The Container Store Group, Inc. Announces First Quarter Fiscal 2017 Financial Results
Net Sales up 3.2%; Comparable Store Sales down 1.2%
0.7% of Comparable Store Sales Decline Attributable to Easter Shift
Comparable Store Sales Slightly Positive in June; Continuing Positive in July
SG&A Savings and Efficiency Program and Custom Closets
Continue to Drive Financial Results
Reiterates Fiscal 2017 Earnings Per Share Outlook of $0.25 to $0.35
The Container Store Group, Inc. (NYSE: TCS) (the “Company”), today announced financial results for the first quarter of
fiscal 2017 ended July 1, 2017.
- Consolidated net sales were $183.1 million, up 3.2%. Net sales in The Container Store retail business
(“TCS”) were $167.1 million, up 3.6%. Elfa International AB (“Elfa”) third-party net sales were $16.0 million, down 1.2%,
primarily due to the negative impact of foreign currency translation of 7.2%.
- Comparable store sales were down 1.2%. The Easter timing shift negatively impacted the quarter’s
comparable store sales by approximately 0.7%.
- Consolidated net loss per share was ($0.16) compared with ($0.04) in the first quarter of fiscal
2016. Adjusted net loss per share was ($0.11) compared with ($0.09) in the first quarter of fiscal 2016 (see Reconciliation of
GAAP to Non-GAAP Financial Measures table). Net loss per share and adjusted net loss per share in the first quarter of fiscal
2017 include a $0.01 negative impact related to the Easter timing shift.
“We are pleased with our first quarter fiscal 2017 financial performance and the progress we have made on many fronts. The
quarter’s results were largely as we expected from both a top and bottom line perspective. Our Custom Closets business continues to
positively contribute to our sales and profitability, and we’ve seen sustained sales trend improvement in our other product
categories. In first quarter 2017, our comparable store sales improved as the quarter progressed, moving into slightly positive
territory by June. This improvement continued into July, the first month of our second quarter. Our results reflect some benefits
from the key sales revitalizing initiatives we are working on, as well as the savings and efficiency efforts we launched last year,
and have been building upon this year,” said Melissa Reiff, Chief Executive Officer.
Reiff continued, “Based on our first quarter performance, we are reiterating our previously provided outlook for fiscal 2017.
Looking ahead to the remainder of the year, we intend to remain focused on executing our previously announced Optimization Plan to
drive improvement in sales and profitability. Additionally, we plan to continue our efforts with the key strategic priorities of
the Company, which include customer experience and store formats and design, product and merchandising, customer acquisition and
retention, and investments in our employees.”
New and Existing Stores
During the first quarter of fiscal 2017 the Company opened one new store in Cleveland, Ohio. In addition, the Company opened a
new store in Albuquerque, New Mexico on July 8, 2017. As previously announced, the Company plans to open the following additional
locations during the remainder of fiscal 2017: Livingston, New Jersey; Staten Island, New York; and the relocation of its Chestnut
Hill, Massachusetts store.
First Quarter Fiscal 2017 Results
For the first quarter (thirteen weeks) ended July 1, 2017:
- Consolidated net sales were $183.1 million, up 3.2% as compared to the first quarter of fiscal 2016.
Net sales at TCS were $167.1 million, up 3.6%, with the increase driven by new store net sales, partially offset by a 1.2%
decrease in net sales from comparable stores. Elfa third-party net sales were $16.0 million, down 1.2% compared to the first
quarter ended July 2, 2016, primarily due to the negative impact of foreign currency translation during the quarter which reduced
third-party net sales by 7.2%, partially offset by higher sales in Russia.
- Consolidated gross margin was 56.6%, a decrease of 240 basis points compared to the first quarter of
fiscal 2016. TCS gross margin declined 210 basis points to 56.5% primarily due to a greater portion of sales generated by
merchandise campaigns during the quarter, combined with strong sales growth in lower gross margin business-to-business sales and
higher costs associated primarily with our installation services business. Elfa gross margin declined 310 basis points primarily
due to higher direct materials costs, partially offset by production efficiencies.
- Consolidated selling, general and administrative expenses (“SG&A”) increased by 4.7% to $96.6
million from $92.3 million in the first quarter of fiscal 2016. SG&A as a percentage of net sales increased 80 basis points.
This was primarily due to the reversal of accrued deferred compensation associated with executive employment agreements amended
and restated during the first quarter of fiscal 2016, net of costs incurred to execute the agreements, of $3.9 million, or a 220
basis points benefit in the prior year first quarter. This increase as a result of the prior period benefit was partially offset
by a 140 basis point improvement in SG&A expense as a percentage of net sales, primarily due to ongoing savings and
efficiency efforts, combined with lower self-insurance costs, partially offset by deleveraging of occupancy costs associated with
negative comparable store sales growth, as well as other additional SG&A costs.
- The Company recorded other expenses of $3.5 million in the first quarter of fiscal 2017, which were
related to severance costs incurred to implement the previously announced Optimization Plan.
- Consolidated net interest expense increased slightly to $4.2 million.
- The effective tax rate was 37.4%, as compared to 33.3% in the first quarter ended July 2,
2016. The increase in the effective tax rate is primarily due to a shift in the mix of projected domestic and foreign
earnings.
- Net loss was $7.7 million, or ($0.16) per share, in the first quarter of fiscal 2017 compared to net
loss of $2.1 million, or ($0.04) per share in the first quarter of fiscal 2016. Adjusted net loss was $5.5 million, or ($0.11)
per share, in the first quarter of fiscal 2017 compared to adjusted net loss of $4.2 million, or ($0.09) per share in the first
quarter of fiscal 2016 (see Reconciliation of GAAP to Non-GAAP Financial Measures table).
- Adjusted EBITDA was $6.4 million in the first quarter of fiscal 2017 compared to $12.0 million in the
first quarter of fiscal 2016 (see Reconciliation of GAAP to Non-GAAP Financial Measures table). The Adjusted EBITDA of $12.0
million in the first quarter of fiscal 2016 includes the aforementioned benefit from the impact of amended and restated
employment agreements during the prior year first quarter, net of costs incurred to execute the agreements of $3.9 million.
Balance sheet highlights:
|
|
|
|
|
|
(In thousands) |
|
July 1, 2017 |
|
July 2, 2016 |
Cash |
|
$7,216 |
|
$8,189 |
Total debt, net of deferred financing costs |
|
$324,552 |
|
$337,990 |
Liquidity* |
|
$87,698 |
|
$78,598 |
*Cash plus availability on revolving credit facilities |
Optimization Plan
In May 2017, the Company announced the implementation of a four-part Optimization Plan to drive improved sales and
profitability. This plan includes sales initiatives, certain full-time position eliminations at TCS, organizational realignment at
Elfa and ongoing savings and efficiency efforts. The Company continues to expect to incur pre-tax charges associated with the
Optimization Plan of approximately $9 to $11 million in fiscal 2017, or $0.12 to $0.14 on a per share basis. The expected
annualized pre-tax savings associated with the Optimization Plan continue to be approximately $20 million, of which approximately
$12 to $15 million, or $0.15 to $0.19 on a per share basis, is expected to be realized in fiscal 2017, for an estimated net benefit
of approximately $0.03 to $0.05 on a per share basis.
Outlook
As previously outlined, for fiscal 2017, consolidated net sales are expected to be $830 to $850 million, based on the Company’s
four expected new store openings and a comparable store sales decrease in the low single digit range. Net income is expected to be
$0.25* to $0.35* per common share based on estimated common shares outstanding of 49 million, and includes the aforementioned
Optimization Plan charges and benefits. This assumes a tax rate of approximately 39% for the full year.
Fiscal 2017 adjusted net income is expected to be $0.37* to $0.49* per share, which compares to adjusted net income of $0.27 per
share in fiscal 2016 (see Reconciliation of GAAP to Non-GAAP Financial Measures table).
*Assumes existing debt structure remains in place. As previously disclosed, the Company is currently seeking
opportunities to refinance its debt.
Conference Call Information
A conference call to discuss first quarter fiscal 2017 financial results is scheduled for today, August 2, 2017, at 4:30 PM
Eastern Time. Investors and analysts interested in participating in the call are invited to dial (877) 407-3982 (international
callers please dial (201) 493-6780) approximately 10 minutes prior to the start of the call. A live audio webcast of the conference
call will be available online at investor.containerstore.com.
A taped replay of the conference call will be available within two hours of the conclusion of the call and can be accessed both
online and by dialing (844) 512-2921 (international callers please dial (412) 317-6671). The pin number to access the telephone
replay is 13666342. The replay will be available until September 2, 2017.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995. All statements contained in this press release that do not relate to matters of historical fact should be considered
forward-looking statements, including statements about our expectations regarding our goals, strategies, priorities and
initiatives, including our Optimization Plan and key strategic priorities; expectations regarding new store openings and
relocations; anticipated financial performance and tax rate for fiscal 2017; anticipated charges and savings in connection with our
Optimization Plan; and seeking opportunities to refinance our debt.
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 operating and
financial performance in a given period may not meet the guidance we provided to the public; our inability to manage costs and
risks relating to new store openings; our inability to source and market new products to meet consumer preferences; our failure to
achieve or maintain profitability; our dependence on a single distribution center for all of our stores; effects of a security
breach or cyber-attack of our website or information technology systems; our vulnerability to natural disasters and other
unexpected events; our reliance upon independent third party transportation providers; our inability to protect our brand; our
failure to successfully anticipate consumer preferences and demand; our inability to manage our growth; inability to locate
available retail store sites on terms acceptable to us; our inability to maintain sufficient levels of cash flow to meet growth
expectations; disruptions in the global financial markets leading to difficulty in borrowing sufficient amounts of capital to
finance the carrying costs of inventory to pay for capital expenditures and operating costs; fluctuations in currency exchange
rates; our inability to effectively manage our online sales; competition from other stores and internet based competition; our
inability to obtain merchandise on a timely basis at competitive prices as a result of changes in vendor relationships; vendors may
sell similar or identical products to our competitors; our reliance on key executive management, and the transition in our
executive leadership; our inability to find, train and retain key personnel; labor relations difficulties; increases in health care
costs and labor costs; our dependence on foreign imports for our merchandise; violations of the U.S. Foreign Corrupt Practices Act
and similar worldwide anti bribery and anti-kickback laws; and 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.
These and other important factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K filed with
the Securities and Exchange Commission, or SEC, on June 1, 2017, and our other reports filed with the SEC could cause actual
results to differ materially from those indicated by the forward-looking statements made in this press release. Any such
forward-looking statements represent management’s estimates as of the date of this press release. While we may elect to update such
forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our
views to change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to
the date of this press release.
About The Container Store
The Container Store (NYSE: TCS) is the nation’s leading retailer of storage and organization products — a concept they
originated in 1978. Today, with locations nationwide, the retailer offers more than 11,000 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 (unaudited)
|
|
|
|
|
|
(In thousands, except share and |
|
|
|
|
per share amounts) |
Thirteen Weeks Ended |
|
July 1, 2017 |
|
July 2, 2016 |
Net sales |
|
$183,068 |
|
|
$177,448 |
|
Cost of sales (excluding depreciation and
amortization)
|
|
79,458 |
|
|
72,753 |
|
Gross profit |
|
103,610 |
|
|
104,695 |
|
Selling, general, and administrative
expenses (excluding depreciation and
amortization)
|
|
96,640 |
|
|
92,313 |
|
Stock-based compensation |
|
494 |
|
|
365 |
|
Pre-opening costs |
|
1,386 |
|
|
1,096 |
|
Depreciation and amortization |
|
9,542 |
|
|
9,347 |
|
Other expenses |
|
3,534 |
|
|
549 |
|
Loss (gain) on disposal of assets |
|
51 |
|
|
(3 |
) |
(Loss) income from operations |
|
(8,037 |
) |
|
1,028 |
|
Interest expense |
|
4,225 |
|
|
4,110 |
|
Loss before taxes |
|
(12,262 |
) |
|
(3,082 |
) |
Benefit for income taxes |
|
(4,585 |
) |
|
(1,025 |
) |
Net loss |
|
$(7,677 |
) |
|
$(2,057 |
) |
Net loss per common share - basic and
diluted
|
|
$(0.16 |
) |
|
$(0.04 |
) |
Weighted-average common shares - basic
and diluted
|
|
48,047,937 |
|
|
47,986,975 |
|
The Container Store Group, Inc.
Consolidated balance sheets (unaudited)
|
|
|
|
|
|
|
|
(In thousands, except share and per share amounts) |
|
July 1, |
|
April 1, |
|
July 2, |
|
2017 |
|
2017 |
|
2016 |
Assets |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash |
|
$7,216 |
|
|
$10,736 |
|
|
$8,189 |
|
Accounts receivable, net |
|
27,490 |
|
|
27,476 |
|
|
25,035 |
|
Inventory |
|
105,006 |
|
|
103,120 |
|
|
104,144 |
|
Prepaid expenses |
|
16,131 |
|
|
10,550 |
|
|
14,817 |
|
Income taxes receivable |
|
668 |
|
|
16 |
|
|
770 |
|
Other current assets |
|
13,683 |
|
|
10,787 |
|
|
9,852 |
|
Total current assets |
|
170,194 |
|
|
162,685 |
|
|
162,807 |
|
Noncurrent assets: |
|
|
|
|
|
|
Property and equipment, net |
|
163,876 |
|
|
165,498 |
|
|
173,937 |
|
Goodwill |
|
202,815 |
|
|
202,815 |
|
|
202,815 |
|
Trade names |
|
229,009 |
|
|
226,685 |
|
|
228,699 |
|
Deferred financing costs, net |
|
297 |
|
|
320 |
|
|
389 |
|
Noncurrent deferred tax assets, net |
|
2,226 |
|
|
2,139 |
|
|
1,269 |
|
Other assets |
|
1,824 |
|
|
1,692 |
|
|
1,826 |
|
Total noncurrent assets |
|
600,047 |
|
|
599,149 |
|
|
608,935 |
|
Total assets |
|
$770,241 |
|
|
$761,834 |
|
|
$771,742 |
|
|
|
|
|
|
|
|
Liabilities and shareholders’ equity
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$43,445 |
|
|
$44,762 |
|
|
$51,552 |
|
Accrued liabilities |
|
69,601 |
|
|
60,107 |
|
|
62,220 |
|
Revolving lines of credit |
|
2,729 |
|
|
- |
|
|
5,982 |
|
Current portion of long-term debt |
|
5,448 |
|
|
5,445 |
|
|
5,464 |
|
Income taxes payable |
|
1,297 |
|
|
2,738 |
|
|
- |
|
Total current liabilities |
|
122,520 |
|
|
113,052 |
|
|
125,218 |
|
Noncurrent liabilities: |
|
|
|
|
|
|
Long-term debt |
|
316,375 |
|
|
312,026 |
|
|
326,544 |
|
Noncurrent deferred tax liabilities, net |
|
77,712 |
|
|
80,679 |
|
|
79,922 |
|
Deferred rent and other long-term liabilities |
|
33,742 |
|
|
34,287 |
|
|
33,532 |
|
Total noncurrent liabilities |
|
427,829 |
|
|
426,992 |
|
|
439,998 |
|
Total liabilities |
|
550,349 |
|
|
540,044 |
|
|
565,216 |
|
|
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
Common stock, $0.01 par value, 250,000,000 shares
authorized; 48,052,900 shares issued at July 1, 2017;
48,045,114 shares issued at April 1, 2017; 47,986,975
shares issued at July 2, 2016
|
|
481 |
|
|
480 |
|
|
480 |
|
Additional paid-in capital |
|
859,638 |
|
|
859,102 |
|
|
857,381 |
|
Accumulated other comprehensive loss |
|
(17,401 |
) |
|
(22,643 |
) |
|
(19,175 |
) |
Retained deficit |
|
(622,826 |
) |
|
(615,149 |
) |
|
(632,160 |
) |
Total shareholders’ equity |
|
219,892 |
|
|
221,790 |
|
|
206,526 |
|
Total liabilities and shareholders’ equity |
|
$770,241 |
|
|
$761,834 |
|
|
$771,742 |
|
The Container Store Group, Inc.
Consolidated statements of cash
flows (unaudited)
|
|
|
|
|
|
Thirteen Weeks Ended |
(In thousands) (unaudited) |
|
July 1, |
|
July 2, |
|
2017 |
|
2016 |
Operating activities |
|
|
|
|
Net loss |
|
$(7,677 |
) |
|
$(2,057 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
Depreciation and amortization |
|
9,542 |
|
|
9,347 |
|
Stock-based compensation |
|
494 |
|
|
365 |
|
Loss (gain) on disposal of property and equipment |
|
51 |
|
|
(3 |
) |
Deferred tax benefit |
|
(4,573 |
) |
|
(922 |
) |
Noncash interest |
|
480 |
|
|
480 |
|
Other |
|
195 |
|
|
(153 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
Accounts receivable |
|
744 |
|
|
(2,836 |
) |
Inventory |
|
(350 |
) |
|
(19,283 |
) |
Prepaid expenses and other assets |
|
(6,565 |
) |
|
244 |
|
Accounts payable and accrued liabilities |
|
5,937 |
|
|
18,497 |
|
Income taxes |
|
(2,120 |
) |
|
175 |
|
Other noncurrent liabilities |
|
(939 |
) |
|
(4,523 |
) |
Net cash used in operating activities |
|
(4,781 |
) |
|
(669 |
) |
|
|
|
|
|
Investing activities |
|
|
|
|
Additions to property and equipment |
|
(5,181 |
) |
|
(8,013 |
) |
Proceeds from sale of property and equipment |
|
2 |
|
|
7 |
|
Net cash used in investing activities |
|
(5,179 |
) |
|
(8,006 |
) |
|
|
|
|
|
Financing activities |
|
|
|
|
Borrowings on revolving lines of credit |
|
4,876 |
|
|
11,530 |
|
Payments on revolving lines of credit |
|
(2,261 |
) |
|
(9,017 |
) |
Borrowings on long-term debt |
|
5,000 |
|
|
12,000 |
|
Payments on long-term debt |
|
(1,350 |
) |
|
(6,355 |
) |
Payment of taxes with shares withheld upon restricted stock vesting |
|
(39 |
) |
|
- |
|
Net cash provided by financing activities |
|
6,226 |
|
|
8,158 |
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
214 |
|
|
(103 |
) |
Net decrease in cash |
|
(3,520 |
) |
|
(620 |
) |
Cash at beginning of period |
|
10,736 |
|
|
8,809 |
|
Cash at end of period |
|
$7,216 |
|
|
$8,189 |
|
|
|
|
|
|
Supplemental information for non-cash investing and financing activities: |
|
|
|
|
Purchases of property and equipment (included in accounts payable) |
|
$1,148 |
|
|
$751 |
|
Capital lease obligation incurred |
|
$36 |
|
|
$147 |
|
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, 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 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, restructuring charges,
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.
We have included a presentation of adjusted net loss for the thirteen weeks ended July 2, 2016 to show the net impact of the
amended and restated employment agreements entered into with key executives during the thirteen weeks ended July 2, 2016
(“management transition costs (benefits)”). Although we disclosed the net positive impact of the amended and restated employment
agreements in our discussions of earnings per share and SG&A in our earnings press releases in fiscal 2016, we did not include
in those press releases a presentation of adjusted net income. However, in the thirteen weeks ended July 1, 2017, our Optimization
Plan has caused us to incur similar charges that we believe are not indicative of our core operating performance, and we expect to
continue to incur such charges in the remainder of fiscal 2017. As a result, we believe that adjusting net loss in the thirteen
weeks ended July 2, 2016 for management transition costs (benefits), in addition to adjusting net loss for the thirteen weeks ended
July 1, 2017 for charges incurred as part of the implementation of our Optimization Plan, will assist investors in comparing our
core operating performance across reporting periods on a consistent basis. Likewise, we believe that presenting full year fiscal
2017 adjusted net income guidance and fiscal 2016 adjusted net income as a comparative measure, will assist investors in evaluating
our anticipated financial performance as it relates to our core operations.
The Company defines EBITDA as net income before interest, taxes, depreciation, and amortization. Adjusted EBITDA is calculated
in accordance with its credit facilities and is one of the components for performance evaluation under its executive compensation
programs. Adjusted EBITDA reflects further adjustments to EBITDA to eliminate the impact of certain items, including certain
non-cash and other items that the Company does not consider in its evaluation of ongoing operating performance from period to
period as discussed further below. The Company uses Adjusted EBITDA in connection with covenant compliance and executive
performance evaluations, and to supplement GAAP measures of performance to evaluate the effectiveness of its business strategies,
to make budgeting decisions and to compare its performance against that of other peer companies using similar measures. The Company
believes it is useful for investors to see the measures that management uses to evaluate the Company, its executives and its
covenant compliance. EBITDA and Adjusted EBITDA are also frequently used by analysts, investors and other interested parties to
evaluate companies in the Company’s industry.
The 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.
|
|
Thirteen Weeks Ended |
|
Fiscal Year 2017 Outlook |
|
Fiscal Year
Ended
|
|
|
July 1, 2017 |
|
July 2, 2016 |
|
Low |
|
High |
|
April 1, 2016 |
Numerator: |
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$(7,677 |
) |
|
$(2,057 |
) |
|
$12,250 |
|
|
$17,150 |
|
|
$14,953 |
|
Management transition costs (benefits) (a) |
|
- |
|
|
(3,361 |
) |
|
- |
|
|
- |
|
|
(3,361 |
) |
Optimization Plan implementation charges (b) |
|
3,534 |
|
|
- |
|
|
9,000 |
|
|
11,000 |
|
|
- |
|
Taxes(c) |
|
(1,331 |
) |
|
1,189 |
|
|
(3,250 |
) |
|
(4,000 |
) |
|
1,374 |
|
Adjusted net (loss) income |
|
$(5,474 |
) |
|
$(4,229 |
) |
|
$18,000 |
|
|
$24,150 |
|
|
$12,966 |
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding – diluted
|
|
48,047,937 |
|
|
47,986,975 |
|
|
49,000,000 |
|
|
49,000,000 |
|
|
48,016,010 |
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per diluted share |
|
$(0.16 |
) |
|
$(0.04 |
) |
|
$0.25 |
|
|
$0.35 |
|
|
$0.31 |
|
Adjusted net (loss) income per diluted share |
|
$(0.11 |
) |
|
$(0.09 |
) |
|
$0.37 |
|
|
$0.49 |
|
|
$0.27 |
|
(a) |
|
Certain management transition costs incurred and benefits realized, including the
impact of amended and restated employment agreements entered into with key executives during fiscal 2016, which resulted in the
reversal of accrued deferred compensation associated with the original employment agreements, net of costs incurred to execute
the agreements, of $3,910, partially offset by severance charges of $549, which we do not consider in our evaluation of ongoing
performance. |
|
|
|
(b) |
|
Charges incurred as part of the implementation of our Optimization Plan, which we do
not consider in our evaluation of ongoing performance. |
|
|
|
(c) |
|
Tax impact of adjustments to net (loss) income, 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 |
|
|
July 1, 2017 |
|
July 2, 2016 |
Net loss |
|
$(7,677 |
) |
|
$(2,057 |
) |
Depreciation and amortization |
|
9,542 |
|
|
9,347 |
|
Interest expense |
|
4,225 |
|
|
4,110 |
|
Income tax benefit |
|
(4,585 |
) |
|
(1,025 |
) |
EBITDA |
|
$1,505 |
|
|
$10,375 |
|
Pre-opening costs (a) |
|
1,386 |
|
|
1,096 |
|
Noncash rent (b) |
|
(461 |
) |
|
(418 |
) |
Stock-based compensation (c) |
|
494 |
|
|
365 |
|
Foreign exchange (gains) losses (d) |
|
(76 |
) |
|
42 |
|
Optimization Plan implementation charges (e) |
|
3,534 |
|
|
- |
|
Other adjustments (f) |
|
48 |
|
|
572 |
|
Adjusted EBITDA |
|
$6,430 |
|
|
$12,032 |
|
(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, consisting
of $1,810 of cash severance payments associated with the elimination of certain full-time positions at TCS and $1,724 of cash
severance payments associated with organizational realignment at Elfa, 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. |
Investor:
ICR, Inc., 203.682.8200
Farah Soi / Shannon Devine
Farah.Soi@icrinc.com / Shannon.Devine@icrinc.com
or
Media:
The Container Store Group, Inc.
Melanie Graham, 972-538-6864
pr@containerstore.com
View source version on businesswire.com: http://www.businesswire.com/news/home/20170802006181/en/