Item 1.02 Termination
of a Material Definitive Agreement.
On March 30, 2020,
Blue Apron, LLC (f/k/a Blue Apron, Inc.) (“Blue Apron”), a subsidiary of Blue Apron Holdings, Inc. (collectively with
its subsidiaries and other affiliates, as applicable, the “Company”) entered into a Lease Termination Agreement (the
“Lease Termination Agreement”) with Gateway 80 Owner, LP (“Landlord”) (as successor in interest to Gateway
80 Industrial, LLC). Under the terms of the Lease Termination Agreement, the Lease Agreement dated as of August 23, 2016 by and
between Blue Apron and Landlord (the “Terminated Lease”) was terminated, effective as of March 31, 2020. The Lease
Termination Agreement also terminated a related parking lot lease.
Under
the terms of the Terminated Lease, Blue Apron leased approximately 431,000 square feet of warehouse space in Fairfield, California
(the “Facility”). As previously disclosed by the Company, the Company has not occupied and does not currently occupy
the Facility. In connection with the Lease Termination Agreement, Blue Apron agreed to pay a termination fee in the amount of
$1.5 million, which will release the Company from all further rent obligations to Landlord in the amount of approximately
$33 million, which otherwise would have expired on June 30, 2028, resulting in ongoing annual cash savings of approximately $3.5
million.
For accounting
purposes, the Company was deemed to be the owner of this arrangement and followed build-to-suit accounting. Therefore, the Company
capitalized the fair value of the building and direct construction costs incurred and recorded a corresponding facility financing
obligation. Prior to the lease termination, the net carrying value of the build-to-suit assets totaled approximately $31 million,
the facility financing obligation totaled approximately $36 million and the Company had deferred rent of approximately $2 million.
Accordingly, as of the termination date, the Company derecognized the net carrying value of the build-to-suit assets and liabilities
and the deferred rent balance. As a result, the Company expects to recognize a one-time, non-cash gain of approximately $5 million,
net of the lease termination fee, for the three months ended March 31, 2020. The Company expects to generate ongoing annual savings
of $2.5 million in interest expense and $1.0 million in product, technology, general and administrative expenses beginning in the
second quarter of 2020 as a result of the lease terminations.
The Company entered into the Lease Termination Agreement following
its previously disclosed evaluation of potential alternatives for the Facility and not as a result of COVID-19 or related issues.
This summary is
qualified in its entirety by reference to the full text of the Lease Termination Agreement, which is included in Exhibit 10.1 to
this Form 8-K.
Forward-Looking Statements
This Form 8-K
includes statements concerning the Company and its future expectations, plans and prospects that constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained
herein that are not statements of historical fact may be deemed to be forward-looking statements. In some cases, you can identify
forward-looking statements by terms such as "may," "should," "expects," "plans," "anticipates,"
"could," "intends," "target," "projects," "contemplates," "believes,"
"estimates," "predicts," "potential," or "continue," or the negative of these terms or
other similar expressions. The Company has based these forward-looking statements largely on its current expectations and projections
about future events and financial trends that it believes may affect its business, financial condition and results of operations.
These forward-looking statements speak only as of the date of this Form 8-K and are subject to a number of risks, uncertainties
and assumptions including, without limitation, the Company’s anticipated growth strategies and dependence on the Company’s
ability to obtain additional financing; its ability to sufficiently manage costs, maintain sufficient capital and obtain additional
financing to and remain in compliance with the financial covenants under its revolving credit facility; its ability, including
the timing and extent, to obtain additional financing and sufficiently manage costs to fund investments in its operations in amounts
necessary to support the execution of its strategic growth plan; the Company’s ability to identify, consummate and achieve
the anticipated benefits of strategic alternatives, and the structure, terms and specific risks and uncertainties associated with
any such potential strategic alternatives; the impact of the COVID-19 pandemic on the Company’s operations and results, including
as a result of the loss of adequate labor, any temporary closure of one or more fulfillment centers, or supply chain or carrier
interruptions or delays; the ability of the Company to sustain the recent increase in demand resulting from the COVID-19 pandemic
and to retain new customers; its ability to achieve the anticipated benefits associated with the Company’s workforce reductions
and the planned closure of the Company’s Arlington fulfillment center and related consolidation of production volume to its
Linden, NJ and Richmond, CA fulfillment centers; risks resulting from the planned fulfillment center closure and workforce reductions,
including, but not limited to, further employee attrition and adverse effects on the Company’s operations, such as interruptions
in production; its expectations regarding competition and its ability to effectively compete; its ability to expand or innovate
on its direct-to-consumer product offerings and strategic partnerships; its ability to cost-effectively attract new customers,
retain existing customers and increase the number of customers it serves; its amount of indebtedness and ability to fulfill its
debt-related obligations; seasonal trends in customer behavior; its expectations regarding, and the stability of, its supply chain;
the size and growth of the markets for its product offerings and its ability to serve those markets; federal and state legal and
regulatory developments; other anticipated trends and challenges in its business; and other risks more fully described in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission (“SEC”)
on February 18, 2020, and in other filings that the Company may make with the SEC in the future. The Company assumes no obligation
to update any forward-looking statements contained in this Form 8-K as a result of new information, future events or otherwise.