Cover Page
Cover Page - shares | 9 Months Ended | |
Oct. 02, 2021 | Nov. 04, 2021 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Oct. 2, 2021 | |
Document Transition Report | false | |
Entity File Number | 001-38950 | |
Entity Registrant Name | Grocery Outlet Holding Corp. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 47-1874201 | |
Entity Address, Address Line One | 5650 Hollis Street | |
Entity Address, City or Town | Emeryville | |
Entity Address, State or Province | CA | |
Entity Address, Postal Zip Code | 94608 | |
City Area Code | 510 | |
Local Phone Number | 845-1999 | |
Title of 12(b) Security | Common Stock, par value $0.001 per share | |
Trading Symbol | GO | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 96,017,043 | |
Entity Central Index Key | 0001771515 | |
Current Fiscal Year End Date | --01-01 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Oct. 02, 2021 | Jan. 02, 2021 |
Current assets: | ||
Cash and cash equivalents | $ 155,976 | $ 105,326 |
Independent operator receivables and current portion of independent operator notes, net of allowance $1,266 and $985 | 6,003 | 5,443 |
Other accounts receivable, net of allowance $7 and $39 | 3,615 | 5,950 |
Merchandise inventories | 245,844 | 245,157 |
Prepaid expenses and other current assets | 18,967 | 20,081 |
Total current assets | 430,405 | 381,957 |
Independent operator notes, net of allowance $10,029 and $7,124 | 21,225 | 27,440 |
Property and equipment, net | 484,718 | 433,652 |
Operating lease right-of-use assets | 875,652 | 835,397 |
Intangible assets, net | 49,242 | 48,226 |
Goodwill | 747,943 | 747,943 |
Deferred income tax assets, net | 0 | 3,529 |
Other assets | 8,483 | 7,480 |
Total assets | 2,617,668 | 2,485,624 |
Current liabilities: | ||
Trade accounts payable | 122,055 | 114,278 |
Accrued expenses | 45,703 | 35,699 |
Accrued compensation | 6,745 | 26,447 |
Current lease liabilities | 46,013 | 48,675 |
Income and other taxes payable | 7,945 | 7,547 |
Total current liabilities | 228,461 | 232,646 |
Long-term debt, net | 450,860 | 449,233 |
Deferred income tax liabilities, net | 5,556 | 0 |
Long-term lease liabilities | 938,760 | 881,438 |
Total liabilities | 1,623,637 | 1,563,317 |
Commitments and contingencies (Note 7) | ||
Stockholders' equity: | ||
Voting common stock, par value $0.001 per share, 500,000,000 shares authorized; 96,007,519 and 94,854,336 shares issued and outstanding, respectively | 96 | 95 |
Additional paid-in capital | 803,099 | 787,047 |
Retained earnings | 190,836 | 135,165 |
Total stockholders' equity | 994,031 | 922,307 |
Total liabilities and stockholders' equity | $ 2,617,668 | $ 2,485,624 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Oct. 02, 2021 | Jan. 02, 2021 |
Statement of Financial Position [Abstract] | ||
Accounts and financing receivable, allowance for credit loss, current | $ 1,266 | $ 985 |
Allowance for doubtful other receivables, current | 7 | 39 |
Financing receivable, allowance for credit loss, noncurrent | $ 10,029 | $ 7,124 |
Common stock, par (in usd per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 500,000,000 | 500,000,000 |
Common stock, issued (in shares) | 96,007,519 | 94,854,336 |
Common stock, outstanding (in shares) | 96,007,519 | 94,854,336 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 02, 2021 | Sep. 26, 2020 | Oct. 02, 2021 | Sep. 26, 2020 | |
Statement of Comprehensive Income [Abstract] | ||||
Net sales | $ 768,880 | $ 764,082 | $ 2,296,881 | $ 2,327,819 |
Cost of sales | 531,768 | 525,899 | 1,590,044 | 1,598,859 |
Gross profit | 237,112 | 238,183 | 706,837 | 728,960 |
Operating expenses: | ||||
Selling, general and administrative | 191,572 | 189,880 | 573,125 | 574,813 |
Depreciation and amortization | 17,495 | 14,131 | 49,997 | 40,291 |
Share-based compensation | 1,902 | 3,857 | 10,051 | 34,309 |
Total operating expenses | 210,969 | 207,868 | 633,173 | 649,413 |
Income from operations | 26,143 | 30,315 | 73,664 | 79,547 |
Other expenses (income): | ||||
Interest expense, net | 3,950 | 4,833 | 11,778 | 15,937 |
Gain on insurance recoveries | 0 | 0 | (3,970) | 0 |
Debt extinguishment and modification costs | 0 | 0 | 0 | 198 |
Total other expenses (income) | 3,950 | 4,833 | 7,808 | 16,135 |
Income before income taxes | 22,193 | 25,482 | 65,856 | 63,412 |
Income tax expense (benefit) | 5,054 | (14,992) | 10,185 | (19,037) |
Net Income | 17,139 | 40,474 | 55,671 | 82,449 |
Comprehensive income | $ 17,139 | $ 40,474 | $ 55,671 | $ 82,449 |
Basic earnings per share (in usd per share) | $ 0.18 | $ 0.44 | $ 0.58 | $ 0.91 |
Diluted earnings per share (in usd per share) | $ 0.17 | $ 0.41 | $ 0.56 | $ 0.84 |
Weighted average shares outstanding: | ||||
Basic (in shares) | 95,955 | 92,489 | 95,610 | 90,929 |
Diluted (in shares) | 99,169 | 99,266 | 99,477 | 98,033 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Total | Cumulative Effect, Period of Adoption, Adjustment | Voting Common | Additional Paid-In Capital | Retained Earnings | Retained EarningsCumulative Effect, Period of Adoption, Adjustment |
Beginning balance (in shares) at Dec. 28, 2019 | 89,005,062 | |||||
Beginning balance at Dec. 28, 2019 | $ 745,384 | $ 439 | $ 89 | $ 717,282 | $ 28,013 | $ 439 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Exercise and vesting of share-based awards (in shares) | 902,132 | |||||
Exercise and vesting of share-based awards | 6,033 | $ 1 | 6,032 | |||
Share-based compensation expense | 20,277 | 20,277 | ||||
Dividends paid | (147) | (147) | ||||
Net income | 12,642 | 12,642 | ||||
Comprehensive income | 12,642 | 12,642 | ||||
Ending balance (in shares) at Mar. 28, 2020 | 89,907,194 | |||||
Ending balance at Mar. 28, 2020 | 784,628 | $ 90 | 743,444 | 41,094 | ||
Beginning balance (in shares) at Dec. 28, 2019 | 89,005,062 | |||||
Beginning balance at Dec. 28, 2019 | 745,384 | $ 439 | $ 89 | 717,282 | 28,013 | $ 439 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income | 82,449 | |||||
Comprehensive income | 82,449 | |||||
Ending balance (in shares) at Sep. 26, 2020 | 93,904,922 | |||||
Ending balance at Sep. 26, 2020 | 888,826 | $ 94 | 777,831 | 110,901 | ||
Beginning balance (in shares) at Mar. 28, 2020 | 89,907,194 | |||||
Beginning balance at Mar. 28, 2020 | 784,628 | $ 90 | 743,444 | 41,094 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Exercise and vesting of share-based awards (in shares) | 1,511,079 | |||||
Exercise and vesting of share-based awards | 9,845 | $ 1 | 9,844 | |||
Tax paid on behalf of employees related to net settlement of share-based awards | (483) | (483) | ||||
Share-based compensation expense | 10,175 | 10,175 | ||||
Dividends paid | (97) | (97) | ||||
Net income | 29,333 | 29,333 | ||||
Comprehensive income | 29,333 | 29,333 | ||||
Ending balance (in shares) at Jun. 27, 2020 | 91,418,273 | |||||
Ending balance at Jun. 27, 2020 | 833,401 | $ 91 | 762,883 | 70,427 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Exercise and vesting of share-based awards (in shares) | 2,486,649 | |||||
Exercise and vesting of share-based awards | 11,255 | $ 3 | 11,252 | |||
Share-based compensation expense | 3,857 | 3,857 | ||||
Dividends paid | (161) | (161) | ||||
Net income | 40,474 | 40,474 | ||||
Comprehensive income | 40,474 | 40,474 | ||||
Ending balance (in shares) at Sep. 26, 2020 | 93,904,922 | |||||
Ending balance at Sep. 26, 2020 | 888,826 | $ 94 | 777,831 | 110,901 | ||
Beginning balance (in shares) at Jan. 02, 2021 | 94,854,336 | |||||
Beginning balance at Jan. 02, 2021 | 922,307 | $ 95 | 787,047 | 135,165 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Exercise and vesting of share-based awards (in shares) | 647,137 | |||||
Exercise and vesting of share-based awards | 2,953 | $ 1 | 2,952 | |||
Share-based compensation expense | 3,939 | 3,939 | ||||
Dividends paid | (5) | (5) | ||||
Net income | 18,892 | 18,892 | ||||
Comprehensive income | 18,892 | 18,892 | ||||
Ending balance (in shares) at Apr. 03, 2021 | 95,501,473 | |||||
Ending balance at Apr. 03, 2021 | 948,086 | $ 96 | 793,933 | 154,057 | ||
Beginning balance (in shares) at Jan. 02, 2021 | 94,854,336 | |||||
Beginning balance at Jan. 02, 2021 | 922,307 | $ 95 | 787,047 | 135,165 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income | 55,671 | |||||
Comprehensive income | 55,671 | |||||
Ending balance (in shares) at Oct. 02, 2021 | 96,007,519 | |||||
Ending balance at Oct. 02, 2021 | 994,031 | $ 96 | 803,099 | 190,836 | ||
Beginning balance (in shares) at Apr. 03, 2021 | 95,501,473 | |||||
Beginning balance at Apr. 03, 2021 | 948,086 | $ 96 | 793,933 | 154,057 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Exercise and vesting of share-based awards (in shares) | 335,747 | |||||
Exercise and vesting of share-based awards | 2,039 | $ 0 | 2,039 | |||
Share-based compensation expense | 4,210 | 4,210 | ||||
Dividends paid | (92) | (92) | ||||
Net income | 19,640 | 19,640 | ||||
Comprehensive income | 19,640 | 19,640 | ||||
Ending balance (in shares) at Jul. 03, 2021 | 95,837,220 | |||||
Ending balance at Jul. 03, 2021 | 973,883 | $ 96 | 800,090 | 173,697 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Exercise and vesting of share-based awards (in shares) | 170,299 | |||||
Exercise and vesting of share-based awards | 1,146 | $ 0 | 1,146 | |||
Share-based compensation expense | 1,902 | 1,902 | ||||
Dividends paid | (39) | (39) | ||||
Net income | 17,139 | 17,139 | ||||
Comprehensive income | 17,139 | 17,139 | ||||
Ending balance (in shares) at Oct. 02, 2021 | 96,007,519 | |||||
Ending balance at Oct. 02, 2021 | $ 994,031 | $ 96 | $ 803,099 | $ 190,836 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Oct. 02, 2021 | Sep. 26, 2020 | |
Cash flows from operating activities: | ||
Net income | $ 55,671 | $ 82,449 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation of property and equipment | 46,236 | 36,772 |
Amortization of intangible and other assets | 5,809 | 5,481 |
Amortization of debt issuance costs and debt discounts | 1,883 | 1,771 |
Gain on insurance recoveries | (3,970) | 0 |
Debt extinguishment and modification costs | 0 | 198 |
Share-based compensation | 10,051 | 34,309 |
Provision for accounts receivable | 3,529 | 321 |
Proceeds from insurance recoveries - business interruption and inventory | 2,103 | 0 |
Deferred income taxes | 9,085 | (18,996) |
Other | 950 | 1,421 |
Changes in operating assets and liabilities: | ||
Independent operator and other accounts receivable | 884 | (3,809) |
Merchandise inventories | (687) | (33,357) |
Prepaid expenses and other current assets | 1,114 | (7,505) |
Income and other taxes payable | 398 | 332 |
Trade accounts payable, accrued compensation and other accrued expenses | (4,526) | (15,545) |
Changes in operating lease assets and liabilities, net | 13,235 | 15,419 |
Net cash provided by operating activities | 141,765 | 99,261 |
Cash flows from investing activities: | ||
Advances to independent operators | (7,614) | (8,715) |
Repayments of advances from independent operators | 3,581 | 5,216 |
Purchases of property and equipment | (89,575) | (85,847) |
Proceeds from sales of assets | 24 | 265 |
Intangible assets and licenses | (4,566) | (3,826) |
Proceeds from insurance recoveries - property and equipment | 1,867 | 0 |
Net cash used in investing activities | (96,283) | (92,907) |
Cash flows from financing activities: | ||
Proceeds from exercise of stock options | 6,138 | 27,133 |
Proceeds from revolving credit facility loan | 0 | 90,000 |
Principal payments on revolving credit facility loan | 0 | (90,000) |
Payments made for net settlement of employee share-based compensation awards | 0 | (483) |
Principal payments on term loans | 0 | (188) |
Principal payments on other borrowings | (834) | (729) |
Dividends paid | (136) | (405) |
Debt issuance costs paid | 0 | (701) |
Net cash provided by financing activities | 5,168 | 24,627 |
Net increase in cash and cash equivalents | 50,650 | 30,981 |
Cash and cash equivalents at beginning of period | 105,326 | 28,101 |
Cash and cash equivalents at end of period | $ 155,976 | $ 59,082 |
Organization and Summary of Sig
Organization and Summary of Significant Accounting Policies | 9 Months Ended |
Oct. 02, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Summary of Significant Account Policies | Organization and Summary of Significant Accounting Policies Description of Business — Based in Emeryville, California, and incorporated in Delaware in 2014, Grocery Outlet Holding Corp. (together with its wholly owned subsidiaries, collectively, "Grocery Outlet," "we," or the "Company") is a high-growth, extreme value retailer of quality, name-brand consumables and fresh products sold through a network of independently operated stores. As of October 2, 2021, we had 407 stores throughout California, Washington, Oregon, Pennsylvania, Idaho and Nevada . Secondary Public Offerings — On February 3, 2020, certain of our selling stockholders completed a secondary public offering of shares of our common stock. We did not receive any of the proceeds from the sale of these shares by the selling stockholders. We incurred related offering costs of $1.1 million which we recognized in selling, general and administrative expenses ("SG&A") during the first quarter of fiscal 2020. We received $1.4 million in cash (excluding withholding taxes) in connection with the exercis e of 191,470 opti ons by certain stockholders participating in this secondary public offering. On April 27, 2020, certain of our selling stockholders completed another secondary public offering of shares of our common stock. We did not receive any of the proceeds from the sale of these shares by the selling stockholders. We incurred related offering costs of $1.0 million which we recognized in SG&A during the second quarter of fiscal 2020. We received $1.6 million in cash (excluding withholding taxes) in connection with the exercis e of 269,000 opti ons by certain stockholders participating in this secondary public offering. On May 28, 2020, the stockholder affiliated with our former private equity sponsor, Hellman and Friedman LLC, distributed the remainder of its holdings representing 9.6 million shares of our common stock to its equity holders. We did not receive any proceeds or incur any material costs related to this distribution. Basis of Presentation — The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and the applicable rules and regulations of the United States ("U.S.") Securities and Exchange Commission (the "SEC") for interim reporting. Certain information and note disclosures included in our annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our 2020 Form 10-K. The condensed consolidated balance sheet as of January 2, 2021 included herein has been derived from those audited consolidated financial statements. Our unaudited condensed consolidated financial statements include the accounts of Grocery Outlet Holding Corp. and its wholly owned subsidiaries. All intercompany balances and transactions were eliminated. In the opinion of management, these condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the periods presented. The interim results of operations and cash flows are not necessarily indicative of those results and cash flows expected for any future interim or annual period. Certain prior period amounts in the notes to the condensed consolidated financial statements have been reclassified to conform to the current period presentation. The reclassification of these items had no impact on net income, earnings per share, or retained earnings in the current or prior period. Use of Estimates — The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results can differ from these estimates depending upon certain risks and uncertainties. Changes in these estimates are recorded when known. Segment Reporting — We manage our business as one operating segment. All of our sales were made to customers located in the United States and all property and equipment is located in the United States. Merchandise Inventories — Merchandise inventories are valued at the lower of cost or net realizable value. Cost is determined by the weighted-average cost method for warehouse inventories and the retail inventory method for store inventories. We provide for estimated inventory losses between physical inventory counts based on historical averages. This provision is adjusted periodically to reflect the actual shrink results of the physical inventory counts. Leases — We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use assets, current lease liabilities, and long-term lease liabilities on our condensed consolidated balance sheets. Finance leases are included in other assets, current lease liabilities, and long-term lease liabilities on our condensed consolidated balance sheets. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease over the same term. Right-of-use assets and liabilities are recognized at commencement date based on the present value of the lease payments over the lease term, reduced by landlord incentives. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate, which is estimated to approximate the interest rate on a collateralized basis with similar terms and payments based on the information available at the commencement date, to determine the present value of our lease payments. Lease term is defined as the non-cancelable period of the lease plus any options to extend or terminate the lease when it is reasonably certain that we will exercise the option. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. Amortization of finance lease right-of-use assets, interest expense on finance lease liabilities and operating and financing cash flows for finance leases are immaterial. We have lease agreements with retail facilities for store locations, distribution centers, office space and equipment with lease and non-lease components, which are accounted for separately. Leases with an initial term of 12 months or less are not recorded on the balance sheet; lease expense for these leases is recognized on a straight-line basis over the lease term. The short-term lease expense is reflective of the short-term lease commitments on a go-forward basis. We sublease certain real estate to unrelated third parties under non-cancelable leases and the sublease portfolio consists of operating leases for retail stores. Fair Value Measurements — Fair value is defined as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The fair value of financial instruments is categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is measured using inputs from the three levels of the fair value hierarchy, which are described as follows: Level 1 — Quoted prices in active markets for identical assets or liabilities Level 2 — Quoted prices for similar assets and liabilities in active markets or inputs that are observable Level 3 — Unobservable inputs in which there is little or no market data, which requires us to develop our own assumptions when pricing the financial instruments, such as cash flow modeling assumptions The assets' or liabilities' fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The fair value framework requires that we maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There were no assets or liabilities measured at fair value on a recurring basis as of October 2, 2021 or January 2, 2021. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges. There were no transfers of assets or liabilities between levels within the fair value hierarchy during the periods ended October 2, 2021 or January 2, 2021, respectively. Our financial assets and liabilities are carried at cost, which generally approximates their fair value, as described below: Cash and cash equivalents, independent operator ("IO") receivables, other accounts receivable and accounts payable — The carrying value of such financial instruments approximates their fair value due to factors such as their short-term nature or their variable interest rates. IO notes receivable (net) — The carrying value of such financial instruments approximates their fair value due to the effect of the related allowance for expected credit losses. Notes payable and term loan — The carrying value of such financial instruments approximates their fair value since the stated interest rates approximates market rates for loans with similar terms for borrowers with similar credit profiles. However, in accordance with Accounting Standards Codification (“ASC”) Topic 825, Financial Instruments , the fair values of our term loan as of October 2, 2021 and January 2, 2021 is disclosed in the below table. The following table sets forth by level within the fair value hierarchy the carrying amounts and estimated fair values of our significant financial liabilities that are not recorded at fair value on the condensed consolidated balance sheets (amounts in thousands): October 2, January 2, Carrying Amount (1) Estimated Fair Value (2) Carrying Amount (1) Estimated Fair Value (2) Financial Liabilities: Term loan (Level 2) $ 458,951 $ 459,425 $ 458,757 $ 460,000 _______________________ (1) The carrying amounts as of October 2, 2021 and January 2, 2021 are net of unamortized debt discounts of $1.0 million and $1.2 million, respectively. (2) The estimated fair value of our term loan was determined based on the average quoted bid-ask prices for the term loan in an over-the-counter market on the last trading day of the periods presented. Revenue Recognition Net Sales — We recognize revenue from the sale of products at the point of sale, net of any taxes or deposits collected and remitted to governmental authorities. Our performance obligations are satisfied upon the transfer of goods to the customer, at the point of sale, and payment from customers is also due at the time of sale. Discounts provided to customers by us are recognized at the time of sale as a reduction in sales as the products are sold. Discounts provided by IOs are not recognized as a reduction in sales as these are provided solely by the IO who bears the incremental costs arising from the discount. We do not accept manufacturer coupons. We do not have any material contract assets or receivables from contracts with customers, any revenue recognized in the current year from performance obligations satisfied in previous periods, any performance obligations, or any material costs to obtain or fulfill a contract as of October 2, 2021 and January 2, 2021. Gift Cards — We record a deferred revenue liability when a Grocery Outlet gift card is sold. Revenue related to gift cards is recognized as the gift cards are redeemed, which is when we have satisfied our performance obligation. While gift cards are generally redeemed within 12 months, some are never fully redeemed. We reduce the liability and recognize revenue for the unused portion of the gift cards (“breakage”) under the proportional method, where recognition of breakage income is based upon the historical run-off rate of unredeemed gift cards. Our gift card deferred revenue liability was $2.8 million and $3.2 million as of October 2, 2021 and January 2, 2021, respectively. Breakage amounts were immaterial for the 13 and 39 weeks ended October 2, 2021 and September 26, 2020. Disaggregated Revenues — The following table presents net sales revenue by type of product for the periods indicated (amounts in thousands): 13 Weeks Ended 39 Weeks Ended October 2, September 26, October 2, September 26, Perishable (1) $ 268,349 $ 258,923 $ 800,623 $ 788,190 Non-perishable (2) 500,531 505,159 1,496,258 1,539,629 Total net sales $ 768,880 $ 764,082 $ 2,296,881 $ 2,327,819 _______________________ (1) Perishable departments include dairy and deli; produce and floral; and fresh meat and seafood. (2) Non-perishable departments include non-perishable grocery; general merchandise; health and beauty care; frozen foods; and beer and wine. Variable Interest Entities — In accordance with the variable interest entities sub-section of ASC Topic 810, Consolidation , we assess at each reporting period whether we, or any consolidated entity, are considered the primary beneficiary of a variable interest entity ("VIE") and therefore required to consolidate the financial results of the VIE in our consolidated financial statements. Determining whether to consolidate a VIE may require judgment in assessing (i) whether an entity is a VIE, and (ii) if a reporting entity is a VIE's primary beneficiary. A reporting entity is determined to be a VIE's primary beneficiary if it has the power to direct the activities that most significantly impact a VIE's economic performance and the obligation to absorb losses or rights to receive benefits that could potentially be significant to a VIE. We had 403, 375 and 367 stores operated by IOs as of October 2, 2021, January 2, 2021 and September 26, 2020, respectively. We have agreements in place with each IO. The IO orders merchandise exclusively from us which is provided to the IO on consignment. Under the Independent Operator Agreement (the "Operator Agreement"), the IO may select a majority of merchandise that we consign to the IO, which the IO chooses from our merchandise order guide according to the IO's knowledge and experience with local customer purchasing trends, preferences, historical sales and similar factors. The Operator Agreement gives the IO discretion to adjust our initial prices if the overall effect of all price changes at any time comports with the reputation of our Grocery Outlet retail stores for selling quality, name-brand consumables and fresh products and other merchandise at extreme discounts. IOs are required to furnish initial working capital and to acquire certain store and safety assets. The IO is also required to hire, train and employ a properly trained workforce sufficient in number to enable the IO to fulfill its obligations under the Operator Agreement. Additionally, the IO is responsible for expenses required for business operations, including all labor costs, utilities, credit card processing fees, supplies, taxes, fines, levies and other expenses. Either party may terminate the Operator Agreement without cause upon 75 days' notice. As consignor of all merchandise to each IO, the aggregate net sales proceeds from merchandise sales belongs to us. Net sales related to IO stores were $754.4 million and $750.5 million for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively, and $2.26 billion and $2.28 billion for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively. We, in turn, pay IOs a commission based on a share of the gross profit of the store. Inventories and related net sales proceeds are our property, and we are responsible for store rent and related occupancy costs. IO commissions were expensed and included in SG&A. IO commissions were $117.2 million and $114.2 million for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively, and $345.3 million and $351.1 million for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively. IO commissions of $8.0 million and $6.0 million were included in accrued expenses as of October 2, 2021 and January 2, 2021, respectively. IOs may fund their initial store investment from existing capital, a third-party loan or most commonly through a loan from us, as further discussed in Note 2. As collateral for IO obligations and performance, the Operator Agreements grant us the security interests in the assets owned by the IOs related to the respective store. Since the total investment at risk associated with each IO is not sufficient to permit each IO to finance its activities without additional subordinated financial support, the IOs are VIEs which we have variable interests in. To determine if we are the primary beneficiary of these VIEs, we evaluate whether we have (i) the power to direct the activities that most significantly impact the IO's economic performance and (ii) the obligation to absorb losses or the right to receive benefits of the IO that could potentially be significant to the IO. Our evaluation includes identification of significant activities and an assessment of its ability to direct those activities. Activities that most significantly impact the IO's economic performance relate to sales and labor. Sales activities that significantly impact the IO's economic performance include determining what merchandise the IO will order and sell and the price of such merchandise, both of which the IO controls. The IO is also responsible for all of their own labor. Labor activities that significantly impact the IO's economic performance include hiring, training, supervising, directing, compensating (including wages, salaries and employee benefits) and terminating all of the employees of the IO, activities which the IO controls. Accordingly, the IO has the power to direct the activities that most significantly impact the IO's economic performance. Furthermore, the mutual termination rights associated with the Operator Agreements illustrate the lack of ultimate control over the IO. Therefore, the Company is not the primary beneficiary of these VIEs. Our maximum exposure to the IOs is generally limited to the IO notes and IO receivables due from these entities, which was $38.5 million and $41.0 million as of October 2, 2021 and January 2, 2021, respectively. See Note 2 for additional information. Recently Adopted Accounting Standards ASU No. 2019-12 — In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes ("ASU 2019-12"). ASU 2019-12 simplifies accounting guidance for certain tax matters including franchise taxes, certain transactions that result in a step-up in tax basis of goodwill, and enacted changes in tax laws in interim periods. In addition, it eliminates a company's need to evaluate certain exceptions relating to the incremental approach for intra-period tax allocation, accounting for basis differences when there are ownership changes in foreign investments, and interim period income tax accounting for year-to-date losses that exceed anticipated losses. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We adopted ASU 2019-12 beginning in the first quarter of fiscal 2021. The adoption of ASU 2019-12 did not have a material impact on our condensed consolidated financial statements. Recently Issued Accounting Pronouncements No recently issued accounting pronouncements are expected to have a material effect on our condensed consolidated financial statements. |
Independent Operator Notes and
Independent Operator Notes and Independent Operator Receivables | 9 Months Ended |
Oct. 02, 2021 | |
Receivables [Abstract] | |
Independent Operator Notes and Independent Operator Receivables | Independent Operator Notes and Independent Operator Receivables The amounts included in IO notes and IO receivables consist primarily of funds we loaned to IOs, net of estimated uncollectible amounts. IO notes are payable on demand and typically bear interest at rates between 3.00% and 9.95%. Accrued interest receivable on IO notes is included within the “independent operator receivables and current portion of independent operator notes, net of allowance” line item on the condensed consolidated balance sheets and was $0.3 million and $0.4 million as of October 2, 2021 and January 2, 2021, respectively. There were no IO notes that were past due or on a non-accrual status due to delinquency as of October 2, 2021 or January 2, 2021. Notes and receivables from our IOs participating in our TCAP, as defined below, are not considered to be past due or on a non-accrual status due to delinquency and are excluded from such measures. IO notes and IO receivables are financial assets which are measured and carried at amortized cost. An allowance for expected credit losses is deducted from (for expected losses) or added to (for expected recoveries) the amortized cost basis of these assets to arrive at the net carrying amount expected to be collected for such assets. The allowance is estimated using an expected loss framework, which includes information about past events, current conditions, and reasonable and supportable forecasts that impact the collectibility of the reported amounts of the assets over their lifetime. The allowance is evaluated on a collective basis for assets with shared risk characteristics and credit quality indicators. The primary shared risk characteristic and credit quality indicator pools that we use as a basis for collective evaluation include: • TCAP — Includes the notes and receivables from IOs with stores that have been open for more than 18 months that are participating in our Temporary Commission Adjustment Program (“TCAP”) as of the end of each reporting period. TCAP allows us to provide a greater commission to participating IOs who require assistance in meeting their working capital needs for various reasons, such as new or increased competition or differences in IO skills and experience. • Non-TCAP — Includes the notes and receivables from IOs with stores that have been open for more than 18 months that are not participating in TCAP as of the end of each reporting period. • New store — Includes the notes and receivables from IOs with stores that have been open for less than 18 months as of the end of each reporting period. Assets without such shared risk characteristics or credit quality indicators, such as assets with unique circumstances or with delinquencies and historical losses in excess of their TCAP, non-TCAP or new store peers are evaluated on an individual basis. Amounts due from IOs and the related allowances as of October 2, 2021 and January 2, 2021 consisted of the following (amounts in thousands) : Allowance Current Portion Long-term Portion Gross Current Portion Long-term Portion Net October 2, 2021 Independent operator notes $ 33,425 $ (653) $ (10,029) $ 22,743 $ 1,518 $ 21,225 Independent operator receivables 5,098 (613) — 4,485 4,485 — Total $ 38,523 $ (1,266) $ (10,029) $ 27,228 $ 6,003 $ 21,225 Allowance Current Portion Long-term Portion Gross Current Portion Long-term Portion Net January 2, 2021 Independent operator notes $ 37,238 $ (514) $ (7,124) $ 29,600 $ 2,160 $ 27,440 Independent operator receivables 3,754 (471) — 3,283 3,283 — Total $ 40,992 $ (985) $ (7,124) $ 32,883 $ 5,443 $ 27,440 A summary of activity in the IO notes and receivable allowance was as follows (amounts in thousands): 13 Weeks Ended 39 Weeks Ended October 2, September 26, October 2, September 26, Beginning balance $ 10,177 $ 9,178 $ 8,109 $ 10,371 Provision for IO notes and IO receivables 1,261 384 3,561 311 Cumulative effect of accounting change — — — (439) Write-off of provision for IO notes and IO receivables (143) (46) (375) (727) Ending Balance $ 11,295 $ 9,516 $ 11,295 $ 9,516 The following table presents the amortized cost basis of IO notes by year of origination and credit quality indicator as of October 2, 2021 (amounts in thousands): Credit Quality Indicator 2021 (YTD) 2020 2019 2018 2017 Prior Total TCAP $ 2,050 $ 2,465 $ 2,075 $ 1,510 $ 532 $ — $ 8,632 Non-TCAP 4,008 3,155 4,037 2,178 1,178 646 15,202 New store 5,329 4,262 — — — — 9,591 Total $ 11,387 $ 9,882 $ 6,112 $ 3,688 $ 1,710 $ 646 $ 33,425 |
Long-Term Debt
Long-Term Debt | 9 Months Ended |
Oct. 02, 2021 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Long-term Debt Long-term debt consisted of the following (amounts in thousands): October 2, January 2, First Lien Credit Agreement: Term loan $ 460,000 $ 460,000 Long-term debt, gross 460,000 460,000 Less: Unamortized debt discounts and debt issuance costs (9,140) (10,767) Long-term debt, net $ 450,860 $ 449,233 First Lien Credit Agreement GOBP Holdings, Inc ("GOBP Holdings"), our wholly owned subsidiary, together with another of our wholly owned subsidiaries, has a first lien credit agreement (the “First Lien Credit Agreement”) with a syndicate of lenders that consists of a $460.0 million senior term loan and a revolving credit facility for an amount up to $100.0 million, with sub-commitments for a $35.0 million letter of credit and $20.0 million of swingline loans as of October 2, 2021. The First Lien Credit Agreement permits voluntary prepayment on borrowings without premium or penalty. Borrowings under the First Lien Credit Agreement are secured by substantially all the assets of the borrower subsidiary and its guarantors. Term Loan Our $460.0 million senior term loan matures on October 22, 2025 and had an interest rate of 2.88% as of October 2, 2021. Due to previous prepayments on the term loan, no further principal payment on the term loan will be due until the maturity date. On January 24, 2020, GOBP Holdings together with another of our wholly owned subsidiaries, entered into a second incremental agreement (the "Second Incremental Agreement") which amended a previous incremental agreement (the "First Incremental Agreement"). The Second Incremental Agreement refinanced a previous replacement term loan under the First Incremental Agreement with a replacement $460.0 million senior secured term loan (the "Second Replacement Term Loan") with an applicable margin of 2.75% for Eurodollar loans and 1.75% for base rate loans, in each case depending on the public corporate family rating of GOBP Holdings , and made certain other corresponding technical ch anges and updates to the First Incremental Agreement. We wrote off debt issuance costs of $0.1 million and incurred debt modification costs of $0.1 million during the first quarter of fiscal 2020 in connection with this refinance. Other than as described above, the Second Replacement Term Loan has the same terms as provided under the original First Lien Credit Agreement and the First Incremental Agreement. Additionally, the parties to the Second Incremental Agreement continue to have the same obligations set forth in the original First Lien Credit Agreement and the First Incremental Agreement. Revolving Credit Facility As of October 2, 2021, we h ad $3.5 million of outstanding standby letters of credit and $96.5 million of remaining borrowing capacity available under the revolving credit facility. No a mounts were outstanding under the revolving credit facility as of October 2, 2021 and January 2, 2021 . We are required to pay a quarterly commitment fee ranging from 0.25% to 0.50% on the daily unused amount of the commitment under the revolving credit facility based upon the leverage ratio defined in the agreement and certain criteria specified in the agreement. We are also required to pay fronting fees and other customary fees for letters of credit issued under the revolving credit facility. The interest rate for the revolving credit facility is determined based on a formula using certain market rates. On March 19, 2020, we borrowed $90.0 million under the revolving credit facility of our First Lien Credit Agreement (the "Revolving Credit Facility Loan"), the proceeds of which were to be used as reserve funding for working capital needs as a precautionary measure in light of the economic uncertainty surrounding the COVID-19 pandemic. On May 26, 2020, we repaid the Revolving Credit Facility Loan in full. Debt Covenants The First Lien Credit Agreement contains certain customary representations and warranties, subject to limitations and exceptions, and affirmative and customary covenants. The First Lien Credit Agreement restricts us from entering into certain types of transactions and making certain types of payments including dividends and stock repurchase and other similar distributions, with certain exceptions. Additionally, the revolving credit facility under our First Lien Credit Agreement is subject to a first lien secured leverage ratio (as defined in the First Lien Credit Agreement) of 7.00 to 1.00. As of October 2, 2021, we were in compliance with all applicable financial covenant requirements for our First Lien Credit Agreement. Schedule of Principal Maturities Principal maturities of debt as of October 2, 2021 are as follows (amounts in thousands): Remainder of fiscal 2021 $ — Fiscal 2022 — Fiscal 2023 — Fiscal 2024 — Fiscal 2025 460,000 Thereafter — Total $ 460,000 Interest Expense, Net Interest expense, net, consisted of the following (amounts in thousands): 13 Weeks Ended 39 Weeks Ended October 2, September 26, October 2, September 26, Interest on loans $ 3,489 $ 4,463 $ 10,454 $ 15,234 Amortization of debt issuance costs and debt discounts 628 634 1,883 1,771 Interest on finance leases 98 98 288 285 Other 2 12 8 25 Interest income (267) (374) (855) (1,378) Interest expense, net $ 3,950 $ 4,833 $ 11,778 $ 15,937 Debt Extinguishment and Modification Costs Debt extinguishment and modification costs consisted of the following (amounts in thousands): 13 Weeks Ended 39 Weeks Ended October 2, September 26, October 2, September 26, Write-off of debt issuance costs $ — $ — $ — $ 74 Debt modification costs — — — 124 Debt extinguishment and modification costs $ — $ — $ — $ 198 |
Share-based Awards
Share-based Awards | 9 Months Ended |
Oct. 02, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Share-based Awards | Share-based Awards For a discussion of our share-based incentive plans, refer to NOTE 7 —Share-based Awards of our 2020 Form 10-K. Grant Activity The following table summarizes stock option activity under all equity incentive plans during the 39 weeks ended October 2, 2021: Time-Based Stock Options Performance-Based Stock Options Number of Options Weighted-Average Number of Options Weighted-Average Options outstanding as of January 2, 2021 3,864,772 $ 12.42 2,325,580 $ 4.54 Exercised (422,138) 7.73 (608,641) 4.39 Forfeitures (180,839) 19.64 — — Options outstanding as of October 2, 2021 3,261,795 $ 12.63 1,716,939 $ 4.59 Options vested and exercisable as of October 2, 2021 1,983,997 $ 7.55 1,716,939 $ 4.59 The following table summarizes restricted stock unit ("RSU") activity under all equity incentive plans during the 39 weeks ended October 2, 2021: Number of Shares Weighted-Average Unvested balance as of January 2, 2021 341,842 $ 35.16 Granted 333,418 35.22 Vested (100,308) 37.05 Forfeitures (50,140) 35.18 Unvested balance as of October 2, 2021 524,812 $ 34.83 The following table summarizes performance-based restricted stock unit ("PSU") activity under the Grocery Outlet Holding Corp. 2019 Incentive Plan during the 39 weeks ended October 2, 2021: Number of Shares Weighted-Average Unvested balance as of January 2, 2021 407,462 $ 36.90 Granted (1) 319,606 35.45 Adjustment for expected performance achievement (2) (213,727) 35.86 Forfeitures (56,287) 36.53 Unvested balance as of October 2, 2021 (3) 457,054 $ 36.41 _______________________ (1) Represents initial grant of PSUs based on performance target level achievement of 100%. (2) Represents the adjustment to previously granted PSUs based on performance expectations as of October 2, 2021. (3) An additional 641,180 PSUs could potentially be included if the maximum performance level of 200% is reached for all PSUs outstanding as of October 2, 2021. Share-Based Compensation Expense We recognize compensation expense for stock options, RSUs and PSUs by amortizing the grant date fair value on a straight-line basis over the expected vesting period to the extent we determine the vesting of the grant is probable. We recognize share-based award forfeitures in the period such forfeitures occur. Share-based compensation expense consisted of the following (amounts in thousands): 13 Weeks Ended 39 Weeks Ended October 2, September 26, October 2, September 26, Time-based stock options $ 430 $ 717 $ 1,467 $ 2,187 Performance-based stock options — — — 26,079 RSUs 1,749 1,325 5,162 3,517 PSUs (316) 1,654 3,286 2,121 Dividends (1) 39 161 136 405 Share-based compensation expense $ 1,902 $ 3,857 $ 10,051 $ 34,309 _______________________ (1) Represents cash dividends paid upon vesting of share-based awards as a result of dividends declared in connection with recapitalizations that occurred in fiscal 2018 and 2016. |
Income Taxes
Income Taxes | 9 Months Ended |
Oct. 02, 2021 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes Our income tax expense (benefit) and effective income tax rate were as follows (amounts in thousands, except percentages): 13 Weeks Ended 39 Weeks Ended October 2, September 26, October 2, September 26, Income tax expense (benefit) $ 5,054 $ (14,992) $ 10,185 $ (19,037) Effective income tax rate 22.8 % (58.8) % 15.5 % (30.0) % The change from net income tax benefits of $15.0 million and $19.0 million for the 13 and 39 weeks ended September 26, 2020, respectively, to net income tax expenses of $5.1 million and $10.2 million for the 13 and 39 weeks ended October 2, 2021, respectively, was primarily driven by a reduction in excess tax benefits related to the exercise of stock options and vesting of RSUs, as compared to the same periods in fiscal 2020. The Company's tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete events arising in each respective quarter. During each interim period, the Company updates the estimated annual effective tax rate. Our effective income tax rate for the 13 and 39 weeks ended October 2, 2021 was lower than the combined U.S. federal and state statutory income tax rate primarily due to excess tax benefits related to the exercise of stock options and vesting of RSUs. The increase in our effective income tax rate for the 13 and 39 weeks ended October 2, 2021 compared to the corresponding period in fiscal 2020 was primarily due to the above mentioned reduction in discrete items related to the exercise of stock options and vesting of employee RSUs. Our policy is to recognize interest and penalties associated with uncertain tax positions as part of the income tax provision and include accrued interest and penalties with the related income tax liability on our condensed consolidated balance sheets. To date, we have not recognized any interest and penalties in our condensed consolidated statements of operations and comprehensive income, nor have we accrued for or made payments for interest and penalties. We had no uncertain tax positions as of October 2, 2021 and January 2, 2021, respectively, and do not anticipate any changes to our uncertain tax positions within the next 12 months. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Oct. 02, 2021 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions Related Party Leases We leased properties from entities affiliated with certain of our non-controlling stockholders for 15 store locations and one warehouse location as of both October 2, 2021 and September 26, 2020. Affiliated entities received aggregate lease payments from us of $1.5 million for each of the 13 weeks ended October 2, 2021 and September 26, 2020, respectively, and $4.5 million for each of the 39 weeks ended October 2, 2021 and September 26, 2020, respectively. Independent Operator Notes and Independent Operator Receivables We offer interest-bearing notes to IOs and the gross IO operating notes and IO receivables due from these was $38.5 million and $41.0 million as of October 2, 2021 and January 2, 2021, respectively. See Note 2 for additional information. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Oct. 02, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies We are involved from time to time in claims, proceedings and litigation arising in the normal course of business. We do not believe the impact of such litigation will have a material adverse effect on our condensed consolidated financial statements taken as a whole. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Oct. 02, 2021 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share The following table sets forth the calculation of basic and diluted earnings per share (amounts in thousands, except per share data): 13 Weeks Ended 39 Weeks Ended October 2, September 26, October 2, September 26, Numerator Net income and comprehensive income $ 17,139 $ 40,474 $ 55,671 $ 82,449 Denominator Weighted-average shares outstanding — basic 95,955 92,489 95,610 90,929 Effect of dilutive stock options 3,156 6,666 3,762 7,022 Effect of dilutive RSUs 58 111 105 82 Weighted-average shares outstanding — diluted (1) 99,169 99,266 99,477 98,033 Earnings per share: Basic $ 0.18 $ 0.44 $ 0.58 $ 0.91 Diluted $ 0.17 $ 0.41 $ 0.56 $ 0.84 _______________________ (1) We are required to include in diluted weighted-average shares outstanding contingently issuable shares that would be issued assuming the end of our reporting period was the end of the relevant PSU award contingency period. No PSUs were included in diluted weighted-average shares outstanding for the 13 and 39 weeks ended October 2, 2021 and September 26, 2020. The following weighted-average common stock equivalents were excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive (amounts in thousands): 13 Weeks Ended 39 Weeks Ended October 2, September 26, October 2, September 26, RSUs 284 — 10 1 |
Subsequent Event
Subsequent Event | 9 Months Ended |
Oct. 02, 2021 | |
Subsequent Events [Abstract] | |
Subsequent Event | Subsequent Event In November 2021, our board of directors approved a share repurchase program. This program, which is effective November 5, 2021, authorizes us to repurchase up to $100.0 million of our outstanding common stock. |
Organization and Summary of S_2
Organization and Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Oct. 02, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and the applicable rules and regulations of the United States ("U.S.") Securities and Exchange Commission (the "SEC") for interim reporting. Certain information and note disclosures included in our annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our 2020 Form 10-K. The condensed consolidated balance sheet as of January 2, 2021 included herein has been derived from those audited consolidated financial statements. |
Consolidation | Our unaudited condensed consolidated financial statements include the accounts of Grocery Outlet Holding Corp. and its wholly owned subsidiaries. All intercompany balances and transactions were eliminated. In the opinion of management, these condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the periods presented. |
Reclassification | Certain prior period amounts in the notes to the condensed consolidated financial statements have been reclassified to conform to the current period presentation. The reclassification of these items had no impact on net income, earnings per share, or retained earnings in the current or prior period. |
Use of Estimates | The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results can differ from these estimates depending upon certain risks and uncertainties. Changes in these estimates are recorded when known. |
Segment Reporting | We manage our business as one operating segment. All of our sales were made to customers located in the United States and all property and equipment is located in the United States. |
Merchandise Inventories | Merchandise inventories are valued at the lower of cost or net realizable value. Cost is determined by the weighted-average cost method for warehouse inventories and the retail inventory method for store inventories. We provide for estimated inventory losses between physical inventory counts based on historical averages. This provision is adjusted periodically to reflect the actual shrink results of the physical inventory counts. |
Leases | We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use assets, current lease liabilities, and long-term lease liabilities on our condensed consolidated balance sheets. Finance leases are included in other assets, current lease liabilities, and long-term lease liabilities on our condensed consolidated balance sheets. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease over the same term. Right-of-use assets and liabilities are recognized at commencement date based on the present value of the lease payments over the lease term, reduced by landlord incentives. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate, which is estimated to approximate the interest rate on a collateralized basis with similar terms and payments based on the information available at the commencement date, to determine the present value of our lease payments. Lease term is defined as the non-cancelable period of the lease plus any options to extend or terminate the lease when it is reasonably certain that we will exercise the option. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. Amortization of finance lease right-of-use assets, interest expense on finance lease liabilities and operating and financing cash flows for finance leases are immaterial. We have lease agreements with retail facilities for store locations, distribution centers, office space and equipment with lease and non-lease components, which are accounted for separately. Leases with an initial term of 12 months or less are not recorded on the balance sheet; lease expense for these leases is recognized on a straight-line basis over the lease term. The short-term lease expense is reflective of the short-term lease commitments on a go-forward basis. We sublease certain real estate to unrelated third parties under non-cancelable leases and the sublease portfolio consists of operating leases for retail stores. |
Fair Value Measurements | Fair value is defined as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The fair value of financial instruments is categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is measured using inputs from the three levels of the fair value hierarchy, which are described as follows: Level 1 — Quoted prices in active markets for identical assets or liabilities Level 2 — Quoted prices for similar assets and liabilities in active markets or inputs that are observable Level 3 — Unobservable inputs in which there is little or no market data, which requires us to develop our own assumptions when pricing the financial instruments, such as cash flow modeling assumptions The assets' or liabilities' fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The fair value framework requires that we maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There were no assets or liabilities measured at fair value on a recurring basis as of October 2, 2021 or January 2, 2021. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges. There were no transfers of assets or liabilities between levels within the fair value hierarchy during the periods ended October 2, 2021 or January 2, 2021, respectively. Our financial assets and liabilities are carried at cost, which generally approximates their fair value, as described below: Cash and cash equivalents, independent operator ("IO") receivables, other accounts receivable and accounts payable — The carrying value of such financial instruments approximates their fair value due to factors such as their short-term nature or their variable interest rates. IO notes receivable (net) — The carrying value of such financial instruments approximates their fair value due to the effect of the related allowance for expected credit losses. Notes payable and term loan — The carrying value of such financial instruments approximates their fair value since the stated interest rates approximates market rates for loans with similar terms for borrowers with similar credit profiles. However, in accordance with Accounting Standards Codification (“ASC”) Topic 825, Financial Instruments |
Revenue Recognition | Net Sales — We recognize revenue from the sale of products at the point of sale, net of any taxes or deposits collected and remitted to governmental authorities. Our performance obligations are satisfied upon the transfer of goods to the customer, at the point of sale, and payment from customers is also due at the time of sale. Discounts provided to customers by us are recognized at the time of sale as a reduction in sales as the products are sold. Discounts provided by IOs are not recognized as a reduction in sales as these are provided solely by the IO who bears the incremental costs arising from the discount. We do not accept manufacturer coupons. We do not have any material contract assets or receivables from contracts with customers, any revenue recognized in the current year from performance obligations satisfied in previous periods, any performance obligations, or any material costs to obtain or fulfill a contract as of October 2, 2021 and January 2, 2021. Gift Cards |
Variable interest Entities | In accordance with the variable interest entities sub-section of ASC Topic 810, Consolidation , we assess at each reporting period whether we, or any consolidated entity, are considered the primary beneficiary of a variable interest entity ("VIE") and therefore required to consolidate the financial results of the VIE in our consolidated financial statements. Determining whether to consolidate a VIE may require judgment in assessing (i) whether an entity is a VIE, and (ii) if a reporting entity is a VIE's primary beneficiary. A reporting entity is determined to be a VIE's primary beneficiary if it has the power to direct the activities that most significantly impact a VIE's economic performance and the obligation to absorb losses or rights to receive benefits that could potentially be significant to a VIE. We had 403, 375 and 367 stores operated by IOs as of October 2, 2021, January 2, 2021 and September 26, 2020, respectively. We have agreements in place with each IO. The IO orders merchandise exclusively from us which is provided to the IO on consignment. Under the Independent Operator Agreement (the "Operator Agreement"), the IO may select a majority of merchandise that we consign to the IO, which the IO chooses from our merchandise order guide according to the IO's knowledge and experience with local customer purchasing trends, preferences, historical sales and similar factors. The Operator Agreement gives the IO discretion to adjust our initial prices if the overall effect of all price changes at any time comports with the reputation of our Grocery Outlet retail stores for selling quality, name-brand consumables and fresh products and other merchandise at extreme discounts. IOs are required to furnish initial working capital and to acquire certain store and safety assets. The IO is also required to hire, train and employ a properly trained workforce sufficient in number to enable the IO to fulfill its obligations under the Operator Agreement. Additionally, the IO is responsible for expenses required for business operations, including all labor costs, utilities, credit card processing fees, supplies, taxes, fines, levies and other expenses. Either party may terminate the Operator Agreement without cause upon 75 days' notice. As consignor of all merchandise to each IO, the aggregate net sales proceeds from merchandise sales belongs to us. Net sales related to IO stores were $754.4 million and $750.5 million for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively, and $2.26 billion and $2.28 billion for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively. We, in turn, pay IOs a commission based on a share of the gross profit of the store. Inventories and related net sales proceeds are our property, and we are responsible for store rent and related occupancy costs. IO commissions were expensed and included in SG&A. IO commissions were $117.2 million and $114.2 million for the 13 weeks ended October 2, 2021 and September 26, 2020, respectively, and $345.3 million and $351.1 million for the 39 weeks ended October 2, 2021 and September 26, 2020, respectively. IO commissions of $8.0 million and $6.0 million were included in accrued expenses as of October 2, 2021 and January 2, 2021, respectively. IOs may fund their initial store investment from existing capital, a third-party loan or most commonly through a loan from us, as further discussed in Note 2. As collateral for IO obligations and performance, the Operator Agreements grant us the security interests in the assets owned by the IOs related to the respective store. Since the total investment at risk associated with each IO is not sufficient to permit each IO to finance its activities without additional subordinated financial support, the IOs are VIEs which we have variable interests in. To determine if we are the primary beneficiary of these VIEs, we evaluate whether we have (i) the power to direct the activities that most significantly impact the IO's economic performance and (ii) the obligation to absorb losses or the right to receive benefits of the IO that could potentially be significant to the IO. Our evaluation includes identification of significant activities and an assessment of its ability to direct those activities. Activities that most significantly impact the IO's economic performance relate to sales and labor. Sales activities that significantly impact the IO's economic performance include determining what merchandise the IO will order and sell and the price of such merchandise, both of which the IO controls. The IO is also responsible for all of their own labor. Labor activities that significantly impact the IO's economic performance include hiring, training, supervising, directing, compensating (including wages, salaries and employee benefits) and terminating all of the employees of the IO, activities which the IO controls. Accordingly, the IO has the power to direct the activities that most significantly impact the IO's economic performance. Furthermore, the mutual termination rights associated with the Operator Agreements illustrate the lack of ultimate control over the IO. Therefore, the Company is not the primary beneficiary of these VIEs. |
Recently Adopted Accounting Standards and Recently Issued Accounting Pronouncements | Recently Adopted Accounting Standards ASU No. 2019-12 — In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes ("ASU 2019-12"). ASU 2019-12 simplifies accounting guidance for certain tax matters including franchise taxes, certain transactions that result in a step-up in tax basis of goodwill, and enacted changes in tax laws in interim periods. In addition, it eliminates a company's need to evaluate certain exceptions relating to the incremental approach for intra-period tax allocation, accounting for basis differences when there are ownership changes in foreign investments, and interim period income tax accounting for year-to-date losses that exceed anticipated losses. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We adopted ASU 2019-12 beginning in the first quarter of fiscal 2021. The adoption of ASU 2019-12 did not have a material impact on our condensed consolidated financial statements. Recently Issued Accounting Pronouncements No recently issued accounting pronouncements are expected to have a material effect on our condensed consolidated financial statements. |
Income Tax | Our policy is to recognize interest and penalties associated with uncertain tax positions as part of the income tax provision and include accrued interest and penalties with the related income tax liability on our condensed consolidated balance sheets. To date, we have not recognized any interest and penalties in our condensed consolidated statements of operations and comprehensive income, nor have we accrued for or made payments for interest and penalties. |
Organization and Summary of S_3
Organization and Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Oct. 02, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of carrying amount and estimated fair values of financial liabilities | The following table sets forth by level within the fair value hierarchy the carrying amounts and estimated fair values of our significant financial liabilities that are not recorded at fair value on the condensed consolidated balance sheets (amounts in thousands): October 2, January 2, Carrying Amount (1) Estimated Fair Value (2) Carrying Amount (1) Estimated Fair Value (2) Financial Liabilities: Term loan (Level 2) $ 458,951 $ 459,425 $ 458,757 $ 460,000 _______________________ (1) The carrying amounts as of October 2, 2021 and January 2, 2021 are net of unamortized debt discounts of $1.0 million and $1.2 million, respectively. (2) The estimated fair value of our term loan was determined based on the average quoted bid-ask prices for the term loan in an over-the-counter market on the last trading day of the periods presented. |
Schedule of sales revenue by product | The following table presents net sales revenue by type of product for the periods indicated (amounts in thousands): 13 Weeks Ended 39 Weeks Ended October 2, September 26, October 2, September 26, Perishable (1) $ 268,349 $ 258,923 $ 800,623 $ 788,190 Non-perishable (2) 500,531 505,159 1,496,258 1,539,629 Total net sales $ 768,880 $ 764,082 $ 2,296,881 $ 2,327,819 _______________________ (1) Perishable departments include dairy and deli; produce and floral; and fresh meat and seafood. |
Independent Operator Notes an_2
Independent Operator Notes and Independent Operator Receivables (Tables) | 9 Months Ended |
Oct. 02, 2021 | |
Receivables [Abstract] | |
Schedule of amounts due from independent operators | Amounts due from IOs and the related allowances as of October 2, 2021 and January 2, 2021 consisted of the following (amounts in thousands) : Allowance Current Portion Long-term Portion Gross Current Portion Long-term Portion Net October 2, 2021 Independent operator notes $ 33,425 $ (653) $ (10,029) $ 22,743 $ 1,518 $ 21,225 Independent operator receivables 5,098 (613) — 4,485 4,485 — Total $ 38,523 $ (1,266) $ (10,029) $ 27,228 $ 6,003 $ 21,225 Allowance Current Portion Long-term Portion Gross Current Portion Long-term Portion Net January 2, 2021 Independent operator notes $ 37,238 $ (514) $ (7,124) $ 29,600 $ 2,160 $ 27,440 Independent operator receivables 3,754 (471) — 3,283 3,283 — Total $ 40,992 $ (985) $ (7,124) $ 32,883 $ 5,443 $ 27,440 |
Schedule of allowance for credit loss activity | A summary of activity in the IO notes and receivable allowance was as follows (amounts in thousands): 13 Weeks Ended 39 Weeks Ended October 2, September 26, October 2, September 26, Beginning balance $ 10,177 $ 9,178 $ 8,109 $ 10,371 Provision for IO notes and IO receivables 1,261 384 3,561 311 Cumulative effect of accounting change — — — (439) Write-off of provision for IO notes and IO receivables (143) (46) (375) (727) Ending Balance $ 11,295 $ 9,516 $ 11,295 $ 9,516 |
Schedule of independent operator notes by credit quality indicators and year of origination | The following table presents the amortized cost basis of IO notes by year of origination and credit quality indicator as of October 2, 2021 (amounts in thousands): Credit Quality Indicator 2021 (YTD) 2020 2019 2018 2017 Prior Total TCAP $ 2,050 $ 2,465 $ 2,075 $ 1,510 $ 532 $ — $ 8,632 Non-TCAP 4,008 3,155 4,037 2,178 1,178 646 15,202 New store 5,329 4,262 — — — — 9,591 Total $ 11,387 $ 9,882 $ 6,112 $ 3,688 $ 1,710 $ 646 $ 33,425 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 9 Months Ended |
Oct. 02, 2021 | |
Debt Disclosure [Abstract] | |
Schedule of long-term debt | Long-term debt consisted of the following (amounts in thousands): October 2, January 2, First Lien Credit Agreement: Term loan $ 460,000 $ 460,000 Long-term debt, gross 460,000 460,000 Less: Unamortized debt discounts and debt issuance costs (9,140) (10,767) Long-term debt, net $ 450,860 $ 449,233 |
Principal maturities of debt | Principal maturities of debt as of October 2, 2021 are as follows (amounts in thousands): Remainder of fiscal 2021 $ — Fiscal 2022 — Fiscal 2023 — Fiscal 2024 — Fiscal 2025 460,000 Thereafter — Total $ 460,000 |
Schedule of interest expense, net | Interest expense, net, consisted of the following (amounts in thousands): 13 Weeks Ended 39 Weeks Ended October 2, September 26, October 2, September 26, Interest on loans $ 3,489 $ 4,463 $ 10,454 $ 15,234 Amortization of debt issuance costs and debt discounts 628 634 1,883 1,771 Interest on finance leases 98 98 288 285 Other 2 12 8 25 Interest income (267) (374) (855) (1,378) Interest expense, net $ 3,950 $ 4,833 $ 11,778 $ 15,937 |
Debt extinguishment and modification cost | Debt extinguishment and modification costs consisted of the following (amounts in thousands): 13 Weeks Ended 39 Weeks Ended October 2, September 26, October 2, September 26, Write-off of debt issuance costs $ — $ — $ — $ 74 Debt modification costs — — — 124 Debt extinguishment and modification costs $ — $ — $ — $ 198 |
Share-based Awards (Tables)
Share-based Awards (Tables) | 9 Months Ended |
Oct. 02, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of stock option activity | The following table summarizes stock option activity under all equity incentive plans during the 39 weeks ended October 2, 2021: Time-Based Stock Options Performance-Based Stock Options Number of Options Weighted-Average Number of Options Weighted-Average Options outstanding as of January 2, 2021 3,864,772 $ 12.42 2,325,580 $ 4.54 Exercised (422,138) 7.73 (608,641) 4.39 Forfeitures (180,839) 19.64 — — Options outstanding as of October 2, 2021 3,261,795 $ 12.63 1,716,939 $ 4.59 Options vested and exercisable as of October 2, 2021 1,983,997 $ 7.55 1,716,939 $ 4.59 |
Schedule of RSU activity | The following table summarizes restricted stock unit ("RSU") activity under all equity incentive plans during the 39 weeks ended October 2, 2021: Number of Shares Weighted-Average Unvested balance as of January 2, 2021 341,842 $ 35.16 Granted 333,418 35.22 Vested (100,308) 37.05 Forfeitures (50,140) 35.18 Unvested balance as of October 2, 2021 524,812 $ 34.83 |
Schedule of PSU Activity | The following table summarizes performance-based restricted stock unit ("PSU") activity under the Grocery Outlet Holding Corp. 2019 Incentive Plan during the 39 weeks ended October 2, 2021: Number of Shares Weighted-Average Unvested balance as of January 2, 2021 407,462 $ 36.90 Granted (1) 319,606 35.45 Adjustment for expected performance achievement (2) (213,727) 35.86 Forfeitures (56,287) 36.53 Unvested balance as of October 2, 2021 (3) 457,054 $ 36.41 _______________________ (1) Represents initial grant of PSUs based on performance target level achievement of 100%. (2) Represents the adjustment to previously granted PSUs based on performance expectations as of October 2, 2021. |
Summary of share-based compensation expense | Share-based compensation expense consisted of the following (amounts in thousands): 13 Weeks Ended 39 Weeks Ended October 2, September 26, October 2, September 26, Time-based stock options $ 430 $ 717 $ 1,467 $ 2,187 Performance-based stock options — — — 26,079 RSUs 1,749 1,325 5,162 3,517 PSUs (316) 1,654 3,286 2,121 Dividends (1) 39 161 136 405 Share-based compensation expense $ 1,902 $ 3,857 $ 10,051 $ 34,309 _______________________ (1) Represents cash dividends paid upon vesting of share-based awards as a result of dividends declared in connection with recapitalizations that occurred in fiscal 2018 and 2016. |
Income Taxes (Tables)
Income Taxes (Tables) | 9 Months Ended |
Oct. 02, 2021 | |
Income Tax Disclosure [Abstract] | |
Schedule of income tax expense (benefit) and effective tax rate | Our income tax expense (benefit) and effective income tax rate were as follows (amounts in thousands, except percentages): 13 Weeks Ended 39 Weeks Ended October 2, September 26, October 2, September 26, Income tax expense (benefit) $ 5,054 $ (14,992) $ 10,185 $ (19,037) Effective income tax rate 22.8 % (58.8) % 15.5 % (30.0) % |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Oct. 02, 2021 | |
Earnings Per Share [Abstract] | |
Schedule of earnings per share, basic and diluted | The following table sets forth the calculation of basic and diluted earnings per share (amounts in thousands, except per share data): 13 Weeks Ended 39 Weeks Ended October 2, September 26, October 2, September 26, Numerator Net income and comprehensive income $ 17,139 $ 40,474 $ 55,671 $ 82,449 Denominator Weighted-average shares outstanding — basic 95,955 92,489 95,610 90,929 Effect of dilutive stock options 3,156 6,666 3,762 7,022 Effect of dilutive RSUs 58 111 105 82 Weighted-average shares outstanding — diluted (1) 99,169 99,266 99,477 98,033 Earnings per share: Basic $ 0.18 $ 0.44 $ 0.58 $ 0.91 Diluted $ 0.17 $ 0.41 $ 0.56 $ 0.84 _______________________ (1) We are required to include in diluted weighted-average shares outstanding contingently issuable shares that would be issued assuming the end of our reporting period was the end of the relevant PSU award contingency period. No PSUs were included in diluted weighted-average shares outstanding for the 13 and 39 weeks ended October 2, 2021 and September 26, 2020. |
Schedule of antidilutive securities excluded from computation of earnings per share | The following weighted-average common stock equivalents were excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive (amounts in thousands): 13 Weeks Ended 39 Weeks Ended October 2, September 26, October 2, September 26, RSUs 284 — 10 1 |
Organization and Summary of S_4
Organization and Summary of Significant Accounting Policies - Narrative (Details) $ in Thousands | May 28, 2020shares | Apr. 27, 2020USD ($)shares | Feb. 03, 2020USD ($)shares | Oct. 02, 2021USD ($)store | Sep. 26, 2020USD ($)store | Oct. 02, 2021USD ($)storesegment | Sep. 26, 2020USD ($)store | Jan. 02, 2021USD ($)store | Jun. 27, 2020USD ($) | Mar. 28, 2020USD ($) |
Subsidiary, Sale of Stock [Line Items] | ||||||||||
Number of stores | store | 407 | 407 | ||||||||
Deferred offering cost | $ 1,000 | $ 1,100 | ||||||||
Proceeds from stock option exercised | $ 1,600 | $ 1,400 | ||||||||
Options exercised (in shares) | shares | 269,000 | 191,470 | ||||||||
Number of operating segments (in segments) | segment | 1 | |||||||||
Number of reportable segments (in segments) | segment | 1 | |||||||||
Gift card, redemption period | 12 months | |||||||||
Contract with customer, liability | $ 2,800 | $ 2,800 | $ 3,200 | |||||||
Variable interest entity, number of stores | store | 403 | 367 | 403 | 367 | 375 | |||||
Net sales | $ 768,880 | $ 764,082 | $ 2,296,881 | $ 2,327,819 | ||||||
Accrued expenses | 45,703 | 45,703 | $ 35,699 | |||||||
Variable Interest Entity, Not Primary Beneficiary | ||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||
Net sales | 754,400 | 750,500 | 2,260,000 | 2,280,000 | ||||||
Sales commissions and fees | 117,200 | $ 114,200 | 345,300 | $ 351,100 | ||||||
Accrued expenses | 8,000 | 8,000 | 6,000 | |||||||
Maximum loss exposure | $ 38,500 | $ 38,500 | $ 41,000 | |||||||
Hellman and Friedman, LLC | ||||||||||
Subsidiary, Sale of Stock [Line Items] | ||||||||||
Transfer of common stock holdings to stockholder's equity holders (in shares) | shares | 9,600,000 |
Organization and Summary of S_5
Organization and Summary of Significant Accounting Policies - Fair Value of Financial Liabilities (Details) - USD ($) $ in Thousands | Oct. 02, 2021 | Jan. 02, 2021 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Unamortized debt discount | $ 1,000 | $ 1,200 |
Fair Value, Inputs, Level 2 | Carrying Amount | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Term loan (Level 2) | 458,951 | 458,757 |
Fair Value, Inputs, Level 2 | Estimated Fair Values | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Term loan (Level 2) | $ 459,425 | $ 460,000 |
Organization and Summary of S_6
Organization and Summary of Significant Accounting Policies - Disaggregated Revenues (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 02, 2021 | Sep. 26, 2020 | Oct. 02, 2021 | Sep. 26, 2020 | |
Disaggregation of Revenue [Line Items] | ||||
Sales | $ 768,880 | $ 764,082 | $ 2,296,881 | $ 2,327,819 |
Perishable | ||||
Disaggregation of Revenue [Line Items] | ||||
Sales | 268,349 | 258,923 | 800,623 | 788,190 |
Non-Perishable | ||||
Disaggregation of Revenue [Line Items] | ||||
Sales | $ 500,531 | $ 505,159 | $ 1,496,258 | $ 1,539,629 |
Independent Operator Notes an_3
Independent Operator Notes and Independent Operator Receivables - Narrative (Details) - USD ($) $ in Millions | Oct. 02, 2021 | Jan. 02, 2021 |
Financing Receivable, Allowance for Credit Loss [Line Items] | ||
Accrued interest receivable | $ 0.3 | $ 0.4 |
Minimum | ||
Financing Receivable, Allowance for Credit Loss [Line Items] | ||
Independent operator notes, stated interest rate | 3.00% | |
Maximum | ||
Financing Receivable, Allowance for Credit Loss [Line Items] | ||
Independent operator notes, stated interest rate | 9.95% |
Independent Operator Notes an_4
Independent Operator Notes and Independent Operator Receivables - Amounts Due From Independent Operators and the Related Allowances and Accruals for Estimated Losses (Details) - USD ($) $ in Thousands | Oct. 02, 2021 | Jan. 02, 2021 |
Independent operator notes | ||
Gross | $ 33,425 | $ 37,238 |
Allowance, Current Portion | (653) | (514) |
Allowance, Long-term Portion | (10,029) | (7,124) |
Net | 22,743 | 29,600 |
Current Portion | 1,518 | 2,160 |
Long-term Portion | 21,225 | 27,440 |
Independent operator receivables | ||
Gross | 5,098 | 3,754 |
Allowance, Current Portion | (613) | (471) |
Allowance, Long-Term Portion | 0 | 0 |
Net | 4,485 | 3,283 |
Current Portion | 4,485 | 3,283 |
Long-term Portion | 0 | 0 |
Total | ||
Gross | 38,523 | 40,992 |
Allowance, Current Portion | (1,266) | (985) |
Allowance, Long-Term Portion | (10,029) | (7,124) |
Net | 27,228 | 32,883 |
Current Portion | 6,003 | 5,443 |
Long-term Portion | $ 21,225 | $ 27,440 |
Independent Operator Notes an_5
Independent Operator Notes and Independent Operator Receivables - Allowance for Credit Loss (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 02, 2021 | Sep. 26, 2020 | Oct. 02, 2021 | Sep. 26, 2020 | |
Accounts And Financing Receivable, Allowance For Credit Loss [Roll Forward] | ||||
Beginning balance | $ 10,177 | $ 9,178 | $ 8,109 | $ 10,371 |
Provision for IO notes and IO receivables | 1,261 | 384 | 3,561 | 311 |
Cumulative effect of accounting change | 0 | 0 | 0 | (439) |
Write-off of provision for IO notes and IO receivables | (143) | (46) | (375) | (727) |
Ending Balance | $ 11,295 | $ 9,516 | $ 11,295 | $ 9,516 |
Independent Operator Notes an_6
Independent Operator Notes and Independent Operator Receivables - Credit Quality Indicators (Details) - USD ($) $ in Thousands | Oct. 02, 2021 | Jan. 02, 2021 |
Financing Receivable, Credit Quality Indicator [Line Items] | ||
2021 (YTD) | $ 11,387 | |
2020 | 9,882 | |
2019 | 6,112 | |
2018 | 3,688 | |
2017 | 1,710 | |
Prior | 646 | |
Total | 33,425 | $ 37,238 |
TCAP | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
2021 (YTD) | 2,050 | |
2020 | 2,465 | |
2019 | 2,075 | |
2018 | 1,510 | |
2017 | 532 | |
Prior | 0 | |
Total | 8,632 | |
Non-TCAP | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
2021 (YTD) | 4,008 | |
2020 | 3,155 | |
2019 | 4,037 | |
2018 | 2,178 | |
2017 | 1,178 | |
Prior | 646 | |
Total | 15,202 | |
New store | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
2021 (YTD) | 5,329 | |
2020 | 4,262 | |
2019 | 0 | |
2018 | 0 | |
2017 | 0 | |
Prior | 0 | |
Total | $ 9,591 |
Long-Term Debt - Schedule of Lo
Long-Term Debt - Schedule of Long-term Debt (Details) - USD ($) $ in Thousands | Oct. 02, 2021 | Jan. 02, 2021 |
Debt Instrument [Line Items] | ||
Long-term debt, gross | $ 460,000 | $ 460,000 |
Less: Unamortized debt discounts and debt issuance costs | (9,140) | (10,767) |
Long-term debt, net | 450,860 | 449,233 |
Senior Notes | First Lien Credit Agreement | ||
Debt Instrument [Line Items] | ||
Long-term debt, gross | $ 460,000 | $ 460,000 |
Long-Term Debt - Narrative (Det
Long-Term Debt - Narrative (Details) - USD ($) | Mar. 19, 2020 | Jan. 24, 2020 | Oct. 02, 2021 | Sep. 26, 2020 | Mar. 28, 2020 | Oct. 02, 2021 | Sep. 26, 2020 | Jan. 02, 2021 |
Debt Instrument [Line Items] | ||||||||
Long-term debt, gross | $ 460,000,000 | $ 460,000,000 | $ 460,000,000 | |||||
Write-off of debt issuance costs | 0 | $ 0 | 0 | $ 74,000 | ||||
Debt modification costs | 0 | $ 0 | 0 | $ 124,000 | ||||
First Lien Credit Agreement | Revolving Credit Facility | ||||||||
Debt Instrument [Line Items] | ||||||||
Maximum borrowing capacity | 100,000,000 | 100,000,000 | ||||||
Remaining borrowing capacity | 96,500,000 | 96,500,000 | ||||||
Outstanding debt | $ 0 | $ 0 | 0 | |||||
Proceeds from line of credit | $ 90,000,000 | |||||||
Secured leverage ratio | 7 | 7 | ||||||
First Lien Credit Agreement | Revolving Credit Facility | Minimum | ||||||||
Debt Instrument [Line Items] | ||||||||
Commitment fee percentage | 0.25% | |||||||
First Lien Credit Agreement | Revolving Credit Facility | Maximum | ||||||||
Debt Instrument [Line Items] | ||||||||
Commitment fee percentage | 0.50% | |||||||
First Lien Credit Agreement | Letter of Credit | ||||||||
Debt Instrument [Line Items] | ||||||||
Maximum borrowing capacity | $ 35,000,000 | $ 35,000,000 | ||||||
First Lien Credit Agreement | Bridge Loan | ||||||||
Debt Instrument [Line Items] | ||||||||
Maximum borrowing capacity | 20,000,000 | 20,000,000 | ||||||
First Lien Credit Agreement | Standby Letters of Credit | ||||||||
Debt Instrument [Line Items] | ||||||||
Letters of credit outstanding | 3,500,000 | 3,500,000 | ||||||
First Lien Credit Agreement | Senior Notes | ||||||||
Debt Instrument [Line Items] | ||||||||
Long-term debt, gross | $ 460,000,000 | $ 460,000,000 | $ 460,000,000 | |||||
Term Loan Maturing October 22, 2025 | Senior Notes | ||||||||
Debt Instrument [Line Items] | ||||||||
Effective interest rate | 2.88% | 2.88% | ||||||
Second Replacement Term Loan | Senior Notes | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt instrument, face amount | $ 460,000,000 | |||||||
Write-off of debt issuance costs | $ 100,000 | |||||||
Debt modification costs | $ 100,000 | |||||||
Second Replacement Term Loan | Senior Notes | Eurodollar | ||||||||
Debt Instrument [Line Items] | ||||||||
Basis spread on variable rate | 2.75% | |||||||
Second Replacement Term Loan | Senior Notes | Base Rate | ||||||||
Debt Instrument [Line Items] | ||||||||
Basis spread on variable rate | 1.75% |
Long-Term Debt - Schedule of Pr
Long-Term Debt - Schedule of Principal Maturities (Details) $ in Thousands | Oct. 02, 2021USD ($) |
Debt Disclosure [Abstract] | |
Remainder of fiscal 2021 | $ 0 |
Fiscal 2022 | 0 |
Fiscal 2023 | 0 |
Fiscal 2024 | 0 |
Fiscal 2025 | 460,000 |
Thereafter | 0 |
Total | $ 460,000 |
Long-Term Debt - Interest Expen
Long-Term Debt - Interest Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 02, 2021 | Sep. 26, 2020 | Oct. 02, 2021 | Sep. 26, 2020 | |
Debt Disclosure [Abstract] | ||||
Interest on loans | $ 3,489 | $ 4,463 | $ 10,454 | $ 15,234 |
Amortization of debt issuance costs and debt discounts | 628 | 634 | 1,883 | 1,771 |
Interest on finance leases | 98 | 98 | 288 | 285 |
Other | 2 | 12 | 8 | 25 |
Interest income | (267) | (374) | (855) | (1,378) |
Interest expense, net | $ 3,950 | $ 4,833 | $ 11,778 | $ 15,937 |
Long-Term Debt - Debt Extinguis
Long-Term Debt - Debt Extinguishment and Modification Costs (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 02, 2021 | Sep. 26, 2020 | Oct. 02, 2021 | Sep. 26, 2020 | |
Debt Disclosure [Abstract] | ||||
Write-off of debt issuance costs | $ 0 | $ 0 | $ 0 | $ 74 |
Debt modification costs | 0 | 0 | 0 | 124 |
Debt extinguishment and modification costs | $ 0 | $ 0 | $ 0 | $ 198 |
Share-based Awards - Summary of
Share-based Awards - Summary of Stock Option Activity (Details) - $ / shares | Apr. 27, 2020 | Feb. 03, 2020 | Oct. 02, 2021 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares [Roll Forward] | |||
Exercised (in shares) | (269,000) | (191,470) | |
Time-Based Stock Options | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares [Roll Forward] | |||
Options outstanding, beginning balance (in shares) | 3,864,772 | ||
Exercised (in shares) | (422,138) | ||
Forfeitures (in shares) | (180,839) | ||
Options outstanding, ending balance (in shares) | 3,261,795 | ||
Options vested and exercisable (in shares) | 1,983,997 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract] | |||
Weighted-average exercise price, beginning balance (in usd per share) | $ 12.42 | ||
Exercised (in usd per share) | 7.73 | ||
Forfeitures (in usd per share) | 19.64 | ||
Weighted-average exercise price, ending balance (in usd per share) | 12.63 | ||
Options vested and exercisable (in dollars per share) | $ 7.55 | ||
Performance-Based Stock Options | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares [Roll Forward] | |||
Options outstanding, beginning balance (in shares) | 2,325,580 | ||
Exercised (in shares) | (608,641) | ||
Forfeitures (in shares) | 0 | ||
Options outstanding, ending balance (in shares) | 1,716,939 | ||
Options vested and exercisable (in shares) | 1,716,939 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract] | |||
Weighted-average exercise price, beginning balance (in usd per share) | $ 4.54 | ||
Exercised (in usd per share) | 4.39 | ||
Forfeitures (in usd per share) | 0 | ||
Weighted-average exercise price, ending balance (in usd per share) | 4.59 | ||
Options vested and exercisable (in dollars per share) | $ 4.59 |
Share-based Awards - Summary _2
Share-based Awards - Summary of RSU and PSU Activity (Details) | 9 Months Ended |
Oct. 02, 2021$ / sharesRateshares | |
RSUs | |
Number of Shares | |
Unvested, beginning balance (in shares) | 341,842 |
Granted (in shares) | 333,418 |
Vested (in shares) | (100,308) |
Forfeitures (in shares) | (50,140) |
Unvested, ending balance (in shares) | 524,812 |
Weighted-Average Grant Date Fair Value | |
Unvested, beginning balance (in usd per share) | $ / shares | $ 35.16 |
Granted (in usd per share) | $ / shares | 35.22 |
Vested (in usd per share) | $ / shares | 37.05 |
Forfeitures (in usd per share) | $ / shares | 35.18 |
Unvested, ending balance (in usd per share) | $ / shares | $ 34.83 |
PSUs | |
Number of Shares | |
Unvested, beginning balance (in shares) | 407,462 |
Granted (in shares) | 319,606 |
Adjustment for expected performance achievement (in shares) | (213,727) |
Forfeitures (in shares) | (56,287) |
Unvested, ending balance (in shares) | 457,054 |
Weighted-Average Grant Date Fair Value | |
Unvested, beginning balance (in usd per share) | $ / shares | $ 36.90 |
Granted (in usd per share) | $ / shares | 35.45 |
Adjustment for expected performance achievement (in usd per share) | $ / shares | 35.86 |
Forfeitures (in usd per share) | $ / shares | 36.53 |
Unvested, ending balance (in usd per share) | $ / shares | $ 36.41 |
Performance target level, percentage | 1 |
PSUs | Pro Forma | |
Number of Shares | |
Adjustment for expected performance achievement (in shares) | (641,180) |
PSUs | Maximum | |
Weighted-Average Grant Date Fair Value | |
Performance target level, percentage | Rate | 200.00% |
Share-based Awards - Summary _3
Share-based Awards - Summary of Share-Based Compensation Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 02, 2021 | Sep. 26, 2020 | Oct. 02, 2021 | Sep. 26, 2020 | |
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Share-based compensation expense | $ 1,902 | $ 3,857 | $ 10,051 | $ 34,309 |
Dividends | 39 | 161 | 136 | 405 |
Time-based stock options | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Share-based compensation expense | 430 | 717 | 1,467 | 2,187 |
Performance-Based Stock Options | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Share-based compensation expense | 0 | 0 | 0 | 26,079 |
RSUs | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Share-based compensation expense | 1,749 | 1,325 | 5,162 | 3,517 |
PSUs | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Share-based compensation expense | $ (316) | $ 1,654 | $ 3,286 | $ 2,121 |
Income Taxes - Income Tax Expen
Income Taxes - Income Tax Expense (Benefit) and Effective Tax Rate (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 02, 2021 | Sep. 26, 2020 | Oct. 02, 2021 | Sep. 26, 2020 | |
Income Tax Disclosure [Abstract] | ||||
Income tax expense (benefit) | $ 5,054 | $ (14,992) | $ 10,185 | $ (19,037) |
Effective income tax rate | 22.80% | (58.80%) | 15.50% | (30.00%) |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 02, 2021 | Sep. 26, 2020 | Oct. 02, 2021 | Sep. 26, 2020 | |
Income Tax Disclosure [Abstract] | ||||
Income tax expense (benefit) | $ 5,054 | $ (14,992) | $ 10,185 | $ (19,037) |
Related Party Transactions (Det
Related Party Transactions (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Oct. 02, 2021USD ($)store | Sep. 26, 2020USD ($)store | Oct. 02, 2021USD ($)store | Sep. 26, 2020USD ($)store | Oct. 02, 2021USD ($) | Oct. 02, 2021warehouse | Jan. 02, 2021USD ($) | Sep. 26, 2020warehouse | |
Related Party Transaction [Line Items] | ||||||||
Number of stores | store | 407 | 407 | ||||||
Accounts and financing receivable, before allowance for credit loss | $ 38,523 | $ 40,992 | ||||||
Affiliated Entity | ||||||||
Related Party Transaction [Line Items] | ||||||||
Number of stores | 15 | 15 | 15 | 15 | 1 | 1 | ||
Independent operator commissions | $ 1,500 | $ 1,500 | $ 4,500 | $ 4,500 |
Earnings Per Share - Earnings P
Earnings Per Share - Earnings Per Share Attributable to Common Stockholders (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Oct. 02, 2021 | Jul. 03, 2021 | Apr. 03, 2021 | Sep. 26, 2020 | Jun. 27, 2020 | Mar. 28, 2020 | Oct. 02, 2021 | Sep. 26, 2020 | |
Numerator | ||||||||
Net income | $ 17,139 | $ 19,640 | $ 18,892 | $ 40,474 | $ 29,333 | $ 12,642 | $ 55,671 | $ 82,449 |
Comprehensive income | $ 17,139 | $ 19,640 | $ 18,892 | $ 40,474 | $ 29,333 | $ 12,642 | $ 55,671 | $ 82,449 |
Denominator | ||||||||
Weighted-average shares of common stock - basic (in shares) | 95,955,000 | 92,489,000 | 95,610,000 | 90,929,000 | ||||
Weighted average shares of common stock - diluted (in shares) | 99,169,000 | 99,266,000 | 99,477,000 | 98,033,000 | ||||
Earnings per share: | ||||||||
Basic (in usd per share) | $ 0.18 | $ 0.44 | $ 0.58 | $ 0.91 | ||||
Diluted (in usd per share) | $ 0.17 | $ 0.41 | $ 0.56 | $ 0.84 | ||||
Stock options | ||||||||
Denominator | ||||||||
Effect of dilutive awards (in shares) | 3,156,000 | 6,666,000 | 3,762,000 | 7,022,000 | ||||
RSUs | ||||||||
Denominator | ||||||||
Effect of dilutive awards (in shares) | 58,000 | 111,000 | 105,000 | 82,000 | ||||
PSUs | ||||||||
Denominator | ||||||||
Effect of dilutive awards (in shares) | 0 | 0 | 0 | 0 |
Earnings Per Share - Anti-dilut
Earnings Per Share - Anti-dilutive Weighted-Average Common Stock Equivalents Excluded from Calculation of Diluted Earnings (Net Loss) Per Share (Details) - shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 02, 2021 | Sep. 26, 2020 | Oct. 02, 2021 | Sep. 26, 2020 | |
RSUs | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of earnings per share (in shares) | 284 | 0 | 10 | 1 |
Subsequent Event (Details)
Subsequent Event (Details) $ in Millions | Nov. 05, 2021USD ($) |
Subsequent Event | |
Subsequent Event [Line Items] | |
Share repurchase program, authorized amount | $ 100 |