What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-11-06 compared with 2024-08-07 · 157 added, 87 removed, 490 unchanged (33% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

September 28,

2024 December 30,

44 unchanged sentences

13 Weeks Ended 39 Weeks Ended

2023 June 29,

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Net sales $ 1,108,183 $ 1,003,913 $ 3,273,647 $ 2,979,635

20 unchanged sentences

Common Stock Additional

Paid-In Capital Retained Earnings Stockholders' Equity

Paid-In Capital Retained Earnings Total Stockholders' Equity

Shares Amount

10 unchanged sentences

Balance as of June 29, 2024 99,154,749 $ 99 $ 865,805 $ 354,940 $ 1,220,844

Exercise and vesting of share-based awards 653,250 1 4,515 — 4,516

Share-based compensation expense — — 1,663 — 1,663

Repurchase of common stock ( 1,164,423 ) ( 1 ) ( 25,149 ) — ( 25,150 )

Net income and comprehensive income — — — 24,178 24,178

Balance as of September 28, 2024 98,643,576 $ 99 $ 846,834 $ 379,118 $ 1,226,051

See Notes to Condensed Consolidated Financial Statements

3 unchanged sentences

Common Stock Additional

Paid-In Capital Retained Earnings Stockholders' Equity

Paid-In Capital Retained Earnings Total Stockholders' Equity

Shares Amount

10 unchanged sentences

Balance as of July 1, 2023 98,773,249 $ 99 $ 863,997 $ 300,718 $ 1,164,814

Exercise and vesting of share-based awards, net of shares withheld for employee taxes 565,541 — 3,602 — 3,602

Share-based compensation expense — — 7,535 — 7,535

Net income and comprehensive income — — — 27,140 27,140

Balance as of September 30, 2023 99,338,790 $ 99 $ 875,134 $ 327,858 $ 1,203,091

See Notes to Condensed Consolidated Financial Statements

3 unchanged sentences

39 Weeks Ended

September 28,

2024 September 30,

Cash flows from operating activities:

40 unchanged sentences

Net cash provided by (used in) financing activities

Net decrease in cash and cash equivalents ( 47,922 ) ( 15,158 )

86,879 ( 92,253 )

Net (decrease) increase in cash and cash equivalents

( 46,334 ) 52,935

Cash and cash equivalents at beginning of period 114,987 102,728

6 unchanged sentences

(together with its wholly owned subsidiaries, collectively, "Grocery Outlet," "we," or the "Company") is a high-growth, extreme value retailer of quality, name-brand consumables and fresh products sold primarily through a network of independently operated stores.

As of June 29, 2024, we had 524 stores throughout California, Washington, Oregon, Pennsylvania, Tennessee, Idaho, Nevada, North Carolina, Maryland, New Jersey, Georgia, Ohio, Alabama, Delaware, Kentucky and Virginia.

As of September 28, 2024, we had 529 stores throughout California, Washington, Oregon, Pennsylvania, Tennessee, Idaho, Nevada, Maryland, North Carolina, New Jersey, Georgia, Ohio, Alabama, Delaware, Kentucky and Virginia.

Basis of Presentation — The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and the applicable rules and regulations of the United States ("U.S.") Securities and Exchange Commission for interim reporting.

11 unchanged sentences

We consider our accounting policy relating to long-lived asset impairment to be a significant accounting policy that involves management's estimates and judgments.

Segment Reporting — We manage our business as one operating segment.

Segment Reporting — We manage our business a s one operating segment.

In addition, all of our sales were made to customers located in the U.S.

26 unchanged sentences

The fair value framework requires that we maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

There were no assets or liabilities measured at fair value on a recurring or non-recurring basis as of June 29, 2024 or December 30, 2023.

There were no assets or liabilities measured at fair value on a recurring or non-recurring basis as of September 28, 2024 or December 30, 2023.

Generally, assets are recorded at fair value on a non-recurring basis as a result of impairment charges.

There were no transfers of assets or liabilities between levels within the fair value hierarchy during the 26 weeks ended June 29, 2024.

There were no tra nsfers of assets or liabilities between levels within the fair value hierarchy during the 13 and 39 weeks ended September 28, 2024 and September 30, 2023, respectively.

Our financial assets and liabilities are carried at cost, which generally approximates their fair value, as described below:

Cash and cash equivalents, independent operator ("IO") receivables, other accounts receivable and accounts payable — The carrying value of such financial instruments approximates their fair value due to factors such as their short-term nature, their variable interest rates or the effect of the related allowance for expected credit losses.

Independent operator notes (net) — The carrying value of such financial instruments approximates their fair value due to the effect of the related allowance for expected credit losses.

Cash and cash equivalents, independent operator ("IO") receivables, other accounts receivable and trade accounts payable — The carrying value of such financial instruments approximates their fair value due to factors such as their short-term nature, their variable interest rates or the effect of the related allowance for expected credit losses.

Independent operator notes — The carrying value of such financial instruments approximates their fair value due to the effect of the related allowance for expected credit losses.

The following table sets forth by level within the fair value hierarchy the carrying amounts and estimated fair values of our significant financial liabilities that are not recorded at fair value on the condensed consolidated balance sheets (amounts in thousands):

September 28,

2024 December 30,

7 unchanged sentences

_______________________

(1) The carrying amounts of the senior term loan as of June 29, 2024 and December 30, 2023 were net of debt issuance costs of $ 1.4 million and $ 1.6 million, respectively.

(1) The carrying amounts of the senior term loan as of September 28, 2024 and December 30, 2023 were net of debt issuance costs of $ 1.3 million and $ 1.6 million, respectively.

(2) The estimated fair value of our current senior term loan and revolving credit facility borrowings under the 2023 Credit Agreement, as defined in Note 3, was deemed to approximate the carrying value, excluding unamortized debt issuance costs, because the interest rate is variable with short reset periods and is reflective of the current market rate.

6 unchanged sentences

We do not accept manufacturer coupons.

We do not have any material contract assets or receivables from contracts with customers, any revenue recognized in the current year from performance obligations satisfied in previous periods, any material performance obligations other than our gift card deferred revenue liability, or any material costs to obtain or fulfill a contract as of June 29, 2024 and December 30, 2023.

Gift Cards — We record a deferred revenue liability when a Grocery Outlet gift card is sold.

2 unchanged sentences

We reduce the liability and recognize revenue for the unused portion of the gift cards ("breakage") under the proportional method, where recognition of breakage income is based upon the historical run-off rate of unredeemed gift cards.

Our gift card deferred revenue liability was $ 2.0 million and $ 3.2 million as of June 29, 2024 and December 30, 2023, respectively.

Breakage amounts were immaterial for the 13 and 26 weeks ended June 29, 2024 and July 1, 2023.

Our gift card deferred revenue liability was $ 3.1 million and $ 3.2 million as of September 28, 2024 and December 30, 2023, respectively.

Breakage amounts were immaterial for the 13 and 39 weeks ended September 28, 2024 and September 30, 2023, respectively.

Disaggregated Revenues — The following table presents net sales revenue by type of product for the periods indicated (amounts in thousands):

13 Weeks Ended 39 Weeks Ended

2023 June 29,

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Perishable (1)

15 unchanged sentences

A reporting entity is determined to be a VIE's primary beneficiary if it has the power to direct the activities that most significantly impact a VIE's economic performance and the obligation to absorb losses or rights to receive benefits that could potentially be significant to a VIE.

We had 481 , 466 and 445 stores operated by IOs as of June 29, 2024, December 30, 2023 and July 1, 2023, respectively.

W e had 486 , 466 a nd 453 stores operated by IOs as of September 28, 2024, December 30, 2023 and September 30, 2023, respectively.

We have agreements in place with each IO.

7 unchanged sentences

As consignor of all merchandise to each IO, the aggregate net sales proceeds from merchandise sales belongs to us.

Net sales related to IO stores were $ 1.07 billion and $ 997.2 million for the 13 weeks ended June 29, 2024 and July 1, 2023, respectively, and $ 2.10 billion and $ 1.95 billion for the 26 weeks ended June 29, 2024 and July 1, 2023, respectively.

Net sales related to IO stores were $ 1.05 billion and $ 991.4 million for the 13 weeks ended September 28, 2024 and September 30, 2023, respectively, and $ 3.15 billion and $ 2.94 billion for the 39 weeks ended September 28, 2024 and September 30, 2023, respectively.

We, in turn, pay each IO a commission based on a share of the gross profit of the store.

1 unchanged sentence

IO commissions are expensed and included in selling, general and administrative expenses.

IO commissions were $ 167.0 million and $ 158.2 million for the 13 weeks ended June 29, 2024 and July 1, 2023, respectively, and $ 327.8 million and $ 303.4 million for the 26 weeks ended June 29, 2024 and July 1, 2023, respectively.

IO commissions of $ 16.0 million and $ 21.7 million were included in accrued and other current liabilities as of June 29, 2024 and December 30, 2023, respectively.

IO commissions were $ 157.0 million and $ 161.7 million for the 13 weeks ended September 28, 2024 and September 30, 2023, respectively, and $ 484.8 million and $ 465.1 million for the 39 weeks ended September 28, 2024 and September 30, 2023, respectively.

IO commissions of $ 7.6 million and $ 21.7 million were included in accrued and other current liabilities as of September 28, 2024 and December 30, 2023, respectively.

An IO may fund its initial store investment from existing capital, a third-party loan or most commonly through a loan from us, as further discussed in Note 2.

10 unchanged sentences

Therefore, we are not the primary beneficiary of these VIEs.

Our maximum exposure, in accordance with ASC Topic 810, to the IOs is generally limited to the IO notes and IO receivables due from these entities, which was $ 59.5 million and $ 59.2 million as of June 29, 2024 and December 30, 2023, respectively.

Our maximum exposure, in accordance with ASC Topic 810, to the IOs is generally limited to the IO notes and IO receivables due from these entities, which was $ 64.1 million and $ 59.2 million, gross, as of September 28, 2024 and December 30, 2023, respectively.

See Note 2 for additional information.

8 unchanged sentences

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

We will adopt ASU 2023-07 upon the effective date and are currently evaluating the impact on our consolidated financial statements and disclosures.

We will adopt ASU 2023-07 upon the effective date.

We do not expect the adoption of ASU 2023-07 to have a material impact on our consolidated financial statements.

2023-09 — In December 2023, the FASB issued ASU No.

4 unchanged sentences

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024.

We will adopt ASU 2023-09 upon the effective date and are currently evaluating the impact on our consolidated financial statements and disclosures.

We will adopt ASU 2023-09 upon the effective dat e and are currently evaluating the impact on our consolidated financial statements and disclosures.

Independent Operator Notes and Independent Operator Receivables

The amounts included in IO notes and IO receivables consist primarily of funds we loaned to IOs, net of estimated uncollectible amounts.

IO notes, which are payable on demand and have no maturity date, typically bear interest at rates

between 5.50 % and 9.95 %.

Accrued interest receivable on IO notes is included within the "independent operator receivables and current portion of independent operator notes, net of allowance" line item on the condensed consolidated balance sheets and was $ 2.3 million and $ 1.8 million as of June 29, 2024 and December 30, 2023, respectively.

There were no IO notes that were past due or on a non-accrual status due to delinquency as of June 29, 2024 or December 30, 2023.

IO notes, which are payable on demand and have no maturity date, typically bear interest at rates between 5.00 % and 9.95 %.

Accrued interest receivable on IO notes is included within the "independent operator receivables and current portion of independent operator notes, net of allowance" line item on the condensed consolidated balance sheets and was $ 2.7 million and $ 1.8 million as of September 28, 2024 and December 30, 2023, respectively.

There were no IO notes that were past due or on a non-accrual status due to delinquency as of September 28, 2024 or December 30, 2023.

Notes and receivables from our IOs participating in our Temporary Commission Adjustment Program ("TCAP"), as defined below, are not considered to be past due or on a non-accrual status due to delinquency and are excluded from such measures.

9 unchanged sentences

Assets without such shared risk characteristics or credit quality indicators, such as assets with unique circumstances or with delinquencies and historical losses in excess of their TCAP, non-TCAP or new store peers are evaluated on an individual basis.

Amounts due from IOs and the related allowances as of June 29, 2024 and December 30, 2023 consisted of the following (amounts in thousands) :

Allowance Current Portion Long-term Portion

Gross Current Portion Long-term Portion Net

June 29, 2024

Amounts due from IOs and the related allowances as of September 28, 2024 and December 30, 2023 consisted of the following (amounts in thousands) :

Allowance Net

Gross Current Portion Long-term Portion Total

Current Portion Long-term Portion

September 28, 2024

Independent operator notes $ 45,703 $ ( 857 ) $ ( 11,523 ) $ 33,323 $ 407 $ 32,916

1 unchanged sentence

Total $ 64,118 $ ( 5,538 ) $ ( 12,125 ) $ 46,455 $ 13,539 $ 32,916

Allowance Current Portion Long-term Portion

Gross Current Portion Long-term Portion Net

Allowance Net

Gross Current Portion Long-term Portion Total

Current Portion Long-term Portion

December 30, 2023

4 unchanged sentences

13 Weeks Ended 39 Weeks Ended

2023 June 29,

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Beginning balance $ 16,564 $ 16,395 $ 16,151 $ 14,747

2 unchanged sentences

Ending Balance $ 17,663 $ 16,375 $ 17,663 $ 16,375

The following table presents the outstanding gross balance of IO notes by fiscal year of origination and credit quality indicator as of June 29, 2024 (amounts in thousands):

The following table presents the outstanding gross balance of IO notes by fiscal year of origination and credit quality indicator as of September 28, 2024 (amounts in thousands):

Fiscal Year of Origination

5 unchanged sentences

TCAP IO Notes

Notes of IOs participating in our TCAP represented 50.4 % and 51.6 % of total IO note balances as of June 29, 2024 and December 30, 2023, respectively.

A total of $ 0.7 million of IO notes were added into our TCAP during the 13 weeks ended June 29, 2024.

The weighted average contractual interest rate of such IO notes during that period was reduced from 9.95 % and, as of June 29, 2024, was 5.50 %.

In addition, $ 2.2 million of IO notes were transferred from TCAP to Non-TCAP during the 13 weeks ended June 29, 2024.

A total of $ 1.9 million of IO notes were added into our TCAP during the 26 weeks ended June 29, 2024.

The weighted average contractual interest rate of such IO notes during that period was reduced from 9.95 % and, as of June 29, 2024, was 5.50 %.

In addition, $ 2.4 million of IO notes were transferred from TCAP to Non-TCAP during the 26 weeks ended June 29, 2024.

Notes of IOs participating in our TCAP represented 57.3 % and 51.6 % of total IO note balances as of September 28, 2024 and December 30, 2023, respectively.

A total of $ 4.3 million of IO notes were added into our TCAP during the 13 weeks ended September 28, 2024.

The weighted average contractual interest rate of such IO notes during that period was reduced from 9.95 % and, as of September 28, 2024, was 5.00 %.

In addition, $ 1.3 million of IO notes were transferred from TCAP to Non-TCAP during the 13 weeks ended September 28, 2024.

A total of $ 6.2 million of IO notes were added into our TCAP during the 39 weeks ended September 28, 2024.

The weighted average contractual interest rate of such IO notes during that period was reduced from 9.95 % and, as of September 28, 2024, was 5.00 %.

In addition, $ 3.7 million of IO notes were transferred from TCAP to Non-TCAP during the 39 weeks ended September 28, 2024.

Long-term Debt

Long-term debt consisted of the following (amounts in thousands):

September 28,

2024 December 30,

13 unchanged sentences

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 our Total Net Leverage Ratio.

As of June 29, 2024, interest on borrowings under the credit facilities was based on one-month Term SOFR with an applicable margin of 2.00 %.

As of September 28, 2024, interest on borrowings under the credit facilities was based on one-month Term SOFR with an applicable margin of 2.25 %.

The 2023 Credit Agreement permits us to add 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 2023 Credit Agreement), subject to certain limitations, plus (b) voluntary prepayments of any 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) we 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.

Our obligations under the 2023 Credit Agreement are unconditionally guaranteed by the Company’s wholly owned restricted subsidiaries, subject to certain exceptions.

Our obligations under the 2023 Credit Agreement are unconditionally guaranteed by the Grocery Outlet Holding Corp.’s direct and indirect wholly owned restricted subsidiaries, subject to certain exceptions.

All obligations under the 2023 Credit Agreement, and the guarantee of such obligations, are secured, subject to permitted liens and other exceptions, by substantially all of the Company’s assets and those of each subsidiary guarantor.

The 2023 Credit Agreement requires us to make scheduled amortization payments of the senior term loan.

The 2023 Credit Agreement requires us to make scheduled quarterly amortization payments on the senior term loan of $ 1.875 million beginning June 2023 through March 2025, followed by $ 3.75 million beginning June 2025 through December 2027, with the remaining balance due on February 21, 2028.

We may voluntarily prepay the 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.

Senior Term Loan due 2028

The senior term loan under the 2023 Credit Agreement matures on February 21, 2028 and had an interest rate of 7.44 % as of June 29, 2024.

The senior term loan under the 2023 Credit Agreement matures on February 21, 2028 and had an interest rate of 7.60 % as of September 28, 2024.

Revolving Credit Facility

As of June 29, 2024 we had $ 4.5 million of outstanding letters of credit and $ 305.5 million of remaining borrowing capacity available under the revolving credit facility, which matures on February 21, 2028.

The interest rate on the revolving credit facility was 7.44 % as of June 29, 2024.

The aggregate outstanding principal balance under the revolving credit facility was $ 90.0 million and zero as of June 29, 2024 and December 30, 2023, respectively.

As of September 28, 2024, we had $ 4.5 million of outstanding letters of credit and $ 255.5 million of remaining borrowing capacity available under the revolving credit facility, which matures on February 21, 2028.

Borrowings under the revolving credit facility had interest rates ranging from 7.60 % to 7.70 % as of September 28, 2024.

The aggregate outstanding principal balance under the revolving credit facility was $ 140.0 million and zero as of September 28, 2024 and December 30, 2023, respectively.

We are required to pay a quarterly commitment fee ranging from 0.15 % to 0.30 % on the daily unused amount of the commitment under the revolving credit facility based upon our Total Net Leverage Ratio.

12 unchanged sentences

The minimum interest coverage ratio test requires us to be in compliance with a Consolidated Interest Coverage Ratio (as defined in the 2023 Credit Agreement) of no less than 1.75 to 1.00 as of the last day of each test period.

As of June 29, 2024, we were in compliance with all applicable financial covenant requirements for the 2023 Credit Agreement.

As of September 28, 2024, we were in compliance with all applicable financial covenant requirements for the 2023 Credit Agreement.

Schedule of Principal Maturities

Principal maturities of debt as of June 29, 2024 are as follows (amounts in thousands):

Principal maturities of debt as of September 28, 2024 are as follows (amounts in thousands):

Remainder of fiscal 2024 $ 1,875

7 unchanged sentences

13 Weeks Ended 39 Weeks Ended

2023 June 29,

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Interest on loans $ 7,871 $ 5,853 $ 20,638 $ 18,827

8 unchanged sentences

13 Weeks Ended 39 Weeks Ended

2023 June 29,

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Write off of debt issuance costs $ — $ — $ — $ 4,518

4 unchanged sentences

Share Repurchase Program

In November 2021, our Board of Directors approved a share repurchase program.

This program, effective November 5, 2021 and without an expiration date, authorizes us to repurchase up to $ 100.0 million of our outstanding common stock utilizing a variety of methods including open-market purchases, accelerated share repurchase programs, privately negotiated transactions, structured repurchase transactions and under a Rule 10b5-1 plan (which would permit shares to be repurchased when we might otherwise be precluded from doing so under securities laws).

In November 2021, our Board of Directors (the "Board") approved our first share repurchase program (the "2021 Share Repurchase Program").

This program, which was effective November 5, 2021 and without an expiration date, authorized us to repurchase up to $ 100.0 million of our outstanding common stock utilizing a variety of methods including open-market purchases, accelerated share repurchase programs, privately negotiated transactions, structured repurchase transactions and under a Rule 10b5-1 plan (which would permit shares to be repurchased when we might otherwise be precluded from doing so under securities laws).

Any repurchased shares were constructively retired and returned to an unissued status.

The following table presents activity related to the 2021 Share Repurchase Program (amounts in thousands except share and per share amounts).

We repurchased these shares in open-market transactions pursuant to a Rule 10b5-1 plan.

13 Weeks Ended 39 Weeks Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Shares repurchased

1,164,423 — 2,469,952 122,862

Amount repurchased (1)

$ 25,035 $ — $ 55,394 $ 3,275

Average repurchase price per share

$ 21.50 $ — $ 22.43 $ 26.66

_______________________

(1) Includes commissions for the shares repurchased for the 13 and 39 weeks ended September 28, 2024 and the 39 weeks ended September 30, 2023 and excludes excise tax due of $ 0.1 million under the Inflation Reduction Act of 2022 for the 13 and 39 weeks ended September 28, 2024

As of September 28, 2024, we had $ 34.4 million of repurchase authority remaining under the 2021 Share Repurchase Program.

Subsequent to September 28, 2024, we repurchased 1,507,211 shares of common stock totaling $ 25.0 million at an average price of $ 16.62 per share in open-market transactions pursuant to a Rule 10b5-1 plan.

In the fourth quarter of fiscal 2024, the Board approved a new share repurchase program (the "2024 Share Repurchase Program"), replacing the Company’s 2021 Share Repurchase Program, under which $ 9.4 million remained available for repurchase.

The 2024 Share Repurchase Program does not have an expiration date and authorizes us to repurchase up to $ 100.0 million of our outstanding common stock (inclusive of fees and commissions) utilizing a variety of methods including open-market purchases, accelerated equity repurchase programs, privately negotiated transactions, block trades and under a Rule 10b5-1 plan.

Any repurchased shares are constructively retired and returned to an unissued status.

During the 13 weeks ended June 29, 2024, we repurchased 1,104,726 shares of common stock totaling $ 25.0 million at an average price of $ 22.66 per share in open-market transactions pursuant to a Rule 10b5-1 plan.

During the 26 weeks ended June 29, 2024, we repurchased 1,305,529 shares of common stock totaling $ 30.4 million at an average price of $ 23.25 per share in open-market transactions pursuant to a Rule 10b5-1 plan.

During the 13 weeks ended July 1, 2023, we did not repurchase any shares of common stock under the share repurchase program.

During the 26 weeks ended July 1, 2023, we repurchased 122,862 shares of common stock totaling $ 3.3 million at an average price of $ 26.66 per share in open-market transactions pursuant to a Rule 10b5-1 plan.

As of June 29, 2024, we had $ 59.4 million of repurchase authority remaining under the share repurchase program.

Share-based Awards

1 unchanged sentence

Share-based Award Activity

The following table summarizes stock option activity under all equity incentive plans during the 26 weeks ended June 29, 2024:

The following table summarizes stock option activity under all equity incentive plans during the 39 weeks ended September 28, 2024:

Time-Based Stock Options Performance-Based Stock Options

5 unchanged sentences

Exercised ( 1,095,739 ) 7.23 ( 90,164 ) 3.81

Options outstanding as of June 29, 2024

Forfeitures ( 53,936 ) 22.00 — —

Options outstanding as of September 28, 2024

941,848 $ 19.14 137,441 $ 8.47

Options vested and exercisable as of June 29, 2024

Options vested and exercisable as of September 28, 2024

941,848 $ 19.14 137,441 $ 8.47

The following table summarizes restricted stock unit ("RSU") activity under all equity incentive plans during the 26 weeks ended June 29, 2024:

The following table summarizes restricted stock unit ("RSU") activity under all equity incentive plans during the 39 weeks ended September 28, 2024:

Number of Shares Weighted-Average

5 unchanged sentences

Forfeitures ( 142,204 ) 25.77

Unvested balance as of June 29, 2024

Unvested balance as of September 28, 2024

1,012,010 $ 26.13

The following table summarizes performance-based restricted stock unit ("PSU") activity under the Grocery Outlet Holding Corp.

2019 Incentive Plan during the 26 weeks ended June 29, 2024:

2019 Incentive Plan during the 39 weeks ended September 28, 2024:

Number of Shares Weighted-Average

7 unchanged sentences

Forfeitures ( 205,754 ) 26.86

Unvested balance as of June 29, 2024 (3)

Unvested balance as of September 28, 2024 (3)

1,493,281 $ 27.74

1 unchanged sentence

(1) Represents initial grant of PSUs based on performance target level achievement of 100 %.

(2) Represents the year-to-date adjustment to previously granted PSUs based on performance expectations as of June 29, 2024.

(3) An additional 552,008 PSUs could potentially be included if the maximum performance level of 200 % is reached for all PSUs outstanding as of June 29, 2024.

(2) Represents the year-to-date adjustment to previously granted PSUs based on performance expectations as of September 28, 2024.

(3) An additional 977,116 PSUs could potentially be included if the maximum performance level of 200 % is reached for all PSUs outstanding as of September 28, 2024.

Share-based Compensation Expense

3 unchanged sentences

13 Weeks Ended 39 Weeks Ended

2023 June 29,

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Time-based stock options $ — $ 25 $ 11 $ 747

7 unchanged sentences

13 Weeks Ended 39 Weeks Ended

2023 June 29,

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Income tax expense $ 9,669 $ 6,191 $ 14,626 $ 21,274

2 unchanged sentences

During each interim period, we update the estimated annual effective tax rate.

Our effective income tax rate for the 13 and 26 weeks ended June 29, 2024 was higher than the combined U.S.

federal and state statutory income tax rate primarily due to non-deductible executive compensation under Internal Revenue Code Section 162(m).

The increase in our effective income tax rate for the 13 weeks ended June 29, 2024 compared to the 13 weeks ended July 1, 2023 was primarily driven by lower excess tax benefits related to the exercise of stock options.

The decrease in our effective income tax rate for the 26 weeks ended June 29, 2024 compared to the 26 weeks ended July 1, 2023 was primarily driven by excess tax benefits related to share-based compensation having a larger impact on the effective tax rate for the 26 weeks ended June 29, 2024 due to decreased pretax book income.

Our effective income tax rate for the 13 and 39 weeks ended September 28, 2024 was higher than the combined U.S.

federal and state statutory income tax rate primarily due to non-deductible executive compensation under Internal Revenue Code Section 162(m), partially offset by excess tax benefit related to the exercise of stock options.

The increase in our effective income tax rate for the 13 and 39 weeks ended September 28, 2024 compared to the 13 and 39 weeks ended September 30, 2023 was primarily driven by lower excess tax benefits related to the exercise of stock options, nondeductible acquisition and integration costs related to the acquisition of United Grocery Outlet (as further discussed in Note 10), and lower pretax book income.

Our policy is to recognize interest and penalties associated with uncertain tax positions as part of the income tax provision in our condensed consolidated statements of operations and comprehensive income and include accrued interest and penalties with the related income tax liability on our condensed consolidated balance sheets.

To date, we have not recognized any interest and penalties, nor have we accrued for or made payments for interest and penalties.

We had no uncertain tax positions as of June 29, 2024 and December 30, 2023, respectively, and do not anticipate having any material uncertain tax positions within the next 12 months.

uncertain tax positions as of September 28, 2024 and December 30, 2023, respectively, and do not anticipate having any material uncertain tax positions within the next 12 months.

Related Party Transactions

Related Party Leases

As of June 29, 2024 and July 1, 2023, we leased 14 store locations and one warehouse location from entities in which Eric Lindberg, Jr., Chairman of our Board of Directors, or his family, had a direct or indirect financial interest.

As of June 29, 2024, the right-of-use assets and lease liabilities related to these properties was $ 38.9 million and $ 43.9 million, respectively.

As of December 30, 2023, the right-of-use assets and lease liabilities related to these properties was $ 42.6 million and $ 47.6 million, respectively.

These related parties received aggregate lease payments from us of $ 1.9 million and $ 1.7 million for the 13 weeks ended June 29, 2024 and July 1, 2023, respectively, and $ 3.7 million and $ 3.4 million for the 26 weeks ended June 29, 2024 and July 1, 2023, respectively.

As of September 28, 2024 and September 30, 2023, we le ased 14 store locations and one warehou se location from entities in which Eric Lindberg, Jr., Chairman of the Board, Interim President and Chief Executive Officer, or his family, had a direct or indirect financial interest.

As of September 28, 2024, the right-of-use assets and lease liabilities related to these pro perties were $ 37.9 million and $ 42.9 million , respectively.

As of December 30, 2023, the right-of-use assets and lease liabilities related to these properties were $ 42.6 million and $ 47.6 million, respectively.

These related parties received aggregate lease payments from u s of $ 1.9 million and $ 1.7 million for the 13 weeks ended September 28, 2024 and September 30, 2023, respectively, a nd $ 5.5 million a nd $ 5.1 million for the 39 weeks ended September 28, 2024 and September 30, 2023, respectively.

Independent Operator Notes and Independent Operator Receivables

We offer interest-bearing notes to IOs and the gross amount of IO operating notes and IO receivables due was $ 59.5 million and $ 59.2 million as of June 29, 2024 and December 30, 2023, respectively.

We offer interest-bearing notes to IOs and the gross amount of IO operating notes and IO receivables due was $ 64.1 million and $ 59.2 million as of September 28, 2024 and December 30, 2023, respectively.

See Note 2 for additional information.

10 unchanged sentences

13 Weeks Ended 39 Weeks Ended

2023 June 29,

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Net income and comprehensive income $ 24,178 $ 27,140 $ 37,154 $ 65,331

13 unchanged sentences

13 Weeks Ended 39 Weeks Ended

2023 June 29,

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Stock options

RSUs 821 10 685 42

Total 1,574 10 936 42

Business Combination

1 unchanged sentence

On February 14, 2024, Grocery Outlet Inc., our wholly owned subsidiary, entered into a Stock Purchase Agreement with BBGO Acquisition, Inc., a Delaware corporation ("Holdings"), specified parties therein that beneficially owned Holdings, and Southvest Fund VII, L.P., a Delaware limited partnership, to acquire all of the issued and outstanding capital stock of Holdings (the "Transaction").

On April 1, 2024, the Transaction was completed for the total purchase consideration of $ 62.8 million, including $ 2.0 million of cash and cash equivalents on hand, subject to post-closing adjustments, and was funded with cash on hand.

On April 1, 2024, the Transaction was completed for the total purchase consideration of $ 62.5 million, including $ 2.0 million of cash and cash equivalents on hand, after post-closing adjustments, and was funded with cash on hand.

Holdings is the owner of all of the issued and outstanding capital stock of The Bargain Barn, Inc., a Tennessee corporation doing business as United Grocery Outlet ("United Grocery Outlet").

United Grocery Outlet operated 40

discount grocery stores across six states in the southeastern United States as of April 1, 2024.

United Grocery Outlet operated 40 discount grocery stores across six states in the southeastern United States as of April 1, 2024.

The acquisition provides us with the opportunity to scale in a new region as well as a platform for future potential expansion in the Southeast.

2 unchanged sentences

These fair value estimates will be reevaluated and adjusted, if needed, during the measurement period of up to one year from the acquisition date, and recorded as adjustments to goodwill.

The following table summarizes the preliminary purchase price allocation recorded for acquired assets and assumed liabilities at the acquisition date (amounts in thousands):

The following table summarizes the preliminary purchase price allocation as of September 28, 2024 recorded for acquired assets and assumed liabilities at the acquisition date (amounts in thousands):

Cash and cash equivalents $ 2,003

17 unchanged sentences

The goodwill will not be deductible for income tax purposes.

During the 26 weeks ended June 29, 2024, we recognized $ 7.6 million in acquisition and integration costs related to due diligence, legal, other consulting and retention bonus expenses.

During the 39 weeks ended September 28, 2024, we recogniz ed $ 8.3 million i n acquisition and integration costs related to due diligence, legal, other consulting and retention bonus expenses.

Such costs were included within selling, general and administrative expenses on the condensed consolidated statements of operations and comprehensive income.

Pro forma results are not presented as the impact of this acquisition is not material to our condensed consolidated financial results.

Subsequent Events

CEO Transition

On October 29, 2024, Robert J.

agreed to step down as the Company’s President and Chief Executive Officer and resign as a member of the Board, and the Board appointed Eric J.

Lindberg, Jr., the current Chairman of the Board of Directors, as the Company’s Interim President and Chief Executive Officer, each effective immediately.

2024 Share Repurchase Program

In the fourth quarter of fiscal 2024, the Board approved the 2024 Share Repurchase Program, which replaced the Company's 2021 Share Repurchase Program.

The 2024 Share Repurchase Program does not have an expiration date and authorizes us to repurchase up to $ 100.0 million of our outstanding common stock (inclusive of fees and commissions).

See Note 4 for additional information.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements