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BASIS OF PRESENTATION | 3 Months Ended
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Apr. 01, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
BASIS OF PRESENTATION | BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). All intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all normal and recurring adjustments necessary to state fairly the consolidated financial condition, results of operations, comprehensive income, statement of shareholders’ equity, and cash flows of the Company for the interim periods presented. Except as otherwise disclosed, all such adjustments consist only of those of a normal recurring nature. Operating results for the fiscal quarter ended April 1, 2023 are not necessarily indicative of the results that may be expected for the current fiscal year ending December 30, 2023. The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The accompanying condensed consolidated balance sheet as of December 31, 2022 was derived from the Company’s audited consolidated financial statements included in its most recently filed Annual Report on Form 10-K. Certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC and the instructions to Form 10-Q. We have recast the consolidated statement of operations for the fiscal quarter ended April 2, 2022 to conform to our current presentation of combining Adverse purchase commitments within Cost of goods sold. Inventories Our inventories, which consist primarily of finished goods, are stated at the lower of cost (first-in, first-out basis for wholesale inventory and average cost for retail inventories) or net realizable value. Inventories at April 1, 2023 were $613.9 million compared to $679.7 million at April 2, 2022 and $744.6 million at December 31, 2022. The decrease of $65.8 million, or 9.7%, at April 1, 2023 compared to April 2, 2022 is primarily due to decreased in-transit inventory, partially offset by longer holding periods for inventory to be sold in future periods and increased product costs. Due to the seasonal nature of our operations, the inventories balance at April 1, 2023 is not comparable to the inventories balance at December 31, 2022. Adjustments to bring inventory to net realizable value as a result of obsolete, damaged, and excess inventory at April 1, 2023 increased 59.9% compared to April 2, 2022. These adjustments as a percentage of inventory have remained relatively stable due to the overall quality and planned use of the inventory. The liability for adverse inventory and fabric purchase commitments increased from $0.5 million as of April 2, 2022 to $5.0 million as of April 1, 2023, primarily due to lower estimated customer demand. Supply Chain Financing Program We facilitate a voluntary supply chain finance (“SCF”) program through participating financial institutions. This SCF program enables our suppliers to sell their receivables due from the Company to participating financial institutions at their discretion. As of April 1, 2023, the SCF program has a $70.0 million revolving capacity. We are not a party to the agreements between the participating financial institutions and the suppliers in connection with the SCF program. The range of payment terms we negotiate with our suppliers is consistent, irrespective of whether a supplier participates in the SCF program. No guarantees are provided by the Company or any of our subsidiaries under the SCF program. The amounts payable to the participating financial institution for suppliers who voluntarily participate in the SCF program are included in Accounts payable on our consolidated statement balance sheets. Amounts under the SCF program included in Account payable were $7.8 million, $16.5 million, and $20.7 million as of April 1, 2023, December 31, 2022, and April 2, 2022, respectively. Payments made under the SCF program, like payments of other accounts payable, are a reduction to our operating cash flow. Accounting Policies The accounting policies the Company follows are set forth in its most recently filed Annual Report on Form 10-K. There have been no material changes to these accounting policies. New accounting pronouncements adopted at the beginning of fiscal 2023 are noted below. Recent Accounting Pronouncements Supplier Finance Programs (ASU 2022-04) In September 2022, the FASB issued Accounting Standards Update No. 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations (“ASU 2022-04”). This new guidance is designed to enhance transparency around supplier finance programs by requiring new disclosures that would allow a user of the financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. ASU 2022-04 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the disclosure of the rollforward of annual activity, which is effective for fiscal years beginning after December 15, 2023. The effect of the adoption of ASU 2022-04 was not material to the Company’s consolidated financial statements.

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