Grocery Outlet Holding Corp. Announces Fourth Quarter and Fiscal 2020 Financial Results

March 2, 2021 4:05 PM EST

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EMERYVILLE, Calif., March 02, 2021 (GLOBE NEWSWIRE) -- Grocery Outlet Holding Corp. (NASDAQ: GO) ("Grocery Outlet" or the "Company") today announced financial results for the fourth quarter and full fiscal year 2020 ended January 2, 2021, both of which contained one additional week ("53rd week") versus the comparable prior periods.

Highlights for Fourth Quarter Fiscal 2020 as compared to the Fourth Quarter Fiscal 2019:

  • Net sales increased by 23.1% to $806.8 million, which includes $53.3 million from the 53rd week.
  • Comparable store sales increased by 7.9% on a 13-week basis over a 5.1% increase in the same period last year.
  • The Company opened eight new stores ending the quarter with 380 stores in six states.
  • Net income increased 146.8% to $24.3 million, or $0.24 per diluted share.
  • Adjusted net income(1) increased 46.1% to $24.2 million, or $0.24 per non-GAAP diluted share.
  • Adjusted EBITDA(1) increased 24.7% to $51.2 million.

Eric Lindberg, CEO of Grocery Outlet, stated, "Reflecting on 2020, our flexible business model, supported by many years of strategic investments, positioned us to deliver exceptional financial results in an unprecedented environment. I am extremely proud of the commitment demonstrated by our organization as we rose to meet the challenges created by the COVID pandemic.

On the heels of an extraordinary year, we will continue to focus on making strategic, disciplined investments to support our growth. We believe that our value proposition is as strong as ever, we have ample white space to execute 10% annual unit growth and we remain committed to continuously reinvesting in the business, all of which position us to achieve our long-term growth objectives."

Highlights for the Full Year Fiscal 2020 as compared to the Full Year Fiscal 2019 :

  • Net sales increased by 22.5% to $3.13 billion.
  • Comparable store sales increased by 12.7% on a 52-week basis compared to a 5.2% increase in the comparable period last year.
  • The Company opened 35 new stores and closed two stores during the year.
  • Net income increased 592.1% to $106.7 million, or $1.08 per diluted share.
  • Adjusted net income(1) increased 86.9% to $112.7 million, or $1.14 per non-GAAP diluted share.
  • Adjusted EBITDA(1) increased 32.4% to $222.9 million.

Balance Sheet and Cash Flow:

  • Cash and cash equivalents totaled $105.3 million at the end of the fourth quarter of fiscal 2020.
  • Total debt was $449.2 million at the end of the fourth quarter of fiscal 2020.
  • Net cash provided by operations during fiscal 2020 was $181.2 million.
  • Capital expenditures for the fourth quarter of fiscal 2020, excluding the impact of tenant improvement allowances, were $39.1 million.

__________________________________

(1) Beginning with the fourth quarter of fiscal 2020, we updated our definitions of our non-GAAP financial measures to simplify our presentation and enhance comparability between periods. A historical reconciliation of net income to both our revised and previous definitions of adjusted EBITDA, non-GAAP adjusted net income and non-GAAP adjusted diluted earnings per share is set forth in the attachment to this release. Please note that our non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

Outlook:

  • The Company currently expects to open between 36 and 38 stores this year with one closure.
  • The Company anticipates that comparable sales for the first quarter will decline in the negative high-single digits reflecting the impact of cycling the initial demand surge related to the COVID-19 pandemic in March 2020.
  • Excluding the impact of discrete items, the Company anticipates a normalized fiscal 2021 tax rate of 28%.
  • Capital expenditures, net of tenant improvement allowances, are estimated to be approximately $130.0 million.
  • As a reminder, the Company will report 52 weeks of operating results in fiscal 2021 compared to 53 weeks in fiscal 2020.

Conference Call Information:

A conference call to discuss the fourth quarter and full year fiscal 2020 financial results is scheduled for today, March 2, 2021 at 4:30 p.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial 877-407-9208 approximately 10 minutes prior to the start of the call. A live audio webcast of the conference call will be available online at https://investors.groceryoutlet.com.

A taped replay of the conference call will be available within two hours of the conclusion of the call and can be accessed both online and by dialing 844-512-2921. The pin number to access the telephone replay is 13715871. The replay will be available for approximately two weeks after the call.

Non-GAAP Financial Information:

In addition to reporting financial results in accordance with accounting principles generally accepted in the United States ("GAAP"), the Company uses EBITDA, adjusted EBITDA, adjusted net income and adjusted diluted earnings per share measures of performance to evaluate the effectiveness of its business strategies, to make budgeting decisions and to compare its performance against that of other peer companies using similar measures. Management believes it is useful to investors and analysts to evaluate these non-GAAP measures on the same basis as management uses to evaluate our operating results.

Adjusted EBITDA is defined as net income before interest expense, taxes, depreciation and amortization ("EBITDA") and other adjustments noted in the "Reconciliation of GAAP Net Income to Adjusted EBITDA" table below. Adjusted net income is defined as net income before the adjustments noted in table "Reconciliation of GAAP Net Income to Adjusted Net Income" below.

Adjusted EBITDA and adjusted net income are non-GAAP measures and may not be comparable to similar measures reported by other companies. Adjusted EBITDA and adjusted net income have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP.

Beginning with the fourth quarter of fiscal 2020, we updated our definitions of adjusted EBITDA and non-GAAP adjusted net income to simplify our presentation and enhance comparability between periods. We no longer exclude new store pre-opening expenses from our presentation of adjusted EBITDA and non-GAAP adjusted net income. We also updated our definition of non-GAAP adjusted net income to exclude the tax impact of options exercises and vesting of restricted stock units. Lastly, debt extinguishment and modification costs were reclassified to the other adjustments line item within the presentation of both adjusted EBITDA and non-GAAP adjusted net income. The presentation for adjusted EBITDA and non-GAAP adjusted net income for all periods presented have been recast to reflect these changes and a reconciliation between the revised and previous definitions of adjusted EBITDA and non-GAAP adjusted net income have been provided within the "Reconciliation of GAAP Net Income to Adjusted EBITDA", "Reconciliation of GAAP Net Income to Adjusted Net Income", "Quarterly Reconciliation of GAAP Net Income to Adjusted EBITDA", and "Quarterly Reconciliation of GAAP Net Income to Adjusted Net Income" tables below.

Forward-Looking Statements:

This news release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect management's current views and estimates regarding the prospects of the industry and the Company’s prospects, plans, business, results of operations, financial position, future financial performance and business strategy. These forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "should," "expect," "intend," "will," "estimate," "anticipate," "believe," "predict," "potential" or "continue" or the negatives of these terms or variations of them or similar terminology. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, the Company cannot provide any assurance that these expectations will prove to be correct.

The following factors are among those that may cause actual results to differ materially from the forward-looking statements: failure of suppliers to consistently supply us with opportunistic products at attractive pricing; inability to successfully identify trends and maintain a consistent level of opportunistic products; failure to maintain or increase comparable store sales; changes affecting the market prices of the products we sell; failure to open, relocate or remodel stores on schedule; risks associated with newly opened stores; inability to retain the loyalty of our customers; costs and implementation difficulties associated with marketing, advertising and promotions; failure to maintain our reputation and the value of our brand, including protecting our intellectual property; any significant disruption to our distribution network, the operations of our distributions centers and our timely receipt of inventory; inability to maintain sufficient levels of cash flow from our operations; risks associated with leasing substantial amounts of space; failure to participate effectively or at all in the growing online retail marketplace; unexpected costs and negative effects if we incur losses not covered by our insurance program; inability to attract, train and retain highly qualified employees; difficulties associated with labor relations; loss of our key personnel or inability to hire additional qualified personnel; risks associated with economic conditions; competition in the retail food industry; movement of consumer trends toward private labels and away from name-brand products; major health epidemics, such as the outbreak of COVID-19, and other outbreaks; natural disasters and unusual weather conditions (whether or not caused by climate change), power outages, pandemic outbreaks, terrorist acts, global political events and other serious catastrophic events; failure to maintain the security of information we hold relating to personal information or payment card data of our customers, employees and suppliers; material disruption to our information technology systems; risks associated with products we and our independent operators ("IOs") sell; risks associated with laws and regulations generally applicable to retailers; legal proceedings from customers, suppliers, employees, governments or competitors; failure of our IOs to successfully manage their business; failure of our IOs to repay notes outstanding to us; inability to attract and retain qualified IOs; inability of our IOs to avoid excess inventory shrink; any loss or changeover of an IO; legal proceedings initiated against our IOs; legal challenges to the IO/independent contractor business model; failure to maintain positive relationships with our IOs; risks associated with actions our IOs could take that could harm our business; our substantial indebtedness could affect our ability to operate our business, react to changes in the economy or industry or pay our debts and meet our obligations; our ability to generate cash flow to service our substantial debt obligations; impairment of goodwill and other intangible assets; any significant decline in our operating profit and taxable income; risks associated with tax matters; changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters; failure to comply with requirements to design, implement and maintain effective internal controls; and the other factors discussed under "Risk Factors" in the Company’s most recent reports on Forms 10-Q and 10-K. Such risk factors may be updated from time to time in the Company’s periodic filings with the SEC. The Company’s periodic filings are accessible on the SEC’s website at www.sec.gov.

You should not rely upon forward-looking statements as predictions of future events. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee that the future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or occur. Except as required by applicable law, the Company undertakes no obligation to update publicly any forward-looking statements for any reason after the date of this news release to conform these statements to actual results or to changes in our expectations.

About Grocery Outlet:

Based in Emeryville, California, Grocery Outlet is a high-growth, extreme value retailer of quality, name-brand consumables and fresh products sold through a network of independently operated stores. Grocery Outlet has more than 375 stores in California, Washington, Oregon, Pennsylvania, Idaho and Nevada.



GROCERY OUTLET HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except per share data)
(unaudited)

 14 Weeks Ended 13 Weeks Ended 53 Weeks Ended 52 Weeks Ended
 January 2,
2021
 December 28,
2019
 January 2,
2021
 December 28,
2019
Net sales$806,821   $655,517  $3,134,640   $2,559,617 
Cost of sales562,434   455,239  2,161,293   1,772,515 
Gross profit244,387   200,278  973,347   787,102 
Operating expenses:       
Selling, general and administrative197,596   167,895  772,409   639,437 
Depreciation and amortization15,188   9,793  55,479   47,883 
Share-based compensation3,775   5,586  38,084   31,439 
Total operating expenses216,559   183,274  865,972   718,759 
Income from operations27,828   17,004  107,375   68,343 
Other expenses:       
Interest expense, net4,106   6,695  20,043   45,927 
Debt extinguishment and modification costs     198   5,634 
Total other expenses4,106   6,695  20,241   51,561 
Income before income taxes23,722   10,309  87,134   16,782 
Income tax expense (benefit)(542)  477  (19,579)  1,363 
Net income and comprehensive income$24,264   $9,832  $106,713   $15,419 
Basic earnings per share$0.26   $0.11  $1.16   $0.20 
Diluted earnings per share$0.24   $0.11  $1.08   $0.19 
Weighted average shares outstanding:       
Basic94,299   88,841  91,818   79,044 
Diluted99,470   93,076  98,452   81,863 
              

GROCERY OUTLET HOLDING CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)

 January 2,
2021
 December 28,
2019
Assets   
Current assets:   
Cash and cash equivalents$105,326  $28,101 
Independent operator receivables and current portion of independent operator notes, net of allowance5,443  7,003 
Other accounts receivable, net of allowance5,950  2,849 
Merchandise inventories245,157  219,420 
Prepaid expenses and other current assets20,081  13,453 
Total current assets381,957  270,826 
Independent operator notes, net of allowance27,440  20,331 
Property and equipment, net433,652  356,614 
Operating lease right-of-use assets835,397  734,327 
Intangible assets, net48,226  47,792 
Goodwill747,943  747,943 
Deferred income tax assets, net3,529   
Other assets7,480  7,696 
Total assets$2,485,624  $2,185,529 
Liabilities and Stockholders’ Equity   
Current liabilities:   
Trade accounts payable$114,278  $119,217 
Accrued expenses35,699  31,363 
Accrued compensation26,447  14,915 
Current portion of long-term debt  246 
Current lease liabilities48,675  38,245 
Income and other taxes payable7,547  4,641 
Total current liabilities232,646  208,627 
Long-term debt, net449,233  447,743 
Deferred income tax liabilities, net  16,020 
Long-term lease liabilities881,438  767,755 
Total liabilities1,563,317  1,440,145 
Stockholders’ equity:   
Voting common stock95  89 
Series A preferred stock   
Additional paid-in capital787,047  717,282 
Retained earnings135,165  28,013 
Total stockholders’ equity922,307  745,384 
Total liabilities and stockholders’ equity$2,485,624  $2,185,529 
        

GROCERY OUTLET HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

 53 Weeks Ended 52 Weeks Ended
 January 2,
2021
 December 28,
2019
Cash flows from operating activities:   
Net income$106,713   $15,419  
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation of property and equipment50,749   42,906  
Amortization of intangible and other assets7,302   7,237  
Amortization of debt issuance costs and discounts2,452   2,542  
Debt extinguishment and modification costs198   5,634  
Share-based compensation38,084   31,439  
Provision for accounts receivable(456)  2,575  
Deferred income taxes(19,578)  872  
Other1,954   1,955  
Changes in operating assets and liabilities:   
Independent operator and other accounts receivable(4,943)  (3,649) 
Merchandise inventories(25,737)  (21,115) 
Prepaid expenses and other current assets(6,628)  498  
Income and other taxes payable2,906   1,191  
Trade accounts payable, accrued compensation and other accrued expenses4,778   22,599  
Proceeds from insurance recoveries479     
Changes in operating lease assets and liabilities, net22,964   22,732  
Net cash provided by operating activities181,237   132,835  
Cash flows from investing activities:   
Advances to independent operators(10,372)  (12,811) 
Repayments of advances from independent operators6,793   4,473  
Purchases of property and equipment(124,920)  (97,194) 
Proceeds from sales of assets269   586  
Intangible assets and licenses(5,861)  (3,073) 
Proceeds from insurance recoveries305     
Net cash used in investing activities(133,786)  (108,019) 
Cash flows from financing activities:   
Proceeds from initial public offering, net of underwriting discounts paid   407,666  
Proceeds from exercise of share-based compensation awards32,604   4,444  
Proceeds from revolving credit facility loan90,000     
Principal payments on revolving credit facility loan(90,000)    
Payments made for net settlement of employee share-based awards(483)  (2,813) 
Other direct costs paid related to the initial public offering   (7,062) 
Principal payments on term loans(188)  (414,813) 
Principal payments on other borrowings(1,024)  (865) 
Dividends paid(434)  (3,645) 
Debt issuance costs paid(701)  (690) 
Net cash provided by (used in) financing activities29,774   (17,778) 
Net increase in cash and cash equivalents77,225   7,038  
Cash and cash equivalents at beginning of period28,101   21,063  
Cash and cash equivalents at end of period$105,326   $28,101  
          

GROCERY OUTLET HOLDING CORP.
RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA
(in thousands)
(unaudited)

 14 Weeks Ended 13 Weeks Ended 53 Weeks Ended 52 Weeks Ended
 January 2,
2021
 December 28,
2019
 January 2,
2021
 December 28,
2019
Net income$24,264   $9,832  $106,713   $15,419 
Interest expense, net4,106   6,695  20,043   45,927 
Income tax expense (benefit)(542)  477  (19,579)  1,363 
Depreciation and amortization expenses (a)15,798   10,356  58,051   50,143 
EBITDA43,626   27,360  165,228   112,852 
Share-based compensation expenses (b)3,775   5,586  38,084   31,439 
Non-cash rent (c)3,025   5,275  10,673   10,582 
Asset impairment and gain or loss on disposition (d)569   1,457  1,727   1,957 
Provision for (write-off of) accounts receivable reserves (e)(777)  202  (456)  2,575 
Other (f)1,001   1,183  7,666   8,928 
Adjusted EBITDA, revised definition$51,219   $41,063  $222,922   $168,333 
        
Revised definition no longer adjusts for:       
New store pre-opening expenses (g)297   473  1,542   1,509 
Adjusted EBITDA, previous definition$51,516   $41,536  $224,464   $169,842 
                  

GROCERY OUTLET HOLDING CORP.
RECONCILIATION OF GAAP NET INCOME TO ADJUSTED NET INCOME
(in thousands, except per share data)
(unaudited)

 14 Weeks Ended 13 Weeks Ended 53 Weeks Ended 52 Weeks Ended
 January 2,
2021
 December 28,
2019
 January 2,
2021
 December 28,
2019
Net income$24,264   $9,832   $106,713   $15,419  
Share-based compensation expenses (b)3,775   5,586   38,084   31,439  
Non-cash rent (c)3,025   5,275   10,673   10,582  
Asset impairment and gain or loss on disposition (d)569   1,457   1,727   1,957  
Provision for (write-off of) accounts receivable reserves (e)(777)  202   (456)  2,575  
Other (f)1,001   1,183   7,666   8,928  
Amortization of purchase accounting assets and deferred financing costs (h)2,985   461   11,808   11,917  
Tax impact of option exercises and vesting of restricted stock units (i)(7,631)  (2,993)  (44,089)  (3,587) 
Tax effect of total adjustments (j)(2,963)  (4,404)  (19,461)  (18,939) 
Non-GAAP adjusted net income, revised definition$24,248   $16,599   $112,665   $60,291  
GAAP earnings per share       
Basic$0.26   $0.11   $1.16   $0.20  
Diluted$0.24   $0.11   $1.08   $0.19  
Non-GAAP adjusted earnings per share, revised definition       
Basic$0.26   $0.19   $1.23   $0.76  
Diluted$0.24   $0.18   $1.14   $0.74  
        
Revised definition no longer adjusts for:       
New store pre-opening expenses (g)297   473   1,542   1,509  
Revised definition now adjusts for:       
Tax impact of option exercises and vesting of restricted stock units (i)7,631   2,993   44,089   3,587  
Change in tax effect of total adjustments (j)(82)  (149)  (431)  (424) 
Non-GAAP adjusted net income, previous definition$32,094   $19,916   $157,865   $64,963  
Non-GAAP adjusted earnings per share, previous definition       
Basic$0.34   $0.22   $1.72   $0.82  
Diluted$0.32   $0.21   $1.60   $0.79  
        
GAAP & Non-GAAP weighted average shares outstanding       
Basic94,299   88,841   91,818   79,044  
Diluted99,470   93,076   98,452   81,863  
                

GROCERY OUTLET HOLDING CORP.
QUARTERLY RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA
(in thousands)
(unaudited)

 13 Weeks Ended 13 Weeks Ended 13 Weeks Ended 13 Weeks Ended 13 Weeks Ended 13 Weeks Ended 13 Weeks Ended 14 Weeks Ended
 March 30,
2019
 June 29,
2019
 September 28,
2019
 December 28,
2019
 March 28,
2020
 June 27,
2020
 September 26,
2020
 January 2,
2021
Net income (loss)$3,774  $(10,632) $12,445  $9,832  $12,642  $29,333   $40,474  $24,264 
Interest expense, net16,438  15,452  7,342  6,695  5,834  5,270   4,833  4,106 
Income tax expense (benefit)1,444  (4,247) 3,689  477  (1,801) (2,244)  (14,992) (542)
Depreciation and amortization expenses (a)12,849  13,156  13,782  10,356  13,570  13,887   14,796  15,798 
EBITDA34,505  13,729  37,258  27,360  30,245  46,246   45,111  43,626 
Share-based compensation expenses (b)211  22,750  2,892  5,586  20,277  10,175   3,857  3,775 
Non-cash rent (c)1,862  1,816  1,629  5,275  2,214  2,759   2,675  3,025 
Asset impairment and gain or loss on disposition (d)182  233  85  1,457  975  (22)  205  569 
Provision for (write-off of) accounts receivable reserves (e)1,483  581  309  202  848  (899)  372  (777)
Other (f)459  5,577  1,709  1,183  2,062  2,048   2,555  1,001 
Adjusted EBITDA, revised definition$38,702  $44,686  $43,882  $41,063  $56,621  $60,307   $54,775  $51,219 
                
Revised definition no longer adjusts for:               
New store pre-opening expenses (g)421  321  294  473  406  337   502  297 
Adjusted EBITDA, previous definition$39,123  $45,007  $44,176  $41,536  $57,027  $60,644   $55,277  $51,516 
                                 

GROCERY OUTLET HOLDING CORP.
QUARTERLY RECONCILIATION OF GAAP NET INCOME TO ADJUSTED NET INCOME
(in thousands, except per share data)
(unaudited)

 13 Weeks Ended 13 Weeks Ended 13 Weeks Ended 13 Weeks Ended 13 Weeks Ended 13 Weeks Ended 13 Weeks Ended 14 Weeks Ended
 March 30,
2019
 June 29,
2019
 September 28,
2019
 December 28,
2019
 March 28,
2020
 June 27,
2020
 September 26,
2020
 January 2,
2021
Net income (loss)$3,774  $(10,632) $12,445  $9,832  $12,642  $29,333  $40,474  $24,264 
Share-based compensation expenses (b)211  22,750  2,892  5,586  20,277  10,175  3,857  3,775 
Non-cash rent (c)1,862  1,816  1,629  5,275  2,214  2,759  2,675  3,025 
Asset impairment and gain or loss on disposition (d)182  233  85  1,457  975  (22) 205  569 
Provision for (write-off of) accounts receivable reserves (e)1,483  581  309  202  848  (899) 372  (777)
Other (f)459  5,577  1,709  1,183  2,062  2,048  2,555  1,001 
Amortization of purchase accounting assets and deferred financing costs (h)3,916  3,835  3,705  461  2,936  2,944  2,943  2,985 
Tax impact of option exercises and vesting of restricted stock units (i)1  (26) (569) (2,993) (4,994) (9,584) (21,880) (7,631)
Tax effect of total adjustments (j)(2,244) (9,929) (2,362) (4,404) (8,207) (4,761) (3,530) (2,963)
Non-GAAP adjusted net income, revised definition$9,644  $14,205  $19,843  $16,599  $28,753  $31,993  $27,671  $24,248 
GAAP earnings per share               
Basic$0.06  $(0.15) $0.14  $0.11  $0.14  $0.32  $0.44  $0.26 
Diluted$0.06  $(0.15) $0.13  $0.11  $0.13  $0.30  $0.41  $0.24 
Non-GAAP adjusted earnings per share, revised definition               
Basic$0.14  $0.20  $0.22  $0.19  $0.32  $0.35  $0.30  $0.26 
Diluted$0.14  $0.20  $0.21  $0.18  $0.30  $0.32  $0.28  $0.24 
                
Revised definition no longer adjusts for:               
New store pre-opening expenses (g)421  321  294  473  406  337  502  297 
Revised definition now adjusts for:               
Tax impact of option exercises and vesting of restricted stock units (i)(1) 26  569  2,993  4,994  9,584  21,880  7,631 
Change in tax effect of total adjustments (j)(117) (92) (66) (149) (114) (95) (140) (82)
Non-GAAP adjusted net income, previous definition$9,947  $14,460  $20,640  $19,916  $34,039  $41,819  $49,913  $32,094 
Non-GAAP adjusted earnings per share, previous definition               
Basic$0.15  $0.21  $0.23  $0.22  $0.38  $0.46  $0.54  $0.34 
Diluted$0.15  $0.20  $0.22  $0.21  $0.36  $0.42  $0.50  $0.32 
                
GAAP weighted average shares outstanding               
Basic68,514  70,475  88,345  88,841  89,481  90,800  92,489  94,299 
Diluted68,553  70,475  93,183  93,076  94,869  98,618  99,266  99,470 
Non-GAAP weighted average shares outstanding               
Basic68,514  70,475  88,345  88,841  89,481  90,800  92,489  94,299 
Diluted (k)68,553  71,315  93,183  93,076  94,869  98,618  99,266  99,470 

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(a)Includes depreciation related to our distribution centers which is included within the cost of sales line item in our consolidated statements of operations and comprehensive income.
(b)Fiscal year ended amounts include non-cash share-based compensation expense and $0.4 million and $3.6 million of cash dividends paid in fiscal 2020 and fiscal 2019, respectively, in respect of vested options as a result of dividends declared in connection with our 2018 Recapitalization and our 2016 Recapitalization.
(c)Consists of the non-cash portion of rent expense, which represents the difference between our straight-line rent expense recognized under GAAP and cash rent payments. The adjustment can vary depending on the average age of our lease portfolio, which has been impacted by our significant growth in recent years.
(d)Represents impairment charges with respect to planned store closures and gains or losses on dispositions of assets in connection with store transitions to new IOs.
(e)Represents non-cash changes in reserves related to our IO notes and accounts receivable.
(f)Represents other non-recurring, non-cash or non-operational items, such as transaction related costs, including costs related to employer payroll taxes associated with equity awards, secondary equity offerings, store closing costs, personnel-related costs, legal expenses, debt extinguishment and modification costs, strategic project costs, and miscellaneous costs.
(g)Includes marketing, occupancy and other expenses incurred in connection with store grand openings, including costs that will be the IO’s responsibility after store opening.
(h)Represents the amortization of debt issuance costs and incremental amortization of an asset step-up resulting from purchase price accounting related to our acquisition in 2014 by an investment fund affiliated with Hellman & Friedman LLC, which included trademarks, customer lists, and below-market leases.
(i)Represents excess tax benefits related to stock option exercises and vesting of restricted stock units to be recorded in earnings as discrete items in the reporting period in which they occur.
(j)Represents the tax effect of the total adjustments. Because of the increased impact of discrete items on our effective tax rate including the excess tax benefits from the exercise of stock options and vesting of RSU share-based awards, beginning in the fourth quarter of fiscal 2019, we changed our methodology to calculate the tax effect of the total adjustments on a discrete basis excluding any non-recurring and unusual tax items. Prior to the fourth quarter of fiscal 2019, the methodology we used was to calculate the tax effect of the total adjustments using our quarterly effective tax rate.
(k)To calculate the diluted non-GAAP adjusted earnings per share, we adjusted the weighted-average shares outstanding for the dilutive effect of all potential shares of common stock. In a period when we record a net loss, the diluted net loss per share is the same as basic net loss per share because the effects of potentially dilutive items were anti-dilutive given the net loss position.



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