Investor Relations
NYSE: TCS 7.46 +0.27(+3.75%) Market Open: 7.26 Market Close: 7.19 52 Week High: 14.25 52 Week Low: 6.70 Jun 24, 2022 04:00 PM (Prices delayed 20 mins)

The Container Store Group, Inc. Announces Fourth Quarter and Full Fiscal Year 2021 Financial Results

05/17/2022

Highest full-year sales in history, with consolidated net sales of $1.1 billion, up 10.5% compared to fiscal 2020 and up 19.5% compared to fiscal 2019;

Highest full-year earnings per diluted share in history, with earnings per diluted share of $1.62 compared to $1.17 in fiscal 2020 and $0.30 in fiscal 2019; Adjusted earnings per diluted share* of $1.65 compared to $1.24 in fiscal 2020 and $0.30 in fiscal 2019;

Fourth quarter consolidated net sales of $305.5 million, down 2.9% compared to fourth quarter of fiscal 2020 (decrease driven by 580 basis points impact of 53rd week in the fourth quarter of fiscal 2020) and up 26.6% compared to fourth quarter of fiscal 2019;

Earnings per diluted share of $0.46 compared to $0.69 in the fourth quarter of fiscal 2020 and $0.26 in the fourth quarter of fiscal 2019; Adjusted earnings per diluted share* of $0.46 compared to $0.71 in the fourth quarter of fiscal 2020 and $0.26 in the fourth quarter of fiscal 2019

COPPELL, Texas--(BUSINESS WIRE)-- The Container Store Group, Inc. (NYSE: TCS) (the “Company”), today announced its financial results for the fourth quarter and fiscal year ended April 2, 2022, outlook for fiscal 2022, and long-term targets. The fourth quarter and full fiscal year 2021 consisted of 13 weeks and 52 weeks, respectively. The fourth quarter and full fiscal year 2020 consisted of 14 weeks and 53 weeks, respectively. The fourth quarter and full fiscal year 2019 consisted of 13 weeks and 52 weeks, respectively.

Satish Malhotra, Chief Executive Officer and President of The Container Store, commented, “We are very pleased with our stronger than expected fourth quarter performance which capped off the best year of sales and profitability in company history. The results demonstrate the progress we are making toward our goal of doubling our sales to $2 billion, and in fiscal 2021 we proudly exceeded $1 billion in sales for the first time. In the fourth quarter of fiscal 2021, custom closet sales were up 3.6% when compared to fiscal 2020 driven by our successful Transform with Elfa event, despite limiting the depth and breadth of the promotions. On 2/22/22, we launched our new branding campaign, Welcome to The Organization, with a 22% off welcome offer that drove a record-breaking single-day sales. We followed up the branding campaign with the launch of a reimagined loyalty program, Organized Insider, and our first mobile app. Fiscal 2021 was a banner year that we believe has established a solid foundation for growth at The Container Store.”

Mr. Malhotra concluded, “While fiscal 2022 will be a unique year as we contend with a dynamic macro backdrop, we will focus on our strategic initiatives to drive growth and market share gains. We will continue to emphasize the power of organization and demonstrate The Container Store’s leadership within the $20 billion addressable market of home storage and organization. With only 5% of total market share today, we are confident in the opportunity ahead to grow sales to $2 billion by fiscal 2027. We are excited to return to store growth with a plan to open two new stores in fiscal 2022, and a plan for an additional 74 new stores by fiscal 2027. This growth coupled with our more productive store base, and disciplined expense management is expected to result in low double digit operating margins over time as inflationary headwinds abate.”

Fourth Quarter Fiscal 2021 Results

For the fourth quarter (thirteen weeks) ended April 2, 2022:

  • Consolidated net sales were $305.5 million, down 2.9%compared to the fourth quarter of fiscal 2020. The 53rd week of fiscal 2020 contributed approximately $17.7 million in net sales and 580 basis points of the decrease when comparing the fourth quarter of fiscal 2021 to the fourth quarter of fiscal 2020. Compared to the fourth quarter of fiscal 2019, consolidated net sales increased 26.6%.
    • Net sales in The Container Store retail business (“TCS”) were $286.5 million, a decrease of 2.6%with general merchandise categories down 8.7%, contributing 440of the basis points decrease, and Custom Closets up 3.6%contributing 180basis points of the increase. Compared to the fourth quarter of fiscal 2019, TCS net sales were up 27.8%, with Custom Closets up 26.6%, contributing 1420 basis points of the increase, and general merchandise categories up 29.3%, contributing 1360 basis points of the increase.
    • Our online sales decreased 25.0% compared to the fourth quarter of fiscal 2020 and increased 29.1% compared to the fourth quarter of fiscal 2019.
    • Elfa International AB (“Elfa”) third-party net sales were $19.1 million, down 7.1% compared to the fourth quarter of fiscal 2020 and up 10.4% compared to the fourth quarter of fiscal 2019. Excluding the impact of foreign currency translation, Elfa third-party net sales were up 1.8%.
    • As a result of the impact of the COVID-19 pandemic on our Company’s stores in fiscal 2019 and fiscal 2020 and the Company’s policy of excluding extended store closures from its comparable sales calculation, the Company does not believe that comparable store sales is a meaningful metric to present for the fourth quarter of fiscal 2021.
  • Consolidated gross margin was 57.0%, a decrease of 230basis points, compared to the fourth quarter of fiscal 2020. TCS gross margin decreased 10basis points to 57.0%primarily due to increased freight and commodity costs, partially offset by less promotional activity and decreased shipping costs as a result of a lower mix of online sales in the fourth quarter of fiscal 2021. Elfa gross margin decreased 750 basis points primarily due to higher direct material costs.
  • Consolidated selling, general and administrative expenses (“SG&A”) increased by 3.0%to $127.1 million in the fourth quarter of fiscal 2021 from $123.4 millionin the fourth quarter of fiscal 2020. SG&A as a percentage of net sales increased 240basis points from 39.2%to 41.6% primarily due to increased marketing costs, increased compensation and benefit costs, as well as deleverage on lower sales during the fourth quarter of fiscal 2021.
  • Consolidated net interest expense decreased 14.8%to $3.2 million in the fourth quarter of fiscal 2021 from $3.7millionin the fourth quarter of fiscal 2020. The decrease was primarily due to a lower principal balance on the Senior Secured Term Loan Facility.
  • The effective tax rate was 31.5% in the fourth quarter of fiscal 2021, as compared to 25.8%in the fourth quarter of fiscal 2020. The increase in the effective tax rate was primarily due to the impact of discrete items on lower pre-tax income in the fourth quarter of fiscal 2021.
  • Net income was $23.2 million, or $0.46 per diluted share, in the fourth quarter of fiscal 2021 compared to $35.1 million, or $0.69, per diluted share in the fourth quarter of fiscal 2020. Adjusted net income* was $23.2 million, or $0.46 per diluted share, in the fourth quarter of fiscal 2021 compared to adjusted net income* of $35.7 million, or $0.71per diluted share in the fourth quarter of fiscal 2020. The 53rd week contributed approximately $0.07 of incremental EPS and Adjusted EPS in the fourth quarter of fiscal 2020.
  • Adjusted EBITDA* was $46.4 million in the fourth quarter of fiscal 2021 compared to $59.5 million in the fourth quarter of fiscal 2020. The 53rd week contributed approximately $5.3 million in adjusted EBITDA.

For the fiscal year (fifty-two weeks) ended April 2, 2022:

  • Consolidated net sales were $1.1 billion, up 10.5% as compared to fiscal 2020 and up 19.5% compared to fiscal 2019. The 53rd week of fiscal 2020 contributed approximately $17.7 million in net sales.
    • Net sales for the TCS segment were $1.0 billion, up 10.8%,with Custom Closets up 16.0%, contributing 740basis points of the increase, and general merchandise categories up 6.4%, contributing 340basis points of the increase. Compared to fiscal 2019, TCS net sales were up 20.0%, with Custom Closets up 22.8%, contributing 1080 basis points of the increase, and general merchandise categories up 17.5%, contributing 920 basis points of the increase.
    • Our online sales decreased 35.5% compared to fiscal 2020 and increased 35.1% compared to fiscal 2019.
    • Elfa third-party net sales were $70.9 million, up 5.9% compared to fiscal 2020 and up 11.5% compared to fiscal 2019. Excluding the impact of foreign currency translation, Elfa third-party net sales were up 5.0% compared to fiscal 2020.
  • Consolidated gross margin was 58.2%, an increase of 60 basis points compared to fiscal 2020. TCS gross margin increased 150 basis pointsto 57.6%, primarily due to less promotional activity and decreased shipping costs as a result of a lower mix of online sales, partially offset by increased freight and commodity costs in fiscal 2021. Elfa gross margin decreased 900 basis points primarily due to higher direct material costs.
  • Consolidated SG&A increased by 10.5% to $471.6 million from $426.8 million in fiscal 2020. However, SG&A as a percentage of net sales remained flat at 43.1%. During fiscal 2021, leverage of occupancy costs on higher sales was partially offset by increased compensation and benefit costs. Additionally, fiscal 2020 benefited from fixed cost leverage of approximately 30 basis points associated with $17.7 million of incremental sales in the 53rd week.
  • Consolidated net interest expense decreased 26.1% to $12.8 million in fiscal 2021 from $17.3 million in fiscal 2020. The decrease is primarily due to a lower principal balance on the Senior Secured Term Loan Facility combined with lower interest rates and decreased borrowings on the asset-based revolving credit agreement. Also, in fiscal 2020, the Company amended its Senior Secured Term Loan Facility and incurred a loss on extinguishment of debt of $0.9 million.
  • The effective tax rate was 27.5% for fiscal 2021 as compared to 27.9% in fiscal 2020. The decrease in the effective tax rate is primarily due to the impact of discrete items on higher pre-tax income in fiscal 2021.
  • Net income was $81.7 million, or $1.62 per diluted share, in fiscal 2021 compared to net income of $58.3 million, or $1.17 per diluted share in fiscal 2020. Adjusted net income* was $82.9 million, or $1.65 per diluted share in fiscal 2021, compared to adjusted net income* of $61.8 million, or $1.24 per diluted sharein fiscal 2020. The 53rd week contributed approximately $0.07 of incremental EPS and Adjusted EPS in fiscal 2020.
  • Adjusted EBITDA* was $159.0 million in fiscal 2021 compared to $150.5 million in fiscal 2020. The 53rd week contributed approximately $5.3 million in adjusted EBITDA.

* See Reconciliation of GAAP to Non-GAAP Financial Measures table.
Amount or percentage is inclusive of a 53rd week in fiscal 2020: $17.7 million in net sales, $5.3 million in adjusted EBITDA, and $0.07 in EPS and adjusted EPS.

New and Existing Stores

During fiscal 2021, the Company opened one new store in Annapolis, Maryland. As of April 2, 2022, the Company store base was 94 compared to 93 stores as of April 3, 2021.

Balance sheet and liquidity highlights:

(In thousands)

 

April 2, 2022

 

April 3, 2021

Cash

 

$

14,252

 

$

17,687

Total debt, net of deferred financing costs

 

$

162,450

 

$

165,984

Liquidity (1)

 

$

121,060

 

$

126,771

Free cash flow (*)

 

$

23,601

 

$

119,483

____________________

(1) Cash plus availability on revolving credit facilities.

Outlook

The Company today provided the following financial outlook for the fiscal year ending on April 1, 2023:

Consolidated net sales

Approximately $1.125 billion

Comparable store sales growth

Low-single digits

Earnings per diluted share

$1.20 to $1.30

Assumed fully diluted shares

51 million

Capital expenditures

$60 to $65 million

Planned store openings (1)

2

The Company also provided the following financial outlook for the fiscal first quarter ending on July 2, 2022:

Consolidated net sales growth

Mid-single digits

Comparable store sales growth

Mid-single digits

Earnings per diluted share

$0.15 to $0.20

Assumed fully diluted shares

51 million

Planned store openings

None

(1)Planned smaller footprint store openings in fiscal 2022 are as follows:

  • Colorado Springs, CO in the fall of calendar 2022
  • Salem, NH in the winter of calendar 2022

Long-Term Financial Targets

As part of today’s enhanced earnings event, the Company provided long-term financial targets. The Company expects to achieve $2 billion in consolidated net sales and more than double our earnings per diluted share by the end of fiscal 2027. Over this period of time, the Company expects to drive low double-digit annual sales growth, which encompasses low-single digit comparable store sales growth, combined with the expectation to open 76 new stores by the end of fiscal 2027. Additionally, the Company expects to spend approximately 5.5% to 6.0% of annual net sales on capital expenditures during this timeframe.

Conference Call Information

A conference call to discuss fourth quarter and full year fiscal 2021 financial results is scheduled for today, May 17, 2022, 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 13728571. The replay will be available until June 17, 2022.

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 regarding our future opportunities; our goals, strategies, priorities and initiatives; sales trends, momentum and targets; and our anticipated financial performance and long term targets.

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: the COVID-19 pandemic and the associated impact on our business, results of operations and financial condition; our ability to continue to lease space on favorable terms; costs and risks relating to new store openings; quarterly and seasonal fluctuations in our operating results; cost increases that are beyond our control; our inability to protect our brand; our failure or inability to protect our intellectual property rights; overall decline in the health of the economy, consumer spending, and the housing market; our inability to source and market new products to meet consumer preferences; failure to successfully anticipate consumer preferences and demand; competition from other stores and internet-based competition; vendors may sell similar or identical products to our competitors; our and our vendors’ vulnerability to natural disasters and other unexpected events; disruptions at our Elfa manufacturing facilities; deterioration or change in vendor relationships or events that adversely affect our vendors or their ability to obtain financing for their operations, including COVID-19; product recalls and/or product liability, as well as changes in product safety and other consumer protection laws; risks relating to operating multiple distribution centers; our dependence on foreign imports for our merchandise; our reliance upon independent third party transportation providers; our inability to effectively manage our online sales; 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; damage to, or interruptions in, our information systems as a result of external factors, working from home arrangements, staffing shortages and difficulties in updating our existing software or developing or implementing new software; 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; fluctuations in currency exchange rates; our inability to maintain sufficient levels of cash flow to meet growth expectations; our fixed lease obligations; 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; changes to global markets and inability to predict future interest expenses; 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; violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery and anti-kickback laws; impairment charges and effects of changes in estimates or projections used to assess the fair value of our assets; effects of tax reform and other tax fluctuations; significant fluctuations in the price of our common stock; substantial future sales of our common stock, or the perception that such sales may occur, which could depress the price of our common stock; risks related to being a public company; our performance meeting guidance provided to the public; anti-takeover provisions in our governing documents, which could delay or prevent a change in control; acquisition-related risks and our failure to establish and maintain effective internal controls.

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, (the “SEC”) on June 3, 2021 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 Group, Inc. (NYSE: TCS) is the nation’s leading specialty retailer of storage and organization products and solutions and custom closets – a concept they originated in 1978. Today, with locations nationwide, the retailer offers more than 11,000 products designed to transform lives through the power of organization.

Visit www.containerstore.com for more information about products, store locations, services offered and real-life inspiration.

Follow The Container Store on Facebook, Twitter, Instagram, TikTok, YouTube, Pinterest and LinkedIn.

The Container Store Group, Inc.

Consolidated statements of operations

 

 

 

 

 

 

 

 

 

 

 

Fiscal Quarter Ended

 

Fiscal Year Ended

 

 

April 2,

 

April 3,

 

April 2,

 

April 3,

(In thousands, except share and per share amounts)

 

2022

 

2021

 

2022

 

2021

 

 

(unaudited)

 

 

 

(unaudited)

 

 

Net sales

 

$

305,546

 

 

$

314,683

 

$

1,094,119

 

 

$

990,088

Cost of sales (excluding depreciation and amortization)

 

 

131,519

 

 

 

127,990

 

 

457,882

 

 

 

419,611

Gross profit

 

 

174,027

 

 

 

186,693

 

 

636,237

 

 

 

570,477

Selling, general, and administrative expenses (excluding depreciation and amortization)

 

 

127,108

 

 

 

123,437

 

 

471,586

 

 

 

426,765

Stock-based compensation

 

 

1,104

 

 

 

2,837

 

 

4,263

 

 

 

7,823

Pre-opening costs

 

 

8

 

 

 

915

 

 

694

 

 

 

1,026

Depreciation and amortization

 

 

8,877

 

 

 

8,461

 

 

34,289

 

 

 

34,731

Other (income) expenses

 

 

 

 

 

23

 

 

 

 

 

1,112

(Gain) loss on disposal of assets

 

 

(35

)

 

 

4

 

 

(49

)

 

 

16

Income from operations

 

 

36,965

 

 

 

51,016

 

 

125,454

 

 

 

99,004

Interest expense, net

 

 

3,176

 

 

 

3,728

 

 

12,760

 

 

 

17,268

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

893

Income before taxes

 

 

33,789

 

 

 

47,288

 

 

112,694

 

 

 

80,843

Provision for income taxes

 

 

10,631

 

 

 

12,204

 

 

30,976

 

 

 

22,560

Net income

 

$

23,158

 

 

$

35,084

 

$

81,718

 

 

$

58,283

 

 

 

 

 

 

 

 

 

Net income per common share — basic

 

$

0.47

 

 

$

0.72

 

$

1.65

 

 

$

1.20

Net income per common share — diluted

 

$

0.46

 

 

$

0.69

 

$

1.62

 

 

$

1.17

 

 

 

 

 

 

 

 

 

Weighted-average common shares — basic

 

 

49,629,758

 

 

 

48,667,689

 

 

49,447,612

 

 

 

48,537,883

Weighted-average common shares — diluted

 

 

50,286,381

 

 

 

50,537,033

 

 

50,294,118

 

 

 

49,712,637

The Container Store Group, Inc.

Consolidated balance sheets

 

 

 

 

 

April 2,

 

April 3,

(In thousands)

2022

 

2021

Assets

(unaudited)

 

 

Current assets:

 

 

 

Cash

$

14,252

 

$

17,687

Accounts receivable, net

 

30,225

 

 

28,949

Inventory

 

192,783

 

 

130,619

Prepaid expenses

 

11,628

 

 

11,429

Income taxes receivable

 

1,687

 

 

93

Other current assets

 

9,836

 

 

14,547

Total current assets

 

260,411

 

 

203,324

Noncurrent assets:

 

 

 

Property and equipment, net

 

140,198

 

 

131,884

Noncurrent operating lease right-of-use assets

 

347,519

 

 

307,147

Goodwill

 

221,159

 

 

202,815

Trade names

 

224,938

 

 

227,669

Deferred financing costs, net

 

203

 

 

255

Noncurrent deferred tax assets, net

 

865

 

 

2,305

Other assets

 

2,284

 

 

3,070

Total noncurrent assets

 

937,166

 

 

875,145

Total assets

$

1,197,577

 

$

1,078,469

The Container Store Group, Inc.

Consolidated balance sheets (continued)

 

 

 

 

 

April 2,

 

April 3,

(In thousands, except share and per share amounts)

2022

 

2021

Liabilities and shareholders’ equity

(unaudited)

 

 

Current liabilities:

 

 

 

Accounts payable

$

84,059

 

 

$

68,546

 

Accrued liabilities

 

89,004

 

 

 

86,551

 

Current borrowings on revolving lines of credit

 

1,790

 

 

 

 

Current portion of long-term debt

 

2,096

 

 

 

2,166

 

Current operating lease liabilities

 

52,540

 

 

 

50,847

 

Income taxes payable

 

6,026

 

 

 

6,803

 

Total current liabilities

 

235,515

 

 

 

214,913

 

Noncurrent liabilities:

 

 

 

Long-term debt

 

158,564

 

 

 

163,818

 

Noncurrent operating lease liabilities

 

317,345

 

 

 

285,022

 

Noncurrent deferred tax liabilities, net

 

50,493

 

 

 

48,923

 

Other long-term liabilities

 

7,564

 

 

 

12,124

 

Total noncurrent liabilities

 

533,966

 

 

 

509,887

 

Total liabilities

 

769,481

 

 

 

724,800

 

Commitments and contingencies

 

 

 

Shareholders’ equity:

 

 

 

Common stock, $0.01 par value, 250,000,000 shares authorized; 49,635,447 shares issued at April 2, 2022; 48,838,261 shares issued at April 3, 2021

 

496

 

 

 

488

 

Additional paid-in capital

 

874,190

 

 

 

873,048

 

Accumulated other comprehensive loss

 

(27,444

)

 

 

(19,003

)

Retained deficit

 

(419,146

)

 

 

(500,864

)

Total shareholders’ equity

 

428,096

 

 

 

353,669

 

Total liabilities and shareholders’ equity

$

1,197,577

 

 

$

1,078,469

 

The Container Store Group, Inc.

Consolidated statements of cash flows

 

 

 

 

 

 

 

Fiscal Year Ended

 

 

April 2,

 

April 3,

(In thousands)

 

2022

 

2021

 

 

(unaudited)

 

 

Operating activities

 

 

 

 

Net income

 

$

81,718

 

 

$

58,283

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

 

34,289

 

 

 

34,731

 

Stock-based compensation

 

 

4,263

 

 

 

7,823

 

(Gain) loss on disposal of assets

 

 

(49

)

 

 

16

 

Loss on extinguishment of debt

 

 

 

 

 

893

 

Deferred tax expense (benefit)

 

 

3,621

 

 

 

(4,740

)

Non-cash interest

 

 

1,883

 

 

 

1,870

 

Other

 

 

(1,321

)

 

 

161

 

Changes in operating assets and liabilities (exclusive of effects of acquisition):

 

 

 

 

Accounts receivable

 

 

(1,631

)

 

 

(1,497

)

Inventory

 

 

(63,533

)

 

 

(2,403

)

Prepaid expenses and other assets

 

 

(1,474

)

 

 

(3,821

)

Accounts payable and accrued liabilities

 

 

9,814

 

 

 

35,203

 

Net change in lease assets and liabilities

 

 

(6,232

)

 

 

(4,118

)

Income taxes

 

 

(1,811

)

 

 

11,346

 

Other noncurrent liabilities

 

 

(2,547

)

 

 

2,912

 

Net cash provided by operating activities

 

 

56,990

 

 

 

136,659

 

 

 

 

 

 

Investing activities

 

 

 

 

Additions to property and equipment

 

 

(33,389

)

 

 

(17,176

)

Closet Works acquisition, net of cash acquired

 

 

(19,445

)

 

 

 

Investment in non-qualified plan trust

 

 

(362

)

 

 

(182

)

Proceeds from non-qualified plan trust redemptions

 

 

2,708

 

 

 

1,810

 

Proceeds from sale of property and equipment

 

 

66

 

 

 

65

 

Net cash used in investing activities

 

 

(50,422

)

 

 

(15,483

)

 

 

 

 

 

Financing activities

 

 

 

 

Borrowings on revolving lines of credit

 

 

75,167

 

 

 

56,132

 

Payments on revolving lines of credit

 

 

(73,269

)

 

 

(66,227

)

Borrowings on long-term debt

 

 

38,000

 

 

 

200,000

 

Payments on long-term debt

 

 

(45,167

)

 

 

(355,954

)

Payment of debt issuance costs

 

 

 

 

 

(5,579

)

Payment of taxes with shares withheld upon restricted stock vesting

 

 

(4,677

)

 

 

(931

)

Proceeds from the exercise of stock options

 

 

565

 

 

 

496

 

Net cash used in financing activities

 

 

(9,381

)

 

 

(172,063

)

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

(622

)

 

 

819

 

 

 

 

 

 

Net decrease in cash

 

 

(3,435

)

 

 

(50,068

)

Cash at beginning of fiscal period

 

 

17,687

 

 

 

67,755

 

Cash at end of fiscal period

 

$

14,252

 

 

$

17,687

 

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 common share - diluted, 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 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., to assess its financial performance.

The Company presents adjusted net income, adjusted net income per common share - diluted, 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 before restructuring charges, charges related to the impact of COVID-19 on business operations, credits pursuant to the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, severance charges associated with COVID-19, acquisition-related costs, charges related to the closure of Elfa France operations, impairment charges related to intangible assets, loss on extinguishment of debt, certain (gains) losses on disposal of assets, certain management transition costs incurred and benefits realized, and the tax impact of these adjustments and other unusual or infrequent tax items. We define adjusted net income per common share - diluted as adjusted net income divided by the diluted weighted average common shares outstanding. We use adjusted net income and adjusted net income per common share - diluted 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 common share - diluted 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 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 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.

Additionally, this press release refers to the change in 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, which is a financial measure not calculated in accordance with GAAP. The Company believes the disclosure of the change in 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 common share - diluted with the most directly comparable GAAP financial measures of GAAP net income and GAAP net income per common share - diluted.

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Quarter Ended

 

Fiscal Year Ended

 

April 2,

 

April 3,

 

March 28,

 

April 2,

 

April 3,

 

March 28,

 

2022

 

2021

 

2020

 

2022

 

2021

 

2020

Numerator:

 

 

 

 

 

 

 

 

 

 

 

Net income

$

23,158

 

 

$

35,084

 

$

12,528

 

$

81,718

 

 

$

58,283

 

 

$

14,487

 

Management transition costs (a)

 

 

 

 

 

 

 

 

473

 

 

 

1,200

 

 

 

 

Loss on extinguishment of debt (b)

 

 

 

 

 

 

 

 

 

 

 

893

 

 

 

 

Elfa France closure (c)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

402

 

Employee retention credit (d)

 

 

 

 

 

 

 

 

 

 

 

(1,028

)

 

 

 

Acquisition-related costs (e)

 

53

 

 

 

 

 

 

 

745

 

 

 

 

 

 

 

COVID-19 costs (f)

 

11

 

 

 

403

 

 

 

 

203

 

 

 

2,266

 

 

 

 

COVID-19 severance and other (g)

 

17

 

 

 

23

 

 

 

 

17

 

 

 

1,111

 

 

 

 

Taxes (h)

 

(8

)

 

 

168

 

 

 

 

(302

)

 

 

(935

)

 

 

(112

)

Adjusted net income

$

23,231

 

 

$

35,678

 

$

12,528

 

$

82,854

 

 

$

61,790

 

 

$

14,777

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding — diluted

 

50,286,381

 

 

 

50,537,033

 

 

48,397,919

 

 

50,294,118

 

 

 

49,712,637

 

 

 

48,964,564

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share — diluted

$

0.46

 

 

$

0.69

 

$

0.26

 

$

1.62

 

 

$

1.17

 

 

$

0.30

 

Adjusted net income per common share — diluted

$

0.46

 

 

$

0.71

 

$

0.26

 

$

1.65

 

 

$

1.24

 

 

$

0.30

 

____________________
(a)

Costs related to the transition of key executives including signing bonus, severance, and relocation costs recorded as selling, general and administrative expenses, which we do not consider in our evaluation of ongoing performance.

 

(b)

Loss recorded as a result of the Seventh Amendment made to the Senior Secured Term Loan Facility in the third quarter of fiscal 2020, which we do not consider in our evaluation of our ongoing performance.

 

(c)

Charges related to the closure of Elfa France operations in the second quarter of fiscal 2019, which we do not consider in our evaluation of ongoing performance.

 

(d)

Employee retention credit related to the CARES Act recorded in the third quarter of fiscal 2020 as selling, general and administrative expense which we do not consider in our evaluation of ongoing performance

 

(e)

Includes costs incurred in the third and fourth quarter of fiscal 2021 associated with the acquisition of Closet Works on December 30, 2021, all of which are recorded as selling, general and administrative expenses, which we do not consider in our evaluation of ongoing performance.

 

(f)

Includes incremental costs attributable to the COVID-19 pandemic, which primarily consist of sanitization costs in the first quarter of fiscal 2021 and fiscal 2020, and hazard pay for distribution center employees in the first quarter of fiscal 2020, all of which are recorded as selling, general and administrative expenses, which we do not consider in our evaluation of ongoing performance.

 

(g)

Includes costs primarily incurred in the first half of fiscal 2020 associated with the reduction in workforce as a result of the COVID-19 pandemic and the related temporary store closures in fiscal 2020, which we do not consider in our evaluation of ongoing performance.

 

(h)

Tax impact of adjustments to net income that 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 income.

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Quarter Ended

 

Fiscal Year Ended

 

April 2,

 

April 3,

 

March 28,

 

April 2,

 

April 3,

 

March 28,

 

2022

 

2021

 

2020

 

2022

 

2021

 

2020

Net income

$

23,158

 

 

$

35,084

 

 

$

12,528

 

 

$

81,718

 

 

$

58,283

 

 

$

14,487

 

Depreciation and amortization

 

8,877

 

 

 

8,461

 

 

 

10,501

 

 

 

34,289

 

 

 

34,731

 

 

 

38,638

 

Interest expense, net

 

3,176

 

 

 

3,728

 

 

 

5,296

 

 

 

12,760

 

 

 

17,268

 

 

 

21,541

 

Income tax provision

 

10,631

 

 

 

12,204

 

 

 

5,287

 

 

 

30,976

 

 

 

22,560

 

 

 

6,715

 

EBITDA

$

45,842

 

 

$

59,477

 

 

$

33,612

 

 

$

159,743

 

 

$

132,842

 

 

$

81,381

 

Pre-opening costs (a)

 

8

 

 

 

915

 

 

 

2,249

 

 

 

694

 

 

 

1,026

 

 

 

8,237

 

Non-cash lease expense (b)

 

(693

)

 

 

(4,164

)

 

 

(637

)

 

 

(7,115

)

 

 

4,147

 

 

 

(2,169

)

Stock-based compensation (c)

 

1,104

 

 

 

2,837

 

 

 

535

 

 

 

4,263

 

 

 

7,823

 

 

 

3,110

 

Management transition costs (d)

 

 

 

 

 

 

 

 

 

 

473

 

 

 

1,200

 

 

 

 

Loss on extinguishment of debt (e)

 

 

 

 

 

 

 

 

 

 

 

 

 

893

 

 

 

 

Foreign exchange losses (gains) (f)

 

20

 

 

 

(2

)

 

 

(69

)

 

 

(14

)

 

 

200

 

 

 

(167

)

Elfa France closure (g)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

402

 

Employee retention credit (h)

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,028

)

 

 

 

Acquisition-related costs (i)

 

53

 

 

 

 

 

 

 

 

 

745

 

 

 

 

 

 

 

COVID-19 costs (j)

 

11

 

 

 

403

 

 

 

 

 

 

203

 

 

 

2,266

 

 

 

 

Severance and other costs (credits) (k)

 

17

 

 

 

66

 

 

 

5

 

 

 

17

 

 

 

1,154

 

 

 

(23

)

Adjusted EBITDA

$

46,362

 

 

$

59,532

 

 

$

35,695

 

 

$

159,009

 

 

$

150,523

 

 

$

90,771

 

____________________
(a)

Non-capital expenditures associated with opening new stores and relocating stores, and costs associated with opening the second distribution center, including 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 operating lease expense has been above or below our cash operating lease payments. The amount varies depending on the average age of our lease portfolio (weighted for size), as our GAAP operating lease expense on younger leases typically exceeds our cash operating lease payments, while our GAAP operating lease expense on older leases is typically less than our cash operating lease payments. Non-cash lease expense increased in fiscal 2020 due to renegotiated terms with landlords due to COVID-19 that resulted in deferral of $11.9 million of certain cash lease payments, of which all amounts were repaid in fiscal 2021. In the thirteen and fifty-two weeks ended March 28, 2020, lease expenses associated with the opening of the second distribution center were excluded from Non-cash lease expense and included in Pre-opening costs.

 
(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)

Costs related to the transition of key executives including signing bonus, severance, and relocation costs recorded as selling, general and administrative expenses, which we do not consider in our evaluation of ongoing performance.

 
(e)

Loss recorded as a result of the Seventh Amendment made to the Senior Secured Term Loan Facility in the third quarter of fiscal 2020, which we do not consider in our evaluation of our ongoing performance.

 
(f)

Realized foreign exchange transactional gains/losses our management does not consider in our evaluation of our ongoing operations.

 
(g)

Charges related to the closure of Elfa France operations in the second quarter of fiscal 2019, which we do not consider in our evaluation of ongoing performance.

 
(h)

Employee retention credit related to the CARES Act recorded in the third quarter of fiscal 2020 as selling, general and administrative expense which we do not consider in our evaluation of ongoing performance.

 
(i)

Includes costs incurred in the third and fourth quarter of fiscal 2021 associated with the acquisition of Closet Works on December 30, 2021, all of which are recorded as selling, general and administrative expenses, which we do not consider in our evaluation of ongoing performance.

 
(j)

Includes incremental costs attributable to the COVID-19 pandemic, which primarily consist of sanitization costs in the first quarter of fiscal 2021 and fiscal 2020, and hazard pay for distribution center employees in the first quarter of fiscal 2020, all of which are recorded as selling, general and administrative expenses, which we do not consider in our evaluation of ongoing performance.

 
(k)

Includes costs primarily incurred in the first half of fiscal 2020 associated with the reduction in workforce as a result of the COVID-19 pandemic and the related temporary store closures in fiscal 2020, and for fiscal 2019 consists of severance and other charges/credits unrelated to COVID-19, which we do not consider in our evaluation of ongoing performance.

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

 

 

April 2,

 

April 3,

 

 

2022

 

2021

Net cash provided by operating activities

 

$

56,990

 

 

$

136,659

 

Less: Additions to property and equipment

 

 

(33,389

)

 

 

(17,176

)

Free cash flow

 

$

23,601

 

 

$

119,483

 

 

Investors:

ICR, Inc.
Farah Soi/Caitlin Churchill
203-682-8200
Farah.Soi@icrinc.com
Caitlin.Churchill@icrinc.com

or

Media:
The Container Store Group, Inc.
Katelyn Clinton, 972-538-6491
publicrelations@containerstore.com

Source: The Container Store Group, Inc.