Net Sales up 6.9%; Comparable Store Sales up 4.7%
EPS of ($0.14); Adjusted EPS improves to ($0.08) from ($0.11) in the
prior year period
Launches Next-Generation Redesigned Store in Dallas
Raises Fiscal 2018 Outlook
COPPELL, Texas--(BUSINESS WIRE)--
The Container Store Group, Inc. (NYSE: TCS) (the “Company”), today
announced financial results for the first quarter of fiscal 2018 ended
June 30, 2018.
-
Consolidated net sales were $195.8 million, up 6.9%. Net sales in The
Container Store retail business (“TCS”) were $180.1 million, up 7.8%.
Elfa International AB (“Elfa”) third-party net sales were $15.7
million, down 1.9%.
-
Comparable store sales were up 4.7%. This includes an approximate 190
basis point benefit from recognition of Custom Closets orders placed
in the fourth quarter of fiscal 2017 that were delivered and installed
in the first quarter of fiscal 2018.
-
Consolidated net loss and net loss per share (“EPS”) were $6.8 million
and ($0.14) compared with $7.7 million and ($0.16), respectively, in
the first quarter of fiscal 2017. Adjusted net loss per share
(“Adjusted EPS”) was ($0.08) compared with ($0.11) in the first
quarter of fiscal 2017 (see Reconciliation of GAAP to Non-GAAP
Financial Measures table).
-
Adjusted EBITDA, which excludes Optimization Plan costs, among other
adjustments (see Reconciliation of GAAP to Non-GAAP Financial Measures
table), increased 92.7% to $12.4 million from $6.4 million in the
prior year period, primarily driven by consolidated gross margin
expansion of 200 basis points and an 80 basis point improvement in
SG&A expense as a percentage of consolidated net sales.
“We are very pleased that our strong fiscal fourth quarter momentum
carried through the first quarter of fiscal 2018 with improving trends
in our Custom Closets business as well as ongoing positive comparable
store sales contribution from our other product categories, as our sales
revitalization and optimization initiatives continued to deliver
positive results. These broad-reaching initiatives span product and
visual merchandising, marketing campaigns, our stores – including the
exciting redesign of our Dallas flagship store, which was completed in
June 2018 - and e-commerce channels as well as our product costs and
overall expenses,” said Melissa Reiff, Chief Executive Officer.
Reiff added, “We are encouraged by our progress and excited about the
opportunities that lie ahead. Our entire organization is focused on the
disciplined execution of our strategy and each of our initiatives as we
realize our vision to be a beloved brand and the first choice for
customized organization solutions and services. Given our strong start
to the year we are raising our top and bottom line outlook for fiscal
2018.”
New and Existing Stores
During the first quarter of fiscal 2018, the Company opened one new
store in Bridgewater, New Jersey. During the remainder of fiscal 2018,
the Company plans to open one additional location in Oklahoma City,
Oklahoma and also plans to relocate its Cherry Creek store in Denver,
Colorado and its Tysons Corner, Virginia store.
First Quarter Fiscal 2018 Results
For the first quarter (thirteen weeks) ended June 30, 2018:
-
Consolidated net sales were $195.8 million, up 6.9% as compared to the
first quarter of fiscal 2017. Net sales at TCS were $180.1 million, up
7.8%, with the increase driven by a comparable store sales increase of
4.7%, as well as incremental net sales from new stores. Elfa
third-party net sales were $15.7 million, down 1.9% compared to the
first quarter ended July 1, 2017, primarily due to lower sales in
Nordic and other markets, partially offset by the positive impact of
foreign currency translation during the quarter which increased
third-party net sales by 1.2%.
-
Consolidated gross margin was 58.6%, an increase of 200 basis points
compared to the first quarter of fiscal 2017. TCS gross margin
increased 140 basis points to 57.9%, primarily due to lower cost of
goods associated with the Optimization Plan. Elfa gross margin
declined 170 basis points primarily due to higher direct materials
costs, partially offset by production efficiencies. On a consolidated
basis, gross margin increased 200 basis points primarily due to
increased sales of higher-margin elfa® products during the first
quarter of fiscal 2018.
-
Consolidated selling, general and administrative expenses (“SG&A”)
increased by 10.3% to $106.6 million from $96.6 million in the first
quarter of fiscal 2017. SG&A as a percentage of net sales increased
160 basis points. This was primarily due to the final consulting costs
incurred as part of the implementation of the Optimization Plan, which
contributed 240 basis points to the increase in the first quarter of
fiscal 2018. The increase was partially offset by an 80 basis point
improvement in SG&A expense as a percentage of net sales primarily due
to ongoing savings and efficiency efforts.
-
Pre-opening costs decreased to $0.3 million in the first quarter of
fiscal 2018 compared to $1.4 million in the first quarter of fiscal
2017. The Company opened one new store in each of the first quarters
of fiscal 2018 and 2017. The decrease is primarily due to the
incurrence of pre-opening costs in the first quarter of fiscal 2017
for a store that opened early in the second quarter of fiscal 2017.
-
Other expenses decreased to $0.2 million in the first quarter of
fiscal 2018 compared to $3.5 million in the first quarter of fiscal
2017. The decrease is due to severance costs incurred in the first
quarter of fiscal 2017 to implement the Optimization Plan.
-
Consolidated net interest expense increased 87% to $7.9 million in the
first quarter of fiscal 2018 from $4.2 million in the first quarter of
fiscal 2017 due to the amendment of our Senior Secured Term Loan
Facility in fiscal 2017, which increased the applicable interest rate
margins.
-
The effective tax rate was 34.0%, as compared to 37.4% in the first
quarter ended July 1, 2017. The decrease in the effective tax rate is
primarily due to lower statutory rates as a result of the Tax Cuts and
Jobs Act enacted in fiscal 2017, partially offset by a benefit for the
remeasurement of deferred tax balances recorded in the first quarter
of fiscal 2018 as a result of a change in the Swedish tax rate.
-
Net loss was $6.8 million, or ($0.14) per share, in the first quarter
of fiscal 2018 compared to net loss of $7.7 million, or ($0.16) per
share in the first quarter of fiscal 2017. Adjusted net loss was $4.0
million, or ($0.08) per share, in the first quarter of fiscal 2018
compared to adjusted net loss of $5.5 million, or ($0.11) per share in
the first quarter of fiscal 2017 (see Reconciliation of GAAP to
Non-GAAP Financial Measures table).
-
Adjusted EBITDA was $12.4 million in the first quarter of fiscal 2018
compared to $6.4 million in the first quarter of fiscal 2017 (see
Reconciliation of GAAP to Non-GAAP Financial Measures table).
Balance sheet and liquidity highlights:
|
|
|
|
|
|
|
(In thousands)
|
|
June 30, 2018
|
|
July 1, 2017
|
Cash
|
|
$
|
14,102
|
|
|
$
|
7,216
|
|
Total debt, net of deferred financing costs
|
|
$
|
299,707
|
|
|
$
|
324,552
|
|
Liquidity (1)
|
|
$
|
84,710
|
|
|
$
|
87,698
|
|
Free cash flow (2)
|
|
$
|
(7,776
|
)
|
|
$
|
(9,962
|
)
|
______________________
|
(1)
|
|
Cash plus availability on revolving credit facilities
|
(2)
|
|
Represents fiscal first quarter thirteen-week periods only. See
reconciliation of GAAP to Non-GAAP Measures table
|
|
|
|
Outlook
The Company is raising its outlook for fiscal 2018 as follows:
|
|
Current Outlook
|
|
Prior Outlook
|
Net sales
|
|
$890 million to $900 million
|
|
$880 million to $890 million
|
Net new store openings
|
|
4, including 2 relocations
|
|
4, including 2 relocations
|
Comparable store sales
|
|
Up 1.5% to up 2.5%
|
|
Flat to up 1%
|
Net income per common share (1)
|
|
$0.30 to $0.40
|
|
$0.27 to $0.37
|
Adjusted net income per common share (2)
|
|
$0.38 to $0.48
|
|
$0.35 to $0.45
|
Assumed tax rate (3)
|
|
30%
|
|
30%
|
Estimated share count
|
|
49 million
|
|
49 million
|
______________________
|
(1)
|
|
Includes $4.9 million of consulting costs to complete the
fiscal 2017 Optimization Plan, or $0.08 per diluted share, which
was incurred in the first quarter of fiscal 2018.
|
(2)
|
|
See Reconciliation of GAAP to Non-GAAP Financial Measures Table.
|
(3)
|
|
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 first quarter fiscal 2018 financial results
is scheduled for today, July 31, 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 13681548.
The replay will be available until August 31, 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 future opportunities; expectations
regarding our goals, strategies, priorities and initiatives; becoming
the first choice for customized organization solutions and services;
expectations regarding new store openings and relocations; 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 May 31, 2018, 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 statements of operations
|
|
|
|
|
|
|
|
(In thousands, except share and
|
|
Thirteen Weeks Ended
|
per share amounts) (unaudited)
|
|
June 30, 2018
|
|
July 1, 2017
|
Net sales
|
|
$
|
195,823
|
|
|
$
|
183,068
|
|
Cost of sales (excluding depreciation and amortization)
|
|
|
81,052
|
|
|
|
79,458
|
|
Gross profit
|
|
|
114,771
|
|
|
|
103,610
|
|
Selling, general, and administrative expenses (excluding
depreciation and amortization)
|
|
|
106,605
|
|
|
|
96,640
|
|
Stock-based compensation
|
|
|
586
|
|
|
|
494
|
|
Pre-opening costs
|
|
|
346
|
|
|
|
1,386
|
|
Depreciation and amortization
|
|
|
9,337
|
|
|
|
9,542
|
|
Other expenses
|
|
|
193
|
|
|
|
3,534
|
|
Loss on disposal of assets
|
|
|
40
|
|
|
|
51
|
|
Loss from operations
|
|
|
(2,336
|
)
|
|
|
(8,037
|
)
|
Interest expense
|
|
|
7,908
|
|
|
|
4,225
|
|
Loss before taxes
|
|
|
(10,244
|
)
|
|
|
(12,262
|
)
|
Benefit for income taxes
|
|
|
(3,480
|
)
|
|
|
(4,585
|
)
|
Net loss
|
|
$
|
(6,764
|
)
|
|
$
|
(7,677
|
)
|
Net loss per common share - basic and diluted
|
|
$
|
(0.14
|
)
|
|
$
|
(0.16
|
)
|
Weighted-average common shares - basic and diluted
|
|
|
48,138,907
|
|
|
|
48,047,937
|
|
|
|
|
|
|
|
|
|
|
The Container Store Group, Inc.
Consolidated balance sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
March 31,
|
|
July 1,
|
(In thousands)
|
|
2018
|
|
2018
|
|
2017
|
Assets
|
|
(unaudited)
|
|
|
|
|
(unaudited)
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
14,102
|
|
$
|
8,399
|
|
$
|
7,216
|
Accounts receivable, net
|
|
|
24,840
|
|
|
25,528
|
|
|
27,490
|
Inventory
|
|
|
104,135
|
|
|
97,362
|
|
|
105,006
|
Prepaid expenses
|
|
|
10,842
|
|
|
11,281
|
|
|
16,131
|
Income taxes receivable
|
|
|
812
|
|
|
15
|
|
|
668
|
Other current assets
|
|
|
12,577
|
|
|
11,609
|
|
|
13,683
|
Total current assets
|
|
|
167,308
|
|
|
154,194
|
|
|
170,194
|
Noncurrent assets:
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
151,455
|
|
|
158,389
|
|
|
163,876
|
Goodwill
|
|
|
202,815
|
|
|
202,815
|
|
|
202,815
|
Trade names
|
|
|
226,613
|
|
|
229,401
|
|
|
229,009
|
Deferred financing costs, net
|
|
|
294
|
|
|
312
|
|
|
297
|
Noncurrent deferred tax assets, net
|
|
|
2,101
|
|
|
2,404
|
|
|
2,226
|
Other assets
|
|
|
1,777
|
|
|
1,854
|
|
|
1,824
|
Total noncurrent assets
|
|
|
585,055
|
|
|
595,175
|
|
|
600,047
|
Total assets
|
|
$
|
752,363
|
|
$
|
749,369
|
|
$
|
770,241
|
|
|
|
|
|
|
|
|
|
|
The Container Store Group, Inc.
Consolidated balance sheets (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
March 31,
|
|
July 1,
|
(In thousands, except share and per share amounts)
|
|
2018
|
|
2018
|
|
2017
|
Liabilities and shareholders’ equity
|
|
(unaudited)
|
|
|
|
|
(unaudited)
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
52,215
|
|
|
$
|
43,692
|
|
|
$
|
43,445
|
|
Accrued liabilities
|
|
|
69,828
|
|
|
|
70,494
|
|
|
|
69,601
|
|
Revolving lines of credit
|
|
|
889
|
|
|
|
—
|
|
|
|
2,729
|
|
Current portion of long-term debt
|
|
|
7,780
|
|
|
|
7,771
|
|
|
|
5,448
|
|
Income taxes payable
|
|
|
2,019
|
|
|
|
4,580
|
|
|
|
1,297
|
|
Other current liabilities
|
|
|
1,989
|
|
|
|
—
|
|
|
|
—
|
|
Total current liabilities
|
|
|
134,720
|
|
|
|
126,537
|
|
|
|
122,520
|
|
Noncurrent liabilities:
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
291,038
|
|
|
|
277,394
|
|
|
|
316,375
|
|
Noncurrent deferred tax liabilities, net
|
|
|
49,378
|
|
|
|
54,839
|
|
|
|
77,712
|
|
Deferred rent and other long-term liabilities
|
|
|
41,337
|
|
|
|
41,892
|
|
|
|
33,742
|
|
Total noncurrent liabilities
|
|
|
381,753
|
|
|
|
374,125
|
|
|
|
427,829
|
|
Total liabilities
|
|
|
516,473
|
|
|
|
500,662
|
|
|
|
550,349
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value, 250,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
|
|
|
|
48,138,907 shares issued at June 30, 2018; 48,072,187 shares
|
|
|
|
|
|
|
|
|
|
|
|
|
issued at March 31, 2018; 48,052,900 shares issued at July 1, 2017
|
|
|
481
|
|
|
|
481
|
|
|
|
481
|
|
Additional paid-in capital
|
|
|
861,726
|
|
|
|
861,263
|
|
|
|
859,638
|
|
Accumulated other comprehensive loss
|
|
|
(24,239
|
)
|
|
|
(17,316
|
)
|
|
|
(17,401
|
)
|
Retained deficit
|
|
|
(602,078
|
)
|
|
|
(595,721
|
)
|
|
|
(622,826
|
)
|
Total shareholders’ equity
|
|
|
235,890
|
|
|
|
248,707
|
|
|
|
219,892
|
|
Total liabilities and shareholders’ equity
|
|
$
|
752,363
|
|
|
$
|
749,369
|
|
|
$
|
770,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Container Store Group, Inc.
Consolidated statements of cash flows
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
June 30,
|
|
July 1,
|
(In thousands) (unaudited)
|
|
2018
|
|
2017
|
Operating activities
|
|
|
|
|
|
|
Net loss
|
|
$
|
(6,764
|
)
|
|
$
|
(7,677
|
)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
9,337
|
|
|
|
9,542
|
|
Stock-based compensation
|
|
|
586
|
|
|
|
494
|
|
Loss on disposal of assets
|
|
|
40
|
|
|
|
51
|
|
Deferred tax benefit
|
|
|
(3,874
|
)
|
|
|
(4,573
|
)
|
Noncash interest
|
|
|
759
|
|
|
|
480
|
|
Other
|
|
|
—
|
|
|
|
195
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
Accounts receivable
|
|
|
110
|
|
|
|
744
|
|
Inventory
|
|
|
(9,975
|
)
|
|
|
(350
|
)
|
Prepaid expenses and other assets
|
|
|
(198
|
)
|
|
|
(6,565
|
)
|
Accounts payable and accrued liabilities
|
|
|
10,030
|
|
|
|
5,937
|
|
Income taxes
|
|
|
(3,303
|
)
|
|
|
(2,120
|
)
|
Other noncurrent liabilities
|
|
|
(68
|
)
|
|
|
(939
|
)
|
Net cash used in operating activities
|
|
|
(3,320
|
)
|
|
|
(4,781
|
)
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
Additions to property and equipment
|
|
|
(4,456
|
)
|
|
|
(5,181
|
)
|
Proceeds from sale of property and equipment
|
|
|
1
|
|
|
|
2
|
|
Net cash used in investing activities
|
|
|
(4,455
|
)
|
|
|
(5,179
|
)
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
Borrowings on revolving lines of credit
|
|
|
7,581
|
|
|
|
4,876
|
|
Payments on revolving lines of credit
|
|
|
(6,663
|
)
|
|
|
(2,261
|
)
|
Borrowings on long-term debt
|
|
|
15,000
|
|
|
|
5,000
|
|
Payments on long-term debt and capital leases
|
|
|
(1,954
|
)
|
|
|
(1,350
|
)
|
Payment of taxes with shares withheld upon restricted stock vesting
|
|
|
(122
|
)
|
|
|
(39
|
)
|
Net cash provided by financing activities
|
|
|
13,842
|
|
|
|
6,226
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
(364
|
)
|
|
|
214
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
5,703
|
|
|
|
(3,520
|
)
|
Cash at beginning of fiscal period
|
|
|
8,399
|
|
|
|
10,736
|
|
Cash at end of fiscal period
|
|
$
|
14,102
|
|
|
$
|
7,216
|
|
Supplemental information for non-cash investing and financing
activities:
|
|
|
|
|
|
|
Purchases of property and equipment (included in accounts payable)
|
|
$
|
852
|
|
|
$
|
1,148
|
|
Capital lease obligation incurred
|
|
$
|
4
|
|
|
$
|
36
|
|
|
|
|
|
|
|
|
|
|
Note Regarding Non-GAAP Information
This press release includes financial measures that are not calculated
in accordance with GAAP, including adjusted net income (loss), adjusted
net income (loss) per diluted share, 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 (loss), adjusted net income
(loss) 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 (loss) as net income (loss)
available to common shareholders before distributions accumulated to
preferred shareholders, stock-based compensation and other costs in
connection with our IPO, charges related to an Elfa manufacturing
facility closure, impairment charges related to intangible assets,
losses on extinguishment of debt, certain gains on disposal of assets,
certain management transition costs incurred and benefits realized,
charges incurred as part of the implementation of our Optimization Plan,
and the tax impact of these adjustments and other unusual or infrequent
tax items. We define adjusted net income (loss) per diluted share as
adjusted net income (loss) divided by the diluted weighted average
common shares outstanding. We use adjusted net income (loss) and
adjusted net income (loss) per diluted share to supplement GAAP measures
of performance to evaluate the effectiveness of our business strategies,
to make budgeting decisions and to compare our performance against that
of other peer companies using similar measures. We present adjusted net
income (loss) and adjusted net income (loss) per diluted share because
we believe they assist investors in comparing our performance across
reporting periods on a consistent basis by excluding items that we do
not believe are indicative of our core operating performance and because
we believe it is useful for investors to see the measures that
management uses to evaluate the Company.
The Company defines EBITDA as net income (loss) 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 (loss) income and adjusted net (loss) 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
Thirteen Weeks Ended
|
|
Fiscal Year 2018 Outlook
|
|
Ended
|
|
|
June 30, 2018
|
|
July 1, 2017
|
|
Low
|
|
High
|
|
March 31, 2018
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(6,764
|
)
|
|
$
|
(7,677
|
)
|
|
$
|
14,890
|
|
|
|
19,820
|
|
|
$
|
19,428
|
|
Elfa manufacturing facility closure (a)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
803
|
|
Loss on extinguishment of debt (b)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,369
|
|
Optimization Plan implementation charges (c)
|
|
|
4,864
|
|
|
|
3,534
|
|
|
|
4,864
|
|
|
|
4,864
|
|
|
|
11,479
|
|
Taxes (d)
|
|
|
(2,112
|
)
|
|
|
(1,331
|
)
|
|
|
(1,270
|
)
|
|
|
(1,270
|
)
|
|
|
(20,485
|
)
|
Adjusted net (loss) income
|
|
$
|
(4,012
|
)
|
|
$
|
(5,474
|
)
|
|
$
|
18,484
|
|
|
$
|
23,414
|
|
|
$
|
13,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding — diluted
|
|
|
48,138,907
|
|
|
|
48,047,937
|
|
|
|
49,000,000
|
|
|
|
49,000,000
|
|
|
|
48,147,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per diluted share
|
|
$
|
(0.14
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
0.30
|
|
|
$
|
0.40
|
|
|
$
|
0.40
|
|
Adjusted net (loss) income per diluted share
|
|
$
|
(0.08
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
0.38
|
|
|
$
|
0.48
|
|
|
$
|
0.28
|
|
______________________
|
(a)
|
|
Charges related to the closure of an Elfa manufacturing facility in
Lahti, Finland in fiscal 2017, recorded in other expenses, which we
do not consider in our evaluation of our ongoing performance.
|
|
|
|
(b)
|
|
Loss recorded as a result of the amendments made to the Senior
Secured Term Loan Facility and the Revolving Credit Facility in
fiscal 2017, which we do not consider in our evaluation of our
ongoing performance.
|
|
|
|
(c)
|
|
Charges incurred as part of the implementation of our Optimization
Plan, which include certain consulting costs recorded in selling,
general and administrative expenses in fiscal 2018 and fiscal 2017,
cash severance payments associated with the elimination of certain
full-time positions at the TCS segment recorded in other expenses in
fiscal 2017, and cash severance payments associated with
organizational realignment at the Elfa segment recorded in other
expenses in fiscal 2017, which we do not consider in our evaluation
of ongoing performance.
|
|
|
|
(d)
|
|
Tax impact of adjustments to net (loss) income, as well as the
estimated impact of the Tax Cuts and Jobs Act enacted in fiscal 2017
and the tax benefit recorded in the first quarter of fiscal 2018 as
a result of a reduction in the Swedish tax rate, which are
considered to be unusual or infrequent tax items, 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.
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
June 30, 2018
|
|
July 1, 2017
|
Net loss
|
|
$
|
(6,764
|
)
|
|
$
|
(7,677
|
)
|
Depreciation and amortization
|
|
|
9,337
|
|
|
|
9,542
|
|
Interest expense
|
|
|
7,908
|
|
|
|
4,225
|
|
Income tax benefit
|
|
|
(3,480
|
)
|
|
|
(4,585
|
)
|
EBITDA
|
|
$
|
7,001
|
|
|
$
|
1,505
|
|
Pre-opening costs (a)
|
|
|
346
|
|
|
|
1,386
|
|
Noncash rent (b)
|
|
|
(637
|
)
|
|
|
(461
|
)
|
Stock-based compensation (c)
|
|
|
586
|
|
|
|
494
|
|
Foreign exchange losses (gains) (d)
|
|
|
38
|
|
|
|
(76
|
)
|
Optimization Plan implementation charges (e)
|
|
|
4,864
|
|
|
|
3,534
|
|
Other adjustments (f)
|
|
|
193
|
|
|
|
48
|
|
Adjusted EBITDA
|
|
$
|
12,391
|
|
|
$
|
6,430
|
|
|
|
|
|
|
|
|
|
|
______________________
|
(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)
|
|
Charges incurred as part of the implementation of our Optimization
Plan, which include certain consulting costs recorded in selling,
general and administrative expenses in the first quarter of fiscal
2018, cash severance payments associated with the elimination of
certain full-time positions at the TCS segment recorded in other
expenses in the first quarter of fiscal 2017, and cash severance
payments associated with organizational realignment at the Elfa
segment recorded in other expenses in the first quarter of fiscal
2017, which we do not consider in our evaluation of ongoing
performance.
|
|
|
|
(f)
|
|
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.
|
|
Thirteen Weeks Ended
|
|
|
June 30,
|
|
July 1,
|
|
|
2018
|
|
2017
|
Net cash used in operating activities
|
|
$
|
(3,320
|
)
|
|
$
|
(4,781
|
)
|
Less: Additions to property and equipment
|
|
|
(4,456
|
)
|
|
|
(5,181
|
)
|
Free cash flow
|
|
$
|
(7,776
|
)
|
|
$
|
(9,962
|
)
|
View source version on businesswire.com:
https://www.businesswire.com/news/home/20180731005820/en/
Investors:
ICR, Inc.
Farah Soi/Shannon Devine
203-682-8200
Farah.Soi@icrinc.com
Shannon.Devine@icrinc.com
or
Media:
The
Container Store Group, Inc.
Mara Richter, 972-538-6893
publicrelations@containerstore.com
Source: The Container Store Group, Inc.