(State of incorporation) | (IRS employer identification no.) |
Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||||||
☒ | 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 | ||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
(In thousands, except share count and per share data) | September 24, 2022 | September 25, 2021 | September 24, 2022 | September 25, 2021 | ||||||||||||||||||||||
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 | ||||||||||||||||||||||||||
Goodwill impairment | ||||||||||||||||||||||||||
Total operating expenses | ||||||||||||||||||||||||||
Income (loss) from operations | ( | |||||||||||||||||||||||||
Other expense: | ||||||||||||||||||||||||||
Bargain purchase gain | ||||||||||||||||||||||||||
Gain on sale-leaseback transactions, net | ||||||||||||||||||||||||||
Other, net | ( | ( | ( | ( | ||||||||||||||||||||||
Interest expense, net | ( | ( | ( | ( | ||||||||||||||||||||||
Income (loss) from continuing operations before income taxes | ( | ( | ||||||||||||||||||||||||
Income tax expense (benefit) | ( | ( | ||||||||||||||||||||||||
Income (loss) from continuing operations | ( | ( | ||||||||||||||||||||||||
Income from discontinued operations, net of tax | ||||||||||||||||||||||||||
Net income (loss) attributable to Franchise Group, Inc. | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
Income (loss) per share from continuing operations: | ||||||||||||||||||||||||||
Basic | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
Diluted | ( | ( | ||||||||||||||||||||||||
Net income per share: | ||||||||||||||||||||||||||
Basic | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
Diluted | ( | ( | ||||||||||||||||||||||||
Weighted-average shares outstanding: | ||||||||||||||||||||||||||
Basic | ||||||||||||||||||||||||||
Diluted |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
(In thousands) | September 24, 2022 | September 25, 2021 | September 24, 2022 | September 25, 2021 | ||||||||||||||||||||||
Net income (loss) | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
Other comprehensive income (loss) | ||||||||||||||||||||||||||
Unrealized (gain) loss on interest rate swap agreement, net of taxes of $0, $0, $0, and $13, respectively | ||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||
Comprehensive income (loss) | $ | ( | $ | $ | ( | $ |
(In thousands, except share count and per share data) | September 24, 2022 | December 25, 2021 | ||||||||||||
Assets | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | $ | $ | ||||||||||||
Current receivables, net | ||||||||||||||
Current securitized receivables, net | ||||||||||||||
Inventories, net | ||||||||||||||
Current assets held for sale | ||||||||||||||
Other current assets | ||||||||||||||
Total current assets | ||||||||||||||
Property, plant, and equipment, net | ||||||||||||||
Non-current receivables, net | ||||||||||||||
Non-current securitized receivables, net | ||||||||||||||
Goodwill | ||||||||||||||
Intangible assets, net | ||||||||||||||
Tradenames | ||||||||||||||
Operating lease right-of-use assets | ||||||||||||||
Investment in equity securities | ||||||||||||||
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 | ||||||||||||||
Other current liabilities | ||||||||||||||
Total current liabilities | ||||||||||||||
Long-term obligations, excluding current installments | ||||||||||||||
Non-current operating lease liabilities | ||||||||||||||
Other non-current liabilities | ||||||||||||||
Total liabilities | ||||||||||||||
Stockholders' equity: | ||||||||||||||
Common stock, $ | ||||||||||||||
Preferred stock, $ | ||||||||||||||
Additional paid-in capital | ||||||||||||||
Retained earnings | ||||||||||||||
Total equity | ||||||||||||||
Total liabilities and equity | $ | $ |
Three Months Ended September 24, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||
(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 25, 2022 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense, net | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
Common dividend declared ($0.625 per share) | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Preferred dividend declared ($0.469 per share) | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Repurchase of common stock | ( | ( | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||
Balance at September 24, 2022 | $ | $ | $ | $ | $ | $ |
Nine Months Ended September 24, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||
(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 25, 2021 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense, net | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
Common dividend declared ($0.625 per share) | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Preferred dividend declared ($0.469 per share) | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Repurchase of stock | ( | ( | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||
Balance at September 24, 2022 | $ | $ | $ | $ | $ | $ |
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 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense, net | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
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 | $ | $ | $ | $ | $ | $ |
Nine Months Ended | ||||||||||||||
(In thousands) | September 24, 2022 | September 25, 2021 | ||||||||||||
Operating Activities | ||||||||||||||
Net income (loss) | $ | ( | $ | |||||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||||||||
Provision for doubtful accounts | ||||||||||||||
Goodwill impairment | ||||||||||||||
Depreciation, amortization, and impairment charges | ||||||||||||||
Amortization of deferred financing costs and prepayment penalties | ||||||||||||||
Amortization of securitized debt discount | ||||||||||||||
Stock-based compensation expense | ||||||||||||||
Change in fair value of investment | ( | |||||||||||||
Gain on sale-leaseback, bargain purchases, and sales of Company-owned stores, net | ( | ( | ||||||||||||
Other non-cash items | ( | ( | ||||||||||||
Changes in operating assets and liabilities | ( | ( | ||||||||||||
Net cash provided by (used in) operating activities | ( | |||||||||||||
Investing Activities | ||||||||||||||
Purchases of property, plant, and equipment | ( | ( | ||||||||||||
Proceeds from sale of property, plant, and equipment | ||||||||||||||
Acquisition of business, net of cash and restricted cash acquired | ( | ( | ||||||||||||
Divestiture of business, net of cash and restricted cash sold | ||||||||||||||
Issuance of operating loans to franchisees | ( | |||||||||||||
Payments received on operating loans to franchisees | ||||||||||||||
Net cash provided by (used in) investing activities | ( | |||||||||||||
Financing Activities | ||||||||||||||
Dividends paid | ( | ( | ||||||||||||
Issuance of long-term debt and other obligations | ||||||||||||||
Repayment of long-term debt and other obligations | ( | ( | ||||||||||||
Issuance of common stock | ||||||||||||||
Issuance of preferred stock | ||||||||||||||
Payments for repurchase of common stock | ( | |||||||||||||
Principal payments of finance lease obligations | ( | |||||||||||||
Payment for debt issue costs and prepayment penalty on extinguishment | ( | ( | ||||||||||||
Other stock compensation transactions | ( | ( | ||||||||||||
Net cash provided by (used in) financing activities | ( | |||||||||||||
Effect of exchange rate changes on cash, net | ||||||||||||||
Net increase (decrease) 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 | ||||||||||||||
Capital expenditures funded by finance lease liabilities | ||||||||||||||
(In thousands) | September 24, 2022 | September 25, 2021 | ||||||||||||
Cash and cash equivalents | $ | $ | ||||||||||||
Restricted cash included in other non-current assets | ||||||||||||||
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows | $ | $ |
(In thousands) | Preliminary November 22, 2021 | |||||||
Cash and cash equivalents | $ | |||||||
Inventories, net | ||||||||
Accounts receivable | ||||||||
Other current assets | ||||||||
Property, plant, and equipment | ||||||||
Operating lease right-of-use assets | ||||||||
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 | ||||||||
Bargain purchase gain | ( | |||||||
Consideration transferred | $ |
(In thousands) | September 27, 2021 | |||||||
Cash and cash equivalents | $ | |||||||
Other current assets | ||||||||
Property, plant, and equipment | ||||||||
Goodwill | ||||||||
Tradenames | ||||||||
Operating lease right-of-use assets | ||||||||
Other intangible assets | ||||||||
Other non-current assets | ||||||||
Total assets | ||||||||
Current operating lease liabilities | ||||||||
Accounts payable and accrued expenses | ||||||||
Non-current operating lease liabilities | ||||||||
Other long-term liabilities | ||||||||
Total liabilities | ||||||||
Consideration transferred | $ |
Pro forma (Unaudited) | ||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
(In thousands) | September 24, 2022 | September 25, 2021 | September 24, 2022 | September 25, 2021 | ||||||||||||||||||||||
Revenue | $ | $ | $ | $ | ||||||||||||||||||||||
Net income (loss) | ( | ( | ||||||||||||||||||||||||
Basic net income (loss) per share | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
Diluted net income (loss) per share | $ | ( | $ | $ | ( | $ |
Three Months Ended | Nine Months Ended | |||||||||||||
(In thousands) | September 25, 2021 | September 25, 2021 | ||||||||||||
Revenue | $ | $ | ||||||||||||
Selling, general, and administrative expenses | ||||||||||||||
Income from operations | ( | |||||||||||||
Other expense: | ||||||||||||||
Gain on sale of discontinued operations | ||||||||||||||
Other | ( | |||||||||||||
Interest expense, net | ( | ( | ||||||||||||
Income before income taxes | ||||||||||||||
Income tax expense | ||||||||||||||
Net income attributable to discontinued operations | $ | $ |
Nine Months Ended | ||||||||
(In thousands) | September 25, 2021 | |||||||
Cash flows provided by operating activities from discontinued operations | $ | |||||||
Cash flows provided by investing activities from discontinued operations | $ |
(In thousands) | September 24, 2022 | December 25, 2021 | ||||||||||||
Accounts receivable | $ | $ | ||||||||||||
Notes receivable | ||||||||||||||
Income tax receivable | ||||||||||||||
Allowance for doubtful accounts | ( | ( | ||||||||||||
Current receivables, net | ||||||||||||||
Notes receivable, non-current | ||||||||||||||
Allowance for doubtful accounts, non-current | ( | ( | ||||||||||||
Non-current receivables, net | ||||||||||||||
Total receivables | $ | $ |
Vitamin Shoppe | Pet Supplies Plus | American Freight | Buddy's | Sylvan | Total | |||||||||||||||||||||||||||||||||
Balance as of December 25, 2021 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
Acquisitions | ||||||||||||||||||||||||||||||||||||||
Goodwill impairment | ( | ( | ||||||||||||||||||||||||||||||||||||
Disposals and purchase accounting adjustments | ( | ( | ( | |||||||||||||||||||||||||||||||||||
Balance as of September 24, 2022 | $ | $ | $ | $ | $ | $ |
September 24, 2022 | ||||||||||||||||||||
(In thousands) | Gross carrying amount | Accumulated amortization | Net carrying amount | |||||||||||||||||
Indefinite lived tradenames | $ | $ | — | $ | ||||||||||||||||
Intangible assets | ||||||||||||||||||||
Franchise and dealer agreements | $ | $ | ( | $ | ||||||||||||||||
Customer contracts | ( | |||||||||||||||||||
Other intangible assets | ( | |||||||||||||||||||
Total intangible assets | $ | $ | ( | $ |
December 25, 2021 | ||||||||||||||||||||
(In thousands) | Gross carrying amount | Accumulated amortization | Net carrying amount | |||||||||||||||||
Indefinite lived tradenames | $ | $ | — | $ | ||||||||||||||||
Intangible assets | ||||||||||||||||||||
Franchise and dealer agreements | $ | $ | ( | $ | ||||||||||||||||
Customer contracts | ( | |||||||||||||||||||
Other intangible assets | ( | |||||||||||||||||||
Total intangible assets | $ | $ | ( | $ |
Three Months Ended | |||||||||||||||||||||||||||||||||||||||||
September 24, 2022 | |||||||||||||||||||||||||||||||||||||||||
(In thousands) | Vitamin Shoppe | Pet Supplies Plus | Badcock | American Freight | Buddy's | Sylvan | Consolidated | ||||||||||||||||||||||||||||||||||
Retail sales | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
Wholesale sales | |||||||||||||||||||||||||||||||||||||||||
Total product revenue | |||||||||||||||||||||||||||||||||||||||||
Royalties and other franchise based fees | |||||||||||||||||||||||||||||||||||||||||
Financing revenue | |||||||||||||||||||||||||||||||||||||||||
Interest income | |||||||||||||||||||||||||||||||||||||||||
Warranty revenue | |||||||||||||||||||||||||||||||||||||||||
Other revenues | |||||||||||||||||||||||||||||||||||||||||
Total service revenue | |||||||||||||||||||||||||||||||||||||||||
Rental revenue, net | |||||||||||||||||||||||||||||||||||||||||
Total rental revenue | |||||||||||||||||||||||||||||||||||||||||
Total revenue | $ | $ | $ | $ | $ | $ | $ |
Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||
September 24, 2022 | |||||||||||||||||||||||||||||||||||||||||
(In thousands) | Vitamin Shoppe | Pet Supplies Plus | Badcock | American Freight | Buddy's | Sylvan | Consolidated | ||||||||||||||||||||||||||||||||||
Retail sales | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
Wholesale sales | |||||||||||||||||||||||||||||||||||||||||
Total product revenue | |||||||||||||||||||||||||||||||||||||||||
Royalties and other franchise based fees | |||||||||||||||||||||||||||||||||||||||||
Financing revenue | |||||||||||||||||||||||||||||||||||||||||
Interest income | |||||||||||||||||||||||||||||||||||||||||
Warranty revenue | |||||||||||||||||||||||||||||||||||||||||
Other revenues | |||||||||||||||||||||||||||||||||||||||||
Total service revenue | |||||||||||||||||||||||||||||||||||||||||
Rental revenue, net | |||||||||||||||||||||||||||||||||||||||||
Total rental revenue | |||||||||||||||||||||||||||||||||||||||||
Total revenue | $ | $ | $ | $ | $ | $ | $ |
Three Months Ended | ||||||||||||||||||||||||||||||||
September 25, 2021 | ||||||||||||||||||||||||||||||||
(In thousands) | Vitamin Shoppe | Pet Supplies Plus | American Freight | Buddy's | Consolidated | |||||||||||||||||||||||||||
Retail sales | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Wholesale sales | — | — | ||||||||||||||||||||||||||||||
Total product revenue | ||||||||||||||||||||||||||||||||
Royalties and other franchise based fees | ||||||||||||||||||||||||||||||||
Financing revenue | — | — | — | |||||||||||||||||||||||||||||
Interest income | — | — | ||||||||||||||||||||||||||||||
Warranty revenue | — | — | ||||||||||||||||||||||||||||||
Other revenues | ||||||||||||||||||||||||||||||||
Total service revenue | ||||||||||||||||||||||||||||||||
Rental revenue, net | ||||||||||||||||||||||||||||||||
Total rental revenue | ||||||||||||||||||||||||||||||||
Total revenue | $ | $ | $ | $ | $ |
Nine Months Ended | ||||||||||||||||||||||||||||||||
September 25, 2021 | ||||||||||||||||||||||||||||||||
(In thousands) | Vitamin Shoppe | Pet Supplies Plus † | American Freight | Buddy's | Consolidated | |||||||||||||||||||||||||||
Retail sales | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Wholesale sales | — | — | ||||||||||||||||||||||||||||||
Total product revenue | ||||||||||||||||||||||||||||||||
Royalties and other franchise based fees | ||||||||||||||||||||||||||||||||
Financing revenue | — | — | — | |||||||||||||||||||||||||||||
Interest income | — | — | ||||||||||||||||||||||||||||||
Warranty and damage revenue | — | — | ||||||||||||||||||||||||||||||
Other revenues | ||||||||||||||||||||||||||||||||
Total service revenue | ||||||||||||||||||||||||||||||||
Rental revenue, net | ||||||||||||||||||||||||||||||||
Total rental revenue | ||||||||||||||||||||||||||||||||
Total revenue | $ | $ | $ | $ | $ |
(In thousands) | September 24, 2022 | December 25, 2021 | ||||||||||||
Accounts receivable | $ | $ | ||||||||||||
Notes receivable | ||||||||||||||
Customer deposits | $ | $ | ||||||||||||
Gift cards and loyalty programs | ||||||||||||||
Deferred franchise fee revenue | ||||||||||||||
Other deferred revenue | ||||||||||||||
Total deferred revenue | $ | $ |
(In thousands) | September 24, 2022 | December 25, 2021 | ||||||||||||
Term loans, net of debt issuance costs | ||||||||||||||
First lien term loan, due March 10, 2026 | $ | $ | ||||||||||||
Second lien term loan, due September 10, 2026 | ||||||||||||||
Badcock first lien term loan, due November 22, 2023 | ||||||||||||||
Badcock second lien term loan, due November 22, 2023 | ||||||||||||||
Total term loans, net of debt issuance costs | ||||||||||||||
Revolving credit facilities | ||||||||||||||
Debt securitized by accounts receivable, net of discount | ||||||||||||||
Other long-term obligations | ||||||||||||||
Finance lease liabilities | ||||||||||||||
Total long-term obligations | ||||||||||||||
Less current installments | ||||||||||||||
Total long-term obligations, net | $ | $ |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
(In thousands, except for share and per share amounts) | September 24, 2022 | September 25, 2021 | September 24, 2022 | September 25, 2021 | ||||||||||||||||||||||
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 RSUs | Weighted average fair value at grant date | |||||||||||||
Balance as of December 25, 2021 | $ | |||||||||||||
Granted | ||||||||||||||
Vested | ( | |||||||||||||
Canceled | ||||||||||||||
Balance as of September 24, 2022 | $ |
Number of PRSUs | Weighted average fair value at grant date | |||||||||||||
Balance as of December 25, 2021 | $ | |||||||||||||
Granted | ||||||||||||||
Vested | ||||||||||||||
Canceled | ||||||||||||||
Balance as of September 24, 2022 | $ |
Number of MPRSUs | Weighted average fair value at grant date | |||||||||||||
Balance as of December 25, 2021 | $ | |||||||||||||
Granted | ||||||||||||||
Vested | ||||||||||||||
Canceled | ( | |||||||||||||
Balance as of September 24, 2022 | $ |
Options Outstanding and Exercisable | ||||||||||||||||||||
Range of exercise prices | Number | Weighted average exercise price | Weighted average remaining contractual life (in years) | |||||||||||||||||
$0.00 - $10.89 | $ | |||||||||||||||||||
$10.90 - $12.01 | ||||||||||||||||||||
$ |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
(In thousands) | September 24, 2022 | September 25, 2021 | September 24, 2022 | September 25, 2021 | ||||||||||||||||||||||
Income (loss) from operations: | ||||||||||||||||||||||||||
Vitamin Shoppe | $ | $ | $ | $ | ||||||||||||||||||||||
Pet Supplies Plus | ||||||||||||||||||||||||||
Badcock | ||||||||||||||||||||||||||
American Freight | ( | ( | ||||||||||||||||||||||||
Buddy's | ||||||||||||||||||||||||||
Sylvan | ||||||||||||||||||||||||||
Total Segments | ( | |||||||||||||||||||||||||
Corporate | ( | ( | ( | ( | ||||||||||||||||||||||
Consolidated income (loss) from operations | $ | ( | $ | $ | $ |
(In thousands) | September 24, 2022 | December 25, 2021 | ||||||||||||
Total assets: | ||||||||||||||
Vitamin Shoppe | $ | $ | ||||||||||||
Pet Supplies Plus | ||||||||||||||
Badcock | ||||||||||||||
American Freight | ||||||||||||||
Buddy's | ||||||||||||||
Sylvan | ||||||||||||||
Total Segments | ||||||||||||||
Corporate | ||||||||||||||
Consolidated total assets | $ | $ |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | September 24, 2022 | September 25, 2021 | $ | % | September 24, 2022 | September 25, 2021 | $ | % | ||||||||||||||||||||||||||||||||||||||||||
Total revenues | $ | 1,051,476 | $ | 828,826 | $ | 222,650 | 26.9 | % | $ | 3,281,943 | $ | 2,312,929 | $ | 969,014 | 41.9 | % | ||||||||||||||||||||||||||||||||||
Income from operations | (26,007) | 54,763 | (80,770) | (147.5) | % | 181,464 | 165,895 | 15,569 | 9.4 | % | ||||||||||||||||||||||||||||||||||||||||
Net income | $ | (121,163) | $ | 35,998 | $ | (157,161) | (436.6) | % | $ | (67,862) | $ | 40,185 | $ | (108,047) | (268.9) | % |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | September 24, 2022 | September 25, 2021 | $ | % | September 24, 2022 | September 25, 2021 | $ | % | ||||||||||||||||||||||||||||||||||||||||||
Product | $ | 922,887 | $ | 782,608 | $ | 140,279 | 17.9 | % | $ | 2,854,060 | $ | 2,172,193 | $ | 681,867 | 31.4 | % | ||||||||||||||||||||||||||||||||||
Service and other | 121,738 | 37,891 | 83,847 | 221.3 | % | 405,666 | 114,659 | 291,007 | 253.8 | % | ||||||||||||||||||||||||||||||||||||||||
Rental | 6,851 | 8,327 | (1,476) | (17.7) | % | 22,217 | 26,077 | (3,860) | (14.8) | % | ||||||||||||||||||||||||||||||||||||||||
Total revenue | $ | 1,051,476 | $ | 828,826 | $ | 222,650 | 26.9 | % | $ | 3,281,943 | $ | 2,312,929 | $ | 969,014 | 41.9 | % |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | September 24, 2022 | September 25, 2021 | $ | % | September 24, 2022 | September 25, 2021 | $ | % | ||||||||||||||||||||||||||||||||||||||||||
Cost of revenue: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Product | $ | 604,969 | $ | 485,682 | $ | 119,287 | 24.6 | % | $ | 1,822,334 | $ | 1,347,673 | $ | 474,661 | 35.2 | % | ||||||||||||||||||||||||||||||||||
Service and other | 8,878 | 8,737 | 141 | 1.6 | % | 26,273 | 10,076 | 16,197 | 160.7 | % | ||||||||||||||||||||||||||||||||||||||||
Rental | 2,637 | 2,930 | (293) | (10.0) | % | 8,239 | 8,869 | (630) | (7.1) | % | ||||||||||||||||||||||||||||||||||||||||
Total cost of revenue | 616,484 | 497,349 | 119,135 | 24.0 | % | 1,856,846 | 1,366,618 | 490,228 | 35.9 | % | ||||||||||||||||||||||||||||||||||||||||
Selling, general, and administrative expenses | 390,999 | 276,714 | 114,285 | 41.3 | % | 1,173,633 | 780,416 | 393,217 | 50.4 | % | ||||||||||||||||||||||||||||||||||||||||
Goodwill impairment | 70,000 | — | 70,000 | — | % | 70,000 | — | 70,000 | — | % | ||||||||||||||||||||||||||||||||||||||||
Total operating expenses | $ | 1,077,483 | $ | 774,063 | $ | 303,420 | 39.2 | % | $ | 3,100,479 | $ | 2,147,034 | $ | 953,445 | 44.4 | % |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | September 24, 2022 | September 25, 2021 | $ | % | September 24, 2022 | September 25, 2021 | $ | % | ||||||||||||||||||||||||||||||||||||||||||
Total revenues | $ | 296,152 | $ | 300,813 | $ | (4,661) | (1.5) | % | $ | 914,003 | $ | 898,108 | $ | 15,895 | 1.8 | % | ||||||||||||||||||||||||||||||||||
Operating expenses | 270,687 | 273,021 | (2,334) | (0.9) | % | 822,167 | 807,278 | 14,889 | 1.8 | % | ||||||||||||||||||||||||||||||||||||||||
Segment income | $ | 25,465 | $ | 27,792 | $ | (2,327) | (8.4) | % | $ | 91,836 | $ | 90,830 | $ | 1,006 | 1.1 | % |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | September 24, 2022 | September 25, 2021 | $ | % | September 24, 2022 | September 25, 2021 | $ | % | ||||||||||||||||||||||||||||||||||||||||||
Total revenues | $ | 199,316 | $ | 223,591 | $ | (24,275) | (10.9) | % | $ | 667,157 | $ | 750,914 | $ | (83,757) | (11.2) | % | ||||||||||||||||||||||||||||||||||
Operating expenses | 277,219 | 214,017 | 63,202 | 29.5 | % | 728,818 | 694,255 | 34,563 | 5.0 | % | ||||||||||||||||||||||||||||||||||||||||
Segment income | (77,903) | 9,574 | (87,477) | (913.7) | % | (61,661) | 56,659 | (118,320) | (208.8) | % |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | September 24, 2022 | September 25, 2021 | $ | % | September 24, 2022 | September 25, 2021 | $ | % | ||||||||||||||||||||||||||||||||||||||||||
Total revenues | $ | 13,160 | $ | 17,779 | $ | (4,619) | (26.0) | % | $ | 42,875 | $ | 50,195 | $ | (7,320) | (14.6) | % | ||||||||||||||||||||||||||||||||||
Operating expenses | 11,364 | 11,788 | (424) | (3.6) | % | 33,452 | 36,565 | (3,113) | (8.5) | % | ||||||||||||||||||||||||||||||||||||||||
Segment income | 1,796 | 5,991 | (4,195) | (70.0) | % | 9,423 | 13,630 | (4,207) | (30.9) | % |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | September 24, 2022 | September 25, 2021 | $ | % | September 24, 2022 | September 25, 2021 | $ | % | ||||||||||||||||||||||||||||||||||||||||||
Total revenues | $ | 323,026 | $ | 286,643 | $ | 36,383 | 12.7 | % | $ | 926,973 | $ | 613,712 | $ | 313,261 | 51.0 | % | ||||||||||||||||||||||||||||||||||
Operating expenses | 303,560 | 267,996 | 35,564 | 13.3 | % | 871,831 | 588,656 | 283,175 | 48.1 | % | ||||||||||||||||||||||||||||||||||||||||
Segment income | 19,466 | 18,647 | 819 | 4.4 | % | 55,142 | 25,056 | 30,086 | 120.1 | % |
Reconciliation of Net Income to Adjusted EBITDA | ||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
(In thousands) | September 24, 2022 | September 25, 2021 | September 24, 2022 | September 25, 2021 | ||||||||||||||||||||||
Net income from continuing operations | $ | (121,163) | $ | 35,998 | $ | (67,862) | $ | 40,185 | ||||||||||||||||||
Add back: | ||||||||||||||||||||||||||
Interest expense | 61,236 | 21,194 | 242,402 | 91,494 | ||||||||||||||||||||||
Income tax expense (benefit) | 32,013 | (15,519) | 49,263 | (15,600) | ||||||||||||||||||||||
Depreciation and amortization charges | 19,877 | 17,834 | 61,465 | 46,407 | ||||||||||||||||||||||
Total Adjustments | 113,126 | 23,509 | 353,130 | 122,301 | ||||||||||||||||||||||
EBITDA | (8,037) | 59,507 | 285,268 | 162,486 | ||||||||||||||||||||||
Adjustments to EBITDA | ||||||||||||||||||||||||||
Executive severance and related costs | 597 | 10 | 853 | 19 | ||||||||||||||||||||||
Stock-based and long term executive compensation | 4,847 | 4,578 | 19,515 | 10,663 | ||||||||||||||||||||||
Litigation costs and settlements | (35) | — | (75) | — | ||||||||||||||||||||||
Corporate compliance costs | 528 | 6 | 579 | 785 | ||||||||||||||||||||||
Store closures | 153 | 2,991 | 1,239 | 3,213 | ||||||||||||||||||||||
W.S. Badcock financing operations | 1,358 | — | (56,441) | — | ||||||||||||||||||||||
Prepayment penalty on early debt repayment | — | — | — | 36,726 | ||||||||||||||||||||||
Right-of-use and long-term asset impairment | 90 | — | 738 | — | ||||||||||||||||||||||
Goodwill impairment | 70,000 | — | 70,000 | — | ||||||||||||||||||||||
Integration costs | 244 | 726 | 772 | 8,542 | ||||||||||||||||||||||
Gain on sale-leaseback and owned properties, net | (9,371) | (2,481) | (61,548) | (2,481) | ||||||||||||||||||||||
Divestiture costs | 585 | 135 | 3,014 | 2,794 | ||||||||||||||||||||||
Acquisition costs | 835 | 2,196 | 6,237 | 15,845 | ||||||||||||||||||||||
Loss on investment in equity securities | 11,282 | 13,175 | 22,146 | 13,175 | ||||||||||||||||||||||
Acquisition bargain purchase gain | — | — | (3,514) | — | ||||||||||||||||||||||
Total Adjustments to EBITDA | 81,113 | 21,336 | 3,515 | 89,281 | ||||||||||||||||||||||
Adjusted EBITDA | $ | 73,076 | $ | 80,843 | $ | 288,783 | $ | 251,767 |
Fiscal Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of the stock repurchase program | Approximate dollar value of shares that may yet be purchased under the program (in millions) | ||||||||||||||||||||||
June 26, 2022 - July 23, 2022 | — | $ | — | — | $ | 500.0 | ||||||||||||||||||||
July 24, 2022 - August 20, 2022 | 831,488 | 34.03 | 831,488 | 471.7 | ||||||||||||||||||||||
August 21, 2022 - September 24, 2022 | 1,395,712 | 35.53 | 1,395,712 | 422.1 | ||||||||||||||||||||||
Total | $ | 34.97 | 2,227,200 | $ | 422.1 |
Exhibit Number | Exhibit Description | Filed Herewith | Incorporated by Reference | |||||||||||||||||
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Third Amendment to the Third Amended and Restated Loan and Security Agreement by and among the ABL Loan Parties, the lenders and issuing bank from time to time party thereto, and JPMorgan Chase Bank, N.A., as agent (incorporated by reference to Exhibit 10.1 to Form 8-K, File No. 001-35588 filed on August 23, 2022) | X | |||||||||||||||||||
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101 | The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 24, 2022, 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 24, 2022, formatted in Inline XBRL (included with Exhibit 101) | X |
*All schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company will furnish the omitted disclosure schedules to the SEC upon request by the SEC; provided, however, that the Company reserves the right to request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedule or exhibit so furnished. |
FRANCHISE GROUP, INC. (Registrant) | |||||||||||
November 3, 2022 | By: | /s/ Brian R. Kahn | |||||||||
Brian R. Kahn Chief Executive Officer and Director (Principal Executive Officer) | |||||||||||
November 3, 2022 | By: | /s/ Eric F. Seeton | |||||||||
Eric F. Seeton Chief Financial Officer (Principal Financial and Accounting Officer) |
November 3, 2022 | By: | /s/ Brian R. Kahn | ||||||
Brian R. Kahn | ||||||||
Chief Executive Officer | ||||||||
(Principal Executive Officer) |
November 3, 2022 | By: | /s/ Eric F. Seeton | ||||||
Eric F. Seeton | ||||||||
Chief Financial Officer | ||||||||
(Principal Financial Officer) |
November 3, 2022 | By: | /s/ Brian R. Kahn | ||||||
Brian R. Kahn | ||||||||
Chief Executive Officer | ||||||||
(Principal Executive Officer) |
November 3, 2022 | By: | /s/ Eric F. Seeton | ||||||
Eric F. Seeton | ||||||||
Chief Financial Officer | ||||||||
(Principal Financial Officer) |
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 24, 2022 |
Sep. 25, 2021 |
Sep. 24, 2022 |
Sep. 25, 2021 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ (121,163) | $ 164,070 | $ (67,862) | $ 216,619 |
Unrealized (gain) loss on interest rate swap agreement, net of taxes of $0, $0, $0, and $13, respectively | 0 | 0 | 0 | 45 |
Foreign currency translation adjustment | 0 | 0 | 0 | (381) |
Forward contracts related to foreign currency exchange rates | 0 | 0 | 0 | 0 |
Other comprehensive income | 0 | 973 | 0 | 1,399 |
Comprehensive income (loss) | $ (121,163) | $ 165,043 | $ (67,862) | $ 218,018 |
Condensed Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended |
---|---|---|
Sep. 25, 2021 |
Sep. 25, 2021 |
|
Statement of Comprehensive Income [Abstract] | ||
Other Adjustments to Income, Discontinued Operations | $ 973 | $ 973 |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Sep. 24, 2022 |
Dec. 25, 2021 |
---|---|---|
Finite-Lived Intangible Assets, Accumulated Amortization | $ 21,132 | $ 12,164 |
Preferred Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
Preferred Stock, Shares Authorized | 20,000,000 | |
Preferred Stock, Shares Issued | 4,541,125 | 4,541,125 |
Class A common stock | ||
Common Stock, Value, Issued | $ 382 | $ 403 |
Common Stock [Member] | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares issued | 38,162,700 | 40,296,688 |
Common Stock, Shares Authorized | 180,000,000 | |
Common Stock, Shares, Outstanding | 38,162,700 | 40,296,688 |
Organization and Significant Accounting Policies |
3 Months Ended |
---|---|
Sep. 24, 2022 | |
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 (this "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 the Company's Form 10-K for the year ended December 25, 2021 that was filed with the Securities and Exchange Commission (“SEC”) on February 23, 2022 (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 25, 2021 balance sheet information was derived from the audited financial statements as of that date. Repurchases of Common Stock The Company's repurchases shares of its common stock through open market transactions. During the nine months ended September 24, 2022, all purchases of common stock under the Company's stock repurchase program were made at prices that exceeded the par value of the repurchased common stock, and the portions of the purchase prices that exceeded par value were charged to additional paid-in capital to the extent that an excess was present. Once additional paid-in capital is fully depleted, remaining excess of cost over par value is charged to retained earnings. Refer to “Note 10. Equity & Stock Compensation Plans” in this Quarterly Report for additional information regarding share repurchases. 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 Company early adopted the ASU in the quarter ended September 24, 2022. Refer to "Note 5. Goodwill and Intangible Assets" for the calculation of the Company's impairment test after the adoption of ASU 2017-04. The London Interbank Offered Rate ("LIBOR") is scheduled to be discontinued on June 30, 2023. 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 option expedients to enable companies to continue to apply hedge accounting to certain hedging relationships impacted by the reference rate reform. As further described in "Note 7. Long-Term Obligations", the Company entered into an amendment to a debt agreement which changed the reference rate from LIBOR to Secured Overnight Financing Rate ("SOFR"). The adoption of ASU 2020-04 did not result in a material impact to the Company's financial results or disclosures.
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Acquisitions |
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Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | (2) Acquisitions The Company continually looks to diversify and grow its portfolio of brands through acquisitions. On September 27, 2021, the Company completed its acquisition (the "Sylvan Acquisition") of Sylvan Learning ("Sylvan"), and on November 22, 2021, the Company completed its acquisition (the "Badcock Acquisition" and, together with the Sylvan Acquisition "the “Acquisitions”) of W.S. Badcock Corporation ("Badcock"). Badcock Acquisition On November 22, 2021, the Company completed the Badcock Acquisition. The preliminary fair value of the consideration transferred at the acquisition date was $548.8 million. For the nine months ended September 24, 2022, $0.8 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 Badcock Acquisition on November 22, 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 24, 2022, the preliminary estimates of the fair value of identifiable assets acquired and liabilities assumed were adjusted, which resulted in an increase to the bargain purchase gain of $3.5 million. The increase was primarily due to the valuation of the property, plant, and equipment partially offset by an increase in other long-term liabilities for deferred taxes. 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 Badcock Acquisition.
Operating lease right-of-use assets of $55.6 million and operating and lease liabilities of $51.7 million, consist of leases for retail store locations, warehouses and office equipment. Property, plant, and equipment consists of fixtures and equipment of $93.0 million, buildings and building improvements of $98.0 million, land and land improvements of $33.4 million, leasehold improvements of $23.7 million, and construction in progress of $1.4 million. During the nine months ended September 24, 2022, the preliminary estimates of the fair value of identifiable assets acquired and liabilities assumed were adjusted, which resulted in a $3.5 million increase to the bargain purchase gain for a cumulative bargain purchase gain of $135.6 million. The adjustment is classified as "Bargain purchase gain" on the Consolidated Statements of Operations. The Company believes the seller in the Badcock Acquisition was willing to accept a bargain purchase price in return for the Company's ability to act more quickly, partially due to the Company's access to capital to complete the transaction, and with greater certainty than any other prospective acquirer. Additionally, the Company believes the seller in the Badcock Acquisition was motivated to complete the transaction as part of an overall repositioning of its business. Upon completion of this reassessment, the Company concluded that recording a bargain purchase gain with respect to the Badcock Acquisition was appropriate and required under GAAP. The tax impact related to the bargain purchase gain was non-taxable and impacted the Company's effective tax rate for the period. Sylvan Acquisition On September 27, 2021, the Company completed the Sylvan Acquisition. The fair value of the consideration transferred at the acquisition date was $82.9 million. The table below summarizes the fair values of the identifiable assets acquired and liabilities assumed in the Sylvan Acquisition on September 27, 2021.
Other intangible assets consists of the franchise agreements of $18.3 million and proprietary content of $1.1 million. Property, plant and equipment consists of fixtures and equipment of $0.3 million, leasehold improvements of $0.7 million, and software and electronic content of $25.3 million. 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. None of the acquired goodwill is deductible for tax purposes. Pet Supplies Plus Acquisition On March 10, 2021, the Company completed its acquisition of Pet Supplies Plus. 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. All of the acquired goodwill is deductible for tax purposes. Wag N' Wash Acquisition On February 22, 2022, the Company's Pet Supplies Plus segment completed the acquisition of Wag N' Wash, an emerging natural pet food, self-wash, and grooming franchise, for an all cash purchase price of $0.9 million, and five of the Wag N' Wash stores were subsequently sold to a franchisee for $0.6 million. The components of the purchase price allocation are not presented herein due to the immateriality of the transaction to the Company overall. 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 Acquisitions as if they had occurred on January 1, 2020.
These unaudited pro forma results include adjustments such as inventory step-up, amortization of acquired intangible assets, depreciation of acquired property, equipment, and software and interest expense on debt financing in connection with the Acquisitions. Material, nonrecurring pro forma adjustments directly attributable to the Acquisitions include: •Acquired inventory step-up to its fair value of $2.3 million is assumed to be recorded in the first quarter of 2020 and therefore removed from the nine months ended September 25, 2021. •Acquisition transaction related costs of $4.9 million that were incurred during the nine months ended September 25, 2021 are assumed to have occurred on the pro forma close date of January 1, 2020, and recognized as if incurred in the first quarter of 2020. 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 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 Acquisitions, 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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Divestitures |
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sale Leaseback Transactions | Divestitures Liberty Tax Divestiture On July 2, 2021, the Company completed the sale of its Liberty Tax business (the "Liberty Transaction") to NextPoint Acquisition Corp. ("NextPoint") and received total consideration of approximately $255.3 million, consisting of approximately $181.2 million in cash and approximately $74.1 million in proportionate voting shares of NextPoint recorded as an investment in equity securities in "Investment in equity securities" on the Condensed Consolidated Balance Sheets. As a result of the Liberty 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 the three and nine months ended September 25, 2021. The following is a Condensed Consolidated Statement of Operations for the Liberty Tax business. The amounts 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.
Assets Held for Sale As of September 24, 2022, the Company's Badcock segment was negotiating sale transactions for certain non-operating properties that it expects to sell within one year. The net book value of the properties of $8.8 million is classified as "Current assets held for sale" on the Condensed Consolidated Balance Sheets. Sale-Leaseback Transactions In the nine months ended September 24, 2022, the Company's Badcock segment sold a number of its retail locations, distribution centers, and its corporate headquarters for a total of $265.8 million, resulting in a net gain of $59.2 million, comprised of $64.7 million of gains and $5.5 million of losses. The corporate headquarters was sold in the three months ended September 24, 2022 for a total of $23.5 million, resulting in a net gain of $9.4 million, comprised of $10.6 million in gains and $1.2 million in losses. Contemporaneously with these sales, the Company entered into lease agreements pursuant to which the Company leased back the retail locations, distribution centers, and corporate headquarters, all of which are being accounted for as operating leases. The net gain has been recognized as "Gain on sale-leaseback transactions" on the Consolidated Statements of Operations for the three and nine months ended September 24, 2022.
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Goodwill and Intangible Assets |
9 Months Ended |
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Sep. 24, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
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. As part of the annual impairment test as of July 2022, the Company updated its long-term forecasts based on the operating results in 2022 and the current macro-economic environment. This resulted in the American Freight reporting unit fair value being lower than the carrying value resulting in a $70.0 million non-cash pre-tax goodwill impairment charge, which was recorded in "Goodwill impairment" in the accompanying consolidated statements of operations. No other reporting units had accumulated goodwill impairment losses recorded. The estimated fair value of each of our reporting units was calculated using a weighted-average of values determined from an income approach and a market approach. The income approach involves estimating the fair value of each reporting unit by discounting its estimated future cash flows using a discount rate that would be consistent with a market participant’s assumption. The market approach bases the fair value measurement on information obtained from observed stock prices of public companies and recent merger and acquisition transaction data of comparable entities. In order to estimate the fair value of goodwill, management must make certain estimates and assumptions that affect the total fair value of the reporting unit including, among other things, an assessment of market conditions, projected cash flows, discount rates and growth rates. Management’s estimates of projected cash flows related to the reporting unit include, but are not limited to, future earnings of the reporting unit, assumptions about the use or disposition of assets included in the reporting unit, estimated remaining lives of those assets, and future expenditures necessary to maintain the assets’ existing service potential. The assumptions in the fair value measurement reflect the current market environment, industry-specific factors and company-specific factors.
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Revenue Revenue (Notes) |
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Revenue from Contract with Customer | (6) Revenue For details regarding the principal activities from which the Company generates its revenue, refer to "Note 1. Description of Business and Summary of Significant Accounting Policies Presentation" in the Form 10-K. For more detailed information regarding reportable segments, refer to "Note 13. Segments" in this Quarterly Report. The following represents the disaggregated revenue by reportable segments for the three months ended September 24, 2022:
The following represents the disaggregated revenue by reportable segments for the nine months ended September 24, 2022:
The following represents the disaggregated revenue by reportable segments for the three months ended September 25, 2021:
The following represents the disaggregated revenue by reportable segments for the nine months ended September 25, 2021:
† Reflects the results from the March 10, 2021 acquisition date. Contract Balances The following table provides information about receivables and contract liabilities (deferred revenue) from contracts with customers as of September 24, 2022 and December 25, 2021:
Deferred revenue consists of (1) amounts received for merchandise of which customers have not yet taken possession, (2) gift card or store credits outstanding, and (3) loyalty reward program credits which are primarily recognized within one year following the revenue deferral. Deferred franchise fee revenue is recognized over the term of the agreement, which is between five and twenty years. The amount of revenue recognized in the period that was included in the contract liability balance at the beginning of the period is immaterial to the condensed consolidated financial statements.
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Income Taxes |
3 Months Ended |
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Sep. 24, 2022 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes Overview For the three months ended September 24, 2022 and September 25, 2021, the Company had an effective tax rate from continuing operations of (35.9)% and (75.8)%, respectively. For the nine months ended September 24, 2022 and September 25, 2021, the Company had an effective tax rate from continuing operations of (264.9)% and (63.5)%, respectively. The changes in the effective tax rate compared to the prior year are due to the reversal of a valuation allowance related to net operating loss carryforwards in the prior year as well as a current year non-cash goodwill impairment charge that is nondeductible for tax purposes. 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 Franchise Group New Holdco, LLC ("New Holdco") resulting from future redemptions or exchanges of New Holdco units. Payments will be made when such Tax Receivable Agreement related deductions actually reduce the Company’s income tax liability. No payments were made to members of New Holdco pursuant to the Tax Receivable Agreement during the nine months ended September 24, 2022. 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 | Net Income (Loss) Per ShareDiluted 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. 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 Compensation Plans For a discussion of our stock-based compensation plans, refer to “Note 11. - Stock Compensation Plans” of the most recently filed Form 10-K. Restricted Stock Units The Company has awarded service-based restricted stock units (the "RSUs") to its non-employee directors, officers and certain employees. The Company recognizes expense based on the estimated fair value of the RSUs granted over the vesting period on a straight-line basis. The fair value of RSUs is determined using the Company's closing stock price on the date of the grant. At September 24, 2022, unrecognized compensation costs related to the RSUs were $6.2 million. These costs are expected to be recognized through fiscal year 2024. The following table summarizes the status of the RSUs as of and changes during the nine months ended September 24, 2022:
Performance Restricted Stock Units The Company has awarded performance restricted stock units (the "PRSUs") to its officers and certain employees. The Company recognizes expense based on the estimated fair value of the PRSUs granted over the vesting period on a straight-line basis. The fair value of PRSUs is determined using the Company's closing stock price on the date of the grant. At September 24, 2022, unrecognized compensation costs related to the PRSUs were $5.4 million. These costs are expected to be recognized through fiscal year 2024. The following table summarizes the status of the PRSUs as of and changes during the nine months ended September 24, 2022:
Market-Based Performance Restricted Stock Units The Company has awarded market-based performance restricted stock units (the "MPRSUs") to its officers and certain employees. The Company recognizes expense based on the estimated fair value of the MPRSUs granted over the vesting period on a straight-line basis. The fair value of MPRSUs is determined using a Monte Carlo simulation valuation model to calculate grant date fair value. Compensation expense is recognized over the requisite service period using the proportionate amount of the award's fair value that has been earned through service to date. Under GAAP, compensation expense is not reversed if the award target is not achieved. At September 24, 2022, unrecognized compensation costs related to the MPRSUs were $11.7 million. These costs are expected to be recognized through fiscal year 2024. The following table summarizes the status of the MPRSUs as of and changes during the nine months ended September 24, 2022:
Stock Options The Company has awarded stock options to its non-employee directors and officers. As of September 24, 2022 and September 25, 2021, there were 259,064 and 355,221 stock options outstanding, respectively. During the nine months ended September 24, 2022, there were no stock options granted, 72,969 stock options exercised, and no stock options forfeited. The weighted-average exercise price of stock options outstanding was $9.46 per share as of September 24, 2022. All outstanding stock options will expire in fiscal years 2023 and 2024. At September 24, 2022 and September 25, 2021, there were zero non-vested stock options outstanding. At September 24, 2022, there was no remaining unrecognized compensation cost related to vested or non-vested stock options. The following table summarizes information about stock options outstanding and exercisable at September 24, 2022:
Stock Compensation Expense The Company recorded $3.3 million and $4.1 million in stock-based compensation expense during the three months ended September 24, 2022 and September 25, 2021, respectively and $14.1 million and $9.6 million in stock-based compensation expense during the nine months ended September 24, 2022 and September 25, 2021, respectively. Long-Term Incentive Plans The Company has long-term incentive plans at various operating companies which are recorded as liabilities. Upon vesting, the awards granted under these plans may be settled in cash or shares of the Company's stock at the Company's discretion. The total aggregate liability for these plans as of September 24, 2022 is $7.1 million, recorded in "Accounts payable and accrued expenses" on the Condensed Consolidated Balance Sheets. During the nine months ended September 24, 2022, total expense recognized related to these plans was $5.4 million. Stock Repurchases On May 18, 2022, the Company's Board of Directors approved a stock repurchase program under which the Company may repurchase up to $500.0 million of its outstanding shares of common stock over the next three years. The repurchase program authorizes shares to be repurchased from time to time in open market or private transactions, through block trades, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. The actual timing, number and value of shares, if any, repurchased under the program will be determined by management in its discretion and will depend on a number of factors, including, among others, the availability of stock, general market and business conditions, the trading price of the Company’s common stock and applicable legal requirements. This plan supersedes the Company's previous stock repurchase programs. During the nine months ended September 24, 2022, the Company repurchased 2,227,200 shares of its common stock through open market transactions totaling an aggregate of $77.9 million. No stock repurchases were made during the nine months ended September 25, 2021.
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Related Party Transactions |
3 Months Ended |
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Sep. 24, 2022 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions The Company considers any of its directors, executive officers or beneficial owners of more than 5% of its common stock, or any member of the immediate family of the foregoing persons, to be related parties. Messrs. Kahn and Laurence Brian Kahn and Vintage Capital Management, LLC and its affiliates ("Vintage"), in aggregate, held approximately 23% of the aggregate voting power of the Company through their ownership of common stock as of September 24, 2022. 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 and served as a member of the Company's Board of Directors until the Company's annual meeting of stockholders in May 2021. Buddy's Franchises. Mr. Kahn's brother-in-law owns eight 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. Tax Receivable Agreement The Company previously had a non-controlling interest in New Holdco as a result of its acquisition of Buddy's on July 10, 2019. On April 1, 2020, the Company redeemed all of the non-controlling interest units. On July 10, 2019, the Company entered into the Tax Receivable Agreement with the then-existing non-controlling interest holders, which comprised the former equity holders of Buddy's (the "Buddy's Members") that provides for the payment by the Company to the non-controlling interest holders 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 24, 2022 and December 25, 2021 were $17.3 million, which are 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 24, 2022.
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Commitments and Contingencies |
3 Months Ended |
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Sep. 24, 2022 | |
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 in aggregate are $22.0 million and $22.9 million as of September 24, 2022 and December 25, 2021, respectively. The Company also remains secondarily liable under loan agreements entered into by certain franchisees who acquired Vitamin Shoppe, American Freight, or Buddy's stores from the Company. In the event of the failure of these franchisees to make the loan payments, the Company could be obligated to pay the default amounts. No amounts were outstanding under these agreements, and, therefore, the Company has no potential guarantee liability as of September 24, 2022. If the Company is required to make payments under any of 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 any of these guarantees is remote as of September 24, 2022.
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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 six reportable business segments: Vitamin Shoppe, Pet Supplies Plus, Badcock, American Freight, Buddy's, and Sylvan. 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 Pet Supplies Plus are included in the Company's results of operations beginning on March 11, 2021, the results of operations of Sylvan are included in the Company's results of operations beginning on September 27, 2021, and the results of operations of Badcock are included in the Company's results of operations beginning on November 22, 2021. The Vitamin Shoppe segment is an omnichannel 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 one of the largest varieties of products among vitamin, mineral and supplement retailers. The broad product offering enables the company to provide customers with a depth of selection of products that may not be readily available at other specialty retailers or mass merchants, such as discount stores, supermarkets, drug stores and wholesale clubs. The Vitamin Shoppe continues to focus on improving the customer experience through the roll-out of initiatives including increasing customer engagement and personalization, redesigning the omnichannel experience (including in stores as well as through the internet and mobile devices), growing private brands and improving the effectiveness of pricing and promotions. Vitamin Shoppe is headquartered in Secaucus, New Jersey. The Pet Supplies Plus segment is a leading omnichannel retail chain and franchisor of pet supplies and services. Pet Supplies Plus has a diversified revenue model comprised of Company-owned store revenue, franchise royalties and revenue generated by the wholesale distribution of products to its franchisees. Pet Supplies Plus offers a curated selection of premium brands, proprietary private labels and specialty products with retail price parity with online players. Additionally, Pet Supplies Plus offers grooming, pet wash and other services in most of its locations. The Pet Supplies Plus segment operates under the "Pet Supplies Plus" brand and is headquartered in Livonia, Michigan. The Badcock segment is a retailer of furniture, appliances, bedding, electronics, home office equipment, accessories and seasonal items in a showroom format. Additionally, Badcock offers multiple and flexible payment solutions and credit options through its consumer financing services. The Badcock segment operates under the “Badcock Home Furniture & More" brand and is headquartered in Mulberry, Florida. The American Freight segment is a retail chain offering in-store and online access to furniture, mattresses, new and out-of-box home appliances and home accessories at discount prices. American Freight buys direct from manufacturers and sells direct in warehouse-style stores. By cutting out the middleman and keeping its overhead costs low, American Freight can offer quality products at low prices. American Freight provides customers with multiple payment options providing access to high-quality products and brand name appliances that may otherwise remain aspirational to some of its customers. American Freight also serves as a liquidation channel for major appliance vendors. American Freight operates specialty distribution centers that test every out-of-box appliance before it is offered for sale to customers. Customers typically are covered by the original manufacturer's warranty and are offered the opportunity to purchase a full suite of extended-service plans and services. The American Freight segment operates under the "American Freight" brand and is headquartered in Delaware, Ohio. The Buddy's segment is a specialty retailer of high quality, name brand consumer electronic, residential furniture, appliances and household accessories through rent-to-own agreements. The rental transaction allows customers the opportunity to benefit from the use of high-quality products under flexible rental purchase agreements without long-term obligations. The Buddy's segment operates under the "Buddy's" brand and is headquartered in Orlando, Florida. The Sylvan segment is an established and growing franchisor of supplemental education for Pre-K-12 students and families. Sylvan addresses the full range of student needs with a broad variety of academic curriculums delivered in an omnichannel format. The Sylvan platform provides franchisees with the ability to provide a range of services, including on premises, virtually, at a satellite location, and in the home. Sylvan is headquartered in Hunt Valley, Maryland. Refer to "Note 6. Revenue" for total revenues by segment. Operating income (loss) by segment were as follows:
Total assets by segment were as follows:
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Organization and Significant Accounting Policies (Policies) |
3 Months Ended | 9 Months Ended |
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Sep. 24, 2022 |
Sep. 24, 2022 |
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Accounting Policies [Abstract] | ||
Basis of Presentation | Unless otherwise stated, references to the "Company," "we," "us," and "our" in this Quarterly Report on Form 10-Q (this "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 the Company's Form 10-K for the year ended December 25, 2021 that was filed with the Securities and Exchange Commission (“SEC”) on February 23, 2022 (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 25, 2021 balance sheet information was derived from the audited financial statements as of that date.
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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 Company early adopted the ASU in the quarter ended September 24, 2022. Refer to "Note 5. Goodwill and Intangible Assets" for the calculation of the Company's impairment test after the adoption of ASU 2017-04. The London Interbank Offered Rate ("LIBOR") is scheduled to be discontinued on June 30, 2023. 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 option expedients to enable companies to continue to apply hedge accounting to certain hedging relationships impacted by the reference rate reform. As further described in "Note 7. Long-Term Obligations", the Company entered into an amendment to a debt agreement which changed the reference rate from LIBOR to Secured Overnight Financing Rate ("SOFR"). The adoption of ASU 2020-04 did not result in a material impact to the Company's financial results or disclosures.
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Acquisitions (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 Badcock Acquisition on November 22, 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 24, 2022, the preliminary estimates of the fair value of identifiable assets acquired and liabilities assumed were adjusted, which resulted in an increase to the bargain purchase gain of $3.5 million. The increase was primarily due to the valuation of the property, plant, and equipment partially offset by an increase in other long-term liabilities for deferred taxes. 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 Badcock 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 Acquisitions as if they had occurred on January 1, 2020.
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Goodwill and Intangible Assets (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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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 24, 2022 are as follows:
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Schedule of the amortizable other intangible assets | Components of intangible assets as of September 24, 2022 and December 25, 2021 were as follows:
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Long-Term Obligations (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Debt | For details regarding the Company's long-term debt obligations, refer to “Note 9. - Long-Term Obligations” in the Form 10-K. Long-term obligations at September 24, 2022 and December 25, 2021 were as follows:
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Stockholders' Equity (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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. 24, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity | The following table summarizes the status of the RSUs as of and changes during the nine months ended September 24, 2022:
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Organization and Significant Accounting Policies (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 24, 2022 |
Sep. 25, 2021 |
Sep. 24, 2022 |
Sep. 25, 2021 |
Dec. 25, 2021 |
Feb. 21, 2021 |
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Geographical concentration | ||||||
Deferred Revenue | $ 59,831 | $ 59,831 | $ 70,614 | |||
Intangible Assets, Net (Excluding Goodwill) | 119,377 | 119,377 | 127,951 | |||
Assets | 3,666,286 | 3,666,286 | 3,913,171 | |||
Deferred Revenue, Current | 37,672 | 37,672 | 50,833 | |||
Liabilities | 3,120,529 | 3,120,529 | 3,150,340 | |||
Retained Earnings (Accumulated Deficit) | 134,416 | 134,416 | 286,987 | |||
Stockholders' Equity Attributable to Parent | 545,757 | 545,757 | 762,831 | |||
Liabilities and Equity | 3,666,286 | 3,666,286 | $ 3,913,171 | |||
General and Administrative Expense | 390,999 | $ 276,714 | 1,173,633 | $ 780,416 | ||
Operating Income (Loss) | (26,007) | 54,763 | 181,464 | 165,895 | ||
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest | (89,150) | 20,479 | (18,599) | 24,585 | ||
Income Tax Expense (Benefit) | 32,013 | $ (15,519) | 49,263 | (15,600) | ||
Revenues | $ 1,051,476 | 3,281,943 | ||||
Payments for Repurchase of Common Stock | $ 77,876 | $ 0 | ||||
Liberty Tax Segment | Discontinued Operations, Held-for-sale | ||||||
Geographical concentration | ||||||
Disposal Group, Including Discontinued Operation, Consideration | $ 255,300 |
Divestitures - Summary of Cash Flow Information (Details) - Discontinued Operations, Held-for-sale - Liberty Tax [Member] $ in Thousands |
9 Months Ended |
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Sep. 25, 2021
USD ($)
| |
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 |
Cash flows provided by investing activities from discontinued operations | $ 173,633 |
Accounts and Notes Receivable - Schedule of Receivables (Details) - USD ($) $ in Thousands |
Sep. 24, 2022 |
Dec. 25, 2021 |
---|---|---|
Receivables [Abstract] | ||
Accounts receivable | $ 101,485 | $ 86,087 |
Notes receivable | 1,160 | 1,735 |
Income taxes receivable | 41,811 | 32,448 |
Accounts Receivable, Allowance for Credit Loss, Current | (1,216) | (1,572) |
Total Receivables, Current, Net | 143,240 | 118,698 |
Financing Receivable, before Allowance for Credit Loss, Noncurrent | 10,387 | 12,183 |
Accounts Receivable, Allowance for Credit Loss, Noncurrent | (138) | (428) |
Receivables, Net, Non-current | 10,249 | 11,755 |
Receivables, Fair Value Disclosure | $ 153,489 | $ 130,453 |
Revenue Revenue (Details 1) - USD ($) $ in Thousands |
Sep. 24, 2022 |
Dec. 25, 2021 |
---|---|---|
Revenue from Contract with Customer [Abstract] | ||
Deferred Revenue | $ 59,831 | $ 70,614 |
Income Taxes (Details) - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Jul. 10, 2019 |
Sep. 24, 2022 |
Sep. 25, 2021 |
Sep. 24, 2022 |
Sep. 25, 2021 |
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Income Tax Disclosure [Abstract] | |||||
Tax Receivable Agreement, Payment to Non-controlling Holders | 40.00% | ||||
Effective Income Tax Rate Reconciliation at Federal Statutory Income Tax Rate, Amount | $ (0.359) | $ (0.758) | $ (2.649) | $ (0.635) |
Related Party Transactions (Details) - USD ($) $ in Millions |
6 Months Ended | ||
---|---|---|---|
Jul. 10, 2019 |
Jun. 27, 2020 |
Sep. 24, 2022 |
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Related Party Transaction [Line Items] | |||
Tax Receivable Agreement, Payment to Non-controlling Holders | 40.00% | ||
Tax Receivable Agreement, Payment to Non-controlling Holders | $ 17.3 | ||
Vintage RTO, L.P. ownership [Member] | |||
Related Party Transaction [Line Items] | |||
aggregate voting power | 23.00% | ||
Payment to Noncontrolling Holders [Member] | |||
Related Party Transaction [Line Items] | |||
Tax Receivable Agreement, Payment to Non-controlling Holders | 40.00% |
Commitments and Contingencies (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Sep. 24, 2022 |
Sep. 25, 2021 |
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Other Commitments [Line Items] | ||
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 in aggregate are $22.0 million and $22.9 million as of September 24, 2022 and December 25, 2021, respectively. The Company also remains secondarily liable under loan agreements entered into by certain franchisees who acquired Vitamin Shoppe, American Freight, or Buddy's stores from the Company. In the event of the failure of these franchisees to make the loan payments, the Company could be obligated to pay the default amounts. No amounts were outstanding under these agreements, and, therefore, the Company has no potential guarantee liability as of September 24, 2022. If the Company is required to make payments under any of 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 any of these guarantees is remote as of September 24, 2022.
|
|
Net Amount at Risk by Product and Guarantee, Net Amount at Risk | $ 22.0 | $ 22.9 |
Label | Element | Value |
---|---|---|
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents | us-gaap_CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents | $ 151,502,000 |
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents | us-gaap_CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents | $ 292,714,000 |
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