Company Quick10K Filing
Blue Apron
Price8.60 EPS-3
Shares13 P/E-3
MCap113 P/FCF-21
Net Debt-3 EBIT-39
TEV110 TEV/EBIT-3
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-04-29
10-K 2019-12-31 Filed 2020-02-18
10-Q 2019-09-30 Filed 2019-10-31
10-Q 2019-06-30 Filed 2019-08-06
10-Q 2019-03-31 Filed 2019-04-30
10-K 2018-12-31 Filed 2019-02-25
10-Q 2018-09-30 Filed 2018-11-14
10-Q 2018-06-30 Filed 2018-08-02
10-Q 2018-03-31 Filed 2018-05-03
10-K 2017-12-31 Filed 2018-02-22
10-Q 2017-09-30 Filed 2017-11-03
10-Q 2017-06-30 Filed 2017-08-10
8-K 2020-05-14 Officers, Regulation FD, Exhibits
8-K 2020-04-29 Regulation FD, Exhibits
8-K 2020-04-29 Earnings, Exhibits
8-K 2020-03-30 Leave Agreement, Exhibits
8-K 2020-03-19 Other Events, Exhibits
8-K 2020-02-18 Exit Costs
8-K 2020-02-18 Earnings, Exhibits
8-K 2019-12-31 Officers
8-K 2019-10-31 Regulation FD, Exhibits
8-K 2019-10-25 Enter Agreement, Earnings, Off-BS Arrangement, Exhibits
8-K 2019-08-06 Earnings, Exhibits
8-K 2019-08-06 Regulation FD, Exhibits
8-K 2019-06-14 Shareholder Rights, Amend Bylaw, Exhibits
8-K 2019-06-13 Shareholder Vote, Other Events, Exhibits
8-K 2019-05-17 Exhibits
8-K 2019-04-30 Earnings, Exhibits
8-K 2019-04-30 Regulation FD, Exhibits
8-K 2019-03-28 Earnings, Officers, Regulation FD, Exhibits
8-K 2019-02-27 Officers
8-K 2019-02-15 Officers
8-K 2019-01-31 Regulation FD, Exhibits
8-K 2019-01-30 Other Events, Exhibits
8-K 2019-01-30 Earnings, Exhibits
8-K 2019-01-29 Enter Agreement, Off-BS Arrangement
8-K 2018-12-19 Shareholder Rights
8-K 2018-12-18 Officers
8-K 2018-11-14 Regulation FD, Exhibits
8-K 2018-11-13 Earnings, Exhibits
8-K 2018-11-13 Officers, Regulation FD, Other Events, Exhibits
8-K 2018-10-09 Enter Agreement, Off-BS Arrangement, Regulation FD, Exhibits
8-K 2018-08-02 Regulation FD, Exhibits
8-K 2018-08-02 Earnings, Exhibits
8-K 2018-06-14 Shareholder Vote
8-K 2018-05-16 Officers, Regulation FD, Exhibits
8-K 2018-05-03 Earnings, Exhibits
8-K 2018-05-03 Regulation FD, Exhibits
8-K 2018-02-25 Officers
8-K 2018-02-13 Earnings, Other Events, Exhibits

APRN 10Q Quarterly Report

Part I Financial Information
Item 1. Financial Statements
Item 2.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II Other Information
Item 1. Legal Proceedings
Item 1A.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 aprn-20200331ex311e62649.htm
EX-31.2 aprn-20200331ex3123fb174.htm
EX-32.1 aprn-20200331ex3215a8d04.htm
EX-32.2 aprn-20200331ex322ccf619.htm

Blue Apron Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
0.60.40.30.1-0.0-0.22017201820192020
Assets, Equity
0.30.20.10.1-0.0-0.12017201820192020
Rev, G Profit, Net Income
0.30.20.10.1-0.0-0.12017201820192020
Ops, Inv, Fin

10-Q 1 aprn-20200331x10q.htm 10-Q aprn_Current_Folio_10Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2020.

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                    to

 

Commission file number 001-38134

 

Blue Apron Holdings, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

 

Delaware

    

81‑4777373

(State or Other Jurisdiction of Incorporation or Organization)

 

(I.R.S. Employer Identification No.)

 

 

 

28 Liberty Street, New York, New York

 

10005

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code (347) 719‑4312

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

 

 

 

 

 

Title of Each Class

 

Trading Symbol

 

Name of Exchange on Which Registered

Class A Common Stock, $0.0001 par value per share

 

APRN

 

New York Stock Exchange LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

 

 

 

 

 

Large accelerated filer ☐

Accelerated filer 

Smaller reporting company 

Emerging growth company 

 

 

 

 

Non-accelerated filer ☐ 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act).    Yes ☐  No 

 

Indicate the number of shares outstanding of each class of the issuer’s common stock as of the latest practicable date.

 

 

 

 

 

Class

Number of Shares Outstanding

Class A Common Stock, $0.0001 par value

9,727,283 shares outstanding as of March 31, 2020

Class B Common Stock, $0.0001 par value

3,654,248 shares outstanding as of March 31, 2020

Class C Capital Stock, $0.0001 par value

0 shares outstanding as of March 31, 2020

 

 

BLUE APRON HOLDINGS, INC.

TABLE OF CONTENTS

 

 

    

 

 

PART I 

 

FINANCIAL INFORMATION

 

 

 

 

Item 1.

Consolidated Financial Statements (unaudited)

 

4

 

 

 

Consolidated Balance Sheets

 

4

 

 

 

Consolidated Statements of Operations

 

5

 

 

 

Consolidated Statement of Stockholders’ Equity (Deficit)

 

6

 

 

 

Consolidated Statements of Cash Flows

 

7

 

 

 

Notes to Consolidated Financial Statements

 

8

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

22

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

37

 

 

Item 4.

Controls and Procedures

 

37

 

 

 

 

 

 

 

PART II 

 

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

 

39

 

 

Item 1A.

Risk Factors

 

41

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

74

 

 

Item 3.

Defaults Upon Senior Securities

 

74

 

 

Item 4.

Mine Safety Disclosures

 

74

 

 

Item 5.

Other Information

 

74

 

 

Item 6.

Exhibits

 

75

 

 

 

 

 

 

 

SIGNATURES 

 

 

76

 

 

 

 

 

 

 

1

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans, and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in the “Risk Factors” section and elsewhere in this Quarterly Report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Some of the key factors that could cause actual results to differ from our expectations include:

·

our expectations regarding our expenses and revenue, our ability to maintain and grow adjusted EBITDA and to achieve profitability, the sufficiency of our cash resources, our needs for additional financing, our ability to effectively manage expenses and cash flows, and our ability to remain in compliance with financial and other covenants under our indebtedness;

·

our ability, including the timing and extent, to obtain additional financing and sufficiently manage costs and to fund investments in our operations in amounts necessary to support the execution of our growth strategy;

·

our ability, including the timing and extent, to successfully execute our growth strategy, cost-effectively attract new customers and retain existing customers, and to expand our direct-to-consumer product offerings;

·

our ability to sustain the recent increase in demand resulting from the COVID-19 (coronavirus) pandemic and to retain new customers;

·

the potential adverse impact of the COVID-19 pandemic on our operations and results, including as a result of the loss of adequate labor, any prolonged closures, or series of temporary closures, of one or more fulfillment centers, supply chain or carrier interruptions or delays, or changes in consumer behaviors, both when stay-at-home and restaurant restriction orders are lifted and/or as a result of the COVID-19 pandemic’s impact on financial markets and economic conditions;

·

our ability to identify, consummate and realize the anticipated benefits of strategic alternatives and the structure, terms and specific risks and uncertainties associated with any such potential strategic alternatives;

·

our expectations regarding the benefits and expected costs and charges associated with our plan to close our Arlington, Texas fulfillment center, together with any potential disruption to our workforce and operations associated with such closure and related transfer of production volume to our Linden, New Jersey and Richmond, California fulfillment centers;

·

our ability to maintain and grow the value of our brand and reputation;

2

·

our expectations regarding, and the stability of, our supply chain, including potential shortages or interruptions in the supply or delivery of ingredients, as a result of COVID-19 or otherwise;

·

our ability to maintain food safety and prevent food-borne illness incidents;

·

changes in consumer tastes and preferences or in consumer spending;

·

our ability to effectively compete;

·

our ability to attract and retain qualified employees and key personnel;

·

our ability to comply with modified or new laws and regulations applying to our business;

·

our vulnerability to adverse weather conditions, natural disasters and pandemics; and

·

our ability to obtain and maintain intellectual property protection.

While we may elect to update these forward-looking statements at some point in the future, whether as a result of any new information, future events, or otherwise, we have no current intention of doing so except to the extent required by applicable law.

3

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

BLUE APRON HOLDINGS, INC.

 

Consolidated Balance Sheets

 

(In thousands, except share and per-share data)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

 

2020

 

2019

ASSETS

 

 

  

 

 

  

CURRENT ASSETS:

 

 

  

 

 

  

Cash and cash equivalents

 

$

29,505

 

$

43,531

Accounts receivable, net

 

 

209

 

 

248

Inventories, net

 

 

24,712

 

 

25,106

Prepaid expenses and other current assets

 

 

13,644

 

 

8,864

Total current assets

 

 

68,070

 

 

77,749

Property and equipment, net

 

 

138,314

 

 

181,806

Other noncurrent assets

 

 

4,868

 

 

6,510

TOTAL ASSETS

 

$

211,252

 

$

266,065

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

  

 

 

  

CURRENT LIABILITIES:

 

 

  

 

 

  

Accounts payable

 

$

26,539

 

$

23,972

Accrued expenses and other current liabilities

 

 

25,743

 

 

30,366

Deferred revenue

 

 

7,814

 

 

6,120

Total current liabilities

 

 

60,096

 

 

60,458

Long-term debt

 

 

53,646

 

 

53,464

Facility financing obligation

 

 

35,976

 

 

71,689

Other noncurrent liabilities

 

 

10,873

 

 

12,455

TOTAL LIABILITIES

 

 

160,591

 

 

198,066

Commitments and contingencies (Note 9)

 

 

  

 

 

  

STOCKHOLDERS’ EQUITY (DEFICIT):

 

 

  

 

 

  

Class A common stock, par value of $0.0001 per share — 1,500,000,000 shares authorized as of March 31, 2020 and December 31, 2019; 9,727,283 and 7,799,093 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively

 

 

 1

 

 

 1

Class B common stock, par value of $0.0001 per share — 175,000,000 shares authorized as of March 31, 2020 and December 31, 2019; 3,654,248 and 5,464,196 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively

 

 

 1

 

 

 1

Class C common stock, par value of $0.0001 per share — 500,000,000 shares authorized as of March 31, 2020 and December 31, 2019; 0 shares issued and outstanding as of March 31, 2020 and December 31, 2019

 

 

 —

 

 

 —

Additional paid-in capital

 

 

602,783

 

 

599,976

Accumulated deficit

 

 

(552,124)

 

 

(531,979)

TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

50,661

 

 

67,999

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

$

211,252

 

$

266,065

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

4

 

 

BLUE APRON HOLDINGS, INC.

Consolidated Statements of Operations

(In thousands, except share and per-share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 

 

    

2020

    

2019

Net revenue

 

$

101,857

 

$

141,890

Operating expenses:

 

 

 

 

 

 

Cost of goods sold, excluding depreciation and amortization

 

 

60,638

 

 

82,704

Marketing

 

 

15,032

 

 

14,234

Product, technology, general and administrative

 

 

34,217

 

 

39,148

Depreciation and amortization

 

 

6,753

 

 

8,604

Other operating expense

 

 

3,198

 

 

230

Total operating expenses

 

 

119,838

 

 

144,920

Income (loss) from operations

 

 

(17,981)

 

 

(3,030)

Interest income (expense), net

 

 

(2,155)

 

 

(2,232)

Income (loss) before income taxes

 

 

(20,136)

 

 

(5,262)

Benefit (provision) for income taxes

 

 

(9)

 

 

(13)

Net income (loss)

 

$

(20,145)

 

$

(5,275)

 

 

 

 

 

 

 

Net income (loss) per share attributable to Class A, Class B, and Class C common stockholders*:

 

 

 

 

 

 

Basic

 

$

(1.51)

 

$

(0.41)

Diluted

 

$

(1.51)

 

$

(0.41)

Weighted-average shares used to compute net income (loss) per share attributable to Class A, Class B, and Class C common stockholders*:

 

 

 

 

 

 

Basic

 

 

13,305,805

 

 

12,979,900

Diluted

 

 

13,305,805

 

 

12,979,900

 

*  Reflects the 1-for-15 reverse stock split that became effective on June 14, 2019.

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

 

5

BLUE APRON HOLDINGS, INC.

Consolidated Statement of Stockholders’ Equity (Deficit)

(In thousands, except share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A

 

Class B

 

Class C

 

Additional

 

 

 

 

Total

 

 

Common Stock *

 

Common Stock *

 

Common Stock *

 

Paid-In

 

Accumulated

 

Stockholders'

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Deficit

 

Equity (Deficit)

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — December 31, 2019

 

7,799,093

 

$

 1

 

5,464,196

 

$

 1

 

 —

 

$

 —

 

$

599,976

 

$

(531,979)

 

$

67,999

Conversion from Class B to Class A common stock

 

1,835,947

 

 

0

 

(1,835,947)

 

 

0

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Issuance of common stock upon exercise of stock options and vesting of restricted stock

 

92,243

 

 

0

 

25,999

 

 

0

 

 —

 

 

 —

 

 

486

 

 

 —

 

 

486

Share-based compensation

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

2,321

 

 

 —

 

 

2,321

Net income (loss)

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(20,145)

 

 

(20,145)

Balance — March 31, 2020

 

9,727,283

 

$

 1

 

3,654,248

 

$

 1

 

 —

 

$

 —

 

$

602,783

 

$

(552,124)

 

$

50,661

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — December 31, 2018

 

5,240,073

 

$

 1

 

7,714,036

 

$

 1

 

 —

 

$

 —

 

$

590,538

 

$

(471,238)

 

$

119,302

Conversion from Class B to Class A common stock

 

1,104,091

 

 

0

 

(1,104,091)

 

 

(0)

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Issuance of common stock upon exercise of stock options and vesting of restricted stock

 

23,911

 

 

0

 

27,444

 

 

0

 

 —

 

 

 —

 

 

103

 

 

 —

 

 

103

Share-based compensation

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

2,974

 

 

 —

 

 

2,974

Impact of adoption of accounting standard update

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

340

 

 

340

Net income (loss)

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(5,275)

 

 

(5,275)

Balance — March 31, 2019

 

6,368,075

 

$

 1

 

6,637,389

 

$

 1

 

 —

 

$

 —

 

$

593,615

 

$

(476,173)

 

$

117,444

 

* Reflects the 1-for-15 reverse stock split that became effective on June 14, 2019.

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

 

6

BLUE APRON HOLDINGS, INC.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 

 

 

2020

    

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income (loss)

$

(20,145)

 

$

(5,275)

 

Adjustments to reconcile net income (loss) to net cash from (used in) operating activities:

 

 

 

 

 

 

Depreciation and amortization of property and equipment

 

6,753

 

 

8,604

 

Loss (gain) on disposal of property and equipment

 

 —

 

 

110

 

Loss (gain) on build-to-suit accounting derecognition

 

(4,936)

 

 

 —

 

Loss on impairment

 

7,448

 

 

 —

 

Changes in reserves and allowances

 

(425)

 

 

(671)

 

Share-based compensation

 

2,240

 

 

2,835

 

Non-cash interest expense

 

182

 

 

125

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

39

 

 

153

 

Inventories

 

767

 

 

1,216

 

Prepaid expenses and other current assets

 

(2,992)

 

 

3,341

 

Accounts payable

 

2,533

 

 

279

 

Accrued expenses and other current liabilities

 

(5,964)

 

 

(1,319)

 

Deferred revenue

 

1,694

 

 

(1,727)

 

Other noncurrent assets and liabilities

 

202

 

 

(2,533)

 

Net cash from (used in) operating activities

 

(12,604)

 

 

5,138

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of property and equipment

 

(1,611)

 

 

(1,734)

 

Proceeds from sale of property and equipment

 

59

 

 

67

 

Net cash from (used in) investing activities

 

(1,552)

 

 

(1,667)

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Payments of debt issuance costs

 

 —

 

 

(7)

 

Proceeds from exercise of stock options

 

486

 

 

102

 

Principal payments on capital lease obligations

 

(77)

 

 

(66)

 

Net cash from (used in) financing activities

 

409

 

 

29

 

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

 

(13,747)

 

 

3,500

 

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period

 

46,443

 

 

97,307

 

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period

$

32,696

 

$

100,807

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

Cash paid for income taxes, net of refunds

$

 —

 

$

 —

 

Cash paid for interest

$

2,088

 

$

2,174

 

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION:

 

 

 

 

 

 

Acquisition (disposal) of property and equipment financed under capital lease obligations

$

22

 

$

 —

 

Non-cash additions to property and equipment

$

81

 

$

138

 

Purchases of property and equipment in Accounts payable and Accrued expenses and other current liabilities

$

354

 

$

250

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

 

7

BLUE APRON HOLDINGS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

1. Organization and Description of Business

When used in these notes, Blue Apron Holdings, Inc. and its subsidiaries are collectively referred to as the “Company.”

The Company creates original recipes, which are sent along with fresh, high-quality, seasonally inspired ingredients, directly to customers for them to prepare, cook, and enjoy. The Company creates meal experiences around original recipes every week based on what’s in-season with farming partners and other suppliers. Customers can choose which recipes they would like to receive in a given week, and the Company delivers those recipes to their doorsteps along with the pre-portioned ingredients required to cook those recipes.

In addition to meals, the Company sells wine through Blue Apron Wine, a direct-to-consumer wine delivery service launched in September 2015. The Company also sells a curated selection of cooking tools, utensils, pantry items, and add-on products for different culinary occasions through Blue Apron Market, an e-commerce market launched in November 2014.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The unaudited interim Consolidated Financial Statements have been prepared on the same basis as the audited Consolidated Financial Statements, and in the opinion of management, reflect all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of March 31, 2020 and December 31, 2019, results of operations for the three months ended March 31, 2020 and 2019, and cash flows for the three months ended March 31, 2020 and 2019. These unaudited Consolidated Financial Statements should be read in conjunction with the Company’s audited Consolidated Financial Statements and the notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 18, 2020 (the “Annual Report”). There have been no material changes in the Company's significant accounting policies from those that were disclosed in Note 2, Summary of Significant Accounting Policies, included in the Annual Report.

The accompanying Consolidated Financial Statements include the accounts of Blue Apron Holdings, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company prepares its Consolidated Financial Statements and related disclosures in conformity with accounting principles generally accepted in the United States (“GAAP”).

Liquidity and Going Concern Evaluation

As of March 31, 2020, the Company had Cash and cash equivalents of $29.5 million and Long-term debt of $53.6 million, net of unamortized debt issuance costs. Long-term debt includes a fully-drawn revolving credit facility, entered into by the Company in August 2016 under a revolving credit and guaranty agreement (the “revolving credit facility”) that was subsequently amended, most recently, in October 2019. As of March 31, 2020, the Company had $54.7 million in outstanding borrowings and $0.3 million in issued letters of credit under the revolving credit facility. The remaining borrowing capacity on the revolving credit facility is $0.0 million.

The revolving credit facility contains certain restrictive covenants, financial covenants, and affirmative and financial reporting covenants restricting the Company and the Company’s subsidiaries’ activities. Financial covenants include a requirement to maintain a minimum aggregate liquidity balance of $20.0 million as of each quarter end and $10.0 million at any liquidity test date other than at quarter end, and in the event the Company has positive consolidated

8

total net debt, maintain minimum quarterly consolidated adjusted EBITDA in excess of certain specified thresholds as defined in the revolving credit and guaranty agreement. Non-compliance with the covenants would result in an event of default upon which the lenders could declare all outstanding principal and interest to be due and payable immediately, terminate their commitments to loan money and foreclose against the assets securing the borrowings. As of March 31, 2020 and December 31, 2019, the Company was in compliance with all of the covenants under the revolving credit facility. See Note 9 for further discussion on the revolving credit facility.

The Company has experienced significant net losses since inception including $20.1 million and $5.3 million for the three months ended March 31, 2020 and 2019, respectively, and operating cash flows of $(12.6) million and $5.1 million for the three months ended March 31, 2020 and 2019, respectively. The Company has also made investments in capital expenditures to support its business including $1.6 million and $1.7 million for the three months ended March 31, 2020 and 2019, respectively. While trends in net loss and operating cash flows have improved over time since inception, and the Company has reduced spending on capital expenditures, it has continued to experience reductions in its Cash and cash equivalents, including a reduction to $29.5 million at March 31, 2020 from $43.5 million at December 31, 2019. In addition, the Company has continued to see significant negative trends in its Net revenue including year-over-year declines of 28% and 28% for the three months ended March 31, 2020 and 2019, respectively.

The Company is currently pursuing a strategy to drive customer and revenue growth, and its Board of Directors is evaluating a range of strategic alternatives to maximize shareholder value, which together with cost optimization initiatives, is being undertaken to provide additional liquidity to support the execution of its growth strategy and continued investments in its business. The Company’s ability, including the timing and extent, to successfully execute its growth strategy is inherently uncertain and is dependent on its ability to raise capital, and to implement the initiatives and deliver the results as forecasted, among other factors. Due to this uncertainty, if the Company is unable to sufficiently deliver results from its strategy and/or effectively manage expenses and cash flows, the Company may not be able to maintain compliance with its financial covenants in future periods resulting in an event of default under its revolving credit facility. Given the Company’s liquidity position, upon an event of default, if the Company were unable to obtain a waiver or successfully renegotiate the terms of its revolving credit facility with its lenders, and the lenders enforced one or more of their rights upon default, the Company would be unable to meet its current obligations.

However, if the Company is unable to sufficiently implement its growth strategy, it believes it has plans to effectively manage expenses and cash flows in order to maintain compliance with its debt covenants. This includes significant expense reductions in areas identified by the Company in product, technology, general and administrative costs, marketing expenses, and capital expenditures. A significant portion of the Company’s costs is discretionary in nature and, if needed, the Company has the ability to reduce or delay spending in order to reduce expenses and cash outflows. While reductions in spending, particularly marketing and capital expenditures, will negatively impact net revenue and the Company’s ability to execute its growth strategy, the Company plans to execute such reductions to the extent needed to comply with debt covenants and to achieve savings to reinvest in the business.

For example, in February 2020, the Company announced the planned closure of its Arlington, Texas fulfillment center and the consolidation of production volume from its Arlington, Texas fulfillment center into its Linden, New Jersey and Richmond, California fulfillment centers, which is expected to generate annual savings beginning in the second quarter of 2020 of approximately $8.0 million.

The Company has also previously demonstrated an ability to implement various cost reduction initiatives. For example, in January 2019, the Company implemented a downsizing and transfer of a substantial portion of the production volume from its Arlington, Texas fulfillment center to its Linden, New Jersey fulfillment center to further optimize fulfillment center efficiencies. In November 2018 and October 2017, the Company implemented workforce reductions to generate savings in Product, technology, general, and administrative expenses and Cost of goods sold, excluding depreciation and amortization. As a result of these actions, along with other cost optimization initiatives, the Company’s Product, technology, general, and administrative expenses reduced by approximately 13% or $4.9 million and 21% or $10.3 million, respectively, for the three months ended March 31, 2020 and 2019. In addition, while the Company reaccelerated its marketing efforts in the three months ended March 31, 2020, it has significantly reduced its Marketing expense over the past 12 months. While Marketing expense decreased 47% over the past 12 months, Net

9

revenue decreased by 32% for the same period. The Company also reduced its year-over-year spending on capital expenditures over the past 12 months by 56% or $6.6 million.

Based on the current facts and circumstances, the Company’s financial planning process and its historical ability to implement cost reductions, the Company believes it is probable it can effectively manage expenses and cash flows in order to maintain compliance with the financial covenants under its revolving credit facility for at least the next 12 months.  As a result, the Company has concluded, that after consideration of management’s plans, it has sufficient liquidity to meet its obligations within one year after the issuance date of the Consolidated Financial Statements, and it does not have substantial doubt about its ability to continue as a going concern.

Use of Estimates

In preparing its Consolidated Financial Statements in accordance with GAAP, the Company is required to make estimates and assumptions that affect the amounts of assets, liabilities, revenue, costs, and expenses, and disclosure of contingent assets and liabilities which are reported in the Consolidated Financial Statements and accompanying disclosures. The accounting estimates that require the most difficult and subjective judgments include revenue recognition, inventory valuation, leases, recoverability of long-lived assets, and the recognition and measurement of contingencies. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could materially differ from the Company’s estimates and assumptions.

Emerging Growth Company Status

The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (the “JOBS” Act), and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” The Company may take advantage of these exemptions until the Company is no longer an “emerging growth company.” Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. The Company has elected to use the extended transition period for complying with new or revised accounting standards and as a result of this election, its financial statements may not be comparable to companies that comply with public company effective dates. The Company may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of its initial public offering (the “IPO”) on July 5, 2017, or such earlier time that it is no longer an emerging growth company. The Company would cease to be an emerging growth company if it has more than $1.07 billion in annual revenue, has more than $700.0 million in market value of its stock held by non-affiliates (and it has been a public company for at least 12 months, and has filed one annual report on Form 10-K), or it issues more than $1.0 billion of non-convertible debt securities over a three-year period.

Smaller Reporting Company Status

The Company is a “smaller reporting company,” as defined by Rule 12b-2 of the Securities Exchange Act of 1934, and therefore qualifies for the SEC's reduced disclosure requirements for smaller reporting companies.

Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued its final standard on lease accounting, Accounting Standards Update No. 2016-02, Leases (Topic 842), which supersedes Topic 840, Leases. The new accounting standard requires the recognition of right-of-use assets and lease liabilities for all long-term leases, including operating leases, on the balance sheet. The new standard also provides additional guidance on the measurement of the right-of-use assets and lease liabilities and will require enhanced disclosures about the Company’s leasing arrangements. In September 2017, the FASB issued ASU No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments, to add SEC paragraphs pursuant to an SEC Staff Announcement made at the July 20, 2017 Emerging Issues Task Force meeting. In July 2018, the FASB issued ASU No. 2018-10, Codification

10

Improvements to Topic 842, Leases, and ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, to improve and clarify certain aspects of ASU No. 2016-02. In January 2019, the FASB issued ASU No. 2019-01, Leases (Topic 842): Codification Improvements, to improve and clarify aspects of ASU No. 2016-02. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, to defer the effective date of ASU No. 2016-02 for certain entities. For the Company, the new standard is effective for annual periods beginning January 1, 2021. Upon adoption of this standard, the Company expects to recognize, on a discounted basis, its minimum commitments under non-cancelable operating leases on the Consolidated Balance Sheets resulting in the recording of right-of-use assets and lease obligations. The Company is currently evaluating any additional impacts this guidance will have on its Consolidated Financial Statements.

In August 2018, the FASB issued Accounting Standards Update No. 2018-15 (“ASU 2018-15”), Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The standard is intended to clarify the accounting for implementation costs of a hosting arrangement that is a service contract. For the Company, the amendments in ASU 2018-15 are effective for annual periods beginning January 1, 2021. The Company is evaluating the impact this new guidance may have on its Consolidated Financial Statements.

In December 2019, the FASB issued Accounting Standards Update No. 2019-12 (“ASU 2019-12”), Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The standard is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740, as well as improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For the Company, the amendments in ASU 2019-12 are effective for annual periods beginning January 1, 2022. The Company is evaluating the impact this new guidance may have on its Consolidated Financial Statements.

Recently Adopted Accounting Pronouncements

In March 2020, the FASB issued Accounting Standards Update No. 2020-04 (“ASU 2020-04”), Reference Rate Reform (“ASC 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The standard is intended to provide optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate that is expected to be discontinued. The guidance was effective upon issuance, and may be applied prospectively through December 31, 2022. The application of the guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements.

.

 

3. Inventories, Net

Inventories, net consist of the following:

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

2020

    

2019

 

(In thousands)

Fulfillment

$

3,611

 

$

2,741

Product

 

21,101

 

 

22,365

Inventories, net

$

24,712

 

$

25,106

Product inventory primarily consists of bulk and prepped food, containers, products available for resale, and wine products. Fulfillment inventory consists of packaging used for shipping and handling. Product and fulfillment inventories are recognized as components of Cost of goods sold, excluding depreciation and amortization in the accompanying Consolidated Statements of Operations when sold.

11

4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

2020

    

2019

 

(In thousands)

Prepaid insurance

$

8,492

 

$

5,755

Other current assets

 

5,152

 

 

3,109

Prepaid expenses and other current assets

$

13,644

 

$

8,864

 

 

 

 

 

 

 

 

5. Restricted Cash

Restricted cash reflects pledged cash deposited into savings accounts that is used as security primarily for fulfillment centers and office space leases, as well as cash held in escrow related to a pending legal judgment.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same amounts reported in the Consolidated Statements of Cash Flows.

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

2020

    

2019

 

(in thousands)

Cash and cash equivalents

$

29,505

 

$

43,531

Restricted cash included in Prepaid expenses and other current assets

 

1,842

 

 

 —

Restricted cash included in Other noncurrent assets

 

1,349

 

 

2,912

Total cash, cash equivalents and restricted cash

$

32,696

 

$

46,443

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

2019

    

2018

 

(in thousands)

Cash and cash equivalents

$

99,114

 

$

95,615

Restricted cash included in Prepaid expenses and other current assets

 

 —

 

 

 —

Restricted cash included in Other noncurrent assets

 

1,693

 

 

1,692

Total cash, cash equivalents and restricted cash

$

100,807

 

$

97,307

 

 

12

 

6. Property and Equipment, Net

Property and equipment, net consists of the following:

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

2020

    

2019

 

(In thousands)

Computer equipment

$

11,453

 

$

11,453

Capitalized software

 

19,072

 

 

18,516

Fulfillment equipment

 

49,600

 

 

54,059

Furniture and fixtures

 

3,513

 

 

3,725

Leasehold improvements

 

32,254

 

 

41,735

Buildings(1)

 

114,877

 

 

148,507

Construction in process

 

2,034

 

 

1,803

Property and equipment, gross

 

232,803

 

 

279,798

Less: accumulated depreciation and amortization

 

(94,489)

 

 

(97,992)

Property and equipment, net

$

138,314

 

$

181,806


(1)

Buildings includes build-to-suit lease arrangements where the Company is considered the owner for accounting purposes including $31.3 million as of March 31, 2020 related to Linden, New Jersey and $62.1 million as of December 31, 2019 related to Linden, New Jersey and Fairfield, California. Buildings also includes costs incurred directly by the Company relating to these arrangements of $80.8 million and $82.3 million as of March 31, 2020 and December 31, 2019, respectively. Capitalized interest for construction projects related to build-to-suit lease arrangements was $2.8 million and $4.2 million as of March 31, 2020 and December 31, 2019, respectively.

Fairfield Lease Termination

In October 2017, the Company performed a review of its real estate needs and decided to no longer pursue its planned build-out of the Fairfield facility and as a result, pursued potential alternatives for the leased Fairfield property. On March 30, 2020, the Company terminated the lease for its Fairfield facility (the “Fairfield lease termination”). In connection with the Fairfield lease termination, the Company agreed to pay a termination fee in the amount of $1.5 million in the second quarter of 2020, which released the Company from all future minimum lease payments related to this facility in the amount of $32.9 million, which otherwise would have expired in 2028.

For accounting purposes, the Company was deemed to be the owner of this arrangement and followed build-to-suit accounting. Therefore, the Company capitalized the fair value of the building and direct construction costs incurred and recorded a corresponding facility financing obligation. Prior to the lease termination, the net carrying value of the build-to-suit assets totaled $31.1 million, the facility financing obligation totaled $35.7 million and the Company had deferred rent of $1.8 million. Accordingly, as of the termination date, the Company derecognized the net carrying value of the build-to-suit assets and liabilities and the deferred rent balance. As a result, the Company recorded a non-cash gain of $4.9 million, net of the lease termination fee, in Other operating expense for the three months ended March 31, 2020.

Impairment Charges on Long-Lived Assets

In February 2020, the Company announced the planned closure of its fulfillment center in Arlington, Texas and the consolidation of production volume from the Arlington, Texas fulfillment center to the Company’s fulfillment centers in Linden, New Jersey and Richmond, California in order to more efficiently continue to service its national footprint while also enabling the Company to redirect its financial resources into other parts of the business, including growth initiatives. The Company concluded that this change in operations represents a triggering event with respect to its long-lived assets at the Arlington facility and therefore performed an impairment test in accordance with ASC 360, Property, Plant, and Equipment. The carrying amount of the Company’s long-lived assets at the Arlington facility was $11.5 million and the fair value was $4.1 million as of the impairment date, resulting in an impairment of $7.4 million, 

13

primarily consisting of leasehold improvements and equipment, recorded in Other operating expense for the three months ended March 31, 2020. The fair value was primarily determined based on estimated market prices of the assets and represented a Level 3 valuation in the fair value hierarchy.  Upon completion of the transition to the Linden and Richmond fulfillment centers, the Company expects its leasehold improvements to remain at its Arlington facility and its equipment to be primarily sold or relocated to the Company’s other fulfillment centers in the second half of 2020. In addition, the Company has future non-cancelable minimum lease payments of approximately $2.2 million through 2024 relating to its Arlington facility. The Company is pursuing a sublease for the facility, which is not expected to have a material impact on the Company’s Consolidated Financial Statements.

 

 

7. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

2020

    

2019

 

(In thousands)

Accrued compensation

$

9,775

 

$

11,967

Accrued credits and refunds reserve

 

1,156

 

 

1,208

Accrued marketing expenses

 

2,320

 

 

5,268

Accrued shipping expenses

 

2,041

 

 

2,034

Other current liabilities

 

10,451

 

 

9,889

Accrued expenses and other current liabilities

$

25,743

 

$

30,366

 

 

8. Deferred Revenue

Deferred revenue consists of the following:

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

2020

 

2019

 

(In thousands)

Cash received prior to fulfillment

$

5,731

 

$

3,205

Gift cards, prepaid orders, and other

 

2,083

 

 

2,915

Deferred revenue

$

7,814

 

$

6,120

 

Under ASC 606, the Company has two types of contractual liabilities: (i) cash collections from its customers prior to delivery of products purchased, which are included in Deferred revenue on the Consolidated Balance Sheet, and are recognized as revenue upon transfer of control of its products, and (ii) unredeemed gift cards and other prepaid orders, which are included in Deferred revenue on the Consolidated Balance Sheet, and are recognized as revenue when gift cards are redeemed and the products are delivered. Certain gift cards are not expected to be redeemed, also known as breakage, and are recognized as revenue over the expected redemption period, subject to requirements to remit balances to governmental agencies.

Contractual liabilities included in Deferred revenue on the Consolidated Balance Sheets were $7.8 million and $6.1 million as of March 31, 2020 and December 31, 2019, respectively. During the three months ended March 31, 2020, the Company recognized $4.7 million to Net revenue from the Deferred revenue at December 31, 2019.

9. Debt

Revolving Credit Facility

In August 2016, the Company entered into a revolving credit and guaranty agreement (the “revolving credit facility”) with a maximum amount available to borrow of $150.0 million. The borrower under the revolving credit facility is the Company’s wholly-owned subsidiary, Blue Apron, LLC. In May 2017 and June 2017, the Company executed amendments to the agreement that each increased the total commitments by $25.0 million, resulting in a total commitment of $200.0 million. In October 2018, the Company amended and refinanced the revolving credit facility (the “2018 credit facility refinancing”) to, among other things, reduce the aggregate lender commitments to $85.0 million and

14

extend the maturity date of the facility to February 2021. In connection with the 2018 credit facility refinancing, the Company repaid $41.4 million of indebtedness. In October 2019, the Company further amended and refinanced the revolving credit facility (the “2019 credit facility refinancing”) to, among other things, further reduce the aggregate lender commitments to $55.0 million and extend the maturity date of the facility to August 2021. In connection with the 2019 credit facility refinancing, the Company repaid $28.9 million of indebtedness.

As of March 31, 2020 and December 31, 2019, the Company had $54.7 million in outstanding borrowings under the revolving credit facility, and $0.3 million in issued letters of credit under the revolving credit facility. The remaining amount available to borrow as of March 31, 2020 and December 31, 2019 was $0.0 million. The Company incurred and capitalized $0.5 million in deferred financing costs in long-term debt in connection with the revolving credit facility in August 2016. In conjunction with the 2019 credit facility refinancing and 2018 credit facility refinancing, the Company incurred and capitalized $0.8 million and $0.9 million, respectively, in deferred financing costs in long-term debt, are being amortized over the remaining term. As of March 31, 2020 and December 31, 2019, the total unamortized deferred financing costs was $1.0 million and $1.2 million, respectively.

As of March 31, 2020 and December 31, 2019, outstanding borrowings of debt consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31,

 

 

    

Maturity Date

 

2020

    

2019

 

 

 

 

 

(In thousands)

 

Revolving credit facility

 

August 2021

 

$

54,678

 

$

54,678

 

Weighted average interest rate

 

 

 

 

6.22

%

 

6.22

%

Subsequent to the 2019 credit facility refinancing, borrowings under the revolving credit facility bore interest, at the Company’s option, at (1) a base rate based on the highest of prime rate, the federal funds rate plus 0.50% and an adjusted LIBOR rate for a one month interest period plus 1.00% (the “base rate”), plus in each case a margin of 3.25% or (2) an adjusted LIBOR rate (the “eurodollar rate”) plus a margin of 4.25%.  Prior to the 2019 credit facility refinancing, base rate loans bear interest at a rate equal to the base rate plus a margin of 3.00% and eurodollar rate loans bear interest at a rate equal to the eurodollar rate plus a margin of 4.00%. As of March 31, 2020 and December 31, 2019, the Company had outstanding borrowings of $54.7 million utilizing the eurodollar rate and $0.0 million utilizing the base rate. The Company is also obligated under the revolving credit facility to pay customary fees, including an unused commitment fee on undrawn amounts of 0.15%.

The obligations under the revolving credit facility are guaranteed by Blue Apron Holdings, Inc. Obligations under the revolving credit facility are secured by substantially all of the assets of the guarantor and its subsidiaries. The revolving credit facility contains certain restrictive covenants, financial covenants, and affirmative and financial reporting covenants restricting the Company and the Company’s subsidiaries’ activities. Restrictive covenants include limitations on the incurrence of indebtedness and liens, restrictions on affiliate transactions, restrictions on the sale or other disposition of collateral, and limitations on dividends and stock repurchases. As of March 31, 2020 and December 31, 2019, financial covenants included a requirement to maintain a minimum aggregate liquidity balance of $20.0 million as of each quarter end and $10.0 million at any liquidity test date other than at quarter end and, in the event the Company had positive consolidated total net debt, maintain minimum quarterly consolidated adjusted EBITDA in excess of certain specified thresholds as defined in the revolving credit and guaranty agreement.

Non-compliance with the covenants under the revolving credit facility would result in an event of default upon which the lenders could declare all outstanding principal and interest to be due and payable immediately, terminate their commitments to loan money and foreclose against the assets securing the borrowings. As of March  31, 2020 and December 31, 2019, the Company was in compliance with all of the covenants under the revolving credit facility.

Facility Financing Obligation

As of March 31, 2020, the Company had a facility financing obligation of $36.0 million related to the leased facility in Linden under the build-to-suit accounting guidance. As of December 31, 2019, the Company had a facility financing obligation of $71.7 million related to leased facilities in Linden and Fairfield under the build-to-suit accounting guidance. See Note 6 for further discussion of the Fairfield lease termination.

15

10. Commitments and Contingencies

Legal Proceedings

The Company records accruals for loss contingencies associated with legal matters when it is probable that a liability will be incurred and the amount of the loss can be reasonably estimated. If the Company determines that a loss is reasonably possible, the Company discloses the matter, and, if estimable, the amount or range of the possible loss in the notes to the Consolidated Financial Statements. As of March 31, 2020, the Company has an accrual of $2.1 million for an estimated legal settlement for which the Company concluded the loss is probable and reasonably estimable.

The Company is subject to a consolidated putative class action lawsuit in the U.S. District Court for the Eastern District of New York alleging federal securities law violations in connection with the IPO.  The amended complaint alleges that the Company and certain current and former officers and directors made material misstatements or omissions in the Company’s registration statement and prospectus that caused the stock price to drop.  Pursuant to a stipulated schedule entered by the parties, defendants filed a motion to dismiss the amended complaint on May 21, 2018.  Plaintiffs filed a response on July 12, 2018 and defendants filed a reply on August 13, 2018.  On April 22, 2020, the Court entered an order (i) denying the motion to dismiss insofar as Plaintiffs’ allegations pertained to certain of the disclosures in the registration statement and prospectus claimed by plaintiff, and (ii) narrowing the factual issues in the case. The Company is also subject to two putative class action lawsuits filed in New York Supreme Court alleging federal securities law violations in connection with the IPO, which are substantially similar to the above-referenced federal court action.  The parties entered into stipulations staying the state court actions pending resolution of the motion to dismiss filed in the federal court action.  Pursuant to the stipulations, the parties have 30 days from the date of the order on the motion to dismiss in the federal action to confer concerning a schedule. The Company is unable to provide any assurances as to the ultimate outcome of any of these lawsuits or that an adverse resolution of any of these lawsuits would not have a material adverse effect on the Company’s consolidated financial position or results of operations.

In December 2017, the Company and its directors were named as defendants in a shareholder derivative action filed in the Delaware Court of Chancery. The plaintiff sought a declaratory judgment challenging the validity of a provision of the Company’s restated certificate of incorporation that requires shareholders to bring claims under the Securities Act of 1933 solely in federal court (the “federal forum provision”). On December 19, 2018, the Court of Chancery entered summary judgment in favor of the plaintiff and on July 8, 2019, the court entered an award of attorneys’ fees and expenses to plaintiff.  The Company appealed both the summary judgment order and the fee award to the Supreme Court of the State of Delaware and a hearing was held on January 8. 2020. On March 18, 2020, the Supreme Court reversed the Court of Chancery’s judgment in all respects, thereby validating the federal forum provision and reversing the fee award. On April 24, 2020, final judgment was entered and the escrowed fee award was returned to the Company.

The Company is subject to a lawsuit filed in California Superior Court under the Private Attorneys General Act on behalf of certain non-exempt employees in the Company’s Richmond, California fulfillment center.  The complaint was filed on October 16, 2017, and alleges that the Company failed to pay wages and overtime, provide required meal and rest breaks, provide suitable resting facilities and provide accurate wage statements, to non-exempt employees in violation of California law.  Plaintiffs’ counsel filed a separate class action lawsuit alleging largely the same claims, but covering a longer period, which is now pending in the United States District Court for the Northern District of California.  A mediation was held on November 20, 2019, at which time the cases were not resolved.  On December 16, 2019, Plaintiff filed a motion for class certification in federal court.  On December 18, 2019, the parties entered into a Memorandum of Understanding which, if finalized and approved by the court, will resolve both actions in their entirety.  The parties finalized a settlement agreement on March 2, 2020 and the court has vacated all other deadlines in the class-action case, including the due date for the Company’s opposition to the motion for class certification.  In light of a reduced court schedule as a result of the COVID-19 pandemic, the court cancelled the hearing on the motion for preliminary approval of the final settlement agreement which had been scheduled for April 16, 2020, and notified the parties that it will issue a determination on the motion without a hearing. If the court does not approve the settlement agreement, the cases will continue.

16

If the settlement agreement is not finalized or approved by the court, the Company is currently unable to provide any assurances as to the ultimate outcome of these lawsuits or that adverse resolution of these lawsuits would not have a material adverse effect on the Company’s consolidated financial position or results of operations.

On July 20, 2018, one of the Company’s suppliers, West Liberty Foods, L.L.C., (i) made an arbitration demand against the Company with JAMS, and (ii) together with certain related entities, filed a lawsuit against the Company in Iowa state court. The arbitration demand alleged breach of contract, fraud, and other common law claims in connection with, among other things, a dispute under the supply agreement between the parties related to the purchase of certain beef and poultry inventory of the supplier. The lawsuit, which was removed to the U.S. District Court for the Southern District of Iowa, alleged breach of oral contract and other common law claims in connection with a purported agreement between the Company and the supplier relating to the supplier’s acquisition of another company. On December 28, 2018, the Court denied the Company’s motion to dismiss the plaintiffs’ amended complaint. The parties settled both matters on January 31, 2020 and on February 4, 2020, both the Iowa lawsuit and the arbitration were dismissed with prejudice.

Although the Company believes that it is reasonably possible that it may incur losses in these cases, the Company is currently unable to estimate the amount of such losses, except as noted above, due to the early stages of certain of the litigations, among other factors.

In addition, from time to time the Company may become involved in legal proceedings or be subject to claims arising in the ordinary course of its business. Although the results of such litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these ordinary course matters will not have a material adverse effect on its business, operating results, financial condition or cash flows.

Sales Tax

On June 21, 2018, the U.S. Supreme Court decided, in South Dakota v. Wayfair, Inc., that state and local jurisdictions may, at least in certain circumstances, enforce a sales and use tax collection obligation on remote vendors that have no physical presence in the jurisdiction. A number of states have already begun, or have positioned themselves to begin, requiring sales and use tax collection by remote vendors and/or by online marketplaces. The details and effective dates of these collection requirements vary from state to state. It is possible that one or more jurisdictions may assert that the Company has liability for periods for which it has not collected sales, use or other similar taxes, and if such an assertion or assertions were successful it could result in substantial tax liabilities, including for past sales as well as penalties and interest, which could materially adversely affect the Company’s business, financial condition and operating results.

17

11. Share-based Compensation

The Company recognized share-based compensation for share-based awards of $2.2 million and $2.8 million during the three months ended March 31, 2020 and 2019, respectively. Share-based compensation was recognized in Cost of goods sold, excluding depreciation and amortization, and Product, technology, general, and administrative expenses as follows:

 

 

 

 

 

 

 

March 31, 

 

2020

  

2019

 

(In thousands)

Cost of goods sold, excluding depreciation and amortization

$

30

 

$

152

Product, technology, general, and administrative

 

2,210

 

 

2,683

Total share-based compensation

$

2,240

 

$

2,835

 

 

12. Earnings per Share

Basic net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period.

Diluted net income (loss) per share attributable to common stockholders is computed by dividing the diluted net income (loss) attributable to common stockholders by the weighted average number of common shares, including potential dilutive common shares assuming the dilutive effect of outstanding common stock options, restricted shares, restricted stock units, and convertible preferred stock. For periods in which the Company has reported net loss, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, because dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

The rights, including the liquidation and dividend rights, of the Class A, Class B, and Class C common stock are substantially the same, other than voting rights. For the three months ended March 31, 2020 and 2019, the Company did not have any outstanding shares of Class C common stock.

On June 13, 2019, the Board of Directors of the Company approved the Reverse Stock Split of the Company’s Class A Common Stock and Class B Common Stock at a ratio of 1-for-15 shares, which Reverse Stock Split became effective on June 14, 2019. Accordingly, all common share, equity award, and per share amounts have been adjusted to reflect the Reverse Stock Split for all prior periods presented.

18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

2020

 

2019

 

 

Class A

  

Class B

  

Class C

 

Class A

 

Class B

 

Class C

(In thousands, except share and per-share data)

 

 

 

 

 

Numerator:

 

 

  

 

 

  

 

 

  

 

 

 

 

 

 

 

 

  

Net income (loss)

 

$

(13,363)

 

$

(6,782)

 

$

 —

 

$

(2,313)

 

$

(2,962)

 

$

 —

Undistributed earnings reallocated to convertible preferred stock

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Net income (loss) attributable to common stockholders

 

$

(13,363)

 

$

(6,782)

 

$

 —

 

$

(2,313)

 

$

(2,962)

 

$

 —

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares used to compute net income (loss) per share attributable to common stockholders—basic

 

 

8,826,116

 

 

4,479,689

 

 

 —

 

 

5,691,984

 

 

7,287,916

 

 

 —

Effect of dilutive securities

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Weighted-average shares used to compute net income (loss) per share attributable to common stockholders—diluted

 

 

8,826,116

 

 

4,479,689

 

 

 —

 

 

5,691,984

 

 

7,287,916

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share attributable to common stockholders—basic (1)

 

$

(1.51)

 

$

(1.51)

 

$

 —

 

$

(0.41)

 

$

(0.41)

 

$

 —

Net income (loss) per share attributable to common stockholders—diluted (1)

 

$

(1.51)

 

$

(1.51)

 

$

 —

 

$

(0.41)

 

$

(0.41)

 

$

 —

 


(1)

Net income (loss) per share attributable to common stockholders — basic and net income (loss) per share attributable to common stockholders — diluted may not recalculate due to rounding.

The following have been excluded from the computation of diluted net income (loss) per share attributable to common stockholders as their effect would have been antidilutive:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

2020

 

2019

 

  

Class A

  

Class B

  

Class C

  

Class A

  

Class B

  

Class C

Stock options

 

22,529

 

184,350

 

 —

 

100,902

 

349,036

 

 —

Restricted shares

 

 —

 

 —

 

 —

 

 —

 

831

 

 —

Restricted stock units

 

1,682,990

 

 —

 

 —

 

708,210

 

 —

 

 —

Total anti-dilutive securities

 

1,705,519

 

184,350

 

 —

 

809,112

 

349,867

 

 —

 

 

 

13. Fair Value of Financial Instruments

The fair value of financial instruments is determined based on assumptions that market participants would use when pricing an asset or liability at the balance sheet date. Certain assets are categorized based on the following fair value hierarchy of market participant assumptions:

Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.

Level 2 — Inputs, other than quoted prices in active markets, that are observable either directly or indirectly.

Level 3 — Prices or valuation techniques that require inputs that are both significant to the fair value of the asset or liability and supported by little or no market activity.

19

The Company uses observable market data when available, and minimizes the use of unobservable inputs when determining fair value.

The following are the major categories of assets and liabilities measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019 using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2) and significant unobservable inputs (Level 3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

    

Level 1

    

Level 2