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EX-32.2 - EX-32.2 - J.Jill, Inc.jill-ex322_6.htm
EX-32.1 - EX-32.1 - J.Jill, Inc.jill-ex321_9.htm
EX-31.2 - EX-31.2 - J.Jill, Inc.jill-ex312_8.htm
EX-31.1 - EX-31.1 - J.Jill, Inc.jill-ex311_7.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 4, 2018

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________________ to _____________________

Commission File Number: 001-38026

 

J.Jill, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

45-1459825

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

4 Batterymarch Park,

Quincy, MA 02169

 

02169

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (617) 376-4300

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

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.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of September 18, 2018, the registrant had 43,747,757 shares of common stock, $0.01 par value per share, outstanding.

 

 

 

 


Table of Contents

 

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

 

Item 1.

Financial Statements

 

 

 

Consolidated Balance Sheets (Unaudited)

 

2

 

Consolidated Statements of Operations and Comprehensive Income (Unaudited)

 

3

 

Consolidated Statement of Shareholders’ Equity (Unaudited)

 

4

 

Consolidated Statements of Cash Flows (Unaudited)

 

5

 

Notes to Consolidated Financial Statements (Unaudited)

 

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

12

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

20

Item 4.

Controls and Procedures

 

20

PART II.

OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

 

21

Item 1A.

Risk Factors

 

21

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

21

Item 3.

Defaults Upon Senior Securities

 

21

Item 4.

Mine Safety Disclosures

 

21

Item 5.

Other Information

 

21

Item 6.

Exhibits

 

21

Exhibit Index

 

22

Signatures

 

23

 

 

 

 

 

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

J.Jill, Inc.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share data)

 

 

 

August 4, 2018

 

 

February 3, 2018

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash

 

$

62,035

 

 

$

25,978

 

Accounts receivable

 

 

5,107

 

 

 

4,733

 

Inventories, net

 

 

61,591

 

 

 

80,591

 

Prepaid expenses and other current assets

 

 

22,466

 

 

 

21,166

 

Total current assets

 

 

151,199

 

 

 

132,468

 

Property and equipment, net

 

 

113,063

 

 

 

118,420

 

Intangible assets, net

 

 

142,569

 

 

 

148,961

 

Goodwill

 

 

197,026

 

 

 

197,026

 

Other assets

 

 

558

 

 

 

682

 

Total assets

 

$

604,415

 

 

$

597,557

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

43,128

 

 

$

53,962

 

Accrued expenses and other current liabilities

 

 

45,717

 

 

 

48,759

 

Current portion of long-term debt

 

 

2,799

 

 

 

2,799

 

Total current liabilities

 

 

91,644

 

 

 

105,520

 

Long-term debt, net of discount and current portion

 

 

238,165

 

 

 

238,881

 

Deferred income taxes

 

 

43,107

 

 

 

46,263

 

Other liabilities

 

 

28,885

 

 

 

27,577

 

Total liabilities

 

 

401,801

 

 

 

418,241

 

Commitments and contingencies (see Note 9)

 

 

 

 

 

 

 

 

Shareholders’ Equity

 

 

 

 

 

 

 

 

Common stock, par value $0.01 per share; 250,000,000 shares authorized;

43,744,033 and 43,752,790 shares issued and outstanding at August 4, 2018 and February 3, 2018, respectively

 

 

437

 

 

 

437

 

Additional paid-in capital

 

 

119,236

 

 

 

117,393

 

Accumulated earnings

 

 

82,941

 

 

 

61,486

 

Total shareholders’ equity

 

 

202,614

 

 

 

179,316

 

Total liabilities and shareholders’ equity

 

$

604,415

 

 

$

597,557

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

2


Table of Contents

 

J.Jill, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (UNAUDITED)

(in thousands, except share and per share data)

 

 

 

For the Thirteen Weeks Ended

 

 

For the Twenty-Six Weeks Ended

 

 

 

August 4, 2018

 

 

July 29, 2017

 

 

August 4, 2018

 

 

July 29, 2017

 

Net sales

 

$

179,713

 

 

$

181,372

 

 

$

361,254

 

 

$

347,498

 

Costs of goods sold

 

 

63,058

 

 

 

58,724

 

 

 

124,258

 

 

 

109,242

 

Gross profit

 

 

116,655

 

 

 

122,648

 

 

 

236,996

 

 

 

238,256

 

Selling, general and administrative expenses

 

 

97,365

 

 

 

97,011

 

 

 

197,659

 

 

 

194,044

 

Operating income

 

 

19,290

 

 

 

25,637

 

 

 

39,337

 

 

 

44,212

 

Interest expense, net

 

 

4,853

 

 

 

5,084

 

 

 

9,670

 

 

 

10,029

 

Income before provision for income taxes

 

 

14,437

 

 

 

20,553

 

 

 

29,667

 

 

 

34,183

 

Provision for income taxes

 

 

3,952

 

 

 

8,557

 

 

 

7,924

 

 

 

14,160

 

Net income and total comprehensive income

 

$

10,485

 

 

$

11,996

 

 

$

21,743

 

 

$

20,023

 

Net income per common share attributable to common shareholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.24

 

 

$

0.29

 

 

$

0.51

 

 

$

0.48

 

Diluted

 

$

0.23

 

 

$

0.28

 

 

$

0.49

 

 

$

0.46

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

42,855,366

 

 

 

41,549,825

 

 

 

42,535,849

 

 

 

42,033,984

 

Diluted

 

 

44,716,193

 

 

 

43,554,275

 

 

 

44,061,804

 

 

 

43,559,781

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

 

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J.Jill, Inc.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (UNAUDITED)

(in thousands, except common share data)

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Shareholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Equity

 

Balance, February 3, 2018

 

 

43,752,790

 

 

$

437

 

 

$

117,393

 

 

$

61,486

 

 

$

179,316

 

Adoption of ASU 2014-09(1)

 

 

 

 

 

 

 

 

 

 

 

(288

)

 

 

(288

)

Vesting of restricted stock units

 

 

9,602

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Forfeiture of restricted stock awards

 

 

(18,359

)

 

 

(1

)

 

 

 

 

 

 

 

 

(1

)

Equity-based compensation

 

 

 

 

 

 

 

 

1,843

 

 

 

 

 

 

1,843

 

Net income

 

 

 

 

 

 

 

 

 

 

 

21,743

 

 

 

21,743

 

Balance, August 4, 2018

 

 

43,744,033

 

 

$

437

 

 

$

119,236

 

 

$

82,941

 

 

$

202,614

 

 

(1) See Note 2 for additional detail regarding the adoption of new accounting standards.

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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J.Jill, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 

 

 

For the Twenty-Six Weeks Ended

 

 

 

August 4, 2018

 

 

July 29, 2017

 

Net income

 

$

21,743

 

 

$

20,023

 

Operating activities:

 

 

 

 

 

 

 

 

Adjustments to reconcile net income to net cash provided by operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

18,245

 

 

 

17,131

 

Loss on disposal of fixed assets

 

 

28

 

 

 

340

 

Noncash amortization of deferred financing and debt discount costs

 

 

794

 

 

 

1,615

 

Equity-based compensation

 

 

1,843

 

 

 

261

 

Deferred rent liability

 

 

(64

)

 

 

664

 

Deferred income taxes

 

 

(3,054

)

 

 

(1,121

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(374

)

 

 

(1,219

)

Inventories

 

 

19,000

 

 

 

3,851

 

Prepaid expenses and other current assets

 

 

(2,371

)

 

 

5,993

 

Accounts payable

 

 

(11,943

)

 

 

(221

)

Accrued expenses

 

 

(2,322

)

 

 

(5,909

)

Other noncurrent assets and liabilities

 

 

1,590

 

 

 

3,872

 

Net cash provided by operating activities

 

 

43,115

 

 

 

45,280

 

Investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(5,659

)

 

 

(10,915

)

Net cash used in investing activities

 

 

(5,659

)

 

 

(10,915

)

Financing activities:

 

 

 

 

 

 

 

 

Repayments on long-term debt

 

 

(1,399

)

 

 

(21,399

)

Receivable from related party

 

 

 

 

 

2,227

 

Net cash used in financing activities

 

 

(1,399

)

 

 

(19,172

)

Net change in cash

 

 

36,057

 

 

 

15,193

 

Cash:

 

 

 

 

 

 

 

 

Beginning of Period

 

 

25,978

 

 

 

13,468

 

End of Period

 

$

62,035

 

 

$

28,661

 

 

The accompanying notes are an integral part of these consolidated financial statements.

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J.Jill, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Description of Business

J.Jill, Inc.,“J.Jill” or the “Company”, is a premier omnichannel retailer and nationally recognized women’s apparel brand committed to delighting customers with great wear-now product. The brand represents an easy, relaxed, inspired style that reflects the confidence and comfort of a woman with a rich, full life. J.Jill provides guiding service through more than 270 stores nationwide and a robust e-commerce platform. J.Jill is headquartered outside Boston.

2. Summary of Significant Accounting Policies

Basis of Presentation

Our interim consolidated financial statements are unaudited. All significant intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted, in accordance with the rules of the Securities and Exchange Commission (the “SEC”). In the opinion of management, these interim consolidated financial statements contain all normal and recurring adjustments necessary to state fairly the financial position and results of operations of the Company. The consolidated balance sheet as of February 3, 2018 is derived from the audited consolidated balance sheet as of that date. The unaudited results of operations for the thirteen and twenty-six weeks ended August 4, 2018 are not necessarily indicative of future results or results to be expected for the full year ending February 2, 2019. You should read these statements in conjunction with our audited consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended February 3, 2018.

Significant changes to our accounting policies as a result of adopting Accounting Standards Update (“ASU”) 2014-09Revenue from Contracts with Customers (Topic 606) are discussed below in “Significant Accounting Policies Update” and Note 3.

Recently Adopted Accounting Policies

In May 2014, the FASB issued ASU 2014-09Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in FASB ASC Topic 605 – Revenue Recognition. The new guidance established principles for reporting revenue and cash flows arising from an entity’s contracts with customers. The Company adopted ASU 2014-09 and related amendments, collectively known as Accounting Standards Codification 606 (“Topic 606”) as of February 4, 2018 on a modified retrospective basis. See “Significant Accounting Policies Update” and Note 3 for a discussion of our updated policies related to revenue recognition and disclosures related to the impact of this standard.

In October 2016 the FASB issued ASU 2016-16 – Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This update is intended to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Under the new guidance, an entity would recognize the current and deferred income tax consequences of an intra-entity asset transfer when the transfer occurs. Intra-entity inventory transfers would still be an exception. The provisions of ASU 2016-16 were adopted as of February 4, 2018 under the modified retrospective method with no cumulative-effect adjustment to retained earnings.

In August 2016, the FASB issued ASU 2016-15 – Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The standard was retrospectively adopted as of February 4, 2018 and did not have an impact on the consolidated statement of cash flows.

Recently Issued Accounting Pronouncements

In July 2018, the FASB issued ASU 2018-09 – Codification Improvements, which facilitates amendments to a variety of topics to clarify, correct errors in, or make minor improvements to the accounting standards codification. The effective date of the standard is dependent on the facts and circumstances of each amendment. Some amendments do not require transition guidance and will be effective upon the issuance of this standard. A majority of the amendments in ASU 2018-09 will be effective in annual periods beginning after December 15, 2018. We will be required to adopt this standard in the first quarter of fiscal 2019.This standard is not expected to have a material impact on our consolidated financial statements and related disclosures.

In June 2018, The FASB issued ASU 2018-07 – Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of Topic 718 to include share-based payment transactions

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for acquiring goods and services from nonemployees. The provisions of ASU 2018-07 are effective for fiscal years beginning after December 15, 2018. The Company plans to adopt these standards beginning in the first quarter of fiscal 2019 using a modified retrospective approach. The Company is evaluating the impact that adopting ASU 2018-07 will have on its consolidated financial statements, but does not expect that impact to be material.

In February 2016, the FASB issued ASU 2016-02 – Leases. The amendments in this update include a new FASB ASC Topic 842, which supersedes Topic 840. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted for all entities as of the beginning of interim or annual reporting periods. In July 2018, the FASB issued ASU 2018-10 – Codification Improvements to Topic 842, Leases. The amendments are intended to address narrow aspects of the guidance issued in the amendments in ASU 2016-02. In July 2018, the FASB issued ASU 2018-11 – Leases (Topic 842): Targeted Improvements, which provides an additional (and optional) transition method by allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. These provisions are effective for reporting periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact that adopting ASU 2016-02 and related amendments will have on its consolidated financial statements and expects to raise significant “Right of Use” assets and significant, offsetting lease liabilities. These amounts have not yet been quantified. The Company plans to adopt these standards beginning in the first quarter of fiscal 2019 using the modified retrospective approach with a cumulative adjustment to retained earnings.

Significant Accounting Policies Update

Adoption of ASC Topic 606: Revenue from Contracts with Customers

On February 4, 2018, the Company adopted Topic 606 using the modified retrospective method applied to contracts which were not completed as of February 4, 2018. As part of the adoption of Topic 606, Topic 340-20 – Capitalized Advertising Costs was superseded and therefore, the Company transitioned to ASC 720-35 – Advertising Costs for reporting on costs of advertising. Results for reporting periods beginning after February 4, 2018 are presented under Topic 606 and Topic 720, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605 and Topic 340.

The Company recorded a cumulative reduction to opening retained earnings of $0.3 million. The impact on opening retained earnings was a $0.8 million decrease from the acceleration of prepaid catalog expenses offset by a $0.5 million increase from the recognition of direct revenues previously deferred under Topic 605.

Effective February 4, 2018, the Company changed its consolidated balance sheet presentation for expected sales returns and recorded a $5.0 million return asset and a corresponding increase to the return liability to present our sales reserve gross in accordance with Topic 606. In addition, as of the date of adoption of Topic 606, the Company will present reimbursements of costs of marketing programs related to the private label credit card gross in the consolidated statement of operations with no impact to opening retained earnings.

Revenue Recognition

Revenue is primarily derived from the sale of apparel and accessory merchandise through our retail channel and direct channel, which includes website and catalog phone orders. Revenue also includes shipping and handling fees collected from customers. Topic 606 requires entities to recognize revenue when control of the promised goods or services are transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.  Revenue from our retail channel is recognized at the time of sale and revenue from our direct channel is recognized upon shipment of merchandise to the customer.

The Company has a return policy where merchandise returns will be accepted within 90 days of the original purchase date.  At the time of sale, the Company records an estimated sales reserve for merchandise returns based on historical prior returns experience and expected future returns. The estimated sales reserve is recorded as a return asset (and corresponding adjustment to cost of goods sold) for the cost of inventory and a return liability for the amount to settle the return with a customer (and a corresponding adjustment to revenue). The return asset and return liability are recorded in prepaid expenses and other assets, and accrued expenses and other current liabilities, respectively, in the consolidated balance sheet. The Company collects and remits sales and use taxes in all states in which retail and direct sales occur and taxes are applicable. These taxes are reported on a net basis and are thereby excluded from revenue.

The Company sells gift cards without expiration dates to customers. The Company does not charge administrative fees on unused gift cards. Proceeds from the sale of gift cards are recorded as a contract liability until the customer redeems the gift card or when the likelihood of redemption is remote. Based on historical experience, the Company estimates the value of outstanding gift

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cards that will ultimately not be redeemed (“gift card breakage”) and will not be escheated under statutory unclaimed property laws. This gift card breakage is recognized as revenue over the time period established by the Company’s historical gift card redemption pattern.

The Company recognizes revenues from shipments to customers before the shipping and handling activities occur and will accrue those related costs. Shipping and handling costs are recorded in selling, general and administrative expenses. There is no change to the Company’s comparative reporting of shipping and handling costs as a result of adopting of Topic 606.

Credit Card Agreement

The Company has an arrangement with a third party to provide a private label credit card to its customers through August 2023, and will automatically renew thereafter for successive two year terms. The Company does not bear the credit risk associated with the private label credit card at any point prior to the termination of the agreement, at which point the Company is obligated to purchase the receivables. If the arrangement is terminated prior to September 7, 2021 and other criteria are met, the Company is obligated to pay a purchase price premium. The potential impact of the purchase obligation cannot be reasonably estimated, and therefore, has not been recorded.

The Company receives royalty payments through its private label credit card agreement. The royalty payments are recognized as revenue when they are received. Royalty payments recognized in the thirteen and twenty-six weeks ended August 4, 2018 were $1.4 million and $2.8 million, respectively, and in the thirteen and twenty-six weeks ended July 29, 2017 were $1.1 million and $2.3 million, respectively.

The Company also receives reimbursements for costs of marketing programs related to the private label credit card, which are recorded as revenue as earned and the costs incurred are recorded as operating expenses in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income (loss). Reimbursements for costs of marketing programs of $0.4 million and $1.5 million were recognized in the thirteen and twenty-six weeks ended August 4, 2018, respectively.

The credit card agreement provides a signing bonus to the Company, which is recognized into revenue over the life of the agreement.

Advertising Costs

The Company incurs costs to produce, print, and distribute its catalogs. Catalog costs are considered direct response advertising, which are capitalized as incurred, and expensed when the catalog is mailed to the customer (the first time the advertising occurs). Advertising expenses were $8.6 million and $18.7 million in the thirteen and twenty-six weeks ended August 4, 2018, respectively, and $8.8 million and $18.0 million in the thirteen and twenty-six weeks ended July 29, 2017, respectively. The costs are included in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income (loss).

Other advertising costs are recorded as incurred. Other advertising costs recorded were $5.4 million and $11.2 million in the thirteen and twenty-six weeks ended August 4, 2018, respectively, and $5.6 million and $10.5 million in the thirteen and twenty-six weeks ended July 29, 2017, respectively. The costs are included in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income (loss).

3. Revenues

Disaggregation of Revenue

The Company sells its products directly to consumers and the Company earns royalties under its credit card agreement. The following table presents revenues disaggregated by revenue source (in thousands):

 

 

For the Thirteen Weeks Ended

 

 

For the Twenty-Six Weeks Ended

 

 

 

August 4, 2018

 

 

July 29, 2017(1)

 

 

August 4, 2018

 

 

July 29, 2017(1)

 

Retail

 

$

106,210

 

 

$

103,189

 

 

$

214,241

 

 

$

198,536

 

Direct

 

$

73,503

 

 

$

78,183

 

 

 

147,013

 

 

 

148,962

 

Net revenues

 

$

179,713

 

 

$

181,372

 

 

$

361,254

 

 

$

347,498

 

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(1) As previously noted, prior period amounts have not been adjusted under the modified retrospective method.

Contract Liabilities

The Company recognizes a contract liability when it has received consideration from the customer and has a future obligation to the customer. Total contract liabilities consisted of the following (in thousands):

 

 

August 4, 2018

 

 

February 3, 2018

 

Contract liabilities:

 

 

 

 

 

 

 

Signing bonus

$

718

 

 

$

788

 

Unredeemed gift cards

 

4,917

 

 

 

6,466

 

Total contract liabilities(1)

$

5,635

 

 

$

7,254

 

 

(1) Included in accrued expenses and other current liabilities on the Company's consolidated balance sheet. The short term portion of the signing bonus is included in accrued expenses on the Company’s consolidated balance sheet.

For the thirteen and twenty-six weeks ended August 4, 2018, the Company recognized approximately $2.8 million and $6.1 million of revenue related to gift card redemptions and breakage. For the thirteen and twenty-six weeks ended July 29, 2017, the Company recognized approximately $2.8 million and $6.0 million of revenue related to gift card redemptions and breakage. Revenue recognized consists of gift cards that were part of the unredeemed gift card balance at the beginning of the period as well as gift cards that were issued during the period.

Performance Obligations

The Company has a remaining performance obligation of $0.7 million for a signing bonus related to the private label credit card agreement. The Company will recognize revenue over the remaining life of the contract as follows (in thousands):

 

 

Fiscal Year 2018

 

 

Fiscal Year 2019

 

 

Thereafter

 

Signing bonus

$

71

 

 

$

141

 

 

$

506

 

 

This disclosure does not include revenue related to performance obligations from unredeemed gift cards, as substantially all gift cards are redeemed in the first year of issuance.

Practical Expedients and Policy Elections

The Company excludes from its transaction price all amounts collected from customers for sales taxes that are remitted to taxing authorities.

Shipping and handling activities that occur after control of related goods transfers to the customer are accounted for as fulfillment activities rather than assessing these activities as performance obligations.

The Company does not disclose remaining performance obligations that have an expected duration of one year or less.

4. Debt

The components of the Company’s outstanding Term Loan were as follows (in thousands):

 

 

 

August 4, 2018

 

 

February 3, 2018

 

Term Loan

 

$

246,777

 

 

$

248,176

 

Discount on debt and debt issuance costs

 

 

(5,813

)

 

 

(6,496

)

Less: Current portion

 

 

(2,799

)

 

 

(2,799

)

Net long-term debt

 

$

238,165

 

 

$

238,881

 

 

The Company was in compliance with all financial covenants as of August 4, 2018.

 

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5. Income Taxes

The Company recorded income tax expense of $4.0 million and $7.9 million during the thirteen and twenty-six weeks ended August 4, 2018, respectively, and $8.6 million and $14.2 million during the thirteen and twenty-six weeks ended July 29, 2017, respectively. The effective tax rates were 27.4% and 26.7% in the thirteen and twenty-six weeks ended August 4, 2018, respectively, and 41.6% and 41.4% in the thirteen and twenty-six weeks ended July 29, 2017, respectively.

The effective tax rate for the thirteen and twenty-six weeks ended August 4, 2018 exceeds the federal statutory rate of 21.0% primarily due to stock compensation, state income taxes and §162(m) officer compensation limitation. The effective tax rate for the thirteen and twenty-six weeks ended July 29, 2017 exceeds the federal statutory rate of 35.0% primarily due to state income taxes and non-deductible IPO related expenses.

On December 22, 2017, the U.S. Tax Cuts and Jobs Act (TCJA) legislation was signed.  The new U.S. tax legislation is subject to a number of provisions, including a reduction of the U.S. federal corporate income tax rate from 35.0% to 21.0% (effective January 1, 2018) and a change in certain business deductions, including allowing for immediate expensing of certain qualified capital expenditures.

Staff Accounting Bulletin No. 118 (“SAB 118”), issued by the Securities and Exchange Commission in December 2017, provides the Company with up to one year to finalize accounting for the impacts of TCJA. When the initial accounting for TCJA impacts is incomplete, the Company may include provisional amounts when reasonable estimates may be determined. As of February 3, 2018, the Company made a reasonable estimate of its deferred income tax benefit related to the corporate rate change of $24.0 million and estimates to expense qualifying capital expenditures.

In the thirteen and twenty-six weeks ended August 4, 2018, the Company has not recognized any measurement period adjustments. The Company has not completed its process to determine the final impact of TCJA. The final impact may differ from this estimate, possibly materially, due to, among other things, changes in interpretations and assumptions that the Company has made and the issuance of additional regulatory and other guidance. Further, any required adjustment would be reflected as a discrete expense or benefit in the quarter that it is identified, as allowed by SAB 118. Although no material changes are anticipated, the Company expects to complete the analysis within the measurement period in accordance with SAB 118.

6. Earnings Per Share

The following table summarizes the computation of basic and diluted net income per share attributable to common shareholders (in thousands, except share and per share data):

 

 

For the Thirteen Weeks Ended

 

 

For the Twenty-Six Weeks Ended

 

 

 

August 4, 2018

 

 

July 29, 2017

 

 

August 4, 2018

 

 

July 29, 2017

 

Numerator

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to common shareholders:

 

$

10,485

 

 

$

11,996

 

 

$

21,743

 

 

$

20,023

 

Denominator

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding, basic:

 

 

42,855,366

 

 

 

41,549,825

 

 

 

42,535,849

 

 

 

42,033,984

 

Dilutive effect of restricted shares:

 

 

1,860,827

 

 

 

2,004,450

 

 

 

1,525,955

 

 

 

1,525,797

 

Weighted average number of common shares outstanding, diluted:

 

 

44,716,193

 

 

 

43,554,275

 

 

 

44,061,804

 

 

 

43,559,781

 

Net income per common share attributable to common shareholders, basic:

 

$

0.24

 

 

$

0.29

 

 

$

0.51

 

 

$

0.48

 

Net income per common share attributable to common shareholders, diluted:

 

$

0.23

 

 

$

0.28

 

 

$

0.49

 

 

$

0.46

 

 

The weighted average common shares for the diluted earnings per share calculation exclude the impact of outstanding equity awards if the assumed proceeds per share of the award is in excess of the related fiscal period’s average price of the Company’s common stock. Such awards are excluded because they would have an antidilutive effect. There were 336,105 and 729,463 for the thirteen and twenty-six weeks ended August 4, 2018, respectively, and 283,230 and 280,038 for the thirteen and twenty-six weeks ended July 29, 2017, respectively, such awards excluded.

7. Equity-Based Compensation

Compensation expense was $1.0 million and $1.8 million for the thirteen and twenty-six weeks ended August 4, 2018, respectively, and $0.2 million and $0.3 million for the thirteen and twenty-six weeks ended July 29, 2017, respectively.

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8. Related Party Transactions

For the thirteen and twenty-six weeks ended August 4, 2018, the Company incurred an immaterial amount of related party transactions. For the thirteen and twenty-six weeks ended July 29, 2017 the Company incurred an immaterial amount of out-of-pocket expenses in relation to the advisory services agreement with a related party. These expenses are included in operating expenses in the accompanying consolidated statements of operations and comprehensive income.

9. Commitments and Contingencies

Operating Lease Agreements

The Company recorded a deferred lease liability of $10.6 million and $9.5 million as of August 4, 2018 and February 3, 2018, respectively. In certain instances, the Company also receives tenant improvement incentives for its store leases, which it accrues and amortizes ratably over the life of the lease. The Company maintained a tenant improvement incentive liability of $18.0 million and $17.3 million as of August 4, 2018 and February 3, 2018, respectively.  

Total rental and common area maintenance expense was $15.1 million and $30.6 million for the thirteen and twenty-six weeks ended August 4, 2018, respectively, exclusive of contingent rental expense recorded of $0.4 million and $0.6 million for the same respective periods. Total rental and common area maintenance expense was $14.9 million and $29.3 million for the thirteen and twenty-six weeks ended July 29, 2017, respectively, exclusive of contingent rental expense recorded of $0.4 million and $0.8 million for the same respective periods.

Legal Proceedings

Shareholder Class Action Lawsuits

On October 13, 2017, a securities lawsuit was filed in the United States District Court for the District of Massachusetts against the Company, several members of our Board of Directors and our Chief Financial Officer, among others. The complaint was brought under the Securities Act of 1933 and sought certification of a class of plaintiffs comprised of all shareholders that acquired stock issued by the Company in its initial public offering in March 2017. The plaintiffs sought compensation for losses they incurred since purchasing the stock.  Following the filing of this lawsuit, two additional, similar actions were brought in the same court. The three matters were eventually consolidated, and a lead plaintiff was appointed by the court. On March 9, 2018, an amended complaint captioned The Pension Trust v. J.Jill, Inc., et al. was filed. The Company filed a motion to dismiss on May 14, 2018, which was opposed by the plaintiffs on July 17, 2018. The Company believes the claims in the case are without merit and intends to defend the matter vigorously. No material amount has been accrued.

We are not presently party to any other legal proceedings the resolution of which we believe would have a material adverse effect on our business, financial condition, operating results or cash flows. We establish reserves for specific legal matters when we determine that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. The following discussion contains forward-looking statements that reflect our plans, estimates and assumptions. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause such differences are discussed in the sections of this Quarterly Report on Form 10-Q titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements”.

We operate on a 52- or 53-week fiscal year that ends on the Saturday that is closest to January 31. Each fiscal year generally is comprised of four 13-week fiscal quarters, although in the years with 53 weeks, the fourth quarter represents a 14-week period. The fiscal year ending February 2, 2019 (“Fiscal Year 2018”) and fiscal year ended February 3, 2018 (“Fiscal Year 2017”) are comprised of 52 weeks and 53 weeks, respectively.

Overview

J.Jill is a premier omnichannel retailer and nationally recognized women’s apparel brand committed to delighting customers with great wear-now product. The brand represents an easy, relaxed, inspired style that reflects the confidence and comfort of a woman with a rich, full life. J.Jill provides guiding service through more than 270 stores nationwide and a robust e-commerce platform. J.Jill is headquartered outside Boston.

Factors Affecting Our Operating Results

Various factors are expected to continue to affect our results of operations going forward, including the following:

Overall Economic Trends. Consumer purchases of clothing and other merchandise generally decline during recessionary periods and other periods when disposable income is adversely affected, and consequently our results of operations may be affected by general economic conditions. For example, reduced consumer confidence and lower availability and higher cost of consumer credit may reduce demand for our merchandise and may limit our ability to increase or sustain prices. The growth rate of the market could be affected by macroeconomic conditions in the United States.

Consumer Preferences and Fashion Trends. Our ability to maintain our appeal to existing customers and attract new customers depends on our ability to anticipate fashion trends. During periods in which we have successfully anticipated fashion trends, we have generally had more favorable results.

Competition. The retail industry is highly competitive and retailers compete based on a variety of factors, including design, quality, price and customer service. Levels of competition and the ability of our competitors to more accurately predict fashion trends and otherwise attract customers through competitive pricing or other factors may impact our results of operations.

Our Strategic Initiatives. Our business will continue to have an impact on our results of operations, including our newly re-platformed e-commerce site. Although initiatives of this nature are designed to create growth in our business and continuing improvement in our operating results, the timing of expenditures related to these initiatives, as well as the achievement of returns on our investments, may affect our results of operation in future periods.

Pricing and Changes in Our Merchandise Mix. Our product offering changes from period to period, as do the prices at which goods are sold and the margins we are able to earn from the sales of those goods. The levels at which we are able to price our merchandise are influenced by a variety of factors, including the quality of our products, cost of production, prices at which our competitors are selling similar products and the willingness of our customers to pay for products.

Potential Changes in Tax Laws and/or Regulations.  Changes in tax laws in any of the multiple jurisdictions in which we operate, or adverse outcomes from tax audits that we may be subject to in any of the jurisdictions in which we operate, could adversely affect our business, financial condition and operating results.  Additionally, any potential changes with respect to tax and trade policies, tariffs and government regulations affecting trade between the U.S. and other countries could adversely affect our business, as we source the majority of our merchandise from manufacturers located outside of the U.S.

How We Assess the Performance of Our Business

In assessing the performance of our business, we consider a variety of financial and operating metrics, including GAAP and non-GAAP measures, including the following:

Net sales consists primarily of revenues, net of merchandise returns and discounts, generated from the sale of apparel and accessory merchandise through our retail channel and direct channel. Net sales also include shipping and handling fees collected from

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customers and royalty revenues and marketing reimbursements related to our private label credit card agreement. Revenue from our retail channel is recognized at the time of sale and revenue from our direct channel is recognized upon shipment of merchandise to the customer.

Net sales are impacted by the size of our active customer base, product assortment and availability, marketing and promotional activities and the spending habits of our customers. Net sales are also impacted by the migration of single-channel customers to omnichannel customers who, on average, spend nearly three times more than single-channel customers.

Total company comparable sales includes net sales from our full-price stores that have been open for more than 52 weeks and from our direct channel. This measure highlights the performance of existing stores open during the period, while excluding the impact of new store openings and closures. When a store in the total company comparable store base is temporarily closed for remodeling or other reasons, it is included in total company comparable sales only using the full weeks it was open. Certain of our competitors and other retailers may calculate total company comparable sales differently than we do. As a result, the reporting of our total company comparable sales may not be comparable to sales data made available by other companies.

Number of stores reflects all stores open at the end of a reporting period. In connection with opening new stores, we incur pre-opening costs. Pre-opening costs include expenses incurred prior to opening a new store and primarily consist of payroll, travel, training, marketing, initial opening supplies and costs of transporting initial inventory and fixtures to store locations, as well as occupancy costs incurred from the time of possession of a store site to the opening of that store. These pre-opening costs are included in selling, general and administrative expenses and are generally incurred and expensed within 30 days of opening a new store.

Gross profit is equal to our net sales less costs of goods sold. Gross profit as a percentage of our net sales is referred to as gross margin. Costs of goods sold includes the direct costs of sold merchandise, inventory shrinkage, and adjustments and reserves for excess, aged and obsolete inventory. We review our inventory levels on an ongoing basis to identify slow-moving merchandise and use product markdowns to efficiently sell these products. Changes in the assortment of our products may also impact our gross profit. The timing and level of markdowns are driven by customer acceptance of our merchandise. Certain of our competitors and other retailers may report costs of goods sold differently than we do. As a result, the reporting of our gross profit and gross margin may not be comparable to other companies.

The primary drivers of the costs of goods sold are raw materials, which fluctuate based on certain factors beyond our control, including labor conditions, transportation or freight costs, energy prices, currency fluctuations and commodity prices. We place orders with merchandise suppliers in United States dollars and, as a result, are not exposed to significant foreign currency exchange risk.

Selling, general and administrative expenses include all operating costs not included in costs of goods sold. These expenses include all payroll and related expenses, occupancy costs and other operating expenses related to our stores and to our operations at our headquarters, including utilities, depreciation and amortization. These expenses also include marketing expense, including catalog production and mailing costs, warehousing, distribution and shipping costs, customer service operations, consulting and software services, professional services and other administrative costs.

Our historical revenue growth has been accompanied by increased selling, general and administrative expenses. The most significant increases were in occupancy costs associated with retail store expansion, and in marketing and payroll investments. While we expect these expenses to increase as we continue to open new stores, increase brand awareness and grow our business, we believe these expenses will decrease as a percentage of net sales over time.

Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA, which represents net income (loss) plus net interest expense, provision (benefit) for income taxes, depreciation and amortization, equity-based compensation expense, write-off of property and equipment, and other non-recurring expenses and one-time items. We present Adjusted EBITDA on a consolidated basis because management uses it as a supplemental measure in assessing our operating performance, and we believe that it is helpful to investors, securities analysts and other interested parties as a measure of our comparative operating performance from period to period. We also use Adjusted EBITDA as one of the primary methods for planning and forecasting overall expected performance of our business and for evaluating on a quarterly and annual basis actual results against such expectations. Further, we recognize Adjusted EBITDA as a commonly used measure in determining business value and as such, use it internally to report results.

While we believe that Adjusted EBITDA is useful in evaluating our business, Adjusted EBITDA is a non-GAAP financial measure that has limitations as an analytical tool. Adjusted EBITDA should not be considered an alternative to, or substitute for, net income (loss), which is calculated in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate Adjusted EBITDA differently or not at all, which reduces the usefulness of Adjusted EBITDA as a tool for comparison. We recommend that you review the reconciliation and calculation of Adjusted EBITDA and Adjusted EBITDA margin to net income (loss), the most directly comparable GAAP financial measure, below and not rely solely on Adjusted EBITDA or any single financial measure to evaluate our business.

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Reconciliation of Net Income to Adjusted EBITDA and Calculation of Adjusted EBITDA Margin

The following table provides a reconciliation of net income to Adjusted EBITDA and the calculation of Adjusted EBITDA margin for the periods presented.

 

 

For the Thirteen Weeks Ended

 

 

For the Twenty-Six Weeks Ended

 

(in thousands)

 

August 4, 2018

 

 

July 29, 2017

 

 

August 4, 2018

 

 

July 29, 2017

 

Statements of Operations Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

10,485

 

 

$

11,996

 

 

$

21,743

 

 

$

20,023

 

Interest expense, net

 

 

4,853

 

 

 

5,084

 

 

 

9,670

 

 

 

10,029

 

Provision for income taxes

 

 

3,952

 

 

 

8,557

 

 

 

7,924

 

 

 

14,160

 

Depreciation and amortization

 

 

8,892

 

 

 

8,341

 

 

 

18,249

 

 

 

17,140

 

Equity-based compensation expense(a)

 

 

1,083

 

 

 

237

 

 

 

1,843

 

 

 

261

 

Write-off of property and equipment (b)

 

 

16

 

 

 

338

 

 

 

28

 

 

 

340

 

Other non-recurring expenses(c)

 

 

 

 

 

721

 

 

 

1,346

 

 

 

4,306

 

Adjusted EBITDA

 

$

29,281

 

 

$

35,274

 

 

$

60,803

 

 

$

66,259

 

Net sales

 

$

179,713

 

 

$

181,372

 

 

$

361,254

 

 

$

347,498

 

Adjusted EBITDA margin

 

 

16.3

%

 

 

19.4

%

 

 

16.8

%

 

 

19.1

%

 

(a)

Represents expenses associated with equity incentive instruments granted to our management and board of directors. Incentive instruments are accounted for as equity-classified awards with the related compensation expense recognized based on fair value at the date of the grants.

(b)

Represents net gain or loss on the disposal of fixed assets.

(c)

Represents items management believes are not indicative of ongoing operating performance. For the period ended July 29, 2017, these expenses are primarily composed of legal and professional fees associated with the initial public offering completed March 14, 2017 and subsequent transition to a public company. For the twenty-six weeks ended August 4, 2018, these expenses include costs related to a CEO transition.

Results of Operations

Thirteen weeks ended August 4, 2018 Compared to Thirteen weeks ended July 29, 2017

The following table summarizes our consolidated results of operations for the periods indicated:

 

 

 

For the Thirteen Weeks Ended

 

 

Change from the Thirteen Weeks Ended July 29, 2017 to the Thirteen Weeks

 

(in thousands)

 

August 4, 2018

 

 

July 29, 2017

 

 

Ended August 4, 2018

 

 

 

Dollars

 

 

% of Net

Sales

 

 

Dollars

 

 

% of Net

Sales

 

 

$ Change

 

 

% Change

 

Net sales

 

$

179,713

 

 

 

100.0

%

 

$

181,372

 

 

 

100.0

%

 

$

(1,659

)

 

 

(0.9

)%

Costs of goods sold

 

 

63,058

 

 

 

35.1

%

 

 

58,724

 

 

 

32.4

%

 

 

4,334

 

 

 

7.4

%

Gross profit

 

 

116,655

 

 

 

64.9

%

 

 

122,648

 

 

 

67.6

%

 

 

(5,993

)

 

 

(4.9

)%

Selling, general and administrative expenses

 

 

97,365

 

 

 

54.2

%

 

 

97,011

 

 

 

53.5

%

 

 

354

 

 

 

0.4

%

Operating income

 

 

19,290

 

 

 

10.7

%

 

 

25,637

 

 

 

14.1

%

 

 

(6,347

)

 

 

(24.8

)%

Interest expense, net

 

 

4,853

 

 

 

2.7

%

 

 

5,084

 

 

 

2.8

%

 

 

(231

)

 

 

(4.5

)%

Income before provision for income taxes

 

 

14,437

 

 

 

8.0

%

 

 

20,553

 

 

 

11.3

%

 

 

(6,116

)

 

 

(29.8

)%

Provision for income taxes

 

 

3,952

 

 

 

2.2

%

 

 

8,557

 

 

 

4.7

%

 

 

(4,605

)

 

 

(53.8

)%

Net income

 

$

10,485

 

 

 

5.8

%

 

$

11,996

 

 

 

6.6

%

 

$

(1,511

)

 

 

(12.6

)%

 

Net Sales

Net sales for the thirteen weeks ended August 4, 2018 decreased $1.7 million, or 0.9%, to $179.7 from $181.4 million for the thirteen weeks ended July 29, 2017.  At the end of those same periods, we operated 273 and 274 retail stores, respectively. The decrease in total net sales versus the prior year was driven by replacing a high volume week in May with a lower volume week in August due to a calendar shift created by the fifty-third week in Fiscal Year 2017, partially offset by a 2.2% increase in total company comparable sales.

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Our retail channel contributed 59.1% of our net sales in the thirteen weeks ended August 4, 2018 and 56.9% in the thirteen weeks ended July 29, 2017. Our direct channel contributed 40.9% of our net sales in the thirteen weeks ended August 4, 2018 and 43.1% in the thirteen weeks ended July 29, 2017.

Gross Profit and Costs of Goods Sold

Gross profit for the thirteen weeks ended August 4, 2018 decreased $6.0 million, or 4.9%, to $116.7 from $122.6 million for the thirteen weeks ended July 29, 2017. The gross margin for the thirteen weeks ended August 4, 2018 was 64.9% compared to 67.6% for the thirteen weeks ended July 29, 2017, largely driven by added promotions, markdowns, and liquidation actions to clear certain goods.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the thirteen weeks ended August 4, 2018 increased $0.4 million, or 0.4%, to $97.4 from $97.0 million for the thirteen weeks ended July 29, 2017. The increase was due to additional expenses of $0.8 million related to depreciation and amortization and costs associated with investments in technology. These increases were partially offset by lower sales related expenses, including retail payroll, occupancy and direct fulfillment, as well as a decrease in net employee compensation, which was primarily driven by incentive expense.

As a percentage of net sales, selling, general and administrative expenses were 54.2% for the thirteen weeks ended August 4, 2018 compared to 53.5% for the thirteen weeks ended July 29, 2017.  

Interest Expense, Net

Interest expense, net, consists of interest expense on the Term Loan and is partially offset by interest earned on cash. Interest expense for the thirteen weeks ended August 4, 2018 decreased $0.2 million, or 4.5%, to $4.9 from $5.1 million for the thirteen weeks ended July 29, 2017. The decrease was driven by the lower balance of the Term Loan and the acceleration of $0.6 million of deferred financing costs in the second quarter of 2017 due to a voluntary principal prepayment on the Term Loan of $20.0 million made in June 2017, partially offset by the impact of higher interest rates.

Provision for Income Taxes

The provision for income taxes was $4.0 million for the thirteen weeks ended August 4, 2018 compared to $8.6 million for the thirteen weeks ended July 29, 2017. Our effective tax rates for the same periods were 27.4% and 41.6%, respectively. The decrease in the effective tax rate was primarily due to new U.S. tax legislation.  The U.S. Tax Cuts and Jobs Act (the “TCJA”), enacted in December 2017, is subject to a number of provisions, including a reduction of the U.S. federal corporate income tax rate from 35.0% to 21.0% (effective January 1, 2018) and a change in certain business deductions, including allowing for immediate expensing of certain qualified capital expenditures.

Twenty-six weeks ended August 4, 2018 Compared to Twenty-six weeks ended July 29, 2017

The following table summarizes our consolidated results of operations for the periods indicated:

 

  

 

For the Twenty-Six Weeks Ended

 

 

Change from the Twenty-Six Weeks Ended July 29, 2017 to the Twenty-Six Weeks

 

(in thousands)

 

August 4, 2018

 

 

July 29, 2017

 

 

Ended August 4, 2018

 

 

 

Dollars

 

 

% of Net

Sales

 

 

Dollars

 

 

% of Net

Sales

 

 

$ Change

 

 

% Change

 

Net sales

 

$

361,254

 

 

 

100.0

%

 

$

347,498

 

 

 

100.0

%

 

$

13,756

 

 

 

4.0

%

Costs of goods sold

 

 

124,258

 

 

 

34.4

%

 

 

109,242

 

 

 

31.4

%

 

 

15,016

 

 

 

13.7

%

Gross profit

 

 

236,996

 

 

 

65.6

%

 

 

238,256

 

 

 

68.6

%

 

 

(1,260

)

 

 

(0.5

)%

Selling, general and administrative expenses

 

 

197,659

 

 

 

54.7

%

 

 

194,044

 

 

 

55.8

%

 

 

3,615

 

 

 

1.9

%

Operating income

 

 

39,337

 

 

 

10.9

%

 

 

44,212

 

 

 

12.7

%

 

 

(4,875

)

 

 

(11.0

)%

Interest expense, net

 

 

9,670

 

 

 

2.7

%

 

 

10,029

 

 

 

2.9

%

 

 

(359

)

 

 

(3.6

)%

Income before provision for income taxes

 

 

29,667