Ollie's Bargain Outlet Holdings, Inc. 10-K

Item 8: Financial Statements and Supplementary Data. OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm ( KPMG LLP , Harrisburg, PA , Auditor Firm ID 185 ) 53 Consolidated Financial Statements: Consolidated Statements of Income for the fiscal years ended February 3, 2024, January 28, 2023, and January 29, 2022 54 Consolidated Balance Sheets as of February 3, 2024 and January 28, 2023 55 Consolidated Statements of Stockholders’ Equity for the fiscal years ended February 3, 2024, January 28, 2023, and January 29, 2022 56 Consolidated Statements of Cash Flows for the fiscal years ended February 3, 2024, January 28, 2023, and January 29, 2022 57 Notes to Consolidated Financial Statements 58 Schedule I – Condensed Financial Information of Registrant 75 52 Index Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Ollie’s Bargain Outlet Holdings, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Ollie’s Bargain Outlet Holdings, Inc. and subsidiaries (the Company) as of February 3, 2024 and January 28, 2023, the related consolidated statements of income, stockholders’ equity, and cash flows for each of the fiscal years in the three-year period ended February 3, 2024, 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 3, 2024 and January 28, 2023, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended February 3, 2024, 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 3, 2024, 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 27, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. 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 store shrink As discussed in Note 1(h) to the consolidated financial statements, inventories are valued at the lower of cost or market determined using the retail inventory method on a first-in, first-out basis. The retail inventory method is based on a number of factors such as markups, markdowns, and shrinkage (or shrink). The Company calculates the shrink provision based on actual physical inventory results during the fiscal period and estimated shrink occurring subsequent to a physical inventory through the end of the fiscal reporting period. This accrual is calculated as a percentage of sales for each retail store, at a department level, based on the Company’s most recent historical shrink rate adjusted, if necessary, for current economic conditions and business trends. The Company’s inventories were $505.8 million as of February 3, 2024. We identified the evaluation of the estimation of store shrink occurring between the physical inventory counts and the fiscal year-end as a critical audit matter. Evaluation of the Company’s estimation of shrink at the end of the fiscal year involved subjective auditor judgment due to the estimation uncertainty associated with the shrink rate assumption. 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 estimation of store shrink. We evaluated the appropriateness of the Company’s shrink accrual at the end of the fiscal year by (1) evaluating the shrink rate used by comparing to historical shrink rates, (2) testing the application of the method and certain assumptions used, and (3) performing a sensitivity analysis over the shrink reserve estimate. /s/ KPMG LLP We have served as the Company’s auditor since 2009. Harrisburg, Pennsylvania March 27, 2024 53 Index OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statements of Income (In thousands, except per share amounts) Fiscal year ended February 3 , January 28 , January 29 , 2024 2023 2022 Net sales $ 2,102,662 $ 1,827,009 $ 1,752,995 Cost of sales 1,270,297 1,170,915 1,071,749 Gross profit 832,365 656,094 681,246 Selling, general and administrative expenses 562,672 490,569 447,615 Depreciation and amortization expenses 27,819 22,907 19,364 Pre-opening expenses 14,075 11,700 9,675 Operating income 227,799 130,918 204,592 Interest (income) expense, net ( 14,686 ) ( 2,965 ) 209 Income before income taxes 242,485 133,883 204,383 Income tax expense 61,046 31,093 46,928 Net income $ 181,439 $ 102,790 $ 157,455 Earnings per common share: Basic $ 2.94 $ 1.64 $ 2.44 Diluted $ 2.92 $ 1.64 $ 2.43 Weighted average common shares outstanding: Basic 61,741 62,495 64,447 Diluted 62,068 62,704 64,878 See accompanying Notes to the Consolidated Financial Statements. 54 Index OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands, except per share amounts) February 3, January 28, Assets 2024 2023 Current assets: Cash and cash equivalents $ 266,262 $ 210,596 Short-term investments 86,980 60,165 Inventories 505,790 470,534 Accounts receivable 2,223 2,374 Prepaid expenses and other assets 10,173 10,627 Total current assets 871,428 754,296 Property and equipment, net 270,063 175,947 Operating lease right-of-use assets 475,526 436,326 Goodwill 444,850 444,850 Trade name 230,559 230,559 Other assets 2,168 2,118 Total assets $ 2,294,594 $ 2,044,096 Liabilities and Stockholders’ Equity Current liabilities: Current portion of long-term debt $ 639 $ 430 Accounts payable 128,097 90,204 Income taxes payable 14,744 3,056 Current portion of operating lease liabilities 89,176 88,636 Accrued expenses and other 82,895 76,959 Total current liabilities 315,551 259,285 Revolving credit facility - - Long-term debt 1,022 858 Deferred income taxes 71,877 70,632 Long-term operating lease liabilities 397,912 351,251 Other long-term liabilities - 1 Total liabilities 786,362 682,027 Stockholders’ equity: Preferred stock - 50,000 shares authorized at $ 0.001 par value; no shares issued - - Common stock - 500,000 shares authorized at $ 0.001 par value; 66,927 and 66,672 shares issued, respectively 67 67 Additional paid-in capital 694,959 677,694 Retained earnings 1,167,951 986,512 Treasury - common stock, at cost; 5,473 and 4,664 shares, respectively ( 354,745 ) ( 302,204 ) Total stockholders’ equity 1,508,232 1,362,069 Total liabilities and stockholders’ equity $ 2,294,594 $ 2,044,096 See accompanying Notes to the Consolidated Financial Statements. 55 Index OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders’ Equity (In thousands) Common stock Treasury stock Additional paid-in capital Retained earnings Total stockholders’ equity Shares Amount Shares Amount Balance as of January 30 , 2021 66,165 66 ( 702 ) ( 40,401 ) 648,949 726,267 1,334,881 Stock-based compensation expense - - - - 8,042 - 8,042 Proceeds from stock options exercised 305 1 - - 8,634 - 8,635 Vesting of restricted stock 62 - - - - - - Common shares withheld for taxes ( 16 ) - - - ( 1,332 ) - ( 1,332 ) Shares repurchased - - ( 3,114 ) ( 219,971 ) - - ( 219,971 ) Net income - - - - - 157,455 157,455 Balance as of January 29 , 2022 66,516 67 ( 3,816 ) ( 260,372 ) 664,293 883,722 1,287,710 Stock-based compensation expense - - - - 9,951 - 9,951 Proceeds from stock options exercised 119 - - - 4,032 - 4,032 Vesting of restricted stock 50 - - - - - - Common shares withheld for taxes ( 13 ) - - - ( 582 ) - ( 582 ) Shares repurchased - - ( 848 ) ( 41,832 ) - - ( 41,832 ) Net income - - - - - 102,790 102,790 Balance as of January 28 , 2023 66,672 67 ( 4,664 ) ( 302,204 ) 677,694 986,512 1,362,069 Stock-based compensation expense - - - - 12,237 - 12,237 Proceeds from stock options exercised 180 - - - 6,686 - 6,686 Vesting of restricted stock 103 - - - - - - Common shares withheld for taxes ( 28 ) - - - ( 1,658 ) - ( 1,658 ) Shares repurchased - - ( 809 ) ( 52,541 ) - - ( 52,541 ) Net income - - - - - 181,439 181,439 Balance as of February 3 , 2024 66,927 $ 67 ( 5,473 ) $ ( 354,745 ) $ 694,959 $ 1,167,951 $ 1,508,232 See accompanying Notes to the Consolidated Financial Statements. 56 Index OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (In thousands) Fiscal year ended February 3, January 28, January 29, 2024 2023 2022 Cash Flows from Operating Activities: Net income $ 181,439 $ 102,790 $ 157,455 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property and equipment 34,936 28,689 24,894 Amortization of debt issuance costs 267 256 256 Gain on sale of assets ( 304 ) ( 325 ) ( 213 ) Deferred income tax provision 1,245 4,453 1,115 Stock-based compensation expense 12,237 9,951 8,042 Other ( 723 ) — — Changes in operating assets and liabilities: Inventories ( 35,256 ) ( 3,228 ) ( 113,602 ) Accounts receivable 151 ( 1,002 ) ( 751 ) Prepaid expenses and other assets 341 375 ( 3,895 ) Accounts payable 38,250 ( 20,379 ) ( 11,116 ) Income taxes payable 11,688 500 ( 8,404 ) Accrued expenses and other liabilities 10,226 ( 7,734 ) ( 8,748 ) Net cash provided by operating activities 254,497 114,346 45,033 Cash Flows from Investing Activities: Purchases of property and equipment ( 124,404 ) ( 51,667 ) ( 34,989 ) Proceeds from sale of property and equipment 409 378 3,159 Purchases of short-term investments ( 273,522 ) ( 60,165 ) — Maturities of short-term investments 247,430 — — Net cash used in investing activities ( 150,087 ) ( 111,454 ) ( 31,830 ) Cash Flows from Financing Activities: Repayments on finance leases ( 1,027 ) ( 891 ) ( 684 ) Payment of debt issuance costs ( 204 ) — — Proceeds from stock option exercises 6,686 4,032 8,635 Common shares withheld for taxes ( 1,658 ) ( 582 ) ( 1,332 ) Payment for shares repurchased ( 52,541 ) ( 41,832 ) ( 219,971 ) Net cash used in financing activities ( 48,744 ) ( 39,273 ) ( 213,352 ) Net increase (decrease) in cash and cash equivalents 55,666 ( 36,381 ) ( 200,149 ) Cash and cash equivalents, beginning of the period 210,596 246,977 447,126 Cash and cash equivalents, end of the period $ 266,262 $ 210,596 $ 246,977 Supplemental disclosure of cash flow information: Cash paid during the year for: Interest $ 419 $ 343 $ 358 Income taxes $ 48,601 $ 26,566 $ 54,690 Non-cash investing activities: Accrued purchases of property and equipment $ 11,270 $ 7,918 $ 3,189 See accompanying Notes to the Consolidated Financial Statements. 57 Index OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) Basis of Presentation and Summary of Significant Accounting Policies (a) Description of Business Ollie’s Bargain Outlet Holdings, Inc. and subsidiaries (collectively referred to as the “Company” or “Ollie’s”) principally buys overproduced, overstocked, and closeout merchandise from manufacturers, wholesalers, distributors, brokers, and other retailers. In addition, the Company augments its name-brand closeout deals with directly sourced private label products featuring names exclusive to Ollie’s in order to provide consistently value-priced goods in select key merchandise categories. Since its first store opened in 1982, the Company has grown to 512 retail locations in 30 states as of February 3, 2024. Ollie’s Bargain Outlet retail locations are located in Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Vermont, Virginia, and West Virginia. (b) Fiscal Year Ollie’s follows a 52/53-week fiscal year, which ends on the Saturday nearer to January 31st of the following calendar year. References to the fiscal year ended February 3, 2024 refer to the 53-week period from January 29, 2023 to February 3, 2024 (“2023”). References to the fiscal year ended January 28, 2023 refer to the 52-week period from January 30, 2022 to January 28, 2023 (“2022”). References to the fiscal year ended January 29, 2022 refer to the 52-week period from January 31, 2021 to January 29, 2022 (“2021”). (c) Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany transactions have been eliminated in consolidation. (d) Use of Estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (e) Cash, Cash Equivalents, and Short-term Investments The Company considers cash on hand in stores, bank deposits, credit card receivables, and all highly liquid investments such as money market funds, treasury bonds and municipal bonds with remaining maturities of three months or less at the date of acquisition to be cash and cash equivalents. Investments with maturities greater than three months, but less than 1 year at the date of acquisition are classified as short-term investments. Amounts receivable from credit card issuers are typically converted to cash within one to two business days of the original sales transaction. 58 Index OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (f) Fair Value Disclosures Fair value is defined as the price which the Company would receive to sell an asset or pay to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. In determining fair value, GAAP establishes a three‑level hierarchy used in measuring fair value, as follows: ● Level 1 inputs are quoted prices available for identical assets and liabilities in active markets. ● Level 2 inputs are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets and liabilities in active markets or other inputs that are observable or can be corroborated by observable market data. ● Level 3 inputs are unobservable, developed using the Company’s estimates and assumptions, which reflect those that market participants would use. Ollie’s financial instruments consist of cash and cash equivalents, investment securities, accounts receivable, accounts payable, and the Company’s credit facilities. The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable are representative of their respective fair value because of their short-term nature. The carrying amount of the Company’s credit facilities, see Note 7 to the Consolidated Financial Statements for additional information related to our credit facility, approximates its fair value because the interest rates are adjusted regularly based on current market conditions. Under the fair value hierarchy, the fair market values of cash equivalents and the investments in treasury bonds and corporate bonds are Level 1 while the investments in municipal bonds are Level 2. Since quoted prices in active markets for identical assets are not available, these prices are determined by the third-party pricing service using observable market information such as quotes from less active markets and quoted prices of similar securities. As of February 3, 2024 and January 28, 2023 , the Company’s investment securities are classified as held-to-maturity since the Company has both the intent and ability to hold the investments to maturity. Such securities are carried at amortized cost plus accrued interest and consist of the following: As of February 3, 2024 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Market Value (in thousands) Short-term: Treasury Bonds $ 49,765 $ 16 $ - $ 49,781 Municipal Bonds 10,136 - ( 139 ) 9,997 Corporate Bonds 27,079 22 - 27,101 Total $ 86,980 $ 38 $ ( 139 ) $ 86,879 As of January 28, 2023 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Market Value (in thousands) Short-term: Treasury Bonds $ 55,274 $ - $ ( 83 ) $ 55,191 Municipal Bonds 4,891 - ( 8 ) 4,883 Corporate Bonds - - - - Total $ 60,165 $ - $ ( 91 ) $ 60,074 Short-term investment securities as of February 3, 2024 and January 28, 2023 all mature in one year or less. 59 Index OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (g) Concentration of Credit Risk A financial instrument which potentially subjects the Company to a concentration of credit risk is cash. Ollie’s currently maintains its day‑to‑day operating cash balances with major financial institutions. The Company’s operating cash balances are in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limit. 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 these balances. (h) Inventories Inventories are stated at the lower of cost or market determined using the retail inventory method on a first-in, first-out basis. The cost of inventories includes the merchandise cost, transportation costs, and certain distribution and storage costs. 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 profit. 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 profit reduction is recognized in the period in which the markdown is recorded. We calculate our shrink provision based on actual physical inventory results during the fiscal period and an accrual for estimated shrink occurring subsequent to a physical inventory through the end of the fiscal reporting period. This accrual is calculated as a percentage of sales for each retail store, at a department level, based on the company’s most recent historical shrink rate adjusted, if necessary, for current economic conditions and business trends. (i) Property and Equipment Property and equipment are stated at original cost less accumulated depreciation and amortization. Depreciation and amortization are calculated over the estimated useful lives of the related assets, or in the case of leasehold improvements, the lesser of the useful lives or the remaining term of the lease. Expenditures for additions, renewals, and betterments are capitalized; expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is computed on the straight-line method for financial reporting purposes. The useful lives for the purpose of computing depreciation and amortization are as follows: Software 3 years Automobiles 2 - 5 years Computer equipment 5 years Furniture, fixtures, and equipment 7 - 10 years Buildings 40 years Leasehold improvements Lesser of lease term or useful life 60 Index OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (j) Goodwill/Intangible Assets The Company amortizes intangible assets over their useful lives unless it determines such lives to be indefinite. Goodwill and intangible assets having indefinite useful lives are not amortized to earnings, but instead are subject to annual impairment testing or more frequently if events or circumstances indicate that the value of goodwill or intangible assets having indefinite useful lives might be impaired. Goodwill and intangible assets having indefinite useful lives are tested for impairment annually in the fiscal month of October. The Company has the option to evaluate qualitative factors to determine if it is more likely than not that the carrying amount of its sole reporting unit or its nonamortizing intangible assets (consisting of a tradename) exceed their implied respective fair value and whether it is necessary to perform a quantitative analysis to determine impairment. As part of this qualitative assessment, the Company weighs the relative impact of factors that are specific to its sole reporting unit or its nonamortizing intangible assets as well as industry, regulatory and macroeconomic factors that could affect the inputs used to determine the fair value of the assets. If management determines a quantitative goodwill impairment test is required, or it elects to perform a quantitative test, the test is performed by determining the fair value of the Company’s sole reporting unit. Fair value is determined based on the Company’s public market capitalization. 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 2023, 2022, and 2021, the Company completed an impairment test of its goodwill and determined that no impairment of goodwill existed. If management determines a quantitative analysis of intangible assets having indefinite useful lives is required, the test is performed using the discounted cash flow method based on management’s projections of future revenues and an estimated royalty rate to determine the fair value of the asset, specifically, the Company’s tradename. An impairment loss is recognized for any excess of the carrying amount of the asset over the implied fair value of that asset. For 2023, 2022, and 2021 , the Company completed an impairment test of its tradename and determined that no impairment of the asset existed. (k) Impairment of Long-Lived Assets Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. (l) Stock-Based Compensation The Company measures the cost of employee services received in exchange for stock-based compensation based on the grant date fair value of the employee stock award. For stock option awards, the Company estimates grant date fair value using the Black-Scholes option pricing model. For restricted stock unit awards, grant date fair value is determined based on the closing trading value of the Company’s stock on the date of grant. In both cases, stock-based compensation is recorded on a straight-line basis over the vesting period for the entire award. 61 Index OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (m) Cost of Sales Cost of sales includes merchandise costs, inventory markdowns, shrinkage and transportation, distribution and warehousing costs, including depreciation and amortization . (n) 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 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. (o) Advertising Costs Advertising costs primarily consist of print flyers, digital media, email campaigns, and media broadcasts and are generally expensed the first time the advertising occurs. Advertising expense for 2023, 2022, and 2021 was $ 64.5 million, $ 62.4 million, and $ 52.2 million, respectively . (p) Operating Leases The Company generally leases its store locations, distribution centers and office facilities. Many of the lease agreements contain rent holidays, rent escalation clauses and contingent rent provisions – or some combination of these items. For leases of store locations and the store support centers, the Company recognizes rent expense in SG&A. For leases of distribution centers, the Company recognizes rent expense within cost of sales. 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 ASC 842, Leases (Topic 842). Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent the Company’s right to use an underlying asset for the lease term. The Company’s lessors do not provide an implicit rate, nor is one readily available, therefore the Company uses its incremental borrowing rate based on the portfolio approach, which applies one rate to leases within a given period. 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. (q) Pre-Opening Expenses Pre-opening expenses consist of expenses of opening new stores and distribution centers, as well as store remodel and store closing costs. For opening new stores, pre-opening expenses include grand opening advertising costs, payroll expenses, travel expenses, employee training costs, rent expenses, and store setup costs. Pre-opening expenses for new stores are expensed as they are incurred, which is typically within 30 to 45 days of opening a new store. For opening distribution centers, pre-opening expenses primarily include inventory transportation costs, employee travel expenses, and occupancy costs. Store remodel costs primarily consist of payroll expenses, travel expenses, and store setup costs expensed as they are incurred. Store closing costs primarily consist of insurance deductibles, rent, and store payroll. 62 Index OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (r) Self ‑ Insurance Liabilities Under a number of the Company’s insurance programs, which include the Company’s employee health insurance program, its workers’ compensation and general liability insurance programs, the Company is liable for a portion of its losses. The Company estimates the accrued liabilities for its self-insurance programs using historical claims experience and loss reserves. To limit the Company’s exposure to losses, a stop‑loss coverage is maintained through third‑party insurers. (s) Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Ollie’s files consolidated federal and state income tax returns. For tax years prior to 2018, the Company is no longer subject to U.S. federal income tax examinations. 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. (t) Earnings per Common Share Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding, after giving effect to the potential dilution, if applicable, from the assumed exercise of stock options into shares of common stock as if those stock options were exercised and the assumed lapse of restrictions on restricted stock units. The following table summarizes those effects for the diluted earnings per common share calculation: Fiscal year ended February 3, January 28, January 29, 2024 2023 2022 (in thousands) Weighted average number of common shares outstanding – Basic 61,741 62,495 64,447 Incremental shares from the assumed exercise of outstanding stock options and vesting of restricted stock units 327 209 431 Weighted average number of common shares outstanding – Diluted 62,068 62,704 64,878 The effect of the weighted average assumed exercise of stock options outstanding totaling 582,645 , 858,413 , and 425,718 as of February 3, 2024, January 28, 2023, and January 29, 2022, 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 11,717 , 39,342 , and 22,546 as of February 3, 2024, January 28, 2023, and January 29, 2022, respectively , were excluded from the calculation of diluted weighted average common shares outstanding because the effect would have been antidilutive. 63 Index OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (u) Recently Issued Accounting Standards In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Improvements to Reportable Segment Disclosures,” which modifies reportable segment disclosure requirements. This ASU expands annual and interim reportable segment disclosures, including: disclosure of the title and position of our chief operating decision maker (“CODM”), interim and annual disclosure of significant reportable segment expenses that are components of segment profit or loss information provided to the CODM, and interim disclosure of all annual reportable segment profit or loss and asset data currently only required to be disclosed annually. This guidance is effective for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The adoption of this standard is not expected to have an impact on our financial statements the Company is comprised of one operating segment. In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures,” which modifies the disclosure requirements for income taxes. This ASU requires disclosure of tabular statutory to effective rate reconciliation in both percentages and dollars, additional disaggregated rate reconciliation categories and disaggregation of both income taxes paid and income tax expense by jurisdiction. This guidance is effective for annual periods beginning after December 15, 2024. We expect this ASU to only impact our disclosures with no impact to our result of operations, cash flows and financial condition. (2) Net Sales Ollie’s recognizes retail sales in its stores when merchandise is sold and the customer takes possession of merchandise. Also included in net sales is revenue allocated to certain redeemed discounts earned via the Ollie’s Army loyalty program and gift card breakage. Net sales are presented net of returns and sales tax. The Company provides an allowance for estimated retail merchandise returns based on prior experience. Revenue Recognition Revenue is deferred for the Ollie’s Army loyalty program where members accumulate points that can be redeemed for discounts on future purchases. The Company has determined it has an additional performance obligation to Ollie’s Army members at the time of the initial transaction. The Company allocates the transaction price to the initial transaction and the discount awards based upon its relative standalone selling price, which considers historical redemption patterns for the award. Revenue is recognized as those discount awards are redeemed. Discount awards issued upon the achievement of specified point levels are subject to expiration. 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. Discount awards are combined in one homogeneous pool and are not separately identifiable. Therefore, the revenue recognized consists of discount awards redeemed that were included in the deferred revenue balance at the beginning of the period as well as discount awards issued during the current period. The following table is a reconciliation of the liability related to this program: Fiscal year ended February 3, January 28, January 29 , 2024 2023 2022 (in thousands) Beginning balance $ 8,130 $ 7,782 $ 8,113 Revenue deferred 16,141 14,446 15,290 Revenue recognized ( 14,112 ) ( 14,098 ) ( 15,621 ) Ending balance $ 10,159 $ 8,130 $ 7,782 64 Index OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Gift card breakage for gift card liabilities not subject to escheatment is recognized as revenue in proportion to the redemption of gift cards. Gift cards do not expire. The rate applied to redemptions is based upon a historical breakage rate. Gift cards are combined in one homogenous pool and are not separately identifiable. Therefore, the revenue recognized consists of gift cards that were included in the liability at the beginning of the period as well as gift cards that were issued during the period. The following table is a reconciliation of the gift card liability: Fiscal year ended February 3, January 28, January 29 , 2024 2023 2022 (in thousands) Beginning balance $ 2,527 $ 2,291 $ 1,902 Gift card issuances 5,150 4,948 5,433 Gift card redemption and breakage ( 5,027 ) ( 4,712 ) ( 5,044 ) Ending balance $ 2,650 $ 2,527 $ 2,291 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. The following table provides a reconciliation of the activity related to the Company’s sales returns allowance: Fiscal year ended February 3, January 28, January 29, 2024 2023 2022 (in thousands) Beginning balance $ 1,170 $ 1,101 $ 1,060 Provisions 57,684 56,989 54,475 Sales returns ( 57,784 ) ( 56,920 ) ( 54,434 ) Ending balance $ 1,070 $ 1,170 $ 1,101 65 Index OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (3) Property and Equipment Property and equipment consists of the following: February 3, 2024 January 28, 2023 (in thousands) Land $ 9,894 $ 7,942 Buildings 34,608 34,608 Furniture, fixtures and equipment 262,571 224,999 Leasehold improvements 78,099 55,945 Automobiles 3,449 2,839 Construction in Progress 65,643 - 454,264 326,333 Less: Accumulated depreciation and amortization ( 184,201 ) ( 150,386 ) $ 270,063 $ 175,947 Depreciation and amortization expense of property and equipment was $ 34.9 million, $ 28.7 million, and $ 24.9 million in 2023, 2022, and 2021, respectively , of which $ 27.8 million, $ 22.9 million, and $ 19.4 million is included in the depreciation and amortization expenses in 2023, 2022, and 2021, respectively , on the consolidated statements of income. The remainder, as it relates to the Company’s distribution centers, is included within cost of sales on the consolidated statements of income. (4) Leases The Company accounts for its leases under ASC 842, Leases (Topic 842). Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the balance sheet as both a right-of-use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease, if available. The Company’s lessors do not provide an implicit rate, nor is one readily available, therefore the Company uses its incremental borrowing rate based on the portfolio approach, which applies one rate to leases within a given period. Lease liabilities are increased by interest and reduced by payments each period, and the right-of-use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right-of-use asset result in straight-line rent expense over the lease term. Variable lease expenses, if any, are recorded when incurred. In calculating the right-of-use asset and lease liability, the Company elects to combine lease and non-lease components. The Company excludes short-term leases having initial terms of 12 months or less from the guidance as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term. Ollie’s generally leases its stores, offices, and distribution facilities under operating leases that expire at various dates through 2038. These leases generally provide for fixed annual rentals. A majority of the Company’s leases also require a payment for all or a portion of common-area maintenance, insurance, real estate taxes, water and sewer costs, and repairs, on a fixed or variable payment basis, the cost of which, for leases existing as of the adoption of ASC 842, is charged to the related expense category rather than being accounted for as rent expense. For leases entered into after the adoption of ASC 842, the Company accounts for lease components together with non-lease components as a single component for all classes of underlying assets. Most of the leases contain options to renew for three to five successive five-year periods. The Company is generally not reasonably certain to exercise renewal options; therefore, the options are not considered in determining the lease term, and associated potential option payments are excluded from the lease payments. Ollie’s lease agreements generally do not contain any material residual value guarantees or material restrictive covenants. 66 Index OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 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. The following table summarizes the maturity of the Company’s operating lease liabilities by fiscal year as of February 3, 2024: February 3, 2024 (in thousands) 2024 $ 106,625 2025 93,148 2026 88,707 2027 76,591 2028 60,171 Thereafter 132,033 Total undiscounted lease payments (1) 557,275 Less: Imputed interest ( 70,187 ) Total lease obligations 487,088 Less: Current obligations under leases ( 89,176 ) Long-term lease obligations $ 397,912 (1) Lease obligations exclude $ 26.6 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 respective periods: Fiscal Year Ended February 3, January 28, January 29, 2024 2023 2022 (dollars in thousands) Cash paid for operating leases $ 114,184 $ 94,909 $ 85,923 Operating lease cost 106,302 95,176 86,516 Variable lease cost 12,463 10,512 7,848 Non-cash right-of-use assets obtained in exchange for lease obligations 53,138 54,705 59,696 Weighted-average remaining lease term 6.52 years 6.4 years 6.6 years Weighted-average discount rate 3.9 % 3.4 % 3.4 % (5) Commitments and Contingencies Contingencies From time to time the Company may be involved in claims and legal actions that arise in the ordinary course of its business. The Company cannot predict the outcome of any litigation or suit to which it is a party. However, the Company does not believe that an unfavorable decision of any of the current claims or legal actions against it, individually or in the aggregate, will have a material adverse effect on its financial position, results of operations, liquidity or capital resources. 67 Index OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (6) Accrued Expenses Accrued expenses consist of the following: February 3, 2024 January 28, 2023 (in thousands) Compensation and benefits $ 20,535 $ 14,751 Deferred revenue 12,809 10,657 Sales and use taxes 10,234 6,567 Insurance 9,671 9,141 Real estate related 4,680 6,283 Freight 4,359 2,641 Advertising 1,780 6,582 Other 18,827 20,337 $ 82,895 $ 76,959 (7) Debt Obligations and Financing Arrangements Long-term debt consists of finance leases . The Company’s credit facility (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”). 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. On January 9, 2024, the Company refinanced its credit facility (the “Credit Facility”), pursuant to which the maturity date for any loans under the revolving credit facility was extended for a period of five years from the effective date of January 9, 2024 and a zero percent ( 0.0 %) interest rate floor was added to the option for the SOFR Loan Rate (as defined in the Amendment). Loans under the Revolving Credit Facility mature on January 9, 2029 . As a result of the anticipated discontinuation of LIBOR in 2023, on January 24, 2023, the Company amended its Credit Facility to replace the LIBOR-based interest rates included therein with SOFR-based interest rates and to modify the provisions for determining an alternative rate of interest upon the occurrence of certain events relating to the availability of interest rate benchmarks. The interest rates for the Credit Facility are calculated as follows: for ABR Loans, the highest of the Prime Rate, the Federal Funds Effective Rate plus 0.50 % and Term SOFR with a term of one-month in effect on such day plus the SOFR Spread Adjustment plus 1.0 %, plus the Applicable Margin, or, for SOFR Loans, the SOFR Loan Rate plus the Applicable Margin plus the SOFR Spread Adjustment. The Applicable Margin will vary from 0.00 % to 0.50 % for an ABR Loan and 1.00 % to 1.50 % for a SOFR Loan, based on availability under the Credit Facility. The SOFR Loan Rate is subject to a 0 % floor. Under the terms of the Revolving Credit Facility, as of February 3, 2024, 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 3, 2024, the Company had no outstanding borrowings under the Revolving Credit Facility, with $ 90.0 million of borrowing availability, outstanding letters of credit commitments of $ 9.7 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. The Company incurred unused line fees of $ 0.1 million in each of the years ended 2023, 2022, and 2021. 68 Index OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 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 financial covenant is a consolidated fixed charge coverage ratio test of at least 1.0 to 1.0 applicable during a covenant period, based on reference to availability. The Company was in compliance with all terms of the Credit Facility during 2023. 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 3, 2024, 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. (8) Income Taxes The components of income tax provision (benefit) are as follows: Fiscal year ended February 3, 2024 January 28, 2023 January 29, 2022 (in thousands) Current: Federal $ 45,871 $ 20,541 $ 35,657 State 13,930 6,099 10,156 59,801 26,640 45,813 Deferred: Federal 1,915 5,588 802 State ( 670 ) ( 1,135 ) 313 1,245 4,453 1,115 Income tax expense $ 61,046 $ 31,093 $ 46,928 A reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate is as follows: Fiscal year ended February 3, 2024 January 28, 2023 January 29, 2022 Statutory federal rate 21.0 % 21.0 % 21.0 % State taxes, net of federal benefit 4.3 2.9 4.1 Excess tax benefits related to stock-based compensation ( 0.3 ) ( 0.2 ) ( 1.7 ) Other 0.2 ( 0.5 ) ( 0.4 ) 25.2 % 23.2 % 23.0 % 69 Index OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Deferred income taxes reflect the effect of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the carrying amounts used for income tax reporting purposes. Significant components of deferred tax assets and liabilities are as follows : February 3, 2024 January 28, 2023 (in thousands) Deferred tax assets: Inventory reserves $ 871 $ 732 Lease liability 122,006 110,100 Stock-based compensation 4,738 4,448 Deferred revenue 2,544 2,034 Other 4,014 3,370 Total deferred tax assets 134,173 120,684 Deferred tax liabilities: Tradename ( 57,721 ) ( 57,664 ) Depreciation ( 29,242 ) ( 24,485 ) Operating lease right-of-use assets ( 119,087 ) ( 109,167 ) Total deferred tax liabilities ( 206,050 ) ( 191,316 ) Net deferred tax liabilities $ ( 71,877 ) $ ( 70,632 ) 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. The ultimate realization of deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible. 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 3, 2024 and January 28, 2023 . 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 3, 2024 or January 28, 2023, 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 2023, 2022 or 2021 . (9) Equity Incentive Plans During 2012, Ollie’s established an equity incentive plan (the “2012 Plan”) under which stock options were granted to executive officers and key employees as deemed appropriate under the provisions of the 2012 Plan, with an exercise price at the fair value of the underlying stock on the date of grant. The vesting period for options granted under the 2012 Plan is five years ( 20 % ratably per year). Options granted under the 2012 Plan are subject to employment for vesting, expire 10 years from the date of grant, and are not transferable other than upon death. As of July 15, 2015, the date of the pricing of the Company’s initial public offering, no additional equity grants will be made under the 2012 Plan. In connection with its initial public offering, the Company adopted the 2015 equity incentive plan (the “2015 Plan”) pursuant to which the Company’s Board of Directors may grant stock options, restricted shares or other awards to employees, directors and consultants. The 2015 Plan allows for the issuance of up to 5,250,000 shares. Awards will be made pursuant to agreements and may be subject to vesting and other restrictions as determined by the Board of Directors or the Compensation Committee of the Board. The Company uses authorized and unissued shares to satisfy share award exercises. As of February 3, 2024, there were 1,957,583 shares available for grant under the 2015 Plan. 70 Index OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Stock Options The exercise price for stock options is determined at the fair value of the underlying stock on the date of grant. The vesting period for awards granted under the 2015 Plan is generally set at four years ( 25 % ratably per year). Awards are subject to employment for vesting, expire 10 years from the date of grant, and are not transferable other than upon death. A summary of the Company’s stock option activity and related information follows for 2021, 2022 and 2023: Number of options Weighted average exercise price Weighted average remaining contractual term (years) Aggregate intrinsic value (in thousands, except share and per share amounts) Outstanding at January 30 , 2021 1,244,235 $ 42.39 Granted 298,990 84.48 Forfeited ( 129,233 ) 61.98 Exercised ( 304,677 ) 28.34 Outstanding at January 29 , 2022 1,109,315 55.30 Granted 328,938 43.97 Forfeited ( 110,295 ) 59.60 Exercised ( 118,707 ) 33.97 Outstanding at January 28 , 2023 1,209,251 53.92 Granted 144,630 57.91 Forfeited ( 54,119 ) 62.90 Exercised ( 180,278 ) 37.09 Outstanding at February 3 , 2024 1,119,484 56.71 6.6 $ 23,406 Exercisable at February 3 , 2024 582,221 57.67 5.4 $ 11,843 The intrinsic value of stock options exercised for 2023, 2022 and 2021 was $ 5.8 million, $ 3.5 million and $ 17.0 million, respectively. The weighted average grant date fair value per option for options granted during 2023, 2022 and 2021 was $ 29.07 , $ 20.62 , and $ 33.38 , respectively. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model that used the weighted average assumptions in the following table: Fiscal Year Ended February 3, 2024 January 28, 2023 January 29, 2022 Risk-free interest rate 3.36 % 2.63 % 1.33 % Expected dividend yield — — — Expected life 6.25 years 6.25 years 6.25 years Expected volatility 47.16 % 44.40 % 38.39 % 71 Index OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The expected life of stock options is estimated using the “simplified method,” as the Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock option grants. The simplified method is based on the average of the vesting tranches and the contractual life of each grant. For expected volatility, the Company uses its historical information over the expected life of the option granted to calculate the fair value of option grants. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected life of the option. Restricted Stock Units Restricted stock units (“RSUs”) are issued at the closing price of the Company’s common stock on the date of grant. RSUs outstanding vest ratably over four years or cliff vest in one or four years . Awards are subject to employment for vesting and are not transferable other than upon death. A summary of the Company’s RSU activity and related information for 2021, 2022 and 2023 is as follows: Number of shares Weighted average grant date fair value Nonvested balance at January 30, 2021 148,838 $ 52.28 Granted 59,195 83.18 Forfeited ( 19,887 ) 62.27 Vested ( 62,663 ) 44.51 Nonvested balance at January 29, 2022 125,483 69.15 Granted 235,754 44.04 Forfeited ( 35,457 ) 51.49 Vested ( 49,502 ) 67.33 Nonvested balance at January 28, 2023 276,278 50.32 Granted 205,663 58.10 Forfeited ( 27,783 ) 53.24 Vested ( 103,354 ) 52.70 Nonvested balance at February 3, 2024 350,804 53.94 Stock-Based Compensation Expense The compensation cost for stock options and RSUs which has been recorded within SG&A was $ 12.2 million, $ 10.0 million, and $ 8.0 million for 2023, 2022 and 2021, respectively. As of February 3, 2024, there was $ 22.1 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 2.5 years. Compensation costs related to awards are recognized using the straight-line method. 72 Index OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (10) Employee Benefit Plans Ollie’s sponsors a defined contribution plan (the “Plan”), qualified under Internal Revenue Code (“IRC”) Section 401(k), for the benefit of employees. An employee becomes eligible to participate in the Plan upon attaining at least 21 years of age and completing three months of full-time employment. An employee may elect to contribute annual compensation up to the maximum allowable under the IRC. The Company assumes all administrative costs of the Plan and matches the employee’s contribution up to 25 % of the first 6 % of their annual compensation. The portion that the Company matches is vested ratably over six years . Beginning January 2024, the Company increased matches for employee contributions to 100 % of the first 3 % contributed of employee’s annual compensation, and 50 % of the next 2 % contributed for a total match of up to 4 %. The enhancements to the plan also include 100 % immediate vesting of the portion that the Company matches. The employer matching contributions to the Plan were $ 0.4 million, $ 0.3 million, and $ 0.2 million for 2023, 2022 and 2021, respectively. In addition to the regular matching contribution, the Company may elect to make a discretionary matching contribution. Discretionary contributions shall be allocated as a percentage of compensation of eligible participants for the Plan year. There were no discretionary contributions in 2023, 2022 or 2021. (11) Common Stock Common Stock The Company’s capital structure consists of a single class of common stock with one vote per share. The Company has authorized 500,000,000 shares at $ 0.001 par value per share. Additionally, the Company has authorized 50,000,000 shares of preferred stock at $ 0.001 par value per share; to date, however, no preferred shares have been issued. Treasury stock, which consists of the Company’s common stock, is accounted for using the cost method. Share Repurchase Program On December 15, 2020, the Board of Directors of the Company authorized the repurchase of up to $ 100.0 million of shares of the Company’s common stock. 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. Both of these authorizations were authorized to be executed through January 2023. On November 30, 2021, the Board authorized an additional $ 200.0 million to repurchase stock pursuant to the Company’s share repurchase program, expiring on December 15, 2023. On November 30, 2023, the Company’s Board of Directors authorized an extension to the existing share repurchase program set to expire on December 15, 2023, until March 31, 2026. The shares to be repurchased may be purchased from time to time in open market conditions (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, economic and business conditions, and other corporate considerations. Repurchases may be made pursuant to plans intended to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, which could allow the Company to purchase its shares during periods when it otherwise might be prevented from doing so under insider trading laws or because of self-imposed trading blackout periods. Repurchases are expected to be funded from cash on hand or through the utilization of the Company’s Revolving Credit Facility. The repurchase authorization does not require the purchase of a specific number of shares and is subject to suspension or termination by the Company’s Board of Directors at any time. 73 Index OLLIE’S BARGAIN OUTLET HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements During 2023, the Company repurchased 808,669 shares of its common stock for $ 52.5 million, inclusive of transaction costs, pursuant to its share repurchase program. During 2022, the Company repurchased 848,133 shares of its common stock for $ 41.8 million, inclusive of transaction costs, and during 2021, it repurchased 3,113,981 shares of its common stock for $ 220.0 million, inclusive of transaction costs. These expenditures were funded by cash on hand. As of February 3, 2024, the Company had $ 85.7 million remaining under its share repurchase authorization. There can be no assurances that any additional repurchases will be completed, or as to the timing or amount of any repurchases. (12) 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. The following table summarizes the percentage of net sales by each product group for each year presented: Fiscal Year Ended 2023 2022 2021 (in thousands) Consumables $ 499,411 23.8 % $ 395,542 21.6 % $ 347,432 19.8 % Home 751,138 35.7 % 699,351 38.3 % 696,689 39.8 % Seasonal 393,563 18.7 % 325,148 17.8 % 317,113 18.1 % Other 458,550 21.8 % 406,968 22.3 % 391,761 22.3 % Total $ 2,102,662 100.0 % $ 1,827,009 100.0 % $ 1,752,995 100.0 % (13) Transactions with Affiliated and Related Parties During fiscal year 2023, the Company purchased excess inventory of $ 1.5 million from a subsidiary of Hillman Solutions, Inc. where John Swygert, President and Chief Executive Officer of Ollie’s, is a member of its Board of Directors. There were purchases of $ 0.8 million made from a subsidiary of Hillman Solutions, Inc. in fiscal year 2022. 74 Index Schedule I - Condensed Financial Information of Registrant Ollie’s Bargain Outlet Holdings, Inc. (parent company only) Condensed Balance Sheets (In thousands) February 3, 2024 January 28, 2023 Assets Total current assets $ - $ - Long-term assets: Investment in subsidiaries 1,508,232 1,362,069 Total assets $ 1,508,232 $ 1,362,069 Liabilities and stockholders’ equity Total current liabilities $ - $ - Total long-term liabilities - - Total liabilities - - Stockholders’ equity: Common stock 67 67 Additional paid-in capital 694,959 677,694 Retained earnings 1,167,951 986,512 Treasury stock, at cost ( 354,745 ) ( 302,204 ) Total stockholders’ equity 1,508,232 1,362,069 Total liabilities and stockholders’ equity $ 1,508,232 $ 1,362,069 See accompanying Notes to Condensed Financial Statements. 75 Index Schedule I - Condensed Financial Information of Registrant Ollie’s Bargain Outlet Holdings, Inc. (parent company only) Condensed Statements of Income (In thousands) Fiscal year ended February 3, 2024 January 28, 2023 January 29, 2022 Net sales $ - $ - $ - Cost of sales - - - Gross profit - - - Selling, general and administrative expenses - - - Depreciation and amortization expenses - - - Pre-opening expenses - - - Operating income - - - Interest expense, net - - - Income before income taxes and equity in net income of subsidiaries - - - Income tax expense - - - Income before equity in net income of subsidiaries - - - Net income of subsidiaries 181,439 102,790 157,455 Net income $ 181,439 $ 102,790 $ 157,455 See accompanying Notes to Condensed Financial Statements . 76 Index Schedule I - Condensed Financial Information of Registrant Ollie’s Bargain Outlet Holdings, Inc. (parent company only) Notes to Condensed Financial Statements 1. Basis of presentation In the parent-company-only condensed financial statements, Ollie’s Bargain Outlet Holdings, Inc.’s (the “Company”) investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries since the date of acquisition. The parent-company-only condensed financial statements should be read in conjunction with the Company’s consolidated financial statements. A condensed statement of cash flows was not presented because Ollie’s Bargain Outlet Holdings, Inc. had no cash flow activities during 2023, 2022 or 2021. 2. Guarantees and restrictions On January 9, 2024, Ollie’s Bargain Outlet, Inc., a subsidiary of the Company, completed a transaction in which it refinanced its credit facility (the “Credit Facility”). 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 January 9, 2029 . In addition, Ollie’s Bargain Outlet, Inc. may at any time add term loan facilities or additional revolving commitments up to $ 150.0 million pursuant to the terms and conditions set out in the Credit Facility. Under the terms of the Credit Facility, Bargain Parent, Inc., a subsidiary of the Company, guaranteed the payment of all principal and interest. In the event of a default under the Credit Facility, Bargain Parent, Inc. will be directly liable to the debt holders . As of February 3, 2024 , Ollie’s Bargain Outlet, Inc. had $ 90.0 million available for borrowing under its Revolving Credit Facility. 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 February 3, 2024. 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 3, 2024 , 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. 77 Index Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.