(State of incorporation) | (IRS employer identification no.) |
Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||||||||||||
Large 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. | ☐ |
Page | ||||||||
Number | ||||||||
(In thousands, except share count and per share data) | September 25, 2021 | December 26, 2020 | ||||||||||||
Assets | (Unaudited) | (Audited) | ||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | $ | $ | ||||||||||||
Current receivables, net | ||||||||||||||
Inventories, net | ||||||||||||||
Current assets held for sale | ||||||||||||||
Other current assets | ||||||||||||||
Total current assets | ||||||||||||||
Property, equipment, and software, net | ||||||||||||||
Non-current receivables, net | ||||||||||||||
Goodwill | ||||||||||||||
Intangible assets, net | ||||||||||||||
Operating lease right-of-use assets | ||||||||||||||
Non-current assets held for sale | ||||||||||||||
Other non-current assets | ||||||||||||||
Total assets | $ | $ | ||||||||||||
Liabilities and Stockholders' Equity | ||||||||||||||
Current liabilities: | ||||||||||||||
Current installments of long-term obligations | $ | $ | ||||||||||||
Current operating lease liabilities | ||||||||||||||
Accounts payable and accrued expenses | ||||||||||||||
Current liabilities held for sale | ||||||||||||||
Other current liabilities | ||||||||||||||
Total current liabilities | ||||||||||||||
Long-term obligations, excluding current installments | ||||||||||||||
Non-current operating lease liabilities | ||||||||||||||
Non-current liabilities held for sale | ||||||||||||||
Other non-current liabilities | ||||||||||||||
Total liabilities | ||||||||||||||
Stockholders' equity: | ||||||||||||||
Common stock, $ | ||||||||||||||
Preferred stock, $ | ||||||||||||||
Additional paid-in capital | ||||||||||||||
Accumulated other comprehensive loss, net of taxes | ( | |||||||||||||
Retained earnings | ||||||||||||||
Total equity attributable to Franchise Group, Inc. | ||||||||||||||
Non-controlling interest | ||||||||||||||
Total equity | ||||||||||||||
Total liabilities and equity | $ | $ |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
(In thousands, except share count and per share data) | September 25, 2021 | September 26, 2020 | September 25, 2021 | September 26, 2020 | ||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||
Product | $ | $ | $ | $ | ||||||||||||||||||||||
Service and other | ||||||||||||||||||||||||||
Rental | ||||||||||||||||||||||||||
Total revenues | ||||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||
Cost of revenue: | ||||||||||||||||||||||||||
Product | ||||||||||||||||||||||||||
Service and other | ||||||||||||||||||||||||||
Rental | ||||||||||||||||||||||||||
Total cost of revenue | ||||||||||||||||||||||||||
Selling, general, and administrative expenses | ||||||||||||||||||||||||||
Total operating expenses | ||||||||||||||||||||||||||
Income from operations | ||||||||||||||||||||||||||
Other expense: | ||||||||||||||||||||||||||
Other | ( | ( | ( | ( | ||||||||||||||||||||||
Interest expense, net | ( | ( | ( | ( | ||||||||||||||||||||||
Income (loss) from continuing operations before income taxes | ( | ( | ||||||||||||||||||||||||
Income tax expense (benefit) | ( | ( | ( | |||||||||||||||||||||||
Income (loss) from continuing operations | ( | |||||||||||||||||||||||||
Income (loss) from discontinued operations, net of tax | ( | |||||||||||||||||||||||||
Net income (loss) | ( | |||||||||||||||||||||||||
Less: Net (income) attributable to non-controlling interest | ( | |||||||||||||||||||||||||
Net income (loss) attributable to Franchise Group, Inc. | $ | $ | ( | $ | $ | |||||||||||||||||||||
Amounts attributable to Franchise Group, Inc.: | ||||||||||||||||||||||||||
Net income (loss) from continuing operations | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||
Net income (loss) from discontinued operations | ( | |||||||||||||||||||||||||
Net income attributable to Franchise Group, Inc. | $ | $ | ( | $ | $ | |||||||||||||||||||||
Basic earnings (loss) per share: | ||||||||||||||||||||||||||
Continuing operations | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||
Discontinued operations | ( | |||||||||||||||||||||||||
Total basic earnings per share | $ | $ | ( | $ | $ | |||||||||||||||||||||
Diluted earnings (loss) per share: | ||||||||||||||||||||||||||
Continuing operations | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||
Discontinued operations | ( | |||||||||||||||||||||||||
Total diluted earnings per share | $ | $ | ( | $ | $ | |||||||||||||||||||||
Weighted-average shares outstanding: | ||||||||||||||||||||||||||
Basic | ||||||||||||||||||||||||||
Diluted | ||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
(In thousands) | September 25, 2021 | September 26, 2020 | September 25, 2021 | September 26, 2020 | ||||||||||||||||||||||
Net income (loss) | $ | $ | ( | $ | $ | |||||||||||||||||||||
Other comprehensive income (loss) | ||||||||||||||||||||||||||
Unrealized (gain) loss on interest rate swap agreement, net of taxes of $ | ( | ( | ||||||||||||||||||||||||
Foreign currency translation adjustment | ( | |||||||||||||||||||||||||
Forward contracts related to foreign currency exchange rates | ||||||||||||||||||||||||||
Reclassification of unrealized loss on interest rate swap agreement and foreign currency translation adjustments realized upon disposal of business | ||||||||||||||||||||||||||
Other comprehensive income (loss) | ( | |||||||||||||||||||||||||
Comprehensive income (loss) | ( | |||||||||||||||||||||||||
Less: comprehensive (income) attributable to non-controlling interest | ( | |||||||||||||||||||||||||
Comprehensive income (loss) attributable to Franchise Group, Inc. | $ | $ | ( | $ | $ |
Three Months Ended September 25, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||
(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 | |||||||||||||||||||||||||||||||||||||||
Balance at June 26, 2021 | $ | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Total other comprehensive income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense, net | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Issuance of Series A Preferred Stock | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Common dividend declared ($0.375 per share) | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Preferred dividend declared ($0.469 per share) | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Balance at September 25, 2021 | $ | $ | $ | $ | $ | $ |
Nine Months Ended September 25, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||
(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 | |||||||||||||||||||||||||||||||||||||||
Balance at December 26, 2020 | $ | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Total other comprehensive income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense, net | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Issuance of Series A Preferred Stock | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Common dividend declared ($0.375 per share) | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Preferred dividend declared ($0.469 per share) | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Balance at September 25, 2021 | $ | $ | $ | $ | $ | $ |
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 | $ | $ | $ | $ | ( | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total other comprehensive income | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 1 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense, net | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of Series A Preferred Stock | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common dividend declared ($0.25 per share) | — | — | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
Preferred dividend declared ($0.14 per share) | — | — | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 26, 2020 | $ | $ | $ | $ | ( | $ | $ | $ | $ |
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 | $ | $ | $ | $ | ( | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
Changes and distributions of non-controlling interest in New Holdco | — | — | — | — | ( | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total other comprehensive loss | — | — | — | — | — | ( | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 1 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense, net | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of Series A Preferred Stock | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of preferred to common stock | ( | ( | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
Common dividend declared ($0.25 per share) | — | — | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
Preferred dividend declared ($0.14 per share) | — | — | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
Adjustment | — | — | — | — | — | — | ( | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 26, 2020 | $ | $ | $ | $ | ( | $ | $ | $ | $ |
Nine Months Ended | ||||||||||||||
(In thousands) | September 25, 2021 | September 26, 2020 | ||||||||||||
Operating Activities | ||||||||||||||
Net income | $ | $ | ||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||
Provision for doubtful accounts | ||||||||||||||
Depreciation, amortization and impairment charges | ||||||||||||||
Amortization of deferred financing costs | ||||||||||||||
Loss (gain) on disposal of other | ( | |||||||||||||
Stock-based compensation expense - equity awards | ||||||||||||||
(Gain) on bargain purchases and sales of Company-owned offices | ( | ( | ||||||||||||
Deferred tax (income) expense | ( | |||||||||||||
Prepayment penalty for early debt extinguishment | ||||||||||||||
Gain on divestiture of Liberty Tax | ( | |||||||||||||
Change in | ||||||||||||||
Accounts, notes, and interest receivable | ( | |||||||||||||
Income taxes receivable | ( | ( | ||||||||||||
Other assets | ||||||||||||||
Accounts payable and accrued expenses | ||||||||||||||
Inventory | ( | |||||||||||||
Deferred revenue | ||||||||||||||
Net cash provided by operating activities | ||||||||||||||
Investing Activities | ||||||||||||||
Issuance of operating loans to franchisees | ( | ( | ||||||||||||
Payments received on operating loans to franchisees | ||||||||||||||
Purchases of Company-owned offices and acquired customer lists | ( | ( | ||||||||||||
Proceeds from sale of Company-owned offices | ||||||||||||||
Acquisition of business, net of cash and restricted cash acquired | ( | ( | ||||||||||||
Divestiture of business, net of cash and restricted cash sold | ||||||||||||||
Purchases of property, equipment, and software | ( | ( | ||||||||||||
Proceeds from sale of property, equipment, and software | ||||||||||||||
Net cash (used in) in investing activities | ( | ( | ||||||||||||
Financing Activities | ||||||||||||||
Proceeds from the exercise of stock options | ||||||||||||||
Dividends paid | ( | ( | ||||||||||||
Non-controlling interest distribution | ( | |||||||||||||
Repayment of other long-term obligations | ( | ( | ||||||||||||
Borrowings under revolving credit facility | ||||||||||||||
Repayments under revolving credit facility | ( | ( | ||||||||||||
Issuance of common stock | ||||||||||||||
Issuance of preferred stock | ||||||||||||||
Payment for debt issue costs and original issuance discounts | ( | ( | ||||||||||||
Prepayment penalty for early debt extinguishment | ( | |||||||||||||
Issuance of debt | ||||||||||||||
Cash paid for taxes on exercises/vesting of stock-based compensation | ( | ( | ||||||||||||
Net cash provided by financing activities | ||||||||||||||
Effect of exchange rate changes on cash, net | ( | |||||||||||||
Net increase in cash equivalents and restricted cash | ||||||||||||||
Cash, cash equivalents and restricted cash at beginning of period | ||||||||||||||
Cash, cash equivalents and restricted cash at end of period | $ | $ | ||||||||||||
Supplemental Cash Flow Disclosure | ||||||||||||||
Cash paid for taxes, net of refunds | $ | $ | ||||||||||||
Cash paid for interest | $ | $ | ||||||||||||
Accrued capital expenditures | $ | $ | ||||||||||||
Non-cash proceeds from divestiture of Liberty Tax | $ | 59,680 | $ | — | ||||||||||
Deferred financing costs from issuance of common stock | $ | $ | ||||||||||||
Capital expenditures funded by finance lease liabilities | $ | $ | ||||||||||||
Tax receivable agreement included in other long-term liabilities | $ | $ |
(In thousands) | September 25, 2021 | September 26, 2020 | ||||||||||||
Cash and cash equivalents | $ | $ | ||||||||||||
Restricted cash included in other non-current assets | ||||||||||||||
Cash and cash equivalents for discontinued operations | ||||||||||||||
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows | $ | $ |
(In thousands) | Preliminary March 10, 2021 | |||||||
Cash and cash equivalents | $ | |||||||
Other current assets | ||||||||
Inventories, net | ||||||||
Property, equipment and software, net | ||||||||
Goodwill | ||||||||
Operating lease right-of-use assets | ||||||||
Other intangible assets, net | ||||||||
Other non-current assets | ||||||||
Total assets | ||||||||
Current operating lease liabilities | ||||||||
Accounts payable and accrued expenses | ||||||||
Other current liabilities | ||||||||
Current installments of long-term obligations | ||||||||
Long-term obligations, excluding current installments | ||||||||
Non-current operating lease liabilities | ||||||||
Other long-term liabilities | ||||||||
Total liabilities | ||||||||
Consideration transferred | $ |
(In thousands) | Preliminary December 27, 2020 | |||||||
Cash and cash equivalents | $ | |||||||
Other current assets | ||||||||
Inventories, net | ||||||||
Property, equipment and software, net | ||||||||
Goodwill | ||||||||
Operating lease right-of-use assets | ||||||||
Total assets | ||||||||
Current operating lease liabilities | ||||||||
Other current liabilities | ||||||||
Non-current operating lease liabilities | ||||||||
Total liabilities | ||||||||
Consideration transferred | $ |
Pro forma (Unaudited) | ||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
(In thousands) | September 25, 2021 | September 26, 2020 | September 25, 2021 | September 26, 2020 | ||||||||||||||||||||||
Revenue | $ | $ | $ | $ | ||||||||||||||||||||||
Net income | $ | $ | $ | $ | ( | |||||||||||||||||||||
Basic net income per share | $ | $ | $ | $ | ( | |||||||||||||||||||||
Diluted net income per share | $ | $ | $ | $ | ( |
Assets | September 25, 2021 | December 26, 2020 | ||||||||||||
(In thousands) | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | $ | $ | ||||||||||||
Current receivables, net | ||||||||||||||
Other current assets | ||||||||||||||
Total current assets | ||||||||||||||
Property, equipment, and software, net | ||||||||||||||
Non-current receivables, net | ||||||||||||||
Goodwill | ||||||||||||||
Intangible assets, net | ||||||||||||||
Operating lease right-of-use assets | ||||||||||||||
Other non-current assets | ||||||||||||||
Total assets held for sale | $ | $ | ||||||||||||
Liabilities and Stockholders' Equity | ||||||||||||||
Current liabilities: | ||||||||||||||
Current installments of long-term obligations | $ | $ | ||||||||||||
Current operating lease liabilities | ||||||||||||||
Accounts payable and accrued expenses | ||||||||||||||
Other current liabilities | ||||||||||||||
Total current liabilities | ||||||||||||||
Long-term obligations, excluding current installments | ||||||||||||||
Non-current operating lease liabilities | ||||||||||||||
Other non-current liabilities | ||||||||||||||
Total liabilities held for sale | $ | $ | ||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
(In thousands) | September 25, 2021 | September 26, 2020 | September 25, 2021 | September 26, 2020 | ||||||||||||||||||||||
Revenue | $ | $ | $ | $ | ||||||||||||||||||||||
Selling, general, and administrative expenses | ||||||||||||||||||||||||||
Income from operations | ( | ( | ||||||||||||||||||||||||
Other expense: | ||||||||||||||||||||||||||
Gain on sale of discontinued operation | ||||||||||||||||||||||||||
Other | ( | |||||||||||||||||||||||||
Interest expense, net | ( | ( | ( | |||||||||||||||||||||||
Income before income taxes | ( | |||||||||||||||||||||||||
Income tax expense | ( | |||||||||||||||||||||||||
Net Income | ( | |||||||||||||||||||||||||
Less: Net (income) attributable to non-controlling interest | ||||||||||||||||||||||||||
Net income attributable to discontinued operations | $ | $ | ( | $ | $ |
Nine Months Ended | ||||||||||||||
(In thousands) | September 25, 2021 | September 26, 2020 | ||||||||||||
Cash flows provided by operating activities from discontinued operations | $ | $ | ||||||||||||
Cash flows provided by investing activities from discontinued operations | $ | $ |
Vitamin Shoppe | American Freight | Pet Supplies Plus | Buddy's | Total | ||||||||||||||||||||||||||||
Balance as of December 26, 2020 | ||||||||||||||||||||||||||||||||
Acquisitions | ||||||||||||||||||||||||||||||||
Balance as of September 25, 2021 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
September 25, 2021 | ||||||||||||||||||||
(In thousands) | Gross carrying amount | Accumulated amortization | Net carrying amount | |||||||||||||||||
Indefinite lived tradenames | ||||||||||||||||||||
Franchise agreements | ( | |||||||||||||||||||
Customer contracts | ( | |||||||||||||||||||
Reacquired rights | ( | |||||||||||||||||||
Total intangible assets | $ | $ | ( | $ |
December 26, 2020 | ||||||||||||||||||||
(In thousands) | Gross carrying amount | Accumulated amortization | Net carrying amount | |||||||||||||||||
Indefinite lived tradenames | $ | $ | $ | |||||||||||||||||
Customer contracts | ( | |||||||||||||||||||
Franchise agreements | ( | |||||||||||||||||||
Reacquired rights | ( | |||||||||||||||||||
Total intangible assets | $ | $ | ( | $ | ||||||||||||||||
September 25, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Vitamin Shoppe | American Freight | Pet Supplies Plus | 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 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
Wholesale sales | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total product revenue | ||||||||||||||||||||||||||||||||||||||||||||||||||
Franchise fees | ||||||||||||||||||||||||||||||||||||||||||||||||||
Royalties and advertising fees | ||||||||||||||||||||||||||||||||||||||||||||||||||
Financial products | ||||||||||||||||||||||||||||||||||||||||||||||||||
Interest income | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Agreement, club and damage waiver fees | ||||||||||||||||||||||||||||||||||||||||||||||||||
Warranty revenue | ||||||||||||||||||||||||||||||||||||||||||||||||||
Other revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total service revenue | ||||||||||||||||||||||||||||||||||||||||||||||||||
Rental revenue, net | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total rental revenue | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total revenue | $ | $ | $ | $ | $ | $ | $ | $ |
September 26, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Vitamin Shoppe | American Freight | Pet Supplies Plus | 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 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
Total product revenue | ||||||||||||||||||||||||||||||||||||||||||||||||||
Franchise fees | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Royalties and advertising fees | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Financial products | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Interest income | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Agreement, club and damage waiver fees | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Warranty revenue | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Other revenues | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total service revenue | ||||||||||||||||||||||||||||||||||||||||||||||||||
Rental revenue, net | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total rental revenue | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total revenue | $ | $ | $ | $ | $ | $ | $ | $ |
(In thousands) | September 25, 2021 | December 26, 2020 | ||||||||||||
Accounts Receivable | $ | $ | ||||||||||||
Notes receivable | $ | $ | ||||||||||||
Deferred revenue | $ | $ | ||||||||||||
Deferred franchise fee revenue | $ | $ |
(In thousands) | September 25, 2021 | December 26, 2020 | ||||||||||||
Revolving credit facilities | $ | $ | ||||||||||||
Term loan, net of debt issuance costs | ||||||||||||||
Finance lease liabilities | ||||||||||||||
Total long-term obligations | ||||||||||||||
Less current installments | ||||||||||||||
Total long-term obligations, excluding current installments, net | $ | $ |
(In thousands) | September 25, 2021 | December 26, 2020 | ||||||||||||
Foreign currency adjustment | $ | $ | ( | |||||||||||
Interest rate swap agreements, net of tax | ( | |||||||||||||
Total accumulated other comprehensive loss | $ | $ | ( |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
(In thousands, except for share and per share amounts) | September 25, 2021 | September 26, 2020 | September 25, 2021 | September 26, 2020 | ||||||||||||||||||||||
Net income (loss) from continuing operations attributable to Franchise Group | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||
Less: Preferred dividend declared | ( | ( | ( | ( | ||||||||||||||||||||||
Adjusted net income (loss) from continuing operations available to Common Stockholders | ( | ( | ||||||||||||||||||||||||
Net income from discontinued operations attributable to Franchise Group | ( | |||||||||||||||||||||||||
Adjusted net income (loss) available to Common Stockholders | $ | $ | ( | $ | $ | |||||||||||||||||||||
Weighted-average common stock outstanding | ||||||||||||||||||||||||||
Net dilutive effect of stock options and restricted stock | ||||||||||||||||||||||||||
Weighted-average diluted shares outstanding | ||||||||||||||||||||||||||
Basic net income (loss) per share: | ||||||||||||||||||||||||||
Continuing operations | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||
Discontinued operations | ( | |||||||||||||||||||||||||
Basic net income per share | $ | $ | ( | $ | $ | |||||||||||||||||||||
Diluted net income (loss) per share: | ||||||||||||||||||||||||||
Continuing operations | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||
Discontinued operations | ( | |||||||||||||||||||||||||
Diluted net income per share | $ | $ | ( | $ | $ |
Number of options | Weighted average exercise price | |||||||||||||
Outstanding as of December 26, 2020 | $ | |||||||||||||
Exercised | ( | |||||||||||||
Expired or forfeited | ||||||||||||||
Outstanding as of September 25, 2021 | $ |
Nonvested options | Weighted average exercise price | |||||||||||||
Outstanding as of December 26, 2020 | $ | |||||||||||||
Vested | ( | |||||||||||||
Expired or forfeited | ||||||||||||||
Outstanding as of September 25, 2021 | $ |
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 | $ | $ | ||||||||||||||||||||||||||||||
$10.90 - $12.01 | ||||||||||||||||||||||||||||||||
$ | $ |
Number of restricted stock units | Weighted average fair value at grant date | |||||||||||||
Balance as of December 26, 2020 | $ | |||||||||||||
Granted | ||||||||||||||
Vested | ( | |||||||||||||
Canceled | ( | |||||||||||||
Balance as of September 25, 2021 | $ |
Number of restricted stock units | Weighted average fair value at grant date | |||||||||||||
Balance as of December 26, 2020 | $ | |||||||||||||
Granted | ||||||||||||||
Vested | ( | |||||||||||||
Canceled | ||||||||||||||
Balance as of September 25, 2021 | $ |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
(In thousands) | September 25, 2021 | September 26, 2020 | September 25, 2021 | September 26, 2020 | ||||||||||||||||||||||
Total revenue: | ||||||||||||||||||||||||||
Vitamin Shoppe | $ | $ | $ | $ | ||||||||||||||||||||||
American Freight | ||||||||||||||||||||||||||
Pet Supplies Plus | ||||||||||||||||||||||||||
Buddy's | ||||||||||||||||||||||||||
Consolidated total revenue | $ | $ | $ | $ | ||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
(In thousands) | September 25, 2021 | September 26, 2020 | September 25, 2021 | September 26, 2020 | ||||||||||||||||||||||
Income (loss) from operations: | ||||||||||||||||||||||||||
Vitamin Shoppe | $ | $ | $ | $ | ( | |||||||||||||||||||||
American Freight | ||||||||||||||||||||||||||
Pet Supplies Plus | ||||||||||||||||||||||||||
Buddy's | ||||||||||||||||||||||||||
Total Segments | ||||||||||||||||||||||||||
Corporate | ( | ( | ( | ( | ||||||||||||||||||||||
Consolidated income (loss) from operations | $ | $ | $ | $ |
(In thousands) | September 25, 2021 | December 26, 2020 | ||||||||||||
Total assets: | ||||||||||||||
Vitamin Shoppe | $ | $ | ||||||||||||
American Freight | ||||||||||||||
Pet Supplies Plus | ||||||||||||||
Buddy's | ||||||||||||||
Total Segments | ||||||||||||||
Corporate | ||||||||||||||
Consolidated total assets | $ | $ |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | September 25, 2021 | September 26, 2020 | $ | % | September 25, 2021 | September 26, 2020 | $ | % | ||||||||||||||||||||||||||||||||||||||||||
Total revenues | $ | 828,826 | $ | 537,692 | $ | 291,134 | 54.1 | % | $ | 2,312,929 | $ | 1,538,193 | $ | 774,736 | 50.4 | % | ||||||||||||||||||||||||||||||||||
Income from operations | 54,763 | 24,680 | 30,083 | 121.9 | % | 165,895 | 36,612 | 129,283 | 353.1 | % | ||||||||||||||||||||||||||||||||||||||||
Net income | $ | 35,998 | $ | (4,726) | $ | 40,724 | 861.7 | % | $ | 40,185 | $ | 2,876 | $ | 37,309 | 1,297.3 | % |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | September 25, 2021 | September 26, 2020 | $ | % | September 25, 2021 | September 26, 2020 | $ | % | ||||||||||||||||||||||||||||||||||||||||||
Product | $ | 782,608 | $ | 500,462 | $ | 282,146 | 56.4 | % | $ | 2,172,193 | $ | 1,440,677 | $ | 731,516 | 50.8 | % | ||||||||||||||||||||||||||||||||||
Service and other | 37,891 | 19,826 | 18,065 | 91.1 | % | 114,659 | 46,516 | 68,143 | 146.5 | % | ||||||||||||||||||||||||||||||||||||||||
Rental | 8,327 | 17,404 | (9,077) | (52.2) | % | 26,077 | 51,000 | (24,923) | (48.9) | % | ||||||||||||||||||||||||||||||||||||||||
Total revenue | $ | 828,826 | $ | 537,692 | $ | 291,134 | 54.1 | % | $ | 2,312,929 | $ | 1,538,193 | $ | 774,736 | 50.4 | % |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | September 25, 2021 | September 26, 2020 | $ | % | September 25, 2021 | September 26, 2020 | $ | % | ||||||||||||||||||||||||||||||||||||||||||
Cost of revenue: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Product | $ | 485,682 | 296,920 | $ | 188,762 | 63.6 | % | $ | 1,347,673 | $ | 862,320 | $ | 485,353 | 56.3 | % | |||||||||||||||||||||||||||||||||||
Service and other | 8,737 | 678 | 8,059 | 1,188.6 | % | 10,076 | 2,135 | 7,941 | 371.9 | % | ||||||||||||||||||||||||||||||||||||||||
Rental | 2,930 | 5,877 | (2,947) | (50.1) | % | 8,869 | 17,327 | (8,458) | (48.8) | % | ||||||||||||||||||||||||||||||||||||||||
Total cost of revenue | 497,349 | 303,475 | 193,874 | 63.9 | % | 1,366,618 | 881,782 | 484,836 | 55.0 | % | ||||||||||||||||||||||||||||||||||||||||
Selling, general, and administrative expenses | 276,714 | 209,537 | 67,177 | 32.1 | % | 780,416 | 619,799 | 160,617 | 25.9 | % | ||||||||||||||||||||||||||||||||||||||||
Total operating expenses | $ | 774,063 | $ | 513,012 | $ | 261,051 | 50.9 | % | $ | 2,147,034 | $ | 1,501,581 | $ | 645,453 | 43.0 | % |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | September 25, 2021 | September 26, 2020 | $ | % | September 25, 2021 | September 26, 2020 | $ | % | ||||||||||||||||||||||||||||||||||||||||||
Total revenues | $ | 300,813 | $ | 266,965 | $ | 33,848 | 12.7 | % | $ | 898,108 | $ | 780,588 | $ | 117,520 | 15.1 | % | ||||||||||||||||||||||||||||||||||
Operating expenses | 273,021 | 264,116 | 8,905 | 3.4 | % | 807,278 | 783,802 | 23,476 | 3.0 | % | ||||||||||||||||||||||||||||||||||||||||
Segment income | $ | 27,792 | $ | 2,849 | $ | 24,943 | 875.5 | % | $ | 90,830 | $ | (3,214) | $ | 94,044 | 2,926.1 | % |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | September 25, 2021 | September 26, 2020 | $ | % | September 25, 2021 | September 26, 2020 | $ | % | ||||||||||||||||||||||||||||||||||||||||||
Total revenues | $ | 223,591 | $ | 245,212 | $ | (21,621) | (8.8) | % | $ | 750,914 | $ | 682,386 | $ | 68,528 | 10.0 | % | ||||||||||||||||||||||||||||||||||
Operating expenses | 214,017 | 225,272 | (11,255) | (5.0) | % | 694,255 | 648,437 | 45,818 | 7.1 | % | ||||||||||||||||||||||||||||||||||||||||
Segment income | $ | 9,574 | $ | 19,940 | $ | (10,366) | (52.0) | % | $ | 56,659 | $ | 33,949 | $ | 22,710 | 66.9 | % |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | September 25, 2021 | September 26, 2020 | $ | % | September 25, 2021 | September 26, 2020 | $ | % | ||||||||||||||||||||||||||||||||||||||||||
Total revenues | $ | 17,779 | $ | 25,515 | $ | (7,736) | (30.3) | % | $ | 50,195 | $ | 75,219 | $ | (25,024) | (33.3) | % | ||||||||||||||||||||||||||||||||||
Operating expenses | 11,788 | 20,213 | (8,425) | (41.7) | % | 36,565 | 61,234 | (24,669) | (40.3) | % | ||||||||||||||||||||||||||||||||||||||||
Segment income | $ | 5,991 | $ | 5,302 | $ | 689 | 13.0 | % | $ | 13,630 | $ | 13,985 | $ | (355) | (2.5) | % |
Reconciliation of Net Income to Adjusted EBITDA | ||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
(In thousands) | September 25, 2021 | September 26, 2020 | September 25, 2021 | September 26, 2020 | ||||||||||||||||||||||
Net income from continuing operations | $ | 35,998 | $ | (4,726) | $ | 40,185 | $ | 2,876 | ||||||||||||||||||
Add back: | ||||||||||||||||||||||||||
Interest expense | 21,194 | 26,269 | 91,494 | 78,658 | ||||||||||||||||||||||
Income tax benefit | (15,519) | 1,891 | (15,600) | (50,217) | ||||||||||||||||||||||
Depreciation and amortization | 17,834 | 14,686 | 46,407 | 44,035 | ||||||||||||||||||||||
Total Adjustments | 23,509 | 42,846 | 122,301 | 72,476 | ||||||||||||||||||||||
EBITDA | 59,507 | 38,120 | 162,486 | 75,352 | ||||||||||||||||||||||
Adjustments to EBITDA | ||||||||||||||||||||||||||
Executive severance and related costs | 10 | 62 | 19 | 5,382 | ||||||||||||||||||||||
Stock based compensation | 4,084 | 1,824 | 9,344 | 5,865 | ||||||||||||||||||||||
Long-term executive compensation expense | 494 | — | 1,319 | — | ||||||||||||||||||||||
Gain on sale of Company-owned stores | (2,481) | — | (2,481) | — | ||||||||||||||||||||||
Corporate compliance costs | 6 | 940 | 785 | (449) | ||||||||||||||||||||||
Early debt repayment costs | — | 1,246 | 36,726 | 5,295 | ||||||||||||||||||||||
Store closures / impairment | 2,991 | 230 | 3,213 | 686 | ||||||||||||||||||||||
Acquisition costs (inclusive of inventory step up amortization) | 2,196 | 7,175 | 15,845 | 51,468 | ||||||||||||||||||||||
Loss on investment in equity securities | 13,175 | — | 13,175 | — | ||||||||||||||||||||||
Divestiture costs | 135 | — | 2,794 | — | ||||||||||||||||||||||
Integration costs | 726 | 1,832 | 8,542 | 6,113 | ||||||||||||||||||||||
Total Adjustments to EBITDA | 21,336 | 13,309 | 89,281 | 74,360 | ||||||||||||||||||||||
Adjusted EBITDA | $ | 80,843 | $ | 51,429 | $ | 251,767 | $ | 149,712 |
Exhibit Number | Exhibit Description | Filed Herewith | Incorporated by Reference | |||||||||||||||||
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101 | The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 25, 2021, 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 | X | ||||||||||||||||||
104 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 25, 2021, formatted in Inline XBRL (included with Exhibit 101) | X |
FRANCHISE GROUP, INC. (Registrant) | |||||||||||
November 2, 2021 | By: | ||||||||||
Brian R. Kahn Chief Executive Officer and Director (Principal Executive Officer) | |||||||||||
November 2, 2021 | By: | ||||||||||
Eric F. Seeton Chief Financial Officer (Principal Financial and Accounting Officer) |
November 2, 2021 | By: | /s/ Brian R. Kahn | ||||||
Brian R. Kahn | ||||||||
Chief Executive Officer | ||||||||
(Principal Executive Officer) |
November 2, 2021 | By: | /s/ Eric F. Seeton | ||||||
Eric F. Seeton | ||||||||
Chief Financial Officer | ||||||||
(Principal Financial Officer) |
November 2, 2021 | By: | /s/ Brian R. Kahn | ||||||
Brian R. Kahn | ||||||||
Chief Executive Officer | ||||||||
(Principal Executive Officer) |
November 2, 2021 | By: | /s/ Eric F. Seeton | ||||||
Eric F. Seeton | ||||||||
Chief Financial Officer | ||||||||
(Principal Financial Officer) |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Sep. 25, 2021 |
Dec. 26, 2020 |
---|---|---|
Finite-Lived Intangible Assets, Accumulated Amortization | $ 9,375 | $ 4,167 |
Liabilities Held-For-sale, Not Part Of Disposal Group, Current | $ 0 | $ 40,576 |
Preferred Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
Preferred Stock, Shares Authorized | 20,000,000 | 20,000,000 |
Preferred Stock, Shares Issued | 4,541,125 | 4,541,125 |
Preferred Stock, Shares Outstanding | 1,250,000 | 1,250,000 |
Class A common stock | ||
Common Stock, Value, Issued | $ 402 | $ 401 |
Common Stock [Member] | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares issued | 40,237,297 | 40,092,260 |
Common Stock, Shares Authorized | 180,000,000 | 180,000,000 |
Common Stock, Shares, Outstanding | 40,237,297 | 40,092,260 |
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 25, 2021 |
Sep. 26, 2020 |
Sep. 25, 2021 |
Sep. 26, 2020 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ 164,070 | $ (8,597) | $ 216,619 | $ 31,359 |
Unrealized (gain) loss on interest rate swap agreement, net of taxes of $—, $2, $13, and $(29), respectively | 0 | (39) | 45 | (119) |
Forward contracts related to foreign currency exchange rates | 0 | 1 | 0 | 7 |
Other comprehensive income (loss) | 973 | 265 | 1,399 | (300) |
Comprehensive income (loss) | 165,043 | (8,332) | 218,018 | 31,059 |
Less: comprehensive (income) attributable to non-controlling interest | 0 | 0 | 0 | (1,915) |
Comprehensive income (loss) attributable to Franchise Group, Inc. | 165,043 | (8,332) | 218,018 | 29,144 |
Other Adjustments to Income, Discontinued Operations | 973 | 0 | 973 | 0 |
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Tax | $ 0 | $ 303 | $ 381 | $ (188) |
Condensed Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 25, 2021 |
Sep. 26, 2020 |
Sep. 25, 2021 |
Sep. 26, 2020 |
|
Statement of Comprehensive Income [Abstract] | ||||
Other Comprehensive Income (Loss), Cash Flow Hedge, Gain (Loss), after Reclassification, Tax | $ 0 | $ 2 | $ 13 | $ (29) |
Organization and Significant Accounting Policies |
3 Months Ended |
---|---|
Sep. 25, 2021 | |
Accounting Policies [Abstract] | |
Organization and Significant Accounting Policies | Basis of Presentation Unless otherwise stated, references to the "Company," "we," "us," and "our" in this Quarterly Report on Form 10-Q (the "Quarterly Report") refer to Franchise Group, Inc. and its direct and indirect subsidiaries on a consolidated basis. The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and pursuant to the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with Exhibit 99.1 of Form 8-K filed on June 25, 2021, to reflect certain retrospective revisions for discontinued operations and changes in reportable segments in the consolidated financial statements of the Company in its Annual Report on Form 10-K for the year ended December 26, 2020 that was previously filed with the Securities and Exchange Commission (“SEC”) on March 10, 2021 (the “Form 10-K”). In the opinion of management, all adjustments (including those of a normal recurring nature) necessary for a fair presentation of such condensed consolidated financial statements in accordance with GAAP have been recorded. The December 26, 2020 balance sheet information was derived from the audited financial statements as of that date. Discontinued Operations As previously disclosed, on February 21, 2021 the Company entered into a purchase agreement (the "Purchase Agreement") to sell its Liberty Tax business to NextPoint Acquisition Corp ("NextPoint"), a special purpose acquisition corporation incorporated under the laws of the Province of British Columbia (the "Transaction"). On July 2, 2021 the Company completed the Transaction and received total consideration of approximately $241.0 million consisting of approximately $181.2 million in cash and approximately $59.7 million in proportionate voting shares of NextPoint recorded as an investment in equity securities in "Other non-current assets" on the Condensed Consolidated Balance Sheet. The transaction resulted in a gain on the sale of $173.7 million recorded in "Income (loss) from discontinued operations, net of tax" on the Condensed Consolidated Statement of Operations. As part of the divestiture, the Company incurred transaction costs of approximately $5.7 million which were paid using shares of NextPoint. As a result of the Transaction, the financial position and results of operations of the Liberty Tax business are presented as discontinued operations and, as such, have been excluded from continuing operations and segment results for all periods presented. The accompanying Notes to the Condensed Consolidated Financial Statements and all prior year balances have been reclassified to conform to this presentation. Please refer to "Note 3. Divestitures" for additional information regarding discontinued operations. Accounting Pronouncements In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU No. 2016-13, "Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", which changes how companies will measure credit losses for most financial assets and certain other instruments that aren't measured at fair value through net income. The standard replaces the "incurred loss" approach with an "expected loss" model for instruments measured at amortized cost (which generally will result in the earlier recognition of allowances for losses) and requires companies to record allowances for available-for-sale debt securities, rather than reduce the carrying amount. In addition, companies will have to disclose significantly more information, including information used to track credit quality by year of origination, for most financing receivables. The ASU should be applied as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the standard is effective. The ASU is effective for the Company for the fiscal year beginning January 1, 2023. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” This standard eliminates Step 2 from the goodwill impairment test. Instead, an entity should compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The ASU is effective for the Company for the fiscal year beginning January 1, 2023. The Company is currently evaluating the impact of the adoption of this standard to its consolidated financial statements. The London Interbank Offered Rate (“LIBOR”) is scheduled to be discontinued on December 31, 2021. In an effort to address the various challenges created by such discontinuance, the FASB issued an amendment to existing guidance, ASU No. 2020-04, "Reference Rate Reform." The amended guidance is designed to provide relief from the accounting analysis and impacts that may otherwise be required for modifications to agreements (e.g., loans, debt securities, derivatives, borrowings) necessitated by the reference rate reform. It also provides optional expedients to enable companies to continue to apply hedge accounting to certain hedging relationships impacted by the reference rate reform. Application of the guidance in the amendment is optional, is only available in certain situations, and is only available for companies to apply until December 31, 2022. The Company expects no material impact as a result of reference rate reform and the new guidance on its consolidated financial statements.In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes", which amends and simplifies the requirements for income taxes. The ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. The adoption did not result in a material impact to the Company's financial results or disclosures.
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Acquisition (Notes) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | (2) Acquisitions The assets acquired and liabilities assumed in the acquisitions below are recorded at fair value in accordance with ASC 805 - "Business Combinations." Goodwill is calculated as the excess of the purchase price over the fair value of the net assets acquired. The goodwill recognized is attributable to operational synergies in the expected franchise models and growth opportunities. The recorded goodwill is deductible for tax purposes. Pet Supplies Plus Acquisition On March 10, 2021, the Company completed its acquisition of Pet Supplies Plus (the "Pet Supplies Plus Acquisition"). The preliminary fair value of the consideration transferred at the acquisition date was $451.1 million. As of September 25, 2021, $5.5 million of acquisition fees had been incurred that are recorded in selling, general and administrative expenses. The table below summarizes the unaudited preliminary estimates of the fair values of the identifiable assets acquired and liabilities assumed in the Pet Supplies Plus Acquisition as of March 10, 2021. The preliminary estimates of the fair value of identifiable assets acquired and liabilities assumed are subject to revisions, which may result in an adjustment to the preliminary values presented below. In the nine months ended September 25, 2021, the preliminary estimates of the fair value of identifiable assets acquired and liabilities assumed were adjusted, which resulted in an increase in goodwill of $0.6 million. The increase was primarily due to a $0.5 million increase of franchise fees receivable and $0.1 million of prepaid expenses. The Company expects to complete the purchase price allocation as soon as reasonably possible but not to exceed one year from the date of completion of the Pet Supplies Plus Acquisition.
Other intangible assets, net consists of the Pet Supplies Plus trade name as an indefinite-lived intangible asset with a fair value of $104.4 million. The trade name is not subject to amortization but will be evaluated annually for impairment. Also included are franchise agreements of $67.1 million and customer relationships of $34.3 million. Operating lease right-of-use assets and lease liabilities consist of leases for retail store locations, warehouses and office equipment. Operating lease right-of-use assets incorporates a favorable adjustment of $12.4 million, net for favorable and unfavorable Pet Supplies Plus real estate leases (as compared to prevailing market rates) which will be amortized over the remaining lease terms. Property, equipment and software, net consists of fixtures and equipment of $37.0 million, leasehold improvements of $33.5 million, construction in progress of $3.5 million and financing leases of $1.7 million. Other non-current assets includes $0.4 million of restricted cash. Furniture Factory Outlet Acquisition On December 27, 2020, the Company completed the acquisition of Furniture Factory Outlet ("FFO Home"), a regional retailer of furniture and mattresses, for an all cash purchase price of $13.8 million. The Company acquired 31 operating locations which were rebranded as American Freight stores and included in its American Freight segment. As of September 25, 2021, $0.4 million of acquisition fees had been incurred that are recorded in selling, general and administrative expenses.
Operating lease right-of-use assets and lease liabilities consist of leases for retail store locations. Operating lease right-of-use assets incorporates a favorable adjustment of $1.4 million, net for favorable and unfavorable FFO Home leases (as compared to prevailing market rates) which will be amortized over the remaining lease terms. The property, equipment and software, net consists of leasehold improvements of $2.5 million and fixtures and equipment of $0.4 million. American Freight Acquisition On February 14, 2020, the Company completed its acquisition of American Freight (the "American Freight Acquisition") for an aggregate purchase price of $357.3 million. The Company accounted for the transaction as a business combination using the acquisition method of accounting. Pro forma financial information The following unaudited consolidated pro forma summary has been prepared by adjusting the Company's historical data to give effect to the Pet Supplies Plus and American Freight acquisitions as if they had occurred on December 28, 2019.
The unaudited consolidated pro forma financial information was prepared in accordance with GAAP and is not necessarily indicative of the results of operations that would have occurred if the Pet Supplies Plus and American Freight acquisitions had been completed on the date indicated, nor is it indicative of the future operating results of the Company. The unaudited pro forma results do not reflect events that either have occurred or may occur after the acquisition, including, but not limited to, the anticipated realization of operating synergies in subsequent periods. They also do not give effect to certain charges that the Company expects to incur in connection with the acquisition, including, but not limited to, additional professional fees and employee integration.
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Revenue Revenue (Notes) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer | (5) Revenue For details regarding the principal activities from which the Company generates its revenue, see "Note 1. Description of Business and Summary of Significant Account Policies Presentation" in the Company's Form 10-K. For more detailed information regarding reportable segments, see "Note 13. Segments" in this quarterly report. The following represents the disaggregated revenue by reportable segments for the three and nine months ended September 25, 2021:
† Reflects the results from the March 10, 2021 acquisition date. The following represents the disaggregated revenue by reportable segments for the three and nine months ended September 26, 2020:
Contract Balances The following table provides information about receivables and contract liabilities (deferred revenue) from contracts with customers as of September 25, 2021 and December 26, 2020:
Deferred revenue consists of (1) amounts received for which customers have not yet taken possession of the merchandise, (2) gift card or store credits outstanding, and (3) loyalty reward program credits which are generally recognized within one year following the revenue deferral. Deferred franchise fee revenue is recognized over the term of the agreement, which is generally between five and ten years.
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Goodwill and Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets | Goodwill and Intangible Assets The Company performs impairment tests for goodwill as of the end of July of each fiscal year and between annual impairment tests if an event occurs or circumstances change that would more likely than not reduce the fair values of the Company's reporting units below their carrying values. There are no accumulated goodwill impairment losses recorded. Changes in the carrying amount of goodwill for the nine months ended September 25, 2021 are as follows:
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Income Taxes |
3 Months Ended |
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Sep. 25, 2021 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes Overview For the three months ended September 25, 2021 and September 26, 2020, the Company had an effective tax rate from continuing operations of (75.8)% and (66.7)%, respectively. The change in the effective tax rate compared to the prior year is due to the reversal of a valuation allowance related to net operating loss carryforwards in the current year. The impact of the CARES Act was included in the prior year effective tax rate. For the nine months ended September 25, 2021 and September 26, 2020, the Company had an effective tax rate from continuing operations of (63.5)% and 106.1%, respectively. The impact of the enactment of the CARES Act was included nine months ended September 26, 2020 which is the primary driver of the difference in the effective tax rate. The Company is also expecting to utilize its net operating loss carryforwards and is expecting to realize its deferred tax assets which previously had a full valuation allowance. CARES Act The Coronavirus, Aid, Relief, and Economic Security, or CARES Act (the “Act”) was enacted on March 27, 2020. The Act retroactively changed the eligibility of certain assets for expense treatment in the year placed in service, back to 2018, and permitted any net operating loss for the tax years 2018, 2019, and 2020 to be carried back for 5 years. The Company recorded a total income tax benefit of $52.3 million during 2020 associated with the income tax components contained in the Act. Tax Receivable Agreement On July 10, 2019, the Company entered into a tax receivable agreement with the then-existing non-controlling interest holders (the "Tax Receivable Agreement") that provides for the payment by the Company to the non-controlling interest holders of 40% of the cash savings, if any, in federal, state and local taxes that the Company realizes or is deemed to realize as a result of any increases in tax basis of the assets of New Holdco resulting from future redemptions or exchanges of New Holdco units. Payments will be made when such TRA related deductions actually reduce the Company’s income tax liability. No payments were made to members of New Holdco pursuant to the TRA during the quarter ended September 25, 2021. Pursuant to the Company's election under Section 754 of the Internal Revenue Code (the "Code"), the Company has obtained an increase in its share of the tax basis in the net assets of New Holdco when the New Holdco units were redeemed or exchanged by the non-controlling interest holders and other qualifying transactions. The Company has treated the redemptions and exchanges of New Holdco units by the non-controlling interest holders as direct purchases of New Holdco units for U.S. federal income tax purposes. This increase in tax basis will reduce the amounts that it would otherwise pay in the future to various tax authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.
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Stockholders' Equity |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | Stockholders’ Equity Stockholders' Equity Activity On January 11, 2021, the Company entered into an Underwriting Agreement with B. Riley Securities, Inc., as representative of the several underwriters named therein (the “Underwriters”), to issue and sell an aggregate of 2,976,191 shares (the “Firm Shares”) of the Company’s 7.50% Series A Cumulative Perpetual Preferred Stock, par value $0.01 per share and liquidation preference of $25.00 per share (the “Series A Preferred Stock”), in a public offering at a price to the public of $25.20 per share. The Company also granted the Underwriters an option (the “Option”) to purchase up to 446,428 additional shares of Series A Preferred Stock during the 30 days following the date of the Underwriting Agreement. On January 14, 2021, the Underwriters partially exercised the Option for 314,934 shares (together with the Firm Shares, the “Shares”). The offering closed on January 14, 2021, and the net proceeds to the Company were approximately $79.5 million, after deducting underwriting discounts, an advisory fee and offering expenses totaling approximately $3.2 million. Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss, which were from the Company's Liberty Tax business, as of September 25, 2021 and December 26, 2020 were as follows:
Non-controlling interest The Company is the sole managing member of New Holdco and, as a result, consolidates the financial results of New Holdco. Prior to April 1, 2020, the Company reported a non-controlling interest representing the economic interest in New Holdco held by the former equity holders of Buddy's (the "Buddy’s Members"). Changes in the Company's ownership interest in New Holdco while it retained a controlling interest in New Holdco were accounted for as equity transactions. On March 26, 2020, the Company redeemed 3,937,726 New Holdco units and 787,545 shares of preferred stock for common stock. On April 1, 2020, the Company redeemed the remaining 5,495,606 New Holdco units and 1,099,121 shares of preferred stock for common stock and the Company is the sole owner of New Holdco. The exchange of New Holdco units for common stock resulted in an increase in the tax basis of the net assets of New Holdco and a liability to be recognized pursuant to the TRA. The difference of $10.0 million in the adjustment of the deferred tax balances and the tax receivable agreement liability was recorded as an adjustment to additional paid-in-capital. Refer to "Note 7. Income Taxes" for further discussion of the TRA. Net Income (Loss) per Share Diluted net income (loss) per share is computed using the weighted-average number of common stock and, if dilutive, the potential common stock outstanding during the period. Potential common stock consists of the incremental common stock issuable upon the exercise of stock options and vesting of restricted stock units. The dilutive effect of outstanding stock options and restricted stock units is reflected in diluted earnings per share by application of the treasury stock method. Additionally, the computation of the diluted net income (loss) per share of common stock assumed the conversion of Preferred Stock, if dilutive. The following table sets forth the calculations of basic and diluted net income (loss) per share:
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Stock Compensation Plans |
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Share-based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Compensation Plans | Stock-Based Compensation Plans For a discussion of our stock-based compensation plans, refer to “Note 11. - Stock-Based Compensation Plans” of the Form 10-K for the year ended December 26, 2020. Stock Options Stock option activity during the nine months ended September 25, 2021 was as follows:
Intrinsic value is defined as the fair value of the stock less the cost to exercise. The total intrinsic value of stock options outstanding at September 25, 2021 was $9.0 million. Stock options vest from the date of grant to years after the date of grant and expire from to years after the vesting date. Nonvested stock options activity during the nine months ended September 25, 2021 was as follows:
At September 25, 2021, there were no unrecognized compensation costs related to nonvested stock options. The following table summarizes information about stock options outstanding and exercisable at September 25, 2021:
Restricted Stock Units The Company has awarded service-based restricted stock units ("RSUs") and performance restricted stock units ("PRSUs") to its non-employee directors, officers and certain employees. The Company recognizes expense based on the estimated fair value of the RSUs or PRSUs granted over the vesting period on a straight-line basis. The fair value of RSUs and PRSUs is determined using the Company's closing stock price on the date of the grant. At September 25, 2021, unrecognized compensation costs related to RSUs and PRSUs were $5.8 million and $24.9 million, respectively. These costs are expected to be recognized through fiscal 2024. The following table summarizes the status of RSUs as of and changes during the nine months ended September 25, 2021:
The following table summarizes the status of PRSUs as of and changes during the nine months ended September 25, 2021:
Stock Compensation Expense The Company recorded $9.6 million and $6.3 million during the nine months ended September 25, 2021 and September 26, 2020, respectively.
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Fair Value of Financial Instruments |
3 Months Ended |
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Sep. 25, 2021 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Financial Instruments | Fair Value of Financial Instruments As required, financial assets and liabilities are classified in the fair value hierarchy in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (e.g., when there is evidence of impairment). The Company recorded impairment charges of $1.1 million and $0 during the nine months ended September 25, 2021 and September 26, 2020. Fair Value of Financial Instruments The carrying value of Cash and cash equivalents, restricted cash, accounts receivable and accounts payable as reported in the accompanying unaudited condensed consolidated balance sheets approximate fair value due to their short-term maturities. The carrying amount of Long-term debt approximates fair value because the interest rate paid has a variable component. The fair value for equity securities for which the Company does not have the ability to exercise significant influence is based on quoted prices in active markets, which was $40.9 million as of September 25, 2021.
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Related Party Transactions |
3 Months Ended |
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Sep. 25, 2021 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions The Company considers directors and their affiliated companies, as well as executive officers and members of their immediate families, to be related parties. Messrs. Kahn and Laurence Vintage Capital Management, LLC and its affiliates ("Vintage") held approximately 31% of the aggregate voting power of the Company through their ownership of common stock as of September 25, 2021. Brian Kahn and Andrew Laurence are principals of Vintage. Mr. Kahn is a member of the Board of Directors, President and Chief Executive Officer of the Company. Mr. Laurence is an Executive Vice President of the Company, served as a member of the Company's Board of Directors until the Company's annual meeting of stockholders in May 2021 and served as the Company's Chairman of the Board until March 31, 2020. Buddy's Franchises. Mr. Kahn's brother-in-law owns seven Buddy's franchises. All transactions between the Company's Buddy's segment and Mr. Kahn's brother-in-law are conducted on a basis consistent with other franchisees. Bryant Riley (former director) Bryant Riley, through controlled entities or affiliates held approximately 4% of the aggregate ownership of the Company's common stock as of September 25, 2021. Prior to the quarter ended September 25, 2021, Mr. Riley held greater than 5% of the aggregate ownership of the Company's common stock. Mr. Riley was also a member of the Company's Board of Directors from September 2018 through March 2020. January 2021 Underwritten Offering of Preferred Stock. On January 11, 2021, the Company reopened its original issuance of its Series A Preferred Stock, which closed on September 18, 2020 as noted above. The Company completed the reopened underwritten offering on January 15, 2021 in which B. Riley Securities, an affiliate of Mr. Riley, acted as representative of the underwriters. In connection with the offering B. Riley Securities and the other underwriters in the offering were entitled to an underwriting discount and reimbursement of certain out-of-pocket expenses incurred of approximately $3.0 million and B. Riley Securities was entitled to a structuring fee of $0.3 million. Debt Commitment Letter and Fee Letter. On January 23, 2021, in connection with the Pet Supplies Plus Acquisition and the refinancing of the Company's existing indebtedness, the Company entered into a debt commitment letter with, among others, BRF Finance Co., LLC (“BRF”), an affiliate of Mr. Riley, pursuant to which BRF committed to provide (i) $100.0 million of a then-contemplated first lien term loan credit facility and (ii) $300.0 million of a then-contemplated senior unsecured term loan credit facility (the “Senior Unsecured Facility”). On January 23, 2021, the Company entered into a fee letter with BRF pursuant to which (a) BRF committed to provide $100.0 million of an alternative then-contemplated first lien term loan credit facility (the “Alternative First Lien Facility”) and (b) BRF (or its affiliates) received, on March 10, 2021, (i) a $9.0 million arrangement fee as consideration for BRF’s commitments and agreements with respect to the Senior Unsecured Facility and (ii) a $1.0 million take-out fee as consideration for BRF’s commitments and agreements with respect to the Alternative First Lien Facility. M. Brent Turner Mr. Turner was the President and Chief Executive Officer of the Company’s Liberty Tax business which was sold to NextPoint on July 2, 2021 in connection with the Transaction. The Company previously entered into certain agreements with Revolution Financial, Inc., an entity partially owned by Mr. Turner, which were terminated upon completion of the sale of the Liberty Tax business. During the nine months ended September 25, 2021, the Company earned less than $0.2 million in royalties related to such agreements which was recorded in "Income (loss) from discontinued operations, net of tax" in the accompanying Condensed Consolidated Statements of Operations. Tax Receivable Agreement In connection with the acquisition of Buddy's, the Company entered into the Tax Receivable Agreement with the Buddy's Members that provides for the payment to the Buddy's Members of 40% of the amount of any tax benefits that the Company actually realizes as a result of increases in the tax basis of the net assets of New Holdco resulting from any redemptions or exchanges of New Holdco units. Amounts due under the Tax Receivable Agreement to the Buddy's Members as of September 25, 2021 were $16.8 million which is recorded in "Other non-current liabilities" in the accompanying condensed consolidated balance sheets. No payments were made to Buddy's Members pursuant to the Tax Receivable Agreement during the nine months ended September 25, 2021
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Commitments and Contingencies |
3 Months Ended |
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Sep. 25, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies In the ordinary course of operations, the Company may become a party to legal proceedings. Based upon information currently available, management believes that such legal proceedings, individually or in the aggregate, will not have a material adverse effect on the Company's business, financial condition, cash flows, or results of operations. The Company is party to claims and lawsuits that are considered to be ordinary, routine litigation incidental to the business, including claims and lawsuits concerning the fees charged to customers for various products and services, relationships with franchisees, intellectual property disputes, employment matters, and contract disputes. Although the Company cannot provide assurance that it will ultimately prevail in each instance, it believes the amount, if any, it will be required to pay in the discharge of liabilities or settlements in these claims will not have a material adverse impact on its consolidated results of operations, financial position, or cash flows. Guarantees The Company remains secondarily liable under various real estate leases that were assigned to franchisees who acquired Pet Supplies Plus stores from the Company. In the event of the failure of an acquirer to pay lease payments, the Company could be obligated to pay the remaining lease payments which extend through 2033 and aggregated $8.7 million as of September 25, 2021. If the Company is required to make payments under these guarantees, the Company could seek to recover those amounts from the franchisees or in some cases their affiliates. The Company believes that payment under these guarantees is remote as of September 25, 2021.
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Segments (Notes) |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting Disclosure [Text Block] | (13) Segments The Company's operations are conducted in four reportable business segments: Vitamin Shoppe, American Freight, Pet Supplies Plus and Buddy's. The Company defines its segments as those operations which results its chief operating decision maker ("CODM") regularly reviews to analyze performance and allocate resources. The results of operations of American Freight are included in the Company's results of operations beginning on February 14, 2020 and the results of operations of Pet Supplies Plus are included in the Company's results of operations beginning on March 11, 2021. As a result of the Company's sale of its Liberty Tax business, as discussed in "Note 3. Divestitures," the Company's Liberty Tax business is not reported in segment information since this business is reported as a discontinued operation. Current and prior year amounts have been revised to reflect this change. The Vitamin Shoppe segment is an omni-channel specialty retailer and wellness lifestyle company with the mission of providing customers with the most trusted products, guidance, and services to help them become their best selves, however they define it. The Vitamin Shoppe segment offers a comprehensive assortment of nutritional solutions, including vitamins, minerals, specialty supplements, herbs, sports nutrition, homeopathic remedies, green living products, and natural beauty aids. The Vitamin Shoppe segment consists of our operations under the "Vitamin Shoppe" brand and is headquartered in Secaucus, New Jersey. The American Freight segment provides in-store and online access to purchase new, one-of-a-kind, out-of-box, discontinued, obsolete, reconditioned, overstocked, scratched and dented household appliances and unbranded furniture and mattresses at value prices. The American Freight segment consists of our operations under the "American Freight" banner and is headquartered in Delaware, Ohio. The Pet Supplies Plus segment is a franchisor and retailer in the pet industry. Pet Supplies Plus has a diversified revenue model comprised of corporate store revenue, royalties and wholesale distribution to franchisees. The Pet Supplies Plus segment consists of the Company's operations under the "Pet Supplies Plus" brand and is headquartered in Livonia, Michigan. The Buddy's segment leases and sells electronics, residential furniture, appliances and household accessories. The Buddy's segment consists of the Company's operations under the "Buddy's" brand and is headquartered in Orlando, Florida. Total revenues by segment were as follows:
Operating income (loss) by segment were as follows:
Total assets by segment were as follows:
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Subsequent Event Subsequent Events (Notes) |
3 Months Ended |
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Sep. 25, 2021 | |
Subsequent Events [Abstract] | |
Subsequent Events [Text Block] | Subsequent EventsOn September 27, 2021, the Company completed the acquisition of Sylvan Learning ("Sylvan"), a leading tutoring franchisor for Pre-K-12 students and families in the U.S., valued at approximately $81 million pursuant to a Stock Purchase Agreement, dated as of September 27, 2021, by and among wholly-owned subsidiaries of the Company and Educate Investments, LLC (the "Sylvan Transaction"). The Sylvan Transaction was financed with cash on hand. The Company is in the process of completing the fair value determinations and resulting purchase price allocations. |
Organization and Significant Accounting Policies (Policies) |
3 Months Ended | 9 Months Ended |
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Sep. 25, 2021 |
Sep. 25, 2021 |
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Accounting Policies [Abstract] | ||
Description of Business | (1) Basis of Presentation | |
Basis of Presentation | Unless otherwise stated, references to the "Company," "we," "us," and "our" in this Quarterly Report on Form 10-Q (the "Quarterly Report") refer to Franchise Group, Inc. and its direct and indirect subsidiaries on a consolidated basis. The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and pursuant to the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with Exhibit 99.1 of Form 8-K filed on June 25, 2021, to reflect certain retrospective revisions for discontinued operations and changes in reportable segments in the consolidated financial statements of the Company in its Annual Report on Form 10-K for the year ended December 26, 2020 that was previously filed with the Securities and Exchange Commission (“SEC”) on March 10, 2021 (the “Form 10-K”).In the opinion of management, all adjustments (including those of a normal recurring nature) necessary for a fair presentation of such condensed consolidated financial statements in accordance with GAAP have been recorded. The December 26, 2020 balance sheet information was derived from the audited financial statements as of that date. | |
Discontinued Operations | Discontinued OperationsAs previously disclosed, on February 21, 2021 the Company entered into a purchase agreement (the "Purchase Agreement") to sell its Liberty Tax business to NextPoint Acquisition Corp ("NextPoint"), a special purpose acquisition corporation incorporated under the laws of the Province of British Columbia (the "Transaction"). On July 2, 2021 the Company completed the Transaction and received total consideration of approximately $241.0 million consisting of approximately $181.2 million in cash and approximately $59.7 million in proportionate voting shares of NextPoint recorded as an investment in equity securities in "Other non-current assets" on the Condensed Consolidated Balance Sheet. The transaction resulted in a gain on the sale of $173.7 million recorded in "Income (loss) from discontinued operations, net of tax" on the Condensed Consolidated Statement of Operations. As part of the divestiture, the Company incurred transaction costs of approximately $5.7 million which were paid using shares of NextPoint. As a result of the Transaction, the financial position and results of operations of the Liberty Tax business are presented as discontinued operations and, as such, have been excluded from continuing operations and segment results for all periods presented. The accompanying Notes to the Condensed Consolidated Financial Statements and all prior year balances have been reclassified to conform to this presentation. Please refer to "Note 3. Divestitures" for additional information regarding discontinued operations. | |
New Accounting Pronouncements, Policy | Accounting Pronouncements In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU No. 2016-13, "Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", which changes how companies will measure credit losses for most financial assets and certain other instruments that aren't measured at fair value through net income. The standard replaces the "incurred loss" approach with an "expected loss" model for instruments measured at amortized cost (which generally will result in the earlier recognition of allowances for losses) and requires companies to record allowances for available-for-sale debt securities, rather than reduce the carrying amount. In addition, companies will have to disclose significantly more information, including information used to track credit quality by year of origination, for most financing receivables. The ASU should be applied as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the standard is effective. The ASU is effective for the Company for the fiscal year beginning January 1, 2023. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” This standard eliminates Step 2 from the goodwill impairment test. Instead, an entity should compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The ASU is effective for the Company for the fiscal year beginning January 1, 2023. The Company is currently evaluating the impact of the adoption of this standard to its consolidated financial statements. The London Interbank Offered Rate (“LIBOR”) is scheduled to be discontinued on December 31, 2021. In an effort to address the various challenges created by such discontinuance, the FASB issued an amendment to existing guidance, ASU No. 2020-04, "Reference Rate Reform." The amended guidance is designed to provide relief from the accounting analysis and impacts that may otherwise be required for modifications to agreements (e.g., loans, debt securities, derivatives, borrowings) necessitated by the reference rate reform. It also provides optional expedients to enable companies to continue to apply hedge accounting to certain hedging relationships impacted by the reference rate reform. Application of the guidance in the amendment is optional, is only available in certain situations, and is only available for companies to apply until December 31, 2022. The Company expects no material impact as a result of reference rate reform and the new guidance on its consolidated financial statements.In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes", which amends and simplifies the requirements for income taxes. The ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. The adoption did not result in a material impact to the Company's financial results or disclosures.
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Acquisition (Tables) |
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Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The table below summarizes the unaudited preliminary estimates of the fair values of the identifiable assets acquired and liabilities assumed in the Pet Supplies Plus Acquisition as of March 10, 2021. The preliminary estimates of the fair value of identifiable assets acquired and liabilities assumed are subject to revisions, which may result in an adjustment to the preliminary values presented below. In the nine months ended September 25, 2021, the preliminary estimates of the fair value of identifiable assets acquired and liabilities assumed were adjusted, which resulted in an increase in goodwill of $0.6 million. The increase was primarily due to a $0.5 million increase of franchise fees receivable and $0.1 million of prepaid expenses. The Company expects to complete the purchase price allocation as soon as reasonably possible but not to exceed one year from the date of completion of the Pet Supplies Plus Acquisition.
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Business Acquisition, Pro Forma Information, Nonrecurring Adjustments | The following unaudited consolidated pro forma summary has been prepared by adjusting the Company's historical data to give effect to the Pet Supplies Plus and American Freight acquisitions as if they had occurred on December 28, 2019.
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Divestitures (Tables) |
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Discontinued Operations and Disposal Groups [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disposal Groups, Including Discontinued Operations | The following is a summary of the major categories of assets and liabilities for the Liberty Tax business. The balances for all periods prior to the sale are included in assets and liabilities held for sale in the Condensed Consolidated Balance Sheet.
The following is a Condensed Consolidated Statement of Operations for the Liberty Tax business. The amounts for all periods are included in "Income (loss) from discontinued operations, net of tax" in the Company's Condensed Consolidated Statements of Operations.
The following is the operating and investing activities for the Liberty Tax business. These amounts are included in the Company's Condensed Consolidated Statement of Cash Flows.
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Goodwill and Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill | Changes in the carrying amount of goodwill for the nine months ended September 25, 2021 are as follows:
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Schedule of the amortizable other intangible assets | Components of intangible assets as of September 25, 2021 and December 26, 2020 were as follows:
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Long-Term Obligations (Tables) |
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Schedule of Debt | Long-term obligations at September 25, 2021 and December 26, 2020 were as follows:
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Stockholders' Equity (Tables) |
3 Months Ended | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 25, 2021 |
Sep. 25, 2021 |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block] | The components of accumulated other comprehensive loss, which were from the Company's Liberty Tax business, as of September 25, 2021 and December 26, 2020 were as follows:
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Schedule of computation of basic and diluted net income (loss) per share | The following table sets forth the calculations of basic and diluted net income (loss) per share:
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Stock Compensation Plans (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 25, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of information about stock options outstanding and exercisable | The following table summarizes information about stock options outstanding and exercisable at September 25, 2021:
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Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity | nine months ended September 25, 2021:
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Schedule of stock option activity | Stock option activity during the nine months ended September 25, 2021 was as follows:
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Schedule of nonvested (options that did not vest in the period in which granted) stock option activity | Nonvested stock options activity during the nine months ended September 25, 2021 was as follows:
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Divestitures - Narrative (Details) - USD ($) $ in Thousands, shares in Millions |
9 Months Ended | |||
---|---|---|---|---|
Feb. 21, 2021 |
Sep. 25, 2021 |
Sep. 26, 2020 |
Jul. 02, 2021 |
|
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Gain (Loss) on Disposition of Business | $ 173,699 | $ 0 | ||
Liberty Tax Segment | Discontinued Operations, Held-for-sale | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Disposal Group, Including Discontinued Operation, Consideration | $ 241,000 | |||
Proceeds from Divestiture of Businesses | $ 181,200 | |||
Disposal Group, Including Discontinued Operation, Consideration, Number Of Proportional Voting Shares, Shares (at least) (in shares) | 59.7 | |||
Gain (Loss) on Disposition of Business | $ 173,700 | |||
Business Acquisition, Transaction Costs | $ 5,700 |
Divestitures - Summary of Cash Flow Information (Details) - Discontinued Operations, Held-for-sale - Liberty Tax [Member] - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 25, 2021 |
Sep. 26, 2020 |
|
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Cash flows provided by operating activities from discontinued operations | $ 39,334 | $ 46,709 |
Cash flows provided by investing activities from discontinued operations | $ 173,633 | $ 13,066 |
Accounts and Notes Receivables (Details) - USD ($) $ in Thousands |
Sep. 25, 2021 |
Dec. 26, 2020 |
---|---|---|
Schedule of Activity Related to Notes Receivable | ||
Accounts and Other Receivables, Net, Current | $ 68,837 | $ 38,444 |
Revenue Revenue (Details 1) - USD ($) $ in Thousands |
Sep. 25, 2021 |
Dec. 26, 2020 |
---|---|---|
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Deferred Revenue | $ 35,472 | $ 24,097 |
Income Taxes (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Jul. 10, 2019 |
Dec. 26, 2020 |
|
Tax Receivable Agreement, Payment to Non-controlling Holders | 40.00% | |
CARES Act, Income Tax Benefit [Member] | ||
Current Income Tax Expense (Benefit) | $ 52.3 |
Fair Value of Financial Instruments (Details) $ in Millions |
Sep. 25, 2021
USD ($)
|
---|---|
NextPoint | |
Assets: | |
Equity Securities, FV-NI | $ 40.9 |
Commitments and Contingencies (Details) $ in Millions |
Sep. 25, 2021
USD ($)
|
---|---|
Property Lease Guarantee | |
Commitments and contingencies | |
Loss Contingency, Estimate of Possible Loss | $ 8.7 |
Segments (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 25, 2021 |
Sep. 26, 2020 |
Sep. 25, 2021 |
Sep. 26, 2020 |
Dec. 26, 2020 |
|
Segment Reporting Information [Line Items] | |||||
Operating Income (Loss) | $ 54,763 | $ 24,680 | $ 165,895 | $ 36,612 | |
Goodwill | 787,441 | 787,441 | $ 448,258 | ||
Assets | 2,831,584 | 2,831,584 | 1,749,773 | ||
Revenues | 828,826 | 537,692 | 2,312,929 | 1,538,193 | |
Vitamin Shoppe [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Operating Income (Loss) | 27,792 | 2,849 | 90,830 | (3,214) | |
Goodwill | 1,277 | 1,277 | 1,277 | ||
Assets | 604,501 | 604,501 | 607,148 | ||
Revenues | 300,813 | 266,965 | 898,108 | 780,588 | |
American Freight [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Operating Income (Loss) | 9,574 | 19,940 | 56,659 | 33,949 | |
Goodwill | 371,375 | 371,375 | 367,882 | ||
Assets | 888,410 | 888,410 | 801,731 | ||
Revenues | 223,591 | 245,212 | 750,914 | 682,386 | |
Pet Supplies Plus | |||||
Segment Reporting Information [Line Items] | |||||
Operating Income (Loss) | 18,647 | 0 | 25,056 | 0 | |
Goodwill | 335,690 | 335,690 | 0 | ||
Assets | 942,019 | 942,019 | 0 | ||
Revenues | 286,643 | 0 | 613,712 | 0 | |
Buddy's [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Operating Income (Loss) | 5,991 | 5,302 | 13,630 | 13,985 | |
Goodwill | 79,099 | 79,099 | 79,099 | ||
Assets | 148,533 | 148,533 | 137,698 | ||
Revenues | 17,779 | 25,515 | 50,195 | 75,219 | |
Overhead [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Operating Income (Loss) | (7,241) | (3,411) | (20,280) | (8,108) | |
Operating Segments [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Operating Income (Loss) | 62,004 | $ 28,091 | 186,175 | $ 44,720 | |
Assets | 2,583,463 | 2,583,463 | 1,546,577 | ||
Corporate, Non-Segment [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Assets | $ 248,121 | $ 248,121 | $ 203,196 |
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