J.Jill(JILL) - 2024 Q3 - Quarterly Report

PART I—FINANCIAL INFORMATION Financial Statements The unaudited condensed consolidated financial statements for October 28, 2023, show decreased assets and debt, with Q3 net income rising to $11.6 million and YTD net income declining to $31.4 million due to a debt refinancing loss Condensed Consolidated Balance Sheets As of October 28, 2023, total assets decreased to $438.0 million, primarily due to lower cash, while total liabilities significantly decreased to $406.4 million, leading to positive shareholders' equity of $31.7 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | October 28, 2023 | January 28, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $64,115 | $87,053 | | Inventories, net | $56,652 | $50,585 | | Total current assets | $143,606 | $160,820 | | Total assets | $438,048 | $466,417 | | Liabilities & Equity | | | | Total current liabilities | $136,004 | $126,987 | | Long-term debt, net | $148,731 | $205,236 | | Total liabilities | $406,390 | $466,636 | | Total shareholders' equity (deficit) | $31,658 | $(219) | Condensed Consolidated Statements of Operations and Comprehensive Income For Q3 2023, net sales were flat at $150.1 million, but net income rose to $11.6 million; for the thirty-nine weeks, net sales decreased 2.7% to $455.2 million, and net income fell to $31.4 million due to a $12.7 million debt refinancing loss Q3 Performance Comparison (in thousands, except per share data) | Metric | Thirteen Weeks Ended Oct 28, 2023 | Thirteen Weeks Ended Oct 29, 2022 | | :--- | :--- | :--- | | Net sales | $150,125 | $150,204 | | Gross profit | $107,842 | $105,023 | | Operating income | $22,127 | $18,850 | | Net income | $11,616 | $8,919 | | Diluted EPS | $0.80 | $0.62 | YTD Performance Comparison (in thousands, except per share data) | Metric | Thirty-Nine Weeks Ended Oct 28, 2023 | Thirty-Nine Weeks Ended Oct 29, 2022 | | :--- | :--- | :--- | | Net sales | $455,214 | $467,616 | | Loss on debt refinancing | $12,702 | $0 | | Net income | $31,434 | $41,139 | | Diluted EPS | $2.19 | $2.89 | Condensed Consolidated Statements of Cash Flows For the thirty-nine weeks ended October 28, 2023, net cash from operations decreased to $56.7 million, while net cash used in investing and financing activities significantly increased, resulting in a net cash decrease of $22.9 million due to debt refinancing Cash Flow Summary (in thousands) | Cash Flow Activity | Thirty-Nine Weeks Ended Oct 28, 2023 | Thirty-Nine Weeks Ended Oct 29, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $56,682 | $66,720 | | Net cash used in investing activities | $(10,760) | $(5,173) | | Net cash used in financing activities | $(68,860) | $(7,424) | | Net change in cash and cash equivalents | $(22,938) | $54,123 | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, revenue disaggregation, debt structure, and equity compensation, highlighting the April 2023 debt refinancing that resulted in a $12.7 million loss and the granting of new Performance Stock Units - Net sales are primarily generated from Retail stores (55.0% YTD) and Direct channels (45.0% YTD), with Direct channel sales decreasing to $204.8 million YTD in 2023 from $214.5 million in 2022[25][106] - On April 5, 2023, the company entered into a new $175.0 million Term Loan Credit Agreement maturing in 2028, with proceeds used to repay existing Priming and Subordinated Term Loans[34][38] - The debt refinancing resulted in a recorded loss of $12.7 million during the thirty-nine weeks ended October 28, 2023[39] - During the thirty-nine weeks ended October 28, 2023, the company granted Performance Stock Units (PSUs) with performance goals based on Adjusted EBITDA and total shareholder return (TSR)[59][62] Management's Discussion and Analysis of Financial Condition and Results of Operations Management reports Q3 2023 net sales were flat with improved gross margin and 30.2% net income growth, while year-to-date net income declined 23.6% due to a $12.7 million debt refinancing loss, with liquidity expected to be sufficient after the April 2023 debt refinancing Results of Operations For Q3 2023, net sales were flat at $150.1 million, with gross margin expanding to 71.8% and operating income increasing 17.4%; for the thirty-nine weeks, net sales decreased 2.7% to $455.2 million, and income before taxes fell 20.8% due to a $12.7 million debt refinancing loss Q3 2023 vs Q3 2022 Performance (in thousands) | Metric | Q3 2023 | Q3 2022 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $150,125 | $150,204 | (0.1)% | | Gross profit | $107,842 | $105,023 | 2.7% | | Gross Margin | 71.8% | 69.9% | +190 bps | | Operating income | $22,127 | $18,850 | 17.4% | | Net income | $11,616 | $8,919 | 30.2% | YTD 2023 vs YTD 2022 Performance (in thousands) | Metric | YTD 2023 | YTD 2022 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $455,214 | $467,616 | (2.7)% | | Gross profit | $326,791 | $326,960 | (0.1)% | | Gross Margin | 71.8% | 69.9% | +190 bps | | Operating income | $75,564 | $70,928 | 6.5% | | Net income | $31,434 | $41,139 | (23.6)% | Liquidity and Capital Resources As of October 28, 2023, the company held $64.1 million in cash and $34.2 million ABL availability, with a significant debt refinancing in April 2023 extending the term loan and ABL facility maturities to 2028, ensuring sufficient liquidity - As of October 28, 2023, the company had $64.1 million in cash and $34.2 million of availability under its ABL Facility[113] - In April 2023, the company entered into a new $175.0 million Term Loan Credit Agreement maturing in May 2028, using the proceeds to fully repay previous credit agreements[114] - The maturity date of the ABL Credit Agreement was extended from May 2024 to May 2028[117] Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in its market risk exposure during Q3 Fiscal Year 2023, referring to the 2022 Annual Report on Form 10-K for detailed discussion - There have been no material changes in the company's exposure to market risk during the third quarter of Fiscal Year 2023[135] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of October 28, 2023, with no material changes to internal control over financial reporting during Q3 - Management concluded that as of October 28, 2023, the company's disclosure controls and procedures are effective[136] - No material changes to the company's internal control over financial reporting occurred during the third quarter of Fiscal Year 2023[137] PART II. OTHER INFORMATION Legal Proceedings The company is subject to various ordinary course legal proceedings, none of which are expected to have a material adverse effect on its business or financial condition - The company is subject to various legal proceedings arising in the ordinary course of business[72] - Management does not believe that the resolution of any current legal proceedings would have a material adverse effect on the company[72][139] Risk Factors No material changes to the risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K have occurred - As of the date of this report, there have been no material changes to the risk factors previously disclosed in the 2022 Annual Report[140] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[141] Exhibits The report includes various exhibits, notably CEO and CFO certifications required by the Sarbanes-Oxley Act and an amendment to an executive employment agreement - Exhibits filed with the report include certifications from the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act[147]