Net Sales Up 6.5%; Comparable Sales Up 1.9%
GAAP EPS of ($0.02); Adjusted EPS Up 50% to $0.12
Raises Fiscal 2017 Total Sales, Comparable Store Sales and Adjusted
EPS Outlook
COPPELL, Texas--(BUSINESS WIRE)--
The Container Store Group, Inc. (NYSE: TCS) (the “Company”), today
announced financial results for the second quarter of fiscal 2017 ended
September 30, 2017.
-
Consolidated net sales were $218.4 million, up 6.5%. Net sales in The
Container Store retail business (“TCS”) were $202.3 million, up 7.0%,
inclusive of an estimated $1.4 million impact due to lost sales
associated with Hurricanes Harvey and Irma. Elfa International AB
(“Elfa”) third-party net sales were $16.1 million, up 0.7%.
-
Comparable store sales for the second quarter of fiscal 2017 were up
1.9% inclusive of the negative impact of the hurricanes. The Company
estimates that the comparable store sales headwind from the combined
impact of Hurricane Harvey in Texas and Hurricane Irma in Florida was
approximately 70 basis points.
-
Consolidated net (loss) income per share (“EPS”) was ($0.02) compared
with $0.07 in the second quarter of fiscal 2016. Adjusted net income
per share (“Adjusted EPS”) was $0.12 compared with $0.08 in the second
quarter of fiscal 2016 (see Reconciliation of GAAP to Non-GAAP
Financial Measures table). Net loss per share and adjusted net income
per share in the second quarter of fiscal 2017 include an estimated
$0.01 per share negative impact related to the impact of the
hurricanes.
Melissa Reiff, Chief Executive Officer, stated, “We are happy to deliver
fiscal second quarter results that are ahead of our expectations on both
the top and the bottom line, despite hurricane-related headwinds in our
Texas and Florida markets, where we experienced temporary store closings
in approximately 12% of our store base during the quarter. The
improvement in our business was broad-based across product categories
and reflects the traction of our sales revitalization initiatives which,
in combination with our efficiency and optimization efforts, is already
driving an encouraging improvement in profitability as illustrated by
the 50% increase in our Adjusted EPS in the second quarter.”
“We are encouraged by the progress we are making towards our strategic
priorities across merchandising, marketing, store operations and
customer experience, as well as our optimization initiatives. With the
first half of the year behind us, we are raising our full year outlook
and remain focused on building on our progress and driving the sales and
profitability improvements we know this business is capable of,” added
Reiff.
Second Quarter 2017 Results
For the second quarter (thirteen weeks) ended September 30, 2017:
-
Consolidated net sales were $218.4 million, up 6.5% as compared to the
second quarter of fiscal 2016. Net sales at TCS were $202.3 million,
up 7.0%, with the increase driven by new store net sales, combined
with a 1.9% increase in net sales from comparable stores. Elfa
third-party net sales were $16.1 million, up 0.7% compared to the
second quarter of fiscal 2016, primarily due to the positive impact of
foreign currency translation which increased third-party net sales by
4.8%, partially offset by lower sales in Nordic markets.
-
Consolidated gross margin was 57.9%, an increase of 20 basis points
compared to the second quarter of fiscal 2016. TCS gross margin
declined 20 basis points to 57.1%, as increased costs associated with
the installation services business and growth in lower gross margin
business-to-business sales were partially offset by lower promotional
activities and the benefit of favorable foreign currency contracts
during the quarter. Elfa gross margin remained consistent at 38.2%. On
a consolidated basis, gross margin increased 20 basis points primarily
due to increased sales of higher-margin elfa® products during the
second quarter of fiscal 2017.
-
Consolidated selling, general and administrative expenses (“SG&A”)
were $106.3 million compared to $95.5 million in the second quarter of
fiscal 2016 and, as a percentage of net sales, increased 210 basis
points. The increase in SG&A as a percentage of net sales was
primarily due to consulting costs incurred as part of the
implementation of the Optimization Plan, which contributed 310 basis
points to the increase. Partially offsetting the increase was a 100
basis point improvement in SG&A due to ongoing savings and efficiency
efforts, inclusive of savings from the Optimization Plan, as well as
lower self-insurance costs, partially offset by increased occupancy
costs.
-
Consolidated net interest expense increased 39.7% to $5.9 million in
the second quarter of fiscal 2017 from $4.2 million in the second
quarter of fiscal 2016 due to the previously announced amendment of
our Senior Secured Term Loan Facility in August 2017, which increased
the applicable interest rate margins. Additionally, the Company
recorded $2.4 million as a loss on extinguishment of debt as a result
of the amendment to the Senior Secured Term Loan Facility.
-
The effective tax rate for the second quarter of fiscal 2017 was
-144.4%, as compared to 41.6% in the second quarter of fiscal
2016. The decrease in the effective tax rate was primarily due to
changes in the mix of domestic and foreign earnings, the expiration of
certain stock-based compensation awards, and the effect of state tax
rate changes in the thirteen weeks ended September 30, 2017.
-
Net loss was $0.9 million, or ($0.02) per share, in the second quarter
of fiscal 2017 compared to net income of $3.5 million, or $0.07 per
share, in the second quarter of fiscal 2016.
-
Adjusted net income was $5.5 million, or $0.12 per share, in the
second quarter of fiscal 2017 compared to adjusted net income of $3.7
million, or $0.08 per share in the second quarter of fiscal 2016 (see
Reconciliation of GAAP to Non-GAAP Financial Measures table).
-
Consolidated Adjusted EBITDA was $26.5 million, compared to $22.3
million in the second quarter of fiscal 2016 (see GAAP/Non-GAAP
reconciliation table).
For the year-to-date (twenty-six weeks) ended September 30, 2017:
-
Consolidated net sales were $401.5 million, up 5.0% as compared to the
first half of fiscal 2016. Net sales at TCS were $369.4 million, up
5.4%, primarily due to new store sales, combined with a 0.4% increase
in net sales from comparable stores. Elfa third-party net sales were
$32.1 million, down 0.2% compared to the year-to-date ended October 1,
2016, primarily due to the negative impact of foreign currency
translation which decreased third-party net sales by 1.2% as well as
lower sales in Nordic markets, partially offset by higher sales in
Russia.
-
Consolidated gross margin was 57.3%, a decrease of 100 basis points
compared to the first half of fiscal 2016 due to decreases in gross
margin at TCS and Elfa. TCS gross margin declined 110 basis points to
56.8%, primarily due to higher costs associated with our installation
services business, combined with a greater portion of sales generated
by merchandise campaigns during the first quarter of fiscal 2017, as
well as strong sales growth in lower gross margin business-to-business
sales. Elfa segment gross margin declined 140 basis points, primarily
due to higher direct materials costs.
-
Consolidated selling, general and administrative expenses (“SG&A”)
were $203.0 million compared to $187.8 million in the first half of
fiscal 2016. SG&A as a percentage of net sales increased 150 basis
points primarily due to consulting costs incurred as part of the
Optimization Plan, which contributed 170 basis points to the increase
in the first half of fiscal 2017. Additionally, the impact of the
amended and restated employment agreements entered into with key
executives during the first half of fiscal 2016, which led to the
reversal of accrued deferred compensation associated with the original
employment agreements, net of costs incurred to execute the
agreements, contributed a 100 basis points benefit in first half of
fiscal 2016. This combined 270 basis points increase year-over-year
was partially offset by a 120 basis point improvement in SG&A as a
percentage of net sales, primarily due to ongoing savings and
efficiency efforts, inclusive of savings from the Optimization Plan,
as well as lower self-insurance costs, partially offset by increased
occupancy costs.
-
Consolidated net interest expense increased 21.4% to $10.1 million in
the first half of fiscal 2017 from $8.3 million in the first half of
fiscal 2016 due to the previously announced amendment of our Senior
Secured Term Loan Facility in August 2017, which increased the
applicable interest rate margins. Additionally, the Company recorded
$2.4 million as a loss on extinguishment of debt as a result of the
amendment to the Senior Secured Term Loan Facility.
-
The effective tax rate was 32.2%, as compared to 50.3% in the first
half of fiscal 2016. The decrease in the effective tax rate is
primarily due to changes in the mix between domestic and foreign
earnings, combined with the impact of a pre-tax loss position in the
twenty-six weeks ended September 30, 2017, as compared to a pre-tax
income position in the twenty-six weeks ended October 1, 2016.
-
Net loss was $8.6 million, or ($0.18) per share, in the first half of
fiscal 2017 compared to net income of $1.5 million, or $0.03 per
share, in the first half of fiscal 2016.
-
Adjusted net income was $0.1 million, or $0.00 per share, in the first
half of fiscal 2017 compared to adjusted net loss of $0.6 million, or
($0.01) per share in the first half of fiscal 2016 (see Reconciliation
of GAAP to Non-GAAP Financial Measures table).
-
Consolidated Adjusted EBITDA was $32.9 million in the first half of
fiscal 2017 compared to $34.3 million in the first half of fiscal 2016
(see GAAP/Non-GAAP reconciliation table). The Adjusted EBITDA of $34.3
million in the first half of fiscal 2016 included a benefit from the
impact of amended and restated employment agreements entered into with
key executives during the first quarter of 2016, net of costs incurred
to execute the agreements, of $3.9 million.
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Balance sheet highlights:
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|
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(In thousands)
|
|
September 30,
2017
|
|
October 1,
2016
|
Cash
|
|
$10,145
|
|
$9,329
|
Total debt
|
|
$310,641
|
|
$333,030
|
Liquidity*
|
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$85,899
|
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$98,775
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*Cash plus availability on revolving credit facilities
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Optimization Plan
In May 2017, the Company announced the implementation of a four-part
Optimization Plan to drive improved sales and profitability. This plan
includes sales initiatives, certain full-time position eliminations at
TCS, organizational realignment at Elfa and ongoing savings and
efficiency efforts. The Company expects to incur pre-tax charges
associated with the Optimization Plan of approximately $11 million in
fiscal 2017, or $0.14 on a per share basis. The expected annualized
pre-tax savings associated with the Optimization Plan continue to be
approximately $20 million, of which approximately $13 to $15 million, or
$0.16 to $0.19 on a per share basis, is expected to be realized in
fiscal 2017, for an estimated net benefit of approximately $0.02 to
$0.05 on a per share basis.
Outlook
The Company is increasing its net sales, comparable store sales, and
adjusted net income per common share outlook for fiscal 2017. Net income
per common share is being reduced due to $0.01 to $0.02 of costs
expected to be incurred as a result of an approval of a plan in the
second fiscal quarter to close an Elfa manufacturing facility by
December 31, 2017.
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Current Outlook
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Prior Outlook
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Net sales
|
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$845 million to $865 million
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|
$830 million to $850 million
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Net new store openings
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4
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|
|
4
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|
|
|
|
|
|
|
|
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Comparable store sales
|
|
|
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Decrease 1% to increase 1%
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|
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Decrease in the low single digit range
|
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|
|
|
|
|
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|
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Net income per common share*
|
|
|
|
$0.11 to $0.22
|
|
|
|
$0.13 to $0.23
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Adjusted net income per common share **
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|
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$0.30 to $0.41
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$0.27 to $0.40
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Assumed tax rate
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|
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39%
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|
|
39%
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Estimated share count
|
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49 million
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|
|
|
49 million
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* Includes the aforementioned Optimization Plan costs and benefits,
as well as an incremental $0.01 to $0.02 per share in costs related to
the expected closure of an Elfa manufacturing facility
**See
Reconciliation of GAAP to Non-GAAP Financial Measures table
Conference Call Information
A conference call to discuss second quarter fiscal 2017 financial
results is scheduled for today, November 7, 2017, at 4:30 PM Eastern
Time. Investors and analysts interested in participating in the call are
invited to dial 1-877-407-3982 (international callers please dial (201)
493-6780) approximately 10 minutes prior to the start of the call. A
live audio webcast of the conference call will be available online at www.containerstore.com
in the investor relations section of the website.
A taped replay of the conference call will be available within two hours
of the conclusion of the call and can be accessed both online and by
dialing 1-844-512-2921 (international replay number is 1-412-317-6671).
The pin number to access the telephone replay is 13672235. The replay
will be available through December 7, 2017 at 11:59 PM Eastern Time.
Forward-Looking Statements
This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. All
statements contained in this press release that do not relate to matters
of historical fact should be considered forward-looking statements,
including statements about our expectations regarding our goals,
strategies, priorities and initiatives, including our Optimization Plan
and key strategic priorities; sales and profitability improvements;
expectations regarding new store openings and relocations; anticipated
financial performance and tax rate for fiscal 2017; and anticipated
charges and savings in connection with our Optimization Plan.
These forward-looking statements are based on management’s current
expectations. These statements are neither promises nor guarantees, but
involve known and unknown risks, uncertainties and other important
factors that may cause our actual results, performance or achievements
to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements,
including, but not limited to, the following: our Optimization Plan may
not result in improved sales and profitability; our inability to open or
relocate new stores, or remodel existing stores, in the timeframe and at
the locations we anticipate; overall decline in the health of the
economy, consumer spending, and the housing market; our operating and
financial performance in a given period may not meet the guidance we
provided to the public; our inability to manage costs and risks relating
to new store openings; our inability to source and market new products
to meet consumer preferences; our failure to achieve or maintain
profitability; our dependence on a single distribution center for all of
our stores; effects of a security breach or cyber-attack of our website
or information technology systems; our vulnerability to natural
disasters and other unexpected events; our reliance upon independent
third party transportation providers; our inability to protect our
brand; our failure to successfully anticipate consumer preferences and
demand; our inability to manage our growth; inability to locate
available retail store sites on terms acceptable to us; our inability to
maintain sufficient levels of cash flow to meet growth expectations;
disruptions in the global financial markets leading to difficulty in
borrowing sufficient amounts of capital to finance the carrying costs of
inventory to pay for capital expenditures and operating costs;
fluctuations in currency exchange rates; our inability to effectively
manage our online sales; competition from other stores and internet
based competition; our inability to obtain merchandise on a timely basis
at competitive prices as a result of changes in vendor relationships;
vendors may sell similar or identical products to our competitors; our
reliance on key executive management, and the transition in our
executive leadership; our inability to find, train and retain key
personnel; labor relations difficulties; increases in health care costs
and labor costs; our dependence on foreign imports for our merchandise;
violations of the U.S. Foreign Corrupt Practices Act and similar
worldwide anti bribery and anti-kickback laws; and our indebtedness may
restrict our current and future operations.
These and other important factors discussed under the caption “Risk
Factors” in our Annual Report on Form 10-K filed with the Securities and
Exchange Commission, or SEC, on June 1, 2017, and our other reports
filed with the SEC could cause actual results to differ materially from
those indicated by the forward-looking statements made in this press
release. Any such forward-looking statements represent management’s
estimates as of the date of this press release. While we may elect to
update such forward-looking statements at some point in the future, we
disclaim any obligation to do so, even if subsequent events cause our
views to change. These forward-looking statements should not be relied
upon as representing our views as of any date subsequent to the date of
this press release.
About The Container Store
The Container Store (NYSE: TCS) is the nation’s leading retailer of
storage and organization products — a concept they originated in 1978.
Today, with locations nationwide, the retailer offers more than 11,000
products designed to maximize any size space, a suite of custom closet
systems, and a wide variety of convenient online and mobile shopping
services. Visit www.containerstore.com
for more information about store locations, the product collection and
services offered. Visit www.containerstore.com/blog
for inspiration and real solutions to everyday storage challenges, and www.whatwestandfor.com
to learn more about the company’s unique culture.
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The Container Store Group, Inc.
|
Consolidated balance sheets (unaudited)
|
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|
|
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|
|
|
(In thousands, except share and per share amounts)
|
|
September 30,
|
|
April 1,
|
|
October 1,
|
|
2017
|
|
2017
|
|
2016
|
Assets
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash
|
|
$10,145
|
|
|
$10,736
|
|
|
$9,329
|
|
Accounts receivable, net
|
|
26,083
|
|
|
27,476
|
|
|
27,896
|
|
Inventory
|
|
109,277
|
|
|
103,120
|
|
|
112,916
|
|
Prepaid expenses
|
|
11,519
|
|
|
10,550
|
|
|
10,368
|
|
Income taxes receivable
|
|
1,456
|
|
|
16
|
|
|
-
|
|
Other current assets
|
|
13,021
|
|
|
10,787
|
|
|
8,546
|
|
Total current assets
|
|
171,501
|
|
|
162,685
|
|
|
169,055
|
|
Noncurrent assets:
|
|
|
|
|
|
|
Property and equipment, net
|
|
162,884
|
|
|
165,498
|
|
|
172,324
|
|
Goodwill
|
|
202,815
|
|
|
202,815
|
|
|
202,815
|
|
Trade names
|
|
230,482
|
|
|
226,685
|
|
|
228,360
|
|
Deferred financing costs, net
|
|
335
|
|
|
320
|
|
|
366
|
|
Noncurrent deferred tax assets, net
|
|
2,240
|
|
|
2,139
|
|
|
1,286
|
|
Other assets
|
|
1,696
|
|
|
1,692
|
|
|
1,659
|
|
Total noncurrent assets
|
|
600,452
|
|
|
599,149
|
|
|
606,810
|
|
Total assets
|
|
$771,953
|
|
|
$761,834
|
|
|
$775,865
|
|
|
|
|
|
|
|
|
|
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|
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|
Liabilities and shareholders’ equity
|
|
|
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|
Current liabilities:
|
|
|
|
|
|
|
Accounts payable
|
|
$61,224
|
|
|
$44,762
|
|
|
$60,287
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|
Accrued liabilities
|
|
64,144
|
|
|
60,107
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|
|
56,924
|
|
Revolving lines of credit
|
|
-
|
|
|
-
|
|
|
1,550
|
|
Current portion of long-term debt
|
|
9,345
|
|
|
5,445
|
|
|
5,506
|
|
Income taxes payable
|
|
960
|
|
|
2,738
|
|
|
383
|
|
Total current liabilities
|
|
135,673
|
|
|
113,052
|
|
|
124,650
|
|
Noncurrent liabilities:
|
|
|
|
|
|
|
Long-term debt
|
|
301,296
|
|
|
312,026
|
|
|
325,974
|
|
Noncurrent deferred tax liabilities, net
|
|
79,091
|
|
|
80,679
|
|
|
81,123
|
|
Deferred rent and other long-term liabilities
|
|
33,012
|
|
|
34,287
|
|
|
33,653
|
|
Total noncurrent liabilities
|
|
413,399
|
|
|
426,992
|
|
|
440,750
|
|
Total liabilities
|
|
549,072
|
|
|
540,044
|
|
|
565,400
|
|
|
|
|
|
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|
|
Shareholders’ equity:
|
|
|
|
|
|
|
Common stock, $0.01 par value, 250,000,000 shares authorized; 48,063,222
shares issued at September 30, 2017; 48,045,114 shares issued
at April 1, 2017; 47,995,450 shares issued at October 1, 2016
|
|
481
|
|
|
480
|
|
|
480
|
|
Additional paid-in capital
|
|
860,196
|
|
|
859,102
|
|
|
857,816
|
|
Accumulated other comprehensive loss
|
|
(14,095
|
)
|
|
(22,643
|
)
|
|
(19,212
|
)
|
Retained deficit
|
|
(623,701
|
)
|
|
(615,149
|
)
|
|
(628,619
|
)
|
Total shareholders’ equity
|
|
222,881
|
|
|
221,790
|
|
|
210,465
|
|
Total liabilities and shareholders’ equity
|
|
$771,953
|
|
|
$761,834
|
|
|
$775,865
|
|
|
|
|
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|
|
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|
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|
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|
|
|
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|
|
The Container Store Group, Inc.
|
Consolidated statements of operations (unaudited)
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(In thousands, except share and
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per share amounts)
|
Thirteen Weeks Ended
|
|
Twenty-Six Weeks Ended
|
|
September 30,
2017
|
|
October 1,
2016
|
|
September 30,
2017
|
|
October 1,
2016
|
Net sales
|
|
$218,410
|
|
|
$205,060
|
|
$401,478
|
|
|
$382,508
|
Cost of sales (excluding depreciation and amortization)
|
|
92,036
|
|
|
86,705
|
|
171,494
|
|
|
159,458
|
Gross profit
|
|
126,374
|
|
|
118,355
|
|
229,984
|
|
|
223,050
|
Selling, general, and administrative expenses (excluding
depreciation and amortization)
|
|
106,332
|
|
|
95,518
|
|
202,972
|
|
|
187,831
|
Stock-based compensation
|
|
510
|
|
|
391
|
|
1,004
|
|
|
756
|
Pre-opening costs
|
|
1,418
|
|
|
2,544
|
|
2,804
|
|
|
3,640
|
Depreciation and amortization
|
|
9,505
|
|
|
9,478
|
|
19,047
|
|
|
18,825
|
Other expenses
|
|
623
|
|
|
108
|
|
4,157
|
|
|
657
|
Loss on disposal of assets
|
|
102
|
|
|
44
|
|
153
|
|
|
41
|
Income (loss) from operations
|
|
7,884
|
|
|
10,272
|
|
(153
|
)
|
|
11,300
|
Interest expense, net
|
|
5,873
|
|
|
4,205
|
|
10,098
|
|
|
8,315
|
Loss on extinguishment of debt
|
|
2,369
|
|
|
-
|
|
2,369
|
|
|
-
|
(Loss) income before taxes
|
|
(358
|
)
|
|
6,067
|
|
(12,620
|
)
|
|
2,985
|
Provision (benefit) for income taxes
|
|
517
|
|
|
2,526
|
|
(4,068
|
)
|
|
1,501
|
Net (loss) income
|
|
$(875
|
)
|
|
$3,541
|
|
$(8,552
|
)
|
|
$1,484
|
|
|
|
|
|
|
|
|
|
Net (loss) income per common share - basic and diluted
|
|
$(0.02
|
)
|
|
$0.07
|
|
$(0.18
|
)
|
|
$0.03
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding - basic
|
|
48,058,231
|
|
|
47,991,445
|
|
48,053,084
|
|
|
47,989,210
|
Weighted-average common shares outstanding - diluted
|
|
48,058,231
|
|
|
48,001,112
|
|
48,053,084
|
|
|
47,995,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Container Store Group, Inc.
|
Consolidated statements of cash flows (unaudited)
|
|
|
|
|
|
|
|
|
|
|
Twenty-Six Weeks Ended
|
(In thousands)
|
|
September 30, 2017
|
|
|
October 1, 2016
|
Operating activities
|
|
|
|
|
|
Net (loss) income
|
|
$(8,552
|
)
|
|
$1,484
|
|
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
19,047
|
|
|
18,825
|
|
Stock-based compensation
|
|
1,004
|
|
|
756
|
|
Loss on disposal of property and equipment
|
|
153
|
|
|
41
|
|
Loss on extinguishment of debt
|
|
2,369
|
|
|
-
|
|
Deferred tax (benefit) provision
|
|
(4,338
|
)
|
|
37
|
|
Noncash interest
|
|
1,146
|
|
|
960
|
|
Other
|
|
283
|
|
|
(145
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Accounts receivable
|
|
2,599
|
|
|
(6,340
|
)
|
Inventory
|
|
(2,259
|
)
|
|
(28,031
|
)
|
Prepaid expenses and other assets
|
|
(1,312
|
)
|
|
6,633
|
|
Accounts payable and accrued liabilities
|
|
17,808
|
|
|
22,489
|
|
Income taxes
|
|
(3,261
|
)
|
|
1,304
|
|
Other noncurrent liabilities
|
|
(1,731
|
)
|
|
(4,595
|
)
|
Net cash provided by operating activities
|
|
22,956
|
|
|
13,418
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
Additions to property and equipment
|
|
(13,129
|
)
|
|
(15,214
|
)
|
Proceeds from sale of property and equipment
|
|
18
|
|
|
7
|
|
Net cash used in investing activities
|
|
(13,111
|
)
|
|
(15,207
|
)
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
Borrowings on revolving lines of credit
|
|
19,694
|
|
|
24,166
|
|
Payments on revolving lines of credit
|
|
(19,694
|
)
|
|
(26,192
|
)
|
Borrowings on long-term debt
|
|
330,000
|
|
|
20,000
|
|
Payments on long-term debt
|
|
(329,551
|
)
|
|
(15,760
|
)
|
Payment of taxes with shares withheld upon restricted stock vesting
|
|
(39
|
)
|
|
-
|
|
Payment of debt issuance costs
|
|
(11,234
|
)
|
|
-
|
|
Net cash (used in) provided by financing activities
|
|
(10,824
|
)
|
|
2,214
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
388
|
|
|
95
|
|
Net (decrease) increase in cash
|
|
(591
|
)
|
|
520
|
|
Cash at beginning of period
|
|
10,736
|
|
|
8,809
|
|
Cash at end of period
|
|
$10,145
|
|
|
$9,329
|
|
|
|
|
|
|
|
Supplemental information for non-cash investing and financing
activities:
|
|
|
|
|
|
Purchases of property and equipment (included in accounts payable)
|
|
$945
|
|
|
$817
|
|
Capital lease obligation incurred
|
|
$91
|
|
|
$620
|
|
|
|
|
|
|
|
|
Note Regarding Non-GAAP Information
This press release includes financial measures that are not calculated
in accordance with GAAP, including adjusted net income (loss), adjusted
net income (loss) per diluted share, and Adjusted EBITDA. The Company
has reconciled these non-GAAP financial measures with the most directly
comparable GAAP financial measures in a table accompanying this release.
These non-GAAP measures should not be considered as alternatives to net
income (loss) as a measure of financial performance or cash flows from
operations as a measure of liquidity, or any other performance measure
derived in accordance with GAAP and they should not be construed as an
inference that the Company’s future results will be unaffected by
unusual or non-recurring items. These non-GAAP measures are key metrics
used by management, the Company’s board of directors, and Leonard Green
and Partners, L.P., its controlling stockholder, to assess its financial
performance. The Company presents these non-GAAP measures because it
believes they assist investors in comparing the Company’s performance
across reporting periods on a consistent basis by excluding items that
the Company does not believe are indicative of its core operating
performance and because the Company believes it is useful for investors
to see the measures that management uses to evaluate the Company. These
non-GAAP measures are also frequently used by analysts, investors and
other interested parties to evaluate companies in the Company’s
industry. In evaluating these non-GAAP measures, you should be aware
that in the future the Company will incur expenses that are the same as
or similar to some of the adjustments in this presentation. The
Company’s presentation of these non-GAAP measures should not be
construed to imply that its future results will be unaffected by any
such adjustments. Management compensates for these limitations by
relying on our GAAP results in addition to using non-GAAP measures
supplementally. These non-GAAP measures are not necessarily comparable
to other similarly titled captions of other companies due to different
methods of calculation.
The Company defines adjusted net income (loss) as net income (loss)
available to common shareholders before distributions accumulated to
preferred shareholders, stock-based compensation and other costs in
connection with our IPO, charges related to an Elfa manufacturing
facility closure, impairment charges related to intangible assets,
losses on extinguishment of debt, certain gains on disposal of assets,
certain management transition costs incurred and benefits realized,
charges incurred as part of the implementation of our Optimization Plan,
and the tax impact of these adjustments and other unusual or infrequent
tax items. We define adjusted net income (loss) per diluted share as
adjusted net income (loss) divided by the diluted weighted average
common shares outstanding. We use adjusted net income (loss) and
adjusted net income (loss) per diluted share to supplement GAAP measures
of performance to evaluate the effectiveness of our business strategies,
to make budgeting decisions and to compare our performance against that
of other peer companies using similar measures. We present adjusted net
income (loss) and adjusted net income (loss) per diluted share because
we believe they assist investors in comparing our performance across
reporting periods on a consistent basis by excluding items that we do
not believe are indicative of our core operating performance and because
we believe it is useful for investors to see the measures that
management uses to evaluate the Company.
We have included a presentation of adjusted net income (loss) for the
thirteen and twenty-six weeks ended October 1, 2016 to show the net
impact of the amended and restated employment agreements entered into
with key executives during the twenty-six weeks ended October 1, 2016
(“management transition costs (benefits)”). Although we disclosed the
net positive impact of the amended and restated employment agreements in
our discussions of earnings per share and SG&A in our earnings press
releases in fiscal 2016, we did not include in those press releases a
presentation of adjusted net income. However, in the thirteen and
twenty-six weeks ended September 30, 2017, our Optimization Plan has
caused us to incur similar charges that we believe are not indicative of
our core operating performance, and we expect to continue to incur such
charges in the remainder of fiscal 2017. As a result, we believe that
adjusting net income in the thirteen and twenty-six weeks ended October
1, 2016 for management transition costs (benefits), in addition to
adjusting net loss for the thirteen and twenty-six weeks ended September
30, 2017 for charges incurred as part of the implementation of our
Optimization Plan will assist investors in comparing our core operating
performance across reporting periods on a consistent basis. Likewise, we
believe that presenting full year fiscal 2017 adjusted net income
guidance and fiscal 2016 adjusted net income as a comparative measure,
will assist investors in evaluating our anticipated financial
performance as it relates to our core operations.
The Company defines EBITDA as net income before interest, taxes,
depreciation, and amortization. Adjusted EBITDA is calculated in
accordance with its credit facilities and is one of the components for
performance evaluation under its executive compensation programs.
Adjusted EBITDA reflects further adjustments to EBITDA to eliminate the
impact of certain items, including certain non-cash and other items that
the Company does not consider in its evaluation of ongoing operating
performance from period to period as discussed further below. The
Company uses Adjusted EBITDA in connection with covenant compliance and
executive performance evaluations, and to supplement GAAP measures of
performance to evaluate the effectiveness of its business strategies, to
make budgeting decisions and to compare its performance against that of
other peer companies using similar measures. The Company believes it is
useful for investors to see the measures that management uses to
evaluate the Company, its executives and its covenant compliance. EBITDA
and Adjusted EBITDA are also frequently used by analysts, investors and
other interested parties to evaluate companies in the Company’s industry.
The Container Store Group, Inc. Supplemental Information -
Reconciliation of GAAP to Non-GAAP Financial Measures
(In
thousands, except share and per share amounts)
(unaudited)
The table below reconciles the non-GAAP financial measures of adjusted
net income (loss) and adjusted net income (loss) per diluted share with
the most directly comparable GAAP financial measures of GAAP net (loss)
income and GAAP net (loss) income per diluted share.
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
Twenty-Six Weeks Ended
|
|
Fiscal Year 2017 Outlook
|
|
Fiscal Year Ended
|
|
September 30, 2017
|
|
October 1, 2016
|
|
September 30, 2017
|
|
October 1, 2016
|
Low
|
|
High
|
April 1, 2017
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$(875
|
)
|
|
$3,541
|
|
$(8,552
|
)
|
|
$1,484
|
|
|
$5,600
|
|
|
$10,900
|
|
|
$14,953
|
|
Management transition costs (a)
|
|
-
|
|
|
108
|
|
-
|
|
|
(3,253
|
)
|
|
-
|
|
|
-
|
|
|
(2,852
|
)
|
Elfa manufacturing facility closure (b)
|
|
517
|
|
|
-
|
|
517
|
|
|
-
|
|
|
1,000
|
|
|
1,000
|
|
|
-
|
|
Loss on extinguishment of debt (c)
|
|
2,369
|
|
|
-
|
|
2,369
|
|
|
-
|
|
|
2,369
|
|
|
2,369
|
|
|
-
|
|
Optimization Plan implementation charges (d)
|
|
6,786
|
|
|
-
|
|
10,320
|
|
|
-
|
|
|
11,000
|
|
|
11,000
|
|
|
-
|
|
Taxes (e)
|
|
(3,253
|
)
|
|
4
|
|
(4,584
|
)
|
|
1,193
|
|
|
(5,069
|
)
|
|
(5,069
|
)
|
|
1,292
|
|
Adjusted net income (loss)
|
|
$5,544
|
|
|
$3,653
|
|
$70
|
|
|
$(576
|
)
|
|
$14,900
|
|
|
$20,200
|
|
|
$13,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding – diluted
|
|
48,058,231
|
|
|
48,001,112
|
|
48,053,084
|
|
|
47,995,766
|
|
|
49,000,000
|
|
|
49,000,000
|
|
|
48,016,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per common share - diluted
|
|
$(0.02
|
)
|
|
$0.07
|
|
$(0.18
|
)
|
|
$0.03
|
|
|
$0.11
|
|
|
$0.22
|
|
|
$0.31
|
|
Adjusted net income (loss) per common share - diluted
|
|
$0.12
|
|
|
$0.08
|
|
$0.00
|
|
|
$(0.01
|
)
|
|
$0.30
|
|
|
$0.41
|
|
|
$0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
|
Certain management transition costs incurred and benefits realized,
including the impact of amended and restated employment agreements
entered into with key executives during fiscal 2016, which resulted
in the reversal of accrued deferred compensation associated with the
original employment agreements, net of costs incurred to execute the
agreements, partially offset by cash severance payments, which we do
not consider in our evaluation of ongoing performance.
|
|
|
|
|
|
(b)
|
|
|
|
Charges related to the expected closure of an Elfa manufacturing
facility in Lahti, Finland in December 2017, recorded in other
expenses, which we do not consider in our evaluation of our ongoing
performance.
|
|
|
|
|
|
(c)
|
|
|
|
Loss recorded as a result of the amendments made to the Senior
Secured Term Loan Facility and the Revolving Credit Facility in
August 2017, which we do not consider in our evaluation of our
ongoing operations.
|
|
|
|
|
|
(d)
|
|
|
|
Charges incurred to implement our Optimization Plan, which includes
certain consulting costs recorded in selling, general and
administrative expenses, cash severance payments associated with the
elimination of certain full-time positions at the TCS segment
recorded in other expenses, and cash severance payments associated
with organizational realignment at the Elfa segment recorded in
other expenses, which we do not consider in our evaluation of
ongoing performance.
|
|
|
|
|
|
(e)
|
|
|
|
Tax impact of adjustments to net (loss) income, which we do not
consider in our evaluation of ongoing performance.
|
|
|
|
|
|
The table below reconciles the non-GAAP financial measure Adjusted
EBITDA with the most directly comparable GAAP financial measure of GAAP
net (loss) income.
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
Twenty-Six Weeks Ended
|
|
|
September 30,
2017
|
|
October 1,
2016
|
|
September 30,
2017
|
|
October 1,
2016
|
Net (loss) income
|
|
$(875
|
)
|
|
$3,541
|
|
|
$(8,552
|
)
|
|
$1,484
|
|
Depreciation and amortization
|
|
9,505
|
|
|
9,478
|
|
|
19,047
|
|
|
18,825
|
|
Interest expense, net
|
|
5,873
|
|
|
4,205
|
|
|
10,098
|
|
|
8,315
|
|
Provision (benefit) for income taxes
|
|
517
|
|
|
2,526
|
|
|
(4,068
|
)
|
|
1,501
|
|
EBITDA
|
|
$15,020
|
|
|
$19,750
|
|
|
$16,525
|
|
|
$30,125
|
|
Pre-opening costs (a)
|
|
1,418
|
|
|
2,544
|
|
|
2,804
|
|
|
3,640
|
|
Non-cash rent (b)
|
|
(276
|
)
|
|
(254
|
)
|
|
(737
|
)
|
|
(672
|
)
|
Stock-based compensation (c)
|
|
510
|
|
|
391
|
|
|
1,004
|
|
|
756
|
|
Loss on extinguishment of debt (d)
|
|
2,369
|
|
|
-
|
|
|
2,369
|
|
|
-
|
|
Foreign exchange losses (gains) (e)
|
|
130
|
|
|
(306
|
)
|
|
54
|
|
|
(264
|
)
|
Optimization Plan implementation charges (f)
|
|
6,786
|
|
|
-
|
|
|
10,320
|
|
|
-
|
|
Elfa manufacturing facility closure (g)
|
|
517
|
|
|
-
|
|
|
517
|
|
|
-
|
|
Other adjustments (h)
|
|
42
|
|
|
175
|
|
|
90
|
|
|
747
|
|
Adjusted EBITDA
|
|
$26,516
|
|
|
$22,300
|
|
|
$32,946
|
|
|
$34,332
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
|
Non-capital expenditures associated with opening new stores and
relocating stores, including rent, marketing expenses, travel and
relocation costs, and training costs. We adjust for these costs to
facilitate comparisons of our performance from period to period.
|
|
|
|
|
|
(b)
|
|
|
|
Reflects the extent to which our annual GAAP rent expense has been
above or below our cash rent payment due to lease accounting
adjustments. The adjustment varies depending on the average age of
our lease portfolio (weighted for size), as our GAAP rent expense on
younger leases typically exceeds our cash cost, while our GAAP rent
expense on older leases is typically less than our cash cost.
|
|
|
|
|
|
(c)
|
|
|
|
Non-cash charges related to stock-based compensation programs, which
vary from period to period depending on volume and vesting timing of
awards. We adjust for these charges to facilitate comparisons from
period to period.
|
|
|
|
|
|
(d)
|
|
|
|
Loss recorded as a result of the amendments made to the Senior
Secured Term Loan Facility and the Revolving Credit Facility in
August 2017, which we do not consider in our evaluation of our
ongoing operations.
|
|
|
|
|
|
(e)
|
|
|
|
Realized foreign exchange transactional gains/losses our management
does not consider in our evaluation of our ongoing operations.
|
|
|
|
|
|
(f)
|
|
|
|
Charges incurred to implement our Optimization Plan, which include
certain consulting costs recorded in selling, general and
administrative expenses, cash severance payments associated with the
elimination of certain full-time positions at the TCS segment
recorded in other expenses, and cash severance payments associated
with organizational realignment at the Elfa segment recorded in
other expenses, which we do not consider in our evaluation of
ongoing performance.
|
|
|
|
|
|
(g)
|
|
|
|
Charges related to the expected closure of an Elfa manufacturing
facility in Lahti, Finland in December 2017, recorded in other
expenses, which we do not consider in our evaluation of our ongoing
performance.
|
|
|
|
|
|
(h)
|
|
|
|
Other adjustments include amounts our management does not consider
in our evaluation of our ongoing operations, including certain
severance and other charges.
|
|
|
|
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20171107006507/en/
Source: The Container Store Group, Inc.