Duluth (DLTH) - 2025 Q1 - Quarterly Report

PART I—Financial Information This part presents unaudited financial statements, management's discussion, market risk, and internal controls Item 1. Financial Statements This section presents Duluth Holdings Inc.'s unaudited condensed consolidated financial statements and detailed notes Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and equity at specific dates | Metric | April 28, 2024 (in thousands) | January 28, 2024 (in thousands) | | :------------------------------------------ | :------------------------------ | :------------------------------ | | Total Assets | $471,383 | $490,453 | | Total Liabilities | $256,080 | $268,279 | | Total Shareholders' Equity | $215,303 | $222,174 | | Cash and cash equivalents | $6,799 | $32,157 | | Inventory, net | $136,434 | $125,757 | | Duluth line of credit | $11,000 | $— | Condensed Consolidated Statements of Operations This section outlines the company's financial performance, including net sales, gross profit, operating loss, and net loss | Metric | Three Months Ended April 28, 2024 (in thousands) | Three Months Ended April 30, 2023 (in thousands) | | :------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Net sales | $116,684 | $123,759 | | Gross profit | $61,624 | $65,651 | | Operating loss | $(8,971) | $(4,549) | | Net loss attributable to controlling interest | $(7,873) | $(3,869) | | Basic/Diluted earnings per share | $(0.24) | $(0.12) | Condensed Consolidated Statements of Comprehensive (Loss) Income This section details the company's comprehensive loss, including net loss and other comprehensive income items | Metric | Three Months Ended April 28, 2024 (in thousands) | Three Months Ended April 30, 2023 (in thousands) | | :------------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Net loss | $(7,865) | $(3,877) | | Unrealized security loss arising during the period | $(140) | $(79) | | Comprehensive loss attributable to controlling interest | $(7,978) | $(3,928) | Condensed Consolidated Statement of Shareholders' Equity This section presents changes in shareholders' equity, including retained earnings and accumulated comprehensive loss | Metric | January 28, 2024 (in thousands) | April 28, 2024 (in thousands) | | :------------------------------------------ | :------------------------------ | :------------------------------ | | Total shareholders' equity | $222,174 | $215,303 | | Retained earnings | $123,816 | $115,943 | | Accumulated other comprehensive loss | $(427) | $(532) | - The decrease in retained earnings is primarily due to a net loss of $7,873 thousand for the period[22] Condensed Consolidated Statements of Cash Flows This section reports cash inflows and outflows from operating, investing, and financing activities | Metric | Three Months Ended April 28, 2024 (in thousands) | Three Months Ended April 30, 2023 (in thousands) | | :------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Net cash used in operating activities | $(33,666) | $(13,973) | | Net cash used in investing activities | $(1,477) | $(21,348) | | Net cash provided by (used in) financing activities | $9,785 | $(1,017) | | Decrease in cash and cash equivalents | $(25,358) | $(36,338) | | Cash and cash equivalents at end of period | $6,799 | $9,210 | Notes to Condensed Consolidated Financial Statements (Unaudited) This section provides detailed explanations of accounting policies, significant estimates, and financial information 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION This note describes the company's business, reporting structure, and fundamental principles of financial statement preparation A. Nature of Operations This section details Duluth Holdings Inc.'s business as a lifestyle brand, its omnichannel sales, and stock structure - Duluth Holdings Inc. is a lifestyle brand of men's and women's casual wear, workwear, and accessories, primarily sold through its omnichannel platform under the Duluth Trading name[31] - The Company reports one reportable external segment[32] - The Company has Class A common stock (ten votes per share) and Class B common stock (one vote per share), with Class B trading on NASDAQ Global Select Market under 'DLTH'[33] B. Basis of Presentation This section outlines the accounting standards, consolidation principles, fiscal periods, and unaudited nature of interim statements - Condensed consolidated financial statements are prepared in accordance with U.S. GAAP and consolidate TRI Holdings, LLC as a variable interest entity[34] - Fiscal 2024 is a 53-week period ending February 2, 2025; Fiscal 2023 was a 52-week period ending January 28, 2024[35] - Interim financial statements are unaudited and include normal and recurring adjustments[36] C. Impairment Analysis This section confirms no triggering events or indicators of asset impairment were identified during the reporting period - No triggering events or indicators of asset impairment were noted as of April 28, 2024, and for the three months ended[37] D. Inventory This section details the valuation methods for inventory, including FIFO, and the significant estimates involved in its assessment - Inventory is valued at the lower of cost or net realizable value using the first-in, first-out (FIFO) method[38] - Significant estimates in inventory valuation include obsolescence (excess, slow-moving, lower of cost or market reserves) and shrinkage, requiring management judgment[38] - Retail store physical inventory counts are performed in July, potentially causing fluctuations in second fiscal quarter results[39] E. Prepaid Expenses and Other Assets This section provides a breakdown of prepaid expenses and other assets, including goodwill, intangible assets, and software costs | Category | April 28, 2024 (in thousands) | January 28, 2024 (in thousands) | | :------------------------------------ | :------------------------------ | :------------------------------ | | Prepaid expenses & other current assets | $17,537 | $16,488 | | Other assets, net | $9,629 | $9,020 | - Other assets, net, include goodwill ($402 thousand), intangible assets ($428 thousand), and non-current software hosting implementation costs ($7,403 thousand) as of April 28, 2024[41] F. Seasonality of Business This section explains the seasonal nature of the company's business, with significant revenue and profit in the fourth quarter - The Company's business is seasonal, with a significant portion of revenue and operating profit recognized in the fourth fiscal quarter due to increased holiday sales[42] G. Cash and Cash Equivalents This section defines cash equivalents, including short-term investments and amounts receivable from credit card issuers - Cash equivalents include short-term investments with original maturities of three months or less and amounts receivable from credit card issuers, typically converted to cash within 2 to 4 days[43] H. Significant Accounting Policies This section confirms no significant changes to the company's accounting policies since its last annual report - There have been no significant changes to the Company's significant accounting policies as described in its Annual Report on Form 10-K for the year ended January 28, 2024[44] 2. LEASES This note details the company's lease accounting, including right-of-use assets, lease liabilities, and associated expenses - The Company recognizes right-of-use (ROU) assets and lease liabilities for non-cancelable retail space leases, which expire on various dates through 2036[47][48] | Metric | Three Months Ended April 28, 2024 (in thousands) | Three Months Ended April 30, 2023 (in thousands) | | :----------------------- | :----------------------------------------------- | :----------------------------------------------- | | Total finance lease expense | $1,247 | $1,278 | | Operating lease expense | $5,093 | $5,050 | | Variable lease expense | $2,922 | $2,914 | | Total lease expense | $9,583 | $9,563 | | Metric | April 28, 2024 | | :-------------------------------- | :------------- | | Weighted-average remaining lease term (Finance leases) | 10 years | | Weighted-average remaining lease term (Operating leases) | 7 years | | Weighted-average discount rate (Finance leases) | 4.5% | | Weighted-average discount rate (Operating leases) | 4.2% | 3. DEBT AND CREDIT AGREEMENT This note outlines the company's debt obligations, including notes and credit facilities, and compliance with related covenants | Debt Type | April 28, 2024 (in thousands) | January 28, 2024 (in thousands) | | :-------------------------- | :------------------------------ | :------------------------------ | | TRI Senior Secured Note | $22,300 | $22,488 | | TRI Note | $3,500 | $3,500 | | Duluth Line of credit | $11,000 | $— | | Total Debt (before current maturities) | $36,800 | $25,988 | - The TRI Senior Secured Note has an interest rate of 4.95% and matures on October 15, 2038[54] - The Credit Agreement, amended in July 2022, provides a $200.0 million revolving senior credit facility maturing on July 8, 2027, with interest rates tied to the Term Secured Overnight Financing Rate[57] - As of April 28, 2024, the Company was in compliance with all financial and non-financial covenants of the Credit Agreement[58] 4. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES This note provides a breakdown of accrued expenses and other current liabilities, including deferred revenue and product returns | Category | April 28, 2024 (in thousands) | January 28, 2024 (in thousands) | | :------------------------------------ | :------------------------------ | :------------------------------ | | Total accrued expenses and other current liabilities | $26,366 | $30,930 | | Deferred revenue | $8,105 | $9,579 | | Product returns | $4,448 | $5,541 | | Salaries and benefits | $3,864 | $2,692 | 5. FAIR VALUE This note categorizes assets and liabilities measured at fair value and details changes in unrealized losses on certain securities - The Company's assets and liabilities measured at fair value are categorized as Level 1 (money market funds) or Level 3 (available-for-sale security, corporate trust, and TRI long-term debt)[64][69] | Security | April 28, 2024 Fair Value (in thousands) | January 28, 2024 Fair Value (in thousands) | | :---------------- | :--------------------------------------- | :--------------------------------------- | | Corporate trust | $4,798 | $4,986 | | TRI Long-term debt | $22,627 | $23,554 | - Gross unrealized losses on the corporate trust (available-for-sale security) increased from $(570) thousand to $(710) thousand[65][67] 6. VARIABLE INTEREST ENTITY This note explains the consolidation of TRI Holdings, LLC as a variable interest entity and its purpose related to company headquarters - The Company consolidates TRI Holdings, LLC as a variable interest entity (VIE) because it is the primary beneficiary, having the power to direct TRI's activities and the obligation/right to absorb/receive significant benefits[70][72][73] - TRI's primary purpose is to own the real property for the Company's headquarters in Mt. Horeb, Wisconsin, which the Company leases[73] | TRI Consolidated Metric | April 28, 2024 (in thousands) | January 28, 2024 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------ | | Total assets | $22,801 | $22,958 | | TRI long-term debt | $24,933 | $25,141 | 7. LOSS PER SHARE This note presents the calculation of basic and diluted loss per share, including net loss and weighted average shares outstanding | Metric | Three Months Ended April 28, 2024 | Three Months Ended April 30, 2023 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net loss attributable to controlling interest | $(7,873) thousand | $(3,869) thousand | | Basic/Diluted loss per share | $(0.24) | $(0.12) | | Weighted average shares outstanding | 33,087 thousand | 32,865 thousand | - 0.3 million unvested restricted stock shares were excluded from diluted loss per share calculation as their inclusion would be anti-dilutive due to the net loss[75] 8. STOCK-BASED COMPENSATION This note details stock-based compensation expense, unrecognized compensation, and outstanding unvested restricted shares | Metric | Three Months Ended April 28, 2024 (in thousands) | Three Months Ended April 30, 2023 (in thousands) | | :-------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Stock compensation expense | $1,372 | $990 | - As of April 28, 2024, unrecognized compensation expense related to restricted stock awards was $8.7 million, expected to be recognized over a weighted average period of 3.0 years[78] - 1,868,895 unvested restricted shares were outstanding at April 28, 2024[78] 9. PROPERTY AND EQUIPMENT This note provides a breakdown of property and equipment, including net values, accumulated depreciation, and construction in progress | Metric | April 28, 2024 (in thousands) | January 28, 2024 (in thousands) | | :-------------------------- | :------------------------------ | :------------------------------ | | Property and equipment, net | $126,526 | $132,718 | | Accumulated depreciation and amortization | $(145,340) | $(140,551) | | Construction in progress | $1,615 | $3,781 | 10. REVENUE This note describes revenue recognition policies for merchandise sales and details contract assets, liabilities, and gift card activity - Revenue from merchandise sales is recognized upon shipment for direct-to-consumer orders and at the point of sale for store sales[80] | Sales Channel | Three Months Ended April 28, 2024 (in thousands) | Three Months Ended April 30, 2023 (in thousands) | | :-------------------- | :----------------------------------------------- | :----------------------------------------------- | | Direct-to-consumer | $75,444 | $79,502 | | Stores | $41,240 | $44,257 | | Total Net Sales | $116,684 | $123,759 | | Contract Item | April 28, 2024 (in thousands) | January 28, 2024 (in thousands) | | :------------------ | :------------------------------ | :------------------------------ | | Contract assets | $2,108 | $2,373 | | Contract liabilities | $8,105 | $9,579 | - Gift card liabilities decreased from $9,579 thousand at the beginning of the period to $8,105 thousand at the end, with $2,222 thousand sold and $3,635 thousand redeemed[85] 11. INCOME TAXES This note explains the company's interim tax provision method, effective tax rates, and exclusions for certain entities - The Company uses the discrete effective tax rate method for its interim tax provision[86] | Metric | Three Months Ended April 28, 2024 | Three Months Ended April 30, 2023 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Effective tax rate | 21% | 27% | - Income from TRI is excluded from the effective tax rate calculation as TRI is a limited liability company not subject to income taxes[88] 12. RECENT ACCOUNTING PRONOUNCEMENTS This note summarizes recently adopted and not yet adopted accounting pronouncements and their impact on the company's financial statements Recently Adopted Accounting Pronouncements This section details the adoption of ASU 2016-13 (CECL) and its immaterial impact on consolidated financial results - The Company adopted ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326)" (CECL), on January 30, 2023, with no material impact on its consolidated financial results[89] Recent Accounting Pronouncements Not Yet Adopted This section lists accounting pronouncements currently under evaluation for future adoption, including segment reporting and income tax disclosures - Management is evaluating the effects of ASU 2023-07 (Segment Reporting, effective for annual periods beginning after Dec 15, 2023) and ASU 2023-09 (Income Tax Disclosures, effective for annual periods beginning after Dec 15, 2024)[90][91] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, operational results, liquidity, and critical accounting policies Overview This section provides a general description of Duluth Holdings Inc.'s business model, retail presence, and a summary of key financial results - Duluth Holdings Inc. is a lifestyle brand of men's and women's casual wear, workwear, and accessories sold primarily through its omnichannel platform, operating 62 retail stores and three outlet stores as of April 28, 2024[100] Q1 Fiscal 2024 Financial Summary | Metric | Q1 Fiscal 2024 | Q1 Fiscal 2023 | | :-------------------------------- | :------------- | :------------- | | Net sales | $116.7 million | $123.8 million | | Net loss | $(7.9) million | $(3.9) million | | Adjusted EBITDA | $1.8 million | $5.3 million | Economic Conditions This section discusses the macroeconomic environment, including inflation, recessionary concerns, and their potential impact on consumer demand - The macroeconomic environment is experiencing inflation, recessionary concerns, and general uncertainty, making it difficult to predict the ultimate impact on operational and financial performance, including store traffic and overall consumer demand[105] How We Assess the Performance of Our Business This section explains the key financial metrics and non-GAAP measures used by management to evaluate the company's business performance Net Sales This section defines net sales, including merchandise sales, shipping revenue, and the timing of revenue recognition - Net sales include merchandise sales plus shipping and handling revenue collected from customers, less returns and discounts[107] - Direct-to-consumer sales are recognized upon shipment, and store sales are recognized at the point of sale[107] Gross Profit This section defines gross profit and gross margin, detailing the components included in the cost of goods sold - Gross profit is net sales less cost of goods sold, with gross margin as a percentage of net sales[108] - Cost of goods sold includes direct merchandise cost, inventory shrinkage, inventory adjustments, inbound freight, and freight from distribution centers to retail stores, excluding depreciation and amortization[108][109] Selling, General and Administrative Expenses This section describes the components of SG&A expenses and explains their typical relationship to net sales in different quarters - SG&A expenses include all operating costs not in cost of goods sold, such as payroll, occupancy, distribution network, marketing, logistics, consulting, and professional services[110] - SG&A as a percentage of net sales is typically higher in lower-volume quarters due to a portion of costs being relatively fixed[110] Adjusted EBITDA This section defines Adjusted EBITDA as a non-GAAP measure, explaining its calculation and purpose for performance assessment - Adjusted EBITDA is a non-GAAP measure defined as consolidated net income before depreciation and amortization, interest expense, and provision for income taxes, adjusted for certain non-cash and other items not representative of ongoing operating performance[112] - It is used to provide a clearer picture of operating results, facilitate period-to-period comparisons, and as a key financial metric for employee bonus compensation[111][112] Results of Operations This section provides a detailed analysis of the company's financial performance, comparing current and prior period results for key metrics Three Months Ended April 28, 2024, Compared to Three Months Ended April 30, 2023 This section presents a comparative summary of key financial metrics for the three-month periods, highlighting changes in performance | Metric | Apr 28, 2024 (in thousands) | Apr 30, 2023 (in thousands) | % of Net Sales (2024) | % of Net Sales (2023) | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------- | :-------------------- | | Net sales | $116,684 | $123,759 | 100.0% | 100.0% | | Cost of goods sold | $55,060 | $58,108 | 47.2% | 47.0% | | Gross profit | $61,624 | $65,651 | 52.8% | 53.0% | | SG&A expenses | $70,595 | $70,200 | 60.5% | 56.7% | | Operating loss | $(8,971) | $(4,549) | (7.7)% | (3.7)% | | Net loss attributable to controlling interest | $(7,873) | $(3,869) | (6.7)% | (3.1)% | Net Sales This section analyzes the decrease in net sales, attributing it to challenging traffic and lower in-stock positions across channels - Net sales decreased by $7.1 million, or 5.7%, to $116.7 million for the three months ended April 28, 2024, compared to the prior year, attributed to challenging traffic and a lower in-stock position[116] - Store market net sales decreased by 8.6% to $78.1 million, and non-store market net sales decreased by 10.2% to $33.6 million[117] Gross Profit This section examines the decrease in gross profit and the slight decline in gross margin rate due to inventory sell-through - Gross profit decreased by $4.0 million, or 6.1%, to $61.6 million, with gross margin slightly decreasing to 52.8% of net sales[118] - The slight decrease in gross margin rate is due to selling through older, higher-cost inventory, despite better-than-expected new product costs[118] Selling, General and Administrative Expenses This section analyzes the increase in SG&A expenses, primarily driven by higher fixed costs and depreciation from strategic investments - SG&A expenses increased by $0.4 million, or 0.6%, to $70.6 million, and as a percentage of net sales, increased to 60.5% from 56.7%[119] - The increase was mainly driven by higher fixed costs and depreciation from foundational strategic investments, partially offset by efficiencies across logistics and the fulfillment center network[120] Income Taxes This section discusses the income tax benefit and the decrease in the effective tax rate for the reporting period - Income tax benefit was $2.1 million for the three months ended April 28, 2024, compared to $1.5 million in the prior year[121] - The effective tax rate related to controlling interest decreased from 27% to 21%[121] Net Loss Attributable to Controlling Interest This section highlights the increase in net loss attributable to controlling interest for the three months ended April 28, 2024 - Net loss attributable to controlling interest increased to $7.9 million for the three months ended April 28, 2024, from $3.9 million in the prior year[122] Reconciliation of Net Loss to EBITDA and EBITDA to Adjusted EBITDA This section provides a reconciliation of net loss to EBITDA and Adjusted EBITDA, detailing adjustments for non-cash and other items | Metric | Three Months Ended April 28, 2024 (in thousands) | Three Months Ended April 30, 2023 (in thousands) | | :---------------------------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net loss | $(7,865) | $(3,877) | | Depreciation and amortization | $8,251 | $7,413 | | Amortization of internal-use software hosting subscription implementation costs | $1,170 | $1,270 | | Interest expense | $993 | $934 | | Income tax benefit | $(2,083) | $(1,458) | | EBITDA | $466 | $4,282 | | Stock based compensation | $1,372 | $990 | | Adjusted EBITDA | $1,838 | $5,272 | - Adjusted EBITDA decreased by $3.4 million to $1.8 million (1.6% of net sales) for the three months ended April 28, 2024, compared to $5.3 million (4.3% of net sales) in the prior year[125] Liquidity and Capital Resources This section discusses the company's sources of liquidity, working capital, anticipated capital expenditures, and sufficiency of funds General This section outlines the company's primary liquidity sources, working capital, and projected capital expenditures for fiscal 2024 - The Company's primary sources of liquidity are cash from operating activities and a credit facility, used for inventory, marketing, payroll, store leases, and capital expenditures[126] - Net working capital was $75.9 million, including $6.8 million of cash and cash equivalents, as of April 28, 2024[126] - Anticipated capital expenditures for fiscal 2024 are approximately $25.0 million, primarily for logistics optimization and information technology[127] - Management believes current liquidity sources will be sufficient to cover working capital and anticipated capital expenditures for the foreseeable future[128] Cash Flow Analysis This section provides a summary of cash flows from operating, investing, and financing activities, and the overall change in cash | Activity | Three Months Ended April 28, 2024 (in thousands) | Three Months Ended April 30, 2023 (in thousands) | | :------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Net cash used in operating activities | $(33,666) | $(13,973) | | Net cash used in investing activities | $(1,477) | $(21,348) | | Net cash provided by (used in) financing activities | $9,785 | $(1,017) | | Decrease in cash and cash equivalents | $(25,358) | $(36,338) | Net Cash Used in Operating Activities This section analyzes the increase in net cash used in operating activities, primarily due to changes in inventory and payables - Net cash used in operating activities increased to $33.7 million for the three months ended April 28, 2024, from $14.0 million in the prior year[132][133] - This was primarily due to a $10.7 million increase in inventory and a $13.2 million decrease in trade accounts payable[132] Net Cash Used in Investing Activities This section discusses the significant decrease in net cash used in investing activities, reflecting lower capital expenditures - Net cash used in investing activities decreased significantly to $1.5 million for the three months ended April 28, 2024, from $21.3 million in the prior year, reflecting lower capital expenditures[135] Net Cash Provided by (Used in) Financing Activities This section explains the shift to net cash provided by financing activities, driven by net borrowings under the credit line - Net cash provided by financing activities was $9.8 million for the three months ended April 28, 2024, a shift from $1.0 million used in the prior year[136][137] - This change was primarily driven by $11.0 million in net borrowings under the revolving line of credit[136] Contractual Obligations This section confirms no significant changes to the company's contractual obligations since its last annual report - There have been no significant changes to the Company's contractual obligations as described in its Annual Report on Form 10-K for the fiscal year ended January 28, 2024[138] Off-Balance Sheet Arrangements This section states that the company is not a party to any material off-balance sheet arrangements - The Company is not a party to any material off-balance sheet arrangements[139] Critical Accounting Policies and Critical Accounting Estimates This section highlights the role of management estimates in financial reporting and confirms no significant changes to critical policies - The preparation of financial statements requires management to make estimates and assumptions based on historical experience and other reasonable factors[140] - No significant changes to critical accounting policies and estimates were reported since the 2023 Form 10-K[141] Recent Accounting Pronouncements This section directs readers to Note 12 for information regarding recent accounting pronouncements and their potential impact - For information regarding recent accounting pronouncements, refer to Note 12 of the Notes to Condensed Consolidated Financial Statements[142] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section confirms no significant changes in market risks since the last annual report and refers to Note 3 for interest rate risk details - No significant changes in market risks have occurred since the 2023 Form 10-K[143] - Information on interest rate risk related to credit agreement borrowings is disclosed in Note 3[143] Item 4. Controls and Procedures This section addresses the effectiveness of disclosure controls and internal control over financial reporting, including material weaknesses and remediation Evaluation of Disclosure Controls and Procedures This section concludes that disclosure controls were not effective due to a material weakness, yet financial statements are fairly presented - The CEO and CFO concluded that disclosure controls and procedures were not effective as of April 28, 2024, due to a material weakness in internal control over financial reporting[144] - Despite the material weakness, management concluded that the condensed consolidated financial statements fairly present the financial position, results of operations, and cash flows in conformity with U.S. GAAP[144][145] Material Weakness This section identifies a material weakness in internal control over financial reporting related to general ledger account mapping - A material weakness was identified in internal control over financial reporting, specifically related to control deficiencies in effective risk assessment for mapping general ledger accounts to the consolidated financial statements[147] - This resulted in manual controls in the financial reporting process that were not designed to sufficiently mitigate the risk of incorrect presentation[147] Remediation Plans This section outlines management's actions to simplify mapping, perform risk assessment, and implement new controls to address the weakness - Management has simplified the general ledger account mapping process, performed a thorough risk assessment, and designed and implemented new process-level controls[148] - The material weakness cannot be considered fully remediated until these controls operate for a sufficient period and are tested effectively[148] Changes in Internal Control Over Financial Reporting This section confirms ongoing remediation efforts for the material weakness and notes no other material changes in internal control - The Company is taking appropriate actions to remediate the identified material weakness in internal control over financial reporting[149] - Except for these remediation efforts, there were no other changes in internal control over financial reporting during the quarter that materially affected or are reasonably likely to materially affect it[149] PART II—Other Information This part includes information on legal proceedings, risk factors, equity sales, other disclosures, and a list of exhibits Item 1. Legal Proceedings This section confirms the company is subject to ordinary legal proceedings but none are expected to materially affect its financial position - The Company is subject to certain legal proceedings and claims in the ordinary course of business[150] - No current legal proceedings are believed to have a material adverse effect on the Company's business, financial condition, operating results, or cash flows[150] - Reserves are established for specific legal matters when an unfavorable outcome is probable and the loss is reasonably estimable[150] Item 1A. Risk Factors This section states there have been no material changes to the risk factors previously disclosed in the company's fiscal 2023 annual report - There have been no material changes to the risk factors as previously disclosed in the Company's fiscal 2023 Annual Report on Form 10-K[151] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports no unregistered equity sales and details shares acquired from employees for tax withholding on vested restricted stock - The Company did not sell any equity securities during the quarter ended April 28, 2024, which were not registered under the Securities Act[152] Shares Acquired from Employees for Tax Withholding | Period | Total number of shares purchased | Average price paid per share | | :----------------------------------- | :------------------------------- | :--------------------------- | | January 29, 2024 - February 25, 2024 | 24,617 | $4.90 | | February 26, 2024 - March 31, 2024 | 159,404 | $4.60 | | April 1, 2024 - April 28, 2024 | 16,677 | $4.90 | | Total | 200,698 | $4.67 | - Shares were acquired from employees to satisfy minimum tax withholding requirements upon the vesting of their restricted stock[152] Item 5. Other Information This section confirms no directors or Section 16 officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No director or Section 16 officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended April 28, 2024[155] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including incentive plans, certifications, and XBRL-related documents - Exhibits include the Amended and Restated Annual Incentive Plan, certifications of the CEO and Interim CFO (pursuant to Rule 13a-14(a) and 18 U.S.C. Section 1350), and various XBRL taxonomy documents[158] - XBRL-related information is deemed "furnished" and not "filed" in accordance with Regulation S-T[160] Signatures This section confirms the report was duly signed on May 31, 2024, by the Chief Financial Officer and Chief Accounting Officer - The report was signed on May 31, 2024, by Heena Agrawal (Senior Vice President, Chief Financial Officer) and Michael Murphy (Vice President, Chief Accounting Officer and Treasury)[163]