UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from to
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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As of January 26, 2022, the registrant had
Boot Barn Holdings, Inc. and Subsidiaries
Form 10-Q
For the Thirteen and Thirty-Nine Weeks Ended December 25, 2021
2
Part 1. Financial Information
Item 1. | Condensed Consolidated Financial Statements (Unaudited) |
BOOT BARN HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
December 25, |
| March 27, | ||||
| 2021 |
| 2021 | |||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Accounts receivable, net |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Right-of-use assets, net | | | ||||
Goodwill |
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Intangible assets, net |
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Other assets |
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Total assets | $ | | $ | | ||
Liabilities and stockholders’ equity | ||||||
Current liabilities: | ||||||
Accounts payable | $ | | $ | | ||
Accrued expenses and other current liabilities |
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Short-term lease liabilities | | | ||||
Total current liabilities |
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Deferred taxes |
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Long-term portion of notes payable, net |
| — |
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Long-term lease liabilities | | | ||||
Other liabilities |
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Total liabilities | | | ||||
Commitments and contingencies (Note 6) | ||||||
Stockholders’ equity: | ||||||
Common stock, $ |
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Preferred stock, $ |
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Additional paid-in capital |
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Retained earnings |
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Less: Common stock held in treasury, at cost, | ( | ( | ||||
Total stockholders’ equity |
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Total liabilities and stockholders’ equity | $ | | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
BOOT BARN HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||
December 25, | December 26, | December 25, | December 26, | |||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||
$ | | $ | | $ | | $ | | |||||
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Gross profit |
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Selling, general and administrative expenses |
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Income from operations |
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Interest expense |
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Other income, net | | | | | ||||||||
Income before income taxes |
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Income tax expense |
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Net income | $ | | $ | | $ | | $ | | ||||
Earnings per share: | ||||||||||||
Basic | $ | | $ | | $ | | $ | | ||||
Diluted | $ | | $ | | $ | | $ | | ||||
Weighted average shares outstanding: | ||||||||||||
Basic |
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Diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
BOOT BARN HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
Additional |
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Common Stock | Paid-In | Retained | Treasury Shares |
| |||||||||||||||
| Shares |
| Amount |
| Capital |
| Earnings |
| Shares |
| Amount |
| Total | ||||||
Balance at March 27, 2021 | | $ | | $ | | $ | | ( | $ | ( | $ | | |||||||
Net income | — | — | — | | — | — | | ||||||||||||
Issuance of common stock related to stock-based compensation | | — | | — | — | — | | ||||||||||||
Tax withholding for net share settlement | — | — | — | — | ( | ( | ( | ||||||||||||
Stock-based compensation expense | — | — | | — | — | — | | ||||||||||||
Balance at June 26, 2021 | | $ | | $ | | $ | | ( | $ | ( | $ | | |||||||
Net income | — | — | — | | — | — | | ||||||||||||
Issuance of common stock related to stock-based compensation | | — | | — | — | — | | ||||||||||||
Tax withholding for net share settlement | — | — | — | — | ( | ( | ( | ||||||||||||
Stock-based compensation expense | — | — | | — | — | — | | ||||||||||||
Balance at September 25, 2021 | | $ | | $ | | $ | | ( | $ | ( | $ | | |||||||
Net income |
| — | — | — | | — | — | | |||||||||||
Issuance of common stock related to stock-based compensation |
| | — | | — | — | — | | |||||||||||
Tax withholding for net share settlement | — | — | — | — | ( | ( | ( | ||||||||||||
Stock-based compensation expense |
| — | — | | — | — | — | | |||||||||||
Balance at December 25, 2021 | | $ | | $ | | $ | | ( | $ | ( | $ | | |||||||
Additional |
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Common Stock | Paid-In | Retained | Treasury Shares |
| |||||||||||||||
| Shares |
| Amount |
| Capital |
| Earnings | Shares |
| Amount | Total | ||||||||
Balance at March 28, 2020 | | $ | | $ | | $ | | ( | $ | ( | $ | | |||||||
Net loss |
| — | — | — | ( | — | — | ( | |||||||||||
Issuance of common stock related to stock-based compensation | | — | | — | — | — | | ||||||||||||
Tax withholding for net share settlement | — | — | — | — | ( | ( | ( | ||||||||||||
Stock-based compensation expense |
| — | — | | — | — | — | | |||||||||||
Balance at June 27, 2020 |
| | $ | | $ | | $ | | ( | $ | ( | $ | | ||||||
Net income | — | — | — | | — | — | | ||||||||||||
Issuance of common stock related to stock-based compensation | | — | | — | — | — | | ||||||||||||
Tax withholding for net share settlement | — | — | — | — | ( | ( | ( | ||||||||||||
Stock-based compensation expense | — | — | | — | — | — | | ||||||||||||
Balance at September 26, 2020 | | $ | | $ | | $ | | ( | $ | ( | $ | | |||||||
Net income | — | — | — | | — | — | | ||||||||||||
Issuance of common stock related to stock-based compensation | | — | | — | — | — | | ||||||||||||
Tax withholding for net share settlement | — | — | — | — | ( | ( | ( | ||||||||||||
Stock-based compensation expense | — | — | | — | — | — | | ||||||||||||
Balance at December 26, 2020 | | $ | | $ | | $ | | ( | $ | ( | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
BOOT BARN HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Thirty-Nine Weeks Ended | ||||||
December 25, |
| December 26, | ||||
| 2021 |
| 2020 | |||
Cash flows from operating activities | ||||||
Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation |
| |
| | ||
Stock-based compensation |
| |
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Amortization of intangible assets |
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Noncash lease expense | | | ||||
Amortization and write-off of debt issuance fees and debt discount |
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Loss on disposal of assets |
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| | ||
(Gain)/loss on adjustment of right-of-use assets and lease liabilities | ( | | ||||
Store impairment charge | — | | ||||
Deferred taxes |
| |
| ( | ||
Changes in operating assets and liabilities: | ||||||
Accounts receivable, net |
| |
| | ||
Inventories |
| ( |
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Prepaid expenses and other current assets |
| ( |
| ( | ||
Other assets |
| ( |
| ( | ||
Accounts payable |
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Accrued expenses and other current liabilities |
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Other liabilities |
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Operating leases | ( | ( | ||||
Net cash provided by operating activities | $ | | $ | | ||
Cash flows from investing activities | ||||||
Purchases of property and equipment | $ | ( | $ | ( | ||
Net cash used in investing activities | $ | ( | $ | ( | ||
Cash flows from financing activities | ||||||
Payments on line of credit - net | $ | — | $ | ( | ||
Repayments on debt and finance lease obligations | ( | ( | ||||
Tax withholding payments for net share settlement | ( | ( | ||||
Proceeds from the exercise of stock options | | | ||||
Net cash used in financing activities | $ | ( | $ | ( | ||
Net increase in cash and cash equivalents |
| |
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Cash and cash equivalents, beginning of period |
| |
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Cash and cash equivalents, end of period | $ | | $ | | ||
Supplemental disclosures of cash flow information: | ||||||
Cash paid for income taxes | $ | | $ | | ||
Cash paid for interest | $ | | $ | | ||
Supplemental disclosure of non-cash activities: | ||||||
Unpaid purchases of property and equipment | $ | | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
BOOT BARN HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Description of the Company, Recent Developments and Basis of Presentation
Boot Barn Holdings, Inc. (the “Company”), the parent holding company of the group of operating subsidiaries that conduct the Boot Barn business, was formed on November 17, 2011, and is incorporated in the State of Delaware. The equity of the Company consists of
The Company operates specialty retail stores and e-commerce websites that sell western and work boots and related apparel and accessories. The Company operates retail locations throughout the U.S. and sells its merchandise via the internet. The Company operated a total of
Recent Developments
In December 2019, a novel strain of coronavirus (“COVID-19”) was reported in Wuhan, China. Since first being reported, COVID-19 spread to numerous countries around the world, including the U.S., resulting in the World Health Organization declaring the outbreak a global pandemic on March 11, 2020. COVID-19 has had and may continue to have a significant impact on economic conditions and consumer confidence. There remains uncertainty around the duration and impact of the COVID-19 pandemic on the U.S. economy and consumer confidence. These and other effects make it more challenging for us to estimate the future performance of our business, particularly over the near-to-medium term.
Basis of Presentation
The Company’s condensed consolidated financial statements as of and for the thirteen and thirty-nine weeks ended December 25, 2021 and December 26, 2020 are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), and include the accounts of the Company and each of its subsidiaries, consisting of Boot Barn, Inc., RCC Western Stores, Inc., Baskins Acquisition Holdings, LLC, Sheplers, LLC and Sheplers Holding LLC (collectively with Sheplers, LLC, “Sheplers”). On September 26, 2021, Sheplers, Inc. and Sheplers Holding Corporation each were converted to limited liability companies, Sheplers, LLC and Sheplers Holding LLC, respectively. All intercompany accounts and transactions among the Company and its subsidiaries have been eliminated in consolidation. The vast majority of the Company’s identifiable assets are in the United States. Certain information and footnote disclosures normally included in the Company’s annual consolidated financial statements have been condensed or omitted.
In the opinion of management, the interim condensed consolidated financial statements reflect all adjustments that are of a normal and recurring nature necessary to fairly present the Company’s financial position and results of operations and cash flows in all material respects as of the dates and for the periods presented. The results of operations presented in the interim condensed consolidated financial statements are not necessarily indicative of the results that may be expected for the fiscal year ending March 26, 2022.
Fiscal Periods
The Company reports its results of operations and cash flows on a 52- or 53-week basis ending on the last Saturday of March unless April 1st is a Saturday, in which case the fiscal year ends on April 1st. In a 52-week year, each quarter includes thirteen weeks of operations; in a 53-week fiscal year, the first, second and third quarters each include thirteen weeks of operations and the fourth quarter includes fourteen weeks of operations. Both the fiscal year ending on
7
2. Summary of Significant Accounting Policies
Information regarding the Company’s significant accounting policies is contained in Note 2, “Summary of Significant Accounting Policies”, to the consolidated financial statements included in the Company’s Annual Report on Form 10-K filed with the SEC on May 13, 2021. Presented below in the following notes is supplemental information that should be read in conjunction with those consolidated financial statements.
Comprehensive Income
The Company does not have any components of other comprehensive income recorded within its condensed consolidated financial statements and, therefore, does not separately present a statement of comprehensive income in its condensed consolidated financial statements.
Segment Reporting
GAAP has established guidance for reporting information about a company’s operating segments, including disclosures related to a company’s products and services, geographic areas and major customers. The Company’s retail stores and e-commerce websites represent
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Among the significant estimates affecting the Company’s condensed consolidated financial statements are those relating to revenue recognition, lease accounting, inventories, goodwill, intangible and long-lived assets, stock-based compensation and income taxes. Management regularly evaluates its estimates and assumptions based upon historical experience and various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. To the extent actual results differ from those estimates, the Company’s future results of operations may be affected.
Inventories
Inventory consists primarily of purchased merchandise and is valued at the lower of cost or net realizable value. Cost is determined using the weighted-average cost method (which approximates the first-in, first-out method) and includes the cost of merchandise and import-related costs, including freight, duty and agent commissions. The Company assesses the recoverability of inventory through a periodic review of historical usage and present demand. When the inventory on hand exceeds the foreseeable demand, the value of inventory that, at the time of the review, is not expected to be sold at or above cost is written down to its estimated net realizable value.
Leases
Operating and finance lease liabilities are recognized at the lease commencement date based on the present value of the fixed lease payments using the Company's incremental borrowing rates for its population of leases. Related operating and finance lease right-of-use (“ROU”) assets are recognized based on the initial present value of the fixed lease payments, reduced by cash payments received from landlords as lease incentives, plus any prepaid rent and other direct costs from executing the leases. Amortization of both operating and finance lease right-of-use assets is performed on a straight-line basis and recorded as part of rent expense in selling, general and administrative expenses on the condensed
8
consolidated statements of operations. The interest expense amortization component of the finance lease liabilities is recorded within interest expense on the condensed consolidated statements of operations.
Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Variable lease payments are recognized as lease expense as they are incurred.
Fair Value of Certain Financial Assets and Liabilities
The Company follows FASB ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), which requires disclosure of the estimated fair value of certain assets and liabilities defined by the guidance as financial instruments. The Company’s financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable and debt. ASC 820 defines the fair value of financial instruments as the price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 establishes a three-level hierarchy for disclosure that is based on the extent and level of judgment used to estimate the fair value of assets and liabilities.
● | Level 1 uses unadjusted quoted prices that are available in active markets for identical assets or liabilities. |
● | Level 2 uses inputs other than quoted prices included in Level 1 that are either directly or indirectly observable through correlation with market data. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs to valuation models or other pricing methodologies that do not require significant judgment because the inputs used in the model, such as interest rates, incremental borrowing rates, and volatility, can be corroborated by readily observable market data. |
● | Level 3 uses one or more significant inputs that are unobservable and supported by little or no market activity, and reflect the use of significant management judgment. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques and significant management judgment or estimation. The Company’s Level 3 assets include certain acquired businesses and the evaluation of store impairment. |
Cash and cash equivalents, accounts receivable and accounts payable are classified according to the lowest level input that is significant to the fair value measurement. As a result, the asset or liability could be classified as Level 2 or Level 3 even though there may be certain significant inputs that are readily observable. The Company believes that the recorded value of its financial instruments approximates their current fair values because of their nature and respective relatively short maturity dates or duration.
Although market quotes for the fair value of the outstanding debt arrangements discussed in Note 4, “Revolving Credit Facilities and Long-Term Debt” are not readily available, the Company believes its carrying value approximates fair value due to the variable interest rates, which are Level 2 inputs. There were
Recent Accounting Pronouncements
In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848), which clarifies some of its guidance around reference rate reform activities as global market participants undertake efforts to transition from using or referencing the London Interbank Offered Rate (LIBOR) and other interbank offered rates to using or referencing alternative reference rates. The amendments in this ASU if elected by an entity, are effective immediately. Unlike other topics, the provisions of this update are only available until December 31, 2022, by which time the reference rate replacement activity is expected to be completed. The Company does not expect the revised standard to have an impact on its consolidated financial statements.
9
Revenue Recognition
Revenue is recorded for store sales upon the purchase of merchandise by customers. Sales are recorded net of taxes collected from customers. Transfer of control takes place at the point at which the customer receives and pays for the merchandise at the register. E-commerce sales are recorded when control transfers to the customer, which generally occurs upon delivery of the product. Shipping and handling revenues are included in total net sales. Shipping costs incurred by the Company are included in cost of goods sold.
The Company maintains a customer loyalty program. Under the program, customers accumulate points based on purchase activity. For customers to maintain their active point balance, they must make a qualifying purchase of merchandise at least once in a
Customer Loyalty Program |
| |||||
(in thousands) |
| December 25, 2021 | December 26, 2020 | |||
Beginning balance as of March 27, 2021 and March 28, 2020, respectively |
| $ | | $ | | |
Year-to-date provisions | | | ||||
Year-to-date award redemptions | ( | ( | ||||
Ending balance | $ | | $ | |
Revenue is recorded net of estimated and actual sales returns and deductions for coupon redemptions, estimated future award redemption and other promotions. The sales returns reserve reflects an estimate of sales returns based on projected merchandise returns determined through the use of historical average return percentages. The total reserve for returns is recorded in accrued expenses and other current liabilities in the consolidated balance sheets. The Company accounts for the return asset and liability separately on a gross basis.
Proceeds from the sale of gift cards are deferred until the customers use the cards to acquire merchandise. Gift cards, gift certificates and store credits do not have expiration dates, and unredeemed gift cards, gift certificates and store credits are subject to state escheatment laws. Amounts remaining after escheatment are recognized in net sales in the period escheatment occurs and the liability is considered to be extinguished. The Company defers recognition of a layaway sale and its related profit to the accounting period when the customer receives the layaway merchandise. Income from the redemption of gift cards, gift card breakage, and the sale of layaway merchandise is included in net sales. deferred revenue is recorded in accrued expenses and other current liabilities in the consolidated balance sheets. The following table provides a reconciliation of the activity related to the Company’s gift card program:
Gift Card Program |
| |||||
(in thousands) |
| December 25, 2021 | December 26, 2020 | |||
Beginning balance as of March 27, 2021 and March 28, 2020, respectively |
| $ | | $ | | |
Year-to-date issued | | | ||||
Year-to-date redemptions | ( | ( | ||||
Ending balance | $ | | $ | |
10
Disaggregated Revenue
The Company disaggregates net sales into the following major merchandise categories:
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||
% of Net Sales |
| December 25, 2021 | December 26, 2020 | December 25, 2021 | December 26, 2020 | |||||
Footwear |
| |||||||||
Apparel | ||||||||||
Hats, accessories and other | ||||||||||
Total |
The Company further disaggregates net sales between stores and e-commerce:
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||
% of Net Sales |
| December 25, 2021 | December 26, 2020 | December 25, 2021 | December 26, 2020 | |||||
Stores |
| |||||||||
E-commerce | ||||||||||
Total |
3. Intangible Assets, Net and Goodwill
Net intangible assets as of December 25, 2021 and March 27, 2021 consisted of the following (in thousands, except for weighted average useful life):
December 25, 2021 | |||||||||||
Gross |
|
|
| Weighted | |||||||
Carrying | Accumulated | Average | |||||||||
| Amount |
| Amortization |
| Net |
| Useful Life | ||||
Customer lists | $ | | $ | ( | $ | |
| ||||
Trademarks—definite lived | | ( | — | ||||||||
Total definite lived |
| |
| ( |
| | |||||
Trademarks—indefinite lived |
| |
| — |
| | |||||
Total intangible assets | $ | | $ | ( | $ | |
March 27, 2021 | |||||||||||
Gross | Weighted | ||||||||||
Carrying | Accumulated | Average | |||||||||
| Amount |
| Amortization |
| Net |
| Useful Life | ||||
Customer lists | $ | | $ | ( | $ | |
| ||||
Trademarks-definite lived | | ( | — | ||||||||
Total definite lived |
| |
| ( |
| | |||||
Trademarks—indefinite lived |
| |
| — |
| | |||||
Total intangible assets | $ | | $ | ( | $ | |
Amortization expense for intangible assets totaled less than $
Amortization expense for intangible assets totaled less than $
11
As of December 25, 2021, estimated future amortization of intangible assets was as follows:
Fiscal Year |
| (in thousands) | |
2022 |
| $ | |
2023 |
| | |
2024 |
| | |
2025 |
| | |
2026 |
| - | |
Thereafter |
| - | |
Total | $ | |
The Company performs its annual goodwill impairment assessment on the first day of the fourth fiscal quarter, or more frequently if it believes that indicators of impairment exist. The Company’s goodwill balance was $
During both the thirteen and thirty-nine weeks ended December 25, 2021, the Company did
4. Revolving Credit Facilities and Long-Term Debt
On June 29, 2015, the Company, as guarantor, and its wholly-owned primary operating subsidiary, Boot Barn, Inc., refinanced a previous Wells Fargo credit facility with the $
Borrowings under the June 2015 Wells Fargo Revolver bear interest at per annum rates equal to, at the Company’s option, either (i) London Interbank Offered Rate (“LIBOR”) plus an applicable margin for LIBOR loans, or (ii) the base rate plus an applicable margin for base rate loans. The base rate is calculated as the highest of (a) the federal funds rate plus
12
During the thirty-nine weeks ended December 25, 2021, the Company repaid the remaining $
All obligations under the June 2015 Wells Fargo Revolver are unconditionally guaranteed by the Company and each of its direct and indirect domestic subsidiaries (other than certain immaterial subsidiaries) which are not named as borrowers under the June 2015 Wells Fargo Revolver.
The June 2015 Wells Fargo Revolver contains customary provisions relating to mandatory prepayments, restricted payments, voluntary payments, affirmative and negative covenants, and events of default, and requires the Company to maintain, on a consolidated basis, a Consolidated Fixed Charge Coverage Ratio of at least
Debt Issuance Costs and Debt Discount
Debt issuance costs totaling $
Debt issuance costs and debt discount totaling $
The following sets forth the balance sheet information related to the term loan:
December 25, | March 27, | |||||
(in thousands) |
| 2021 |
| 2021 | ||
Term Loan | $ | — |
| $ | | |
Unamortized value of the debt issuance costs and debt discount | — | ( | ||||
Net carrying value | $ | — | $ | |
Total amortization expense of $
Total amortization expense of $
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5. Stock-Based Compensation
Equity Incentive Plans
On January 27, 2012, the Company approved the 2011 Equity Incentive Plan (the “2011 Plan”). The 2011 Plan authorized the Company to issue options to employees, consultants and directors exercisable for up to a total of
On October 19, 2014, the Company approved the 2014 Equity Incentive Plan, which was amended as of August 24, 2016 (as amended, the “2014 Plan”). Following the approval of the 2014 Plan, no further grants have been made under the 2011 Plan. The 2014 Plan authorizes the Company to issue awards to employees, consultants and directors for up to a total of
On August 26, 2020, the Company approved the 2020 Equity Incentive Plan (the “2020 Plan”). Following the approval of the 2020 Plan, no further grants have been made under the 2014 Plan. The 2020 Plan authorizes the Company to issue awards to employees and directors for up to a total of
Non-Qualified Stock Options
During both the thirteen weeks ended December 25, 2021 and December 26, 2020, the Company did
During the thirty-nine weeks ended December 25, 2021, the Company did
During the thirty-nine weeks ended December 26, 2020, the Company granted certain members of management options to purchase a total of
During both the thirteen and thirty-nine weeks ended December 25, 2021, and the thirteen weeks ended December 26, 2020, there were
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Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||||||||||
December 25, | December 26, | December 25, | December 26, | |||||||||||||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||||||||||||||
Expected option term(1) | N/A | N/A | N/A | years | ||||||||||||||||||||
Expected volatility factor(2) | N/A | N/A | N/A | | % | - | | % | ||||||||||||||||
Risk-free interest rate(3) | N/A | N/A | N/A | | % | - | | % | ||||||||||||||||
Expected annual dividend yield | N/A | N/A | N/A | % |
(1) | The Company has limited historical information regarding expected option term. Accordingly, the Company determined the expected life of the options using the simplified method. |
(2) | Stock volatility for each grant is measured using the weighted average of historical daily price changes of the Company’s stock and its competitors’ common stock over the most recent period equal to the expected option term of the Company’s awards. |
(3) | The risk-free interest rate is determined using the rate on treasury securities with the same term. |
Intrinsic value for stock options is defined as the difference between the market price of the Company’s common stock on the last business day of the fiscal quarter and the weighted average exercise price of in-the-money stock options outstanding at the end of each fiscal period.
The following table summarizes the stock award activity for the thirty-nine weeks ended December 25, 2021:
Grant Date | Weighted | |||||||||
Weighted | Average | Aggregate | ||||||||
Stock | Average | Remaining | Intrinsic | |||||||
| Options |
| Exercise Price |
| Contractual Life |
| Value | |||
(in years) | (in thousands) | |||||||||
Outstanding at March 27, 2021 |
| | $ | | ||||||
Granted |
| — | $ | — | ||||||
Exercised | ( | $ | | $ | | |||||
Cancelled, forfeited or expired |
| ( | $ | | ||||||
Outstanding at December 25, 2021 |
| | $ | |
| $ | | |||
Vested and expected to vest after December 25, 2021 |
| | $ | |
| $ | | |||
Exercisable at December 25, 2021 |
| | $ | |
| $ | |
A summary of the status of non-vested stock options as of December 25, 2021 including changes during the thirty-nine weeks ended December 25, 2021 is presented below:
|
| Weighted- | |||
Average | |||||
Grant Date | |||||
| Shares |
| Fair Value | ||
Nonvested at March 27, 2021 |
| | $ | | |
Granted |
| — | $ | — | |
Vested |
| ( | $ | | |
Nonvested shares forfeited |
| ( | $ | | |
Nonvested at December 25, 2021 |
| | $ | |
Restricted Stock Units
During the thirteen weeks ended December 25, 2021, the Company granted
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totaled $
During the thirty-nine weeks ended December 25, 2021, the Company granted
During the thirteen weeks ended December 26, 2020, the Company did not grant any restricted stock units.
During the thirty-nine weeks ended December 26, 2020, the Company granted
Performance Share Units
During the thirteen weeks ended December 25, 2021, the Company did
During the thirty-nine weeks ended December 25, 2021, the company granted
During the thirteen and thirty-nine weeks ended December 26, 2020, the Company did
The performance share units granted during the thirty-nine weeks ended December 25, 2021 are stock-based awards in which the number of shares ultimately received depends on the Company's performance against its cumulative earnings per share target over a
The grant date fair value of the performance share units granted during the thirty-nine weeks ended December 25, 2021 was initially measured using the Company's closing stock price on the date of grant with the resulting stock compensation expense recognized on a straight-line basis over the
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during the performance period, stock compensation expense would be reversed. The awards are forfeited if the threshold performance goals are not achieved as of the end of the performance period.
Stock-Based Compensation Expense
Stock-based compensation expense was $
As of December 25, 2021, there was $
6. Commitments and Contingencies
The Company is involved, from time to time, in litigation that is incidental to its business. The Company has reviewed these matters to determine if reserves are required for losses that are probable and reasonable to estimate in accordance with FASB ASC Topic 450, Contingencies. The Company evaluates such reserves, if any, based upon several criteria, including the merits of each claim, settlement discussions and advice from outside legal counsel, as well as indemnification of amounts expended by the Company’s insurers or others pursuant to indemnification policies or agreements, if any.
On May 8, 2019, Sheplers, LLC (formerly known as Sheplers, Inc. prior to September 26, 2021), a wholly-owned subsidiary of the Company, was named as defendant in a class-action complaint filed in the Superior Court of California, County of Los Angeles. Among other things, the complaint generally alleges deceptive pricing on merchandise sold in Sheplers’ e-commerce site. The estimated cost of the matter has been accrued as of December 25, 2021.
On February 27, 2020, one employee, on behalf of themself and all other similarly situated employees, filed a class action lawsuit against the Company, which includes claims for penalties under California’s Private Attorney General Act, in the Sacramento County Superior Court, Case No. 34-2019-00272000-CU-OE-GDS, alleging violations of California’s wage and hour, overtime, meal periods and rest breaks, and an alleged violation of the suitable seating requirement as per California Labor Law among other things. The complaint seeks an unspecified amount of damages and penalties. The Company intends to defend this claim vigorously. As of December 25, 2021, the Company has recorded an amount for the estimated probable loss, which is not material to the condensed consolidated financial statements. Depending on the actual outcome of pending litigation, charges in excess of such recorded amount could be recorded in the future, which may have a material adverse effect on the Company’s financial position, results of operations or liquidity.
The Company is also subject to certain other pending or threatened litigation matters incidental to its business. In management's opinion, none of these legal matters, individually or in the aggregate, will have a material effect on the Company's financial position, results of operations, or liquidity.
During the normal course of its business, the Company has made certain indemnifications and commitments under which the Company may be required to make payments for certain transactions. These indemnifications include those given to various lessors in connection with facility leases for certain claims arising from such facility leases, and
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indemnifications to directors and officers of the Company to the maximum extent permitted under the laws of the State of Delaware. The majority of these indemnifications and commitments do not provide for any limitation of the maximum potential future payments the Company could be obligated to make, and their duration may be indefinite. The Company has not recorded any liability for these indemnifications and commitments in the condensed consolidated balance sheets as the impact is expected to be immaterial.
7. Leases
The Company does not own any real estate. Instead, most of its retail store locations are occupied under operating leases. The store leases generally have a base lease term of
Operating and finance lease liabilities are recognized at the lease commencement date based on the present value of the fixed lease payments using the Company's incremental borrowing rates for its population of leases. Related operating and finance lease ROU assets are recognized based on the initial present value of the fixed lease payments, reduced by cash payments received from landlords as lease incentives, plus any prepaid rent and other direct costs from executing the leases. Amortization of both operating and finance lease ROU assets is performed on a straight-line basis and recorded as part of rent expense in costs of goods sold and selling, general and administrative expenses on the condensed consolidated statements of operations. The interest expense amortization component of the finance lease liabilities is recorded within interest expense on the condensed consolidated statements of operations. ROU assets are tested for impairment in the same manner as long-lived assets. During both the thirteen and thirty-nine weeks ended December 25, 2021, the Company did
ROU assets and lease liabilities as of December 25, 2021 and March 27, 2021 consist of the following:
Balance Sheet Classification | December 25, 2021 | March 27, 2021 | ||||||
Assets | ||||||||
Finance lease assets | $ | | $ | | ||||
Operating lease assets |
| |
| | ||||
Total lease assets | $ | | $ | | ||||
Liabilities |
|
| ||||||
Current | ||||||||
Finance | $ | | $ | | ||||
Operating | | | ||||||
Total short-term lease liabilities | $ | | $ | | ||||
Non-Current | ||||||||
Finance | $ | | $ | | ||||
Operating | | | ||||||
Total long-term lease liabilities | $ | | $ | | ||||
Total lease liabilities | $ | | $ | |
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Total lease costs for the thirteen and thirty-nine weeks ended December 25, 2021 and December 26, 2020 were:
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||
(in thousands) |
| Statement of Operations Classification |
| December 25, 2021 | December 26, 2020 | December 25, 2021 | December 26, 2020 | |||||||||
Finance lease cost | ||||||||||||||||
Amortization of right-of-use assets | Cost of goods sold | $ | | $ | | $ | | $ | | |||||||
Interest on lease liabilities | Interest expense | | | | | |||||||||||
Total finance lease cost | $ | | $ | | $ | | $ | | ||||||||
Operating lease cost | Cost of goods sold | $ | | $ | | $ | | $ | | |||||||
Operating lease cost | Selling, general and administrative expenses | | | | | |||||||||||
Short-term lease cost | Cost of goods sold | | | * | | | ** | |||||||||
Short-term lease cost | Selling, general and administrative expenses | | | * | | | ** | |||||||||
Variable lease cost | Cost of goods sold | | | * | | | ** | |||||||||
Variable lease cost | Selling, general and administrative expenses | | | * | | | ** | |||||||||
Sublease income | Cost of goods sold | — | ( | — | ( | |||||||||||
Total lease cost | $ | | $ | | $ | | $ | |
*Amounts disclosed above for short-term lease cost recorded in selling, general, and administrative expenses and in costs of goods sold, as well as amounts for variable lease cost recorded in selling, general, and administrative expenses and in costs of goods sold, for the thirteen weeks ended December 26, 2020 have been corrected from amounts previously reported of $
**Amounts disclosed above for short-term lease cost recorded in selling, general, and administrative expenses and in costs of goods sold, as well as amounts for variable lease cost recorded in selling, general, and administrative expenses and in costs of goods sold, for the thirty-nine weeks ended December 26, 2020 have been corrected from amounts previously reported of $
The following table summarizes future lease payments as of December 25, 2021:
Operating Leases | Finance Leases | |||||
Fiscal Year | (in thousands) | (in thousands) | ||||
2022 | $ | | $ | | ||
2023 |
| |
| | ||
2024 |
| |
| | ||
2025 | | | ||||
2026 | | | ||||
Thereafter |
| |
| | ||
Total | | | ||||
Less: Imputed interest | ( | ( | ||||
Present value of net lease payments | $ | | $ | |
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The following table includes supplemental lease information:
Thirty-Nine Weeks Ended | Thirty-Nine Weeks Ended | |||||||
Supplemental Cash Flow Information (dollars in thousands) | December 25, 2021 | December 26, 2020 | ||||||
Cash paid for amounts included in the measurement of lease liabilities | ||||||||
Operating cash flows from operating leases | $ | | $ | | ||||
Operating cash flows from finance leases |
| — |
| | ||||
Financing cash flows from finance leases | | | ||||||
$ | | $ | | |||||
Lease liabilities arising from new right-of-use assets | ||||||||
Operating leases | $ | | $ | | ||||
Finance leases | $ | | $ | | ||||
Weighted average remaining lease term (in years) | ||||||||
Operating leases | ||||||||
Finance leases | ||||||||
Weighted average discount rate | ||||||||
Operating leases | | % | | % | ||||
Finance leases | | % | | % |
8. Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”). In accordance with ASC 740, the Company recognizes deferred tax assets and liabilities based on the liability method, which requires an adjustment to the deferred tax asset or liability to reflect income tax rates currently in effect. When income tax rates increase or decrease, a corresponding adjustment to income tax expense is recorded by applying the rate change to the cumulative temporary differences. ASC 740 prescribes the recognition threshold and measurement principles for financial statement disclosure of tax positions taken or expected to be taken on a tax return. ASC 740 requires the Company to determine whether it is “more likely than not” that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recognized. Additionally, ASC 740 provides guidance on recognition measurement, derecognition, classification, related interest and penalties, accounting in interim periods, disclosure and transition.
The income tax rate was
The Company’s policy is to accrue interest and penalties related to unrecognized tax benefits as a component of income tax expense. At December 25, 2021 and March 27, 2021, the Company had
The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. At December 25, 2021, the Company is not aware of tax examinations (current or potential) in any tax jurisdictions.
9. Related Party Transactions
During the thirteen and thirty-nine weeks ended December 25, 2021 and December 26, 2020, the Company had capital expenditures with Floor & Decor Holdings, Inc., a specialty retail vendor in the flooring market. These capital
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expenditures amounted to $
10. Earnings Per Share
Earnings per share is computed under the provisions of FASB ASC Topic 260, Earnings Per Share. Basic earnings per share is computed based on the weighted average number of outstanding shares of common stock during the period. Diluted earnings per share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential shares of common stock outstanding during the period using the treasury stock method, whereby proceeds from such exercise and unamortized compensation, if any, on share-based awards, are assumed to be used by the Company to purchase the shares of common stock at the average market price during the period. The dilutive effect of stock options and restricted stock is applicable only in periods of net income. Performance share units and market-based stock option awards are excluded from the calculation of diluted earnings per share until their respective performance or market criteria has been achieved.
The components of basic and diluted earnings per share of common stock, in aggregate, for the thirteen and thirty-nine weeks ended December 25, 2021 and December 26, 2020 are as follows:
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||
December 25, | December 26, | December 25, | December 26, | |||||||||
(in thousands, except per share data) |
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Net income | $ | | $ | | $ | | $ | | ||||
Weighted average basic shares outstanding |
| |
| |
| |
| | ||||
Dilutive effect of options and restricted stock |
| |
| |
| |
| | ||||
Weighted average diluted shares outstanding |
| |
| |
| |
| | ||||
Basic earnings per share | $ | | $ | | $ | | $ | | ||||
Diluted earnings per share | $ | | $ | | $ | | $ | |
Options to purchase
Options to purchase
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the financial condition and results of our operations should be read together with the unaudited financial statements and related notes of Boot Barn Holdings, Inc. and Subsidiaries included in Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and the related notes included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”), on May 13, 2021 (the “Fiscal 2021 10-K”). As used in this Quarterly Report on Form 10-Q, except where the context otherwise requires or where otherwise indicated, the terms “company”, “Boot Barn”, “we”, “our” and “us” refer to Boot Barn Holdings, Inc. and its subsidiaries.
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Quarterly Report on
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Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate”, “believe”, “can”, “continue”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “project”, “seek”, “should”, “target”, “will”, “would” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. These forward-looking statements are subject to numerous risks and uncertainties, including the risks and uncertainties described under the section titled “Risk Factors” in our Fiscal 2021 10-K, and those identified in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in an evolving environment. New risks and uncertainties emerge from time to time and it is not possible for our management to predict all risks and uncertainties, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ materially from those contained in any forward-looking statement. We qualify all of our forward-looking statements by these cautionary statements.
We caution you that the risks and uncertainties identified by us may not be all of the factors that are important to you. Furthermore, the forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
The major global health pandemic caused by COVID-19 and resulting economic impacts have had and may continue to have an impact on our operations, future growth strategies and outlook. Our business and opportunities for growth depend on consumer discretionary spending, and as such, our results are particularly sensitive to economic conditions and consumer confidence. The extent to which COVID-19 impacts our operations will depend on future developments, which remain uncertain. For further discussion of the uncertainties and business risks associated with COVID-19, see Item 1A, Risk Factors, of our Fiscal 2021 10-K.
Overview
We believe that Boot Barn is the largest lifestyle retail chain devoted to western and work-related footwear, apparel and accessories in the U.S. As of December 25, 2021, we operated 289 stores in 37 states, as well as our e-commerce websites consisting primarily of bootbarn.com, sheplers.com and countryoutfitter.com. Our product offering is anchored by an extensive selection of western and work boots and is complemented by a wide assortment of coordinating apparel and accessories. Our stores feature a comprehensive assortment of brands and styles, coupled with attentive, knowledgeable store associates. Many of the items that we offer are basics or necessities for our customers’ daily lives and typically represent enduring styles that are not meaningfully impacted by changing fashion trends.
We strive to offer an authentic, one-stop shopping experience that fulfills the everyday lifestyle needs of our customers, and as a result, many of our customers make purchases in both the western and work wear sections of our stores. We target a broad and growing demographic, ranging from passionate western and country enthusiasts, to workers seeking dependable, high-quality footwear and apparel. Our broad geographic footprint, which comprises more than three times as many stores as our nearest direct competitor that sells primarily western and work wear, provides us with significant economies of scale, enhanced supplier relationships, the ability to recruit and retain high quality store associates and the ability to reinvest in our business at levels that we believe exceed those of our competition.
How We Assess the Performance of Our Business
In assessing the performance of our business, we consider a variety of performance and financial measures. The key indicators we use to evaluate the financial condition and operating performance of our business are net sales and gross profit. In addition, we also review other important metrics, such as same store sales, new store openings, and selling, general and administrative expenses (“SG&A”), as well as the non-GAAP financial measures, earnings before interest, taxes, depreciation and amortization (“EBITDA”), EBITDA adjusted to exclude certain items (“Adjusted EBITDA”), and earnings before interest and taxes, adjusted to exclude certain items (“Adjusted EBIT”). See “—EBITDA, Adjusted
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EBITDA and Adjusted EBIT” below for more information and “—Results of Operations” for a reconciliation of these measures to net income.
Net sales
Net sales reflect revenue from the sale of our merchandise at retail locations, as well as sales of merchandise through our e-commerce websites. We recognize revenue upon the purchase of merchandise by customers at our stores and upon delivery of the product in the case of our e-commerce websites. Net sales also include shipping and handling fees for e-commerce shipments that have been delivered to our customers. Net sales are net of returns on sales during the period as well as an estimate of returns and award redemptions expected in the future stemming from current period sales. Revenue from the sale of gift cards is deferred until the gift cards are used to purchase merchandise.
Our business is moderately seasonal and as a result our revenues fluctuate from quarter to quarter. In addition, our revenues in any given quarter can be affected by a number of factors including the timing of holidays, weather patterns, rodeos and country concerts. The third quarter of our fiscal year, which includes the Christmas shopping season, has historically produced higher sales and disproportionately larger operating income than the other quarters of our fiscal year. However, neither the western nor the work component of our business has been meaningfully impacted by fashion trends or seasonality historically. We believe that many of our customers are driven primarily by utility and brand, and our best-selling styles.
Same store sales
The term “same store sales” refers to net sales from stores that have been open at least 13 full fiscal months as of the end of the current reporting period, although we include or exclude stores from our calculation of same store sales in accordance with the following additional criteria:
● | stores that are closed for five or fewer consecutive days in any fiscal month are included in same store sales; |
● | stores that are closed temporarily, but for more than five consecutive days in any fiscal month, are excluded from same store sales beginning in the fiscal month in which the temporary closure begins (and for the comparable periods of the prior or subsequent fiscal periods for comparative purposes) until the first full month of operation once the store re-opens; |
● | stores that are closed temporarily and relocated within their respective trade areas are included in same store sales; |
● | stores that are permanently closed are excluded from same store sales beginning in the month preceding closure (and for the comparable periods of the prior or subsequent fiscal periods for comparative purposes); and |
● | acquired stores are added to same store sales beginning on the later of (a) the applicable acquisition date and (b) the first day of the first fiscal month after the store has been open for at least 13 full fiscal months regardless of whether the store has been operated under our management or predecessor management. |
If the criteria described with respect to acquired stores above are met, then all net sales of such acquired store, excluding those net sales before our acquisition of that store, are included for the period presented. However, when an acquired store is included for the period presented, the net sales of such acquired store for periods before its acquisition are included (to the extent relevant) for purposes of calculating “same store sales growth” and illustrating the comparison between the applicable periods. Pre-acquisition net sales numbers are derived from the books and records of the acquired company, as prepared prior to the acquisition, and have not been independently verified by us.
In addition to retail store sales, same store sales also includes e-commerce sales, e-commerce shipping and handling revenue and actual retail store or e-commerce sales returns. Sales as a result of an e-commerce asset acquisition are excluded from same store sales until the 13th full fiscal month subsequent to the Company’s acquisition of such assets.
We exclude gift card escheatment, provision for sales returns and estimated future loyalty award redemptions from sales in our calculation of net sales per store.
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Measuring the change in year-over-year same store sales allows us to evaluate how our store base is performing. Numerous factors affect our same store sales, including:
● | national and regional economic trends, including those resulting from the COVID-19 pandemic; |
● | our ability to identify and respond effectively to regional consumer preferences; |
● | changes in our product mix; |
● | changes in pricing; |
● | competition; |
● | changes in the timing of promotional and advertising efforts; |
● | holidays or seasonal periods; and |
● | weather. |
Opening new stores is an important part of our growth strategy and we anticipate that a percentage of our net sales in the near future will come from stores not included in our same store sales calculation. Accordingly, same store sales are only one measure we use to assess the success of our business and growth strategy. Some of our competitors and other retailers may calculate “same” or “comparable” store sales differently than we do. As a result, data in this Quarterly Report on Form 10-Q regarding our same store sales may not be comparable to similar data made available by other retailers.
New store openings
New store openings reflect the number of stores, excluding acquired stores, that are opened during a particular reporting period. In connection with opening new stores, we incur pre-opening costs. Pre-opening costs consist of costs incurred prior to opening a new store and primarily consist of manager and other employee payroll, travel and training costs, marketing expenses, initial opening supplies and costs of transporting initial inventory and certain fixtures to store locations, as well as occupancy costs incurred from the time that we take possession of a store site to the opening of that store. Occupancy costs are included in cost of goods sold and the other pre-opening costs are included in SG&A expenses. All of these costs are expensed as incurred.
New stores often open with a period of high sales levels, which subsequently decrease to normalized sales volumes. In addition, we experience typical inefficiencies in the form of higher labor, advertising and other direct operating expenses, and as a result, store-level profit margins at our new stores are generally lower during the start-up period of operation. The number and timing of store openings has had, and is expected to continue to have, a significant impact on our results of operations. In assessing the performance of a new store, we review its actual sales against the sales that we projected that store to achieve at the time we initially approved its opening. We also review the actual number of stores opened in a fiscal year against the number of store openings that we included in our budget at the beginning of that fiscal year.
Gross profit
Gross profit is equal to our net sales less our cost of goods sold. Cost of goods sold includes the cost of merchandise, obsolescence and shrinkage provisions, store and warehouse occupancy costs (including rent, depreciation and utilities), inbound and outbound freight, supplier allowances, occupancy-related taxes, compensation costs for merchandise purchasing and warehouse personnel, and other inventory acquisition-related costs. These costs are significant and can be expected to continue to increase as we grow. The components of our reported cost of goods sold may not be comparable to those of other retail companies, including our competitors.
Our gross profit generally follows changes in net sales. We regularly analyze the components of gross profit, as well as gross profit as a percentage of net sales. Specifically, we examine the initial markup on purchases, markdowns and reserves, shrinkage, buying costs, distribution costs and occupancy costs. Any inability to obtain acceptable levels of initial markups, a significant increase in our use of markdowns or in inventory shrinkage, or a significant increase in freight and other inventory acquisition costs, could have an adverse impact on our gross profit and results of operations.
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Gross profit is also impacted by shifts in the proportion of sales of our exclusive brand products compared to third-party brand products, as well as by sales mix changes within and between brands and major product categories such as footwear, apparel or accessories.
Selling, general and administrative expenses
Our SG&A expenses are composed of labor and related expenses, other operating expenses and general and administrative expenses not included in cost of goods sold. Specifically, our SG&A expenses include the following:
● | Labor and related expenses - Labor and related expenses include all store-level salaries and hourly labor costs, including salaries, wages, benefits and performance incentives, labor taxes and other indirect labor costs. |
● | Other operating expenses - Other operating expenses include all operating costs, including those for advertising, pay-per-click, marketing campaigns, operating supplies, utilities, and repairs and maintenance, as well as credit card fees and costs of third-party services. |
● | General and administrative expenses - General and administrative expenses include expenses associated with corporate and administrative functions that support the development and operations of our stores, including compensation and benefits, travel expenses, corporate occupancy costs, stock compensation costs, legal and professional fees, insurance, long-lived asset impairment charges and other related corporate costs. |
The components of our SG&A expenses may not be comparable to those of our competitors and other retailers. We expect our selling, general and administrative expenses will increase in future periods as a result of incremental share-based compensation, legal, and accounting-related expenses and increases resulting from growth in the number of our stores.
EBITDA, Adjusted EBITDA and Adjusted EBIT
EBITDA, Adjusted EBITDA and Adjusted EBIT are important non-GAAP financial measures used by our management, board of directors and lenders to assess our operating performance. We use EBITDA, Adjusted EBITDA and Adjusted EBIT as key performance measures because we believe that they facilitate operating performance comparisons from period to period by excluding potential differences primarily caused by the impact of variations from period to period in tax positions, interest expense and depreciation and amortization, as well as, in the case of Adjusted EBITDA, excluding non-cash expenses, such as stock-based compensation and the non-cash accrual for future award redemptions, and other costs and expenses that are not directly related to our operations, including loss on disposal of assets and gain/loss on adjustment of ROU assets and lease liabilities. Similar to Adjusted EBITDA, Adjusted EBIT excludes the aforementioned adjustments while maintaining the impact of depreciation and amortization on our financial results. See “Results of Operations” below for a reconciliation of our EBITDA, Adjusted EBITDA and Adjusted EBIT to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP. Because EBITDA, Adjusted EBITDA and Adjusted EBIT facilitate internal comparisons of our historical operating performance on a more consistent basis, we also use EBITDA, Adjusted EBITDA and Adjusted EBIT for business planning purposes, in determining incentive compensation for members of our management and in evaluating acquisition opportunities. Our credit facilities also require us to use EBITDA, Adjusted EBITDA and Adjusted EBIT in calculating covenant compliance. In addition, we believe that EBITDA, Adjusted EBITDA and Adjusted EBIT and similar measures are widely used by investors, securities analysts, ratings agencies and other parties in evaluating companies in our industry as a measure of financial performance and debt-service capabilities. Given that EBITDA, Adjusted EBITDA and Adjusted EBIT are measures not deemed to be in accordance with GAAP and are susceptible to varying calculations, our EBITDA, Adjusted EBITDA and Adjusted EBIT may not be comparable to similarly titled measures of other companies, including companies in our industry, because other companies may calculate EBITDA, Adjusted EBITDA and Adjusted EBIT in a different manner than we calculate these measures.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, as well as the related disclosures of contingent assets and liabilities at the date of the financial
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statements. A summary of our significant accounting policies is included in Note 2 to our consolidated financial statements included in the Fiscal 2021 10-K.
Certain of our accounting policies and estimates are considered critical, as these policies and estimates are the most important to the depiction of our consolidated financial statements and require significant, difficult or complex judgments, often about the effect of matters that are inherently uncertain. Such policies are summarized in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Fiscal 2021 10-K. As of the date of this filing, there were no significant changes to any of the critical accounting policies and estimates described in the Fiscal 2021 10-K.
Results of Operations
We operate on a fiscal calendar that results in a 52- or 53-week fiscal year ending on the last Saturday of March unless April 1st is a Saturday, in which case the fiscal year ends on April 1st. In a 52-week fiscal year, each quarter includes thirteen weeks of operations; in a 53-week fiscal year, the first, second and third quarters each include thirteen weeks of operations and the fourth quarter includes fourteen weeks of operations. Both the fiscal year ending on March 26, 2022 (“fiscal 2022”) and the fiscal year ended on March 27, 2021 (“fiscal 2021”) consist of 52 weeks. We identify our fiscal years by reference to the calendar year in which the fiscal year ends.
The following table summarizes key components of our results of operations for the periods indicated, both in dollars and as a percentage of our net sales:
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||
December 25, |
| December 26, |
| December 25, |
| December 26, | |||||||
(dollars in thousands) |
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||
Condensed Consolidated Statements of Operations Data: | |||||||||||||
Net sales | $ | 485,904 | $ | 302,338 | $ | 1,104,948 | $ | 634,619 | |||||
Cost of goods sold |
| 294,245 |
| 195,529 |
| 678,711 |
| 432,119 | |||||
Gross profit |
| 191,659 |
| 106,809 |
| 426,237 |
| 202,500 | |||||
Selling, general and administrative expenses |
| 99,467 |
| 65,183 |
| 230,288 |
| 149,034 | |||||
Income from operations |
| 92,192 |
| 41,626 |
| 195,949 |
| 53,466 | |||||
Interest expense |
| 1,667 |
| 2,303 |
| 5,392 |
| 7,327 | |||||
Other income, net | 43 | 152 | 161 | 294 | |||||||||
Income before income taxes |
| 90,568 |
| 39,475 |
| 190,718 |
| 46,433 | |||||
Income tax expense |
| 21,337 |
| 9,909 |
| 42,981 |
| 11,599 | |||||
Net income | $ | 69,231 | $ | 29,566 | $ | 147,737 | $ | 34,834 | |||||
Percentage of Net Sales (1): | |||||||||||||
Net sales |
| 100.0 | % |
| 100.0 | % |
| 100.0 | % |
| 100.0 | % | |
Cost of goods sold |
| 60.6 | % |
| 64.7 | % |
| 61.4 | % |
| 68.1 | % | |
Gross profit |
| 39.4 | % |
| 35.3 | % |
| 38.6 | % |
| 31.9 | % | |
Selling, general and administrative expenses |
| 20.5 | % |
| 21.6 | % |
| 20.8 | % |
| 23.5 | % | |
Income from operations |
| 19.0 | % |
| 13.8 | % |
| 17.7 | % |
| 8.4 | % | |
Interest expense |
| 0.3 | % |
| 0.8 | % |
| 0.5 | % |
| 1.2 | % | |
Other income, net | — | % | 0.1 | % | — | % | — | % | |||||
Income before income taxes |
| 18.6 | % |
| 13.1 | % |
| 17.3 | % |
| 7.3 | % | |
Income tax expense |
| 4.4 | % |
| 3.3 | % |
| 3.9 | % |
| 1.8 | % | |
Net income |
| 14.2 | % |
| 9.8 | % |
| 13.4 | % |
| 5.5 | % |
(1) | Percentages may not recalculate due to rounding. |
26
The following table presents a reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBIT to our net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, for each of the periods indicated:
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||
December 25, | December 26, | December 25, | December 26, | |||||||||
(in thousands) |
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
EBITDA, Adjusted EBITDA and Adjusted EBIT Reconciliations: | ||||||||||||
Net income | $ | 69,231 | $ | 29,566 | $ | 147,737 | $ | 34,834 | ||||
Income tax expense |
| 21,337 |
| 9,909 |
| 42,981 |
| 11,599 | ||||
Interest expense |
| 1,667 |
| 2,303 |
| 5,392 |
| 7,327 | ||||
Depreciation and intangible asset amortization |
| 6,947 |
| 5,994 |
| 19,854 |
| 17,986 | ||||
EBITDA |
| 99,182 |
| 47,772 |
| 215,964 |
| 71,746 | ||||
Non-cash stock-based compensation(a) |
| 1,839 |
| 1,482 |
| 7,807 |
| 5,011 | ||||
Non-cash accrual for future award redemptions(b) |
| 828 |
| 697 |
| 1,470 |
| 767 | ||||
Loss/(Gain) on disposal of assets(c) |
| 61 |
| (19) |
| 151 |
| 23 | ||||
(Gain)/Loss on adjustment of right-of-use assets and lease liabilities(d) | (12) | — | (259) | 295 | ||||||||
Store impairment charge(e) | — | — | — | 384 | ||||||||
Adjusted EBITDA | $ | 101,898 | $ | 49,932 | $ | 225,133 | $ | 78,226 | ||||
Depreciation and intangible asset amortization | (6,947) | (5,994) | (19,854) | (17,986) | ||||||||
Adjusted EBIT | $ | 94,951 | $ | 43,938 | $ | 205,279 | $ | 60,240 |
(a) | Represents non-cash compensation expenses related to stock options, restricted stock units and performance share units granted to certain of our employees and directors. |
(b) | Represents the non-cash accrual for future award redemptions in connection with our customer loyalty program. |
(c) | Represents loss/(gain) on disposal of assets. |
(d) | Represents (gain)/loss on adjustment of right-of-use assets and lease liabilities. |
(e) | Represents store impairment charges recorded in order to reduce the carrying amount of the assets to their estimated fair values. |
The following table presents store operating data for the periods indicated:
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||
December 25, | December 26, | December 25, | December 26, | ||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| |||||
Selected Store Data: | |||||||||||||
Same Store Sales growth/(decline) | 54.2 | % | 4.6 | % | 61.8 | % | (3.2) | % | |||||
Stores operating at end of period | 289 | 266 | 289 | 266 | |||||||||
Total retail store square footage, end of period (in thousands) | 3,063 | 2,787 | 3,063 | 2,787 | |||||||||
Average store square footage, end of period | 10,597 | 10,477 | 10,597 | 10,477 | |||||||||
Average net sales per store (in thousands) | $ | 1,372 | $ | 889 | $ | 3,218 | $ | 1,858 |
Thirteen Weeks Ended December 25, 2021 Compared to Thirteen Weeks Ended December 26, 2020
Net sales. Net sales increased $183.6 million, or 60.7%, to $485.9 million for the thirteen weeks ended December 25, 2021 from $302.3 million for the thirteen weeks ended December 26, 2020. Consolidated same store sales increased 54.2%. Excluding the impact of the 48.4% increase in e-commerce same store sales, same store sales increased by 55.7%. The increase in net sales was the result of an increase of 54.2% in same store sales, and the incremental sales from new stores opened over the past twelve months.
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Gross profit. Gross profit increased $84.9 million, or 79.4%, to $191.7 million for the thirteen weeks ended December 25, 2021 from $106.8 million for the thirteen weeks ended December 26, 2020. As a percentage of net sales, gross profit was 39.4% and 35.3% for the thirteen weeks ended December 25, 2021 and December 26, 2020, respectively. Gross profit increased primarily due to higher sales. The increase in gross profit rate of 410 basis points was driven by 140 basis points of leverage in buying and occupancy costs as a result of expense leverage on higher sales, and a 270-basis point increase in merchandise margin rate. Merchandise margin rate increased 270 basis points primarily as a result of better full-price selling and growth in exclusive brand penetration.
Selling, general and administrative expenses. SG&A expenses increased $34.3 million, or 52.6%, to $99.5 million for the thirteen weeks ended December 25, 2021 from $65.2 million for the thirteen weeks ended December 26, 2020. The increase in SG&A expenses was primarily a result of higher store payroll, higher store overhead and increased marketing expenses in the current-year period compared to the prior-year period. As a percentage of net sales, SG&A decreased by 110 basis points to 20.5% for the thirteen weeks ended December 25, 2021 from 21.6% for the thirteen weeks ended December 26, 2020. SG&A expenses as a percentage of net sales decreased by 110 basis points primarily as a result of expense leverage on higher sales.
Income from operations. Income from operations increased $50.6 million, or 121.5%, to $92.2 million for the thirteen weeks ended December 25, 2021 from $41.6 million for the thirteen weeks ended December 26, 2020. The increase in income from operations was attributable to the factors noted above. As a percentage of net sales, income from operations was 19.0% and 13.8% for the thirteen weeks ended December 25, 2021 and December 26, 2020, respectively.
Interest expense. Interest expense was $1.7 million and $2.3 million for the thirteen weeks ended December 25, 2021 and December 26, 2020, respectively. The decrease in interest expense was primarily the result of a lower debt balance in the current-year period compared to the prior-year period. Interest expense for the thirteen weeks ended December 25, 2021 includes the write off of $0.6 million in debt issuance costs and debt discount associated with the $50.0 million prepayment on the 2015 Golub Term Loan.
Income tax expense. Income tax expense was $21.3 million for the thirteen weeks ended December 25, 2021, compared to $9.9 million for the thirteen weeks ended December 26, 2020. Our effective tax rate was 23.6% and 25.1% for the thirteen weeks ended December 25, 2021 and December 26, 2020, respectively. The tax rate for the thirteen weeks ended December 25, 2021 was lower than the tax rate for the thirteen weeks ended December 26, 2020, primarily due to a higher tax benefit due to income tax accounting for share-based compensation compared to a lower tax benefit in the thirteen weeks ended December 26, 2020.
Net income. Net income was $69.2 million for the thirteen weeks ended December 25, 2021 compared to $29.6 million for the thirteen weeks ended December 26, 2020. The increase in net income was primarily attributable to the factors noted above.
Adjusted EBITDA and Adjusted EBIT. Adjusted EBITDA increased $52.0 million, or 104.1%, to $101.9 million for the thirteen weeks ended December 25, 2021 from $49.9 million for the thirteen weeks ended December 26, 2020. Adjusted EBIT increased $51.0 million, or 116.1%, to $95.0 million for the thirteen weeks ended December 25, 2021 from $43.9 million for the thirteen weeks ended December 26, 2020. The increase in Adjusted EBITDA and Adjusted EBIT was primarily a result of the year-over-year increase in income from operations driven by an increase in net sales and gross profit and a decrease in SG&A as a percentage of net sales.
Thirty-Nine Weeks Ended December 25, 2021 Compared to Thirty-Nine Weeks Ended December 26, 2020
Note: Comparisons to the thirty-nine weeks ended December 26, 2020 reflect the effect the COVID-19 crisis had on our results during such time period.
Net sales. Net sales increased $470.3 million, or 74.1%, to $1.1 billion for the thirty-nine weeks ended December 25, 2021 from 634.6 million for the thirty-nine weeks ended December 26, 2020. Consolidated same store sales increased 61.8%. Excluding the impact of the 35.8% increase in e-commerce same store sales, same store sales increased by 68.7%. The increase in net sales was the result of an increase of 61.8% in same store sales, the sales contribution from
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temporarily closed stores that were excluded from the comp base, and the incremental sales from new stores opened over the past twelve months. Net sales in the thirty-nine weeks ended December 26, 2020 were adversely impacted by decreases in retail store sales resulting from decreased traffic in our stores from customers staying at home in response to the COVID-19 crisis and temporary store closures.
Gross profit. Gross profit increased $223.7 million, or 110.5%, to $426.2 million for the thirty-nine weeks ended December 25, 2021 from $202.5 million for the thirty-nine weeks ended December 26, 2020. As a percentage of net sales, gross profit was 38.6% and 31.9% for the thirty-nine weeks ended December 25, 2021 and December 26, 2020, respectively. Gross profit increased primarily due to higher sales. The increase in gross profit rate of 670 basis points was driven by 340 basis points of leverage in buying and occupancy costs as a result of expense leverage on higher sales, and a 330 basis point increase in merchandise margin rate. Merchandise margin rate increased 330 basis points primarily as a result of better full-price selling, the increased penetration of store sales when compared to the prior year, and growth in exclusive brand penetration.
Selling, general and administrative expenses. SG&A expenses increased $81.3 million, or 54.5%, to $230.3 million for the thirty-nine weeks ended December 25, 2021 from $149.0 million for the thirty-nine weeks ended December 26, 2020. The increase in SG&A expenses was primarily a result of higher store payroll, higher store overhead and increased marketing expenses in the current-year period compared to the prior-year period which was impacted by COVID-19. As a percentage of net sales, SG&A decreased by 260 basis points to 20.8% for the thirty-nine weeks ended December 25, 2021 from 23.5% for the thirty-nine weeks ended December 26, 2020. SG&A expenses as a percentage of net sales decreased by 260 basis points primarily as a result of expense leverage on higher sales.
Income from operations. Income from operations increased $142.5 million, or 266.5%, to $195.9 million for the thirty-nine weeks ended December 25, 2021 from $53.5 million for the thirty-nine weeks ended December 26, 2020. The increase in income from operations was attributable to the factors noted above. As a percentage of net sales, income from operations was 17.7% and 8.4% for the thirty-nine weeks ended December 25, 2021 and December 26, 2020, respectively.
Interest expense. Interest expense was $5.4 million and $7.3 million for the thirty-nine weeks ended December 25, 2021 and December 26, 2020, respectively. Interest expense in the thirty-nine weeks ended December 25, 2021 includes the write off of $1.4 million in debt issuance costs and debt discount associated with the $111.5 million prepayment on the 2015 Golub Term Loan. Excluding the write off, interest expense was $4.0 million for the thirty-nine weeks ended December 25, 2021 compared to $7.3 million for the thirty-nine weeks ended December 26, 2020. The decrease in interest expense was primarily the result of a lower debt balance in the current-year period compared to the prior-year period.
Income tax expense. Income tax expense was $43.0 million for the thirty-nine weeks ended December 25, 2021, compared to $11.6 million for the thirty-nine weeks ended December 26, 2020. Our effective tax rate was 22.5% and 25.0% for the thirty-nine weeks ended December 25, 2021 and December 26, 2020, respectively. The tax rate for the thirty-nine weeks ended December 25, 2021 was lower than the tax rate for the thirty-nine weeks ended December 26, 2020, primarily due to a higher tax benefit due to income tax accounting for share-based compensation compared to a lower tax benefit in the thirty-nine weeks ended December 26, 2020.
Net income. Net income was $147.7 million for the thirty-nine weeks ended December 25, 2021 compared to $34.8 million for the thirty-nine weeks ended December 26, 2020. The increase was primarily attributable to the factors noted above.
Adjusted EBITDA and Adjusted EBIT. Adjusted EBITDA increased $146.9 million, or 187.8%, to $225.1 million for the thirty-nine weeks ended December 25, 2021 from $78.2 million for the thirty-nine weeks ended December 26, 2020. Adjusted EBIT increased $145.0 million, or 240.8%, to $205.3 million for the thirty-nine weeks ended December 25, 2021 from $60.2 million for the thirty-nine weeks ended December 26, 2020. The increase in Adjusted EBITDA and Adjusted EBIT was primarily a result of the year-over-year increase in income from operations driven by an increase in net sales and gross profit and a decrease in SG&A as a percentage of net sales.
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Liquidity and Capital Resources
We rely on cash flows from operating activities and our credit facilities as our primary sources of liquidity. Our primary cash needs are for inventories, operating expenses, capital expenditures associated with opening new stores and remodeling or refurbishing existing stores, improvements to our distribution facilities, marketing and information technology expenditures, debt service and taxes. We have also used cash for acquisitions, the subsequent rebranding and integration of the stores acquired in those acquisitions and costs to consolidate the corporate offices. In addition to cash and cash equivalents, the most significant components of our working capital are accounts receivable, inventories, accounts payable and accrued expenses and other current liabilities. We believe that cash flows from operating activities and the availability of cash under our credit facilities or other financing arrangements will be sufficient to cover working capital requirements, anticipated capital expenditures and other anticipated cash needs for at least the next 12 months.
Our liquidity is moderately seasonal. Our cash requirements generally increase in our third fiscal quarter as we increase our inventory in advance of the Christmas shopping season.
We are planning to continue to open new stores, remodel and refurbish our existing stores, and make improvements to our e-commerce and information technology infrastructure, which will result in increased capital expenditures. We estimate that our total capital expenditures in fiscal 2022 will be between $41.0 million and $43.0 million (including the capital expenditures made during the thirty-nine weeks ended December 25, 2021), net of landlord tenant allowances, and we anticipate that we will use cash flows from operations to fund these expenditures.
June 2015 Wells Fargo Revolver and 2015 Golub Term Loan
On June 29, 2015, we, as guarantor, and our wholly-owned primary operating subsidiary, Boot Barn, Inc., refinanced a previous Wells Fargo credit facility with the $125.0 million syndicated senior secured asset-based revolving credit facility for which Wells Fargo Bank, National Association (“June 2015 Wells Fargo Revolver”), is agent, and the $200.0 million syndicated senior secured term loan for which GCI Capital Markets LLC (“2015 Golub Term Loan”) was agent. During the thirty-nine weeks ended December 25, 2021, we repaid the remaining $111.5 million outstanding principal under the 2015 Golub Term Loan and terminated the agreement.
The borrowing base of the June 2015 Wells Fargo Revolver is calculated on a monthly basis and is based on the amount of eligible credit card receivables, commercial accounts, inventory, and available reserves.
Borrowings under the June 2015 Wells Fargo Revolver bear interest at per annum rates equal to, at our option, either (i) London Interbank Offered Rate (“LIBOR”) plus an applicable margin for LIBOR loans, or (ii) the base rate plus an applicable margin for base rate loans. The base rate is calculated as the highest of (a) the federal funds rate plus 0.5%, (b) the Wells Fargo prime rate and (c) one-month LIBOR plus 1.0%. The applicable margin is calculated based on a pricing grid that in each case is linked to quarterly average excess availability. For LIBOR Loans, the applicable margin ranges from 1.00% to 1.25%, and for base rate loans it ranges from 0.00% to 0.25%. We also pay a commitment fee of 0.25% per annum of the actual daily amount of the unutilized revolving loans. The interest on the June 2015 Wells Fargo Revolver is payable in quarterly installments ending on the maturity date. On May 26, 2017, the Company entered into an amendment to the June 2015 Wells Fargo Revolver (the “2017 Wells Amendment”), increasing the aggregate revolving credit facility to $135.0 million and extending the maturity date to the earlier of May 26, 2022 or 90 days prior to the previous maturity of the 2015 Golub Term Loan, which was then scheduled to mature on June 29, 2021. On June 6, 2019, we entered into Amendment No. 3 to the Credit Agreement (the “2019 Wells Amendment”), further increasing the aggregate revolving credit facility to $165.0 million and extending the maturity date to the earlier of June 6, 2024 or 90 days prior to the maturity of the 2015 Golub Term Loan, which was then currently scheduled to mature on June 29, 2023. The 2019 Wells Amendment further made changes to the 2015 Wells Fargo Revolver in connection with the transition away from LIBOR as the benchmark rate. On July 26, 2021, the Company entered in an amendment, increasing the aggregate revolving credit facility to $180.0 million. The amount outstanding under the June 2015 Wells Fargo Revolver as of both December 25, 2021 and March 27, 2021 was zero. Total interest expense incurred in the thirteen and thirty-nine weeks ended December 25, 2021 on the June 2015 Wells Fargo Revolver was $0.2 million and $0.5 million, respectively. Total interest expense incurred in the thirteen and thirty-nine weeks ended December 26, 2020
30
on the June 2015 Wells Fargo Revolver was $0.3 million and $1.3 million, respectively, and the weighted average interest rate for the thirteen weeks ended December 26, 2020 was 1.7%.
Total interest expense incurred in the thirteen and thirty-nine weeks ended December 25, 2021 on the 2015 Golub Term Loan was $0.6 million and $2.5 million, respectively, and the weighted average interest rate for the thirteen weeks ended December 25, 2021 was 5.5%. Total interest expense incurred in the thirteen and thirty-nine weeks ended December 26, 2020 on the 2015 Golub Term Loan was $1.6 million and $4.7 million, respectively, and the weighted average interest rate for the thirteen weeks ended December 26, 2020 was 5.9%.
All obligations under the June 2015 Wells Fargo Revolver are unconditionally guaranteed by us and each of our direct and indirect domestic subsidiaries (other than certain immaterial subsidiaries) which are not named as borrowers under the June 2015 Wells Fargo Revolver.
The June 2015 Wells Fargo Revolver contains customary provisions relating to mandatory prepayments, restricted payments, voluntary payments, affirmative and negative covenants, and events of default, and requires the Company to maintain, on a consolidated basis, a Consolidated Fixed Charge Coverage Ratio of at least 1.00:1.00 during such times as a covenant trigger event shall exist. The June 2015 Wells Fargo Revolver also requires us to pay additional interest of 2.0% per annum upon triggering certain specified events of default as set forth therein. For financial accounting purposes, the requirement for us to pay a higher interest rate upon an event of default is an embedded derivative. As of December 25, 2021, the fair value of this embedded derivative was estimated and was not significant.
As of December 25, 2021, we were in compliance with the June 2015 Wells Fargo Revolver covenants.
Cash Position and Cash Flow
Cash and cash equivalents were $114.7 million as of December 25, 2021 compared to $73.1 million as of March 27, 2021.
The following table presents summary cash flow information for the periods indicated:
Thirty-Nine Weeks Ended | ||||||
December 25, |
| December 26, | ||||
(in thousands) |
| 2021 |
| 2020 | ||
Net cash provided by/(used in): | ||||||
Operating activities | $ | 190,556 | $ | 156,604 | ||
Investing activities |
| (39,749) |
| (20,508) | ||
Financing activities |
| (109,241) |
| (129,317) | ||
Net increase in cash | $ | 41,566 | $ | 6,779 |
Operating Activities
Net cash provided by operating activities was $190.6 million for the thirty-nine weeks ended December 25, 2021. The significant components of cash flows provided by operating activities were net income of $147.7 million, the add-back of non-cash depreciation and intangible asset amortization expense of $19.9 million, and stock-based compensation expense of $7.8 million. Accounts payable and accrued expenses and other current liabilities increased by $157.9 million due to the timing of payments. Inventory increased by $109.9 million as a result of an increase in purchases.
Net cash provided by operating activities was $156.6 million for the thirty-nine weeks ended December 26, 2020. The significant components of cash flows provided by operating activities were net income of $34.8 million, the add-back of non-cash depreciation and intangible asset amortization expense of $18.0 million, and stock-based compensation expense of $5.0 million. Accounts payable and accrued expenses and other current liabilities increased by $52.0 million due to the timing of payments, particularly with elevated December sales when compared to sales in March. Inventory decreased by $42.7 million as a result of a reduction in purchases due to the COVID-19 crisis combined with elevated December sales.
31
Investing Activities
Net cash used in investing activities was $39.7 million for the thirty-nine weeks ended December 25, 2021, which was attributable to $39.7 million in capital expenditures related to store construction, improvements to our e-commerce information technology infrastructure, and improvements to our distribution facilities.
Net cash used in investing activities was $20.5 million for the thirty-nine weeks ended December 26, 2020, which was primarily attributable to $20.5 million in capital expenditures related to store construction, improvements to our e-commerce information technology infrastructure, and improvements to our distribution facilities.
Financing Activities
Net cash used in financing activities was $109.2 million for the thirty-nine weeks ended December 25, 2021. We repaid $112.1 million on our debt and finance lease obligations during the period and paid $2.7 million in taxes related to the vesting of restricted stock. We also received $5.6 million from the exercise of stock options.
Net cash used in financing activities was $129.3 million for the thirty-nine weeks ended December 26, 2020. We repaid $130.4 million on our debt and finance lease obligations during the period. We also paid $0.5 million in taxes related to the vesting restricted stock. We also received $1.6 million from the exercise of stock options.
Contractual Obligations
During the thirteen and thirty-nine weeks ended December 25, 2021, there were no significant changes to our contractual obligations described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Fiscal 2021 10-K, other than those which occur in the normal course of business.
Off-Balance Sheet Arrangements
We are not a party to any off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosure of Market Risk
We are subject to interest rate risk in connection with borrowings under our credit facilities, which bear interest at variable rates. As of December 25, 2021, we had zero outstanding under the June 2015 Wells Fargo Revolver and zero outstanding under the 2015 Golub Term Loan.
As of December 25, 2021, there were no other material changes in the market risks described in the “Quantitative and Qualitative Disclosure of Market Risks” section of the Fiscal 2021 10-K.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, including our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 25, 2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of December 25, 2021, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
32
Changes in Internal Control Over Financial Reporting
During the quarter ended December 25, 2021, no changes occurred with respect to our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Part II. Other Information
Item 1. Legal Proceedings
For information on legal proceedings, see Note 6, “Commitments and Contingencies”, to our unaudited financial statements included in this Quarterly Report on Form 10-Q, which information is incorporated herein by reference.
Item 1A. Risk Factors
We operate in a rapidly changing environment that involves a number of risks that could materially and adversely affect our business, financial condition, prospects, operating results or cash flows, including the risks contained in “Item 1A—Risk Factors” in our Fiscal 2021 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
Exhibit No. | Description of Exhibit | |
31.1 | ||
31.2 | ||
32.1* | ||
32.2* | ||
101 | Interactive data files from Boot Barn Holdings, Inc.’s Quarterly Report on Form 10-Q for the quarter ended December 25, 2021, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statement of Stockholders’ Equity; (iv) the Condensed Consolidated Statements of Cash Flows and (v) Notes to the Condensed Consolidated Financial Statements. | |
104 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended December 25, 2021, formatted in Inline XBRL. |
* | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing. |
34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Boot Barn Holdings, Inc. | |
Date: January 27, 2022 | /s/ James G. Conroy |
James G. Conroy | |
President and Chief Executive Officer | |
Date: January 27, 2022 | /s/ James M. Watkins |
James M. Watkins | |
Chief Financial Officer and Secretary |
35