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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Franchise Group Inc | NASDAQ:FRG | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 29.88 | 29.87 | 29.88 | 0 | 01:00:00 |
Delaware
|
|
27-3561876
|
(State of incorporation)
|
|
(IRS employer identification no.)
|
Title of each class
|
|
Trading symbol(s)
|
|
Name of each exchange on which registered
|
Common stock, par value $.01 per share
|
|
FRG
|
|
NASDAQ Global Market
|
7.50% Series A Cumulative Preferred Stock, par value $0.01 per share and liquidation preference of $25.00 per share
|
|
FRGAP
|
|
NASDAQ Global Market
|
|
|
Page
|
|
|
Number
|
|
|
|
|
|
|
|
||
|
||
|
||
|
||
|
||
|
||
|
|
|
|
|
|
|
(In thousands, except share count and per share data)
|
|
September 26, 2020
|
|
December 28, 2019
|
||||
Assets
|
|
(Unaudited)
|
|
(Audited)
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
179,932
|
|
|
$
|
39,581
|
|
Current receivables, net
|
|
84,277
|
|
|
79,693
|
|
||
Inventories, net
|
|
319,545
|
|
|
300,312
|
|
||
Other current assets
|
|
22,845
|
|
|
20,267
|
|
||
Total current assets
|
|
606,599
|
|
|
439,853
|
|
||
Property, equipment, and software, net
|
|
143,512
|
|
|
150,147
|
|
||
Non-current receivables, net
|
|
16,095
|
|
|
18,638
|
|
||
Goodwill
|
|
469,788
|
|
|
134,301
|
|
||
Intangible assets, net
|
|
145,478
|
|
|
77,590
|
|
||
Operating lease right-of-use assets
|
|
516,398
|
|
|
462,610
|
|
||
Other non-current assets
|
|
14,634
|
|
|
15,406
|
|
||
Total assets
|
|
$
|
1,912,504
|
|
|
$
|
1,298,545
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
||||
Current installments of long-term obligations
|
|
$
|
112,374
|
|
|
$
|
218,384
|
|
Current operating lease liabilities
|
|
131,685
|
|
|
107,680
|
|
||
Accounts payable and accrued expenses
|
|
257,387
|
|
|
158,995
|
|
||
Other current liabilities
|
|
36,461
|
|
|
16,409
|
|
||
Total current liabilities
|
|
537,907
|
|
|
501,468
|
|
||
Long-term obligations, excluding current installments
|
|
516,353
|
|
|
245,236
|
|
||
Non-current operating lease liabilities
|
|
412,613
|
|
|
394,307
|
|
||
Other non-current liabilities
|
|
37,099
|
|
|
5,773
|
|
||
Total liabilities
|
|
1,503,972
|
|
|
1,146,784
|
|
||
|
|
|
|
|
||||
Stockholders' equity:
|
|
|
|
|
||||
Common stock, $0.01 par value per share, 180,000,000 and 180,000,000 shares authorized, 40,056,665 and 18,250,225 shares issued and outstanding at September 26, 2020 and December 28, 2019, respectively
|
|
401
|
|
|
183
|
|
||
Preferred Stock, $0.01 par value per share, 20,000,000 and 20,000,000 shares authorized, 1,200,000 and 1,886,667 shares issued and outstanding at September 26, 2020 and December 28, 2019, respectively
|
|
12
|
|
|
19
|
|
||
Additional paid-in capital
|
|
386,030
|
|
|
108,339
|
|
||
Accumulated other comprehensive loss, net of taxes
|
|
(1,838
|
)
|
|
(1,538
|
)
|
||
Retained earnings
|
|
23,927
|
|
|
18,388
|
|
||
Total equity attributable to Franchise Group, Inc.
|
|
408,532
|
|
|
125,391
|
|
||
Non-controlling interest
|
|
—
|
|
|
26,370
|
|
||
Total equity
|
|
408,532
|
|
|
151,761
|
|
||
Total liabilities and equity
|
|
$
|
1,912,504
|
|
|
$
|
1,298,545
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
(In thousands, except share count and per share data)
|
|
September 26, 2020
|
|
September 30, 2019
|
|
September 26, 2020
|
|
September 30, 2019
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Product
|
|
$
|
500,462
|
|
|
$
|
557
|
|
|
$
|
1,440,677
|
|
|
$
|
557
|
|
Service and other
|
|
33,126
|
|
|
10,284
|
|
|
164,508
|
|
|
129,942
|
|
||||
Rental
|
|
17,404
|
|
|
8,079
|
|
|
51,000
|
|
|
8,079
|
|
||||
Total revenues
|
|
550,992
|
|
|
18,920
|
|
|
1,656,185
|
|
|
138,578
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of revenue:
|
|
|
|
|
|
|
|
|
||||||||
Product
|
|
296,920
|
|
|
438
|
|
|
862,320
|
|
|
438
|
|
||||
Service and other
|
|
678
|
|
|
—
|
|
|
2,135
|
|
|
—
|
|
||||
Rental
|
|
5,877
|
|
|
3,048
|
|
|
17,327
|
|
|
3,048
|
|
||||
Total cost of revenue
|
|
303,475
|
|
|
3,486
|
|
|
881,782
|
|
|
3,486
|
|
||||
Selling, general, and administrative expenses
|
|
228,194
|
|
|
40,481
|
|
|
697,670
|
|
|
110,928
|
|
||||
Total operating expenses
|
|
531,669
|
|
|
43,967
|
|
|
1,579,452
|
|
|
114,414
|
|
||||
Income (loss) from operations
|
|
19,323
|
|
|
(25,047
|
)
|
|
76,733
|
|
|
24,164
|
|
||||
Other expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other
|
|
(1,229
|
)
|
|
(1
|
)
|
|
(5,293
|
)
|
|
(101
|
)
|
||||
Interest expense, net
|
|
(26,264
|
)
|
|
(2,755
|
)
|
|
(83,642
|
)
|
|
(4,225
|
)
|
||||
Income (loss) before income taxes
|
|
(8,170
|
)
|
|
(27,803
|
)
|
|
(12,202
|
)
|
|
19,838
|
|
||||
Income tax expense (benefit)
|
|
427
|
|
|
(4,339
|
)
|
|
(43,561
|
)
|
|
10,367
|
|
||||
Net income (loss)
|
|
(8,597
|
)
|
|
(23,464
|
)
|
|
31,359
|
|
|
9,471
|
|
||||
Less: Net (income) loss attributable to non-controlling interest
|
|
—
|
|
|
8,578
|
|
|
(2,090
|
)
|
|
8,578
|
|
||||
Net income (loss) attributable to Franchise Group, Inc.
|
|
$
|
(8,597
|
)
|
|
$
|
(14,886
|
)
|
|
$
|
29,269
|
|
|
$
|
18,049
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) per share of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
|
$
|
(0.22
|
)
|
|
$
|
(0.93
|
)
|
|
$
|
0.89
|
|
|
$
|
1.23
|
|
Diluted
|
|
(0.22
|
)
|
|
(0.93
|
)
|
|
0.88
|
|
|
1.22
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares outstanding:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
39,692,384
|
|
|
15,997,041
|
|
|
32,679,576
|
|
|
14,712,297
|
|
||||
Diluted
|
|
39,692,384
|
|
|
15,997,041
|
|
|
32,961,905
|
|
|
14,770,973
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
(In thousands)
|
|
September 26, 2020
|
|
September 30, 2019
|
|
September 26, 2020
|
|
September 30, 2019
|
||||||||
Net income (loss)
|
|
$
|
(8,597
|
)
|
|
$
|
(23,464
|
)
|
|
$
|
31,359
|
|
|
$
|
9,471
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
||||||||
Unrealized loss on interest rate swap agreement, net of taxes of $2, $(8), $(29) and $(29), respectively
|
|
(39
|
)
|
|
(21
|
)
|
|
(119
|
)
|
|
(75
|
)
|
||||
Foreign currency translation adjustment
|
|
303
|
|
|
41
|
|
|
(188
|
)
|
|
382
|
|
||||
Forward contracts related to foreign currency exchange rates
|
|
1
|
|
|
—
|
|
|
7
|
|
|
—
|
|
||||
Other comprehensive income (loss)
|
|
265
|
|
|
20
|
|
|
(300
|
)
|
|
307
|
|
||||
Comprehensive income (loss)
|
|
(8,332
|
)
|
|
(23,444
|
)
|
|
31,059
|
|
|
9,778
|
|
||||
Less: comprehensive (income) loss attributable to non-controlling interest
|
|
—
|
|
|
8,569
|
|
|
(1,915
|
)
|
|
8,569
|
|
||||
Comprehensive income (loss) attributable to Franchise Group, Inc.
|
|
$
|
(8,332
|
)
|
|
$
|
(14,875
|
)
|
|
$
|
29,144
|
|
|
$
|
18,347
|
|
|
Three Months Ended September 26, 2020
|
||||||||||||||||||||||||||||||||||||
(In thousands)
|
Common stock shares
|
|
Common stock
|
|
Preferred stock shares
|
|
Preferred stock
|
|
Additional paid-in-capital
|
|
Accumulated other comprehensive loss
|
|
Retained earnings
|
|
Total Franchise Group equity
|
|
Non-controlling interest
|
|
Total equity
|
||||||||||||||||||
Balance at June 28, 2020
|
35,186
|
|
|
$
|
352
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
249,525
|
|
|
$
|
(2,103
|
)
|
|
$
|
42,935
|
|
|
$
|
290,709
|
|
|
$
|
—
|
|
|
$
|
290,709
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,597
|
)
|
|
(8,597
|
)
|
|
—
|
|
|
(8,597
|
)
|
||||||||
Total other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
265
|
|
|
—
|
|
|
265
|
|
|
—
|
|
|
265
|
|
||||||||
Exercise of stock options
|
28
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
333
|
|
|
—
|
|
|
—
|
|
|
334
|
|
|
—
|
|
|
334
|
|
||||||||
Stock-based compensation expense, net
|
13
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,945
|
|
|
—
|
|
|
—
|
|
|
1,945
|
|
|
—
|
|
|
1,945
|
|
||||||||
Issuance of common stock
|
4,830
|
|
|
48
|
|
|
—
|
|
|
—
|
|
|
105,873
|
|
|
—
|
|
|
—
|
|
|
105,921
|
|
|
—
|
|
|
105,921
|
|
||||||||
Issuance of Series A Preferred Stock
|
—
|
|
|
—
|
|
|
1,200
|
|
|
12
|
|
|
28,354
|
|
|
—
|
|
|
—
|
|
|
28,366
|
|
|
—
|
|
|
28,366
|
|
||||||||
Common dividend declared ($0.25 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,242
|
)
|
|
(10,242
|
)
|
|
—
|
|
|
(10,242
|
)
|
||||||||
Preferred dividend declared ($0.14 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(169
|
)
|
|
(169
|
)
|
|
—
|
|
|
(169
|
)
|
||||||||
Balance at September 26, 2020
|
40,057
|
|
|
$
|
401
|
|
|
1,200
|
|
|
$
|
12
|
|
|
$
|
386,030
|
|
|
$
|
(1,838
|
)
|
|
$
|
23,927
|
|
|
$
|
408,532
|
|
|
$
|
—
|
|
|
$
|
408,532
|
|
|
Nine Months Ended September 26, 2020
|
||||||||||||||||||||||||||||||||||||
(In thousands)
|
Common stock shares
|
|
Common stock
|
|
Preferred stock shares
|
|
Preferred stock
|
|
Additional paid-in-capital
|
|
Accumulated other comprehensive loss
|
|
Retained earnings
|
|
Total Franchise Group equity
|
|
Non-controlling interest
|
|
Total equity
|
||||||||||||||||||
Balance at December 29, 2019
|
18,250
|
|
|
$
|
183
|
|
|
1,887
|
|
|
$
|
19
|
|
|
$
|
108,339
|
|
|
$
|
(1,538
|
)
|
|
$
|
18,388
|
|
|
$
|
125,391
|
|
|
$
|
26,370
|
|
|
$
|
151,761
|
|
Changes and distributions of non-controlling interest in New Holdco
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23,744
|
|
|
(175
|
)
|
|
—
|
|
|
23,569
|
|
|
(25,927
|
)
|
|
(2,358
|
)
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29,269
|
|
|
29,269
|
|
|
2,090
|
|
|
31,359
|
|
||||||||
Total other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(125
|
)
|
|
—
|
|
|
(125
|
)
|
|
(175
|
)
|
|
(300
|
)
|
||||||||
Exercise of stock options
|
50
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
520
|
|
|
—
|
|
|
—
|
|
|
521
|
|
|
—
|
|
|
521
|
|
||||||||
Stock-based compensation expense, net
|
31
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,209
|
|
|
—
|
|
|
—
|
|
|
6,209
|
|
|
—
|
|
|
6,209
|
|
||||||||
Issuance of common stock
|
12,292
|
|
|
123
|
|
|
—
|
|
|
—
|
|
|
228,892
|
|
|
—
|
|
|
—
|
|
|
229,015
|
|
|
—
|
|
|
229,015
|
|
||||||||
Issuance of Series A Preferred Stock
|
—
|
|
|
—
|
|
|
1,200
|
|
|
12
|
|
|
28,354
|
|
|
—
|
|
|
—
|
|
|
28,366
|
|
|
—
|
|
|
28,366
|
|
||||||||
Conversion of preferred to common stock
|
9,434
|
|
|
94
|
|
|
(1,887
|
)
|
|
(19
|
)
|
|
(10,028
|
)
|
|
—
|
|
|
—
|
|
|
(9,953
|
)
|
|
—
|
|
|
(9,953
|
)
|
||||||||
Common dividend declared ($0.25 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(25,919
|
)
|
|
(25,919
|
)
|
|
—
|
|
|
(25,919
|
)
|
||||||||
Preferred dividend declared ($0.14 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(169
|
)
|
|
(169
|
)
|
|
—
|
|
|
(169
|
)
|
||||||||
Adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,358
|
|
|
2,358
|
|
|
(2,358
|
)
|
|
—
|
|
||||||||
Balance at September 26, 2020
|
40,057
|
|
|
$
|
401
|
|
|
1,200
|
|
|
$
|
12
|
|
|
$
|
386,030
|
|
|
$
|
(1,838
|
)
|
|
$
|
23,927
|
|
|
$
|
408,532
|
|
|
$
|
—
|
|
|
$
|
408,532
|
|
|
Three Months Ended September 30, 2019
|
||||||||||||||||||||||||||||||||||||
(In thousands)
|
Common stock shares
|
|
Common stock
|
|
Preferred stock shares
|
|
Preferred stock
|
|
Additional paid-in-capital
|
|
Accumulated other comprehensive loss
|
|
Retained earnings
|
|
Total Franchise Group equity
|
|
Non-controlling interest
|
|
Total equity
|
||||||||||||||||||
Balance at July 1, 2019
|
14,100
|
|
|
$
|
141
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
13,183
|
|
|
$
|
(1,732
|
)
|
|
$
|
85,290
|
|
|
$
|
96,882
|
|
|
$
|
—
|
|
|
$
|
96,882
|
|
Cumulative effect of adopted accounting standards, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Changes and distributions of non-controlling interest in New Holdco LLC
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(64,142
|
)
|
|
—
|
|
|
—
|
|
|
(64,142
|
)
|
|
64,142
|
|
|
—
|
|
||||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14,886
|
)
|
|
(14,886
|
)
|
|
(8,578
|
)
|
|
(23,464
|
)
|
||||||||
Buddy's Acquisition - issuance of Preferred Stock and New Holdco LLC units
|
—
|
|
|
—
|
|
|
1,617
|
|
|
16
|
|
|
96,984
|
|
|
—
|
|
|
—
|
|
|
97,000
|
|
|
—
|
|
|
97,000
|
|
||||||||
Buddy's Partners Asset Acquisition - issuance of Preferred Stock and New Holdco LLC units
|
—
|
|
|
—
|
|
|
270
|
|
|
3
|
|
|
16,197
|
|
|
—
|
|
|
—
|
|
|
16,200
|
|
|
—
|
|
|
16,200
|
|
||||||||
Total other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
11
|
|
|
9
|
|
|
20
|
|
||||||||
Exercise of stock options
|
100
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1,060
|
|
|
—
|
|
|
—
|
|
|
1,061
|
|
|
—
|
|
|
1,061
|
|
||||||||
Stock-based compensation, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
292
|
|
|
—
|
|
|
—
|
|
|
292
|
|
|
—
|
|
|
292
|
|
||||||||
Issuance of common stock
|
2,083
|
|
|
21
|
|
|
—
|
|
|
—
|
|
|
24,979
|
|
|
—
|
|
|
—
|
|
|
25,000
|
|
|
—
|
|
|
25,000
|
|
||||||||
Balance at September 30, 2019
|
16,283
|
|
|
$
|
163
|
|
|
1,887
|
|
|
$
|
19
|
|
|
$
|
88,553
|
|
|
$
|
(1,721
|
)
|
|
$
|
70,404
|
|
|
$
|
157,418
|
|
|
$
|
55,573
|
|
|
$
|
212,991
|
|
|
Nine Months Ended September 30, 2019
|
||||||||||||||||||||||||||||||||||||
(In thousands)
|
Common stock shares
|
|
Common stock
|
|
Preferred stock shares
|
|
Preferred stock
|
|
Additional paid-in-capital
|
|
Accumulated other comprehensive loss
|
|
Retained earnings
|
|
Total Franchise Group equity
|
|
Non-controlling interest
|
|
Total equity
|
||||||||||||||||||
Balance at January 1, 2019
|
14,044
|
|
|
$
|
140
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
12,091
|
|
|
$
|
(2,019
|
)
|
|
$
|
52,029
|
|
|
$
|
62,241
|
|
|
$
|
—
|
|
|
$
|
62,241
|
|
Cumulative effect of adopted accounting standards, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
322
|
|
|
322
|
|
|
—
|
|
|
322
|
|
||||||||
Changes and distributions of non-controlling interest in New Holdco LLC
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(64,142
|
)
|
|
—
|
|
|
—
|
|
|
(64,142
|
)
|
|
64,142
|
|
|
—
|
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18,049
|
|
|
18,049
|
|
|
(8,578
|
)
|
|
9,471
|
|
||||||||
Buddy's Acquisition - issuance of Preferred Stock and New Holdco LLC units
|
—
|
|
|
—
|
|
|
1,617
|
|
|
16
|
|
|
96,984
|
|
|
—
|
|
|
—
|
|
|
97,000
|
|
|
—
|
|
|
97,000
|
|
||||||||
Buddy's Partners Asset Acquisition - issuance of Preferred Stock and New Holdco LLC units
|
—
|
|
|
—
|
|
|
270
|
|
|
3
|
|
|
16,197
|
|
|
—
|
|
|
—
|
|
|
16,200
|
|
|
—
|
|
|
16,200
|
|
||||||||
Total other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
298
|
|
|
—
|
|
|
298
|
|
|
9
|
|
|
307
|
|
||||||||
Cancellation of common stock
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(88
|
)
|
|
—
|
|
|
—
|
|
|
(88
|
)
|
|
—
|
|
|
(88
|
)
|
||||||||
Exercise of stock options
|
114
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1,213
|
|
|
—
|
|
|
—
|
|
|
1,214
|
|
|
—
|
|
|
1,214
|
|
||||||||
Stock-based compensation, net
|
51
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1,319
|
|
|
—
|
|
|
—
|
|
|
1,320
|
|
|
—
|
|
|
1,320
|
|
||||||||
Issuance of common stock
|
2,083
|
|
|
21
|
|
|
—
|
|
|
—
|
|
|
24,979
|
|
|
—
|
|
|
—
|
|
|
25,000
|
|
|
—
|
|
|
25,000
|
|
||||||||
RSU dividend accrual
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
4
|
|
|
—
|
|
|
4
|
|
||||||||
Balance at September 30, 2019
|
16,283
|
|
|
$
|
163
|
|
|
1,887
|
|
|
$
|
19
|
|
|
$
|
88,553
|
|
|
$
|
(1,721
|
)
|
|
$
|
70,404
|
|
|
$
|
157,418
|
|
|
$
|
55,573
|
|
|
$
|
212,991
|
|
|
|
Nine Months Ended
|
||||||
(In thousands)
|
|
September 26, 2020
|
|
September 30, 2019
|
||||
Operating Activities
|
|
|
|
|
|
|||
Net income
|
|
$
|
31,359
|
|
|
$
|
9,471
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|||
Provision for doubtful accounts
|
|
3,412
|
|
|
6,401
|
|
||
Depreciation, amortization and impairment charges
|
|
51,254
|
|
|
12,239
|
|
||
Amortization of deferred financing costs
|
|
28,703
|
|
|
1,013
|
|
||
Loss on disposal of fixed assets
|
|
75
|
|
|
703
|
|
||
Stock-based compensation expense
|
|
6,294
|
|
|
1,339
|
|
||
Gain on bargain purchases and sales of Company-owned offices
|
|
(1,761
|
)
|
|
(438
|
)
|
||
Deferred income taxes
|
|
7,851
|
|
|
706
|
|
||
Change in
|
|
|
|
|
|
|
||
Accounts, notes, and interest receivable
|
|
(2,223
|
)
|
|
10,054
|
|
||
Income taxes
|
|
(23,721
|
)
|
|
8,977
|
|
||
Other assets
|
|
3,971
|
|
|
(1,076
|
)
|
||
Accounts payable and accrued expenses
|
|
38,884
|
|
|
7,693
|
|
||
Inventory
|
|
79,967
|
|
|
579
|
|
||
Deferred revenue
|
|
5,649
|
|
|
(3,394
|
)
|
||
Net cash provided by operating activities
|
|
229,714
|
|
|
54,267
|
|
||
Investing Activities
|
|
|
|
|
|
|||
Issuance of operating loans to franchisees and area developers
|
|
(30,368
|
)
|
|
(51,484
|
)
|
||
Payments received on operating loans to franchisees and area developers
|
|
50,064
|
|
|
66,303
|
|
||
Purchases of Company-owned offices, area developer rights, and acquired customer lists
|
|
(4,830
|
)
|
|
(2,232
|
)
|
||
Proceeds from sale of Company-owned offices and area developer rights
|
|
1,118
|
|
|
22
|
|
||
Acquisition of business, net of cash acquired
|
|
(353,423
|
)
|
|
(26,443
|
)
|
||
Proceeds from sale of property, equipment, and software
|
|
1,474
|
|
|
—
|
|
||
Purchases of property, equipment, and software
|
|
(26,702
|
)
|
|
(1,183
|
)
|
||
Net cash used in investing activities
|
|
(362,667
|
)
|
|
(15,017
|
)
|
||
Financing Activities
|
|
|
|
|
|
|||
Proceeds from the exercise of stock options
|
|
520
|
|
|
1,214
|
|
||
Dividends paid
|
|
(19,167
|
)
|
|
—
|
|
||
Non-controlling interest distribution
|
|
(4,716
|
)
|
|
—
|
|
||
Repayment of other long-term obligations
|
|
(455,811
|
)
|
|
(16,213
|
)
|
||
Borrowings under revolving credit facility
|
|
174,665
|
|
|
121,874
|
|
||
Repayments under revolving credit facility
|
|
(218,260
|
)
|
|
(186,099
|
)
|
||
Issuance of common stock
|
|
198,003
|
|
|
25,000
|
|
||
Issuance of preferred stock
|
|
28,366
|
|
|
—
|
|
||
Payment for debt issue costs
|
|
(16,673
|
)
|
|
(4,382
|
)
|
||
Issuance of debt
|
|
586,000
|
|
|
105,000
|
|
||
Cash paid for taxes on exercises/vesting of stock-based compensation
|
|
(85
|
)
|
|
(20
|
)
|
||
Net cash provided by financing activities
|
|
272,842
|
|
|
46,374
|
|
||
Effect of exchange rate changes on cash, net
|
|
(142
|
)
|
|
111
|
|
||
Net increase in cash equivalents and restricted cash
|
|
139,747
|
|
|
85,735
|
|
||
Cash, cash equivalents and restricted cash at beginning of period
|
|
45,146
|
|
|
3,981
|
|
||
Cash, cash equivalents and restricted cash at end of period
|
|
$
|
184,893
|
|
|
$
|
89,716
|
|
Supplemental Cash Flow Disclosure
|
|
|
|
|
|
|||
Cash paid for taxes, net of refunds
|
|
$
|
944
|
|
|
$
|
84
|
|
Cash paid for interest
|
|
$
|
41,226
|
|
|
$
|
1,484
|
|
Accrued capital expenditures
|
|
$
|
3,633
|
|
|
$
|
478
|
|
Deferred financing costs from issuance of common stock
|
|
$
|
31,013
|
|
|
$
|
—
|
|
Tax receivable agreement included in other long-term liabilities
|
|
$
|
17,156
|
|
|
$
|
—
|
|
(In thousands)
|
|
September 26, 2020
|
|
September 30, 2019
|
||||
Cash and cash equivalents
|
|
$
|
179,932
|
|
|
$
|
89,716
|
|
Restricted cash included in other non-current assets
|
|
4,961
|
|
|
—
|
|
||
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows
|
|
$
|
184,893
|
|
|
$
|
89,716
|
|
•
|
Product revenues: These include sales of merchandise at the stores and online. Revenue is measured based on the amount of fixed consideration that the Company expects to receive, reduced by estimates for variable consideration such as returns. Revenue also excludes any amounts collected from customers and remitted or payable to governmental authorities. In arrangements where the Company has multiple performance obligations, the transaction price is allocated to each performance obligation using the relative stand-alone selling price. The Company recognizes revenues from retail operations upon the transfer of control of goods to the customer. The Company satisfies its performance obligations at the point of sale for retail store transactions and upon delivery for online transactions. The Company recognizes revenue for retail store and online transactions when it transfers control of the goods to the customer. Merchandise sales also include payments received for the exercise of the early purchase option offered through rental-purchase agreements or merchandise sold through point of sale transactions. Revenue for merchandise sales associated with rental purchase agreements is recognized when payment is received, and ownership of the merchandise passes to the customer. The remaining net value of merchandise sold is recorded to cost of sales at the time of the transaction.
|
•
|
Service and other revenues: These include royalties and advertising fees from franchisees, fees from the sales of franchises and area developer ("AD") territories, financial products, interest income from loans to franchisees and ADs, tax preparation services in the Company-owned stores, electronic filing fees, services and extended-service plans and financing programs. Commissions earned on services are presented net of related costs because the Company is acting as an agent in arranging the services for the customer and does not control the services being rendered. The Company recognizes revenue on the commissions on extended-service plans when it transfers control of the related goods to the customer. The Company recognizes franchise fee and AD fee revenue for the sales of individual territories on a straight-line basis over the initial contract term when the obligations of the Company to prepare the franchisee and AD for operation are substantially complete, not to exceed the estimated amount of cash to be received. Royalties and advertising fees are recognized as franchise territories generate sales. Tax return preparation fees and financial products revenue are recognized as revenue in the period in which related tax return is filed for the customer. Discounts for promotional programs are recorded at the time the return is filed and are recorded as reductions to revenues. Interest income on notes receivable is recognized based on the outstanding principal note balance less unrecognized revenue unless it is put on non-accrual status. Interest income on the unrecognized revenue portion of notes receivable is recognized when received. For accounts receivable, interest income is recognized based on the outstanding receivable balance over 30 days old, net of an allowance.
|
•
|
Rental revenues: The Company provides merchandise, consisting of consumer electronics, computers, residential furniture, appliances, and household accessories to its customers pursuant to rental-purchase agreements which provide for weekly, semi-monthly or monthly non-refundable rental payments. The average rental term is twelve to eighteen months and the Company maintains ownership of the lease merchandise until all payment obligations are satisfied under sales and lease ownership agreements. Customers have the option to purchase the leased goods at any point in the lease term. Customers can terminate the agreement at the end of any rental term without penalty. Therefore, rental transactions are accounted for as operating leases and rental revenue is recognized over the rental term. Cash received prior to the beginning of the lease term is recorded as deferred revenue. Revenue related to various reinstatement or late fees are recognized when paid by the customer. The Company offers additional product plans along with rental agreements that provide customers with liability protection against significant damage or loss of a product, and club membership benefits, including various discount programs, product services and replacement benefits in the event merchandise is damaged or lost. Customers renew product plans in conjunction with their rental term renewals and can cancel the plans at any time. Revenue for product plans is recognized over the term of the plan.
|
(In thousands)
|
|
Preliminary 2/14/2020
|
||
Cash and cash equivalents
|
|
$
|
3,840
|
|
Prepaid expenses and other current assets
|
|
3,284
|
|
|
Inventories, net
|
|
99,200
|
|
|
Property, equipment and software, net
|
|
11,032
|
|
|
Goodwill
|
|
335,474
|
|
|
Operating lease right-of-use assets
|
|
91,101
|
|
|
Other intangible assets, net
|
|
70,200
|
|
|
Other non-current assets
|
|
1,607
|
|
|
Total assets
|
|
615,738
|
|
|
Current operating lease liabilities
|
|
17,242
|
|
|
Accounts payable
|
|
44,696
|
|
|
Accrued expenses and other current liabilities
|
|
26,451
|
|
|
Current installments of long-term obligations
|
|
3,210
|
|
|
Long-term obligations, excluding current installments
|
|
93,975
|
|
|
Deferred tax liabilities
|
|
11,451
|
|
|
Non-current operating lease liabilities
|
|
61,450
|
|
|
Total liabilities
|
|
258,475
|
|
|
Consideration transferred
|
|
$
|
357,263
|
|
|
|
Pro forma (Unaudited)
|
||||||||||||||
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
(In thousands)
|
|
September 26, 2020
|
|
September 30, 2019
|
|
September 26, 2020
|
|
September 30, 2019
|
||||||||
Revenue
|
|
$
|
550,992
|
|
|
$
|
493,504
|
|
|
$
|
1,704,844
|
|
|
$
|
1,711,954
|
|
Net income
|
|
(5,201
|
)
|
|
(25,468
|
)
|
|
59,133
|
|
|
7,728
|
|
(In thousands)
|
|
September 26, 2020
|
|
December 28, 2019
|
||||
Accounts receivable, net
|
|
$
|
48,788
|
|
|
$
|
44,333
|
|
Notes receivable
|
|
13,975
|
|
|
37,994
|
|
||
Interest receivable, net
|
|
2,289
|
|
|
3,132
|
|
||
Income tax receivable
|
|
27,014
|
|
|
3,356
|
|
||
Allowance for doubtful accounts
|
|
(7,789
|
)
|
|
(9,122
|
)
|
||
Current receivables, net
|
|
84,277
|
|
|
79,693
|
|
||
Notes receivable - non-current
|
|
16,691
|
|
|
19,501
|
|
||
Allowance for doubtful accounts - non-current
|
|
(596
|
)
|
|
(863
|
)
|
||
Non-current receivables, net
|
|
16,095
|
|
|
18,638
|
|
||
Total receivables
|
|
$
|
100,372
|
|
|
$
|
98,331
|
|
(In thousands)
|
|
Past due
|
|
Current
|
|
Interest receivable, net
|
|
Total
receivables
|
||||||||
Accounts receivable
|
|
$
|
31,302
|
|
|
$
|
17,486
|
|
|
$
|
—
|
|
|
$
|
48,788
|
|
Notes and interest receivable, net (1)
|
|
9,454
|
|
|
21,212
|
|
|
2,289
|
|
|
32,955
|
|
||||
Total accounts, notes and interest receivable
|
|
$
|
40,756
|
|
|
$
|
38,698
|
|
|
$
|
2,289
|
|
|
$
|
81,743
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
(In thousands)
|
|
September 26, 2020
|
|
September 30, 2019
|
|
September 26, 2020
|
|
September 30, 2019
|
||||||||
Balance at beginning of period
|
|
$
|
10,678
|
|
|
$
|
11,860
|
|
|
$
|
9,985
|
|
|
$
|
12,353
|
|
Provision for doubtful accounts
|
|
(99
|
)
|
|
1,641
|
|
|
3,425
|
|
|
6,411
|
|
||||
Write-offs and reduction from repurchases of franchises
|
|
(2,244
|
)
|
|
(4,173
|
)
|
|
(4,994
|
)
|
|
(9,508
|
)
|
||||
Foreign currency adjustment
|
|
50
|
|
|
(27
|
)
|
|
(31
|
)
|
|
45
|
|
||||
Balance at end of period
|
|
$
|
8,385
|
|
|
$
|
9,301
|
|
|
$
|
8,385
|
|
|
$
|
9,301
|
|
(In thousands)
|
|
September 26, 2020
|
|
December 28, 2019
|
||||
Balance at beginning of period
|
|
$
|
134,301
|
|
|
$
|
6,566
|
|
Acquisitions of assets from franchisees and third parties
|
|
920
|
|
|
3,658
|
|
||
Buddy's Acquisition
|
|
—
|
|
|
75,038
|
|
||
Buddy's Partners Asset Acquisition
|
|
—
|
|
|
7,217
|
|
||
A-Team Leasing Acquisition
|
|
—
|
|
|
6,287
|
|
||
Sears Outlet Acquisition
|
|
—
|
|
|
31,028
|
|
||
American Freight Acquisition
|
|
335,472
|
|
|
—
|
|
||
Vitamin Shoppe Acquisition
|
|
—
|
|
|
4,951
|
|
||
Disposals and foreign currency changes, net
|
|
(1,660
|
)
|
|
(444
|
)
|
||
Purchase price reallocation
|
|
792
|
|
|
—
|
|
||
Impairments
|
|
(37
|
)
|
|
—
|
|
||
Balance at end of period
|
|
$
|
469,788
|
|
|
$
|
134,301
|
|
|
|
September 26, 2020
|
||||||||||
(In thousands)
|
|
Gross carrying amount
|
|
Accumulated amortization
|
|
Net carrying amount
|
||||||
Tradenames (1)
|
|
$
|
94,300
|
|
|
$
|
(100
|
)
|
|
$
|
94,200
|
|
Customer contracts
|
|
12,700
|
|
|
(2,521
|
)
|
|
10,179
|
|
|||
Franchise agreements and non-compete agreements
|
|
10,581
|
|
|
(1,302
|
)
|
|
9,279
|
|
|||
Customer lists
|
|
4,120
|
|
|
(2,698
|
)
|
|
1,422
|
|
|||
Reacquired rights
|
|
10,241
|
|
|
(2,249
|
)
|
|
7,992
|
|
|||
AD rights
|
|
39,237
|
|
|
(16,831
|
)
|
|
22,406
|
|
|||
Total intangible assets
|
|
$
|
171,179
|
|
|
$
|
(25,701
|
)
|
|
$
|
145,478
|
|
|
|
December 28, 2019
|
||||||||||
(In thousands)
|
|
Gross carrying amount
|
|
Accumulated amortization
|
|
Net carrying amount
|
||||||
Tradenames (1)
|
|
$
|
23,534
|
|
|
$
|
(72
|
)
|
|
$
|
23,462
|
|
Customer contracts
|
|
12,736
|
|
|
(886
|
)
|
|
11,850
|
|
|||
Franchise agreements and non-compete agreements
|
|
10,609
|
|
|
(486
|
)
|
|
10,123
|
|
|||
Customer lists
|
|
4,338
|
|
|
(2,559
|
)
|
|
1,779
|
|
|||
Reacquired rights
|
|
11,577
|
|
|
(2,053
|
)
|
|
9,524
|
|
|||
AD rights
|
|
37,263
|
|
|
(16,411
|
)
|
|
20,852
|
|
|||
Total intangible assets
|
|
$
|
100,057
|
|
|
$
|
(22,467
|
)
|
|
$
|
77,590
|
|
|
|
September 26, 2020
|
||||||||||||||||||||||||||||||
|
|
Vitamin Shoppe
|
|
American Freight
|
|
Liberty Tax
|
|
Buddy's
|
||||||||||||||||||||||||
(In thousands)
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||
Retail sales
|
|
$
|
266,965
|
|
|
$
|
780,588
|
|
|
$
|
231,959
|
|
|
$
|
655,311
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,538
|
|
|
$
|
4,778
|
|
Total product revenue
|
|
266,965
|
|
|
780,588
|
|
|
231,959
|
|
|
655,311
|
|
|
—
|
|
|
—
|
|
|
1,538
|
|
|
4,778
|
|
||||||||
Franchise fees
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
188
|
|
|
915
|
|
|
8
|
|
|
20
|
|
||||||||
Area developer fees
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,607
|
|
|
3,076
|
|
|
—
|
|
|
—
|
|
||||||||
Royalties and advertising fees
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,346
|
|
|
55,410
|
|
|
2,517
|
|
|
7,346
|
|
||||||||
Financial products
|
|
—
|
|
|
—
|
|
|
6,775
|
|
|
8,066
|
|
|
1,328
|
|
|
31,200
|
|
|
—
|
|
|
—
|
|
||||||||
Interest income
|
|
—
|
|
|
—
|
|
|
315
|
|
|
987
|
|
|
356
|
|
|
3,254
|
|
|
—
|
|
|
—
|
|
||||||||
Assisted tax preparation fees, net of discounts
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
559
|
|
|
15,477
|
|
|
—
|
|
|
—
|
|
||||||||
Electronic filing fees
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
219
|
|
|
2,619
|
|
|
—
|
|
|
—
|
|
||||||||
Agreement, club and damage waiver fees
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,436
|
|
|
10,124
|
|
||||||||
Warranty revenue
|
|
—
|
|
|
—
|
|
|
4,775
|
|
|
13,754
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Other revenues
|
|
—
|
|
|
—
|
|
|
1,388
|
|
|
4,268
|
|
|
1,697
|
|
|
6,041
|
|
|
612
|
|
|
1,951
|
|
||||||||
Total service revenue
|
|
—
|
|
|
—
|
|
|
13,253
|
|
|
27,075
|
|
|
13,300
|
|
|
117,992
|
|
|
6,573
|
|
|
19,441
|
|
||||||||
Rental revenue, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17,404
|
|
|
51,000
|
|
||||||||
Total rental revenue
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17,404
|
|
|
51,000
|
|
||||||||
Total revenue
|
|
$
|
266,965
|
|
|
$
|
780,588
|
|
|
$
|
245,212
|
|
|
$
|
682,386
|
|
|
$
|
13,300
|
|
|
$
|
117,992
|
|
|
$
|
25,515
|
|
|
$
|
75,219
|
|
|
|
September 30, 2019
|
||||||||||||||||||||||||||||||
|
|
Vitamin Shoppe
|
|
American Freight
|
|
Liberty Tax
|
|
Buddy's
|
||||||||||||||||||||||||
(In thousands)
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||
Retail sales
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
557
|
|
|
$
|
557
|
|
Total product revenue
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
557
|
|
|
557
|
|
||||||||
Franchise fees
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
450
|
|
|
1,943
|
|
|
—
|
|
|
—
|
|
||||||||
Area developer fees
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
920
|
|
|
2,618
|
|
|
—
|
|
|
—
|
|
||||||||
Royalties and advertising fees
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
933
|
|
|
61,831
|
|
|
2,453
|
|
|
2,453
|
|
||||||||
Financial products
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
297
|
|
|
33,172
|
|
|
—
|
|
|
—
|
|
||||||||
Interest income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,137
|
|
|
5,966
|
|
|
—
|
|
|
—
|
|
||||||||
Assisted tax preparation fees, net of discounts
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
237
|
|
|
12,227
|
|
|
—
|
|
|
—
|
|
||||||||
Electronic filing fees
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32
|
|
|
2,977
|
|
|
—
|
|
|
—
|
|
||||||||
Agreement, club and damage waiver fees
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,693
|
|
|
1,693
|
|
||||||||
Other revenues
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,408
|
|
|
4,338
|
|
|
724
|
|
|
724
|
|
||||||||
Total service revenue
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,414
|
|
|
125,072
|
|
|
4,870
|
|
|
4,870
|
|
||||||||
Rental revenue, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,079
|
|
|
8,079
|
|
||||||||
Total rental revenue
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,079
|
|
|
8,079
|
|
||||||||
Total revenue
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,414
|
|
|
$
|
125,072
|
|
|
$
|
13,506
|
|
|
$
|
13,506
|
|
(In thousands)
|
|
September 26, 2020
|
|
December 28, 2019
|
||||
Notes receivable
|
|
$
|
30,667
|
|
|
$
|
57,495
|
|
Deferred revenue
|
|
34,236
|
|
|
10,519
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||
(In thousands)
|
|
September 26, 2020
|
|
September 26, 2020
|
||||
Deferred revenue at beginning of period
|
|
$
|
35,982
|
|
|
$
|
10,519
|
|
Revenue recognized during the period
|
|
(23,541
|
)
|
|
(39,744
|
)
|
||
Deferred revenue from acquisitions and purchase price adjustments
|
|
—
|
|
|
14,056
|
|
||
New deferred revenue during the period
|
|
21,795
|
|
|
49,405
|
|
||
Deferred revenue at end of period
|
|
$
|
34,236
|
|
|
$
|
34,236
|
|
(In thousands)
|
|
Estimate for Fiscal Year
|
||
2020 (1)
|
|
$
|
30,173
|
|
2021
|
|
1,403
|
|
|
2022
|
|
1,195
|
|
|
2023
|
|
768
|
|
|
2024
|
|
138
|
|
|
Thereafter
|
|
559
|
|
|
Total
|
|
$
|
34,236
|
|
(In thousands)
|
|
September 26, 2020
|
|
December 28, 2019
|
||||
Revolving credit facilities
|
|
$
|
85,665
|
|
|
$
|
129,260
|
|
Term loan, net of debt issuance costs
|
|
537,970
|
|
|
268,660
|
|
||
Convertible senior notes
|
|
60
|
|
|
60,439
|
|
||
Amounts due to former ADs, franchisees and third parties
|
|
2,036
|
|
|
1,661
|
|
||
Mortgages
|
|
1,725
|
|
|
1,825
|
|
||
Finance lease liabilities
|
|
1,271
|
|
|
1,775
|
|
||
Total long-term obligations
|
|
628,727
|
|
|
463,620
|
|
||
Less current installments
|
|
112,374
|
|
|
218,384
|
|
||
Total long-term obligations, excluding current installments, net
|
|
$
|
516,353
|
|
|
$
|
245,236
|
|
(In thousands)
|
|
September 26, 2020
|
|
December 28, 2019
|
||||
Foreign currency adjustment
|
|
$
|
(1,684
|
)
|
|
$
|
(1,496
|
)
|
Interest rate swap agreements, net of tax
|
|
(161
|
)
|
|
(42
|
)
|
||
Forward contracts related to foreign currency exchange rates
|
|
7
|
|
|
—
|
|
||
Total accumulated other comprehensive loss
|
|
$
|
(1,838
|
)
|
|
$
|
(1,538
|
)
|
Preferred Stock
|
|
September 26, 2020
|
|
December 28, 2019
|
||
Voting Non-economic Preferred Stock, par value $0.01 per share
|
|
—
|
|
|
1,886,667
|
|
Series A Preferred Stock, par value $0.01 per share
|
|
1,200,000
|
|
|
—
|
|
Shares outstanding
|
|
1,200,000
|
|
|
1,886,667
|
|
|
|
Three Months Ended
September 26, 2020 |
|
Three Months Ended
September 30, 2019 |
||||||||
(In thousands, except for share and per share amounts)
|
|
Common Stock
|
|
Common Stock
|
||||||||
Basic and diluted net loss per share:
|
|
|
|
|
|
|
||||||
Numerator
|
|
|
|
|
|
|
||||||
Allocation of undistributed loss attributable to Franchise Group
|
|
$
|
(8,597
|
)
|
|
$
|
(14,886
|
)
|
||||
Less: Preferred dividend declared
|
|
169
|
|
|
—
|
|
||||||
Net loss attributable to Franchise Group common stockholders
|
|
(8,766
|
)
|
|
(14,886
|
)
|
||||||
Denominator
|
|
|
|
|
|
|
||||||
Weighted-average common stock outstanding
|
|
39,692,384
|
|
|
15,997,041
|
|
||||||
|
|
|
|
|
||||||||
Basic and diluted net loss per share
|
|
$
|
(0.22
|
)
|
|
$
|
(0.93
|
)
|
|
|
Nine Months Ended
September 26, 2020 |
|
Nine Months Ended
September 30, 2019 |
||||||||
(In thousands, except for share and per share amounts)
|
|
Common Stock
|
|
Common Stock
|
||||||||
Basic net income per share:
|
|
|
|
|
|
|
||||||
Numerator
|
|
|
|
|
|
|
||||||
Allocation of undistributed income attributable to Franchise Group
|
|
$
|
29,269
|
|
|
$
|
18,049
|
|
||||
Less: Preferred dividend declared
|
|
169
|
|
|
—
|
|
||||||
Net income attributable to Franchise Group common stockholders
|
|
29,100
|
|
|
18,049
|
|
||||||
Denominator
|
|
|
|
|
|
|
||||||
Weighted-average common stock outstanding
|
|
32,679,576
|
|
|
14,712,297
|
|
||||||
|
|
|
|
|
||||||||
Basic net income per share
|
|
$
|
0.89
|
|
|
$
|
1.23
|
|
||||
|
|
|
|
|
||||||||
Diluted net income per share:
|
|
|
|
|
||||||||
Numerator
|
|
|
|
|
||||||||
Allocation of undistributed earnings for basic computation
|
|
$
|
29,100
|
|
|
$
|
18,049
|
|
||||
Denominator
|
|
|
|
|
|
|
||||||
Number of shares used in basic computation
|
|
32,679,576
|
|
|
14,712,297
|
|
||||||
Weighted-average effect of dilutive securities
|
|
|
|
|
||||||||
Employee stock options and restricted stock units
|
|
282,329
|
|
|
58,676
|
|
||||||
Weighted-average diluted shares outstanding
|
|
32,961,905
|
|
|
14,770,973
|
|
||||||
|
|
|
|
|
||||||||
Diluted net income per share
|
|
$
|
0.88
|
|
|
$
|
1.22
|
|
|
|
Number of
options
|
|
Weighted
average
exercise price
|
|||
Outstanding at December 28, 2019
|
|
460,285
|
|
|
$
|
10.28
|
|
Exercised
|
|
(50,278
|
)
|
|
10.35
|
|
|
Expired or forfeited
|
|
(18,598
|
)
|
|
11.93
|
|
|
Outstanding at September 26, 2020
|
|
391,409
|
|
|
$
|
10.19
|
|
|
|
Nonvested
options
|
|
Weighted
average
exercise price
|
|||
Outstanding at December 28, 2019
|
|
215,007
|
|
|
$
|
10.11
|
|
Vested
|
|
(133,075
|
)
|
|
10.46
|
|
|
Expired or forfeited
|
|
(18,598
|
)
|
|
11.93
|
|
|
Outstanding at September 26, 2020
|
|
63,334
|
|
|
$
|
8.83
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
||||||||||||
Range of exercise prices
|
|
Number
|
|
Weighted average exercise price
|
|
Weighted average remaining contractual life (in years)
|
|
Number
|
|
Weighted average exercise price
|
||||||
|
|
|
|
|
||||||||||||
$0.00 - $10.89
|
|
217,500
|
|
|
$
|
8.77
|
|
|
4.5
|
|
154,166
|
|
|
$
|
8.74
|
|
$10.90 - $12.79
|
|
173,909
|
|
|
11.98
|
|
|
3.5
|
|
173,909
|
|
|
11.98
|
|
||
|
|
391,409
|
|
|
$
|
10.19
|
|
|
|
|
328,075
|
|
|
$
|
10.46
|
|
|
|
Number of restricted stock units
|
|
Weighted average fair value at grant date
|
|||
Balance at December 28, 2019
|
|
671,039
|
|
|
$
|
13.99
|
|
Granted
|
|
337,713
|
|
|
24.72
|
|
|
Vested
|
|
(34,701
|
)
|
|
10.75
|
|
|
Canceled
|
|
(16,698
|
)
|
|
19.49
|
|
|
Balance at September 26, 2020
|
|
957,353
|
|
|
$
|
17.80
|
|
•
|
Level 1 — Quoted prices for identical assets and liabilities in active markets.
|
•
|
Level 2 — Quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-based valuations in which all significant inputs are observable in the market.
|
•
|
Level 3 — Unobservable inputs in which little or no market data exists, therefore, requiring an entity to develop its own assumptions.
|
|
|
September 26, 2020
|
||||||||||||||
|
|
|
|
Fair value measurements using
|
||||||||||||
(In thousands)
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Recurring assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents
|
|
$
|
31
|
|
|
$
|
31
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total recurring assets
|
|
31
|
|
|
31
|
|
|
—
|
|
|
—
|
|
||||
Nonrecurring assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Impaired accounts and notes receivable, net of unrecognized revenue and allowance
|
|
11,217
|
|
|
—
|
|
|
—
|
|
|
11,217
|
|
||||
Total nonrecurring assets
|
|
11,217
|
|
|
—
|
|
|
—
|
|
|
11,217
|
|
||||
Total recurring and nonrecurring assets
|
|
$
|
11,248
|
|
|
$
|
31
|
|
|
$
|
—
|
|
|
$
|
11,217
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Recurring liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward contract related to foreign currency exchange rates
|
|
$
|
180
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
180
|
|
Contingent consideration included in obligations due former ADs, franchisees and others
|
|
355
|
|
|
—
|
|
|
—
|
|
|
355
|
|
||||
Interest rate swap agreement
|
|
161
|
|
|
—
|
|
|
161
|
|
|
—
|
|
||||
Total recurring liabilities
|
|
$
|
696
|
|
|
$
|
—
|
|
|
$
|
161
|
|
|
$
|
535
|
|
|
|
December 28, 2019
|
||||||||||||||
|
|
|
|
Fair value measurements using
|
||||||||||||
(In thousands)
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
||||||||
Recurring assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents
|
|
$
|
4,253
|
|
|
$
|
4,253
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total recurring assets
|
|
4,253
|
|
|
4,253
|
|
|
—
|
|
|
—
|
|
||||
Nonrecurring assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Impaired accounts and notes receivable, net of unrecognized revenue
|
|
7,310
|
|
|
—
|
|
|
—
|
|
|
7,310
|
|
||||
Total nonrecurring assets
|
|
7,310
|
|
|
—
|
|
|
—
|
|
|
7,310
|
|
||||
Total recurring and nonrecurring assets
|
|
$
|
11,563
|
|
|
$
|
4,253
|
|
|
$
|
—
|
|
|
$
|
7,310
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Recurring liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent consideration included in obligations due to former ADs, franchisees and others
|
|
$
|
916
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
916
|
|
Interest rate swap agreement
|
|
58
|
|
|
—
|
|
|
58
|
|
|
—
|
|
||||
Total recurring liabilities
|
|
$
|
974
|
|
|
$
|
—
|
|
|
$
|
58
|
|
|
$
|
916
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
(In thousands)
|
|
September 26, 2020
|
|
September 30, 2019
|
|
September 26, 2020
|
|
September 30, 2019
|
||||||||
Total revenue:
|
|
|
|
|
|
|
|
|
||||||||
Vitamin Shoppe
|
|
$
|
266,965
|
|
|
$
|
—
|
|
|
$
|
780,588
|
|
|
$
|
—
|
|
American Freight
|
|
245,212
|
|
|
—
|
|
|
682,386
|
|
|
—
|
|
||||
Liberty Tax
|
|
13,300
|
|
|
5,414
|
|
|
117,992
|
|
|
125,072
|
|
||||
Buddy's
|
|
25,515
|
|
|
13,506
|
|
|
75,219
|
|
|
13,506
|
|
||||
Consolidated total revenue
|
|
$
|
550,992
|
|
|
$
|
18,920
|
|
|
$
|
1,656,185
|
|
|
$
|
138,578
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
(In thousands)
|
|
September 26, 2020
|
|
September 30, 2019
|
|
September 26, 2020
|
|
September 30, 2019
|
||||||||
Depreciation, amortization, and impairment charges:
|
|
|
|
|
|
|
|
|
||||||||
Vitamin Shoppe
|
|
$
|
11,474
|
|
|
$
|
—
|
|
|
$
|
35,204
|
|
|
$
|
—
|
|
American Freight
|
|
1,806
|
|
|
—
|
|
|
4,272
|
|
|
—
|
|
||||
Liberty Tax
|
|
2,776
|
|
|
3,649
|
|
|
7,219
|
|
|
11,421
|
|
||||
Buddy's
|
|
1,406
|
|
|
818
|
|
|
4,559
|
|
|
818
|
|
||||
Consolidated depreciation, amortization, and impairment charges
|
|
$
|
17,462
|
|
|
$
|
4,467
|
|
|
$
|
51,254
|
|
|
$
|
12,239
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
(In thousands)
|
|
September 26, 2020
|
|
September 30, 2019
|
|
September 26, 2020
|
|
September 30, 2019
|
||||||||
Income from operations:
|
|
|
|
|
|
|
|
|
||||||||
Vitamin Shoppe
|
|
$
|
2,849
|
|
|
$
|
—
|
|
|
$
|
(3,214
|
)
|
|
$
|
—
|
|
American Freight
|
|
19,940
|
|
|
—
|
|
|
33,949
|
|
|
—
|
|
||||
Liberty Tax
|
|
(5,357
|
)
|
|
(14,708
|
)
|
|
40,121
|
|
|
35,558
|
|
||||
Buddy's
|
|
5,302
|
|
|
2,232
|
|
|
13,985
|
|
|
2,232
|
|
||||
Total Segments
|
|
22,734
|
|
|
(12,476
|
)
|
|
84,841
|
|
|
37,790
|
|
||||
Corporate
|
|
(3,411
|
)
|
|
(12,571
|
)
|
|
(8,108
|
)
|
|
(13,626
|
)
|
||||
Consolidated income from operations
|
|
$
|
19,323
|
|
|
$
|
(25,047
|
)
|
|
$
|
76,733
|
|
|
$
|
24,164
|
|
(In thousands)
|
|
September 26, 2020
|
|
December 28, 2019
|
||||
Total assets:
|
|
|
|
|
||||
Vitamin Shoppe
|
|
$
|
620,578
|
|
|
$
|
679,646
|
|
American Freight
|
|
830,902
|
|
|
267,176
|
|
||
Liberty Tax
|
|
99,562
|
|
|
123,576
|
|
||
Buddy's
|
|
185,197
|
|
|
188,941
|
|
||
Total Segments
|
|
1,736,239
|
|
|
1,259,339
|
|
||
Corporate
|
|
176,265
|
|
|
39,206
|
|
||
Consolidated total assets
|
|
$
|
1,912,504
|
|
|
$
|
1,298,545
|
|
(In thousands)
|
|
September 26, 2020
|
|
December 28, 2019
|
||||
Goodwill:
|
|
|
|
|
||||
Vitamin Shoppe
|
|
$
|
—
|
|
|
$
|
4,951
|
|
American Freight
|
|
370,147
|
|
|
31,028
|
|
||
Liberty Tax
|
|
9,003
|
|
|
9,780
|
|
||
Buddy's
|
|
90,638
|
|
|
88,542
|
|
||
Consolidated goodwill
|
|
$
|
469,788
|
|
|
$
|
134,301
|
|
•
|
the uncertainty of the future impact of the COVID-19 pandemic and public health measures on our business and results of operations, including uncertainties surrounding the physical and financial health of our customers, the ability of government assistance programs to individuals, households and businesses to support consumer spending, levels of foot traffic in our stores, changes in customer demand for our products and services, possible disruptions in our supply chain or sources of supply, potential future temporary store closures due to government mandates and whether we will have the governmental approvals, personnel and sources of supply to be able to keep our stores open;
|
•
|
our plans and expectations in response to the COVID-19 pandemic, including increased expenses for potential higher wages and bonuses paid to associates and the cost of personal protective equipment and additional cleaning supplies and protocols for the safety of our associates, and expected delays in new store openings and cost reduction initiatives (including the Company’s ability to effectively obtain lease concessions with landlords);
|
•
|
the effect of steps the Company takes in response to COVID-19, the severity and duration of the pandemic, including whether there is a “second wave” as a result of the loosening of governmental restrictions, the pace of recovery when the pandemic subsides and the heightened impact it has on many of the risks described herein and in our other filings with the SEC;
|
•
|
potential regulatory actions relating to the COVID-19 pandemic;
|
•
|
the possibility that any of the anticipated benefits of the Buddy’s Acquisition, Sears Outlet Acquisition, Vitamin Shoppe Acquisition and American Freight Acquisition (as all such terms are defined below) will not be realized or will not be realized within the expected time period, the businesses of the Company and the Buddy’s segment, Vitamin Shoppe segment or American Freight segment may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected, revenues following the Buddy’s Acquisition, Sears Outlet Acquisition, Vitamin Shoppe Acquisition or American Freight Acquisition may be lower than expected;
|
•
|
our inability to grow on a sustainable basis;
|
•
|
changes in operating costs, including employee compensation and benefits;
|
•
|
the seasonality of certain of the Company's business segments;
|
•
|
departures of key executives or directors;
|
•
|
our ability to attract additional talent to our senior management team;
|
•
|
our ability to maintain an active trading market for our common stock on The Nasdaq Global Market (“Nasdaq”);
|
•
|
our inability to secure reliable sources of the products and services we make available to our customers;
|
•
|
government regulation and oversight over our products and services;
|
•
|
our ability to comply with the terms of our settlement with the Department of Justice (the "DOJ") and the Internal Revenue Service ("IRS");
|
•
|
government initiatives that simplify tax return preparation, improve the timing and efficiency of processing tax returns, limit payments to tax preparers, or decrease the number of tax returns filed or the size of the refunds;
|
•
|
government initiatives to pre-populate income tax returns;
|
•
|
the effect of regulation of the products and services that we offer, including changes in laws and regulations and the costs and administrative burdens associated with complying with such laws and regulations;
|
•
|
the possible characterization of refund transfers as a form of loan or extension of credit;
|
•
|
changes in the tax settlement products offered to our customers that make our services less attractive to customers or more costly to us;
|
•
|
our ability to maintain relationships with our third-party product and service providers;
|
•
|
our ability to offer merchandise and services that our customers demand;
|
•
|
our ability to successfully manage our inventory levels and implement initiatives to improve inventory management and other capabilities;
|
•
|
the performance of our products within the prevailing retail industry;
|
•
|
disruption of manufacturing, warehouse or distribution facilities or information systems;
|
•
|
the continued reduction of our competitors promotional pricing on new-in-box appliances, potentially adversely impacting our sales of out-of-box appliances and associated margin;
|
•
|
competitive conditions in the retail industry and tax preparation market;
|
•
|
worldwide economic conditions and business uncertainty, the availability of consumer and commercial credit, change in consumer confidence, tastes, preferences and spending, and changes in vendor relationships;
|
•
|
the risk that natural disasters, public health crises, political uprisings, uncertainty or unrest, or other catastrophic events could adversely affect our operations and financial results, including the impact of the COVID-19 pandemic on manufacturing operations and our supply chain, customer traffic and our operations in general;
|
•
|
any potential non-compliance, fraud or other misconduct by our franchisees or employees;
|
•
|
our ability and the ability of our franchisees to comply with legal and regulatory requirements;
|
•
|
failures by our franchisees and their employees to comply with their contractual obligations to us and with laws and regulations, to the extent these failures affect our reputation or subject us to legal risk;
|
•
|
the ability of our franchisees to open new territories and operate them successfully;
|
•
|
the availability of suitable store locations at appropriate lease terms;
|
•
|
the ability of our franchisees to generate sufficient revenue to repay their indebtedness to us;
|
•
|
our ability to manage Company-owned offices;
|
•
|
our exposure to litigation and any governmental investigations;
|
•
|
our ability and our franchisees' ability to protect customers' personal information, including from a cyber-security incident;
|
•
|
the impact of identity-theft concerns on customer attitudes toward our services;
|
•
|
our ability to access the credit markets and satisfy our covenants to lenders;
|
•
|
challenges in deploying accurate tax software in a timely way each tax season;
|
•
|
the effect of federal and state legislation that affects the demand for paid tax preparation, such as the Affordable Care Act and potential immigration reform;
|
•
|
our reliance on technology systems and electronic communications;
|
•
|
our ability to effectively deploy software in a timely manner and with all the features our customers require;
|
•
|
the impact of any acquisitions or dispositions, including our ability to integrate acquisitions and capitalize on their anticipated synergies; and
|
•
|
other factors, including the risk factors discussed in this quarterly report.
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||||||||||
|
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
||||||||||||||||||
(In thousands)
|
|
September 26, 2020
|
|
September 30, 2019
|
|
$
|
|
%
|
|
September 26, 2020
|
|
September 30, 2019
|
|
$
|
|
%
|
||||||||||||||
Total revenues
|
|
$
|
550,992
|
|
|
$
|
18,920
|
|
|
$
|
532,072
|
|
|
(2,812
|
)%
|
|
$
|
1,656,185
|
|
|
$
|
138,578
|
|
|
$
|
1,517,607
|
|
|
1,095
|
%
|
Income from operations
|
|
19,323
|
|
|
(25,047
|
)
|
|
44,370
|
|
|
177
|
%
|
|
76,733
|
|
|
24,164
|
|
|
52,569
|
|
|
218
|
%
|
||||||
Net income
|
|
(8,597
|
)
|
|
(23,464
|
)
|
|
14,867
|
|
|
63
|
%
|
|
31,359
|
|
|
9,471
|
|
|
21,888
|
|
|
231
|
%
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||||||||||
|
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
||||||||||||||||||
(In thousands)
|
|
September 26, 2020
|
|
September 30, 2019
|
|
$
|
|
%
|
|
September 26, 2020
|
|
September 30, 2019
|
|
$
|
|
%
|
||||||||||||||
Product
|
|
$
|
500,462
|
|
|
$
|
557
|
|
|
$
|
499,905
|
|
|
89,750
|
%
|
|
$
|
1,440,677
|
|
|
$
|
557
|
|
|
$
|
1,440,120
|
|
|
258,549
|
%
|
Service and other
|
|
33,126
|
|
|
10,284
|
|
|
22,842
|
|
|
222
|
%
|
|
164,508
|
|
|
129,942
|
|
|
34,566
|
|
|
27
|
%
|
||||||
Rental
|
|
17,404
|
|
|
8,079
|
|
|
9,325
|
|
|
115
|
%
|
|
51,000
|
|
|
8,079
|
|
|
42,921
|
|
|
531
|
%
|
||||||
Total revenue
|
|
$
|
550,992
|
|
|
$
|
18,920
|
|
|
$
|
532,072
|
|
|
2,812
|
%
|
|
$
|
1,656,185
|
|
|
$
|
138,578
|
|
|
$
|
1,517,607
|
|
|
1,095
|
%
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||||||||||
|
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
||||||||||||||||||
(In thousands)
|
|
September 26, 2020
|
|
September 30, 2019
|
|
$
|
|
%
|
|
September 26, 2020
|
|
September 30, 2019
|
|
$
|
|
%
|
||||||||||||||
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Product
|
|
$
|
296,920
|
|
|
$
|
438
|
|
|
$
|
296,482
|
|
|
67,690
|
%
|
|
$
|
862,320
|
|
|
$
|
438
|
|
|
$
|
861,882
|
|
|
196,777
|
%
|
Service and other
|
|
678
|
|
|
—
|
|
|
678
|
|
|
—
|
%
|
|
2,135
|
|
|
—
|
|
|
2,135
|
|
|
—
|
%
|
||||||
Rental
|
|
5,877
|
|
|
3,048
|
|
|
2,829
|
|
|
93
|
%
|
|
17,327
|
|
|
3,048
|
|
|
14,279
|
|
|
468
|
%
|
||||||
Total cost of revenue
|
|
303,475
|
|
|
3,486
|
|
|
299,989
|
|
|
8,606
|
%
|
|
881,782
|
|
|
3,486
|
|
|
878,296
|
|
|
25,195
|
%
|
||||||
Selling, general, and administrative expenses
|
|
228,194
|
|
|
40,481
|
|
|
187,713
|
|
|
464
|
%
|
|
697,670
|
|
|
110,928
|
|
|
586,742
|
|
|
529
|
%
|
||||||
Total operating expenses
|
|
$
|
531,669
|
|
|
$
|
43,967
|
|
|
$
|
487,702
|
|
|
1,109
|
%
|
|
$
|
1,579,452
|
|
|
$
|
114,414
|
|
|
$
|
1,465,038
|
|
|
1,280
|
%
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||||||||||
|
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
||||||||||||||||||
(In thousands)
|
|
September 26, 2020
|
|
September 30, 2019
|
|
$
|
|
%
|
|
September 26, 2020
|
|
September 30, 2019
|
|
$
|
|
%
|
||||||||||||||
Total revenues
|
|
$
|
13,300
|
|
|
$
|
5,414
|
|
|
$
|
7,886
|
|
|
145.7
|
%
|
|
$
|
117,992
|
|
|
$
|
125,072
|
|
|
$
|
(7,080
|
)
|
|
(5.7
|
)%
|
Operating expenses
|
|
18,657
|
|
|
20,122
|
|
|
(1,465
|
)
|
|
(7.3
|
)%
|
|
77,871
|
|
|
89,514
|
|
|
(11,643
|
)
|
|
(13.0
|
)%
|
||||||
Segment income
|
|
$
|
(5,357
|
)
|
|
$
|
(14,708
|
)
|
|
$
|
9,351
|
|
|
(63.6
|
)%
|
|
$
|
40,121
|
|
|
$
|
35,558
|
|
|
$
|
4,563
|
|
|
12.8
|
%
|
•
|
a decrease of $0.8 million in interest income due to fewer working capital loans issued to franchisees; and
|
•
|
a $0.1 million decrease in other revenues primarily related to gains in the prior year on sales of Company-owned stores where the sales price exceeds the carrying value of the assets sold; and
|
•
|
an increase of $8.4 million in royalties and advertising fees, financial products, tax preparation and electronic filing fees related to the extension of the tax season due to COVID-19; and
|
•
|
an increase of $0.4 million in franchise and area developer fees due to AD buybacks and the timing of payments made on loans.
|
•
|
a decrease of $8.8 million in royalties and advertising fees, financial products and electronic filing fees related to store closures and reduced tax returns due to COVID-19; and
|
•
|
a $2.7 million decrease in interest income due to fewer working capital loans issued to franchisees; and
|
•
|
a decrease of $0.6 million in franchise and area developer fees due to AD buybacks and the timing of payments made on loans; and
|
•
|
an increase of $3.2 million in assisted tax preparation fees, net of discounts related to an increase in the number of Company-owned stores operated in 2020; and
|
•
|
a $1.7 million increase in other revenues primarily related to gains on sales of Company-owned stores where the sales price exceeds the carrying value of the assets sold.
|
•
|
a $2.8 million decrease in other expenses primarily related to reduced bad debt expense in 2020 and non-recurring professional fees and legal settlements in 2019; and
|
•
|
a decrease of $0.9 million in depreciation, amortization and impairment charges primarily related to software disposed of in December 2019, partially offset by AD buybacks in 2020; and
|
•
|
a $0.4 million decrease in advertising expense due to the timing of advertising spending compared to the prior year; and
|
•
|
a $1.5 million increase in employee compensation due to management incentives and increased company-owned stores; and
|
•
|
a $1.2 million increase in AD expenses due to the extension of the tax season related to COVID-19.
|
•
|
a $5.6 million decrease in AD expenses due to reacquired ADs and reduced tax return volume; and
|
•
|
a decrease of $4.2 million in depreciation, amortization and impairment charges primarily related to software disposed of in December 2019, partially offset by AD buybacks in 2020; and
|
•
|
a $4.1 million decrease in other expenses primarily related to non-recurring professional fees and legal settlements in 2019 and decreased bad debt expense in 2020, partially offset by higher software license and rebate costs; and
|
•
|
a $1.2 million increase in advertising expense due to the timing of advertising spending compared to the prior year; and
|
•
|
a $1.1 million increase in employee compensation due to management incentives and increased company-owned stores.
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||||||||||
|
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
||||||||||||||||||
(In thousands)
|
|
September 26, 2020
|
|
September 30, 2019
|
|
$
|
|
%
|
|
September 26, 2020
|
|
September 30, 2019
|
|
$
|
|
%
|
||||||||||||||
Total revenues
|
|
$
|
25,515
|
|
|
$
|
13,506
|
|
|
$
|
12,009
|
|
|
88.9
|
%
|
|
$
|
75,219
|
|
|
$
|
13,506
|
|
|
$
|
61,713
|
|
|
456.9
|
%
|
Operating expenses
|
|
20,213
|
|
|
11,274
|
|
|
8,939
|
|
|
79.3
|
%
|
|
61,234
|
|
|
11,274
|
|
|
49,960
|
|
|
443.1
|
%
|
||||||
Segment income
|
|
$
|
5,302
|
|
|
$
|
2,232
|
|
|
$
|
3,070
|
|
|
137.5
|
%
|
|
$
|
13,985
|
|
|
$
|
2,232
|
|
|
$
|
11,753
|
|
|
526.6
|
%
|
|
|
Reconciliation of Net Income (Loss) to Adjusted EBITDA
|
||||||||||||||
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
(In thousands)
|
|
September 26, 2020
|
|
September 30, 2019
|
|
September 26,2020
|
|
September 30, 2019
|
||||||||
Net income (loss)
|
|
$
|
(8,597
|
)
|
|
$
|
(14,886
|
)
|
|
$
|
29,269
|
|
|
$
|
18,049
|
|
Add back:
|
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
|
26,264
|
|
|
2,755
|
|
|
83,642
|
|
|
4,225
|
|
||||
Income tax expense (benefit)
|
|
427
|
|
|
(4,339
|
)
|
|
(43,561
|
)
|
|
10,367
|
|
||||
Depreciation and amortization charges
|
|
17,462
|
|
|
4,467
|
|
|
51,254
|
|
|
12,239
|
|
||||
Total Adjustments
|
|
44,153
|
|
|
2,883
|
|
|
91,335
|
|
|
26,831
|
|
||||
EBITDA
|
|
35,556
|
|
|
(12,003
|
)
|
|
120,604
|
|
|
44,880
|
|
||||
Adjustments to EBITDA
|
|
|
|
|
|
|
|
|
||||||||
Executive severance and related costs
|
|
664
|
|
|
—
|
|
|
5,983
|
|
|
952
|
|
||||
Stock based compensation
|
|
1,956
|
|
|
292
|
|
|
6,294
|
|
|
905
|
|
||||
Shareholder litigation costs
|
|
219
|
|
|
210
|
|
|
506
|
|
|
271
|
|
||||
Corporate compliance costs
|
|
533
|
|
|
—
|
|
|
637
|
|
|
58
|
|
||||
Prepayment penalty on early debt repayment
|
|
1,246
|
|
|
—
|
|
|
5,295
|
|
|
—
|
|
||||
Accrued judgments and settlements
|
|
334
|
|
|
643
|
|
|
(835
|
)
|
|
968
|
|
||||
Store closures
|
|
203
|
|
|
—
|
|
|
719
|
|
|
1,221
|
|
||||
Rebranding costs
|
|
1,286
|
|
|
—
|
|
|
4,509
|
|
|
—
|
|
||||
Acquisition costs
|
|
1,073
|
|
|
10,920
|
|
|
18,173
|
|
|
11,595
|
|
||||
Inventory fair value step up amortization
|
|
6,960
|
|
|
—
|
|
|
35,153
|
|
|
—
|
|
||||
Tender offer
|
|
—
|
|
|
549
|
|
|
—
|
|
|
549
|
|
||||
Total Adjustments to EBITDA
|
|
14,474
|
|
|
12,614
|
|
|
76,434
|
|
|
16,519
|
|
||||
Adjusted EBITDA
|
|
$
|
50,030
|
|
|
$
|
611
|
|
|
$
|
197,038
|
|
|
$
|
61,399
|
|
•
|
On January 3, 2020, we entered into a subscription agreement with an affiliate of Vintage, pursuant to which the affiliate of Vintage purchased from the Company 2,354,000 shares of common stock for an aggregate purchase price of $28.2 million in cash.
|
•
|
On February 7, 2020, in connection with our repurchases of Vitamin Shoppe’s outstanding 2.25% Convertible Senior Notes due 2020 (the “VSI Convertible Notes”), certain investors provided the Company with an aggregate of approximately $65.9 million of equity financing to fund the repurchase or redemption of the VSI Convertible Notes, make interest payments on the VSI Convertible Notes that are not so repurchased or redeemed until their maturity and to also fund general, working capital and cash needs of the Company.
|
•
|
On February 14, 2020, we entered into a $675.0 million credit facility, which was used to fund the American Freight Acquisition and repay the existing Sears Outlets and Buddy’s term loans.
|
•
|
On May 1, 2020, we entered into a backstop commitment for a $100.0 million asset-based lending facility with B. Riley. As of September 26, 2020, this commitment has been ended.
|
•
|
On June 30, 2020, we completed an offering in which we sold 4.2 million shares of our common stock and received net proceeds of approximately $92.2 million, after deducting underwriting discounts and estimated offering expenses totaling approximately $5.4 million. On July 30, 2020, the Common Stock Underwriters exercised their option to purchase additional shares of our common stock, and on August 3, 2020 we received net proceeds of approximately $13.8 million, after deducting underwriting discounts of approximately $0.8 million.
|
•
|
On September 18, 2020, we completed an offering in which we sold 1.2 million shares of our Series A Preferred Stock and received net proceeds of approximately $28.8 million, after deducting underwriting discounts, the structuring fee and estimated offering expenses totaling approximately $1.2 million.
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On September 23, 2020, we entered into a $125.0 million New ABL Credit Agreement in which we have borrowed $32.7 million.
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The outbreak of the COVID-19 pandemic has affected economic conditions, including macroeconomic conditions and levels of business confidence and has created economic disruption. Mitigation efforts, including federal, state and local government restrictions, including travel restrictions, restrictions on public gatherings, closing of nonessential businesses and quarantining of people who may have been exposed to the COVID-19 pandemic, may have an impact on our cash flow from operations and our ability to raise capital from financial institutions. Currently, there is significant uncertainty surrounding the potential impact on our business and we are actively managing our business to respond to the impact and increase our liquidity.
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The extent to which we extend additional operating financing to our franchisees and ADs, beyond the levels of prior periods;
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The extent and timing of capital expenditures;
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The extent and timing of future acquisitions;
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Our ability to integrate our acquisitions and implement business and cost savings initiatives to improve profitability; and
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The extent, if any, to which our Board of Directors elects to continue to declare dividends on our common stock.
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our ability to manage increased responsibilities for our executive level personnel and administrative burdens;
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our risk of litigation and other unanticipated liabilities;
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adding new customers and retaining existing customers;
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innovating new products and services to meet the needs of our customers;
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finding new opportunities in our existing and new markets;
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remaining competitive in the tax return preparation, specialty retailing, consumable durable goods and retail industries;
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our ability to offer directly and to facilitate through others the sale of tax settlement products and maintaining a reputation for quality tax preparation services to attract and retain customers and independent tax preparers;
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attracting and retaining capable franchisees and ADs;
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effectively managing the seasonality of the businesses, in particular our Liberty Tax segment;
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delivering on our products and services in sufficient volumes and in a timely manner;
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hiring, training, and retaining skilled managers and employees; and
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expanding and improving the efficiency of our operations and systems and managing related organizational challenges.
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limiting our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or other general corporate purposes;
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requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes;
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limiting our ability to refinance our indebtedness on terms acceptable to us or at all;
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increasing the cost of future borrowings and, accordingly, our cost of capital;
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limiting our flexibility in planning for and reacting to changes in the markets in which we compete and to changing business and economic conditions;
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imposing restrictive covenants on our operations;
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placing us at a competitive disadvantage to competitors carrying less debt; and
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making us more vulnerable to economic downturns and adverse developments in our business, including the COVID-19 pandemic, and limiting our ability to withstand competitive pressures.
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incur, assume or guarantee additional indebtedness;
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declare or pay dividends or make other distributions with respect to, or purchase or otherwise acquire or retire for value, equity interests;
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make any principal payment on, or redeem or repurchase, certain indebtedness;
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make loans, advances or other investments;
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incur liens;
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sell or otherwise dispose of assets, including capital stock of subsidiaries;
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enter into sale and lease-back transactions;
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consolidate or merge with or into, or sell all or substantially all of our assets to, another person;
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enter into transactions with affiliates;
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materially change the nature of our business;
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enter into agreements that restrict the ability of certain subsidiaries to make dividends or other payments; and
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service our indebtedness if covenants under our credit facilities are not satisfied.
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limited in how we conduct our business;
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unable to raise additional debt or equity financing to operate during general economic or business downturns; or
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unable to compete effectively, take advantage of new business opportunities or grow in accordance with our plans.
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Exhibit
Number
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Exhibit Description
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Filed
Herewith
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Incorporated by
Reference
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X
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X
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X
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X
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X
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X
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X
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X
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X
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X
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X
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X
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X
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X
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X
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X
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X
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X
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X
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X
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X
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X
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X
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X
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X
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X
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101
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The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 26, 2020, formatted in Inline XBRL, filed herewith: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations (unaudited), (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited), (iv) the Condensed Consolidated Statements of Stockholders’ Equity (unaudited), (v) the Condensed Consolidated Statements of Cash Flows (unaudited) and (vi) the Notes to Unaudited Condensed Consolidated Financial Statements
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X
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104
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The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 26, 2020, formatted in Inline XBRL (included with Exhibit 101)
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X
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FRANCHISE GROUP, INC.
(Registrant)
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November 4, 2020
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By:
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/s/ Brian R. Kahn
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Brian R. Kahn
Chief Executive Officer and Director
(Principal Executive Officer)
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November 4, 2020
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By:
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/s/ Eric F. Seeton
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Eric F. Seeton
Chief Financial Officer
(Principal Financial and Accounting Officer)
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