BOOT BARN HOLDINGS, INC., 10-K filed on 5/16/2018
Annual Report
v3.8.0.1
Document and Entity Information - USD ($)
$ in Millions
12 Months Ended
Mar. 31, 2018
May 15, 2018
Sep. 30, 2017
Document and Entity Information      
Entity Registrant Name Boot Barn Holdings, Inc.    
Entity Central Index Key 0001610250    
Document Type 10-K    
Document Period End Date Mar. 31, 2018    
Amendment Flag false    
Current Fiscal Year End Date --03-31    
Entity Well-known Seasoned Issuer No    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Filer Category Accelerated Filer    
Entity Public Float     $ 115.6
Entity Common Stock, Shares Outstanding   27,476,196  
Document Fiscal Year Focus 2018    
Document Fiscal Period Focus FY    
v3.8.0.1
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Mar. 31, 2018
Apr. 01, 2017
Current assets:    
Cash and cash equivalents $ 9,016 $ 8,035
Accounts receivable, net 4,389 4,354
Inventories 211,472 189,096
Prepaid expenses and other current assets 16,250 22,818
Total current assets 241,127 224,303
Property and equipment, net 89,208 82,711
Goodwill 193,095 193,095
Intangible assets, net 63,383 64,511
Other assets 1,128 961
Total assets 587,941 565,581
Current liabilities:    
Line of credit 21,006 33,274
Accounts payable 89,958 77,482
Accrued expenses and other current liabilities 40,034 35,983
Current portion of notes payable, net   1,062
Total current liabilities 150,998 147,801
Deferred taxes 13,030 20,961
Long-term portion of notes payable, net 183,200 191,517
Capital lease obligations 7,303 7,825
Other liabilities 18,804 17,568
Total liabilities 373,335 385,672
Commitments and contingencies (Note 10)
Stockholders' equity:    
Common stock, $0.0001 par value; March 31, 2018 - 100,000 shares authorized, 27,331 shares issued; April 1, 2017 - 100,000 shares authorized, 26,575 shares issued 3 3
Preferred stock, $0.0001 par value; 10,000 shares authorized, no shares issued or outstanding
Additional paid-in capital 148,127 142,184
Retained earnings 66,670 37,791
Less: Common stock held in treasury, at cost, 31 and 14 shares at March 31, 2018 and April 1, 2017, respectively (194) (69)
Total stockholders' equity 214,606 179,909
Total liabilities and stockholders' equity $ 587,941 $ 565,581
v3.8.0.1
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares
Mar. 31, 2018
Apr. 01, 2017
CONSOLIDATED BALANCE SHEETS    
Common stock, par value (in dollars per share) $ 0.0001 $ 0.0001
Common stock, shares authorized (in shares) 100,000,000 100,000,000
Common Stock, shares issued (in shares) 27,331,000 26,575,000
Preferred stock, par value (in dollars per share) $ 0.0001 $ 0.0001
Preferred stock, shares authorized (in shares) 10,000,000 10,000,000
Preferred Stock, shares issued (in shares) 0 0
Preferred Stock, shares outstanding (in shares) 0 0
Common Stock, shares held in treasury (in shares) 31,000 14,000
v3.8.0.1
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
shares in Thousands, $ in Thousands
12 Months Ended
Mar. 31, 2018
Apr. 01, 2017
Mar. 26, 2016
CONSOLIDATED STATEMENTS OF OPERATIONS      
Net sales $ 677,949 $ 629,816 $ 569,020
Cost of goods sold 470,034 439,930 396,317
Amortization of inventory fair value adjustment 0 0 (500)
Total cost of goods sold 470,034 439,930 395,817
Gross profit 207,915 189,886 173,203
Operating expenses:      
Selling, general and administrative expenses 161,660 152,068 142,078
Acquisition-related expenses     891
Total operating expenses 161,660 152,068 142,969
Income from operations 46,255 37,818 30,234
Interest expense, net 15,076 14,699 12,923
Income before income taxes 31,179 23,119 17,311
Income tax expense 2,300 8,922 7,443
Net income $ 28,879 $ 14,197 $ 9,868
Earnings per share:      
Basic shares (in dollars per share) $ 1.08 $ 0.54 $ 0.38
Diluted shares (in dollars per share) $ 1.05 $ 0.53 $ 0.37
Weighted average shares outstanding:      
Basic shares 26,744 26,459 26,170
Diluted shares 27,528 26,939 26,955
v3.8.0.1
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($)
$ in Thousands
Common Stock
Additional Paid-In Capital
Retained Earnings
Treasury Shares
Total
Balance at Mar. 28, 2015 $ 3 $ 128,693 $ 13,726   $ 142,422
Balance (in shares) at Mar. 28, 2015 25,824,000        
Increase (Decrease) in Stockholders' Equity          
Net income     9,868   9,868
Stock options exercised   2,698     2,698
Stock options exercised (in shares) 530,000        
Shares forfeited, held in treasury stock       (4,000)  
Excess tax benefit (deficiency) related to stock-based compensation   3,621     3,621
Stock-based compensation expense   2,881     2,881
Balance at Mar. 26, 2016 $ 3 137,893 23,594   161,490
Balance (in shares) at Mar. 26, 2016 26,354,000     (4,000)  
Increase (Decrease) in Stockholders' Equity          
Net income     14,197   14,197
Issuance of common stock related to stock-based compensation   1,275     1,275
Issuance of common stock related to stock-based compensation (in shares) 221,000     (3,000)  
Tax withholding for net share settlement       $ (69) (69)
Tax withholding for net share settlement (in shares)       (7,000)  
Excess tax benefit (deficiency) related to stock-based compensation   (7)     (7)
Stock-based compensation expense   3,023     3,023
Balance at Apr. 01, 2017 $ 3 142,184 37,791 $ (69) $ 179,909
Balance (in shares) at Apr. 01, 2017 26,575,000     (14,000) 26,561,523
Increase (Decrease) in Stockholders' Equity          
Net income     28,879   $ 28,879
Issuance of common stock related to stock-based compensation   3,695     3,695
Issuance of common stock related to stock-based compensation (in shares) 756,000     (4,000)  
Tax withholding for net share settlement       $ (125) (125)
Tax withholding for net share settlement (in shares)       (13,000)  
Stock-based compensation expense   2,248     2,248
Balance at Mar. 31, 2018 $ 3 $ 148,127 $ 66,670 $ (194) $ 214,606
Balance (in shares) at Mar. 31, 2018 27,331,000     (31,000) 27,299,688
v3.8.0.1
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
12 Months Ended
Mar. 31, 2018
Apr. 01, 2017
Mar. 26, 2016
Cash flows from operating activities      
Net income $ 28,879 $ 14,197 $ 9,868
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation 16,000 14,555 11,480
Stock-based compensation 2,248 3,023 2,881
Excess tax benefit     (3,621)
Amortization of intangible assets 1,128 2,155 2,536
Amortization and write-off of debt issuance fees and debt discount 1,199 1,145 2,274
Loss on disposal of property and equipment 252 367 463
Hurricane-related asset write-off 2,357    
Store impairment charge 83 1,164 0
Accretion of above market leases (2) (36) (72)
Deferred taxes 1,860 6,175 981
Amortization of inventory fair value adjustment 0 0 (500)
Changes in operating assets and liabilities:      
Accounts receivable, net (35) (223) 1,524
Inventories (24,598) (12,761) (16,087)
Prepaid expenses and other current assets (3,281) (3,805) 7,543
Other assets (167) 5 (2,713)
Accounts payable 13,062 10,501 6,835
Accrued expenses and other current liabilities 3,977 (483) 5,068
Other liabilities 1,238 5,172 4,469
Net cash provided by operating activities 44,200 41,151 32,929
Cash flows from investing activities      
Purchases of property and equipment (24,418) (22,293) (36,127)
Hurricane-related insurance recoveries for property and equipment 865    
Acquisition of business or assets, net of cash acquired   (1,305) (146,541)
Net cash used in investing activities (23,553) (23,598) (182,668)
Cash flows from financing activities      
Borrowings/(payments) on line of credit - net (12,268) (15,541) 32,615
Proceeds from loan borrowings     200,938
Repayments on debt and capital lease obligations (10,448) (2,378) (77,899)
Debt issuance fees paid (520)   (6,487)
Tax withholding for net share settlement (125) (69)  
Excess tax benefit from stock options     3,621
Proceeds from exercise of stock options 3,695 1,275 2,698
Net cash (used in)/provided by financing activities (19,666) (16,713) 155,486
Net increase in cash and cash equivalents 981 840 5,747
Cash and cash equivalents, beginning of period 8,035 7,195 1,448
Cash and cash equivalents, end of period 9,016 8,035 7,195
Supplemental disclosures of cash flow information:      
Cash paid for income taxes 614 4,192 3,296
Cash paid for interest 13,743 13,646 10,333
Supplemental disclosure of non-cash activities:      
Unpaid purchases of property and equipment $ 1,315 $ 2,421 1,992
Equipment acquired through capital lease     $ 38
v3.8.0.1
Business Operations
12 Months Ended
Mar. 31, 2018
Business Operations  
Business Operations

Boot Barn Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements

1. Business Operations

Boot Barn Holdings, Inc., formerly known as WW Top Investment Corporation (the “Company”) was formed on November 17, 2011, and is incorporated in the State of Delaware. The equity of the Company consists of 100,000,000 authorized shares and 27,299,688 and 26,561,523 outstanding shares of common stock as of March 31, 2018 and April 1, 2017, respectively, with 7,021,771 and 13,435,387 shares of common stock held by Freeman Spogli & Co. as of March 31, 2018 and April 1, 2017, respectively. The shares of common stock have voting rights of one vote per share.

The Company operates specialty retail stores that sell western and work boots and related apparel and accessories. The Company operates retail locations throughout the U.S. and sells its merchandise via the Internet. The Company operated a total of 226 stores in 31 states as of March 31, 2018, 219 stores in 31 states as of April 1, 2017 and 208 stores in 29 states as of March 26, 2016. As of the fiscal year ending March 31, 2018, all stores operate under the Boot Barn name, with the exception of two stores which operate under the “American Worker” name.

v3.8.0.1
Summary of Significant Accounting Policies
12 Months Ended
Mar. 31, 2018
Summary of Significant Accounting Policies  
Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The Company’s consolidated financial statements, prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), include the accounts of the Company and each of its subsidiaries, including WW Holding Corporation, Boot Barn Holding Corporation, Boot Barn, Inc., RCC Western Stores, Inc. (“RCC”), Baskins Acquisition Holdings, LLC (“Baskins”), Sheplers Inc. and Sheplers Holding Corporation (collectively with Sheplers, Inc. “Sheplers”) and Boot Barn International (Hong Kong) Limited (“Hong Kong”). All intercompany accounts and transactions among the Company and its subsidiaries have been eliminated in consolidation.

Fiscal Year

The Company reports its results of operations and cash flows on a 52‑ or 53‑week basis, and its fiscal year ends on the last Saturday of March unless April 1st is a Saturday, in which case the fiscal year ends on April 1st. The year ended March 31, 2018 (“fiscal 2018”) consisted of 52 weeks. The years ended April 1, 2017 (“fiscal 2017”) and March 26, 2016 (“fiscal 2016”) consisted of 53 and 52 weeks, respectively. 

Comprehensive Income

The Company does not have any components of other comprehensive income recorded within its consolidated financial statements and, therefore, does not separately present a statement of comprehensive income in its consolidated financial statements.

Segment Reporting

GAAP has established guidance for reporting information about a company’s operating segments, including disclosures related to a company’s products and services, geographic areas and major customers. The Company operates in a single operating segment, which includes net sales generated from its retail stores and e‑commerce websites. The vast majority of the Company’s identifiable assets are in the U.S.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Among the significant estimates affecting the Company’s consolidated financial statements are those relating to revenue recognition, inventories, goodwill, intangible and long‑lived assets, stock‑based compensation and income taxes. Management regularly evaluates its estimates and assumptions based upon historical experience and various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. To the extent actual results differ from those estimates, the Company’s future results of operations may be affected.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents also include receivables from credit card sales. The carrying amounts of cash and cash equivalents represent their fair values.

Accounts Receivable

The Company’s accounts receivable consists of amounts due from commercial customers for merchandise sold, as well as receivables from suppliers under co‑operative arrangements. The Company’s allowance for doubtful accounts was less than $0.1 million for both the fiscal years ending March 31, 2018 and April 1, 2017.

Inventories

Inventory consists primarily of purchased merchandise and is valued at the lower of cost or net realizable value. Cost is determined on a first‑in, first‑out basis and includes the cost of merchandise and import related costs, including freight, duty and agent commissions. The Company assesses the recoverability of inventory through a periodic review of historical usage and present demand. When the inventory on hand exceeds the foreseeable demand, the value of inventory that, at the time of the review, is not expected to be sold is written down to its estimated net realizable value.

The Company recorded fair value adjustments to reflect the acquired cost of inventory related to its acquisitions of Baskins and Sheplers. These amounts were amortized over the period that the related inventory was sold. Amortization of the acquired cost of inventory was zero for both fiscal 2018 and fiscal 2017, and $0.5 million for fiscal 2016.

Debt Issuance Costs and Debt Discounts

Debt issuance costs are capitalized and amortized to interest expense over the terms of the applicable loan agreements using the effective interest method. Those costs related to the issuance of debt are presented as a reduction to the principal amount of the debt. Debt issuance costs incurred with the issuance of revolving credit lines are included in prepaid expenses and other current assets.

 

Debt discounts arise when transaction fees are paid to the lending institution. Debt discounts are recorded as a reduction to the principal amount of the debt. Amortization of debt discounts is recorded as an increase to the net principal amount of the debt and as a charge to interest expense over the term of the applicable loan agreement using the effective interest method.

Property and Equipment, net

Property and equipment consists of leasehold improvements, machinery and equipment, furniture and fixtures, software and vehicles. Property and equipment is subject to depreciation and is recorded at cost less accumulated depreciation. Expenditures for major remodels and improvements are capitalized while minor replacements, maintenance and repairs that do not improve or extend the life of such assets are charged to expense. Gains or losses on disposal of fixed assets, when applicable, are reflected in operations. Depreciation is computed using the straight‑line method over the estimated useful lives, ranging from five to ten years. Machinery and equipment is depreciated over five years. Furniture and fixtures are depreciated over seven years. Software and vehicles are depreciated over five years. Leasehold improvements are depreciated over the shorter of the terms of the leases or ten years.

Goodwill and Indefinite‑Lived Intangible Assets

Goodwill is recorded as the difference between the aggregate consideration paid for an acquisition and the fair value of the acquired net tangible and intangible assets. Goodwill is tested for impairment at least annually as of the first day of the fourth fiscal quarter or more frequently if indicators of impairment exist, in accordance with the provisions of Accounting Standards Codification (“ASC”) Topic 350, Goodwill and Other. This guidance provides the option to first assess qualitative factors such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and other relevant entity-specific events to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value (a “Step 0” analysis). If, based on a review of qualitative factors it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company performs “Step 1” of the traditional two-step goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.

If the Company proceeds to conduct a two‑step goodwill impairment test, the first step of the impairment test involves comparing the fair value of the reporting unit with its carrying value. Management evaluates the fair value of the reporting unit using a market‑based analysis to review market capitalization as well as reviewing a discounted cash flow analysis using management’s assumptions. The Company’s entire operations represent one reporting unit. The Company determines the fair value of its reporting unit using the income approach and market approach to valuation, as well as other generally accepted valuation methodologies. If the carrying amount of the reporting unit exceeds the reporting unit’s fair value, the Company performs the second step of the goodwill impairment test, which involves comparing the implied fair value of the reporting unit’s goodwill to the carrying value of that goodwill. The amount by which the carrying value of the goodwill exceeds its implied fair value, if any, will be recognized as an impairment loss. The Company concluded that there was no impairment of goodwill during fiscal 2018, 2017, or 2016.

Intangible assets with indefinite lives, which include the Boot Barn, Sheplers and Country Outfitter trademarks, are not amortized but instead are measured for impairment at least annually, or when events indicate that impairment may exist. The Company calculates impairment as the excess of the carrying value of indefinite‑lived intangible assets over their estimated fair value. If the carrying value exceeds the estimate of fair value, an impairment charge is recorded. The Company concluded there was no impairment of intangible assets with indefinite lives during fiscal 2018, 2017 or 2016.

Definite‑Lived Intangible Assets

Definite‑lived intangible assets consist of certain trademarks, customer lists, non‑compete agreements, and below‑market leases. Definite‑lived intangible assets are amortized utilizing the straight‑line method over the assets’ estimated useful lives, with the exception of customer lists, which are amortized based on the estimated attrition rate. The period of amortization for customer lists is three to five years, non‑compete agreements is four to five years and below‑market leases is four to 19 years.

Long‑Lived Assets

Long‑lived assets consist of property and equipment and definite‑lived intangible assets. The Company assesses potential impairment of its long‑lived assets whenever events or changes in circumstances indicate that an asset or asset group’s carrying value may not be recoverable. Factors that are considered important that could trigger an impairment review include a current period operating or cash flow loss combined with a history of operating or cash flow losses and a projection or forecast that demonstrates continuing losses or insufficient income associated with the use of a long‑lived asset or asset group. Other factors include a significant change in the manner of the use of the asset or a significant negative industry or economic trend. This evaluation is performed based on estimated undiscounted future cash flows from operating activities compared with the carrying value of the related assets. If the undiscounted future cash flows are less than the carrying value, an impairment loss is recognized, measured by the difference between the carrying value, and the estimated fair value of the assets, with such estimated fair values determined using the best information available and in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 820, Fair Value Measurements. During Fiscal 2018, the Company recorded an asset impairment charge of less than $0.1 million related to two of its stores. During fiscal 2017, the Company recorded an asset impairment charge of $1.2 million related to three of its stores. Long-lived assets held and used with a carrying value of $1.5 million were written down to their fair value of $0.3 million, resulting in an asset impairment charge of $1.2 million. The fair values of these locations were calculated based on the projected discounted cash flows at a similar rate that would be used by market participants in valuing these assets or prices of similar assets. There were no impairments of long‑lived assets during fiscal 2016.

Stock‑Based Compensation

Stock‑based compensation is accounted for under FASB ASC Topic 718, Compensation—Stock Compensation (“ASC 718”). The Company accounts for all stock‑based compensation transactions using a fair‑value method and recognizes the fair value of each award as an expense over the service period. The Company estimates the fair value of stock options granted using the Black‑Scholes option‑pricing model. The use of the Black‑Scholes model requires a number of estimates, including the expected option term, the expected volatility in the price of the Company’s common stock, the risk‑free rate of interest and the dividend yield on the Company’s common stock. Judgment is required in estimating the number of share‑based awards that the Company expects will ultimately vest upon the fulfillment of service conditions (such as time‑based vesting). The fair value of the Company’s restricted stock awards and restricted stock units is the closing price of the Company’s common stock on the grant date. The consolidated financial statements include amounts that are based on the Company’s best estimates and judgments. The Company classifies compensation expense related to these awards in the consolidated statements of operations based on the department to which the recipient reports.

Revenue Recognition

Revenue is recorded for store sales upon the purchase of merchandise by customers. E‑commerce sales are recorded when the customer takes title of the merchandise and assumes risk of loss, collection of the relevant receivable is reasonably assured, persuasive evidence of an arrangement exists and the sales price is fixed or determinable, which generally occurs upon delivery of the product. Shipping and handling revenues are included in total net sales. Shipping costs incurred by the Company are included as cost of goods sold.

Revenue is recorded net of estimated and actual sales returns and deductions for coupon redemptions, estimated future award redemption and other promotions. The sales return reserve reflects an estimate of sales returns based on projected merchandise returns determined through the use of historical average return percentages. The total reserve for returns was $1.6 million, $1.5 million, and $1.3 million as of fiscal 2018, 2017 and 2016, respectively and is recorded in accrued expenses and other current liabilities in the accompanying consolidated balance sheets. The following table provides a reconciliation of the activity related to the Company’s sales returns reserve:

 

 

 

 

 

 

 

 

 

 

 

Sales Returns Reserve

 

Fiscal Year Ended

 

 

 

March 31,

 

April 1,

 

March 26,

 

(In thousands)

    

2018

    

2017

    

2016

 

Beginning balance

 

$

1,544

 

$

1,319

 

$

687

 

Provisions

 

 

35,189

 

 

30,624

 

 

29,597

 

Sales returns

 

 

(35,146)

 

 

(30,399)

 

 

(28,965)

 

Ending balance

 

$

1,587

 

$

1,544

 

$

1,319

 

 

The Company maintains a customer loyalty program. Under the program, customers accumulate points based on purchase activity. For customers to maintain their active point balance, they must make a qualifying purchase of merchandise at least once in a 365‑day period. Once a loyalty program member achieves a certain point level, the member earns awards that may be redeemed for credits on merchandise purchases. To redeem awards, the member must make a qualifying purchase of merchandise within 60 days of the date the award was granted. Unredeemed awards and accumulated partial points are accrued as unearned revenue and as an adjustment to net sales. The unearned revenue for this program is recorded in accrued expenses and other current liabilities on the consolidated balance sheets and was $1.7 million and $2.1 million as of March 31, 2018 and April 1, 2017, respectively. The following table provides a reconciliation of the activity related to the Company’s customer loyalty program:

 

 

 

 

 

 

 

 

 

 

 

Customer Loyalty Program

    

Fiscal Year Ended

 

 

 

March 31,

 

April 1,

 

March 26,

 

(In thousands)

    

2018

    

2017

    

2016

 

Beginning balance

 

$

2,060

 

$

1,975

 

$

1,971

 

Current year provisions

 

 

4,877

 

 

6,782

 

 

5,718

 

Current year award redemptions

 

 

(5,232)

 

 

(6,697)

 

 

(5,714)

 

Ending balance

 

$

1,705

 

$

2,060

 

$

1,975

 

Proceeds from the sale of gift cards are deferred until the customers use the cards to acquire merchandise. Gift cards, gift certificates and store credits do not have expiration dates, and unredeemed gift cards, gift certificates and store credits are subject to state escheatment laws. The Company retains the percentage of the value of such unredeemed gift cards, gift certificates and store credits not escheated, and recognizes these amounts in net sales. The Company defers recognition of a layaway sale and its related profit to the accounting period when the customer receives the layaway merchandise. Income from the redemption of gift cards, gift card breakage, and the sale of layaway merchandise is included in net sales.

Cost of Goods Sold

Cost of goods sold includes the cost of merchandise, obsolescence and shrink provisions, store and warehouse occupancy costs (including rent, depreciation and utilities), inbound and outbound freight, supplier allowances, occupancy‑related taxes, compensation costs for merchandise purchasing and warehouse personnel and other inventory acquisition‑related costs.

Store Opening Costs

Store opening costs consist of costs incurred prior to opening a new store and primarily consist of manager and other employee payroll, travel and training costs, marketing expenses, initial opening supplies and costs of transporting initial inventory and certain fixtures to store locations, as well as occupancy costs incurred from the time that we take possession of a store site to the opening of that store. Occupancy costs are included in cost of goods sold and the other store opening costs are included in selling, general and administrative (“SG&A”) expenses. All of these costs are expensed as incurred.

Advertising Costs

Certain advertising costs, including pay-per-click, direct mail, television and radio promotions, event sponsorship, in‑store photographs and other promotional advertising are expensed when the marketing campaign commences. The Company had prepaid advertising costs of $0.8 million and $0.4 million as of March 31, 2018 and April 1, 2017, respectively. All other advertising costs are expensed as incurred. The Company recognized $25.5 million, $24.7 million, and $22.0 million in advertising costs during fiscal 2018, 2017 and 2016, respectively. 

Leases

The Company recognizes rent expense for operating leases on a straight‑line basis (including the effect of reduced or free rent and rent escalations) over the lease term. The difference between the cash paid to the landlord and the amount recognized as rent expense on a straight‑line basis is recognized as an adjustment to deferred rent in the consolidated balance sheets. Cash reimbursements received from landlords for leasehold improvements and other cash payments received from landlords as lease incentives are recorded as deferred rent and are amortized using the straight‑line method over the lease term as an offset to rent expense. Contingent rent, determined based on a percentage of sales in excess of specified levels, is recognized as rent expense when the achievement of the specified sales that triggers the contingent rent is probable.

Income Taxes

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes (“ASC 740”), which requires the asset and liability approach for financial accounting and reporting of income taxes. Deferred tax assets and liabilities are attributable to differences between financial statement and income tax reporting. Deferred tax assets, net of any valuation allowances, represent the future tax return consequences of those differences and for operating loss and tax credit carryforwards, which will be deductible when the assets are recovered. Deferred tax assets are reduced by a valuation allowance if it is deemed more likely than not that some or all of the deferred tax assets will not be realized. In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

The Company accounts for uncertain tax positions in accordance with ASC 740, which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. It prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Such changes in recognition or measurement might result in the recognition of a tax benefit or an additional charge to the tax provision in the period.

The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the consolidated statements of operations. Accrued interest and penalties, if incurred, are included within accrued expenses and other current liabilities in the consolidated balance sheets. There were no accrued interest or penalties for the fiscal years ended March 31, 2018 or April 1, 2017. 

Per Share Information

Basic earnings per share is computed by dividing net income by the weighted average number of outstanding shares of common stock. In computing diluted earnings per share, the weighted average number of common shares outstanding is adjusted to reflect the effect of potentially dilutive securities such as stock options. In accordance with ASC 718, the Company utilizes the treasury stock method to compute the dilutive effect of stock options, restricted stock awards and restricted stock units.

Fair Value of Certain Financial Assets and Liabilities

The Company follows FASB ASC Topic 820, Fair Value Measurements and Disclosures, (“ASC 820”) which requires disclosure of the estimated fair value of certain assets and liabilities defined by the guidance as financial instruments. The Company’s financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable and debt. ASC 820 defines the fair value of financial instruments as the price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 establishes a three‑level hierarchy for disclosure that is based on the extent and level of judgment used to estimate the fair value of assets and liabilities.

·

Level 1 uses unadjusted quoted prices that are available in active markets for identical assets or liabilities. The Company’s Level 1 assets include investments in money market funds.

·

Level 2 uses inputs other than quoted prices included in Level 1 that are either directly or indirectly observable through correlation with market data. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs to valuation models or other pricing methodologies that do not require significant judgment because the inputs used in the model, such as interest rates and volatility, can be corroborated by readily observable market data.

·

Level 3 uses one or more significant inputs that are unobservable and supported by little or no market activity, and reflect the use of significant management judgment. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques and significant management judgment or estimation. The Company’s Level 3 assets include certain acquired businesses.

Cash and cash equivalents, accounts receivable and accounts payable are classified according to the lowest level input that is significant to the fair value measurement. As a result, the asset or liability could be classified as Level 2 or Level 3 even though there may be certain significant inputs that are readily observable. The Company believes that the recorded values of its financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or duration.

Although market quotes for the fair value of the outstanding debt arrangements discussed in Note 8 “Revolving credit facilities and long‑term debt” are not readily available, the Company believes its carrying value approximates fair value due to the variable interest rates, which are Level 2 inputs. There were no financial assets or liabilities requiring fair value measurements as of March 31, 2018 on a recurring basis.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to credit risk consist principally of cash and cash equivalents. At times, such amounts held at banks may be in excess of Federal Deposit Insurance Corporation insurance limits, and the Company mitigates such risk by utilizing multiple banks.

Supplier Concentration Risk

The Company purchases merchandise inventories from several hundred suppliers worldwide. Sales of products from the Company’s three largest suppliers totaled approximately 40% of net sales in fiscal 2018, and approximately 38% of net sales in fiscal 2017 and fiscal 2016.

Hurricane-Related Insurance Claims

During fiscal 2018, as a result of Hurricane Harvey, $3.2 million of inventory and property, plant and equipment at certain Houston-area stores were damaged and written off. These assets were insured at the time of the loss. The Company also incurred $0.3 million of repairs and maintenance expense during fiscal 2018 as a result of Hurricane Harvey. The Company received cash insurance proceeds of $5.1 million as of March 31, 2018, which includes $0.1 million of business interruption cash insurance proceeds. The charges and recoveries are recorded in selling, general and administrative expenses, resulting in a net gain of $1.6 million during fiscal 2018.

Recent Accounting Pronouncements

In May 2014, the FASB and the International Accounting Standards Board (“IASB”) jointly issued a new revenue recognition standard, ASU No. 201409, Revenue From Contracts with Customers, that will supersede nearly all existing revenue recognition guidance under GAAP. The revenue recognition standard will allow for the recognition of revenue when a company transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The standard permits the use of either a full retrospective or retrospective with cumulative effect transition method. On August 8, 2015, the FASB issued ASU No. 2015-14, which deferred the effective date of ASU No. 2014-09 by one year, and permits early adoption as long as the adoption date is not before the original public entity effective date. The standard is effective for public entities for annual periods, and interim periods within that year, beginning after December 15, 2017. The Company’s revenues are primarily generated from the sale of finished products to customers. Those sales predominantly contain a single delivery element and revenue for such sales is recognized when the customer obtains control. The Company has completed its assessment of the impact of the revised standard and does not expect it to have a material impact on the consolidated financial statements. The Company will use the modified retrospective transition approach upon adoption in the first quarter of fiscal 2019.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The FASB issued this ASU to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under current U.S. GAAP and disclosing key information about leasing arrangements. The amendments in this ASU are effective for annual periods, and interim periods within that year, beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact the guidance will have on its consolidated financial statements. The Company currently expects that most of its operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon adoption. Therefore, the Company expects this adoption will result in a material increase in the assets and liabilities on its consolidated balance sheets. Enhanced disclosures will also be required to give financial statement users the ability to assess the amount, timing and uncertainty of cash flows arising from leases. The Company plans to adopt the standard in the first quarter of fiscal 2020 and is currently continuing its assessment, which may identify other impacts the revised standard will have on the consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU No. 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public entities, ASU No. 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted. The Company adopted ASU No. 2016-09 beginning April 2, 2017, the first day of fiscal 2018. Upon adoption, the Company began to recognize, on a prospective basis, all excess tax benefits and deficiencies as income tax benefit or expense, respectively, in its Condensed Consolidated Statement of Operations. This resulted in the recognition of less than $0.1 million of additional income tax expense associated with net tax deficiencies for awards that were exercised or vested during the thirteen weeks ended July 1, 2017, the period of adoption. Additionally, as of April 2, 2017, excess tax benefits are classified as an operating activity along with deferred tax cash flows in the Condensed Consolidated Statement of Cash Flows. The Company elected to adopt such presentation on a prospective basis. Cash paid by the Company to tax authorities when directly withholding shares for tax withholding purposes will continue to be classified as a financing activity in the consolidated statements of cash flows. Stock-based compensation expense will no longer reflect estimated forfeitures of share-based awards and forfeitures will instead be recorded as they occur. In evaluating the impact of this change, the adjustment to adopt on a modified retrospective basis was immaterial, therefore no adjustment was made to retained earnings as of the beginning of the period presented. Lastly, excess tax benefits are now excluded from assumed future proceeds in the Company’s calculation of diluted shares for purposes of determining diluted earnings per share. This change had an immaterial impact on the Company’s weighted average diluted shares outstanding for the thirteen weeks ended July 1, 2017, the period of adoption.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles — Goodwill and Other: Simplifying the Test for Goodwill Impairment, which simplifies the accounting for goodwill impairment by eliminating step two from the goodwill impairment test. Under this new guidance, if the carrying amount of a reporting unit exceeds its estimated fair value, an impairment charge shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The amendments in this ASU are effective prospectively for fiscal years and interim periods within those years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company plans to adopt the standard in the first quarter of fiscal 2021 and does not expect the revised standard to have a material impact on the consolidated financial statements.

On December 22, 2017, the SEC issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), allowing taxpayers to record a reasonable estimate of the impact of the U.S. legislation when it does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law. In March 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740), Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. This Accounting Standards Update adds various SEC paragraphs pursuant to the issuance of SEC Staff Accounting Bulletin No. 118 as amendments to Subtopic 740-10. In accordance with SAB 118, the Company has recorded estimated tax benefit associated with the impacts of the Tax Act (see Note 13: Income Taxes, for additional information).

v3.8.0.1
Asset Acquisitions and Business Combination
12 Months Ended
Mar. 31, 2018
Asset Acquisitions and Business Combination  
Asset Acquisitions and Business Combination

3. Asset Acquisitions and Business Combination

Wood’s Boots Asset Acquisition

On September 11, 2017, Boot Barn, Inc., a wholly owned subsidiary of the Company, completed the acquisition of assets from Wood’s Boots, a four-store family-owned retailer with stores in Midland and Odessa, Texas. As part of the transaction, Boot Barn, Inc. purchased the inventory, entered into new leases with the stores’ landlord, offered employment to the Wood’s Boots team at all four store locations and assumed certain customer credits. The cash consideration paid was $2.7 million.

In allocating the purchase price, the Company recorded all assets acquired and liabilities assumed at fair value. As the acquisition did not meet the definition of a business combination under FASB ASC Topic 805, Business Combinations, the Company accounted for the transaction as an asset acquisition. In an asset acquisition, goodwill is not recognized, but rather any excess consideration transferred over the fair value of the net assets acquired is allocated on a relative fair value basis to the identifiable net assets. 

The Company determined the estimated fair values using Level 3 inputs after review and consideration of relevant information, including quoted market prices and estimates made by management. The inventory was valued using the comparative sales method. Based on the fair value analysis of the net assets acquired and liabilities assumed, the inventory was valued at $2.8 million, and the customer credits were valued at less than $0.1 million.

Country Outfitter Asset Acquisition

On February 16, 2017, Sheplers Inc., a wholly owned subsidiary of Boot Barn Holdings, Inc., entered into an asset purchase agreement with Acumen Brands, Inc., who owned and historically operated as one of its unincorporated business divisions a multi-faceted e-commerce retail business under the “Country Outfitter” name. As a result of the asset purchase agreement, Sheplers Inc. purchased the rights and interest in the www.countryoutfitter.com website and social media accounts along with a customer email list (collectively the “Country Outfitter Asset Acquisition”). The cash consideration paid for the Country Outfitter Asset Acquisition was $1.3 million.

In allocating the purchase price, the Company recorded all assets acquired and liabilities assumed at fair value. As the acquisition did not meet the definition of a business combination under ASC 805, the Company accounted for the transaction as an asset acquisition. In an asset acquisition, goodwill is not recognized, but rather any excess consideration transferred over the fair value of the net assets acquired is allocated on a relative fair value basis to the identifiable net assets.

The Company determined the estimated fair values using Level 3 inputs after review and consideration of relevant information, including discounted cash flows, quoted market prices and estimates made by management. The trade name was valued using the relief from royalty method, the customer list was valued using the cost approach, and the merchandise credits were valued using the cost build-up approach. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date based on the purchase price allocation:

 

 

 

 

 

 

   

 

At February 16, 2017

 

 

   

(in thousands)

 

Assets acquired:

 

 

 

 

Intangible - trade name

 

$

1,300

 

Intangible - customer list

 

 

506

 

Total assets acquired

 

$

1,806

 

 

 

 

 

 

Liabilities assumed:

 

 

 

 

Other liability - merchandise credits

 

$

501

 

Total liabilities assumed

 

 

501

 

Net Assets acquired

 

$

1,305

 

 

The acquired trade name is an indefinite-lived intangible asset. The period of amortization for the acquired customer list is based on the estimated attrition rate of three years, consistent with the valuation of the Company’s other customer list intangible assets.

 

Business Combination

Sheplers Acquisition

On June 29, 2015, the Company completed the acquisition of Sheplers, a western lifestyle company with 25 retail locations across the United States and an e-commerce business, for a purchase price of $147.0 million (which included assumption of certain indebtedness), subject to customary adjustments (the “Sheplers Acquisition”). The primary reason for the Sheplers Acquisition was to expand the Company’s retail operations into new and existing markets and grow the Company’s e-commerce business.

 

The Company funded the Sheplers Acquisition by refinancing approximately $172.0 million of its and Sheplers’ existing indebtedness in part with an initial borrowing of $57.0 million under a $125.0 million syndicated senior secured asset-based revolving credit facility for which Wells Fargo Bank, National Association (“June 2015 Wells Fargo Revolver”), is agent, and a $200.0 million syndicated senior secured term loan for which GCI Capital Markets LLC (“2015 Golub Term Loan”) is agent. Borrowings under the credit agreements were initially used to pay costs and expenses related to the Sheplers Acquisition and the closing of the credit agreements, and may be used for working capital and other general corporate purposes.

 

The acquisition-date fair value of the consideration transferred totaled $149.3 million, which consisted of $147.0 million in cash and $2.3 million of a working capital adjustment, cash acquired and other adjustments. The total fair value of consideration transferred for the acquisition was allocated to the net tangible and intangible assets based upon their estimated fair values as of the date of the acquisition. The excess of the purchase price over the net tangible and intangible assets was recorded as goodwill. The goodwill and intangibles assets are not deductible for income tax purposes. Such estimated fair values require management to make estimates and judgments, especially with respect to intangible assets.

 

The fair value of each intangible and fixed asset acquired through the Sheplers Acquisition was measured in accordance with ASC 820. Customer lists, furniture, fixtures, office equipment, leasehold improvements, computer equipment and warehouse equipment were all valued using the cost approach. The trade name was valued under the royalty savings income approach method and inventory was valued under the comparative sales method. All operating leases, below-market leases, capital leases and financing obligations were valued under either the cost or income approach. Such fair values were determined using Level 3 inputs.

 

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date based on the purchase price allocation:

 

 

 

 

 

   

 

At June 29, 2015

 

 

   

(in thousands)

 

Assets acquired:

 

 

 

 

Cash

 

$

2,762

 

Accounts receivable

 

 

1,792

 

Inventory

 

 

30,436

 

Prepaid expenses and other current assets

 

 

17,711

 

Property and equipment

 

 

10,744

 

Properties under capital lease and financing transactions

 

 

10,528

 

Intangible - below-market leases

 

 

500

 

Intangible - trade name

 

 

9,200

 

Intangible - customer lists

 

 

488

 

Goodwill

 

 

99,998

 

Other assets

 

 

128

 

Total assets acquired

 

$

184,287

 

 

 

 

 

 

Liabilities assumed:

 

 

 

 

Accounts payable

 

$

14,554

 

Accrued liabilities and other payables

 

 

5,065

 

Accrued customer liabilities

 

 

1,318

 

Deferred tax liability

 

 

1,226

 

Capital lease and financing transactions

 

 

8,853

 

Other liabilities

 

 

3,968

 

Total liabilities assumed

 

 

34,984

 

Net Assets acquired

 

$

149,303

 

 

The Company incurred $0.9 million of acquisition‑related costs in fiscal 2016 related to the acquisition of Sheplers, which are recorded in “Acquisition-related expenses” in the consolidated statements of operations for the fiscal year ending March 26, 2016.

 

The amount of net revenue and net loss of Sheplers included in the Company’s consolidated statements of operations subsequent to the June 29, 2015 acquisition date was as follows:

 

 

 

 

 

 

 

Fiscal Year Ended

 

 

    

March 26, 2016

 

 

 

(in thousands)

 

 

 

 

 

 

Net sales

 

$

126,877

 

Net loss

 

$

(6,082)

 

 

Supplemental As Adjusted Data (Unaudited)

The as adjusted net sales and net income below give effect to the Sheplers Acquisition as if it had been consummated on March 30, 2014, the first day of the Company’s 2015 fiscal year. These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Sheplers to reflect the effects of amortization of purchased intangible assets and acquired inventory valuation step-down, refinanced debt and capital lease and financing transactions as of March 30, 2014 in order to complete the acquisition, and income tax expense. The adjustments are based upon currently available information and certain assumptions that the Company believes are reasonable under the circumstances. Pre-acquisition net sales and net income numbers for Sheplers are derived from their books and records prepared prior to the acquisition and are not verified by the Company. This as adjusted data is presented for informational purposes only and does not purport to be indicative of the results of future operations or of the results that would have occurred had the acquisition taken place as of the date noted above.

 

 

 

 

 

 

 

Fiscal Year Ended

 

 

March 26,

 

    

2016

(in thousands)

    

 

    

As adjusted net sales

 

$

601,952

As adjusted net income

 

$

6,449

 

The carrying amount of goodwill was $193.1 million as of fiscal 2018, fiscal 2017 and fiscal 2016.  

v3.8.0.1
Prepaid Expenses and Other Current Assets
12 Months Ended
Mar. 31, 2018
Prepaid Expenses and Other Current Assets  
Prepaid Expenses and Other Current Assets

4. Prepaid Expenses and Other Current Assets

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

 

 

 

 

 

 

 

 

 

    

March 31,

    

April 1,

 

 

    

2018

    

2017

 

Prepaid rent and property taxes

 

$

3,778

 

$

3,350

 

Prepaid advertising

 

 

849

 

 

396

 

Prepaid insurance

 

 

1,024

 

 

1,051

 

Deferred taxes

 

 

 —

 

 

9,790

 

Income tax receivable

 

 

5,834

 

 

5,677

 

Debt issuance costs

 

 

514

 

 

572

 

Other

 

 

4,251

 

 

1,982

 

Total prepaid expenses and other current assets

 

$

16,250

 

$

22,818

 

 

v3.8.0.1
Property and Equipment, Net
12 Months Ended
Mar. 31, 2018
Property and Equipment, Net  
Property and Equipment, Net

5. Property and Equipment, Net

Property and equipment, net, consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

    

March 31,

    

April 1,

 

 

    

2018

    

2017

 

Land

 

$

2,530

 

$

2,530

 

Buildings

 

 

7,998

 

 

7,998

 

Leasehold improvements

 

 

55,885

 

 

50,240

 

Machinery and equipment

 

 

26,411

 

 

19,101

 

Furniture and fixtures

 

 

47,103

 

 

36,948

 

Construction in progress

 

 

1,954

 

 

3,418

 

Vehicles

 

 

1,201

 

 

941

 

 

 

 

143,082

 

 

121,176

 

Less: Accumulated depreciation

 

 

(53,874)

 

 

(38,465)

 

Property and equipment, net

 

$

89,208

 

$

82,711

 

 

Depreciation expense was $16.0 million, $14.6 million, and $11.5 million for fiscal years 2018, 2017, and 2016, respectively. Amortization related to assets under capital leases is included in the above depreciation expense (see Note 11 “Leases”).

v3.8.0.1
Intangible Assets, Net
12 Months Ended
Mar. 31, 2018
Intangible Assets, Net  
Intangible Assets, Net

6. Intangible Assets, Net

Net intangible assets consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2018

 

 

 

Gross

    

 

 

    

 

 

    

Weighted

 

 

 

Carrying

 

Accumulated

 

 

 

 

Average

 

 

    

Amount

    

Amortization

    

Net

    

Useful Life

 

 

 

(in thousands, except for weighted average useful life)

 

Customer lists

 

$

1,594

 

$

(1,287)

 

$

307

 

3.8

 

Below-market leases

 

 

4,918

 

 

(2,519)

 

 

2,399

 

11.6

 

Total definite lived

 

 

6,512

 

 

(3,806)

 

 

2,706

 

 

 

Trademarks—indefinite lived

 

 

60,677

 

 

 —

 

 

60,677

 

 

 

Total intangible assets

 

$

67,189

 

$

(3,806)

 

$

63,383

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

April 1, 2017

 

 

 

Gross

 

 

 

 

 

 

 

Weighted

 

 

 

Carrying

 

Accumulated

 

 

 

 

Average

 

 

   

Amount

   

Amortization

   

Net

   

Useful Life

 

 

 

(in thousands, except for weighted average useful life)

 

Customer lists

 

$

4,694

 

$

(3,810)

 

$

884

 

4.6

 

Non-compete agreements

 

 

990

 

 

(915)

 

 

75

 

4.8

 

Below-market leases

 

 

4,918

 

 

(2,043)

 

 

2,875

 

11.6

 

Total definite lived

 

 

10,602

 

 

(6,768)

 

 

3,834

 

 

 

Trademarks—indefinite lived

 

 

60,677

 

 

 —

 

 

60,677

 

 

 

Total intangible assets

 

$

71,279

 

$

(6,768)

 

$

64,511

 

 

 

 

Amortization expense for intangible assets totaled $1.1 million, $2.2 million, and $2.5 million for fiscal 2018, 2017, and 2016, respectively, and is included in selling, general and administrative expenses.

As of March 31, 2018, estimated future amortization of intangible assets was as follows:

 

 

 

 

 

Fiscal year

    

(in thousands)

 

 

 

 

 

 

2019

 

$

624

 

2020

 

 

477

 

2021

 

 

308

 

2022

 

 

215

 

2023

 

 

184

 

Thereafter

 

 

898

 

Total

 

$

2,706

 

 

v3.8.0.1
Accrued Expenses and Other Current Liabilities
12 Months Ended
Mar. 31, 2018
Accrued Expenses and Other Current Liabilities  
Accrued Expenses and Other Current Liabilities

7. Accrued Expenses and Other Current Liabilities

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

 

 

 

 

 

 

 

 

 

    

March 31,

    

April 1,

 

 

    

2018

    

2017

 

Accrued compensation

 

$

10,773

 

$

6,530

 

Deferred revenue

 

 

9,528

 

 

8,038

 

Sales tax liability

 

 

5,479

 

 

5,304

 

Accrued interest

 

 

192

 

 

35

 

Sales reward redemption liability

 

 

1,705

 

 

2,060

 

Capital leases-short term

 

 

521

 

 

447

 

Other

 

 

11,836

 

 

13,569

 

Total accrued expenses

 

$

40,034

 

$

35,983

 

 

v3.8.0.1
Revolving Credit Facilities and Long-Term Debt
12 Months Ended
Mar. 31, 2018
Revolving Credit Facilities and Long-Term Debt  
Revolving Credit Facilities and Long-Term Debt

8. Revolving Credit Facilities and Long-Term Debt

On June 29, 2015, the Company, as guarantor, and its wholly-owned primary operating subsidiary, Boot Barn, Inc., refinanced the $150.0 million credit facility with Wells Fargo Bank, N.A. (“February 2015 Wells Fargo Credit Facility”) with the $125.0 million June 2015 Wells Fargo Revolver and the $200.0 million 2015 Golub Term Loan. The borrowing base of the June 2015 Wells Fargo Revolver is calculated on a monthly basis and is based on the amount of eligible credit card receivables, commercial accounts, inventory, and available reserves. Borrowings under the credit agreements were initially used to pay costs and expenses related to the Sheplers Acquisition and the closing of such credit agreements, and may be used for working capital and other general corporate purposes.

 

Borrowings under the June 2015 Wells Fargo Revolver bear interest at per annum rates equal to, at the Company’s option, either (i) London Interbank Offered Rate (“LIBOR”) plus an applicable margin for LIBOR loans, or (ii) the base rate plus an applicable margin for base rate loans. The base rate is calculated as the highest of (a) the federal funds rate plus 0.5%, (b) the Wells Fargo prime rate and (c) one-month LIBOR plus 1.0%. The applicable margin is calculated based on a pricing grid that in each case is linked to quarterly average excess availability. For LIBOR Loans, the applicable margin ranges from 1.00% to 1.25%, and for base rate loans it ranges from 0.00% to 0.25%. The Company also pays a commitment fee of 0.25% per annum of the actual daily amount of the unutilized revolving loans. The interest on the June 2015 Wells Fargo Revolver is payable in quarterly installments ending on June 29, 2020, the maturity date as of April 1, 2017. On May 26, 2017, the Company entered into an amendment to the June 2015 Wells Fargo Revolver (the “2017 Wells Amendment”), increasing the aggregate revolving credit facility to $135.0 million and extending the maturity date to the earlier of May 26, 2022 or 90 days prior to the maturity of the 2015 Golub Term Loan, which is currently scheduled to mature on June 29, 2021. The amount outstanding under the June 2015 Wells Fargo Revolver as of March 31, 2018 and April 1, 2017 was $21.0 million and $33.3 million, respectively. Total interest expense incurred in the fiscal year ended March 31, 2018 on the June 2015 Wells Fargo Revolver was $1.9 million, and the weighted average interest rate for the fiscal year ended March 31, 2018 was 2.5%. Total interest expense incurred in the fiscal year ended April 1, 2017 on the June 2015 Wells Fargo Revolver was $1.5 million, and the weighted average interest rate for the fiscal year ended April 1, 2017 was 1.9%. Total interest expense incurred in the fiscal year ended March 26, 2016 on the June 2015 Wells Fargo Revolver was $0.9 million, and the weighted average interest rate for the fiscal year ended March 26, 2016 was 1.7%.

 

Borrowings under the 2015 Golub Term Loan bear interest at per annum rates equal to, at the Company’s option, either (a) LIBOR plus an applicable margin for LIBOR loans with a LIBOR floor of 1.0%, or (b) the base rate plus an applicable margin for base rate loans. The base rate is calculated as the greater of (i) the higher of (x) the prime rate and (y) the federal funds rate plus 0.5% and (ii) the sum of one-month LIBOR plus 1.0%. The applicable margin is 4.5% for LIBOR Loans and 3.5% for base rate loans. The principal and interest on the 2015 Golub Term Loan is payable in quarterly installments ending on the maturity date of the term loan, June 29, 2021. Quarterly principal payments of $500,000 are due each quarter. Total interest expense incurred in the fiscal year ended March 31, 2018 on the 2015 Golub Term Loan was $11.2 million, and the weighted average interest rate for the fiscal year ended March 31, 2018 was 5.9%. Total interest expense incurred in the fiscal year ended April 1, 2017 on the 2015 Golub Term Loan was $11.2 million, and the weighted average interest rate for the fiscal year ended April 1, 2017 was 5.5%. Total interest expense incurred in the fiscal year ended March 26, 2016 on the 2015 Golub Term Loan was $8.3 million, and the weighted average interest rate for the fiscal year ended March 26, 2016 was 5.5%.

 

All obligations under each of the 2015 Golub Term Loan and the June 2015 Wells Fargo Revolver are unconditionally guaranteed by the Company and each of its direct and indirect domestic subsidiaries (other than certain immaterial subsidiaries) which are not named as borrowers under the 2015 Golub Term Loan or the June 2015 Wells Fargo Revolver, as applicable.

 

The priority with respect to collateral under each of the 2015 Golub Term Loan and the June 2015 Wells Fargo Revolver is subject to the terms of an intercreditor agreement among the lenders under the 2015 Golub Term Loan and the June 2015 Wells Fargo Revolver.

 

Each of the June 2015 Wells Fargo Revolver and the 2015 Golub Term Loan contains customary provisions relating to mandatory prepayments, restricted payments, voluntary payments, affirmative and negative covenants, and events of default. In addition, the terms of the June 2015 Wells Fargo Revolver require the Company to maintain, on a consolidated basis, a Consolidated Fixed Charge Coverage Ratio of at least 1.00:1.00 during such times as a covenant trigger event shall exist. On May 26, 2017, the Company entered into an amendment to the 2015 Golub Term Loan (the “2017 Golub Amendment”). The 2017 Golub Amendment changed the maximum Consolidated Total Net Leverage Ratio requirements to 4.50:1.00 as of March 31, 2018, stepping down to 4.00:1.00 as of December 29, 2018 and for all subsequent periods. The June 2015 Wells Fargo Revolver and 2015 Golub Term Loan also require the Company to pay additional interest of 2.0% per annum upon triggering certain specified events of default set forth therein. For financial accounting purposes, the requirement for the Company to pay a higher interest rate upon an event of default is an embedded derivative. As of March 31, 2018, the fair value of these embedded derivatives was estimated and was not significant.

Debt Issuance Costs and Debt Discount

The Company paid $1.4 million of transaction fees in connection with the February 2015 Wells Fargo Credit Facility. These transaction fees were paid to both Wells Fargo and other advisors via a reduction in the proceeds from the February 2015 Wells Fargo Credit Facility and were accounted for as debt issuance costs and a debt discount at March 26, 2016. On June 29, 2015, the note payable was repaid when the new financing was obtained, and the $1.4 million remaining debt issuance costs and debt discounts were written off to interest expense.

 

Debt issuance costs totaling $1.0 million were incurred under the June 2015 Wells Fargo Revolver and 2017 Wells Amendment and are included as assets on the consolidated balance sheets in prepaid expenses and other current assets. Total unamortized debt issuance costs were $0.5 million and $0.6 million as of March 31, 2018 and April 1, 2017, respectively. These amounts are being amortized to interest expense over the term of the June 2015 Wells Fargo Revolver.

 

Debt issuance costs and debt discount totaling $6.0 million were incurred under the 2015 Golub Term Loan and 2017 Golub Amendment and are included as a reduction of the current and non-current note payable on the consolidated balance sheets. Total unamortized debt issuance costs and debt discount were $3.3 million and $3.9 million as of March 31, 2018 and April 1, 2017, respectively. These amounts are being amortized to interest expense over the term of the 2015 Golub Term Loan.

 

The following sets forth the balance sheet information related to the term loan:

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

April 1,

 

 

    

2018

      

2017

 

(in thousands)

 

 

 

 

 

 

 

Term Loan

 

$

186,500

$

196,500

 

Unamortized value of the debt issuance costs and debt discount

 

 

(3,300)

 

 

(3,921)

 

Net carrying value

 

$

183,200

 

$

192,579

 

 

 

Total amortization expense of $1.2 million and $1.1 million related to the June 2015 Wells Fargo Revolver and 2015 Golub Term Loan is included as a component of interest expense in the fiscal year ended March 31, 2018 and April 1, 2017, respectively. 

 

$150 Million Credit Facility (Wells Fargo Bank, N.A.)

 

On February 23, 2015, the Company and Boot Barn, Inc., the Company’s wholly-owned primary operating subsidiary, entered into the February 2015 Wells Fargo Credit Facility, which consisted of a $75.0 million revolving credit facility, including a $5.0 million sub-limit for letters of credit, and a $75.0 million term loan, and also provided the Company with the ability to incur additional incremental term loans of up to $50.0 million, provided that certain conditions were met, including compliance with certain covenants. On June 29, 2015, the Company repaid all outstanding borrowings under the February 2015 Wells Fargo Credit Facility and terminated such facility in connection with the refinancing discussed above.

 

Total interest expense incurred in fiscal 2016 on the February 2015 Wells Fargo Credit Facility was $0.8 million.

 

Aggregate contractual maturities

Aggregate contractual maturities for the Company’s long-term debt as of March 31, 2018 are as follows:

 

 

 

 

 

Fiscal Year

 

 

(in thousands)

 

 

 

 

 

 

2019

 

$

 —

 

2020

 

 

 —

 

2021

 

 

 —

 

2022

 

 

186,500

 

2023

 

 

 —

 

Total

 

$

186,500

 

 

v3.8.0.1
Stock-Based Compensation
12 Months Ended
Mar. 31, 2018
Stock-Based Compensation  
Stock-Based Compensation

9. Stock-Based Compensation

Equity Incentive Plans

On January 27, 2012, the Company approved the 2011 Equity Incentive Plan (the “2011 Plan”). The 2011 Plan authorized the Company to issue options to employees, consultants and directors exercisable for up to a total of 3,750,000 shares of common stock. As of March 31, 2018, all awards granted by the Company under the 2011 Plan have been nonqualified stock options. Options granted under the 2011 Plan have a life of 10 years and vest over service periods of five years or in connection with certain events as defined by the 2011 Plan.

On October 19, 2014, the Company approved the 2014 Equity Incentive Plan, which was amended as of August 24, 2016 (as amended, the “2014 Plan”). The 2014 Plan authorizes the Company to issue awards to employees, consultants and directors for up to a total of 3,600,000 shares of common stock, par value $0.0001 per share. As of March 31, 2018, all awards granted by the Company under the 2014 Plan to date have been nonqualified stock options, restricted stock awards or restricted stock units. Options granted under the 2014 Plan have a life of eight years and vest over service periods of five years or in connection with certain events as defined by the 2014 Plan. Restricted stock awards granted vest over one or four years, as determined by the Compensation Committee of the Board of Directors. Restricted stock units vest over service periods of one or five years, as determined by the Compensation Committee of the Board of Directors.

Stock Options

During fiscal 2018, the Company granted certain members of management options to purchase a total of 448,792 shares under the 2014 Plan. The total grant date fair value of stock options granted during fiscal 2018 was $1.2 million, with grant date fair values ranging from $2.11 to $6.97 per share. The Company is recognizing the expense relating to these stock options on a straight-line basis over the five-year service period of the awards. The exercise prices of these awards range between $6.15 and $18.66 per share.

During fiscal 2017, the Company granted certain members of management options to purchase a total of 560,892 shares under the 2014 Plan. The total grant date fair value of stock options granted during fiscal 2017 was $1.5 million, with grant date fair values ranging from $2.50 to $2.95 per share. The Company is recognizing the expense relating to these stock options on a straight-line basis over the five-year service period of the awards. The exercise prices of these awards range between $7.11 and $8.38 per share.

During fiscal 2016, the Company granted certain members of management options to purchase a total of 294,153 shares under the 2014 Plan. The total grant date fair value of stock options granted during fiscal 2016 was $2.7 million, with grant date fair values ranging from $7.48 to $11.52 per share. The Company is recognizing the expense relating to these stock options on a straight-line basis over the five-year service period of the awards. The exercise prices of these awards range between $22.31 and $32.02 per share.

The stock option awards discussed above were measured at fair value on the grant date using the Black‑Scholes option valuation model. Key input assumptions used to estimate the fair value of stock options include the exercise price of the award, the expected option term, expected volatility of the Company’s stock price over the option’s expected term, the risk‑free interest rate over the option’s expected term and the Company’s expected annual dividend yield, if any. The Company will issue shares of common stock when the options are exercised.

The fair values of stock options granted in fiscal 2018, 2017 and 2016 were estimated on the grant dates using the following assumptions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Year Ended

 

 

March 31,

 

April 1,

 

March 26,

 

 

2018

    

2017

    

2016

    

Expected option term(1)

 

 

 

5.5

years  

 

 

 

5.5

years  

 

 

 

5.5

years  

Expected volatility factor(2)

34.0

%

-

35.5

%  

35.8

%

-

36.0

%  

33.3

%

-

36.7

%  

Risk-free interest rate(3)

1.8

%

-

2.7

%  

 

 

 

1.4

%  

1.3

%

-

1.8

%  

Expected annual dividend yield(4)

 

 

 

0

%

 

 

 

0

%

 

 

 

0

%

 


(1)

The Company has limited historical information regarding expected option term. Accordingly, the Company determined the expected life of the options using the simplified method.

(2)

Stock volatility for each grant is measured using the weighted average of historical daily price changes of the Company’s competitors’ common stock over the most recent period equal to the expected option term of the Company’s awards.

(3)

The risk‑free interest rate is determined using the rate on treasury securities with the same term.

(4)

The Company’s board of directors does not plan to pay cash dividends in the foreseeable future. Consequently, we used an expected dividend yield of zero.

Intrinsic value for stock options is defined as the difference between the market price of the Company’s common stock on the last business day of the fiscal year and the weighted average exercise price of in‑the‑money stock options outstanding at the end of each fiscal period. The following table summarizes the stock award activity for the fiscal year ended March 31, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

 

    

Weighted

    

 

 

 

 

 

 

 

Grant Date

 

Average

 

 

 

 

 

 

 

 

Weighted

 

Remaining

 

Aggregate

 

 

 

Stock

 

Average

 

Contractual

 

Intrinsic

 

 

    

Options

    

Exercise Price

    

Life (in Years)

    

Value

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Outstanding at April 1, 2017

 

2,543,660

 

$

9.29

 

 

 

 

 

 

Granted

 

448,792

 

$

7.74

 

 

 

 

 

 

Exercised

 

(705,474)

 

$

5.24

 

 

 

$

8,012

 

Cancelled, forfeited or expired

 

(211,893)

 

$

8.66

 

 

 

 

 

 

Outstanding at March 31, 2018

 

2,075,085

 

$

10.40

 

5.4

 

$

16,988

 

Vested and expected to vest after March 31, 2018

 

2,075,085

 

$

10.40

 

5.4

 

$

16,988

 

Exercisable at March 31, 2018

 

1,094,154

 

$

10.23

 

4.5

 

$

8,999

 

A summary of the status of non-vested stock options as of March 31, 2018 and changes during fiscal 2018 is presented below:

 

 

 

 

 

 

 

 

    

 

    

Weighted-

 

 

 

 

 

Average

 

 

 

 

 

Grant Date

 

 

    

Shares

    

Fair Value

 

Nonvested at April 1, 2017

 

1,148,500

 

$

4.84

 

Granted

 

448,792

 

$

2.73

 

Vested

 

(409,153)

 

$

4.92

 

Nonvested shares forfeited

 

(207,208)

 

$

3.70

 

Nonvested at March 31, 2018

 

980,931

 

$

4.08

 

 

Restricted Stock

During fiscal 2018, the Company granted 126,800 restricted stock units to various employees under the 2014 Plan. The shares granted to employees vest in five equal annual installments beginning on the grant date, provided that the respective award recipient continues to be employed by the Company through each of those dates. The shares granted to the Company’s directors vest on the first anniversary of the date of grant. The grant date fair value of these awards for fiscal 2018 totaled $1.1 million. The Company is recognizing the expense relating to these awards on a straight-line basis over the service period of each award, commencing on the date of grant.

During fiscal 2017, the Company granted 136,732 restricted stock units to various employees under the 2014 Plan. The shares granted to employees vest in five equal annual installments beginning on the grant date, provided that the respective award recipient continues to be employed by the Company through each of those dates. The shares granted to the Company’s directors vest on the first anniversary of the date of grant. The grant date fair value of these awards for fiscal 2017 totaled $1.1 million. The Company is recognizing the expense relating to these awards on a straight-line basis over the service period of each award, commencing on the date of grant. 

During fiscal 2016, the Company granted 86,530 restricted stock units to various employees under the 2014 Plan. The shares granted to employees vest in five equal annual installments beginning on the grant date, provided that the respective award recipient continues to be employed by the Company through each of those dates. The grant date fair value of these awards for fiscal 2016 totaled $1.7 million. The Company is recognizing the expense relating to these awards on a straight-line basis over the service period of each award, commencing on the date of grant.

Stock-Based Compensation Expense

Stock‑based compensation expense was $2.2 million, $3.0 million, and $2.9 million for fiscal 2018, 2017 and 2016, respectively. Stock-based compensation expense of $0.4 million, $0.5 million, and $0.4 million was recorded in cost of goods sold in the consolidated statements of operations for fiscal 2018, 2017 and 2016, respectively. All other stock-based compensation expense is included in selling, general and administrative expenses in the consolidated statements of operations.

As of March 31, 2018, there was $3.0 million of total unrecognized stock-based compensation expense related to unvested stock options, with a weighted-average remaining recognition period of 2.99 years. As of March 31, 2018, there was $1.9 million of total unrecognized stock-based compensation expense related to restricted stock, with a weighted-average remaining recognition period of 3.52 years.

v3.8.0.1
Commitments and Contingencies
12 Months Ended
Mar. 31, 2018
Commitments and Contingencies  
Commitments and Contingencies

10. Commitments and Contingencies

The Company is involved, from time to time, in litigation that is incidental to its business. The Company has reviewed these matters to determine if reserves are required for losses that are probable and reasonable to estimate in accordance with FASB ASC Topic 450, Contingencies. The Company evaluates such reserves, if any, based upon several criteria, including the merits of each claim, settlement discussions and advice from outside legal counsel, as well as indemnification of amounts expended by the Company’s insurers or others, if any.

On April 28, 2016, two employees, on behalf of themselves and all other similarly situated employees, filed a wage-and-hour class action, which includes claims for penalties under California’s Private Attorney General Act, in the Fresno County Superior Court, Case No. 16 CE CG 01330, alleging violations of California’s wage and hour, overtime, meal break and statement of wages rules and regulations, among other things.  On April 10, 2017, the Company reached a settlement with the employees for an amount that is not material to the consolidated financial statements. The amount of the settlement has been accrued as of March 31, 2018.

During the normal course of its business, the Company has made certain indemnifications and commitments under which the Company may be required to make payments for certain transactions. These indemnifications include those given to various lessors in connection with facility leases for certain claims arising from such facility leases, and indemnifications to directors and officers of the Company to the maximum extent permitted under the laws of the State of Delaware. The majority of these indemnifications and commitments do not provide for any limitation of the maximum potential future payments the Company could be obligated to make, and their duration may be indefinite. The Company has not recorded any liability for these indemnifications and commitments in the consolidated balance sheets as the impact is expected to be immaterial.

v3.8.0.1
Leases
12 Months Ended
Mar. 31, 2018
Leases  
Leases

11. Leases

Operating Leases

The following is a schedule by year of non‑cancelable future minimum rental payments under operating leases as of March 31, 2018 (in thousands):

 

 

 

 

 

 

    

 

 

 

 

    

Total

 

2019

 

$

35,545

 

2020

 

 

32,588

 

2021

 

 

31,342

 

2022

 

 

27,063

 

2023

 

 

22,348

 

Thereafter

 

 

46,771

 

Total

 

$

195,657

 

 

Minimum rent payments consist primarily of future minimum lease commitments related to store operating leases. Minimum lease payments do not include common area maintenance, insurance or tax payments. Rent expense related to operating leases was $43.3 million, $41.3 million, and $38.1 million for the fiscal years ended March 31, 2018, April 1, 2017 and March 26, 2016, respectively, and includes common area maintenance and contingent rent payments.

Capital Leases and Financing Transactions

As of March 31, 2018, the Company had non‑cancelable capital leases for property and equipment rentals with principal and interest payments due monthly. The liability under capital lease arrangements as of March 31, 2018 totals $0.7 million.

During fiscal 2016, the Company acquired leases related to two retail stores, two office buildings, one distribution center facility and land as part of the Sheplers Acquisition. On July 30, 2007, Sheplers sold these properties to an unrelated third-party real estate company and simultaneously entered into an arrangement with the third-party real estate company to lease back these properties. Sheplers maintained continuing involvement in these properties such that this sale did not qualify for sale-leaseback accounting treatment. This transaction is recorded as a financing transaction with the assets and related financing obligation recorded on the balance sheet. The lease expires in fiscal 2028 and includes renewal options and certain default provisions requiring the Company to perform repairs and maintenance, make timely rent payments and insure the buildings and equipment. The liability under the financing transaction as of March 31, 2018 totals $7.1 million.

The total liability under capital lease and financing transactions as of March 31, 2018 is $7.8 million and is included as capital lease obligations in the consolidated balance sheet. The current portion of the capital lease arrangements is included in accrued expenses and other current liabilities on the consolidated balance sheets. The interest rates range from 6.1% to 10.9%. 

As of March 31, 2018, future minimum capital lease and financing transaction payments are as follows:

 

 

 

 

 

Fiscal Year

 

(in thousands)

 

 

    

 

 

 

2019

 

$

1,291

 

2020

 

 

1,302

 

2021

 

 

1,326

 

2022

 

 

1,351

 

2023

 

 

1,300

 

Thereafter

 

 

5,527

 

Total