Fourth Quarter Comparable Store Sales up 2.7%; Consolidated Net Sales
up 5.3%
Fiscal 2017 Comparable Store Sales up 0.9%;
Consolidated Net Sales up 4.5%
Fiscal 2017 Operating
Cash Flow Increases 39% to $62.2 million; Fiscal 2017 Free Cash Flow1
More than Doubles to $34.5 million; Reduces Net Debt by $32.3 million
Issues Fiscal 2018 Outlook for Comparable Store Sales of flat to up
1%, Consolidated Net Sales of $880 to $890 million, GAAP EPS of $0.27 to
$0.37 and Adjusted EPS1 of $0.35 to $0.45
COPPELL, Texas--(BUSINESS WIRE)--
The Container Store Group, Inc. (NYSE: TCS) (the “Company”), today
announced financial results for the fourth quarter and fiscal year 2017
ended March 31, 2018.
For the fourth quarter of fiscal 2017:
-
Consolidated net sales were $232.8 million, up 5.3%. Net sales in The
Container Store retail business were $214.1 million, up 5.3%. Elfa
International AB third-party net sales were $18.7 million, up 4.8%,
primarily due to the positive impact of foreign currency translation.
-
Comparable store sales were up 2.7% with Custom Closets contributing
strongly to the increase, largely due to the success of Our Annual
elfa® Sale.
-
Consolidated net loss per share (“EPS”) was ($0.01), inclusive of a
$0.18 per share net provisional expense from the Tax Cuts and Jobs Act
(“Tax Act”), compared with consolidated net income per share of $0.17
in the fourth quarter of fiscal 2016. Adjusted net income per share
(“Adjusted EPS”) was $0.18 compared with $0.18 in the fourth quarter
of fiscal 2016 (see Reconciliation of GAAP to Non-GAAP Financial
Measures table).
“We are very pleased to have concluded our fiscal 2017 with our
strongest quarter of comparable store sales performance of the year,
driven by an acceleration in our important Custom Closets business as
well as in our other product categories. This improvement is primarily
the result of our sales revitalization and optimization initiatives, and
was accompanied by gross margin expansion of 100 basis points and 20
basis points of SG&A leverage, despite some timing factors that impacted
profitability in the fourth quarter and are expected to benefit fiscal
2018,” said Melissa Reiff, Chief Executive Officer.
“In fiscal 2018 we remain committed to driving improved performance on
both the top and the bottom line as we build on the progress we have
made across each of our key strategic priorities, particularly our
Optimization Plan executed in fiscal 2017 that is expected to generate
substantial benefits in fiscal 2018. We plan to continue our disciplined
approach to expense management and capital allocation, and expect to
open two new stores and relocate two existing stores this year. In
addition, we have begun to invest in a second distribution center which
is anticipated to become operational in late fiscal 2019, as well as
continued technology and marketing investments that are designed to
further enhance the customer experience and improve efficiency,” Reiff
concluded.
___________
|
1 See Reconciliation of GAAP to Non-GAAP Financial
Measures table.
|
|
Fourth Quarter and Full Fiscal Year 2017 Results
For the fourth quarter (thirteen weeks) ended March 31, 2018:
-
Consolidated net sales were $232.8 million, up 5.3% as compared to the
fourth quarter of fiscal 2016. Net sales in The Container Store retail
business (“TCS”) were $214.1 million, up 5.3% as compared to the
fourth quarter of fiscal 2016, primarily due to an increase in
comparable store sales of 2.7%, as well as an increase in sales from
new stores. Elfa International AB (“Elfa”) third party net sales were
$18.7 million, up 4.8% compared to the fourth quarter of fiscal 2016,
primarily due to a positive impact from foreign currency translation,
which increased third-party sales by 9.0%, partially offset by lower
sales in the Nordic markets during the quarter.
-
Consolidated gross margin was 58.6%, an increase of 100 basis points
compared to the fourth quarter of fiscal 2016. TCS gross margin
increased 110 basis points to 57.1%, as lower cost of goods associated
with the Optimization Plan and the benefit of favorable foreign
currency contracts were partially offset by a greater portion of sales
generated by sale campaigns during the quarter. Elfa gross margin
decreased 300 basis points to 39.8% primarily due to higher direct
materials costs during the quarter. On a consolidated basis, gross
margin increased 100 basis points, as the improvement in TCS gross
margin was partially offset by the decline in Elfa gross margin.
-
Consolidated selling, general and administrative expenses (“SG&A”)
increased by 4.9% to $104.9 million from $99.9 million in the fourth
quarter of fiscal 2016. SG&A as a percentage of net sales decreased 20
basis points, primarily due to ongoing savings and efficiency efforts,
with a portion of such savings offset by incremental spending,
including costs incurred for various projects.
-
Consolidated net interest expense increased 79% to $7.6 million in the
fourth quarter of fiscal 2017 from $4.3 million in the fourth 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.
-
The consolidated effective tax rate for the fourth quarter of fiscal
2017 was 103.1%, as compared to 35.2% in the fourth quarter of fiscal
2016. The increase in the effective tax rate is primarily due to the
provisional amount recorded for the one-time transition tax on foreign
earnings in connection with the Tax Act.
-
Consolidated net loss was $0.4 million, or ($0.01) per share
(inclusive of $0.18 per share net provisional expense from the Tax
Act), in the fourth quarter of fiscal 2017 compared to consolidated
net income of $8.4 million, or $0.17 per share, in the fourth quarter
of fiscal 2016.
-
Consolidated adjusted net income was $8.4 million, or $0.18 per share,
in the fourth quarter of fiscal 2017 compared to adjusted net income
of $8.7 million, or $0.18 per share in the fourth quarter of fiscal
2016 (see Reconciliation of GAAP to Non-GAAP Financial Measures table).
-
Consolidated Adjusted EBITDA was $31.1 million compared to $26.9
million in the fourth quarter of fiscal 2016 (see Reconciliation of
GAAP to Non-GAAP Financial Measures table).
For the year (fifty-two weeks) ended March 31, 2018:
-
Consolidated net sales were $857.2 million, up 4.5% as compared to
fiscal 2016. Net sales at TCS were $787.4 million, up 4.6% as compared
to fiscal 2016, primarily due to new store sales, as well as a 0.9%
increase in comparable store sales. Elfa third-party net sales were
$69.9 million, up 3.9% compared to fiscal 2016, primarily due to the
impact of foreign currency translation during the fiscal year, which
increased third party net sales by 4.0%, partially offset by lower
sales in the Nordic markets.
-
Consolidated gross margin was 58.0%, a decline of 10 basis points
compared to fiscal 2016. TCS gross margin increased 10 basis points to
57.2%, primarily due to lower cost of goods sold associated with the
Optimization Plan and the benefit of favorable foreign currency
contracts, partially offset by a greater portion of sales generated by
merchandise campaigns and higher costs associated with our
installation services business. Elfa gross margin declined 180 basis
points primarily due to higher direct materials costs. On a
consolidated basis, gross margin declined 10 basis points, as the
improvement in TCS gross margin was more than offset by the decline in
Elfa gross margin.
-
Consolidated selling, general and administrative expenses increased by
6.1% to $411.7 million from $387.9 million in fiscal 2016. SG&A as a
percentage of net sales increased 70 basis points. The increase was
primarily due to consulting costs incurred as part of the Optimization
Plan, which contributed 80 basis points to the increase in fiscal
2017. Additionally, the impact of amended and restated employment
agreements entered into with key executives during 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 50 basis points benefit in fiscal 2016.
This combined 130 basis points year-over-year increase was partially
offset by a 60 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, partially offset by
increased occupancy costs.
-
Pre-opening costs decreased to $5.3 million in fiscal 2017 compared to
$6.9 million in fiscal 2016. The Company opened five new stores
(inclusive of one relocation) in fiscal 2017 as compared to seven new
stores in fiscal 2016.
-
Consolidated net interest expense increased 50% to $25.0 million in
fiscal 2017 from $16.7 million in 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 consolidated effective tax rate was -189.8%, as compared to 38.6%
in fiscal 2016. The decrease in the effective tax rate is primarily
due to the estimated impact of the Tax Act enacted in the third
quarter of fiscal 2017, including the provisional benefit for the
remeasurement of deferred tax balances, partially offset by the
provisional accrual of the one-time transition tax on foreign earnings.
-
Consolidated net income was $19.4 million, or $0.40 per share
(inclusive of $0.33 per share net provisional benefit from the Tax
Act), in fiscal 2017 compared to net income of $15.0 million, or $0.31
per share, in fiscal 2016.
-
Consolidated adjusted net income was $13.6 million, or $0.28 per
share, in fiscal 2017 compared to adjusted net income of $13.4
million, or $0.28 per share in fiscal 2016 (see Reconciliation of GAAP
to Non-GAAP Financial Measures table).
-
Consolidated Adjusted EBITDA was $89.6 million compared to $86.6
million in fiscal 2016 (see Reconciliation of GAAP to Non-GAAP
Financial Measures table). The Adjusted EBITDA of $86.6 million in
fiscal 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 and liquidity highlights:
|
|
|
|
|
|
Fiscal Year Ended
|
(In thousands)
|
|
|
March 31, 2018
|
|
|
April 1, 2017
|
Cash
|
|
|
$8,399
|
|
|
$10,736
|
Total debt, net of deferred financing costs
|
|
|
$285,165
|
|
|
$317,471
|
Liquidity1
|
|
|
$90,767
|
|
|
$99,594
|
Free cash flow2
|
|
|
$34,530
|
|
|
$16,124
|
|
|
|
|
|
|
|
1Cash plus availability on revolving credit facilities
|
2See reconciliation of GAAP to Non-GAAP Measures table
|
|
Outlook
The Company is establishing its outlook for fiscal 2018 as follows:
|
|
|
Fiscal 2018 Outlook
|
Net sales
|
|
|
$880 million to $890 million
|
New store openings
|
|
|
4, including 2 relocations of existing stores (1)
|
Comparable store sales
|
|
|
Flat to up 1%
|
Net income per common share (2)
|
|
|
$0.27 to $0.37
|
Adjusted net income per common share (3)
|
|
|
$0.35 to $0.45
|
Assumed tax rate (4)
|
|
|
30%
|
Estimated share count
|
|
|
49 million
|
|
|
|
|
(1) The Company opened a new store in Bridgewater,
NJ on April 7, 2018 and plans to open a new store in Oklahoma City
late in the second quarter of fiscal 2018. Additionally, during
the second half of fiscal 2018, the Company plans to relocate two
existing stores, Tysons Corner, VA and Cherry Creek/Denver, CO.
|
(2) Includes approximately $5 million of consulting
costs to complete the fiscal 2017 Optimization Plan, or $0.08 per
diluted share, which is expected to be incurred in the first
quarter of fiscal 2018.
|
(3) See Reconciliation of GAAP to Non-GAAP Financial
Measures Table.
|
(4) During fiscal 2017, the Company recorded
provisional estimates for remeasurement of deferred tax balances
and for transition taxes on foreign earnings. The Company is
currently not able to estimate any future adjustments to the
provisional amount recognized for the remeasurement of deferred
tax balances or future adjustments to transition taxes on foreign
earnings, which is permissible during the allotted one-year
measurement period under the Tax Act, ending on December 22, 2018.
Accordingly, the assumed tax rate does not reflect any impact of
any potential future adjustments to the provisional amounts
initially recorded.
|
|
Conference Call Information
A conference call to discuss fourth quarter and full fiscal year 2017
financial results is scheduled for today, May 22, 2018, 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 13679726. The replay
will be available until June 22, 2018.
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 driving top and
bottom line performance; expectations regarding our goals, strategies,
priorities and initiatives, including the addition of a second
distribution center and our Optimization Plan; expectations regarding
new store openings and relocations; beliefs regarding technology and
marketing investments; and anticipated financial performance and tax
rate for fiscal 2018.
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 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; risks relating to the opening of a
second distribution center; effects of a security breach or cyber-attack
of our website or information technology systems, including relating to
our use of third-party web service providers; 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 we may not be able
to refinance our debt on favorable terms, or at all; effects of tax
reform; and uncertainty with respect to tax and trade policies, tariffs
and government regulations affecting trade between the United States and
other countries.
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 10,000
products designed to save space and time, a suite of custom closet
systems and an array of digital shopping services. Visit www.containerstore.com
for more information about store locations, the product collection and
services offered. Visit www.containerstore.com/blog
for real solutions from the really organized and www.whatwestandfor.com
to learn more about the company’s unique culture.
|
The Container Store Group, Inc.
Consolidated balance sheets (unaudited)
|
|
|
|
|
|
(In thousands, except share amounts)
|
|
March 31,
|
|
April 1,
|
|
2018
|
|
2017
|
Assets
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash
|
|
$8,399
|
|
|
$10,736
|
|
Accounts receivable, net
|
|
25,528
|
|
|
27,476
|
|
Inventory
|
|
97,362
|
|
|
103,120
|
|
Prepaid expenses
|
|
11,281
|
|
|
10,550
|
|
Income taxes receivable
|
|
15
|
|
|
16
|
|
Other current assets
|
|
11,609
|
|
|
10,787
|
|
Total current assets
|
|
154,194
|
|
|
162,685
|
|
Noncurrent assets:
|
|
|
|
|
Property and equipment, net
|
|
158,389
|
|
|
165,498
|
|
Goodwill
|
|
202,815
|
|
|
202,815
|
|
Trade names
|
|
229,401
|
|
|
226,685
|
|
Deferred financing costs, net
|
|
312
|
|
|
320
|
|
Noncurrent deferred tax assets, net
|
|
2,404
|
|
|
2,139
|
|
Other assets
|
|
1,854
|
|
|
1,692
|
|
Total noncurrent assets
|
|
595,175
|
|
|
599,149
|
|
Total assets
|
|
$749,369
|
|
|
$761,834
|
|
Liabilities and shareholders’ equity
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Accounts payable
|
|
$43,692
|
|
|
$44,762
|
|
Accrued liabilities
|
|
70,494
|
|
|
60,107
|
|
Revolving lines of credit
|
|
-
|
|
|
-
|
|
Current portion of long-term debt
|
|
7,771
|
|
|
5,445
|
|
Income taxes payable
|
|
4,580
|
|
|
2,738
|
|
Total current liabilities
|
|
126,537
|
|
|
113,052
|
|
Noncurrent liabilities:
|
|
|
|
|
Long-term debt
|
|
277,394
|
|
|
312,026
|
|
Noncurrent deferred tax liabilities, net
|
|
54,839
|
|
|
80,679
|
|
Deferred rent and other long-term liabilities
|
|
41,892
|
|
|
34,287
|
|
Total noncurrent liabilities
|
|
374,125
|
|
|
426,992
|
|
Total liabilities
|
|
500,662
|
|
|
540,044
|
|
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
Common stock, $0.01 par value, 250,000,000 shares authorized;
48,072,187 shares issued at March 31, 2018 and 48,045,114 shares
issued at April 1, 2017
|
|
481
|
|
|
480
|
|
Additional paid-in capital
|
|
861,263
|
|
|
859,102
|
|
Accumulated other comprehensive loss
|
|
(17,316
|
)
|
|
(22,643
|
)
|
Retained deficit
|
|
(595,721
|
)
|
|
(615,149
|
)
|
Total shareholders’ equity
|
|
248,707
|
|
|
221,790
|
|
Total liabilities and shareholders’ equity
|
|
$749,369
|
|
|
$761,834
|
|
|
|
|
|
|
|
|
|
The Container Store Group, Inc.
Consolidated statements of operations (unaudited)
|
|
|
|
|
|
|
|
|
|
(In thousands, except share and
|
|
Thirteen
|
|
Thirteen
|
|
Fifty-two
|
|
Fifty-two
|
per share amounts)
|
Weeks Ended
|
Weeks Ended
|
Weeks Ended
|
Weeks Ended
|
|
March 31, 2018
|
April 1, 2017
|
March 31, 2018
|
April 1, 2017
|
Net sales
|
|
$232,764
|
|
|
$221,042
|
|
$857,228
|
|
|
$819,930
|
Cost of sales (excluding depreciation and amortization)
|
|
96,248
|
|
|
93,724
|
|
360,167
|
|
|
343,860
|
Gross profit
|
|
136,516
|
|
|
127,318
|
|
497,061
|
|
|
476,070
|
Selling, general, and administrative expenses (excluding
depreciation and amortization)
|
|
104,855
|
|
|
99,911
|
|
411,721
|
|
|
387,948
|
Stock-based compensation
|
|
437
|
|
|
634
|
|
2,026
|
|
|
1,989
|
Pre-opening costs
|
|
617
|
|
|
294
|
|
5,293
|
|
|
6,852
|
Depreciation and amortization
|
|
9,398
|
|
|
9,063
|
|
37,922
|
|
|
37,124
|
Other expenses
|
|
826
|
|
|
219
|
|
5,734
|
|
|
1,058
|
Loss on disposal of assets
|
|
42
|
|
|
16
|
|
278
|
|
|
57
|
Income from operations
|
|
20,341
|
|
|
17,181
|
|
34,087
|
|
|
41,042
|
Interest expense
|
|
7,615
|
|
|
4,253
|
|
25,013
|
|
|
16,687
|
Loss on extinguishment of debt
|
|
-
|
|
|
-
|
|
2,369
|
|
|
-
|
Income before taxes
|
|
12,726
|
|
|
12,928
|
|
6,705
|
|
|
24,355
|
Provision (benefit) for income taxes
|
|
13,125
|
|
|
4,551
|
|
(12,723
|
)
|
|
9,402
|
Net (loss) income
|
|
(399
|
)
|
|
8,377
|
|
19,428
|
|
|
$14,953
|
|
|
|
|
|
|
|
|
|
Net (loss) income per common share - basic and diluted
|
|
($0.01
|
)
|
|
$0.17
|
|
$0.40
|
|
|
$0.31
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares - basic
|
|
48,072,187
|
|
|
48,009,029
|
|
48,061,527
|
|
|
47,996,746
|
Weighted-average common shares - diluted
|
|
48,202,980
|
|
|
48,073,420
|
|
48,147,725
|
|
|
48,016,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Container Store Group, Inc.
Consolidated statements of cash flows(unaudited)
|
|
|
|
|
|
|
|
Fiscal year ended
|
(In thousands)
|
March 31,
|
|
April 1,
|
2018
|
|
2017
|
Operating activities
|
|
|
|
Net income
|
$19,428
|
|
|
$14,953
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
Depreciation and amortization
|
37,922
|
|
|
37,124
|
|
Stock-based compensation
|
2,026
|
|
|
1,989
|
|
Loss on disposal of assets
|
278
|
|
|
57
|
|
Loss on extinguishment of debt
|
2,369
|
|
|
-
|
|
Deferred tax benefit
|
(25,545
|
)
|
|
(96
|
)
|
Noncash interest
|
2,664
|
|
|
1,921
|
|
Other
|
227
|
|
|
(29
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
Accounts receivable
|
3,192
|
|
|
(5,861
|
)
|
Inventory
|
8,406
|
|
|
(19,598
|
)
|
Prepaid expenses and other assets
|
(2,133
|
)
|
|
4,028
|
|
Accounts payable and accrued liabilities
|
6,249
|
|
|
10,965
|
|
Income taxes
|
625
|
|
|
3,527
|
|
Other noncurrent liabilities
|
6,468
|
|
|
(4,341
|
)
|
Net cash provided by operating activities
|
62,176
|
|
|
44,639
|
|
|
|
|
|
Investing activities
|
|
|
|
Additions to property and equipment
|
(27,646
|
)
|
|
(28,515
|
)
|
Proceeds from sale of property and equipment
|
96
|
|
|
7
|
|
Net cash used in investing activities
|
(27,550
|
)
|
|
(28,508
|
)
|
|
|
|
|
Financing activities
|
|
|
|
Borrowings on revolving lines of credit
|
47,486
|
|
|
42,731
|
|
Payments on revolving lines of credit
|
(47,486
|
)
|
|
(46,216
|
)
|
Borrowings on long-term debt
|
335,000
|
|
|
30,000
|
|
Payments on long-term debt and capital leases
|
(361,403
|
)
|
|
(40,496
|
)
|
Payment of debt issuance costs
|
(11,246
|
)
|
|
-
|
|
Payment of taxes with shares withheld upon restricted stock vesting
|
(39
|
)
|
|
-
|
|
Net cash used in financing activities
|
(37,688
|
)
|
|
(13,981
|
)
|
|
|
|
|
Effect of exchange rate changes on cash
|
725
|
|
|
(223
|
)
|
Net (decrease) increase in cash
|
(2,337
|
)
|
|
1,927
|
|
Cash at beginning of fiscal year
|
10,736
|
|
|
8,809
|
|
Cash at end of fiscal year
|
$8,399
|
|
|
$10,736
|
|
|
|
|
|
|
|
Note Regarding Non-GAAP Information
This press release includes financial measures that are not calculated
in accordance with GAAP, including adjusted net income, adjusted net
income per diluted share, Adjusted EBITDA, and free cash flow. 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 adjusted net income, adjusted net income per
diluted share, and Adjusted EBITDA 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 as net income 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 per diluted share as adjusted net
income divided by the diluted weighted average common shares
outstanding. We use adjusted net income and adjusted net income 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 and adjusted net
income 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 for the thirteen
and fifty-two weeks ended April 1, 2017 to show the net impact of the
amended and restated employment agreements entered into with key
executives during fiscal 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 fifty-two weeks ended
March 31, 2018, our Optimization Plan caused us to incur similar charges
that we believe are not indicative of our core operating performance. As
a result, we believe that adjusting net income in the thirteen and
fifty-two weeks ended April 1, 2017 for management transition costs
(benefits), in addition to adjusting net income for the thirteen and
fifty-two weeks ended March 31, 2018 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
2018 adjusted net income guidance 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 Company presents free cash flow, which the Company defines as net
cash provided by (used in) operating activities in a period minus
payments for property and equipment made in that period, because it
believes it is a useful indicator of the Company’s overall liquidity, as
the amount of free cash flow generated in any period is representative
of cash that is available for debt repayment, investment, and other
discretionary and non-discretionary cash uses. Accordingly, we believe
that free cash flow provides useful information to investors in
understanding and evaluating our liquidity in the same manner as
management. Our definition of free cash flow is limited in that it does
not solely represent residual cash flows available for discretionary
expenditures due to the fact that the measure does not deduct the
payments required for debt service and other contractual obligations.
Therefore, we believe it is important to view free cash flow as a
measure that provides supplemental information to our Consolidated
Statements of Cash Flows. Although other companies report their free
cash flow, numerous methods may exist for calculating a company's free
cash flow. As a result, the method used by our management to calculate
our free cash flow may differ from the methods used by other companies
to calculate their free cash flow.
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 and adjusted net income 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
|
|
Fifty-Two Weeks Ended
|
|
Fiscal Year 2018 Outlook
|
|
|
March 31, 2018
|
|
April 1, 2017
|
|
March 31, 2018
|
|
April 1, 2017
|
|
Low
|
|
High
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$(399
|
)
|
|
$8,377
|
|
$19,428
|
|
|
$14,953
|
|
|
$13,200
|
|
|
$18,200
|
|
Management transition costs (benefits) (a)
|
|
-
|
|
|
219
|
|
-
|
|
|
(2,852
|
)
|
|
-
|
|
|
-
|
|
Elfa manufacturing facility
closure (b)
|
|
(49
|
)
|
|
-
|
|
803
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Loss on extinguishment of debt (c)
|
|
-
|
|
|
-
|
|
2,369
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Optimization Plan implementation charges (d)
|
|
737
|
|
|
-
|
|
11,479
|
|
|
-
|
|
|
5,000
|
|
|
5,000
|
|
Taxes (e)
|
|
8,152
|
|
|
145
|
|
(20,485
|
)
|
|
1,292
|
|
|
(1,290
|
)
|
|
(1,290
|
)
|
Adjusted net income
|
|
$8,441
|
|
|
$8,741
|
|
$13,594
|
|
|
$13,393
|
|
|
$16,910
|
|
|
$21,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares – diluted
|
|
48,202,980
|
|
|
48,073,420
|
|
48,147,725
|
|
|
48,016,010
|
|
|
49,000,000
|
|
|
49,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per common share - diluted
|
|
($0.01
|
)
|
|
$0.17
|
|
$0.40
|
|
|
$0.31
|
|
|
$0.27
|
|
|
$0.37
|
|
Adjusted net income per common
share - diluted
|
|
$0.18
|
|
|
$0.18
|
|
$0.28
|
|
|
$0.28
|
|
|
$0.35
|
|
|
$0.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 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 income, as well as the estimated
impact of the Tax Cuts and Jobs Act enacted in the third quarter of
fiscal 2017, which is considered to be an unusual or infrequent tax
item, all of 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
|
|
Thirteen
|
|
Fifty-two
|
|
Fifty-two
|
Weeks Ended
|
|
Weeks Ended
|
|
Weeks Ended
|
|
Weeks Ended
|
|
|
March 31, 2018
|
|
April 1, 2017
|
|
March 31, 2018
|
|
April 1, 2017
|
Net (loss) income
|
|
$(399
|
)
|
|
$8,377
|
|
|
$19,428
|
|
|
$14,953
|
|
Depreciation and amortization
|
|
9,398
|
|
|
9,063
|
|
|
37,922
|
|
|
37,124
|
|
Interest expense, net
|
|
7,615
|
|
|
4,253
|
|
|
25,013
|
|
|
16,687
|
|
Provision (benefit) for income taxes
|
|
13,125
|
|
|
4,551
|
|
|
(12,723
|
)
|
|
9,402
|
|
EBITDA
|
|
29,739
|
|
|
26,244
|
|
|
69,640
|
|
|
78,166
|
|
Pre-opening costs (a)
|
|
617
|
|
|
294
|
|
|
5,293
|
|
|
6,852
|
|
Non-cash rent (b)
|
|
(464
|
)
|
|
(395
|
)
|
|
(1,915
|
)
|
|
(1,365
|
)
|
Stock-based compensation (c)
|
|
437
|
|
|
634
|
|
|
2,026
|
|
|
1,989
|
|
Loss on extinguishment of debt (d)
|
|
-
|
|
|
-
|
|
|
2,369
|
|
|
-
|
|
Foreign exchange gains (e)
|
|
(290
|
)
|
|
(131
|
)
|
|
(596
|
)
|
|
(342
|
)
|
Optimization Plan implementation charges (f)
|
|
737
|
|
|
-
|
|
|
11,479
|
|
|
-
|
|
Elfa manufacturing facility closure (g)
|
|
(49
|
)
|
|
-
|
|
|
803
|
|
|
-
|
|
Other adjustments (h)
|
|
369
|
|
|
263
|
|
|
504
|
|
|
1,259
|
|
Adjusted EBITDA
|
|
$31,096
|
|
|
$26,909
|
|
|
$89,603
|
|
|
$86,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 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.
|
|
|
|
|
|
The table below reconciles the non-GAAP financial measure of free cash
flow with the most directly comparable GAAP financial measure of net
cash provided by operating activities.
|
|
|
Fiscal Year Ended
|
|
|
|
March 31,
|
|
|
April 1,
|
|
|
|
2018
|
|
|
2017
|
Net cash provided by operating activities
|
|
|
$62,176
|
|
|
|
$44,639
|
|
Less: Additions to property and equipment
|
|
|
(27,646
|
)
|
|
|
(28,515
|
)
|
Free cash flow
|
|
|
$34,530
|
|
|
|
$16,124
|
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20180522006147/en/
Source: The Container Store Group, Inc.