Subsequent Events |
12 Months Ended |
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Feb. 01, 2020 | |
Subsequent Events | |
Subsequent Events | NOTE 20—SUBSEQUENT EVENT In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic, which continues to spread throughout the United States and globally. The COVID-19 health crisis poses significant and widespread risks to the Company’s business as well as to the business environment and the markets in which the Company operates. In response to the public health crisis posed by COVID-19, effective from March 17, 2020, the Company temporarily closed its retail locations for an indeterminate period of time. Although the Company continues to serve its customers virtually through its Gallery representatives and designers, as well as its online websites, the Company’s business operations are being substantially affected by applicable regulatory restrictions including stay-at-home requirements applicable in California where its corporate headquarters is located. The Company’s decision to reopen retail locations will be affected by a number of factors including applicable regulatory restrictions and there is substantial uncertainty regarding the manner and timing in which the Company can return some or all of its business to more normal business operations. The Company may face longer term closure requirements and other operational restrictions with respect to some or all of its physical locations for prolonged periods of time due to, among other factors, evolving and increasingly stringent federal, state and local restrictions including shelter-in-place orders. Even once the Company is able to reopen closed physical locations, changes in consumer behavior and health concerns may continue to impact consumer demand for the Company’s products and customer traffic at its Galleries, restaurants and outlets and may make it more difficult to staff its business operations. As a result of these developments, the Company expects an unfavorable impact on its sales, results of operations and cash flows in fiscal 2020. The Company has already experienced significant disruption to its business as a result of the rapid development of COVID-19 and the corresponding reduction in sales associated with its retail location closures. The Company may face longer term closure requirements with respect to some or all of its physical locations for prolonged periods of time due to, among other factors, evolving and increasingly stringent federal, state and local restrictions and shelter-in-place orders. Even once the Company is able to reopen its physical locations, changes in consumer behavior and health concerns may continue to impact customer traffic at the Company’s retail locations and may make it more difficult to staff these locations. Additionally, customer purchasing patterns are influenced by economic factors including the health of the stock market and the Company has correlated previous downturns in the stock market with a reduction in consumer demands for its products. Accordingly, adverse conditions and events have occurred that will impact the Company’s operations and liquidity. The Company has relied on cash flows from operations, net cash proceeds from the issuance of the convertible senior notes, as well as borrowings under credit facilities as primary sources of liquidity. The current events and economic conditions are significant in relation to the Company’s ability to fund its business operations, as well as debt repayments when due, such as the $300 million convertible senior notes maturing in July 2020 and payments under equipment promissory notes. The Company expects to repay the $300 million outstanding principal amount of the convertible notes in cash, whether in connection with a conversion of such notes or repayment at maturity in July 2020. In response to the impact of COVID-19, the Company is implementing a number of measures to minimize cash outlays, including managing workforce costs, delaying planned capital expenditures, deferring new business introductions, adjusting the timing and circulation of Source Books and minimizing discretionary expenses. The Company plans to utilize its asset based credit facility, and the Company may pursue other sources of capital that may include other forms of external financing, in order to increase its cash position and preserve financial flexibility in response to the uncertainty in the United States and global markets resulting from COVID-19. Refer to Note 10—Convertible Senior Notes and Note 11—Credit Facilities for further information on the terms and conditions of the Company’s outstanding debt agreements. The Company had outstanding borrowings under the Credit Agreement of $35.0 million as of March 27, 2020 and the amount under the revolving line of credit borrowing base that could be available pursuant to the Credit Agreement was $307.9 million, net of $13.2 million in outstanding letters of credit. The Company believes that these actions mitigate risks arising from COVID-19 and will be sufficient to repay the Company’s debt obligations as they become due, meet working capital requirements and fulfill other capital needs for more than the next 12 months. |