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Recent Accounting Pronouncements | 12 Months Ended
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Dec. 31, 2018
Accounting Policies [Abstract] |
Recent Accounting Pronouncements | RECENT ACCOUNTING PRONOUNCEMENTS New Accounting Pronouncement Adopted Income Tax Accounting Implications of the Tax Cuts and Jobs Act In March 2018, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance on the income tax accounting implications of the U.S. Tax Cuts and Job Act (“Tax Act”), addressing the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. As a result of the Tax Act, we recorded provisional estimates in accordance with Staff Accounting Bulletin No. 118 ("SAB 118"), Income Tax Accounting Implications of the Tax Cuts and Jobs Act, during the year ended December 31, 2017 in relation to the revaluation of our net deferred tax assets at the lower U.S. corporate income tax rate and the additional tax expense associated with the deemed repatriation tax. During the year ended December 31, 2018, we recorded measurement period adjustments related to the provisional estimates. We now consider our accounting for the Tax Act complete. For more information, see Note 12 — Income Taxes. Stock Compensation Scope of Modification Accounting In May 2017, the FASB issued authoritative guidance intended to clarify those changes to terms and conditions of share-based compensation awards that are required to be accounted for as modifications of existing share-based awards. The Company adopted this guidance as of January 1, 2018. The adoption did not have an impact on our consolidated financial position or results of operations. Statements of Cash Flows - Classification and Change in Restricted Cash In August 2016, the FASB issued authoritative guidance intended to clarify how entities should classify certain cash receipts and cash payments in the statements of cash flows. In November 2016, the FASB issued additional guidance requiring that restricted cash be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts reported in the statements of cash flows. The guidance is applied retrospectively to all periods presented and is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual periods. The Company adopted this guidance as of January 1, 2018. As a result of the adoption, the Company changed the presentation in its statements of cash flows for all periods presented. Prepaid Stored-Value Products In March 2016, the FASB issued guidance related to the recognition of breakage for certain prepaid stored-value products. The standard is effective for annual periods (including interim periods) beginning after December 15, 2017. The Company adopted this guidance as of January 1, 2018. The adoption did not have a significant impact on our consolidated financial position or results of operations. Revenue Recognition In May 2014, the FASB issued authoritative guidance related to revenue recognition from contracts with customers. On January 1, 2018, the Company adopted the guidance using the modified retrospective method. The comparative information presented in the consolidated financial statements was not restated and is reported under the accounting standards in effect for the periods presented. The adoption of this guidance did not have, and is not expected to have, a significant impact on our reported revenues, gross margins, income from operations, or cash flows from operations. Substantially all of the Company’s revenues are recognized when control of product passes to customers when the products are shipped or delivered. Effective January 1, 2018, the Company changed its balance sheet presentation for expected product returns by reporting a product return asset for the right to receive returned products and a returns liability for amounts expected to be refunded to customers as a result of product returns. The product return asset is reported within ‘Prepaid expenses and other assets’ in the consolidated balance sheet. The returns liability and payments received from customers for future delivery of products are reported within ‘Accrued liabilities and other expenses’ in the consolidated balance sheet. The Company elected to account for shipping and handling costs associated with outbound freight after control of product passes to customers as fulfillment costs, which are expensed as incurred and included in ‘Cost of sales’ in our consolidated statements of operations. There is no change to the Company’s comparative reporting of shipping and handling costs as a result of adoption. The Company elected to expense incremental costs to obtain customer contracts, consisting primarily of commission incentives, when incurred and reports these costs within ‘Selling, general and administrative expenses’ in its consolidated statement of operations. There is no change to the Company’s comparative reporting of incremental costs to obtain customer contracts as a result of adoption. The impact of adoption on the January 1, 2018 consolidated balance sheet was:
|  | December 31, 2017 |  | Impact of Adoption (1) |  | January 1, 2018
|  | (in thousands)
Assets: |  |  |  |  |  |
Accounts receivable, net |  | $ | 83,518 |  |  | $ | 1,801 |  |  | $ | 85,319 |
Prepaid expenses and other assets |  | 22,596 |  |  | 1,555 |  |  | 24,151 |
Liabilities: |  |  |  |  |  |
Accrued expenses and other liabilities |  | 84,460 |  |  | 3,356 |  |  | 87,816 |
(1) Prior to adoption, product return assets and return liabilities were reported within ‘Accounts receivable, net’, within the allowance for doubtful accounts. As of the adoption date, the product return assets were reclassified and reported as a component of ‘Prepaid expenses and other assets’, and return liabilities were reclassified to ‘Accrued expenses and other liabilities’ in the Company’s consolidated balance sheet. The impact of the new revenue recognition guidance on our consolidated balance sheet as of December 31, 2018 was:
|  | December 31, 2018
|  | Balances Without Adoption |  | Effects of New Guidance (1) |  | As Reported
|  | (in thousands)
Assets: |  |  |  |  |  |
Accounts receivable, net |  | $ | 93,994 |  |  | $ | 3,633 |  |  | $ | 97,627 |
Prepaid expenses and other assets |  | 19,327 |  |  | 2,796 |  |  | 22,123 |
Liabilities: |  |  |  |  |  |
Accrued expenses and other liabilities |  | 95,742 |  |  | 6,429 |  |  | 102,171 |
(1) The new revenue recognition guidance requires comparative disclosures of the effects of the new guidance on the Company’s consolidated financial statements for all interim periods and the annual period during the year of adoption. The new guidance did not have a significant effect on the Company’s consolidated statements of operations for the year ended December 31, 2018. See Note 10 — Revenues for additional disclosures. New Accounting Pronouncements Not Yet Adopted Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income In February 2018, the FASB issued authoritative guidance that permits reclassification of the income tax effects of the Tax Act on accumulated other comprehensive income (“AOCI”) to retained earnings. This guidance may be adopted retrospectively to each period (or periods) in which the income tax effects of the Tax Act related to items remaining in AOCI are recognized, or at the beginning of the period of adoption. The guidance becomes effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. The Company is currently assessing the adoption method and the impact that adopting this new accounting standard will have on its consolidated financial statements. Leases The Company’s lease portfolio consists primarily of real estate assets, which includes retail, warehouse, distribution center, and office spaces. Some of our retail lease agreements include variable payments based on a percentage of retail sales over contractual amounts, and others include periodic payment adjustment for inflation. Some of our leases also require us to pay maintenance, utilities, real estate taxes, insurance, and other operating expenses associated with the leased space. Based upon the nature of the items leased and the structure of the leases, substantially all of the Company’s leases are classified as operating leases and will continue to be operating leases under the new accounting standard discussed below. In February 2016, the FASB issued authoritative guidance intended to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. Under the new guidance, lessees will be required to recognize a right-of-use asset and a lease liability, measured on a discounted basis, at the commencement date for all leases with terms greater than twelve months. Additionally, this guidance requires disclosures to help investors and other financial statement users to better understand the amount, timing, and uncertainty of cash flows arising from leases, including qualitative and quantitative requirements. This guidance and related amendments are effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. In July 2017, the Company established an implementation team and engaged external advisers and solution providers to develop a multi-phase plan to assess the Company’s leasing arrangements, as well as any changes to accounting policies, processes, or necessary systems. The Company procured the necessary software and services to facilitate adoption of the guidance, completed a detailed review of its leases and other contractual arrangements, assessed its systems and business processes, and related accounting procedures and controls requirements. The Company selected and implemented new software to support adoption of the new standard. The Company has elected all of the available transition practical expedients, including the ‘package of practical expedients’, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. The Company has elected not to apply ‘hindsight’ when adopting the standard for determining the reasonably certain lease term and in assessing impairments. The Company has elected the short-term lease exemption, which means the Company will not recognize a right-of-use asset or liability for leases that qualify for the short-term exemption and will recognize those lease expenses on a straight-line basis over the lease term in its consolidated statements of operations. Further, the Company has elected to not separate lease and non-lease components for all of its leases. The Company will also take a portfolio approach in applying its incremental borrowing rate based upon the information available to the Company at the adoption date to calculate the present value of the lease liabilities over the lease terms. The Company will adopt this new lease standard on January 1, 2019. Additionally, the Company will elect the modified retrospective method of adoption with the cumulative-effect recognized through retained earnings upon adoption and will not restate prior periods. While the Company has not completed its evaluation of impairment of right-of-use assets upon adoption, the Company expects that the rationalization of the company-operated retail stores and impairments incurred in the historical periods prior to adoption will result, at a minimum, in an impairment of retail store right-of use-assets recognized through retained earnings upon adoption. The Company will finalize its accounting assessment and quantitative impact of the adoption during the first quarter of fiscal year 2019. The Company is finalizing its implementation related to policies, processes and internal controls over lease recognition to assist in the application of the new lease standard as well as completing the implementation of new software to address the new lease guidance requirements. We expect that this standard will have a material effect on our financial statements. While we continue to assess all of the effects of the new standard, we expect adoption to result in recognition of significant new right-of-use assets and lease liabilities in the Company’s consolidated balance sheet, and significant new disclosures in the footnotes to the Company’s consolidated financial statements. We are unable to quantify the impact at this time. The Company does not expect that adoption of the standard will have a significant effect on the consolidated operating income or the cash flows of the Company. The Company's bank covenants under our Senior Revolving Credit Facility will not be affected by the adoption of this new standard. We have also entered into additional real estate leases that will commence in 2019 that will be accounted for under the new lease guidance. Future undiscounted obligations related to our real estate leases in effect as of December 31, 2018, as well as those real estate leases entered into prior to December 31, 2018 that contain lease commencement dates after January 1, 2019, are included in the table of future obligations disclosed in Note 14 — Commitments and Contingencies. Implementation Costs Incurred in Cloud Computing Arrangements In August 2018, the FASB issued authoritative guidance related to the treatment of implementation costs incurred in a hosting arrangement that is considered a service contract. This guidance becomes effective for annual reporting periods beginning after December 15, 2019, including interim periods within those periods, with early adoption permitted, and will be applied prospectively to all implementation costs incurred after the date of adoption. The Company does not expect this standard to have a material impact on its consolidated financial statements. Other Pronouncements Other new pronouncements issued but not effective until after December 31, 2018 are not expected to have a material impact on the Company’s consolidated financial statements.

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