Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Jun. 27, 2020 | Jul. 24, 2020 | |
Document and Entity Information | ||
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity File Number | 001-36161 | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 26-0565401 | |
Entity Address, Address Line One | 500 Freeport Parkway | |
Entity Address, City or Town | Coppell | |
Entity Address, State or Province | TX | |
Entity Address, Postal Zip Code | 75019 | |
City Area Code | 972 | |
Local Phone Number | 538-6000 | |
Title of 12(b) Security | Common Stock, par value $0.01 per share | |
Trading Symbol | TCS | |
Security Exchange Name | NYSE | |
Entity Registrant Name | Container Store Group, Inc. | |
Entity Central Index Key | 0001411688 | |
Current Fiscal Year End Date | --04-03 | |
Document Fiscal Year Focus | 2019 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 27, 2020 | |
Entity Interactive Data Current | Yes | |
Amendment Flag | false | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Common Stock Outstanding | 50,362,468 | |
Document Fiscal Period Focus | Q1 | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false |
Consolidated balance sheets
Consolidated balance sheets - USD ($) $ in Thousands | Jun. 27, 2020 | Mar. 28, 2020 | Jun. 29, 2019 |
Current assets: | |||
Cash | $ 63,508 | $ 67,755 | $ 11,404 |
Accounts receivable, net | 25,369 | 24,721 | 27,821 |
Inventory | 109,182 | 124,207 | 120,512 |
Prepaid expenses | 8,632 | 8,852 | 11,129 |
Income taxes receivable | 3,391 | 4,724 | 1,124 |
Other current assets | 14,235 | 11,907 | 11,867 |
Total current assets | 224,317 | 242,166 | 183,857 |
Noncurrent assets: | |||
Property and equipment, net | 141,504 | 147,540 | 152,448 |
Noncurrent operating lease assets | 311,911 | 347,170 | 353,490 |
Goodwill | 202,815 | 202,815 | 202,815 |
Trade names | 225,100 | 222,769 | 225,182 |
Deferred financing costs, net | 153 | 170 | 223 |
Noncurrent deferred tax assets, net | 2,411 | 2,311 | 1,898 |
Other assets | 2,250 | 1,873 | 1,607 |
Total noncurrent assets | 886,144 | 924,648 | 937,663 |
Total assets | 1,110,461 | 1,166,814 | 1,121,520 |
Current liabilities: | |||
Accounts payable | 51,656 | 53,647 | 55,387 |
Accrued liabilities | 75,962 | 66,046 | 68,507 |
Revolving lines of credit | 5,533 | 9,050 | 9,951 |
Current portion of long-term debt | 6,952 | 6,952 | 6,931 |
Current operating lease liabilities | 53,165 | 62,476 | 58,664 |
Income taxes payable | 198 | 2,011 | |
Total current liabilities | 193,466 | 198,171 | 201,451 |
Noncurrent liabilities: | |||
Long-term debt | 296,209 | 317,485 | 272,556 |
Noncurrent operating lease liabilities | 301,399 | 317,284 | 327,221 |
Noncurrent deferred tax liabilities, net | 45,053 | 50,178 | 50,182 |
Other long-term liabilities | 11,304 | 11,988 | 8,903 |
Total noncurrent liabilities | 653,965 | 696,935 | 658,862 |
Total liabilities | 847,431 | 895,106 | 860,313 |
Commitments and contingencies (Note 6) | |||
Shareholders' equity: | |||
Common stock, $0.01 par value, 250,000,000 shares authorized; 48,491,369 shares issued at June 27, 2020; 48,316,559 shares issued at March 28, 2020; 48,283,197 shares issued at June 29, 2019 | 485 | 483 | 483 |
Additional paid-in capital | 867,332 | 866,667 | 864,386 |
Accumulated other comprehensive loss | (28,970) | (36,295) | (25,929) |
Retained deficit | (575,817) | (559,147) | (577,733) |
Total shareholders' equity | 263,030 | 271,708 | 261,207 |
Total liabilities and shareholders' equity | $ 1,110,461 | $ 1,166,814 | $ 1,121,520 |
Consolidated balance sheets (Pa
Consolidated balance sheets (Parenthetical) - $ / shares | Jun. 27, 2020 | Mar. 28, 2020 | Jun. 29, 2019 |
Consolidated balance sheets | |||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 250,000,000 | 250,000,000 | 250,000,000 |
Common stock, shares issued | 48,491,369 | 48,316,559 | 48,283,197 |
Consolidated statements of oper
Consolidated statements of operations - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 27, 2020 | Jun. 29, 2019 | |
Consolidated statements of operations | ||
Net sales | $ 151,686 | $ 209,520 |
Cost of sales (excluding depreciation and amortization) | 73,447 | 89,713 |
Gross profit | 78,239 | 119,807 |
Selling, general, and administrative expenses (excluding depreciation and amortization) | 86,265 | 109,029 |
Stock-based compensation | 832 | 811 |
Pre-opening costs | 9 | 477 |
Depreciation and amortization | 8,949 | 9,706 |
Other expenses (income) | 809 | |
Other Income | 27 | |
Gain on disposal of assets | (7) | (4) |
Loss from operations | (18,618) | (185) |
Interest expense, net | 4,950 | 5,709 |
Loss before taxes | (23,568) | (5,894) |
Benefit for income taxes | (6,898) | (1,795) |
Net loss | $ (16,670) | $ (4,099) |
Net loss per common share - basic and diluted | $ (0.34) | $ (0.08) |
Weighted-average common shares - basic and diluted (in shares) | 48,389,205 | 48,231,148 |
Consolidated statements of comp
Consolidated statements of comprehensive income - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 27, 2020 | Jun. 29, 2019 | |
Consolidated statements of comprehensive income | ||
Net loss | $ (16,670) | $ (4,099) |
Unrealized loss on financial instruments, net of tax provision (benefit) of $1,393 and ($18) | 3,961 | (128) |
Pension liability adjustment, net of $0 | (219) | (2) |
Foreign currency translation adjustment | 3,583 | 333 |
Comprehensive loss | $ (9,345) | $ (3,896) |
Consolidated statements of co_2
Consolidated statements of comprehensive income (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 27, 2020 | Jun. 29, 2019 | |
Consolidated statements of comprehensive income | ||
Unrealized gain (loss) on financial instruments, net of tax provision (benefit) | $ 1,393 | $ (18) |
Pension liability adjustment, taxes | $ 0 | $ 0 |
Consolidated statements of cash
Consolidated statements of cash flows - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 27, 2020 | Jun. 29, 2019 | |
Operating activities | ||
Net loss | $ (16,670) | $ (4,099) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 8,949 | 9,706 |
Stock-based compensation | 832 | 811 |
Gain on disposal of assets | (7) | (4) |
Deferred tax benefit | (7,178) | (1,891) |
Non-cash interest | 465 | 465 |
Other | 104 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | 204 | (2,200) |
Inventory | 16,085 | (11,923) |
Prepaid expenses and other assets | (1,841) | (670) |
Accounts payable and accrued liabilities | 11,651 | 2,275 |
Net change in lease assets and liabilities | 9,851 | (152) |
Income taxes | 1,560 | (1,009) |
Other noncurrent liabilities | 1,609 | 370 |
Net cash provided by (used in) operating activities | 25,614 | (8,321) |
Investing activities | ||
Additions to property and equipment | (3,913) | (8,703) |
Proceeds from sale of property and equipment | 6 | 4 |
Net cash used in investing activities | (3,907) | (8,699) |
Financing activities | ||
Borrowings on revolving lines of credit | 11,340 | 17,961 |
Payments on revolving lines of credit | (15,288) | (13,599) |
Borrowings on long-term debt | 19,000 | |
Payments on long-term debt | (21,739) | (1,741) |
Payment of taxes with shares withheld upon restricted stock vesting | (406) | (347) |
Net cash (used in) provided by financing activities | (26,093) | 21,274 |
Effect of exchange rate changes on cash | 139 | (214) |
Net (decrease) increase in cash | (4,247) | 4,040 |
Cash at beginning of fiscal period | 67,755 | 7,364 |
Cash at end of fiscal period | 63,508 | 11,404 |
Supplemental information for non-cash investing and financing activities: | ||
Purchases of property and equipment (included in accounts payable) | $ 407 | $ 1,590 |
Consolidated statements of shar
Consolidated statements of shareholders' equity - USD ($) $ in Thousands | Common stock | Additional paid-in capital | Accumulated other comprehensive (loss) income | Retained deficit | Total |
Common stock, par value (in dollars per share) | $ 0.01 | ||||
Balance at the beginning of period at Mar. 30, 2019 | $ 481 | $ 863,978 | $ (26,132) | $ (573,634) | $ 264,693 |
Balance (in shares) at Mar. 30, 2019 | 48,142,319 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Net loss | (4,099) | (4,099) | |||
Stock-based compensation | 811 | 811 | |||
Vesting of restricted stock awards | $ 2 | (56) | (54) | ||
Vesting of restricted stock awards (in shares) | 140,878 | ||||
Taxes related to net share settlement of restricted stock awards | (347) | (347) | |||
Foreign currency translation adjustment | 333 | 333 | |||
Unrealized gain on financial instruments, net of tax provision | (128) | (128) | |||
Pension liability adjustment, net of $0 | (2) | (2) | |||
Balance at the end of period at Jun. 29, 2019 | $ 483 | 864,386 | (25,929) | (577,733) | $ 261,207 |
Balance (in shares) at Jun. 29, 2019 | 48,283,197 | ||||
Common stock, par value (in dollars per share) | $ 0.01 | ||||
Common stock, par value (in dollars per share) | $ 0.01 | ||||
Balance at the beginning of period at Mar. 28, 2020 | $ 483 | 866,667 | (36,295) | (559,147) | $ 271,708 |
Balance (in shares) at Mar. 28, 2020 | 48,316,559 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Net loss | (16,670) | (16,670) | |||
Stock-based compensation | 832 | 832 | |||
Vesting of restricted stock awards | $ 2 | (2) | 0 | ||
Vesting of restricted stock awards (in shares) | 174,810 | ||||
Taxes related to net share settlement of restricted stock awards | (165) | (165) | |||
Foreign currency translation adjustment | 3,583 | 3,583 | |||
Unrealized gain on financial instruments, net of tax provision | 3,961 | 3,961 | |||
Pension liability adjustment, net of $0 | (219) | (219) | |||
Balance at the end of period at Jun. 27, 2020 | $ 485 | $ 867,332 | $ (28,970) | $ (575,817) | $ 263,030 |
Balance (in shares) at Jun. 27, 2020 | 48,491,369 | ||||
Common stock, par value (in dollars per share) | $ 0.01 |
Consolidated statements of sh_2
Consolidated statements of shareholders' equity (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |||
Jun. 27, 2020 | Jun. 29, 2019 | Mar. 28, 2020 | Mar. 30, 2019 | |
Consolidated statements of shareholders' equity | ||||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.01 | $ 0.01 |
Unrealized gain (loss) on financial instruments, taxes | $ 1,393 | $ (18) | ||
Pension liability adjustment, taxes | $ 0 | $ 0 |
Description of business and bas
Description of business and basis of presentation | 3 Months Ended |
Jun. 27, 2020 | |
Description of business and basis of presentation | |
Description of business and basis of presentation | The Container Store Group, Inc. Notes to consolidated financial statements (unaudited) (In thousands, except share amounts and unless otherwise stated) June 27, 2020 1. Description of business and basis of presentation These financial statements should be read in conjunction with the financial statement disclosures in our Annual Report on Form 10-K for the fiscal year ended March 28, 2020, filed with the Securities and Exchange Commission (“SEC”) on June 17, 2020 (the “2019 Annual Report on Form 10-K”). The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). We use the same accounting policies in preparing quarterly and annual financial statements. All adjustments necessary for a fair presentation of quarterly operating results are reflected herein and are of a normal, recurring nature. Certain items in these consolidated financial statements have been reclassified to conform to the current period presentation. All references herein to “fiscal 2020” refer to the 53-week fiscal year ending April 3, 2021, “fiscal 2019” refer to the 52-week fiscal year ended March 28, 2020, and “fiscal 2018” refer to the 52-week fiscal year ended March 30, 2019. Description of business The Container Store, Inc. was founded in 1978 in Dallas, Texas, as a retailer with a mission to provide customers with storage and organization solutions through an assortment of innovative products and unparalleled customer service. In 2007, The Container Store, Inc. was sold to The Container Store Group, Inc. (the “Company”), a holding company, of which a majority stake was purchased by Leonard Green and Partners, L.P. (“LGP”). On November 6, 2013, the Company completed its initial public offering (the “IPO”). As the majority shareholder, LGP retains a controlling interest in the Company. As of June 27, 2020, The Container Store, Inc. (“TCS”) operates 93 stores with an average size of approximately 25,000 square feet (19,000 selling square feet) in 33 states and the District of Columbia. The Container Store, Inc. also offers all of its products directly to its customers (including business customers), through its website and call center. The Container Store, Inc.’s wholly-owned Swedish subsidiary, Elfa International AB (“Elfa”), designs and manufactures component-based shelving and drawer systems and made-to-measure sliding doors. elfa ® Business Update Related to Coronavirus The novel coronavirus (“COVID-19”) pandemic had a negative impact on the Company’s first quarter of fiscal 2020 operations and financial results. We experienced significant disruptions in store operations, including the temporary closure of all stores, which adversely affected our business, results of operations and financial condition, and saw a significant increase in our curbside pick-up and online selling. As of June 27, 2020, all 93 stores were reopened and operating at close to normalized schedules, with limited capacity. Therefore, we expect online sales to moderate, compared to the significant increase experienced while our stores were temporarily closed, as customers shift to purchasing in-store. However, we will continue to review local, state, and federal mandates as we may need to temporarily close some or all of the stores again, as COVID-19 and other uncertainties continue to unfold. The Company has taken actions to tightly manage costs, working capital and capital expenditures to preserve the Company’s financial health. As previously announced, the Company furloughed approximately 2,800 employees, primarily in its stores, as well as a portion of corporate employees, and reduced the base salaries of its executive officers, due to COVID-19. As of the date of this filing, we have approximately 3,500 active employees. We have also prioritized the health and safety of our customers and employees by implementing strict health and safety protocols in our stores, including intensive and frequent cleaning procedures and limitations on the number of customers shopping in each store at any given time. Furthermore, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020 and the Company is implementing applicable benefits of the CARES Act, such as deferring employer payroll taxes and evaluating potential employee retention credits. We will continue to monitor guidance from the Centers for Disease Control and Prevention, local, state and federal guidance, and the impact of COVID-19 on the Company's business, results of operations, financial position and cash flows. Seasonality The Company’s business is moderately seasonal in nature and, therefore, the results of operations for the thirteen weeks ended June 27, 2020 are not necessarily indicative of the operating results for the full year. The Company has historically realized a higher portion of net sales, operating income, and cash flows from operations in the fourth fiscal quarter, attributable primarily to the timing and impact of Our Annual elfa ® Recent accounting pronouncements In July 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . ASU 2016-13 changes how to recognize expected credit losses on financial assets. The standard requires a more timely recognition of credit losses on loans and other financial assets and also provides additional transparency about credit risk. The current credit loss standard generally requires that a loss actually be incurred before it is recognized, while the new standard will require recognition of full lifetime expected losses upon initial recognition of the financial instrument. Originally, ASU 2016-13 was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. An entity should apply the standard by recording a cumulative effect adjustment to retained earnings upon adoption. In November 2019, FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) . This ASU defers the effective date of ASU 2016-13 for public companies that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is planning to adopt this standard in the first quarter of fiscal 2023. In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, The Company is planning to adopt this standard in the first quarter of fiscal 2021. In March 2020, the FASB issued, ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, issuance for all entities. The adoption of this standard did not result in a material impact to the Company’s financial statements. |
Detail of certain balance sheet
Detail of certain balance sheet accounts | 3 Months Ended |
Jun. 27, 2020 | |
Detail of certain balance sheet accounts | |
Detail of certain balance sheet accounts | 2. Detail of certain balance sheet accounts June 27, March 28, June 29, 2020 2020 2019 Accounts receivable, net: Trade receivables, net $ 14,678 $ 20,217 $ 15,366 Credit card receivables 9,297 3,326 10,677 Other receivables 1,394 1,178 1,778 $ 25,369 $ 24,721 $ 27,821 Inventory: Finished goods $ 103,880 $ 118,981 $ 115,536 Raw materials 4,697 4,523 4,321 Work in progress 605 703 655 $ 109,182 $ 124,207 $ 120,512 Accrued liabilities: Accrued payroll, benefits and bonuses $ 20,214 $ 19,112 $ 21,684 Unearned revenue 14,554 12,976 15,297 Accrued transaction and property tax 13,099 12,509 11,484 Gift cards and store credits outstanding 9,035 9,208 9,010 Accrued lease liabilities 1,311 49 187 Accrued interest 2,633 1,483 1,796 Accrued sales returns 8,165 1,650 2,531 Other accrued liabilities 6,951 9,059 6,518 $ 75,962 $ 66,046 $ 68,507 Contract balances as a result of transactions with customers primarily consist of trade receivables included in Accounts receivable, net, Unearned revenue included in Accrued liabilities, and Gift cards and store credits outstanding included in Accrued liabilities in the Company's Consolidated Balance Sheets provided above. Unearned revenue was $12,976 as of March 28, 2020, and $9,855 was subsequently recognized into revenue for the thirteen weeks ended June 27, 2020. Gift cards and store credits outstanding was $9,208 as of March 28, 2020, and $869 was subsequently recognized into revenue for the thirteen weeks ended June 27, 2020. See Note 10 for disaggregated revenue disclosures. |
Leases
Leases | 3 Months Ended |
Jun. 27, 2020 | |
Leases | |
Leases | 3. Leases We conduct all of our U.S. operations from leased facilities that include corporate headquarters, warehouse facilities, and 93 store locations. The corporate headquarters, warehouse facilities, and stores are under operating leases that generally expire over the next 1 to 20 years. We also lease computer hardware under operating leases that generally expire over the next few years. In most cases, management expects that in the normal course of business, leases will be renewed or replaced by other leases. The Company also has finance leases at our Elfa segment which are immaterial. Lease expense on operating leases is recorded on a straight-line basis over the term of the lease, commencing on the date the Company takes possession of the leased property and is recorded in selling, general and administrative expenses (“SG&A”). We consider lease payments that cannot be predicted with reasonable certainty upon lease commencement to be variable lease payments, which are recorded as incurred each period and are excluded from our calculation of lease liabilities. Our variable lease payments include lease payments that are based on a percentage of sales. Upon lease commencement, we recognize the lease liability measured at the present value of the fixed future minimum lease payments. We have elected the practical expedient to not separate lease and non-lease components. Therefore, lease payments included in the measurement of the lease liability include all fixed payments in the lease arrangement. We record a right-of-use asset for an amount equal to the lease liability, increased for any prepaid lease costs and initial direct costs and reduced by any lease incentives. We remeasure the lease liability and right-of-use asset when a change to our future minimum lease payments occurs. Key assumptions and judgments included in the determination of the lease liability include the discount rate applied to present value the future lease payments and the exercise of renewal options. Many of our leases contain renewal options. The option periods are generally not included in the lease term used to measure our lease liabilities and right-of-use assets upon commencement as exercise of the options is not reasonably certain. We remeasure the lease liability and right-of-use asset when we are reasonably certain to exercise a renewal option. During the first quarter of fiscal 2020, the Company renegotiated terms with landlords as a result of the COVID-19 pandemic, which resulted in the deferral of $11,900 of certain cash lease payments and the modification of certain lease terms for a substantial portion of our leased properties. Under ASC 842, changes to lease payments that are not stipulated in the original lease contract are generally accounted for as lease modifications. In April 2020, the FASB issued guidance related to the relief for lease concessions offered as a result of the effects of the COVID-19 pandemic and does not require these concessions to be accounted for in accordance with the lease modification guidance in ASC 842. Under existing lease guidance, the Company would determine, on a lease by lease basis, if a lease concession was the result of a new arrangement with the tenant or if it was under the enforceable rights and obligations within the lease agreement. Under the relief guidance, a company can account for the concessions (i) as if no changes to the existing lease contract were made or (ii) as a variable lease adjustment. The Company did not apply the lease modification relief , and the remeasurement impact is included in the Company’s condensed consolidated financial statements as of and for the three months ended June 27, 2020. Discount Rate Our leases do not provide information about the rate implicit in the lease. Therefore, we utilize an incremental borrowing rate to calculate the present value of our future lease obligations. The incremental borrowing rate represents the rate of interest we would have to pay on a collateralized borrowing, for an amount equal to the lease payments, over a similar term and in a similar economic environment. The components of lease costs for the thirteen weeks ended June 27, 2020 and June 29, 2019 were as follows: Thirteen Weeks Ended June 27, 2020 June 29, 2019 Operating lease costs $ 22,500 $ 22,364 Variable lease costs 32 472 Total lease costs $ 22,532 $ 22,836 We do not have sublease income and do not recognize lease assets or liabilities for short-term leases, defined as operating leases with initial terms of less than 12 months. Our short-term lease costs were not material for the thirteen weeks ended June 27, 2020. Supplemental cash flow information related to our leases for the thirteen weeks ended June 27, 2020 and June 29, 2019 were as follows: Thirteen Weeks Ended June 27, 2020 June 29, 2019 Cash paid for amounts included in the measurement of operating lease liabilities $ 11,434 $ 22,168 Additions to right-of-use assets $ 28,943 $ 15,565 Weighted average remaining operating lease term and incremental borrowing rate as of June 27, 2020 and June 29, 2019 were as follows: Thirteen Weeks Ended June 27, 2020 June 29, 2019 Weighted average remaining lease term (years) 7.1 7.3 Weighted average incremental borrowing rate 14.5 % 8.8 % As of June 27, 2020, future minimum lease payments under our operating lease liabilities were as follows: Operating leases (1) Within 1 year (remaining) $ 73,320 2 years 91,012 3 years 77,194 4 years 69,586 5 years 62,266 Thereafter 192,157 Total lease payments $ 565,535 Less amount representing interest (210,971) Total lease liability $ 354,564 Less current lease liability (53,165) Total noncurrent lease liability $ 301,399 (1) Operating lease payments exclude $12,125 of legally binding minimum lease payments for leases signed but not yet commenced. |
Net income per common share
Net income per common share | 3 Months Ended |
Jun. 27, 2020 | |
Net income per common share | |
Net income per common share | 4. Net loss per common share Basic net loss per common share is computed as net loss divided by the weighted-average number of common shares for the period. Net loss per common share – diluted is computed as net loss divided by the weighted-average number of common shares for the period plus common stock equivalents consisting of shares subject to stock-based awards with exercise prices less than or equal to the average market price of the Company’s common stock for the period, to the extent their inclusion would be dilutive. Potentially dilutive securities are excluded from the computation of net loss per common share – diluted if their effect is anti-dilutive. The following is a reconciliation of net loss and the number of shares used in the basic and diluted net loss per common share calculations: Thirteen Weeks Ended June 27, June 29, 2020 2019 Numerator: Net loss $ (16,670) $ (4,099) Denominator: Weighted-average common shares — basic and diluted 48,389,205 48,231,148 Net loss per common share — basic and diluted $ (0.34) $ (0.08) Antidilutive securities not included: Stock options outstanding 2,545,383 2,497,573 Nonvested restricted stock awards 674,176 197,687 |
Income taxes
Income taxes | 3 Months Ended |
Jun. 27, 2020 | |
Income taxes | |
Income taxes | 5. Income taxes The benefit for income taxes in the thirteen weeks ended June 27, 2020 was $6,898 as compared to a benefit of $1,795 in the thirteen weeks ended June 29, 2019. The effective tax rate for the thirteen weeks ended June 27, 2020 was 29.3%, as compared to 30.5% in the thirteen weeks ended June 29, 2019. During the thirteen weeks ended June 27, 2020, the effective tax rate rose above the U.S. statutory rate of 21%, primarily due to stock-based compensation, U.S. state income taxes, and the impact of the global intangible low-taxed income (“GILTI”) provision. During the thirteen weeks ended June 29, 2019, the effective tax rate rose above the U.S. statutory rate primarily due to the impact of the GILTI provision and U.S. state income taxes. |
Commitments and contingencies
Commitments and contingencies | 3 Months Ended |
Jun. 27, 2020 | |
Commitments and contingencies | |
Commitments and contingencies | 6. Commitments and contingencies In connection with insurance policies and other contracts, the Company has outstanding standby letters of credit totaling $3,635 as of June 27, 2020. The Company is subject to ordinary litigation and routine reviews by regulatory bodies that are incidental to its business, none of which is expected to have a material adverse effect on the Company’s financial condition, results of operations, or cash flows on an individual basis or in the aggregate. |
Accumulated other comprehensive
Accumulated other comprehensive loss | 3 Months Ended |
Jun. 27, 2020 | |
Accumulated other comprehensive loss | |
Accumulated other comprehensive loss | 7. Accumulated other comprehensive loss Accumulated other comprehensive loss (“AOCL”) consists of changes in our foreign currency forward contracts, pension liability adjustment, and foreign currency translation. The components of AOCL, net of tax, are shown below for the thirteen weeks ended June 27, 2020: Foreign currency Pension Foreign hedge liability currency instruments adjustment translation Total Balance at March 28, 2020 $ (5,563) $ (2,611) $ (28,121) $ (36,295) Other comprehensive income (loss) before reclassifications, net of tax 3,617 (219) 3,583 6,981 Amounts reclassified to earnings, net of tax 344 — — 344 Net current period other comprehensive income (loss) 3,961 (219) 3,583 7,325 Balance at June 27, 2020 $ (1,602) $ (2,830) $ (24,538) $ (28,970) Amounts reclassified from AOCL to earnings for the foreign currency forward contracts category are generally included in cost of sales in the Company’s consolidated statements of operations. For a description of the Company’s use of foreign currency forward contracts, refer to Note 8. |
Foreign currency forward contra
Foreign currency forward contracts | 3 Months Ended |
Jun. 27, 2020 | |
Foreign currency forward contracts. | |
Foreign currency forward contracts | 8. Foreign currency forward contracts The Company’s international operations and purchases of inventory products from foreign suppliers are subject to certain opportunities and risks, including foreign currency fluctuations. In the TCS segment, we utilize foreign currency forward contracts in Swedish krona to stabilize our retail gross margins and to protect our domestic operations from downward currency exposure by hedging purchases of inventory from our wholly-owned subsidiary, Elfa. Forward contracts in the TCS segment are designated as cash flow hedges, as defined by ASC 815. In the Elfa segment, we utilize foreign currency forward contracts to hedge purchases, primarily of raw materials, that are transacted in currencies other than Swedish krona, which is the functional currency of Elfa. Forward contracts in the Elfa segment are economic hedges and are not designated as cash flow hedges as defined by ASC 815. During the thirteen weeks ended June 27, 2020 and June 29, 2019, the TCS segment used forward contracts for 63% and 100% of inventory purchases in Swedish krona, respectively. Generally, the Company’s foreign currency forward contracts have terms from 1 to 24 months and require the Company to exchange currencies at agreed-upon rates at settlement. The counterparties to the contracts consist of a limited number of major domestic and international financial institutions. The Company does not hold or enter into financial instruments for trading or speculative purposes. The Company records its foreign currency forward contracts on a gross basis and generally does not require collateral from these counterparties because it does not expect any losses from credit exposure. The Company records all foreign currency forward contracts on its consolidated balance sheet at fair value. The Company accounts for its foreign currency hedging instruments in the TCS segment as cash flow hedges, as defined. Changes in the fair value of the foreign currency hedging instruments that are considered to be effective, as defined, are recorded in other comprehensive loss until the hedged item (inventory) is sold to the customer, at which time the deferred gain or loss is recognized through cost of sales. Any portion of a change in the foreign currency hedge instrument’s fair value that is considered to be ineffective, as defined, or that the Company has elected to exclude from its measurement of effectiveness, is immediately recorded in earnings as cost of sales. The Company assessed the effectiveness of the foreign currency hedge instruments and determined the foreign currency hedge instruments were highly effective during the thirteen weeks ended June 27, 2020 and June 29, 2019. Forward contracts not designated as hedges in the Elfa segment are adjusted to fair value as SG&A on the consolidated statements of operations; however, during the thirteen weeks ended June 27, 2020, the Company did not The Company had a $1,602 loss in accumulated other comprehensive loss related to foreign currency hedge instruments at June 27, 2020, of which $688 represents an unrealized loss for settled foreign currency hedge instruments related to inventory on hand as of June 27, 2020. The Company expects the unrealized loss of $688, net of taxes, to be reclassified into earnings over the next 12 months as the underlying inventory is sold to the end customer. The change in fair value of the Company’s foreign currency hedge instruments that qualify as cash flow hedges and are included in accumulated other comprehensive loss, net of taxes, are presented in Note 7 of these financial statements. |
Fair value measurements
Fair value measurements | 3 Months Ended |
Jun. 27, 2020 | |
Fair value measurements | |
Fair value measurements | 9. Fair value measurements Under GAAP, the Company is required to a) measure certain assets and liabilities at fair value or b) disclose the fair values of certain assets and liabilities recorded at cost. Accounting standards define fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date. Fair value is calculated assuming the transaction occurs in the principal or most advantageous market for the asset or liability and includes consideration of non-performance risk and credit risk of both parties. Accounting standards pertaining to fair value establish a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value. These tiers include: ● Level 1—Valuation inputs are based upon unadjusted quoted prices for identical instruments traded in active markets. ● Level 2—Valuation inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. ● Level 3—Valuation inputs are unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are determined using model-based techniques that include option pricing models, discounted cash flow models and similar techniques. As of June 27, 2020, March 28, 2020 and June 29, 2019, the Company held certain items that are required to be measured at fair value on a recurring basis. These included the nonqualified retirement plan, which consists of investments purchased by employee contributions to retirement savings accounts. The fair value amount of the nonqualified retirement plan is measured at fair value using the net asset value per share practical expedient, and therefore, is not classified in the fair value hierarchy. The Company also considers counterparty credit risk and its own credit risk in its determination of all estimated fair values. The Company has consistently applied these valuation techniques in all periods presented and believes it has obtained the most accurate information available for the types of contracts it holds. The following items are measured at fair value on a recurring basis, subject to the disclosure requirements of ASC 820, Fair Value Measurements June 27, March 28, June 29, Description Balance Sheet Location 2020 2020 2019 Assets Nonqualified retirement plan N/A Other current assets $ 5,350 $ 5,066 $ 5,673 Total assets $ 5,350 $ 5,066 $ 5,673 The fair value of long-term debt was estimated using quoted prices as well as recent transactions for similar types of borrowing arrangements (Level 2 valuations). As of June 27, 2020, March 28, 2020 and June 29, 2019, the estimated fair value of the Company’s long-term debt, including current maturities, was as follows: June 27, March 28, June 29, 2020 2020 2019 Senior secured term loan facility $ 206,728 $ 198,041 $ 254,729 2019 Elfa revolving credit facility 5,533 9,050 9,951 Obligations under finance leases 254 274 262 Revolving credit facility 58,000 78,000 31,000 Total fair value of debt 270,515 285,365 295,942 |
Segment reporting
Segment reporting | 3 Months Ended |
Jun. 27, 2020 | |
Segment reporting | |
Segment reporting | 10. Segment reporting The Company’s reportable segments were determined on the same basis as how management evaluates performance internally by the Chief Operating Decision Maker (“CODM”). The Company has determined that the Chief Executive Officer is the CODM and the Company’s two reportable segments consist of TCS and Elfa. The TCS segment includes the Company’s retail stores, website and call center, as well as the installation and organization services business. The Elfa segment includes the manufacturing business that produces the elfa ® brand products that are sold domestically exclusively through the TCS segment, as well as on a wholesale basis in approximately 30 countries around the world with a concentration in the Nordic region of Europe. The intersegment sales in the Elfa column represent elfa ® product sales to the TCS segment. These sales and the related gross margin on merchandise recorded in TCS inventory balances at the end of the period are eliminated for consolidation purposes in the Eliminations column. The net sales to third parties in the Elfa column represent sales to customers outside of the United States. The Company has determined that adjusted earnings before interest, tax, depreciation, and amortization (“Adjusted EBITDA”) is the profit or loss measure that the CODM uses to make resource allocation decisions and evaluate segment performance. Adjusted EBITDA assists management in comparing our performance on a consistent basis for purposes of business decision-making by removing the impact of certain items that management believes do not directly reflect our core operations and, therefore, are not included in measuring segment performance. Adjusted EBITDA is calculated in accordance with the Senior Secured Term Loan Facility and the Revolving Credit Facility and we define Adjusted EBITDA as net loss before interest, taxes, depreciation and amortization, certain non-cash items, and other adjustments that we do not consider in our evaluation of ongoing operating performance from period to period. Thirteen Weeks Ended June 27, 2020 TCS Elfa Eliminations Total Net sales to third parties $ 139,386 $ 12,300 $ — $ 151,686 Intersegment sales — 8,691 (8,691) — Adjusted EBITDA 1,725 2,937 (199) 4,463 Interest expense, net 4,848 102 — 4,950 Assets (1) 1,016,425 100,834 (6,798) 1,110,461 Thirteen Weeks Ended June 29, 2019 TCS Elfa Eliminations Total Net sales to third parties $ 195,076 $ 14,444 $ — $ 209,520 Intersegment sales — 11,550 (11,550) — Adjusted EBITDA 10,234 2,088 (1,679) 10,643 Interest expense, net 5,614 95 — 5,709 Assets (1) 1,018,984 107,678 (5,142) 1,121,520 (1) Tangible assets in the Elfa column are located outside of the United States. A reconciliation of loss before taxes to Adjusted EBITDA is set forth below: Thirteen Weeks Ended June 27, June 29, 2020 2019 Loss before taxes $ (23,568) $ (5,894) Add: Depreciation and amortization 8,949 9,706 Interest expense, net 4,950 5,709 Pre-opening costs (a) 9 477 Non-cash lease expense (b) 11,138 (64) Stock-based compensation (c) 832 811 Foreign exchange losses (gains) (d) 121 (75) COVID-19 costs (e) 1,223 — Severance and other costs (f) 809 (27) Adjusted EBITDA $ 4,463 $ 10,643 (a) Non-capital expenditures associated with opening new stores and relocating stores, including marketing expenses, travel and relocation costs, and training costs. We adjust for these costs to facilitate comparisons of our performance from period to period. (b) Reflects the extent to which our annual GAAP operating lease expense has been above or below our cash operating lease payments. The amount varies depending on the average age of our lease portfolio (weighted for size), as our GAAP operating lease expense on younger leases typically exceeds our cash operating lease payments, while our GAAP operating lease expense on older leases is typically less than our cash operating lease payments. Non-cash lease expense increased due to renegotiated terms with landlords during the first quarter of fiscal 2020 due to COVID-19 that resulted in deferral of $11,900 of certain cash lease payments a nd the modification of certain lease terms for a substantial portion of our leased properties. (c) Non-cash charges related to stock-based compensation programs, which vary from period to period depending on volume and vesting timing of awards. We adjust for these charges to facilitate comparisons from period to period. (d) Realized foreign exchange transactional gains/losses our management does not consider in our evaluation of our ongoing operations. (e) Includes incremental costs attributable to the COVID-19 pandemic, substantially all of which consist of hazard pay for distribution center employees and sanitization costs. (f) Severance and other costs include amounts our management does not consider in our evaluation of our ongoing operations. For the first quarter of fiscal 2020, Severance and other costs consists of amounts associated with the reduction in workforce as a result of the COVID-19 pandemic and the related temporary store closures, and for the first quarter of fiscal 2019, consist of severance and other charges unrelated to COVID-19. |
Subsequent Event
Subsequent Event | 3 Months Ended |
Jun. 27, 2020 | |
Subsequent Event. | |
Subsequent Event | 12. Subsequent Events Subsequent to the fiscal quarter ended June 27, 2020, the Company paid down $40,000 of outstanding borrowings on the Revolving Credit Facility. |
Nature of business and summary
Nature of business and summary of significant accounting policies (Policies) | 3 Months Ended |
Jun. 27, 2020 | |
Description of business and basis of presentation | |
Business Update Related to Coronavirus | Business Update Related to Coronavirus The novel coronavirus (“COVID-19”) pandemic had a negative impact on the Company’s first quarter of fiscal 2020 operations and financial results. We experienced significant disruptions in store operations, including the temporary closure of all stores, which adversely affected our business, results of operations and financial condition, and saw a significant increase in our curbside pick-up and online selling. As of June 27, 2020, all 93 stores were reopened and operating at close to normalized schedules, with limited capacity. Therefore, we expect online sales to moderate, compared to the significant increase experienced while our stores were temporarily closed, as customers shift to purchasing in-store. However, we will continue to review local, state, and federal mandates as we may need to temporarily close some or all of the stores again, as COVID-19 and other uncertainties continue to unfold. The Company has taken actions to tightly manage costs, working capital and capital expenditures to preserve the Company’s financial health. As previously announced, the Company furloughed approximately 2,800 employees, primarily in its stores, as well as a portion of corporate employees, and reduced the base salaries of its executive officers, due to COVID-19. As of the date of this filing, we have approximately 3,500 active employees. We have also prioritized the health and safety of our customers and employees by implementing strict health and safety protocols in our stores, including intensive and frequent cleaning procedures and limitations on the number of customers shopping in each store at any given time. Furthermore, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020 and the Company is implementing applicable benefits of the CARES Act, such as deferring employer payroll taxes and evaluating potential employee retention credits. We will continue to monitor guidance from the Centers for Disease Control and Prevention, local, state and federal guidance, and the impact of COVID-19 on the Company's business, results of operations, financial position and cash flows. |
Seasonality | Seasonality The Company’s business is moderately seasonal in nature and, therefore, the results of operations for the thirteen weeks ended June 27, 2020 are not necessarily indicative of the operating results for the full year. The Company has historically realized a higher portion of net sales, operating income, and cash flows from operations in the fourth fiscal quarter, attributable primarily to the timing and impact of Our Annual elfa ® |
Recent accounting pronouncements | Recent accounting pronouncements In July 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . ASU 2016-13 changes how to recognize expected credit losses on financial assets. The standard requires a more timely recognition of credit losses on loans and other financial assets and also provides additional transparency about credit risk. The current credit loss standard generally requires that a loss actually be incurred before it is recognized, while the new standard will require recognition of full lifetime expected losses upon initial recognition of the financial instrument. Originally, ASU 2016-13 was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. An entity should apply the standard by recording a cumulative effect adjustment to retained earnings upon adoption. In November 2019, FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) . This ASU defers the effective date of ASU 2016-13 for public companies that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is planning to adopt this standard in the first quarter of fiscal 2023. In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, The Company is planning to adopt this standard in the first quarter of fiscal 2021. In March 2020, the FASB issued, ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, issuance for all entities. The adoption of this standard did not result in a material impact to the Company’s financial statements. |
Detail of certain balance she_2
Detail of certain balance sheet accounts (Tables) | 3 Months Ended |
Jun. 27, 2020 | |
Detail of certain balance sheet accounts | |
Schedule of detail of certain balance sheet accounts | June 27, March 28, June 29, 2020 2020 2019 Accounts receivable, net: Trade receivables, net $ 14,678 $ 20,217 $ 15,366 Credit card receivables 9,297 3,326 10,677 Other receivables 1,394 1,178 1,778 $ 25,369 $ 24,721 $ 27,821 Inventory: Finished goods $ 103,880 $ 118,981 $ 115,536 Raw materials 4,697 4,523 4,321 Work in progress 605 703 655 $ 109,182 $ 124,207 $ 120,512 Accrued liabilities: Accrued payroll, benefits and bonuses $ 20,214 $ 19,112 $ 21,684 Unearned revenue 14,554 12,976 15,297 Accrued transaction and property tax 13,099 12,509 11,484 Gift cards and store credits outstanding 9,035 9,208 9,010 Accrued lease liabilities 1,311 49 187 Accrued interest 2,633 1,483 1,796 Accrued sales returns 8,165 1,650 2,531 Other accrued liabilities 6,951 9,059 6,518 $ 75,962 $ 66,046 $ 68,507 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Jun. 27, 2020 | |
Leases | |
Schedule of components of lease costs | The components of lease costs for the thirteen weeks ended June 27, 2020 and June 29, 2019 were as follows: Thirteen Weeks Ended June 27, 2020 June 29, 2019 Operating lease costs $ 22,500 $ 22,364 Variable lease costs 32 472 Total lease costs $ 22,532 $ 22,836 |
Schedule of supplemental cash flow information | Supplemental cash flow information related to our leases for the thirteen weeks ended June 27, 2020 and June 29, 2019 were as follows: Thirteen Weeks Ended June 27, 2020 June 29, 2019 Cash paid for amounts included in the measurement of operating lease liabilities $ 11,434 $ 22,168 Additions to right-of-use assets $ 28,943 $ 15,565 |
Schedule of weighted average remaining operating lease term and incremental borrowing rate | Weighted average remaining operating lease term and incremental borrowing rate as of June 27, 2020 and June 29, 2019 were as follows: Thirteen Weeks Ended June 27, 2020 June 29, 2019 Weighted average remaining lease term (years) 7.1 7.3 Weighted average incremental borrowing rate 14.5 % 8.8 % |
Schedule of future minimum lease payments under our operating lease liabilities | Operating leases (1) Within 1 year (remaining) $ 73,320 2 years 91,012 3 years 77,194 4 years 69,586 5 years 62,266 Thereafter 192,157 Total lease payments $ 565,535 Less amount representing interest (210,971) Total lease liability $ 354,564 Less current lease liability (53,165) Total noncurrent lease liability $ 301,399 |
Net income per common share (Ta
Net income per common share (Tables) | 3 Months Ended |
Jun. 27, 2020 | |
Net income per common share | |
Schedule of reconciliation of net loss and the number of shares used in the basic and diluted net loss per common share calculations: | Thirteen Weeks Ended June 27, June 29, 2020 2019 Numerator: Net loss $ (16,670) $ (4,099) Denominator: Weighted-average common shares — basic and diluted 48,389,205 48,231,148 Net loss per common share — basic and diluted $ (0.34) $ (0.08) Antidilutive securities not included: Stock options outstanding 2,545,383 2,497,573 Nonvested restricted stock awards 674,176 197,687 |
Accumulated other comprehensi_2
Accumulated other comprehensive loss (Tables) | 3 Months Ended |
Jun. 27, 2020 | |
Accumulated other comprehensive loss | |
Schedule of components of AOCL, net of tax | Foreign currency Pension Foreign hedge liability currency instruments adjustment translation Total Balance at March 28, 2020 $ (5,563) $ (2,611) $ (28,121) $ (36,295) Other comprehensive income (loss) before reclassifications, net of tax 3,617 (219) 3,583 6,981 Amounts reclassified to earnings, net of tax 344 — — 344 Net current period other comprehensive income (loss) 3,961 (219) 3,583 7,325 Balance at June 27, 2020 $ (1,602) $ (2,830) $ (24,538) $ (28,970) |
Fair value measurements (Tables
Fair value measurements (Tables) | 3 Months Ended |
Jun. 27, 2020 | |
Fair value measurements | |
Schedule of items measured at fair value on a recurring basis, subject to the disclosure requirements of ASC 820 | June 27, March 28, June 29, Description Balance Sheet Location 2020 2020 2019 Assets Nonqualified retirement plan N/A Other current assets $ 5,350 $ 5,066 $ 5,673 Total assets $ 5,350 $ 5,066 $ 5,673 |
Schedule of estimated fair values of the Company's long-term debt, including current maturities | June 27, March 28, June 29, 2020 2020 2019 Senior secured term loan facility $ 206,728 $ 198,041 $ 254,729 2019 Elfa revolving credit facility 5,533 9,050 9,951 Obligations under finance leases 254 274 262 Revolving credit facility 58,000 78,000 31,000 Total fair value of debt 270,515 285,365 295,942 |
Segment reporting (Tables)
Segment reporting (Tables) | 3 Months Ended |
Jun. 27, 2020 | |
Segment reporting | |
Schedule of segment reporting | Thirteen Weeks Ended June 27, 2020 TCS Elfa Eliminations Total Net sales to third parties $ 139,386 $ 12,300 $ — $ 151,686 Intersegment sales — 8,691 (8,691) — Adjusted EBITDA 1,725 2,937 (199) 4,463 Interest expense, net 4,848 102 — 4,950 Assets (1) 1,016,425 100,834 (6,798) 1,110,461 Thirteen Weeks Ended June 29, 2019 TCS Elfa Eliminations Total Net sales to third parties $ 195,076 $ 14,444 $ — $ 209,520 Intersegment sales — 11,550 (11,550) — Adjusted EBITDA 10,234 2,088 (1,679) 10,643 Interest expense, net 5,614 95 — 5,709 Assets (1) 1,018,984 107,678 (5,142) 1,121,520 (1) Tangible assets in the Elfa column are located outside of the United States. |
Summary of reconciliation of Adjusted EBITDA by segment to income before taxes | A reconciliation of loss before taxes to Adjusted EBITDA is set forth below: Thirteen Weeks Ended June 27, June 29, 2020 2019 Loss before taxes $ (23,568) $ (5,894) Add: Depreciation and amortization 8,949 9,706 Interest expense, net 4,950 5,709 Pre-opening costs (a) 9 477 Non-cash lease expense (b) 11,138 (64) Stock-based compensation (c) 832 811 Foreign exchange losses (gains) (d) 121 (75) COVID-19 costs (e) 1,223 — Severance and other costs (f) 809 (27) Adjusted EBITDA $ 4,463 $ 10,643 (a) Non-capital expenditures associated with opening new stores and relocating stores, including marketing expenses, travel and relocation costs, and training costs. We adjust for these costs to facilitate comparisons of our performance from period to period. (b) Reflects the extent to which our annual GAAP operating lease expense has been above or below our cash operating lease payments. The amount varies depending on the average age of our lease portfolio (weighted for size), as our GAAP operating lease expense on younger leases typically exceeds our cash operating lease payments, while our GAAP operating lease expense on older leases is typically less than our cash operating lease payments. Non-cash lease expense increased due to renegotiated terms with landlords during the first quarter of fiscal 2020 due to COVID-19 that resulted in deferral of $11,900 of certain cash lease payments a nd the modification of certain lease terms for a substantial portion of our leased properties. (c) Non-cash charges related to stock-based compensation programs, which vary from period to period depending on volume and vesting timing of awards. We adjust for these charges to facilitate comparisons from period to period. (d) Realized foreign exchange transactional gains/losses our management does not consider in our evaluation of our ongoing operations. (e) Includes incremental costs attributable to the COVID-19 pandemic, substantially all of which consist of hazard pay for distribution center employees and sanitization costs. (f) Severance and other costs include amounts our management does not consider in our evaluation of our ongoing operations. For the first quarter of fiscal 2020, Severance and other costs consists of amounts associated with the reduction in workforce as a result of the COVID-19 pandemic and the related temporary store closures, and for the first quarter of fiscal 2019, consist of severance and other charges unrelated to COVID-19. |
Description of business and b_2
Description of business and basis of presentation (Details) | Jun. 27, 2020ft²employeestorestatecountry |
Description of business and basis of presentation | |
Number of stores | store | 93 |
Average size of stores (in square feet) | ft² | 25,000 |
Average selling square feet in stores (in square feet) | ft² | 19,000 |
Number of states | state | 33 |
Number of stores reopened | store | 93 |
Number of furloughed employees | employee | 2,800 |
Number of active employees | employee | 3,500 |
Elfa | |
Description of business and basis of presentation | |
Number of countries in which products are sold on wholesale basis | country | 30 |
Detail of certain balance she_3
Detail of certain balance sheet accounts (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Jun. 27, 2020 | Mar. 28, 2020 | Jun. 29, 2019 | |
Accounts receivable, net: | |||
Trade receivables, net | $ 14,678 | $ 20,217 | $ 15,366 |
Credit card receivables | 9,297 | 3,326 | 10,677 |
Other receivables | 1,394 | 1,178 | 1,778 |
Accounts receivable, net | 25,369 | 24,721 | 27,821 |
Inventory: | |||
Finished goods | 103,880 | 118,981 | 115,536 |
Raw materials | 4,697 | 4,523 | 4,321 |
Work in progress | 605 | 703 | 655 |
Inventory | 109,182 | 124,207 | 120,512 |
Accrued Liabilities: | |||
Accrued payroll, benefits and bonuses | 20,214 | 19,112 | 21,684 |
Unearned revenue | 14,554 | 12,976 | 15,297 |
Accrued transaction and property tax | 13,099 | 12,509 | 11,484 |
Gift cards and store credits outstanding | 9,035 | 9,208 | 9,010 |
Accrued lease liabilities | 1,311 | 49 | 187 |
Accrued interest | 2,633 | 1,483 | 1,796 |
Accrued sales returns | 8,165 | 1,650 | 2,531 |
Other accrued liabilities | 6,951 | 9,059 | 6,518 |
Accrued liabilities | 75,962 | 66,046 | $ 68,507 |
Revenue recognized included in unearned income | 9,855 | 12,976 | |
Revenue recognized included in Gift Cards and Store Credits | $ 869 | $ 9,208 |
Leases (Details)
Leases (Details) $ in Thousands | Jun. 27, 2020USD ($)store |
Leases | |
Number of store locations | store | 93 |
Deferred cash lease payments | $ | $ 11,900 |
Minimum | |
Leases | |
Expiration term | 1 year |
Maximum | |
Leases | |
Expiration term | 20 years |
Leases - Components of lease co
Leases - Components of lease costs (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 27, 2020 | Jun. 29, 2019 | |
Lease costs | ||
Operating lease costs | $ 22,500 | $ 22,364 |
Variable lease costs | 32 | 472 |
Total lease costs | $ 22,532 | $ 22,836 |
Leases - Supplemental cash flow
Leases - Supplemental cash flow information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 27, 2020 | Jun. 29, 2019 | |
Leases | ||
Cash paid for amounts included in the measurement of operating lease liabilities | $ 11,434 | $ 22,168 |
Additions to right-of-use assets | $ 28,943 | $ 15,565 |
Leases - Weighted average remai
Leases - Weighted average remaining operating lease term and incremental borrowing rate (Details) | Jun. 27, 2020 | Jun. 29, 2019 |
Leases | ||
Weighted average remaining lease term (years) | 7 years 1 month 6 days | 7 years 3 months 18 days |
Weighted average incremental borrowing rate | 14.50% | 8.80% |
Leases - Future minimum lease p
Leases - Future minimum lease payments (Details) - USD ($) $ in Thousands | Jun. 27, 2020 | Mar. 28, 2020 | Jun. 29, 2019 |
Operating leases | |||
Within 1 year (remaining) | $ 73,320 | ||
2 years | 91,012 | ||
3 years | 77,194 | ||
4 years | 69,586 | ||
5 years | 62,266 | ||
Thereafter | 192,157 | ||
Total lease payments | 565,535 | ||
Less amount representing interest | (210,971) | ||
Total lease liability | 354,564 | ||
Less current lease liability | (53,165) | $ (62,476) | $ (58,664) |
Total non-current lease liability | 301,399 | $ 317,284 | $ 327,221 |
Amount of minimum lease payments for leases signed but not yet commenced | $ 12,125 |
Net income per common share (De
Net income per common share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Jun. 27, 2020 | Jun. 29, 2019 | |
Numerator: | ||
Net income (loss) | $ (16,670) | $ (4,099) |
Denominator: | ||
Weighted-average common shares - basic and diluted (in shares) | 48,389,205 | 48,231,148 |
Net loss per common share - basic and diluted | $ (0.34) | $ (0.08) |
Stock options outstanding | ||
Antidilutive securities not included: | ||
Antidilutive securities | 2,545,383 | 2,497,573 |
Nonvested restricted stock awards | ||
Antidilutive securities not included: | ||
Antidilutive securities | 674,176 | 197,687 |
Income taxes (Details)
Income taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 27, 2020 | Jun. 29, 2019 | |
Income taxes | ||
Benefit for income taxes | $ (6,898) | $ (1,795) |
Effective income tax rate (as a percent) | 29.30% | 30.50% |
U.S. federal corporate tax rate | 21.00% |
Commitments and contingencies (
Commitments and contingencies (Details) $ in Thousands | Jun. 27, 2020USD ($) |
Standby letters of credit | |
Commitments and contingencies | |
Amount outstanding | $ 3,635 |
Accumulated other comprehensi_3
Accumulated other comprehensive loss (Details) $ in Thousands | 3 Months Ended |
Jun. 27, 2020USD ($) | |
Rollforward of the amounts included in AOCI, net of taxes | |
Balance beginning of period | $ (36,295) |
Other comprehensive income (loss) before reclassifications, net of tax | 6,981 |
Amounts reclassified to earnings, net of tax | 344 |
Net current period other comprehensive income (loss) | 7,325 |
Balance end of period | (28,970) |
Pension liability adjustment | |
Rollforward of the amounts included in AOCI, net of taxes | |
Balance beginning of period | (2,611) |
Other comprehensive income (loss) before reclassifications, net of tax | (219) |
Net current period other comprehensive income (loss) | (219) |
Balance end of period | (2,830) |
Foreign currency translation | |
Rollforward of the amounts included in AOCI, net of taxes | |
Balance beginning of period | (28,121) |
Other comprehensive income (loss) before reclassifications, net of tax | 3,583 |
Net current period other comprehensive income (loss) | 3,583 |
Balance end of period | (24,538) |
Foreign currency hedge instruments | |
Rollforward of the amounts included in AOCI, net of taxes | |
Balance beginning of period | (5,563) |
Other comprehensive income (loss) before reclassifications, net of tax | 3,617 |
Amounts reclassified to earnings, net of tax | 344 |
Net current period other comprehensive income (loss) | 3,961 |
Balance end of period | $ (1,602) |
Foreign currency forward cont_2
Foreign currency forward contracts (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Jun. 27, 2020 | Jun. 29, 2019 | Mar. 28, 2020 | |
Purchase of inventory from use of forward contracts in Swedish krona (as a percent) | 63.00% | 100.00% | |
Accumulated other comprehensive loss | $ (28,970) | $ (25,929) | $ (36,295) |
Foreign currency forward contracts | Not Designated as Hedging Instrument | |||
Amount associated with forward contracts not designated as hedge instruments | 0 | ||
Foreign currency hedge instruments | |||
Accumulated other comprehensive loss | (1,602) | $ (5,563) | |
Foreign currency hedge instruments | Designated as Hedging Instrument | Cash Flow Hedging | |||
Unrealized loss for settled foreign currency hedge instruments | (688) | ||
Unrealized loss to be reclassified into earnings over the next 12 months | (688) | ||
Loss in accumulated other comprehensive loss related to foreign currency hedge instruments | $ (1,602) | ||
Minimum | Foreign currency forward contracts | |||
Term of contract | 1 month | 1 month | |
Maximum | Foreign currency forward contracts | |||
Term of contract | 24 months | 24 months |
Fair value measurements (Detail
Fair value measurements (Details) - Recurring - USD ($) $ in Thousands | Jun. 27, 2020 | Mar. 28, 2020 | Jun. 29, 2019 |
Assets | |||
Total assets | $ 5,350 | $ 5,066 | $ 5,673 |
Other current assets | |||
Assets | |||
Nonqualified retirement plan | $ 5,350 | $ 5,066 | $ 5,673 |
Fair value measurements - Estim
Fair value measurements - Estimated fair value of long-term debt, including current maturities (Details) - Level 2 - USD ($) $ in Thousands | Jun. 27, 2020 | Mar. 28, 2020 | Jun. 29, 2019 |
Fair value measurements | |||
Total fair value of debt | $ 270,515 | $ 285,365 | $ 295,942 |
The 2019 Elfa Revolving Credit Facility | |||
Fair value measurements | |||
Total fair value of debt | 5,533 | 9,050 | 9,951 |
Revolving credit facility | |||
Fair value measurements | |||
Total fair value of debt | 58,000 | 78,000 | 31,000 |
Senior secured term loan facility | |||
Fair value measurements | |||
Total fair value of debt | 206,728 | 198,041 | 254,729 |
Obligations under capital leases | |||
Fair value measurements | |||
Total fair value of debt | $ 254 | $ 274 | $ 262 |
Segment reporting - (Details)
Segment reporting - (Details) $ in Thousands | 3 Months Ended | ||
Jun. 27, 2020USD ($)segmentcountry | Jun. 29, 2019USD ($) | Mar. 28, 2020USD ($) | |
Segment reporting | |||
Number of reportable segments | segment | 2 | ||
Segment reporting | |||
Sales | $ 151,686 | $ 209,520 | |
Adjusted EBITDA | 4,463 | 10,643 | |
Interest expense, net | 4,950 | 5,709 | |
Assets | $ 1,110,461 | 1,121,520 | $ 1,166,814 |
Elfa | |||
Segment reporting | |||
Number of countries in which products are sold on wholesale basis | country | 30 | ||
Operating segments | TCS | |||
Segment reporting | |||
Sales | $ 139,386 | 195,076 | |
Adjusted EBITDA | 1,725 | 10,234 | |
Interest expense, net | 4,848 | 5,614 | |
Assets | 1,016,425 | 1,018,984 | |
Operating segments | Elfa | |||
Segment reporting | |||
Sales | 12,300 | 14,444 | |
Adjusted EBITDA | 2,937 | 2,088 | |
Interest expense, net | 102 | 95 | |
Assets | 100,834 | 107,678 | |
lntersegment | |||
Segment reporting | |||
Sales | (8,691) | (11,550) | |
Adjusted EBITDA | (199) | (1,679) | |
Assets | (6,798) | (5,142) | |
lntersegment | Elfa | |||
Segment reporting | |||
Sales | $ 8,691 | $ 11,550 |
Segment reporting - Reconciliat
Segment reporting - Reconciliation of EBITDA (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Jun. 27, 2020 | Jun. 29, 2019 | |
Segment reporting | ||
Loss before taxes | $ (23,568) | $ (5,894) |
Depreciation and amortization | 8,949 | 9,706 |
Interest expense, net | 4,950 | 5,709 |
Pre-opening costs | 9 | 477 |
Non-cash lease expense | 11,138 | (64) |
Stock-based compensation | 832 | 811 |
Foreign exchange (gains) losses | 121 | (75) |
COVID-19 costs | 1,223 | |
Severance and other costs | 809 | (27) |
Total Adjusted EBITDA | 4,463 | $ 10,643 |
Deferred cash lease payments | $ 11,900 |
Stock-based compensation (Detai
Stock-based compensation (Details) - USD ($) $ / shares in Units, $ in Thousands | Jun. 01, 2020 | Jun. 27, 2020 |
Restricted Stock Awards | ||
Stock-based compensation | ||
Unrecognized compensation expense related to outstanding restricted stock awards | $ 4,240 | |
Average remaining service period for recognition of unrecognized compensation cost | 1 year 4 months 24 days | |
Nonvested restricted shares | 1,864,446 | |
Amended and Restated 2013 Incentive Award Plan | ||
Stock-based compensation | ||
Number of shares available for grant | 1,358,709 | |
Granted (in dollars per share) | $ 3.03 | |
Amended and Restated 2013 Incentive Award Plan | Time - based restricted shares | ||
Stock-based compensation | ||
Vesting period | 3 years | |
Amended and Restated 2013 Incentive Award Plan | Performance - based restricted shares | ||
Stock-based compensation | ||
Vesting period | 3 years |
Subsequent Event (Details)
Subsequent Event (Details) $ in Thousands | 3 Months Ended |
Sep. 26, 2020USD ($) | |
Subsequent event | Revolving credit facility | |
Subsequent Event | |
Repayment of credit facility | $ 40,000 |