BOOT BARN HOLDINGS, INC., S-1/A filed on 2/23/2015
Securities Registration Statement
Document and Entity Information
9 Months Ended
Dec. 27, 2014
Document and Entity Information
 
Entity Registrant Name
Boot Barn Holdings, Inc. 
Entity Central Index Key
0001610250 
Document Type
S-1 
Pre-Effective Amendment Number
Document Period End Date
Dec. 27, 2014 
Amendment Flag
false 
Entity Filer Category
Non-accelerated Filer 
CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Mar. 30, 2013
Current assets:
 
Cash and cash equivalents
$ 1,190 
Accounts receivable
1,078 
Inventories
67,995 
Prepaid expenses and other current assets
5,311 
Total current assets
75,574 
Property and equipment, net
10,736 
Goodwill
78,033 
Intangible assets, net
58,017 
Other assets
1,922 
Total assets
224,282 
Current liabilities:
 
Line of credit
18,910 
Accounts payable
22,488 
Accrued expenses and other current liabilities
14,722 
Current portion of notes payable
2,000 
Total current liabilities
58,120 
Deferred taxes
19,538 
Long-term portion of notes payable
17,000 
Related party notes payable
50,500 
Other liabilities
1,500 
Total liabilities
146,658 
Commitments and contingencies (see Note 10)
   
Stockholders' equity:
 
Common stock, $0.0001 par value; March 29, 2014 and March 30, 2013 - 100,000,000 shares authorized, 18,929,350 shares issued and outstanding
Preferred stock, $0.0001 par value; 10,000,000 shares authorized, no shares issued or outstanding
   
Additional paid-in capital
77,543 
Retained earnings (accumulated deficit)
(3,725)
Total Boot Barn Holdings, Inc. stockholders' equity
73,820 
Non-controlling interest
3,804 
Total stockholders' equity
77,624 
Total liabilities and stockholders' equity
$ 224,282 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Dec. 27, 2014
Oct. 19, 2014
Mar. 29, 2014
Mar. 30, 2013
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
 
 
Common stock, par value (in dollars per share)
$ 0.0001 
$ 0.0001 
$ 0.0001 
$ 0.0001 
Common stock, share authorized (in shares)
100,000,000 
100,000,000 
100,000,000 
100,000,000 
Common Stock, share issued (in shares)
25,709,194 
 
18,929,350 
18,929,350 
Common Stock, share outstanding (in shares)
25,709,194 
 
18,929,350 
18,929,350 
Preferred stock, par value (in dollars per share)
$ 0.0001 
$ 0.0001 
$ 0.0001 
$ 0.0001 
Preferred stock, shares authorized (in shares)
10,000,000 
10,000,000 
10,000,000 
10,000,000 
Preferred Stock, shares issued (in shares)
 
Preferred Stock, shares outstanding (in shares)
 
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Mar. 31, 2012
Successor
Dec. 11, 2011
Predecessor
Net sales
$ 58,267 
$ 110,429 
Cost of goods sold
37,313 
72,129 
Amortization of inventory fair value adjustment
9,369 
 
Total cost of goods sold
46,682 
72,129 
Gross profit
11,585 
38,300 
Operating expenses:
 
 
Selling, general and administrative expenses
12,769 
28,145 
Acquisition-related expenses
3,027 
7,336 
Total operating expenses
15,796 
35,481 
Income from operations
(4,211)
2,819 
Interest expense, net
1,442 
3,684 
Other income, net
70 
Income before income taxes
(5,648)
(795)
Income tax expense (benefit)
(1,047)
(135)
Net income
(4,601)
(660)
Net income (loss) attributed to non-controlling interest
(230)
 
Net income attributed to Boot Barn Holdings, Inc.
$ (4,371)
$ (660)
Net income (loss) per share:
 
 
Basic shares (in dollars per share)
$ (0.23)
$ (3.82)
Diluted shares (in dollars per share)
$ (0.23)
$ (3.82)
Weighted average shares outstanding:
 
 
Basic shares
18,633 
173 
Diluted shares
18,633 
173 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)
In Thousands, except Share data, unless otherwise specified
Successor
USD ($)
Successor
Common Stock [Member]
USD ($)
Successor
Additional Paid In Capital [Member]
USD ($)
Successor
Retained Earnings [Member]
USD ($)
Successor
Noncontrolling Interest [Member]
USD ($)
Predecessor
USD ($)
Predecessor
Common Stock [Member]
Predecessor
Preferred Stock [Member]
Series A Preferred Stock [Member]
USD ($)
Predecessor
Preferred Stock [Member]
Series B Preferred Stock [Member]
USD ($)
Predecessor
Additional Paid In Capital [Member]
USD ($)
Predecessor
Retained Earnings [Member]
USD ($)
Total
USD ($)
Common Stock [Member]
USD ($)
Additional Paid In Capital [Member]
USD ($)
Retained Earnings [Member]
USD ($)
Noncontrolling Interest [Member]
USD ($)
Balance at Apr. 02, 2011
 
 
 
 
 
$ 32,857 
 
$ 31,765 
$ 1,036 
$ 17 
$ 39 
 
 
 
 
 
Balance (in shares) at Apr. 02, 2011
 
 
 
 
 
 
172,858 
31,765 
1,036 
 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
 
 
 
 
(660)
 
 
 
 
(660)
 
 
 
 
 
Balance at Dec. 11, 2011
 
 
 
 
 
32,197 
 
31,765 
1,036 
17 
(621)
 
 
 
 
 
Balance (in shares) at Dec. 11, 2011
 
 
 
 
 
 
172,858 
31,765 
1,036 
 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of stock
78,660 
74,658 
 
4,000 
 
 
 
 
 
 
 
 
 
 
 
Reorganization and issuance of stock (in shares)
 
18,632,625 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation expense
99 
 
99 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
(4,601)
 
 
(4,371)
(230)
 
 
 
 
 
 
 
 
 
 
 
Balance at Mar. 31, 2012
74,158 
74,757 
(4,371)
3,770 
 
 
 
 
 
 
 
 
 
 
 
Balance (in shares) at Mar. 31, 2012
 
18,632,625 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at Dec. 31, 2011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
(4,601)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at Mar. 31, 2012
74,158 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of stock
 
 
 
 
 
 
 
 
 
 
 
1,999 
 
1,999 
 
 
Reorganization and issuance of stock (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
296,725 
 
 
 
Stock-based compensation expense
 
 
 
 
 
 
 
 
 
 
 
787 
 
787 
 
 
Net income
 
 
 
 
 
 
 
 
 
 
 
680 
 
 
646 
34 
Balance at Mar. 30, 2013
 
 
 
 
 
 
 
 
 
 
 
77,624 
77,543 
(3,725)
3,804 
Balance (in shares) at Mar. 30, 2013
 
 
 
 
 
 
 
 
 
 
 
 
18,929,350 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation expense
 
 
 
 
 
 
 
 
 
 
 
1,291 
 
1,291 
 
 
Net income
 
 
 
 
 
 
 
 
 
 
 
5,660 
 
 
5,377 
283 
Balance at Mar. 29, 2014
 
 
 
 
 
 
 
 
 
 
 
84,575 
78,834 
1,652 
4,087 
Balance (in shares) at Mar. 29, 2014
 
 
 
 
 
 
 
 
 
 
 
 
18,929,350 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of stock
 
 
 
 
 
 
 
 
 
 
 
 
 
4,091 
 
(4,091)
Reorganization and issuance of stock (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
1,000,000 
 
 
 
Stock-based compensation expense
 
 
 
 
 
 
 
 
 
 
 
1,459 
 
1,459 
 
 
Net income
 
 
 
 
 
 
 
 
 
 
 
11,120 
 
 
11,116 
Balance at Dec. 27, 2014
 
 
 
 
 
 
 
 
 
 
 
$ 138,078 
$ 3 
$ 126,959 
$ 11,116 
 
Balance (in shares) at Dec. 27, 2014
 
 
 
 
 
 
 
 
 
 
 
 
25,709,000 
 
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
12 Months Ended 3 Months Ended 9 Months Ended
Mar. 29, 2014
Mar. 30, 2013
Mar. 31, 2012
Successor
Dec. 11, 2011
Predecessor
Cash flows from operating activities
 
 
 
 
Net income
$ 5,660 
$ 680 
$ (4,601)
$ (660)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
Depreciation
4,628 
2,662 
656 
1,163 
Stock-based compensation
1,291 
787 
99 
 
Amortization of intangible assets
3,501 
2,926 
439 
55 
Amortization of deferred loan fees
2,507 
435 
81 
286 
Loss on disposal of property and equipment
1,980 
322 
17 
Accretion of above market leases
(230)
(231)
(63)
(93)
Deferred taxes
(1,874)
(633)
(2,374)
(189)
Amortization of inventory fair value adjustment
867 
9,199 
9,369 
 
Changes in operating assets and liabilities:
 
 
 
 
Accounts receivable
(710)
(209)
629 
(892)
Due from related party
 
 
 
52 
Inventories
(14,100)
(4,821)
3,466 
(9,436)
Prepaid expenses and other current assets
(871)
(2,490)
(615)
587 
Other assets
104 
199 
278 
26 
Accounts payable
3,190 
4,916 
915 
4,608 
Accrued expenses and other current liabilities
5,944 
2,494 
(12,385)
10,446 
Other liabilities
893 
(4,312)
52 
165 
Net cash provided by operating activities
12,780 
11,924 
(4,037)
6,122 
Cash flows from investing activities
 
 
 
 
Purchases of property and equipment
(11,400)
(3,848)
(698)
(2,055)
Proceeds from sales of property and equipment
24 
61 
 
Purchase of trademark rights
(200)
 
 
 
Acquisition of business, net of cash acquired
(15,696)
(41,912)
(85,574)
 
Net cash used in investing activities
(27,272)
(45,699)
(86,272)
(2,051)
Cash flows from financing activities
 
 
 
 
Proceeds from issuance of stock
 
1,999 
76,019 
 
Line of credit - net
9,714 
4,324 
4,567 
101 
Proceeds from loan borrowings
100,000 
10,583 
12,000 
 
Repayments on debt and capital lease obligations
(70,126)
(1,461)
(294)
(2,204)
Proceeds from borrowings - related parties
 
25,500 
 
 
Debt issuance fees
(3,350)
(1,167)
(1,391)
 
Payment of assumed contingent consideration and debt from acquisitions
(21,818)
(5,405)
 
 
Net cash (used in) provided by financing activities
14,420 
34,373 
90,901 
(2,103)
Net increase in cash and cash equivalents
(72)
598 
592 
1,968 
Cash and cash equivalents, beginning of period
1,190 
592 
 
567 
Cash and cash equivalents, end of period
1,118 
1,190 
592 
2,535 
Supplemental disclosures of cash flow information:
 
 
 
 
Cash paid for income taxes
4,849 
3,337 
95 
445 
Cash paid for interest
9,110 
6,275 
966 
2,782 
Supplemental disclosure of non-cash activities:
 
 
 
 
Unpaid purchases of property and equipment
132 
65 
 
 
Equipment acquired through capital lease
28 
 
 
41 
Exchange of Predecessor shares for Successor shares
 
 
2,641 
 
Net replacement of Predecessor debt with the same lender
 
 
$ 17,000 
 
Business operations
Business operations

1.     Business operations

Boot Barn Holdings, Inc., formerly named WW Top Investment Corporation (the "Company" or "Successor") 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 18,929,350 outstanding shares of common stock as of each of March 29, 2014 and March 30, 2013 with 17,750,000 shares of common stock held by Freeman Spogli & Co. as of each of March 29, 2014 and March 30, 2013. The shares of common stock have voting rights of one vote per share.

Boot Barn Holding Corporation (the "Predecessor"), a Delaware corporation, was incorporated on September 28, 2007 and owns 100% of the common stock of Boot Barn, Inc. (together with Predecessor, "Boot Barn"). The Company was formed to effect the purchase of the Predecessor, including the operations of Boot Barn. On December 12, 2011, the Company acquired 94.9% of the outstanding capital stock of the Predecessor, which is referred to as the Recapitalization. During the period from November 17, 2011 through December 11, 2011, there was no material activity of the Company and the Company had no operations prior to the acquisition. In connection with the Recapitalization, management and other investors purchased shares of the Successor's common stock, collectively representing a 9.6% equity interest in Boot Barn Holding Corporation.

As of June 8, 2014, the Company held all of the outstanding shares of common stock of WW Holding Corporation, which held 95.0% of the outstanding shares of common stock of Boot Barn Holding Corporation. On June 9, 2014, WW Holding Corporation was merged with and into the Company and then Boot Barn Holding Corporation was merged with and into the Company. As a result of this reorganization, Boot Barn, Inc. became a direct wholly owned subsidiary of the Company, and the minority stockholders that formerly held 5.0% of Boot Barn Holding Corporation became holders of 5.0% of the Company. On June 10, 2014, the legal name of the Company was changed from WW Top Investment Corporation to Boot Barn Holdings, Inc.

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 152 stores in 23 states as of March 29, 2014 and 117 stores in 21 states as of March 30, 2013. As of the fiscal year ending March 29, 2014, all stores operate under the Boot Barn name (other than two stores, which operate under the "American Worker" name).

Summary of significant accounting policies
9 Months Ended 12 Months Ended
Dec. 27, 2014
Mar. 29, 2014
Summary of significant accounting policies

2.Summary of Significant Accounting Policies

 

Information regarding the Company’s significant accounting policies is contained in Note 2, “Summary of Significant Accounting Policies”, to the consolidated financial statements included in the Company’s final prospectus filed with the Securities and Exchange Commission (the “SEC”) on October 30, 2014. Presented below in the following notes is supplemental information that should be read in conjunction with those consolidated financial statements.

 

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 website. All 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. As of December 27, 2014, the Company had identified no indicators of impairment with respect to its goodwill, intangible and long-lived asset balances. To the extent actual results differ from those estimates, the Company’s future results of operations may be affected. The Company performs its annual goodwill impairment test on the first day of the fourth fiscal quarter, or more frequently if it believes that indicators of impairment exist.

 

Fair Value of Certain Financial Assets and Liabilities

 

The Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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 at 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.

 

·

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.

 

Cash and cash equivalents, accounts receivable and accounts payable are valued at fair value and 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 value 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 5, “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 December 27, 2014 on a recurring basis.

 

Recent Accounting Pronouncements

 

In July 2013, the FASB issued Accounting Standards Update (“ASU”) No. 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit when a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force)”. The amendments in this ASU provide guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists. An unrecognized tax benefit should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward with certain exceptions, in which case such an unrecognized tax benefit should be presented in the financial statements as a liability. The amendments in this ASU do not require new recurring disclosures. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Companies may choose to apply this guidance retrospectively to each prior reporting period presented. The Company adopted this ASU on March 30, 2014, and the adoption of this guidance did not have a material impact on its consolidated financial statements.

 

In April 2014, the FASB issued ASU No. 2014-08, “Presentation of Financial Statements and Property, Plant, and Equipment “ and “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”. The ASU amendment changes the requirements for reporting discontinued operations in Subtopic 205-20. The amendment is effective on a prospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2014. Early adoption is permitted for disposals that have not been reported in financial statements previously issued. Based on the Company’s evaluation of the ASU, its adoption of this update is not expected to have a material impact on the Company’s financial position or results of operation.

 

In May 2014, the FASB issued ASU No. 2014-09, “Revenue From Contracts with Customers”. The ASU amended revenue recognition guidance to clarify the principles for recognizing revenue from contracts with customers. The new standard is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled to when products are transferred to customers. The Company is required to adopt this new standard for annual and interim periods beginning after December 15, 2016. Early adoption is not permitted. The new revenue accounting standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.

 

In August 2014, the FASB issued an amendment to the accounting guidance related to the evaluation of an entity’s ability to continue as a going concern. The amendment establishes management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern in connection with preparing financial statements for each annual and interim reporting period. The update also gives guidance to determine whether to disclose information about relevant conditions and events when there is substantial doubt about an entity’s ability to continue as a going concern. This guidance will be effective for the Company as of December 15, 2016. The new guidance is not expected to have an impact on our financial position, results of operations, or cash flows.

 

 

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 U.S. ("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") and Baskins Acquisition Holdings, LLC ("Baskins"). 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 Saturday closest to March 31. The years ending March 29, 2014 ("fiscal 2014") and March 30, 2013 ("fiscal 2013") each consisted of 52 weeks. The period from December 12, 2011 to March 31, 2012 (the "Successor Period") consisted of approximately 16 weeks. The period from April 3, 2011 to December 11, 2011 (the "Predecessor Period") consisted of approximately 36 weeks.

Comprehensive income (loss)

The Company does not have any components of other comprehensive income (loss) recorded within its consolidated financial statements and, therefore, does not separately present a statement of comprehensive income (loss) 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 has a single operating and reportable segment, which includes net sales generated from its retail stores and e-commerce website. All 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 has concluded that no allowance for bad debts is required.

Inventories

Inventory consists primarily of purchased merchandise and is valued at the lower of cost or market. 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 Boot Barn, RCC and Baskins. These amounts were amortized over the period that the related inventory was sold. Amortization of the acquired cost of inventory was $0.9 million, $9.2 million and $9.4 million in the fiscal years ended March 29, 2014 and March 30, 2013, and the Successor Period, respectively.

Deferred loan fees

Deferred loan fees are capitalized and amortized to interest expense over the terms of the applicable loan agreements using the effective interest method. Included in prepaid expenses and other current assets are short-term deferred loan fees of $0.6 million and $0.5 million as of March 29, 2014 and March 30, 2013, respectively. Included in other assets are long-term deferred loan fees of $2.3 million and $1.5 million as of March 29, 2014 and March 30, 2013, respectively.

Property and equipment, net

Property and equipment consists of leasehold improvements, machinery and equipment, furniture and fixtures 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 seven years. Machinery and equipment is depreciated over five years. Furniture and fixtures are depreciated over five to seven years. Vehicles are depreciated over five years. Leasehold improvements are depreciated over the shorter of the terms of the leases or their estimated useful lives.

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 or more frequently if indicators of impairment exist. An annual goodwill impairment test is performed as of the first day of the fourth fiscal quarter. In fiscal 2013 and prior, the annual goodwill impairment test was performed as of fiscal year-end. The Company changed the timing of its annual impairment test to provide sufficient time to prepare the analysis and meet reporting deadlines. 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 conducts 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. 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 with 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. No impairment was recorded during the fiscal years ended March 29, 2014 or March 30, 2013, the Successor Period or the Predecessor Period.

Intangible assets with indefinite lives, which include the Boot Barn trademark, 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. No impairment was recorded during the fiscal years ended March 29, 2014, March 30, 2013, the Successor Period or the Predecessor Period.

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 trademarks is six months, for customer lists is five years, for non-compete agreements is four to five years and for below-market leases is two to 17 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") Accounting Standards Codification ("ASC") Topic 820, Fair Value Measurements. The Company has determined that there were no impairments of long-lived assets during the fiscal years ended March 29, 2014 or March 30, 2013, the Successor Period or the Predecessor Period.

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 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.

Noncontrolling interest

On December 12, 2011, the Company acquired the majority of the outstanding shares of its consolidated subsidiary Boot Barn Holding Corporation. Certain investors hold approximately 5.0% of the outstanding shares of Boot Barn Holding Corporation. Noncontrolling interests are recorded at the acquisition date fair value plus an allocation of subsidiary earnings (loss) based on the relative ownership interest.

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 revenue. 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 $0.4 million, $0.2 million, $0.2 million and $0.1 million as of March 29, 2014 and March 30, 2013 and the end of the Successor Period and the Predecessor Period, respectively. The following table provides a reconciliation of the activity related to the Company's sales returns reserve:

                                                                                                                                                                                    

 

 

 

 

 

 

 

 

 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

 

Fiscal year ended

 

(in thousands)

 

March 29,
2014

 

March 30,
2013

 

(Successor)
December 12, 2011
to March 31, 2012

 

(Predecessor)
April 3, 2011 to
December 11, 2011

 

​  

 

​  

​  

 

​  

​  

 

​  

​  

 

​  

​  

Beginning balance

 

$

238

 

$

169

 

$

139

 

$

139

 

Provisions

 

 

15,034

 

 

9,723

 

 

2,821

 

 

3,800

 

Sales returns

 

 

(14,842

)

 

(9,654

)

 

(2,791

)

 

(3,800

)

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Ending balance

 

$

430

 

$

238

 

$

169

 

$

139

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

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 $2.0 million, $1.3 million, $1.1 million and $0.7 million as of March 29, 2014 and March 30, 2013 and the end of the Successor Period and the Predecessor Period, respectively. The following table provides a reconciliation of the activity related to the Company's customer loyalty program:

                                                                                                                                                                                    

 

 

 

 

 

 

 

 

 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

 

Fiscal year ended

 

(in thousands)

 

March 29,
2014

 

March 30,
2013

 

(Successor)
December 12, 2011
to March 31, 2012

 

(Predecessor)
April 3, 2011 to
December 11, 2011

 

​  

 

​  

​  

 

​  

​  

 

​  

​  

 

​  

​  

Beginning balance

 

$

1,343

 

$

1,124

 

$

741

 

$

270

 

Provisions

 

 

10,440

 

 

5,644

 

 

1,325

 

 

1,512

 

Usage

 

 

(9,833

)

 

(5,425

)

 

(942

)

 

(1,041

)

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Ending balance

 

$

1,950

 

$

1,343

 

$

1,124

 

$

741

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

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 recognize 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. In fiscal 2014, the Company elected to participate in a voluntary disclosure program with the State of Delaware in order to settle past due unclaimed property obligations. The Company agreed with the State of Delaware to settle all unreported escheatment liabilities in the amount of $0.3 million. These amounts were recorded in accrued expenses and other current liabilities in fiscal 2014 based upon preliminary settlement amounts. The final settlement was reached with, and amounts were paid to, the State of Delaware in May 2014.

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 SG&A expenses. All of these costs are expensed as incurred.

Advertising costs

Certain advertising costs, including 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 $0.4 million and $0.2 million as of March 29, 2014 and March 30, 2013, respectively. All other advertising costs are expensed as incurred. The Company recognized $11.3 million and $7.1 million in advertising costs during the fiscal years ended March 29, 2014 and March 30, 2013, respectively. Advertising costs of $1.1 million and $3.5 million were recognized for the Successor Period, and the Predecessor Period, 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 (benefit) 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 29, 2014, March 30, 2013, for the Successor Period or the Predecessor Period.

Per share information

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of outstanding shares of common stock. In computing diluted earnings (loss) 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.

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 and its Level 3 liability includes contingent consideration.

Cash and cash equivalents, accounts receivable and accounts payable are valued at fair value and 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 value 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 29, 2014 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

We purchase merchandise inventories from several hundred suppliers worldwide. Sales of products from our three largest suppliers totaled approximately 40%, 40%, 39% and 39% of our net sales for fiscal 2014, fiscal 2013, the Successor Period and the Predecessor Period, respectively.

Recent accounting pronouncements

In July 2013, the FASB issued Accounting Standards Update ("ASU") No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit when a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force). The amendments in this ASU provide guidance on the financial statements presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists. An unrecognized tax benefit should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward with certain exceptions, in which case such an unrecognized tax benefit should be presented in the financial statements as a liability. The amendments in this ASU do not require new recurring disclosures. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Companies may choose to apply this guidance retrospectively to each prior reporting period presented. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

In May 2014, the FASB and the International Accounting Standard Board ("IASB") jointly issued a new revenue recognition standard 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 is effective for public entities for annual and interim periods beginning after December 15, 2016. Early adoption is not permitted under GAAP. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.

Business combinations
9 Months Ended 12 Months Ended
Dec. 27, 2014
Mar. 29, 2014
Business combinations

3.Business Combinations

 

Baskins Acquisition Holdings, LLC

 

Effective May 25, 2013, the Company completed the acquisition of 100% of the member interests in Baskins, including 30 stores and an online retail website. Baskins was a specialty western retailer with stores in Texas and Louisiana, and the acquisition expanded the Company’s operations into these core markets. All of the acquired Baskins stores were subsequently converted into Boot Barn stores. The goodwill represents the additional amounts paid in order to expand the Company’s geographical presence.

 

The acquisition-date fair value of the consideration transferred totaled $37.7 million, which consisted of $36.0 million in cash and $1.7 million of contingent consideration. The $36.0 million of cash included $13.7 million paid to the members of Baskins, $2.2 million paid into an escrow account and $20.1 million to repay Baskins’ outstanding debt. These payments were partially offset by $1.9 million, which represents the amount of cash on hand immediately prior to the closing of the acquisition. Claims against the escrow account could have been made until November 30, 2014. However, no claims were made as of that date, and the escrow funds were released during the thirteen weeks ended December 27, 2014.

 

The Company was obligated to make additional earnout payments, contingent on the achievement of milestones relating to 12-month store sales associated with three new stores for the periods beginning January 24, 2013, January 31, 2013 and February 20, 2013 at each of the three stores. The maximum amount payable upon achievement of the milestones was $2.1 million. Each of the milestones was achieved, and the Company made a cash payment of $2.1 million in the fourth quarter of fiscal 2014. As of the acquisition date, the Company estimated that these earnout payments would be $1.7 million, based on then existing facts and circumstances. The estimated fair value of this earnout was determined by using revenue projections and applying a discount rate to reflect the risk of the underlying conditions not being satisfied, such that no payment would be due. The fair value measurement of the earnout was based primarily on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in ASC 820. A total of $0.4 million from the revaluation of contingent consideration was recorded in the fourth quarter of fiscal 2014 to selling, general and administrative expenses in the Company’s consolidated statement of operations.

 

The total fair value of consideration transferred for the acquisition was allocated to the net tangible and intangible assets based upon the Company’s estimate of their 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 is deductible for income tax purposes. 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 (in thousands):

 

 

 

At May 25, 2013
(Level 3)

 

 

 

 

 

Assets acquired:

 

 

 

Cash and cash equivalents

 

$

1,935 

 

Current assets

 

22,083 

 

Property and equipment, net

 

5,850 

 

Intangible assets acquired

 

5,006 

 

Goodwill

 

15,064 

 

Other assets

 

109 

 

Total assets acquired

 

50,047 

 

Liabilities assumed:

 

 

 

Other current liabilities

 

12,119 

 

Line of credit - current

 

10,259 

 

Notes payable - current

 

9,819 

 

Contingent consideration

 

1,740 

 

Above-market leases

 

83 

 

Capital lease obligation

 

138 

 

Total liabilities assumed

 

34,158 

 

Total purchase price

 

$

15,889 

 

 

Definite-lived intangible assets are recorded at their fair value as of the acquisition date with amortization computed 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 trademarks is six months, non-compete agreements is four years, customer lists is five years, and below-market leases is four to 18 years. For leases under market rent, amortization is based on the discounted future benefits from lease payments under market rents.

 

Acquisition-related costs are recognized separately from the acquisition and are expensed as incurred. The Company incurred $0.7 million of acquisition-related costs during the thirty-nine weeks ended December 28, 2013. The amount of net revenue and net income of Baskins included in the Company’s condensed consolidated statements of operations from the acquisition date to December 28, 2013 were $41.9 million and $3.3 million, respectively.

 

Supplemental As Adjusted Data (Unaudited)

 

The unaudited as adjusted statements of operations data below gives effect to the Baskins acquisition, as well as the Company’s acquisition of RCC on August 31, 2012, as if they had all occurred as of March 30, 2013. These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Baskins, RCC and Boot Barn Holding Corporation to reflect the effects of amortization of purchased intangible assets and acquired inventory valuation step-up, additional financing as of April 3, 2011 in order to complete the acquisitions, income tax expense and other transaction costs directly associated with the acquisitions such as legal, accounting and banking fees. 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 acquired entities are derived from their books and records prepared prior to the acquisition. 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 acquisitions taken place as of the date noted above.

 

As adjusted net sales (Unaudited)

 

(in thousands)

 

Thirty-Nine Weeks Ended
December 28, 2013

 

 

 

 

 

Net sales (as reported)

 

$

257,382 

 

Baskins

 

8,290 

 

As adjusted net sales

 

$

265,672 

 

 

As adjusted net income (Unaudited)

 

(in thousands)

 

Thirty-Nine weeks ended
December 28, 2013

 

 

 

 

 

Net income (as reported)

 

$

3,768

 

Baskins

 

831

 

RCC

 

(821

)

Boot Barn Holding Corporation

 

2,593

 

As adjusted net income

 

$

6,371

 

 

 

Business combinations

3.     Business combinations

In allocating the purchase price of the following acquisitions, the Company recorded all assets acquired and liabilities assumed at fair value. The excess of the purchase price over the aggregate fair values was recorded as goodwill. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value assigned to identifiable intangible assets acquired was based on estimates and assumptions made by management at the time of the acquisitions.

The purchase price of an acquisition is allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values as of the date of acquisition. To the extent the purchase price exceeds the fair value of the net identifiable tangible and intangible assets acquired and liabilities assumed such excess is allocated to goodwill. The Company determines the estimated fair values after review and consideration of relevant information, including discounted cash flows, quoted market prices and estimates made by management. The Company adjusts the preliminary purchase price allocation, as necessary, during the measurement period of up to one year after the acquisition closing date as it obtains more information as to facts and circumstances existing as of the acquisition date.

Valuations on acquired intangible assets for acquisitions were completed based on Level 3 inputs. The acquired trademarks, customer lists, below-market leases, above-market leases and non-compete agreements are subject to fair value measurements that were based primarily on significant inputs not observable in the market and thus represent Level 3 measurements. The Company recorded the fair values of acquired trademarks using a relief from royalty method. In the relief from royalty method, the fair value of the intangible asset is estimated to be the present value of the royalties saved because the company owns the intangible asset. Revenue projections and estimated useful life were used in estimating the fair value of the trademarks. The non-compete agreements were calculated using the with-or-without method, which utilizes the probability of these employees competing with the Company and revenue projections to calculate the valuation of non-competition agreements. The valuation of the customer list utilized a replacement cost approach, which provides an estimate of the fair value of an asset based on the estimated costs associated with creating a similar asset of like utility. The replacement cost valuation relies on estimates of the average cost to purchase names on a mailing list, as well as response rates. The valuation of the leases below and above market rent were performed using an income approach and were based upon market rent per square foot and market rate inflation.

Baskins Acquisition Holdings, LLC

Effective May 25, 2013, the Company completed the acquisition of 100% of the member interests in Baskins, including 30 stores and an online retail website. Baskins is a specialty western retailer with stores in Texas and Louisiana, and the acquisition expanded the Company's operations into these core markets. The goodwill represents the additional amounts paid in order to expand the Company's geographical presence.

The acquisition-date fair value of the consideration transferred totaled $37.7 million, which consisted of $36.0 million in cash and $1.7 million of contingent consideration. The $36.0 million of cash included $13.7 million paid to the members of Baskins, $2.2 million paid into an escrow account and $20.1 million to repay Baskins' outstanding debt. These payments were partially offset by $1.9 million, which represents the amount of cash on hand immediately prior to the closing of the acquisition. As of March 29, 2014, $1.7 million remained in an escrow account and is not included in the Company's consolidated balance sheet. Claims against the escrow account can be made until November 30, 2014. Due to the nature of the escrow account, the cash portion of the consideration transferred has been determined only provisionally and is subject to change pending the outcome of potential escrow claims.

The Company was obligated to make additional earnout payments, contingent on the achievement of milestones relating to 12-month store sales associated with three new stores for the periods beginning January 24, 2013, January 31, 2013 and February 20, 2013 at each of the three stores. The maximum amount payable upon achievement of the milestones was $2.1 million. Each of the milestones was achieved, and the Company made a cash payment of $2.1 million in the fourth quarter of fiscal 2014. As of the acquisition date, the Company estimated that these earnout payments would be $1.7 million, based on then existing facts and circumstances. The estimated fair value of this earnout was determined by using revenue projections and applying a discount rate to reflect the risk of the underlying conditions not being satisfied such that no payment would be due. The fair value measurement of the earnout was based primarily on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in ASC 820. A total of $0.4 million from the revaluation of contingent consideration was recorded in fiscal 2014 to selling, general and administrative expenses in the Company's consolidated statement of operations.

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 is deductible for income tax purposes. Such estimated fair values require management to make estimates and judgments, especially with respect to intangible assets. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date based on the preliminary purchase price (in thousands):

                                                                                                                                                                                    

 

 

 

 

​  

​  

​  

​  

 

 

At May 25,
2013
(Level 3)

 

​  

 

​  

​  

Assets acquired:

 

 

 

 

Cash and cash equivalents

 

$

1,935 

 

Current assets

 

 

22,083 

 

Property and equipment, net

 

 

5,850 

 

Intangible assets acquired

 

 

5,006 

 

Goodwill

 

 

15,064 

 

Other assets

 

 

109 

 

​  

​  

Total assets acquired

 

 

50,047 

 

​  

​  

Liabilities assumed:

 

 

 

 

Other current liabilities

 

 

12,119 

 

Line of credit—current

 

 

10,259 

 

Notes payable—current

 

 

9,819 

 

Contingent consideration

 

 

1,740 

 

Above-market leases

 

 

83 

 

Capital lease obligation

 

 

138 

 

​  

​  

Total liabilities assumed

 

 

34,158 

 

​  

​  

Total purchase price

 

$

15,889 

 

​  

​  

​  

​  

Definite-lived intangible assets are recorded at their fair value as of the acquisition date with amortization computed 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 trademarks is six months, non-compete agreements is four to five years, customer lists is five years, and below-market leases is two to 17 years. For leases under market rent, amortization is based on the discounted future benefits from lease payments under market rents.

Acquisition-related costs are recognized separately from the acquisition and are expensed as incurred. Goodwill represents the additional amounts paid in order to expand the Company's geographical presence. The Company incurred $0.7 million of acquisition-related costs in fiscal 2014. The amount of net revenue and net loss of Baskins included in the Company's consolidated statements of operations from the acquisition date to March 29, 2014 were $63.4 million and $0.1 million, respectively.

Acquisitions from prior years

RCC Western Stores, Inc.

On August 31, 2012, the Company acquired 100% of the capital stock of RCC. The primary reason for the acquisition of RCC was to expand its retail operations into 11 additional states. The total purchase price of $43.5 million was paid in cash. The Company acquired $1.5 million in cash as part of the acquisition. Acquisition-related costs totaling $1.1 million are recorded within the consolidated statement of operations for fiscal 2013.

In connection with the acquisition of RCC, the Company entered into certain debt agreements in which loan fees of $1.2 million were incurred and are recorded as prepaid loan fees within other assets in the consolidated balance sheet as of March 30, 2013. In addition, the Company issued 296,725 shares of its common stock in connection with the acquisition for cash proceeds of $2.0 million.

Allocation of the purchase price for the acquisition of RCC was based on the fair value of the net assets that were acquired. As of August 31, 2012, the purchase price was allocated as follows (in thousands):

                                                                                                                                                                                    

 

 

 

 

​  

​  

​  

​  

 

 

Significant
unobservable
inputs
(Level 3)

 

​  

 

​  

​  

Current assets

 

$

19,528 

 

Property and equipment

 

 

3,616 

 

Goodwill

 

 

31,103 

 

Intangible assets acquired

 

 

5,002 

 

Other assets

 

 

21 

 

​  

​  

Total assets acquired

 

 

59,270 

 

​  

​  

Current liabilities assumed

 

 

10,252 

 

Line of credit—current

 

 

5,405 

 

Below market lease liability

 

 

154 

 

​  

​  

Total purchase price

 

$

43,459 

 

​  

​  

​  

​  

Definite-lived intangible assets acquired include trademarks, customer list, non-compete agreements and below-market leases. The amount of net revenue and net loss of RCC included in the Company's consolidated statements of operations from the acquisition date to March 30, 2013 were $35.5 million and $0.5 million, respectively.

Boot Barn Holding Corporation

Effective December 12, 2011, the Company acquired the Predecessor. The primary reason for the Predecessor acquisition was to monetize the initial investment made by the Predecessor. Of the total purchase price, $88.1 million was paid in cash, and $2.6 million was contributed in the form of equity interests by new investors and former owners of the Predecessor. The Company acquired $2.5 million in cash as part of the transaction. Acquisition-related costs totaled $3.0 million and $7.3 million for the Successor and Predecessor periods, respectively, and are recorded within the fiscal 2012 consolidated statement of operations. All costs were incurred by Boot Barn Holding Corporation in the respective periods.

Allocation of the purchase price for the Predecessor is based on estimates of the fair value of net assets acquired. As of December 11, 2011, the purchase price was allocated as follows (in thousands):

                                                                                                                                                                                    

 

 

 

 

​  

​  

​  

​  

 

 

Significant
unobservable
inputs
(Level 3)

 

​  

 

​  

​  

Current assets

 

$

71,869 

 

Property and equipment

 

 

6,228 

 

Goodwill

 

 

46,930 

 

Intangible assets acquired

 

 

56,380 

 

Other assets

 

 

336 

 

​  

​  

Total assets acquired

 

 

181,743 

 

​  

​  

Current liabilities assumed

 

 

36,087 

 

Line of credit—current

 

 

21,692 

 

Below market lease liability

 

 

33,214 

 

​  

​  

Total purchase price

 

$

90,750 

 

​  

​  

​  

​  

The change in the carrying amount of goodwill is as follows (in thousands):

                                                                                                                                                                                    

 

 

 

 

​  

​  

​  

​  

Balance as of March 31, 2012

 

$

46,930 

 

Goodwill as a result of the RCC Acquisition

 

 

31,103 

 

​  

​  

Balance as of March 30, 2013

 

 

78,033 

 

Goodwill as a result of the Baskins Acquisition

 

 

15,064 

 

​  

​  

Balance as of March 29, 2014

 

$

93,097 

 

​  

​  

​  

​  

Supplemental as adjusted data (unaudited)

The unaudited as adjusted statements of operations data below gives effect to the acquisitions described above, as if they had all occurred as of April 3, 2011. These amounts have been calculated after applying the Company's accounting policies and adjusting the results of Baskins, RCC and the Predecessor to reflect the effects of amortization of purchased intangible assets and acquired inventory valuation step-up, additional financing as of April 3, 2011 in order to complete the acquisitions, income tax expense and other transaction costs directly associated with the acquisitions such as legal, accounting and banking fees. 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 acquired entities are derived from their books and records prepared prior to the acquisition. 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 acquisitions taken place as of the date noted above.

                                                                                                                                                                                    

 

 

 

 

 

 

 

 

 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

As adjusted net sales—unaudited
(in thousands)

 

March 29,
2014

 

March 30,
2013

 

(Successor)
December 12, 2011
to March 31, 2012

 

(Predecessor)
April 3, 2011 to
December 12, 2011

 

​  

 

​  

​  

 

​  

​  

 

​  

​  

 

​  

​  

Net sales (as reported)

 

$

345,868 

 

$

233,203 

 

$

58,267 

 

$

110,429 

 

Baskins

 

 

8,290 

 

 

58,058 

 

 

18,169 

 

 

29,118 

 

RCC

 

 

 

 

21,503 

 

 

16,595 

 

 

31,246 

 

Boot Barn Holding Corporation

 

 

 

 

 

 

 

 

—  

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

As adjusted net sales

 

$

354,158 

 

$

312,764 

 

$

93,031 

 

$

170,793 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

                                                                                                                                                                                    

 

 

 

 

 

 

 

 

 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

As adjusted net income (loss)—
unaudited
(in thousands)

 

March 29,
2014

 

March 30,
2013

 

(Successor)
December 12, 2011
to March 31, 2012

 

(Predecessor)
April 3, 2011 to
December 12, 2011

 

​  

 

​  

​  

 

​  

​  

 

​  

​  

 

​  

​  

Net income (loss) (as reported)

 

$

5,660

 

$

680

 

$

(4,601

)

$

(660

)

Baskins

 

 

580

 

 

396

 

 

468

 

 

(3,831

)

RCC

 

 

(1,100

)

 

2,818

 

 

413

 

 

(7,108

)

Boot Barn Holding Corporation

 

 

3,183

 

 

4,487

 

 

8,125

 

 

(15,794

)

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

As adjusted net income (loss)

 

$

8,323

 

$

8,381

 

$

4,405

 

$

(27,393

)

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

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 29,
2014

 

March 30,
2013

 

​  

 

​  

​  

 

​  

​  

Prepaid rent and property taxes

 

$

2,096 

 

$

1,331 

 

Prepaid advertising

 

 

401 

 

 

186 

 

Prepaid insurance

 

 

81 

 

 

280 

 

Deferred taxes

 

 

4,748 

 

 

2,452 

 

Income tax receivable

 

 

 

 

31 

 

Deferred loan fees—current

 

 

558 

 

 

548 

 

Other

 

 

801 

 

 

483 

 

​  

​  

​  

​  

​  

Total prepaid expenses and other current assets

 

$

8,685 

 

$

5,311 

 

​  

​  

​  

​  

​  

​  

​  

 

Property and equipment, net
Property and equipment, net

5.     Property and equipment, net

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

                                                                                                                                                                                    

 

 

 

 

 

 

​  

​  

​  

​  

​  

​  

​  

 

 

March 29,
2014

 

March 30,
2013

 

​  

 

​  

​  

 

​  

​  

Leasehold improvements

 

$

12,491

 

$

5,634

 

Machinery and equipment

 

 

5,964

 

 

3,781

 

Furniture and fixtures

 

 

9,373

 

 

4,085

 

Construction in progress

 

 

754

 

 

104

 

Vehicles

 

 

387

 

 

325

 

​  

​  

​  

​  

​  

 

 

 

28,969

 

 

13,929

 

Less: Accumulated depreciation

 

 

(7,519

)

 

(3,193

)

​  

​  

​  

​  

​  

Property and equipment, net

 

$

21,450

 

$

10,736

 

​  

​  

​  

​  

​  

​  

​  

Depreciation expense was $4.6 million, $2.7 million, $0.7 million and $1.2 million for the periods ended March 29, 2014 and March 30, 2013, the Successor Period and the Predecessor Period, respectively. Amortization related to assets under capital lease is included in the above depreciation expense (see Note 11 "Leases").

Intangible assets, net
9 Months Ended 12 Months Ended
Dec. 27, 2014
Mar. 29, 2014
Intangible assets, net

4.Intangible Assets, Net

 

Net intangible assets as of December 27, 2014 and March 29, 2014 consisted of the following (in thousands):

 

 

 

December 27, 2014

 

 

 

Gross 
Carrying 
Amount

 

Accumulated 
Amortization

 

Net

 

 

 

 

 

 

 

 

 

Trademarks

 

$

2,490

 

$

(2,490

)

$

 

Customer list

 

7,300

 

(4,038

)

3,262

 

Non-compete agreements

 

1,380

 

(723

)

657

 

Below-market leases

 

5,318

 

(1,576

)

3,742

 

Total definite lived

 

16,488

 

(8,827

)

7,661

 

Trademarks-indefinite lived

 

50,100

 

 

50,100

 

Total intangible assets

 

$

66,588

 

$

(8,827

)

$

57,761

 

 

 

 

March 29, 2014

 

 

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Net

 

 

 

 

 

 

 

 

 

Trademarks

 

$

2,490

 

$

(2,490

)

$

 

Customer list

 

7,300

 

(2,732

)

4,568

 

Non-compete agreements

 

1,380

 

(500

)

880

 

Below-market leases

 

5,318

 

(1,143

)

4,175

 

Total definite lived

 

16,488

 

(6,865

)

9,623

 

Trademarks-indefinite lived

 

50,100

 

 

50,100

 

Total intangible assets

 

$

66,588

 

$

(6,865

)

$

59,723

 

 

Amortization expense for intangible assets totaled $0.6 million and $1.0 million for the thirteen weeks ended December 27, 2014 and December 28, 2013, respectively, and $2.0 million and $2.9 million for the thirty-nine weeks ended December 28, 2013, respectively, and is included in selling, general and administrative expenses.

 

As of December 27, 2014, estimated future amortization of intangible assets was as follows (in thousands):

 

Fiscal year

 

 

 

 

 

 

 

2015

 

$

631 

 

2016

 

2,324 

 

2017

 

1,772 

 

2018

 

777 

 

2019

 

438 

 

Thereafter

 

1,719 

 

Total

 

$

7,661 

 

 

Intangible assets, net

6.     Intangible assets, net

Net intangible assets consisted of the following (in thousands):

                                                                                                                                                                                    

 

 

 

 

 

 

 

 

 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

 

March 29, 2014

 

 

 

Gross
carrying
amount

 

Accumulated
amortization

 

Net

 

Weighted
average
useful life

 

​  

 

​  

​  

 

​  

​  

 

​  

​  

 

​  

​  

Intangible assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Trademarks

 

$

2,490

 

$

(2,490

)

$

 

 

0.9

 

Customer list

 

 

7,300

 

 

(2,732

)

 

4,568

 

 

5.0

 

Non-compete agreements

 

 

1,380

 

 

(500

)

 

880

 

 

4.7

 

Below-market leases

 

 

5,318

 

 

(1,143

)

 

4,175

 

 

10.4

 

​  

​  

​  

​  

​  

​  

​  

​  

Total definite lived

 

 

16,488

 

 

(6,865

)

 

9,623

 

 

 

 

Trademarks—indefinite lived

 

 

50,100

 

 

 

 

50,100

 

 

 

 

​  

​  

​  

​  

​  

​  

​  

​  

Total intangible assets

 

$

66,588

 

$

(6,865

)

$

59,723

 

 

 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

                                                                                                                                                                                    

 

 

 

 

 

 

 

 

 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

 

March 30, 2013

 

 

 

Gross
carrying
amount

 

Accumulated
amortization

 

Net

 

Weighted
average
useful life

 

​  

 

​  

​  

 

​  

​  

 

​  

​  

 

​  

​  

Intangible assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Trademarks

 

$

1,550

 

$

(1,338

)

$

212

 

 

1.1

 

Customer list

 

 

6,700

 

 

(1,292

)

 

5,408

 

 

5.0

 

Non-compete agreements

 

 

1,200

 

 

(211

)

 

989

 

 

4.9

 

Below-market leases

 

 

2,032

 

 

(524

)

 

1,508

 

 

6.7

 

​  

​  

​  

​  

​  

​  

​  

​  

Total definite lived

 

 

11,482

 

 

(3,365

)

 

8,117

 

 

 

 

Trademarks—indefinite lived

 

 

49,900

 

 

 

 

49,900

 

 

 

 

​