BOOT BARN HOLDINGS, INC., 10-K filed on 5/29/2015
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Mar. 28, 2015
May 27, 2015
Sep. 26, 2014
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. 28, 2015 
 
 
Amendment Flag
false 
 
 
Current Fiscal Year End Date
--03-28 
 
 
Entity Well-known Seasoned Issuer
No 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Non-accelerated Filer 
 
 
Entity Public Float
 
 
$ 0 
Entity Common Stock, Shares Outstanding
 
25,824,100 
 
Document Fiscal Year Focus
2015 
 
 
Document Fiscal Period Focus
FY 
 
 
CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Mar. 28, 2015
Mar. 29, 2014
Current assets:
 
 
Cash and cash equivalents
$ 1,448 
$ 1,118 
Accounts receivable
3,863 
2,191 
Inventories
129,312 
102,702 
Prepaid expenses and other current assets
10,773 
8,685 
Total current assets
145,396 
114,696 
Property and equipment, net
30,054 
21,450 
Goodwill
93,097 
93,097 
Intangible assets, net
57,131 
59,723 
Other assets
1,026 
2,897 
Total assets
326,704 
291,863 
Current liabilities:
 
 
Line of credit
16,200 
28,624 
Accounts payable
44,636 
36,029 
Accrued expenses and other current liabilities
24,061 
20,763 
Current portion of notes payable
1,713 
1,000 
Total current liabilities
86,610 
86,416 
Deferred taxes
21,102 
19,960 
Long-term portion of notes payable
72,489 
98,500 
Other liabilities
4,081 
2,412 
Total liabilities
184,282 
207,288 
Commitments and contingencies (Note 10)
   
   
Stockholders' equity:
 
 
Common stock, $0.0001 par value; March 28, 2015 - 100,000 shares authorized, 25,824 shares issued and outstanding; March 29, 2014 - 100,000 shares authorized, 18,929 shares issued and outstanding
Preferred stock, $0.0001 par value; 10,000 shares authorized, no shares issued or outstanding
   
   
Additional paid-in capital
128,693 
78,834 
Retained earnings
13,726 
1,652 
Total Boot Barn Holdings, Inc. stockholders' equity
142,422 
80,488 
Non-controlling interest
 
4,087 
Total stockholders' equity
142,422 
84,575 
Total liabilities and stockholders' equity
$ 326,704 
$ 291,863 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Mar. 28, 2015
Mar. 29, 2014
CONSOLIDATED BALANCE SHEETS
 
 
Common stock, par value (in dollars per share)
$ 0.0001 
$ 0.0001 
Common stock, share authorized (in shares)
100,000,000 
100,000,000 
Common Stock, share issued (in shares)
25,824,000 
18,929,000 
Common Stock, share outstanding (in shares)
25,824,569 
18,929,350 
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)
Preferred Stock, shares outstanding (in shares)
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Mar. 28, 2015
Mar. 29, 2014
Mar. 30, 2013
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
Net sales
$ 402,684 
$ 345,868 
$ 233,203 
Cost of goods sold
267,907 
231,796 
151,357 
Amortization of inventory fair value adjustment
867 
9,199 
Total cost of goods sold
267,907 
232,663 
160,556 
Gross profit
134,777 
113,205 
72,647 
Operating expenses:
 
 
 
Selling, general and administrative expenses
99,341 
91,998 
62,609 
Acquisition-related expenses
 
671 
1,138 
Total operating expenses
99,341 
92,669 
63,747 
Income from operations
35,436 
20,536 
8,900 
Interest expense, net
13,291 
11,594 
7,415 
Other income, net
51 
39 
21 
Income before income taxes
22,196 
8,981 
1,506 
Income tax expense
8,466 
3,321 
826 
Net income
13,730 
5,660 
680 
Net income attributed to non-controlling interest
283 
34 
Net income attributed to Boot Barn Holdings, Inc.
$ 13,726 
$ 5,377 
$ 646 
Earnings per share:
 
 
 
Basic shares (in dollars per share)
$ 0.56 
$ 0.28 
$ 0.03 
Diluted shares (in dollars per share)
$ 0.54 
$ 0.28 
$ 0.03 
Weighted average shares outstanding:
 
 
 
Basic shares
22,126,000 
18,929,000 
18,757,000 
Diluted shares
22,888,000 
19,175,000 
18,757,000 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)
In Thousands, except Share data, unless otherwise specified
Common Stock
Additional Paid-In Capital
Retained Earnings (Accumulated Deficit)
Noncontrolling Interest
Total
Balance at Mar. 31, 2012
$ 2 
$ 74,757 
$ (4,371)
$ 3,770 
$ 74,158 
Balance (in shares) at Mar. 31, 2012
18,632,000 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
Net income
 
 
646 
34 
680 
Reorganization and issuance of stock
 
1,999 
 
 
1,999 
Reorganization and issuance of stock (in shares)
297,000 
 
 
 
 
Stock-based compensation expense
 
787 
 
 
787 
Balance at Mar. 30, 2013
77,543 
(3,725)
3,804 
77,624 
Balance (in shares) at Mar. 30, 2013
18,929,000 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
Net income
 
 
5,377 
283 
5,660 
Stock-based compensation expense
 
1,291 
 
 
1,291 
Balance at Mar. 29, 2014
78,834 
1,652 
4,087 
84,575 
Balance (in shares) at Mar. 29, 2014
18,929,000 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
Net income
 
 
13,726 
13,730 
Dividend paid
 
(39,648)
(1,652)
 
(41,300)
Reorganization and issuance of stock
 
4,091 
 
(4,091)
 
Reorganization and issuance of stock (in shares)
1,000,000 
 
 
 
 
Issuance of stock in initial public offering, net of costs
82,223 
 
 
82,224 
Issuance of stock in initial public offering, net of costs (in shares)
5,750,000 
 
 
 
 
Issuance of restricted stock awards
30,000 
 
 
 
 
Stock options exercised
 
464 
 
 
464 
Stock options exercised (in shares)
115,000 
 
 
 
 
Federal and state income tax deducted on stock options
 
681 
 
 
681 
Stock-based compensation expense
 
2,048 
 
 
2,048 
Balance at Mar. 28, 2015
$ 3 
$ 128,693 
$ 13,726 
 
$ 142,422 
Balance (in shares) at Mar. 28, 2015
25,824,000 
 
 
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Mar. 28, 2015
Mar. 29, 2014
Mar. 30, 2013
Cash flows from operating activities
 
 
 
Net income
$ 13,730 
$ 5,660 
$ 680 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation
6,615 
4,628 
2,662 
Stock-based compensation
2,048 
1,291 
787 
Excess tax benefit
(681)
 
 
Amortization of intangible assets
2,592 
3,501 
2,926 
Amortization of deferred loan fees and debt discount
3,684 
2,507 
435 
Loss on disposal of property and equipment
134 
1,980 
322 
Accretion of above market leases
(149)
(230)
(231)
Deferred taxes
1,402 
(1,874)
(633)
Amortization of inventory fair value adjustment
867 
9,199 
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(1,672)
(710)
(209)
Inventories
(26,610)
(14,100)
(4,821)
Prepaid expenses and other current assets
(1,667)
(871)
(2,490)
Other assets
(362)
104 
199 
Accounts payable
7,364 
3,190 
4,916 
Accrued expenses and other current liabilities
3,298 
5,944 
2,494 
Other liabilities
1,782 
893 
(4,312)
Net cash provided by operating activities
11,508 
12,780 
11,924 
Cash flows from investing activities
 
 
 
Purchases of property and equipment
(14,074)
(11,400)
(3,848)
Proceeds from sale of property and equipment
 
24 
61 
Purchase of trademark rights
 
(200)
 
Acquisition of business, net of cash acquired
 
(15,696)
(41,912)
Net cash used in investing activities
(14,074)
(27,272)
(45,699)
Cash flows from financing activities
 
 
 
Line of credit - net
(12,424)
9,714 
4,324 
Proceeds from loan borrowings
104,938 
100,000 
10,583 
Proceeds from loan borrowings - related parties
 
 
25,500 
Repayments on debt and capital lease obligations
(130,326)
(70,126)
(1,461)
Debt issuance fees
(1,361)
(3,350)
(1,167)
Proceeds from issuance of stock
 
 
1,999 
Net proceeds from initial public offering
82,224 
 
 
Excess tax benefits from stock options
681 
 
 
Proceeds from exercise of stock options
464 
 
 
Dividends paid
(41,300)
 
 
Payment of assumed contingent consideration and debt from acquisitions
 
(21,818)
(5,405)
Net cash provided by financing activities
2,896 
14,420 
34,373 
Net increase (decrease) in cash and cash equivalents
330 
(72)
598 
Cash and cash equivalents, beginning of period
1,118 
1,190 
592 
Cash and cash equivalents, end of period
1,448 
1,118 
1,190 
Supplemental disclosures of cash flow information:
 
 
 
Cash paid for income taxes
8,297 
4,849 
3,337 
Cash paid for interest
11,167 
9,110 
6,275 
Supplemental disclosures of non-cash activities:
 
 
 
Unpaid purchases of property and equipment
1,374 
132 
65 
Equipment acquired through capital lease
$ 36 
$ 28 
 
Business Operations
Business Operations

1. Business Operations

        Boot Barn Holdings, Inc., (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 25,824,569 and 18,929,350 outstanding shares of common stock as of March 28, 2015 and March 29, 2014, respectively, with 12,432,000 and 17,750,000 shares of common stock held by Freeman Spogli & Co. as of March 28, 2015 and March 29, 2014, respectively. 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 169 stores in 26 states as of March 28, 2015, 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 28, 2015, all stores operate under the Boot Barn name (other than two stores, which operate under the "American Worker" name).

Amendment of Certificate of Incorporation

        On October 19, 2014, the Company's board of directors authorized the amendment of its certificate of incorporation to increase the number of shares that the Company is authorized to issue to 100,000,000 shares of common stock, par value $0.0001 per share. In addition, the amendment of the certificate of incorporation authorized the Company to issue 10,000,000 shares of preferred stock, par value $0.0001 per share, and effect a 25-for-1 stock split of its outstanding common stock. The amendment became effective on October 27, 2014. Accordingly, all common share and per share amounts in these consolidated financial statements have been adjusted to reflect the increase in authorized shares and the 25-for-1 stock split as though it had occurred at the beginning of the initial period presented.

Initial Public Offering

        On October 29, 2014, the Company commenced its initial public offering ("IPO") of 5,000,000 shares of its common stock. In addition, on October 31, 2014, the underwriters of the IPO exercised their option to purchase an additional 750,000 shares of common stock from the Company. As a result, 5,750,000 shares of common stock were issued and sold by the Company at a price of $16.00 per share.

        As a result of the IPO, the Company received net proceeds of approximately $82.2 million, after deducting the underwriting discount of $6.4 million and related fees and expenses of $3.3 million. The Company used the net proceeds from the IPO to pay down the principal balance of its term loan with Golub Capital LLC. See Note 8, "Revolving Credit Facilities and Long-Term Debt".

Secondary Offering

        On February 25, 2015, the Company completed a secondary offering of 6,235,544 shares of common stock, including 813,332 shares of the Company's common stock, issued as a result of the underwriters' exercise of their option to purchase additional shares at the public offering price of $23.50 per share, less the underwriting discount. The Company did not receive any proceeds from the secondary offering.

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") 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 last Saturday of March unless April 1st is a Saturday, in which case the fiscal year ends on April 1st. The years ending March 28, 2015 ("fiscal 2015"), March 29, 2014 ("fiscal 2014") and March 30, 2013 ("fiscal 2013") each consisted of 52 weeks.

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 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 consist 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. There was no amortization of inventory costs in fiscal 2015. Amortization of the acquired cost of inventory was $0.9 million and $9.2 million for fiscal years 2014 and 2013, 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 $0.1 million and $0.6 million as of March 28, 2015 and March 29, 2014, respectively. Included in other assets are long-term deferred loan fees of $0.5 million and $2.3 million as of March 28, 2015 and March 29, 2014, respectively.

Debt Discount

        Debt discount fees arise when transaction fees are paid to the lending institution. Debt discount fees are recorded as a reduction to the principal amount of the debt. Amortization of debt discount fees 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 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. The Company concluded that there was no impairment of goodwill during fiscal years 2015, 2014 or 2013.

        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. The Company concluded there was no impairment of intangible assets with indefinite lives during fiscal years 2015, 2014 or 2013.

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 to two years, customer lists is five years, non-compete agreements is four to five years and 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 fiscal years 2015, 2014 or 2013.

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. Until June 8, 2014, certain investors held approximately 5.0% of the outstanding shares of Boot Barn Holding Corporation. Noncontrolling interests were recorded at the acquisition date fair value plus an allocation of subsidiary earnings (loss) based on the relative ownership interest. On June 8, 2014, as a result of the Reorganization discussed in Note 1, the minority stockholders that formerly held 5.0% of Boot Barn Holding Corporation became holders of 5.0% of the Company.

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 $0.7 million, $0.4 million and $0.2 million as of March 28, 2015, March 29, 2014 and March 30, 2013, respectively and is recorded in accrued expenses and other current liabilities in the accompanying consolidated balance sheet. The following table provides a reconciliation of the activity related to the Company's sales returns reserve:

Sales Returns Reserve

                                                                                                                                                                                    

 

 

Fiscal Year Ended

 

(In thousands)

 

March 28,
2015

 

March 29,
2014

 

March 30,
2013

 

Beginning balance

 

$

430

 

$

238

 

$

169

 

Provisions

 

 

17,689

 

 

15,034

 

 

9,723

 

Sales returns

 

 

(17,432

)

 

(14,842

)

 

(9,654

)

​  

​  

​  

​  

​  

​  

Ending balance

 

$

687

 

$

430

 

$

238

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

        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 and $2.0 million as of March 28, 2015 and March 29, 2014, respectively. The following table provides a reconciliation of the activity related to the Company's customer loyalty program:

Customer Loyalty Program

                                                                                                                                                                                    

 

 

Fiscal Year Ended

 

(In thousands)

 

March 28,
2015

 

March 29,
2014

 

March 30,
2013

 

Beginning balance

 

$

1,950

 

$

1,343

 

$

1,124

 

Current year provisions

 

 

4,996

 

 

5,015

 

 

3,698

 

Current year award redemptions

 

 

(4,975

)

 

(4,408

)

 

(3,479

)

​  

​  

​  

​  

​  

​  

Ending balance

 

$

1,971

 

$

1,950

 

$

1,343

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

        The current year provisions and current year award redemptions previously reported for fiscal years 2014 and 2013 have been corrected to reflect the total current year activity. The balances as currently reported were reduced by $5.4 million and $1.9 million, respectively, from the balances previously reported.

        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. 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 $0.5 million and $0.4 million as of March 28, 2015 and March 29, 2014, respectively. All other advertising costs are expensed as incurred. The Company recognized $11.5 million, $11.3 million and $7.1 million in advertising costs during fiscal years 2015, 2014 and 2013, 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 28, 2015 or March 29, 2014.

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.

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 28, 2015 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 for fiscal years 2015, 2014 and 2013.

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 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. The Company does not expect the adoption of this update 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, ASU No. 2014-09, 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 is effective for public entities for annual and interim periods beginning after December 15, 2017. 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.

        In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40) which amends 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 is effective for the Company as of December 15, 2016. The Company does not expect the new guidance to have an impact on its consolidated financial statements.

        In January 2015, the FASB issued ASU 2015-01 Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. This Update eliminates from GAAP the concept of extraordinary items. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The adoption of this standard is not expected to have a material impact on the Company's consolidated financial statements.

        In April 2015, the FASB issued Accounting Standards Update 2015-03 Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. Entities that have historically presented debt issuance costs as an asset, related to a recognized debt liability, will be required to present those costs as a direct deduction from the carrying amount of that debt liability. This presentation will result is debt issuance cost being presented the same way debt discounts have historically been handled. The ASU does not change the recognition, measurement, or subsequent measurement guidance for debt issuance costs. This guidance is effective for the Company beginning in fiscal year 2017 and may be adopted early. The Company expects this new guidance will reduce total assets and total long-term debt on its consolidated balance sheets by amounts classified as deferred debt issuance costs, but does not expect this update to have any other effect on its consolidated financial statements.

Business Combinations
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 Acquisition Holdings LLC ("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 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 as of that date. Claims against the escrow account could be made until November 30, 2014. At the close of the escrow period, the $1.7 million was transferred to the sellers.

        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

 

$

1,934 

 

Current assets

 

 

22,083 

 

Property and equipment, net

 

 

5,850 

 

Intangible assets acquired

 

 

5,006 

 

Goodwill

 

 

15,065 

 

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 to two years, 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.

RCC Western Stores, Inc.

        On August 31, 2012, the Company acquired 100% of the capital stock of RCC Western Stores, Inc. ("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 liabilities assumed

 

 

15,811 

 

​  

​  

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.

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

                                                                                                                                                                                    

Balance as of March 30, 2013

 

$

78,033 

 

Goodwill as a result of the Baskins Acquisition Holdings LLC acquisition

 

 

15,064 

 

​  

​  

Balance as of March 29, 2014

 

 

93,097 

 

Activity during fiscal 2015

 

 

—  

 

​  

​  

Balance as of March 28, 2015

 

$

93,097 

 

​  

​  

​  

​  

​  

Supplemental As Adjusted Data (Unaudited)

        The adjustments to net sales and net income below give 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 and RCC 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.

                                                                                                                                                                                    

Pro Forma Net Sales—Unaudited (in thousands)

 

March 29,
2014

 

March 30,
2013

 

The Company (as reported)

 

$

345,868 

 

$

233,203 

 

Baskins

 

 

8,290 

 

 

58,058 

 

RCC

 

 

 

 

21,503 

 

Boot Barn Holding Company

 

 

 

 

—  

 

​  

​  

​  

​  

Pro Forma Net Sales

 

$

354,158 

 

$

312,764 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

                                                                                                                                                                                    

Pro Forma Net Income (Loss)—Unaudited (in thousands)

 

March 29,
2014

 

March 30,
2013

 

The Company (as reported)

 

$

5,660

 

$

680

 

Baskins

 

 

580

 

 

396

 

RCC

 

 

(1,100

)

 

2,818

 

​  

​  

​  

​  

Pro Forma Net Income

 

$

5,140

 

$

3,894

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

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 28,
2015

 

March 29,
2014

 

Prepaid rent and property taxes

 

$

2,314 

 

$

2,096 

 

Prepaid advertising

 

 

513 

 

 

401 

 

Prepaid insurance

 

 

582 

 

 

81 

 

Deferred taxes

 

 

5,358 

 

 

4,748 

 

Income tax receivable

 

 

916 

 

 

 

Deferred loan fees—current

 

 

117 

 

 

558 

 

Other

 

 

973 

 

 

801 

 

​  

​  

​  

​  

Total prepaid expenses and other current assets

 

$

10,773 

 

$

8,685 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

Property and Equipment, Net
Property and Equipment, Net

5. Property and Equipment, Net

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

                                                                                                                                                                                    

 

 

March 28,
2015

 

March 29,
2014

 

Leasehold improvements

 

$

18,716

 

$

12,491

 

Machinery and equipment

 

 

6,738

 

 

5,964

 

Furniture and fixtures

 

 

16,345

 

 

9,373

 

Construction in progress

 

 

1,720

 

 

754

 

Vehicles

 

 

483

 

 

387

 

​  

​  

​  

​  

 

 

 

44,002

 

 

28,969

 

Less: Accumulated depreciation

 

 

(13,948

)

 

(7,519

)

​  

​  

​  

​  

Property and equipment, net

 

$

30,054

 

$

21,450

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

        Depreciation expense was $6.6 million, $4.6 million and $2.7 million for fiscal years 2015, 2014 and 2013, respectively. Amortization related to assets under capital lease is included in the above depreciation expense (see Note 11 "Leases").

Intangible Assets, Net
Intangible Assets, Net

6. Intangible Assets, Net

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

                                                                                                                                                                                    

 

 

March 28, 2015

 

 

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Net

 

Weighted
Average
Useful Life

 

Trademarks

 

$

2,490

 

$

(2,490

)

$

 

 

0.9

 

Customer list

 

 

7,300

 

 

(4,473

)

 

2,827

 

 

5.0

 

Non-compete agreements

 

 

1,380

 

 

(788

)

 

592

 

 

4.7

 

Below-market leases

 

 

5,318

 

 

(1,706

)

 

3,612

 

 

10.4

 

​  

​  

​  

​  

​  

​  

Total definite lived

 

 

16,488

 

 

(9,457

)

 

7,031

 

 

 

 

Trademarks-indefinite lived

 

 

50,100

 

 

 

 

50,100

 

 

 

 

​  

​  

​  

​  

​  

​  

Total intangible assets

 

$

66,588

 

$

(9,457

)

$

57,131

 

 

 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

                                                                                                                                                                                    

 

 

March 29, 2014

 

 

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Net

 

Weighted
Average
Useful Life

 

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

 

 

 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

        Amortization expense for intangible assets totaled $2.6 million, $3.5 million and $2.9 million for fiscal years 2015, 2014 and 2013, respectively, and is included in selling, general and administrative expenses.

        As of March 28, 2015, estimated future amortization of intangible assets was as follows (in thousands):

                                                                                                                                                                                    

Fiscal year

 

 

 

2016

 

$

2,325 

 

2017

 

 

1,771 

 

2018

 

 

777 

 

2019

 

 

442 

 

2020

 

 

338 

 

Thereafter

 

 

1,378 

 

​  

​  

Total

 

$

7,031 

 

​  

​  

​  

​  

​  

 

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 28,
2015

 

March 29,
2014

 

Accrued compensation

 

$

7,207 

 

$

5,225 

 

Deferred revenue—gift cards and layaways

 

 

4,360 

 

 

3,752 

 

Sales tax liability

 

 

3,554 

 

 

2,900 

 

Accrued interest

 

 

192 

 

 

1,738 

 

Sales reward redemption liability

 

 

1,971 

 

 

1,950 

 

Capital leases—short term

 

 

30 

 

 

61 

 

Other

 

 

6,747 

 

 

5,137 

 

​  

​  

​  

​  

Total accrued expenses

 

$

24,061 

 

$

20,763 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

Revolving Credit Facilities and Long-Term Debt
Revolving Credit Facilities and Long-Term Debt

8. Revolving Credit Facilities and Long-Term Debt

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

        On February 23, 2015, the Company and Boot Barn, Inc., the Company's primary operating subsidiary, entered into a new credit facility with Wells Fargo Bank, N.A. ("Wells Fargo Credit Facility"). The Wells Fargo Credit Facility consists 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 provides the Company with the ability to incur additional incremental term loans of up to $50.0 million, provided that certain conditions are met, including compliance with certain covenants. Proceeds from the Wells Fargo Credit Facility were used to pay off outstanding debt. The Wells Fargo Credit Facility is to be used for working capital, capital expenditures, permitted acquisitions and other general corporate purposes.

        Interest on borrowings under the Wells Fargo Credit Facility is payable, at the election of the Company, at a rate equal to, either (i) the London Interbank Offered Rate ("LIBOR") plus an applicable margin, or (ii) a base rate plus an applicable margin. The base rate is calculated as the highest of (1) the Federal Funds Rate plus 0.50%, (2) the prime rate publicly announced by the Administrative Agent and (3) LIBOR plus 1.0%. The applicable margin is calculated based on a pricing grid that in each case will be linked to a consolidated total lease adjusted net leverage ratio. For LIBOR loans, the applicable margin is in the range of 2.00% to 2.75%, and for base rate loans it is between 1.00% and 1.75%. The applicable margin will initially be set at 2.25% for LIBOR loans and 1.25% for base rate loans until the delivery of financial statements and a compliance certificate for the period ending on March 28, 2015. Total interest expense incurred in fiscal 2015 on the Wells Fargo Credit Facility was $0.2 million and the weighted average interest rate at March 28, 2015 was 2.5%. In addition, the Company will pay a commitment fee on the average daily unused portion of the revolving credit commitment under the Wells Fargo Credit Facility, which will be 0.30% until the delivery of financial statements and a compliance certificate for the period ending on or about March 28, 2015 and after that will range between 0.25% and 0.40%. The Wells Fargo Credit Facility also requires the Company to pay additional interest of 2% per annum upon triggering certain events which are not clearly and closely related to the Wells Fargo Credit Facility. For financial accounting purposes, the requirement for the Company to pay a higher interest rate in the event of default is an embedded derivative. As of March 28, 2015, the fair value of these embedded derivatives was estimated and was not significant.

        The Wells Fargo Credit Facility requires principal payments in respect of the term loan on a quarterly basis commencing on June 26, 2015. The required principal payments are $468,750 for that first fiscal quarter and each of the three following fiscal quarters, $937,500 for each of the next four fiscal quarters, $1,406,250 for each of the following four fiscal quarters, and $1,875,000 for each subsequent fiscal quarter, with the remaining balance due on the maturity date of February 23, 2020, as well as certain mandatory prepayments. The outstanding borrowings as of March 28, 2015 consisted of $75.0 million of term loan and $16.2 million of revolving credit facility. There was approximately $58.8 million of unused availability under the revolving portion of our new credit facility.

        The obligations of Boot Barn, Inc. under the Wells Fargo Credit Facility are guaranteed by the Company and each of the Company's subsidiaries. All obligations of Boot Barn, Inc. and the guarantors under the Wells Fargo Credit Facility are secured by a lien on all of the assets, including equity interests, of Boot Barn, Inc. and the guarantors.

        The Wells Fargo Credit Facility contains a number of covenants that restrict, among other things and subject to certain exceptions, the Company's ability to: (1) incur additional indebtedness; (2) create liens on property; (3) engage in mergers, consolidations and other fundamental changes; (4) dispose of assets; (5) make investments, loans or advances; (6) make certain acquisitions; (7) engage in certain transactions with affiliates; (8) declare or pay dividends on, or repurchase, our stock; and (9) change lines of business or fiscal year. In addition, the Wells Fargo Credit Facility prohibits the Company from exceeding specified consolidated total lease adjusted net leverage ratios and requires the Company to maintain a specified consolidated fixed charge coverage ratio during each specified measurement period. The Wells Fargo Credit Facility also contains customary events of default, including a customary default triggered by a "Change in Control" as defined in the Wells Fargo Credit facility. The Company was in compliance with all of its financial and non-financial covenants as of March 28, 2015. The Wells Fargo Credit Facility limits the Company's aggregate dividend payments to $5.0 million for the term of the Wells Fargo Credit Facility in the event that the Company's leverage ratio exceeds a specified leverage ratio.

        The Company incurred approximately $0.6 million of loan fees related to the issuance of the Wells Fargo Credit Facility, which were deferred and are being amortized to interest expense using the effective interest method over the term of the loan through February 23, 2020. The remaining balance of deferred loan fees as of March 28, 2015 is $0.6 million, and is included in prepaid expenses and other current assets (current portion) and other assets (long-term portion) on the condensed consolidated balance sheet.

Debt Discount

        Upon issuance of the note payable on February 23, 2015, the Company paid $0.8 million of transaction fees to Wells Fargo Bank, N.A. in connection with the Wells Fargo Credit Facility. These transaction fees were paid via a reduction in the proceeds from the Wells Fargo Credit Facility and are accounted for as a debt discount. Amortization expense of $0.01 million was included as a component of interest expense in fiscal 2015. The following sets forth balance sheet information related to the term loan:

                                                                                                                                                                                    

 

 

March 28,
2015

 

Term Loan

 

$

75,000

 

Unamortized value of the debt discount

 

 

(798

)

​  

​  

Net carrying value

 

$

74,202

 

​  

​  

​  

​  

​  

Revolving Credit Facility (PNC Bank, N.A.)

        On December 11, 2011, the Company obtained a collateral-based revolving line of credit with PNC Bank, N.A. (the "PNC Line of Credit"), which the Company amended on August 31, 2012 and May 31, 2013. The PNC Line of Credit includes a $5.0 million sub-limit for letters of credit. On April 15, 2014, the Company amended the PNC Line of Credit to increase the borrowing capacity from $60.0 million to up to $70.0 million. The available borrowing under the PNC Line of Credit was based on the collective value of eligible inventory and credit card receivables multiplied by specific advance rates. Total interest expense incurred on the PNC Line of Credit for the Fiscal Year ended March 28, 2015 was $2.6 million. On February 23, 2015, proceeds from the Wells Fargo Credit Facility were used to pay the entire $50.8 million outstanding balance of the PNC Line of Credit.

Term Loan Due May 2019 (Golub Capital LLC)

        The Company entered into a loan and security agreement with Golub Capital LLC on May 31, 2013, as amended by the first amendment to term loan and security agreement dated September 23, 2013 (the "Golub Loan"). On April 14, 2014, the Company entered into an amended and restated term loan and security agreement for the Golub Loan. The amended and restated loan and security agreement increased the borrowings on the Golub Loan from $99.2 million to $130.0 million, with the proceeds used to fund a portion of the $41.3 million dividend to stockholders and cash payment to holders of vested options that was paid in April 2014. See Note 9, "Stock-Based Compensation". On November 5, 2014, the Company amended the Golub Loan to reduce the applicable LIBOR Floor from 1.25% to 1.00% which changed the current interest rate from 7.00% to 6.75%. Total interest expense incurred on the Golub Loan was $6.8 million for the fiscal year ended March 28, 2015.

        On November 5, 2014, the Company used $81.9 million of the net proceeds from the IPO to repay a portion of the principal balance on the Golub Loan. The Company incurred a pre-payment penalty of $0.6 million and accelerated amortization of deferred loan fees of $1.7 million, which was recorded to interest expense.

        On February 23, 2015, proceeds from the Wells Fargo Credit Facility were used to pay the entire $47.3 million outstanding balance of the Golub Loan. The Company incurred prepayment penalties of $1.1 million to the lenders under the Company's prior credit facilities. Total deferred loan fees from the PNC Line of Credit and the Golub Loan of $1.4 million were written off to interest expense.

        The Company wrote off $3.1 million of deferred loan fees in fiscal 2015.

$20 Million Term Loan (PNC Bank, N.A.)

        The Company entered into a loan and security agreement with PNC Bank N.A. on December 11, 2011, as amended by the first amendment to term loan agreement dated August 31, 2012 (the "PNC Term Loan"). The PNC Term Loan included a term loan facility of $20.0 million. Interest accrued on outstanding amounts under the PNC Term Loan at the rate of 7.5% per annum, due monthly. Effective October 1, 2012, monthly principal payments of $166,667 were required. In connection with the closing of the Golub Loan in May 2013, the Company converted all outstanding amounts on the PNC Term Loan to borrowings under the PNC Line of Credit.

Senior Subordinated Term Loans (Related Party Term Loans)

        On December 11, 2011, the Company obtained senior subordinated term loans from certain subordinated lenders, in the aggregate amount of $25.0 million, bearing interest at the rate of 12.5%, due quarterly. The subordinated lenders were related parties. On August 31, 2012, the Company borrowed an additional $25.5 million from the subordinated lenders. See Note 14, "Related Party Transactions". In connection with the closing of the Golub Loan in May 2013, the Company paid off all outstanding amounts on its senior subordinated term loans.

Aggregate contractual maturities

        Aggregate contractual maturities for the Company's line of credit and long-term debt as of March 28, 2015 are as follows (in thousands):

                                                                                                                                                                                    

Fiscal year

 

 

 

2016

 

 

1,875 

 

2017

 

 

3,750 

 

2018

 

 

5,625 

 

2019

 

 

7,500 

 

2020

 

 

72,450 

 

Thereafter

 

 

—  

 

​  

​  

Total

 

 

91,200 

 

​  

​  

​  

​  

​  

 

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 28, 2015, all awards granted by the Company 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 (the "2014 Plan"). The 2014 Plan authorizes the Company to issue awards to employees, consultants and directors for up to a total of 1,600,000 shares of common stock, par value $0.0001 per share. As of March 28, 2015, all awards granted by the Company to date have been nonqualified stock options or restricted stock awards. 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.

Pro Rata Cash Dividend, Cash Payment to Holders of Vested Options and Adjustment to Exercise Price of Unvested Options

        On April 11, 2014, the Company declared and subsequently paid a pro rata cash dividend to its stockholders totaling $39.9 million, made a cash payment of $1.4 million to holders of vested options, and lowered the exercise price of 1,918,550 unvested options by $2.00 per share. The cash payments totaling $41.3 million reduced retained earnings to zero and reduced additional paid-in capital by $39.7 million. The 2011 Plan has nondiscretionary antidilution provisions that require the fair value of the option awards to be equalized in the event of an equity restructuring. Consequently, the board of directors of the Company was obligated under the antidilution provisions to approve the reduction of the exercise price on the unvested options and make the cash payment to the holders of vested options. No incremental stock-based compensation expense was recognized for the dividend for the vested options or reduction in exercise price for the unvested options.

Stock Options

        During fiscal 2015, the Company granted certain members of management options to purchase a total of 265,650 shares under the 2014 Plan and 237,500 shares under the 2011 Plan. The total grant date fair value of stock options granted during fiscal 2015 was $3.5 million, with grant date fair values ranging from $6.08 to $9.27 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 $9.40 and $25.50 per share.

        On October 29, 2014, the Company granted its Chief Executive Officer ("CEO") options to purchase 99,650 shares of common stock under the 2014 Plan. These options contain both service and market conditions. Vesting of the options occurs if the market price of the Company's stock achieves stated targets through the third anniversary of the date of grant. If those market price targets are achieved, the options will vest in equal amounts on the third, fourth and fifth anniversaries of the grant date. The fair value of the options was estimated using a Monte Carlo simulation model. The following significant assumptions were used as of October 29, 2014:

                                                                                                                                                                                    

Stock price

 

$

16.00 

 

Exercise price

 

$

16.00 

 

Expected option term

 

 

6.0 years

 

Expected volatility

 

 

55.0 

%

Risk-free interest rate

 

 

1.8 

%

Expected annual dividend yield

 

 

%

        During fiscal 2014, the Company granted certain members of management options to purchase a total of 312,500 shares under the 2011 Plan. The total grant date fair value of stock options granted during fiscal 2014 was $2.1 million, with grant date fair values ranging from $6.64 to $6.92 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 $7.18 and $8.16 per share.

        During fiscal 2013, the Company granted certain members of management options to purchase a total of 894,600 shares under the 2011 Plan. The total grant date fair value of stock options granted during fiscal 2013 was $3.5 million, with grant date fair values ranging from $3.43 to $4.31 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 $4.74 and $11.21 per share.

        The fair values of stock options granted in fiscal years 2015, 2014 and 2013 were estimated on the grant dates using the following assumptions:

                                                                                                                                                                                    

 

 

Fiscal Year Ended

 

 

March 28,
2015

 

March 29,
2014

 

March 30,
2013

Expected option term(1)

 

5.5 years

 

6.5 years

 

6.5 years

Expected volatility factor(2)

 

37.0% - 56.2%

 

56.2% 

 

57.7% 

Risk-free interest rate(3)

 

1.4% - 2.0%

 

1.9% - 2.0%

 

1.0% 

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 as the expected life of the stock option as of the grant date.

(4)

The board of directors paid a dividend to stockholders in April 2014. 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.

 

        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's estimate of pre-vesting forfeitures, or forfeiture rate, was based on its internal analysis, which included the award recipients' positions within the Company and the vesting period of the awards. The Company will issue shares of common stock when the options are exercised.

        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 quarter and the weighted average exercise price of in-the-money stock options outstanding at the end of each fiscal period. The market value per share was $23.21 at March 28, 2015. The following table summarizes the stock award activity for the fiscal year ended March 28, 2015 (aggregate intrinsic value in thousands):

                                                                                                                                                                                    

 

 

Stock
Options

 

Grant Date
Weighted-
Average
Exercise
Price(1)

 

Weighted
Average
Remaining
Contractual
Life (in Years)

 

Aggregate
Intrinsic
Value

 

Outstanding at March 29, 2014

 

 

2,515,000

 

$

5.97

 

 

 

 

 

 

 

Granted

 

 

503,150

 

$

14.70

 

 

 

 

 

 

 

Exercised

 

 

(115,375

)

$

4.01

 

 

 

 

 

 

 

Cancelled, forfetied or expired

 

 

 

$

 

 

 

 

 

 

 

​  

​  

​  

​  

​  

​  

​  

​  

Outstanding at March 28, 2015

 

 

2,902,775

 

$

7.56

 

 

7.5

 

$

45,419

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Vested and expected to vest after March 28, 2015

 

 

2,902,775

 

$

7.56

 

 

7.5

 

$

45,419

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Exerciseable at March 28, 2015

 

 

1,102,605

 

$

6.28

 

 

7.1

 

$

18,670

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  


 

 

(1)

The grant date weighted-average exercise price reflects the reduction of the exercise price by $2.00 per share for the 1,918,550 unvested options that were part of the April 2014 dividend discussed above.

 

        A summary of the status of non-vested stock options as of March 28, 2015 and changes during fiscal 2015 is presented below:

                                                                                                                                                                                    

 

 

Shares

 

Weighted-
Average
Grant Date
Fair Value

 

Nonvested at March 29, 2014

 

 

1,793,550

 

$

3.55

 

Granted

 

 

503,150

 

$

6.88

 

Vested

 

 

(496,530

)

$

3.24

 

Nonvested shares forfeited

 

 

 

$

—  

 

​  

​  

Nonvested at March 28, 2015

 

 

1,800,170

 

$

4.57

 

​  

​  

​  

​  

​  

Restricted Stock Awards

        During fiscal 2015, the Company granted 30,313 restricted shares of common stock to various employees and one member of its Board of Directors under the 2014 Plan. The shares granted to employees vest in four 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 member of the Board of Directors vest in full upon the one-year anniversary of the date of grant, provided that the Board member continues to serve on the Board of Directors through that date. The grant date fair value of these awards totaled $0.5 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 $2.0 million, $1.3 million and $0.8 million for fiscal years 2015, 2014 and 2013, respectively. Stock-based compensation expense of $0.4 million, $0.2 million and $0.2 million was recorded in cost of goods sold in the consolidated statements of operations for fiscal years 2015, 2014 and 2013, respectively. All other stock-based compensation expense is included in selling, general and administrative expenses in the consolidated statements of operations. As of March 28, 2015, there was $7.8 million of total unrecognized stock-based compensation expense related to unvested stock options and restricted stock awards. This cost had a weighted-average remaining recognition period of 2.2 years.

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. In management's opinion, none of these legal matters, individually or in the aggregate, will have a material effect on the Company's financial position, results of operations or liquidity.

        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.

Leases
Leases

11. Leases

        The following is a schedule by year of non-cancelable future minimum rental payments under operating leases as of March 28, 2015 (in thousands):

                                                                                                                                                                                    

 

 

Related
party(1)

 

All other

 

Total

 

2016

 

$

195 

 

$

23,383 

 

$

23,578 

 

2017

 

 

199 

 

 

20,873 

 

 

21,072 

 

2018

 

 

101 

 

 

18,884 

 

 

18,985 

 

2019

 

 

 

 

 

15,809 

 

 

15,809 

 

2020

 

 

 

 

 

13,156 

 

 

13,156 

 

Thereafter

 

 

 

 

 

45,448 

 

 

45,448 

 

​  

​  

​  

​  

​  

​  

Total

 

$

495 

 

$

137,553 

 

$

138,048 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  


 

 

(1)

See Note 14 "Related party transactions".

 

        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 store operating leases was $27.3 million, $25.0 million and $17.0 million for the fiscal years ended March 28, 2015, March 29, 2014 and March 30, 2013, respectively, and includes common area maintenance and contingent rent payments.

Capital Leases

        As of March 28, 2015, the Company had ten non-cancelable capital leases with principal and interest payments due monthly. The gross value of assets under capital lease arrangements totals $0.2 million and is included as property and equipment in the consolidated balance sheets. Accumulated depreciation of these assets totaled $0.1 million as of March 28, 2015. The interest rates range from 0% to 12.0%. As of March 28, 2015, future minimum capital lease payments are as follows (in thousands):

                                                                                                                                                                                    

Fiscal Year

 

 

 

 

2016

 

$

31

 

2017

 

 

15

 

2018

 

 

1

 

​  

​  

Total minimum lease payments

 

 

47

 

Less: Amount representing interest

 

 

(2

)

​  

​  

Present value of minimum lease payments

 

 

45

 

Less: Current portion

 

 

(30

)

​  

​  

Long-term portion

 

$

15

 

​  

​  

​  

​  

​  

        Long-term lease related liabilities are as follows:

                                                                                                                                                                                    

 

 

March 28,
2015

 

March 29,
2014

 

Above-market leases

 

$

117 

 

$

266 

 

Deferred rent—long-term

 

 

3,949 

 

 

2,123 

 

Long-term portion of capital lease obligation

 

 

15 

 

 

23 

 

​  

​  

​  

​  

Total other liabilities

 

$

4,081 

 

$

2,412 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

Defined Contribution Plan
Defined Contribution Plan

 

12. Defined Contribution Plan

        The Boot Barn 401(k) Plan (the "401(k) Plan") is a qualified plan under Section 401(k) of the Internal Revenue Code. The 401(k) Plan covers all employees that work a minimum of 1,000 hours per year and have been employed by the Company for at least one year. Contributions to the plan are based on certain criteria as defined in the agreement, governing the 401(k) Plan. Participating employees are allowed to contribute up to the statutory maximum set by the Internal Revenue Service. The Company provides a safe harbor matching contribution that matches 100% of employee contributions up to 3% of their respective wages and then 50% of further contributions up to 5% of their respective wages. Contributions to the plan and charges to selling, general and administrative expenses were $0.4 million, $0.3 million and $0.2 million, for the fiscal years ended March 28, 2015, March 29, 2014 and March 30, 2013, respectively.

Income Taxes
Income Taxes

 

13. Income Taxes

        Income tax expense consisted of the following:

                                                                                                                                                                                    

 

 

Fiscal Year Ended

 

(in thousands)

 

March 28
2015

 

March 29,
2014

 

March 29,
2014

 

Current:

 

 

 

 

 

 

 

 

 

 

Federal

 

$

6,542

 

$

4,510

 

$

1,148

 

State

 

 

1,203

 

 

685

 

 

314

 

​  

​  

​  

​  

​  

​  

Total current

 

 

7,745

 

 

5,195

 

 

1,462

 

Deferred:

 

 

 

 

 

 

 

 

 

 

Federal

 

 

1,461

 

 

(1,536

)

 

(530

)

State

 

 

(740

)

 

(338

)

 

(106

)

​  

​  

​  

​  

​  

​  

Total deferred

 

 

721

 

 

(1,874

)

 

(636

)

​  

​  

​  

​  

​  

​  

Total income tax expense

 

$

8,466

 

$

3,321

 

$

826

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

        The reconciliation between the Company's effective tax rate on income from operations and the statutory tax rate is as follows:

                                                                                                                                                                                    

 

 

Fiscal Year Ended

 

 

 

March 28
2015

 

March 29,
2014

 

March 30,
2013

 

Expected provision at statutory U.S. federal tax rate

 

 

35.0

%

 

34.0

%

 

34.0

%

State and local income taxes, net of federal tax benefit

 

 

3.7

 

 

4.5

 

 

4.2

 

Change in tax rates

 

 

0.5

 

 

(0.1

)

 

(2.9

)

State credits

 

 

 

 

(1.8

)

 

 

Acquisition costs

 

 

 

 

 

 

20.0

 

Other

 

 

(1.1

)

 

0.4

 

 

(0.5

)

​  

​  

​  

​  

​  

​  

Effective tax rate

 

 

38.1

%

 

37.0

%

 

54.8

%  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

        Differences between the effective tax rate and the statutory rate relate primarily to state taxes and acquisition costs.

        Deferred taxes reflect the net tax effects of the temporary differences between the carrying amount of assets and liabilities for financial reporting and the amount used for income tax purposes. Significant components of the Company's net deferred tax assets as of March 28, 2015 and March 29, 2014 consisted of the following (in thousands):

                                                                                                                                                                                    

 

 

March 28
2015

 

March 29,
2014

 

Deferred tax assets:

 

 

 

 

 

 

 

State taxes

 

$

913

 

$

1,002

 

Accrued liabilities

 

 

1,991

 

 

813

 

Award program liabilities

 

 

868

 

 

787

 

Deferred revenue

 

 

425

 

 

434

 

Inventory

 

 

2,952

 

 

2,997

 

Stock options

 

 

1,512

 

 

879

 

Other

 

 

521

 

 

257

 

​  

​  

​  

​  

Total deferred tax assets

 

 

9,182

 

 

7,169

 

​  

​  

​  

​  

Deferred tax liabilities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

(24,685

)

 

(22,084

)

Prepaid expenses

 

 

(430

)

 

(297

)

​  

​  

​  

​