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The Container Store(TCS) - 2021 Q3 - Quarterly Report

Filing Information This section provides essential details about the company's quarterly report filing, including registrant status and stock information Report Details This Quarterly Report on Form 10-Q for Q3 FY2020 details The Container Store Group, Inc.'s filing status and outstanding shares - The Container Store Group, Inc. filed a Quarterly Report on Form 10-Q for the period ended December 26, 20202 - The registrant is classified as an Accelerated filer and a Smaller reporting company3 Common Stock Outstanding (as of January 29, 2021) | Metric | Value | | :--- | :--- | | Common Stock Outstanding (as of Jan 29, 2021) | 50,488,622 shares | PART I. FINANCIAL INFORMATION This part presents the company's unaudited consolidated financial statements and management's discussion and analysis Item 1. Financial Statements This section presents unaudited consolidated financial statements and notes on business, accounting policies, debt, leases, taxes, and segments Unaudited Consolidated Balance Sheets This section presents the company's financial position at specific dates, detailing assets, liabilities, and shareholders' equity Consolidated Balance Sheets (In thousands) | (In thousands) | Dec 26, 2020 (unaudited) | Mar 28, 2020 | Dec 28, 2019 (unaudited) | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash | $27,895 | $67,755 | $13,971 | | Total current assets | $228,022 | $242,166 | $206,261 | | Total noncurrent assets | $880,160 | $924,648 | $936,021 | | Total assets | $1,108,182 | $1,166,814 | $1,142,282 | | Liabilities and Shareholders' Equity | | | | | Total current liabilities | $240,163 | $198,171 | $196,509 | | Total noncurrent liabilities | $545,480 | $696,935 | $677,604 | | Total liabilities | $785,643 | $895,106 | $874,113 | | Total shareholders' equity | $322,539 | $271,708 | $268,169 | | Total liabilities and shareholders' equity | $1,108,182 | $1,166,814 | $1,142,282 | Unaudited Consolidated Statements of Operations This section details the company's financial performance, including net sales, gross profit, operating income, and net income Consolidated Statements of Operations (In thousands, except share and per share amounts) | (In thousands, except share and per share amounts) | Thirteen Weeks Ended Dec 26, 2020 | Thirteen Weeks Ended Dec 28, 2019 | Thirty-Nine Weeks Ended Dec 26, 2020 | Thirty-Nine Weeks Ended Dec 28, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $275,478 | $228,657 | $675,405 | $674,609 | | Gross profit | $159,487 | $134,365 | $383,784 | $390,976 | | Income from operations | $32,842 | $9,432 | $47,988 | $19,632 | | Income before taxes | $27,850 | $4,298 | $33,555 | $3,387 | | Net income | $19,669 | $2,412 | $23,199 | $1,959 | | Net income per common share — basic | $0.40 | $0.05 | $0.48 | $0.04 | | Net income per common share — diluted | $0.40 | $0.05 | $0.47 | $0.04 | Unaudited Consolidated Statements of Comprehensive Income This section presents the company's comprehensive income, including net income and other comprehensive income components Consolidated Statements of Comprehensive Income (In thousands) | (In thousands) (unaudited) | Thirteen Weeks Ended Dec 26, 2020 | Thirteen Weeks Ended Dec 28, 2019 | Thirty-Nine Weeks Ended Dec 26, 2020 | Thirty-Nine Weeks Ended Dec 28, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net income | $19,669 | $2,412 | $23,199 | $1,959 | | Unrealized gain (loss) on financial instruments, net of tax | 5,919 | 2,414 | 11,800 | (515) | | Pension liability adjustment | (341) | (111) | (697) | 12 | | Foreign currency translation adjustment | 6,425 | 3,321 | 12,454 | (136) | | Comprehensive income | $31,672 | $8,036 | $46,756 | $1,320 | Unaudited Consolidated Statements of Cash Flows This section outlines the company's cash inflows and outflows from operating, investing, and financing activities Consolidated Statements of Cash Flows (In thousands) | (In thousands) (unaudited) | Thirty-Nine Weeks Ended Dec 26, 2020 | Thirty-Nine Weeks Ended Dec 28, 2019 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $116,689 | $(1,136) | | Net cash used in investing activities | $(11,605) | $(29,284) | | Net cash (used in) provided by financing activities | $(146,304) | $36,751 | | Effect of exchange rate changes on cash | $1,360 | $276 | | Net (decrease) increase in cash | $(39,860) | $6,607 | | Cash at end of fiscal period | $27,895 | $13,971 | Unaudited Consolidated Statements of Shareholders' Equity This section details changes in shareholders' equity, including net income, stock-based compensation, and other adjustments Consolidated Statements of Shareholders' Equity (In thousands, except share amounts) | (In thousands, except share amounts) | Balance at March 28, 2020 | Balance at December 26, 2020 | | :--- | :--- | :--- | | Total shareholders' equity | $271,708 | $322,539 | | Net income (loss) | $(16,670) (Q1) / $20,200 (Q2) / $19,669 (Q3) | $19,669 (Q3) | | Stock-based compensation | $832 (Q1) / $1,836 (Q2) / $1,583 (Q3) | $1,583 (Q3) | | Foreign currency translation adjustment | $3,583 (Q1) / $2,446 (Q2) / $6,425 (Q3) | $6,425 (Q3) | | Unrealized gain on financial instruments | $3,961 (Q1) / $1,920 (Q2) / $5,919 (Q3) | $5,919 (Q3) | | Pension liability adjustment | $(219) (Q1) / $(137) (Q2) / $(341) (Q3) | $(341) (Q3) | | Balance at December 26, 2020 | N/A | $322,539 | Notes to the Unaudited Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the unaudited consolidated financial statements 1. Description of business and basis of presentation This note describes the company's operations, its segments, and the impact of the COVID-19 pandemic on its business - The Container Store, Inc. operates 93 stores across 33 states and D.C., with online and call center sales, and its Swedish subsidiary Elfa manufactures shelving systems22 - The COVID-19 pandemic negatively impacted Q1 fiscal 2020 operations, leading to temporary store closures and a significant increase in curbside pickup and online sales23 - The company furloughed approximately 2,800 employees and reduced executive salaries due to COVID-19, but all have returned, with approximately 4,500 active employees2324 - The company's business is moderately seasonal, with a higher portion of net sales, operating income, and cash flows typically realized in the fourth fiscal quarter due to the Annual elfa® Sale26 2. Detail of certain balance sheet accounts This note provides detailed breakdowns of key balance sheet accounts, including accounts receivable, inventory, and accrued liabilities Detail of Balance Sheet Accounts (In thousands) | (In thousands) | Dec 26, 2020 | Mar 28, 2020 | Dec 28, 2019 | | :--- | :--- | :--- | :--- | | Accounts receivable, net: | | | | | Trade receivables, net | $17,439 | $20,217 | $17,127 | | Credit card receivables | $10,823 | $3,326 | $10,718 | | Other receivables | $3,537 | $1,178 | $1,593 | | Total Accounts receivable, net | $31,799 | $24,721 | $29,438 | | Inventory: | | | | | Finished goods | $134,296 | $118,981 | $134,487 | | Raw materials | $4,154 | $4,523 | $4,490 | | Work in progress | $539 | $703 | $602 | | Total Inventory | $138,989 | $124,207 | $139,579 | | Accrued liabilities: | | | | | Accrued payroll, benefits and bonuses | $29,451 | $19,112 | $22,528 | | Unearned revenue | $17,913 | $12,976 | $13,579 | | Gift cards and store credits outstanding | $11,815 | $9,208 | $10,180 | | Total Accrued liabilities | $88,080 | $66,046 | $67,658 | - Unearned revenue of $12,384 thousand and gift cards/store credits of $2,343 thousand, outstanding as of March 28, 2020, were subsequently recognized into revenue for the thirty-nine weeks ended December 26, 202033 3. Long-term debt and revolving lines of credit This note details the company's long-term debt, including amendments to the Senior Secured Term Loan and Revolving Credit Facilities - The Senior Secured Term Loan Facility was amended on November 25, 2020, reducing the principal to $200,000 thousand, extending maturity to January 31, 2026, and imposing a 1.00% prepayment premium34 - Quarterly amortization payments of $500 thousand on the term loan facility will commence on March 31, 202134 - The Revolving Credit Facility was amended on November 25, 2020, extending its maturity date to the earlier of November 25, 2025, or October 31, 2025, under specific conditions37 Long-Term Debt and Revolving Lines of Credit (In thousands) | (In thousands) | Dec 26, 2020 | Mar 28, 2020 | Dec 28, 2019 | | :--- | :--- | :--- | :--- | | Senior secured term loan facility | $200,000 | $252,282 | $253,985 | | Revolving credit facility | — | $78,000 | $58,000 | | Total debt | $200,389 | $339,606 | $312,278 | | Less current portion | $(2,186) | $(16,002) | $(6,953) | | Less deferred financing costs | $(9,313) | $(6,119) | $(6,567) | | Total long-term debt | $188,890 | $317,485 | $298,758 | 4. Leases This note describes the company's operating lease arrangements for its facilities and the impact of COVID-19 on lease payments - The company operates primarily from leased facilities, including 93 stores, with operating leases expiring over 1 to 20 years, and lease expense recorded on a straight-line basis4041 - During fiscal 2020, the company renegotiated lease terms due to COVID-19, deferring approximately $11,900 thousand in cash lease payments, with $10,100 thousand remaining deferred as of December 26, 202045 Lease Costs (In thousands) | (In thousands) | Thirteen Weeks Ended Dec 26, 2020 | Thirteen Weeks Ended Dec 28, 2019 | Thirty-Nine Weeks Ended Dec 26, 2020 | Thirty-Nine Weeks Ended Dec 28, 2019 | | :--- | :--- | :--- | :--- | :--- | | Operating lease costs | $22,926 | $22,842 | $68,132 | $67,840 | | Variable lease costs | $331 | $270 | $642 | $903 | | Total lease costs | $23,257 | $23,112 | $68,774 | $68,743 | Lease Term and Borrowing Rate | Metric | Dec 26, 2020 | Dec 28, 2019 | | :--- | :--- | :--- | | Weighted average remaining lease term (years) | 7.0 | 7.2 | | Weighted average incremental borrowing rate | 13.9 % | 8.8 % | 5. Net income per common share This note provides the calculation of basic and diluted net income per common share, including weighted-average shares Net Income Per Common Share (In thousands, except share and per share amounts) | (In thousands, except share and per share amounts) | Thirteen Weeks Ended Dec 26, 2020 | Thirteen Weeks Ended Dec 28, 2019 | Thirty-Nine Weeks Ended Dec 26, 2020 | Thirty-Nine Weeks Ended Dec 28, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net income | $19,669 | $2,412 | $23,199 | $1,959 | | Weighted-average common shares — basic | 48,570,843 | 48,313,671 | 48,491,286 | 48,987,525 | | Weighted-average common shares — diluted | 49,513,225 | 48,370,418 | 48,950,253 | 49,172,633 | | Net income per common share — basic | $0.40 | $0.05 | $0.48 | $0.04 | | Net income per common share — diluted | $0.40 | $0.05 | $0.47 | $0.04 | | Antidilutive securities not included (Stock options outstanding) | 1,895,557 | 2,527,745 | 1,965,591 | 2,364,692 | 6. Income taxes This note details the provision for income taxes and the effective tax rate, explaining factors influencing the rate Income Tax Provision and Effective Tax Rate | Metric | Thirteen Weeks Ended Dec 26, 2020 | Thirteen Weeks Ended Dec 28, 2019 | Thirty-Nine Weeks Ended Dec 26, 2020 | Thirty-Nine Weeks Ended Dec 28, 2019 | | :--- | :--- | :--- | :--- | :--- | | Provision for income taxes | $8,181 | $1,886 | $10,356 | $1,428 | | Effective tax rate | 29.4% | 43.9% | 30.9% | 42.2% | - The effective tax rate for both periods was above the U.S. statutory rate of 21%, primarily due to stock-based compensation, state income taxes, officer compensation limitation, and GILTI provision5152 7. Commitments and contingencies This note outlines the company's outstanding standby letters of credit and management's assessment of legal proceedings - The company had $3,961 thousand in outstanding standby letters of credit as of December 26, 202053 - Management does not expect current legal proceedings and routine regulatory reviews to have a material adverse effect on the company's financial condition, results of operations, or cash flows53 8. Accumulated other comprehensive loss This note presents the components of accumulated other comprehensive loss, including foreign currency hedges and pension adjustments Accumulated Other Comprehensive Loss (In thousands) | (In thousands) | Balance at March 28, 2020 | Net current period other comprehensive income (loss) | Balance at December 26, 2020 | | :--- | :--- | :--- | :--- | | Foreign currency hedge instruments | $(5,563) | $11,800 | $6,237 | | Pension liability adjustment | $(2,611) | $(697) | $(3,308) | | Foreign currency translation | $(28,121) | $12,454 | $(15,667) | | Total | $(36,295) | $23,557 | $(12,738) | 9. Foreign currency forward contracts This note explains the company's use of foreign currency forward contracts for hedging inventory purchases and raw materials - The TCS segment uses foreign currency forward contracts in Swedish krona (90% of inventory purchases in fiscal 2020) as cash flow hedges to stabilize retail gross margins5556 - The Elfa segment uses foreign currency forward contracts as economic hedges for raw material purchases in non-Swedish krona currencies55 - As of December 26, 2020, the company had a $6,237 thousand gain in accumulated other comprehensive loss related to foreign currency hedge instruments, with an expected $1,639 thousand unrealized loss to be reclassified into earnings over the next 12 months61 10. Fair value measurements This note describes the company's fair value measurements for assets and liabilities, categorized by a three-tier hierarchy - The company measures certain assets and liabilities at fair value, classifying inputs into a three-tier hierarchy: Level 1 (quoted prices), Level 2 (observable market data), and Level 3 (unobservable estimates)6364 Fair Value Measurements (In thousands) | (In thousands) | Dec 26, 2020 | Mar 28, 2020 | Dec 28, 2019 | | :--- | :--- | :--- | :--- | | Nonqualified retirement plan (Other current assets) | $6,116 | $5,066 | $6,249 | | Total fair value of debt | $200,389 | $285,365 | $299,579 | 11. Segment reporting This note provides financial information for the company's two reportable segments: The Container Store (TCS) and Elfa - The company operates two reportable segments: The Container Store (TCS), including retail stores and online sales, and Elfa, which manufactures shelving systems globally6667 - Adjusted EBITDA is the primary profit/loss measure used by the Chief Operating Decision Maker (CODM) to evaluate segment performance and allocate resources6870 Segment Net Sales and Adjusted EBITDA (In thousands) | (In thousands) | TCS Net Sales to Third Parties (13 Weeks) | Elfa Net Sales to Third Parties (13 Weeks) | Total Adjusted EBITDA (13 Weeks) | TCS Net Sales to Third Parties (39 Weeks) | Elfa Net Sales to Third Parties (39 Weeks) | Total Adjusted EBITDA (39 Weeks) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Dec 26, 2020 | $256,544 | $18,934 | $42,445 | $628,933 | $46,472 | $90,991 | | Dec 28, 2019 | $211,971 | $16,686 | $22,007 | $628,282 | $46,327 | $55,076 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes the company's financial performance, condition, liquidity, capital resources, and critical accounting policies Key Financial Metrics (In thousands, except per share amounts) | Metric | 13 Weeks Ended Dec 26, 2020 | 13 Weeks Ended Dec 28, 2019 | 39 Weeks Ended Dec 26, 2020 | 39 Weeks Ended Dec 28, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $275,478 | $228,657 | $675,405 | $674,609 | | Gross profit | $159,487 | $134,365 | $383,784 | $390,976 | | Income from operations | $32,842 | $9,432 | $47,988 | $19,632 | | Net income | $19,669 | $2,412 | $23,199 | $1,959 | | Adjusted EBITDA | $42,445 | $22,007 | $90,991 | $55,076 | | Adjusted net income | $20,705 | $2,411 | $26,112 | $2,249 | | Adjusted net income per common share — diluted | $0.42 | $0.05 | $0.53 | $0.05 | Cautionary note regarding forward-looking statements This section warns that the report contains forward-looking statements subject to various risks and uncertainties - The report contains forward-looking statements subject to known and unknown risks, uncertainties, and important factors that could cause actual results to differ materially78 - Key risk factors include the COVID-19 pandemic, supply chain issues, economic health, consumer preferences, competition, and debt restrictions78 Overview This section provides a general description of The Container Store's business as a specialty retailer of storage and organization products - The Container Store is a leading specialty retailer of storage and organization products, offering creative, multifunctional, and customizable solutions, including Custom Closets83 - The company's operations are divided into two segments: TCS (retail stores, website, call center, installation services) and Elfa (Swedish subsidiary manufacturing shelving and drawer systems)8485 Management Transition This section announces the retirement of Melissa Reiff as CEO and the appointment of Satish Malhotra as her successor - Melissa Reiff retired as President and CEO, effective February 1, 2021, and Satish Malhotra was appointed as her successor, with Ms. Reiff continuing as Chairwoman of the Board8788 Business Update Related to Coronavirus This section details the impact of COVID-19 on the company's operations, including store closures, sales shifts, and cost management - COVID-19 negatively impacted Q1 fiscal 2020, leading to temporary store closures and a surge in online/curbside sales, with all 93 stores reopening by Q290 - The company implemented cost management, furloughed 2,800 employees, and reduced executive salaries; all furloughed employees have returned, and salaries are restored to pre-COVID-19 levels, with 4,500 active employees90 - The company deferred approximately $5,200 thousand in employer payroll taxes and recorded an employee retention credit of approximately $1,000 thousand under the CARES Act90 Results of Operations This section analyzes the company's financial results for the reported periods, comparing performance year-over-year Thirteen Weeks Ended December 26, 2020 Compared to Thirteen Weeks Ended December 28, 2019 This section compares the company's financial performance for the thirteen-week period, highlighting changes in sales, margins, and expenses Financial Performance (Thirteen Weeks Ended December 26, 2020 vs. December 28, 2019) (In thousands, except percentages) | Metric | Dec 26, 2020 | Dec 28, 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $275,478 | $228,657 | $46,821 | 20.5% | | TCS net sales | $256,544 | $211,971 | $44,573 | 21.0% | | Elfa third party net sales | $18,934 | $16,686 | $2,248 | 13.5% | | Online sales increase (TCS) | N/A | N/A | $22,920 | 98.1% | | Gross profit | $159,487 | $134,365 | $25,122 | 18.7% | | Total gross margin | 57.9% | 58.8% | -0.9% | N/A | | TCS gross margin | 57.2% | 57.6% | -0.4% | N/A | | Elfa gross margin | 40.3% | 37.7% | 2.6% | N/A | | SG&A expenses | $115,870 | $111,972 | $3,898 | 3.5% | | SG&A as % of net sales | 42.1% | 49.0% | -6.9% | N/A | | Pre-opening costs | $95 | $2,482 | $(2,387) | -96.2% | | Interest expense | $4,099 | $5,134 | $(1,035) | -20.2% | | Loss on extinguishment of debt | $893 | — | $893 | N/A | | Provision for income taxes | $8,181 | $1,886 | $6,295 | 333.8% | | Effective tax rate | 29.4% | 43.9% | -14.5% | N/A | - TCS gross margin decreased due to higher shipping costs from increased online sales and surcharges, partially offset by less promotional activity and a favorable product mix; Elfa gross margin increased due to lower direct material costs111 - SG&A as a percentage of net sales decreased significantly due to leverage of occupancy and payroll costs on higher sales, combined with reductions in marketing and other expenses112 Thirty-Nine Weeks Ended December 26, 2020 Compared to Thirty-Nine Weeks Ended December 28, 2019 This section compares the company's financial performance for the thirty-nine-week period, detailing changes in sales, margins, and expenses Financial Performance (Thirty-Nine Weeks Ended December 26, 2020 vs. December 28, 2019) (In thousands, except percentages) | Metric | Dec 26, 2020 | Dec 28, 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $675,405 | $674,609 | $796 | 0.1% | | TCS net sales | $628,933 | $628,282 | $651 | 0.1% | | Elfa third party net sales | $46,472 | $46,327 | $145 | 0.4% | | Online sales increase (TCS) | N/A | N/A | $86,673 | 124.7% | | Elfa third party net sales (excluding FX impact) | N/A | N/A | $(2,262) | -4.8% | | Gross profit | $383,784 | $390,976 | $(7,192) | -1.8% | | Total gross margin | 56.8% | 58.0% | -1.2% | N/A | | TCS gross margin | 55.7% | 57.3% | -1.6% | N/A | | Elfa gross margin | 40.7% | 36.7% | 4.0% | N/A | | SG&A expenses | $303,328 | $334,281 | $(30,953) | -9.3% | | SG&A as % of net sales | 44.9% | 49.6% | -4.7% | N/A | | Pre-opening costs | $111 | $5,988 | $(5,877) | -98.1% | | Other expenses | $1,089 | $375 | $714 | 190.4% | | Interest expense | $13,540 | $16,245 | $(2,705) | -16.7% | | Loss on extinguishment of debt | $893 | — | $893 | N/A | | Provision for income taxes | $10,356 | $1,428 | $8,928 | 625.2% | | Effective tax rate | 30.9% | 42.2% | -11.3% | N/A | - TCS gross margin decreased due to increased shipping costs from higher online sales mix and increased promotional activity; Elfa gross margin increased due to a favorable customer/product sales mix and lower direct material costs121 - Other expenses increased primarily due to severance costs associated with workforce reductions and temporary store closures resulting from the COVID-19 pandemic124 Liquidity and Capital Resources This section discusses the company's sources of liquidity, cash flow activities, capital expenditures, and contractual obligations - Primary liquidity sources are cash flows from operations, a $100,000 thousand asset-based revolving credit agreement, and the 2019 Elfa Senior Secured Credit Facilities129 - Due to COVID-19, the company extended payment terms, renegotiated lease payments, significantly reduced merchandise purchases, and cut discretionary spending, with normal vendor payment terms resuming by Q3 fiscal 2020130 - As of December 26, 2020, the company had $27,895 thousand in cash, $96,830 thousand available under the Revolving Credit Facility, and approximately $13,399 thousand available under the 2019 Elfa Revolving Credit Facility132 Cash Flow Summary (In thousands) | (In thousands) | Thirty-Nine Weeks Ended Dec 26, 2020 | Thirty-Nine Weeks Ended Dec 28, 2019 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $116,689 | $(1,136) | | Net cash used in investing activities | $(11,605) | $(29,284) | | Net cash (used in) provided by financing activities | $(146,304) | $36,751 | | Free cash flow (Non-GAAP) | $105,019 | $(30,432) | - Net cash provided by operating activities significantly increased to $116,689 thousand (from $(1,136) thousand in prior year) primarily due to increased accounts payable and accrued liabilities, higher taxes payable, and decreased cash operating lease payments135 - Capital expenditures for the thirty-nine weeks ended December 26, 2020, totaled $11,670 thousand, primarily for maintenance capital, IT investments ($6,467 thousand), and distribution centers ($3,362 thousand), with no new stores opened138 - Net cash used in financing activities was $146,304 thousand, including net repayments of $78,000 thousand on the Revolving Credit Facility and $52,281 thousand on the Senior Secured Term Loan Facility143 - Free cash flow was positive $105,019 thousand for the thirty-nine weeks ended December 26, 2020, a significant improvement from negative $30,432 thousand in the prior year, driven by liquidity preservation actions during COVID-19147 Contractual Obligations (In thousands) | (In thousands) | Total | Within 1 Year (Remaining) | 1 - 3 Years | 3 - 5 Years | After 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Term loans | $200,000 | $500 | $4,000 | $4,000 | $191,500 | | Operating leases | $548,817 | $26,868 | $174,392 | $139,832 | $207,725 | | Total | $748,817 | $27,368 | $178,392 | $143,832 | $399,225 | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there are no applicable quantitative and qualitative disclosures about market risk for the reporting period - No applicable quantitative and qualitative disclosures about market risk are provided in this report174 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective, with no material changes in internal control over financial reporting - Management, with CEO and CFO participation, evaluated the effectiveness of disclosure controls and procedures and concluded they were effective at the reasonable assurance level as of December 26, 2020176 - No material changes in internal control over financial reporting were identified during the quarter ended December 26, 2020177 PART II. OTHER INFORMATION This part includes disclosures on legal proceedings, risk factors, equity sales, defaults, mine safety, and other information Item 1. Legal Proceedings The company is involved in various ordinary course legal proceedings, but management does not anticipate any material adverse effect - The company is subject to ordinary litigation and routine regulatory reviews, but management does not expect a material adverse effect on financial condition, results of operations, or cash flows178 Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's 2019 Annual Report on Form 10-K - No material changes to risk factors were reported compared to the 2019 Annual Report on Form 10-K179 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities and use of proceeds occurred during the period180 Item 3. Default Upon Senior Securities There were no defaults upon senior securities to report for the period - No defaults upon senior securities were reported182 Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company's operations - Mine Safety Disclosures are not applicable183 Item 5. Other Information No other information requiring disclosure was reported for the period - No other information was reported184 Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including amendments to credit agreements, an employment agreement, and certifications List of Exhibits | Exhibit Number | Exhibit Description | | :--- | :--- | | 10.1 | Amendment No. 7 to Term Facility Credit Agreement | | 10.2 | Amendment No. 5 to Term Facility Credit Agreement | | 10.3 | Employment Agreement, dated December 21, 2020, between Satish Malhotra and The Container Store Group, Inc. | | 31.1 | Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) | | 31.2 | Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) | | 32.1 | Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 | | 32.2 | Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 | | 101.INS | Inline XBRL Instance Document | | 104 | Cover Page Interactive Data File | SIGNATURES This section contains the official signatures for the quarterly report, confirming its submission Signatures The report was duly signed on February 3, 2021, by Jeffrey A. Miller, CFO, and Kristin Schwertner, CAO - The report was signed by Jeffrey A. Miller, Chief Financial Officer, and Kristin Schwertner, Chief Accounting Officer, on February 3, 2021191