What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-24 compared with 2020-03-25 · 138 added, 179 removed, 548 unchanged (37% of the section changed)

5 unchanged sentences

Consolidated Financial Statements:

Consolidated Statements of Income for the fiscal years ended February 1, 2020, February 2, 2019 and February 3, 2018

Consolidated Balance Sheets as of February 1, 2020 and February 2, 2019

Consolidated Statements of Stockholders’ Equity for the fiscal years ended February 1, 2020, February 2, 2019 and February 3, 2018

Consolidated Statements of Cash Flows for the fiscal years ended February 1, 2020, February 2, 2019 and February 3, 2018

Consolidated Statements of Income for the fiscal years ended January 30, 2021, February 1, 2020 and February 2, 2019

Consolidated Balance Sheets as of January 30, 2021 and February 1, 2020

Consolidated Statements of Stockholders’ Equity for the fiscal years ended January 30, 2021, February 1, 2020 and February 2, 2019

Consolidated Statements of Cash Flows for the fiscal years ended January 30, 2021, February 1, 2020 and February 2, 2019

Notes to Consolidated Financial Statements

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We have audited the accompanying consolidated balance sheets of Ollie’s Bargain Outlet Holdings, Inc.

and subsidiaries (the Company) as of February 1, 2020 and February 2, 2019, the related consolidated statements of income, stockholders’ equity, and cash flows for each of the fiscal years in the three-year period ended February 1, 2020, and the related notes and financial statement schedule I – condensed financial information of registrant (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of February 1, 2020 and February 2, 2019, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended February 1, 2020, in conformity with U.S.

and subsidiaries (the Company) as of January 30, 2021 and February 1, 2020, the related consolidated statements of income, stockholders’ equity, and cash flows for each of the fiscal years in the three-year period ended January 30, 2021, and the related notes and financial statement schedule I - condensed financial information of registrant (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of January 30, 2021 and February 1, 2020, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended January 30, 2021, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of February 1, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 25, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Changes in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for revenue as of February 4, 2018 due to the adoption of Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers.

Also as discussed in Note 4 to the consolidated financial statements, the Company has changed its method of accounting for leases as of February 3, 2019 due to the adoption of ASU 2016-02, Leases.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 30, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 24, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 4 to the consolidated financial statements, the Company has changed its method of accounting for leases as of February 3, 2019 due to the adoption of Accounting Standards Update (ASU) 2016-02, Leases .

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of excess inventories

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Factors considered in the determination of permanent markdowns include inventory obsolescence, excess inventories, current and anticipated demand, age of the merchandise and customer preferences.

As of February 1, 2020, the Company’s inventory balance was $335.2 million.

As of January 30, 2021, the Company’s inventory balance was $353.7 million.

We identified the evaluation of excess inventories as a critical audit matter.

Especially challenging auditor judgement was required to evaluate the timeliness of permanent markdowns due to the subjective nature of the audit procedures applied to evaluate the time period in which the excess inventories warranted a permanent markdown.

We addressed this critical audit matter by performing the following procedures.

We tested certain internal controls over the Company’s process relating to inventory permanent markdowns, including controls related to the review of the excess inventory analysis, which included the number of days inventories have been outstanding, in order to identify excess inventories.

To test the timeliness of permanent markdowns, we involved information technology professionals with specialized skills and knowledge to assess the reliability of the aged inventory items by product type, and we assessed the reliability of the excess inventory analysis.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the evaluation of excess inventories.

This included controls related to inventory permanent markdowns, including controls over the review of the excess inventory analysis, which provided the time period inventories have been outstanding in order to identify excess inventories.

To test the timeliness of permanent markdowns, we assessed the reliability of the excess inventory analysis, and we involved information technology professionals with specialized skills and knowledge, who assisted in evaluating the reliability of the aged inventory items by product type.

In addition, we evaluated the Company’s determination of timely permanent markdowns by analyzing the Company’s excess inventory analysis.

Assessment of the adoption of ASU 2016-02, Leases

As discussed in Note 4 to the consolidated financial statements, the Company adopted ASU 2016-02 on February 3, 2019.

The Company leases 344 stores, two distribution centers, and their corporate locations.

At the adoption date, the Company recognized $268.2 million of right-of-use assets and $269.1 million of operating lease liabilities on its consolidated balance sheet.

We identified the assessment of the adoption of ASU 2016-02 as a critical audit matter.

There was a significant amount of effort and judgment by the Company over its implementation of ASU 2016-02.

This in turn led to significant audit effort and a high degree of auditor judgment in applying our audit procedures to assess the Company’s adoption of ASU 2016-02, which required the assistance of professionals with specialized skills and knowledge.

Such audit effort and judgment required in our procedures related to testing the amount recorded for the right-of-use assets and lease liabilities, which also included evaluating assumptions inherent in the implementation of the standard;

specifically, the incremental borrowing rates used to discount the future cash flows.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s ASU 2016-02 implementation, including the Company’s process to estimate the incremental borrowing rates.

We selected a sample of leases classified as short-term to evaluate the Company’s determination that they qualified for the short-term lease recognition exemption.

We read the Company’s ASU 2016-02 accounting analyses that documented its selection of available practical expedients and the terms of its lease contracts.

We evaluated these analyses by selecting samples of lease contracts and comparing the relevant contract terms to those used by the Company in its determination of the right-of-use assets and lease liabilities.

We tested the amount recorded for the right-of-use asset and lease liability for samples of leases.

We evaluated the Company’s estimate of the incremental borrowing rates by comparing its rates to external data.

We utilized valuation professionals with specialized skills and knowledge, who assisted by independently estimating rates based on market-based data and comparing the results to the Company’s rates.

In addition, we evaluated the overall sufficiency of the audit procedures applied and audit evidence obtained over the Company’s adoption of ASU 2016-02.

We have served as the Company’s auditor since 2009.

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March 24, 2021

OLL IE’S BARGAIN OUTLET HOLDINGS, INC.

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

AND SUBSIDIARIES

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See accompanying notes to the consolidated financial statements.

OLL IE’S BARGAIN OUTLET HOLDINGS, INC.

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

AND SUBSIDIARIES

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Total current assets

Property and equipment, net of accumulated depreciation and amortization of $ 77,286 and $ 60,433 , respectively

Property and equipment, net

Operating lease right-of-use assets

Trade name and other intangible assets, net of accumulated amortization of $ 0 and $ 2,160 , respectively

Liabilities and Stockholders’ Equity

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See accompanying notes to the consolidated financial statements.

OLLI E’S BARGAIN OUTLET HOLDINGS, INC.

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity

(In thousands, except per share amounts)

(In thousands)

Treasury stock

stockholders’

Balance as of January 28, 2017

Balance as of February 3, 2018

Cumulative effect of adopting ASU 2014-09 (Note 2)

Stock-based compensation expense

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Balance as of February 2, 2019

Cumulative effect of adopting ASU 2014-09 (Note 2)

Stock-based compensation expense

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Common shares withheld for taxes

Shares repurchased

Balance as of February 1, 2020

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Shares repurchased

Balance as of February 1, 2020

Balance as of January 30, 2021

See accompanying notes to the consolidated financial statements.

OLLIE’S BARG AIN OUTLET HOLDINGS, INC.

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

AND SUBSIDIARIES

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Proceeds from sale of property and equipment

Purchase of intangible asset

Net cash used in investing activities

Cash flows from financing activities:

Repayments on term loan and capital leases

Repayments on term loan and finance leases

Payment of debt issuance costs

2 unchanged sentences

Payment for shares repurchased

Net cash used in financing activities

Net increase (decrease) in cash and cash equivalents

Net cash provided by (used in) financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at the beginning of the year

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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.

and subsidiaries (collectively referred 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 the first store opened in 1982, the Company has grown to 345 retail locations in 25 states as of February 1, 2020.

Since its first store opened in 1982, the Company has grown to 388 retail locations in 25 states as of January 30, 2021.

Ollie’s Bargain Outlet retail locations are located in Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Indiana, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, New Jersey, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Virginia, and West Virginia.

Ollie’s follows a 52/53-week fiscal year, which ends on the Saturday nearer January 31 of the following calendar year.

References to the fiscal year ended January 30, 2021 refer to the 52-week period from February 2, 2020 to January 30, 2021 (“2020”).

References to the fiscal year ended February 1, 2020 refer to the 52-week period from February 3, 2019 to February 1, 2020 (“2019”).

References to the fiscal year ended February 2, 2019 refer to the 52-week period from February 4, 2018 to February 2, 2019 (“2018”).

References to the fiscal year ended February 3, 2018 refer to the 53-week period from January 29, 2017 to February 3, 2018 (“2017”) .

Principles of Consolidation

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From time to time, Ollie’s invests temporary excess cash in overnight investments with expected minimal volatility, such as money market funds.

Although the Company maintains balances which exceed the FDIC insured limit, it has not experienced any losses related to this balance, and Ollie’s believes the credit risk to be minimal.

Although the Company maintains balances which exceed the FDIC insured limit, it has not experienced any losses related to these balances, and Ollie’s believes the credit risk to be minimal.

Inventories are stated at the lower of cost or market determined using the retail inventory method on a first-in, first-out basis.

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Such costs are thereafter expensed as cost of sales upon the sale of the merchandise.

Inherent in the retail inventory method are certain management judgments and estimates including, among others, merchandise markups, the amount and timing of permanent markdowns, and shrinkage, which may significantly impact both the ending inventory valuation and gross margin.

Factors considered in the determination of permanent markdowns include inventory obsolescence, excess inventories, current and anticipated demand, age of the merchandise and customer preferences.

Pursuant to the retail inventory method, permanent markdowns result in the devaluation of inventory and the resulting gross margin reduction is recognized in the period in which the markdown is recorded.

Pursuant to the retail inventory method, permanent markdowns result in the devaluation of inventory and the resulting gross profit reduction is recognized in the period in which the markdown is recorded.

Property and Equipment

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Fair value is determined based upon the Company’s public market capitalization.

The quantitative test is a two-step test.

Under the first step, the fair value of the reporting unit is compared with its carrying value (including goodwill).

If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the Company must perform step two of the impairment test (measurement).

Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill.

The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation.

The residual fair value after the allocation is the implied fair value of the reporting unit’s goodwill.

The carrying value of goodwill is considered impaired when the reporting unit’s fair value is less than its carrying value and the Company would record an impairment loss equal to the difference, not to exceed the total amount of goodwill allocated to the reporting unit .

For 2020, 2019 and 2018, the Company completed an impairment test of its goodwill and determined that no impairment of goodwill existed.

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For 2020, 2019 and 2018, the Company completed an impairment test of its tradename and determined that no impairment of the asset existed.

For 2018 and 2017, intangible assets with determinable useful lives were amortized over their estimated useful lives and reviewed for impairment whenever events or changes in circumstances indicated that the carrying amount may not be recoverable.

Due to the adoption of Accounting Standards Update 2016-02, Leases , as of February 3, 2019, intangible assets are now included in the operating lease right-of-use assets on the consolidated balance sheet.

For 2018, intangible assets with determinable useful lives were amortized over their estimated useful lives and reviewed for impairment whenever events or changes in circumstances indicated that the carrying amount may not be recoverable.

Due to the adoption of Accounting Standards Update 2016-02, Leases (“ASU 2016-02”), as of February 3, 2019, favorable leases are now included in the operating lease right-of-use assets on the consolidated balance sheets.

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Impairment of Long-Lived Assets

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In both cases, stock-based compensation is recorded on a straight-line basis over the vesting period for the entire award.

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Cost of Sales

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Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SG&A”) are comprised of payroll and benefits for stores, field support and support center employees.

Selling, general and administrative expenses (“SG&A”) are comprised of payroll and benefits for stores, field support and support center associates.

SG&A also include marketing and advertising expense, occupancy costs for stores and the store support center, insurance, corporate infrastructure and other general expenses.

8 unchanged sentences

All rent expense is recorded on a straight-line basis over the accounting lease term, which includes lease renewals determined to be reasonably certain.

The Company recognizes operating lease assets and liabilities at the lease commencement date in accordance with Accounting Standards Update (“ASU”) 2016-02, Leases .

The Company recognizes operating lease assets and liabilities at the lease commencement date in accordance with ASU 2016-02.

Operating lease liabilities represent the present value of lease payments not yet paid.

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The incremental borrowing rate is used to discount future cash flows and is an estimate which is determined by an analysis of the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms and current market conditions.

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Pre-Opening Expenses

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Debt issuance costs are amortized to interest expense using the effective interest method over the life of the related debt.

As of February 1, 2020 and February 2, 2019, debt issuance costs, net of accumulated amortization, were $ 1.1 million and $ 0.8 million, respectively.

As of January 30, 2021 and February 1, 2020, debt issuance costs, net of accumulated amortization, were $ 0.8 million and $ 1.1 million, respectively.

The amortization expense for debt issuance costs was $ 0.3 million, $ 0.3 million and $ 0.5 million for 2020, 2019 and 2018, respectively.

The write-off of unamortized debt issuance costs recorded in loss on extinguishment of debt on the consolidated statements of income totaled $ 0.0 million, $ 0.2 million and $ 0.8 million for 2019, 2018 and 2017, respectively.

The write-off of unamortized debt issuance costs recorded in loss on extinguishment of debt on the consolidated statement of income totaled $ 0.2 million for 2018.

Self-Insurance Liabilities

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To limit the Company’s exposure to losses, a stop-loss coverage is maintained through third-party insurers.

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Income taxes are accounted for under the asset and liability method.

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State income tax returns are filed in various state tax jurisdictions, as appropriate, with varying statutes of limitation and remain subject to examination for varying periods up to three to four years depending on the state.

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Earnings per Common Share

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Earnings per common share – Diluted

The effect of the weighted average assumed exercise of stock options outstanding totaling 359,801 , 100,183 and 126,899 as of February 1, 2020, February 2, 2019 and February 3, 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 34,673 , 6,800 and 10,169 as of February 1, 2020, February 2, 2019 and February 3, 2018, respectively, were excluded from the calculation of diluted weighted average common shares outstanding because the effect would have been antidilutive.

Immaterial Correction of Prior Period Financial Statements

During the fourth quarter of fiscal 2019, the Company identified that it had been incorrectly recording the activity within one of its cash accounts as borrowings and repayments on its revolving credit facility within the consolidated statements of cash flows although there were no actual borrowings or repayments on the revolving credit facility during the periods.

The error had no impact to total net cash used in financing activities or to the Company’s consolidated balance sheets or consolidated statements of income.

The Company corrected the presentation for the current period as well as the prior periods in the accompanying consolidated statements of cash flows.

The effect of the weighted average assumed exercise of stock options outstanding totaling 322,238 , 359,801 and 100,183 as of January 30, 2021, February 1, 2020 and February 2, 2019, 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 12,047 , 34,673 and 6,800 as of January 30, 2021, February 1, 2020 and February 2, 2019, respectively, were excluded from the calculation of diluted weighted average common shares outstanding because the effect would have been antidilutive.

Impact of the Novel Coronavirus (“COVID-19” )

The outbreak of the novel coronavirus COVID-19, which was declared a global pandemic by the World Health Organization on March 11, 2020, has led to adverse impacts on the U.S.

and global economies.

The outbreak of COVID-19 and related measures to quell the outbreak have impacted the Company’s inventory supply chain, operations and customer demand.

The Company’s stores and distribution centers have continued to operate as an essential business during the COVID-19 pandemic and the Company is committed to maintaining a safe work and shopping environment.

The COVID-19 pandemic could further affect the Company’s operations and the operations of its suppliers and vendors as a result of continuing or renewed restrictions and limitations on travel, shelter-in-place orders, limitations on store or facility operations up to and including closures, and other governmental, business or consumer actions.

The extent to which the COVID-19 pandemic will impact the Company’s operations, liquidity or financial results in subsequent periods is uncertain, but such impact could be material.

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

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In May 2014, the Financial Accounting Standards Board issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers.

The new standard supersedes U.S.

GAAP guidance on revenue recognition and requires the use of more estimates and judgments than prior guidance.

The Company adopted ASU 2014-09 as of February 4, 2018 using the modified retrospective transition method.

Results for reporting periods beginning after February 4, 2018 are presented pursuant to the requirements of the new standard, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting under prior guidance.

The Company recorded a net reduction to the opening balance of retained earnings of $5.6 million as of February 4, 2018 due to the cumulative impact of adopting ASU 2014-09, with the impact primarily related to the changes in revenue recognition associated with the Company’s customer loyalty program and gift card breakage.

The cumulative effect of changes to the Company’s consolidated February 4, 2018 balance sheet for the adoption of ASU 2014-09 was as follows (in thousands):

Accrued expenses and other

Deferred income taxes

Retained earnings

The adoption of ASU 2014-09 did not have a material impact on the Company’s consolidated income statement and statement of cash flows for 2018.

As a result of the adoption of ASU 2014-09, the Company determined it has an additional performance obligation to Ollie’s Army members at the time of the initial transaction as noted below.

The Company’s balance sheet at February 2, 2019 reflected an additional liability of $ 9.1 million related to the Ollie’s Army loyalty program which would not have been recorded prior to adoption.

Other changes to the consolidated balance sheet at February 2, 2019 were not significant.

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

At the time of adoption, the Company recorded a net reduction to the opening balance of retained earnings of $ 5.6 million due to the cumulative impact of adopting ASU 2014-09, with the impact primarily related to the changes in revenue recognition associated with the Company’s customer loyalty program and gift card breakage.

Revenue Recognition

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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.

The Company allocates the transaction price to the initial transaction and the discount awards based upon their relative standalone selling price, which considers historical redemption patterns for the award.

Revenue is recognized as those discount awards are redeemed.

Discount awards issued upon the achievement of specified point levels are subject to expiration.

The maximum redemption period is 45 days .

Unless temporarily extended, the maximum redemption period is 45 days .

At the end of each fiscal period, unredeemed discount awards and accumulated points to earn a future discount award are reflected as a liability.

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Ending balance

Sales return allowance is recorded on a gross basis on the consolidated balance sheet as a refund liability and an asset for recovery rather than as a net liability.

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Sales return allowance is recorded on a gross basis on the consolidated balance sheets as a refund liability and an asset for recovery.

The allowance for estimated retail merchandise returns is based on prior experience.

2 unchanged sentences

Beginning balance

Cumulative effect of adopting ASU 2014-09

Sales returns

Ending balance

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Property and Equipment

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Commitments and Contingencies

On February 3, 2019, the first day of Ollie’s fiscal year 2019, the Company adopted ASU 2016-02, Leases (“ASU 2016-02”), which requires that lessees recognize right-of-use assets and lease liabilities for all leases on the balance sheet.

On February 3, 2019, the first day of Ollie’s fiscal year 2019, the Company adopted ASU 2016-02, which requires that lessees recognize right-of-use assets and lease liabilities for all leases on the balance sheet.

The Company used the modified retrospective transition method, including the option to not restate comparative periods.

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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.

The Company did not adopt the hindsight practical expedient and, therefore, will continue to utilize lease terms determined under previous lease guidance for leases existing at the date of adoption that are not subsequently modified.

Adoption of the standard had a material impact on the 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 consolidated statement of income, stockholders’ equity or cash flows.

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Ollie’s generally leases its stores, offices and distribution facilities under operating leases that expire at various dates through 2034.

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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.

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.

Store and office lease costs are classified in SG&A and distribution center lease costs are classified in cost of goods sold on the consolidated statements of income.

Store and office lease costs are classified in SG&A and distribution center lease costs are classified in cost of sales on the consolidated statements of income.

Lease costs for operating leases for 2020, 2019 and 2018 were $ 77.8 million, $ 67.4 million and $ 49.8 million, respectively.

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following table summarizes the maturity of the Company’s operating lease liabilities as of February 1, 2020 (in thousands):

The following table summarizes the maturity of the Company’s operating lease liabilities by fiscal year as of January 30, 2021 (in thousands):

Total undiscounted lease payments (1)

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Lease obligations exclude $ 42.2 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 and for the fiscal year ended February 1, 2020 (dollars in thousands):

The following table summarizes other information related to the Company’s operating leases as of and for the respective periods (dollars in thousands):

Fiscal Year Ended

Cash paid for operating leases

Operating lease cost

Variable lease cost

2 unchanged sentences

Weighted-average discount rate

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):

Total minimum lease payments

Marketing Commitment

The Company has entered into an agreement with Valassis Communications, Inc.

for marketing services.

This agreement has a guaranteed spend commitment of $ 23.0 million over a two-year period ending on May 28, 2022.

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Related Party Leases

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These lease payments are included in the operating lease disclosures stated above.

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Contingencies

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OBO received approximately $ 42.0 million for the 12 locations, which resulted in no net gain or loss.

Each of the 12 leased locations has 15 -year lease terms with options for renewal.

Goodwill and Other Intangible Assets

Goodwill and other intangible assets consist of the following (in thousands):

Non-amortizing intangible assets:

Amortizing intangible assets:

Favorable leases

Accumulated amortization:

Favorable leases

Amortization expense for each of 2018 and 2017 was $ 0.3 million , which was charged to rent expense.

In 2019, as a result of the adoption of ASU 2016 - 02, favorable leases are now included in operating lease right-of-use assets and no longer reflected in intangible assets.

Each of the 12 leased locations has 15 -year lease terms with options for renewal and are included in operating lease liabilities in the accompanying consolidated balance sheets .

Accrued Expenses

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Deferred revenue

Real estate related

Sales and use taxes

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Real estate related

Debt Obligations and Financing Arrangements

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

Finance leases

Current portion

Long-term debt

Long-term debt consists of finance leases as of January 30, 2021 and February 1, 2020.

The Company’s prior credit facilities consisted of a $ 200.0 million term loan, which was fully paid as of February 2, 2019, and a $ 100.0 million revolving credit facility, which included a $ 25.0 million sub-facility for letters of credit and a $ 25.0 million sub-facility for swingline loans.

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The Credit Facility 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 “Revolving Credit Facility”).

The loans under the Revolving Credit Facility mature on May 22, 2024 .

Loans under the Revolving Credit Facility mature on May 22, 2024 .

In addition, the Company may at any time add term loan facilities or additional revolving commitments up to $ 150.0 million pursuant to terms and conditions set out in the Credit Facility.

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The interest rates for the Credit Facility are calculated as follows:

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The Eurodollar Rate is subject to a 0 % floor.

Under the terms of the Revolving Credit Facility, as of February 1, 2020, 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 February 1, 2020, the Company had no outstanding borrowings under the Revolving Credit Facility, with $ 90.8 million of borrowing availability, outstanding letters of credit commitments of $ 9.0 million and $ 0.2 million of rent reserves.

Under the terms of the Revolving Credit Facility, as of January 30, 2021, 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 January 30, 2021, the Company had no outstanding borrowings under the Revolving Credit Facility, with $ 92.0 million of borrowing availability, outstanding letters of credit commitments of $ 7.8 million and $ 0.2 million of rent reserves.

The Revolving Credit Facility also contains a variable unused line fee ranging from 0.125 % to 0.250 % per annum.

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The Company was in compliance with all terms of the Credit Facility during 2020.

The provisions of the Credit Facility 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 February 1, 2020, 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 Facility, subject to material exceptions including proforma compliance with the applicable conditions described in the Credit Facility.

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

On December 22, 2017, new U.S.

federal tax legislation, the Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted.

The new legislation was a significant modification of existing U.S.

federal tax law and contained a number of provisions which impacted the tax position of the Company in 2017 and 2018.

Among other things, the 2017 Tax Act permanently lowered the federal corporate tax rate to 21 % from the existing maximum rate of 35 % , effective for tax years including or commencing January 1, 2018.

As a result of the 2017 Tax Act, the Company recorded a tax benefit of $ 30.9 million in 2017 due to the net impact of the revaluation of net deferred tax liability balances.

The provisions of the Credit Facility 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 January 30, 2021, 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 Facility, subject to material exceptions including proforma compliance with the applicable conditions described in the Credit Facility.

The components of income tax provision (benefit) are as follows (in thousands):

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Income tax expense

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

A reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate is as follows:

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State taxes, net of federal benefit

Impact from 2017 Tax Act

Impact from tax law changes

Excess tax benefits related to stock-based compensation

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Lease liability

Deferred rent

Stock-based compensation

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Net deferred tax liabilities

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

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Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income and tax-planning strategies in making this assessment.

Based on the level of historical taxable income and projections for future taxable income and the scheduled reversal of deferred liabilities over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences as of February 1, 2020 and February 2, 2019.

Ollie’s has no material accrual for uncertain tax positions or interest or penalties related to income taxes on the Company’s consolidated balance sheets as of February 1, 2020 or February 2, 2019, and has no t recognized any material uncertain tax positions or interest or penalties related to income taxes in the consolidated statements of income for 2019, 2018 or 2017.

Ollie’s has no material accrual for uncertain tax positions or interest or penalties related to income taxes on the Company’s consolidated balance sheets as of January 30, 2021 or February 1, 2020, and has no t recognized any material uncertain tax positions or interest or penalties related to income taxes in the consolidated statements of income for 2020, 2019 or 2018.

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Equity Incentive Plans

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The Company uses authorized and unissued shares to satisfy share award exercises.

As of February 1, 2020, there were 3,312,540 shares available for grant under the 2015 Plan.

As of January 30, 2021, there were 2,853,979 shares available for grant under the 2015 Plan.

Stock Options

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A summary of the Company’s stock option activity and related information follows for 2018, 2019 and 2020 (in thousands, except share and per share amounts):

exercise price

average remaining

contractual term

intrinsic value

Outstanding at January 28, 2017

Outstanding at February 3, 2018

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Outstanding at February 1, 2020

Exercisable at February 1, 2020

Outstanding at January 30, 2021

Exercisable at January 30, 2021

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

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Notes to Consolidated Financial Statements

In December 2019, the Company announced the unexpected passing of Mark Butler, the then-Chairman of the Board, President and Chief Executive Officer of the Company.

During 2020, the estate of Mark Butler exercised 1.9 million vested stock options and the Company received $ 17.1 million in proceeds.

The intrinsic value of stock options exercised for 2020, 2019 and 2018 was $ 145.3 million, $ 44.6 million and $ 59.4 million, respectively.

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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.

Restricted stock units (“RSUs”) are issued at a value not less than the fair value of the common stock on the date of the grant.

RSUs outstanding vest ratably over four years or cliff vest in one or four years .

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A summary of the Company’s RSU activity and related information for 2018, 2019 and 2020 is as follows:

Nonvested balance at January 28, 2017

Nonvested balance at February 3, 2018

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Nonvested balance at February 1, 2020

Nonvested balance at January 30, 2021

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

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The compensation cost for stock options and RSUs which has been recorded within SG&A was $ 6.5 million, $ 7.3 million and $ 7.3 million for 2020, 2019 and 2018, respectively.

As of February 1, 2020, there was $ 13.5 million of total unrecognized compensation cost related to non-vested stock-based compensation arrangements.

As of January 30, 2021, there was $ 13.8 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 2.6 years.

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The program is authorized to be executed through March 2021.

Shares to be repurchased may be purchased from time to time in open market conditions.

On December 15, 2020, the Board of Directors authorized a $ 100.0 million increase in its share repurchase program.

This second authorization expires in January 2023.

Shares under both authorizations may be purchased from time to time in open market transactions (including blocks), privately negotiated transactions, accelerated share repurchase programs or other derivative transactions, issuer self-tender offers or any combination of the foregoing.

The timing of repurchases and the actual amount purchased will depend on a variety of factors, including the market price of the Company’s shares, general market and economic conditions, and other corporate considerations.

In addition, the authorizations are subject to extension or earlier termination by the Board of Directors at any time .

During 2020, the Company repurchased 3,885 shares of its common stock for $ 0.3 million , inclusive of transaction costs, pursuant to its share repurchase program.

During 2019, the Company repurchased 689,457 shares of its common stock for $ 40.0 million, inclusive of transaction costs, pursuant to its share repurchase program.

These expenditures were funded by cash generated from operations.

As of February 1, 2020, the Company had $ 60.0 million remaining under its share repurchase authorization.

As of January 30, 2021, the Company had $ 159.7 million remaining under its share repurchase authorization.

There can be no assurance that any additional repurchases will be completed, or as to the timing or amount of any repurchases.

The share repurchase program may be discontinued at any time.

See Note 13 for additional information.

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

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Notes to Consolidated Financial Statements

Segment Reporting

Segment Reporting and Entity-Wide Information

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.

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Fiscal Year Ended

Books and stationery

Floor coverings

Health and beauty aids

Books and stationery

Quarterly Results of Operations and Seasonality (Unaudited)

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Diluted earnings per common share

Beginning in the second quarter of fiscal 2020, the Company’s financial results benefited from increased consumer spending associated with federal stimulus funds for the COVID- 19 pandemic and the Company’s response to changing consumer needs as a result of the pandemic.

The Company’s business is seasonal in nature and demand is generally the highest in the fourth fiscal quarter due to the holiday sales season.

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As a result of this seasonality, and generally because of variation in consumer spending habits, the Company experiences fluctuations in net sales and working capital requirements during the year.

OLLIE’S BARGAIN OUTLET HOLDINGS, INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Subsequent Event

In March 2020, the outbreak of COVID-19 (coronavirus) caused by a novel strain of the coronavirus has recently been recognized as a pandemic by the World Health Organization, and the outbreak has become increasingly widespread in the United States, including in the markets in which the Company operates.

The COVID-19 (coronavirus) outbreak has had a notable impact on general economic conditions, including but not limited to the temporary closures of many businesses, “shelter in place” and other governmental regulations, reduced consumer spending due to both job losses and other effects attributable to the COVID-19 (coronavirus), and there are many unknowns.

While to date the Company has not been required to close any of its stores, the Company is currently operating under reduced hours and has seen increased sales pressure in recent days.

The Company continues to monitor the impact of the COVID-19 (coronavirus) outbreak closely.

The extent to which the COVID-19 (coronavirus) outbreak will impact its operations or financial results is uncertain.

On March 16, 2021, the Board of Directors of the Company authorized an increase of $ 100.0 million in the Company’s share repurchase program.

This third authorization expires in January 2023 and is subject to the same considerations regarding timing and amount of repurchases as the two prior authorizations.

See Note 10 for additional information.

Schedule I - Condensed Financial Information of Registrant

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Guarantees and restrictions

Ollie’s Bargain Outlet, Inc., a subsidiary of the Company, had prior credit facilities which consisted of a $ 200.0 million term loan, which was fully paid as of February 2, 2019.

On May 22, 2019, Ollie’s Bargain Outlet, Inc.

completed a transaction in which it refinanced its credit facility (the “Credit Facility”).

On May 22, 2019, Ollie’s Bargain Outlet, Inc., a subsidiary of the Company, completed a transaction in which it refinanced its credit facility (the “Credit Facility”).

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will be directly liable to the debt holders .

As of February 1, 2020, Ollie’s Bargain Outlet, Inc.

As of January 30, 2021 , Ollie’s Bargain Outlet, Inc.

had $ 92.0 million available for borrowing under its Revolving Credit Facility.

The Revolving Credit Facility matures on May 22, 2024 .

The Credit Facility is 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 such agreements.

The Company was in compliance with all terms of such agreements during and as of the fiscal year ended February 1, 2020.

The provisions of the Credit Facility 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 February 1, 2020, from being used to pay any dividends or make other restricted payments without prior written consent from the lenders under the Credit Facility, subject to certain exceptions.

The Credit Facility is collateralized by the Company’s assets and equity and contains a financial covenant, as well as certain business covenants, including restrictions on dividend payments, which the Company must comply with during the term of the agreement.

The Company was in compliance with all terms of the agreement during and as of the fiscal year ended January 30, 2021.

The provisions of the Credit Facility 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 January 30, 2021 , from being used to pay any dividends or make other restricted payments without prior written consent from the lenders under the Credit Facility, subject to certain exceptions.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data