TAX 10-Q

Cambria Tax Aware ETF (TAX)

10-Q 2021-11-02 For: 2021-09-25

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Added on August 12, 2026

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Delaware						27-3561876
(State of incorporation)						(IRS employer identification no.)


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			☐


		Page
		Number

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of September 2 5 , 2021 and December 26, 2020	2
	Condensed Consolidated Statements of Operations for the three and nine months ended September 2 5 , 2021 and September 2 6 , 2020	3
	Condensed Consolidated Statements of Comprehensive Operations for the three and nine months ended September 2 5 , 2021 and September 2 6 , 2020	4
	Condensed Consolidated Statements of Stockholders' Equity for the three and ni ne months ended September 2 5 , 2021 and September 2 6 , 2020	5
	Condensed Consolidated Statements of Cash Flows for the ni ne months ended September 2 5 , 2021 and September 2 6 , 2020	7
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	39
Signatures		42


(In thousands, except share count and per share data)	September 25, 2021		December 26, 2020
Assets	(Unaudited)		(Audited)
Current assets:
Cash and cash equivalents	$	159,972	$	148,780
Current receivables, net	95,686		67,335
Inventories, net	533,552		302,307
Current assets held for sale	—		43,023
Other current assets	18,643		13,997
Total current assets	807,853		575,442
Property, equipment, and software, net	202,968		135,872
Non-current receivables, net	12,000		12,800
Goodwill	787,441		448,258
Intangible assets, net	308,905		109,892
Operating lease right-of-use assets	656,561		502,104
Non-current assets held for sale	—		55,116
Other non-current assets	55,856		8,428
Total assets	$	2,831,584	$	1,847,912
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term obligations	$	1,420	$	104,053
Current operating lease liabilities	158,577		127,032
Accounts payable and accrued expenses	360,274		252,389
Current liabilities held for sale	—		40,576
Other current liabilities	34,095		25,174
Total current liabilities	554,366		549,224
Long-term obligations, excluding current installments	1,072,909		466,944
Non-current operating lease liabilities	513,461		402,276
Non-current liabilities held for sale	—		8,779
Other non-current liabilities	51,366		35,522
Total liabilities	2,192,102		1,462,745

Stockholders' equity:
Common stock, $0.01 par value per share, 180,000,000 and 180,000,000 shares authorized, 40,237,297 and 40,092,260 shares issued and outstanding at September 25, 2021 and December 26, 2020, respectively	402		401
Preferred stock, $0.01 par value per share, 20,000,000 and 20,000,000 shares authorized, 4,541,125 and 1,250,000 shares issued and outstanding at September 25, 2021 and December 26, 2020, respectively	45		13
Additional paid-in capital	471,405		382,383
Accumulated other comprehensive loss, net of taxes	—		(1,399)
Retained earnings	167,630		3,769
Total equity attributable to Franchise Group, Inc.	639,482		385,167
Non-controlling interest	—		—
Total equity	639,482		385,167
Total liabilities and equity	$	2,831,584	$	1,847,912


	Three Months Ended				Nine Months Ended
(In thousands, except share count and per share data)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
Revenues:
Product	$	782,608	$	500,462	$	2,172,193	$	1,440,677
Service and other	37,891		19,826		114,659		46,516
Rental	8,327		17,404		26,077		51,000
Total revenues	828,826		537,692		2,312,929		1,538,193
Operating expenses:
Cost of revenue:
Product	485,682		296,920		1,347,673		862,320
Service and other	8,737		678		10,076		2,135
Rental	2,930		5,877		8,869		17,327
Total cost of revenue	497,349		303,475		1,366,618		881,782
Selling, general, and administrative expenses	276,714		209,537		780,416		619,799
Total operating expenses	774,063		513,012		2,147,034		1,501,581
Income from operations	54,763		24,680		165,895		36,612
Other expense:
Other	(13,090)		(1,246)		(49,816)		(5,295)
Interest expense, net	(21,194)		(26,269)		(91,494)		(78,658)
Income (loss) from continuing operations before income taxes	20,479		(2,835)		24,585		(47,341)
Income tax expense (benefit)	(15,519)		1,891		(15,600)		(50,217)
Income (loss) from continuing operations	35,998		(4,726)		40,185		2,876
Income (loss) from discontinued operations, net of tax	128,072		(3,871)		176,434		28,483
Net income (loss)	164,070		(8,597)		216,619		31,359
Less: Net (income) attributable to non-controlling interest	—		—		—		(2,090)
Net income (loss) attributable to Franchise Group, Inc.	$	164,070	$	(8,597)	$	216,619	$	29,269

Amounts attributable to Franchise Group, Inc.:
Net income (loss) from continuing operations	$	35,998	$	(4,726)	$	40,185	$	(11,005)
Net income (loss) from discontinued operations	128,072		(3,871)		176,434		40,274
Net income attributable to Franchise Group, Inc.	$	164,070	$	(8,597)	$	216,619	$	29,269

Basic earnings (loss) per share:
Continuing operations	$	0.84	$	(0.12)	$	0.84	$	(0.34)
Discontinued operations	3.18		(0.10)		4.39		1.23
Total basic earnings per share	$	4.02	$	(0.22)	$	5.23	$	0.89

Diluted earnings (loss) per share:
Continuing operations	$	0.83	$	(0.12)	$	0.83	$	(0.34)
Discontinued operations	3.13		(0.10)		4.31		1.23
Total diluted earnings per share	$	3.96	$	(0.22)	$	5.14	$	0.89

Weighted-average shares outstanding:
Basic	40,229,232		39,692,384		40,171,458		32,679,576
Diluted	40,973,736		39,692,384		40,931,423		32,679,576


	Three Months Ended				Nine Months Ended
(In thousands)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
Net income (loss)	$	164,070	$	(8,597)	$	216,619	$	31,359
Other comprehensive income (loss)
Unrealized (gain) loss on interest rate swap agreement, net of taxes of $—, $2, $13, and $(29), respectively	—		(39)		45		(119)
Foreign currency translation adjustment	—		303		381		(188)
Forward contracts related to foreign currency exchange rates	—		1		—		7
Reclassification of unrealized loss on interest rate swap agreement and foreign currency translation adjustments realized upon disposal of business	973		—		973		—
Other comprehensive income (loss)	973		265		1,399		(300)
Comprehensive income (loss)	165,043		(8,332)		218,018		31,059
Less: comprehensive (income) attributable to non-controlling interest	—		—		—		(1,915)
Comprehensive income (loss) attributable to Franchise Group, Inc.	$	165,043	$	(8,332)	$	218,018	$	29,144


	Three Months Ended September 25, 2021
(In thousands)	Common stock shares	Common stock		Preferred stock shares	Preferred stock		Additional paid-in-capital		Accumulated other comprehensive loss		Retained earnings		Total Franchise Group equity
Balance at June 26, 2021	40,208	$	402	4,541	$	45	$	467,351	$	(973)	$	21,170	$	487,995
Net income	—	—		—	—		—		—		164,070		164,070
Total other comprehensive income	—	—		—	—		—		973		—		973
Exercise of stock options	—	—		—	—		—		—		—		—
Stock-based compensation expense, net	29	—		—	—		4,054		—		—		4,054

Issuance of Series A Preferred Stock	—	—		—	—		—		—		—		—
Common dividend declared ($0.375 per share)	—	—		—	—		—		—		(15,482)		(15,482)
Preferred dividend declared ($0.469 per share)	—	—		—	—		—		—		(2,128)		(2,128)
Balance at September 25, 2021	40,237	$	402	4,541	$	45	$	471,405	$	—	$	167,630	$	639,482


	Nine Months Ended September 25, 2021
(In thousands)	Common stock shares	Common stock		Preferred stock shares	Preferred stock		Additional paid-in-capital		Accumulated other comprehensive loss		Retained earnings		Total Franchise Group equity
Balance at December 26, 2020	40,092	$	401	1,250	$	13	$	382,383	$	(1,399)	$	3,769	$	385,167
Net income	—	—		—	—		—		—		216,619		216,619
Total other comprehensive income	—	—		—	—		—		1,399		—		1,399
Exercise of stock options	36	—		—	—		385		—		—		385
Stock-based compensation expense, net	109	1		—	—		9,127		—		—		9,128

Issuance of Series A Preferred Stock	—	—		3,291	32		79,510		—		—		79,542
Common dividend declared ($0.375 per share)	—	—		—	—		—		—		(46,372)		(46,372)
Preferred dividend declared ($0.469 per share)	—	—		—	—		—		—		(6,386)		(6,386)
Balance at September 25, 2021	40,237	$	402	4,541	$	45	$	471,405	$	—	$	167,630	$	639,482


	Three Months Ended September 26, 2020
(In thousands)	Common stock shares	Common stock		Preferred stock shares	Preferred stock		Additional paid-in-capital		Accumulated other comprehensive loss		Retained earnings		Total Franchise Group equity		Non-controlling interest		Total equity
Balance at June 28, 2020	35,186	$	352	—	$	—	$	249,525	$	(2,103)	$	42,935	$	290,709	$	—	$	290,709

Net loss	—	—		—	—		—		—		(8,597)		(8,597)		—		(8,597)
Total other comprehensive income	—	—		—	—		—		265		—		265		—		265
Exercise of stock options	28	1		—	—		333		—		—		334		—		334
Stock-based compensation expense, net	13	—		—	—		1,945		—		—		1,945		—		1,945
Issuance of common stock	4,830	48		—	—		105,873		—		—		105,921		—		105,921
Issuance of Series A Preferred Stock	—	—		1,200	12		28,354		—		—		28,366		—		28,366
Common dividend declared ($0.25 per share)	—	—		—	—		—		—		(10,242)		(10,242)		—		(10,242)
Preferred dividend declared ($0.14 per share)	—	—		—	—		—		—		(169)		(169)		—		(169)
Balance at September 26, 2020	40,057	$	401	1,200	$	12	$	386,030	$	(1,838)	$	23,927	$	408,532	$	—	$	408,532


	Nine Months Ended September 26, 2020
(In thousands)	Common stock shares	Common stock		Preferred stock shares	Preferred stock		Additional paid-in-capital		Accumulated other comprehensive loss		Retained earnings		Total Franchise Group equity		Non-controlling interest		Total equity
Balance at December 29, 2019	18,250	$	183	1,887	$	19	$	108,339	$	(1,538)	$	18,388	$	125,391	$	26,370	$	151,761
Changes and distributions of non-controlling interest in New Holdco	—	—		—	—		23,744		(175)		—		23,569		(25,927)		(2,358)
Net income	—	—		—	—		—		—		29,269		29,269		2,090		31,359
Total other comprehensive loss	—	—		—	—		—		(125)		—		(125)		(175)		(300)
Exercise of stock options	50	1		—	—		520		—		—		521		—		521
Stock-based compensation expense, net	31	—		—	—		6,209		—		—		6,209		—		6,209
Issuance of common stock	12,292	123		—	—		228,892		—		—		229,015		—		229,015
Issuance of Series A Preferred Stock	—	—		1,200	12		28,354		—		—		28,366		—		28,366
Conversion of preferred to common stock	9,434	94		(1,887)	(19)		(10,028)		—		—		(9,953)		—		(9,953)
Common dividend declared ($0.25 per share)	—	—		—	—		—		—		(25,919)		(25,919)		—		(25,919)
Preferred dividend declared ($0.14 per share)	—	—		—	—		—		—		(169)		(169)		—		(169)
Adjustment	—	—		—	—		—		—		2,358		2,358		(2,358)		—
Balance at September 26, 2020	40,057	$	401	1,200	$	12	$	386,030	$	(1,838)	$	23,927	$	408,532	$	—	$	408,532


(In thousands)	Preliminary March 10, 2021
Cash and cash equivalents	$	2,131
Other current assets	39,844
Inventories, net	118,600
Property, equipment and software, net	75,616
Goodwill	335,690
Operating lease right-of-use assets	151,243
Other intangible assets, net	205,800
Other non-current assets	6,393
Total assets	935,317
Current operating lease liabilities	25,405
Accounts payable and accrued expenses	82,071
Other current liabilities	1,705
Current installments of long-term obligations	3,507
Long-term obligations, excluding current installments	247,458
Non-current operating lease liabilities	114,292
Other long-term liabilities	9,761
Total liabilities	484,199
Consideration transferred	$	451,118


(In thousands)	Preliminary December 27, 2020
Cash and cash equivalents	$	6
Other current assets	96
Inventories, net	6,450
Property, equipment and software, net	2,934
Goodwill	3,293
Operating lease right-of-use assets	26,571
Total assets	39,350
Current operating lease liabilities	2,587
Other current liabilities	299
Non-current operating lease liabilities	22,624
Total liabilities	25,510
Consideration transferred	$	13,840


	Pro forma (Unaudited)
	Three Months Ended				Nine Months Ended
(In thousands)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
Revenue	$	828,826	$	750,094	$	2,506,519	$	2,187,416
Net income	$	35,999	$	6,167	$	92,974	$	(38,583)
Basic net income per share	$	0.84	$	0.15	$	2.16	$	(1.19)
Diluted net income per share	$	0.83	$	0.15	$	2.12	$	(1.19)


	Vitamin Shoppe		American Freight		Pet Supplies Plus		Buddy's		Total
Balance as of December 26, 2020	1,277		367,882		—		79,099		448,258
Acquisitions	—		3,493		335,690		—		339,183
Balance as of September 25, 2021	$	1,277	$	371,375	$	335,690	$	79,099	$	787,441


	September 25, 2021
(In thousands)	Gross carrying amount		Accumulated amortization		Net carrying amount
Indefinite lived tradenames	197,700		—		197,700
Franchise agreements	77,600		(4,791)		72,809
Customer contracts	42,414		(4,302)		38,112
Reacquired rights	566		(282)		284
Total intangible assets	$	318,280	$	(9,375)	$	308,905


	Nine Months Ended
(In thousands)	September 25, 2021		September 26, 2020
Operating Activities
Net income	$	216,619	$	31,359
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts	2,010		3,412
Depreciation, amortization and impairment charges	50,127		51,254
Amortization of deferred financing costs	35,590		28,703
Loss (gain) on disposal of other	(374)		75
Stock-based compensation expense - equity awards	9,561		6,294
(Gain) on bargain purchases and sales of Company-owned offices	(3,368)		(1,761)
Deferred tax (income) expense	(17)		7,851
Prepayment penalty for early debt extinguishment	36,726		—
Gain on divestiture of Liberty Tax	(173,699)		—
Change in
Accounts, notes, and interest receivable	5,748		(2,223)
Income taxes receivable	(13,473)		(23,721)
Other assets	26,026		3,971
Accounts payable and accrued expenses	21,959		38,884
Inventory	(108,947)		79,967
Deferred revenue	10,952		5,649
Net cash provided by operating activities	115,440		229,714
Investing Activities
Issuance of operating loans to franchisees	(17,749)		(30,368)
Payments received on operating loans to franchisees	23,103		50,064
Purchases of Company-owned offices and acquired customer lists	(1,086)		(4,830)
Proceeds from sale of Company-owned offices	3,189		1,118
Acquisition of business, net of cash and restricted cash acquired	(462,821)		(353,423)
Divestiture of business, net of cash and restricted cash sold	179,471		—
Purchases of property, equipment, and software	(36,871)		(26,702)
Proceeds from sale of property, equipment, and software	195		1,474
Net cash (used in) in investing activities	(312,569)		(362,667)
Financing Activities
Proceeds from the exercise of stock options	386		520
Dividends paid	(50,016)		(19,167)
Non-controlling interest distribution	—		(4,716)
Repayment of other long-term obligations	(957,382)		(455,811)
Borrowings under revolving credit facility	6,724		174,665
Repayments under revolving credit facility	(84,874)		(218,260)


(In thousands)	September 25, 2021		December 26, 2020
Accounts Receivable	$	68,837	$	38,444
Notes receivable	$	13,600	$	28,240
Deferred revenue	$	35,472	$	24,097
Deferred franchise fee revenue	$	12,682	$	1,519


	Number of options	Weighted average exercise price
Outstanding as of December 26, 2020	391,409	$	10.19
Exercised	(36,188)	10.66
Expired or forfeited	—	—
Outstanding as of September 25, 2021	355,221	$	10.15


	Nonvested options	Weighted average exercise price
Outstanding as of December 26, 2020	63,334	$	8.83
Vested	(63,334)	8.83
Expired or forfeited	—	—
Outstanding as of September 25, 2021	—	$	—


	December 26, 2020
(In thousands)	Gross carrying amount		Accumulated amortization		Net carrying amount
Indefinite lived tradenames	$	93,300	$	—	$	93,300
Customer contracts	8,781		(2,159)		6,622
Franchise agreements	10,500		(1,546)		8,954
Reacquired rights	1,478		(462)		1,016
Total intangible assets	$	114,059	$	(4,167)	$	109,892


	Three Months Ended				Nine Months Ended
(In thousands, except for share and per share amounts)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
Net income (loss) from continuing operations attributable to Franchise Group	$	35,998	$	(4,726)	$	40,185	$	(11,005)
Less: Preferred dividend declared	(2,128)		(169)		(6,384)		(169)
Adjusted net income (loss) from continuing operations available to Common Stockholders	33,870		(4,895)		33,801		(11,174)
Net income from discontinued operations attributable to Franchise Group	128,072		(3,871)		176,434		40,274
Adjusted net income (loss) available to Common Stockholders	$	161,942	$	(8,766)	$	210,235	$	29,100

Weighted-average common stock outstanding	40,229,232		39,692,384		40,171,458		32,679,576
Net dilutive effect of stock options and restricted stock	744,504		—		759,965		—
Weighted-average diluted shares outstanding	40,973,736		39,692,384		40,931,423		32,679,576

Basic net income (loss) per share:
Continuing operations	$	0.84	$	(0.12)	$	0.84	$	(0.34)
Discontinued operations	3.18		(0.10)		4.39		1.23
Basic net income per share	$	4.02	$	(0.22)	$	5.23	$	0.89

Diluted net income (loss) per share:
Continuing operations	$	0.83	$	(0.12)	$	0.83	$	(0.34)
Discontinued operations	3.13		(0.10)		4.31		1.23
Diluted net income per share	$	3.96	$	(0.22)	$	5.14	$	0.89


	Options Outstanding				Options Exercisable
Range of exercise prices	Number	Weighted average exercise price		Weighted average remaining contractual life (in years)	Number	Weighted average exercise price

$0.00 - $10.89	204,500	$	8.80	3.8	204,500	$	8.80
$10.90 - $12.01	150,721	11.98		2.5	150,721	11.98
	355,221	$	10.15		355,221	$	10.15


	Number of restricted stock units	Weighted average fair value at grant date
Balance as of December 26, 2020	296,147	$	20.51
Granted	120,952	35.72
Vested	(101,503)	22.56
Canceled	(2,342)	12.22
Balance as of September 25, 2021	313,254	$	25.78


	Three Months Ended								Nine Months Ended
					Change								Change
(In thousands)	September 25, 2021		September 26, 2020		$		%		September 25, 2021		September 26, 2020		$		%
Total revenues	$	828,826	$	537,692	$	291,134	54.1	%	$	2,312,929	$	1,538,193	$	774,736	50.4	%
Income from operations	54,763		24,680		30,083		121.9	%	165,895		36,612		129,283		353.1	%
Net income	$	35,998	$	(4,726)	$	40,724	861.7	%	$	40,185	$	2,876	$	37,309	1,297.3	%


	Reconciliation of Net Income to Adjusted EBITDA
	Three Months Ended				Nine Months Ended
(In thousands)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
Net income from continuing operations	$	35,998	$	(4,726)	$	40,185	$	2,876
Add back:
Interest expense	21,194		26,269		91,494		78,658
Income tax benefit	(15,519)		1,891		(15,600)		(50,217)
Depreciation and amortization	17,834		14,686		46,407		44,035
Total Adjustments	23,509		42,846		122,301		72,476
EBITDA	59,507		38,120		162,486		75,352
Adjustments to EBITDA
Executive severance and related costs	10		62		19		5,382
Stock based compensation	4,084		1,824		9,344		5,865
Long-term executive compensation expense	494		—		1,319		—
Gain on sale of Company-owned stores	(2,481)		—		(2,481)		—
Corporate compliance costs	6		940		785		(449)
Early debt repayment costs	—		1,246		36,726		5,295
Store closures / impairment	2,991		230		3,213		686
Acquisition costs (inclusive of inventory step up amortization)	2,196		7,175		15,845		51,468
Loss on investment in equity securities	13,175		—		13,175		—
Divestiture costs	135		—		2,794		—

Integration costs	726		1,832		8,542		6,113
Total Adjustments to EBITDA	21,336		13,309		89,281		74,360
Adjusted EBITDA	$	80,843	$	51,429	$	251,767	$	149,712


		FRANCHISE GROUP, INC. (Registrant)


November 2, 2021	By:
			Brian R. Kahn Chief Executive Officer and Director (Principal Executive Officer)

November 2, 2021	By:
			Eric F. Seeton Chief Financial Officer (Principal Financial and Accounting Officer)