UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
| Form 10-Q |
| ☑ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
For the quarterly period ended May 4, 2019
OR
| ☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
Ollie’s Bargain Outlet Holdings, Inc.
(Exact name of registrant as
specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
|
001-37501
|
80-0848819
|
|
|
(Commission File Number)
|
(IRS Employer Identification No.)
|
|
6295 Allentown Boulevard
Suite 1
Harrisburg, Pennsylvania
|
17112
|
|
|
(Address of principal executive offices)
|
(Zip Code)
|
|
(717) 657-2300
|
|
(Registrant’s telephone number, including area code)
|
Securities registered pursuant to Section 12(b) of the Act:
|
Title of Each Class
|
Trading Symbol
|
Name of each exchange on which registered
|
|
Common Stock, $0.001 par value
|
OLLI
|
The NASDAQ Stock Market LLC
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares of the registrant’s common stock, $0.001 par value, outstanding as of June 5, 2019 was 63,483,898.
|
PART I - FINANCIAL INFORMATION
|
Page
|
|
|
Item 1.
|
1
|
|
|
1
|
||
|
2
|
||
|
3
|
||
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4
|
||
|
5
|
||
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Item 2.
|
14 | |
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Item 3.
|
24 | |
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Item 4.
|
24 | |
|
PART II - OTHER INFORMATION
|
||
|
Item 1.
|
25 | |
|
Item 1A.
|
25 | |
|
Item 2.
|
25 | |
|
Item 3.
|
25 | |
|
Item 4.
|
25 | |
|
Item 5.
|
25 | |
|
Item 6.
|
26 | |
OLLIE'S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
(In thousands, except per share amounts)
(Unaudited)
|
Thirteen weeks ended
|
||||||||
|
May 4,
2019
|
May 5,
2018
|
|||||||
|
Net sales
|
$
|
324,854
|
$
|
275,739
|
||||
|
Cost of sales
|
192,120
|
162,863
|
||||||
|
Gross profit
|
132,734
|
112,876
|
||||||
|
Selling, general and administrative expenses
|
83,332
|
72,364
|
||||||
|
Depreciation and amortization expenses
|
3,409
|
2,763
|
||||||
|
Pre-opening expenses
|
5,209
|
1,764
|
||||||
|
Operating income
|
40,784
|
35,985
|
||||||
|
Interest (income) expense, net
|
(145
|
)
|
538
|
|||||
|
Loss on extinguishment of debt
|
-
|
100
|
||||||
|
Income before income taxes
|
40,929
|
35,347
|
||||||
|
Income tax expense
|
2,212
|
4,893
|
||||||
|
Net income
|
$
|
38,717
|
$
|
30,454
|
||||
|
Earnings per common share:
|
||||||||
|
Basic
|
$
|
0.61
|
$
|
0.49
|
||||
|
Diluted
|
$
|
0.59
|
$
|
0.46
|
||||
|
Weighted average common shares outstanding:
|
||||||||
|
Basic
|
63,188
|
62,169
|
||||||
|
Diluted
|
66,176
|
65,624
|
||||||
See accompanying notes to the condensed consolidated financial statements.
OLLIE'S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
(In thousands, except per share amounts)
(Unaudited)
|
Assets
|
May 4,
2019
|
May 5,
2018
|
February 2,
2019
|
|||||||||
|
Current assets:
|
||||||||||||
|
Cash and cash equivalents
|
$
|
58,511
|
$
|
27,614
|
$
|
51,941
|
||||||
|
Inventories
|
329,065
|
276,040
|
296,407
|
|||||||||
|
Accounts receivable
|
961
|
414
|
570
|
|||||||||
|
Prepaid expenses and other assets
|
5,723
|
8,132
|
9,579
|
|||||||||
|
Total current assets
|
394,260
|
312,200
|
358,497
|
|||||||||
|
Property and equipment, net of accumulated depreciation of $64,446, $53,276 and $60,433, respectively
|
134,498
|
55,647
|
119,052
|
|||||||||
|
Operating lease right-of-use assets
|
273,099
|
-
|
-
|
|||||||||
|
Goodwill
|
444,850
|
444,850
|
444,850
|
|||||||||
|
Trade name and other intangible assets, net of accumulated amortization of $0, $1,909 and $2,160, respectively
|
230,559
|
232,555
|
232,304
|
|||||||||
|
Other assets
|
2,022
|
2,084
|
4,300
|
|||||||||
|
Total assets
|
$
|
1,479,288
|
$
|
1,047,336
|
$
|
1,159,003
|
||||||
|
Liabilities and Stockholders’ Equity
|
||||||||||||
|
Current liabilities:
|
||||||||||||
|
Current portion of long-term debt
|
$
|
197
|
$
|
10,143
|
$
|
238
|
||||||
|
Accounts payable
|
92,738
|
75,420
|
77,431
|
|||||||||
|
Income taxes payable
|
9,429
|
10,858
|
7,393
|
|||||||||
|
Current portion of operating lease liabilities
|
50,955
|
-
|
-
|
|||||||||
|
Accrued expenses and other
|
58,773
|
47,067
|
65,934
|
|||||||||
|
Total current liabilities
|
212,092
|
143,488
|
150,996
|
|||||||||
|
Revolving credit facility
|
-
|
-
|
-
|
|||||||||
|
Long-term debt
|
413
|
13,926
|
441
|
|||||||||
|
Deferred income taxes
|
55,424
|
57,094
|
55,616
|
|||||||||
|
Long-term operating lease liabilities
|
222,976
|
-
|
-
|
|||||||||
|
Other long-term liabilities
|
7
|
7,113
|
9,298
|
|||||||||
|
Total liabilities
|
490,912
|
221,621
|
216,351
|
|||||||||
|
Stockholders’ equity:
|
||||||||||||
|
Preferred stock - 50,000 shares authorized at $0.001 par value; no shares issued
|
-
|
-
|
-
|
|||||||||
|
Common stock - 500,000 shares authorized at $0.001 par value; 63,492, 62,358 and 63,015 shares issued, respectively
|
63
|
62
|
63
|
|||||||||
|
Additional paid-in capital
|
607,241
|
587,857
|
600,234
|
|||||||||
|
Retained earnings
|
381,158
|
237,882
|
342,441
|
|||||||||
|
Treasury - common stock, at cost; 9 shares
|
(86
|
)
|
(86
|
)
|
(86
|
)
|
||||||
|
Total stockholders’ equity
|
988,376
|
825,715
|
942,652
|
|||||||||
|
Total liabilities and stockholders’ equity
|
$
|
1,479,288
|
$
|
1,047,336
|
$
|
1,159,003
|
||||||
See accompanying notes to the condensed consolidated financial statements.
OLLIE'S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
(In thousands)
(Unaudited)
Common stock
|
Treasury stock
|
Additional
paid-in
|
Retained
|
Total
stockholders’
|
||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
capital
|
earnings
|
equity
|
||||||||||||||||||||||
|
Balance as of February 3, 2018
|
62,007
|
$
|
62
|
(9
|
)
|
$
|
(86
|
)
|
$
|
583,467
|
$
|
213,019
|
$
|
796,462
|
||||||||||||||
|
Cumulative effect of adopting ASU 2014-09
|
-
|
-
|
-
|
-
|
-
|
(5,591
|
)
|
(5,591
|
)
|
|||||||||||||||||||
|
Stock-based compensation expense
|
-
|
-
|
-
|
-
|
1,600
|
-
|
1,600
|
|||||||||||||||||||||
|
Proceeds from stock options exercised
|
312
|
-
|
-
|
-
|
3,492
|
-
|
3,492
|
|||||||||||||||||||||
|
Vesting of restricted stock
|
51
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
|
Common shares withheld for taxes
|
(12
|
)
|
-
|
-
|
-
|
(702
|
)
|
-
|
(702
|
)
|
||||||||||||||||||
|
Net income
|
-
|
-
|
-
|
-
|
-
|
30,454
|
30,454
|
|||||||||||||||||||||
|
Balance as of May 5, 2018
|
62,358
|
$
|
62
|
(9
|
)
|
$
|
(86
|
)
|
$
|
587,857
|
$
|
237,882
|
$
|
825,715
|
||||||||||||||
|
Balance as of February 2, 2019
|
63,015
|
$
|
63
|
(9
|
)
|
$
|
(86
|
)
|
$
|
600,234
|
$
|
342,441
|
$
|
942,652
|
||||||||||||||
|
Stock-based compensation expense
|
-
|
-
|
-
|
-
|
2,193
|
-
|
2,193
|
|||||||||||||||||||||
|
Proceeds from stock options exercised
|
437
|
-
|
-
|
-
|
6,081
|
-
|
6,081
|
|||||||||||||||||||||
|
Vesting of restricted stock
|
56
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
|
Common shares withheld for taxes
|
(16
|
)
|
-
|
-
|
-
|
(1,267
|
)
|
-
|
(1,267
|
)
|
||||||||||||||||||
|
Net income
|
-
|
-
|
-
|
-
|
-
|
38,717
|
38,717
|
|||||||||||||||||||||
|
Balance as of May 4, 2019
|
63,492
|
$
|
63
|
(9
|
)
|
$
|
(86
|
)
|
$
|
607,241
|
$
|
381,158
|
$
|
988,376
|
||||||||||||||
See accompanying notes to the condensed consolidated financial statements.
OLLIE'S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
(In thousands)
(Unaudited)
|
Thirteen weeks ended
|
||||||||
|
May 4,
2019
|
May 5,
2018
|
|||||||
|
Cash flows from operating activities:
|
||||||||
|
Net income
|
$
|
38,717
|
$
|
30,454
|
||||
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
|
Depreciation and amortization of property and equipment
|
4,116
|
3,309
|
||||||
|
Amortization of debt issuance costs
|
104
|
128
|
||||||
|
Amortization of original issue discount
|
-
|
2
|
||||||
|
Loss on extinguishment of debt
|
-
|
100
|
||||||
|
Gain on sale of assets
|
(10
|
)
|
(6
|
)
|
||||
|
Amortization of intangibles
|
-
|
84
|
||||||
|
Deferred income tax provision (benefit)
|
11
|
(57
|
)
|
|||||
|
Deferred rent expense
|
-
|
128
|
||||||
|
Stock-based compensation expense
|
2,193
|
1,600
|
||||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Inventories
|
(32,658
|
)
|
(20,855
|
)
|
||||
|
Accounts receivable
|
(391
|
)
|
857
|
|||||
|
Prepaid expenses and other assets
|
(876
|
)
|
(188
|
)
|
||||
|
Accounts payable
|
15,424
|
1,500
|
||||||
|
Income taxes payable
|
2,036
|
4,823
|
||||||
|
Accrued expenses and other liabilities
|
(6,690
|
)
|
(6,531
|
)
|
||||
|
Net cash provided by operating activities
|
21,976
|
15,348
|
||||||
|
Cash flows from investing activities:
|
||||||||
|
Purchases of property and equipment
|
(20,123
|
)
|
(4,719
|
)
|
||||
|
Proceeds from sale of property and equipment
|
16
|
11
|
||||||
|
Net cash used in investing activities
|
(20,107
|
)
|
(4,708
|
)
|
||||
|
Cash flows from financing activities:
|
||||||||
|
Borrowings on revolving credit facility
|
336,965
|
287,750
|
||||||
|
Repayments on revolving credit facility
|
(336,965
|
)
|
(287,750
|
)
|
||||
|
Repayments on term loan and finance leases
|
(113
|
)
|
(25,050
|
)
|
||||
|
Proceeds from stock option exercises
|
6,081
|
3,492
|
||||||
|
Common shares withheld for taxes
|
(1,267
|
)
|
(702
|
)
|
||||
|
Net cash provided by (used in) financing activities
|
4,701
|
(22,260
|
)
|
|||||
|
Net increase (decrease) in cash and cash equivalents
|
6,570
|
(11,620
|
)
|
|||||
|
Cash and cash equivalents at the beginning of the period
|
51,941
|
39,234
|
||||||
|
Cash and cash equivalents at the end of the period
|
$
|
58,511
|
$
|
27,614
|
||||
|
Supplemental disclosure of cash flow information:
|
||||||||
|
Cash paid during the period for:
|
||||||||
|
Interest
|
$
|
129
|
$
|
421
|
||||
|
Income taxes
|
$
|
163
|
$
|
127
|
||||
|
Non-cash investing activities:
|
||||||||
|
Accrued purchases of property and equipment
|
$
|
5,136
|
$
|
1,279
|
||||
See accompanying notes to the condensed consolidated financial statements.
| (a) |
Description of Business
|
Ollie’s Bargain Outlet Holdings, Inc. and subsidiaries (collectively referenced to as the “Company” or “Ollie’s”)
principally buys overproduced, overstocked, and closeout merchandise from manufacturers, wholesalers and other retailers. In addition, the Company augments its name-brand closeout deals with directly sourced private label products featuring names
exclusive to Ollie’s in order to provide consistently value-priced goods in select key merchandise categories.
Since its first store opened in 1982, the Company has grown to 324 retail locations in 23 states as of May 4, 2019. Ollie’s
Bargain Outlet retail locations are located in Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Indiana, Kentucky, Louisiana, Maryland, Michigan, Mississippi, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island,
South Carolina, Tennessee, Texas, Virginia and West Virginia.
| (b) |
Fiscal Year
|
Ollie’s follows a 52/53-week fiscal year, which ends on the Saturday nearer to January 31 of the following calendar year. References to the thirteen
weeks ended May 4, 2019 and May 5, 2018 refer to the thirteen weeks from February 3, 2019 to May 4, 2019 and from February 4, 2018 to May 5, 2018, respectively. References to “2018” refer to the fiscal year ended February 2, 2019, which
consisted of a 52-week period. References to “2019” refer to the fiscal year ending February 1, 2020, which consists of a 52-week period.
| (c) |
Basis of Presentation
|
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally
accepted accounting principles (“GAAP”) for interim financial information and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The condensed consolidated financial
statements reflect all normal recurring adjustments which management believes are necessary to present fairly the Company’s results of operations, financial condition, and cash flows for all periods presented. The condensed consolidated balance
sheets as of May 4, 2019 and May 5, 2018, and the condensed consolidated statements of income, stockholders’ equity and cash flows for the thirteen weeks ended May 4, 2019 and May 5, 2018 have been prepared by the Company and are unaudited. The
Company’s business is seasonal in nature and results of operations for the interim periods presented are not necessarily indicative of operating results for 2019 or any other period. All intercompany accounts, transactions, and balances have been
eliminated in consolidation.
The Company’s
balance sheet as of February 2, 2019, presented herein, has been derived from the audited balance sheet included in the Company’s Annual Report on Form 10-K filed with the SEC on March 29, 2019 (“Annual Report”), but does not include all
disclosures required by GAAP. These financial statements should be read in conjunction with the financial statements for 2018 and footnotes thereto included in the Annual Report.
For purposes of the disclosure requirements for segments of a business enterprise, it has been determined that the Company
is comprised of one operating segment.
| (d) |
Use of Estimates
|
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
May 4, 2019 and May 5, 2018
(Unaudited)
| (e) |
Fair Value Disclosures
|
Fair value is defined as the price which the Company would receive to sell an asset or pay to transfer a liability (an exit
price) in an orderly transaction between market participants on the measurement date. In determining fair value, GAAP establishes a three‑level hierarchy used in measuring fair value, as follows:
| • |
Level 1 inputs are quoted prices available for identical assets and liabilities in active markets.
|
| • |
Level 2 inputs are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets and liabilities in active
markets or other inputs which are observable or can be corroborated by observable market data.
|
| • |
Level 3 inputs are less observable and reflect the Company’s assumptions.
|
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, and its
credit facilities. The carrying amount of cash and cash equivalents, accounts receivable and accounts payable approximates fair value because of their short maturities. The carrying amount of the Company’s credit facilities approximates its fair
value because the interest rates are adjusted regularly based on current market conditions.
| (f) |
Recently Adopted Accounting Pronouncements
|
Leases
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases. ASU 2016-02 requires that lease arrangements longer than 12 months result in an entity recognizing a right-of-use asset and lease liability.
The updated guidance is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted.
The Company adopted ASU 2016-02 as of February 3, 2019 using the modified retrospective transition method, including the
option to not restate comparative periods. As a part of the adoption process, the Company has elected the practical expedients that do not require it to reassess existing contracts to determine if they contain leases under the new definition of
a lease, or to reassess historical lease classification or initial direct costs. The Company also adopted the practical expedient to not separate lease and non-lease components for new leases after adoption of the new standard. In addition, the
Company applied a policy election to exclude leases with an initial term of 12 months or less from balance sheet recognition. The Company did not adopt the hindsight practical expedient and, therefore, will continue to utilize lease terms
determined under previous lease guidance.
Adoption of the standard had a material impact on the condensed consolidated balance sheet and related disclosures and
resulted in recognition of right-of-use assets of $268.2 million and lease liabilities for operating leases of $269.1 million as of February 3, 2019, while eliminating pre-existing balances for other assets of $6.9 million, deferred rent and
tenant improvement allowances of $9.5 million and intangible assets related to favorable leases of $1.7 million which were reclassified to the operating lease right-of-use asset. The standard did not have a material impact on the Company’s
condensed consolidated statements of income, stockholders’ equity or cash flows. Refer to Note 4 for further details.
OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
May 4, 2019 and May 5, 2018
(Unaudited)
| (2) |
Net Sales
|
Ollie’s recognizes retail sales in its stores when merchandise is sold and the customer takes possession of merchandise.
Also included in net sales is revenue allocated to certain redeemed discounts earned via the Ollie’s Army loyalty program and gift card breakage. Net sales are presented net of returns and sales tax. The Company provides an allowance for
estimated retail merchandise returns based on prior experience.
Revenue Recognition
Revenue is deferred for the Ollie’s Army loyalty program where members accumulate points that can be redeemed for
discounts on future purchases. The Company has determined it has an additional performance obligation to Ollie’s Army members at the time of the initial transaction. The Company allocates the transaction price to the initial transaction and the
discount awards based upon its relative standalone selling price, which considers historical redemption patterns for the award. Revenue is recognized as those discount awards are redeemed. Discount awards which are issued upon the achievement of
specified point levels are valid for a maximum of 90 days from the date of issuance. At the end of each fiscal period, unredeemed discount awards and accumulated points to earn a future discount award are reflected as a liability. Discount
awards are combined in one homogeneous pool and are not separately identifiable. Therefore, the revenue recognized consists of discount awards redeemed that were included in the deferred revenue balance at the beginning of the period as well as
discount awards issued during the current period. The following table is a reconciliation of the liability related to this program (in thousands):
|
Thirteen weeks ended
|
||||||||
|
May 4,
2019
|
May 5,
2018
|
|||||||
|
Beginning Balance
|
$
|
9,055
|
$
|
8,321
|
||||
|
Revenue deferred
|
4,294
|
2,575
|
||||||
|
Revenue recognized
|
(3,939
|
)
|
(2,364
|
)
|
||||
|
Ending Balance
|
$
|
9,410
|
$
|
8,532
|
||||
Gift card breakage for gift card liabilities not subject to escheatment is recognized as revenue in proportion to the redemption of gift cards. The rate applied to redemptions is based upon a historical breakage rate. Gift cards
are combined in one homogenous pool and are not separately identifiable. Therefore, the revenue recognized consists of gift cards that were included in the liability at the beginning of the period as well as gift cards that were issued during
the period. The following table is a reconciliation of the gift card liability (in thousands):
|
Thirteen weeks ended
|
||||||||
|
May 4,
2019
|
May 5,
2018
|
|||||||
|
Beginning Balance
|
$
|
1,448
|
$
|
1,223
|
||||
|
Gift card issuances
|
1,065
|
908
|
||||||
|
Gift card redemption and breakage
|
(1,167
|
)
|
(990
|
)
|
||||
|
Ending Balance
|
$
|
1,346
|
$
|
1,141
|
||||
OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
May 4, 2019 and May 5, 2018
(Unaudited)
| (3) |
Earnings per Common Share
|
Basic earnings per common share is computed by dividing net income by the weighted average number of common shares
outstanding. Diluted earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding after giving effect to the potential dilution, if applicable, from the assumed exercise of stock options
into shares of common stock as if those stock options were exercised and the assumed lapse of restrictions on restricted stock units.
The following table summarizes those effects for the diluted earnings per common share calculation (in thousands, except per
share amounts):
|
Thirteen weeks ended
|
||||||||
|
May 4,
2019
|
May 5,
2018
|
|||||||
|
Net income
|
$
|
38,717
|
$
|
30,454
|
||||
|
Weighted average number of common shares outstanding – Basic
|
63,188
|
62,169
|
||||||
|
Incremental shares from the assumed exercise of outstanding stock options and vesting of
restricted stock units
|
2,988
|
3,455
|
||||||
|
Weighted average number of common shares outstanding - Diluted
|
66,176
|
65,624
|
||||||
|
Earnings per common share – Basic
|
$
|
0.61
|
$
|
0.49
|
||||
|
Earnings per common share - Diluted
|
$
|
0.59
|
$
|
0.46
|
||||
The effect of the weighted average assumed exercise of stock options outstanding totaling 145,684 and 124,738 for the
thirteen weeks ended May 4, 2019 and May 5, 2018, respectively, were excluded from the calculation of diluted weighted average common shares outstanding because the effect would have been antidilutive.
The effect of weighted average non-vested restricted stock units outstanding totaling 29,127 and 26,333 for the thirteen
weeks ended May 4, 2019 and May 5, 2018, respectively, were excluded from the calculation of diluted weighted average common shares outstanding because the effect would have been antidilutive.
| (4) |
Commitments and Contingencies
|
Commitments
On February 3, 2019, the first day of Ollie’s fiscal year 2019, the Company adopted ASU 2016-02, Leases, which requires that lessees recognize right-of-use assets and lease liabilities for all leases on the balance sheet. Ollie’s generally leases its stores,
offices and distribution facilities under operating leases that expire at various dates through 2033. These leases generally provide for fixed annual rentals; however, several provide for minimum annual rentals plus contingent rentals based on a
percentage of annual sales. A majority of the Company’s leases also require a payment for all or a portion of insurance, real estate taxes, water and sewer costs and repairs, the cost of which is charged to the related expense category rather
than being accounted for as rent expense. Most of the leases contain options to renew for three to five successive five-year periods. The Company is generally not reasonably certain to exercise renewal options, therefore the options are not
considered in determining the lease term, and associated potential option payments are excluded from the lease payments. Ollie’s lease agreements generally do not contain any material residual value guarantees or material restrictive covenants.
Lease cost for operating leases for the thirteen weeks ended May 4, 2019 and May 5, 2018 was $15.2 million and $12.0
million, respectively, which was classified in selling, general and administrative expenses on the condensed consolidated statements of income.
OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
May 4, 2019 and May 5, 2018
(Unaudited)
The following table summarizes the maturity of the Company’s operating lease liabilities as of May 4, 2019 (in thousands):
|
2019
|
$
|
46,911
|
||
|
2020
|
54,289
|
|||
|
2021
|
52,737
|
|||
|
2022
|
46,555
|
|||
|
2023
|
41,559
|
|||
|
Thereafter
|
72,751
|
|||
|
Total undiscounted lease payments (1)
|
314,802
|
|||
|
Less: Imputed interest
|
(40,871
|
)
|
||
|
Total lease obligations
|
273,931
|
|||
|
Less: Current obligations under leases
|
(50,955
|
)
|
||
|
Long-term lease obligations
|
$
|
222,976
|
| (1) |
Lease obligations exclude $31.8 million of minimum lease payments for leases signed, but not commenced.
|
The following table summarizes other information related to the Company’s operating leases as of May 4, 2019:
|
Cash paid for operating leases
|
$
|
15,307
|
||
|
Non-cash right-of-use assets obtained in exchange for lease obligations
|
17,613
|
|||
|
Weighted-average remaining lease term
|
6 years
|
|||
|
Weighted-average discount rate
|
4.5
|
%
|
||
The Company adopted the new lease standard in the first quarter of 2019 as discussed in Note 1, and as required, the
following disclosure is provided for periods prior to adoption. As of February 2, 2019, the following is a schedule by year of future minimum rental payments required under non-cancelable operating leases, including renewal periods that were
reasonably assured and that had initial or remaining lease terms in excess of one year, excluding any payments related to insurance, taxes, or maintenance (in thousands):
|
2019
|
$
|
60,804
|
||
|
2020
|
56,106
|
|||
|
2021
|
49,226
|
|||
|
2022
|
42,724
|
|||
|
2023
|
34,876
|
|||
|
Thereafter
|
65,218
|
|||
|
Total minimum lease payments
|
$
|
308,954
|
OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
May 4, 2019 and May 5, 2018
(Unaudited)
Related Party Leases
The Company has entered into five non-cancelable operating leases with related parties for office and store locations.
Ollie’s made $0.3 million and $0.4 million in rent payments to such related parties during each of the thirteen weeks ended May 4, 2019 and May 5, 2018, respectively.
Contingencies
From time to time the Company may be involved in claims and legal actions that arise in the ordinary course of its business.
The Company cannot predict the outcome of any litigation or suit to which it is a party. However, the Company does not believe that an unfavorable decision of any of the current claims or legal actions against it, individually or in the
aggregate, will have a material adverse effect on its financial position, results of operations, liquidity or capital resources.
| (5) |
Accrued Expenses and Other
|
Accrued expenses and other consists of the following (in thousands):
|
May 4,
2019
|
May 5,
2018
|
February 2,
2019
|
||||||||||
|
Deferred revenue
|
$
|
10,756
|
$
|
8,532
|
$
|
10,503
|
||||||
|
Compensation and benefits
|
7,266
|
6,910
|
16,438
|
|||||||||
|
Insurance
|
6,831
|
3,918
|
6,159
|
|||||||||
|
Freight
|
6,216
|
4,434
|
4,496
|
|||||||||
|
Sales and use taxes
|
5,820
|
4,721
|
3,464
|
|||||||||
|
Real estate related
|
3,950
|
3,772
|
3,748
|
|||||||||
|
Advertising
|
3,821
|
3,339
|
5,678
|
|||||||||
|
Other
|
14,113
|
11,441
|
15,448
|
|||||||||
|
$
|
58,773
|
$
|
47,067
|
$
|
65,934
|
|||||||
| (6) |
Debt Obligations and Financing Arrangements
|
Long-term debt consists of the following (in thousands):
|
May 4,
2019
|
May 5,
2018
|
February 2,
2019
|
||||||||||
|
Term loan, net
|
$
|
-
|
$
|
23,655
|
$
|
-
|
||||||
|
Finance leases
|
610
|
414
|
679
|
|||||||||
|
Total debt
|
610
|
24,069
|
679
|
|||||||||
|
Less: current portion
|
(197
|
)
|
(10,143
|
)
|
(238
|
)
|
||||||
|
Long-term debt
|
$
|
413
|
$
|
13,926
|
$
|
441
|
||||||
The Company’s credit facilities (“Credit Facilities”) consist of a $200.0 million term loan (“Term Loan Facility”), which
was fully paid as of February 2, 2019, and a $100.0 million revolving credit facility (“Revolving Credit Facility”), which includes a $25.0 million sub-facility for letters of credit and a $25.0 million sub-facility for swingline loans. Loans
under the Credit Facilities mature on January 29, 2021.
OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
May 4, 2019 and May 5, 2018
(Unaudited)
The interest rates for the Credit Facilities are not subject to a floor and are calculated as the higher of the Prime Rate,
the Federal Funds Effective Rate plus 0.50% or the Eurodollar Rate plus 1.0%, plus the Applicable Margin, or, for Eurodollar Loans, the Eurodollar Rate plus the Applicable Margin. The Applicable Margin will vary from 0.75% to 1.25% for a Base
Rate Loan and 1.75% to 2.25% for a Eurodollar Loan, based on reference to the total leverage ratio (total debt to adjusting EBITDA, as defined in the agreement).
The Company made voluntary prepayments under the Term Loan Facility totaling $48.8 million during 2018, paying the balance
in full.
Under the terms of the Revolving Credit Facility, as of May 4, 2019, the Company could borrow up to 90.0% of the most recent
appraised value (valued at cost, discounted for the current net orderly liquidation value) of its eligible inventory, as defined, up to $100.0 million.
As of May 4, 2019, the Company had no outstanding borrowings under the Revolving Credit Facility, with $98.1 million of
borrowing availability, letter of credit commitments of $1.6 million and $0.3 million of rent reserves. The Revolving Credit Facility also contains a variable unused line fee ranging from 0.250% to 0.375% per annum.
The Credit Facilities are collateralized by the Company’s assets and equity and contain financial covenants, as well as
certain business covenants, including restrictions on dividend payments, which the Company must comply with during the term of the agreements. The financial covenants include a consolidated fixed charge coverage ratio test of at least 1.1 to 1.0
and a total leverage test of no greater than 3.5 to 1.0. The Company was in compliance with all terms of the Credit Facilities during the thirteen weeks ended May 4, 2019.
The provisions of the Credit Facilities restrict all of the net assets of the Company’s consolidated subsidiaries, which
constitutes all of the net assets on the Company’s consolidated balance sheet as of May 4, 2019, from being used to pay any dividends or make other restricted payments to the Company without prior written consent from the financial institutions
that are a party to the Credit Facilities, subject to certain exceptions.
| (7) |
Income Taxes
|
The provision for income taxes is based on the current estimate of the annual effective tax rate and is adjusted as
necessary for discrete events occurring in a particular period. The effective tax rates for the thirteen weeks ended May 4, 2019 and May 5, 2018 were 5.4% and 13.8%, respectively. The reduced effective tax rate in the thirteen weeks ended May
4, 2019 was primarily the result of an increase in excess tax benefits related to stock-based compensation. These discrete tax benefits totaled $8.1 million and $3.9 million for the thirteen weeks ended May 4, 2019 and May 5, 2018, respectively.
| (8) |
Equity Incentive Plans
|
During 2012, Ollie’s established an equity incentive plan (the “2012 Plan”), under which stock options were granted to
executive officers and key employees as deemed appropriate under the provisions of the 2012 Plan, with an exercise price at the fair value of the underlying stock on the date of grant. The vesting period for options granted under the 2012 Plan is
five years (20% ratably per year). Options granted under the 2012 Plan are subject to employment for vesting, expire 10 years from the date of grant and are not transferable other than upon death. As of July 15, 2015, the date of the pricing of
the Company’s initial public offering, no additional equity grants will be made under the 2012 Plan.
OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
May 4, 2019 and May 5, 2018
(Unaudited)
In connection with its initial public offering, the Company adopted the 2015 equity incentive plan (the “2015 Plan”)
pursuant to which the Company’s Board of Directors may grant stock options, restricted shares or other awards to employees, directors and consultants. The 2015 Plan allows for the issuance of up to 5,250,000 shares. Awards will be made pursuant
to agreements and may be subject to vesting and other restrictions as determined by the Board of Directors or the Compensation Committee of the Board. The Company uses authorized and unissued shares to satisfy share award exercises. As of May 4,
2019, there were 3,133,750 shares available for grant under the 2015 Plan.
Stock
Options
The exercise price for stock options is determined at the fair value of the underlying stock on the date of grant. The
vesting period for awards granted under the 2015 Plan is generally set at four years (25% ratably per year). Awards are subject to employment for vesting, expire 10 years from the date of grant, and are not transferable other than upon death.
A summary of the Company’s stock option activity and related information follows for the thirteen weeks ended May 4, 2019
(in thousands, except share and per share amounts):
|
Number
of options
|
Weighted
average
exercise
price
|
Weighted
average
remaining
contractual
term (years)
|
||||||||||
|
Outstanding at February 2, 2019
|
3,746,422
|
$
|
15.29
|
|||||||||
|
Granted
|
286,849
|
79.96
|
||||||||||
|
Forfeited
|
(13,504
|
)
|
64.25
|
|||||||||
|
Exercised
|
(437,204
|
)
|
13.91
|
|||||||||
|
Outstanding at May 4, 2019
|
3,582,563
|
20.46
|
5.4
|
|||||||||
|
Exercisable at May 4, 2019
|
2,435,065
|
10.83
|
4.3
|
|||||||||
The Company uses the Black-Scholes option pricing model to value its stock option awards. The assumptions used in
calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions,
stock-based compensation expense could be materially different for future awards.
The expected life of stock options was estimated using the “simplified method,” as the Company does not have sufficient
historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock option grants. The simplified method is based on the average of the vesting tranches and the
contractual life of each grant. For stock price volatility, the Company uses its historical information since its initial public offering as well as comparable public companies’ information as a basis for its expected volatility to calculate the
fair value of option grants. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected life of the option.
The weighted average grant date fair value per option for options granted during the thirteen weeks ended May 4, 2019 and
May 5, 2018 was $24.95 and $18.73, respectively. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model that used the weighted average assumptions in the following table:
OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
May 4, 2019 and May 5, 2018
(Unaudited)
|
Thirteen weeks ended
|
||||||||
|
May 4,
2019
|
May 5,
2018
|
|||||||
|
Risk-free interest rate
|
2.43
|
%
|
2.70
|
%
|
||||
|
Expected dividend yield
|
—
|
—
|
||||||
|
Expected term (years)
|
6.25 years
|
6.25 years
|
||||||
|
Expected volatility
|
25.88
|
%
|
25.84
|
%
|
||||
Restricted
Stock Units
Restricted stock units (“RSUs”) are issued at a value not less than the fair market value of the common stock on the date of
the grant. RSUs granted to date vest ratably over three or four years or cliff vest in one or four years. Awards are subject to employment for vesting and are not transferable other than upon death.
A summary of the Company’s RSU activity and related information for the thirteen weeks ended May 4, 2019 is as follows:
|
Number
of shares
|
Weighted
average
grant date
fair value
|
|||||||
|
Non-vested balance at February 2, 2019
|
220,200
|
$
|
35.75
|
|||||
|
Granted
|
58,530
|
80.12
|
||||||
|
Forfeited
|
(799
|
)
|
75.90
|
|||||
|
Vested
|
(56,360
|
)
|
33.84
|
|||||
|
Non-vested balance at May 4, 2019
|
221,571
|
47.81
|
||||||
Stock-Based
Compensation Expense
The
compensation cost for stock options and RSUs which have been recorded within selling, general and administrative expenses related to the Company’s equity incentive plans was $2.2 million and $1.6 million for the thirteen weeks ended May 4, 2019
and May 5, 2018, respectively.
As of May 4, 2019, there was $22.4 million of total unrecognized compensation cost related to non-vested stock-based
compensation arrangements. That cost is expected to be recognized over a weighted average period of 3.0 years. Compensation costs related to awards are recognized using the straight-line method.
| (9) |
Subsequent Events
|
On May 22, 2019, the Company entered into an amended and restated credit agreement (the “Credit Agreement”). The Credit
Agreement provides for a five-year $100.0 million revolving credit facility, which includes a $45.0 million sub-facility for letters of credit and a $25.0 million sub-facility for swingline loans (the “New Revolving Credit Facility”). The loans
under the New Revolving Credit Facility mature on May 22, 2024. In addition, the Company may, at any time and from time to time add term loan facilities or additional revolving commitments up to $150.0 million together with certain additional
amounts pursuant to terms and conditions set out in the Credit Agreement.
On May 31, 2019, OBO Ventures, Inc. (“OBO”), a wholly owned subsidiary of the Company, entered into a sale-leaseback
transaction with an unaffiliated third-party involving 12 former Toys “R” Us store locations which were acquired by OBO on August 29, 2018. OBO received approximately $42 million in cash for the 12 locations.
The following discussion and analysis of the financial condition and results of our
operations should be read together with the financial statements and related notes of Ollie’s Bargain Outlet Holdings, Inc. included in Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and the related notes
included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, on March 29, 2019. As used in this Quarterly Report on Form 10-Q, except where the context otherwise requires or where otherwise indicated, the
terms “Ollie’s,” the “Company,” “we,” “our” and “us” refer to Ollie’s Bargain Outlet Holdings, Inc.
We operate on a fiscal calendar widely used by the retail industry that results in
a fiscal year consisting of a 52- or 53-week period ending on the Saturday nearer to January 31 of the following year. References to “2019” refer to the 52-week period from February 3, 2019 to February 1, 2020. References to “2018” refer to the
52-week period from February 4, 2018 to February 2, 2019. The fiscal quarters or “first quarter” ended May 4, 2019 and May 5, 2018 refer to the 13 weeks from February 3, 2019 to May 4, 2019 and from February 4, 2018 to May 5, 2018, respectively.
Historical results are not necessarily indicative of the results to be expected for any future period and results for any interim period may not necessarily be indicative of the results that may be expected for a full year.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form
10-Q contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “could,” “may,” “might,” “will,” “likely,”
“anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “continues,” “projects” and similar references to future periods, prospects, financial performance and industry outlook. Forward-looking statements are based on our
current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in
circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the
forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions, including tax legislation, and the following: our failure to adequately procure and manage our inventory
or anticipate consumer demand; changes in consumer confidence and spending; risks associated with intense competition; our failure to open new profitable stores, or successfully enter new markets, on a timely basis or at all; our failure to hire
and retain key personnel and other qualified personnel; our inability to obtain favorable lease terms for our properties; the failure to timely acquire, develop, and open, the loss of, or disruption or interruption in the operations of, our
centralized distribution centers; fluctuations in comparable store sales and results of operations, including on a quarterly basis; risks associated with our lack of operations in the growing online retail marketplace; risks associated with
litigation and the outcomes thereof; our inability to successfully implement our marketing, advertising and promotional efforts; the seasonal nature of our business; risks associated with the timely and effective deployment and protection of
computer networks and other electronic systems; the risks associated with doing business with international manufacturers including, but not limited to, potential increases in tariffs on imported goods; changes in government regulations,
procedures and requirements; and our ability to service indebtedness and to comply with our financial covenants together with the other factors set forth under “Item 1A - Risk Factors” contained herein and in our filings with the SEC, including
our Annual Report on Form 10-K. Any forward-looking statement made by us in this Quarterly Report on Form 10-Q speaks only as of the date on
which such statement is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. You are advised, however, to consult any further disclosures we make on related subjects in our public
announcements and SEC filings.
Overview
Ollie’s is a highly differentiated and fast-growing, extreme value retailer of brand name merchandise at drastically reduced
prices. Known for our assortment of products offered as “Good Stuff Cheap,” we offer customers a broad selection of brand name products, including
housewares, food, books and stationery, bed and bath, flooring, toys and hardware. Our differentiated go-to market strategy is characterized by a unique, fun and engaging treasure hunt shopping experience, compelling customer value proposition and witty, humorous in-store signage and advertising campaigns.
Our Growth Strategy
Since 1982, when we were founded, we have grown organically by backfilling in existing marketplaces and leveraging our brand
awareness, marketing and infrastructure to expand into new markets in contiguous states. In 2003, Mark Butler, our co-founder, assumed his current role as President and Chief Executive Officer. Under Mr. Butler’s leadership, we expanded from 28
stores located in three states at the end of fiscal year 2003 to 324 stores located in 23 states as of May 4, 2019.
Our stores are currently supported by two distribution centers, one in York, PA and one in Commerce, GA, which we believe
can support between 350 to 400 stores. In 2018, we acquired a 58-acre parcel of land in Lancaster, TX to construct our third distribution center which will be approximately 615,000 square feet and will support 150 to 200 additional stores. We
have invested in our associates, infrastructure, distribution network and information systems to allow us to continue to rapidly grow our store footprint, including:
| • |
growing our merchant buying team to increase our access to brand name/closeout merchandise;
|
| • |
adding members to our senior management team;
|
| • |
expanding the capacity of our distribution centers to their current 1.6 million square feet plus an additional 615,000 square feet once the new distribution
center is fully operational; and
|
| • |
investing in information technology, accounting, and warehouse management systems.
|
Our business model has produced consistent and predictable store growth over the past several years, during both strong and
weaker economic cycles. We plan to continue to enhance our competitive positioning and drive growth in sales and profitability by executing on the following strategies:
| • |
growing our store base;
|
| • |
increasing our offerings of great bargains; and
|
| • |
leveraging and expanding Ollie’s Army, our customer loyalty program.
|
We have a proven portable, flexible, and highly profitable store model that has produced consistent financial results and
returns. Our new store model targets a store size between 25,000 to 35,000 square feet and an average initial cash investment of approximately $1.0 million, which includes store fixtures and equipment, store-level and distribution center
inventory (net of payables) and pre-opening expenses. We target new store sales of approximately $3.9 million.
While we are focused on driving comparable store sales and managing our expenses, our revenue and profitability growth will
primarily come from opening new stores. The core elements of our business model are procuring great deals, offering extreme values to our customers and creating consistent, predictable store growth and margins. In addition, our new stores
generally open strong, immediately contributing to the growth in net sales and profitability of our business. We plan to achieve continued net sales growth, including comparable stores sales, by adding additional stores to our store base and by
continuing to provide quality merchandise at a value for our customers as we scale and gain more access to purchase directly from major manufacturers. We also plan to leverage and expand our Ollie’s Army database marketing strategies. In
addition, we plan to continue to manage our selling, general and administrative expenses (“SG&A”) by continuing to make process improvements and by maintaining our standard policy of reviewing our operating costs.
Our ability to grow and our results of operations may be impacted by additional factors and uncertainties, such as consumer
spending habits, which are subject to macroeconomic conditions and changes in discretionary income. Our customers’ discretionary income is primarily impacted by gas prices, wages and consumer trends and preferences, which fluctuate depending on
the environment. The potential consolidation of our competitors or other changes in our competitive landscape could also impact our results of operations or our ability to grow, even though we compete with a broad range of retailers.
Our key competitive advantage is our direct buying relationships with many major manufacturers, wholesalers, distributors,
brokers and retailers for our brand name and closeout products and unbranded goods. We also augment our product mix with private label brands. As we continue to grow, we believe our increased scale will provide us with even greater access to
brand name and closeout products as major manufacturers seek a single buyer to acquire an entire deal.
How We Assess the Performance of Our Business and Key Line Items
We consider a variety of financial and operating measures in assessing the performance of our business. The key measures we
use are number of new stores, net sales, comparable store sales, gross profit and gross margin, SG&A, pre-opening expenses, operating income, EBITDA and Adjusted EBITDA.
Number of New Stores
The number of new stores reflects the number of stores opened during a particular reporting period. Before we open new
stores, we incur pre-opening expenses described below under “Pre-Opening Expenses” and we make an initial investment in inventory. We also make initial capital investments in fixtures and equipment, which we amortize over time.
We opened 21 new stores during the thirteen weeks ended May 4, 2019. We expect new store growth to be the primary driver of
our sales growth. Our initial lease terms are approximately seven years with options to renew for three to five successive five-year periods. Our portable and predictable real estate model focuses on backfilling existing markets and entering
new markets in contiguous states. Our new stores often open with higher sales levels as a result of greater advertising and promotional spend
in connection with grand opening events, but decline shortly thereafter to our new store model levels.
Net Sales
Ollie’s recognizes retail sales in its stores when merchandise is sold and the customer takes possession of merchandise.
Also included in net sales is revenue allocated to certain redeemed discounts earned via the Ollie’s Army loyalty program and gift card breakage. Net sales are presented net of returns and sales tax. Net sales consist of sales from comparable
stores and non-comparable stores, described below under “Comparable Store Sales.” Growth of our net sales is primarily driven by expansion of our store base in existing and new markets. As we continue to grow, we believe we will have greater
access to brand name and closeout merchandise and an increased deal selection, resulting in more potential offerings for our customers. Net sales are impacted by product mix, merchandise mix and availability, as well as promotional activities
and the spending habits of our customers. Our broad selection of offerings across diverse product categories supports growth in net sales by attracting new customers, which results in higher spending levels and frequency of shopping visits from
our customers, including Ollie’s Army members.
The spending habits of our customers are subject to macroeconomic conditions and changes in discretionary income. Our
customers’ discretionary income is primarily impacted by gas prices, wages, and consumer trends and preferences, which fluctuate depending on the environment. However, because we offer a broad selection of merchandise at extreme values, we
believe we are less impacted than other retailers by economic cycles. These cycles correspond with declines in general consumer spending habits and we benefit from periods of increased consumer spending.
Comparable Store Sales
Comparable store sales measure performance of a store during the current reporting period against the performance of the
same store in the corresponding period of the previous year. Comparable store sales consists of net sales from our stores beginning on the first day of the sixteenth full fiscal month following the store’s opening, which is when we believe
comparability is achieved. Comparable store sales are impacted by the same factors that impact net sales.
We define comparable stores to be stores that:
| • |
have been remodeled while remaining open;
|
| • |
are closed for five or fewer days in any fiscal month;
|
| • |
are closed temporarily and relocated within their respective trade areas; and
|
| • |
have expanded, but are not significantly different in size, within their current locations.
|
Non-comparable store sales consist of new store sales and sales for stores not open for a full 15 months. Stores which are
closed temporarily, but for more than five days in any fiscal month, are included in non-comparable store sales beginning in the fiscal month in which the temporary closure begins until the first full month of operation once the store re-opens,
at which time they are included in comparable store sales.
Opening new stores is the primary component of our growth strategy and as we continue to execute on our growth strategy, we
expect a significant portion of our sales growth will be attributable to non-comparable store sales. Accordingly, comparable store sales are only one measure we use to assess the success of our growth strategy.
Gross Profit and Gross Margin
Gross profit is equal to our net sales less our cost of sales. Cost of sales includes merchandise costs, inventory
markdowns, shrinkage and transportation, distribution and warehousing costs, including depreciation. Gross margin is gross profit as a percentage of our net sales. Gross margin is a measure used by management to indicate whether we are selling
merchandise at an appropriate gross profit.
In addition, our gross profit margin is impacted by product mix, as some products generally provide higher gross margins, by
our merchandise mix and availability, and by our merchandise cost, which can vary.
Our gross profit is variable in nature and generally follows changes in net sales. We regularly analyze the components of
gross profit, as well as gross margin. Specifically, our product margin and merchandise mix is reviewed by our merchant team and senior management, ensuring strict adherence to internal margin goals. Our disciplined buying approach has produced
consistent gross margins and we believe helps to mitigate adverse impacts on gross profit and results of operation.
The components of our cost of sales may not be comparable to the components of cost of sales or similar measures of our
competitors and other retailers. As a result, our gross profit and gross margin may not be comparable to similar data made available by our competitors and other retailers.
Selling, General and Administrative Expenses
SG&A are comprised of payroll and benefits for store, field support and support center associates. SG&A also
include marketing and advertising, occupancy, utilities, supplies, credit card processing fees, insurance and professional services. The components of our SG&A remain relatively consistent per store and for each new store opening. The
components of our SG&A may not be comparable to the components of similar measures of other retailers. Consolidated SG&A generally increase as we grow our store base and as our net sales increase. A significant portion of our expenses is
primarily fixed in nature, and we expect to continue to maintain strict discipline while carefully monitoring SG&A as a percentage of net sales. We expect that our SG&A will continue to increase in future periods with future growth.
Pre-Opening Expenses
Pre-opening expenses consist of expenses of opening new stores and distribution centers. For new stores, pre-opening
expenses include grand opening advertising costs, payroll expenses, travel expenses, employee training costs, rent expenses and store setup costs, as well as store closing costs. Pre-opening expenses for new stores are expensed as they are
incurred, which is typically within 30 to 45 days of opening a new store. For distribution centers, pre-opening expenses primarily include inventory transportation costs, employee travel expenses and occupancy costs.
Operating Income
Operating income is gross profit less SG&A, depreciation and amortization and pre-opening expenses. Operating income
excludes interest expense, net, and income tax expense. We use operating income as an indicator of the productivity of our business and our ability to manage expenses.
EBITDA and Adjusted EBITDA
EBITDA and Adjusted EBITDA are key metrics used by management and our Board to assess our financial performance. EBITDA and
Adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry. We use Adjusted EBITDA to supplement GAAP measures of performance to evaluate the effectiveness of our business
strategies, to make budgeting decisions, to evaluate our performance in connection with compensation decisions and to compare our performance against that of other peer companies using similar measures. Management believes it is useful to
investors and analysts to evaluate these non-GAAP measures on the same basis as management uses to evaluate the Company’s operating results. We believe that excluding items from operating income, net income and net income per diluted share that
may not be indicative of, or are unrelated to, our core operating results, and that may vary in frequency or magnitude, enhances the comparability of our results and provides a better baseline for analyzing trends in our business.
We define EBITDA as net income before net interest expense, loss on extinguishment of debt, depreciation and amortization
expenses and income taxes. Adjusted EBITDA represents EBITDA as further adjusted for non-cash stock-based compensation expense, gain from insurance settlement and non-cash purchase accounting items. EBITDA and Adjusted EBITDA are non-GAAP
measures and may not be comparable to similar measures reported by other companies. EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as
reported under GAAP. In the future we may incur expenses or charges such as those added back to calculate Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by
these items. For further discussion of EBITDA and Adjusted EBITDA and for reconciliations of EBITDA and Adjusted EBITDA to net income, the most directly comparable GAAP measure, see “Results of Operations.”
Factors Affecting the Comparability of our Results of Operations
Our results over the past two years have been affected by the following events, which must be
understood in order to assess the comparability of our period-to-period financial performance and condition.
Historical Results
Historical results are not necessarily indicative of the results to be expected for any future period.
Financing Transactions
Our credit facilities consisted of a $200.0 million term loan (“Term Loan Facility”) and $100.0 million revolving credit
facility (“Revolving Credit Facility,” and together with the Term Loan, the “Credit Facilities”) which includes a $25.0 million sub-facility for letters of credit and a $25.0 million sub-facility for swingline loans.
On May 22, 2019, we amended and restated our Revolving Credit Facility to effect several amendments thereto and extend the
maturity thereunder to May 22, 2024. For further information, see Note 9 under “Notes to Unaudited Condensed Consolidated Financial Statements”.
The Company made voluntary prepayments under the Term Loan Facility totaling $48.8 million during 2018, paying the balance
in full.
Store Openings
We opened 21 and eight new stores in the thirteen weeks ended May 4, 2019 and May 5, 2018 respectively. In connection with
these store openings, we incurred pre-opening expenses of $5.2 million and $1.8 million for the thirteen weeks ended May 4, 2019 and May 5, 2018, respectively.
Seasonality
Our business is seasonal in nature and demand is generally the highest in our fourth fiscal quarter due to the holiday sales
season. To prepare for the holiday sales season, we must order and keep in stock more merchandise than we carry during other times of the year and generally engage in additional marketing efforts. We expect inventory levels, along with accounts
payable and accrued expenses, to reach their highest levels in our third and fourth fiscal quarters in anticipation of increased net sales during the holiday sales season. As a result of this seasonality, and generally because of variation in
consumer spending habits, we experience fluctuations in net sales and working capital requirements during the year. Because we offer a broad selection of merchandise at extreme values, we believe we are less impacted than other retailers by
economic cycles which correspond with declines in general consumer spending habits and we believe we still benefit from periods of increased consumer spending.
Results of Operations
The following tables summarize key components of our results of operations for the periods indicated, both in dollars and as
a percentage of our net sales.
We derived the condensed consolidated statements of income for the thirteen weeks ended May 4, 2019 and May 5, 2018 from our
unaudited condensed consolidated financial statements and related notes. Our historical results are not necessarily indicative of the results that may be expected in the future.
|
Thirteen weeks ended
|
||||||||
|
May 4,
2019
|
May 5,
2018
|
|||||||
|
( dollars in thousands)
|
||||||||
|
Condensed consolidated statements of income data:
|
||||||||
|
Net sales
|
$
|
324,854
|
$
|
275,739
|
||||
|
Cost of sales
|
192,120
|
162,863
|
||||||
|
Gross profit
|
132,734
|
112,876
|
||||||
|
Selling, general and administrative expenses
|
83,332
|
72,364
|
||||||
|
Depreciation and amortization expenses
|
3,409
|
2,763
|
||||||
|
Pre-opening expenses
|
5,209
|
1,764
|
||||||
|
Operating income
|
40,784
|
35,985
|
||||||
|
Interest (income) expense, net
|
(145
|
)
|
538
|
|||||
|
Loss on extinguishment of debt
|
-
|
100
|
||||||
|
Income before income taxes
|
40,929
|
35,347
|
||||||
|
Income tax expense
|
2,212
|
4,893
|
||||||
|
Net income
|
$
|
38,717
|
$
|
30,454
|
||||
|
Percentage of net sales (1):
|
||||||||
|
Net sales
|
100.0
|
%
|
100.0
|
%
|
||||
|
Cost of sales
|
59.1
|
59.1
|
||||||
|
Gross profit
|
40.9
|
40.9
|
||||||
|
Selling, general and administrative expenses
|
25.7
|
26.2
|
||||||
|
Depreciation and amortization expenses
|
1.0
|
1.0
|
||||||
|
Pre-opening expenses
|
1.6
|
0.6
|
||||||
|
Operating income
|
12.6
|
13.1
|
||||||
|
Interest (income) expense, net
|
— |
0.2
|
||||||
|
Loss on extinguishment of debt
|
—
|
—
|
||||||
|
Income before income taxes
|
12.6
|
12.8
|
||||||
|
Income tax expense
|
0.7
|
1.8
|
||||||
|
Net income
|
11.9
|
%
|
11.0
|
%
|
||||
|
Select operating data:
|
||||||||
|
New store openings
|
21
|
8
|
||||||
|
Number of stores open at end of period
|
324
|
276
|
||||||
|
Average net sales per store (2)
|
$
|
1,032
|
$
|
1,011
|
||||
|
Comparable stores sales change
|
0.8
|
%
|
1.9
|
%
|
||||
| (1) |
Components may not add to totals due to rounding.
|
| (2) |
Average net sales per store represents the weighted average of total net sales divided
by the number of stores open, in each case at the end of each week in each fiscal period.
|
The following table provides a reconciliation of our net income to Adjusted EBITDA for the periods presented:
|
Thirteen weeks ended
|
||||||||
|
May 4,
2019
|
May 5,
2018
|
|||||||
|
( dollars in thousands)
|
||||||||
|
Net income
|
$
|
38,717
|
$
|
30,454
|
||||
|
Interest (income) expense, net
|
(145
|
)
|
538
|
|||||
|
Loss on extinguishment of debt
|
-
|
100
|
||||||
|
Depreciation and amortization expenses (1)
|
4,199
|
3,393
|
||||||
|
Income tax expense
|
2,212
|
4,893
|
||||||
|
EBITDA
|
44,983
|
39,378
|
||||||
|
Gain from insurance settlement
|
(565
|
)
|
-
|
|||||
|
Non-cash stock-based compensation expense
|
2,193
|
1,600
|
||||||
|
Non-cash purchase accounting items (2)
|
-
|
(1
|
)
|
|||||
|
Adjusted EBITDA
|
$
|
46,611
|
$
|
40,977
|
||||
| (1) |
Includes depreciation and amortization relating to our distribution centers, which is included within cost of sales on our condensed consolidated statements of
income and amortization of acquisition-related favorable lease adjustments which is included within SG&A on our condensed consolidated statements of income.
|
| (2) |
Includes purchase accounting impact from unfavorable lease liabilities related to a prior acquisition.
|
First Quarter 2019 Compared to First Quarter 2018
Net Sales
Net sales increased to $324.9 million in the thirteen weeks ended May 4, 2019 from $275.7 million in the thirteen weeks
ended May 5, 2018, an increase of $49.1 million, or 17.8%. The increase was the result of a comparable store sales increase of $2.1 million, or 0.8%, and a non-comparable store sales increase of $47.0 million. The increase in non-comparable
store sales was driven by sales from new stores that have not been open for a full 15 months.
Comparable store sales increased 0.8% for the thirteen weeks ended May 4, 2019 compared to a 1.9% increase for the thirteen
weeks ended May 5, 2018. The increase in comparable store sales for the thirteen weeks ended May 4, 2019 was driven by strong sales in our floor coverings, health and beauty aids, and electronics departments offset by decreases in the food and
stationery departments.
Cost of Sales
Cost of sales increased to $192.1 million in the thirteen weeks ended May 4, 2019 from $162.9 million in the thirteen weeks
ended May 5, 2018, an increase of $29.3 million, or 18.0%. The increase in cost of sales was primarily the result of increased net sales.
Gross Profit and Gross Margin
Gross profit increased to $132.7 million in the thirteen weeks ended May 4, 2019 from $112.9 million in the thirteen weeks
ended May 5, 2018, an increase of $19.9 million, or 17.6%. Gross margin was consistent for the thirteen weeks ended May 4, 2019 and the thirteen weeks ended May 5, 2018 at 40.9% as both merchandise margin and supply chain costs as a percentage of
net sales were even compared to the prior year.
Selling, General and Administrative Expenses
SG&A increased to $83.3 million in the thirteen weeks ended May 4, 2019 from $72.4 million in the thirteen weeks ended
May 5, 2018, an increase of $11.0 million, or 15.2%. Included in SG&A in the thirteen weeks ended May 4, 2019 is $0.6 million of income related to a gain from an insurance settlement. Excluding this gain, SG&A increased 15.9% to $83.9
million in the thirteen weeks ended May 4, 2019. The increase in SG&A was primarily driven by increased selling expenses related to new store growth and increased sales volume. The increased selling expenses consisted primarily of store
payroll and benefits, store occupancy costs and other store related expenses.
Pre-Opening Expenses
Pre-opening expenses increased to $5.2 million in the thirteen weeks ended May 4, 2019 from $1.8 million in the thirteen
weeks ended May 5, 2018, an increase of $3.4 million, or 195.3%. The increase in pre-opening expenses during the thirteen weeks ended May 4, 2019 was due to the timing and number of new store openings.
Interest (Income) Expense, Net
Net interest income was $0.1 million in the thirteen weeks ended May 4, 2019 compared to net interest expense of $0.5
million in the thirteen weeks ended May 5, 2018, a net decrease in expense of $0.7 million. The Term Loan Facility was paid in full during 2018, decreasing our average outstanding debt balance during the thirteen weeks ended May 4, 2019, which
decreased our interest expense.
Income Tax Expense
Income tax expense for the thirteen weeks ended May 4, 2019 was $2.2 million compared to $4.9 million for the thirteen weeks
ended May 5, 2018. The effective tax rates for the thirteen weeks ended May 4, 2019 and May 5, 2018 were 5.4% and 13.8%, respectively. The reduced effective tax rate in the thirteen weeks ended May 4, 2019 was primarily the result of an
increase in excess tax benefits related to stock-based compensation. These discrete tax benefits totaled $8.1 million and $3.9 million for the thirteen weeks ended May 4, 2019 and May 5, 2018, respectively.
Net Income
As a result of the foregoing, net income increased to $38.7 million in the thirteen weeks ended May 4, 2019 from $30.5
million in the thirteen weeks ended May 5, 2018, an increase of $8.3 million or 27.1%.
Adjusted EBITDA
Adjusted EBITDA increased to $46.6 million in the thirteen weeks ended May 4, 2019 from $41.0 million in the thirteen weeks
ended May 5, 2018, an increase of $5.6 million, or 13.7%, largely driven by increased gross profit dollars due to the increased sales volume. In addition, as a result of the sales increase in the period, SG&A as a percentage of net sales,
excluding the gain from the insurance settlement, decreased by 40 basis points, all resulting in increased adjusted EBITDA compared to the same period last year.
Liquidity and Capital Resources
Overview
Our primary sources of liquidity are net cash provided by operating activities and borrowings under our Revolving Credit
Facility. Our primary cash needs are for capital expenditures and working capital. As of May 4, 2019, we had $98.1 million of available borrowings under our Revolving Credit Facility and $58.5 million of cash and cash equivalents on hand. On
May 22, 2019, we amended and restated our Revolving Credit Facility to effect several amendments thereto and extend the maturity thereunder to May 22, 2024. For further information, see Note 9 under “Notes to Unaudited Condensed Consolidated
Financial Statements”.
Our capital expenditures are primarily related to new store openings, store resets, which consist of improvements to stores
as they are needed, expenditures related to our distribution centers, and infrastructure-related investments, including investments related to upgrading and maintaining our information technology systems. For the thirteen weeks ended May 4,
2019, we spent $20.1 million for capital expenditures compared to $4.7 million for the thirteen weeks ended May 5, 2018. We expect to fund capital expenditures from net cash provided by operating activities. We opened 21 stores during the
thirteen weeks ended May 4, 2019 and expect to open between 42 and 44 stores during 2019. We also expect to invest in our distribution centers, including the 58-acre parcel of land in Lancaster, TX acquired in 2018 for the construction of our
third distribution center. In addition, we expect to invest in store resets and general corporate capital expenditures, including information technology, in 2019.
Historically, we have funded our capital expenditures and working capital requirements during the fiscal year with cash on
hand and borrowings under our Revolving Credit Facility. When we have used our Revolving Credit Facility, the amount of indebtedness outstanding under it has tended to be the highest in the beginning of our fourth fiscal quarter.
Our primary working capital requirements are for the purchase of inventory, payroll, rent, other store operating costs,
distribution costs and general and administrative costs. Our working capital requirements fluctuate during the year, rising in our third fiscal quarter as we increase quantities of inventory in anticipation of our peak holiday sales season in
our fourth fiscal quarter. Fluctuations in working capital are also driven by the timing of new store openings.
Based on our new store growth plans, we believe our cash position, net cash provided by operating activities and
availability under our Revolving Credit Facility will be adequate to finance our planned capital expenditures, working capital requirements and debt service over the next 12 months. If cash provided by operating activities and borrowings under
our Revolving Credit Facility are not sufficient or available to meet our capital requirements, we will then be required to obtain additional equity or debt financing in the future. There can be no assurance equity or debt financing will be
available to us when needed or, if available, the terms will be satisfactory to us and not dilutive to our then-current stockholders.
Summary of Cash Flows
A summary of our cash flows from operating, investing and financing activities is presented in the following table:
|
Thirteen weeks ended
|
||||||||
|
May 4,
2019
|
May 5,
2018
|
|||||||
|
(in thousands)
|
||||||||
|
Net cash provided by operating activities
|
$
|
21,976
|
$
|
15,348
|
||||
|
Net cash used in investing activities
|
(20,107
|
)
|
(4,708
|
)
|
||||
|
Net cash provided by (used in) financing activities
|
4,701
|
(22,260
|
)
|
|||||
|
Net increase (decrease) in cash and cash equivalents
|
$
|
6,570
|
$
|
(11,620
|
)
|
|||
Cash Provided by Operating Activities
Net cash provided by operating activities for the thirteen weeks ended May 4, 2019 and May 5, 2018 was $22.0 million and
$15.3 million, respectively. The increase in net cash provided by operating activities for the thirteen weeks ended May 4, 2019 was primarily due to increases in net income due to new store openings.
Cash Used in Investing Activities
Net cash used in investing activities for the thirteen weeks ended May 4, 2019 and May 5, 2018 was $20.1 million and $4.7
million, respectively. The increase in cash used in investing activities relates to the continued construction of our third distribution center, which totaled approximately $10.1 million, and the timing of capital expenditures for our new store
locations.
Cash Provided by (Used In) Financing Activities
Net cash provided by financing activities was $4.7 million in the thirteen weeks ended May 4, 2019 compared to net cash used
in financing activities of $22.3 million in the thirteen weeks ended May 5, 2018. The net change in financing activities is primarily due to the pay off of the term loan in 2018.
Contractual Obligations
We enter into long-term contractual obligations and commitments in the normal course of business, primarily operating
leases. Except as set forth below, there have been no material changes to our contractual obligations as disclosed in our Annual Report on Form 10-K, other than those which occur in the ordinary course of business.
During the thirteen weeks ended May 4, 2019, eight new store leases commenced. The fully executed leases have initial terms
of approximately seven years with options to renew for three to five successive five-year periods which have future minimum lease payments which total approximately $12.5 million.
Off-Balance Sheet Arrangements
We do not have any off-balance
sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues, expenses and related disclosures. There have been no significant changes in the significant accounting policies and estimates.
Recently Issued Accounting Pronouncements
Recently issued accounting pronouncements are discussed in Note 1(f) to the condensed consolidated
financial statements.
Interest Rate Risk
We are subject to interest rate risk in connection with borrowings under our credit facilities, which bear interest at
variable rates. As of May 4, 2019, we had no outstanding variable rate debt under our Revolving Credit Facility and no outstanding variable rate debt under our Term Loan Facility, which was paid in full in 2018.
As of May 4, 2019, there were no other material changes in the market risks described in the “Quantitative and Qualitative
Disclosure of Market Risks” section of our Annual Report on Form 10-K filed with the SEC on March 29, 2019.
Impact of Inflation
Our results of operations and financial condition are presented based on historical cost. While it is difficult to
accurately measure the impact of inflation due to the imprecise nature of the estimates required, we believe the effects of inflation, if any, on our historical results of operations and financial condition have been immaterial. We cannot be
assured that our results of operations and financial condition will not be materially impacted by inflation in the future.
Evaluation of Disclosure Controls and Procedures
Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief
Financial Officer, the effectiveness of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report
on Form 10-Q pursuant to Rule 13a-15(b) of the Exchange Act. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of the end of the period covered by this
Quarterly Report on Form 10-Q are effective at a reasonable assurance level in ensuring that information required to be disclosed in our Exchange Act reports is: (1) recorded, processed, summarized and reported in a timely manner, and (2)
accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our management, including our Chief Executive Officer and
Chief Financial Officer, does not expect that our disclosure controls and procedures will prevent or detect all errors and all fraud. While our disclosure controls and procedures are designed to provide reasonable assurance of their
effectiveness, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
Changes in Internal Control over Financial Reporting
We adopted ASU 2016-02, Leases,
as of February 3, 2019. As a result, we implemented controls related to the adoption and the related financial statement reporting. There were no other changes to our internal control over financial reporting during the thirteen weeks
ended May 4, 2019 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
From time to time we may be involved in claims and legal actions that arise in the ordinary course of
our business. We cannot predict the outcome of any litigation or suit to which we are a party. However, we do not believe that an unfavorable decision of any of the current claims or legal actions against us, individually or in the aggregate,
will have a material adverse effect on our financial position, results of operations, liquidity or capital resources.
See Item 1A in our Annual Report on Form 10-K for the year ended February 2, 2019 for a detailed description of risk factors
affecting the Company. There have been no significant changes from the risk factors previously disclosed in those filings.
Not applicable.
Not applicable.
Not applicable.
None.
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Exhibit No.
|
Description of Exhibits
|
|
|
Amended and Restated Credit Agreement, dated May 22, 2019, among Bargain Parent, Inc., OBO Ventures, Inc. and certain subsidiaries, as
borrowers, Manufacturers and Traders Trust Company, as Administrative Agent, and certain lenders party thereto (incorporated by reference to Exhibit 10.1 to the Current Report filed on Form 8-K by the Company on May 24, 2019 (No.
001-37501)).
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||
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Amended and Restated Guarantee and Collateral Agreement, dated May 22, 2019, Bargain Parent, Inc., Ollie’s Holdings, Inc., OBO Ventures,
Inc. and certain subsidiaries, in favor of Manufacturers and Trading Trust Company, as Administrative Agent (incorporated by reference to Exhibit 10.2 to the Current Report filed on Form 8-K by the Company on May 24, 2019 (No.
001-37501)).
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||
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Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
||
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
||
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
||
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
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||
|
**101.INS
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XBRL Instance Document.
|
|
|
**101.SCH
|
XBRL Taxonomy Extension Schema Document.
|
|
|
**101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
**101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
**101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
**101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document.
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* Filed herewith.
† Previously filed.
** Submitted electronically with this Report.
Pursuant to the requirements 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.
|
OLLIE’S BARGAIN OUTLET HOLDINGS, INC.
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|||
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Date: June 10, 2019
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/s/ Jay Stasz
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Jay Stasz
|
|
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Senior Vice President and
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|
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Chief Financial Officer
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(Principal Financial and Accounting Officer)
|
27
Exhibit 31.1
CERTIFICATIONS
I, Mark Butler, certify that:
| 1. |
I have reviewed this quarterly report on Form 10-Q of Ollie’s Bargain Outlet Holdings, Inc.;
|
| 2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
| 3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
| 4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
| (a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
| (b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
|
| (c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
| (d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal
quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
| 5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
| (a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
| (b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
|
|
Date: June 10, 2019
|
/s/ Mark Butler
|
|
Mark Butler
|
|
|
President, Chief Executive Officer and Chairman of the Board
|
|
|
(Principal Executive Officer)
|
Exhibit 31.2
CERTIFICATIONS
I, Jay Stasz, certify that:
| 1. |
I have reviewed this quarterly report on Form 10-Q of Ollie’s Bargain Outlet Holdings, Inc.;
|
| 2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
| 3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
| 4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
| (a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
| (b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
|
| (c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
| (d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal
quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
| 5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
| (a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
| (b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
|
|
Date: June 10, 2019
|
/s/ Jay Stasz
|
|
Jay Stasz
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Ollie’s Bargain Outlet Holdings, Inc. (the “Company”) on Form 10-Q for the
quarter ended May 4, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark Butler, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, adopted pursuant to §906 of the
Sarbanes-Oxley Act of 2002, that:
| (1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
| (2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
Date: June 10, 2019
|
||
|
/s/ Mark Butler
|
||
|
Mark Butler
|
||
|
Chief Executive Officer
|
||
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Ollie’s Bargain Outlet Holdings, Inc. (the “Company”) on Form 10-Q for the
quarter ended May 4, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jay Stasz, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, adopted pursuant to §906 of the
Sarbanes-Oxley Act of 2002, that:
| (1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
| (2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
Date: June 10, 2019
|
||
|
/s/ Jay Stasz
|
||
|
Jay Stasz
|
||
|
Chief Financial Officer
|
||