Form 8-K TAILORED BRANDS INC For: Dec 06

December 6, 2017 4:31 PM

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): December 6, 2017

 

Tailored Brands, Inc.

(Exact name of registrant as specified in its charter)

 

Texas

 

1-16097

 

47-4908760

(State or other jurisdiction

 

(Commission File Number)

 

(IRS Employer Identification No.)

of incorporation)

 

 

 

 

 

6380 Rogerdale Road

 

 

Houston, Texas

 

77072

(Address of principal executive offices)

 

(Zip Code)

 

281-776-7000

(Registrant’s telephone number,
including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

 

Emerging growth company   o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o

 

 

 



 

Item 2.02 Results of Operations and Financial Condition.

 

On December 6, 2017, Tailored Brands, Inc. (the “Company”) issued a press release reporting its earnings results for its third quarter ended October 28, 2017.  A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

 

The information in this Item 2.02 and Exhibit 99.1 attached hereto is intended to be furnished under Item 2.02 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Act, except as expressly set forth by specific reference in such filing.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

The following exhibit is included in this Form 8-K.

 

99.1              Press Release of the Company dated December 6, 2017.

 

2



 

EXHIBIT INDEX

 

Exhibit
Number

 

Description

 

 

 

99.1

 

Press Release of the Company dated December 6, 2017.

 

3



 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date:      December 6, 2017

 

 

TAILORED BRANDS, INC.

 

 

 

 

By:

 /s/ Brian T. Vaclavik

 

 

Brian T. Vaclavik

 

Senior Vice President and Chief Accounting Officer

 

4


Exhibit 99.1

 

 

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 2017 THIRD QUARTER RESULTS

 

·                  Q3 2017 GAAP diluted EPS of $0.75 compared to GAAP diluted EPS of $0.58 last year and adjusted diluted EPS(1) of $0.71 last year

 

·                  Company updates outlook for FY 2017 GAAP diluted EPS to $1.80 - $1.85; Adjusted diluted EPS to $2.03 - $2.08

 

·                  Company repurchased and retired $65 million face value of senior notes in Q3 2017 for a total of $115 million YTD 2017

 

·                  Cash and cash equivalents of $126 million at end of quarter, an increase of $91 million compared to Q3 2016

 

FREMONT, CA — December 6, 2017 — Tailored Brands, Inc. (NYSE: TLRD) today announced consolidated financial results for the fiscal third quarter ended October 28, 2017.

 

Third quarter 2017 GAAP diluted earnings per share (“EPS”) were $0.75, which includes $0.03 per share from a net gain on extinguishment of debt, compared to GAAP diluted EPS of $0.58, or adjusted diluted EPS of $0.71(1), for the third quarter last year, which includes $0.03 per share from a net gain on extinguishment of debt.  There were no adjusted items for the third quarter of 2017.

 

“While we still have more work to do, we are pleased with the progress in our business in the third quarter. We posted positive comparable sales at Jos. A. Bank and sequential comparable sales improvement at Men’s Wearhouse and K&G, resulting in our second consecutive quarter of positive comparable sales for our retail segment.  Based on solid third quarter results and a good start to the fourth quarter, we have increased our EPS outlook for the year,” said Tailored Brands CEO Doug Ewert.

 

“Our new marketing campaigns are building awareness about the solutions we provide to men of all shapes and sizes. We’re bringing new customers into our stores where we win with superior service and selection, including custom suiting at a disruptive price.  We are encouraged by the progress we are making on our strategic initiatives to grow our custom business and enhance our online and in-store omni-channel capabilities.  These initiatives are part of our strategy to deliver a superior customer experience in order to increase market share and drive long-term sustainable growth.”

 

Ewert added, “We also continued to make progress toward strengthening our balance sheet.  During the third quarter, we repurchased and retired $65 million face value of senior notes, resulting in year-to-date repurchases of $115 million.  We remain committed to a balanced capital allocation strategy, investing to support our growth initiatives, returning cash to shareholders via our dividend and using excess free cash flow to reduce debt.”

 


(1)         In fiscal 2017, adjusted items currently consist of costs to terminate our tuxedo rental license agreement with Macy’s.  In fiscal 2016, these items primarily related to our store rationalization and profit improvement initiatives as well as integration costs related to Jos. A. Bank. Given the recurring nature of our debt reduction transactions and to facilitate comparability, we have recast our non-GAAP measures presentations for 2016 to remove adjustments previously made for gains/losses on extinguishment of debt.  This changes our non-GAAP diluted EPS for the third quarter of 2016 to $0.71 from $0.68. Non-GAAP adjusted diluted EPS is referred to as “adjusted EPS” for simplicity.  See Use of Non-GAAP Financial Measures for additional information on items excluded from adjusted EPS.

 

1



 

Third Quarter Fiscal 2017 Net Sales and Comparable Sales

 

The table that follows is a summary of total net sales for the third quarter and year-to-date period ending October 28, 2017.  Comparable sales is defined as net sales from stores open at least twelve months at period end and includes e-commerce sales.  The Moores comparable sales change is based on the Canadian dollar.  Due to rounded numbers, amounts may not sum.

 

Third Quarter Net Sales Summary — Fiscal 2017

 

 

 

Net Sales (U.S. dollars, in millions)

 

Comparable Sales
Change

 

 

 

Current
Quarter

 

% of Total
Sales

 

% Change

 

$ Change

 

Current
Quarter

 

Prior Year
Quarter

 

Retail Segment

 

$

747.5

 

92.2

%

(2.1

)%

$

(16.2

)

0.1

%

(2.6

)%

Men’s Wearhouse

 

$

449.0

 

55.4

%

(2.8

)%

$

(12.8

)

(1.0

)%

0.1

%

Jos. A. Bank

 

$

162.7

 

20.1

%

(2.0

)%

$

(3.3

)

4.9

%

(9.8

)%

K&G

 

$

69.6

 

8.6

%

(1.8

)%

$

(1.3

)

(0.6

)%

(3.0

)%

Moores

 

$

57.6

 

7.1

%

1.9

%

$

1.1

 

(2.6

)%

(0.4

)%

MW Cleaners

 

$

8.7

 

1.1

%

2.0

%

$

0.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate Apparel Segment

 

$

63.3

 

7.8

%

(24.0

)%

$

(19.9

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Company

 

$

810.8

 

 

 

(4.3

)%

$

(36.1

)

 

 

 

 

 

Year-To-Date Net Sales Summary — Fiscal 2017

 

 

 

Net Sales (U.S. dollars, in millions)

 

Comparable Sales
Change

 

 

 

YTD

 

% of Total
Sales

 

% Change

 

$ Change

 

Current
Year

 

Prior
Year

 

Retail Segment

 

$

2,265.8

 

92.7

%

(4.0

)%

$

(94.3

)

(1.1

)%

(4.5

)%

Men’s Wearhouse

 

$

1,327.8

 

54.3

%

(4.2

)%

$

(58.6

)

(2.1

)%

(0.1

)%

Jos. A. Bank

 

$

504.2

 

20.6

%

(4.9

)%

$

(26.2

)

5.4

%

(14.2

)%

K&G

 

$

244.1

 

10.0

%

(3.1

)%

$

(7.9

)

(3.5

)%

(1.5

)%

Moores

 

$

163.7

 

6.7

%

(1.5

)%

$

(2.5

)

(2.2

)%

(1.8

)%

MW Cleaners

 

$

26.0

 

1.1

%

3.6

%

$

0.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate Apparel Segment

 

$

178.7

 

7.3

%

(20.7

)%

$

(46.7

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Company

 

$

2,444.5

 

 

 

(5.5

)%

$

(141.0

)

 

 

 

 

 

For the third quarter of 2017, total net sales decreased 4.3% to $810.8 million. Retail net sales decreased 2.1% primarily due to the impact of last year’s store closures, with retail segment comparable sales up 0.1%.  Corporate apparel net sales decreased 24.0%, in line with expectations, primarily due to anniversarying last year’s rollout of a large new uniform program.

 

Comparable sales at Men’s Wearhouse decreased 1.0%. Comparable sales for clothing increased slightly primarily due to an increase in transactions and units per transaction partially offset by a decrease in average unit retail. Comparable rental services revenue decreased 4.3%, primarily reflecting a consumer shift to purchase suits for special occasions.

 

Jos. A. Bank comparable sales increased 4.9% primarily due to an increase in transactions and average unit retail that more than offset a decrease in units per transaction.

 

K&G comparable sales decreased 0.6% primarily due to lower transactions partially offset by increases in average unit retail and units per transaction.

 

Moores comparable sales decreased 2.6% primarily due to decreases in both units per transaction and transactions that more than offset an increase in average unit retail.

 

2



 

Gross Margin

 

On a GAAP basis, total gross margin was $358.8 million, a decrease of $18.4 million, primarily due to a decrease in corporate apparel net sales.  As a percent of sales, total gross margin decreased 30 basis points to 44.2%.  On an adjusted basis, total gross margin decreased 20 basis points.

 

On a GAAP basis, retail gross margin was $342.1 million, a decrease of $8.2 million.  As a percent of sales, retail gross margin decreased 10 basis points to 45.8%.  On an adjusted basis, retail gross margin decreased $7.3 million and the retail gross margin rate was flat compared to last year.

 

Advertising Expense

 

Advertising expense decreased $7.0 million to $38.7 million and decreased 60 basis points as a percent of total sales to 4.8%.  The decrease in advertising expense was driven primarily by reductions in television advertising reflecting a shift to digital advertising, as well as the timing of marketing spend.

 

Selling, General and Administrative Expenses

 

On a GAAP basis, selling, general and administrative expenses (“SG&A”) decreased $27.0 million to $243.5 million and decreased 190 basis points as a percent of total sales.

 

On an adjusted basis, SG&A expenses decreased $13.7 million, primarily due to decreases in store-related costs resulting from last year’s store rationalization program as well as lower employee-related benefit costs, partially offset by increased incentive compensation expense.  As a percent of total sales, SG&A expenses decreased 40 basis points to 30.0%.

 

Operating Income

 

On a GAAP basis, operating income was $76.6 million compared to $61.1 million last year.  As a percent of sales, operating margin increased 230 basis points to 9.5%.

 

On an adjusted basis, operating income was $76.6 million, up 4.4% compared to $73.4 million last year.  As a percent of sales, operating margin increased 80 basis points to 9.5%.

 

Net Interest Expense and Net Gain on Extinguishment of Debt

 

Net interest expense was $24.3 million compared to $25.4 million last year, as we reduced our outstanding debt.

 

Net gain on extinguishment of debt was $2.5 million compared to $1.8 million last year resulting from the Company’s repurchase of senior notes.

 

Effective Tax Rate

 

On a GAAP basis, the effective tax rate was 32.8% compared to 24.1% last year.

 

On an adjusted basis, the effective tax rate was 32.8% compared to 30.6% last year.

 

Net Earnings and EPS

 

On a GAAP basis, net earnings were $36.9 million compared to $28.4 million last year.  Diluted EPS was $0.75 compared to $0.58 last year.

 

On an adjusted basis, net earnings were $36.9 million compared to $34.6 million last year.  Adjusted diluted EPS was $0.75, an increase of 5.6% compared to $0.71 last year.

 

3



 

Balance Sheet Highlights

 

Cash and cash equivalents at the end of the third quarter of 2017 were $126.2 million, an increase of $91.3 million compared to the end of the third quarter of 2016.  There were no borrowings outstanding on our revolving credit facility at the end of the third quarter of 2017.  As previously announced, the Company amended its revolving credit facility, expanding availability to $550 million at a lower cost and extending its maturity from June 2019 to October 2022.

 

Inventories decreased $74.9 million, or 7.1%, to $973.0 million at the end of the third quarter of 2017 compared to the end of the third quarter of 2016, primarily due to lower inventories across all of our retail brands.

 

Total debt at the end of the third quarter of 2017 was approximately $1.5 billion.  During the third quarter, the Company repurchased and retired $65.0 million in face value of its senior notes for a year-to-date total of $115.0 million.  In addition, the Company made its scheduled $1.8 million payment on its term loan.

 

Cash flow from operating activities for the nine months ended October 28, 2017 was $252.5 million compared to $176.9 million in the same period last year.  The increase was primarily driven by higher earnings, expected lower rental product and inventory purchases, and timing of income tax payments, partially offset by anniversarying last year’s income tax refund.

 

Capital expenditures for the nine months ended October 28, 2017 were $56.0 million compared to $80.6 million in the same period last year.

 

FISCAL 2017 FULL YEAR OUTLOOK

 

·                  Earnings per Share: The Company now expects to achieve GAAP diluted EPS in the range of $1.80 to $1.85, and adjusted diluted EPS of $2.03 to $2.08.

 

·                  Comparable Sales: The Company continues to expect comparable sales for Men’s Wearhouse and Moores to be down low-single digits and comparable sales for Jos. A. Bank to increase mid-single digits.  The Company now expects comparable sales for K&G to be down low-single digits.

 

·                  Effective Tax Rate: The Company continues to expect the effective tax rate to be approximately 33%.

 

·                  Capital Expenditures: The Company continues to expect capital expenditures of approximately $90 million.

 

·                  Real Estate: In addition to closing all 170 tuxedo shops at Macy’s, the Company continues to expect approximately net 20 store closures in 2017 resulting from its continuous review of its real estate portfolio for opportunities to optimize its fleet as lease terms expire.

 

The Company noted that fiscal 2017 is a 53-week year versus the 52-week fiscal 2016.

 

CALL AND WEBCAST INFORMATION

 

At 5:00 p.m. Eastern time on Wednesday, December 6, 2017, management will host a conference call and real time webcast to discuss fiscal 2017 third quarter results.  To access the conference call, please dial 412-902-0030.  To access the live webcast, visit the Investor Relations section of the Company’s website at http://ir.tailoredbrands.com.  A telephonic replay will be available through December 13, 2017, by calling 201-612-7415 and entering the access code of 13672669#, or a webcast archive will be available free on the website for approximately 90 days.

 

4



 

STORE INFORMATION

 

 

 

October 28, 2017

 

October 29, 2016

 

January 28, 2017

 

 

 

Number
of Stores

 

Sq. Ft.
(000’s)

 

Number
of Stores

 

Sq. Ft.
(000’s)

 

Number
of Stores

 

Sq. Ft.
(000’s)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Men’s Wearhouse (a)

 

720

 

4,040.9

 

713

 

4,010.2

 

716

 

4,021.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jos. A. Bank (b)

 

493

 

2,318.3

 

550

 

2,588.7

 

506

 

2,388.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Men’s Wearhouse and Tux

 

51

 

77.0

 

61

 

90.1

 

58

 

86.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Tuxedo Shop @ Macy’s (c)

 

 

 

170

 

84.0

 

170

 

84.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Moores, Clothing for Men

 

126

 

787.5

 

126

 

789.0

 

126

 

789.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

K&G (d)

 

90

 

2,076.3

 

90

 

2,101.5

 

91

 

2,113.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

1,480

 

9,300.0

 

1,710

 

9,663.5

 

1,667

 

9,483.1

 

 


(a)  Includes one Joseph Abboud store.

(b)  Excludes 14 franchise stores.

(c)  All Tuxedo Shop @ Macy’s stores were closed in the second quarter of 2017.

(d)  86, 82 and 86 stores offering women’s apparel at the end of each period, respectively.

 

As the leading specialty retailer of men’s suits 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.  We also operate an international corporate apparel and workwear group consisting of Dimensions, Alexandra and Yaffy in the United Kingdom and Twin Hill in the United States.

 

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, www.kgstores.com, www.mwcleaners.com, www.dimensions.co.uk, www.alexandra.co.uk. and www.twinhill.com.

 

This press release contains forward-looking information, including the Company’s statements regarding its 2017 outlook for earnings per share, comparable sales, effective tax rate, capital expenditures and net 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 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 executing our internal strategies and operating plans including new store and new market expansion plans; cost reduction initiatives, store rationalization plans, profit improvement plans, and revenue enhancement strategies; the impact of the termination of our tuxedo rental license agreement with Macy’s; 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; performance issues with key suppliers; disruptions in our supply chain; severe weather; foreign currency fluctuations; government export and import policies; advertising or marketing activities of competitors; and legal proceedings.

 

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.

 

5



 

TAILORED BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

 

For the Three Months Ended October 28, 2017 and October 29, 2016

(In thousands, except per share data)

 

 

 

Three Months Ended

 

 

 

 

 

% of

 

 

 

% of

 

 

 

2017

 

Sales

 

2016

 

Sales

 

 

 

 

 

 

 

 

 

 

 

Net sales:

 

 

 

 

 

 

 

 

 

Retail clothing product

 

$

575,203

 

70.9

%

$

575,046

 

67.9

%

Rental services

 

126,410

 

15.6

%

138,724

 

16.4

%

Alteration and other services

 

45,909

 

5.7

%

49,919

 

5.9

%

Total retail sales

 

747,522

 

92.2

%

763,689

 

90.2

%

Corporate apparel clothing product

 

63,296

 

7.8

%

83,245

 

9.8

%

Total net sales

 

810,818

 

100.0

%

846,934

 

100.0

%

 

 

 

 

 

 

 

 

 

 

Total cost of sales

 

452,061

 

55.8

%

469,728

 

55.5

%

 

 

 

 

 

 

 

 

 

 

Gross margin (a):

 

 

 

 

 

 

 

 

 

Retail clothing product

 

327,910

 

57.0

%

327,068

 

56.9

%

Rental services

 

105,955

 

83.8

%

115,766

 

83.5

%

Alteration and other services

 

11,771

 

25.6

%

16,393

 

32.8

%

Occupancy costs

 

(103,579

)

-13.9

%

(108,923

)

-14.3

%

Total retail gross margin

 

342,057

 

45.8

%

350,304

 

45.9

%

Corporate apparel clothing product

 

16,700

 

26.4

%

26,902

 

32.3

%

Total gross margin

 

358,757

 

44.2

%

377,206

 

44.5

%

 

 

 

 

 

 

 

 

 

 

Advertising expense

 

38,664

 

4.8

%

45,656

 

5.4

%

Selling, general and administrative expenses

 

243,466

 

30.0

%

270,494

 

31.9

%

 

 

 

 

 

 

 

 

 

 

Operating income

 

76,627

 

9.5

%

61,056

 

7.2

%

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(24,253

)

-3.0

%

(25,424

)

-3.0

%

Gain on extinguishment of debt, net

 

2,539

 

0.3

%

1,808

 

0.2

%

 

 

 

 

 

 

 

 

 

 

Earnings before income taxes

 

54,913

 

6.8

%

37,440

 

4.4

%

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

18,021

 

2.2

%

9,007

 

1.1

%

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

36,892

 

4.5

%

$

28,433

 

3.4

%

 

 

 

 

 

 

 

 

 

 

Net earnings per diluted common share allocated to common shareholders

 

$

0.75

 

 

 

$

0.58

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average diluted common shares outstanding

 

49,430

 

 

 

48,812

 

 

 

 


(a)  Gross margin percent of sales is calculated as a percentage of related sales.

 

6



 

TAILORED BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

 

For the Nine Months Ended October 28, 2017 and October 29, 2016

(In thousands, except per share data)

 

 

 

Nine Months Ended

 

 

 

 

 

% of

 

 

 

% of

 

 

 

2017

 

Sales

 

2016

 

Sales

 

 

 

 

 

 

 

 

 

 

 

Net sales:

 

 

 

 

 

 

 

 

 

Retail clothing product

 

$

1,753,782

 

71.7

%

$

1,806,660

 

69.9

%

Rental services

 

373,208

 

15.3

%

403,564

 

15.6

%

Alteration and other services

 

138,835

 

5.7

%

149,888

 

5.8

%

Total retail sales

 

2,265,825

 

92.7

%

2,360,112

 

91.3

%

Corporate apparel clothing product

 

178,657

 

7.3

%

225,328

 

8.7

%

Total net sales

 

2,444,482

 

100.0

%

2,585,440

 

100.0

%

 

 

 

 

 

 

 

 

 

 

Total cost of sales

 

1,356,589

 

55.5

%

1,446,089

 

55.9

%

 

 

 

 

 

 

 

 

 

 

Gross margin (a):

 

 

 

 

 

 

 

 

 

Retail clothing product

 

1,004,980

 

57.3

%

1,010,445

 

55.9

%

Rental services

 

312,628

 

83.8

%

337,621

 

83.7

%

Alteration and other services

 

35,149

 

25.3

%

45,803

 

30.6

%

Occupancy costs

 

(311,994

)

-13.8

%

(327,673

)

-13.9

%

Total retail gross margin

 

1,040,763

 

45.9

%

1,066,196

 

45.2

%

Corporate apparel clothing product

 

47,130

 

26.4

%

73,155

 

32.5

%

Total gross margin

 

1,087,893

 

44.5

%

1,139,351

 

44.1

%

 

 

 

 

 

 

 

 

 

 

Advertising expense

 

120,804

 

4.9

%

138,547

 

5.4

%

Selling, general and administrative expenses

 

750,995

 

30.7

%

849,122

 

32.8

%

 

 

 

 

 

 

 

 

 

 

Operating income

 

216,094

 

8.8

%

151,682

 

5.9

%

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(74,876

)

-3.1

%

(77,751

)

-3.0

%

Gain on extinguishment of debt, net

 

6,535

 

0.3

%

1,737

 

0.1

%

 

 

 

 

 

 

 

 

 

 

Earnings before income taxes

 

147,753

 

6.0

%

75,668

 

2.9

%

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

50,551

 

2.1

%

20,623

 

0.8

%

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

97,202

 

4.0

%

$

55,045

 

2.1

%

 

 

 

 

 

 

 

 

 

 

Net earnings per diluted common share allocated to common shareholders

 

$

1.97

 

 

 

$

1.13

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average diluted common shares outstanding

 

49,251

 

 

 

48,691

 

 

 

 


(a)  Gross margin percent of sales is calculated as a percentage of related sales.

 

7



 

TAILORED BRANDS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

 

 

 

October 28,

 

October 29,

 

 

 

2017

 

2016

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

126,244

 

$

34,948

 

Accounts receivable, net

 

81,193

 

71,898

 

Inventories

 

973,001

 

1,047,915

 

Other current assets

 

53,566

 

60,190

 

 

 

 

 

 

 

Total current assets

 

1,234,004

 

1,214,951

 

Property and equipment, net

 

454,921

 

501,391

 

Rental product, net

 

125,320

 

160,101

 

Goodwill

 

119,125

 

116,026

 

Intangible assets, net

 

169,072

 

172,337

 

Other assets

 

8,859

 

10,323

 

 

 

 

 

 

 

Total assets

 

$

2,111,301

 

$

2,175,129

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

186,862

 

$

200,199

 

Accrued expenses and other current liabilities

 

281,533

 

280,658

 

Income taxes payable

 

21,224

 

917

 

Current portion of long-term debt

 

8,750

 

7,000

 

 

 

 

 

 

 

Total current liabilities

 

498,369

 

488,774

 

 

 

 

 

 

 

Long-term debt, net

 

1,467,735

 

1,588,873

 

Deferred taxes and other liabilities

 

160,197

 

175,179

 

 

 

 

 

 

 

Total liabilities

 

2,126,301

 

2,252,826

 

 

 

 

 

 

 

Shareholders’ deficit:

 

 

 

 

 

Preferred stock

 

 

 

Common stock

 

492

 

487

 

Capital in excess of par

 

485,299

 

466,817

 

Accumulated deficit

 

(469,463

)

(499,663

)

Accumulated other comprehensive loss

 

(31,328

)

(45,338

)

 

 

 

 

 

 

Total shareholders’ deficit

 

(15,000

)

(77,697

)

 

 

 

 

 

 

Total liabilities and shareholders’ deficit

 

$

2,111,301

 

$

2,175,129

 

 

8



 

TAILORED BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

For the Nine Months Ended October 28, 2017 and October 29, 2016

(In thousands)

 

 

 

Nine Months Ended

 

 

 

2017

 

2016

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net earnings

 

$

97,202

 

$

55,045

 

Non-cash adjustments to net earnings:

 

 

 

 

 

Depreciation and amortization

 

78,929

 

87,838

 

Rental product amortization

 

32,779

 

35,982

 

Asset impairment charges

 

2,867

 

4,293

 

Gain on extinguishment of debt, net

 

(6,535

)

(1,737

)

Amortization of deferred financing costs and discount on long-term debt

 

5,391

 

5,650

 

Loss on disposition of assets

 

1,407

 

616

 

Other

 

15,029

 

(556

)

Changes in operating assets and liabilities

 

25,469

 

(10,257

)

 

 

 

 

 

 

Net cash provided by operating activities

 

252,538

 

176,884

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Capital expenditures

 

(55,956

)

(80,550

)

Acquisition of business, net of cash

 

(457

)

 

Proceeds from sales of property and equipment

 

2,157

 

605

 

 

 

 

 

 

 

Net cash used in investing activities

 

(54,256

)

(79,945

)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Payments on term loan

 

(9,879

)

(40,701

)

Proceeds from asset-based revolving credit facility

 

235,900

 

520,550

 

Payments on asset-based revolving credit facility

 

(235,900

)

(520,550

)

Repurchase and retirement of senior notes

 

(106,731

)

(21,924

)

Deferred financing costs

 

(2,464

)

 

Cash dividends paid

 

(26,895

)

(26,438

)

Proceeds from issuance of common stock

 

1,334

 

1,451

 

Tax payments related to vested deferred stock units

 

(1,682

)

(1,258

)

 

 

 

 

 

 

Net cash used in financing activities

 

(146,317

)

(88,870

)

 

 

 

 

 

 

Effect of exchange rate changes

 

3,390

 

(3,101

)

 

 

 

 

 

 

INCREASE IN CASH AND CASH EQUIVALENTS

 

55,355

 

4,968

 

 

 

 

 

 

 

Balance at beginning of period

 

70,889

 

29,980

 

Balance at end of period

 

$

126,244

 

$

34,948

 

 

9



 

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, if applicable, as well as forecasted information for our fiscal year ending February 3, 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 fiscal 2017, these items currently consist of costs to terminate our tuxedo rental license agreement with Macy’s.  For fiscal 2016, these costs primarily related to our store rationalization and profit improvement programs and integration costs related to Jos. A. Bank.  Given the recurring nature of our debt reduction transactions and to facilitate comparability, we have recast our non-GAAP presentation for 2016 to remove adjustments previously made for gains/losses on extinguishment of debt.

 

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.

 

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.

 

GAAP to Non-GAAP Adjusted Consolidated Statements of Earnings Information

 

GAAP to Non-GAAP Adjusted - Three Months Ended October 29, 2016 (Recasted)

 

Consolidated Results

 

GAAP Results

 

Jos. A. Bank
Integration (1)

 

Profit
Improvement(2)

 

Other

 

Total
Adjustments

 

Non-GAAP
Adjusted Results

 

Alteration and other services gross margin

 

$

16,393

 

$

 

$

7

 

$

 

$

7

 

$

16,400

 

Occupancy costs

 

(108,923

)

532

 

(1,510

)

 

(978

)

(109,901

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total retail gross margin

 

350,304

 

532

 

(1,503

)

 

(971

)

349,333

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total gross margin

 

377,206

 

532

 

(1,503

)

 

(971

)

376,235

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

270,494

 

(866

)

(12,452

)

 

(13,318

)

257,176

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income(3)

 

61,056

 

1,398

 

10,949

 

 

12,347

 

73,403

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on extinguishment of debt, net(4)

 

1,808

 

 

 

 

 

1,808

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes(5)

 

9,007

 

 

 

 

 

 

 

6,220

 

15,227

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

28,433

 

 

 

 

 

 

 

6,127

 

34,560

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per diluted common share allocated to common shareholders

 

$

0.58

 

 

 

 

 

 

 

$

0.13

 

$

0.71

 

 


(1)         Primarily consisting of severance costs and accelerated depreciation.

(2)         Primarily consists of $8.7 million of lease termination costs and $1.8 million of consulting costs.

(3)         Of the $12.3 million in total adjustments to operating income, $9.9 million relates to the retail segment and $2.4 million relates to shared services.

(4)         Recast to remove adjustments previously made for gains/losses on extinguishment of debt, which changes non-GAAP diluted EPS to $0.71 from $0.68.

(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. 

 

10



 

GAAP to Non-GAAP Adjusted - Nine Months Ended October 28, 2017

 

Consolidated Results

 

GAAP Results

 

Macy’s
Termination (1)

 

Total
Adjustments

 

Non-GAAP
Adjusted Results

 

Rental services gross margin

 

$

312,628

 

$

1,416

 

$

1,416

 

$

314,044

 

 

 

 

 

 

 

 

 

 

 

Total retail gross margin

 

1,040,763

 

1,416

 

1,416

 

1,042,179

 

 

 

 

 

 

 

 

 

 

 

Total gross margin

 

1,087,893

 

1,416

 

1,416

 

1,089,309

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

750,995

 

(15,736

)

(15,736

)

735,259

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

216,094

 

17,152

 

17,152

 

233,246

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes(2)

 

50,551

 

 

 

5,671

 

56,222

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

97,202

 

 

 

11,481

 

108,683

 

 

 

 

 

 

 

 

 

 

 

Net earnings per diluted common share allocated to common shareholders

 

$

1.97

 

 

 

$

0.23

 

$

2.21

 

 


(1)         Consists of $12.3 million of termination costs, $1.4 million of rental product writeoffs, $1.2 million of asset impairment charges and $2.3 million of other costs, all related to the retail segment.

(2)         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 - Nine Months Ended October 29, 2016 (Recasted)

 

Consolidated Results

 

GAAP Results

 

Jos. A. Bank
Integration (1)

 

Profit
Improvement(2)

 

Other

 

Total
Adjustments

 

Non-GAAP
Adjusted Results

 

Retail clothing product gross margin

 

$

1,010,445

 

$

 

$

 

$

(23

)

$

(23

)

$

1,010,422

 

Alteration and other services gross margin

 

45,803

 

 

295

 

 

295

 

46,098

 

Occupancy costs

 

(327,673

)

1,613

 

(3,016

)

(564

)

(1,967

)

(329,640

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total retail gross margin

 

1,066,196

 

1,613

 

(2,721

)

(587

)

(1,695

)

1,064,501

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total gross margin

 

1,139,351

 

1,613

 

(2,721

)

(587

)

(1,695

)

1,137,656

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

849,122

 

(5,431

)

(61,846

)

(2,637

)

(69,914

)

779,208

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income(3)

 

151,682

 

7,044

 

59,125

 

2,050

 

68,219

 

219,901

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on extinguishment of debt, net(4)

 

1,737

 

 

 

 

 

1,737

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes(5)

 

20,623

 

 

 

 

 

 

 

26,745

 

47,368

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

55,045

 

 

 

 

 

 

 

41,474

 

96,519

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per diluted common share allocated to common shareholders

 

$

1.13

 

 

 

 

 

 

 

$

0.85

 

$

1.98

 

 


(1)         Primarily consisting of accelerated depreciation and severance costs.

(2)         Primarily consists of $37.0 million of lease termination costs and $13.6 million of consulting costs.

(3)         Of the $68.2 million in total adjustments to operating income, $47.4 million relates to the retail segment and $20.8 million relates to shared services.

(4)         Recast to remove adjustments previously made for gains/losses on extinguishment of debt, which changes non-GAAP diluted EPS to $1.98 from $1.96.

(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. 

 

GAAP to Non-GAAP Adjusted EPS for Fiscal 2017

 

GAAP to Non-GAAP Adjusted — Reconciliation of Forecasted Adjusted EPS for Fiscal 2017

 

Diluted EPS- GAAP Basis

 

$1.80-$1.85

 

Costs to Terminate Macy’s Agreement

 

$0.23

 

Diluted EPS- Non-GAAP Adjusted (1)

 

$2.03-$2.08

 

 


(1)         Based on forecasted adjusted non-GAAP tax rate of 33%

 

11


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