The Container Store Group Annual Report 2020
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The Container Store Group Annual Report 2020 Form 10-K (NYSE:TCS) Published: June 17th, 2020 PDF generated by stocklight.com F UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ( Mark O ne) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 28, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001‑36161 THE CONTAINER STORE GROUP, INC. (Exact name of registrant as specified in its charter) Delaware 26‑0565401 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 500 Freeport Parkway Coppell, TX 75019 (Addresses of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (972) 538‑6000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.01 per share TCS New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well‑known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☑ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ☐ NO ☑ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☑ NO ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) YES ☑ NO ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. L arge accelerated filer ☐ Accelerated filer ☑ Non‑accelerated filer ☐ Smaller reporting company ☑ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Act). YES ☐ NO ☑ As of September 27, 2019, the last business day of the registrant’s most recently completed second quarter, the approximate market value of the registrant’s common stock held by non-affiliates was $89,420,395. Solely for purposes of this disclosure, shares of common stock held by executive officers and directors of the registrant as of such date have been excluded because such persons may be deemed to be affiliates. As of June 12, 2020, the number of shares of common stock outstanding was 50,362,520. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s definitive Proxy Statement for its 2020 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10‑K. EXPLANATORY NOTE As previously disclosed in the Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on June 10, 2020, the Company expected that the filing of this Annual Report on Form 10-K for the fiscal year ended March 28, 2020, originally due on June 11, 2020, would be delayed due to disruptions caused by the COVID-19 pandemic. In particular, the impact of the COVID-19 pandemic on the Company’s store operations and stock price resulted in the need to conduct an interim impairment assessment of the Company's intangibles, long-lived assets and goodwill. The uncertainty caused by the COVID-19 pandemic complicated the analysis required in connection with such impairment assessment, causing the Company to need to perform additional analyses and procedures. As a result, the Company required additional time to complete such assessment. The Company is relying upon Release No. 34-88465 issued by the Securities and Exchange Commission on March 25, 2020, pursuant to Section 36 of the Securities Exchange Act of 1934, as amended, in filing this Annual Report on Form 10-K after the original due date of June 11, 2020. 2 TABLE OF CONTENTS PART I. Item 1. Business 5 Item 1A. Risk Factors 13 Item 1B. Unresolved Staff Comments 32 Item 2. Properties 32 Item 3. Legal Proceedings 33 Item 4. Mine Safety Disclosures 33 PART II. 34 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 34 Item 6. Selected Financial and Operating Data 34 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 42 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 62 Item 8. Financial Statements and Supplementary Data 63 Item 9. Changes and Disagreements With Accountants on Accounting and Financial Disclosures 107 Item 9A. Controls and Procedures 107 Item 9B. Other Information 110 PART III. 110 Item 10. Directors, Executive Officers and Corporate Governance 110 Item 11. Executive Compensation 110 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 110 Item 13. Certain Relationships and Related Transactions, and Director Independence 110 Item 14. Principal Accounting Fees and Services 110 PART IV. 111 Item 15. Exhibits, Financial Statement Schedules 111 Item 16. Form 10‑K Summary 115 3 Cautionary note regarding forward‑looking statements This Annual Report on Form 10‑K contains statements that constitute forward‑looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward‑looking statements. In some cases, you can identify forward‑looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward‑looking statements in this Annual Report on Form 10-K include, but are not limited to, statements related to: the outbreak of COVID-19 and the anticipated impact on our business, results of operations and financial condition; anticipated financial performance and key metrics, expectations regarding the reduction of capital expenditures and anticipated benefits to free cash flow, anticipated tax rates, the sufficiency of our cash generated from operations and borrowings under our credit facilities, ability to increase our market share, expectations with respect to new store openings and other expansion opportunities, expectations regarding key growth initiatives, expectations regarding the impact of, and potential charges related to, marketing and expense savings programs, and our ability to attract new customers and increase brand loyalty. These forward‑looking statements are only predictions. We have based these forward‑looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward‑looking statements speak only as of the date of this Annual Report on Form 10-K and are subject to a number of risks, uncertainties and assumptions, including the important factors described in the “Item 1A. Risk Factors” section of this Annual Report on Form 10‑K. Because forward‑looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward‑looking statements as accurate predictions of future events. The events and circumstances reflected in our forward‑looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward‑looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward‑looking statements contained herein after the date of this Annual Report on Form 10-K, whether as a result of any new information, future events or otherwise. Unless the context otherwise requires, references in this Annual Report on Form 10‑K to the “Company,” “we,” “us,” and “our” refer to The Container Store Group, Inc. and, where appropriate, its subsidiaries. The following discussion contains references to fiscal 2020, fiscal 2019, fiscal 2018, fiscal 2017, fiscal 2016, and fiscal 2015, which represent our fiscal years ending April 3, 2021, March 28, 2020, March 30, 2019, March 31, 2018, April 1, 2017, and February 27, 2016, respectively. 4 PART I ITEM 1. BUSINESS General The Container Store® is the original and leading specialty retailer of storage and organization products and solutions in the United States and the only national retailer solely devoted to the category. We provide a collection of creative, multifunctional and customizable storage and organization solutions that are sold in our stores and online through a high-service, differentiated shopping experience.