Item 9A. Controls and Procedures
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of the end of the period covered by this report. Our disclosure controls are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2022.
Management's Report on Internal Control Over Financial Reporting
The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined by Rule 13a-15(f) of the Exchange Act. The Company's management conducted an assessment of the Company's internal control over financial reporting based on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework (2013). Based on this assessment, the Company's management has concluded that, as of December 31, 2022, the Company's internal control over financial reporting is effective.
The Company's internal control over financial reporting as of December 31, 2022 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is set forth below.
Changes in Internal Control over Financial Reporting
During the quarter ended December 31, 2022, there was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls
In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Grocery Outlet Holding Corp.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Grocery Outlet Holding Corp. and subsidiaries (the "Company") as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2022, of the Company and our report dated March 1, 2023, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
San Francisco, California
March 1, 2023
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ITEM 9B. OTHER INFORMATION
None.
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ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
The information required by this item is incorporated herein by reference from sections entitled "Corporate Governance and Board Matters," "Proposals for Consideration and the Annual Meeting – Proposal 1 – Election of Directors" and "Additional Information" in our definitive Proxy Statement related to the 2023 Annual Meeting of Stockholders (the "2023 Proxy Statement") to be filed with the SEC within 120 days of our fiscal year ended December 31, 2022 and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference from sections entitled "Compensation Discussion and Analysis," "Named Executive Officer Compensation Tables" (excluding the information under the subheading "Pay Versus Performance"), "Corporate Governance and Board Matters - Board of Directors – Director Compensation," "Corporate Governance and Board Matters – Board of Directors – Compensation Committee Interlocks and Insider Participation," and "Compensation Committee Report" in our 2023 Proxy Statement. However, the Compensation Committee Report included in such 2023 Proxy Statement shall not be deemed "filed" with the SEC for the purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing made by us with the SEC, regardless of any general incorporation language in such filing.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item is included under the sections entitled "Security Ownership of Certain Beneficial Owners and Management," and "Securities Authorized for Issuance Under Equity Compensation Plans," in each case in our 2023 Proxy Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is included under the sections entitled "Certain Relationships and Related Party Transactions," and "Corporate Governance and Board Matters – Board of Directors – Director Independence," in each case in our 2023 Proxy Statement and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is included under the sections entitled "Corporate Governance and Board Matters – Board of Directors," and "Other Audit and Risk Committee Matters" in our 2023 Proxy Statement and is incorporated herein by reference.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this Annual Report on Form 10-K:
1. Consolidated Financial Statements
See Index to Consolidated Financial Statements at "Item 8. Financial Statements and Supplementary Data."
2. Financial Statement Schedules
See Schedule I—Condensed Financial Information of Registrant (Parent Company Only) beginning on page 103 herein.
All other schedules have been omitted because they are either not required, not applicable, not present in amounts sufficient to require submission of the schedule, or the required information is included elsewhere in this Annual Report on Form 10-K.
3. Exhibits
Incorporated by Reference
Exhibit
No. Exhibit Form File
No. Filing
Date Exhibit
No.
3.1 Restated Certificate of Incorporation of Grocery Outlet Holding Corp.
8-K 001-38950 6/10/2022 3.1
3.2 Amended and Restated Bylaws of Grocery Outlet Holding Corp.
8-K 001-38950 4/8/2022 3.1
4.1 Form of Stock Certificate for Common Stock
S-1/A 333-231428 6/10/2019 4.1
4.2 Amended and Restated Stockholders Agreement by and among Grocery Outlet Holding Corp. and the other parties named therein
10-K 001-38950 3/25/2020 4.2
4.3* Description of Grocery Outlet Holding Corp.'s Securities
10.1 Incremental Agreement, dated as of January 24, 2020, among GOBP Holdings, Inc., Globe Intermediate Corp., certain subsidiaries of GOBP Holdings, Inc., the lenders party thereto, and Morgan Stanley Senior Funding, Inc., as Administrative Agent
8-K 001-38950 1/24/2020 10.1
10.2 Incremental Agreement, dated as of July 23, 2019, among GOBP Holdings, Inc., Globe Intermediate Corp., certain subsidiaries of GOBP Holdings, Inc., the lenders party thereto, and Morgan Stanley Senior Funding, Inc., as Administrative Agent
8-K 001-38950 7/25/2019 10.1
10.3 First Lien Credit Agreement, dated as of October 22, 2018, among Globe Intermediate Corp., GOBP Holdings, Inc., Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent, the lenders from time to time party thereto and the letter of credit issuers from time to time party thereto
S-1/A 333-231428 5/22/2019 10.1
10.4 First Lien Security Agreement, dated as of October 22, 2018, among Globe Intermediate Corp., GOBP Holdings, Inc., the subsidiaries of GOBP Holdings, Inc. from time to time party thereto and Morgan Stanley Senior Funding, Inc., as collateral agent
S-1/A 333-231428 5/22/2019 10.2
10.5 First Lien Pledge Agreement, dated as of October 22, 2018, among Globe Intermediate Corp., GOBP Holdings, Inc., the subsidiaries of GOBP Holdings, Inc. from time to time party thereto and Morgan Stanley Senior Funding, Inc., as collateral agent
S-1/A 333-231428 5/22/2019 10.3
10.6 First Lien Copyright Security Agreement, dated as of October 22, 2018, between Grocery Outlet Inc. and Morgan Stanley Senior Funding, Inc., as collateral agent
S-1/A 333-231428 5/22/2019 10.4
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10.7 First Lien Trademark Security Agreement, dated as of October 22, 2018, between Grocery Outlet Inc. and Morgan Stanley Senior Funding, Inc., as collateral agent
S-1/A 333-231428 5/22/2019 10.5
10.8 First Lien Guarantee, dated as of October 22, 2018, among Globe Intermediate Corp., GOBP Holdings, Inc., the subsidiaries of GOBP Holdings, Inc. from time to time party thereto and Morgan Stanley Senior Funding, Inc., as collateral agen t
S-1/A 333-231428 5/22/2019 10.6
10.9 Credit Agreement, dated as of February 21, 2023, by and among Grocery Outlet Holding Corp. , the Lenders and Letter of Credit Issuers from time to time party thereto, and Bank of America, N.A., as the Administrative Agent, Collateral Agent and Swingline Lender. , the Lenders and Letter of Credit Issuers from time to time party thereto, and Bank of America, N.A., as the Administrative Agent, Collateral Agent and Swingline Lender.
8-K 001-38950 2/23/2023 10.1
10.10† Globe Holding Corp. 2014 Stock Incentive Plan
S-1/A 333-231428 5/22/2019 10.13
10.11† Amended and Restated Performance Vesting Stock Option Grant Notice and Agreement (Globe Holding Corp. 2014 Stock Incentive Plan) (Eric J. Lindberg, Jr., S. MacGregor Read, Jr.), dated October 21, 2014
S-1/A 333-231428 5/22/2019 10.14
10.12† Amended and Restated Time Vesting Stock Option Grant Notice and Agreement (Globe Holding Corp. 2014 Stock Incentive Plan) (Eric J. Lindberg, Jr., S. MacGregor Read, Jr.), dated October 21, 2014
S-1/A 333-231428 5/22/2019 10.15
10.13† Form of Performance Vesting Stock Option Grant Notice and Agreement (Globe Holding Corp. 2014 Stock Incentive Plan) (Charles C. Bracher, Robert Joseph Sheedy, Jr., Steven K. Wilson)
S-1/A 333-231428 5/22/2019 10.16
10.14† Form of Time Vesting Stock Option Grant Notice and Agreement (Globe Holding Corp. 2014 Stock Incentive Plan) (Charles C. Bracher, Robert Joseph Sheedy, Jr., Steven K. Wilson)
S-1/A 333-231428 5/22/2019 10.17
10.15† Grocery Outlet Holding Corp. 2019 Incentive Plan
S-1/A 333-231428 6/10/2019 10.18
10.16† Form of Nonqualified Option Grant and Award Agreement (Grocery Outlet Holding Corp. 2019 Incentive Plan)
S-1/A 333-231428 6/10/2019 10.19
10.17† 2020 Form of Restricted Stock Unit Grant and Award Agreement (Grocery Outlet Holding Corp. 2019 Incentive Plan)
S-1/A 333-231428 6/10/2019 10.20
10.18† Grocery Outlet Inc. 2019 Annual Incentive Plan
S-1/A 333-231428 6/10/2019 10.21
10.19† Amended and Restated Executive Employment Agreement by and between Eric J. Lindberg, Jr., Grocery Outlet Inc. and Globe Holding Corp., dated October 7, 2014
S-1/A 333-231428 5/22/2019 10.22
10.20† Form of Indemnification Agreement between Grocery Outlet Holding Corp. and directors and executive officers of Grocery Outlet Holding Corp.
S-1/A 333-231428 6/10/2019 10.31
10.21† Grocery Outlet Holding Corp. Directors Deferral Plan
10-Q 001-38950 11/10/2020 10.1
10.22† Grocery Outlet Holding Corp. Executive Severance Plan
10-Q 001-38950 11/10/2020 10.2
10.23† 2020 Form of Performance Stock Unit Grant and Agreement (Grocery Outlet Holding Corp. 2019 Stock Incentive Plan)
10-Q 001-38950 5/12/2020 10.3
10.24† 2021 Form of Restricted Stock Unit Grant and Agreement (Grocery Outlet Holding Corp. 2019 Stock Incentive Plan)
10-K 001-38950 3/2/2021 10.32
10.25† 2021 Form of Performance Stock Unit Grant and Agreement (Grocery Outlet Holding Corp. 2019 Stock Incentive Plan)
10-K 001-38950 3/2/2021 10.33
10.26† Form of Restricted Stock Unit Grant and Agreement for Non-Employee Directors (Grocery Outlet Holding Corp. 2019 Stock Incentive Plan) (effective February 2021)
10-K 001-38950 3/2/2021 10.34
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10.27† Transition, Separation Agreement, and General Release of all Claims, dated as of December 13, 2021, by and between Grocery Outlet Inc. and Heather L. Mayo
8-K 001-38950 12/15/2021 10.1
10.28† Form of Performance Stock Unit Grant and Agreement (Grocery Outlet Holding Corp. 2019 Stock Incentive Plan) (effective October 2021)
10-K 001-38950 3/2/2022 10.29
10.29† Form of Restricted Stock Unit Grant and Agreement (Grocery Outlet Holding Corp. 2019 Stock Incentive Plan) (effective October 2021)
10-K 001-38950 3/2/2022 10.30
10.30† Non-Employee Director Compensation Policy (as amended November 6, 2020)
10-K 001-38950 3/2/2022 10.31
10.31† Non-Employee Director Compensation Policy (as amended April 27, 2022)
10-Q 001-38950 8/10/2022 10.1
10.32† Non-Employee Director Compensation Policy (as amended November 2, 2022 and as effective January 1, 2023)
8-K 001-38950 11/8/2022 10.2
10.33† Employment Agreement, effective January 1, 2023, by and among Robert Joseph Sheedy, Jr., Grocery Outlet Inc. and Grocery Outlet Holding Corp.
8-K 001-38950 11/8/2022 10.1
10.34†* Restricted Stock Unit Grant and Agreement (Grocery Outlet Holding Corp. 2019 Stock Incentive Plan) (CEO Form)
21.1* Subsidiaries of the Registrant
23.1* Consent of Deloitte and Touche LLP
24.1* Power of Attorney (incorporated by reference to the signature page to this Annual Report on Form 10-K)
31.1* Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2* Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1** Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2** Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Extension Calculation Linkbase Document
101.DEF Inline XBRL Extension Definition Linkbase Document
101.LAB Inline XBRL Extension Label Linkbase Document
101.PRE Inline XBRL Extension Presentation Linkbase Document
104 Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document and included as Exhibit 101.
____________________________________
† Management contract or compensatory plan or arrangement.
* Filed herewith.
**
Furnished herewith. The certifications attached as Exhibit 32.1 and 32.2 that accompany this Annual Report on Form 10-K are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Grocery Outlet Holding Corp. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing.
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Schedule I—Condensed Financial Information of Registrant (Parent Company Only)
GROCERY OUTLET HOLDING CORP.
INDEX TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY ONLY)
Page
Condensed Balance Sheets
104
Condensed Statements of Operations and Comprehensive Income
105
Condensed Statements of Cash Flows
106
Notes to Condensed Financial Statements
107
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Table of Contents
Schedule I—Condensed Financial Information of Registrant
GROCERY OUTLET HOLDING CORP.
CONDENSED BALANCE SHEETS
(PARENT COMPANY ONLY)
(in thousands, except share and per share amounts)
December 31,
2022 January 1,
2022
Assets
Investment in wholly owned subsidiary $ 1,112,226 $ 1,011,033
Total assets $ 1,112,226 $ 1,011,033
Liabilities and Stockholders' Equity
Intercompany payable $ 2,012 $ 1,761
Total liabilities 2,012 1,761
Stockholders' equity:
Capital stock:
Common stock, par value $ 0.001 per share, 500,000,000 shares authorized; 97,674,356 and 96,144,433 shares issued and outstanding, respectively
98 96
Series A Preferred stock, par value $ 0.001 per share, 50,000,000 shares authorized; no shares issued and outstanding
— —
Additional paid-in capital 847,589 811,701
Retained earnings 262,527 197,475
Total stockholders' equity 1,110,214 1,009,272
Total liabilities and stockholders' equity $ 1,112,226 $ 1,011,033
See Notes to Condensed Financial Statements (Parent Company Only)
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Schedule I—Condensed Financial Information of Registrant
GROCERY OUTLET HOLDING CORP.
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(PARENT COMPANY ONLY)
(in thousands)
Fiscal Year Ended
December 31,
2022 January 1,
2022 January 2,
2021
Operating expenses $ 251 $ 251 $ 265
Operating loss ( 251 ) ( 251 ) ( 265 )
Loss before equity in net income of subsidiary ( 251 ) ( 251 ) ( 265 )
Equity in net income of subsidiary, net of tax 65,303 62,561 106,978
Net income and comprehensive income $ 65,052 $ 62,310 $ 106,713
See Notes to Condensed Financial Statements (Parent Company Only)
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Schedule I—Condensed Financial Information of Registrant
GROCERY OUTLET HOLDING CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(PARENT COMPANY ONLY)
(in thousands)
Fiscal Year Ended
December 31,
2022 January 1,
2022 January 2,
2021
Cash flows from operating activities:
Net income $ 65,052 $ 62,310 $ 106,713
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Equity in net income of subsidiary ( 65,303 ) ( 62,561 ) ( 106,978 )
Changes in operating assets and liabilities:
Net cash used in operating activities ( 251 ) ( 251 ) ( 265 )
Cash flows from investing activities:
Investment in subsidiary ( 3,439 ) ( 7,226 ) ( 32,121 )
Net cash used in investing activities ( 3,439 ) ( 7,226 ) ( 32,121 )
Cash flows from financing activities:
Intercompany payables 251 251 265
Proceeds from exercise of share-based compensation awards 6,890 7,226 32,604
Payments related to net settlement of share-based compensation awards — — ( 483 )
Repurchase of common stock ( 3,451 ) — —
Net cash provided by financing activities 3,690 7,477 32,386
Net increase (decrease) in cash and cash equivalents — — —
Cash and cash equivalents at beginning of period — — —
Cash and cash equivalents at end of period $ — $ — $ —
See Notes to Condensed Financial Statements (Parent Company Only)
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Schedule I—Condensed Financial Information of Registrant
GROCERY OUTLET HOLDING CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS (PARENT COMPANY ONLY)
NOTE 1—Description of Grocery Outlet Holding Corp.
Grocery Outlet Holding Corp. (the "Parent Company") owns 100 % of Globe Intermediate Corp. ("Intermediate"), which owns 100 % of GOBP Holdings, Inc. ("GOBP Holdings"), which owns 100 % of GOBP Midco, Inc. ("Midco"), which owns 100 % of Grocery Outlet Inc. ("GOI"). GOI is a high-growth, extreme value retailer of quality, name-brand consumables and fresh products sold through a network of independently operated stores.
The Parent Company was incorporated in Delaware on September 11, 2014 and became the ultimate parent of GOI on October 7, 2014. The Parent Company has no operations or significant assets or liabilities other than its investment in Intermediate. Accordingly, the Parent Company is dependent upon distributions from Intermediate to fund its limited, non-significant operating expenses. As of December 31, 2022, GOBP Holdings' and GOI's ability to pay dividends or lend to Intermediate or the Parent Company were limited under the terms of various debt agreements.
Intermediate and GOBP Holdings were parties to credit facilities that contained covenants limiting the Parent Company's ability and the ability of its restricted subsidiaries to, among other things: pay dividends or distributions, repurchase equity, prepay junior debt and make certain investments; incur additional debt or issue certain disqualified stock and preferred stock; incur liens on assets; merge or consolidate with another company or sell all or substantially all assets; enter into transactions with affiliates; and enter into agreements that would restrict its subsidiaries to pay dividends or make other payments to the Parent Company. Due to the aforementioned qualitative restrictions, substantially all of the assets of the Parent Company's subsidiaries were restricted. These covenants were subject to important exceptions and qualifications as described in such credit facilities.
NOTE 2—Basis of Presentation
The accompanying condensed financial statements (parent company only) include the accounts of the Parent Company and its investment in Intermediate, accounted for in accordance with the equity method, and do not present the financial statements of the Parent Company and its subsidiary on a consolidated basis. These parent company only financial statements should be read in conjunction with the Parent Company's consolidated financial statements and notes thereto, included elsewhere in this Annual Report on Form 10-K.
NOTE 3—Secondary Offerings
On February 3, 2020, certain selling stockholders completed a secondary public offering of shares of our common stock. We did not receive any of the proceeds from the sale of these shares by the selling stockholders. We incurred offering costs of $ 1.1 million, which were recognized in SG&A expenses during fiscal 2020. We received $ 1.4 million in cash (excluding withholding taxes) in connection with the exercis e of 191,470 opti ons by certain stockholders participating in this secondary public offering.
On April 27, 2020, certain of our selling stockholders completed another secondary public offering of shares of our common stock. We did not receive any of the proceeds from the sale of these shares by the selling stockholders. We incurred related offering costs of $ 1.0 million which we recognized in SG&A expenses during fiscal 2020. We received $ 1.6 million in cash (excluding withholding taxes) in connection with the exercise of 269,000 options by certain stockholders participating in this secondary public offering.
On May 28, 2020, the stockholder affiliated with our former private equity sponsor, Hellman and Friedman LLC, distributed the remainder of its holdings representing 9.6 million shares of our common stock to its equity holders. We did not receive any proceeds or incur any material costs related to this distribution.
NOTE 4—Subsequent Event
On February 21, 2023, the Parent Company entered into a credit agreement with Bank of America, N.A., as administrative agent and collateral agent, and the other parties party thereto (the "Credit Agreement"). The Credit Agreement provides for senior secured credit facilities consisting of (i) a senior secured term loan facility (the "term loan facility") in an aggregate principal amount of $ 300.0 million and (ii) a senior secured revolving credit facility (the "revolving credit facility" and, together with the term loan facility, the "credit facilities") in an aggregate principal amount of $ 400.0 million. The term loan facility was borrowed in full at closing, and $ 25.0 million of the revolving credit facility was borrowed at closing.
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On February 21, 2023, Parent Company repaid all of the outstanding indebtedness under a first lien credit agreement, dated as of October 22, 2018, with GOBP Holdings as borrower (the "Prior First Lien Credit Agreement"), of $ 387.2 million as well as fees and expenses in connection therewith. All obligations of the Parent Company’s subsidiaries under the Prior First Lien Credit Agreement were discharged as of such date.
The revolving credit facility includes borrowing capacity available for letters of credit and for borrowings on same-day notice, referred to as the swingline loans. The credit facilities permit the Parent Company to add one or more incremental term loan facilities, increase any existing term loan facility, increase revolving commitments, and/or add incremental replacement revolving credit facility tranches. The aggregate principal amount of such incremental facilities are limited to (a) an amount not in excess of the sum of the greater of $ 200.0 million and 100 % of Consolidated EBITDA (as defined in the Credit Agreement), subject to certain limitations, plus (b) voluntary prepayments of the term loan facility, voluntary permanent reductions of the commitments for the revolving credit facility and voluntary prepayments of indebtedness secured by liens on the collateral securing the credit facilities, subject to certain exceptions, plus (c) an amount such that (assuming that the full amount of any such incremental revolving increase and/or incremental replacement revolving credit facility was drawn, and after giving effect to any appropriate pro forma adjustment events) the Parent Company would be in compliance, on a pro forma basis (but excluding the cash proceeds of such incurrence), with a total net leverage ratio of 3.00 to 1.00. The lenders under the credit facilities are not under any obligation to provide any such incremental commitments or loans under incremental facilities and any such incremental commitments or loans under incremental facilities are subject to certain customary conditions.
Borrowings under the Credit Agreement in dollars bear interest at a rate equal to, at our option, either (a) the base rate, which is defined as a fluctuating rate per annum equal to the greatest of (i) the federal funds rate then in effect, plus 0.50 %, (ii) the prime rate then in effect and (iii) a specified Term SOFR (as defined in the Credit Agreement) rate plus 1.00 %, subject to the interest rate floors set forth therein, plus an applicable margin ranging from 0.75 % to 1.75 % based on the Parent Company's total net leverage ratio; and (b) an adjusted Term SOFR rate determined on the basis of a one, three or six month interest period, plus 0.10 %, subject to the interest rate floors set forth therein, plus an applicable margin ranging from 1.75 % to 2.75 % based on the Parent Company's total net leverage ratio. As of the closing date, interest on the initial borrowings under the new credit facility were based on one-month Term SOFR with an applicable margin of 2.25 %.
The term credit facilities mature on February 21, 2028.
The Parent Company’s obligations under the Credit Agreement are unconditionally guaranteed by all of the Parent Company’s wholly owned restricted subsidiaries, subject to certain exceptions. All obligations under the Credit Agreement, and the guarantees of such obligations, are secured, subject to permitted liens and other exceptions, by substantially all of the Parent Company’s assets and those of each subsidiary guarantor.
The Credit Agreement requires the Parent Company to make scheduled amortization payments of the outstanding term loans. The Parent Company may voluntarily prepay the senior secured credit facilities, in whole or in part, at any time without premium or penalty, subject to reimbursement of the lenders’ breakage and redeployment costs in applicable cases.
The Credit Agreement contains certain customary representations and warranties, subject to limitations and exceptions, and affirmative and customary covenants. The Credit Agreement contains certain covenants that, among other things, limit the Parent Company’s ability and the ability of the Parent Company’s restricted subsidiaries to: pay dividends or distributions, repurchase equity, prepay junior debt and make certain investments; incur additional debt or issue certain disqualified stock and preferred stock; incur liens on assets; merge or consolidate with another company or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets; enter into transactions with affiliates; and allow to exist certain restrictions on the ability of subsidiaries to pay dividends or make other payments to the Parent Company. The Credit Agreement also contains financial performance covenants requiring the Parent Company to satisfy a maximum total net leverage ratio test and a minimum interest coverage ratio test as of the last day of each fiscal quarter ending on or after April 1, 2023, as specified therein.
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ITEM 16. FORM 10-K SUMMARY
Not applicable.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Grocery Outlet Holding Corp.
Date: March 1, 2023 By: /s/ Robert Joseph Sheedy, Jr.
Robert Joseph Sheedy, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitute and appoint Robert Joseph Sheedy, Jr., Charles C. Bracher and Luke D. Thompson, or any of them, his or her attorneys-in-fact, for such person in any and all capacities, to sign any amendments to this report and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that either of said attorneys-in-fact, or substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Robert Joseph Sheedy, Jr. President and Chief Executive Officer; Director
(Principal Executive Officer) March 1, 2023
Robert Joseph Sheedy, Jr.
/s/ Charles C. Bracher Chief Financial Officer
(Principal Financial Officer) March 1, 2023
Charles C. Bracher
/s/ Lindsay E. Gray Senior Vice President, Accounting
(Principal Accounting Officer) March 1, 2023
Lindsay E. Gray
/s/ Eric J. Lindberg, Jr. Director, Chairman of the Board March 1, 2023
Eric J. Lindberg, Jr.
/s/ Erik D. Ragatz Lead Independent Director March 1, 2023
Erik D. Ragatz
/s/ Kenneth W. Alterman Director March 1, 2023
Kenneth W. Alterman
/s/ John E. Bachman Director March 1, 2023
John E. Bachman
/s/ Mary Kay Haben Director March 1, 2023
Mary Kay Haben
/s/ Thomas F. Herman Director March 1, 2023
Thomas F. Herman
/s/ Carey F. Jaros Director March 1, 2023
Carey F. Jaros
/s/ Norman S. Matthews Director March 1, 2023
Norman S. Matthews
/s/ Gail Moody-Byrd Director March 1, 2023
Gail Moody-Byrd
/s/ Jeffrey R. York Director March 1, 2023
Jeffrey R. York
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