| Segment reporting | 11. 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 in-home services. On December 30, 2021, the Company completed the acquisition of Closet Works, which designs and manufactures the Company’s premium wood-based custom space product offering. We determined that TCS and Closet Works have similar economic characteristics and meet the aggregation criteria set forth in ASC 280, Segment Reporting The Elfa segment includes the manufacturing business that produces 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 income 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 December 31, 2022 TCS Elfa Eliminations Total Net sales to third parties $ 239,271 $ 12,965 $ — $ 252,236 Intersegment sales — 19,083 (19,083) — Adjusted EBITDA 22,086 3,970 (3,895) 22,161 Interest expense, net 4,265 124 — 4,389 Assets (1) 1,261,798 119,176 (171,953) 1,209,021 Thirteen Weeks Ended January 1, 2022 TCS Elfa Eliminations Total Net sales to third parties $ 248,618 $ 18,686 $ — $ 267,304 Intersegment sales — 21,852 (21,852) — Adjusted EBITDA 28,762 3,690 (1,055) 31,397 Interest expense, net 3,147 66 — 3,213 Assets (1) 1,095,409 111,330 (5,654) 1,201,085 Thirty-Nine Weeks Ended December 31, 2022 TCS Elfa Eliminations Total Net sales to third parties $ 745,914 $ 41,628 $ — $ 787,542 Intersegment sales — 50,792 (50,792) — Adjusted EBITDA 82,071 10,123 (5,934) 86,260 Interest expense, net 11,025 370 — 11,395 Assets (1) 1,261,798 119,176 (171,953) 1,209,021 Thirty-Nine Weeks Ended January 1, 2022 TCS Elfa Eliminations Total Net sales to third parties $ 736,726 $ 51,847 $ — $ 788,573 Intersegment sales — 54,958 (54,958) — Adjusted EBITDA 98,406 11,900 2,341 112,647 Interest expense, net 9,368 216 — 9,584 Assets (1) 1,095,409 111,330 (5,654) 1,201,085 (1) Tangible assets in the Elfa column are located outside of the United States. A reconciliation of income before taxes to Adjusted EBITDA is set forth below: Thirteen Weeks Ended Thirty-Nine Weeks Ended December 31, January 1, December 31, January 1, 2022 2022 2022 2022 Income before taxes $ 6,295 $ 18,985 $ 42,251 $ 78,905 Add: Depreciation and amortization 9,952 8,667 28,507 25,412 Interest expense, net 4,389 3,213 11,395 9,584 Pre-opening costs (a) 430 20 1,049 686 Non-cash lease expense (b) 232 (1,345) 403 (6,422) Stock-based compensation (c) 825 1,204 2,562 3,159 Management transition costs (d) — — — 473 Foreign exchange losses (gains) (e) 38 (39) 30 (34) Acquisition-related costs (f) — 692 63 692 COVID-19 costs (g) — — — 192 Adjusted EBITDA $ 22,161 $ 31,397 $ 86,260 $ 112,647 (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. (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) Costs related to the transition of key executives including severance and signing bonus recorded as selling, general and administrative expenses, which we do not consider in our evaluation of ongoing performance. (e) Realized foreign exchange transactional gains/losses our management does not consider in our evaluation of our ongoing operations. (f) Includes legal costs incurred in the third quarter of fiscal 2021 and the second quarter of fiscal 2022 associated with the acquisition of Closet Works, all of which are recorded as selling, general and administrative expenses, which we do not consider in our evaluation of ongoing performance. (g) Includes incremental costs attributable to the COVID-19 pandemic, which primarily consist of sanitization costs in the first quarter of fiscal 2021, all of which were recorded as selling, general and administrative expenses, which we do not consider in our evaluation of ongoing performance . |
