BOOT BARN HOLDINGS, INC. 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 ofBoot 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 theSecurities and Exchange Commission (the "SEC"), onMay 12, 2022 (the "Fiscal 2022 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 toBoot Barn Holdings, Inc. and its subsidiaries. 20 Table of Contents 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 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 2022 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.
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. Inflation (which has occurred over the past
twelve months and is continuing) and other challenges affecting the global
economy could impact our operations and will depend on future developments,
which are uncertain. For further discussion of the uncertainties and business
risks affecting the Company, see Item 1A, Risk Factors, of our Fiscal 2022 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 24, 2022 , we operated 333 stores in 41 states, as well as our
e-commerce websites consisting primarily of bootbarn.com, sheplers.com,
countryoutfitter.com and third-party marketplaces. 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.
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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
("SG&A") expenses, and operating 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 estimated and actual sales returns and deductions for estimated future award redemptions. 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.
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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.
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 global
pandemics;
? 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 stock-based compensation, legal, and accounting-related expenses and increases resulting from growth in the number of our stores.
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 statements. A summary of our
significant accounting policies is included in Note 2 to our consolidated
financial statements included in the Fiscal 2022 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 2022 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 2022 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. The current fiscal year
ending on April 1, 2023 ("fiscal 2023") will consist of 53 weeks; whereas, the
fiscal year ended on March 26, 2022 ("fiscal 2022") consisted of 52 weeks. We
identify our fiscal years by reference to the calendar year in which the fiscal
year ends.
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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 24, December 25, December 24, December 25,
(dollars in thousands) 2022 2021 2022 2021
Condensed Consolidated Statements of
Operations Data:
Net sales $ 514,553 $ 485,904 $ 1,231,954 $ 1,104,948
Cost of goods sold 326,739 294,245 777,214 678,711
Gross profit 187,814 191,659 454,740 426,237
Selling, general and administrative
expenses 115,318 99,467 285,669 230,288
Income from operations 72,496 92,192 169,071 195,949
Interest expense 2,258 1,667 4,345 5,392
Other income/(loss), net 63 43 (210) 161
Income before income taxes 70,301 90,568 164,516 190,718
Income tax expense 17,529 21,337 40,372 42,981
Net income $ 52,772 $ 69,231 $ 124,144 $ 147,737
Percentage of Net Sales (1):
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of goods sold 63.5 % 60.6 % 63.1 % 61.4 %
Gross profit 36.5 % 39.4 % 36.9 % 38.6 %
Selling, general and administrative
expenses 22.4 % 20.5 % 23.2 % 20.8 %
Income from operations 14.1 % 19.0 % 13.7 % 17.7 %
Interest expense 0.4 % 0.3 % 0.4 % 0.5 %
Other income/(loss), net - % - % - % - %
Income before income taxes 13.7 % 18.6 % 13.4 % 17.3 %
Income tax expense 3.4 % 4.4 % 3.3 % 3.9 %
Net income 10.3 % 14.2 % 10.1 % 13.4 %
(1) Percentages may not recalculate due to rounding.
Thirteen Weeks Ended
Net sales. Net sales increased$28.6 million , or 5.9%, to$514.6 million for the thirteen weeks endedDecember 24, 2022 from$485.9 million for the thirteen weeks endedDecember 25, 2021 . Consolidated same store sales decreased 3.6%. Excluding the impact of the 15.2% decrease in e-commerce same store sales, same store sales decreased by 0.8%. The increase in net sales was the result of the incremental sales from new stores opened over the past twelve months, partially offset by the decrease in consolidated same store sales. Higher average unit retail prices, driven in part by inflation, further contributed to the increase in net sales. Gross profit. Gross profit decreased$3.8 million , or 2.0%, to$187.8 million for the thirteen weeks endedDecember 24, 2022 from$191.7 million for the thirteen weeks endedDecember 25, 2021 . As a percentage of net sales, gross profit was 36.5% and 39.4% for the thirteen weeks endedDecember 24, 2022 andDecember 25, 2021 , respectively. Gross profit decreased primarily due to higher freight expense and cost of merchandise. The decrease in gross profit rate of 290 basis points was driven primarily by a 190 basis-point decrease in merchandise margin rate and 100 basis points of deleverage in buying, occupancy and distribution center costs. The decline in merchandise margin rate was driven primarily by a 180 basis-point headwind from higher freight expense.
Selling, general and administrative expenses. SG&A expenses increased
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expenses in the current-year period compared to the prior-year period. As a percentage of net sales, SG&A increased by 190 basis points to 22.4% for the thirteen weeks endedDecember 24, 2022 from 20.5% for the thirteen weeks endedDecember 25, 2021 primarily as a result of higher store-related expenses and store payroll.
Income from operations. Income from operations decreased
Interest expense. Interest expense was$2.3 million and$1.7 million for the thirteen weeks endedDecember 24, 2022 andDecember 25, 2021 , respectively. The increase in interest expense in the current-year period was primarily the result of a higher debt balance in the current-year period compared to the prior-year period. Income tax expense. Income tax expense was$17.5 million for the thirteen weeks endedDecember 24, 2022 , compared to$21.3 million for the thirteen weeks endedDecember 25, 2021 . Our effective tax rate was 24.9% and 23.6% for the thirteen weeks endedDecember 24, 2022 andDecember 25, 2021 , respectively. The tax rate for the thirteen weeks endedDecember 24, 2022 was higher than the tax rate for the thirteen weeks endedDecember 25, 2021 , primarily due to a lower tax benefit due to income tax accounting for stock-based compensation compared to the thirteen weeks endedDecember 25, 2021 . Net income. Net income was$52.8 million for the thirteen weeks endedDecember 24, 2022 compared to$69.2 million for the thirteen weeks endedDecember 25, 2021 . The decrease in net income was primarily attributable to the factors noted above.
Thirty-Nine Weeks Ended
Net sales. Net sales increased$127.0 million , or 11.5%, to$1.232 billion for the thirty-nine weeks endedDecember 24, 2022 from$1.105 billion for the thirty-nine weeks endedDecember 25, 2021 . Consolidated same store sales increased 1.8%. Excluding the impact of the 7.5% decrease in e-commerce same store sales, same store sales increased by 3.6%. The increase in net sales was the result of the incremental sales from new stores opened over the past twelve months and an increase of 1.8% in consolidated same store sales, which saw an increase in average unit retail prices, driven in part by inflation. Gross profit. Gross profit increased$28.5 million , or 6.7%, to$454.7 million for the thirty-nine weeks endedDecember 24, 2022 from$426.2 million for the thirty-nine weeks endedDecember 25, 2021 . As a percentage of net sales, gross profit was 36.9% and 38.6% for the thirty-nine weeks endedDecember 24, 2022 andDecember 25, 2021 , respectively. Gross profit increased primarily due to higher sales. The decrease in gross profit rate of 170 basis points was driven by 120 basis points of deleverage in buying, occupancy and distribution center costs and a 50 basis-point decrease in merchandise margin rate. The decline in merchandise margin rate was driven primarily by a 90 basis-point headwind from higher freight expense, partially offset by growth in exclusive brand penetration. Selling, general and administrative expenses. SG&A expenses increased$55.4 million , or 24.0%, to$285.7 million for the thirty-nine weeks endedDecember 24, 2022 from$230.3 million for the thirty-nine weeks endedDecember 25, 2021 . The increase in SG&A expenses was primarily a result of higher store payroll, store-related expenses, and marketing expenses in the current-year period compared to the prior-year period. As a percentage of net sales, SG&A increased by 230 basis points to 23.2% for the thirty-nine weeks endedDecember 24, 2022 from 20.8% for the thirty-nine weeks endedDecember 25, 2021 , primarily as a result of an increase in store-related expenses, store payroll and marketing expenses. Income from operations. Income from operations decreased$26.9 million , or 13.7%, to$169.1 million for the thirty-nine weeks endedDecember 24, 2022 from$195.9 million for the thirty-nine weeks endedDecember 25, 2021 . The decrease in income from operations was attributable to the factors noted above. As a percentage of net sales, income 26
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from operations was 13.7% and 17.7% for the thirty-nine weeks ended
Interest expense. Interest expense was$4.3 million and$5.4 million for the thirty-nine weeks endedDecember 24, 2022 andDecember 25, 2021 , respectively. Interest expense in the thirty-nine weeks endedDecember 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 in the prior-year period, interest expense was$4.3 million for the thirty-nine weeks endedDecember 24, 2022 , compared to$4.0 million for the thirty-nine weeks endedDecember 25, 2021 . The increase in interest expense in the current-year period was primarily the result of interest expense incurred on the revolving line of credit during the thirty-nine weeks endedDecember 24, 2022 at a higher interest rate than the prior-year period. Income tax expense. Income tax expense was$40.4 million for the thirty-nine weeks endedDecember 24, 2022 , compared to$43.0 million for the thirty-nine weeks endedDecember 25, 2021 . Our effective tax rate was 24.5% and 22.5% for the thirty-nine weeks endedDecember 24, 2022 andDecember 25, 2021 , respectively. The tax rate for the thirty-nine weeks endedDecember 24, 2022 was higher than the tax rate for the thirty-nine weeks endedDecember 25, 2021 , primarily due to a lower tax benefit due to income tax accounting for stock-based compensation compared to the thirty-nine weeks endedDecember 25, 2021 . Net income. Net income was$124.1 million for the thirty-nine weeks endedDecember 24, 2022 compared to$147.7 million for the thirty-nine weeks endedDecember 25, 2021 . The decrease in net income was primarily attributable to
the factors noted above. Store Operating Data:
The following table presents store operating data for the periods indicated:
Thirteen Weeks Ended Thirty-Nine Weeks Ended
December 24 ,December 25 ,
2022 2021 2022 2021
Selected Store Data:
Same Store Sales (decline)/growth (3.6) % 54.2 % 1.8 % 61.8 %
Stores operating at end of period 333 289 333 289
Total retail store square footage,
end of period (in thousands) 3,598 3,063 3,598 3,063
Average store square footage, end of
period 10,806 10,597 10,806 10,597
Average net sales per store (in
thousands) (1) $ 1,320 $ 1,372 Average net sales per store is calculated by dividing net sales for the (1) applicable period by the number of stores operating at the end of the period.
For the purpose of calculating net sales per store, e-commerce sales and
certain other revenues are excluded from net sales.
Liquidity and Capital Resources
We rely on cash flows from operating activities and our credit facility 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 facility 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.
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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. Included in our fiscal 2023 capital expenditures are investments in a new distribution center inKansas City, Missouri . We estimate that our total capital expenditures in fiscal 2023 will be between$90.0 million and$95.0 million (including the capital expenditures made during the thirty-nine weeks endedDecember 24, 2022 ), net of landlord tenant allowances, and we anticipate that we will use cash flows from operations to fund these expenditures.
OnJune 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 whichWells Fargo Bank, National Association ("June 2015 Wells Fargo Revolver"), is agent, and the$200.0 million syndicated senior secured term loan for whichGCI Capital Markets LLC ("2015 Golub Term Loan") was agent.
The borrowing base of the
Borrowings under theJune 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 theJune 2015 Wells Fargo Revolver is payable in quarterly installments ending on the maturity date. OnMay 26, 2017 , the Company entered into an amendment to theJune 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 ofMay 26, 2022 or 90 days prior to the previous maturity of the 2015 Golub Term Loan, which was then scheduled to mature onJune 29, 2021 . OnJune 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 toJune 6, 2024 . 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. OnJuly 26, 2021 , the Company entered in an amendment (the "2021 Wells Amendment"), increasing the aggregate revolving credit facility to$180.0 million . OnJuly 11, 2022 , the Company entered into Amendment No. 4 to the Credit Agreement (the "2022 Wells Amendment"), increasing the aggregate revolving credit facility to$250.0 million , which includes a$10.0 million sublimit for letters of credit. The 2022 Wells Amendment extended the maturity date toJuly 11, 2027 . The 2022 Wells Amendment also made other changes to theJune 2015 Wells Fargo Revolver, replacing all LIBOR based provisions with provisions reflecting Term Secured Overnight Financing Rate ("SOFR"), including, without limitation, the use of Term SOFR as the benchmark rate. Following the 2022 Wells Amendment, Revolving Credit Loans bear interest at per annum rates equal to, at the Company's option, either (i) Adjusted Term SOFR (defined as Term SOFR plus 0.10%) plus an applicable margin for Term SOFR 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) Term SOFR for a one month tenor in effect on such day 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 SOFR loans, the applicable margin ranges from 1.00% to 1.25% and for base rate loans it ranges from 0.00% to 0.25%. The amounts outstanding under theJune 2015 Wells Fargo Revolver and letter of credit commitments as ofDecember 24, 2022 , were$59.1 million and$0.8 million , respectively. The amounts outstanding under theJune 2015 Wells Fargo Revolver and letter of credit commitments as ofMarch 26, 2022 were$28.5 million and zero, respectively. 28 Table of Contents
Total interest expense incurred in the thirteen and thirty-nine weeks endedDecember 24, 2022 on theJune 2015 Wells Fargo Revolver was$2.1 million and$3.8 million , respectively, and the weighted average interest rate for the thirteen weeks endedDecember 24, 2022 was 4.9%. Total interest expense incurred in the thirteen and thirty-nine weeks endedDecember 25, 2021 on theJune 2015 Wells Fargo Revolver was$0.2 million and$0.5 million , respectively. OnDecember 14, 2021 , we repaid the remaining outstanding principal under the 2015 Golub Term Loan and terminated the agreement. Total interest expense incurred in the thirteen and thirty-nine weeks endedDecember 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 endedDecember 25, 2021 was 5.5%. All obligations under theJune 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 theJune 2015 Wells Fargo Revolver. TheJune 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. TheJune 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 ofDecember 24, 2022 , the fair value of this embedded derivative was estimated and was not significant.
As of
Cash Position and Cash Flow
Cash and cash equivalents were
The following table presents summary cash flow information for the periods
indicated below:
Thirty-Nine Weeks Ended
December 24, December 25,
(in thousands) 2022 2021
Net cash provided by/(used in):
Operating activities $ 87,050 $ 190,556
Investing activities (83,056) (39,749)
Financing activities 25,724 (109,241)
Net increase in cash $ 29,718 $ 41,566
Operating Activities
Net cash provided by operating activities was $87.1 million for the thirty-nine
weeks ended December 24, 2022 . The significant components of cash flows used in
operating activities were net income of $124.1 million , the add-back of non-cash
depreciation and intangible asset amortization expense of $26.0 million , and
stock-based compensation expense of $9.6 million . Accounts payable and accrued
expenses and other current liabilities increased by $52.4 million due to the
timing of payments. Inventory increased by $117.9 million as a result of an
increase in purchases.
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.
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Table of Contents
Investing Activities
Net cash used in investing activities was
Net cash used in investing activities was
Financing Activities
Net cash provided by financing activities was$25.7 million for the thirty-nine weeks endedDecember 24, 2022 . We borrowed$30.5 million on our revolving line of credit and paid$4.5 million in taxes related to the vesting of restricted stock. Net cash used in financing activities was$109.2 million for the thirty-nine weeks endedDecember 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.
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