OXFORD INDUSTRIES, INC. The following discussion and analysis of our results of operations, cash flows, liquidity and capital resources compares Fiscal 2021 to Fiscal 2020, as well as Fiscal 2019 for some line items due to the significant negative impact of the COVID-19 pandemic on Fiscal 2020 and the significant recovery in Fiscal 2021, and should be read in conjunction with our consolidated financial statements contained in this report. The results of operations, cash flows, liquidity and capital resources for Fiscal 2020 compared to Fiscal 2019 are not included in this report on Form 10-K. For a discussion of our results of operations, cash flows, liquidity and capital resources for Fiscal 2020 compared to Fiscal 2019 and certain other financial information related to Fiscal 2020 and Fiscal 2019, refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II. Item 7 of our 2020 Annual Report on Form 10-K, filed with theSEC onMarch 29, 2021 , which is available on theSEC's website at www.sec.gov and under the Investor Relations section of our website at www.oxfordinc.com. OVERVIEW Business Overview
We are a leading branded apparel company that designs, sources, markets and distributes products bearing the trademarks of ourTommy Bahama ,Lilly Pulitzer , Southern Tide, TBBC and Duck Head lifestyle brands. Our business strategy is to develop and market compelling lifestyle brands and products that evoke a strong emotional response from our target consumers. We consider lifestyle brands to be those brands that have a clearly defined and targeted point of view inspired by an appealing lifestyle or attitude. Furthermore, we believe lifestyle brands that create an emotional connection can command greater loyalty and higher price points and create licensing opportunities. We believe the attraction of a lifestyle brand depends on creating compelling product, effectively communicating the respective lifestyle brand message and distributing products to consumers where and when they want them. We believe the principal competitive factors in the apparel industry are the reputation, value, and image of brand names; design of differentiated, innovative or otherwise compelling product; consumer preference; price; quality; marketing; product fulfillment capabilities; and customer service. Our ability to compete successfully in the apparel industry is directly related to our proficiency in foreseeing changes and trends in fashion and consumer preference and presenting appealing products for consumers. Our design-led, commercially informed lifestyle brand operations strive to provide exciting, differentiated products each season.Tommy Bahama andLilly Pulitzer , in the aggregate, represented 90% of our consolidated net sales in Fiscal 2021. During Fiscal 2021, 80% of our consolidated net sales were through our direct to consumer channels of distribution, which consists of our brand specific full-price retail stores and e-commerce websites,Tommy Bahama food and beverage operations andTommy Bahama outlets. The remaining 20% of our net sales was generated through our wholesale distribution channels. Our wholesale operations consist of net sales of products bearing our lifestyle brands, which complement our direct to consumer operations and provide access to a larger base of consumers, and the net sales of our Lanier Apparel operating group, which we exited in Fiscal 2021. For additional information about our business and each of our operating groups, see Part I, Item 1. Business included in this report. Important factors relating to certain risks which could impact our business are described in Part I, Item 1A. Risk Factors of this report.
Industry Overview
We operate in a highly competitive apparel market that continues to evolve
rapidly with the expanding application of technology to fashion retail. No
single apparel firm or small group of apparel firms dominates the apparel
industry, and our direct competitors vary by operating group and distribution
channel. The apparel industry is cyclical and very dependent upon the overall
level and focus of discretionary consumer spending, which changes as consumer
preferences and regional, domestic and international economic conditions change.
Further, negative economic conditions often have a longer and more severe impact
on the apparel industry than on other industries. Also, in recent years prior to
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the COVID-19 pandemic consumers have chosen to spend less of their discretionary
spending on certain product categories, including apparel, while spending more
on services and other product categories.
The competitive and evolving environment requires that brands and retailers
approach their operations, including marketing and advertising, very differently
than historical practices and may result in increased operating costs and
capital investments to generate growth or even maintain sales levels. While the
competition and evolution presents significant risks, especially for traditional
retailers who fail or are unable to adapt, we believe it also presents a
tremendous opportunity for brands and retailers to capitalize on the changing
consumer environment.
Many of the changes in the industry noted above were accelerated or exacerbated
by the COVID-19 pandemic. Additionally, in Fiscal 2021 the United States
economy, as well as the apparel retail industry and our own business operations,
began experiencing very strong growth in consumer demand and also began
encountering various challenges including labor shortages, supply chain
disruptions and product and operating cost increases. These items have continued
to impact the apparel retail industry and our business into Fiscal 2022. We, as
well as others in our industry, have increased prices to attempt to offset these
significant inflationary pressures.
We believe our lifestyle brands have true competitive advantages in this new
retailing paradigm, and we continue to invest in and leverage technology to
serve our consumers when and where they want to be served. We continue to
believe that our lifestyle brands, with their strong emotional connections with
consumers, are well suited to succeed and thrive in the long term while managing
the various challenges facing our industry.
COVID-19 Pandemic
The COVID-19 pandemic has had a significant effect on overall economic conditions and our operations in Fiscal 2020 and Fiscal 2021.
In Fiscal 2020, due to the COVID-19 pandemic, we temporarily closed all our retail and restaurant locations, resulting in a reduction in net sales and a significant net loss after many years of profitable operating results. We began reopening our stores and restaurants in the Second Quarter of Fiscal 2020 in a phased approach in accordance with local government guidelines and with additional safety protocols. After reopening many of our locations, we continued to experience reduced traffic, limited operating hours and capacity, seating and other limitations, with such factors impacting individual locations to varying degrees. There can be no assurance that additional closures will not occur in the future as a result of any resurgence of COVID-19 cases and/or additional government mandates or recommendations. In addition, the shift from in-store shopping to online shopping accelerated in Fiscal 2020 resulting in strong growth in our e-commerce businesses.
During Fiscal 2020, we took several actions to mitigate the impact of the COVID-19 pandemic on our business, operations and liquidity, including furloughs, salary reductions, modifying arrangements with suppliers and wholesale customers, renegotiating rental arrangements with landlords, reducing our dividend and taking advantage of government relief programs.
In Fiscal 2021, the economic environment improved significantly with a significant rebound in retail traffic. This improved environment and exceptionally strong consumer demand drove record net earnings. There can be no assurance that these trends will continue for our business or the broader retail apparel market. There remains significant uncertainty as to the duration and severity of the pandemic as well as the associated impact of changes in consumer discretionary spending habits, supply chain and other business disruptions, operating cost increases and inflationary pressures, general economic conditions and restrictions on our ongoing operations that result from the COVID-19 pandemic. Thus, the ultimate impact of the pandemic on our business remains uncertain at this time.
Lanier Apparel Exit
In Fiscal 2020, we decided to exit our Lanier Apparel business, a business which had been focused on moderately priced tailored clothing and related products. This decision aligns with our stated business strategy of developing and marketing compelling lifestyle brands. It also took into consideration the
increased macroeconomic
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challenges faced by the Lanier Apparel business, many of which were magnified by
the COVID-19 pandemic. The exit of the Lanier Apparel business was completed in
Fiscal 2021. In connection with the exit of the Lanier Apparel business, we
recorded pre-tax charges of $13 million in the Lanier Apparel operating group
during Fiscal 2020 and a pre-tax benefit of $2 million in Fiscal 2021. The
Lanier Apparel exit charges are discussed in Note 11 in our consolidated
financial statements included in this report.
In Fiscal 2021, Lanier Apparel's net sales were $25 million and represented 2%
of our consolidated net sales. In Fiscal 2020, Lanier Apparel's net sales were
$39 million and represented 5% of our consolidated net sales. We do not expect
any revenues, or additional exit charges related to the Lanier Apparel business
after Fiscal 2021.
Key Financial Information
The following table sets forth our consolidated operating results (in thousands, except per share amounts) for Fiscal 2021, Fiscal 2020 and Fiscal 2019:
Fiscal 2021 Fiscal 2020 Fiscal 2019
Net sales $ 1,142,079 $ 748,833 $ 1,122,790
Operating income (loss) $ 165,503 $ (123,849) $ 93,675
Net earnings (loss) $ 131,321 $ (95,692) $ 68,493 Net earnings (loss) per diluted share$ 7.78 $ (5.77) $ 4.05 Weighted average shares outstanding - diluted 16,869
16,576 16,914
Earnings per share were$7.78 in Fiscal 2021 compared to a loss per share of$5.77 in Fiscal 2020. The higher earnings per share were primarily a result of (1) improved operating results in each of our operating groups as our operations continued to recover from the unfavorable impact the COVID-19 pandemic had on Fiscal 2020, (2) the absence of impairment charges related to goodwill and intangible assets in Fiscal 2021 after recognizing$60 million of impairment charges related to goodwill and intangible assets in Southern Tide in Fiscal 2020, (3) the absence of information technology project impairment charges in Fiscal 2021 after recognizing$15 million of such charges in Fiscal 2020, and (4) the$15 million favorable change from the impact of exit charges inLanier Apparel. These favorable items were partially offset by (1) a larger operating loss in Corporate and Other, which in Fiscal 2021 included the net impact of a LIFO accounting charge of$16 million and a gain on sale of an unconsolidated entity of$12 million and (2) a lease termination charge of$5 million inTommy Bahama in Fiscal 2021. Earnings per share were$7.78 in Fiscal 2021 compared to earnings per share of$4.05 in Fiscal 2019. The higher earnings per share were primarily a result of (1) increased operating income in each of ourTommy Bahama ,Lilly Pulitzer , Southern Tide and Lanier Apparel operating groups, and (2) a lower effective tax rate. These items were partially offset by (1) a larger operating loss in Corporate and Other, which in Fiscal 2021 included the net impact of LIFO accounting charge of$16 million and a gain on sale of an unconsolidated entity of$12 million and (2) a lease termination charge of$5 million inTommy Bahama in Fiscal 2021. During Fiscal 2021 and Fiscal 2020, we generated$198 million and$84 million of cash flows from operations, respectively, which exceeded our cash used for investing and financing activities resulting in cash and short-term investments of$210 million , and no outstanding debt, as ofJanuary 29, 2022 . Our history of strong positive cash flows from operations, and our strong balance sheet provide adequate liquidity and position us very well to thrive in the post-pandemic retail environment. OPERATING GROUPS We identify our operating groups based on the way our management organizes the components of our business for purposes of allocating resources and assessing performance. Our operating group structure reflects a brand-focused management approach, emphasizing operational coordination and resource allocation across each brand's direct to consumer, wholesale and licensing operations, as applicable. Our business has historically been operated primarily through ourTommy Bahama ,Lilly Pulitzer , Southern Tide and Lanier Apparel reportable operating groups.Tommy Bahama ,Lilly Pulitzer and Southern Tide each design, source, market and distribute apparel and related products 47
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bearing their respective trademarks and license their trademarks for other
product categories. For a more extensive description of our reportable operating
groups and Corporate and Other, see Part I, Item 1. Business and Note 2 to our
consolidated financial statements, both included in this report.
STORE COUNT
The table below provides store count information for our brands as of the dates
specified. The store count includes our permanent locations and excludes any
pop-up or temporary store locations which have an initial lease term of 12
months or less.
January 29, January 30, February 2, February 3,
2022 2021 2020 2019Tommy Bahama retail stores 102 105 111 113 Tommy Bahama retail-restaurant locations 21 20 16 17 Tommy Bahama outlets 35 35 35 37 Total Tommy Bahama locations 158 160 162 167Lilly Pulitzer retail stores 58 59 61 62 Southern Tide retail stores 4
3 1 -
TBBC retail stores 1 - - -
Total Oxford locations 221 222 224 229
RESULTS OF OPERATIONS
The following table sets forth the specified line items in our consolidated
statements of operations both in dollars (in thousands) and as a percentage of
net sales. We have calculated all percentages based on actual data,
but percentage columns may not add due to rounding. Individual line items of our
consolidated statements of operations may not be directly comparable to those of
our competitors, as classification of certain expenses may vary by company.
Fiscal 2021 Fiscal 2020 Fiscal 2019
Net sales $ 1,142,079 100.0 % $ 748,833 100.0 % $ 1,122,790 100.0 %
Cost of goods sold 435,861 38.2 % 333,626 44.6 % 477,823 42.6 %
Gross profit 706,218 61.8 % 415,207 55.4 % 644,967 57.4 %
SG&A 573,636 50.2 % 492,628 65.8 % 566,149 50.4 %
Impairment of goodwill and
intangible assets - - % 60,452 8.1 % - - %
Royalties and other operating
income 32,921 2.9 % 14,024 1.9 % 14,857 1.3 %
Operating income (loss) 165,503 14.5 % (123,849) (16.5) % 93,675 8.3 %
Interest expense, net 944 0.1 % 2,028 0.3 % 1,245 0.1 %
Earnings (loss) before income
taxes 164,559 14.4 % (125,877) (16.8) % 92,430 8.2 %
Income taxes 33,238 2.9 % (30,185) (4.0) % 23,937 2.1 %
Net earnings (loss) $ 131,321 NM $ (95,692) NM
Net earnings (loss) per share$ 7.78 $ (5.77)
$ 4.05 Weighted average shares outstanding - diluted 16,869 16,576 16,914 48 Table of Contents The following table presents the proportion of our consolidated net sales by distribution channel for each period presented. We have calculated all percentages below based on actual data, and percentages may not add to 100
due
to rounding.
Fiscal 2021 Fiscal 2020 Fiscal 2019
Retail 39 % 27 % 39 %
E-commerce 32 % 43 % 23 %
Restaurant 8 % 6 % 8 %
Wholesale 20 % 23 % 30 %
Total 100 % 100 % 100 %
FISCAL 2021 COMPARED TO FISCAL 2020
The discussion and tables below compare certain line items included in our consolidated statements of operations for Fiscal 2021 to Fiscal 2020, except where indicated otherwise. Each dollar and share amount included in the tables is in thousands except for per share amounts. We have calculated all percentages based on actual data, and percentage columns in tables may not add due to rounding. Individual line items of our consolidated statements of operations may not be directly comparable to those of our competitors, as classification of certain expenses may vary by company.Net Sales Fiscal 2021 Fiscal 2020 $ Change % Change Tommy Bahama$ 724,305 $ 419,817 $ 304,488 72.5 %Lilly Pulitzer 298,995 231,078 67,917 29.4 % Southern Tide 54,050 34,664 19,386 55.9 % Lanier Apparel 24,858 38,796 (13,938) (35.9) % Corporate and Other 39,871 24,478 15,393 62.9 % Consolidated net sales$ 1,142,079 $ 748,833 $ 393,246 52.5 % Consolidated net sales were$1.142 billion in Fiscal 2021 compared to net sales of$749 million in Fiscal 2020. The 53% increase included increases inTommy Bahama ,Lilly Pulitzer , Southern Tide and Corporate and Other partially offset by a decrease in Lanier Apparel. In Fiscal 2021, our operations continued to recover from the impact of the COVID-19 pandemic, which resulted in temporary store closures and reduced traffic in Fiscal 2020, as consumers become increasingly more comfortable returning to physical shopping in both our direct to consumer locations and those of our wholesale accounts. The increase in net sales included increases in (1) full-price retail sales of$216 million , or 127%, (2) sales of our non-Lanier Apparel wholesale businesses of$72 million , or 54%, (3) full-price e-commerce sales of$63 million , or 23%, (4) restaurant sales of$48 million , or 99%, and (5) outlet sales of$25 million , or 79%. These increases were partially offset by (1) a decrease in e-commerce flash clearance sales of$17 million , or 35%, as the strong full-price selling in Fiscal 2021 resulted in less inventory available for e-commerce flash clearance sales, and (2) a decrease in Lanier Apparel sales of$14 million . The changes in net sales for each operating group and distribution channel were primarily driven by increased volume. The changes in net sales by operating group are discussed below. Consolidated net sales were$1.142 billion in Fiscal 2021 compared to net sales of$1.123 billion in Fiscal 2019. Net sales increased inTommy Bahama ,Lilly Pulitzer , Southern Tide and Corporate and Other partially offset by the lower net sales in Lanier Apparel. The higher net sales, even with a$70 million decrease in Lanier Apparel, were primarily due to increases in our full-price direct to consumer businesses partially offset by reductions in our wholesale businesses, as wholesale accounts were conservative on initial inventory purchases for Fiscal 2021 and a reduction in Spring 2022 orders that shipped before the end of Fiscal 2021 as compared to Spring 2020 orders that shipped before the end of Fiscal 2019. The higher net sales relative to Fiscal 2019 included increases in (1) full-price e-commerce sales of$123 million , or 58%, with increases in each of our brands, (2) restaurant sales of$12 million , or 15%, resulting from the sales at additionalTommy Bahama Marlin Bars and increased sales in existingTommy Bahama food and beverage locations and (3) full-price retail sales of$3 million , or 1%, with increases inTommy Bahama and Southern Tide partially offset by a reduction inLilly Pulitzer . These increases were partially offset by decreases in (1) Lanier Apparel 49
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sales of$70 million , (2) sales of our non-Lanier Apparel wholesale businesses of$32 million , or 14%, with reductions inTommy Bahama ,Lilly Pulitzer and Southern Tide partially offset by increases in our TBBC and Duck Head brands, (3) e-commerce flash clearance sales of$16 million , or 33%, and (4) outlet sales of$1 million , or 1%.
Tommy Bahama net sales increased$304 million , or 73%, in Fiscal 2021, with an increase in each channel of distribution, after a significant net sales decrease in Fiscal 2020 due to the COVID-19 pandemic. The increase in net sales inTommy Bahama included increases in (1) full-price retail sales of$159 million , or 130%, (2) restaurant sales of$48 million , or 99%, including higher sales at our additional Tommy Bahama Marlin Bar locations as well as existing locations, (3) wholesale sales of$38 million , or 56%, (4) e-commerce sales of$34 million , or 23%, and (5) outlet sales of$25 million , or 81%. The following table presents the proportion of net sales by distribution channel forTommy Bahama for each period presented. Fiscal 2021 Fiscal 2020 Retail 47 % 37 % E-commerce 25 % 36 % Restaurant 13 % 11 % Wholesale 15 % 16 % Total 100 % 100 %Lilly Pulitzer :Lilly Pulitzer net sales increased$68 million , or 29%, in Fiscal 2021 after a net sales decrease in Fiscal 2020 due to the COVID-19 pandemic. The increase in net sales inLilly Pulitzer included increases in (1) retail sales of$54 million , or 116%, (2) full-price e-commerce sales of$20 million , or 20%, and (3) wholesale sales of$12 million , or 31%. These increases were partially offset by a$17 million , or 35%, decrease in e-commerce flash clearance sales asLilly Pulitzer did not have as much end of season inventory for e-commerce flash clearance sales in Fiscal 2021 due to strong full-price sellthroughs during the year. The following table presents the proportion of net sales by distribution channel forLilly Pulitzer for each period presented. Fiscal 2021 Fiscal 2020 Retail 34 % 20 % E-commerce 50 % 64 % Wholesale 16 % 16 % Total 100 % 100 % Southern Tide:
Southern Tide net sales increased$19 million , or 56%, in Fiscal 2021, with an increase in each channel of distribution, after a significant net sales decrease in Fiscal 2020 due to the COVID-19 pandemic. The increase in net sales in Southern Tide included increases in (1) wholesale sales of$14 million , or 62%, (2) e-commerce sales of$3 million , or 28%, and (3) retail sales of$2 million , primarily due to the sales of Southern Tide retail stores that opened during either Fiscal 2020 or Fiscal 2021. The following table presents the proportion of net sales by distribution channel for Southern Tide for each period presented. Fiscal 2021 Fiscal 2020 Retail 7 % 4 % E-commerce 26 % 32 % Wholesale 67 % 64 % Total 100 % 100 % 50 Table of Contents Lanier Apparel:
Lanier Apparel net sales decreased
Corporate and Other:
Corporate and Other net sales increased
Gross Profit
The tables below present gross profit by operating group and in total for Fiscal
2021 and Fiscal 2020, as well as the change between those two periods and gross
margin by operating group and in total. Our gross profit and gross margin, which
is calculated as gross profit divided by net sales, may not be directly
comparable to those of our competitors, as the statement of operations
classification of certain expenses may vary by company.
Fiscal 2021 Fiscal 2020 $ Change % Change
Tommy Bahama $ 459,575 $ 244,197 $ 215,378 88.2 %
Lilly Pulitzer 201,145 137,962 63,183 45.8 %
Southern Tide 29,041 11,810 17,231 145.9 %
Lanier Apparel 12,256 303 11,953 NM %
Corporate and Other 4,201 20,935 (16,734) NM %
Consolidated gross profit $ 706,218 $ 415,207 $ 291,011 70.1 %
Notable items included in amounts
above:
LIFO adjustments in Corporate and
Other $ 15,870 $ (9,220)
Lanier Apparel exit charges in cost
of goods sold $ (2,826) $ 6,684
Fiscal 2021 Fiscal 2020
Tommy Bahama 63.5 % 58.2 %
Lilly Pulitzer 67.3 % 59.7 %
Southern Tide 53.7 % 34.1 %
Lanier Apparel 49.3 % 0.8 %
Corporate and Other NM % NM %
Consolidated gross margin 61.8 % 55.4 %
The higher gross profit was primarily due to the higher net sales as well as
improved gross margin, with gross margin improvement in each operating group.
Gross margin was 61.8% in Fiscal 2021 compared to a gross margin of 55.4% in
Fiscal 2020.
The improved consolidated gross margin in Fiscal 2021 was primarily due to (1)
more full-price selling and fewer inventory markdowns, discounts, allowances and
promotions, (2) a change in sales mix as full-price direct to consumer sales
represented a larger proportion of net sales, while wholesale sales and
e-commerce flash clearance sales represented a lower proportion of net sales, in
Fiscal 2021, (3) improved initial product margins, and (4) the favorable impact
of Lanier Apparel exit charges in cost of goods sold. These items that favorably
impacted gross margin were partially offset by (1) a $25 million unfavorable
impact of LIFO accounting, with Fiscal 2021 including a $16 million LIFO
accounting charge compared to a $9 million LIFO accounting credit in Fiscal
2020, and (2) increased freight costs, including rate increases impacting
inbound products and e-commerce shipping costs, as well as increased air freight
on inbound products.
During Fiscal 2021, LIFO accounting had a
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well as a reduction of the Lanier Apparel inventory markdown reserves recognized in association with the announced Lanier Apparel exit, that were not required upon the ultimate disposal of the remaining Lanier Apparel inventory, and (2) a$7 million increase in the LIFO reserve in Fiscal 2021. In Fiscal 2020, LIFO accounting had a$9 million favorable impact on gross profit primarily due to the increase in inventory markdowns recognized in the operating groups that were deferred as part of LIFO accounting. Gross margin was 61.8% in Fiscal 2021 compared to a gross margin of 57.4% in Fiscal 2019, with improved gross margins in each operating group. The improved consolidated gross margin in Fiscal 2021 compared to Fiscal 2019 was primarily due to (1) more full-price selling and fewer inventory markdowns, discounts, allowances and promotions, (2) a change in sales mix as full-price direct to consumer sales represented a larger proportion of net sales, while wholesale sales in our brands, Lanier Apparel sales and e-commerce flash clearance sales represented a lower proportion of net sales, in Fiscal 2021, (3) improved initial product margins and (4) the Fiscal 2021 reversal in cost of goods sold of previously recognized Lanier Apparel exit charges for estimated inventory markdowns. These items that favorably impacted gross margin were partially offset by (1) a$15 million unfavorable impact of LIFO accounting, with Fiscal 2021 including a$16 million LIFO accounting charge compared to a$1 million LIFO accounting charge in Fiscal 2019, and (2) increased freight costs, including rate increases impacting inbound products and e-commerce shipping costs, as well as increased air freight on inbound products.
The improved gross margin forTommy Bahama was primarily due to (1) more full-price selling and fewer inventory markdowns, discounts and promotions, (2) a change in sales mix as full-price direct to consumer sales represented a larger proportion of net sales, and wholesale sales represented a lower proportion of net sales, and (3) improved initial product margins. These items that favorably impacted gross margin were partially offset by increased freight costs.Lilly Pulitzer :
The improved gross margin forLilly Pulitzer was primarily due to (1) more full-price selling and fewer inventory markdowns, discounts and promotions, (2) a change in sales mix as full-price direct to consumer sales represented a larger proportion of net sales, and e-commerce flash clearance sales represented a lower proportion of net sales, and (3) improved initial product margins. These items that favorably impacted gross margin were partially offset by increased freight costs. Southern Tide: The improved gross margin for Southern Tide was primarily due to (1) more full-price selling and fewer inventory markdowns, with the higher markdowns in the prior year more significantly impacting gross margin due to the much lower net sales in the prior period and (2) a change in sales mix as direct to consumer sales represented a larger proportion of net sales. These items that favorably impacted gross margin were partially offset by increased freight costs.
Lanier Apparel:
We exited the Lanier Apparel business in Fiscal 2021 and do not expect any gross profit related to the Lanier Apparel business in future periods. Fiscal 2021 included the net favorable impact of$3 million in cost of goods sold related to Lanier Apparel exit charges. These items included the net impact of a$4 million reduction in inventory markdowns as we disposed of the remaining Lanier Apparel inventory and$1 million of additional charges related to ourMerida manufacturing facility. Fiscal 2020 included$7 million of Lanier Apparel exit charges including inventory markdowns and charges related to ourMerida manufacturing facility. The recovery in the general retail environment in Fiscal 2021, which created significant unanticipated demand from Lanier Apparel's wholesale customers, resulted in us being able to liquidate the remainingLanier Apparel inventory in Fiscal 2021 at significantly better gross margins than we had previously estimated in Fiscal 2020. Refer to Note 11 in our consolidated financial statements included in this report for additional details about amounts related to the Lanier Apparel exit in Fiscal 2021 and Fiscal 2020.
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Corporate and Other:
The gross profit in Corporate and Other primarily reflects the gross profit of TBBC, Duck Head and theLyons, Georgia distribution center as well as the impact of LIFO accounting adjustments. The primary driver for the lower gross profit was the$25 million net unfavorable impact of LIFO accounting with a$16 million LIFO accounting charge in Fiscal 2021 and a$9 million LIFO accounting credit in Fiscal 2020. The$25 million net unfavorable impact of LIFO accounting was partially offset by the higher gross profit resulting from the increased net sales in Corporate and Other. The LIFO accounting impact in Corporate and Other in each period includes the net impact of (1) a charge in Corporate and Other when inventory that had been marked down in an operating group in a prior period was ultimately sold, (2) a credit in Corporate and Other when inventory had been marked down in an operating group in the current period, but had not been sold as of period end and (3) the change in the LIFO reserve, if any. SG&A Fiscal 2021 Fiscal 2020 $ Change % Change SG&A$ 573,636 $ 492,628 $ 81,008 16.4 % SG&A (as a % of net sales) 50.2 % 65.8 % Notable items included in amounts above: Tommy Bahama lease termination charge$ 4,850 $ -Tommy Bahama information technology project write-off $ -$ 15,473 Amortization ofLilly Pulitzer Signature Store intangible assets $ - $ 270 Amortization of Southern Tide intangible assets $ 289 $ 288
Lanier Apparel exit charges in SG&A
$ 1,188 $ 593 SG&A was$574 million in Fiscal 2021 compared to SG&A of$493 million in Fiscal 2020. The higher SG&A in Fiscal 2021 was primarily due to the impact the COVID-19 pandemic had on our operations in Fiscal 2020. The higher SG&A included (1) increased employment costs of$58 million , including increased incentive compensation totaling$19 million , (2) an$18 million increase in variable expenses related to higher sales, including credit card transaction fees, supplies, commissions and other expenses, (3) an$11 million increase in advertising expense, (4) a$10 million increase in administrative expenses including professional fees, travel and other items, and (5) an$8 million increase in occupancy expense, primarily resulting from the Tommy Bahama office and showroom lease termination charge of$5 million . These increases were partially offset by (1) Fiscal 2020 including a$15 million charge for the write off of costs associated with aTommy Bahama information technology project that was abandoned and will not be implemented, with no such charges in Fiscal 2021, (2) a$7 million decrease in estimated provisions for credit losses and other charges related to bankruptcies and credit exposure with respect to multiple customers and (3) a$2 million reduction in sample expense. SG&A was$574 million in Fiscal 2021 compared to SG&A of$566 million in Fiscal 2019. The higher SG&A was primarily due to (1) a$14 million increase in incentive compensation, (2) an$8 million increase in advertising expense, (3) a$5 million Tommy Bahama office and showroom lease termination charge, (4) a$6 million increase in variable expenses, including credit card transaction fees, supplies, commissions, royalties, selling and shipping charges and other expenses, (5) a$6 million increase in administrative expenses including professional fees, travel and other items and (6) a$2 million increase in depreciation expense. These increases were partially offset by (1) an$18 million decrease in employment costs, excluding incentive compensation, resulting from employee headcount reduction and other initiatives implemented in Fiscal 2020 in response to the COVID-19 pandemic and the Lanier Apparel exit, (2) a$7 million reduction in occupancy expenses due to fewer stores and reduced occupancy amounts, (3) a$4 million reduction in travel expense, (4) a$2 million reduction in sample expense and (5) a$1 million reduction in estimated provisions for credit losses.
Impairment of goodwill and intangible assets
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There were no impairment charges for goodwill or intangible assets in Fiscal 2021. However, in Fiscal 2020, impairment charges for goodwill and intangible assets totaling$60 million were recognized in Southern Tide. In addition, in Fiscal 2020, a small impairment charge was recognized in Lanier Apparel related to a trademark acquired in a prior year that was not deemed recoverable. Refer to Note 4 in the consolidated financial statements included in this report for additional discussion about the impairment charges recognized in Fiscal 2020.
Royalties and other operating income
Fiscal 2021 Fiscal 2020 $ Change % Change
Royalties and other operating
income $ 32,921 $ 14,024 $ 18,897 134.7 %
Notable items included in
amounts above:
Gain on sale of Lanier Apparel
distribution center $ (2,669) $ -
Gain on sale of investment in
unconsolidated entity $ (11,586) $ -
Royalties and other operating income in Fiscal 2021 included (1) a $12 million
gain recognized on the sale of an interest in an unconsolidated entity and (2) a
$3 million gain recognized on the sale of the Toccoa, Georgia distribution
center which was previously utilized by the Lanier Apparel operating group. The
remaining amounts included in royalties and other operating income in Fiscal
2021 and Fiscal 2020 primarily consist of income received from third parties
from the licensing of our lifestyle brands. The increase in royalties to $18
million in Fiscal 2021 from $14 million in Fiscal 2020 was primarily due to
higher royalty income in Tommy Bahama .
Operating income (loss)
Fiscal 2021 Fiscal 2020 $ Change % Change
Tommy Bahama $ 111,733 $ (53,310) $ 165,043 NM %
Lilly Pulitzer 63,601 27,702 35,899 129.6 %
Southern Tide 9,968 (64,801) 74,769 NM %
Lanier Apparel 4,888 (26,654) 31,542 NM %
Corporate and Other (24,687) (6,786) (17,901) NM %
Consolidated Operating Income
(Loss) $ 165,503 $ (123,849) $ 289,352 NM %
Notable items included in amounts
above:
LIFO adjustments in Corporate and
Other $ 15,870 $ (9,220)
Lanier Apparel exit charges in cost
of goods sold $ (2,826) $ 6,684
Tommy Bahama lease termination
charge $ 4,850 $ -
Tommy Bahama information technology
project write-off $ - $ 15,473
Amortization of Lilly Pulitzer
Signature Store intangible assets $ - $ 270
Amortization of Southern Tide
intangible assets $ 289 $ 288
Southern Tide goodwill and
intangible asset impairment charge $ - $ 60,245
Lanier Apparel intangible asset
impairment charge $ - $ 207 Lanier Apparel exit charges in SG&A
$ (2,669) $ - Gain on sale of investment in unconsolidated entity$ (11,586) $ - TBBC change in fair value of contingent consideration$ 1,188 $ 593 Operating income was$166 million in Fiscal 2021 compared to an operating loss of$124 million in Fiscal 2020. The improved operating results were primarily due to (1) the improved operating results in each of our operating groups, (2) no impairment charges related to goodwill and intangible assets in Fiscal 2021 compared to$60 million of impairment charges related to goodwill and intangible assets in Fiscal 2020, (3) a decrease in Lanier Apparel exit 54
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charges in Fiscal 2021 compared to Fiscal 2020, and (4) Fiscal 2020 including the$15 million write off of an information technology project inTommy Bahama , with no such charges in Fiscal 2021. These items were partially offset by (1) a higher operating loss of$18 million in Corporate and Other, including the net unfavorable impact of the LIFO accounting adjustments and a gain on sale of investment in unconsolidated entity, and (2) a$5 million lease termination charge inTommy Bahama . Changes in operating income (loss) by operating group are discussed below. Operating income was$166 million in Fiscal 2021 compared to$94 million in Fiscal 2019. The higher operating income was primarily due to higher gross margin, higher net sales, and the gain on the sale of our investment in an unconsolidated entity, partially offset by higher SG&A. Compared to Fiscal 2019, operating income inTommy Bahama ,Lilly Pulitzer , Southern Tide andLanier Apparel each increased, while the operating loss of Corporate and Other increased. The higher operating income inTommy Bahama ,Lilly Pulitzer and Southern Tide each included higher gross margin and net sales, while the higher operating income in Lanier Apparel primarily resulted from the favorable impact in Fiscal 2021 of the Lanier Apparel exit in Fiscal 2021.Tommy Bahama : Fiscal 2021 Fiscal 2020 $ Change % Change Net sales$ 724,305 $ 419,817 $ 304,488 72.5 % Gross profit$ 459,575 $ 244,197 $ 215,378 88.2 % Gross margin 63.5 % 58.2 % Operating income (loss)$ 111,733 $ (53,310) $ 165,043 NM % Operating income (loss) as % of net sales 15.4 % (12.7) % Notable items included in amounts above:Tommy Bahama lease termination charge$ 4,850 $ -Tommy Bahama information technology project write-off $ -$ 15,473 The improved operating results forTommy Bahama were due to higher sales, improved gross margin and increased royalty income partially offset by increased SG&A. The increased SG&A was primarily due to (1)$44 million of increased employment costs, including$8 million of increased incentive compensation, (2)$12 million of increased variable expenses related to higher sales, including credit card transaction fees, supplies, commissions, royalties and other expenses, (3)$10 million of higher occupancy costs, including the lease termination charge of$5 million , with the remainder of the increase primarily resulting from increased costs for utilities, maintenance and related expenses as direct to consumer locations were open for the full period in Fiscal 2021, and (4)$4 million of increased advertising expense. These increases were partially offset by (1) Fiscal 2020 including a$15 million charge related to the write off of an information technology project inTommy Bahama that was abandoned in Fiscal 2020, with no such charge in Fiscal 2021 and (2) lower provisions for credit losses.Lilly Pulitzer : Fiscal 2021 Fiscal 2020 $ Change % Change Net sales$ 298,995 $ 231,078 $ 67,917 29.4 % Gross profit$ 201,145 $ 137,962 $ 63,183 45.8 % Gross margin 67.3 % 59.7 % Operating income$ 63,601 $ 27,702 $ 35,899 129.6 % Operating income as % of net sales 21.3 % 12.0 % Notable items included in amounts above: Amortization ofLilly Pulitzer Signature Store intangible assets $ - $ 270 The increased operating income forLilly Pulitzer was primarily due to higher sales and improved gross margin partially offset by increased SG&A. The increased SG&A was primarily due to (1)$8 million of increased employment costs, including$3 million of increased incentive compensation, (2)$7 million of higher advertising expense, (3)$5 million of professional and other fees primarily related to various ongoing direct to consumer and brand initiatives, (4) 55 Table of Contents
$4 million of variable expenses related to the higher net sales, including credit card transaction fees, supplies and other expenses, (5)$2 million of increased depreciation expense and (6)$1 million of higher occupancy expense costs. These increases were partially offset by lower provisions for credit
losses.
Southern Tide:
Fiscal 2021 Fiscal 2020 $ Change % Change
Net sales $ 54,050 $ 34,664 $ 19,386 55.9 %
Gross profit $ 29,041 $ 11,810 $ 17,231 145.9 %
Gross margin 53.7 % 34.1 %
Operating income (loss) $ 9,968 $ (64,801) $ 74,769 NM %
Operating income (loss) as % of
net sales 18.4 % (186.9) %
Notable items included in
amounts above:
Amortization of Southern Tide
intangible assets $ 289 $ 288
Southern Tide goodwill and
intangible asset impairment
charge $ - $ 60,245
The improved operating results for Southern Tide were primarily due to no
impairment charges related to goodwill and intangible assets in Fiscal 2021
compared to $60 million of impairment charges in Fiscal 2020. Additionally, the
operating results of Southern Tide improved due to higher net sales and higher
gross margin, partially offset by increased SG&A. The increased SG&A included
higher SG&A associated with the Southern Tide retail store operations, incentive
compensation amounts, advertising expense and variable expenses partially offset
by decreases in provisions for credit losses and sample expense.
Lanier Apparel:
Fiscal 2021 Fiscal 2020 $ Change % Change
Net sales $ 24,858 $ 38,796 $ (13,938) (35.9) %
Gross profit $ 12,256 $ 303 $ 11,953 NM %
Gross margin 49.3 % 0.8 %
Operating income (loss) $ 4,888 $ (26,654) $ 31,542 NM %
Operating income (loss) as % of
net sales 19.7 % (68.7) %
Notable items included in
amounts above:
Lanier Apparel exit charges in
cost of goods sold $ (2,826) $ 6,684
Lanier Apparel intangible asset
impairment charge $ - $ 207
Lanier Apparel exit charges in
SG&A $ 3,788 $ 6,342
Gain on sale of Lanier Apparel
distribution center $ (2,669) $ -
We sold our remaining inventory and exited the Lanier Apparel business in Fiscal
2021. The improved operating results for Fiscal 2021 were primarily due to (1)
Fiscal 2020 including $13 million of initial charges associated with the
decision to exit the Lanier Apparel business, primarily consisting of inventory
markdowns, charges related to the Lanier Apparel manufacturing facility in
Merida, Mexico , operating lease asset impairment charges, employee charges, and
fixed asset impairment charges, compared to a $2 million net favorable impact of
Lanier Apparel exit charges in Fiscal 2021, (2) lower SG&A of $10 million in
Lanier Apparel, excluding the Lanier Apparel exit charges, during the wind down
phase in 2021 and (3) Fiscal 2020 including $3 million of estimated provisions
for credit losses and other charges related to bankruptcies and credit exposure
with respect to multiple customers compared to a $1 million reduction of
provisions for credit losses in Fiscal 2021. These favorable items were
partially offset by the lower net sales in Fiscal 2021. The $2 million net
favorable impact of Lanier Apparel exit charges in Fiscal 2021 primarily
consists of (1) a $4 million reduction in inventory markdown charges and (2) a
$3 million gain on sale of the Lanier Apparel distribution center, which were
partially offset by (1) $4 million of Lanier Apparel exit charges included in
SG&A and (2) $1 million of exit charges related to the Lanier Apparel
manufacturing facility in Merida, Mexico
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included in cost of goods sold. The Lanier Apparel exit charges are discussed in
Note 11 in the unaudited condensed consolidated financial statements included in
this report.
Corporate and Other:
Fiscal 2021 Fiscal 2020 $ Change % Change
Net sales $ 39,871 $ 24,478 $ 15,393 62.9 %
Gross profit $ 4,201 $ 20,935 $ (16,734) NM %
Operating loss $ (24,687) $ (6,786) $ (17,901) NM %
Notable items included in
amounts above:
LIFO adjustments in Corporate
and Other $ 15,870 $ (9,220)
Gain on sale of investment in
unconsolidated entity $ (11,586) $ -
TBBC change in fair value of
contingent consideration $ 1,188 $ 593
The lower operating results in Corporate and Other were primarily due to (1) the
$25 million unfavorable impact of LIFO accounting resulting from a $16 million
charge in Fiscal 2021 and a $9 million credit in Fiscal 2020 and (2) an increase
in employment costs of $10 million , including higher incentive compensation of
$7 million and additional employees at corporate and at our smaller brands.
These unfavorable items were partially offset by (1) a $12 million gain on sale
of our investment in an unconsolidated entity and (2) the gross profit impact of
the higher net sales in Fiscal 2021.
Interest expense, net
Fiscal 2021 Fiscal 2020 $ Change % Change
Interest expense, net $ 944 $ 2,028 $ (1,084) (53.5) %
The decreased interest expense in Fiscal 2021 was primarily due to the lack of debt outstanding in Fiscal 2021, while in Fiscal 2020, we had debt outstanding in order to maintain a certain level of cash on our balance sheet during the earlier stages of the COVID-19 pandemic. The interest expense in Fiscal 2021 primarily consisted of unused line fees and amortization of deferred financing fees associated with theU.S. Revolving Credit Agreement.
Income taxes
Fiscal 2021 Fiscal 2020 $ Change % Change
Income tax provision (benefit) $ 33,238 $ (30,185) $ 63,423 NM %
Effective tax rate 20.2 % 24.0 %
The income tax expense in Fiscal 2021 included the benefit of (1) the
utilization of $3 million of benefits associated with certain capital losses to
substantially offset a gain recognized on the sale of an unconsolidated entity
in Fiscal 2021, (2) a $2 million net reduction in uncertain tax positions
resulting from the settlement of those uncertain tax position amounts during the
year, (3) a $1 million benefit of certain net operating losses to offset current
year income and (4) a $1 million favorable impact of the finalization of the
Fiscal 2020 income tax returns. These favorable items were partially offset by
certain unfavorable permanent items which are not deductible for income tax
purposes. The net impact of these items resulted in the 20% effective tax rate,
which is lower than a more typical 24% to 25% annual effective tax rate.
The income tax benefit in Fiscal 2020 included (1) the benefit of the operating
losses that were realized at a federal rate of 35% pursuant to the CARES Act
provision allowing the carryback of the Fiscal 2020 loss amounts to pre-U.S. Tax
Reform years and (2) as well as a favorable provision to return adjustment for
our Fiscal 2019 returns. These favorable items were offset by (1) the
non-deductibility of certain impairment charges which resulted in an estimated
effective tax rate of 17% on the impairment charges, (2) the estimated book to
tax timing differences and certain discrete non-deductible items, which reduced
the amount of expenses expected to be deductible for income tax return purposes
in
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Fiscal 2020 (3) an increase to the reserve for uncertain tax positions and (4) the impact of restricted stock awards vesting at a price lower than the grant date value.
Refer to Note 10 in our consolidated financial statements included in this report for additional information about our income tax expense for Fiscal 2021 and income tax benefit for Fiscal 2020.
Net earnings
Fiscal 2021 Fiscal 2020
Net sales $ 1,142,079 $ 748,833
Operating income (loss) $ 165,503 $ (123,849)
Net earnings (loss) $ 131,321 $ (95,692)
Net earnings (loss) per diluted share $ 7.78 $ (5.77)
Weighted average shares outstanding - diluted 16,869 16,576
Earnings per share were$7.78 in Fiscal 2021 compared to a loss per share of$5.77 in Fiscal 2020. The higher earnings per share were primarily a result of (1) improved operating results in each of our operating groups as our operations continued to recover from the unfavorable impact the COVID-19 pandemic had on Fiscal 2020, (2) the absence of impairment charges related to goodwill and intangible assets in Fiscal 2021 after recognizing$60 million of impairment charges related to goodwill and intangible assets in Southern Tide in Fiscal 2020, (3) the absence of information technology project impairment charges in Fiscal 2021 after recognizing$15 million of such charges in Fiscal 2020, and (4) the$15 million favorable change from the impact of exit charges inLanier Apparel. These favorable items were partially offset by (1) a larger operating loss in Corporate and Other, which in Fiscal 2021 included the net impact of a LIFO accounting charge of$16 million and a gain on sale of an unconsolidated entity of$12 million and (2) a lease termination charge of$5 million inTommy Bahama in Fiscal 2021. Earnings per share were$7.78 in Fiscal 2021 compared to earnings per share of$4.05 in Fiscal 2019. The higher earnings per share were primarily a result of (1) increased operating income in each of ourTommy Bahama ,Lilly Pulitzer , Southern Tide and Lanier Apparel operating groups, and (2) a lower effective tax rate. These items were partially offset by (1) a larger operating loss in Corporate and Other, which in Fiscal 2021 included the net impact of LIFO accounting charge of$16 million and a gain on sale of an unconsolidated entity of$12 million and (2) a lease termination charge of$5 million inTommy Bahama in Fiscal 2021. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES Our primary source of revenue and cash flow is through our design, sourcing, marketing and distribution of branded apparel products bearing the trademarks of ourTommy Bahama ,Lilly Pulitzer , Southern Tide, TBBC and Duck Head lifestyle brands. We distribute our products to our customers via direct to consumer and wholesale channels of distribution. Our primary uses of cash flow include the purchase of branded apparel products from third party contract manufacturers outside ofthe United States , as well as our operating expenses, including employee compensation and benefits, operating lease commitments and other occupancy-related costs, marketing and advertising costs, distribution costs, information technology costs, other general and administrative expenses and the periodic payment of interest, if any. Additionally, we use our cash to fund capital expenditures and other investing activities, dividends, share repurchases and repayment of indebtedness, if any. In the ordinary course of business, we maintain certain levels of inventory, extend credit to our wholesale customers and pay our operating expenses. Thus, we require a certain amount of ongoing working capital to operate our business. Our need for working capital is typically seasonal with the greatest requirements generally in the fall and spring of each year. Our capital needs depend on many factors including the results of our operations and cash flows, future growth rates, the need to finance inventory levels and the success of our various products. We have a long history of generating sufficient cash flows from operations to satisfy our cash requirements for our ongoing capital expenditure needs as well as payment of dividends and repayment of our debt. Thus, we believe our 58
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anticipated future cash flows from operating activities, as well as our$210 million of cash and short-term investments as ofJanuary 29, 2022 , will provide sufficient cash over both the short and long term to satisfy our ongoing cash requirements as well as ample opportunity to continue to invest in our lifestyle brands, direct to consumer initiatives, information technology projects and other strategic initiatives. Also, if cash inflows are less than cash outflows, we have access to amounts under ourU.S. Revolving Credit Agreement, subject to its terms, which is described below. Key Liquidity Measures January 29, January 30, ($ in thousands) 2021 2021 $ Change % Change Total current assets$ 400,335 $ 258,316 $ 142,019 55.0 % Total current liabilities$ 226,166 $ 196,252 29,914 15.2 % Working capital$ 174,169 $ 62,064 $ 112,105 180.6 % Working capital ratio 1.77 1.32
Our working capital ratio is calculated by dividing total current assets by total current liabilities. Current assets as ofJanuary 29, 2022 , increased fromJanuary 30, 2021 , primarily due to our short-term investments and cash balances, which increased$144 million in the aggregate as a result of our strong cash flow from operations exceeding our cash requirements for capital expenditure and financing activities. Current liabilities as ofJanuary 29, 2022 , increased fromJanuary 30, 2021 primarily due to higher accrued compensation, accounts payable and accrued expenses and other liabilities. Changes in current assets and current liabilities are discussed below.
Balance Sheet
The following tables set forth certain information included in our consolidated balance sheets (in thousands). Below each table are explanations for any significant changes in the balances as ofJanuary 29, 2022 as compared toJanuary 30, 2021 . Current Assets: January 29, January 30, 2021 2021 $ Change % Change Cash and cash equivalents$ 44,859 $ 66,013 $ (21,154) (32.0) % Short-term investments 164,890 - 164,890 100.0 % Receivables, net 34,550 30,418 4,132 13.6 % Inventories, net 117,709 123,543 (5,834) (4.7) % Income tax receivable 19,728 17,975 1,753 9.8 %
Prepaid expenses and other current assets 18,599 20,367
(1,768) (8.7) %
Total current assets $ 400,335 $ 258,316 $ 142,019 55.0 %
Cash and cash equivalents were$45 million as ofJanuary 29, 2022 , compared to$66 million as ofJanuary 30, 2021 . Short-term investments were$165 million as ofJanuary 29, 2022 with no short-term investments as ofJanuary 30, 2021 . The increase in the short-term investments and cash, in the aggregate, was primarily due to our strong cash flows from operations exceeding our cash requirements for capital expenditures and financing activities. The increase in receivables, net as ofJanuary 29, 2022 was primarily due to (1) reductions in wholesale accounts receivables allowances, with the decrease generally related to the exit of Lanier Apparel, (2) increased pre-payments for certain inventory, (3) increased credit card receivables and (4) reductions in provisions for credit losses. These items were partially offset by (1) lower wholesale trade receivables and (2) reductions in other receivables, including amounts due from landlords for certain tenant allowances. Inventories, net, which is net of a$69 million and$62 million LIFO reserve in Fiscal 2021 and Fiscal 2020, respectively, decreased as ofJanuary 29, 2022 due to (1) lower inventories at Corporate and Other, primarily due to the impact of LIFO accounting, which deferred the recognition of markdowns previously recognized in the operating groups 59
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until the inventory was disposed in Fiscal 2021 and also included a$7 million increase in the LIFO reserve in Fiscal 2021, due to the current year inflation impact on LIFO accounting, (2) the disposal of the remaining Lanier Apparel inventory during Fiscal 2021 as we exited the business, and (3) lower inventory inLilly Pulitzer . These decreases were partially offset by increased inventory inTommy Bahama , TBBC, Southern Tide and Duck Head to support planned sales increases in Fiscal 2022. Inventory in transit as ofJanuary 29, 2022 increased significantly fromJanuary 30, 2021 due to the delayed receipt of certain product at our distribution centers, larger inventory purchases for Spring 2022 as compared Spring 2021 and the earlierChinese New Year in 2022, which accelerated certain shipments. Sales in our operating groups generally outpaced inventory purchases during Fiscal 2021 due to exceptionally strong consumer demand. Income tax receivable primarily relates to the income tax receivable associated with tax returns for Fiscal 2020, which included the carry back of operating losses to offset previous years taxable income, with the increase primarily due to the finalization of the Fiscal 2020 income tax returns. Non-current Assets: January 29, January 30, 2021 2021 $ Change % Change Property and equipment, net$ 152,447 $ 159,732 $ (7,285) (4.6) % Intangible assets, net 155,307 156,187 (880) (0.6) % Goodwill 23,869 23,910 (41) (0.2) % Operating lease assets 195,100 233,775 (38,675) (16.5) % Other assets, net 30,584 33,714 (3,130) (9.3) % Total non-current assets$ 557,307 $ 607,318 $ (50,011) (8.2) %
Property and equipment, net as ofJanuary 29, 2022 decreased primarily due to depreciation expense and impairment charges during Fiscal 2021, which exceeded capital expenditures for the year. Operating lease assets as ofJanuary 29, 2022 decreased primarily due to the recognition of amortization related to existing operating leases, the termination or reduced term of certain operating leases and the impairment of certain operating lease assets which exceeded the increased operating lease assets associated with any new or extended operating lease agreements. The decrease in other assets, net as ofJanuary 29, 2022 was primarily due to (1) a$3 million decrease in investment in unconsolidated entities due to the sale of our ownership interest in an unconsolidated entity, (2) a reduction in certain deposit payments, and (3) a reduction in non-current deferred tax assets. These decreases in other non-current assets were partially offset by an increase in assets set aside for potential deferred compensation obligations. Liabilities: January 29, January 30, 2021 2021 $ Change % Change Total current liabilities$ 226,166 $ 196,252 $ 29,914 15.2 % Long-term debt - - - - % Non-current portion of operating lease liabilities 199,488 239,963 (40,475) (16.9) % Other non-current liabilities 21,413 23,691
(2,278) (9.6) % Deferred income taxes 2,911 - 2,911 100.0 % Total liabilities$ 449,978 $ 459,906 $ (9,928) (2.2) % Current liabilities increased as ofJanuary 29, 2022 primarily due to increases in (1) accrued compensation, which was primarily due to a$19 million increase in accrued incentive compensation after the annual bonus program was suspended in Fiscal 2020, partially offset by a$5 million reduction in FICA payable as the amounts allowed to be deferred pursuant to the CARES Act in the prior year were paid during Fiscal 2021 and a reduction in accrued compensation amounts associated with the exit from Lanier Apparel, (2) accounts payable, which was primarily due to increased payables associated with an increase in inventory in transit partially offset by reductions in other payables and outstanding ACH payments and checks, and (3) accrued expenses and other liabilities, which
was
primarily due to
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increases in estimated direct to consumer inventory returns, gift card liabilities, accrued percentage rent amounts, and the contingent consideration liability related to TBBC.
Non-current portion of operating lease liabilities as ofJanuary 29, 2022 , decreased primarily due to the payment of operating lease liabilities and reductions in liabilities related to the termination or reduced term of certain operating leases, which exceeded operating lease liabilities associated with any new or extended operating lease agreements. Other non-current liabilities as ofJanuary 29, 2022 decreased primarily due to decreases in (1) uncertain tax positions and (2) non-current contingent consideration liabilities as all amounts are classified as current liabilities as ofJanuary 29, 2022 , partially offset by an increase in deferred compensation liabilities. Deferred income taxes increased as ofJanuary 29, 2022 primarily due to timing differences associated with depreciation and amortization partially offset by timing differences associated with accrued compensation, other current liability amounts and inventories.
Statement of Cash Flows
The following table sets forth the net cash flows resulting in the change in our cash and cash equivalents (in thousands):
Fiscal 2021 Fiscal 2020 Fiscal 2019
Cash provided by operating activities $ 198,006 $ 83,850 $121,926
Cash used in investing activities (181,572) (34,651)
(37,421)
Cash used in financing activities (38,175) (35,848)
(41,298)
Net change in cash and cash equivalents
43,207
Cash and cash equivalents and short-term-investments, in the aggregate, were$210 million and$66 million atJanuary 29, 2022 andJanuary 30, 2021 , respectively. The increase in the aggregate cash and short-term investments balance was primarily due to our strong cash flows from operations exceeding our capital expenditure and financing activities cash requirements. Changes in cash flows in Fiscal 2021 and the Fiscal 2020 related to operating activities, investing activities and financing activities are discussed below.
Operating Activities:
In Fiscal 2021 and Fiscal 2020, operating activities provided$198 million and$84 million of cash, respectively. The cash flow from operating activities for each year primarily consisted of net earnings (loss) for the relevant period adjusted, as applicable, for non-cash activities including depreciation, amortization, impairment, equity-based compensation, gain on sale of our interest in an unconsolidated entity, and gain on sale of property and equipment, as well as the net impact of changes in deferred taxes and operating assets and liabilities. In both Fiscal 2021 and Fiscal 2020, changes in operating assets and liabilities had a significant net favorable impact on cash flow from operations. In Fiscal 2021, changes in operating assets and liabilities were primarily due to an increase in current liabilities and a decrease in inventories, which increased cash flow from operations, partially offset by an increase in receivables, which decreased cash flow from operations. In Fiscal 2020, changes in operating assets and liabilities were primarily due to a decrease in inventories and receivables and an increase in current liabilities, which increased cash flow from operations, partially offset by an increase in income tax receivables and a decrease in deferred tax liabilities, which decreased
cash flow from operations. Investing Activities:
In Fiscal 2021 and Fiscal 2020, investing activities used$182 million and$35 million of cash, respectively. During Fiscal 2021, we converted$165 million of cash on hand into short-term investments. On an ongoing basis, our cash flow used in investing activities primarily consists of our capital expenditures, which totaled$32 million and$29 million in Fiscal 2021 and Fiscal 2020, respectively. Additionally, in Fiscal 2021, we received$15 million of proceeds from the sale of our investment in an unconsolidated entity as well as$3 million of proceeds from the sale of Lanier Apparel'sToccoa, Georgia distribution center, which is included in other investing activities. In Fiscal 2021 and Fiscal 61 Table of Contents
2020, we used certain amounts of cash, which are included in other investing activities, for investments in unconsolidated entities, including minority ownership interests or loans.
On an ongoing basis, our cash flow used in investing activities is expected to primarily consist of our capital expenditure investments associated with investments in information technology initiatives, including e-commerce capabilities; direct to consumer locations, including opening, relocating and remodeling; and facilities enhancements for distribution centers and offices. Additionally, cash flow from investing activities will include any amounts contributed to or received from or short-term investment accounts, if any.
Financing Activities:
In Fiscal 2021 and Fiscal 2020, financing activities used$38 million and$36 million of cash, respectively, which primarily consists of returning amounts to shareholders through dividends and share repurchases. During Fiscal 2021, we used cash flow from operations to pay$28 million of dividends and repurchase$11 million of shares, including repurchased shares of our stock pursuant to an open market stock repurchase program and of equity awards in respect of employee tax withholding liabilities. During Fiscal 2020, we used cash flow from operations to pay$17 million of dividends and repurchase$20 million of shares, including repurchased shares of our stock pursuant to an open market stock repurchase program and of equity awards in respect of employee tax withholding liabilities. Both Fiscal 2021 and Fiscal 2020 included certain amounts related to (1) the issuance of equity pursuant to our employee stock purchase plan and (2) the payment of contingent consideration or other deferred acquisition payment amounts, which are included in other financing activities.
Liquidity and Capital Resources
We have a long history of generating sufficient cash flows from operations to satisfy our cash requirements for our ongoing capital expenditure needs as well as payment of dividends and repayment of our debt. Thus, we believe our anticipated future cash flows from operating activities, as well as our$210 million of cash and short-term investments as ofJanuary 29, 2022 , will provide sufficient cash flows over both the short and long term to satisfy our ongoing cash requirements as well as ample opportunity to continue to invest in our lifestyle brands, direct to consumer initiatives, information technology projects and other strategic initiatives. Our capital needs depend on many factors including the results of our operations and cash flows, future growth rates, the need to finance inventory levels and the success of our various products. To the extent cash flow needs, for acquisitions or otherwise, in the future exceed cash flow provided by our operations, as well as our cash and short-term investment amounts, we will have access, subject to its terms, to our$325 million U.S. Revolving Credit Agreement to provide funding for operating activities, capital expenditures and acquisitions, if any, and any other investing or financing activities. OurU.S. Revolving Credit Agreement is also used to establish collateral for certain insurance programs and leases and to finance trade letters of credit for certain product purchases, which reduce the amounts available under our line of credit when issued and, as ofJanuary 29, 2022 , totaled$3 million . During Fiscal 2021, we did not have any borrowings outstanding under ourU.S. Revolving Credit Agreement. As ofJanuary 29, 2022 , we had no borrowings outstanding and$322 million of unused availability under ourU.S. Revolving Credit Agreement. Considering both the$322 million of unused availability under ourU.S. Revolving Credit Agreement and our cash, cash equivalents and short-term investments in excess of the amounts available for inclusion in the borrowing base assets of$60 million , our total liquidity position totaled$382 million as ofJanuary 29, 2022 . Our cash, short-term investments and debt levels in future periods may not be comparable to historical amounts as we continue to assess, and possibly make changes to, our capital structure, including borrowings from additional credit facilities or sales of debt or equity securities in the future. Changes in our capital structure, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. 62 Table of Contents
TheU.S. Revolving Credit Agreement generally (1) is limited to a borrowing base consisting of specified percentages of eligible categories of assets, (2) accrues variable-rate interest, unused line fees and letter of credit fees based upon average utilization or unused availability, as applicable, (3) requires periodic interest payments with principal due at maturity (July 2024 ) and (4) is secured by a first priority security interest in substantially all of the assets ofOxford Industries, Inc. and its domestic subsidiaries, including accounts receivable, books and records, chattel paper, deposit accounts, equipment, certain general intangibles, inventory, investment property (including the equity interests of certain subsidiaries), negotiable collateral, life insurance policies, supporting obligations, commercial tort claims, cash and cash equivalents, eligible trademarks, proceeds and other personal property. TheU.S. Revolving Credit Agreement is subject to a number of affirmative covenants regarding the delivery of financial information, compliance with law, maintenance of property, insurance requirements and conduct of business. Also, theU.S. Revolving Credit Agreement is subject to certain negative covenants or other restrictions including, among other things, limitations on our ability to (1) incur debt, (2) guaranty certain obligations, (3) incur liens, (4) pay dividends to shareholders, (5) repurchase shares of our common stock, (6) make investments, (7) sell assets or stock of subsidiaries, (8) acquire assets or businesses, (9) merge or consolidate with other companies or (10) prepay, retire, repurchase or redeem debt. Additionally, theU.S. Revolving Credit Agreement contains a financial covenant that applies only if excess availability under the agreement for three consecutive business days is less than the greater of (1)$23.5 million or (2) 10% of availability. In such case, our fixed charge coverage ratio as defined in theU.S. Revolving Credit Agreement must not be less than 1.0 to 1.0 for the immediately preceding 12 fiscal months for which financial statements have been delivered. This financial covenant continues to apply until we have maintained excess availability under theU.S. Revolving Credit Agreement of more than the greater of (1)$23.5 million or (2) 10% of availability for 30 consecutive days. We believe that the affirmative covenants, negative covenants, financial covenants and other restrictions under theU.S. Revolving Credit Agreement are customary for those included in similar facilities entered into at the time we amended theU.S. Revolving Credit Agreement. During Fiscal 2021 and as ofJanuary 29, 2022 , no financial covenant testing was required pursuant to ourU.S. Revolving Credit Agreement as the minimum availability threshold was met at all times. As ofJanuary 29, 2022 , we were compliant with all applicable covenants related to theU.S. Revolving Credit Agreement. We anticipate that at the maturity of theU.S. Revolving Credit Agreement inJuly 2024 , or as otherwise deemed appropriate, we will be able to refinance the facility or obtain other financing on terms available in the market at that time. The terms of any future financing arrangements may not be as favorable as the terms of the current agreement or current market terms.
The principal amount that will be outstanding and interest rate during any
fiscal year will be dependent upon future events which are not known at this
time. During Fiscal 2021, we paid
Operating Lease Commitments:
In the ordinary course of business, we enter into long-term real estate lease
agreements for our direct to consumer locations, which include retail and food
and beverage locations, and office and warehouse/distribution space, as well as
leases for certain equipment. Our real estate leases have varying terms and
expirations and may have provisions to extend, renew or terminate the lease
agreement at our discretion, among other provisions. Our real estate lease terms
are typically for a period of ten years or less and typically require monthly
rent payments with specified rent escalations during the lease term. Our real
estate leases usually provide for payments of our pro rata share of real estate
taxes, insurance and other operating expenses applicable to the property, and
certain of our leases require payment of sales taxes on rental payments. Base
rent amounts specified in the leases are included in determining the operating
lease liabilities included in our consolidated balance sheet, while amounts for
real estate taxes, sales tax, insurance, other
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operating expenses and contingent rent applicable to the properties pursuant to the respective leases are not included in determining the operating lease liabilities included in our consolidated balance sheets.
These leases require us to make a substantial amount of cash on an annual basis. Base rent amounts required to be paid in the future over the remaining lease terms under our existing leases as ofJanuary 29, 2022 , totaled$289 million , including$69 million ,$62 million ,$49 million ,$36 million and$28 million of required payments in each of the next five years. Additionally, amounts for real estate taxes, sales tax, insurance, other operating expenses and contingent rent applicable to the properties pursuant to the respective operating leases are required to be paid in the future, but these amounts payable in future periods are, in most cases, not quantified in the lease agreement or are dependent on factors which may not be known at this time. Such amounts incurred in Fiscal 2021 totaled$35 million .
Refer to Note 1 and Note 6 in our consolidated financial statements for additional disclosures about our operating lease agreements and related commitments.
Capital Expenditures:
Our anticipated capital expenditures for Fiscal 2022 are expected to be approximately$50 million . Our ongoing capital expenditures primarily consist of costs associated with investments in information technology initiatives, including e-commerce capabilities; direct to consumer locations, including opening, relocating and remodeling; and facilities enhancements for distribution centers and offices. Our capital expenditure amounts in future years will fluctuate from the amounts incurred in Fiscal 2021 and prior years depending on the investments we believe appropriate for that year to support future expansion of our businesses. Dividends:
OnMarch 21, 2022 , our Board of Directors approved a cash dividend of$0.55 per share payable onApril 29, 2022 to shareholders of record as of the close of business onApril 14, 2022 . This dividend is a 31% increase over the dividend paid in the Fourth Quarter of Fiscal 2021. Although we have paid dividends in each quarter since we became a public company inJuly 1960 , including$28 million in total, or$1.63 per common share, in Fiscal 2021, we may discontinue or modify dividend payments at any time if we determine that other uses of our capital, including payment of outstanding debt, funding of acquisitions, funding of capital expenditures or repurchases of outstanding shares, may be in our best interest; if our expectations of future cash flows and future cash needs outweigh the ability to pay a dividend; or if the terms of our credit facility, other debt instruments or applicable law limit our ability to pay dividends. We may borrow to fund dividends or repurchase shares in the short term subject to the terms and conditions of our credit facility, other debt instruments and applicable law. All cash flow from operations will not be paid out as dividends in all periods. For details about limitations on our ability to pay dividends, see the discussion of ourU.S. Revolving Credit Agreement above and in Note 5 of our consolidated financial statements contained in this report.
Share Repurchases:
We have executed share repurchase programs previously, including share repurchases in Fiscal 2021 and Fiscal 2020, but we do not have an annual program for share repurchases as part of our overall plan for shareholder return. As disclosed in our Quarterly Report on Form 10-Q for the Third Quarter of Fiscal 2021, onDecember 7, 2021 , our Board of Directors authorized us to spend up to$150 million to repurchase shares of our stock. This authorization superseded and replaced all previous authorizations to repurchase shares of our stock and has no automatic expiration. Pursuant to the Board of Directors' authorization, we entered into a$100 million open market stock repurchase program (Rule 10b5-1 plan) to acquire shares of our stock, under which 91,000 shares of our stock were repurchased for$8 million in the Fourth Quarter of Fiscal 2021. As ofJanuary 29, 2022 ,$142 million of the authorization remained available for future repurchases of our common stock.
Additionally, subsequent to
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Other Liquidity Items:
Amounts totaling$17 million of deferred compensation obligations are included in other non-current liabilities in our consolidated balance sheet as ofJanuary 29, 2022 . The timing of payment of these amounts are uncertain as the amounts are payable generally at the discretion of the individual employees or upon the death of the individual. Also, non-current deferred tax liability amounts are included in our consolidated balance sheet as ofJanuary 29, 2022 and discussed in Note 10 to our consolidated financial statements included in this report. As the results of the deferred tax liability calculations do not have a direct connection with the amount of cash taxes to be paid in any specific future periods, the timing of deferred income tax amounts by period are uncertain. A liability of$2 million for TBBC contingent consideration is a current liability included in accrued expenses and other liabilities in our consolidated balance sheet for the final payment related to the TBBC contingent consideration arrangement. We have not entered into agreements which meet theSEC's definition of an off balance sheet financing arrangement, other than operating leases, and have made no financial commitments or guarantees with respect to any unconsolidated subsidiaries or special purpose entities. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP in a consistent manner. The preparation of these financial statements requires the selection and application of accounting policies. Further, the application of GAAP requires us to make estimates and judgments about future events that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. We base our estimates on historical experience, current trends and various other assumptions (including with respect to the uncertain impact of the COVID-19 pandemic), that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Also, we believe it is possible that other professionals, applying reasonable judgment to the same set of facts and circumstances, could develop and support a range of alternative estimated amounts. The use of different assumptions could result in materially different amounts. We believe that we have appropriately applied our critical accounting policies. However, in the event that inappropriate assumptions or methods were used relating to the critical accounting policies, our consolidated statements of operations could be materially misstated. A detailed summary of significant accounting policies is included in Note 1 to our consolidated financial statements contained in this report. The following is a brief discussion of the more significant estimates, assumptions and judgments we use or the amounts most sensitive to change from outside factors.
Revenue Recognition and Accounts Receivable
Our revenue consists of direct to consumer sales, including our retail store, e-commerce and restaurant operations, and wholesale sales, as well as royalty income, which is included in royalties and other income in our consolidated statements of operations. We recognize revenue when performance obligations under the terms of the contracts with our customers are satisfied, which generally occurs when we deliver our products to our direct to consumer and wholesale customers. In our direct to consumer operations, which represented 80% of our consolidated net sales in Fiscal 2021, consumers have certain rights to return product within a specified period and are eligible for certain point of sale discounts. We make estimates of reserves for products which were sold prior to the balance sheet date but that we anticipate may be returned by the consumer subsequent to that date. The determination of direct to consumer return reserve amounts requires judgment and consideration of historical and current trends, evaluation of
current economic
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trends and other factors. As of January 29, 2022 , our direct to consumer return
reserve liability was $11 million compared to $7 million as of January 30, 2021 .
A 10% change in the direct to consumer sales return reserve as of January 29,
2022 would have had an impact of less than $1 million on net earnings in Fiscal
2021.
In the ordinary course of our wholesale operations, we offer discounts,
allowances and cooperative advertising support to some of our wholesale accounts
for certain products. As certain allowances, other deductions and returns are
not finalized until the end of a season, program or other event which may not
have occurred yet, we estimate such discounts, allowances and returns on an
ongoing basis to estimate the consideration from the customer that we expect to
ultimately receive. Significant considerations in determining our estimates for
these amounts for wholesale customers may include historical and current trends,
agreements with customers, projected seasonal or program results, an evaluation
of current economic conditions, specific program or product expectations and
retailer performance. As of January 29, 2022 , our total reserves for discounts,
returns and allowances for our wholesale businesses were $3 million compared to
$6 million as of January 30, 2021 . If these allowances changed by 10% it would
have had an impact of less than $1 million on net earnings in Fiscal 2021.
We extend credit to certain wholesale customers based on an evaluation of the
customer's financial capacity and condition, usually without requiring
collateral. We recognize estimated provisions for credit losses based on our
historical collection experience, the financial condition of our customers, an
evaluation of current economic conditions, anticipated trends, and the risk
characteristics of the receivables, each of which is subjective and requires
certain assumptions. As of January 29, 2022 , our provision for credit losses for
our wholesale receivables was $1 million compared to $3 million as of January
30, 2021 . If the provision for credit losses changed by 10% it would have had an
impact of less than $1 million on net earnings in Fiscal 2021.
Inventories, net
For operating group reporting, our inventory is carried at the lower of the first-in, first-out (FIFO) cost or market. We evaluate the composition of our inventories for identification of distressed inventory at least quarterly. We estimate the amount of goods that we will not be able to sell in the normal course of business and write down the value of these goods as necessary. As the amount to be ultimately realized for the goods is not necessarily known at period end, we must use certain assumptions considering historical experience, inventory quantity, quality, age and mix, historical sales trends, future sales projections, consumer and retailer preferences, market trends, general economic conditions and our anticipated plans to sell the inventory. For consolidated financial reporting,$103 million , or 88%, of our inventories were valued at the lower of the last-in, first-out (LIFO) cost or market after deducting the$69 million LIFO reserve as ofJanuary 29, 2022 . The remaining$14 million of our inventories are valued at the lower of FIFO cost or market as ofJanuary 29, 2022 . LIFO reserves are based on the Producer Price Index (PPI) as published by theUnited States Department of Labor . We write down inventories valued at the lower of LIFO cost or market when LIFO cost exceeds market value. As ofJanuary 29, 2022 , we had recorded a reserve of$3 million , compared to$6 million as ofJanuary 30, 2021 , related to inventory on the lower of FIFO cost or market method and for inventory on the lower of LIFO cost or market method with markdowns in excess of our LIFO reserve. A 10% change in the amount of such markdowns would have had an impact of less than$1 million on net earnings in Fiscal 2022. A change in the markdowns of our inventory valued at the lower of LIFO cost or market method that is not marked down in excess of our LIFO reserve typically would not be expected to have a material impact on our consolidated financial statements. A change in inventory levels, the mix of inventory by inventory category or the PPI at the end of future fiscal years compared to amounts as ofJanuary 29, 2022 could result in a material impact on our consolidated financial statements in the future. Given the significant amount of uncertainty surrounding the year-end LIFO calculation, including the estimate of year-end inventory balances, the proportion of inventory in each inventory category and the year-end PPI, we typically do not adjust our LIFO reserve in the first three quarters of a fiscal year. This policy may result in significant LIFO accounting adjustments in the fourth quarter of the fiscal year. We do recognize changes in markdown reserves during each quarter of the fiscal year as those amounts can be estimated on an interim basis. 66
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The cost of each acquired business is allocated to the individual tangible and intangible assets acquired and liabilities assumed or incurred as a result of an acquisition based on their estimated fair values. The assessment of the estimated fair values of assets and liabilities acquired requires us to make certain assumptions about a number of uncertain factors. Our intangible assets primarily consist of trademarks, as well as reacquired rights and customer relationships.Goodwill is recognized as the amount by which the cost to acquire a business exceeds the fair value of assets acquired less any liabilities assumed at acquisition. The fair values and useful lives of our acquired intangible assets and goodwill are estimated based on our assessment as well as independent third party appraisals, in some cases. At acquisition, as well as any subsequent impairment tests, assumptions and estimates about various items with significant uncertainty are required to determine the fair value of intangible assets and goodwill. When determining the fair value, significant assumptions may include our planned use of the asset as well as estimates of net sales, royalty income, operating income, growth rates, royalty rates for the trademarks, a risk-adjusted market based cost of capital as the discount rates and income tax rates, among other factors. Our fair value assessment may also consider any comparable market transactions. The use of different assumptions related to these uncertain factors at acquisition could result in a material change to the amounts of intangible assets and goodwill initially recorded at acquisition, which could result in a material impact on our consolidated financial statements. Trademarks with indefinite lives, which totaled$148 million as ofJanuary 29, 2022 , and goodwill, which totaled$24 million as ofJanuary 29, 2022 , are not amortized but instead evaluated, either qualitatively or quantitatively, for impairment annually as of the first day of our fourth quarter, or more frequently if events or circumstances indicate that the intangible asset or goodwill might be impaired. The assessment of fair value of trademarks with indefinite lives and goodwill often includes assessments based on a discounted cash flow analysis. This analysis is typically similar to the analysis performed at acquisition and dependent upon a number of uncertain factors, including those used in the initial valuation at acquisition as listed above. If this analysis indicates an impairment of a trademark with an indefinite life or goodwill, the amount of the impairment is recognized based on the amount that the carrying value of the intangible asset or goodwill exceeds the estimated fair value. While we have the option for a qualitative test, we performed a quantitative test for each test date in Fiscal 2021, Fiscal 2020 and Fiscal 2019. If our operating results, plans for the acquired business and/or macroeconomic conditions, anticipated results or other assumptions change after an acquisition, it could result in the impairment of the acquired intangible assets or goodwill. Also, a change in macroeconomic conditions may not only impact the estimated operating cash flows used in our cash flow models but may also impact other assumptions used in our analysis, including but not limited to, the risk-adjusted market-based cost of capital and/or discount rates. During Fiscal 2020, we recognized impairment charges for goodwill and intangible assets of Southern Tide of$60 million , resulting in the impairment of all goodwill for Southern Tide and the majority of the indefinite-lived intangible assets for Southern Tide. As noted above, the use of different assumptions related to the estimated fair value of the Southern Tide amounts could have resulted in a different fair value and a different impairment charge or charges in different periods. In Fiscal 2021 and Fiscal 2019, no impairment charges related to intangible assets or goodwill were recognized based on our impairment tests in those periods. Indefinite-lived intangible assets and goodwill that have been recently acquired or impaired are typically more sensitive to changes in assumptions than other intangible asset and goodwill amounts as those amounts have recently been recorded at or adjusted to fair value. Accordingly, the$9 million of indefinite-lived trademark of Southern Tide has the least excess of fair value over book value as ofJanuary 29, 2022 . We do not believe any of our indefinite-lived intangible assets or goodwill amounts are at risk of an impairment charge as ofJanuary 29, 2022 . Intangible assets with finite lives totaled$8 million as ofJanuary 29, 2022 and primarily consist of certain trademarks, reacquired rights and customer relationships. These assets are amortized over their estimated useful lives and reviewed for impairment periodically if events or changes in circumstances indicate that the carrying amount may not be recoverable. If the assets are determined to not be recoverable on an undiscounted cash flow basis and the 67
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expected future discounted cash flows of the asset group are less than the carrying amount, an asset group is impaired and a loss is recorded for the amount by which the carrying value of the asset group exceeds its fair value.
Other Fair Value Measurements
For many assets and liabilities, the determination of fair value may not require the use of many assumptions or other estimates. However, in some cases the assumptions or inputs associated with the determination of fair value may require the use of many assumptions which may be internally derived or otherwise unobservable. These assumptions may include the planned use of the assets, anticipated cash flows, probabilities of cash flows, discount rates and other factors. We use certain market-based and internally derived information and make assumptions about the information in (1) determining the fair values of assets and liabilities acquired as part of a business combination, (2) adjusting recognized assets and liabilities to fair value and (3) assessing recognized assets for impairment, including intangible assets, goodwill and other non-current assets. From time to time, we may recognize asset impairment or other charges related to certain lease assets, property and equipment or other amounts associated with us exiting retail or office space or otherwise. In these cases, we must determine the impairment charge related to the asset group if the assets are determined to not be recoverable on an undiscounted cash flow basis and the expected future discounted cash flows of the asset group are less than the carrying amount. While estimated cash outflows can be determined, in certain cases, if there is an underlying lease, the timing and amount of estimated cash inflows for any sublease rental income and other costs are often uncertain, particularly if there is not a sub-lease agreement in place. Also, we could subsequently negotiate a lease termination agreement that would differ from the estimated under other assumptions. Thus, our estimate of an impairment charge related to an asset group could change significantly as we obtain better information in future periods. In connection with certain acquisitions, we have entered into contingent consideration arrangements, which are recognized at fair value at acquisition and each subsequent balance sheet date, to compensate the sellers if certain targets are achieved. The valuation of these contingent consideration amounts requires assumptions regarding the anticipated amounts and probabilities of cash flows, discount rates and other factors, each requiring a significant amount of judgment. Income Taxes Income taxes included in our consolidated financial statements are determined using the asset and liability method, in which income taxes are recognized based on amounts of income tax payable or refundable in the current year as well as the impact of any items that are recognized in different periods for consolidated financial statement reporting purposes and tax return reporting purposes. Significant judgment is required in determining our income tax provision as there are many transactions and calculations where the ultimate tax outcome is uncertain and tax laws and regulations are often complex and subject to interpretation and judgment. These uncertainties relate to the recognition or changes to the realizability of deferred tax assets, loss carryforwards, valuation allowances, uncertain tax positions and other matters. Our assessment of these income tax matters requires our consideration of taxable income and other items for historical periods, projected future taxable income, projected future reversals of existing timing differences, tax planning strategies and other information. The use of different assumptions related to the income tax matters above, as well as a shift in earnings among jurisdictions, changes in tax laws, enacted rates or interpretations, court case decisions, statute of limitation expirations or audit settlements, each could have a significant impact on our income tax rate. The ultimate resolution of our income tax matter uncertainties may differ significantly from the anticipated resolution included in our current assumptions and estimates, which could have a significant impact on our financial statements. An increase in our consolidated income tax expense rate from 20.0% to 21.0% during Fiscal 2021 would have reduced net earnings by$2 million . See Note 10 to our consolidated financial statements included in this report for further discussion of income taxes. 68 Table of Contents RECENT ACCOUNTING PRONOUNCEMENTS Refer to Note 1 in our consolidated financial statements included in this report for a discussion of recent accounting pronouncements issued by the FASB that we have not yet adopted that may have a material effect on our financial position, results of operations or cash flows in the future. SEASONALITY
Each of our operating groups is impacted by seasonality as the demand by specific product or style, as well as by distribution channel, may vary significantly depending on the time of year. For information regarding the impact of seasonality on our business operations, see Part I, Item 1, Business, included in this report.
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