Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Dec. 29, 2018	Feb. 01, 2019
Document and Entity Information
Entity Registrant Name	Container Store Group, Inc.
Entity Central Index Key	0001411688
Document Type	10-Q
Document Period End Date	Dec. 29, 2018
Amendment Flag	false
Current Fiscal Year End Date	--03-30
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Common Stock Outstanding		48,912,177
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	true

Consolidated balance sheets - USD ($) $ in Thousands	Dec. 29, 2018	Mar. 31, 2018	Dec. 30, 2017
Current assets:
Cash	$ 20,969	$ 8,399	$ 22,653
Accounts receivable, net	29,549	25,528	29,548
Inventory	116,006	97,362	110,391
Prepaid expenses	8,877	11,281	11,668
Income taxes receivable	640	15	1,450
Other current assets	10,404	11,609	10,338
Total current assets	186,445	154,194	186,048
Noncurrent assets:
Property and equipment, net	151,860	158,389	160,836
Goodwill	202,815	202,815	202,815
Trade names	226,996	229,401	230,379
Deferred financing costs, net	259	312	329
Noncurrent deferred tax assets, net	1,898	2,404	2,308
Other assets	1,749	1,854	1,684
Total noncurrent assets	585,577	595,175	598,351
Total assets	772,022	749,369	784,399
Current liabilities:
Accounts payable	59,571	43,692	53,757
Accrued liabilities	67,708	70,494	73,539
Current portion of long-term debt	7,018	7,771	9,465
Income taxes payable	1,589	4,580	1,690
Other current liabilities	67
Total current liabilities	135,953	126,537	138,451
Noncurrent liabilities:
Long-term debt	297,895	277,394	304,638
Noncurrent deferred tax liabilities, net	50,397	54,839	56,706
Deferred rent and other long-term liabilities	36,339	41,892	32,941
Total noncurrent liabilities	384,631	374,125	394,285
Total liabilities	520,584	500,662	532,736
Commitments and contingencies (Note 6)
Shareholders' equity:
Common stock, $0.01 par value, 250,000,000 shares authorized; 48,142,319 shares issued at December 29, 2018; 48,072,187 shares issued at March 31, 2018; 48,072,187 shares issued at December 30, 2017	481	481	481
Additional paid-in capital	863,119	861,263	860,827
Accumulated other comprehensive loss	(22,646)	(17,316)	(14,323)
Retained deficit	(589,516)	(595,721)	(595,322)
Total shareholders' equity	251,438	248,707	251,663
Total liabilities and shareholders' equity	$ 772,022	$ 749,369	$ 784,399

Consolidated balance sheets (Parenthetical) - $ / shares	Dec. 29, 2018	Mar. 31, 2018	Dec. 30, 2017
Consolidated balance sheets
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01	$ 0.01
Common stock, shares authorized	250,000,000	250,000,000	250,000,000
Common stock, shares issued	48,142,319	48,072,187	48,072,187

Consolidated statements of operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 29, 2018	Dec. 30, 2017	Dec. 29, 2018	Dec. 30, 2017
Consolidated statements of operations
Net sales	$ 221,637	$ 222,986	$ 641,913	$ 624,464
Cost of sales (excluding depreciation and amortization)	91,580	92,425	266,510	263,919
Gross profit	130,057	130,561	375,403	360,545
Selling, general, and administrative expenses (excluding depreciation and amortization)	108,688	103,894	320,949	306,866
Stock-based compensation	632	585	1,987	1,589
Pre-opening costs	691	1,872	1,918	4,676
Depreciation and amortization	8,887	9,477	27,352	28,524
Other expenses	80	751	297	4,908
(Gain) loss on disposal of assets	(324)	83	(284)	236
Income from operations	11,403	13,899	23,184	13,746
Interest expense, net	6,008	7,300	21,293	17,398
Loss on extinguishment of debt			2,082	2,369
Income (loss) before taxes	5,395	6,599	(191)	(6,021)
Benefit for income taxes	(3,926)	(21,780)	(5,989)	(25,848)
Net income	$ 9,321	$ 28,379	$ 5,798	$ 19,827
Net income per common share—basic and diluted	$ 0.19	$ 0.59	$ 0.12	$ 0.41
Weighted-average common shares - basic (in shares)	48,139,582	48,067,754	48,139,132	48,057,974
Weighted-average common shares - diluted (in shares)	48,381,455	48,167,882	48,407,337	48,128,682

Consolidated statements of comprehensive income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 29, 2018	Dec. 30, 2017	Dec. 29, 2018	Dec. 30, 2017
Consolidated statements of comprehensive income
Net income	$ 9,321	$ 28,379	$ 5,798	$ 19,827
Unrealized gain (loss) on financial instruments, net of tax provision (benefit) of $216, ($595), ($196) and $951	660	(713)	(687)	1,687
Pension liability adjustment	(3)	5	132	(175)
Foreign currency translation adjustment	(136)	480	(4,775)	6,808
Comprehensive income	$ 9,842	$ 28,151	$ 468	$ 28,147

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Consolidated statements of comprehensive income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 29, 2018	Dec. 30, 2017	Dec. 29, 2018	Dec. 30, 2017
Consolidated statements of comprehensive income
Unrealized gain (loss) on financial instruments, tax provision (benefit)	$ 216	$ (595)	$ (196)	$ 951

Consolidated statements of cash flows - USD ($) $ in Thousands	9 Months Ended
	Dec. 29, 2018	Dec. 30, 2017
Operating activities
Net income	$ 5,798	$ 19,827
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	27,352	28,524
Stock-based compensation	1,987	1,589
(Gain) loss on disposal of assets	(284)	236
Loss on extinguishment of debt	2,082	2,369
Deferred tax benefit	(3,959)	(27,255)
Non-cash interest	1,886	1,905
Other	(35)	326
Changes in operating assets and liabilities:
Accounts receivable	(4,655)	(727)
Inventory	(22,013)	(2,665)
Prepaid expenses and other assets	4,853	233
Accounts payable and accrued liabilities	13,475	19,627
Income taxes	(3,564)	(2,461)
Other noncurrent liabilities	(5,100)	(2,136)
Net cash provided by operating activities	17,823	39,392
Investing activities
Additions to property and equipment	(21,328)	(20,101)
Proceeds from sale of property and equipment	915	19
Net cash used in investing activities	(20,413)	(20,082)
Financing activities
Borrowings on revolving lines of credit	40,256	47,054
Payments on revolving lines of credit	(40,256)	(47,054)
Borrowings on long-term debt	326,500	335,000
Payments on long-term debt and capital leases	(308,251)	(331,885)
Payment of debt issuance costs	(2,384)	(11,246)
Payment of taxes with shares withheld upon restricted stock vesting	(128)	(39)
Net cash provided by (used in) financing activities	15,737	(8,170)
Effect of exchange rate changes on cash	(577)	777
Net increase in cash	12,570	11,917
Cash at beginning of fiscal period	8,399	10,736
Cash at end of fiscal period	20,969	22,653
Supplemental information for non-cash investing and financing activities:
Purchases of property and equipment (included in accounts payable)	2,619	894
Capital lease obligation incurred	$ 169	$ 178

Description of business and basis of presentation

9 Months Ended

Dec. 29, 2018

Nature of business and summary of significant accounting policies

Description of business and basis of presentation

The Container Store Group, Inc.

Notes to consolidated financial statements (unaudited)

(In thousands, except share amounts and unless otherwise stated)

December 29, 2018

1. Description of business and basis of presentation

These financial statements should be read in conjunction with the financial statement disclosures in our Annual Report on Form 10-K for the fiscal year ended March 31, 2018, filed with the Securities and Exchange Commission on May 31, 2018. The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). We use the same accounting policies in preparing quarterly and annual financial statements. All adjustments necessary for a fair presentation of quarterly operating results are reflected herein and are of a normal, recurring nature. Certain items in these consolidated financial statements have been reclassified to conform to the current period presentation.

Description of business

The Container Store, Inc. was founded in 1978 in Dallas, Texas, as a retailer with a mission to provide customers with storage and organization solutions through an assortment of innovative products and unparalleled customer service. In 2007, The Container Store, Inc. was sold to The Container Store Group, Inc. (the “Company”), a holding company, of which a majority stake was purchased by Leonard Green and Partners, L.P. (“LGP”), with the remainder held by certain employees of The Container Store, Inc. On November 6, 2013, the Company completed its initial public offering (the “IPO”). As the majority shareholder, LGP retains a controlling interest in the Company. As of December 29, 2018, The Container Store, Inc. (“TCS”) operates 92 stores with an average size of approximately 25,000 square feet (19,000 selling square feet) in 33 states and the District of Columbia. The Container Store, Inc. also offers all of its products directly to its customers, including business-to-business customers, through its website and call center. The Container Store, Inc.’s wholly-owned Swedish subsidiary, Elfa International AB (“Elfa”), designs and manufactures component-based shelving and drawer systems and made-to-measure sliding doors. elfa® branded products are sold exclusively in the United States in The Container Store retail stores, website and call center, and Elfa sells to various retailers on a wholesale basis in approximately 30 countries around the world, with a concentration in the Nordic region of Europe.

Seasonality

The Company’s business is moderately seasonal in nature and, therefore, the results of operations for the thirty-nine weeks ended December 29, 2018 are not necessarily indicative of the operating results for the full year. The Company has historically realized a higher portion of net sales, operating income, and cash flows from operations in the fourth fiscal quarter, attributable primarily to the timing and impact of Our Annual elfa® Sale, which traditionally starts in late December and runs into February.

Revenue recognition

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, an updated standard on revenue recognition. The Company adopted this standard in the first quarter of fiscal 2018 and elected to use the modified-retrospective approach for implementation of the standard. The core principle of the new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the Company expects to be entitled in exchange for those goods or services.

The Company has identified certain impacts to our accounting for gift cards given away for promotional or marketing purposes. Under previous GAAP, the value of promotional gift cards was recorded as selling, general, and administrative (“SG&A”) expense. The new standard requires these types of gift cards to be accounted for as a reduction of revenue (i.e. a discount). Additionally, ASU 2014-09 disallows the capitalization of direct-response advertising costs which will impact the timing of recognition of certain advertising production and distribution costs.

Upon transition on April 1, 2018, the Company recorded a cumulative adjustment to increase retained earnings/(deficit) and to decrease accrued liabilities by approximately $400. The Company also reclassified the asset balance for the estimate of future returned merchandise, which was approximately $900 as of March 31, 2018, from the “Inventory” line to the “Other current assets” line on the balance sheet. Overall, the adoption of ASU 2014-09 did not result in a material impact to the Company’s financial statements. Note 10 provides the related disaggregated revenue disclosures.

We recognize revenues and the related cost of goods sold for our TCS segment when merchandise is received by our customers. We recognize revenues and the related cost of goods sold for our Elfa segment upon shipment. We recognize shipping and handling fees as revenue when the merchandise is delivered to the customer. Costs of shipping and handling are included in cost of goods sold. We recognize fees for installation and other services as revenue upon completion of the service to the customer. Costs of installation and other services are included in cost of goods sold. Sales tax collected is not recognized as revenue as it is ultimately remitted to governmental authorities. We reserve for projected merchandise returns based on historical experience and various other assumptions that we believe to be reasonable. The reserve reduces sales and cost of sales, accordingly. Merchandise exchanges of similar product and price are not considered merchandise returns and, therefore, are excluded when calculating the sales returns reserve.

Contract Balances

Contract balances as a result of transactions with customers primarily consist of trade receivables included in Accounts receivable, net, unearned revenue included in Accrued liabilities, and gift cards and store credits outstanding included in Accrued liabilities in the Company's Consolidated Balance Sheets. Note 2 provides the Company's trade receivables, unearned revenue, and gift cards and store credits outstanding with customers as of December 29, 2018, March 31, 2018, and December 30, 2017.

Below is a rollforward of contract liability balances from March 31, 2018 to December 29, 2018, which illustrates the amount of contract liability as of March 31, 2018 which was subsequently recognized into revenue in the thirty-nine weeks ended December 29, 2018:


	Contract liability		Revenue recognized		Contract liabilities		Contract liability
	balance at		from beginning		added during		balance at
	March 31, 2018 (1)		liability		period (2)		December 29, 2018

Unearned revenue	$	11,080	$	(10,735)	$	10,596	$	10,941
Gift cards and store credits outstanding	$	8,470	$	(2,623)	$	3,715	$	9,562

(1)

Gift cards and store credits outstanding balance is net of revenue recognition transition adjustment

(2)

Net of estimated breakage

Recent accounting pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), to revise lease accounting guidance. The update requires most leases to be recorded on the balance sheet as a lease liability, with a corresponding right-of-use asset, whereas these leases currently have an off-balance sheet classification. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. The Company currently intends to adopt this standard in the first quarter of fiscal 2019 and expects to elect certain practical expedients permitted under the transition guidance, including the package of practical expedients; however, the Company does not intend to elect the hindsight practical expedient. Additionally, the Company will elect the optional transition method that allows for a cumulative-effect adjustment in the period of adoption and will not restate prior periods. In fiscal 2018, the Company implemented a new lease system to assist with its compliance with ASU 2016-02 in fiscal 2019, and has a project team focused on identifying a complete population of leases, evaluating accounting policy elections, and establishing new processes and internal controls. The Company is still evaluating the impact of implementation of this standard on its financial statements, but expects that adoption will have a material impact to the Company’s total assets and liabilities given the Company has a significant number of operating leases not currently recognized on its balance sheet. However, this standard is not expected to have a material impact on the consolidated statement of operations or the consolidated statement of cash flows.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which requires entities to recognize the income tax effects of intercompany sales and transfers of assets, other than inventory, in the period in which the transfer occurs. This is a change from current GAAP, which requires entities to defer the income tax effects of intercompany transfers of assets until the asset has been sold to an outside party or otherwise recognized (i.e. depreciated, amortized, impaired). The income tax effects of intercompany sales and transfers of inventory will continue to be deferred until the inventory is sold to an outside party. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those years, with early adoption permitted. The Company adopted ASU 2016-16 in the first quarter of fiscal 2018. The adoption of this standard did not result in a material impact to the Company’s financial statements.

In March 2017, the FASB issued ASU 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which provides guidance that requires an employer to present the service cost component separate from the other components of net periodic benefit cost. The update requires that employers present the service cost component of the net periodic benefit cost in the same income statement line item as other employee compensation costs arising from services rendered by participating employees during the period. The other components of the net periodic benefit cost are required to be presented separately from the line item that includes service cost and outside of the subtotal of income from operations. If a separate line item is not used, the line item used in the income statement must be disclosed. In addition, only the service cost component is eligible for capitalization in assets. The Company adopted ASU 2017-07 in the first quarter of fiscal 2018 on a retrospective basis. The adoption of this standard did not result in a material impact to the Company’s financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifies when modification accounting should be applied for changes to terms or conditions of a share-based payment award. The Company adopted ASU 2017-09 in the first quarter of fiscal 2018 on a prospective basis. The adoption of this standard did not result in a material impact to the Company’s financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which is intended to improve and simplify hedge accounting and improve the disclosures of hedging arrangements. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The adoption of this standard is not expected to result in a material impact to the Company’s financial statements.

In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under this ASU, the guidance on share-based payments to nonemployees would be aligned with the requirements for share-based payments granted to employees, with certain exceptions. This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. The Company is currently evaluating the impact of adopting the new standard on its financial statements, but does not expect it to have a material impact to the financial statements.

In August 2018, the FASB issued 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, which requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in Accounting Standards Codification (“ASC”) 350-40 to determine which implementation costs to capitalize as assets. A customer’s accounting for the costs of the hosting component of the arrangement are not affected by the new guidance. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. The adoption of this standard is not expected to result in a material impact to the Company’s financial statements.

Detail of certain balance sheet accounts

9 Months Ended

Dec. 29, 2018

Detail of certain balance sheet accounts

Detail of certain balance sheet accounts

2. Detail of certain balance sheet accounts


	December 29,		March 31,		December 30,
	2018		2018		2017
Accounts receivable, net:
Trade receivables, net	$	15,150	$	15,968	$	14,934
Credit card receivables		10,407		6,939		11,221
Tenant allowances		2,186		998		1,681
Other receivables		1,806		1,623		1,712
	$	29,549	$	25,528	$	29,548
Inventory:
Finished goods	$	110,769	$	91,970	$	104,714
Raw materials		4,762		4,840		5,139
Work in progress		475		552		538
	$	116,006	$	97,362	$	110,391
Accrued liabilities:
Accrued payroll, benefits and bonuses	$	21,406	$	23,833	$	25,847
Unearned revenue		10,941		11,080		10,197
Accrued transaction and property tax		9,767		12,846		12,621
Gift cards and store credits outstanding		9,562		8,891		9,984
Accrued lease liabilities		4,793		5,105		6,329
Accrued interest		1,844		292		156
Other accrued liabilities		9,395		8,447		8,405
	$	67,708	$	70,494	$	73,539

Long-term debt and revolving lines of credit

9 Months Ended

Dec. 29, 2018

Long-term debt and revolving lines of credit

Long-term debt and revolving lines of credit

3. Long-term debt and revolving lines of credit

On September 14, 2018 (the “Effective Date”), the Company entered into a fifth amendment (the “Fifth Amendment”) to the Credit Agreement dated as of April 6, 2012 (“Senior Secured Term Loan Facility”). The Fifth Amendment amended the Senior Secured Term Loan Facility to, among other things, (i) extend the maturity date of the loans under the Senior Secured Term Loan Facility to September 14, 2023, (ii) decrease the applicable interest rate margin to 5.00% for LIBOR loans and 4.00% for base rate loans and, beginning from the date that a compliance certificate is delivered to the administrative agent for the fiscal year ending March 30, 2019, allow the applicable interest rate margin to step down to 4.75% for LIBOR loans and 3.75% for base rate loans upon achievement of a consolidated leverage ratio equal to or less than 2.75:1.00, and (iii) impose a 1.00% premium if a voluntary prepayment is made from the proceeds of a repricing transaction within 12 months after the Effective Date.

In connection with the Fifth Amendment, the Company repaid $20,000 of the outstanding loans under the Senior Secured Term Loan Facility, which reduced the aggregate principal amount of the Senior Secured Term Loan Facility to $272,500. The Company drew down a net amount of approximately $10,000 on its $100,000 asset-based revolving credit agreement (the “Revolving Credit Facility”) in connection with the closing of the Fifth Amendment. In addition, the Company recorded a loss on extinguishment of debt of $2,082 in the thirteen weeks ended September 29, 2018 associated with the Fifth Amendment.

The Company capitalizes certain costs associated with issuance of various debt instruments. These deferred financing costs are amortized to interest expense on a straight-line method, which is materially consistent with the effective interest method, over the terms of the related debt agreements. In the thirty-nine weeks ended December 29, 2018, the Company capitalized $2,384 of fees associated with the Fifth Amendment which will be amortized through September 14, 2023.

Long-term debt and revolving lines of credit consist of the following:


	December 29,		March 31,		December 30,
	2018		2018		2017
Senior secured term loan facility	$	270,797	$	294,375	$	296,250
2014 Elfa term loan facility		—		—		2,569
2014 Elfa revolving credit facility		—		—		—
Obligations under capital leases		474		662		865
Other loans		—		16		49
Revolving credit facility		42,000		—		25,000
Total debt		313,271		295,053		324,733
Less current portion		(7,018)		(7,771)		(9,465)
Less deferred financing costs (1)		(8,358)		(9,888)		(10,630)
Total long-term debt	$	297,895	$	277,394	$	304,638

(1)

Represents deferred financing costs related to our Senior Secured Term Loan Facility, which are presented net of long-term debt in the consolidated balance sheet.

Net income per common share

9 Months Ended

Dec. 29, 2018

Net income per common share

Net income per common share

4. Net income per common share

Basic net income per common share is computed as net income divided by the weighted-average number of common shares for the period. Diluted net income per share is computed as net income divided by the weighted-average number of common shares for the period plus common stock equivalents consisting of shares subject to stock-based awards with exercise prices less than or equal to the average market price of the Company’s common stock for the period, to the extent their inclusion would be dilutive. Potentially dilutive securities are excluded from the computation of diluted net income per share if their effect is anti-dilutive.

The following is a reconciliation of net income and the number of shares used in the basic and diluted net income per share calculations:


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	December 29,		December 30,		December 29,		December 30,
	2018		2017		2018		2017
Numerator:
Net income	$	9,321	$	28,379	$	5,798	$	19,827
Denominator:
Weighted-average common shares — basic		48,139,582		48,067,754		48,139,132		48,057,974
Options and other dilutive securities		241,873		100,128		268,205		70,708
Weighted-average common shares — diluted		48,381,455		48,167,882		48,407,337		48,128,682

Net income per common share — basic and diluted	$	0.19	$	0.59	$	0.12	$	0.41
Antidilutive securities not included:
Stock options outstanding		2,408,068		3,157,843		2,450,246		3,016,359
Nonvested restricted stock awards		148,310		42,541		29,251		40,643

Income taxes	9 Months Ended
Income taxes	Dec. 29, 2018
Income taxes
Income taxes	5. Income taxes The benefit for income taxes in the thirteen weeks ended December 29, 2018 was $3,926 as compared to a benefit of $21,780 in the thirteen weeks ended December 30, 2017. The effective tax rate for the thirteen weeks ended December 29, 2018 was -72.8%, as compared to -330.1% in the thirteen weeks ended December 30, 2017. During the thirteen weeks ended December 29, 2018, the effective tax rate fell below the U.S statutory rate primarily due to the finalization of the one-time transition tax on foreign earnings related to the Tax Cuts and Jobs Act (the “Tax Act”) enacted in fiscal 2017. During the thirteen weeks ended December 30, 2017, the effective tax rate fell below the blended U.S. statutory rate of 31.5% primarily due to the estimated impact of the Tax Act, which was primarily driven by the remeasurement of deferred tax balances. The Company’s effective income tax rate for the thirty-nine weeks ended December 29, 2018 was 3135.6% compared to 429.3% for the thirty-nine weeks ended December 30, 2017. During the thirty-nine weeks ended December 29, 2018, the effective tax rate rose above the U.S. statutory rate due to the finalization of the one-time transition tax on foreign earnings and other Tax Act items, and recognition of a $604 tax benefit for the remeasurement of deferred tax balances as a result of a change in the Swedish tax rate, combined with a year-to-date pre-tax loss. During the thirty-nine weeks ended December 30, 2017, the effective tax rate rose above the blended U.S. statutory rate of 31.5% primarily due to the estimated impact of the Tax Act, which was primarily driven by the remeasurement of deferred tax balances. Tax Cuts and Jobs Act Pursuant to Staff Accounting Bulletin (“SAB”) No. 118 (“SAB 118”), the Company’s measurement period for implementing the accounting changes required by the Tax Act closed on December 22, 2018 and the Company completed the accounting under ASC Topic 740, Income Taxes (“ASC 740”) in the third quarter of fiscal 2018. In the fourth quarter of fiscal 2017, the Company recorded a provisional expense of $8,521 related to the one-time transition tax on foreign earnings. Upon further analysis of certain aspects of the Tax Act and refinement of its calculations, the Company recorded a benefit of $5,903 in the third quarter of fiscal 2018, which is included as a component of income tax benefit in the consolidated statement of operations, related to the one-time transition tax on foreign earnings. The final calculated one-time transition tax on foreign earnings is $2,618 which is net of foreign tax credit utilization of $833. Additionally, the Company has $1,331 of foreign tax credits which it does not expect to utilize to offset future foreign taxable income. As such, the Company has recorded a full valuation allowance related to these credits, the effect of which is included within the net transition tax liability. As of December 29, 2018, the Company has a remaining transition tax liability of $1,819, which will be paid in installments over the next seven years as elected. As of December 30, 2017, the Company remeasured deferred tax assets and liabilities based on the rates at which they were expected to reverse in the future, which was generally 21%, by recording a provisional benefit of $24,210. Upon further analysis of certain aspects of the Tax Act and refinement of its calculations, the Company adjusted its provisional amount by $224 of tax expense in the thirty-nine weeks ended December 29, 2018, which is included as a component of income tax benefit in the consolidated statement of operations. The final net impact related to the remeasurement of deferred tax assets and liabilities pursuant to the Tax Act is a benefit of $23,986. The Tax Act creates a new requirement that certain global intangible low-taxed income (“GILTI”) earned by controlled foreign corporations (“CFC”) must be included currently in the taxable income of the CFC’s U.S. shareholder. The Company became subject to the GILTI provisions beginning in fiscal 2018. The Company has elected an accounting policy to recognize GILTI as a period cost when incurred.

Commitments and contingencies	9 Months Ended
Commitments and contingencies	Dec. 29, 2018
Commitments and contingencies
Commitments and contingencies	6. Commitments and contingencies In connection with insurance policies and other contracts, the Company has outstanding standby letters of credit totaling $3,826 as of December 29, 2018. The Company is subject to ordinary litigation and routine reviews by regulatory bodies that are incidental to its business, none of which is expected to have a material adverse effect on the Company’s financial condition, results of operations, or cash flows on an individual basis or in the aggregate.

Accumulated other comprehensive income

9 Months Ended

Dec. 29, 2018

Accumulated other comprehensive income

Accumulated other comprehensive income

7. Accumulated other comprehensive loss

Accumulated other comprehensive loss (“AOCL”) consists of changes in our foreign currency forward contracts, pension liability adjustment, and foreign currency translation. The components of AOCL, net of tax, are shown below for the thirty-nine weeks ended December 29, 2018:


	Foreign
	currency		Pension		Foreign
	hedge		liability		currency
	instruments		adjustment		translation		Total
Balance at March 31, 2018	$	(102)	$	(1,793)	$	(15,421)	$	(17,316)

Other comprehensive (loss) income before reclassifications, net of tax		(1,408)		132		(4,775)		(6,051)
Amounts reclassified to earnings, net of tax		721		—		—		721
Net current period other comprehensive (loss) income		(687)		132		(4,775)		(5,330)

Balance at December 29, 2018	$	(789)	$	(1,661)	$	(20,196)	$	(22,646)

Amounts reclassified from AOCL to earnings for the foreign currency forward contracts category are generally included in cost of sales in the Company’s consolidated statements of operations. For a description of the Company’s use of foreign currency forward contracts, refer to Note 8.

Foreign currency forward contracts	9 Months Ended
Foreign currency forward contracts	Dec. 29, 2018
Foreign currency forward contracts.
Foreign currency forward contracts	8. Foreign currency forward contracts The Company’s international operations and purchases of inventory products from foreign suppliers are subject to certain opportunities and risks, including foreign currency fluctuations. In the TCS segment, we utilize foreign currency forward contracts in Swedish krona to stabilize our retail gross margins and to protect our domestic operations from downward currency exposure by hedging purchases of inventory from our wholly-owned subsidiary, Elfa. Forward contracts in the TCS segment are designated as cash flow hedges, as defined by ASC 815. In the Elfa segment, we utilize foreign currency forward contracts to hedge purchases, primarily of raw materials, that are transacted in currencies other than Swedish krona, which is the functional currency of Elfa. Forward contracts in the Elfa segment are economic hedges and are not designated as cash flow hedges as defined by ASC 815. During the thirty-nine weeks ended December 29, 2018 and December 30, 2017, the TCS segment used forward contracts for 97% and 100% of inventory purchases in Swedish krona, respectively. During the thirty-nine weeks ended December 29, 2018 and December 30, 2017, the Elfa segment used forward contracts to purchase U.S. dollars in the amount of $0 and $1,648, which represented 0% and 27% of the Elfa segment’s U.S. dollar purchases, respectively. Generally, the Company’s foreign currency forward contracts have terms from 1 to 12 months and require the Company to exchange currencies at agreed-upon rates at settlement. The counterparties to the contracts consist of a limited number of major domestic and international financial institutions. The Company does not hold or enter into financial instruments for trading or speculative purposes. The Company records its foreign currency forward contracts on a gross basis and generally does not require collateral from these counterparties because it does not expect any losses from credit exposure. The Company records all foreign currency forward contracts on its consolidated balance sheet at fair value. The Company accounts for its foreign currency hedging instruments in the TCS segment as cash flow hedges, as defined. Changes in the fair value of the foreign currency hedging instruments that are considered to be effective, as defined, are recorded in other comprehensive income (loss) until the hedged item (inventory) is sold to the customer, at which time the deferred gain or loss is recognized through cost of sales. Any portion of a change in the foreign currency hedge instrument’s fair value that is considered to be ineffective, as defined, or that the Company has elected to exclude from its measurement of effectiveness, is immediately recorded in earnings as cost of sales. The Company assessed the effectiveness of the foreign currency hedge instruments and determined the foreign currency hedge instruments were highly effective during the thirty-nine weeks ended December 29, 2018 and December 30, 2017. Forward contracts not designated as hedges in the Elfa segment are adjusted to fair value as SG&A expenses on the consolidated statements of operations; however, during the thirty-nine weeks ended December 29, 2018, the Company did not recognize any amount associated with the change in fair value of forward contracts not designated as hedging instruments, as the Company had none of these instruments outstanding. The Company had a $789 loss in accumulated other comprehensive loss related to foreign currency hedge instruments at December 29, 2018, of which $740 represents an unrealized loss for settled foreign currency hedge instruments related to inventory on hand as of December 29, 2018. The Company expects the unrealized loss of $740, net of taxes, to be reclassified into earnings over the next 12 months as the underlying inventory is sold to the end customer. The change in fair value of the Company’s foreign currency hedge instruments that qualify as cash flow hedges and are included in accumulated other comprehensive loss, net of taxes, are presented in Note 7 of these financial statements.

Fair value measurements

9 Months Ended

Dec. 29, 2018

Fair value measurements

Fair value measurements

9. Fair value measurements

Under GAAP, the Company is required to a) measure certain assets and liabilities at fair value or b) disclose the fair values of certain assets and liabilities recorded at cost. Accounting standards define fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date. Fair value is calculated assuming the transaction occurs in the principal or most advantageous market for the asset or liability and includes consideration of non-performance risk and credit risk of both parties. Accounting standards pertaining to fair value establish a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value. These tiers include:

·

Level 1—Valuation inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

·

Level 2—Valuation inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

·

Level 3—Valuation inputs are unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are determined using model-based techniques that include option pricing models, discounted cash flow models and similar techniques.

As of December 29, 2018, March 31, 2018 and December 30, 2017, the Company held certain items that are required to be measured at fair value on a recurring basis. These included the nonqualified retirement plan and foreign currency forward contracts. The nonqualified retirement plan consists of investments purchased by employee contributions to retirement savings accounts. The Company’s foreign currency hedging instruments consist of over-the-counter (OTC) contracts, which are not traded on a public exchange. See Note 8 for further information on the Company’s hedging activities.

The fair values of the nonqualified retirement plan and foreign currency forward contracts are determined based on the market approach which utilizes inputs that are readily available in public markets or can be derived from information available in publicly quoted markets for comparable assets. Therefore, the Company has categorized these items as Level 2. The Company also considers counterparty credit risk and its own credit risk in its determination of all estimated fair values. The Company has consistently applied these valuation techniques in all periods presented and believes it has obtained the most accurate information available for the types of contracts it holds.

The following items are measured at fair value on a recurring basis, subject to the disclosure requirements of ASC 820, Fair Value Measurements:


			December 29,		March 31,		December 30,
Description		Balance Sheet Location	2018		2018		2017
Assets
Nonqualified retirement plan (1)	N/A	Other current assets	$	5,156	$	5,848	$	5,782
Foreign currency forward contracts	Level 2	Other current assets		35		—		—
Total assets			$	5,191	$	5,848	$	5,782

(1)

The fair value amount of the nonqualified retirement plan is measured at fair value using the net asset value per share practical expedient, and therefore, is not classified in the fair value hierarchy.

The fair value of long-term debt was estimated using quoted prices as well as recent transactions for similar types of borrowing arrangements (Level 2 valuations). As of December 29, 2018, March 31, 2018 and December 30, 2017, the estimated fair value of the Company’s long-term debt, including current maturities, was $292,961, $295,605, and $313,068, respectively.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Segment reporting

9 Months Ended

Dec. 29, 2018

Segment reporting

Segment reporting

10. Segment reporting

The Company’s reportable segments were determined on the same basis as how management evaluates performance internally by the Chief Operating Decision Maker (“CODM”). The Company has determined that the Chief Executive Officer is the CODM and the Company’s two reportable segments consist of TCS and Elfa. The TCS segment includes the Company’s retail stores, website and call center, as well as the installation and organization services business.

The Elfa segment includes the manufacturing business that produces the elfa® brand products that are sold domestically exclusively through the TCS segment, as well as on a wholesale basis in approximately 30 countries around the world with a concentration in the Nordic region of Europe. The intersegment sales in the Elfa column represent elfa® product sales to the TCS segment. These sales and the related gross margin on merchandise recorded in TCS inventory balances at the end of the period are eliminated for consolidation purposes in the Eliminations column. The net sales to third parties in the Elfa column represent sales to customers outside of the United States.

The Company has determined that adjusted earnings before interest, tax, depreciation, and amortization (“Adjusted EBITDA”) is the profit or loss measure that the CODM uses to make resource allocation decisions and evaluate segment performance.

Adjusted EBITDA assists management in comparing our performance on a consistent basis for purposes of business decision-making by removing the impact of certain items that management believes do not directly reflect our core operations and, therefore, are not included in measuring segment performance. Adjusted EBITDA is calculated in accordance with the Senior Secured Term Loan Facility and the Revolving Credit Facility and we define Adjusted EBITDA as net income before interest, taxes, depreciation and amortization, certain non-cash items, and other adjustments that we do not consider in our evaluation of ongoing operating performance from period to period.


Thirteen weeks ended December 29, 2018	TCS		Elfa		Eliminations		Total
Net sales to third parties	$	204,899	$	16,738	$	—	$	221,637
Intersegment sales		—		22,369		(22,369)		—
Adjusted EBITDA		19,014		4,994		(2,192)		21,816
Interest expense, net		5,957		51		—		6,008
Assets (1)		671,865		105,491		(5,334)		772,022


Thirteen weeks ended December 30, 2017	TCS		Elfa		Eliminations		Total
Net sales to third parties	$	203,881	$	19,105	$	—	$	222,986
Intersegment sales		—		23,495		(23,495)		—
Adjusted EBITDA		22,550		6,374		(3,363)		25,561
Interest expense, net		7,232		68		—		7,300
Assets (1)		673,489		116,779		(5,869)		784,399


Thirty-nine weeks ended December 29, 2018	TCS		Elfa		Eliminations		Total
Net sales to third parties	$	593,896	$	48,017	$	—	$	641,913
Intersegment sales		—		47,414		(47,414)		—
Adjusted EBITDA		50,345		10,432		(2,223)		58,554
Interest expense, net		21,097		196		—		21,293
Assets (1)		671,865		105,491		(5,334)		772,022


Thirty-nine weeks ended December 30, 2017	TCS		Elfa		Eliminations		Total
Net sales to third parties	$	573,261	$	51,203	$	—	$	624,464
Intersegment sales		—		46,036		(46,036)		—
Adjusted EBITDA		51,760		10,965		(4,218)		58,507
Interest expense, net		17,189		209		—		17,398
Assets (1)		673,489		116,779		(5,869)		784,399

(1)

Tangible assets in the Elfa column are located outside of the United States.

A reconciliation of income (loss) before taxes to Adjusted EBITDA is set forth below:


	Thirteen Weeks Ended					Thirty-Nine Weeks Ended
	December 29,		December 30,		December 29,		December 30,
		2018		2017	2018		2017
Income (loss) before taxes	$	5,395	$	6,599	$	(191)	$	(6,021)
Add:
Depreciation and amortization		8,887		9,477		27,352		28,524
Interest expense, net		6,008		7,300		21,293		17,398
Pre-opening costs (a)		691		1,872		1,918		4,676
Non-cash rent (b)		101		(714)		(1,117)		(1,451)
Stock-based compensation (c)		632		585		1,987		1,589
Loss on extinguishment of debt (d)		—		—		2,082		2,369
Foreign exchange losses (gains) (e)		22		(360)		69		(306)
Optimization Plan implementation charges (f)		—		422		4,864		10,742
Elfa manufacturing facility closure (g)		—		335		—		852
Other adjustments (h)		80		45		297		135
Adjusted EBITDA	$	21,816	$	25,561	$	58,554	$	58,507

(a)

Non-capital expenditures associated with opening new stores and relocating stores, including rent, marketing expenses, travel and relocation costs, and training costs. We adjust for these costs to facilitate comparisons of our performance from period to period.

(b)

Reflects the extent to which our annual GAAP rent expense has been above or below our cash rent payment due to lease accounting adjustments. The adjustment varies depending on the average age of our lease portfolio (weighted for size), as our GAAP rent expense on younger leases typically exceeds our cash cost, while our GAAP rent expense on older leases is typically less than our cash cost.

(c)

Non-cash charges related to stock-based compensation programs, which vary from period to period depending on volume and vesting timing of awards. We adjust for these charges to facilitate comparisons from period to period.

(d)

Loss recorded as a result of the amendments made to the Senior Secured Term Loan Facility in September 2018 and the amendments made to the Senior Secured Term Loan Facility and the Revolving Credit Facility in August 2017, which we do not consider in our evaluation of our ongoing operations.

(e)

Realized foreign exchange transactional gains/losses our management does not consider in our evaluation of our ongoing operations.

(f)

Charges incurred to implement our Optimization Plan, which include certain consulting costs recorded in SG&A expenses in the first quarter of fiscal 2018 and in fiscal 2017, cash severance payments associated with the elimination of certain full-time positions at the TCS segment recorded in other expenses in fiscal 2017, and cash severance payments associated with organizational realignment at the Elfa segment recorded in other expenses in fiscal 2017, which we do not consider in our evaluation of ongoing performance.

(g)

Charges related to the closure of an Elfa manufacturing facility in Lahti, Finland in December 2017, recorded in other expenses, which we do not consider in our evaluation of our ongoing performance.

(h)

Other adjustments include amounts our management does not consider in our evaluation of our ongoing operations, including certain severance and other charges.

Subsequent Event	9 Months Ended
Subsequent Event	Dec. 29, 2018
Subsequent Event
Subsequent Event	11. Subsequent Event On January 24, 2019, as part of its ongoing long-term succession planning, the Company announced that Melissa Reiff, Chief Executive Officer, will succeed William A. “Kip” Tindell, III as Chairman of the Board effective as of the conclusion of the Company’s 2019 Annual Meeting of Shareholders (the “2019 Annual Meeting”). The Company also announced that Sharon Tindell, President and Chief Merchandising Officer, will retire from her role as President and Chief Merchandising Officer at the conclusion of the 2019 Annual Meeting. At that time, John Gehre, who joined The Container Store in June 2018 as Executive Vice President of Merchandising and Planning, will succeed Ms. Tindell as the Company’s Chief Merchandising Officer, and Melissa Reiff will add President to her title. In addition, the Company announced that Jodi Taylor will continue to serve as the Company’s Chief Financial Officer, Chief Administrative Officer and Secretary until a mutually agreed upon date after March 1, 2020 but before September 1, 2020, at which point she will no longer serve as the Company’s Chief Financial Officer and a successor Chief Financial Officer will be named, but Ms. Taylor will continue to serve as the Company’s Chief Administrative Officer and Secretary. In connection with the management changes described above, the Company entered into amended and restated employment agreements on January 23, 2019 with Ms. Reiff, Ms. Tindell, and Ms. Taylor. Each of the employment agreements continue to provide for annual grants of equity awards subject to the Company's 2013 Incentive Award Plan and award agreements thereunder. Each employment agreement was modified to provide that (i) upon a termination of employment by the Company without Cause (as defined in the applicable employment agreement), by the executive for Good Reason (as defined in the applicable employment agreement), or due to death or Disability (as defined in the applicable employment agreement), all equity awards subject to solely service-based vesting (rather than only stock options and performance-based restricted shares for which the performance period has ended) will vest (intended to reflect changes in the types of equity awards that have been granted by the Company recently), (ii) in the event of a termination of employment by the Company without Cause or by the executive for Good Reason within the two years following the date of a Change in Control (as defined in the applicable employment agreement), all restricted share awards subject to performance-based vesting with ongoing performance periods will fully vest in the amount that would have otherwise vested if the performance targets underlying such equity awards had been achieved at maximum levels, and (iii) upon a termination of employment due to expiration of the term, each executive will receive (a) in the case of Ms. Reiff and Ms. Taylor, severance that is substantially similar to that which such executive would receive in the event of a termination of employment by the Company without Cause or by the executive for Good Reason outside the Change in Control Context, with the exception that the severance multiple of annual base salary and annual bonus will be one rather than two, and (b) in the case of Ms. Tindell, accelerated vesting of the portion of Ms. Tindell’s outstanding performance-based restricted share award granted on July 1, 2016 that is scheduled to time-vest on April 1, 2020 (in the amount determined based on actual performance).

Description of business and basis of presentation

9 Months Ended

Dec. 29, 2018

Nature of business and summary of significant accounting policies

Rollforward of contract liabilities

Below is a rollforward of contract liability balances from March 31, 2018 to December 29, 2018, which illustrates the amount of contract liability as of March 31, 2018 which was subsequently recognized into revenue in the thirty-nine weeks ended December 29, 2018:


	Contract liability		Revenue recognized		Contract liabilities		Contract liability
	balance at		from beginning		added during		balance at
	March 31, 2018 (1)		liability		period (2)		December 29, 2018

Unearned revenue	$	11,080	$	(10,735)	$	10,596	$	10,941
Gift cards and store credits outstanding	$	8,470	$	(2,623)	$	3,715	$	9,562

(1)

Gift cards and store credits outstanding balance is net of revenue recognition transition adjustment

(2)

Net of estimated breakage

Detail of certain balance sheet accounts (Tables)

9 Months Ended

Dec. 29, 2018

Detail of certain balance sheet accounts

Schedule of detail of certain balance sheet accounts


	December 29,		March 31,		December 30,
	2018		2018		2017
Accounts receivable, net:
Trade receivables, net	$	15,150	$	15,968	$	14,934
Credit card receivables		10,407		6,939		11,221
Tenant allowances		2,186		998		1,681
Other receivables		1,806		1,623		1,712
	$	29,549	$	25,528	$	29,548
Inventory:
Finished goods	$	110,769	$	91,970	$	104,714
Raw materials		4,762		4,840		5,139
Work in progress		475		552		538
	$	116,006	$	97,362	$	110,391
Accrued liabilities:
Accrued payroll, benefits and bonuses	$	21,406	$	23,833	$	25,847
Unearned revenue		10,941		11,080		10,197
Accrued transaction and property tax		9,767		12,846		12,621
Gift cards and store credits outstanding		9,562		8,891		9,984
Accrued lease liabilities		4,793		5,105		6,329
Accrued interest		1,844		292		156
Other accrued liabilities		9,395		8,447		8,405
	$	67,708	$	70,494	$	73,539

Long-term debt and revolving lines of credit (Tables)

9 Months Ended

Dec. 29, 2018

Long-term debt and revolving lines of credit

Schedule of long-term debt and revolving lines of credit

Long-term debt and revolving lines of credit consist of the following:


	December 29,		March 31,		December 30,
	2018		2018		2017
Senior secured term loan facility	$	270,797	$	294,375	$	296,250
2014 Elfa term loan facility		—		—		2,569
2014 Elfa revolving credit facility		—		—		—
Obligations under capital leases		474		662		865
Other loans		—		16		49
Revolving credit facility		42,000		—		25,000
Total debt		313,271		295,053		324,733
Less current portion		(7,018)		(7,771)		(9,465)
Less deferred financing costs (1)		(8,358)		(9,888)		(10,630)
Total long-term debt	$	297,895	$	277,394	$	304,638

(1)

Represents deferred financing costs related to our Senior Secured Term Loan Facility, which are presented net of long-term debt in the consolidated balance sheet.

Net income per common share (Tables)

9 Months Ended

Dec. 29, 2018

Net income per common share

Schedule of reconciliation of net income and the number of shares used in the basic and diluted net income per share calculations


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	December 29,		December 30,		December 29,		December 30,
	2018		2017		2018		2017
Numerator:
Net income	$	9,321	$	28,379	$	5,798	$	19,827
Denominator:
Weighted-average common shares — basic		48,139,582		48,067,754		48,139,132		48,057,974
Options and other dilutive securities		241,873		100,128		268,205		70,708
Weighted-average common shares — diluted		48,381,455		48,167,882		48,407,337		48,128,682

Net income per common share — basic and diluted	$	0.19	$	0.59	$	0.12	$	0.41
Antidilutive securities not included:
Stock options outstanding		2,408,068		3,157,843		2,450,246		3,016,359
Nonvested restricted stock awards		148,310		42,541		29,251		40,643

Accumulated other comprehensive income (Tables)

9 Months Ended

Dec. 29, 2018

Accumulated other comprehensive income

Schedule of components of AOCI, net of tax


	Foreign
	currency		Pension		Foreign
	hedge		liability		currency
	instruments		adjustment		translation		Total
Balance at March 31, 2018	$	(102)	$	(1,793)	$	(15,421)	$	(17,316)

Other comprehensive (loss) income before reclassifications, net of tax		(1,408)		132		(4,775)		(6,051)
Amounts reclassified to earnings, net of tax		721		—		—		721
Net current period other comprehensive (loss) income		(687)		132		(4,775)		(5,330)

Balance at December 29, 2018	$	(789)	$	(1,661)	$	(20,196)	$	(22,646)

Fair value measurements (Tables)

9 Months Ended

Dec. 29, 2018

Fair value measurements

Schedule of items measured at fair value on a recurring basis, subject to the disclosure requirements of ASC 820


			December 29,		March 31,		December 30,
Description		Balance Sheet Location	2018		2018		2017
Assets
Nonqualified retirement plan (1)	N/A	Other current assets	$	5,156	$	5,848	$	5,782
Foreign currency forward contracts	Level 2	Other current assets		35		—		—
Total assets			$	5,191	$	5,848	$	5,782

(1)

The fair value amount of the nonqualified retirement plan is measured at fair value using the net asset value per share practical expedient, and therefore, is not classified in the fair value hierarchy.

Segment reporting (Tables)

9 Months Ended

Dec. 29, 2018

Segment reporting

Schedule of segment reporting


Thirteen weeks ended December 29, 2018	TCS		Elfa		Eliminations		Total
Net sales to third parties	$	204,899	$	16,738	$	—	$	221,637
Intersegment sales		—		22,369		(22,369)		—
Adjusted EBITDA		19,014		4,994		(2,192)		21,816
Interest expense, net		5,957		51		—		6,008
Assets (1)		671,865		105,491		(5,334)		772,022


Thirteen weeks ended December 30, 2017	TCS		Elfa		Eliminations		Total
Net sales to third parties	$	203,881	$	19,105	$	—	$	222,986
Intersegment sales		—		23,495		(23,495)		—
Adjusted EBITDA		22,550		6,374		(3,363)		25,561
Interest expense, net		7,232		68		—		7,300
Assets (1)		673,489		116,779		(5,869)		784,399


Thirty-nine weeks ended December 29, 2018	TCS		Elfa		Eliminations		Total
Net sales to third parties	$	593,896	$	48,017	$	—	$	641,913
Intersegment sales		—		47,414		(47,414)		—
Adjusted EBITDA		50,345		10,432		(2,223)		58,554
Interest expense, net		21,097		196		—		21,293
Assets (1)		671,865		105,491		(5,334)		772,022


Thirty-nine weeks ended December 30, 2017	TCS		Elfa		Eliminations		Total
Net sales to third parties	$	573,261	$	51,203	$	—	$	624,464
Intersegment sales		—		46,036		(46,036)		—
Adjusted EBITDA		51,760		10,965		(4,218)		58,507
Interest expense, net		17,189		209		—		17,398
Assets (1)		673,489		116,779		(5,869)		784,399

(1)

Tangible assets in the Elfa column are located outside of the United States.

Summary of reconciliation of Adjusted EBITDA by segment to income before taxes

A reconciliation of income (loss) before taxes to Adjusted EBITDA is set forth below:


	Thirteen Weeks Ended					Thirty-Nine Weeks Ended
	December 29,		December 30,		December 29,		December 30,
		2018		2017	2018		2017
Income (loss) before taxes	$	5,395	$	6,599	$	(191)	$	(6,021)
Add:
Depreciation and amortization		8,887		9,477		27,352		28,524
Interest expense, net		6,008		7,300		21,293		17,398
Pre-opening costs (a)		691		1,872		1,918		4,676
Non-cash rent (b)		101		(714)		(1,117)		(1,451)
Stock-based compensation (c)		632		585		1,987		1,589
Loss on extinguishment of debt (d)		—		—		2,082		2,369
Foreign exchange losses (gains) (e)		22		(360)		69		(306)
Optimization Plan implementation charges (f)		—		422		4,864		10,742
Elfa manufacturing facility closure (g)		—		335		—		852
Other adjustments (h)		80		45		297		135
Adjusted EBITDA	$	21,816	$	25,561	$	58,554	$	58,507

(a)

Non-capital expenditures associated with opening new stores and relocating stores, including rent, marketing expenses, travel and relocation costs, and training costs. We adjust for these costs to facilitate comparisons of our performance from period to period.

(b)

Reflects the extent to which our annual GAAP rent expense has been above or below our cash rent payment due to lease accounting adjustments. The adjustment varies depending on the average age of our lease portfolio (weighted for size), as our GAAP rent expense on younger leases typically exceeds our cash cost, while our GAAP rent expense on older leases is typically less than our cash cost.

(c)

Non-cash charges related to stock-based compensation programs, which vary from period to period depending on volume and vesting timing of awards. We adjust for these charges to facilitate comparisons from period to period.

(d)

Loss recorded as a result of the amendments made to the Senior Secured Term Loan Facility in September 2018 and the amendments made to the Senior Secured Term Loan Facility and the Revolving Credit Facility in August 2017, which we do not consider in our evaluation of our ongoing operations.

(e)

Realized foreign exchange transactional gains/losses our management does not consider in our evaluation of our ongoing operations.

(f)

Charges incurred to implement our Optimization Plan, which include certain consulting costs recorded in SG&A expenses in the first quarter of fiscal 2018 and in fiscal 2017, cash severance payments associated with the elimination of certain full-time positions at the TCS segment recorded in other expenses in fiscal 2017, and cash severance payments associated with organizational realignment at the Elfa segment recorded in other expenses in fiscal 2017, which we do not consider in our evaluation of ongoing performance.

(g)

Charges related to the closure of an Elfa manufacturing facility in Lahti, Finland in December 2017, recorded in other expenses, which we do not consider in our evaluation of our ongoing performance.

(h)

Other adjustments include amounts our management does not consider in our evaluation of our ongoing operations, including certain severance and other charges.

Description of business and basis of presentation (Details)	Dec. 29, 2018 ft² store state country
Description of business and basis of presentation
Number of stores \| store	92
Average size of stores (in square feet)	25,000
Average selling square feet in stores (in square feet)	19,000
Number of states \| state	33
Elfa
Description of business and basis of presentation
Number of countries in which products are sold on wholesale basis \| country	30

Description of business and basis of presentation - Recent accounting pronouncements (Details) - USD ($) $ in Thousands	Dec. 29, 2018	Apr. 01, 2018	Mar. 31, 2018	Dec. 30, 2017
Recent accounting pronouncements
Retained Earnings (Accumulated Deficit)	$ (589,516)		$ (595,721)	$ (595,322)
Accrued Liabilities, Current	67,708		70,494	73,539
Inventory, Net	116,006		97,362	110,391
Other Assets, Current	$ 10,404		11,609	$ 10,338
ASU 2014-09
Recent accounting pronouncements
Retained Earnings (Accumulated Deficit)		$ 400
Accrued Liabilities, Current		$ (400)
Inventory, Net			(900)
Other Assets, Current			$ 900

Description of business and basis of presentation - Contract Balances (Details) $ in Thousands	9 Months Ended
	Dec. 29, 2018 USD ($)
Rollforward of contract liability balances
Contract liability beginning balance	$ 11,080
Contract liability balance ending balance	10,941
Unearned revenue
Rollforward of contract liability balances
Contract liability beginning balance	11,080
Revenue recognized from beginning liability	(10,735)
Contract liabilities added during period	10,596
Contract liability balance ending balance	10,941
Gift card and store credits outstanding
Rollforward of contract liability balances
Contract liability beginning balance	8,470
Revenue recognized from beginning liability	(2,623)
Contract liabilities added during period	3,715
Contract liability balance ending balance	$ 9,562

Detail of certain balance sheet accounts (Details) - USD ($) $ in Thousands	Dec. 29, 2018	Mar. 31, 2018	Dec. 30, 2017
Accounts receivable, net:
Trade receivables, net	$ 15,150	$ 15,968	$ 14,934
Credit card receivables	10,407	6,939	11,221
Tenant allowances	2,186	998	1,681
Other receivables	1,806	1,623	1,712
Accounts receivable, net	29,549	25,528	29,548
Inventory:
Finished goods	110,769	91,970	104,714
Raw materials	4,762	4,840	5,139
Work in progress	475	552	538
Inventory	116,006	97,362	110,391
Accrued Liabilities:
Accrued payroll, benefits and bonuses	21,406	23,833	25,847
Unearned revenue	10,941	11,080	10,197
Accrued transaction and property tax	9,767	12,846	12,621
Gift cards and store credits outstanding	9,562	8,891	9,984
Accrued lease liabilities	4,793	5,105	6,329
Accrued interest	1,844	292	156
Other accrued liabilities	9,395	8,447	8,405
Accrued liabilities	$ 67,708	$ 70,494	$ 73,539

Long-term debt and revolving lines of credit - Term Loan Amendment and Revolving Amendment (Details) $ in Thousands		3 Months Ended	9 Months Ended
	Sep. 14, 2018	Sep. 29, 2018 USD ($)	Dec. 29, 2018 USD ($)	Dec. 30, 2017 USD ($)
Long-term debt and revolving lines of credit
Loss on extinguishment of debt			$ 2,082	$ 2,369
Revolving credit facility
Long-term debt and revolving lines of credit
Aggregate principle amount			100,000
Line of credit, draw down			10,000
Senior secured term loan facility
Long-term debt and revolving lines of credit
Fee premium imposed on voluntary prepayments (as a percent)	1.00%
Period in which a premium is imposed on voluntary prepayments, in months	12 months
Principal repayments			20,000
Outstanding borrowings		$ 272,500
Loss on extinguishment of debt		$ 2,082
Deferred financing costs			$ 2,384
Senior secured term loan facility \| Maximum
Long-term debt and revolving lines of credit
Debt Instrument leverage ratio covenant	2.75
Senior secured term loan facility \| LIBOR
Long-term debt and revolving lines of credit
Debt instrument annual step down leverage ratio	4.75
Interest rate margin (as a percent)	5.00%
Senior secured term loan facility \| Base rate
Long-term debt and revolving lines of credit
Debt instrument annual step down leverage ratio	3.75
Interest rate margin (as a percent)	4.00%

Long-term debt and revolving lines of credit - Schedule of long-term debt and revolving lines of credit (Details) - USD ($) $ in Thousands	Dec. 29, 2018	Mar. 31, 2018	Dec. 30, 2017
Long-term debt and revolving lines of credit
Total debt	$ 313,271	$ 295,053	$ 324,733
Less current portion	(7,018)	(7,771)	(9,465)
Less deferred financing costs	(8,358)	(9,888)	(10,630)
Total long-term debt	297,895	277,394	304,638
Senior secured term loan facility
Long-term debt and revolving lines of credit
Total debt	270,797	294,375	296,250
Obligations under capital leases
Long-term debt and revolving lines of credit
Total debt	474	662	865
Other loans
Long-term debt and revolving lines of credit
Total debt		$ 16	49
2014 Elfa term loan facility
Long-term debt and revolving lines of credit
Total debt			2,569
Revolving credit facility
Long-term debt and revolving lines of credit
Total debt	$ 42,000		$ 25,000

Net income per common share (Details) - USD ($)	3 Months Ended		9 Months Ended
Net income per common share (Details) - USD ($)	Dec. 29, 2018	Dec. 30, 2017	Dec. 29, 2018	Dec. 30, 2017
Numerator:
Net income	$ 9,321,000	$ 28,379,000	$ 5,798,000	$ 19,827,000
Denominator:
Weighted-average common shares - basic (in shares)	48,139,582	48,067,754	48,139,132	48,057,974
Options and other dilutive securities	$ 241,873	$ 100,128	$ 268,205	$ 70,708
Weighted-average common shares - diluted (in shares)	48,381,455	48,167,882	48,407,337	48,128,682
Net income per common share—basic and diluted	$ 0.19	$ 0.59	$ 0.12	$ 0.41
Stock options outstanding
Antidilutive securities not included:
Antidilutive securities	2,408,068	3,157,843	2,450,246	3,016,359
Nonvested restricted stock awards
Antidilutive securities not included:
Antidilutive securities	148,310	42,541	29,251	40,643

Income taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Income taxes (Details) - USD ($) $ in Thousands	Dec. 29, 2018	Dec. 30, 2017	Dec. 29, 2018	Dec. 30, 2017
Income taxes
Benefit for income taxes	$ (3,926)	$ (21,780)	$ (5,989)	$ (25,848)
Remeasurement of deferred tax balances			$ 604
U.S. blended statutory income tax rate (as a percent)		31.50%
Effective income tax rate (as a percent)	(72.80%)	(330.10%)	3135.60%	429.30%

Income taxes - Tax Cuts and Jobs Act (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 29, 2018	Mar. 31, 2018	Dec. 29, 2018	Dec. 30, 2017
Income taxes
U.S. federal corporate tax rate				21.00%
Net provisional tax benefit				$ 24,210
Provisional benefit related to the remeasurement of deferred tax balances			$ 224
Provisional expense related to the one-time transition tax on foreign earnings		$ 8,521
Provisional expense related to the one-time transition tax on foreign earnings, net of foreign tax credit	$ 5,903
Foreign tax credits utilized, result of Tax Act		833
Foreign tax credits, result of Tax Act		$ 1,331
Amount of deferred taxes	$ 23,986		23,986
Total amount of transition tax on foreign earnings			2,618
Remaining transistion tax liability			$ 1,819
Number of installments			7 years

Commitments and contingencies (Details) $ in Thousands	Dec. 29, 2018 USD ($)
Standby letters of credit
Commitments and contingencies
Amount outstanding	$ 3,826

Accumulated other comprehensive income (Details) $ in Thousands	9 Months Ended
	Dec. 29, 2018 USD ($)
Rollforward of the amounts included in AOCI, net of taxes
Balance beginning of period	$ (17,316)
Other comprehensive income (loss) before reclassifications, net of tax	(6,051)
Amounts reclassified to earnings, net of tax	721
Net current period other comprehensive (loss) income	(5,330)
Balance end of period	(22,646)
Pension liability adjustment
Rollforward of the amounts included in AOCI, net of taxes
Balance beginning of period	(1,793)
Other comprehensive income (loss) before reclassifications, net of tax	132
Net current period other comprehensive (loss) income	132
Balance end of period	(1,661)
Foreign currency translation
Rollforward of the amounts included in AOCI, net of taxes
Balance beginning of period	(15,421)
Other comprehensive income (loss) before reclassifications, net of tax	(4,775)
Net current period other comprehensive (loss) income	(4,775)
Balance end of period	(20,196)
Foreign currency hedge instruments
Rollforward of the amounts included in AOCI, net of taxes
Balance beginning of period	(102)
Other comprehensive income (loss) before reclassifications, net of tax	(1,408)
Amounts reclassified to earnings, net of tax	721
Net current period other comprehensive (loss) income	(687)
Balance end of period	$ (789)

Foreign currency forward contracts (Details) - USD ($) $ in Thousands	9 Months Ended
	Dec. 29, 2018	Dec. 30, 2017
Foreign Currency Forward Contracts
Purchase of inventory from use of forward contracts in Swedish krona (as a percent)	97.00%	100.00%
Purchase of U.S. dollars from use of forward contracts	$ 0	$ 1,648
Purchase of U.S. dollars from use of forward contracts as a percent of Elfa's U.S. Dollar purchases	0.00%	27.00%
Foreign currency forward contracts \| Not Designated as Hedging Instrument
Foreign Currency Forward Contracts
Loss associated with the change in fair value of forward contracts not designated as hedging instruments	$ 0
Foreign currency hedge instruments \| Designated as Hedging Instrument \| Cash Flow Hedging
Foreign Currency Forward Contracts
Loss in accumulated other comprehensive loss related to foreign currency hedge instruments	(789)
Unrealized loss for settled foreign currency hedge instruments	(740)
Unrealized loss to be reclassified into earnings over the next 12 months	$ (740)
Minimum \| Foreign currency forward contracts
Foreign Currency Forward Contracts
Term of contract	1 month
Maximum \| Foreign currency forward contracts
Foreign Currency Forward Contracts
Term of contract	12 months

Fair value measurements (Details) - USD ($) $ in Thousands	Dec. 29, 2018	Mar. 31, 2018	Dec. 30, 2017
Fair value
Liabilities
Estimated fair value of long-term debt, including current maturities	$ 292,961	$ 295,605	$ 313,068
Recurring
Assets
Total assets	5,191	5,848	5,782
Recurring \| Other current assets
Assets
Nonqualified retirement plan	5,156	$ 5,848	$ 5,782
Not Designated as Hedging Instrument \| Recurring \| Foreign currency forward contracts \| Level 2 \| Other current assets
Assets
Foreign currency forward contracts	$ 35

Segment reporting (Details) $ in Thousands	3 Months Ended		9 Months Ended
Segment reporting (Details) $ in Thousands	Dec. 29, 2018 USD ($) segment country	Dec. 30, 2017 USD ($)	Dec. 29, 2018 USD ($) country	Dec. 30, 2017 USD ($)	Mar. 31, 2018 USD ($)
Segment reporting
Number of reportable segments \| segment	2
Segment reporting
Sales	$ 221,637	$ 222,986	$ 641,913	$ 624,464
Adjusted EBITDA	21,816	25,561	58,554	58,507
Interest expense, net	6,008	7,300	21,293	17,398
Assets	$ 772,022	784,399	$ 772,022	784,399	$ 749,369
Elfa
Segment reporting
Number of countries in which products are sold on wholesale basis \| country	30		30
Operating segments \| TCS
Segment reporting
Sales	$ 204,899	203,881	$ 593,896	573,261
Adjusted EBITDA	19,014	22,550	50,345	51,760
Interest expense, net	5,957	7,232	21,097	17,189
Assets	671,865	673,489	671,865	673,489
Operating segments \| Elfa
Segment reporting
Sales	16,738	19,105	48,017	51,203
Adjusted EBITDA	4,994	6,374	10,432	10,965
Interest expense, net	51	68	196	209
Assets	105,491	116,779	105,491	116,779
lntersegment
Segment reporting
Sales	(22,369)	(23,495)	(47,414)	(46,036)
Adjusted EBITDA	(2,192)	(3,363)	(2,223)	(4,218)
Assets	(5,334)	(5,869)	(5,334)	(5,869)
lntersegment \| Elfa
Segment reporting
Sales	$ 22,369	$ 23,495	$ 47,414	$ 46,036

Segment reporting - Reconciliation of Adjusted EBITDA by segment to income before taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Dec. 29, 2018	Dec. 30, 2017	Dec. 29, 2018	Dec. 30, 2017
Segment reporting
Loss before taxes	$ 5,395	$ 6,599	$ (191)	$ (6,021)
Depreciation and amortization	8,887	9,477	27,352	28,524
Interest expense, net	6,008	7,300	21,293	17,398
Pre-opening costs	(691)	(1,872)	(1,918)	(4,676)
Non-cash rent	101	(714)	(1,117)	(1,451)
Stock-based compensation	(632)	(585)	(1,987)	(1,589)
Loss on extinguishment of debt			(2,082)	(2,369)
Foreign exchange losses	(22)	360	(69)	306
Optimization Plan implementation charges		(422)	(4,864)	(10,742)
Elfa manufacturing facility closure		335		852
Other adjustments	80	45	297	135
Adjusted EBITDA	$ 21,816	$ 25,561	$ 58,554	$ 58,507