Basis of Presentation	3 Months Ended
May 02, 2020
Basis of Presentation
Basis of Presentation	1. Basis of Presentation: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial reporting and the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. We believe the accompanying unaudited condensed consolidated financial statements reflect all normal, recurring adjustments that are necessary for a fair presentation of our financial position and results of operations as of the dates and for the periods presented. Results of operations for the interim periods presented are not necessarily indicative of results to be expected for our full fiscal year. The preparation of our unaudited condensed consolidated financial statements in conformity with GAAP requires us to make certain estimates and assumptions that affect the amounts reported as assets, liabilities, revenues and expenses in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. We assessed certain accounting matters, including the carrying value of goodwill, intangible assets and long-lived assets, provisions for credit losses, inventory markdowns and the estimated effective tax rate, that require consideration of forecasted financial information based on information reasonably available to us as well as the uncertain future impacts of the novel coronavirus (COVID-19) pandemic. These assessments resulted in the recognition of certain amounts in the First Quarter of Fiscal 2020, as discussed below. Future changes in the business environment, our expectations and assumptions as compared to the information at the time of this filing regarding the magnitude and duration of the COVID-19 pandemic, and other factors could result in additional material impacts to our consolidated financial statements in future periods. COVID-19 Pandemic In March 2020, the World Health Organization characterized the outbreak of COVID-19 as a pandemic. COVID-19 had a significant effect on overall economic conditions and our operations, resulting in a significant net sales reduction and a net loss in the First Quarter of Fiscal 2020. While our mission remains the enhancement of long-term shareholder value, our focus during this crisis has been, and will continue to be, the health and well-being of our employees, customers and communities as well as protecting our brands and preserving liquidity. Due to the COVID-19 pandemic, we saw reduced consumer traffic starting in early March 2020 and temporarily closed all our retail and restaurant locations in North America on March 17, 2020. Subsequent to those closures, we also temporarily closed all our retail locations in Australia. The COVID-19 pandemic is expected to continue to have a material adverse impact on our business, financial condition, results of operations and cash flows for the foreseeable future, including as a result of temporary closure of our retail and restaurant locations, which continued into the Second Quarter of Fiscal 2020; decreased customer traffic in stores and restaurants even as we reopen locations in accordance with federal, state and local guidelines, including due to limited operating hours and capacity and seating limitations; uncertainty as to continued strength of our brands’ e-commerce websites during the pendency of the pandemic; overall changes in consumer confidence and consumer spending habits; any potential disruptions to our supply chain; and a slowdown in the U.S. and global economies. For many reasons, including those identified above, the full magnitude of the COVID-19 pandemic is difficult to predict at this time, and its ultimate duration and severity will depend on future developments. We believe that cash on hand and our credit facility provide adequate funds to support our operating, capital expenditure and debt service requirements for Fiscal 2020 and beyond. We could also experience other potential adverse impacts as a result of the COVID-19 pandemic including charges resulting from adjustments to the carrying amount of goodwill, intangible assets and long-lived assets, provisions for credit losses and inventory markdowns as well as potential changes to the estimated effective tax rate. Due to the COVID-19 pandemic in the First Quarter of Fiscal 2020, net sales in each of our operating groups decreased from prior periods resulting in significantly lower operating results, including operating losses in each group other than Lilly Pulitzer. As a result of the COVID-19 impact on our operating results, as well as lower operating results projected for future periods, we concluded that a goodwill impairment test triggering event had occurred for the goodwill associated with our Lilly Pulitzer, Southern Tide and TBBC reporting units. Further, we determined that an intangible asset impairment test triggering event had occurred for our indefinite-lived trademarks for Tommy Bahama, Lilly Pulitzer and Southern Tide. These goodwill and indefinite-lived intangible asset triggering events required the need for a quantitative interim impairment assessment over these reporting units and indefinite-lived intangible assets, in accordance with our accounting policies as described in Note 1 to our consolidated financial statements included in our Annual Report on Form 10-K for Fiscal 2019. These assessments concluded that the fair values of the Southern Tide goodwill and indefinite-lived intangible assets as of May 2, 2020 did not exceed their respective carrying values, resulting in impairment charges as discussed in Note 4. These impairment charges, which totaled $60 million, were recorded in impairment of goodwill and intangible assets in our consolidated statements of operations. Additionally, due to the lower operating results and lower projected operating results, we performed recoverability tests for certain other non-current assets, including property and equipment, finite-lived intangible assets and operating lease assets, and determined that the amounts included in the asset group are recoverable, except for a $0.2 million charge related to a finite-lived intangible asset in Lanier Apparel. The significant accounting policies applied during the interim periods presented are consistent with the significant accounting policies described in our Annual Report on Form 10-K for Fiscal 2019, except for the adoption of the credit losses and income tax guidance discussed below. Accounting Standards Adopted in Fiscal 2020 In June 2016, the FASB issued guidance, as amended, on the measurement of credit losses on financial instruments. This guidance amends the previous incurred loss model by requiring that companies use a forward-looking current expected loss approach to estimate credit losses on certain financial instruments, including trade and other receivables, as well as other financial assets and instruments. We estimate current expected credit losses based on our historical collection experience, the financial condition of our customers, an evaluation of current economic conditions and anticipated trends. We adopted the guidance on the first day of Fiscal 2020 resulting in a charge to retained earnings of $0.5 million and a reduction to various asset amounts included in our consolidated balance sheet at adoption. In December 2019, the FASB amended its guidance on accounting for income taxes. This guidance amends and simplifies the accounting for income taxes by removing certain exceptions in existing guidance to reduce complexity in certain areas. On the first day of Fiscal 2020, we adopted the provisions related to classification of franchise taxes partially based on income and changes in ownership of foreign equity method investments or foreign subsidiaries on a modified retrospective basis while the other provisions were adopted on a prospective basis. The adoption of the new guidance did not have an impact on our consolidated financial statements at adoption. Other recently issued guidance that was adopted in Fiscal 2020 did not have a material impact on our consolidated financial statements upon adoption. Recently Issued Accounting Standards Applicable to Future Periods Recent accounting pronouncements pending adoption are either not applicable or not expected to have a material impact on our consolidated financial statements.

Basis of Presentation

3 Months Ended

May 02, 2020

1. Basis of Presentation: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial reporting and the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. We believe the accompanying unaudited condensed consolidated financial statements reflect all normal, recurring adjustments that are necessary for a fair presentation of our financial position and results of operations as of the dates and for the periods presented. Results of operations for the interim periods presented are not necessarily indicative of results to be expected for our full fiscal year.

The preparation of our unaudited condensed consolidated financial statements in conformity with GAAP requires us to make certain estimates and assumptions that affect the amounts reported as assets, liabilities, revenues and expenses in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. We assessed certain accounting matters, including the carrying value of goodwill, intangible assets and long-lived assets, provisions for credit losses, inventory markdowns and the estimated effective tax rate, that require consideration of forecasted financial information based on information reasonably available to us as well as the uncertain future impacts of the novel coronavirus (COVID-19) pandemic. These assessments resulted in the recognition of certain amounts in the First Quarter of Fiscal 2020, as discussed below. Future changes in the business environment, our expectations and assumptions as compared to the information at the time of this filing regarding the magnitude and duration of the COVID-19 pandemic, and other factors could result in additional material impacts to our consolidated financial statements in future periods.

COVID-19 Pandemic

In March 2020, the World Health Organization characterized the outbreak of COVID-19 as a pandemic. COVID-19 had a significant effect on overall economic conditions and our operations, resulting in a significant net sales reduction and a net loss in the First Quarter of Fiscal 2020. While our mission remains the enhancement of long-term shareholder value, our focus during this crisis has been, and will continue to be, the health and well-being of our employees, customers and communities as well as protecting our brands and preserving liquidity.

Due to the COVID-19 pandemic, we saw reduced consumer traffic starting in early March 2020 and temporarily closed all our retail and restaurant locations in North America on March 17, 2020. Subsequent to those closures, we also temporarily closed all our retail locations in Australia.

The COVID-19 pandemic is expected to continue to have a material adverse impact on our business, financial condition, results of operations and cash flows for the foreseeable future, including as a result of temporary closure of our retail and restaurant locations, which continued into the Second Quarter of Fiscal 2020; decreased customer traffic in stores and restaurants even as we reopen locations in accordance with federal, state and local guidelines, including due to limited operating hours and capacity and seating limitations; uncertainty as to continued strength of our brands’ e-commerce websites during the pendency of the pandemic; overall changes in consumer confidence and consumer spending habits; any potential disruptions to our supply chain; and a slowdown in the U.S. and global economies.

For many reasons, including those identified above, the full magnitude of the COVID-19 pandemic is difficult to predict at this time, and its ultimate duration and severity will depend on future developments. We believe that cash on hand and our credit facility provide adequate funds to support our operating, capital expenditure and debt service requirements for Fiscal 2020 and beyond. We could also experience other potential adverse impacts as a result of the COVID-19 pandemic including charges resulting from adjustments to the carrying amount of goodwill, intangible assets and long-lived assets, provisions for credit losses and inventory markdowns as well as potential changes to the estimated effective tax rate.

Due to the COVID-19 pandemic in the First Quarter of Fiscal 2020, net sales in each of our operating groups decreased from prior periods resulting in significantly lower operating results, including operating losses in each group other than Lilly Pulitzer. As a result of the COVID-19 impact on our operating results, as well as lower operating results projected for future periods, we concluded that a goodwill impairment test triggering event had occurred for the goodwill associated with our Lilly Pulitzer, Southern Tide and TBBC reporting units. Further, we determined that an intangible asset impairment test triggering event had occurred for our indefinite-lived trademarks for Tommy Bahama, Lilly Pulitzer and Southern Tide. These goodwill and indefinite-lived intangible asset triggering events required the need for a quantitative interim impairment assessment over these reporting units and indefinite-lived intangible assets, in accordance with our accounting policies as described in Note 1 to our consolidated financial statements included in our Annual Report on Form 10-K for Fiscal 2019. These assessments concluded that the fair values of the Southern Tide goodwill and indefinite-lived intangible assets as of May 2, 2020 did not exceed their respective carrying values, resulting in impairment charges as discussed in Note 4. These impairment charges, which totaled $60 million, were recorded in impairment of goodwill and intangible assets in our consolidated statements of operations. Additionally, due to the lower operating results and lower projected operating results, we performed recoverability tests for certain other non-current assets, including property and equipment, finite-lived intangible assets and operating lease assets, and determined that the amounts included in the asset group are recoverable, except for a $0.2 million charge related to a finite-lived intangible asset in Lanier Apparel.

The significant accounting policies applied during the interim periods presented are consistent with the significant accounting policies described in our Annual Report on Form 10-K for Fiscal 2019, except for the adoption of the credit losses and income tax guidance discussed below.

Accounting Standards Adopted in Fiscal 2020

In June 2016, the FASB issued guidance, as amended, on the measurement of credit losses on financial instruments. This guidance amends the previous incurred loss model by requiring that companies use a forward-looking current expected loss approach to estimate credit losses on certain financial instruments, including trade and other receivables, as well as other financial assets and instruments. We estimate current expected credit losses based on our historical collection experience, the financial condition of our customers, an evaluation of current economic conditions and anticipated trends. We adopted the guidance on the first day of Fiscal 2020 resulting in a charge to retained earnings of $0.5 million and a reduction to various asset amounts included in our consolidated balance sheet at adoption.

In December 2019, the FASB amended its guidance on accounting for income taxes. This guidance amends and simplifies the accounting for income taxes by removing certain exceptions in existing guidance to reduce complexity in certain areas. On the first day of Fiscal 2020, we adopted the provisions related to classification of franchise taxes partially based on income and changes in ownership of foreign equity method investments or foreign subsidiaries on a modified retrospective basis while the other provisions were adopted on a prospective basis. The adoption of the new guidance did not have an impact on our consolidated financial statements at adoption.

Other recently issued guidance that was adopted in Fiscal 2020 did not have a material impact on our consolidated financial statements upon adoption.

Recently Issued Accounting Standards Applicable to Future Periods

Recent accounting pronouncements pending adoption are either not applicable or not expected to have a material impact on our consolidated financial statements.