Company Achieves Comparable Store Sales Growth of 0.2% for Fiscal 2015
Fourth Quarter; Concludes On-Time, Company-Wide Rollout of TCS Closets™
Outlines Previously Announced SG&A Savings Program
Expects Fiscal 2016 Earnings Per Share of $0.20 to $0.30
COPPELL, Texas--(BUSINESS WIRE)--
The Container Store Group, Inc. (NYSE:TCS) (the “Company”) today
announced financial results for the fourth quarter and fiscal year 2015
ended February 27, 2016.
-
Comparable store sales for the fourth quarter of fiscal 2015 were up
0.2% compared to the fourth quarter of fiscal 2014, exceeding the
Company’s guidance of - 3.0% to - 5.0% comparable store sales growth
and marking the third consecutive quarter of positive comparable store
sales.
-
Consolidated net sales for the fourth quarter of fiscal 2015 were
$232.1 million, up 3.5% compared to the fourth quarter of fiscal 2014
after converting the Elfa International AB portion of consolidated net
sales from Swedish krona (“SEK”) to U.S. dollars. Net sales in The
Container Store retail business were $214.2 million, up 4.7% as
compared to the fourth quarter of fiscal 2014, primarily due to new
store sales. Elfa International AB third-party net sales for the
fourth quarter of fiscal 2015 were SEK 151.9 million, down 4.4%
compared to the fourth quarter of fiscal 2014. Converting Elfa
International AB third-party net sales to U.S. dollars reduced the
consolidated net sales results by 0.4% percent, from 3.9% to 3.5%, or
$0.9 million for the fourth quarter of fiscal 2015 compared to the
fourth quarter of fiscal 2014 using the prior year conversion rate for
both periods.
-
Consolidated net income per diluted share (EPS) was $0.20 for the
fourth quarter of fiscal 2015, which was in line with the Company’s
previously provided outlook, and included approximately $0.02 per
diluted share in spend for key strategic initiatives. This compares to
consolidated adjusted net income per diluted share of $0.24 in the
fourth quarter of fiscal 2014 (see GAAP/Non-GAAP reconciliation table
at the end of this release).
“We exceeded our stated expectations on total consolidated fourth
quarter sales and delivered earnings in line with our previously
provided outlook,” said Kip Tindell, Chairman and Chief Executive
Officer. “From a comparable store sales standpoint we performed much
better than we projected for the fourth quarter and importantly, saw
improved and positive comparable store sales across non-TCS Closets and
non-elfa® areas of the store during the last two months of
the fiscal quarter. In addition, our TCS Closets initiative was again a
key driver of performance, providing a 140 basis point lift to overall
comparable store sales.”
“For fiscal year 2015, we executed and delivered on our stated
initiatives and, with flat comparable store sales growth, also exceeded
our most recent annual comparable store sales outlook of -1.0% to -1.6%
after having started the year with outlook of -2.0% to flat then raising
the floor of it upon release of our second quarter earnings to -1.0% to
flat. As we have consistently said, fiscal 2015 was an investment year
for our company as we strategically, and importantly, put extremely
focused and significant financial, human and operational resources into
key initiatives designed to transform our business by addressing the
changing retail landscape and setting the stage for long-term growth.
Some of our primary accomplishments for fiscal 2015 are as follows:
-
Taking our quarterly comparable store sales trend from slightly
negative to slightly positive;
-
We successfully rolled out TCS Closets and Contained Home?
on time, to every store;
-
We introduced free shipping on orders over $75;
-
We increased our POP! Stars® by approximately 1.6 million
to over 3.3 million total;
-
We expanded our presence by opening 10 new stores (inclusive of one
relocation) extending our reach into seven new markets while expanding
two existing markets;
-
We implemented numerous enhancements to the Company’s digital
platform, including more strategic targeting and organic search
programs, upgrades to the native search platform and the launch of a
lifestyle blog, ContainerStories?;
-
We executed our Distribution Center automation project that
successfully went live in April 2016, which is intended to drive
supply chain and payroll efficiencies; and
-
We jumped to #14, from #27, on Fortune magazine’s list of “100 Best
Companies to Work For,” marking the Company’s seventeenth consecutive
year on the list.
Tindell commented, “Expense management has always been a priority for
us, but as we embark on the new fiscal year, we’re heightening our
efforts with an SG&A savings program for fiscal 2016. We are focused on
cutting costs in a comprehensive manner, but in a way that does not
compromise the success of our custom closet focus or harm our company
culture, through a combination of actions, including a company-wide
salary and wage freeze and a 401k match freeze, a reduction in payroll,
plus extensive efforts to drive costs out of the business. In
combination with a prudent plan for comparable store sales, and
moderating new store growth, these expense initiatives are expected to
contribute to our projected earnings per share for fiscal 2016 at nearly
double or triple the levels of fiscal 2015.”
For fiscal 2016, the Company plans to prioritize initiatives that focus
on dominating the custom closet market inclusive of continued
improvements to its custom closet selling process and employee selling
skills training, an enhanced online and in-store experience, new product
development, and robust marketing support for its TCS Closets, elfa®
and closet completion solutions. The benefit of the investment in the
launch of TCS Closets, which was completed in all stores in late fiscal
2015, is expected to be realized in fiscal 2016 and beyond as the
Company leverages all of these continuous improvement efforts.
Closet-related solutions are The Container Store’s dominant category,
making it the retailer’s primary area of expertise and the most natural
and strategic area for focus and differentiation. The Company will
continue to leverage its online and in-store demand and traffic to sell
these solutions, in addition to using its network of Contained Home
organizers, while also more strategically and overtly positioning The
Container Store as the ultimate resource for custom closet solutions.
The Company’s Customer Financing Program is expected to launch in summer
2016 and is intended to drive incremental spend and increased conversion
of its higher average ticket elfa® and TCS Closets solutions,
of which the average TCS Closets ticket remains over $10,000.
The Company is moderating its new store growth for fiscal 2016 while
remaining committed to the importance of new stores in order to
capitalize on untapped market opportunities and achieve scale on
enterprise-wide investments. The Container Store expects to open a total
of eight new stores (inclusive of one relocation) in fiscal 2016 (four
of which are scheduled to open in the first half of the fiscal year)
including, Novi, MI, Palm Beach Gardens, FL, Pittsburgh, PA, Des Moines,
IA, Troy, MI, Omaha, NE, Baybrook, TX and a relocation of the Chestnut
Hill, MA location. The Company will annually evaluate its store growth
plan, adjusting it as appropriate in response to the overall retail
environment, real estate opportunities and operational priorities. The
Company intends to pilot a reduced square footage format in fiscal 2017
for new stores in select smaller markets with an objective to further
maximize profitability.
The Company believes that the important investments it made in fiscal
2015, coupled with its planned 2016 SG&A savings program, will
contribute significantly to its efforts to meaningfully improve
financial results.
Fourth Quarter and Full Fiscal Year 2015 Results
For the fourth quarter (thirteen weeks) ended February 27, 2016, on a
consolidated basis:
-
The result for consolidated net sales for the fourth quarter of fiscal
2015 was $232.1 million, up 3.5% compared to the fourth quarter of
fiscal 2014 after converting the Elfa International AB portion of
consolidated net sales from Swedish krona (“SEK”) to U.S. dollars. Net
sales in The Container Store retail business were $214.2 million, up
4.7% as compared to the fourth quarter of fiscal 2014, primarily due
to new store sales. Elfa International AB third-party net sales for
the fourth quarter of fiscal 2015 were SEK 151.9 million, down 4.4%
compared to the fourth quarter of fiscal 2014. Converting Elfa
International AB third-party net sales to U.S. dollars reduced the
consolidated net sales results by 0.4% percent, from 3.9% to 3.5%, or
$0.9 million for the fourth quarter of fiscal 2015 compared to the
fourth quarter of fiscal 2014 using the prior year conversion rate for
both periods.
-
The extension of Our Annual elfa® Sale (“elfa®
Sale Extension”) ended on February 27, 2016, which was the last day of
fiscal 2015. In the prior year, the elfa® Sale Extension
ended on March 2, 2015, during the first quarter of fiscal 2015,
rather than in the fourth quarter of fiscal 2014. Due to the large
volume of elfa® orders placed in the last few days of the
elfa® Sale Extension, the shift in timing of the conclusion
of the sale led to an increase in the unearned revenue balance of $4.6
million to $16.0 million as of the fourth quarter of fiscal 2015, as
compared to $11.4 million as of the fourth quarter of fiscal 2014.
-
Gross margin was 57.9%, an increase of 10 basis points compared to the
fourth quarter of fiscal 2014. The Container Store retail business
gross margin remained consistent at 57.0%, as the impact of the April
2015 introduction of everyday free shipping on orders over $75, the
growing mix of lower-margin service sales, and the increase in
promotional activities were offset by the positive impact of the
stronger U.S. dollar during the fourth quarter of fiscal 2015 as
compared to the fourth quarter of fiscal 2014. While the introduction
of everyday free shipping on orders over $75 has reduced the gross
margin rate, increased sales volumes associated with the strategy more
than offset the related costs. Elfa International AB gross margin
improved 330 basis points primarily due to production efficiencies and
stabilization of freight costs, partially offset by increased direct
materials costs. On a consolidated basis, gross margin increased as
the impact of The Container Store retail business gross margin
partially offset the improvement in Elfa International AB gross margin
due to a larger percentage of net sales coming from The Container
Store retail business.
-
Selling, general and administrative expenses (“SG&A”) were $104.3
million, up 6.6% as compared to $97.9 million in the fourth quarter of
fiscal 2014. SG&A as a percentage of net sales increased 140 basis
points primarily due to incremental expenses incurred at The Container
Store retail business related to strategic initiatives, a larger
percentage of total net sales coming from The Container Store retail
business, an increase in distribution center payroll due to
fulfillment of an increased number of orders shipped directly to
customers, and store payroll incurred at the conclusion of the elfa®
Sale Extension to generate sales that are recorded as unearned revenue
at the end of the fourth quarter.
-
Net interest expense remained consistent at $4.2 million in the fourth
quarter of fiscal 2015.
-
The effective tax rate for the fourth quarter of fiscal 2015 was
33.9%, as compared to 25.2% in the fourth quarter of fiscal 2014. The
increase in the effective tax rate is primarily due to a shift in the
mix of domestic and foreign earnings.
-
U.S. generally accepted accounting principles (“GAAP”) net income was
$9.4 million, or $0.20 per diluted share, in the fourth quarter of
fiscal 2015 compared to $13.0 million, or $0.27 per diluted share, in
the fourth quarter of fiscal 2014. Net income in the fourth quarter of
fiscal 2014 includes certain items that we do not consider in the
evaluation of our ongoing performance, specifically certain gains on
disposal of assets and certain taxes. Excluding these items, adjusted
net income in the fourth quarter of fiscal 2014 was $11.8 million or
$0.24 per diluted share (see GAAP/Non-GAAP reconciliation table at the
end of this release).
-
Adjusted EBITDA was $29.8 million compared to $31.3 million in the
fourth quarter of fiscal 2014, (see GAAP/Non-GAAP reconciliation
table).
For the year (fifty-two weeks) ended February 27, 2016, on a
consolidated basis:
-
The result for consolidated net sales was $794.6 million, up 1.6%
compared to fiscal 2014 after converting the Elfa International AB
portion of consolidated net sales from Swedish krona (“SEK”) to U.S.
dollars. Net sales in The Container Store retail business were $724.1
million, up 3.8% as compared to fiscal 2014, primarily due to new
store sales. Elfa International AB third-party net sales were SEK
598.3 million, down 0.6% compared to fiscal 2014. Converting Elfa
International AB third-party net sales to U.S. dollars reduced the
consolidated net sales results by 1.7% percent, from 3.3% to 1.6%, or
$13.1 million for fiscal 2015 compared to fiscal 2014 using the prior
year conversion rate for both periods.
-
Gross margin was 58.3%, a 30 basis point decrease as compared to
fiscal 2014. The Container Store retail business gross margin declined
by 60 basis points, largely due to increased promotional activities,
the April 2015 introduction of everyday free shipping on orders over
$75, and a growing mix of lower-margin service sales in fiscal 2015 as
compared to fiscal 2014. This was partially offset by the impact of
the stronger U.S. dollar. While the introduction of everyday free
shipping on orders over $75 has reduced the gross margin rate,
increased sales volumes associated with the strategy more than offset
the related costs. Elfa International AB gross margin improved 110
basis points primarily due to production efficiencies and lower direct
materials costs, partially offset by increased freight costs. On a
consolidated basis, gross margin declined as the decline in The
Container Store retail business gross margin more than offset the
improvement in Elfa International AB gross margin due to a larger
percentage of net sales coming from The Container Store retail
business.
-
SG&A was $393.8 million, up 5.6% from $372.9 million in fiscal 2014.
SG&A as a percentage of net sales increased 190 basis points primarily
due to a larger percentage of total net sales coming from The
Container Store retail business, costs incurred related to major
initiatives, increased investment in store payroll for enhanced sales
floor coverage and distribution center payroll due to fulfillment of
an increased number of orders shipped directly to customers, and an
increase in healthcare costs.
-
Net interest expense decreased to $16.8 million from $17.1 million in
fiscal 2014.
-
The effective tax rate for fiscal 2015 was 36.1% as compared to 24.1%
in fiscal 2014. The increase in the effective tax rate is primarily
due to a $1.8 million reduction in tax expense recorded in the second
quarter of fiscal 2014 related to a refund of tax paid in a prior
period as well as a shift in the mix of domestic and foreign earnings.
-
GAAP net income was $5.1 million, or $0.11 per diluted share, in
fiscal 2015 compared to $22.7 million, or $0.47 per diluted share in
fiscal 2014. Net income in fiscal 2014 includes certain items that we
do not consider in the evaluation of our ongoing performance,
specifically certain gains on disposal of assets and certain taxes.
Excluding these items, adjusted net income in fiscal 2014 was $16.5
million or $0.34 per diluted share (see GAAP/Non-GAAP reconciliation
table at the end of this release).
-
Adjusted EBITDA was $68.2 million compared to $88.2 million in fiscal
2014, (see GAAP/Non-GAAP reconciliation table).
Balance sheet highlights:
|
(In thousands)
|
|
|
|
February 27, 2016
|
|
|
February 28, 2015
|
|
Cash
|
|
|
|
$13,609
|
|
|
$24,994
|
|
Total debt
|
|
|
|
$327,878
|
|
|
$334,928
|
|
Liquidity*
|
|
|
|
$104,382
|
|
|
$97,766
|
|
|
|
|
|
|
|
|
|
|
*Cash plus availability on revolving credit facilities
|
|
|
|
|
|
|
|
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|
Change in Fiscal Year
As previously disclosed, the Company elected to change its fiscal year
end from the Saturday closest to February 28 to the Saturday closest to
March 31 of each year. The fiscal year change is effective beginning
with the Company’s current 2016 fiscal year, which began on April 3,
2016 and will end on April 1, 2017. Recast historical unaudited
financial information for the first three quarterly periods of 2015
(which, based on the new fiscal year, would have ended on July 4, 2015,
October 3, 2015 and January 2, 2016) is included in this press release
as well as posted on the Company’s website under the Investor Relations
link. Results for the March 2016 fiscal month transition period, as well
as the recast historical unaudited financial information for the fourth
quarter of 2015 (which, based on the new fiscal year, would have ended
on April 2, 2016) are expected to be reported when the Company releases
its results for the first quarter ending July 2, 2016.
Outlook
For fiscal 2016, consolidated net sales are expected to be $830 to $845
million, based on the Company’s expected store openings and a comparable
store sales change of -1.5% to +0.5%. Net income is expected to be $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 year. Adjusted EBITDA is expected to be
between $75 to $85 million. This outlook incorporates a US dollar to
Swedish Krona exchange rate of approximately the rate in effect on April
18, 2016 and contemplates an intense focus on SG&A management and
savings.
Conference Call Information
In conjunction with this release, the Company published a recording and
transcript of its prepared remarks on investor.containerstore.com,
which will be available for 30 days. Additionally, a live Question &
Answer session with the investment community is scheduled for today,
April 25, 2016, at 5:00 PM Eastern Time. Investors and analysts
interested in participating in this session 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 this session will be available online at investor.containerstore.com
and remain on the website for 30 days.
A taped replay of the Question & Answer session will be available within
two hours of its conclusion and can be accessed both online and by
dialing 877-870-5176 (toll free) or 1-858-384-5517 (international). The
pin number to access the telephone replay is 13634238. The replay will
be available until May 25, 2016.
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 expectations regarding achieving long-term growth, the
Company’s planned fiscal 2016 SG&A savings program, and the anticipated
effects of such program on fiscal 2016 financial results, prioritized
fiscal 2016 initiatives, including timing of launch or rollout of such
initiatives, expectations for new store openings and relocations and a
reduced square footage pilot program for new stores, beliefs regarding
our ability to meaningfully improve financial results, expected timing
of reporting recast financial information, and statements regarding our
anticipated financial performance, including anticipated foreign
currency translation and the expected impact on gross margin.
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 initiatives in the
timeframe we expect or at all; our inability to open or relocate new
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; 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 May 8, 2015, 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 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 79 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 blog at www.whatwestandfor.com.
|
|
|
The Container Store Group, Inc.
Consolidated balance sheets (unaudited)
|
|
|
|
|
|
|
(In thousands, except share amounts)
|
February 27,
|
|
February 28,
|
|
2016
|
|
2015
|
|
Assets
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash
|
$13,609
|
|
$24,994
|
|
Accounts receivable, net
|
28,843
|
|
24,319
|
|
Inventory
|
86,435
|
|
83,724
|
|
Prepaid expenses
|
8,692
|
|
7,895
|
|
Income taxes receivable
|
157
|
|
1,698
|
|
Deferred tax assets, net
|
-
|
|
3,256
|
|
Other current assets
|
8,695
|
|
11,056
|
|
Total current assets
|
146,431
|
|
156,942
|
|
Noncurrent assets:
|
|
|
|
|
Property and equipment, net
|
176,117
|
|
169,053
|
|
Goodwill
|
202,815
|
|
202,815
|
|
Trade names
|
228,368
|
|
229,433
|
|
Deferred financing costs, net
|
6,068
|
|
7,742
|
|
Noncurrent deferred tax assets, net
|
2,090
|
|
1,739
|
|
Other assets
|
1,879
|
|
1,333
|
|
Total noncurrent assets
|
617,337
|
|
612,115
|
|
Total assets
|
$763,768
|
|
$769,057
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders’ equity
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Accounts payable
|
$40,274
|
|
$48,904
|
|
Accrued liabilities
|
69,635
|
|
59,891
|
|
Revolving lines of credit
|
721
|
|
2,834
|
|
Current portion of long-term debt
|
5,373
|
|
5,319
|
|
Income taxes payable
|
-
|
|
2,188
|
|
Total current liabilities
|
116,003
|
|
119,136
|
|
Noncurrent liabilities:
|
|
|
|
|
Long-term debt
|
321,784
|
|
326,775
|
|
Noncurrent deferred tax liabilities, net
|
80,720
|
|
82,965
|
|
Deferred rent and other long-term liabilities
|
38,193
|
|
38,319
|
|
Total noncurrent liabilities
|
440,697
|
|
448,059
|
|
Total liabilities
|
556,700
|
|
567,195
|
|
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
Common stock, $0.01 par value, 250,000,000 shares authorized;
47,986,975 shares issued and outstanding at February 27, 2016,
47,983,660 shares issued and outstanding at February 28, 2015
|
480
|
|
480
|
|
Additional paid-in capital
|
856,879
|
|
855,322
|
|
Accumulated other comprehensive loss
|
(19,835)
|
|
(18,342)
|
|
Retained deficit
|
(630,456)
|
|
(635,598)
|
|
Total shareholders’ equity
|
207,068
|
|
201,862
|
|
Total liabilities and shareholders’ equity
|
$763,768
|
|
$769,057
|
|
|
|
|
|
|
|
|
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
|
|
|
February 27,
|
February 28,
|
February 27,
|
February 28,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Net sales
|
|
$232,074
|
|
$224,259
|
|
$794,630
|
|
$781,866
|
|
Cost of sales (excluding depreciation and amortization)
|
|
97,780
|
|
94,570
|
|
331,079
|
|
323,800
|
|
Gross profit
|
|
134,294
|
|
129,689
|
|
463,551
|
|
458,066
|
|
Selling, general, and administrative expenses (excluding
depreciation and amortization)
|
|
104,341
|
|
97,852
|
|
393,810
|
|
372,867
|
|
Stock-based compensation
|
|
392
|
|
339
|
|
1,556
|
|
1,289
|
|
Pre-opening costs
|
|
2,163
|
|
1,340
|
|
9,033
|
|
8,283
|
|
Depreciation and amortization
|
|
8,981
|
|
8,412
|
|
34,230
|
|
31,011
|
|
Other expenses
|
|
-
|
|
(38)
|
|
-
|
|
1,132
|
|
(Gain) loss on disposal of assets
|
|
(3)
|
|
178
|
|
61
|
|
(3,487)
|
|
Income from operations
|
|
18,420
|
|
21,606
|
|
24,861
|
|
46,971
|
|
Interest expense, net
|
|
4,199
|
|
4,155
|
|
16,810
|
|
17,105
|
|
Income before taxes
|
|
14,221
|
|
17,451
|
|
8,051
|
|
29,866
|
|
Provision for income taxes
|
|
4,822
|
|
4,403
|
|
2,909
|
|
7,193
|
|
Net income
|
|
$9,399
|
|
$13,048
|
|
$5,142
|
|
$22,673
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share - basic and diluted
|
|
$0.20
|
|
$0.27
|
|
$0.11
|
|
$0.47
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding - basic
|
|
47,986,975
|
|
47,982,276
|
|
47,985,717
|
|
47,971,243
|
|
Weighted-average common shares outstanding - diluted
|
|
47,986,975
|
|
48,372,125
|
|
47,985,717
|
|
48,520,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Container Store Group, Inc.
Consolidated statements of cash
flows (unaudited)
|
|
|
|
|
|
|
Fiscal year ended
|
|
(In thousands)
|
February 27,
|
|
February 28,
|
|
2016
|
|
2015
|
|
Operating activities
|
|
|
|
|
Net income
|
$5,142
|
|
$22,673
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
Depreciation and amortization
|
34,230
|
|
31,011
|
|
Stock-based compensation
|
1,556
|
|
1,289
|
|
Excess tax provision from stock-based compensation
|
-
|
|
4
|
|
Loss (gain) on disposal of assets
|
61
|
|
(3,487)
|
|
Deferred tax expense
|
859
|
|
1,423
|
|
Noncash refinancing expense
|
-
|
|
-
|
|
Noncash interest
|
1,940
|
|
1,956
|
|
Other
|
401
|
|
(504)
|
|
Changes in operating assets and liabilities:
|
-
|
|
-
|
|
Accounts receivable
|
(5,338)
|
|
4,137
|
|
Inventory
|
(1,929)
|
|
(2,668)
|
|
Prepaid expenses and other assets
|
487
|
|
4,705
|
|
Accounts payable and accrued liabilities
|
5,840
|
|
5,562
|
|
Income taxes
|
(1,330)
|
|
(2,582)
|
|
Other noncurrent liabilities
|
388
|
|
1,106
|
|
Net cash provided by operating activities
|
42,307
|
|
64,625
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
Additions to property and equipment
|
(46,431)
|
|
(48,740)
|
|
Proceeds from investment grant
|
479
|
|
-
|
|
Proceeds from sale of subsidiary, net
|
-
|
|
3,846
|
|
Proceeds from sale of property and equipment
|
202
|
|
950
|
|
Net cash used in investing activities
|
(45,750)
|
|
(43,944)
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
Borrowings on revolving lines of credit
|
88,872
|
|
74,411
|
|
Payments on revolving lines of credit
|
(90,935)
|
|
(85,474)
|
|
Borrowings on long-term debt
|
-
|
|
34,389
|
|
Payments on long-term debt and capital leases
|
(5,246)
|
|
(36,591)
|
|
Payment of debt issuance costs
|
(266)
|
|
-
|
|
Proceeds from the exercise of stock options
|
59
|
|
742
|
|
Excess tax provision from stock-based compensation
|
-
|
|
(4)
|
|
Net cash used in financing activities
|
(7,516)
|
|
(12,527)
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
(426)
|
|
(1,206)
|
|
Net (decrease) increase in cash
|
(11,385)
|
|
6,948
|
|
Cash at beginning of fiscal year
|
24,994
|
|
18,046
|
|
Cash at end of fiscal year
|
$13,609
|
|
$24,994
|
|
|
|
|
|
|
Supplemental information:
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
Interest
|
$14,850
|
|
$15,255
|
|
Taxes
|
$891
|
|
$7,192
|
|
Supplemental information for non-cash investing and financing
activities:
|
|
|
|
|
Purchases of property and equipment (included in accounts payable)
|
$1,386
|
|
$4,918
|
|
Capital lease obligation incurred
|
$541
|
|
$513
|
|
|
|
|
|
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 common 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 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 Company defines adjusted net income as net income (loss) available
to common shareholders before distributions accumulated to preferred
shareholders, stock-based compensation and other costs in connection
with our initial public offering, restructuring charges, losses on
extinguishment of debt, certain gains on disposal of assets and the tax
impact of these adjustments and other unusual or infrequent tax items.
The Company defines adjusted net income per common share – diluted as
adjusted net income divided by the diluted weighted average common
shares outstanding. The Company uses adjusted net income and adjusted
net income per common share – diluted 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.
Additionally, this press release also refers to Elfa third party net
sales after the conversion of Elfa’s net sales from Swedish krona to
U.S. dollars using the prior year’s conversion rate. The Company
believes the disclosure of Elfa third party net sales without the
effects of currency exchange rate fluctuations helps investors
understand the Company’s underlying performance.
|
|
|
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 common share with the
most directly comparable GAAP financial measures of GAAP net income
(loss) available to common shareholders and GAAP net income (loss) per
diluted common share.
|
|
|
Thirteen
|
|
Thirteen
|
|
Fifty-two
|
|
Fifty-two
|
|
Weeks Ended
|
Weeks Ended
|
Weeks Ended
|
Weeks Ended
|
|
|
|
February 27,
|
|
February 28,
|
|
February 27,
|
|
February 28,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$9,399
|
|
$13,048
|
|
$5,142
|
|
$22,673
|
|
Distributions accumulated to preferred shareholders
|
|
-
|
|
-
|
|
-
|
|
-
|
|
IPO related stock-based compensation
|
|
-
|
|
-
|
|
-
|
|
-
|
|
IPO costs
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Restructuring charges
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Loss (gain) on disposal of subsidiary and real estate
|
|
-
|
|
149
|
|
-
|
|
(3,681)
|
|
Loss on extinguishment of debt
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Certain taxes
|
|
-
|
|
(1,440)
|
|
-
|
|
(2,491)
|
|
Adjusted net income
|
|
$9,399
|
|
$11,757
|
|
$5,142
|
|
$16,501
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding – diluted
|
|
47,986,975
|
|
48,372,125
|
|
47,985,717
|
|
48,520,865
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income per diluted common share
|
|
$0.20
|
|
$0.24
|
|
$0.11
|
|
$0.34
|
|
|
|
|
|
|
|
|
|
|
The table below reconciles the non-GAAP financial measure Adjusted
EBITDA with the most directly comparable GAAP financial measure of GAAP
net income (loss).
|
|
|
Thirteen
|
|
Thirteen
|
|
Fifty-two
|
|
Fifty-two
|
|
Weeks Ended
|
|
Weeks Ended
|
|
Weeks Ended
|
|
Weeks Ended
|
|
|
|
February 27,
|
|
February 28,
|
|
February 27,
|
|
February 28,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Net income
|
|
$9,399
|
|
$13,048
|
|
$5,142
|
|
$22,673
|
|
Depreciation and amortization
|
|
8,981
|
|
8,412
|
|
34,230
|
|
31,011
|
|
Interest expense, net
|
|
4,199
|
|
4,155
|
|
16,810
|
|
17,105
|
|
Income tax expense
|
|
4,822
|
|
4,403
|
|
2,909
|
|
7,193
|
|
EBITDA
|
|
$27,401
|
|
$30,018
|
|
$59,091
|
|
$77,982
|
|
Pre-opening costs
|
|
2,163
|
|
1,340
|
|
9,033
|
|
8,283
|
|
Noncash rent
|
|
(256)
|
|
(427)
|
|
(1,844)
|
|
(374)
|
|
Stock-based compensation
|
|
392
|
|
339
|
|
1,556
|
|
1,289
|
|
Foreign exchange losses (gains)
|
|
54
|
|
1
|
|
241
|
|
(171)
|
|
Other adjustments
|
|
23
|
|
(19)
|
|
82
|
|
1,221
|
|
Adjusted EBITDA
|
|
$29,777
|
|
$31,252
|
|
$68,159
|
|
$88,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Container Store Group, Inc.
Recast consolidated statements of operations (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except share and
|
|
Thirteen
|
|
Thirteen
|
|
Thirteen
|
|
Thirty-nine
|
|
per share amounts)
|
|
Weeks Ended
|
|
Weeks Ended
|
|
Weeks Ended
|
|
Weeks Ended
|
|
|
|
July 4,
|
|
October 3,
|
|
January 2,
|
|
January 2,
|
|
|
|
2015
|
|
2015
|
|
2016
|
|
2016
|
|
Net sales
|
|
$169,958
|
|
$204,412
|
|
$212,836
|
|
$587,206
|
|
Cost of sales (excluding depreciation and amortization)
|
|
70,447
|
|
86,139
|
|
87,402
|
|
243,988
|
|
Gross profit
|
|
99,511
|
|
118,273
|
|
125,434
|
|
343,218
|
|
Selling, general, and administrative expenses (excluding
depreciation and amortization)
|
|
94,284
|
|
96,068
|
|
103,867
|
|
294,219
|
|
Stock-based compensation
|
|
327
|
|
373
|
|
488
|
|
1,188
|
|
Pre-opening costs
|
|
1,640
|
|
3,532
|
|
1,784
|
|
6,956
|
|
Depreciation and amortization
|
|
8,231
|
|
8,393
|
|
9,081
|
|
25,705
|
|
Other expenses
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Loss (gain) on disposal of assets
|
|
10
|
|
(3)
|
|
58
|
|
65
|
|
(Loss) income from operations
|
|
(4,981)
|
|
9,910
|
|
10,156
|
|
15,085
|
|
Interest expense, net
|
|
4,173
|
|
4,232
|
|
4,209
|
|
12,614
|
|
(Loss) income before taxes
|
|
(9,154)
|
|
5,678
|
|
5,947
|
|
2,471
|
|
(Benefit) provision for income taxes
|
|
(3,366)
|
|
2,336
|
|
2,023
|
|
993
|
|
Net (loss) income
|
|
($5,788)
|
|
$3,342
|
|
$3,924
|
|
$1,478
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per common share - basic and diluted
|
|
($0.12)
|
|
$0.07
|
|
$0.08
|
|
$0.03
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding - basic
|
|
47,983,785
|
|
47,986,401
|
|
47,986,975
|
|
47,985,720
|
|
Weighted-average common shares outstanding - diluted
|
|
47,983,785
|
|
47,986,972
|
|
47,986,975
|
|
47,985,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Container Store Group, Inc.
Recast selected consolidated balance sheet data (unaudited)
|
|
|
|
|
|
|
As of
|
|
(In thousands)
|
|
|
July 4, 2015
|
|
October 3, 2015
|
|
January 2, 2016
|
|
Cash
|
|
|
$8,397
|
|
$7,397
|
|
$20,953
|
|
Inventory
|
|
|
109,246
|
|
112,115
|
|
101,899
|
|
Total assets
|
|
|
784,420
|
|
791,536
|
|
792,209
|
|
Long-term debt
|
|
|
353,091
|
|
351,792
|
|
355,445
|
|
Stockholders' equity
|
|
|
198,052
|
|
201,359
|
|
205,048
|
|
|
|
|
|
|
|
|
|
|
|
|
The Container Store Group, Inc.
Recast selected consolidated cash flow data (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen
|
|
Twenty-six
|
|
Thirty-nine
|
|
|
|
Weeks Ended
|
|
Weeks Ended
|
|
Weeks Ended
|
|
|
|
July 4,
|
|
October 3,
|
|
January 2,
|
|
(In thousands)
|
|
2015
|
|
2015
|
|
2016
|
|
Cash flows (used in) provided by operating activities
|
|
($16,409)
|
|
($1,644)
|
|
$22,065
|
|
Cash flows used in investing activities
|
|
(12,008)
|
|
(22,789)
|
|
(31,607)
|
|
Cash flows provided by financing activities
|
|
24,800
|
|
20,376
|
|
19,303
|
|
Effect of exchange rate changes on cash
|
|
495
|
|
(65)
|
|
(327)
|
|
Net (decrease) increase in cash
|
|
(3,122)
|
|
(4,122)
|
|
9,434
|
|
Cash at beginning of fiscal period
|
|
11,519
|
|
11,519
|
|
11,519
|
|
Cash at end of fiscal period
|
|
8,397
|
|
7,397
|
|
20,953
|
|
|
|
|
|
|
|
|
|
|
|
The Container Store Group, Inc.
Recast Reconciliation of GAAP to Non-GAAP Financial Measures
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen
|
|
Thirteen
|
|
Thirteen
|
|
Thirty-nine
|
|
Weeks Ended
|
|
Weeks Ended
|
|
Weeks Ended
|
|
Weeks Ended
|
|
|
|
July 4,
|
|
October 3,
|
|
January 2,
|
|
January 2,
|
|
(In thousands)
|
|
2015
|
|
2015
|
|
2016
|
|
2016
|
|
Net (loss) income
|
|
($5,788)
|
|
$3,342
|
|
$3,924
|
|
$1,478
|
|
Depreciation and amortization
|
|
8,231
|
|
8,393
|
|
9,081
|
|
25,705
|
|
Interest expense, net
|
|
4,173
|
|
4,232
|
|
4,209
|
|
12,614
|
|
Income tax (benefit) expense
|
|
(3,366)
|
|
2,336
|
|
2,023
|
|
993
|
|
EBITDA
|
|
3,250
|
|
18,303
|
|
19,237
|
|
40,790
|
|
Pre-opening costs
|
|
1,640
|
|
3,532
|
|
1,784
|
|
6,956
|
|
Noncash rent
|
|
(670)
|
|
(311)
|
|
(508)
|
|
(1,489)
|
|
Stock-based compensation
|
|
327
|
|
373
|
|
488
|
|
1,188
|
|
Foreign exchange losses (gains)
|
|
176
|
|
(44)
|
|
141
|
|
273
|
|
Other adjustments
|
|
14
|
|
16
|
|
22
|
|
52
|
|
Adjusted EBITDA
|
|
4,737
|
|
21,869
|
|
21,164
|
|
47,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Container Store Group, Inc.
Recast Operating Data (unaudited)
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
|
July 4,
|
|
October 3,
|
|
January 2,
|
|
|
|
|
|
2015
|
|
2015
|
|
2016
|
|
|
|
Store count
|
|
72
|
|
75
|
|
77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen
|
|
Thirteen
|
|
Thirteen
|
|
Thirty-nine
|
|
|
|
Weeks Ended
|
|
Weeks Ended
|
|
Weeks Ended
|
|
Weeks Ended
|
|
|
|
July 4,
|
|
October 3,
|
|
January 2,
|
|
January 2,
|
|
|
|
2015
|
|
2015
|
|
2016
|
|
2016
|
|
Comparable store sales growth for the period(1)
|
|
-1.7%
|
|
1.0%
|
|
-2.1%
|
|
-0.9%
|
|
|
|
|
|
|
|
|
|
|
(1) A store is included in the comparable store sales calculation on the
first day of the sixteenth full fiscal month following the store’s
opening. When a store is relocated, we continue to consider sales from
that store to be comparable store sales. Net sales from our website and
call center are also included in calculations of comparable store sales.
The comparable store sales growth operating measure in a given period is
based on merchandise and service orders placed in that period, excluding
shipping and delivery, which may not always reflect when the merchandise
and services are received by the customer. The comparable store sales
growth metric is an operating measure intended only as supplemental
information and is not a substitute for net sales presented in
accordance with generally accepted accounting principles (“GAAP”).
View source version on businesswire.com: http://www.businesswire.com/news/home/20160425006347/en/
Source: The Container Store Group, Inc.