What changed in this filing

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Item 1. Business

2021-03-18 compared with 2020-03-19 · 156 added, 42 removed, 247 unchanged (44% of the section changed)

Recent Developments

The outbreak of the Coronavirus (or COVID-19) continues to grow both in the U.S.

and globally and is expected to adversely affect our business operations.

It is impossible to predict the effect and ultimate impact of the COVID-19 pandemic as the situation is rapidly evolving.

On March 13, 2020, the President of the United States declared a national emergency as a result of the outbreak in the U.S.

The pandemic has caused public health officials to recommend precautions to mitigate the spread of the virus, especially when congregating in heavily populated areas, such as malls and shopping centers.

In recent days there have been mandates from federal, state and local authorities requiring reduction of operating hours and forced temporary closures of non-essential retailers and other businesses, which have affected our stores, further negatively impacting our business.

As a result of these developments, and out of concern for our customers, crew members and community, effective at the end of business on March 19, 2020, we will be temporarily closing all of our retail stores until at least March 31, 2020.

All statements in this Annual Report concerning our current and planned operations, including plans concerning opening new stores and associated capital expenditures, are modified by reference to these recent developments, and our ability to carry out those plans are dependent on further developments associated with the COVID-19 pandemic.

For more information, see "Risks Relating to Our Business and Industry - The Coronavirus (or COVID-19) outbreak has led to the temporary closure of our stores and is expected to have an adverse impact on our results of operations, financial position and liquidity " later in this Annual Report.

Five Below, Inc.

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We operate on a fiscal calendar widely used by the retail industry that results in a given fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to January 31 of the following year.

References to "fiscal year 2021" or "fiscal 2021" refer to the period from January 31, 2021 to January 29, 2022, which consists of a 52-week fiscal year.

References to "fiscal year 2020" or "fiscal 2020" refer to the period from February 2, 2020 to January 30, 2021, which consists of a 52-week fiscal year.

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References to “fiscal year 2016” or “fiscal 2016” refer to the period from January 31, 2016 to January 28, 2017, which consists of a 52-week fiscal year.

References to “fiscal year 2015” or “fiscal 2015” refer to the period from February 1, 2015 to January 30, 2016, which consists of a 52-week fiscal year.

References to 2021, 2020, 2019, 2018, 2017, and 2016 are to our fiscal years unless otherwise specified.

Due to the 53rd week in fiscal 2017, all comparable sales related to any reporting period during the year ended February 2, 2019 are reported on a restated calendar basis using the National Retail Federation's restated calendar comparing similar weeks.

Effects of the COVID-19 Pandemic on our Business and Operations

As a result of the coronavirus (or COVID-19) pandemic in 2020, federal, state and local governments and private entities mandated various restrictions, including travel restrictions, restrictions on public gatherings, stay at home orders and advisories, and quarantining of people who may have been exposed to the virus.

Such mandates required reduction of operating hours and forced temporary closures of certain retailers and other businesses.

As a result of these restrictions and out of concern for our customers and employees, we temporarily closed all of our stores as of March 20, 2020.

We began reopening our stores at the end of April in compliance with federal, state and local requirements.

As a result of the temporary store closures, we withheld store rent for the closure period.

With respect to virtually all of our lease portfolio, we have resumed rent payments and, in most cases, agreed to rent deferrals and abatements related to this closure period with landlords.

As a result, we do not expect that our prior rent withholdings or the associated deferrals and abatements agreed upon with landlords will have a material adverse impact on our business, financial condition and results of future operations.

As a result of the COVID-19 pandemic, our business operations and results of operations, including our net sales, earnings and cash flows, were materially impacted in fiscal 2020 as a result of the temporary closures of our stores in the first half of 2020, and decreased customer traffic in stores, including, without limitation, as the result of limitations on the number of persons permitted in stores at one time by certain local and state regulations.

Although our ability to operate improved in the second half of fiscal 2020, the ultimate health and economic impact of the COVID-19 pandemic remain highly uncertain.

If the pandemic were to worsen, our business operations and results of operations, including our net sales, earnings and cash flows, may be materially impacted for the foreseeable future, as a result of:

• additional temporary closures of our stores;

• continued decreased customer traffic in stores, including, without limitation, as the result of limitations on the number of persons permitted in stores at one time by certain local and state regulations;

• uncertainty of the extent to which customers will continue making purchases through our e-commerce website and through curbside pickup (if and where any stores are closed to the public);

• changes in consumer confidence and consumer spending habits, including spending for the merchandise that we sell, and negative trends in consumer purchasing patterns due to changes in consumers’ disposable income, credit availability and debt levels;

• disruption to our supply chain including the manufacturing, supply, distribution, transportation and delivery of our products;

• increased safety measures for our employees and customers at our stores, distribution centers and home office;

• a slowdown in the U.S.

and global economies, and an uncertain global economic outlook or a potential credit crisis.

To seek to mitigate the effects of the pandemic and to create financial flexibility, we took the following actions:

• a majority of our store and distribution center employees were furloughed in March and we covered the cost of health benefits for such furloughed employees through the end of May;

• we implemented a voluntary temporary base salary reduction of 50% for Joel Anderson, our Chief Executive Officer, and a 25% base salary reduction for the remainder of the executive leadership team that reports into Mr.

This compensation was reinstated in the second fiscal quarter of 2020 after substantially all of our stores were reopened;

• our Board of Directors elected to forgo its quarterly cash retainers for the first fiscal quarter of 2020;

• we implemented a temporary pay reduction for all salaried corporate employees and certain field and supply chain leadership (that has been reinstated now that substantially all of our stores have reopened) and delayed annual salary increases for corporate employees;

• as permitted by the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, we applied for and received payroll tax credits with the IRS, and elected to defer the payment of the employer's portion of FICA taxes;

• we implemented significant temporary non-payroll expense reductions, including advertising, occupancy and other store operating expenses, distribution and corporate office operating expenses, as well as professional and consulting fees;

• we temporarily ceased paying rent on all closed store locations;

as discussed above, with respect to virtually all of our lease portfolio, we have resumed rent payments and, in many cases, agreed to rent deferrals and abatements related to this closure period with landlords;

• we cancelled certain vendor orders and delayed receipts on others in order to manage inventory levels, and extended payment terms for product and non-product vendors, although we have since returned to more normalized payment terms;

• we significantly reduced our 2020 capital expenditure budget, including reducing the number of new stores to be opened in 2020 and delaying purchase and construction of a new Midwest distribution center;

• we amended our Credit Agreement and increased our Revolving Credit Facility from $50 million to $225 million;

• we evolved our product mix to meet the needs of our customers by adding to our assortment of essential products, including consumables (such as cleaning and personal hygiene products), food and drink, fitness products, pet accessories, and products needed to support work-from-home and school-from-home.

Depending on future developments with respect to the COVID-19 pandemic, including any new federal, state and local governmental restrictions that may be imposed, we may determine to reinstate any of the foregoing mitigation measures that have been terminated or take any additional steps that we consider necessary.

For more information, see "Risks Relating to Our Business and Industry - The COVID-19 global pandemic and measures intended to prevent its spread present material uncertainty and risk and have had, and are expected to continue to have, a material adverse impact on our business, results of operations, financial condition, and cash flows." later in this Annual Report.

Five Below is a rapidly growing specialty value retailer offering a broad range of trend-right, high-quality merchandise targeted at the tween and teen customer.

We offer a dynamic, edited assortment of exciting products, most priced at $5 and below with some items up to $10, including select brands and licensed merchandise across eight worlds:

We offer a dynamic, edited assortment of exciting products, most priced at $5 and below, including select brands and licensed merchandise across eight worlds:

Style , Room , Sports , Tech , Create , Party, Candy and Now .

In the fall of 2019, we rolled out new pricing to our full chain, increasing prices on certain products to be over $5.

We believe we are transforming the shopping experience of our target demographic with a differentiated merchandising strategy and high-energy retail concept, which allows our customers to “Let Go and Have Fun.” Based on our management’s experience and industry knowledge, we believe our customer-centric, experience-first, innovative approach to retail has led to a fiercely loyal customer base and has fostered universal appeal across a variety of age groups beyond our target demographic.

We opened the first Five Below store in the greater Philadelphia area in 2002 and, since then, have been expanding throughout the United States.

As of February 1, 2020 , we operated a total of 900 locations across 36 states.

As of January 30, 2021, we operated a total of 1,020 locations across 38 states.

Our new store model assumes a store size of approximately 9,000 square feet and is typically located within power, community and lifestyle shopping centers across a variety of urban, suburban and semi-rural markets.

We opened 150 new stores in fiscal 2019 and we plan to open new stores in fiscal 2020 .

We opened 120 net new stores in fiscal 2020 and we plan to open approximately 170 to 180 new stores in fiscal 2021.

We believe that we have the opportunity to grow our store base to more than 2,500 locations over time.

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Our e-commerce expenses will have components classified as both cost of goods sold and selling, general and administrative expenses.

We believe that our business model has resulted in strong financial performance irrespective of the economic environment:

Our comparable sales increased by 0.6% in fiscal 2019 , 3.9% in fiscal 2018 , based on the restated calendar, and 6.5% in fiscal 2017 .

We believe that our business model has resulted in strong financial performance when considered in light of the economic environment:

• Our comparable sales decreased by 5.5% in fiscal 2020, and increased by 0.6% in fiscal 2019, and 3.9% in fiscal 2018, based on the restated calendar.

• We expanded our store base from 750 stores at the end of fiscal year 2018 to 1,020 stores at the end of fiscal year 2020, representing a compounded annual growth rate of 16.6%.

• Between fiscal 2018 and 2020, our net sales increased from $1.6 billion to $2.0 billion, representing a compounded annual growth rate of 12.2%.

Over the same period, our operating income increased from $157.4 million to $217.3 million , representing a compounded annual growth rate of 17.5% .

Over the same period, our operating income decreased from $187.2 million to $154.8 million.

Our Competitive Strengths

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While we refresh our products frequently, we maintain a floor layout, designed with an easy-to-navigate flow and featuring sight-lines across the entire store enabling customers to easily identify our category worlds.

All of our stores feature a sound system playing trend-right music throughout the shopping day.

All of our stores feature a sound system playing popular music throughout the shopping day.

We employ novel and dynamic techniques to display our products, including distinctive merchandise fixtures and colorful and stimulating signage.

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• Highly Experienced and Passionate Senior Management Team with Proven Track Record.

Our senior management team, led by Joel Anderson, our President and Chief Executive Officer, has extensive retail experience across a broad range of disciplines, including merchandising, real estate, finance, store operations, supply chain management and information technology.

Our senior management team, led by Joel Anderson, our President and Chief Executive Officer, has extensive retail experience across a broad range of disciplines, including merchandising, real estate, finance, store operations, digital, supply chain management and information technology.

Our management team drives our operating philosophy, which is based on a relentless focus on providing high-quality merchandise at exceptional value and a superior shopping experience utilizing a disciplined, low-cost operating and sourcing structure.

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• Grow Our Store Base.

We believe there is significant opportunity to expand our store base throughout the United States from 900 locations as of February 1, 2020 to more than 2,500 locations within the United States over time.

We believe there is significant opportunity to expand our store base throughout the United States from 1,020 locations as of January 30, 2021 to more than 2,500 locations within the United States over time.

Based upon our strategy of store densification, we expect most of our near-term growth will occur within our existing markets, as well as new markets.

This strategy allows us to benefit from enhanced brand awareness and achieve operational efficiencies.

We opened 125 net new stores in fiscal 2018 and 150 new stores in fiscal 2019 , and we plan to open new stores in fiscal 2020 .

We opened 150 new stores in fiscal 2019 and 120 net new stores in fiscal 2020, and we plan to open approximately 170 to 180 new stores in fiscal 2021.

Our new store model assumes approximately 9,000 square feet and is primarily in-line locations within power, community and lifestyle shopping centers across a variety of urban, suburban and semi-rural markets.

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We analyze the demographics of the surrounding trade areas and the performance of adjacent retailers, as well as traffic and specific site characteristics and other variables.

As of February 1, 2020 , we have executed lease agreements for the opening of 105 new stores in fiscal 2020 ,

As of January 30, 2021, we have executed lease agreements for the opening of 96 new stores in fiscal 2021.

• Drive Comparable Sales.

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We have a cost-effective marketing strategy designed to promote brand awareness and drive store and website traffic.

Our strategy includes the use of digital marketing, streaming video, television, print media, philanthropic and local community marketing to support existing and new market entries.

Our strategy predominantly includes the use of digital marketing, streaming video, television, philanthropic and local community marketing to support existing and new market entries.

We leverage our growing e-mail database, mobile website and social media presence to drive brand engagement and increased store visits within existing and new markets.

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Percentage of Net Sales

2020 2019 2018

Leisure 47.3 % 49.8 % 50.9 %

Fashion and home 35.8 % 31.3 % 30.9 %

Party and snack 16.9 % 18.9 % 18.2 %

Total 100.0 % 100.0 % 100.0 %

Leisure includes items such as sporting goods, games, toys, tech, books, electronic accessories, and arts and crafts.

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Party and snack includes items such as party and seasonal goods, greeting cards, candy and other snacks, and beverages.

As of February 1, 2020 , we operated 900 stores throughout the United States.

As of January 30, 2021, we operated 1,020 stores throughout the United States.

Our new store model assumes a store size of approximately 9,000 square feet.

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approximately 5% of our stores are located in malls.

The following map shows the number of stores in each of the states in which we operated and the locations of our distribution centers as of February 1, 2020 .

The following map shows the number of stores in each of the states in which we operated and the locations of our distribution centers as of January 30, 2021.

Store Design and Layout

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We seek to operate stores in high-visibility, high-traffic retail venues, which reinforce our brand message, heighten brand awareness and drive customer traffic.

Our strategy is to saturate markets with clusters of stores because of the considerable benefit that stores derive from market concentration.

Our strategy is to densify markets with clusters of stores because of the considerable benefit that stores derive from market concentration.

Our store model is profitable across a variety of urban, suburban and semi-rural markets and in multiple real estate venues including power, community and lifestyle shopping centers.

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We believe there is a significant opportunity to expand our store base in the United States.

We opened 150 new stores in fiscal 2019 and we intend to open new stores in fiscal 2020 through expansion in existing markets and by entering new markets.

We maintain a pipeline of real estate sites that have been approved by our real estate committee and have executed 105 leases as of February 1, 2020 for new stores in fiscal 2020 .

We opened 120 net new stores in fiscal 2020 and we intend to open approximately 170 to 180 new stores in fiscal 2021 through expansion in existing markets and by entering new markets.

We maintain a pipeline of real estate sites that have been approved by our real estate committee and have executed 96 leases as of January 30, 2021 for new stores in fiscal 2021.

The actual number, location and timing of new store openings in 2021 will depend on a number of factors, such as retail trends, competition, the general economic environment and our ability to hire and retain new store managers and employees.

Our recent store growth is summarized in the following table:

Period Stores at

Period Stores

Opened Stores

Increase Stores at

Fiscal 2018 625 126 1 125 750

Fiscal 2019 750 150 — 150 900

Fiscal 2020 900 122 2 120 1,020

Opening stores within existing markets enables Five Below to benefit from enhanced brand awareness and to achieve advertising, operating and distribution efficiencies.

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Our Chief Merchandising Officer has over 30 years of experience within the retail sector.

Our product development team is led by a Senior Vice President of Business and Product Development.

Our product development team works directly with our merchandising group to identify new and improved products through international sourcing.

Our Senior Vice President of Business and Product Development has over 30 years of experience within the retail sector.

Our product development team works directly with our merchandising group to identify new and improved products through international sourcing and has significant experience within the retail sector.

We believe we have strong sourcing capabilities developed through a dynamic and collaborative relationship with our vendor partners that provide us with favorable access to quality merchandise at attractive prices.

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We also employ an opportunistic buying strategy, capitalizing on selected excess inventory opportunities, to purchase complementary merchandise based on consumer trends, product availability and favorable economic terms.

We work with approximately 800 active vendors, with no single vendor representing more than 7% of our purchases in fiscal 2019 .

We work with approximately 1,000 vendors, with no single vendor representing more than 5% of our purchases in fiscal 2020.

We sourced approximately 60% of our purchases from domestic vendors in fiscal 2020.

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Distribution and Fulfillment

We distribute over 85% of our merchandise for our retail stores from our approximately 1,000,000 square foot distribution center in Pedricktown, New Jersey, our approximately 700,000 square foot distribution center in Forsyth, Georgia and our approximately 600,000 square foot distribution center in Olive Branch, Mississippi, with the remaining merchandise shipped directly from the vendor to our stores.

We distribute over 85% of our merchandise for our retail stores from our approximately 1,000,000 square foot distribution center in Pedricktown, New Jersey, our approximately 860,000 square foot distribution center in Conroe, Texas, our approximately 700,000 square foot distribution center in Forsyth, Georgia and our approximately 600,000 square foot distribution center in Olive Branch, Mississippi, with the remaining merchandise shipped directly from the vendor to our stores.

We realize cost savings by working with our vendors to streamline and reduce packaging to diminish shipping costs.

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In August 2019, we acquired land in Conroe, Texas, to build an approximately 860,000 square foot distribution center.

The total cost of the land and building is expected to be approximately $56 million, of which approximately $31 million has been paid through February 1, 2020.

We expect to occupy the distribution center in Conroe, Texas in 2020.

The total amount paid for the land and building was approximately $56 million.

We began operating the distribution center in July 2020.

In July 2020, we acquired land in Buckeye, Arizona, to build an approximately 860,000 square foot distribution center.

The total cost of the land and building is expected to be approximately $65 million, of which approximately $36 million has been paid through January 30, 2021.

We expect to occupy the distribution center in Buckeye, Arizona in the second half of 2021.

We are planning to lease or build new distribution centers over the next few years to support our growth objectives.

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Our cost-effective marketing strategy is designed to promote brand awareness and drive store and website traffic with our target demographic, as well as other value-oriented customers.

Our strategy includes highlighting our brand and exceptional value proposition through the use of digital advertising, commercials (on television and through streaming), print media, and local marketing, with a focus on peak selling seasons.

Our strategy includes highlighting our brand and exceptional value proposition predominantly through the use of digital advertising, commercials (on television and through streaming), and local marketing, with a focus on peak selling seasons.

Additionally, we rely on the strong visibility and the presence of our store locations, email messaging and community fundraising to promote and further our brand image and drive traffic.

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Our marketing team works with our merchandising team to develop novel and dynamic techniques to display our products, including distinctive merchandise fixtures and colorful and stimulating signage, which attract customers, encourage hands-on interaction with our products and convey our value pricing.

For new store openings, we seek to create community awareness and consumer excitement through a mix of print and digital advertising, public relations and community outreach promoting the grand opening and by creating an engaging grand opening event that includes contests, giveaways and signature “Five Cent” hot dogs.

For new store openings, we seek to create community awareness and consumer excitement predominantly through digital advertising, public relations and community outreach promoting the grand opening and by creating an engaging grand opening event that includes contests, giveaways and signature “Five Cent” hot dogs.

We also aim to execute multiple store openings in a given new market on the same day in order to leverage marketing efforts to produce maximum impact.

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We also own domain names, including www.fivebelow.com , and unregistered copyrights in our website content.

We attempt to obtain registration of our trademarks whenever practicable and pursue any

infringement of those marks.

We attempt to obtain registration of our trademarks whenever practicable and pursue any infringement of those marks.

Solely for convenience, trademarks and trade names referred to in this document may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names.

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We monitor changes in these laws and believe that we are in material compliance with applicable laws.

As a result of the COVID-19 pandemic, federal, state and local governments and private entities mandated various restrictions, including travel restrictions, restrictions on public gatherings, stay at home orders and advisories, and quarantining of people who may have been exposed to the virus.

Such mandates required reduction of operating hours and forced temporary closures of certain retailers and other businesses.

As a result of these restrictions and out of concern for our customers and employees, we temporarily closed all of our stores as of March 20, 2020.

We began reopening our stores at the end of April and continued in operation throughout fiscal 2020 in compliance with federal, state and local requirements.

While we were able to quickly reopen our stores and maintain operational throughout the remainder of fiscal 2020, there can be no guarantee that federal, state and local governments will not adopt restrictions that further serve to restrict our ability to operate.

We maintain third-party insurance for a number of risk management activities including but not limited to workers’ compensation, cyber, directors & officers, general liability, property and employee-related health care benefits.

We evaluate our insurance requirements on an ongoing basis to ensure we maintain adequate levels of coverage.

As of February 1, 2020 , we employed approximately 4,400 full-time and 12,200 part-time employees.

Of our total employees, approximately 500 were based at our corporate headquarters in Philadelphia, Pennsylvania, approximately 700 were based at our distribution centers in Pedricktown, New Jersey, Olive Branch, Mississippi, Forsyth, Georgia and Cincinnati, Ohio and approximately 15,400 were store employees.

Human Capital

Our Purpose, Beliefs and Core Values

The success and growth of Five Below is the direct result of our employees (whom we call "crew members") who embrace our purpose, our beliefs and our core values.

- Our Purpose -

What We Believe

- The Five Below Way -

How We Behave

- Our Five Core Values -

Five Below knows life is way better when you're free to Let Go and Have Fun in an amazing experience filled with unlimited possibilities priced so low we make it easy to say YES!

to the newest, coolest stuff!

We are an Adopted Family.

One who actively participates and leans in to support each other and our business.

In this family, we value every individual for their uniqueness and potential.

We know Five Below is strongest when our teams reflect the diversity of the communities we serve and our crew members can bring their whole authentic self to work, do what they do best, feel that they truly belong and grow every single day.

We live our purpose through five core values.

These values guide all of our decisions and actions.

• Wow Our Customers

• Unleash your Passion

• Hold the Penny Hostage

• Achieve the Impossible

• Work Hard, Have Fun and Build a Career

As of January 30, 2021, we employed approximately 5,100 full-time and 13,900 part-time employees.

Of our total employees, approximately 500 were corporate, approximately 900 were based at our distribution centers in Pedricktown, New Jersey, Olive Branch, Mississippi, Forsyth, Georgia, Conroe, Texas and Cincinnati, Ohio and approximately 17,600 were store employees located in 38 states throughout the United States.

The number of part-time employees fluctuates depending on seasonal needs.

None of our employees belong to a union or are party to any collective bargaining or similar agreement.

COVID-19 Response

As a result of the Covid-19 pandemic, we responded quickly to put the safety of our employees first.

For the health and safety of our corporate employees, we implemented a work from home policy in March 2020, which has continued ever since.

In our distribution centers, we remained operational as we quickly adopted safety protocols.

As for the stores, as a result of federal, state and local restrictions and out of concern for our customers and employees, we temporarily closed all of our stores as of March 20, 2020.

We began reopening our stores at the end of April only after extensive safety protocols were introduced.

We established robust safety protocols at all of our workplaces, including offices, stores, and distribution centers, summarized below (all in accordance with applicable federal, state and local standards):

Mitigation Measure Corporate Stores Distribution Centers

Mandatory face coverings for all employees and, where required by law, customers X X X

Daily health checks (with temperature checks when warranted) X X X

Additional signage, floor decals and reminder messaging regarding social distancing X X X

Increased sanitization of high touch surfaces X X X

Established policies for COVID-19 exposure, contact tracing and remediation X X X

Implemented COVID-19 sick pay policy for impacted employees X X X

Restricted non-essential employee travel X X X

Implemented work from home policy and limited mandatory in-person meetings X

Installation of plexiglass barriers at workstations / point-of-sale X X

Adopted occupancy limitations (employees and customers as applicable) X X

Further roll out of employee self-assisted check-out in stores X

Established COVID-19 hotline for employees X X X

Total Rewards

We provide a comprehensive suite of benefits designed to help employees and their families stay healthy, meet their financial goals, protect their income and help them balance their work and personal lives.

We provide competitive pay and significant career growth opportunities all within a culture that values diverse viewpoints and contributions at every level.

Our available benefits also include the following:

Health and Wellness Medical (with a choice of two high deductible plans and a traditional plan)

Prescription drug coverage included with every medical plan

Dental (with a choice of two plans)

Health savings account with Company match

Pre-tax flexible spending account for qualified medical and dependent care expenses

Mental health support with medical benefits coverage

Employee assistance program

Fertility program

Life and Disability No cost life and disability coverage provided for all employees

Supplemental life plan at option and cost of employees

401(k) 401(k) retirement savings option with safe harbor Company match

Other In-store employee discount

Employee Stock Purchase Plan

Paid time off provided to all full-time employees

Paid parental leave

Identification theft, pet insurance, legal services access, as well as supplemental accident, hospital indemnity, and critical illness coverage

Employment Practices

We aim to provide challenging, meaningful and rewarding opportunities for personal and professional growth of all employees, and encourages all employees to bring their unique backgrounds and experiences to the table to work together.

In order to promote the desired work environment, we have adopted policies which describe the standards of respect, inclusivity and professionalism expected of all employees.

As an equal opportunity employer, we comply with all federal, state and local laws.

This means that we make all employment decisions (such as who to recruit, hire, train, promote, transfer, and terminate, as well as compensation decisions) without considering an employee’s or applicant’s sex, race, religion, color, gender (including gender identity and gender expression), national origin, ancestry, physical or mental disability, medical condition, genetic information, marital status, registered domestic partner status, age, sexual orientation, military and veteran status or any other characteristic protected by federal, state or local law.

We do not and will not tolerate harassment, discrimination, retaliation, and disrespectful or other unprofessional conduct against employees or any other covered persons based on any protected characteristic.

We also prohibit discrimination, harassment, disrespectful or unprofessional conduct based on the perception that anyone has any of those characteristics, or is associated with a person who has or is perceived as having any of those characteristics.

In addition, we will not retaliate against individuals who raise complaints of discrimination or harassment or who participate in workplace investigations or other protected activities.

Furthermore, we are committed to maintaining a workplace free from sexual harassment and unwelcome conduct, and recognizes sexual harassment as a form of workplace discrimination.

We promote and strive to maintain a safe and healthy work environment, and conduct our business in ways that protect our employees’ safety and are sensitive to the environment.

We are committed to maintaining a drug-free work place and prohibit the manufacture, distribution, sale, purchase, transfer, possession, or use of illegal substances in the workplace, while representing us outside the workplace or if such activity affects work performance or the work environment of the Company.

We encourage open, timely communications that help us achieve organizational goals, share information, increase understanding, participate in the decision-making process, enhance our pride in the organization and provide recognition for our work-related successes.

We believe our policies and practices are in compliance with all applicable laws, and have been designed with significant inputs from the employees themselves.

Our business is seasonal in nature with the highest level of net sales and net income generated in the fourth fiscal quarter due to the year-end holiday season and, therefore, operating results for any fiscal quarter are not necessarily indicative of results for the full fiscal year.

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

What changed 10-K

Item 1. Business