[June 06, 2019] |
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At Home Group Inc. Announces First Quarter Fiscal 2020 Financial Results
At Home Group Inc. (NYSE: HOME), the home décor superstore, today
announced its financial results for the first quarter ended April 27,
2019.
Lee Bird, Chairman and Chief Executive Officer, stated: "It was a
challenging first quarter as we faced unusually adverse weather across a
majority of our markets, resulting in comparable store sales below our
expectations. However, favorability in new store weeks and the solid
productivity of our non-comp stores enabled us to deliver nearly 20% net
sales growth and adjusted earnings per share at the low end of our
outlook range. Because of the challenging weather, we have already taken
swift markdown actions in order to sell through the necessary product at
lower than expected margins and head into the fall in a cleaner
inventory position."
"In the first quarter, we continued to make great operational progress
against our key strategic priorities including our second distribution
center, which is ramping on time and under budget. Our direct sourcing
penetration continues to grow, and both our loyalty program and brand
awareness continue to expand. We are focused on making continued
progress against all of our strategic priorities in fiscal 2020 and
beyond."
Mr. Bird added, "As we look to the rest of the year, we are updating our
outlook to reflect a softer start and recent industry trends, the
related markdowns, and the margin impact of recently raised 25% tariffs.
However, we have a strong, fresh assortment for the important fall and
holiday selling seasons and compelling marketing campaigns to maximize
performance. As an everyday low price retailer, we will remain sharp on
price to deliver the great value our customers expect of us. We are
focused on delivering on both our near and longer-term goals as we
expand the At Home brand toward its full potential."
For the Thirteen Weeks Ended April 27, 2019
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The Company opened 11 new stores in the first quarter of fiscal 2020
and ended the quarter with 191 stores in 38 states. The Company has
added a net 35 stores since the first quarter of fiscal 2019,
representing a 22.4% increase.
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Net sales increased 19.6% to $306.3 million from $256.2 million in the
quarter ended April 27, 2019 driven by the net increase in open
stores. Comparable store sales decreased 0.8% primarily due to adverse
weather conditions.
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Gross profit increased 3.3% to $88.1 million from $85.2 million in the
first quarter of fiscal 2019. Gross margin decreased 450 basis points
to 28.8% from 33.3% in the prior year period primarily due to costs
associated with opening a second distribution center, increased
occupancy costs resulting from both the adoption of ASC 842 "Leases"
and fiscal year 2020 and 2019 sale-leaseback transactions, and, to a
lesser extent, product margin contraction due to incremental markdowns.
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Selling, general and administrative expenses ("SG&A") increased 29.4%
to $76.9 million from $59.5 million in the prior year period. Adjusted
SG&A1 increased 30.5% to $76.0 million compared to a
recast3 $58.2 million in the first quarter of fiscal 2019.
Adjusted SG&A1 as a percentage of net sales increased
210 basis points on a recast3 basis to 24.8% primarily due
to the timing of increased store labor to support our growth
strategies, preopening expenses related to the timing of new store
openings, and advertising to support our brand awareness initiatives.
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Operating income increased 7.0% to $25.9 million compared to $24.2
million in the first quarter of fiscal 2019. Adjusted operating income1
decreased 55.6% to $10.3 million from a recast3 $23.2
million in the first quarter of fiscal 2019. Adjusted operating margin1
decreased 570 basis points on a recast3 basis to 3.4% of
net sales driven by the gross margin and adjusted SG&A factors
described above.
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Interest expense increased to $7.8 million from $5.8 million in the
first quarter of fiscal 2019 due to a year-over-year increase in
interest rates as well as increased borrowings to support our growth
strategies.
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Income tax expense was $4.2 million compared to $0.1 million in the
first quarter of fiscal 2019. The effective tax rate increased to
23.4% from 0.3% in the first quarter of fiscal 2019 primarily due to
the recognition of excess tax benefits related to stock option
exercises in the prior year period.
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Net income was $13.9 million compared to $18.4 million in the first
quarter of fiscal 2019. Adjusted Net Income1 was $1.9
million compared to a recast3 $18.2 million in the first
quarter of fiscal 2019.
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EPS was $0.21 compared to $0.28 in the first quarter of fiscal 2019.
Adjusted EPS1 was $0.03 compared to a recast3
$0.28 in the first quarter of fiscal 2019.
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Adjusted EBITDA1 decreased to $33.8 million from $42.2
million in the first quarter of fiscal 2019.
Sale-leaseback Transaction
In March 2019, the Company completed a sale-leaseback transaction
pursuant to which five properties were sold for a total of $74.7 million
and contemporaneously leased back for cumulative initial annual rent of
$5.0 million, subject to annual escalations. In accordance with ASC 842,
the resulting gain on sale-leaseback of $16.5 million was recognized
immediately in GAAP operating income. The Company excludes gains on
sale-leaseback transactions from its non-GAAP earnings metrics. See
"Non-GAAP Measures" below.
Balance Sheet Highlights as of April 27, 2019
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Net inventories increased 44.1% to $408.0 million compared to a 12.3%
increase to $283.1 million in the first quarter of fiscal 2019. The
increase as of April 27, 2019 is primarily due to a 22.4% increase in
the number of open stores, incremental seasonal product due to lower
than normal inventory in the prior year period, and the accelerated
cadence of expected new store openings year-over-year.
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Total liquidity (cash plus $121.6 million of availability under our
revolving credit facility) was $136.9 million.
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Total long-term debt was $346.3 million compared to $298.7 million as
of April 28, 2018. Additionally, there was $228.0 million outstanding
under our revolving credit facility as of April 27, 2019. Increased
borrowings were primarily driven by an increase of 35 net new stores
year-over-year.
Outlook & Key Assumptions
Below is an overview of the Company's outlook and related assumptions
for selected second quarter and fiscal 2020 financial data. Since the
beginning of fiscal 2020, the Company has implemented the new lease
accounting standard, ASC 842 "Leases," which requires, among other
things, a change to the accounting treatment of sale-leaseback
transactions and the reclassification of certain of the Company's
financing obligations. For illustrative purposes only, the Company has
provided the table below based on management estimates in order to
assist investors in understanding the impact of ASC 842 for
comparability purposes to fiscal 2019.
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Fiscal 2020 Outlook
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Fiscal 2019 as Reported
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Illustrative Impact of ASC 842 on
Fiscal 2019(3)
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Fiscal 2019, as Recast(4)
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Store growth
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32 net (36 gross)
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Sales
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$1,370.0 million to $1,390.0 million, representing growth of
18% to 19%
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Comp store sales
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(1)% to 1%
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Gross margin
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29.2% to 29.4%, inclusive of 90 to 100 bps
impact of second DC
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33.1%
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(90) bps
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32.2%
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Adjusted operating margin(1)(2)
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6.6% to 6.9%, inclusive of 80 to 90 bps
impact of second DC
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10.7%
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(120) bps
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9.5%
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Interest expense, net
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Approximately $33.0 million
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$27.1 million
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$(2.4) million
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$24.7 million
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Effective tax rate(5)
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23%, as compared to 0% in fiscal 2019
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Adjusted Net Income(1)(2)
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$44.0 million to $48.5 million, inclusive of approximately
$(8.5) million to $(9.6) million impact of second DC
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$86.0 million
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$(8.8) million
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$77.2 million
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Adjusted EPS(1)(2)
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$0.67 to $0.74, inclusive of $(0.13) to $(0.15) impact of
second DC
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$1.30
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$ (0.13)
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$1.17
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Diluted weighted average shares outstanding
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Approximately 66 million
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Capital expenditures
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$200 to $220 million, net of approximately $75 million of
sale-leaseback proceeds
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Q2 Fiscal 2020 Outlook
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Q2 Fiscal 2019 as Reported
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Illustrative
Impact of ASC 842 on Q2 Fiscal 2019(3)
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Q2 Fiscal 2019, as Recast(4)
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Store growth
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13 net (13 gross)
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Sales
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$340.0 million to $345.0 million, representing growth of 18%
to 20%
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Comp store sales
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(1)% to 1%
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Adjusted operating margin(1)(2)
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6.2% to 6.6%, inclusive of approximately 100 bps impact of
second DC
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10.9%
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(110) bps
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9.8%
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Effective tax rate(5)
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23%, as compared to 45.6% in Q2 fiscal 2019
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Adjusted Net Income(1)(2)
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$9.5 million to $11.0 million, inclusive of approximately
$(2.7) million impact of second DC
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$22.6 million
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$(2.0) million
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$20.6 million
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Adjusted EPS(1)(2)
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$0.14 to $0.17, inclusive of $(0.04)
impact of second DC
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$0.34
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$ (0.03)
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$0.31
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Diluted weighted average shares outstanding
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Approximately 66 million
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(1) Represents a non-GAAP financial measure. For additional information
about non-GAAP measures, including, where applicable, reconciliations to
the most directly comparable financial measures presented in accordance
with GAAP, please see "Non-GAAP Measures" below.
(2) We have not presented a quantitative reconciliation of the
forward-looking non-GAAP measures adjusted operating margin, Adjusted
Net Income and adjusted EPS to their most directly comparable GAAP
financial measures because it is impractical to forecast certain items
without unreasonable efforts due to the uncertainty and inherent
difficulty of predicting the occurrence and financial impact of such
items as well as the periods in which such items may be recognized. Such
items include the gain to be recognized as a result of sale-leaseback
transactions as well as the tax impact of certain stock-based
compensation events.
(3) Represents the necessary adjustments to reflect management's
estimates, for illustrative purposes, of the impact of the adoption of
ASC 842 on fiscal 2019 results, which requires, among other things, a
change to the accounting treatment of sale-leaseback transactions and
the reclassification of certain of our financing obligations.
(4) Represents second quarter and fiscal year 2019 results as adjusted
for illustrative purposes to reflect the impact of ASC 842.
(5) We have not included an estimate of any potential impact on our
forward-looking effective tax rate of certain stock-based compensation
events, including the vesting of restricted stock units or the tax
benefit from stock option exercises, due to the uncertainty and inherent
difficulty of predicting the occurrence and financial impact of such
items as well as the periods in which such items may be recognized. The
impact of these events in any particular period may have a material
effect on our effective tax rate for such period.
Conference Call Details
A conference call to discuss the first quarter fiscal year 2020
financial results is scheduled for today, June 6, 2019, at 8:30 a.m.
Eastern Time. Investors and analysts interested in participating in the
call are invited to dial 877-407-0789 (international callers please dial
201-689-8562) approximately 10 minutes prior to the start of the call. A
live audio webcast of the conference call, together with certain
supplemental materials, will be available online at investor.athome.com.
A recorded replay of the conference call will be available within two
hours of the conclusion of the call and can be accessed online at
investor.athome.com for 90 days.
Terminology
We define certain terms used in this release as follows:
"Adjusted EBITDA" means net income before net interest expense, loss
from early extinguishment of debt, income tax provision and depreciation
and amortization, adjusted for the impact of certain other items as
defined in our debt agreements, including certain legal settlements and
consulting and other professional fees, relocation and employee
recruiting incentives, management fees and expenses, stock-based
compensation expense, impairment of our trade name, gain on
sale-leaseback and non-cash rent. Periods prior to the adoption of ASC
842 have been recast to show the illustrative impact of the accounting
standard, which is non-cash in nature.
"Adjusted Net Income" means net income, adjusted for the gain on
sale-leaseback, initial public offering related non-cash stock-based
compensation expense and related payroll tax expenses and the income tax
impact associated with the special one-time initial public offering
bonus stock option exercises and other adjustments which include certain
transaction costs. Periods prior to the adoption of ASC 842 have been
recast to show the illustrative impact of the accounting standard, which
is non-cash in nature.
"Adjusted operating income" means operating income, adjusted for the
gain on sale-leaseback, non-cash stock-based compensation expense
related to our initial public offering and related payroll tax expenses
associated with special one-time initial public offering bonus grant
stock option exercises and other adjustments which include certain
transaction costs. Periods prior to the adoption of ASC 842 have been
recast to show the illustrative impact of the accounting standard, which
is non-cash in nature.
"Adjusted SG&A" means selling, general and administrative expenses
adjusted for certain expenses, including non-cash stock-based
compensation expense related to our initial public offering and related
payroll tax expenses associated with special one-time initial public
offering bonus grant stock option exercises and other adjustments which
include certain transaction costs. Periods prior to the adoption of ASC
842 have been recast to show the illustrative impact of the accounting
standard, which is non-cash in nature.
"Comparable store sales" means, for any reporting period, the change in
period-over-period net sales for the comparable store base, beginning
with stores on the second day of the sixteenth full fiscal month
following the store's opening. When a store is being relocated or
remodeled, we exclude sales from that store in the calculation of
comparable store sales until the first day of the sixteenth full fiscal
month after it reopens. As it relates to At Home, "two-year comparable
store sales basis" refers to the sum of the increase in comparable store
sales for each of the current and preceding fiscal years.
"EPS" means diluted earnings per share.
"GAAP" means accounting principles generally accepted in the United
States.
"Adjusted EPS" means Adjusted Net Income divided by diluted weighted
average shares outstanding.
"Store-level Adjusted EBITDA" means Adjusted EBITDA, adjusted further to
exclude the impact of costs associated with new store openings and
certain corporate overhead expenses which we do not consider in our
evaluation of the ongoing performance of our stores from period to
period.
Forward-Looking Statements
This release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. You can generally
identify forward-looking statements by our use of forward-looking
terminology such as "anticipate", "are confident", "assumed", "believe",
"continue", "could", "estimate", "expect", "intend", "look forward",
"may", "might", "on track", "outlook", "plan", "potential", "predict",
"reaffirm", "seek", "should", or "vision", or the negative thereof or
other variations thereon or comparable terminology. In particular,
statements about our outlook and assumptions for financial performance
for the second quarter and fiscal year 2020, as well as statements about
the markets in which we operate, expected new store openings, our real
estate strategy, growth targets, potential growth opportunities, impact
of expected stock option exercises, future capital expenditures, and
estimates of expenses we may incur in connection with equity incentive
awards to management and our expectations, beliefs, plans, strategies,
objectives, prospects, assumptions or future events or performance
contained in this document are forward-looking statements.
We have based these forward-looking statements on our current
expectations, assumptions, estimates and projections. While we believe
these expectations, assumptions, estimates and projections are
reasonable, such forward-looking statements are only predictions and
involve known and unknown risks and uncertainties, many of which are
beyond our control. These and other important factors, including those
factors described in "Item 1A. Risk Factors" of our Annual Report on
Form 10-K for the fiscal year ended January 26, 2019 and other reports
that we file with the Securities and Exchange Commission ("SEC"), may
cause our actual results, performance or achievements to differ
materially from any future results, performance or achievements
expressed or implied by these forward-looking statements. Given these
risks and uncertainties, you are cautioned not to place undue reliance
on such forward-looking statements. The forward-looking statements
contained in this release are not guarantees of future performance and
our actual results of operations, financial condition and liquidity, and
the development of the industry in which we operate, may differ
materially from the forward-looking statements contained in this
release. In addition, even if our results of operations, financial
condition and liquidity, and events in the industry in which we operate,
are consistent with the forward-looking statements contained in this
release, they may not be predictive of results or developments in future
periods.
Any forward-looking statement that we make in this release speaks only
as of the date of such statement. Except as required by law, we do not
undertake any obligation to update or revise, or to publicly announce
any update or revision to, any of the forward-looking statements,
whether as a result of new information, future events or otherwise,
after the date of this document.
About At Home Group Inc.
At Home (NYSE:HOME), the home decor superstore, offers more than 50,000
on-trend home products to fit any budget or style, from furniture,
mirrors, rugs, art and housewares to tabletop, patio and seasonal decor.
At Home is headquartered in Plano, Texas, and currently operates 196
stores in 39 states. For more information, please visit us online at
investor.athome.com.
-Financial Tables to Follow-
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AT HOME GROUP INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(Unaudited)
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April 27, 2019
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January 26, 2019
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April 28, 2018
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Assets
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Current assets:
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Cash and cash equivalents
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$
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15,332
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$
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10,951
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$
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13,532
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Inventories, net
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408,033
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382,023
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283,107
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Prepaid expenses
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8,284
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7,949
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9,239
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Other current assets
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10,023
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13,626
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9,234
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Total current assets
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441,672
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414,549
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315,112
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Operating lease right-of-use assets
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1,033,976
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Property and equipment, net
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685,208
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682,663
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528,710
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Goodwill
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569,732
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569,732
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569,732
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Trade name
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1,458
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1,458
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1,458
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Debt issuance costs, net
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1,429
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1,539
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1,868
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Restricted cash
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2,515
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2,515
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2,515
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Noncurrent deferred tax asset
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21,237
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52,805
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39,277
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Other assets
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954
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945
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736
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Total assets
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$
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2,758,181
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$
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1,726,206
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$
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1,459,408
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Liabilities and Shareholders' Equity
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Current liabilities:
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Accounts payable
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$
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125,103
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$
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115,821
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$
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76,194
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Accrued and other current liabilities
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119,585
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117,508
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92,758
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Revolving line of credit
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227,960
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221,010
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183,500
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Current portion of operating lease liabilities
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57,048
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-
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-
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Current portion of deferred rent
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-
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11,364
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10,512
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Current portion of long-term debt
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3,980
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4,049
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3,600
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Income taxes payable
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1,896
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-
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1,583
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Total current liabilities
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535,572
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469,752
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368,147
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Operating lease liabilities
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1,042,142
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-
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-
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Long-term debt
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336,829
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336,435
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289,397
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Financing obligations
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9,301
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35,038
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28,152
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Deferred rent
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-
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169,339
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147,605
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Other long-term liabilities
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4,161
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4,556
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5,508
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Total liabilities
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1,928,005
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1,015,120
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838,809
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Shareholders' Equity
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Common stock; $0.01 par value; 500,000,000 shares authorized;
63,959,406, 63,609,684 and 62,354,101 shares issued and
outstanding, respectively
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640
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636
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624
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Additional paid-in capital
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650,286
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643,677
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583,837
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Retained earnings
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179,250
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66,773
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36,138
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Total shareholders' equity
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830,176
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711,086
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620,599
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Total liabilities and shareholders' equity
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$
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2,758,181
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$
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1,726,206
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$
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1,459,408
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AT HOME GROUP INC.
Condensed Consolidated Statements of Income
(in thousands, except share and per share data)
(Unaudited)
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Thirteen Weeks Ended
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April 27, 2019
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April 28, 2018
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Net sales
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$
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306,264
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$
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256,161
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Cost of sales
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218,213
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170,917
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Gross profit
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88,051
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85,244
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Operating expenses
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Selling, general and administrative expenses
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76,929
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59,465
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Depreciation and amortization
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1,761
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1,579
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Total operating expenses
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78,690
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61,044
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Gain on sale-leaseback
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16,528
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-
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Operating income
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25,889
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24,200
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Interest expense, net
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7,769
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5,778
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Income before income taxes
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18,120
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18,422
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Income tax provision
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4,237
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61
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Net income
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$
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13,883
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$
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18,361
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|
Earnings per share:
|
|
|
|
|
|
|
Net income per common share:
|
|
|
|
|
|
|
Basic
|
|
$
|
0.22
|
|
$
|
0.30
|
Diluted
|
|
$
|
0.21
|
|
$
|
0.28
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
Basic
|
|
|
63,672,824
|
|
|
61,758,330
|
Diluted
|
|
|
65,815,833
|
|
|
65,889,163
|
|
|
|
|
|
|
|
AT HOME GROUP INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
April 27, 2019
|
|
April 28, 2018
|
Operating Activities
|
|
|
|
|
|
Net income
|
|
$
|
13,883
|
|
$
|
18,361
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
16,530
|
|
|
11,456
|
Loss on disposal of fixed assets
|
|
|
109
|
|
|
31
|
Non-cash interest expense
|
|
|
581
|
|
|
501
|
Gain on sale-leaseback
|
|
|
(16,528)
|
|
|
-
|
Amortization of deferred gain on sale-leaseback
|
|
|
-
|
|
|
(1,978)
|
Deferred income taxes
|
|
|
(1,176)
|
|
|
(5,716)
|
Stock-based compensation
|
|
|
1,848
|
|
|
2,128
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
Inventories
|
|
|
(26,010)
|
|
|
(13,264)
|
Prepaid expenses and other current assets
|
|
|
1,574
|
|
|
4,091
|
Other assets
|
|
|
(8)
|
|
|
(420)
|
Accounts payable
|
|
|
3,474
|
|
|
(5,263)
|
Accrued liabilities
|
|
|
(1,549)
|
|
|
(9,117)
|
Income taxes payable
|
|
|
1,896
|
|
|
1,583
|
Operating lease assets and liabilities
|
|
|
6,541
|
|
|
-
|
Deferred rent
|
|
|
-
|
|
|
4,315
|
Net cash provided by operating activities
|
|
|
1,165
|
|
|
6,708
|
Investing Activities
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(80,572)
|
|
|
(78,587)
|
Net proceeds from sale of property and equipment
|
|
|
63,808
|
|
|
49,637
|
Net cash used in investing activities
|
|
|
(16,764)
|
|
|
(28,950)
|
Financing Activities
|
|
|
|
|
|
|
Payments under lines of credit
|
|
|
(215,580)
|
|
|
(131,000)
|
Proceeds from lines of credit
|
|
|
222,530
|
|
|
152,500
|
Payment of debt issuance costs
|
|
|
(256)
|
|
|
-
|
Payments on financing obligations
|
|
|
(60)
|
|
|
(139)
|
Proceeds from financing obligations
|
|
|
9,571
|
|
|
-
|
Payments on long-term debt
|
|
|
(989)
|
|
|
(828)
|
Proceeds from exercise of stock options
|
|
|
4,764
|
|
|
9,231
|
Net cash provided by financing activities
|
|
|
19,980
|
|
|
29,764
|
Increase in cash, cash equivalents and restricted cash
|
|
|
4,381
|
|
|
7,522
|
Cash, cash equivalents and restricted cash, beginning of period
|
|
|
13,466
|
|
|
8,525
|
Cash, cash equivalents and restricted cash, end of period
|
|
$
|
17,847
|
|
$
|
16,047
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
7,001
|
|
$
|
5,033
|
Cash paid (received) for income taxes
|
|
$
|
72
|
|
$
|
(160)
|
Supplemental Information for Non-cash Investing and Financing
Activities
|
|
|
|
|
|
|
Increase in current liabilities of property and equipment
|
|
$
|
9,039
|
|
$
|
13,670
|
Property and equipment reduction due to sale-leaseback
|
|
$
|
-
|
|
$
|
(26,982)
|
Property and equipment additions due to build-to-suit lease
transactions
|
|
$
|
-
|
|
$
|
8,660
|
Non-GAAP Measures
Certain financial measures presented in this release, such as comparable
store sales, Adjusted EBITDA, adjusted SG&A, adjusted operating income,
Adjusted Net Income, adjusted EPS and Store-level Adjusted EBITDA, are
not recognized under GAAP.
We present comparable store sales, which is not a recognized financial
measure under GAAP, because it allows us to evaluate how our store base
is performing by measuring the change in period-over-period net sales in
stores that have been open for the applicable period. We present
Adjusted EBITDA and Store-level Adjusted EBITDA, which are not
recognized financial measures under GAAP, because we believe they assist
investors and analysts in comparing our operating performance across
reporting periods on a consistent basis by excluding items that we do
not believe are indicative of our core operating performance, such as
interest, depreciation, amortization, loss on extinguishment of debt,
impairment charges and taxes. We present adjusted SG&A, adjusted
operating income, Adjusted Net Income and adjusted EPS, which are not
recognized financial measures under GAAP, because we believe investors'
understanding of our operating performance is enhanced by the disclosure
of selling, general and administrative expenses, operating income, net
income and earnings per diluted share adjusted for items that we do not
believe are indicative of our core operating performance.
You are encouraged to evaluate each of these adjustments and the reasons
we consider them appropriate for supplemental analysis. In evaluating
our non-GAAP measures, you should be aware that in the future we may
incur expenses that are the same as or similar to some of the
adjustments in such presentations. In particular, Store-level Adjusted
EBITDA does not reflect costs associated with new store openings, which
are incurred on a limited basis with respect to any particular store
when opened and are not indicative of ongoing core operating
performance, and corporate overhead expenses that are necessary to allow
us to effectively operate our stores and generate Store-level Adjusted
EBITDA. Our presentation of non-GAAP financial measures should not be
construed as an inference that our future results will be unaffected by
unusual or non-recurring items. There can be no assurance that we will
not modify the presentation of our non-GAAP financial measures in the
future, and any such modification may be material. In addition,
comparable store sales, Adjusted EBITDA, adjusted SG&A, adjusted
operating income, Adjusted Net Income, adjusted EPS and Store-level
Adjusted EBITDA may not be comparable to similarly titled measures used
by other companies in our industry or across different industries.
Comparable store sales, Adjusted EBITDA, adjusted SG&A, adjusted
operating income, Adjusted Net Income, adjusted EPS and Store-level
Adjusted EBITDA have limitations as analytical tools and you should not
consider them in isolation, or as a substitute for analysis of our
results as reported under GAAP. We compensate for these limitations by
relying primarily on our GAAP results and using comparable store sales,
Adjusted EBITDA, adjusted SG&A, adjusted operating income, Adjusted Net
Income, adjusted EPS and Store-level Adjusted EBITDA only as
supplemental information.
The Company has not presented a quantitative reconciliation of the
forward-looking non-GAAP measures adjusted operating income, Adjusted
Net Income and adjusted EPS to their most directly comparable GAAP
financial measures because it is impractical to forecast certain items
without unreasonable efforts due to the uncertainty and inherent
difficulty of predicting the occurrence and financial impact of and the
periods in which such items may be recognized.
AT HOME GROUP INC.
Supplemental Information - Reconciliation of GAAP to Non-GAAP
Financial Measures
(in thousands, except share and per share data)
(Unaudited)
The tables below reconcile the non-GAAP financial measures of adjusted
SG&A, adjusted operating income, Adjusted Net Income, adjusted EPS,
Adjusted EBITDA and Store-level Adjusted EBITDA to their most directly
comparable GAAP financial measures. Periods prior to the adoption of ASC
842 have been adjusted in the tables below to show the illustrative
impact of the accounting standard based on management's estimates for
comparability purposes.
Reconciliation of selling, general and administrative expenses as
reported to adjusted SG&A
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
April 27, 2019
|
|
April 28, 2018
|
|
|
|
|
|
|
Selling, general and administrative expenses, as reported
|
|
$
|
76,929
|
|
$
|
59,465
|
Adjustments:
|
|
|
|
|
|
|
Stock-based compensation related to special one-time IPO bonus
grant(a)
|
|
|
-
|
|
|
(1,296)
|
Payroll tax expense related to special one-time IPO bonus stock
option exercises(b)
|
|
|
(36)
|
|
|
(11)
|
Other(c)
|
|
|
(899)
|
|
|
(522)
|
Adjusted selling, general and administrative expenses, as reported
|
|
|
75,994
|
|
|
57,636
|
Illustrative impact of ASC 842(d)
|
|
|
-
|
|
|
585
|
Adjusted selling, general and administrative expenses, as recast
|
|
$
|
75,994
|
|
$
|
58,221
|
Reconciliation of operating income as reported to adjusted operating
income
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
April 27, 2019
|
|
April 28, 2018
|
|
|
|
|
|
|
Operating income, as reported
|
|
$
|
25,889
|
|
$
|
24,200
|
Adjustments:
|
|
|
|
|
|
|
Gain on sale-leaseback(e)
|
|
|
(16,528)
|
|
|
-
|
Stock-based compensation related to special one-time IPO bonus grant(a)
|
|
|
-
|
|
|
1,296
|
Payroll tax expense related to special one-time IPO bonus stock
option exercises(b)
|
|
|
36
|
|
|
11
|
Other(c)
|
|
|
899
|
|
|
522
|
Adjusted operating income, as reported
|
|
|
10,296
|
|
|
26,029
|
Illustrative impact of ASC 842(d)
|
|
|
-
|
|
|
(2,838)
|
Adjusted operating income, as recast
|
|
$
|
10,296
|
|
$
|
23,191
|
Adjusted operating margin, as recast
|
|
|
3.4%
|
|
|
9.1%
|
Reconciliation of net income as reported to Adjusted Net Income
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
April 27, 2019
|
|
April 28, 2018
|
|
|
|
|
|
|
Net income, as reported
|
|
$
|
13,883
|
|
$
|
18,361
|
Adjustments:
|
|
|
|
|
|
|
Gain on sale-leaseback(e)
|
|
|
(16,528)
|
|
|
-
|
Stock-based compensation related to special one-time IPO bonus grant(a)
|
|
|
-
|
|
|
1,296
|
Payroll tax expense related to special one-time IPO bonus stock
option exercises(b)
|
|
|
36
|
|
|
11
|
Other(c)
|
|
|
899
|
|
|
522
|
Tax impact of adjustments to net income(f)
|
|
|
3,612
|
|
|
(11)
|
Tax benefit related to special one-time IPO bonus stock option exercises(g)
|
|
|
(6)
|
|
|
(54)
|
Adjusted Net Income, as reported
|
|
|
1,896
|
|
|
20,125
|
Illustrative impact of ASC 842(d)
|
|
|
-
|
|
|
(1,885)
|
Adjusted Net Income, as recast
|
|
|
1,896
|
|
|
18,240
|
Diluted weighted average shares outstanding
|
|
|
65,815,833
|
|
|
65,889,163
|
Adjusted EPS, as reported
|
|
|
0.03
|
|
|
0.31
|
Illustrative impact of ASC 842(d)
|
|
|
-
|
|
|
(0.03)
|
Adjusted EPS, as recast
|
|
$
|
0.03
|
|
$
|
0.28
|
(a) Non-cash stock-based compensation expense associated with a special
one-time initial public offering bonus grant to certain members of
senior management (the "IPO grant"), which we do not consider in our
evaluation of our ongoing performance. The IPO grant was made in
addition to the ongoing equity incentive program that we have in place
to incentivize, retain and motivate our employees, officers and
non-employee directors and was made to reward certain senior executives
for historical performance and allow them to benefit from future
successful outcomes for certain existing stockholders.
(b) Payroll tax expense related to stock option exercises associated
with the IPO grant, which we do not consider in our evaluation of our
ongoing performance.
(c) Other adjustments include amounts management believes are not
representative of our ongoing operations, including transaction costs.
(d) Represents the necessary adjustments to reflect management's
estimates of the impact of the adoption of ASC 842 on fiscal 2019
results, which requires, among other things, a change to the accounting
treatment of sale-leaseback transactions and the reclassification of
certain of our financing obligations.
(e) As of January 27, 2019, we fully recognized the gains on
sale-leaseback transactions on the condensed consolidated statements of
income in accordance with ASC 842.
(f) Represents the income tax impact of the adjusted expenses using the
annual effective tax rate excluding discrete items. After giving effect
to the adjustments to net income, the adjusted effective tax rate was
25.0% and 0.6% for the thirteen weeks ended April 27, 2019 and April 28,
2018, respectively.
(g) Represents the income tax benefit related to stock option exercises
associated with the IPO grant.
Reconciliation of net income to EBITDA, Adjusted EBITDA and
Store-level Adjusted EBITDA
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
April 27, 2019
|
|
April 28, 2018
|
|
|
|
|
|
|
Net income, as reported
|
|
$
|
13,883
|
|
$
|
18,361
|
Interest expense, net
|
|
|
7,769
|
|
|
5,778
|
Income tax provision
|
|
|
4,237
|
|
|
61
|
Depreciation and amortization(a)
|
|
|
16,530
|
|
|
11,456
|
EBITDA, as reported
|
|
|
42,419
|
|
|
35,656
|
Gain on sale-leaseback(b)
|
|
|
(16,528)
|
|
|
-
|
Consulting and other professional services(c)
|
|
|
1,581
|
|
|
2,348
|
Stock-based compensation expense(d)
|
|
|
1,848
|
|
|
832
|
Stock-based compensation related to special one-time IPO bonus grant(e)
|
|
|
-
|
|
|
1,296
|
Non-cash rent(b)
|
|
|
4,376
|
|
|
1,657
|
Other(f)
|
|
|
54
|
|
|
414
|
Adjusted EBITDA, as reported
|
|
|
33,750
|
|
|
42,203
|
Illustrative impact of ASC 842(g)
|
|
|
-
|
|
|
(916)
|
Adjusted EBITDA, as recast
|
|
|
33,750
|
|
|
41,287
|
Costs associated with new store openings(h)
|
|
|
7,060
|
|
|
3,739
|
Corporate overhead expenses(i)
|
|
|
23,897
|
|
|
22,208
|
Less illustrative impact of ASC 842(g)
|
|
|
-
|
|
|
916
|
Store-level Adjusted EBITDA, as reported
|
|
|
64,707
|
|
|
68,150
|
Illustrative impact of ASC 842(g)
|
|
|
-
|
|
|
(400)
|
Store-level Adjusted EBITDA, as recast
|
|
$
|
64,707
|
|
$
|
67,750
|
(a) Includes the portion of depreciation and amortization expenses that
are classified as cost of sales in our condensed consolidated statements
of income.
(b) Consists of the non-cash portion of rent, which reflects the extent
to which our GAAP straight-line rent expense recognized exceeds or is
less than our cash rent payments, partially offset, for the thirteen
weeks ended April 28, 2018, by the amortization of deferred gains on
sale-leaseback transactions that are recognized to rent expense on a
straight-line basis through the applicable lease term. The offsetting
amount relating to the amortization of deferred gains on sale-leaseback
transactions was $(2.0) million during the thirteen weeks ended April
28, 2018. As of January 27, 2019, we fully recognized the gains on
sale-leaseback transactions on the condensed consolidated statements of
income in accordance with ASC 842. The GAAP straight-line rent expense
adjustment can vary depending on the average age of our lease portfolio,
which has been impacted by our significant growth. For newer leases, our
rent expense recognized typically exceeds our cash rent payments while
for more mature leases, rent expense recognized is typically less than
our cash rent payments.
(c) Primarily consists of (i) consulting and other professional fees
with respect to projects to enhance our merchandising and human resource
capabilities and other company initiatives; and (ii) transaction costs.
(d) Non-cash stock-based compensation expense related to the ongoing
equity incentive program that we have in place to incentivize, retain
and motivate our employees, officers and non-employee directors.
(e) Non-cash stock-based compensation expense associated with the IPO
grant, which we do not consider in our evaluation of our ongoing
performance. The IPO grant was made in addition to the ongoing equity
incentive program that we have in place to incentivize, retain and
motivate our employees, officers and non-employee directors and was made
to reward certain senior executives for historical performance and allow
them to benefit from future successful outcomes for certain existing
stockholders.
(f) Other adjustments include amounts our management believes are not
representative of our ongoing operations, including a payroll tax
expense of $0.3 million related to the exercise of stock options for the
thirteen weeks ended April 28, 2018.
(g) Represents the necessary adjustments to reflect management's
estimates of the impact of the adoption of ASC 842 on fiscal year 2019
results, which requires, among other things, a change to the accounting
treatment of sale-leaseback transactions and the reclassification of
certain of our financing obligations.
(h) Reflects non-capital expenditures associated with opening new
stores, including marketing and advertising, labor and cash occupancy
expenses. Costs related to new store openings represent cash costs, and
you should be aware that in the future we may incur expenses that are
similar to these costs. We anticipate that we will continue to incur
cash costs as we open new stores in the future. We opened eleven and
nine new stores during the thirteen weeks ended April 27, 2019 and April
28, 2018, respectively.
(i) Reflects corporate overhead expenses, which are not directly related
to the profitability of our stores, to facilitate comparisons of store
operating performance as we do not consider these corporate overhead
expenses when evaluating the ongoing performance of our stores from
period to period. Corporate overhead expenses, which are a component of
selling, general and administrative expenses, are comprised of various
home office general and administrative expenses such as payroll
expenses, occupancy costs, marketing and advertising, and consulting and
professional fees. Store-level Adjusted EBITDA should not be used as a
substitute for consolidated measures of profitability or performance
because it does not reflect corporate overhead expenses that are
necessary to allow us to effectively operate our stores and generate
Store-level Adjusted EBITDA. We anticipate that we will continue to
incur corporate overhead expenses in future periods.
HOME-F
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