Earnings Per Share Up 38% over Prior Year Period
SG&A Savings and Efficiency Program Drives Financial Results
COPPELL, Texas--(BUSINESS WIRE)--
The Container Store Group, Inc. (NYSE:TCS) (the “Company”), today
announced financial results for the third quarter of fiscal 2016 ended
December 31, 2016. In light of the Company’s previously announced fiscal
year end change, all references to prior year results are based on the
recast third quarter of fiscal 2015 ended January 2, 2016.
-
Consolidated net sales were $216.4 million, up 1.7%. Net sales in The
Container Store retail business were $199.1 million, up 2.3%. Elfa
International AB third-party net sales were $17.3 million, down 5.2%,
due to the negative impact of foreign currency translation of 5.8%.
-
Comparable store sales for the third quarter of fiscal 2016 were down
3.9% with holiday department sales contributing notably to the
decline. TCS Closets® positively contributed 1.3% to third quarter
comparable store sales.
-
Consolidated net income per diluted share (EPS) was $0.11 compared
with $0.08, an increase of 38% from the third quarter ended January 2,
2016.
-
The Company opened four new stores in the third quarter of fiscal 2016
ending the quarter with 86 stores, as compared to 77 as of January 2,
2016.
Melissa Reiff, Chief Executive Officer, stated, “We’re pleased that our
ongoing discipline on the expense side enabled us to deliver a 38%
increase in earnings per share versus the prior year period. Our custom
closets business, specifically elfa® and TCS Closets®,
drove incremental sales and profit; however, holiday department sales
were disappointing during the quarter and, as we expected, Our Annual
elfa® Sale was impacted by fewer selling days combined with
Christmas and New Year’s Eve holidays falling on weekends.”
Reiff continued, “We’re nearing completion of our new long-term
strategic plan that outlines our goals and priorities and our roadmap to
achieving them. We look forward to sharing its central elements by June.
Fundamental to this plan is leveraging our key differentiators and
implementing new strategies to achieve top-line sales growth and
maximizing the productivity of our stores by aligning our marketing,
merchandising, in-store and online experience with the evolving
expectations of today’s consumer.”
“Given our top and bottom-line performance for the first nine months of
fiscal 2016, we now expect to deliver results at the lower end of our
previously provided annual comparable store sales and earnings outlook
ranges, and consolidated sales modestly below our previously provided
annual outlook range,” Reiff concluded.
New and Existing Stores
In fiscal 2017, the Company plans to open locations in Cleveland, OH,
Albuquerque, NM, Livingston, NJ, and Staten Island, NY, as well as
relocate its Chestnut Hill, MA store. The Albuquerque store will be the
first of the Company’s new mid-size store format as part of its
test-and-learn effort to optimize its stores and improve efficiency and
productivity.
“Overall, for the seven stores we opened in fiscal 2016, sales results
have exceeded our expectations and moving forward we will continue to
seek strategic store expansion opportunities,” added Reiff. “While we
believe that new stores are important to our future and that our runway
for growth remains strong with only 86 stores, for fiscal 2017, we plan
to point a significant portion of our capital allocation toward our
existing store remodels and enhancements. This will allow us to properly
support the expansion of our custom closets business, as well as explore
new store formats.”
Third Quarter 2016 Results
For the third quarter (thirteen weeks) ended December 31, 2016:
-
Consolidated net sales were $216.4 million, up 1.7% as compared to the
third quarter ended January 2, 2016. Net sales in The Container Store
retail business (“TCS”) were $199.1 million, up 2.3% as compared to
the third quarter ended January 2, 2016, primarily due to new store
sales, partially offset by a 3.9% decrease in comparable store sales.
Elfa International AB (“Elfa”) third party net sales were $17.3
million, down 5.2% compared to the third quarter ended January 2,
2016, due to the impact of foreign currency translation during the
quarter, which reduced third party net sales by 5.8 percentage points.
-
Consolidated gross margin was 58.1%, a decline of 80 basis points
compared to the third quarter ended January 2, 2016. TCS gross margin
declined 110 basis points to 57.0%, primarily due to an increased mix
of lower-margin product and service sales and, to a lesser extent,
increased promotional activities during the third quarter of fiscal
2016. Elfa gross margin declined 90 basis points to 37.8% primarily
due to increased direct materials costs and higher freight costs
associated with changes in customer sales mix, partially offset by
improved production efficiencies.
-
Consolidated selling, general and administrative expenses (“SG&A”)
decreased by 3.5% to $100.2 million from $103.9 million in the third
quarter ended January 2, 2016. SG&A as a percentage of net sales
decreased 250 basis points, primarily due to decreased costs as a
result of the Company’s SG&A savings program, as well as lower
healthcare costs and a positive impact from foreign currency exchange
rates. Additionally, the decrease was a result of the impact of
one-time storage costs incurred in connection with a distribution
center automation project in the thirteen weeks ended January 2, 2016
that were not incurred in the current fiscal year period. These
positive impacts were partially offset by deleveraging of occupancy
costs associated with negative comparable store sales growth.
-
Pre-opening costs increased to $2.9 million in the third quarter of
fiscal 2016 compared to $1.8 million in the third quarter ended
January 2, 2016. The Company opened four new stores in the third
quarter of fiscal 2016 as compared to two new stores in the third
quarter ended January 2, 2016.
-
Consolidated net interest expense decreased slightly to $4.1 million.
-
The effective tax rate for the third quarter of fiscal 2016 was 39.7%,
as compared to 34.0% in the third quarter ended January 2, 2016. The
increase in the effective tax rate is primarily due to changes in the
mix of projected domestic and foreign earnings, combined with the
expensing of certain deferred tax assets due to the expiration of
certain stock based compensation awards.
-
Net income was $5.1 million, or $0.11 per share, in the third quarter
of fiscal 2016 compared to net income of $3.9 million, or $0.08 per
share, in the third quarter ended January 2, 2016.--
-
Consolidated Adjusted EBITDA was $25.3 million compared to $21.2
million in the third quarter ended January 2, 2016, (see GAAP/Non-GAAP
reconciliation table).
For the year-to-date (thirty-nine weeks) ended December 31, 2016:
-
Consolidated net sales were $598.9 million, up 2.0% as compared to the
year-to-date ended January 2, 2016. Net sales at TCS were $549.4
million, up 2.6% as compared to the year-to-date ended January 2,
2016, primarily due to new store sales, partially offset by a 3.3%
decrease in comparable store sales. Elfa third-party net sales were
$49.5 million, down 4.4% compared to the year-to-date ended January 2,
2016, primarily due to lower sales in Russia.
-
Consolidated gross margin was 58.2%, a decline of 20 basis points
compared to the year-to-date ended January 2, 2016. TCS gross margin
declined 40 basis points to 57.6%, as an increased mix of lower margin
products and services was partially offset by the impact of a stronger
U.S. dollar. Elfa gross margin improved 60 basis points primarily due
to improved production efficiencies, partially offset by higher
freight costs associated with changes in customer sales mix. On a
consolidated basis, gross margin declined 20 basis points, as the
improvement in Elfa gross margin was more than offset by the decline
in TCS gross margin.
-
Consolidated selling, general and administrative expenses (“SG&A”)
decreased by 2.1% to $288.0 million from $294.2 million in the
year-to-date ended January 2, 2016. SG&A as a percentage of net sales
decreased 200 basis points. This was primarily due to decreased costs
as a result of the Company’s SG&A savings program, as well as the
reversal of accrued deferred compensation of $3.9 million, which
occurred in the first quarter of 2016. The Company also experienced
lower healthcare costs and a positive impact from foreign currency
exchange rates during the year-to-date ended December 31, 2016. The
positive impact of these items was partially offset by deleveraging of
occupancy costs associated with negative comparable store sales growth.
-
Consolidated net interest expense decreased to $12.4 million from
$12.6 million in the year-to-date ended January 2, 2016.
-
The effective tax rate was 42.5%, as compared to 40.2% in the
year-to-date ended January 2, 2016. The increase in the effective tax
rate is primarily due to the expensing of certain deferred tax assets
due to the expiration of certain stock based compensation awards,
partially offset by changes in the mix of projected domestic and
foreign earnings.
-
Net income was $6.6 million, or $0.14 per share, compared to net
income of $1.5 million, or $0.03 per share, in the year-to-date ended
January 2, 2016. Net income of $6.6 million in the year-to-date ended
December 31, 2016 includes a benefit from the impact of amended and
restated employment agreements entered into with key executives, net
of costs incurred related to management transition and income taxes,
of approximately $1.8 million, or $0.04 per share.
-
Consolidated Adjusted EBITDA was $59.7 million compared to $47.8
million in the year-to-date ended January 2, 2016, (see GAAP/Non-GAAP
reconciliation table). The Adjusted EBITDA of $59.7 million in the
thirty-nine weeks ended December 31, 2016 includes 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.
Balance sheet highlights:
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(In thousands)
|
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December 31, 2016
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January 2, 2016
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Cash
|
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$18,491
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|
$20,953
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Total debt
|
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$338,290
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$352,049
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Liquidity*
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$106,384
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$93,350
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|
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*Cash plus availability on revolving credit facilities
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Outlook
For fiscal 2016, the Company expects consolidated net sales to be
modestly below the previously provided range of $820 to $830 million.
Comparable store sales are expected to be at the low end of the
previously provided range of -3.0% to -1.5%. Net income for fiscal 2016
is expected to be at the low end of the previously provided range of
$0.20 to $0.30 per diluted common share based on estimated diluted
common shares outstanding of 49 million. This assumes a tax rate of
approximately 39% for the full fiscal year.
Conference Call Information
A conference call to discuss third quarter fiscal 2016 financial results
is scheduled for today, February 7, 2017, at 4:30 PM Eastern Time.
Investors and analysts interested in participating in the call are
invited to dial 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
investor.containerstore.com.
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 844-512-2921 (international callers please dial 412-317-6671).
The pin number to access the telephone replay is 13654006. The replay
will be available until March 7, 2017.
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 long-term
strategic plan for increased sales and productivity; expectations
regarding the contribution of our closet business in driving sales and
profit growth; expectations regarding our goals, strategies, priorities
and initiatives, including the expansion of our Custom Closets section
and exploration of new store formats; ; expectations regarding new store
openings and relocations and remodeling of existing stores; and
statements regarding our anticipated financial performance.
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 inability to
successfully implement our planned fiscal 2016 and 2017 initiatives in
the timeframe we expect or at all; 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 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; our indebtedness
may restrict our current and future operations; and increased
uncertainty with respect to tax and trade policies, tariffs and
government regulations affecting trade between the United States and
other countries as a result of the recent presidential and congressional
elections in the United States.
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 May 10, 2016, 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 and the only retailer solely devoted
to the storage and organization category of retailing. The Company
originated the concept of storage and organization retailing when it
opened its first store in 1978. Today, the retailer has 86 store
locations nationwide that each average 25,000 square feet. The Container
Store has over 11,000 products to help customers save space and,
ultimately, save them time. As the pace of modern life accelerates and
being organized is not a luxury anymore but a necessity, The Container
Store is devoted to making customers more productive, relaxed and
happier by selling customized, complete solutions. Since its inception,
the retailer has nurtured an employee-first culture and couples its
one-of-kind product collection with a high level of customer service
delivered by its highly trained organization experts. The Company has
been named to FORTUNE magazine’s 100 Best Companies To Work For® — 17
years in a row. Visit www.containerstore.com
for more information about store locations, the product collection and
services offered. To find out more about The Container Store’s unique
culture, Foundation Principles® and devotion to Conscious
Capitalism®, visit the retailer’s culture blog at www.whatwestandfor.com.
The Container Store Group, Inc.
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Consolidated balance sheets (unaudited)
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|
|
|
|
|
|
|
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|
|
|
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(In thousands, except share and per share amounts)
|
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December 31,
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February 27,
|
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January 2,
|
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2016
|
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2016
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2016
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Assets
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|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash
|
|
$18,491
|
|
|
$13,609
|
|
|
$20,953
|
|
Accounts receivable, net
|
|
31,344
|
|
|
28,843
|
|
|
26,726
|
|
Inventory
|
|
109,009
|
|
|
86,435
|
|
|
101,899
|
|
Prepaid expenses
|
|
10,815
|
|
|
8,692
|
|
|
10,396
|
|
Income taxes receivable
|
|
-
|
|
|
157
|
|
|
1,876
|
|
Deferred tax assets, net
|
|
-
|
|
|
-
|
|
|
3,256
|
|
Other current assets
|
|
12,319
|
|
|
8,695
|
|
|
9,501
|
|
Total current assets
|
|
181,978
|
|
|
146,431
|
|
|
174,607
|
|
Noncurrent assets:
|
|
|
|
|
|
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Property and equipment, net
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|
166,428
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|
|
176,117
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|
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175,193
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Goodwill
|
|
202,815
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|
|
202,815
|
|
|
202,815
|
|
Trade names
|
|
226,050
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|
|
228,368
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|
|
228,967
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Deferred financing costs, net
|
|
343
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|
|
419
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|
|
426
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|
Noncurrent deferred tax assets, net
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|
1,080
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|
|
2,090
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|
|
2,324
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Other assets
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|
1,420
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|
|
1,879
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|
|
1,923
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|
Total noncurrent assets
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|
598,136
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|
|
611,688
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|
|
611,648
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Total assets
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|
$780,114
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|
|
$758,119
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|
|
$786,255
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|
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Liabilities and shareholders’ equity
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|
|
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Current liabilities:
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|
|
|
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Accounts payable
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|
$49,057
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|
|
$40,274
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|
$43,365
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Accrued liabilities
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|
64,552
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|
69,635
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|
|
62,220
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Revolving lines of credit
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|
-
|
|
|
721
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|
|
2,558
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Current portion of long-term debt
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|
5,390
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|
|
5,373
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|
|
5,279
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|
Income taxes payable
|
|
4,156
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|
|
-
|
|
|
311
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|
Total current liabilities
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|
123,155
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|
|
116,003
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|
|
113,733
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|
Noncurrent liabilities:
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|
|
|
|
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Long-term debt
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|
332,900
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|
|
316,135
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|
|
344,212
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Noncurrent deferred tax liabilities, net
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|
79,672
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|
|
80,720
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|
|
84,899
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|
Deferred rent and other long-term liabilities
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|
33,020
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|
|
38,193
|
|
|
38,363
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|
Total noncurrent liabilities
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|
445,592
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|
|
435,048
|
|
|
467,474
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|
Total liabilities
|
|
568,747
|
|
|
551,051
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|
|
581,207
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|
|
|
|
|
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Shareholders’ equity:
|
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|
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Common stock, $0.01 par value, 250,000,000 shares authorized;
48,003,359 shares issued at December 31, 2016; 47,986,975 shares
issued at February 27, 2016 and January 2, 2016
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480
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|
|
480
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|
|
480
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|
Additional paid-in capital
|
|
858,460
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|
|
856,879
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|
|
856,667
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Accumulated other comprehensive loss
|
|
(24,047
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)
|
|
(19,835
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)
|
|
(18,615
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)
|
Retained deficit
|
|
(623,526
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)
|
|
(630,456
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)
|
|
(633,484
|
)
|
Total shareholders’ equity
|
|
211,367
|
|
|
207,068
|
|
|
205,048
|
|
Total liabilities and shareholders’ equity
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|
$780,114
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|
|
$758,119
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|
|
$786,255
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Container Store Group, Inc.
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Consolidated statements of operations (unaudited)
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|
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(In thousands, except share and per share amounts)
|
Thirteen Weeks Ended
|
|
Thirty-Nine Weeks Ended
|
|
December 31, 2016
|
|
January 2, 2016
|
|
December 31, 2016
|
|
January 2, 2016
|
Net sales
|
|
$216,380
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|
$212,836
|
|
$598,888
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|
$587,206
|
Cost of sales (excluding depreciation and amortization)
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|
90,678
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|
87,402
|
|
250,136
|
|
243,988
|
Gross profit
|
|
125,702
|
|
125,434
|
|
348,752
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|
343,218
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Selling, general, and administrative expenses (excluding
depreciation and amortization)
|
|
100,206
|
|
103,867
|
|
288,037
|
|
294,219
|
Stock-based compensation
|
|
599
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|
488
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|
1,355
|
|
1,188
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Pre-opening costs
|
|
2,918
|
|
1,784
|
|
6,558
|
|
6,956
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Depreciation and amortization
|
|
9,236
|
|
9,081
|
|
28,061
|
|
25,705
|
Other expenses
|
|
182
|
|
-
|
|
839
|
|
-
|
Loss on disposal of assets
|
|
-
|
|
58
|
|
41
|
|
65
|
Income from operations
|
|
12,561
|
|
10,156
|
|
23,861
|
|
15,085
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Interest expense, net
|
|
4,119
|
|
4,209
|
|
12,434
|
|
12,614
|
Income before taxes
|
|
8,442
|
|
5,947
|
|
11,427
|
|
2,471
|
Provision for income taxes
|
|
3,350
|
|
2,023
|
|
4,851
|
|
993
|
Net income
|
|
$5,092
|
|
$3,924
|
|
$6,576
|
|
$1,478
|
|
|
|
|
|
|
|
|
|
Net income per common share - basic and diluted
|
|
$0.11
|
|
$0.08
|
|
$0.14
|
|
$0.03
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares - basic
|
|
47,999,535
|
|
47,986,975
|
|
47,992,652
|
|
47,985,720
|
Weighted-average common shares - diluted
|
|
48,022,499
|
|
47,986,975
|
|
48,002,495
|
|
47,985,720
|
|
|
|
|
|
|
|
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|
|
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|
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The Container Store Group, Inc.
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Consolidated statements of cash flows (unaudited)
|
|
|
|
Thirty-Nine Weeks Ended
|
(In thousands)
|
|
December 31, 2016
|
|
January 2, 2016
|
Operating activities
|
|
|
|
|
Net income
|
|
$6,576
|
|
|
$1,478
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
Depreciation and amortization
|
|
28,061
|
|
|
25,705
|
|
Stock-based compensation
|
|
1,355
|
|
|
1,188
|
|
Loss on disposal of property and equipment
|
|
41
|
|
|
65
|
|
Deferred tax (benefit) provision
|
|
(1,044
|
)
|
|
138
|
|
Noncash interest
|
|
1,441
|
|
|
1,457
|
|
Other
|
|
(135
|
)
|
|
383
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
Accounts receivable
|
|
(9,843
|
)
|
|
(6,504
|
)
|
Inventory
|
|
(25,686
|
)
|
|
(12,810
|
)
|
Prepaid expenses and other assets
|
|
2,932
|
|
|
(376
|
)
|
Accounts payable and accrued liabilities
|
|
19,882
|
|
|
12,612
|
|
Income taxes
|
|
5,089
|
|
|
(1,831
|
)
|
Other noncurrent liabilities
|
|
(4,794
|
)
|
|
560
|
|
Net cash provided by operating activities
|
|
23,875
|
|
|
22,065
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
Additions to property and equipment
|
|
(21,010
|
)
|
|
(32,285
|
)
|
Proceeds from investment grant
|
|
-
|
|
|
479
|
|
Proceeds from sale of property and equipment
|
|
7
|
|
|
199
|
|
Net cash used in investing activities
|
|
(21,003
|
)
|
|
(31,607
|
)
|
|
|
|
|
|
Financing activities
|
|
|
|
|
Borrowings on revolving lines of credit
|
|
43,135
|
|
|
43,957
|
|
Payments on revolving lines of credit
|
|
(46,653
|
)
|
|
(48,467
|
)
|
Borrowings on long-term debt
|
|
30,000
|
|
|
33,000
|
|
Payments on long-term debt
|
|
(19,121
|
)
|
|
(8,986
|
)
|
Payment of debt issuance costs
|
|
-
|
|
|
(258
|
)
|
Proceeds from the exercise of stock options
|
|
-
|
|
|
57
|
|
Net cash provided by financing activities
|
|
7,361
|
|
|
19,303
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
(551
|
)
|
|
(327
|
)
|
Net increase in cash
|
|
9,682
|
|
|
9,434
|
|
Cash at beginning of period
|
|
8,809
|
|
|
11,519
|
|
Cash at end of period
|
|
$18,491
|
|
|
$20,953
|
|
|
|
|
|
|
Supplemental information for non-cash investing and financing
activities:
|
|
|
|
|
Purchases of property and equipment (included in accounts payable)
|
|
$304
|
|
|
$1,311
|
|
Capital lease obligation incurred
|
|
$658
|
|
|
$386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note Regarding Non-GAAP Information
This press release includes financial measures that are not calculated
in accordance with GAAP, including 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 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, as
applicable. 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 measure Adjusted
EBITDA with the most directly comparable GAAP financial measure of
GAAP net income.
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
Thirty-Nine Weeks Ended
|
|
|
December 31, 2016
|
|
January 2, 2016
|
|
December 31, 2016
|
|
January 2, 2016
|
Net income
|
|
$5,092
|
|
|
$3,924
|
|
|
$6,576
|
|
|
$1,478
|
|
Depreciation and amortization
|
|
9,236
|
|
|
9,081
|
|
|
28,061
|
|
|
25,705
|
|
Interest expense, net
|
|
4,119
|
|
|
4,209
|
|
|
12,434
|
|
|
12,614
|
|
Provision for income taxes
|
|
3,350
|
|
|
2,023
|
|
|
4,851
|
|
|
993
|
|
EBITDA
|
|
$21,797
|
|
|
$19,237
|
|
|
$51,922
|
|
|
$40,790
|
|
Pre-opening costs (a)
|
|
2,918
|
|
|
1,784
|
|
|
6,558
|
|
|
6,956
|
|
Noncash rent (b)
|
|
(298
|
)
|
|
(508
|
)
|
|
(970
|
)
|
|
(1,489
|
)
|
Stock-based compensation (c)
|
|
599
|
|
|
488
|
|
|
1,355
|
|
|
1,188
|
|
Foreign exchange losses (gains) (d)
|
|
53
|
|
|
141
|
|
|
(211
|
)
|
|
273
|
|
Other adjustments (e)
|
|
249
|
|
|
22
|
|
|
996
|
|
|
52
|
|
Adjusted EBITDA
|
|
$25,318
|
|
|
$21,164
|
|
|
$59,650
|
|
|
$47,770
|
|
|
|
(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)
|
|
Realized foreign exchange transactional gains/losses our management
does not consider in our evaluation of our ongoing operations.
|
|
|
|
|
|
|
|
(e)
|
|
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/20170207006269/en/
Source: The Container Store Group, Inc.