10-Q 1 lesl-20240330.htm 10-Q 10-Q
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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 30, 2024

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: 001-39667

 

LESLIE’S, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

20-8397425

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2005 East Indian School Road

Phoenix, AZ

85016

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (602) 366-3999

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.001 per share

 

LESL

 

The Nasdaq Global Select Market

 

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. YesNo

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). YesNo

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

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YesNo

As of May 3, 2024, the Registrant had 184,742,767, shares of common stock, $0.001 par value per share, outstanding.

 

 

 


Table of Contents

 

Page

PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements

2

 

Condensed Consolidated Balance Sheets

2

 

Condensed Consolidated Statements of Operations

3

 

Condensed Consolidated Statements of Stockholders’ Deficit

4

 

Condensed Consolidated Statements of Cash Flows

5

 

Notes to the Unaudited Condensed Consolidated Financial Statements

6

Item 2.

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

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

 

PART II

OTHER INFORMATION

 

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

26

Item 3.

Defaults Upon Senior Securities

26

Item 4.

Mine Safety Disclosures

26

Item 5.

Other Information

26

Item 6.

Exhibits

27

 

 

 

Signatures

 

28

 

i


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. 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 or financial condition, business strategy, legal proceedings, competitive advantages, market size, growth opportunities, industry expectations, and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would,” or the negative of these words or other similar terms or expressions. Our actual results or outcomes could differ materially from those indicated in these forward-looking statements for a variety of reasons, including, among others:

our ability to execute on our growth strategies;
supply disruptions;
our ability to maintain favorable relationships with suppliers and manufacturers;
competition from mass merchants and specialty retailers;
impacts on our business from the sensitivity of our business to weather conditions, changes in the economy (including rising interest rates, recession fears, and inflationary pressures), geopolitical events or conflicts, and the housing market;
disruptions in the operations of our distribution centers;
our ability to implement technology initiatives that deliver the anticipated benefits, without disrupting our operations;
our ability to attract and retain senior management and other qualified personnel;
regulatory changes and development affecting our current and future products including evolving legal standards and regulations concerning environmental, social and governance (“ESG”) matters;
our ability to obtain additional capital to finance operations;
commodity price inflation and deflation;
impacts on our business from epidemics, pandemics, or natural disasters;
impacts on our business from cyber incidents and other security threats or disruptions;
our ability to remediate material weaknesses or other deficiencies in our internal control over financial reporting or to maintain effective disclosure controls and procedures and internal control over financial reporting; and
other risks and uncertainties, including those listed in the section titled “Risk Factors” in our filings with the United States Securities and Exchange Commission (“SEC”).

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, 2023 and in our other filings with the SEC. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results or outcomes could differ materially from those described in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q, and, while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q are based on events or circumstances as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information, changed expectations, the occurrence of unanticipated events or otherwise, except as required by law. We may not actually achieve the plans, intentions, outcomes, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments.

1


PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

LESLIE’S, INC.

CONDENSED Consolidated Balance Sheets

(Amounts in Thousands, Except Share and Per Share Amounts)

 

 

 

March 30, 2024

 

 

September 30, 2023

 

 

April 1, 2023

 

 

 

(Unaudited)

 

 

(Audited)

 

 

(Unaudited)

 

Assets

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,436

 

 

$

55,420

 

 

$

8,701

 

Accounts and other receivables, net

 

 

32,693

 

 

 

29,396

 

 

 

37,988

 

Inventories

 

 

379,090

 

 

 

311,837

 

 

 

492,328

 

Prepaid expenses and other current assets

 

 

33,413

 

 

 

23,633

 

 

 

52,701

 

Total current assets

 

 

453,632

 

 

 

420,286

 

 

 

591,718

 

Property and equipment, net

 

 

89,820

 

 

 

90,285

 

 

 

80,612

 

Operating lease right-of-use assets

 

 

260,221

 

 

 

251,460

 

 

 

231,428

 

Goodwill and other intangibles, net

 

 

216,973

 

 

 

218,855

 

 

 

216,594

 

Deferred tax assets

 

 

34,297

 

 

 

7,598

 

 

 

 

Other assets

 

 

40,305

 

 

 

45,951

 

 

 

42,878

 

Total assets

 

$

1,095,248

 

 

$

1,034,435

 

 

$

1,163,230

 

Liabilities and stockholders’ deficit

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

112,441

 

 

$

58,556

 

 

$

139,804

 

Accrued expenses and other current liabilities

 

 

79,989

 

 

 

90,598

 

 

 

82,900

 

Operating lease liabilities

 

 

61,571

 

 

 

62,794

 

 

 

61,587

 

Income taxes payable

 

 

 

 

 

5,782

 

 

 

 

Current portion of long-term debt

 

 

8,100

 

 

 

8,100

 

 

 

8,100

 

Total current liabilities

 

 

262,101

 

 

 

225,830

 

 

 

292,391

 

Deferred tax liabilities

 

 

 

 

 

 

 

 

676

 

Operating lease liabilities, noncurrent

 

 

193,818

 

 

 

193,222

 

 

 

173,531

 

Revolving Credit Facility

 

 

97,000

 

 

 

 

 

 

172,000

 

Long-term debt, net

 

 

770,157

 

 

 

773,276

 

 

 

776,542

 

Other long-term liabilities

 

 

3,144

 

 

 

3,469

 

 

 

3,055

 

Total liabilities

 

 

1,326,220

 

 

 

1,195,797

 

 

 

1,418,195

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Stockholders’ deficit

 

 

 

 

 

 

 

 

 

Common stock, $0.001 par value, 1,000,000,000 shares authorized and 184,742,767, 184,333,670, and 183,843,169 issued and outstanding as of March 30, 2024, September 30, 2023, and April 1, 2023, respectively.

 

 

185

 

 

 

184

 

 

 

184

 

Additional paid in capital

 

 

103,775

 

 

 

99,280

 

 

 

94,705

 

Retained deficit

 

 

(334,932

)

 

 

(260,826

)

 

 

(349,854

)

Total stockholders’ deficit

 

 

(230,972

)

 

 

(161,362

)

 

 

(254,965

)

Total liabilities and stockholders’ deficit

 

$

1,095,248

 

 

$

1,034,435

 

 

$

1,163,230

 

 

See accompanying notes which are an integral part of these condensed consolidated financial statements.

2


LESLIE’S, INC.

CONDENSED Consolidated Statements of Operations

(Amounts in Thousands, Except Per Share Amounts)

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

March 30, 2024

 

 

April 1, 2023

 

 

March 30, 2024

 

 

April 1, 2023

 

Sales

 

$

188,664

 

 

$

212,844

 

 

$

362,624

 

 

$

407,948

 

Cost of merchandise and services sold

 

 

134,336

 

 

 

141,674

 

 

 

257,888

 

 

 

271,482

 

Gross profit

 

 

54,328

 

 

 

71,170

 

 

 

104,736

 

 

 

136,466

 

Selling, general and administrative expenses

 

 

84,856

 

 

 

96,357

 

 

 

171,734

 

 

 

188,638

 

Operating loss

 

 

(30,528

)

 

 

(25,187

)

 

 

(66,998

)

 

 

(52,172

)

Other expense:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

18,153

 

 

 

17,247

 

 

 

35,224

 

 

 

30,607

 

Total other expense

 

 

18,153

 

 

 

17,247

 

 

 

35,224

 

 

 

30,607

 

Loss before taxes

 

 

(48,681

)

 

 

(42,434

)

 

 

(102,222

)

 

 

(82,779

)

Income tax benefit

 

 

(14,128

)

 

 

(10,907

)

 

 

(28,116

)

 

 

(20,993

)

Net loss

 

$

(34,553

)

 

$

(31,527

)

 

$

(74,106

)

 

$

(61,786

)

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.19

)

 

$

(0.17

)

 

$

(0.40

)

 

$

(0.34

)

Diluted

 

$

(0.19

)

 

$

(0.17

)

 

$

(0.40

)

 

$

(0.34

)

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

184,625

 

 

 

183,729

 

 

 

184,504

 

 

 

183,621

 

Diluted

 

 

184,625

 

 

 

183,729

 

 

 

184,504

 

 

 

183,621

 

 

See accompanying notes which are an integral part of these condensed consolidated financial statements.

3


LESLIE’S, INC.

CONDENSED Consolidated Statements of Stockholders’ Deficit

(Amounts in Thousands)

(Unaudited)

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Paid in Capital

 

 

Retained Deficit

 

 

Stockholders’ Deficit

 

Balance, December 31, 2022

 

 

183,564

 

 

$

184

 

 

$

92,508

 

 

$

(318,327

)

 

$

(225,635

)

Issuance of common stock under the Plan

 

 

367

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity-based compensation

 

 

 

 

 

 

 

 

3,517

 

 

 

 

 

 

3,517

 

Restricted stock units surrendered in lieu of withholding taxes

 

 

(88

)

 

 

 

 

 

(1,320

)

 

 

 

 

 

(1,320

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(31,527

)

 

 

(31,527

)

Balance, April 1, 2023

 

 

183,843

 

 

$

184

 

 

$

94,705

 

 

$

(349,854

)

 

$

(254,965

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 30, 2023

 

 

184,513

 

 

$

184

 

 

$

101,547

 

 

$

(300,379

)

 

$

(198,648

)

Issuance of common stock under the Plan

 

 

320

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Equity-based compensation

 

 

 

 

 

 

 

 

2,688

 

 

 

 

 

 

2,688

 

Restricted stock units surrendered in lieu of withholding taxes

 

 

(90

)

 

 

 

 

 

(460

)

 

 

 

 

 

(460

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(34,553

)

 

 

(34,553

)

Balance, March 30, 2024

 

 

184,743

 

 

$

185

 

 

$

103,775

 

 

$

(334,932

)

 

$

(230,972

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Paid in Capital

 

 

Retained Deficit

 

 

Stockholders’ Deficit

 

Balance, October 1, 2022

 

 

183,481

 

 

$

183

 

 

$

89,934

 

 

$

(288,068

)

 

$

(197,951

)

Issuance of common stock under the Plan

 

 

477

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Equity-based compensation

 

 

 

 

 

 

 

 

6,510

 

 

 

 

 

 

6,510

 

Restricted stock units surrendered in lieu of withholding taxes

 

 

(115

)

 

 

 

 

 

(1,739

)

 

 

 

 

 

(1,739

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(61,786

)

 

 

(61,786

)

Balance, April 1, 2023

 

 

183,843

 

 

$

184

 

 

$

94,705

 

 

$

(349,854

)

 

$

(254,965

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2023

 

 

184,334

 

 

$

184

 

 

$

99,280

 

 

$

(260,826

)

 

$

(161,362

)

Issuance of common stock under the Plan

 

 

541

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Equity-based compensation

 

 

 

 

 

 

 

 

5,383

 

 

 

 

 

 

5,383

 

Restricted stock units surrendered in lieu of withholding taxes

 

 

(132

)

 

 

 

 

 

(888

)

 

 

 

 

 

(888

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(74,106

)

 

 

(74,106

)

Balance, March 30, 2024

 

 

184,743

 

 

$

185

 

 

$

103,775

 

 

$

(334,932

)

 

$

(230,972

)

 

See accompanying notes which are an integral part of these condensed consolidated financial statements.

4


LESLIE’S, INC.

CONDENSED Consolidated Statements of Cash Flows

(Amounts in Thousands)

(Unaudited)

 

 

Six Months Ended

 

 

 

March 30, 2024

 

 

April 1, 2023

 

Operating Activities

 

 

 

 

 

 

Net loss

 

$

(74,106

)

 

$

(61,786

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

16,173

 

 

 

17,425

 

Equity-based compensation

 

 

5,383

 

 

 

6,510

 

Amortization of deferred financing costs and debt discounts

 

 

1,116

 

 

 

1,006

 

Provision for doubtful accounts

 

 

318

 

 

 

123

 

Deferred income taxes

 

 

(26,699

)

 

 

1,944

 

Loss on asset dispositions

 

 

88

 

 

 

118

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts and other receivables

 

 

(3,615

)

 

 

7,919

 

Inventories

 

 

(67,253

)

 

 

(127,365

)

Prepaid expenses and other current assets

 

 

(9,780

)

 

 

(30,897

)

Other assets

 

 

5,461

 

 

 

(6,734

)

Accounts payable

 

 

53,885

 

 

 

(16,652

)

Accrued expenses and other current liabilities

 

 

(9,649

)

 

 

(25,049

)

Income taxes payable

 

 

(5,782

)

 

 

(12,511

)

Operating lease assets and liabilities, net

 

 

(622

)

 

 

(41

)

Net cash used in operating activities

 

 

(115,082

)

 

 

(245,990

)

Investing Activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

(24,008

)

 

 

(14,828

)

Business acquisitions, net of cash acquired

 

 

 

 

 

(9,939

)

Proceeds from asset dispositions

 

 

44

 

 

 

1,176

 

Net cash used in investing activities

 

 

(23,964

)

 

 

(23,591

)

Financing Activities

 

 

 

 

 

 

Borrowings on Revolving Credit Facility

 

 

130,500

 

 

 

193,000

 

Payments on Revolving Credit Facility

 

 

(33,500

)

 

 

(21,000

)

Repayment of long-term debt

 

 

(4,050

)

 

 

(4,050

)

Payment of deferred financing costs

 

 

 

 

 

(222

)

Payments of employee tax withholdings related to restricted stock vesting

 

 

(888

)

 

 

(1,739

)

Net cash provided by financing activities

 

 

92,062

 

 

 

165,989

 

Net decrease in cash and cash equivalents

 

 

(46,984

)

 

 

(103,592

)

Cash and cash equivalents, beginning of period

 

 

55,420

 

 

 

112,293

 

Cash and cash equivalents, end of period

 

$

8,436

 

 

$

8,701

 

Supplemental Information:

 

 

 

 

 

 

Cash paid for interest

 

$

33,517

 

 

$

28,339

 

Cash paid for income taxes, net of refunds received

 

 

6,046

 

 

 

11,932

 

 

See accompanying notes which are an integral part of these condensed consolidated financial statements.

5


LESLIE’S, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Business and Operations

Leslie’s, Inc. (“Leslie’s,” “we,” “our,” “us,” “its,” or the “Company”) is the leading direct-to-consumer pool and spa care brand. We market and sell pool and spa supplies and related products and services, which primarily consist of maintenance items such as chemicals, equipment and parts, and cleaning accessories, as well as safety, recreational, and fitness-related products. We currently market our products through over 1,000 company-operated locations in 39 states and e-commerce websites.

Note 2—Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

We prepared the accompanying interim condensed consolidated financial statements following United States generally accepted accounting principles (“GAAP”). The financial statements include all normal and recurring adjustments that are necessary for a fair presentation of our financial position and operating results. The interim condensed consolidated financial statements include the accounts of Leslie’s, Inc. and our subsidiaries. All significant intercompany accounts and transactions have been eliminated. These interim condensed consolidated financial statements and the related notes should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended September 30, 2023.

Reclassification

Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on our results of operations.

Fiscal Periods

We operate on a fiscal calendar that results in a fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to September 30th. In a 52-week fiscal year, each quarter contains 13 weeks of operations; in a 53-week fiscal year, each of the first, second and third quarters includes 13 weeks of operations and the fourth quarter includes 14 weeks of operations. References to the three months ended March 30, 2024 and April 1, 2023 refer to the 13 weeks ended March 30, 2024 and April 1, 2023, respectively. References to the six months ended March 30, 2024 and April 1, 2023 refer to the 26 weeks ended March 30, 2024 and April 1, 2023, respectively.

Use of Estimates

Management is required to make certain estimates and assumptions during the preparation of the condensed consolidated financial statements in accordance with GAAP. These estimates and assumptions impact the reported amount of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the condensed consolidated financial statements. They also impact the reported amount of net income (loss) during any period. Actual results could differ from those estimates.

Significant estimates underlying the accompanying condensed consolidated financial statements include inventory reserves, lease assumptions, vendor rebate programs, our loyalty program, the determination of income taxes payable and deferred income taxes, sales returns reserve, self-insurance liabilities, the recoverability of intangible assets and goodwill, fair value of assets acquired in a business combination, and contingent consideration related to business combinations.

Seasonality

Our business is highly seasonal. Sales and earnings are highest during our third and fourth fiscal quarters, being April through September, which represent the peak months of swimming pool use. Sales are substantially lower during our first and second fiscal quarters.

Summary of Other Significant Accounting Policies

There have been no changes to our Significant Accounting Policies since our Annual Report on Form 10-K for the year ended September 30, 2023. For more information regarding our Significant Accounting Policies and Estimates, see Note 2—Summary of Significant Accounting Policies included in our Annual Report on Form 10-K for the year ended September 30, 2023.

6


Recent Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. This update is effective for annual periods beginning after December 15, 2024, though early adoption is permitted. We are currently evaluating the ASU to determine its impact on our disclosures; however, we do not expect there to be a material impact.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which require an entity to disclose the title and position of the Chief Operating Decision Maker (“CODM”) and the significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss. This update is effective for annual periods beginning after December 15, 2023 and interim disclosures beginning after December 15, 2024, though early adoption is permitted. This update is effective retrospectively upon adoption to all periods presented in the financial statements. We are currently evaluating the ASU to determine its impact on our disclosures; however, we do not expect there to be a material impact.

Note 3 —Goodwill and Other Intangibles, Net

Goodwill

The following table details the changes in goodwill (in thousands):

 

 

 

March 30, 2024

 

 

September 30, 2023

 

 

April 1, 2023

 

Balance at beginning of the period

 

$

180,698

 

 

$

173,513

 

 

$

173,513

 

Acquisitions, net of measurement period adjustments

 

 

 

 

 

7,185

 

 

 

2,831

 

Balance at the end of the period

 

$

180,698

 

 

$

180,698

 

 

$

176,344

 

Other Intangible Assets

Other intangible assets consisted of the following as of March 30, 2024 (in thousands, except weighted average remaining useful life):

 

 

Weighted
Average
Remaining
Useful Life
(in Years)

 

 

Gross
Carrying
Value

 

 

Accumulated
Amortization

 

 

Net
Carrying
Amount

 

Trade name and trademarks (finite life)

 

 

9.4

 

 

$

22,100

 

 

$

(4,350

)

 

$

17,750

 

Trade name and trademarks (indefinite life)

 

Indefinite

 

 

 

9,350

 

 

 

 

 

 

9,350

 

Non-compete agreements

 

 

4.9

 

 

 

2,260

 

 

 

(1,265

)

 

 

995

 

Consumer relationships

 

 

7.0

 

 

 

15,400

 

 

 

(7,332

)

 

 

8,068

 

Other intangibles

 

 

4.6

 

 

 

4,000

 

 

 

(3,888

)

 

 

112

 

Total

 

 

 

 

$

53,110

 

 

$

(16,835

)

 

$

36,275

 

 

Other intangible assets consisted of the following as of September 30, 2023 (in thousands, except weighted average remaining useful life):

 

 

Weighted
Average
Remaining
Useful Life
(in Years)

 

 

Gross
Carrying
Value

 

 

Accumulated
Amortization

 

 

Net
Carrying
Amount

 

Trade name and trademarks (finite life)

 

 

9.8

 

 

$

26,740

 

 

$

(7,958

)

 

$

18,782

 

Trade name and trademarks (indefinite life)

 

Indefinite

 

 

 

9,350

 

 

 

 

 

 

9,350

 

Non-compete agreements

 

 

5.4

 

 

 

8,683

 

 

 

(7,585

)

 

 

1,098

 

Consumer relationships

 

 

7.4

 

 

 

24,100

 

 

 

(15,317

)

 

 

8,783

 

Other intangibles

 

 

5.1

 

 

 

6,620

 

 

 

(6,476

)

 

 

144

 

Total

 

 

 

 

$

75,493

 

 

$

(37,336

)

 

$

38,157

 

 

7


Other intangible assets consisted of the following as of April 1, 2023 (in thousands, except weighted average remaining useful life):

 

 

Weighted
Average
Remaining
Useful Life
(in Years)

 

 

Gross
Carrying
Value

 

 

Accumulated
Amortization

 

 

Net
Carrying
Amount

 

Trade name and trademarks (finite life)

 

 

10.3

 

 

$

26,740

 

 

$

(6,915

)

 

$

19,825

 

Trade name and trademarks (indefinite life)

 

Indefinite

 

 

 

9,350

 

 

 

 

 

 

9,350

 

Non-compete agreements

 

 

5.9

 

 

 

8,683

 

 

 

(7,482

)

 

 

1,201

 

Consumer relationships

 

 

7.6

 

 

 

24,100

 

 

 

(14,419

)

 

 

9,681

 

Other intangibles

 

 

5.6

 

 

 

6,620

 

 

 

(6,427

)

 

 

193

 

Total

 

 

 

 

$

75,493

 

 

$

(35,243

)

 

$

40,250

 

 

Amortization expense was $0.9 million and $1.3 million for the three months ended March 30, 2024 and April 1, 2023, respectively. Amortization expense was $1.9 million and $2.2 million for the six months ended March 30, 2024 and April 1, 2023. No impairment of goodwill or other intangible assets was recorded during the three and six months ended March 30, 2024 and April 1, 2023, respectively.

The following table summarizes the estimated future amortization expense related to finite-lived intangible assets on our condensed consolidated balance sheet as of March 30, 2024 (in thousands):

 

 

Amount

 

Remainder of fiscal 2024

 

$

1,846

 

2025

 

 

3,632

 

2026

 

 

3,385

 

2027

 

 

3,262

 

2028

 

 

3,154

 

Thereafter

 

 

11,646

 

Total

 

$

26,925

 

 

Note 4—Accounts and Other Receivables, Net

Accounts and other receivables, net consisted of the following (in thousands):

 

 

 

March 30, 2024

 

 

September 30, 2023

 

 

April 1, 2023

 

Vendor and other rebates receivable

 

$

14,597

 

 

$

6,818

 

 

$

18,114

 

Customer receivables

 

 

15,120

 

 

 

18,334

 

 

 

16,560

 

Other receivables

 

 

4,668

 

 

 

5,900

 

 

 

4,805

 

Allowance for doubtful accounts

 

 

(1,692

)

 

 

(1,656

)

 

 

(1,491

)

Total

 

$

32,693

 

 

$

29,396

 

 

$

37,988

 

 

Note 5—Inventories

Inventories consisted of the following (in thousands):

 

 

 

March 30, 2024

 

 

September 30, 2023

 

 

April 1, 2023

 

Raw materials

 

$

4,693

 

 

$

3,076

 

 

$

7,184

 

Finished goods

 

 

374,397

 

 

 

308,761

 

 

 

485,144

 

Total

 

$

379,090

 

 

$

311,837

 

 

$

492,328

 

 

8


 

Note 6—Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

 

 

 

March 30, 2024

 

 

September 30, 2023

 

 

April 1, 2023

 

Prepaid insurance

 

$

5,777

 

 

$

1,236

 

 

$

6,125

 

Prepaid occupancy costs

 

 

2,167

 

 

 

1,967

 

 

 

1,937

 

Prepaid sales tax

 

 

3,396

 

 

 

4,060

 

 

 

3,027

 

Prepaid maintenance

 

 

5,329

 

 

 

4,426

 

 

 

2,589

 

Prepaid other

 

 

2,024

 

 

 

1,813

 

 

 

1,405

 

Income taxes receivable

 

 

1,682

 

 

 

 

 

 

22,362

 

Other current assets

 

 

13,038

 

 

 

10,131

 

 

 

15,256

 

Total

 

$

33,413

 

 

$

23,633

 

 

$

52,701

 

 

Note 7—Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

 

 

 

March 30, 2024

 

 

September 30, 2023

 

 

April 1, 2023

 

Accrued payroll and employee benefits

 

$

15,587

 

 

$

18,558

 

 

$

18,439

 

Customer deposits

 

 

6,370

 

 

 

7,356

 

 

 

8,766

 

Interest

 

 

1,179

 

 

 

581

 

 

 

1,604

 

Inventory related accruals

 

 

8,498

 

 

 

13,843

 

 

 

15,444

 

Loyalty and deferred revenue

 

 

7,577

 

 

 

6,785

 

 

 

6,379

 

Sales tax

 

 

6,532

 

 

 

9,146

 

 

 

7,534

 

Self-insurance reserves

 

 

11,477

 

 

 

9,138

 

 

 

9,662

 

Other accrued liabilities

 

 

22,769

 

 

 

25,191

 

 

 

15,072

 

Total

 

$

79,989

 

 

$

90,598

 

 

$

82,900

 

As of March 30, 2024, September 30, 2023, and April 1, 2023, capital expenditures included in other accrued liabilities were $0.6 million, $1.5 million, and $1.2 million, respectively.

Note 8—Long-Term Debt, Net

Our long-term debt, net consisted of the following (in thousands, except interest rates):

 

 

 

Effective
Interest Rate
(1)

 

 

March 30, 2024

 

 

September 30, 2023

 

 

April 1, 2023

 

Term Loan

 

 

8.19

%

(2)

$

785,700

 

 

$

789,750

 

 

$

793,800

 

Revolving Credit Facility

 

 

6.70

%

(3)

 

97,000

 

 

 

 

 

 

172,000

 

Total long-term debt

 

 

 

 

 

882,700

 

 

 

789,750

 

 

 

965,800

 

Less: current portion of long-term debt

 

 

 

 

 

(8,100

)

 

 

(8,100

)

 

 

(8,100

)

Less: noncurrent Revolving Credit Facility

 

 

 

 

 

(97,000

)

 

 

 

 

 

(172,000

)

Less: unamortized discount

 

 

 

 

 

(2,068

)

 

 

(2,316

)

 

 

(2,562

)

Less: deferred financing charges

 

 

 

 

 

(5,375

)

 

 

(6,058

)

 

 

(6,596

)

Total long-term debt, net

 

 

 

 

$

770,157

 

 

$

773,276

 

 

$

776,542

 

 

(1)
Effective interest rates as of March 30, 2024.
(2)
Carries interest at a specified margin over the Term Secured Overnight Financing Rate (“SOFR”) between 2.50% and 2.75% with a minimum SOFR of 0.50% plus a SOFR adjustment.
(3)
Carries interest at a specific margin between 0.25% and 0.75% with respect to base rate loans and between 1.25% and 1.75% with respect to Term SOFR loans, with a SOFR adjustment.

 

9


Term Loan

In June 2023, we entered into Amendment No. 1 (“Term Loan Amendment”) to our Amended and Restated Term Loan Credit Agreement (“Term Loan”). The Term Loan Amendment (i) replaced the existing LIBOR-based interest rate benchmark with a Term SOFR-based benchmark and (ii) amended certain other related terms and provisions, including the addition of a SOFR adjustment of (a) 0.11448% per annum for one-month, (b) 0.26161% per annum for three months, and (c) 0.42826% per annum for six months. The other material terms of the Term Loan remained substantially unchanged.

The Term Loan provides for an $