Boot Barn (BOOT) 10-Q 2020 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended December 28, 2019

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to

Commission File Number: 001-36711

Boot Barn Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization) 90-0776290 (I.R.S. employer identification no.)

15345 Barranca Pkwy Irvine, California (Address of principal executive offices) 92618 (Zip code)

(949) 453-4400

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.0001 par value	BOOT	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒	Accelerated filer ☐	Emerging growth company ☐
Non-accelerated filer ☐	Smaller reporting company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of February 3, 2020, the registrant had 28,771,509 shares of common stock outstanding, $0.0001 par value.

Boot Barn Holdings, Inc. and Subsidiaries

Form 10-Q

For the Thirteen and Thirty-Nine Weeks Ended December 28, 2019

		Page
PART I.	FINANCIAL INFORMATION	3
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of December 28, 2019 and March 30, 2019	3
	Condensed Consolidated Statements of Operations for the Thirteen and Thirty-Nine Weeks Ended December 28, 2019 and December 29, 2018	4
	Condensed Consolidated Statements of Stockholders’ Equity for the Thirteen and Thirty-Nine Weeks Ended December 28, 2019 and December 29, 2018	5
	Condensed Consolidated Statements of Cash Flows for the Thirty-Nine Weeks Ended December 28, 2019 and December 29, 2018	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosure of Market Risk	35
Item 4.	Controls and Procedures	36
PART II.	OTHER INFORMATION	36
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	38
	Signatures	38

2

Part 1. Financial Information

Item 1. Condensed Consolidated Financial Statements (Unaudited)

BOOT BARN HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

	December 28,		March 30,
	2019		2019
Assets
Current assets:
Cash and cash equivalents	$	45,446	$	16,614
Accounts receivable, net		11,239		8,095
Inventories		275,352		240,734
Prepaid expenses and other current assets		13,849		11,900
Total current assets		345,886		277,343
Property and equipment, net		102,597		98,663
Right-of-use assets, net		168,082		—
Goodwill		197,502		195,858
Intangible assets, net		61,019		62,845
Other assets		1,749		1,366
Total assets	$	876,835	$	636,075
Liabilities and stockholders’ equity
Current liabilities:
Line of credit	$	45,000	$	—
Accounts payable		122,800		104,955
Accrued expenses and other current liabilities		78,231		46,988
Short-term lease liabilities		34,135		—
Total current liabilities		280,166		151,943
Deferred taxes		16,466		17,202
Long-term portion of notes payable, net		108,832		174,264
Capital lease obligations		—		6,746
Long-term lease liabilities		152,790		—
Other liabilities		4,642		21,756
Total liabilities		562,896		371,911
Commitments and contingencies (Note 7)
Stockholders’ equity:
Common stock, $0.0001 par value; December 28, 2019 - 100,000 shares authorized, 28,832 shares issued; March 30, 2019 - 100,000 shares authorized, 28,399 shares issued		3		3
Preferred stock, $0.0001 par value; 10,000 shares authorized, 0 shares issued or outstanding		—		—
Additional paid-in capital		167,175		159,137
Retained earnings		147,912		105,692
Less: Common stock held in treasury, at cost, 67 and 51 shares at December 28, 2019 and March 30, 2019, respectively		(1,151)		(668)
Total stockholders’ equity		313,939		264,164
Total liabilities and stockholders’ equity	$	876,835	$	636,075

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

BOOT BARN HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	December 28,		December 29,		December 28,		December 29,
	2019		2018		2019		2018
Net sales	$	283,997	$	254,006	$	656,947	$	584,099
Cost of goods sold		186,961		168,343		438,417		396,071
Gross profit		97,036		85,663		218,530		188,028
Selling, general and administrative expenses		62,059		56,366		154,558		140,205
Income from operations		34,977		29,297		63,972		47,823
Interest expense, net		3,155		4,011		10,369		12,264
Other income, net		37		4		51		4
Income before income taxes		31,859		25,290		53,654		35,563
Income tax expense		7,040		6,260		11,434		5,238
Net income	$	24,819	$	19,030	$	42,220	$	30,325
Earnings per share:
Basic shares	$	0.87	$	0.67	$	1.48	$	1.08
Diluted shares	$	0.85	$	0.66	$	1.45	$	1.05
Weighted average shares outstanding:
Basic shares		28,665		28,320		28,516		28,014
Diluted shares		29,367		28,886		29,188		28,775

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

BOOT BARN HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

				Additional
	Common Stock			Paid-In		Retained		Treasury Shares
	Shares	Amount		Capital		Earnings		Shares	Amount		Total
Balance at March 30, 2019	28,399	$	3	$	159,137	$	105,692	(51)	$	(668)	$	264,164
Net income	—		—		—		9,721	—		—		9,721
Issuance of common stock related to stock-based compensation	143		—		1,267		—	—		—		1,267
Tax withholding for net share settlement	—		—		—		—	(15)		(422)		(422)
Stock-based compensation expense	—		—		965		—	—		—		965
Balance at June 29, 2019	28,542	$	3	$	161,369	$	115,413	(66)	$	(1,090)	$	275,695
Net income	—		—		—		7,680	—		—		7,680
Issuance of common stock related to stock-based compensation	90		—		655		—	—		—		655
Tax withholding for net share settlement	—		—		—		—	(1)		(61)		(61)
Stock-based compensation expense	—		—		1,180		—	—		—		1,180
Balance at September 28, 2019	28,632	$	3	$	163,204	$	123,093	(67)	$	(1,151)	$	285,149
Net income	—		—		—		24,819	—		—		24,819
Issuance of common stock related to stock-based compensation	200		—		2,790		—	—		—		2,790
Tax withholding for net share settlement	—		—		—		—	—		—		—
Stock-based compensation expense	—		—		1,181		—	—		—		1,181
Balance at December 28, 2019	28,832	$	3	$	167,175	$	147,912	(67)	$	(1,151)	$	313,939
				Additional
	Common Stock			Paid-In		Retained		Treasury Shares
	Shares	Amount		Capital		Earnings		Shares	Amount		Total
Balance at March 31, 2018	27,331	$	3	$	148,127	$	66,670	(31)	$	(194)	$	214,606
Net income	—		—		—		6,761	—		—		6,761
Issuance of common stock related to stock-based compensation	709		—		5,038		—	—		—		5,038
Tax withholding for net share settlement	—		—		—		—	(14)		(306)		(306)
Stock-based compensation expense	—		—		612		—	—		—		612
Balance at June 30, 2018	28,040	$	3	$	153,777	$	73,431	(45)	$	(500)	$	226,711
Net income	—		—		—		4,534	—		—		4,534
Issuance of common stock related to stock-based compensation	337		—		2,987		—	—		—		2,987
Tax withholding for net share settlement	—		—		—		—	(2)		(74)		(74)
Stock-based compensation expense	—		—		804		—	—		—		804
Balance at September 29, 2018	28,377	$	3	$	157,568	$	77,965	(47)	$	(574)	$	234,962
Net income	—		—		—		19,030	—		—		19,030
Issuance of common stock related to stock-based compensation	—		—		—		—	—		—		—
Tax withholding for net share settlement	—		—		—		—	(1)		(23)		(23)
Stock-based compensation expense	—		—		792		—	—		—		792
Balance at December 29, 2018	28,377	$	3	$	158,360	$	96,995	(48)	$	(597)	$	254,761

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

BOOT BARN HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Thirty-Nine Weeks Ended
	December 28,		December 29,
	2019		2018
Cash flows from operating activities
Net income	$	42,220	$	30,325
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		15,384		13,225
Stock-based compensation		3,326		2,207
Amortization of intangible assets		127		499
Amortization of right-of-use assets		22,899		—
Amortization of debt issuance fees and debt discount		725		933
Loss on disposal of property and equipment		389		23
Gain on adjustment of right-of-use assets and lease liabilities		(186)		—
Damaged asset write-off		—		103
Insurance recovery receivable		—		(99)
Accretion of above market leases		—		(20)
Store impairment charge		—		455
Deferred taxes		(736)		2,113
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable, net		290		(3,522)
Inventories		(32,257)		(11,897)
Prepaid expenses and other current assets		(1,885)		1,774
Other assets		(559)		(269)
Accounts payable		17,063		32,761
Accrued expenses and other current liabilities		31,929		21,410
Other liabilities		396		1,588
Operating leases		(22,324)		—
Net cash provided by operating activities	$	76,801	$	91,609
Cash flows from investing activities
Purchases of property and equipment	$	(27,550)	$	(21,826)
Acquisition of business, net of cash acquired		(3,688)		(4,424)
Insurance recoveries for property and equipment		717		4
Net cash used in investing activities	$	(30,521)	$	(26,246)
Cash flows from financing activities
Borrowings/(payments) on line of credit - net	$	45,000	$	(21,006)
Repayments on debt and finance lease obligations		(65,456)		(10,382)
Debt issuance fees paid		(1,221)		—
Tax withholding payments for net share settlement		(483)		(403)
Proceeds from the exercise of stock options		4,712		8,026
Net cash used in financing activities	$	(17,448)	$	(23,765)
Net increase in cash and cash equivalents		28,832		41,598
Cash and cash equivalents, beginning of period		16,614		9,016
Cash and cash equivalents, end of period	$	45,446	$	50,614
Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	8,139	$	397
Cash paid for interest	$	9,472	$	11,290
Supplemental disclosure of non-cash activities:
Unpaid purchases of property and equipment	$	2,659	$	1,178

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

BOOT BARN HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Description of the Company and Basis of Presentation

Boot Barn Holdings, Inc. (the “Company”), the parent holding company of the group of operating subsidiaries that conduct the Boot Barn business, was formed on November 17, 2011, and is incorporated in the State of Delaware. The equity of the Company consists of 100,000,000 authorized shares and 28,831,991 issued and 28,764,670 outstanding shares of common stock as of December 28, 2019. The shares of common stock have voting rights of 1 vote per share.

The Company operates specialty retail stores and e-commerce websites that sell western and work boots and related apparel and accessories. The Company operates retail locations throughout the U.S. and sells its merchandise via the internet. The Company operated a total of 251 stores in 33 states as of December 28, 2019 and 240 stores in 33 states as of March 30, 2019. As of December 28, 2019, all stores operate under the Boot Barn name, with the exception of 2 stores that operate under the “American Worker” name.

Basis of Presentation

The Company’s condensed consolidated financial statements as of and for the thirteen and thirty-nine weeks ended December 28, 2019 and December 29, 2018 are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), and include the accounts of the Company and each of its subsidiaries, consisting of Boot Barn, Inc., RCC Western Stores, Inc., Baskins Acquisition Holdings, LLC, Sheplers, Inc. and Sheplers Holding Corporation (collectively with Sheplers, Inc., “Sheplers”) and Boot Barn International (Hong Kong) Limited. All intercompany accounts and transactions among the Company and its subsidiaries have been eliminated in consolidation. The vast majority of the Company’s identifiable assets are in the United States. Certain information and footnote disclosures normally included in the Company’s annual consolidated financial statements have been condensed or omitted.

In the opinion of management, the interim condensed consolidated financial statements reflect all adjustments that are of a normal and recurring nature necessary to fairly present the Company’s financial position and results of operations and cash flows in all material respects as of the dates and for the periods presented. The results of operations presented in the interim condensed consolidated financial statements are not necessarily indicative of the results that may be expected for the fiscal year ending March 28, 2020.

Fiscal Periods

The Company reports its results of operations and cash flows on a 52- or 53-week basis ending on the last Saturday of March unless April 1st is a Saturday, in which case the fiscal year ends on April 1st. In a 52-week year, each quarter includes thirteen weeks of operations; in a 53-week fiscal year, the first, second and third quarters each include thirteen weeks of operations and the fourth quarter includes fourteen weeks of operations. Both the fiscal year ending on March 28, 2020 (“fiscal 2020”) and the fiscal year ended on March 30, 2019 (“fiscal 2019”) consist of 52 weeks.

2. Summary of Significant Accounting Policies

Information regarding the Company’s significant accounting policies is contained in Note 2, “Summary of Significant Accounting Policies”, to the consolidated financial statements included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on May 24, 2019. Presented below in the following notes is supplemental information that should be read in conjunction with those consolidated financial statements.

7

Comprehensive Income

The Company does not have any components of other comprehensive income recorded within its consolidated financial statements and, therefore, does not separately present a statement of comprehensive income in its consolidated financial statements.

Segment Reporting

GAAP has established guidance for reporting information about a company’s operating segments, including disclosures related to a company’s products and services, geographic areas and major customers. The Company’s retail stores and e-commerce websites represent 2 operating segments. Given the similar qualitative and economic characteristics of the two operating segments, the Company’s retail stores and e-commerce websites are aggregated into 1 reporting segment in accordance with guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting (“ASC 280”). The Company’s operations represent two reporting units, retail stores and e-commerce, for the purpose of its goodwill impairment analysis.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Among the significant estimates affecting the Company’s consolidated financial statements are those relating to revenue recognition, inventories, goodwill, intangible and long-lived assets, stock-based compensation and income taxes. Management regularly evaluates its estimates and assumptions based upon historical experience and various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. To the extent actual results differ from those estimates, the Company’s future results of operations may be affected.

Inventories

Inventory consists primarily of purchased merchandise and is valued at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis and includes the cost of merchandise and import-related costs, including freight, duty and agent commissions. The Company assesses the recoverability of inventory through a periodic review of historical usage and present demand. When the inventory on hand exceeds the foreseeable demand, the value of inventory that, at the time of the review, is not expected to be sold at or above cost is written down to its estimated net realizable value.

Fair Value of Certain Financial Assets and Liabilities

The Company follows FASB ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), which requires disclosure of the estimated fair value of certain assets and liabilities defined by the guidance as financial instruments. The Company’s financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable and debt. ASC 820 defines the fair value of financial instruments as the price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 establishes a three-level hierarchy for disclosure that is based on the extent and level of judgment used to estimate the fair value of assets and liabilities.

● Level 1 uses unadjusted quoted prices that are available in active markets for identical assets or liabilities.

● Level 2 uses inputs other than quoted prices included in Level 1 that are either directly or indirectly observable through correlation with market data. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs to

8

valuation models or other pricing methodologies that do not require significant judgment because the inputs used in the model, such as interest rates and volatility, can be corroborated by readily observable market data.

● Level 3 uses one or more significant inputs that are unobservable and supported by little or no market activity, and reflect the use of significant management judgment. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques and significant management judgment or estimation. The Company’s Level 3 assets include certain acquired businesses and the evaluation of store impairment.

Cash and cash equivalents, accounts receivable and accounts payable are classified according to the lowest level input that is significant to the fair value measurement. As a result, the asset or liability could be classified as Level 2 or Level 3 even though there may be certain significant inputs that are readily observable. The Company believes that the recorded value of its financial instruments approximates their current fair values because of their nature and respective relatively short maturity dates or duration.

Although market quotes for the fair value of the outstanding debt arrangements discussed in Note 5, “Revolving Credit Facilities and Long-Term Debt” are not readily available, the Company believes its carrying value approximates fair value due to the variable interest rates, which are Level 2 inputs. There were 0 financial assets or liabilities requiring fair value measurements on a recurring basis as of December 28, 2019.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASC 842”). The FASB issued this Accounting Standards Update (“ASU”) to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet for those leases classified as operating leases and finance leases under current U.S. GAAP and disclosing key information about leasing arrangements. Enhanced disclosures are also required to give financial statement users the ability to assess the amount, timing and uncertainty of cash flows arising from leases. In July 2018, the FASB issued ASU 2018-11, allowing a modified retrospective approach, under which entities have the option to not restate comparative periods and instead recognize a cumulative effect adjustment to beginning retained earnings in the period of adoption. The amendments in these ASU’s are effective for annual periods, and interim periods within that year, beginning after December 15, 2018. The standards became effective for the Company beginning March 31, 2019, the first day of its fiscal 2020 year.

As a result of the adoption of the new accounting standard, the Company elected transition-related practical expedients as accounting policies which allowed it to not reassess, as of the adoption date, (1) whether any expired or existing contracts are or contain leases, (2) the classification of any expired or existing leases, and (3) if previously capitalized initial direct costs qualify for capitalization under ASC 842. The Company elected the practical expedient option to not separate lease and non-lease components for all of its leases, and also elected the short-term lease recognition exemption that keeps leases with an initial term of 12 months or less excluded from balance sheet capitalization. This results in recognizing those lease payments in the consolidated statements of operations on a straight-line basis over the lease term. As of March 31, 2019, the first day of fiscal 2020, the Company recorded right-of-use (“ROU”) assets of $164.5 million and lease liabilities of $179.4 million upon adoption of this standard. The adoption of this standard did not have a material impact on its consolidated statements of operations and consolidated statements of cash flows. Refer to Note 8, “Leases” for further discussion.

Revenue Recognition

Revenue is recorded for store sales upon the purchase of merchandise by customers. Transfer of control takes place at the point at which the customer receives and pays for the merchandise at the register. E-commerce sales are recorded when control transfers to the customer, which generally occurs upon delivery of the product. Shipping and handling revenues are included in total net sales. Shipping costs incurred by the Company are included in cost of goods sold.

The Company maintains a customer loyalty program. Under the program, customers accumulate points based on purchase activity. For customers to maintain their active point balance, they must make a qualifying purchase of

9

merchandise at least once in a 365-day period. Once a loyalty program member achieves a certain point level, the member earns awards that may be redeemed for credits on merchandise purchases. To redeem awards, the member must make a qualifying purchase of merchandise within 60 days of the date the award was granted. Unredeemed awards and accumulated partial points are accrued as unearned revenue until redemption or expiration and, upon redemption and expiration, as an adjustment to net sales using the relative standalone selling price method. The unearned revenue for this program is recorded in accrued expenses and other current liabilities on the consolidated balance sheets and was $2.6 million as of December 28, 2019 and $2.1 million as of December 29, 2018. The following table provides a reconciliation of the activity related to the Company’s customer loyalty program:

Customer Loyalty Program
(in thousands)	December 28, 2019		December 29, 2018
Beginning balance as of March 30, 2019 and March 31, 2018, respectively	$	1,936	$	1,705
Year-to-date provisions		5,410		4,237
Year-to-date award redemptions		(4,795)		(3,798)
Ending balance	$	2,551	$	2,144

Revenue is recorded net of estimated and actual sales returns and deductions for coupon redemptions, estimated future award redemption and other promotions. The sales returns reserve reflects an estimate of sales returns based on projected merchandise returns determined through the use of historical average return percentages. The total reserve for returns is recorded in accrued expenses and other current liabilities in the consolidated balance sheets. The Company accounts for the asset and liability separately on a gross basis.

Proceeds from the sale of gift cards are deferred until the customers use the cards to acquire merchandise. Gift cards, gift certificates and store credits do not have expiration dates, and unredeemed gift cards, gift certificates and store credits are subject to state escheatment laws. Amounts remaining after escheatment are recognized in net sales in the period escheatment occurs and the liability is considered to be extinguished. The Company defers recognition of a layaway sale and its related profit to the accounting period when the customer receives the layaway merchandise. Income from the redemption of gift cards, gift card breakage, and the sale of layaway merchandise is included in net sales. The following table provides a reconciliation of the activity related to the Company’s gift card program:

Gift Card Program
(in thousands)	December 28, 2019		December 29, 2018
Beginning balance as of March 30, 2019 and March 31, 2018, respectively	$	8,796	$	7,857
Year-to-date issued		13,269		11,165
Year-to-date redemptions		(9,221)		(7,492)
Ending balance	$	12,844	$	11,530

Disaggregated Revenue

The Company disaggregates net sales into the following major merchandise categories:

	Thirteen Weeks Ended		Thirty-Nine Weeks Ended
% of Net Sales	December 28, 2019	December 29, 2018	December 28, 2019	December 29, 2018
Footwear	48%	49%	50%	51%
Apparel	37%	37%	35%	34%
Hats, accessories and other	15%	14%	15%	15%
Total	100%	100%	100%	100%

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The Company further disaggregates net sales between stores and e-commerce:

	Thirteen Weeks Ended		Thirty-Nine Weeks Ended
% of Net Sales	December 28, 2019	December 29, 2018	December 28, 2019	December 29, 2018
Stores	82%	82%	84%	83%
E-commerce	18%	18%	16%	17%
Total	100%	100%	100%	100%

Recent Accounting Pronouncements

In January 2017, the FASB issued ASU No. 2017-04, Intangibles — Goodwill and Other: Simplifying the Test for Goodwill Impairment, which simplifies the accounting for goodwill impairment by eliminating step two from the goodwill impairment test. Under this new guidance, if the carrying amount of a reporting unit exceeds its estimated fair value, an impairment charge shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The amendments in this ASU are effective prospectively for fiscal years and interim periods within those years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company plans to adopt the standard in the first quarter of fiscal 2021 and does not expect the revised standard to have a material impact on the consolidated financial statements.

3. Asset Acquisition and Business Combinations

G.&L. Clothing, Inc.

On August 26, 2019, Boot Barn, Inc. completed the acquisition of G.&L. Clothing, Inc. (“G.&L. Clothing”), an individually-owned retailer operating 1 store in Des Moines, Iowa. As part of the transaction, Boot Barn, Inc. purchased the inventory, entered into new leases with the store’s landlord and offered employment to the G.&L. Clothing team. The primary reason for the acquisition of G.&L. Clothing was to further expand the Company’s retail operations in Iowa. The cash consideration paid for the acquisition was $3.7 million.

In allocating the purchase price, the Company recorded all assets acquired and liabilities assumed at fair value. The total fair value of consideration transferred for the acquisition was allocated to the net tangible and intangible assets based upon their estimated fair values as of the date of the acquisition of G.&L. Clothing. The excess of the purchase price over the net tangible and intangible assets was recorded as goodwill.

The Company determined the estimated fair values using Level 3 inputs after review and consideration of relevant information, including quoted market prices and estimates made by management. The inventory was valued using the comparative sales method. Property and equipment, net, customer list and merchandise credits and other current liabilities were valued under either the cost or income approach. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date based on the purchase price allocation:

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(in thousands)	At August 26, 2019
Assets acquired:
Inventory	$	2,361
Property & equipment, net		64
Customer list		345
Right-of-use asset, net		1,946
Goodwill		1,644
Total assets acquired	$	6,360
Liabilities assumed:
Merchandise credits and other current liabilities	$	169
Short-term lease liability		129
Long-term lease liability		2,374
Total liabilities assumed		2,672
Net assets acquired	$	3,688

Drysdales, Inc.

On July 3, 2018, Boot Barn, Inc. completed the acquisition of assets from Drysdales, Inc. (“Drysdales”), a retailer with 2 stores in Tulsa, Oklahoma. As part of the transaction, Boot Barn, Inc. purchased the inventory, entered into new leases with the stores’ landlord, offered employment to the Drysdales team at both store locations and assumed certain customer credits. The primary reason for the acquisition of Drysdales was to further expand the Company’s retail operations in Oklahoma. The cash consideration paid was $3.8 million.

In allocating the purchase price, the Company recorded all assets acquired and liabilities assumed at fair value. As the acquisition did not meet the definition of a business combination under FASB ASC Topic 805, Business Combinations, the Company accounted for the transaction as an asset acquisition. In an asset acquisition, goodwill is not recognized, but rather any excess consideration transferred over the fair value of the net assets acquired is allocated on a relative fair value basis to the identifiable net assets. 

The Company determined the estimated fair values using Level 3 inputs after review and consideration of relevant information, including quoted market prices and estimates made by management. The inventory was valued using the comparative sales method and the customer credits were valued using the cost approach. Based on the fair value analysis of the net assets acquired and liabilities assumed, the inventory was valued at $4.2 million, and the customer credits were valued at $0.4 million.

Lone Star Western & Casual LLC

On April 24, 2018, Boot Barn, Inc. completed the acquisition of Lone Star Western & Casual LLC (“Lone Star”), an individually owned retail company with three stores in Waxahachie, Corsicana and Athens, Texas. As part of the transaction, Boot Barn, Inc. purchased the inventory, entered into new leases with the stores’ landlord and offered employment to the Lone Star team at all 3 store locations. The primary reason for the acquisition of Lone Star was to further expand the Company’s retail operations in Texas. The cash consideration paid for the acquisition was $4.4 million.

In allocating the purchase price, the Company recorded all assets acquired and liabilities assumed at fair value. The total fair value of consideration transferred for the acquisition was allocated to the net tangible and intangible assets based upon their estimated fair values as of the date of the acquisition of Lone Star. The excess of the purchase price over the net tangible and intangible assets was recorded as goodwill.

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4. Intangible Assets, Net and Goodwill

Net intangible assets as of December 28, 2019 and March 30, 2019 consisted of the following (in thousands, except for weighted average useful life):

	December 28, 2019
	Gross						Weighted
	Carrying		Accumulated				Average
	Amount		Amortization		Net		Useful Life
Customer lists	$	851	$	(516)	$	335	3.8
Trademarks—definite lived		15		(8)		7	3.0
Total definite lived		866		(524)		342
Trademarks—indefinite lived		60,677		—		60,677
Total intangible assets	$	61,543	$	(524)	$	61,019

	March 30, 2019
	Gross						Weighted
	Carrying		Accumulated				Average
	Amount		Amortization		Net		Useful Life
Customer lists	$	506	$	(393)	$	113	3.0
Below-market leases		5,011		(2,967)		2,044	11.5
Trademarks-definite lived		15		(4)		11	3.0
Total definite lived		5,532		(3,364)		2,168
Trademarks—indefinite lived		60,677		—		60,677
Total intangible assets	$	66,209	$	(3,364)	$	62,845

Amortization expense for intangible assets totaled less than $0.1 million for the thirteen weeks ended December 28, 2019 and $0.1 million for the thirteen weeks ended December 29, 2018, and is included in selling, general and administrative expenses.

Amortization expense for intangible assets totaled $0.1 million for the thirty-nine weeks ended December 28, 2019 and $0.5 million for the thirty-nine weeks ended December 29, 2018, and is included in selling, general and administrative expenses.

As of December 28, 2019, estimated future amortization of intangible assets was as follows:

Fiscal Year	(in thousands)
2020	$	45
2021		89
2022		72
2023		62
2024		54
Thereafter		20
Total	$	342

The Company performs its annual goodwill impairment assessment on the first day of the fourth fiscal quarter, or more frequently if it believes that indicators of impairment exist. The Company’s goodwill balance was $197.5 million and $195.9 million as of December 28, 2019 and March 30, 2019, respectively. As of December 28, 2019, the Company had identified 0 indicators of impairment with respect to its goodwill and intangible asset balances. During the thirteen and thirty-nine weeks ended December 28, 2019, the Company did not record any long-lived asset impairment charges related to its stores. During the thirteen and thirty-nine weeks ended December 29, 2018, the Company recorded long-lived asset impairment charges of $0.2 million and $0.5 million, respectively, related to its stores.

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The change in the carrying amount of goodwill is as follows (in thousands):

Goodwill	December 28, 2019
Balance as of March 30, 2019	$	195,858
Goodwill as a result of the G.&L. Clothing Inc. Acquisition		1,644
Balance as of December 28, 2019	$	197,502

5. Revolving Credit Facilities and Long-Term Debt

On June 29, 2015, the Company, as guarantor, and its wholly-owned primary operating subsidiary, Boot Barn, Inc., refinanced a previous Wells Fargo credit facility with the $125.0 million syndicated senior secured asset-based revolving credit facility for which Wells Fargo Bank, National Association (“June 2015 Wells Fargo Revolver”), is agent, and the $200.0 million syndicated senior secured term loan for which GCI Capital Markets LLC (“2015 Golub Term Loan”) is agent. The borrowing base of the June 2015 Wells Fargo Revolver is calculated on a monthly basis and is based on the amount of eligible credit card receivables, commercial accounts, inventory, and available reserves.

Borrowings under the June 2015 Wells Fargo Revolver bear interest at per annum rates equal to, at the Company’s option, either (i) London Interbank Offered Rate (“LIBOR”) plus an applicable margin for LIBOR loans, or (ii) the base rate plus an applicable margin for base rate loans. The base rate is calculated as the highest of (a) the federal funds rate plus 0.5%, (b) the Wells Fargo prime rate and (c) one-month LIBOR plus 1.0%. The applicable margin is calculated based on a pricing grid that in each case is linked to quarterly average excess availability. For LIBOR Loans, the applicable margin ranges from 1.00% to 1.25%, and for base rate loans it ranges from 0.00% to 0.25%. The Company also pays a commitment fee of 0.25% per annum of the actual daily amount of the unutilized revolving loans. The interest on the June 2015 Wells Fargo Revolver is payable in quarterly installments ending on the maturity date. On May 26, 2017, the Company entered into an amendment to the June 2015 Wells Fargo Revolver (the “2017 Wells Amendment”), increasing the aggregate revolving credit facility to $135.0 million and extending the maturity date to the earlier of May 26, 2022 or 90 days prior to the previous maturity of the 2015 Golub Term Loan, which was then scheduled to mature on June 29, 2021. On June 6, 2019, the Company entered into Amendment No. 3 to the Credit Agreement (the “2019 Wells Amendment”), further increasing the aggregate revolving credit facility to $165.0 million and extending the maturity date to the earlier of June 6, 2024 or 90 days prior to the maturity of the 2015 Golub Term Loan, which is currently scheduled to mature on June 29, 2023. The 2019 Wells Amendment further made changes to the 2015 Wells Fargo Revolver in connection with the transition away from LIBOR as the benchmark rate. The amount outstanding under the June 2015 Wells Fargo Revolver as of December 28, 2019 and March 30, 2019 was $45.0 million and 0, respectively. Total interest expense incurred in the thirteen and thirty-nine weeks ended December 28, 2019 on the June 2015 Wells Fargo Revolver was $0.9 million and $2.4 million, respectively, and the weighted average interest rate for the thirteen weeks ended December 28, 2019 was 3.2%. Total interest expense incurred in the thirteen and thirty-nine weeks ended December 29, 2018 on the June 2015 Wells Fargo Revolver was $0.4 million and $1.5 million, respectively, and the weighted average interest rate for the thirteen weeks ended December 29, 2018 was 3.6%.

Borrowings under the 2015 Golub Term Loan bear interest at per annum rates equal to, at the Company’s option, either (a) LIBOR plus an applicable margin for LIBOR loans with a LIBOR floor of 1.0%, or (b) the base rate plus an applicable margin for base rate loans. The base rate is calculated as the greater of (i) the higher of (x) the prime rate and (y) the federal funds rate plus 0.5% and (ii) the sum of one-month LIBOR plus 1.0%. The applicable margin is 4.5% for LIBOR Loans and 3.5% for base rate loans. The principal and interest on the 2015 Golub Term Loan is payable in quarterly installments ending on the maturity date, which was originally June 29, 2021 but is now June 29, 2023. Quarterly principal payments of $500,000 are due for each quarter; however, on June 2, 2017, the Company prepaid $10.0 million on the 2015 Golub Term Loan, which included all of the required quarterly principal payments until the maturity date of the loan. On May 15, 2018, the Company made an additional $10.0 million prepayment on the 2015 Golub Term Loan. On June 6, 2019, the Company entered into the Third Amendment to the 2015 Golub Term Loan (the “2019 Golub Amendment”) which extended the maturity date to June 29, 2023. At the time of the Third Amendment, the company also prepaid $65.0 million of the term loan facility, reducing the outstanding principal balance to $111.5 million. The 2019 Golub Amendment further made changes to the 2015 Golub Term Loan in connection with the transition away from LIBOR as the benchmark rate. Total interest expense incurred in the thirteen and thirty-nine weeks ended December 28, 2019 on the 2015 Golub Term Loan was $1.9 million and $6.7 million, respectively, and the weighted average interest rate for the thirteen weeks ended December 28, 2019 was 6.6%. Total interest expense

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incurred in the thirteen and thirty-nine weeks ended December 29, 2018 on the 2015 Golub Term Loan was $3.1 million and $9.3 million, respectively, and the weighted average interest rate for the thirteen weeks ended December 29, 2018 was 6.9%.

All obligations under each of the 2015 Golub Term Loan and the June 2015 Wells Fargo Revolver are unconditionally guaranteed by the Company and each of its direct and indirect domestic subsidiaries (other than certain immaterial subsidiaries) which are not named as borrowers under the 2015 Golub Term Loan or the June 2015 Wells Fargo Revolver, as applicable.

The priority with respect to collateral under each of the 2015 Golub Term Loan and the June 2015 Wells Fargo Revolver is subject to the terms of an intercreditor agreement among the lenders under the 2015 Golub Term Loan and the June 2015 Wells Fargo Revolver.

Each of the June 2015 Wells Fargo Revolver and the 2015 Golub Term Loan contains customary provisions relating to mandatory prepayments, restricted payments, voluntary payments, affirmative and negative covenants, and events of default. In addition, the terms of the June 2015 Wells Fargo Revolver require the Company to maintain, on a consolidated basis, a Consolidated Fixed Charge Coverage Ratio of at least 1.00:1.00 during such times as a covenant trigger event shall exist. On May 26, 2017, the Company entered into an amendment to the 2015 Golub Term Loan (the “2017 Golub Amendment”). The 2017 Golub Amendment changed the maximum Consolidated Total Net Leverage Ratio requirements to 4.00:1.00 as of December 29, 2018 and for all subsequent periods. The 2019 Golub Amendment maintains the same maximum Consolidated Total Net Leverage Ratio requirements. The June 2015 Wells Fargo Revolver and 2015 Golub Term Loan also require the Company to pay additional interest of 2.0% per annum upon triggering certain specified events of default set forth therein. For financial accounting purposes, the requirement for the Company to pay a higher interest rate upon an event of default is an embedded derivative. As of December 28, 2019, the fair value of these embedded derivatives was estimated and was not significant. As of December 28, 2019, the Company was in compliance with the June 2015 Wells Fargo Revolver and the 2015 Golub Term Loan debt covenants.

Debt Issuance Costs and Debt Discount

Debt issuance costs totaling $1.2 million were incurred under the June 2015 Wells Fargo Revolver, 2017 Wells Amendment and 2019 Wells Amendment and are included as assets on the condensed consolidated balance sheets in prepaid expenses and other current assets. Total unamortized debt issuance costs were $0.4 million and $0.3 million as of December 28, 2019 and March 30, 2019, respectively. These amounts are being amortized to interest expense over the term of the June 2015 Wells Fargo Revolver.

Debt issuance costs and debt discount totaling $7.1 million were incurred under the 2015 Golub Term Loan, 2017 Golub Amendment and 2019 Golub Amendment and are included as a reduction of the current and non-current notes payable on the condensed consolidated balance sheets. Total unamortized debt issuance costs and debt discount were $2.7 million and $2.2 million as of December 28, 2019 and March 30, 2019, respectively. These amounts are being amortized to interest expense over the term of the 2015 Golub Term Loan.

The following sets forth the balance sheet information related to the term loan:

	December 28,			March 30,
(in thousands)	2019			2019
Term Loan	$	111,500	​	$	176,500
Unamortized value of the debt issuance costs and debt discount		(2,668)			(2,236)
Net carrying value	$	108,832		$	174,264

Total amortization expense of $0.2 million and $0.3 million related to the June 2015 Wells Fargo Revolver and 2015 Golub Term Loan is included as a component of interest expense in the thirteen weeks ended December 28, 2019 and December 29, 2018, respectively.

Total amortization expense of $0.7 million and $0.9 million related to the June 2015 Wells Fargo Revolver and 2015 Golub Term Loan is included as a component of interest expense in the thirty-nine weeks ended December 28, 2019 and December 29, 2018, respectively.

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Aggregate Contractual Maturities

Aggregate contractual maturities for the Company’s long-term debt as of December 28, 2019 are as follows:

Fiscal Year	(in thousands)
2020	$	—
2021		—
2022		—
2023		—
2024		111,500
Total	$	111,500

6. Stock-Based Compensation

Equity Incentive Plans

On January 27, 2012, the Company approved the 2011 Equity Incentive Plan (the “2011 Plan”). The 2011 Plan authorized the Company to issue options to employees, consultants and directors exercisable for up to a total of 3,750,000 shares of common stock. As of December 28, 2019, all awards granted by the Company under the 2011 Plan have been nonqualified stock options. Options granted under the 2011 Plan have a life of 10 years and vest over service periods of five years or in connection with certain events as defined by the 2011 Plan.

On October 19, 2014, the Company approved the 2014 Equity Incentive Plan, which was amended as of August 24, 2016 (as amended, the “2014 Plan”). Following the approval of the 2014 Plan, no further grants have been made under the 2011 Plan. The 2014 Plan authorizes the Company to issue awards to employees, consultants and directors for up to a total of 3,600,000 shares of common stock. As of December 28, 2019, all awards granted by the Company under the 2014 Plan to date have been nonqualified stock options, restricted stock awards, restricted stock units or performance share units. Options granted under the 2014 Plan have a life of eight to ten years and vest over service periods of four or five years or in connection with certain events as defined by the 2014 Plan. Restricted stock awards granted under the 2014 Plan vest over one or four years, as determined by the Compensation Committee of our board of directors. Restricted stock units vest over service periods of one, four or five years, as determined by the Compensation Committee of our board of directors. Performance share units are subject to the vesting criteria discussed further below.

Non-Qualified Stock Options

On May 20, 2019, the Company granted its Chief Executive Officer ("CEO") an option to purchase 227,273 shares of common stock under the 2014 Plan. This option contains both service and market vesting conditions. Vesting of this option is contingent upon the market price of the Company's common stock achieving 3 stated price targets for 30 consecutive trading days through the fourth anniversary of the date of grant. If the first market price target is met, 33% of the option granted will cliff vest on the fourth anniversary of the date of grant, with an additional 33% of the option vesting if the second market price target is met, and the last 34% of the option vesting if the final market price target is met. The total grant date fair value of this option was $2.0 million, with a grant date fair value of $8.80 per share. The Company is recognizing the expense relating to this stock option on a straight-line basis over the four-year service period. The exercise price of this award is $28.63 per share. The fair value of the option was estimated using a Monte Carlo simulation model. The following significant assumptions were used as of May 20, 2019, the date of grant:

Stock price	$	28.63
Exercise price	$	28.63
Expected option term		7.0	years
Expected volatility		35.3	%
Risk-free interest rate		2.3	%
Expected annual dividend yield		0	%

During the thirteen weeks ended December 28, 2019, the Company did not grant options to purchase shares under the 2014 Plan.

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During the thirty-nine weeks ended December 28, 2019, the Company granted certain members of management options to purchase a total of 116,952 shares under the 2014 Plan. The total grant date fair value of stock options granted during the thirty-nine weeks ended December 28, 2019 was $1.3 million, with a grant date fair value of $11.19 per share. The Company is recognizing the expense relating to these stock options on a straight-line basis over the four-year service period of the awards. The exercise price of these awards is $28.63 per share.

During the thirteen weeks ended December 29, 2018, the Company did not grant options to purchase shares under the 2014 Plan.

During the thirty-nine weeks ended December 29, 2018, the Company granted certain members of management options to purchase a total of 264,691 shares under the 2014 Plan. The total grant date fair value of stock options granted during the thirty-nine weeks ended December 29, 2018 was $2.4 million, with a grant date fair value ranging from $8.90 to $11.11 per share. The Company is recognizing the expense relating to these stock options on a straight-line basis over the four-year service period of the awards. The exercise price of these awards range between $23.92 and $29.73 per share.

The stock option awards discussed above were measured at fair value on the grant date using the Black-Scholes option valuation model. Key input assumptions used to estimate the fair value of stock options include the exercise price of the award, the expected option term, expected volatility of the Company’s stock price over the option’s expected term, the risk-free interest rate over the option’s expected term and the Company’s expected annual dividend yield, if any. The Company will issue shares of common stock when the options are exercised.

The fair values of stock options granted during the thirteen and thirty-nine weeks ended December 28, 2019 and December 29, 2018 were estimated on the grant dates using the following assumptions:

	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
		December 28,	December 29,		December 28,					December 29,
		2019	2018		2019					2018
Expected option term(1)		N/A		N/A		6.3	-	7.0	years				5.3	years
Expected volatility factor(2)		N/A		N/A	35.3	%	-	35.6	%	36.1	%	-	36.5	%
Risk-free interest rate(3)		N/A		N/A				2.3	%				2.8	%
Expected annual dividend yield		N/A		N/A				0	%				0	%

(1) The Company has limited historical information regarding expected option term. Accordingly, the Company determined the expected life of the options using the simplified method.

(2) Stock volatility for each grant is measured using the weighted average of historical daily price changes of the Company’s competitors’ common stock over the most recent period equal to the expected option term of the Company’s awards.

(3) The risk-free interest rate is determined using the rate on treasury securities with the same term.

Intrinsic value for stock options is defined as the difference between the market price of the Company’s common stock on the last business day of the fiscal quarter and the weighted average exercise price of in-the-money stock options outstanding at the end of each fiscal period.

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The following table summarizes the stock award activity for the thirty-nine weeks ended December 28, 2019:

		Grant Date		Weighted
		Weighted		Average	Aggregate
	Stock	Average		Remaining	Intrinsic
	Options	Exercise Price		Contractual Life	Value
				(in years)	(in thousands)
Outstanding at March 30, 2019	1,293,347	$	15.40
Granted	344,225	$	28.63
Exercised	(364,536)	$	12.93		$	8,996
Cancelled, forfeited or expired	(5,401)	$	27.50
Outstanding at December 28, 2019	1,267,635	$	19.66	6.2	$	29,933
Vested and expected to vest after December 28, 2019	1,267,635	$	19.66	6.2	$	29,933
Exercisable at December 28, 2019	283,134	$	19.26	4.1	$	6,799

A summary of the status of non-vested stock options as of December 28, 2019 including changes during the thirty-nine weeks ended December 28, 2019 is presented below:

		Weighted-
		Average
		Grant Date
	Shares	Fair Value
Nonvested at March 30, 2019	917,850	$	5.48
Granted	344,225	$	9.61
Vested	(275,757)	$	5.45
Nonvested shares forfeited	(1,817)	$	7.04
Nonvested at December 28, 2019	984,501	$	6.93

Restricted Stock Units

During the thirteen weeks ended December 28, 2019, the Company did not grant any restricted stock units. During the thirty-nine weeks ended December 28, 2019, the Company granted 89,985 restricted stock units to various directors and employees under the 2014 Plan. The shares granted to employees vest in four equal annual installments beginning on the grant date, provided that the respective award recipient continues to be employed by the Company through each of those dates (subject to certain exceptions). The shares granted to the Company’s directors vest on the first anniversary of the date of grant. The grant date fair value of these awards for the thirty-nine weeks ended December 28, 2019 totaled $2.6 million. The Company is recognizing the expense relating to these awards on a straight-line basis over the service period of each award, commencing on the date of grant.

During the thirteen weeks ended December 29, 2018, the Company did not grant any restricted stock units. During the thirty-nine weeks ended December 29, 2018, the Company granted 80,966 restricted stock units to various directors and employees under the 2014 Plan. The shares granted to employees vest in four equal annual installments beginning on the grant date, provided that the respective award recipient continues to be employed by the Company through each of those dates. The shares granted to the Company’s directors vest on the first anniversary of the date of grant. The grant date fair value of these awards for the thirty-nine weeks ended December 29, 2018 totaled $2.0 million. The Company is recognizing the expense relating to these awards on a straight-line basis over the service period of each award, commencing on the date of grant.

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Performance Share Units

During the thirteen weeks ended December 28, 2019, the Company did not grant any performance share units. During the thirty-nine weeks ended December 28, 2019, the Company granted 38,546 performance share units to various employees under the 2014 Plan with a grant date fair value of $28.63 per share.

The performance share units granted are stock-based awards in which the number of shares ultimately received depends on the Company's performance against its cumulative earnings per share target over a three-year performance period beginning March 31, 2019 and ending March 26, 2022. These performance metrics were established by the Company at the beginning of the performance period. At the end of the performance period, the number of performance shares to be issued is fixed based upon the degree of achievement of the performance goals. If the cumulative three-year performance goals are below the threshold level, the number of performance units to vest will be 0%, if the performance goals are at the threshold level, the number of performance units to vest will be 50% of the target amounts, if the performance goals are at the target level, the number of performance units to vest will be 100% of the target amounts, and if the performance goals are at the maximum level, the number of performance units to vest will be 200% of the target amounts, each subject to continued service through the last day of the performance period (subject to certain exceptions). If performance is between threshold and target goals or between target and maximum goals, the number of performance units to vest will be determined by linear interpolation. The number of shares ultimately issued can range from 0% to 200% of the participant's target award.

The grant date fair value of the performance share units granted during the thirty-nine weeks ended December 28, 2019 was initially measured using the Company's closing stock price on the date of grant with the resulting stock compensation expense recognized on a straight-line basis over the three-year vesting period. The expense recognized over the vesting period is adjusted up or down on a quarterly basis based on the anticipated performance level during the performance period. If the performance metrics are not probable of achievement during the performance period, stock compensation expense would be reversed. The awards are forfeited if the threshold performance goals are not achieved as of the end of the performance period.

During the thirteen and thirty-nine weeks ended December 29, 2018, the Company did not grant any performance share units.

Stock-Based Compensation Expense

Stock-based compensation expense was $1.2 million and $0.8 million for the thirteen weeks ended December 28, 2019 and December 29, 2018, respectively. Stock-based compensation expense was $3.3 million and $2.2 million for the thirty-nine weeks ended December 28, 2019 and December 29, 2018, respectively. Stock-based compensation expense of $0.2 million and $0.1 million was recorded in cost of goods sold in the condensed consolidated statements of operations for the thirteen weeks ended December 28, 2019 and December 29, 2018, respectively. Stock-based compensation expense of $0.5 million and $0.3 million was recorded in cost of goods sold in the condensed consolidated statements of operations for the thirty-nine weeks ended December 28, 2019 and December 29, 2018, respectively. All other stock-based compensation expense is included in selling, general and administrative expenses in the condensed consolidated statements of operations.

As of December 28, 2019, there was $5.4 million of total unrecognized stock-based compensation expense related to unvested stock options, with a weighted-average remaining recognition period of 2.91 years. As of December 28, 2019, there was $3.6 million of total unrecognized stock-based compensation expense related to restricted stock units, with a weighted-average remaining recognition period of 2.81 years. As of December 28, 2019, there was $1.3 million of total unrecognized stock-based compensation expense related to performance share units, with a weighted-average remaining recognition period of 2.39 years.

7. Commitments and Contingencies

The Company is involved, from time to time, in litigation that is incidental to its business. The Company has reviewed these matters to determine if reserves are required for losses that are probable and reasonable to estimate in

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accordance with FASB ASC Topic 450, Contingencies. The Company evaluates such reserves, if any, based upon several criteria, including the merits of each claim, settlement discussions and advice from outside legal counsel, as well as indemnification of amounts expended by the Company’s insurers or others pursuant to indemnification policies or agreements, if any.

The Company is also subject to certain other pending or threatened litigation matters incidental to its business. In management's opinion, none of these legal matters, individually or in the aggregate, will have a material effect on the Company's financial position, results of operations, or liquidity.

During the normal course of its business, the Company has made certain indemnifications and commitments under which the Company may be required to make payments for certain transactions. These indemnifications include those given to various lessors in connection with facility leases for certain claims arising from such facility leases, and indemnifications to directors and officers of the Company to the maximum extent permitted under the laws of the State of Delaware. The majority of these indemnifications and commitments do not provide for any limitation of the maximum potential future payments the Company could be obligated to make, and their duration may be indefinite. The Company has not recorded any liability for these indemnifications and commitments in the condensed consolidated balance sheets as the impact is expected to be immaterial.

8. Leases

The Company does not own any real estate. Instead, most of its retail store locations are occupied under operating leases. The store leases generally have a base lease term of five or 10 years, with one or more renewal periods of five years, on average, exercisable at the Company’s option. The Company is generally responsible for the payment of property taxes and insurance, utilities and common area maintenance fees. Some leases also require additional payments based on percentage of sales. Lease terms include the non-cancellable portion of the underlying leases along with any reasonably certain lease periods associated with available renewal periods, termination options and purchase options.

Operating and finance lease liabilities are recognized at the lease commencement date based on the present value of the fixed lease payments using the Company's incremental borrowing rates for its population of leases. Related operating and finance lease ROU assets are recognized based on the initial present value of the fixed lease payments, reduced by cash payments received from landlords as lease incentives, plus any prepaid rent and other direct costs from executing the leases. Amortization of both operating and finance lease ROU assets is performed on a straight-line basis and recorded as part of rent expense in selling, general and administrative expenses on the condensed consolidated statements of operations. The interest expense amortization component of the finance lease liabilities is recorded within interest expense on the condensed consolidated statements of operations. ROU assets are tested for impairment in the same manner as long-lived assets.

Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Variable lease payments are recognized as lease expense as they are incurred.

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ROU assets and lease liabilities as of December 28, 2019 consist of the following:

	Balance Sheet Classification	December 28, 2019 (in thousands)
Assets
Finance lease assets	Right-of-use assets, net	$	7,523
Operating lease assets	Right-of-use assets, net		160,559
Total lease assets		$	168,082
Liabilities
Current
Finance	Short-term lease liabilities	$	674
Operating	Short-term lease liabilities		33,461
Total short-term lease liabilities		$	34,135
Non-Current
Finance	Long-term lease liabilities	$	6,232
Operating	Long-term lease liabilities		146,558
Total long-term lease liabilities		$	152,790
Total lease liabilities		$	186,925

Total lease costs for the thirteen and thirty-nine weeks ended December 28, 2019 were:

		Thirteen Weeks Ended		Thirty-Nine Weeks Ended
(in thousands)	Statement of Operations Classification	December 28, 2019		December 28, 2019
Finance lease cost
Amortization of right-of-use assets	Cost of goods sold	$	178	$	535
Interest on lease liabilities	Interest expense, net		178		551
Total finance lease cost		$	356	$	1,086
Operating lease cost	Cost of goods sold	$	10,116	$	29,541
Operating lease cost	Selling, general and administrative expenses		422		1,275
Short-term lease cost	Selling, general and administrative expenses		932		2,092
Variable lease cost	Selling, general and administrative expenses		758		1,909
Sublease income	Cost of goods sold		(22)		(22)
Total lease cost		$	12,562	$	35,881

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The following table summarizes future lease payments as of December 28, 2019:

	Operating Leases		Finance Leases
Fiscal Year	(in thousands)		(in thousands)
2020	$	10,952	$	336
2021		44,353		1,346
2022		38,944		1,359
2023		34,463		1,305
2024		27,912		1,280
Thereafter		76,569		4,261
Total		233,193		9,887
Less: Imputed interest		(53,174)		(2,981)
Present value of net lease payments	$	180,019	$	6,906

Prior to the Company’s adoption of ASC 842, its future minimum operating lease commitments as of March 30, 2019 under ASC 840 were (in thousands):

Fiscal Year	Total
2020	$	37,877
2021		36,352
2022		31,732
2023		26,649
2024		20,536
Thereafter		44,061
Total	$	197,207

The following table includes supplemental lease information:

	Thirty-Nine Weeks Ended
Supplemental Cash Flow Information (dollars in thousands)	December 28, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	30,583
Operating cash flows from finance leases		551
Financing cash flows from finance leases		461
	$	31,595
Lease liabilities arising from new right-of-use assets
Operating leases	$	33,646
Finance leases	$	—
Weighted average remaining lease term (in years)
Operating leases		6.4
Finance leases		10.6
Weighted average discount rate
Operating leases		6.3	%
Finance leases		10.2	%

9. Income Taxes

The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”). In accordance with ASC 740, the Company recognizes deferred tax assets and liabilities based on the liability method, which requires an adjustment to the deferred tax asset or liability to reflect income tax rates currently in effect. When income tax rates increase or decrease, a corresponding adjustment to income tax expense is recorded by applying the rate change to the cumulative temporary differences. ASC 740 prescribes the recognition threshold and measurement principles for

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financial statement disclosure of tax positions taken or expected to be taken on a tax return. ASC 740 requires the Company to determine whether it is “more likely than not” that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recognized. Additionally, ASC 740 provides guidance on recognition measurement, derecognition, classification, related interest and penalties, accounting in interim periods, disclosure and transition.

The income tax rate was 22.1% and 24.8% for the thirteen weeks ended December 28, 2019 and December 29, 2018, respectively, and 21.3% and 14.7% for the thirty-nine weeks ended December 28, 2019 and December 29, 2018, respectively. The thirteen weeks ended December 28, 2019 include $1.1 million of tax benefit due to income tax accounting for share-based compensation compared to a lower tax benefit of less than $0.1 million for the thirteen weeks ended December 29, 2018. The thirty-nine weeks ended December 28, 2019 include $1.9 million of tax benefit due to income tax accounting for share-based compensation compared to a higher tax benefit of $3.6 million for the thirty-nine weeks ended December 29, 2018. Valuation allowances are established, when necessary, to reduce deferred income tax assets to the amounts expected to be realized. To this end, the Company has considered and evaluated its sources of taxable income, including forecasted future taxable income, and the Company has concluded that a valuation allowance is primarily required for certain state net operating losses and credits it expects to expire unused. The Company will continue to evaluate the need for a valuation allowance at each period end.

The Company’s policy is to accrue interest and penalties related to unrecognized tax benefits as a component of income tax expense. At December 28, 2019 and March 30, 2019, the Company had 0 accrued liability for penalties and interest.

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. At December 28, 2019, the Company is not aware of tax examinations (current or potential) in any tax jurisdictions.

10. Related Party Transactions

During the thirteen and thirty-nine weeks ended December 28, 2019 and December 29, 2018, the Company had capital expenditures with Floor & Decor Holdings, Inc., a specialty retail vendor in the flooring market. These capital expenditures amounted to $0.2 million and $0.1 million in the thirteen weeks ended December 28, 2019 and December 29, 2018, respectively. These capital expenditures amounted to $0.5 million and $0.4 million in the thirty-nine weeks ended December 28, 2019 and December 29, 2018, respectively, and were recorded as property and equipment, net on the condensed consolidated balance sheets. Certain members of the Company’s board of directors either currently serve on the board of directors or as an executive officer at Floor & Decor Holdings, Inc.

11. Earnings Per Share

Earnings per share is computed under the provisions of FASB ASC Topic 260, Earnings Per Share. Basic earnings per share is computed based on the weighted average number of outstanding shares of common stock during the period. Diluted earnings per share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential shares of common stock outstanding during the period using the treasury stock method, whereby proceeds from such exercise and unamortized compensation, if any, on share-based awards, are assumed to be used by the Company to purchase the shares of common stock at the average market price during the period. The dilutive effect of stock options and restricted stock is applicable only in periods of net income. Performance share units and market-based stock option awards are excluded from the calculation of diluted earnings per share until their respective performance or market criteria has been achieved.

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The components of basic and diluted earnings per share of common stock, in aggregate, for the thirteen and thirty-nine weeks ended December 28, 2019 and December 29, 2018 are as follows:

					��
	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	December 28,		December 29,		December 28,		December 29,
(in thousands, except per share data)	2019		2018		2019		2018
Net income	$	24,819	$	19,030	$	42,220	$	30,325
Weighted average basic shares outstanding		28,665		28,320		28,516		28,014
Dilutive effect of options and restricted stock		702		566		672		761
Weighted average diluted shares outstanding		29,367		28,886		29,188		28,775
Basic earnings per share	$	0.87	$	0.67	$	1.48	$	1.08
Diluted earnings per share	$	0.85	$	0.66	$	1.45	$	1.05

Options to purchase 0 shares and 462,024 shares of common stock were outstanding during the thirteen weeks ended December 28, 2019 and December 29, 2018, respectively, but were not included in the computation of weighted average diluted shares of common stock outstanding as the effect of doing so would have been anti-dilutive.

Options to purchase 377,492 shares and 462,024 shares of common stock were outstanding during the thirty-nine weeks ended December 28, 2019 and December 29, 2018, respectively, but were not included in the computation of weighted average diluted shares of common stock outstanding as the effect of doing so would have been anti-dilutive.

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the financial condition and results of our operations should be read together with the unaudited financial statements and related notes of Boot Barn Holdings, Inc. and Subsidiaries included in Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and the related notes included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”), on May 24, 2019 (the “Fiscal 2019 10-K”). As used in this Quarterly Report on Form 10-Q, except where the context otherwise requires or where otherwise indicated, the terms “company”, “Boot Barn”, “we”, “our” and “us” refer to Boot Barn Holdings, Inc. and its subsidiaries.

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate”, “believe”, “can”, “continue”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “project”, “seek”, “should”, “target”, “will”, “would” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. These forward-looking statements are subject to numerous risks and uncertainties, including the risks and uncertainties described under the section titled “Risk Factors” in our Fiscal 2019 10-K, and those identified in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in an evolving environment. New risks and uncertainties emerge from time to time and it is not possible for our management to predict all risks and uncertainties, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ materially from those contained in any forward-looking statement. We qualify all of our forward-looking statements by these cautionary statements.

We caution you that the risks and uncertainties identified by us may not be all of the factors that are important to you. Furthermore, the forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers,

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dispositions, joint ventures or investments that we may make. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

Overview

We believe that Boot Barn is the largest lifestyle retail chain devoted to western and work-related footwear, apparel and accessories in the U.S. As of December 28, 2019, we operated 251 stores in 33 states, as well as our e-commerce websites consisting primarily of bootbarn.com, sheplers.com and countryoutfitter.com. Our product offering is anchored by an extensive selection of western and work boots and is complemented by a wide assortment of coordinating apparel and accessories. Our stores feature a comprehensive assortment of brands and styles, coupled with attentive, knowledgeable store associates. Many of the items that we offer are basics or necessities for our customers’ daily lives and typically represent enduring styles that are not meaningfully impacted by changing fashion trends.

We strive to offer an authentic, one-stop shopping experience that fulfills the everyday lifestyle needs of our customers, and as a result, many of our customers make purchases in both the western and work wear sections of our stores. We target a broad and growing demographic, ranging from passionate western and country enthusiasts, to workers seeking dependable, high-quality footwear and apparel. Our broad geographic footprint, which comprises approximately three times as many stores as our nearest direct competitor that sells primarily western and work wear, provides us with significant economies of scale, enhanced supplier relationships, the ability to recruit and retain high quality store associates and the ability to reinvest in our business at levels that we believe exceed those of our competition.

How We Assess the Performance of Our Business

In assessing the performance of our business, we consider a variety of performance and financial measures. The key indicators we use to evaluate the financial condition and operating performance of our business are net sales and gross profit. In addition, we also review other important metrics, such as same store sales, new store openings, and selling, general and administrative expenses (“SG&A”), as well as the non-GAAP financial measures, earnings before interest, taxes, depreciation and amortization (“EBITDA”), EBITDA adjusted to exclude certain items (“Adjusted EBITDA”), and earnings before interest and taxes, adjusted to exclude certain items (“Adjusted EBIT”). See “—EBITDA, Adjusted EBITDA and Adjusted EBIT” below for more information and “—Results of Operations” for a reconciliation of these measures to net income.

Net sales

Net sales reflect revenue from the sale of our merchandise at retail locations, as well as sales of merchandise through our e-commerce websites. We recognize revenue upon the purchase of merchandise by customers at our stores and upon delivery of the product in the case of our e-commerce websites. Net sales also include shipping and handling fees for e-commerce shipments that have been delivered to our customers. Net sales are net of returns on sales during the period as well as an estimate of returns and award redemptions expected in the future stemming from current period sales. Revenue from the sale of gift cards is deferred until the gift cards are used to purchase merchandise.

Our business is moderately seasonal and as a result our revenues fluctuate from quarter to quarter. In addition, our revenues in any given quarter can be affected by a number of factors including the timing of holidays, weather patterns, rodeos and country concerts. The third quarter of our fiscal year, which includes the Christmas shopping season, has historically produced higher sales and disproportionately larger operating income than the other quarters of our fiscal year. However, neither the western nor the work component of our business has been meaningfully impacted by fashion trends or seasonality historically. We believe that many of our customers are driven primarily by utility and brand, and our best-selling styles.

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Same store sales

The term “same store sales” refers to net sales from stores that have been open at least 13 full fiscal months as of the end of the current reporting period, although we include or exclude stores from our calculation of same store sales in accordance with the following additional criteria:

● stores that are closed for five or fewer days in any fiscal month are included in same store sales;

● stores that are closed temporarily, but for more than five days in any fiscal month, are excluded from same store sales beginning in the fiscal month in which the temporary closure begins (and for the comparable periods of the prior or subsequent fiscal periods for comparative purposes) until the first full month of operation once the store re-opens;

● stores that are closed temporarily and relocated within their respective trade areas are included in same store sales;

● stores that are permanently closed are excluded from same store sales beginning in the month preceding closure (and for the comparable periods of the prior or subsequent fiscal periods for comparative purposes); and

● acquired stores are added to same store sales beginning on the later of (a) the applicable acquisition date and (b) the first day of the first fiscal month after the store has been open for at least 13 full fiscal months regardless of whether the store has been operated under our management or predecessor management.

If the criteria described with respect to acquired stores above are met, then all net sales of such acquired store, excluding those net sales before our acquisition of that store, are included for the period presented. However, when an acquired store is included for the period presented, the net sales of such acquired store for periods before its acquisition are included (to the extent relevant) for purposes of calculating “same store sales growth” and illustrating the comparison between the applicable periods. Pre-acquisition net sales numbers are derived from the books and records of the acquired company, as prepared prior to the acquisition, and have not been independently verified by us. Beginning on their respective dates of acquisition, sales from the acquired Wood’s Boots stores, Lone Star stores, Drysdales stores and G.&L. Clothing store have been included in same store sales.

In addition to retail store sales, same store sales also includes e-commerce sales, e-commerce shipping and handling revenue and actual retail store or e-commerce sales returns. Sales as a result of an e-commerce asset acquisition, such as Country Outfitter, are excluded from same store sales until the 13th full fiscal month subsequent to the Company’s acquisition of such assets.

We exclude gift card escheatment, provision for sales returns and estimated future loyalty award redemptions from sales in our calculation of net sales per store.

Measuring the change in year-over-year same store sales allows us to evaluate how our store base is performing. Numerous factors affect our same store sales, including:

● national and regional economic trends;

● our ability to identify and respond effectively to regional consumer preferences;

● changes in our product mix;

● changes in pricing;

● competition;

● changes in the timing of promotional and advertising efforts;

● holidays or seasonal periods; and

● weather.

Opening new stores is an important part of our growth strategy and we anticipate that a percentage of our net sales in the near future will come from stores not included in our same store sales calculation. Accordingly, same store sales are only one measure we use to assess the success of our business and growth strategy. Some of our competitors and other retailers may calculate “same” or “comparable” store sales differently than we do. As a result, data in this Quarterly Report on Form 10-Q regarding our same store sales may not be comparable to similar data made available by other retailers.

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New store openings

New store openings reflect the number of stores, excluding acquired stores, that are opened during a particular reporting period. In connection with opening new stores, we incur pre-opening costs. Pre-opening costs consist of costs incurred prior to opening a new store and primarily consist of manager and other employee payroll, travel and training costs, marketing expenses, initial opening supplies and costs of transporting initial inventory and certain fixtures to store locations, as well as occupancy costs incurred from the time that we take possession of a store site to the opening of that store. Occupancy costs are included in cost of goods sold and the other pre-opening costs are included in SG&A expenses. All of these costs are expensed as incurred.

New stores often open with a period of high sales levels, which subsequently decrease to normalized sales volumes. In addition, we experience typical inefficiencies in the form of higher labor, advertising and other direct operating expenses, and as a result, store-level profit margins at our new stores are generally lower during the start-up period of operation. The number and timing of store openings has had, and is expected to continue to have, a significant impact on our results of operations. In assessing the performance of a new store, we review its actual sales against the sales that we projected that store to achieve at the time we initially approved its opening. We also review the actual number of stores opened in a fiscal year against the number of store openings that we included in our budget at the beginning of that fiscal year.

Gross profit

Gross profit is equal to our net sales less our cost of goods sold. Cost of goods sold includes the cost of merchandise, obsolescence and shrinkage provisions, store and warehouse occupancy costs (including rent, depreciation and utilities), inbound and outbound freight, supplier allowances, occupancy-related taxes, compensation costs for merchandise purchasing and warehouse personnel, and other inventory acquisition-related costs. These costs are significant and can be expected to continue to increase as we grow. The components of our reported cost of goods sold may not be comparable to those of other retail companies, including our competitors.

Our gross profit generally follows changes in net sales. We regularly analyze the components of gross profit, as well as gross profit as a percentage of net sales. Specifically, we examine the initial markup on purchases, markdowns and reserves, shrinkage, buying costs, distribution costs and occupancy costs. Any inability to obtain acceptable levels of initial markups, a significant increase in our use of markdowns or in inventory shrinkage, or a significant increase in freight and other inventory acquisition costs, could have an adverse impact on our gross profit and results of operations.

Gross profit is also impacted by shifts in the proportion of sales of our exclusive brand products compared to third-party brand products, as well as by sales mix changes within and between brands and major product categories such as footwear, apparel or accessories.

Selling, general and administrative expenses

Our SG&A expenses are composed of labor and related expenses, other operating expenses and general and administrative expenses not included in cost of goods sold. Specifically, our SG&A expenses include the following:

● Labor and related expenses - Labor and related expenses include all store-level salaries and hourly labor costs, including salaries, wages, benefits and performance incentives, labor taxes and other indirect labor costs.

● Other operating expenses - Other operating expenses include all operating costs, including those for advertising, pay-per-click, marketing campaigns, operating supplies, utilities, and repairs and maintenance, as well as credit card fees and costs of third-party services.

● General and administrative expenses - General and administrative expenses include expenses associated with corporate and administrative functions that support the development and operations of our stores, including compensation and benefits, travel expenses, corporate occupancy costs, stock compensation costs, legal and professional fees, insurance and other related corporate costs.

The components of our SG&A expenses may not be comparable to those of our competitors and other retailers. We expect our selling, general and administrative expenses will increase in future periods as a result of incremental share-

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based compensation, legal, and accounting-related expenses and increases resulting from growth in the number of our stores.

EBITDA, Adjusted EBITDA and Adjusted EBIT

EBITDA, Adjusted EBITDA and Adjusted EBIT are important non-GAAP financial measures used by our management, board of directors and lenders to assess our operating performance. We use EBITDA, Adjusted EBITDA and Adjusted EBIT as key performance measures because we believe that they facilitate operating performance comparisons from period to period by excluding potential differences primarily caused by the impact of variations from period to period in tax positions, interest expense and depreciation and amortization, as well as, in the case of Adjusted EBITDA, excluding non-cash expenses, such as stock-based compensation and the non-cash accrual for future award redemptions, and other costs and expenses that are not directly related to our operations, including loss on disposal of assets, gain on adjustment of right-of-use assets and lease liabilities, store impairment charges and secondary offering costs. Similar to Adjusted EBITDA, Adjusted EBIT excludes the aforementioned adjustments while maintaining the impact of depreciation and amortization on our financial results. See “Results of Operations” below for a reconciliation of our EBITDA, Adjusted EBITDA and Adjusted EBIT to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP. Because EBITDA, Adjusted EBITDA and Adjusted EBIT facilitate internal comparisons of our historical operating performance on a more consistent basis, we also use EBITDA, Adjusted EBITDA and Adjusted EBIT for business planning purposes, in determining incentive compensation for members of our management and in evaluating acquisition opportunities. Our credit facilities also require us to use EBITDA, Adjusted EBITDA and Adjusted EBIT in calculating covenant compliance. In addition, we believe that EBITDA, Adjusted EBITDA and Adjusted EBIT and similar measures are widely used by investors, securities analysts, ratings agencies and other parties in evaluating companies in our industry as a measure of financial performance and debt-service capabilities. Given that EBITDA, Adjusted EBITDA and Adjusted EBIT are measures not deemed to be in accordance with GAAP and are susceptible to varying calculations, our EBITDA, Adjusted EBITDA and Adjusted EBIT may not be comparable to similarly titled measures of other companies, including companies in our industry, because other companies may calculate EBITDA, Adjusted EBITDA and Adjusted EBIT in a different manner than we calculate these measures.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, as well as the related disclosures of contingent assets and liabilities at the date of the financial statements. A summary of our significant accounting policies is included in Note 2 to our consolidated financial statements included in the Fiscal 2019 10-K.

Certain of our accounting policies and estimates are considered critical, as these policies and estimates are the most important to the depiction of our consolidated financial statements and require significant, difficult or complex judgments, often about the effect of matters that are inherently uncertain. Such policies are summarized in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Fiscal 2019 10-K. As of the date of this filing, there were no significant changes to any of the critical accounting policies and estimates described in the Fiscal 2019 10-K.

Results of Operations

We operate on a fiscal calendar that results in a 52- or 53-week fiscal year ending on the last Saturday of March unless April 1st is a Saturday, in which case the fiscal year ends on April 1st. In a 52-week fiscal year, each quarter includes thirteen weeks of operations; in a 53-week fiscal year, the first, second and third quarters each include thirteen weeks of operations and the fourth quarter includes fourteen weeks of operations. Both the fiscal year ending on March 28, 2020 (“fiscal 2020”) and the fiscal year ended on March 30, 2019 (“fiscal 2019”) consist of 52 weeks. We identify our fiscal years by reference to the calendar year in which the fiscal year ends.

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The following table summarizes key components of our results of operations for the periods indicated, both in dollars and as a percentage of our net sales:

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	December 28,			December 29,			December 28,			December 29,
(dollars in thousands)	2019			2018			2019			2018
Condensed Consolidated Statements of Operations Data:
Net sales	$	283,997		$	254,006		$	656,947		$	584,099
Cost of goods sold		186,961			168,343			438,417			396,071
Gross profit		97,036			85,663			218,530			188,028
Selling, general and administrative expenses		62,059			56,366			154,558			140,205
Income from operations		34,977			29,297			63,972			47,823
Interest expense, net		3,155			4,011			10,369			12,264
Other income, net		37			4			51			4
Income before income taxes		31,859			25,290			53,654			35,563
Income tax expense		7,040			6,260			11,434			5,238
Net income	$	24,819		$	19,030		$	42,220		$	30,325
Percentage of Net Sales (1):
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of goods sold		65.8	%		66.3	%		66.7	%		67.8	%
Gross profit		34.2	%		33.7	%		33.3	%		32.2	%
Selling, general and administrative expenses		21.9	%		22.2	%		23.5	%		24.0	%
Income from operations		12.3	%		11.5	%		9.7	%		8.2	%
Interest expense, net		1.1	%		1.6	%		1.6	%		2.1	%
Other income, net		—	%		—	%		—	%		—	%
Income before income taxes		11.2	%		10.0	%		8.2	%		6.1	%
Income tax expense		2.5	%		2.5	%		1.7	%		0.9	%
Net income		8.7	%		7.5	%		6.4	%		5.2	%

(1) Percentages may not recalculate due to rounding.

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The following table presents a reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBIT to our net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, for each of the periods indicated:

	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	December 28,		December 29,		December 28,		December 29,
(in thousands)	2019		2018		2019		2018
EBITDA Reconciliation:
Net income	$	24,819	$	19,030	$	42,220	$	30,325
Income tax expense		7,040		6,260		11,434		5,238
Interest expense, net		3,155		4,011		10,369		12,264
Depreciation and intangible asset amortization(a)		5,682		4,720		15,511		13,724
EBITDA		40,696		34,021		79,534		61,551
Non-cash stock-based compensation(b)		1,181		791		3,326		2,207
Non-cash accrual for future award redemptions(c)		575		526		661		640
Loss/(gain) on disposal of assets(d)		377		(4)		389		23
Loss/(gain) on adjustment of right-of-use assets and lease liabilities(e)		7		—		(186)		—
Store impairment charge(f)		—		150		—		455
Secondary offering costs(g)		—		—		—		176
Adjusted EBITDA	$	42,836	$	35,484	$	83,724	$	65,052
Depreciation and intangible asset amortization		(5,682)		(4,720)		(15,511)		(13,724)
Adjusted EBIT	$	37,154	$	30,764	$	68,213	$	51,328

(a) The thirteen and thirty-nine weeks ended December 28, 2019 exclude below-market lease amortization and certain asset depreciation expenses no longer recorded as amortization expense, but as rent expense under ASC 842.

(b) Represents non-cash compensation expenses related to stock options, restricted stock awards, restricted stock units and performance share units granted to certain of our employees and directors.

(c) Represents the non-cash accrual for future award redemptions in connection with our customer loyalty program.

(d) Represents loss/(gain) on disposal of assets.

(e) Represents loss/(gain) on adjustment of right-of-use assets and lease liabilities.

(f) Represents store impairment charges recorded in order to reduce the carrying amount of the assets to their estimated fair values.

(g) Represents professional fees and expenses incurred in connection with the May 2018 secondary offering.

The following table presents store operating data for the periods indicated:

		Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	December 28,			December 29,			December 28,			December 29,
	2019			2018			2019			2018
Selected Store Data:
Same Store Sales growth		6.7	%		9.2	%		7.8	%		10.4	%
Stores operating at end of period		251			234			251			234
Total retail store square footage, end of period (in thousands)*		2,639			2,486			2,639			2,486
Average store square footage, end of period*		10,514			10,624			10,514			10,624
Average net sales per store (in thousands)	$	903		$	862		$	2,161		$	2,031

*Note: The Company has changed the presentation of square footage to represent the estimated selling square footage in each of its stores and has presented the comparable information for the prior-year periods presented using the new measurement.

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Thirteen Weeks Ended December 28, 2019 Compared to Thirteen Weeks Ended December 29, 2018

Net sales. Net sales increased $30.0 million, or 11.8%, to $284.0 million for the thirteen weeks ended December 28, 2019 from $254.0 million for the thirteen weeks ended December 29, 2018. Consolidated same store sales increased 6.7%. Excluding the impact of the 11.0% increase in e-commerce same store sales, same store sales increased by 5.7%. Net sales increased during the thirteen weeks ended December 28, 2019 due to the increase in same store sales and sales from stores added over the past twelve months.

Gross profit. Gross profit increased $11.4 million, or 13.3%, to $97.0 million for the thirteen weeks ended December 28, 2019 from $85.7 million for the thirteen weeks ended December 29, 2018. As a percentage of net sales, gross profit was 34.2% and 33.7% for the thirteen weeks ended December 28, 2019 and December 29, 2018, respectively. Gross profit increased primarily due to increased sales and an increase in merchandise margin rate. As a percentage of net sales, consolidated gross profit primarily increased as a result of a 50 basis point increase in merchandise margin rate. The higher merchandise margin was driven by growth in exclusive brand penetration.

Selling, general and administrative expenses. SG&A expenses increased $5.7 million, or 10.1%, to $62.1 million for the thirteen weeks ended December 28, 2019 from $56.4 million for the thirteen weeks ended December 29, 2018. As a percentage of net sales, SG&A was 21.9% and 22.2% for the thirteen weeks ended December 28, 2019 and December 29, 2018, respectively. The increase in SG&A expenses was primarily a result of additional costs to support higher sales and expenses for both new and acquired stores. As a percentage of net sales, SG&A decreased by 30 basis points primarily as a result of expense leverage on higher sales.

Income from operations. Income from operations increased $5.7 million, or 19.4%, to $35.0 million for the thirteen weeks ended December 28, 2019 from $29.3 million for the thirteen weeks ended December 29, 2018. As a percentage of net sales, income from operations was 12.3% and 11.5% for the thirteen weeks ended December 28, 2019 and December 29, 2018, respectively. The increase in income from operations was attributable to the factors noted above.

Interest expense, net. Interest expense, net, was $3.2 million and $4.0 million for the thirteen weeks ended December 28, 2019 and December 29, 2018, respectively. The decrease in interest expense, net was primarily the result of a lower 2015 Golub Term Loan balance in the current-year period relative to the prior-year period, partially offset by a higher outstanding balance on the June 2015 Wells Fargo Revolver in the current-year period.

Income tax expense. Income tax expense was $7.0 million and $6.3 million for the thirteen weeks ended December 28, 2019 and December 29, 2018, respectively. Our effective tax rate was 22.1% and 24.8% for the thirteen weeks ended December 28, 2019 and December 29, 2018, respectively. The effective tax rate for the thirteen weeks ended December 28, 2019 is lower than the comparable period in the prior year due primarily to a $1.1 million tax benefit due to income tax accounting for share-based compensation compared to a lower tax benefit of less than $0.1 million for the thirteen weeks ended December 29, 2018.

Net income. Net income increased $5.8 million to $24.8 million for the thirteen weeks ended December 28, 2019, from $19.0 million for the thirteen weeks ended December 29, 2018. The increase in net income was primarily attributable to the factors noted above.

Adjusted EBITDA and Adjusted EBIT. Adjusted EBITDA increased $7.4 million, or 20.7%, to $42.8 million for the thirteen weeks ended December 28, 2019 from $35.5 million for the thirteen weeks ended December 29, 2018. Adjusted EBIT increased $6.4 million, or 20.8%, to $37.2 million for the thirteen weeks ended December 28, 2019 from $30.8 million for the thirteen weeks ended December 29, 2018. The increase in Adjusted EBITDA and Adjusted EBIT was primarily a result of the year-over-year increase in income from operations driven by an increase in gross profit and a decrease in SG&A as a percentage of net sales.

Thirty-Nine Weeks Ended December 28, 2019 Compared to Thirty-Nine Weeks Ended December 29, 2018

Net sales. Net sales increased $72.8 million, or 12.5%, to $656.9 million for the thirty-nine weeks ended December 28, 2019 from $584.1 million for the thirty-nine weeks ended December 29, 2018. Consolidated same store sales

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increased 7.8%. Excluding the impact of the 7.4% increase in e-commerce same store sales, same store sales increased by 7.9%. Net sales increased during the thirty-nine weeks ended December 28, 2019 due to the increase in same store sales and sales from stores added over the past twelve months.

Gross profit. Gross profit increased $30.5 million, or 16.2%, to $218.5 million for the thirty-nine weeks ended December 28, 2019 from $188.0 million for the thirty-nine weeks ended December 29, 2018. As a percentage of net sales, gross profit was 33.3% and 32.2% for the thirty-nine weeks ended December 28, 2019 and December 29, 2018, respectively. Gross profit increased primarily due to increased sales and an increase in merchandise margin rate. As a percentage of net sales, consolidated gross profit primarily increased as a result of a 120 basis point increase in merchandise margin rate, partially offset by 10 basis points of deleverage in buying and occupancy costs. The higher merchandise margin was driven by better full-price selling and growth in exclusive brand penetration.

Selling, general and administrative expenses. SG&A expenses increased $14.4 million, or 10.2%, to $154.6 million for the thirty-nine weeks ended December 28, 2019 from $140.2 million for the thirty-nine weeks ended December 29, 2018. As a percentage of net sales, SG&A was 23.5% and 24.0% for the thirty-nine weeks ended December 28, 2019 and December 29, 2018, respectively. The increase in SG&A expenses was primarily a result of additional costs to support higher sales and expenses for both new and acquired stores. As a percentage of net sales, SG&A decreased by 50 basis points primarily as a result of expense leverage on higher sales.

Income from operations. Income from operations increased $16.1 million, or 33.8%, to $64.0 million for the thirty-nine weeks ended December 28, 2019 from $47.8 million for the thirty-nine weeks ended December 29, 2018. As a percentage of net sales, income from operations was 9.7% and 8.2% for the thirty-nine weeks ended December 28, 2019 and December 29, 2018, respectively. The increase in income from operations was attributable to the factors noted above.

Interest expense, net. Interest expense, net, was $10.4 million and $12.3 million for the thirty-nine weeks ended December 28, 2019 and December 29, 2018, respectively. The decrease in interest expense, net was primarily the result of a lower 2015 Golub Term Loan balance in the current-year period relative to the prior-year period, partially offset by a higher outstanding balance on the June 2015 Wells Fargo Revolver in the current-year period.

Income tax expense. Income tax expense was $11.4 million for the thirty-nine weeks ended December 28, 2019 compared to income tax expense of $5.2 million for the thirty-nine weeks ended December 29, 2018. Our effective tax rate was 21.3% and 14.7% for the thirty-nine weeks ended December 28, 2019 and December 29, 2018, respectively. The effective tax rate for the thirty-nine weeks ended December 28, 2019 is higher than the comparable period in the prior year due primarily to a $1.9 million tax benefit due to income tax accounting for share-based compensation compared to a higher tax benefit of $3.6 million for the thirty-nine weeks ended December 29, 2018.

Net income. Net income increased $11.9 million to $42.2 million for the thirty-nine weeks ended December 28, 2019, from $30.3 million for the thirty-nine weeks ended December 29, 2018. The increase in net income was primarily attributable to the factors noted above.

Adjusted EBITDA and Adjusted EBIT. Adjusted EBITDA increased $18.7 million, or 28.7%, to $83.7 million for the thirty-nine weeks ended December 28, 2019 from $65.1 million for the thirty-nine weeks ended December 29, 2018. Adjusted EBIT increased $16.9 million, or 32.9%, to $68.2 million for the thirty-nine weeks ended December 28, 2019 from $51.3 million for the thirty-nine weeks ended December 29, 2018. The increase in Adjusted EBITDA and Adjusted EBIT was primarily a result of the year-over-year increase in income from operations driven by an increase in gross profit and a decrease in SG&A as a percentage of net sales.

Liquidity and Capital Resources

We rely on cash flows from operating activities and our credit facilities as our primary sources of liquidity. Our primary cash needs are for inventories, operating expenses, capital expenditures associated with opening new stores and remodeling or refurbishing existing stores, improvements to our distribution facilities, marketing and information technology expenditures, debt service and taxes. We have also used cash for acquisitions, the subsequent rebranding and

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integration of the stores acquired in those acquisitions and costs to consolidate the corporate offices. In addition to cash and cash equivalents, the most significant components of our working capital are accounts receivable, inventories, accounts payable and accrued expenses and other current liabilities. We believe that cash flows from operating activities and the availability of cash under our credit facilities or other financing arrangements will be sufficient to cover working capital requirements, anticipated capital expenditures and other anticipated cash needs for at least the next 12 months.

Our liquidity is moderately seasonal. Our cash requirements generally increase in our third fiscal quarter as we increase our inventory in advance of the Christmas shopping season.

We are planning to continue to open new stores, remodel and refurbish our existing stores, and make improvements to our e-commerce and information technology infrastructure, which will result in increased capital expenditures. We estimate that our total capital expenditures in fiscal 2020 will be between $30.0 million to $32.0 million (including the capital expenditures made during the thirty-nine weeks ended December 28, 2019), net of landlord tenant allowances, and we anticipate that we will use cash flows from operations to fund these expenditures.

June 2015 Wells Fargo Revolver and 2015 Golub Term Loan

On June 29, 2015, we, as guarantor, and our wholly-owned primary operating subsidiary, Boot Barn, Inc., refinanced a previous Wells Fargo credit facility with the $125.0 million syndicated senior secured asset-based revolving credit facility for which Wells Fargo Bank, National Association (“June 2015 Wells Fargo Revolver”), is agent, and the $200.0 million syndicated senior secured term loan for which GCI Capital Markets LLC (“2015 Golub Term Loan”) is agent. The borrowing base of the June 2015 Wells Fargo Revolver is calculated on a monthly basis and is based on the amount of eligible credit card receivables, commercial accounts, inventory, and available reserves.

Borrowings under the June 2015 Wells Fargo Revolver bear interest at per annum rates equal to, at our option, either (i) London Interbank Offered Rate (“LIBOR”) plus an applicable margin for LIBOR loans, or (ii) the base rate plus an applicable margin for base rate loans. The base rate is calculated as the highest of (a) the federal funds rate plus 0.5%, (b) the Wells Fargo prime rate and (c) one-month LIBOR plus 1.0%. The applicable margin is calculated based on a pricing grid that in each case is linked to quarterly average excess availability. For LIBOR Loans, the applicable margin ranges from 1.00% to 1.25%, and for base rate loans it ranges from 0.00% to 0.25%. We also pay a commitment fee of 0.25% per annum of the actual daily amount of the unutilized revolving loans. The interest on the June 2015 Wells Fargo Revolver is payable in quarterly installments ending on the maturity date. On May 26, 2017, the Company entered into an amendment to the June 2015 Wells Fargo Revolver (the “2017 Wells Amendment”), increasing the aggregate revolving credit facility to $135.0 million and extending the maturity date to the earlier of May 26, 2022 or 90 days prior to the previous maturity of the 2015 Golub Term Loan, which was then scheduled to mature on June 29, 2021. On June 6, 2019, we entered into Amendment No. 3 to the Credit Agreement (the “2019 Wells Amendment”), further increasing the aggregate revolving credit facility to $165.0 million and extending the maturity date to the earlier of June 6, 2024 or 90 days prior to the maturity of the 2015 Golub Term Loan, which is currently scheduled to mature on June 29, 2023. The 2019 Wells Amendment further made changes to the 2015 Wells Fargo Revolver in connection with the transition away from LIBOR as the benchmark rate. The amount outstanding under the June 2015 Wells Fargo Revolver as of December 28, 2019 and March 30, 2019 was $45.0 million and zero, respectively. Total interest expense incurred in the thirteen and thirty-nine weeks ended December 28, 2019 on the June 2015 Wells Fargo Revolver was $0.9 million and $2.4 million, respectively, and the weighted average interest rate for the thirteen weeks ended December 28, 2019 was 3.2%. Total interest expense incurred in the thirteen and thirty-nine weeks ended December 29, 2018 on the June 2015 Wells Fargo Revolver was $0.4 million and $1.5 million, respectively, and the weighted average interest rate for the thirteen weeks ended December 29, 2018 was 3.6%.

Borrowings under the 2015 Golub Term Loan bear interest at per annum rates equal to, at our option, either (a) LIBOR plus an applicable margin for LIBOR loans with a LIBOR floor of 1.0%, or (b) the base rate plus an applicable margin for base rate loans. The base rate is calculated as the greater of (i) the higher of (x) the prime rate and (y) the federal funds rate plus 0.5% and (ii) the sum of one-month LIBOR plus 1.0%. The applicable margin is 4.5% for LIBOR Loans and 3.5% for base rate loans. The principal and interest on the 2015 Golub Term Loan is payable in quarterly installments ending on the maturity date, which was originally June 29, 2021 but is now June 29, 2023. Quarterly principal payments of $500,000 are due for each quarter; however, on June 2, 2017, the Company prepaid $10.0 million

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on the 2015 Golub Term Loan, which included all of the required quarterly principal payments until the maturity date of the loan. On May 15, 2018, the Company made an additional $10.0 million prepayment on the 2015 Golub Term Loan. On June 6, 2019, the Company entered into the Third Amendment to the 2015 Golub Term Loan (the “2019 Golub Amendment”) which extended the maturity date to June 29, 2023. At the time of the Third Amendment, the company also prepaid $65.0 million of the term loan facility, reducing the outstanding principal balance to $111.5 million. The 2019 Golub Amendment further made changes to the 2015 Golub Term Loan in connection with the transition away from LIBOR as the benchmark rate. Total interest expense incurred in the thirteen and thirty-nine weeks ended December 28, 2019 on the 2015 Golub Term Loan was $1.9 million and $6.7 million, respectively, and the weighted average interest rate for the thirteen weeks ended December 28, 2019 was 6.6%. Total interest expense incurred in the thirteen and thirty-nine weeks ended December 29, 2018 on the 2015 Golub Term Loan was $3.1 million and $9.3 million, respectively, and the weighted average interest rate for the thirteen weeks ended December 29, 2018 was 6.9%.

All obligations under each of the 2015 Golub Term Loan and the June 2015 Wells Fargo Revolver are unconditionally guaranteed by us and each of our direct and indirect domestic subsidiaries (other than certain immaterial subsidiaries) which are not named as borrowers under the 2015 Golub Term Loan or the June 2015 Wells Fargo Revolver, as applicable.

The priority with respect to collateral under each of the 2015 Golub Term Loan and the June 2015 Wells Fargo Revolver is subject to the terms of an intercreditor agreement among the lenders under the 2015 Golub Term Loan and the June 2015 Wells Fargo Revolver.

Each of the June 2015 Wells Fargo Revolver and the 2015 Golub Term Loan contains customary provisions relating to mandatory prepayments, restricted payments, voluntary payments, affirmative and negative covenants, and events of default. In addition, the terms of the June 2015 Wells Fargo Revolver require the Company to maintain, on a consolidated basis, a Consolidated Fixed Charge Coverage Ratio of at least 1.00:1.00 during such times as a covenant trigger event shall exist. On May 26, 2017, the Company entered into an amendment to the 2015 Golub Term Loan (the “2017 Golub Amendment”). The 2017 Golub Amendment changed the maximum Consolidated Total Net Leverage Ratio requirements to 4.00:1.00 as of December 29, 2018 and for all subsequent periods. The 2019 Golub Amendment maintains the same maximum Consolidated Total Net Leverage Ratio requirements. The June 2015 Wells Fargo Revolver and 2015 Golub Term Loan also require us to pay additional interest of 2.0% per annum upon triggering certain specified events of default as set forth therein. For financial accounting purposes, the requirement for us to pay a higher interest rate upon an event of default is an embedded derivative. As of December 28, 2019, the fair value of these embedded derivatives was estimated and was not significant.

As of December 28, 2019, we were in compliance with the June 2015 Wells Fargo Revolver and the 2015 Golub Term Loan debt covenants.

Cash Position and Cash Flow

Cash and cash equivalents were $45.4 million as of December 28, 2019 compared to $16.6 million as of March 30, 2019.

The following table presents summary cash flow information for the periods indicated:

	Thirty-Nine Weeks Ended
	December 28,		December 29,
(in thousands)	2019		2018
Net cash provided by/(used in):
Operating activities	$	76,801	$	91,609
Investing activities		(30,521)		(26,246)
Financing activities		(17,448)		(23,765)
Net increase in cash	$	28,832	$	41,598

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Operating Activities

Net cash provided by operating activities was $76.8 million for the thirty-nine weeks ended December 28, 2019. The significant components of cash flows provided by operating activities were net income of $42.2 million, the add-back of non-cash depreciation and intangible asset amortization expense of $15.5 million, stock-based compensation expense of $3.3 million, amortization of right-of-use assets of $22.9 million and amortization of debt issuance fees and debt discount of $0.7 million. Accounts payable and accrued expenses and other current liabilities increased by $49.0 million due to the timing of payments. Inventory increased by $32.3 million due to the growth of the company.

Net cash provided by operating activities was $91.6 million for the thirty-nine weeks ended December 29, 2018. The significant components of cash flows provided by operating activities were net income of $30.3 million, the add-back of non-cash depreciation and amortization expense of $13.7 million, stock-based compensation expense of $2.2 million, and amortization of debt issuance fees and debt discount of $0.9 million. Accounts payable and accrued expenses and other current liabilities increased by $54.2 million due to the timing of payments. Inventory increased by $11.9 million due to the growth of the company and the purchase of Drysdales’ inventory. 

Investing Activities

Net cash used in investing activities was $30.5 million for the thirty-nine weeks ended December 28, 2019, which was primarily attributable to $27.6 million in capital expenditures related to store construction, improvements to our e-commerce information technology infrastructure, and improvements to our distribution facilities and $3.7 million for the acquisition of G.&L. Clothing.

Net cash used in investing activities was $26.2 million for the thirty-nine weeks ended December 29, 2018, which was primarily attributable to $21.8 million in capital expenditures related to store construction, improvements to our e-commerce information technology infrastructure, and improvements to our distribution facilities and $4.4 million for the acquisition of Lone Star.

Financing Activities

Net cash used in financing activities was $17.4 million for the thirty-nine weeks ended December 28, 2019. We increased our line of credit borrowings by $45.0 million and repaid $65.5 million on our debt and finance lease obligations during the period. We also received $4.7 million from the exercise of stock options.

Net cash used in financing activities was $23.8 million for the thirty-nine weeks ended December 29, 2018. We reduced our line of credit borrowings by $21.0 million and repaid $10.4 million on our debt and capital lease obligations during the period. We also received $8.0 million from the exercise of stock options.

Contractual Obligations

During the thirteen and thirty-nine weeks ended December 28, 2019, there were no significant changes to our contractual obligations described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Fiscal 2019 10-K, other than those which occur in the normal course of business.

Off-Balance Sheet Arrangements

We are not a party to any off-balance sheet arrangements.

Item 3.    Quantitative and Qualitative Disclosure of Market Risk

We are subject to interest rate risk in connection with borrowings under our credit facilities, which bear interest at variable rates. As of December 28, 2019, we had $45.0 million outstanding under the June 2015 Wells Fargo Revolver and $111.5 million under the 2015 Golub Term Loan. The annual impact of a 1.0% rate change on the outstanding total debt balance as of December 28, 2019 would be approximately $1.6 million.

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As of December 28, 2019, there were no other material changes in the market risks described in the “Quantitative and Qualitative Disclosure of Market Risks” section of the Fiscal 2019 10-K.

Item 4.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 28, 2019. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of December 28, 2019, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

During the quarter ended December 28, 2019, no changes occurred with respect to our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Part II. Other Information

Item 1.    Legal Proceedings

For information on legal proceedings, see Note 7, “Commitments and Contingencies”, to our unaudited financial statements included in this Quarterly Report, which information is incorporated herein by reference.

Item 1A.    Risk Factors

We operate in a rapidly changing environment that involves a number of risks that could materially and adversely affect our business, financial condition, prospects, operating results or cash flows, including the updated risk set forth below, as well as the risks contained in “Item 1A—Risk Factors” in our Fiscal 2019 10-K.

Most of our merchandise is produced in foreign countries, making the price and availability of our merchandise susceptible to international trade risks and other international conditions.

The majority of our private brand products are manufactured in foreign countries, including Mexico and China. In addition, we purchase most of our third-party branded merchandise from domestic suppliers that have a large portion of their merchandise made in foreign countries.

The countries, specifically Mexico and China, in which our merchandise currently is manufactured or may be manufactured in the future could become subject to trade restrictions imposed by the U.S., including increased tariffs or quotas, embargoes and customs restrictions, which could increase the cost or reduce the supply of products available to us and have a material adverse effect on our business, financial condition and results of operations. Recently, uncertainty has increased regarding tax and trade policies, border adjustments, tariffs and government regulations affecting trade

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between the U.S. and other countries, such as Mexico and China. This includes the possibility of the imposition of tariffs or penalties on products manufactured outside the United States, including several tariffs on a variety of products from China imposed or threatened by the Office of the U.S. Trade Representative in 2018 ranging from 10-25%. China has already announced a plan to impose tariffs on a wide range of American products in retaliation for such American tariffs. There is also a concern that the imposition of additional tariffs by the United States could result in the adoption of tariffs by other countries as well. Such tariffs on imports from foreign countries, as well as changes in tax and trade policies such as a border adjustment tax or disallowance of certain tax deductions for imported merchandise, if enacted, could materially increase our manufacturing costs, the costs of our imported merchandise or our income tax expense, which would have a material adverse effect on our financial condition and results of operations. Any tariffs by China or other foreign countries on imports of our products could also adversely affect our international e-commerce sales. Any increase in our manufacturing costs, the cost of our merchandise or limitation on the amount of merchandise we are able to purchase, or any decrease in our international e-commerce sales, could have a material adverse effect on our financial condition and results of operations.

Additionally, public health issues affecting China, Mexico or another foreign country from which a large portion of our third-party and private brand merchandise is purchased and imported, including the recent outbreak of the Coronavirus respiratory illness first identified in Wuhan, China, may result in the temporary closure of our suppliers’ facilities or shipping ports, resulting in product delivery delays. This impact on our supply chain could have a material adverse effect on our financial condition and results of operations.

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.     Defaults Upon Senior Securities

None.

Item 4.     Mine Safety Disclosures

Not Applicable.

Item 5.     Other Information

None.

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Item 6.     Exhibits

Exhibit No.	Description of Exhibit
31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
32.1*	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	Interactive data files from Boot Barn Holdings, Inc.’s Quarterly Report on Form 10-Q for the quarter ended December 28, 2019, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statement of Stockholders’ Equity; (iv) the Condensed Consolidated Statements of Cash Flows and (v) Notes to the Condensed Consolidated Financial Statements.
104	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended December 28, 2019, formatted in Inline XBRL.

* These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Boot Barn Holdings, Inc.
Date: February 4, 2020	/s/ James G. Conroy
	James G. Conroy
	President and Chief Executive Officer (Principal Executive Officer)
Date: February 4, 2020	/s/ Gregory V. Hackman
	Gregory V. Hackman
	Chief Financial Officer and Secretary (Principal Financial Officer and Principal Accounting Officer)

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