
general and
administrative expenses," which appear to be Non-GAAP measures in your
discussion of
results of operations for the nine months ended November 2, 2019 as
compared to the nine
months ended November 3, 2018 and for fiscal 2018 compared to fiscal
2017. Please
revise to explain why you believe the presentation of these Non-GAAP
measures is useful
to potential investors. Also, please describe how management uses
these Non-GAAP
measures. Refer to the guidance in Item 10(e)(i)(C) and (D) of
Regulation S-K.
10. We note your adjustment to Adjusted EBITDA for the Ohio Distribution
Center for
duplicative and start-up costs. Please tell us your consideration of
including a discussion
of whether you are anticipating cost savings or otherwise once you
have fully transitioned
to the new distribution center.
Liquidity and Capital Resources
Net Cash Provided by Operating Activities, page 64
11. Please revise your discussion of cash flows from operating activities
to discuss the factors
or key drivers responsible for changes in non-cash adjustments to net
income and changes
in operating assets and liabilities during the periods presented in
your consolidated
statements of cash flows. Refer to the guidance in the Commission's
Release Nos. 33-
3850, 34-48960 and FR-72.
Critical Accounting Policies and Estimates
Share-Based Compensation, page 73
12. Given the material impact that the incentive units issued by your
parent, Torrid Holding
LLC, have had on your results of operations during the periods presented
in your financial
statements, please revise your discussion of your critical accounting
policies with respect
to share-based compensation to explain in further detail the methods and
significant
assumptions that were used in valuing share-based compensation grants
from your parent
FirstName LastNameElizabeth Mu oz
to your employees. Your revised discussion should explain how the
various assumptions
Comapany NameTorrid Holdings Inc.
used in determining the fair values of incentive units were determined
and should also
explain how changes in these assumptions could impact your results of
operations.
April 3, 2020 Page 3
FirstName LastName
Elizabeth Mu oz
FirstName LastNameElizabeth Mu oz
Torrid Holdings Inc.
Comapany NameTorrid Holdings Inc.
April 3, 2020
Page 3,
April 4 2020 Page 4
FirstName LastName
Quantitative and Qualitative Disclosure of Market Risks
Interest Rate Risk, page 74
13. Your quantitative disclosures with respect to your exposure to
interest rate risk posed by
your Existing ABL Facility and Term Loan Credit Agreement do not
comply with Item
305 of Regulation S-K. Please revise to present your disclosures in
one of the suggested
formats outlined in Item 305(a) of Regulation S-K.
Employment Agreements with our Named Executive Officers
Elizabeth Munoz Employment Agreement, page 105
14. The disclosure on page 105 indicates if an initial public offering (an
"IPO") of your equity
securities occurs during Ms. Munoz's employment, she is entitled to a
one-time grant of
restricted stock units or restricted share awards in an amount equal
to $1.5 million divided
by the IPO price per share of your common stock. Please revise MD&A to
discuss the
nature, amount, and significant terms of these and any other
stock-based compensation
grants you intend to make in connection with your planned public
offering, as well as the
amount of any charge to compensation expense you will be required to
recognize in
connection with the consummation of your public offering.
Certain Relationships and Related Party Transactions
Stockholders Agreement
Registration Rights Agreement, page 114
15. Your disclosure indicates that in connection with the offering, you
will enter into a
stockholders agreement and a registration rights agreement with
Sycamore and its
affiliates. Please revise MD&A to discuss the nature and significant
terms of these and
any other related party agreements that you intend to enter into in
connection with your
planned offering.
Related Party Promissory Notes, page 114
16. Please file the promissory note issued to you by your parent on July
31, 2019, or tell us
why you believe you are not required to do so.
Description of Certain Indebtedness, page 116
17. We note you disclose on page 33 that "A failure by us or our
subsidiaries to comply with
the covenants or to maintain the required financial ratios contained
in the Term Loan
Credit Agreement and the agreement governing the ABL Facility could
result in an event
of default under such indebtedness." Please revise to summarize the
covenants and
financial ratios you are required to maintain to avoid an event of
default as contained in
the Term Loan Credit Agreement and the agreement governing the ABL
Facility.
Elizabeth Mu oz
FirstName LastNameElizabeth Mu oz
Torrid Holdings Inc.
Comapany NameTorrid Holdings Inc.
April 3, 2020
April 5 2020 Page 5
Page 3,
FirstName LastName
Torrid Parent Inc. Consolidated Financial Statements
Notes to Consolidated Financial Statements
Note. 2 Summary of Significant Accounting Policies
Share-Based Compensation, page F-20
18. Your disclosure indicates that based on the features and
characteristics of the incentive
units issued by your parent, including repurchase rights and
disproportionate voting and
distribution rights, you have determined the incentive units are
in-substance liabilities that
should be accounted for as liability instruments in your financial
statements. Please
explain in further detail the specific features of these incentive
units that have resulted in
your classification of these units as liability instruments in your
financial statements.
Note 11. Related Party Transactions
Services Agreements with Hot Topic, page F-31
19. Please disclose how you account for the information technology
services provided to Hot
Topic by you at no cost and quantify your expense for providing these
services.
IT Asset Purchase Agreement with Hot Topic, page F-32
20. We note you purchased information technology assets from Hot Topic for
$29.5 million
that were recorded at their historical carrying amounts of $3.5
million. You also disclose
information technology-related obligations and personnel, along with
associated assets
and liabilities were transferred from Hot Topic. Please quantify the
amount of assets and
liabilities transferred to you as part of this transaction.
Promissory Notes Receivable from Parent, page F-32
21. Please disclose the interest rate for each of the promissory notes
issued by your parent and
the amount of accrued interest as of the latest balance sheet.
Note 14. Share-Based Compensation, page F-42
22. Your disclosure in Note 14 indicates Torrid Holding LLC issued various
classes of
incentive units to members of your management beginning in fiscal year
2015. Given
these incentive units appear to be subject to the guidance in ASC
718-10-15-4, please
revise the notes to your financial statements to include all of the
disclosures required by
ASC 718-10-50 with respect to the various classes of incentive units
granted to your
employees, as applicable. If you do not believe additional disclosures
are required, please
explain the basis for your conclusion.
Elizabeth Mu oz
FirstName LastNameElizabeth Mu oz
Torrid Holdings Inc.
Comapany NameTorrid Holdings Inc.
April 3, 2020
April 6 2020 Page 6
Page 3,
FirstName LastName
23. Your disclosure in Note 14 indicates the fair value estimates for
incentive units issued by
your parent incorporates the time to a liquidity event in determining
their fair value.
Please explain the nature or type of liquidity event that is
considered in determining the
fair values of the incentive units. If your planned public offering
represents a liquidity
event, please indicate the amount of any compensation expense you
expect to recognize in
connection with your offering.
You may contact Linda Cvrkel at 202-551-3813 or Donna Di Silvio at
202-551-3202 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Jacqueline Kaufman at 202-551-3797 or Erin Jaskot at 202-551-3442 with
any other
questions.
Sincerely,
Division of
Corporation Finance
Office of Trade &
Services