Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Oct. 28, 2016 | Dec. 07, 2016 | |
Document and Entity Information | ||
Entity Registrant Name | 99 CENTS ONLY STORES LLC | |
Entity Central Index Key | 1,011,290 | |
Document Type | 10-Q | |
Document Period End Date | Oct. 28, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --01-27 | |
Entity Current Reporting Status | No | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 100 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Oct. 28, 2016 | Jan. 29, 2016 |
Current Assets: | ||
Cash | $ 2,426 | $ 2,312 |
Accounts receivable, net of allowance for doubtful accounts of $117 and $140 at October 28, 2016 and January 29, 2016, respectively | 3,142 | 1,674 |
Income taxes receivable | 2,235 | 3,665 |
Inventories, net | 188,380 | 196,651 |
Assets held for sale | 4,903 | 2,308 |
Other | 11,293 | 18,570 |
Total current assets | 212,379 | 225,180 |
Property and equipment, net | 522,002 | 542,570 |
Deferred financing costs, net | 3,992 | 916 |
Intangible assets, net | 448,830 | 453,242 |
Goodwill | 387,772 | 387,772 |
Deposits and other assets | 8,384 | 7,352 |
Total assets | 1,583,359 | 1,617,032 |
Current Liabilities: | ||
Accounts payable | 88,049 | 79,197 |
Payroll and payroll-related | 22,034 | 18,421 |
Sales tax | 15,002 | 13,314 |
Other accrued expenses | 54,244 | 39,520 |
Workers' compensation | 75,542 | 76,389 |
Current portion of long-term debt | 6,138 | 6,138 |
Current portion of capital and financing lease obligations | 30,251 | 989 |
Total current liabilities | 291,260 | 233,968 |
Long-term debt, net of current portion | 868,382 | 875,843 |
Unfavorable lease commitments, net | 4,426 | 5,746 |
Deferred rent | 29,717 | 29,333 |
Deferred compensation liability | 774 | 709 |
Capital and financing lease obligation, net of current portions | 46,856 | 34,817 |
Deferred income taxes | 163,045 | 163,045 |
Other liabilities | 7,011 | 5,118 |
Total liabilities | 1,411,471 | 1,348,579 |
Commitments and contingencies (Note 11) | ||
Member's Equity: | ||
Member units - 100 units issued and outstanding at October 28, 2016 and January 29, 2016 | 550,769 | 550,226 |
Investment in Number Holdings, Inc. preferred stock | (19,200) | (19,200) |
Accumulated deficit | (359,681) | (262,411) |
Other comprehensive loss | (162) | |
Total equity | 171,888 | 268,453 |
Total liabilities and equity | $ 1,583,359 | $ 1,617,032 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Oct. 28, 2016 | Jan. 29, 2016 |
CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, allowance for doubtful accounts (in dollars) | $ 117 | $ 140 |
Member units, units issued | 100 | 100 |
Member units, units outstanding | 100 | 100 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Oct. 28, 2016 | Oct. 30, 2015 | Oct. 28, 2016 | Oct. 30, 2015 | |
Net Sales: | ||||
99 Only Stores | $ 489,900,000 | $ 480,547,000 | $ 1,479,126,000 | $ 1,452,682,000 |
Bargain Wholesale | 10,244,000 | 10,918,000 | 30,405,000 | 33,474,000 |
Total sales | 500,144,000 | 491,465,000 | 1,509,531,000 | 1,486,156,000 |
Cost of sales | 354,982,000 | 359,796,000 | 1,074,202,000 | 1,061,989,000 |
Gross profit | 145,162,000 | 131,669,000 | 435,329,000 | 424,167,000 |
Selling, general and administrative expenses | 165,219,000 | 147,149,000 | 481,933,000 | 451,865,000 |
Goodwill impairment | 120,000,000 | 0 | 120,000,000 | |
Operating loss | (20,057,000) | (135,480,000) | (46,604,000) | (147,698,000) |
Other (income) expense: | ||||
Interest income | (7,000) | (45,000) | (3,000) | |
Interest expense | 16,920,000 | 16,549,000 | 50,230,000 | 49,302,000 |
Loss on extinguishment | 335,000 | |||
Total other expense, net | 16,913,000 | 16,549,000 | 50,520,000 | 49,299,000 |
Loss before provision for income taxes | (36,970,000) | (152,029,000) | (97,124,000) | (196,997,000) |
Provision for income taxes | 21,000 | 607,000 | 146,000 | 32,569,000 |
Net loss | (36,991,000) | (152,636,000) | (97,270,000) | (229,566,000) |
Other comprehensive income, net of tax: | ||||
Unrealized losses on interest rate cash flow hedge | (192,000) | (168,000) | (333,000) | |
Less: reclassification adjustment included in net income | 724,000 | 330,000 | 1,207,000 | |
Other comprehensive income, net of tax | 532,000 | 162,000 | 874,000 | |
Comprehensive loss | $ (36,991,000) | $ (152,104,000) | $ (97,108,000) | $ (228,692,000) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | |
Oct. 28, 2016 | Oct. 30, 2015 | |
Cash flows from operating activities: | ||
Net loss | $ (97,270,000) | $ (229,566,000) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation | 51,375,000 | 49,179,000 |
Amortization of deferred financing costs and accretion of OID | 4,457,000 | 3,542,000 |
Amortization of intangible assets | 1,312,000 | 1,332,000 |
Amortization of favorable/unfavorable leases, net | 1,802,000 | 1,322,000 |
Gain on disposal of fixed assets | (564,000) | (5,497,000) |
Loss on interest rate hedge | 514,000 | 1,119,000 |
Goodwill impairment | 0 | 120,000,000 |
Loss on extinguishment of debt | 335,000 | |
Long-lived assets impairment | 491,000 | 509,000 |
Deferred income taxes | 31,704,000 | |
Stock-based compensation | 543,000 | 1,456,000 |
Changes in assets and liabilities associated with operating activities: | ||
Accounts receivable | (1,468,000) | 141,000 |
Inventories | 8,271,000 | 29,804,000 |
Deposits and other assets | 5,202,000 | 3,487,000 |
Accounts payable | 8,190,000 | (22,433,000) |
Accrued expenses | 19,781,000 | 3,270,000 |
Accrued workers' compensation | (847,000) | (1,786,000) |
Income taxes | 1,322,000 | 9,371,000 |
Deferred rent | 1,339,000 | 3,266,000 |
Other long-term liabilities | 3,146,000 | 1,607,000 |
Net cash provided by operating activities | 7,931,000 | 1,827,000 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (35,273,000) | (55,710,000) |
Proceeds from sale of property and fixed assets | 617,000 | 22,320,000 |
Insurance recoveries for replacement assets | 937,000 | |
Net cash used in investing activities | (33,719,000) | (33,390,000) |
Cash flows from financing activities: | ||
Payments of long-term debt | (4,604,000) | (4,604,000) |
Proceeds under revolving credit facility | 168,500,000 | 404,050,000 |
Payments under revolving credit facility | (174,500,000) | (385,350,000) |
Payments of debt issuance costs | (4,725,000) | (487,000) |
Proceeds from financing lease obligations | 41,993,000 | 8,666,000 |
Payments of capital and financing lease obligations | (762,000) | (143,000) |
Payments to repurchase stock options of Number Holdings, Inc. | (390,000) | |
Net settlement of stock options of Number Holdings, Inc. for tax withholdings | (57,000) | |
Net cash provided by financing activities | 25,902,000 | 21,685,000 |
Net increase (decreased) in cash | 114,000 | (9,878,000) |
Cash - beginning of period | 2,312,000 | 12,463,000 |
Cash - end of period | 2,426,000 | 2,585,000 |
Supplemental cash flow information: | ||
Income taxes refunded | (1,175,000) | (8,500,000) |
Interest paid | 38,436,000 | 39,084,000 |
Non-cash investing activities for purchases of property and equipment | $ (662,000) | $ 17,953,000 |
Basis of Presentation and Summa
Basis of Presentation and Summary of Significant Accounting Policies | 9 Months Ended |
Oct. 28, 2016 | |
Basis of Presentation and Summary of Significant Accounting Policies | |
Basis of Presentation and Summary of Significant Accounting Policies | 1. Basis of Presentation and Summary of Significant Accounting Policies Nature of Business The Company is organized under the laws of the State of California. Effective October 18, 2013, 99¢ Only Stores converted from a California corporation to a California limited liability company, 99 Cents Only Stores LLC, that is managed by its sole member, Number Holdings, Inc., a Delaware corporation (“Parent”). The term “Company” refers to 99¢ Only Stores and its consolidated subsidiaries prior to the Conversion (as described in Note 1 to the Annual Report on Form 10-K for the fiscal year ended January 29, 2016) and to 99 Cents Only Stores LLC and its consolidated subsidiaries at the time of or after the Conversion. The Company is an extreme value retailer of consumable and general merchandise and seasonal products. As of October 28, 2016, the Company operated 394 retail stores with 287 in California, 48 in Texas, 38 in Arizona, and 21 in Nevada. The Company is also a wholesale distributor of various products. Merger On January 13, 2012, the Company was acquired through a merger (the “Merger”) with a subsidiary of Parent with the Company surviving. In connection with the Merger, the Company became a subsidiary of Parent, which is controlled by affiliates of Ares Management, L.P. (“Ares”) and Canada Pension Plan Investment Board (“CPPIB”). As a result of the Merger, the Company’s common stock was delisted from the New York Stock Exchange and the Company ceased to be a publicly held and traded equity company. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). However, certain information and footnote disclosures normally included in financial statements prepared in conformity with GAAP have been omitted or condensed pursuant to the rules and regulations of the Securities and Exchange Commission. These statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2016. In the opinion of the Company’s management, these interim unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the consolidated financial position and results of operations for each of the periods presented. The results of operations and cash flows for such periods are not necessarily indicative of results to be expected for the full fiscal year ending January 27, 2017 (“fiscal 2017”). Fiscal Year The Company follows a fiscal calendar consisting of four quarters with 91 days, each ending on the Friday closest to the last day of April, July, October or January, as applicable, and a 52-week fiscal year with 364 days, with a 53-week year every five to six years. Unless otherwise stated, references to years in this Report relate to fiscal years rather than calendar years. The Company’s fiscal 2017 began on January 30, 2016, will end on January 27, 2017 and will consist of 52 weeks. The Company’s fiscal year 2016 (“fiscal 2016”) began on January 31, 2015, ended on January 29, 2016 and consisted of 52 weeks. The third quarter ended October 28, 2016 (the “third quarter of fiscal 2017”) and the third quarter ended October 30, 2015 (the “third quarter of fiscal 2016”) were each comprised of 91 days. The nine-month period ended October 28, 2016 (the “first three quarters of fiscal 2017”) and the nine-month period ended October 30, 2015 (the “first three quarters of fiscal 2016”) were each comprised of 273 days. Use of Estimates The preparation of the unaudited consolidated financial statements, in conformity with GAAP, requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassification Certain prior year amounts have been reclassified to conform to the current year’s presentation. Specifically, the Company adopted Accounting Standard Update (“ASU”) No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs” in the first quarter of fiscal 2017, which requires the Company to present debt issuance costs related to a recognized debt liability on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts. The adoption of this accounting standard resulted in the reclassification of $11.5 million of debt issuance costs (net of accumulated amortization) from deferred financing costs, net to long-term debt, net of current portion on the Company’s consolidated balance sheet at January 29, 2016. The Company also early adopted ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes” in the first quarter of fiscal 2017, which requires that all deferred tax assets and liabilities be classified as long-term on the balance sheet. The adoption of this accounting standard resulted in the reclassification of $16.6 million of deferred income tax from current assets to long-term deferred income taxes liability on the Company’s consolidated balance sheet at January 29, 2016. Cash For purposes of reporting cash flows, cash includes cash on hand, cash at the stores and cash in financial institutions. The majority of payments due from financial institutions for the settlement of debit card and credit card transactions are processed within three business days and therefore are also classified as cash. Cash balances held at financial institutions are generally in excess of federally insured limits. These accounts are only insured by the Federal Deposit Insurance Corporation up to $250,000. The Company historically has not experienced any losses in such accounts. The Company places its temporary cash investments with what it believes to be high credit, quality financial institutions. Under the Company’s cash management system, checks issued but not presented to the bank may result in book cash overdraft balances for accounting purposes. The Company reclassifies book overdrafts to accounts payable, which are reflected as an operating activity in its unaudited consolidated statements of cash flows. Book overdrafts included in accounts payable were $3.2 million and $7.9 million as of October 28, 2016 and January 29, 2016, respectively. Allowance for Doubtful Accounts In connection with its wholesale business, the Company evaluates the collectability of accounts receivable based on a combination of factors. In cases where the Company is aware of circumstances that may impair a specific customer’s or tenant’s ability to meet its financial obligations subsequent to the original sale, the Company will record an allowance against amounts due and thereby reduce the net recognized receivable to the amount the Company reasonably believes will be collected. For all other customers and tenants, the Company recognizes allowances for doubtful accounts based on the length of time the receivables are past due, industry and geographic concentrations, the current business environment and the Company’s historical experiences. Inventories Inventories are valued at the lower of cost or market. Inventory costs are established using a methodology that approximates first in, first out, which for store inventories is based on a retail inventory method. Valuation allowances for shrinkage as well as excess and obsolete inventory are also recorded. The Company includes spoilage, scrap and shrink in its definition of shrinkage. Shrinkage is estimated as a percentage of sales for the period from the last physical inventory date to the end of the applicable period. Such estimates are based on experience and the most recent physical inventory results. Physical inventory counts are completed at each of the Company’s retail stores at least once a year by an outside inventory service company. The Company performs inventory cycle counts at its warehouses throughout the year. The Company also performs inventory reviews and analysis on a quarterly basis for both warehouse and store inventory to determine inventory valuation allowances for excess and obsolete inventory. The valuation allowances for excess and obsolete inventory are based on the age of the inventory, sales trends and future merchandising plans. The valuation allowances for excess and obsolete inventory require management judgment and estimates that may impact the ending inventory valuation and valuation allowances that may have a material effect on the reported gross margin for the period. These estimates are subject to change based on management’s evaluation of, and response to, a variety of factors and trends, including, but not limited to, consumer preferences and buying patterns, age of inventory, increased competition, inventory management, merchandising strategies and historical sell through trends. The Company’s ability to adequately evaluate the impact of inventory management and merchandising strategies executed in response to such factors and trends in future periods could have a material impact on such estimates. In order to obtain inventory at attractive prices, the Company takes advantage of large volume purchases, closeouts and other similar purchase opportunities. Consequently, the Company’s inventory fluctuates from period to period and the inventory balances vary based on the timing and availability of such opportunities. Property and Equipment Property and equipment are carried at cost and are depreciated or amortized on a straight-line basis over the following useful lives: Owned buildings and improvements Lesser of 30 years or the estimated useful life of the improvement Leasehold improvements Lesser of the estimated useful life of the improvement or remaining lease term Fixtures and equipment 3-5 years Transportation equipment 3-5 years Information technology systems For major corporate systems, estimated useful life up to 7 years; for functional standalone systems, estimated useful life up to 5 years The Company’s policy is to capitalize expenditures that materially increase asset lives and expense ordinary repairs and maintenance as incurred. Long-Lived Assets The Company assesses the impairment of depreciable long-lived assets when events or changes in circumstances indicate that the carrying value may not be recoverable. The Company groups and evaluates long-lived assets for impairment at the individual store level, which is the lowest level at which individual identifiable cash flows are available. Recoverability is measured by comparing the carrying amount of an asset to expected future net cash flows generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, the carrying amount is compared to its fair value and an impairment charge is recognized to the extent of the difference. Factors that the Company considers important that could individually or in combination trigger an impairment review include the following: (1) significant underperformance relative to expected historical or projected future operating results; (2) significant changes in the manner of the Company’s use of the acquired assets or the strategy for the Company’s overall business; and (3) significant changes in the Company’s business strategies and/or negative industry or economic trends. On a quarterly basis, the Company assesses whether events or changes in circumstances occur that potentially indicate that the carrying value of long-lived assets may not be recoverable (Level 3 measurement, see Note 7, “Fair Value of Financial Instruments”). Considerable management judgment is necessary to estimate projected future operating cash flows. Accordingly, if actual results fall short of such estimates, significant future impairments could result. During the third quarter of fiscal 2017, the Company decided to close five retail stores in California by the end of fiscal 2017 upon the expiration of their respective lease terms. As a result of this decision, the Company recognized an impairment charge of approximately $0.1 million related to the closure of three of these stores and recorded an impairment charge of $0.1 million related to fixtures that will be disposed of and for which the Company concluded the fair value was zero. During the third quarter of fiscal 2017, the Company also reduced the carrying value of a held for sale property to the estimated net realizable value, net of expected disposal costs, and accordingly recorded an asset impairment charge of $0.2 million. During the second quarter of fiscal 2016, due to the underperformance of one store in Texas, the Company concluded that the carrying value of its long-lived assets was not recoverable and accordingly recorded an asset impairment charge of $0.5 million. Goodwill and Other Intangible Assets In connection with the Merger purchase price allocation, the fair values of long-lived and intangible assets were determined based upon assumptions related to the future cash flows, discount rates and asset lives using then available information, and in some cases were obtained from independent professional valuation experts. The Company amortizes intangible assets over their estimated useful lives unless such lives are deemed indefinite. Amortizable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable based on undiscounted cash flows, and, if impaired, written down to fair value based on either discounted cash flows or appraised values. Significant judgment is required in determining whether a potential indicator of impairment of long-lived assets exists and in estimating future cash flows used in the impairment tests (Level 3 measurement, see Note 7, “Fair Value of Financial Instruments”). Goodwill and indefinite-lived intangible assets are not amortized but instead tested annually for impairment or more frequently when events or changes in circumstances indicate that the assets might be impaired. Goodwill is tested for impairment by comparing the carrying amount of the reporting unit to the fair value of the reporting unit to which the goodwill is assigned. The Company has the option of performing a qualitative assessment before calculating the fair value of the reporting unit (i.e., step zero of the goodwill impairment test). If the Company does not perform a qualitative assessment, or determines, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, the two-step impairment test would be required. The first step is to compare the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is considered not impaired; otherwise, goodwill is impaired and the loss is measured by performing step two. Under step two, the impairment loss is measured by comparing the implied fair value of the reporting unit’s goodwill with the carrying amount of goodwill. Management has determined that the Company has two reporting units, the retail reporting unit and the wholesale reporting unit. The Company, assisted by an independent third party valuation firm, performs the annual test for impairment in January of the fiscal year and determines fair value based on a combination of the income approach and the market approach. The income approach is based on discounted cash flows to determine fair value. The market approach uses a selection of comparable companies and transactions in determining fair value. The fair value of the trade name is also tested for impairment in the fourth quarter by comparing the carrying value to the fair value. Fair value of a trade name is determined using a relief from royalty method under the income approach, which uses projected revenue allocable to the trade name and an assumed royalty rate (Level 3 measurement, see Note 7, “Fair Value of Financial Instruments”). These approaches involve making key assumptions about future cash flows, discount rates and asset lives using then best available information. These assumptions are subject to a high degree of complexity and judgment and are subject to change. During the third quarter of fiscal 2016, the Company determined that indicators of impairment existed to require an interim impairment analysis of goodwill and trade name, including (i) overall performance deterioration reflected in decreased comparable same-store sales and cannibalization from stores opened in fiscal 2015 under an accelerated expansion program, (ii) increases in inventory shrinkage and buildup of excess inventory, (iii) decreased margin due to disappointing results from sales promotions and (iv) a decision to delay the pace of future store openings. The first step evaluation concluded that the fair value of the retail reporting unit was below its carrying value. The Company performed step two of the goodwill impairment test that requires the retail reporting unit’s fair value to be allocated to all of the assets and liabilities of the reporting unit, including any intangible assets, in a hypothetical analysis that calculates the implied fair value of goodwill in the same manner as if the reporting unit was being acquired in a business combination, including consideration of the fair value of tangible property and intangible assets. As a result of this preliminary analysis and based on best estimate, the Company recorded a $120.0 million non-cash goodwill impairment charge in the third quarter of fiscal 2016, which was reflected as goodwill impairment in the consolidated statements of comprehensive income (loss). The finalization of the preliminary goodwill impairment test was completed in the fourth quarter of fiscal 2016 and resulted in a $28.0 million adjustment in goodwill, lowering the estimated third quarter of fiscal 2016 goodwill impairment charge from $120.0 million to $92.0 million. The remaining amount of goodwill allocated to the retail reporting unit and wholesale reporting unit was $375.2 million and $12.5 million, respectively, as of January 29, 2016. During the fourth quarter of fiscal 2016, the Company completed step one of its annual goodwill impairment test for the two reporting units and determined that there was no impairment of goodwill since the fair value of the Company’s reporting units exceeded their carrying amounts. As discussed above, considerable management judgment is necessary in estimating future cash flows, market interest rates, discount rates and other factors affecting the valuation of goodwill. The Company’s forecasts used in its fiscal 2016 annual impairment test include growth in net sales, new store openings and same-store sales, positive trends in cost of sales and selling, general and administrative expense. In each case, these estimates and assumptions could be materially affected by factors such as unforeseen events or changes in general economic conditions, a decline in comparable company market multiples, changes to discount rates, increased competitive forces, inability to maintain pricing structure, deterioration of vendor relationships, failure to adequately manage and improve inventory processes and procedures and changes in customer behavior which could result in changes to management’s strategies. If operating results continue to change versus the Company’s expectations, additional impairment charges may be recorded in the future. Additionally, during the fourth quarter of fiscal 2016, the Company completed its annual indefinite-lived intangible asset impairment test and determined there was no impairment to the trade name since the fair value of the trade name exceeded its carrying amount. The results of this test showed that the fair value of trade name exceeded carrying value by approximately 12%. The relief from royalty method estimates our theoretical royalty savings from ownership of the intangible asset. Key assumptions used in this model included sales projections, discount rates and royalty rates, and considerable management judgment is necessary in developing and evaluating such assumptions. If future results are not consistent with current estimates and assumptions, impairment charges maybe recorded in future. During the first three quarters of fiscal 2017, the Company did not record any impairment charges related to goodwill or other intangible assets. Derivatives The Company accounts for derivative financial instruments in accordance with authoritative guidance for derivative instrument and hedging activities. Financial instrument positions taken by the Company are primarily intended to be used to manage risks associated with interest rate exposures. The Company’s derivative financial instruments are recorded on the balance sheet at fair value, and are recorded in either current or noncurrent assets or liabilities based on their maturity. Changes in the fair values of derivatives are recorded in net earnings or other comprehensive income (“OCI”), based on whether the instrument is designated and effective as a hedge transaction and, if so, the type of hedge transaction. Gains or losses on derivative instruments reported in accumulated other comprehensive income (“AOCI”) are reclassified to earnings in the period the hedged item affects earnings. Any ineffectiveness is recognized in earnings in the period incurred. Income Taxes The Company uses the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company’s ability to realize deferred tax assets is assessed throughout the year and a valuation allowance is established accordingly. The Company recognizes the impact of a tax position only if it is more likely than not to be sustained upon examination based on the technical merits of the position. The Company recognizes potential interest and penalties related to uncertain tax positions in income tax expense. Refer to Note 10, “Income Taxes,” for further discussion of income taxes. Stock-Based Compensation The Company accounts for stock-based payment awards based on their fair value. The value of the portion of the award that is ultimately expected to vest is recognized as an expense ratably over the requisite service periods. For awards classified as equity, the Company estimates the fair value for each option award as of the date of grant using the Black-Scholes option pricing model or other appropriate valuation models. The Black-Scholes model considers, among other factors, the expected life of the award and the expected volatility of the stock price. Stock options are generally granted to employees at exercise prices equal to or greater than the fair market value of the stock at the dates of grant. The fair value of options that vest based on the Company’s and Parent’s achievement of certain performance hurdles were valued using a Monte Carlo simulation method. The fair value of options granted to the current Chief Executive Officer were valued using a binomial model and the Monte Carlo simulation method. Refer to Note 8, “Stock-Based Compensation” for further discussion of the Company’s stock-based compensation. Revenue Recognition The Company recognizes retail sales in its retail stores at the time the customer takes possession of merchandise. All sales are net of discounts and returns and exclude sales tax. Wholesale sales are recognized in accordance with the shipping terms agreed upon on the purchase order. Wholesale sales are typically recognized free on board origin, where title and risk of loss pass to the buyer when the merchandise leaves the Company’s distribution facility. The Company has a gift card program. The Company does not charge administrative fees on gift cards and the Company’s gift cards do not have expiration dates. The Company records the sale of gift cards as a current liability and recognizes a sale when a customer redeems a gift card. The liability for outstanding gift cards is recorded in accrued expenses. Cost of Sales Cost of sales includes the cost of inventory, freight in, obsolescence, spoilage, scrap and inventory shrink, and is net of discounts and allowances. Cost of sales also includes receiving, warehouse costs and distribution costs (which include payroll and associated costs, occupancy, transportation to and from stores and depreciation expense). Cash discounts for satisfying early payment terms are recognized when payment is made, and allowances and rebates based upon milestone achievements such as reaching a certain volume of purchases of a vendor’s products are included as a reduction of cost of sales when such contractual milestones are reached or based on other systematic and rational approaches where possible. Selling, General and Administrative Expenses Selling, general and administrative expenses include the costs of selling merchandise in stores (which include payroll and associated costs, occupancy and other store-level costs) and corporate costs (which include payroll and associated costs, occupancy, advertising, professional fees and other corporate administrative costs). Selling, general and administrative expenses also include depreciation and amortization expense relating to these costs. Leases The Company follows the policy of capitalizing allowable expenditures that relate to the acquisition and signing of its retail store leases. These costs are amortized on a straight-line basis over the applicable lease term. The Company recognizes rent expense for operating leases on a straight-line basis (including the effect of reduced or free rent and rent escalations) over the applicable lease term. The difference between the cash paid to the landlord and the amount recognized as rent expense on a straight-line basis is included in deferred rent. Cash reimbursements received from landlords for leasehold improvements and other cash payments received from landlords as lease incentives are recorded as deferred rent. Deferred rent related to landlord incentives is amortized as an offset to rent expense using the straight-line method over the applicable lease term. In certain lease arrangements, the Company can be involved with the construction of the building. If it is determined that the Company has substantially all of the risks of ownership during construction of the leased property and therefore is deemed to be the owner of the construction project, the Company records an asset for the amount of the total project costs and an amount related to the value attributed to the pre-existing leased building in property and equipment, net and the related financing obligation as part of current and non-current liabilities. Once construction is complete, if it is determined that the asset does not qualify for sale-leaseback accounting treatment, the Company amortizes the obligation over the lease term and depreciates the asset over the life of the lease. The Company does not report rent expense for the portion of the rent payment determined to be related to the assets which are owned for accounting purposes. Rather, this portion of the rent payment under the lease is recognized as a reduction of the financing obligation and interest expense. For store closures where a lease obligation still exists, the Company records the estimated future liability associated with the rental obligation on the cease use date (when the store is closed). Liabilities are established at the cease use date for the present value of any remaining operating lease obligations, net of estimated sublease income, and at the communication date for severance and other exit costs. Key assumptions in calculating the liability include the timeframe expected to terminate lease agreements, estimates related to the sublease potential of closed locations, and estimates of other related exit costs. If actual timing and potential termination costs or realization of sublease income differ from the Company’s estimates, the resulting liabilities could vary from recorded amounts. These liabilities are reviewed periodically and adjusted when necessary. During the third quarter of fiscal 2017, the Company sold and concurrently leased back two stores with an aggregate carrying value of $7.6 million and received net proceeds from these transactions of $10.5 million. The Company was deemed to have “continuing involvement,” which precluded the de-recognition of the assets from the consolidated balance sheet when the transactions closed. The resulting leases are accounted for as financing leases and the Company has recorded a corresponding financing lease obligation of $10.5 million (as a component of current and non-current liabilities). The Company will amortize the financing lease obligation over the lease term and depreciate the assets over their remaining useful lives. Self-Insured Workers’ Compensation Liability The Company self-insures for workers’ compensation claims in California and Texas. The Company establishes a liability for losses from both estimated known and incurred but not reported insurance claims based on reported claims and actuarial valuations of estimated future costs of known and incurred but not yet reported claims. Should an amount of claims greater than anticipated occur, the liability recorded may not be sufficient and additional workers’ compensation costs, which may be significant, could be incurred. The Company has not discounted the projected future cash outlays for the time value of money for claims and claim-related costs when establishing its workers’ compensation liability in its financial reports for each of October 28, 2016 and January 29, 2016. Self-Insured Health Insurance Liability The Company self-insures for a portion of its employee medical benefit claims. The liability for the self-funded portion of the Company health insurance program is determined actuarially, based on claims filed and an estimate of claims incurred but not yet reported. The Company maintains stop loss insurance coverage to limit its exposure for the self-funded portion of its health insurance program. Pre-Opening Costs The Company expenses, as incurred, pre-opening costs such as payroll, rent and marketing related to the opening of new retail stores. Advertising The Company expenses advertising costs as incurred. Fair Value of Financial Instruments The Company’s financial instruments consist principally of cash, accounts receivable, interest rate and other derivatives, accounts payable, accruals, debt, and other liabilities. Cash and derivatives are measured and recorded at fair value. Accounts receivable and other receivables are financial assets with carrying values that approximate fair value. Accounts payable and other accrued expenses are financial liabilities with carrying values that approximate fair value. Refer to Note 7, “Fair Value of Financial Instruments” for further discussion of the fair value of debt. The Company uses the authoritative guidance for fair value, which includes the definition of fair value, the framework for measuring fair value, and disclosures about fair value measurements. Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value measurements reflect the assumptions market participants would use in pricing an asset or liability based on the best information available. Assumptions include the risks inherent in a particular valuation technique (such as a pricing model) and/or the risks inherent in the inputs to the model. Comprehensive Income OCI includes unrealized gains or losses on interest rate derivatives designated as cash flow hedges. |
Goodwill and Other Intangibles
Goodwill and Other Intangibles | 9 Months Ended |
Oct. 28, 2016 | |
Goodwill and Other Intangibles | |
Goodwill and Other Intangibles | 2. The following tables set forth the value of the goodwill and other intangible assets and liabilities, and unfavorable leases, respectively (in thousands): October 28, 2016 January 29, 2016 Gross Impairment Accumulated Net Gross Impairment Accumulated Net Indefinite lived intangible assets: Goodwill $ $ ) $ — $ $ $ ) $ — $ Trade name — — — — Total indefinite lived intangible assets $ $ ) $ — $ $ $ ) $ — $ Finite lived intangible assets: Trademarks $ $ ) $ ) $ $ $ ) $ ) $ Bargain Wholesale customer relationships — ) — ) Favorable leases ) ) ) ) Total finite lived intangible assets ) ) ) ) Total goodwill and other intangible assets $ $ ) $ ) $ $ $ ) $ ) $ October 28, 2016 January 29, 2016 Gross Accumulated Net Gross Accumulated Net Unfavorable leases $ $ ) $ $ $ ) $ |
Property and Equipment, net
Property and Equipment, net | 9 Months Ended |
Oct. 28, 2016 | |
Property and Equipment, net | |
Property and Equipment, net | 3. The following table provides details of property and equipment (in thousands): October 28, January 29, Land $ $ Buildings Buildings improvements Leasehold improvements Fixtures and equipment Transportation equipment Construction in progress Total property and equipment Less: accumulated depreciation and amortization ) ) Property and equipment, net $ $ |
Comprehensive Loss
Comprehensive Loss | 9 Months Ended |
Oct. 28, 2016 | |
Comprehensive Loss | |
Comprehensive Loss | 4. The following table sets forth the calculation of comprehensive loss, net of tax effects (in thousands): For the Third Quarter Ended For the First Three Quarters Ended October 28, October 30, October, 28 October 30, Net loss $ ) $ ) $ ) $ ) Unrealized loss on interest rate cash flow hedge, net of tax effects of $0, $94, $(112) and $0 for the third quarter and first three quarters of fiscal 2017 and fiscal 2016, respectively — ) ) ) Reclassification adjustment, net of tax effects of $0, $(321), $220 and $0 for the third quarter and first three quarters of fiscal 2017 and fiscal 2016, respectively — Total gains, net — Total comprehensive loss $ ) $ ) $ ) $ ) Amounts in accumulated other comprehensive loss as of January 29, 2016 consisted of unrealized losses on interest rate cash flow hedges. Reclassifications out of accumulated other comprehensive loss in each of the third quarter and first three quarters of fiscal 2017 and fiscal 2016 are presented in Note 6, “Derivative Financial Instruments.” |
Debt
Debt | 9 Months Ended |
Oct. 28, 2016 | |
Debt | |
Debt | 5. Short and long-term debt consists of the following (in thousands): October 28, January 29, ABL Facility $ $ First Lien Term Loan Facility , maturing on January 13, 2019, payable in quarterly installments of $1,535, plus interest through December 31, 2018, with unpaid principal and accrued interest due on January 13, 2019, net of unamortized OID of $3,240 and $4,724 as of October 28, 2016 and January 29, 2016, respectively Senior Notes (unsecured) maturing on December 15, 2019, unpaid principal and accrued interest due on December 15, 2019 Deferred financing costs ) ) Total debt Less: current portion Long-term debt, net of current portion $ $ As of October 28, 2016 and January 29, 2016, the net deferred financing costs are as follows (in thousands): Deferred financing costs October 28, January 29, ABL Facility (included in non-current deferred financing costs) $ $ First Lien Term Loan Facility (included in long-term debt, net of current portion) Senior Notes (included in long-term debt, net of current portion) Total deferred financing costs, net $ $ On January 13, 2012 (the “Original Closing Date”), in connection with the Merger, the Company obtained Credit Facilities (as defined below) provided by a syndicate of lenders arranged by Royal Bank of Canada as administrative agent, as well as other agents and lenders that are parties to the agreements governing these Credit Facilities. The Credit Facilities include (a) a first lien asset based revolving credit facility (as amended, the “ABL Facility”), and (b) a first lien term loan facility (as amended, the “First Lien Term Loan Facility” and together with the ABL Facility, the “Credit Facilities”). First Lien Term Loan Facility Under the First Lien Term Loan Facility, (i) $525.0 million of term loans were incurred on the Original Closing Date and (ii) $100.0 million of additional term loans were incurred pursuant to an incremental facility effected through an amendment entered into on October 8, 2013 (the “Second Amendment”) (all such term loans, collectively, the “Term Loans”). The First Lien Term Loan Facility has a maturity date of January 13, 2019. All obligations under the First Lien Term Loan Facility are guaranteed by Parent and the Company’s direct or indirect 100% owned domestic subsidiaries (with customary exceptions, including immaterial subsidiaries) (collectively, the “Credit Facilities Guarantors”). In addition, the First Lien Term Loan Facility is secured by substantially all of the Company’s assets and the assets of the Credit Facilities Guarantors, including a first priority pledge of all of the Company’s equity interests and the equity interests of the Credit Facilities Guarantors and a first priority security interest in certain other fixed assets, and a second priority security interest in certain current assets. The Company is required to make scheduled quarterly payments each equal to 0.25% of the principal amount of the Term Loans, with the balance due on the maturity date. Borrowings under the First Lien Term Loan Facility bear interest at an annual rate equal to an applicable margin plus, at the Company’s option, either (i) a base rate (the “Base Rate”) determined by reference to the highest of (a) the interest rate in effect determined by the administrative agent as the “Prime Rate” (3.50% as of October 28, 2016), (b) the federal funds effective rate plus 0.50% and (c) an adjusted Eurocurrency rate for one month (determined by reference to the greater of the Eurocurrency rate for the interest period subject to certain adjustments) plus 1.00%, or (ii) a Eurocurrency rate determined by reference to the London Interbank Offered Rate (“LIBOR”), adjusted for statutory reserve requirements, for the interest period relevant to such borrowing. On April 4, 2012, the Company amended the terms of the First Lien Term Loan Facility (the “First Amendment”) and incurred related refinancing costs of $11.2 million. The First Amendment, among other things, (i) decreased the applicable margin from LIBOR plus 5.50% (or Base Rate plus 4.50%) to LIBOR plus 4.00% (or Base Rate plus 3.00%) and (ii) decreased the LIBOR floor from 1.50% to 1.25%. On October 8, 2013, the Company entered into the Second Amendment, which among other things, (i) provided $100.0 million of additional term loans as described above, (ii) decreased the applicable margin from LIBOR plus 4.00% (or Base Rate plus 3.00%) to LIBOR plus 3.50% (or Base Rate plus 2.50%) and (iii) decreased the LIBOR floor from 1.25% to 1.00%. Upon the occurrence of the Second Amendment, the Company’s obligation to make scheduled quarterly payments on the Term Loans was increased to require the Company to make scheduled quarterly payments each equal to 0.25% of the amended principal amount of the Term Loans (approximately $1.5 million). In addition, the Second Amendment (i) amended certain restricted payment provisions, (ii) removed the maximum capital expenditures covenant from the agreement governing the First Lien Term Loan Facility, (iii) modified the existing provision restricting the Company’s ability to make dividend and other payments so that from and after March 31, 2013, the permitted payment amount represents the sum of (a) a calculation based on 50% of Consolidated Net Income (as defined in the First Lien Term Loan Facility agreement), if positive, or a deficit of 100% of Consolidated Net Income, if negative, and (b) $20.0 million, and (iv) permitted proceeds of any sale leasebacks of any assets acquired after January 13, 2012, to be reinvested in the Company’s business without restriction. As of October 28, 2016, the interest rate charged on the First Lien Term Loan Facility was 4.50% (1.00% Eurocurrency rate, plus the Eurocurrency loan margin of 3.50%). As of October 28, 2016, the gross amount outstanding under the First Lien Term Loan Facility was $595.4 million. Following the end of each fiscal year, the Company is required to make prepayments on the First Lien Term Loan Facility in an amount equal to (i) 50% of Excess Cash Flow (as defined in the agreement governing the First Lien Term Loan Facility), with the ability to step down to 25% and 0% upon achievement of specified total leverage ratios, minus (ii) the amount of certain voluntary prepayments made on the First Lien Term Loan Facility and/or the ABL Facility during such fiscal year. There was no Excess Cash Flow payment required for fiscal 2016. The First Lien Term Loan Facility includes certain customary restrictions, among other things, on the Company’s ability and the ability of Parent, the Credit Facilities Guarantors (including the Company’s subsidiary 99 Cents Only Stores Texas Inc.) and certain future subsidiaries of the Company to incur or guarantee additional indebtedness, make certain restricted payments, acquisitions or investments, materially change the Company’s business, incur or permit to exist certain liens, enter into transactions with affiliates, sell assets, make capital expenditures or merge or consolidate with or into, another company. As of October 28, 2016, the Company was in compliance with the terms of the First Lien Term Loan Facility. During the first quarter of fiscal 2013, the Company entered into an interest rate swap agreement to limit the variability of cash flows associated with interest payments on the First Lien Term Loan Facility that result from fluctuations in the LIBOR rate. See Note 6, “Derivative Financial Instruments” for more information on this interest rate swap agreement. ABL Facility The ABL Facility initially was to mature on January 13, 2017 and provided for up to $175.0 million of borrowings, subject to certain borrowing base limitations. Subject to certain conditions, the Company could increase the commitments under the ABL Facility by up to $50.0 million. All obligations under the ABL Facility are guaranteed by Parent and the other Credit Facilities Guarantors. The ABL Facility is secured by substantially all of the Company’s assets and the assets of the Credit Facilities Guarantors, including a first priority security interest in certain current assets, and a second priority pledge of all of the Company’s equity interests and the equity interest of the Credit Facilities Guarantors and a second priority security interest in certain other fixed assets. Borrowings under the ABL Facility bear interest at a rate based, at the Company’s option, on (i) LIBOR plus an applicable margin to be determined (3.00% as of October 28, 2016) or (ii) the determined base rate (Prime Rate) plus an applicable margin to be determined (2.00% at October 28, 2016), in each case based on a pricing grid depending on average daily excess availability for the most recently ended quarter. In addition to paying interest on outstanding principal under the Credit Facilities, the Company is required to pay a commitment fee to the lenders under the ABL Facility on unused commitments. The commitment fee is adjusted at the beginning of each quarter based upon the average historical excess availability of the prior quarter (0.50% for the quarter ended October 28, 2016). The Company must also pay customary letter of credit fees and agency fees. As of October 28, 2016, borrowings under the ABL Facility were $41.8 million, outstanding letters of credit were $31.6 million and availability under the ABL Facility subject to the borrowing base, was $48.6 million. As of January 29, 2016, borrowings under the ABL Facility were $47.8 million, outstanding letters of credit were $2.5 million and availability under the ABL Facility subject to the borrowing base, was $90.9 million, prior to giving effect to a subsequent amendment to the ABL Facility on April 8, 2016 that decreased commitments available under the ABL Facility by $25.0 million. The ABL Facility includes restrictions on the Company’s ability and the ability of Parent and certain of the Company’s restricted subsidiaries to incur or guarantee additional indebtedness, pay dividends on, or redeem or repurchase, its capital stock, make certain acquisitions or investments, materially change its business, incur or permit to exist certain liens, enter into transactions with affiliates, sell assets or merge or consolidate with or into another company. On October 8, 2013, the ABL Facility was amended to among other things, modify the provision restricting the Company’s ability to make dividend and other payments. Such payments are subject to achievement of Excess Availability (as defined in the agreement governing the ABL Facility) and a ratio of EBITDA (as defined in the agreement governing the ABL Facility) to fixed charges. On August 24, 2015, the Company amended its ABL Facility to increase commitments available under the ABL Facility by $10.0 million, resulting in an aggregate ABL Facility size of $185.0 million. The additional commitments implemented pursuant to the amendment have terms identical to the existing commitments under the ABL Facility, including as to interest rate and other pricing terms. The Company paid amendment fees of $0.5 million to lenders under the ABL Facility. In addition, the amendment to the ABL Facility (i) modified certain springing covenants triggered by reference to excess availability under the ABL Facility agreement so that, from August 24, 2015 to April 30, 2016, the occurrence of any such excess availability trigger is determined solely by reference to the available borrowing base under the ABL Facility rather than by reference to the lesser of the available borrowing base and the available aggregate commitments under the ABL Facility, (ii) increased the inventory advance rate during such period for purposes of calculating the borrowing base from 90% to 92.5%, (iii) provided for certain additional inspection rights by the administrative agent if there is a material increase in the amount of inventory that is not eligible inventory for purposes of the borrowing base and (iv) provided for certain additional technical waivers and amendments in order to effect the foregoing. On April 8, 2016, the Company amended its ABL Facility to, among other things, decrease the commitments available under the ABL Facility by $25.0 million, resulting in an aggregate facility size of $160.0 million, and extend the maturity date of the ABL Facility to April 8, 2021; provided however, the ABL Facility will mature on the earlier of (i) the date that is 90 days prior to the stated maturity date in respect of the First Lien Term Loan Facility and (ii) the date that is 90 days prior to the stated maturity date in respect of the Senior Notes (as defined below), unless the First Lien Term Loan Facility and Senior Notes have been repaid or refinanced in full or amended to extend the final maturity dates thereof to a date that is at least 180 days after April 8, 2021 (the date of such repayment or refinancing, the “Term/Notes Refinancing Date”) (such amendment, the “Fourth Amendment”). The Fourth Amendment also modified the interest rate margins payable under the ABL Facility. The initial applicable margin for borrowings under the ABL Facility is 2.0% with respect to base rate borrowings and 3.0% with respect to Eurocurrency rate borrowings. Commencing with the first day of the first fiscal quarter commencing after the closing of the Fourth Amendment, the applicable margin for borrowings thereunder is subject to adjustment each fiscal quarter, based on average historical excess availability during the preceding fiscal quarter. Furthermore, the applicable margin will be reduced by 0.50% after the Term/Notes Refinancing Date. In addition, the Fourth Amendment (i) reduced the incremental revolving commitment capacity from $50.0 million to $25.0 million, but provides that any such incremental revolving commitment may take the form of a “last-out” term loan, (ii) added restrictions on certain negative covenants in respect of investments, restricted payments and prepayments of indebtedness, including the First Lien Term Loan Facility and the Senior Notes, in each case, until the occurrence of Term/Notes Refinancing Date, (iii) reduced the letter of credit sublimit from $50.0 million to $45.0 million and (iv) provided for certain additional technical waivers and amendments in order to effect the foregoing. In connection with the Fourth Amendment and in the first quarter of fiscal 2017, the Company recognized a loss on debt extinguishment of approximately $0.3 million related to a portion of the unamortized debt issuance costs. The Company recorded $4.7 million of debt issuance costs in connection with the Fourth Amendment in the first quarter of fiscal 2017 as part of non-current deferred financing costs. As of October 28, 2016, the Company was in compliance with the terms of the ABL Facility. Senior Notes On December 29, 2011, the Company issued $250.0 million aggregate principal amount of 11% Senior Notes that mature on December 15, 2019 (the “Senior Notes”). The Senior Notes are guaranteed by the same subsidiaries that guarantee the Credit Facilities (the “Subsidiary Guarantors”). Pursuant to the terms of the indenture governing the Senior Notes (the “Indenture”), the Company may redeem all or a part of the Senior Notes at certain redemption prices that vary based on the date of redemption. The Company is not required to make any mandatory redemptions or sinking fund payments, and may at any time or from time to time purchase notes in the open market. The Indenture contains covenants that, among other things, limit the Company’s ability and the ability of certain of its subsidiaries to incur or guarantee additional indebtedness, create or incur certain liens, pay dividends or make other restricted payments and investments, incur restrictions on the payment of dividends or other distributions from restricted subsidiaries, sell assets, engage in transactions with affiliates, or merge or consolidate with other companies. As of October 28, 2016, the Company was in compliance with the terms of the Indenture. The significant components of interest expense are as follows (in thousands): For the Third Quarter Ended For the First Three Quarters Ended October 28, October 30, October 28, October 30 First Lien Term Loan Facility $ $ $ $ ABL Facility Senior Notes Amortization of deferred financing costs and OID Other interest expense Interest expense $ $ $ $ |
Derivative Financial Instrument
Derivative Financial Instruments | 9 Months Ended |
Oct. 28, 2016 | |
Derivative Financial Instruments | |
Derivative Financial Instruments | 6. The Company entered into derivative instruments for risk management purposes and uses these derivatives to manage exposure to fluctuation in interest rates. Interest Rate Swap In May 2012, the Company entered into a floating-to-fixed interest rate swap agreement for an initial aggregate notional amount of $261.8 million to limit exposure to interest rate increases related to a portion of the Company’s floating rate indebtedness once the Company’s interest rate cap agreement expires. The swap agreement, effective November 2013, hedged a portion of contractual floating rate interest commitments through the expiration of the swap agreement in May 2016. As a result of the agreement, the Company’s effective fixed interest rate on the notional amount of floating rate indebtedness was 1.36% plus an applicable margin of 3.50%. The Company designated the interest rate swap agreement as a cash flow hedge. The interest rate swap agreement was highly correlated to the changes in interest rates to which the Company is exposed. Unrealized gains and losses on the interest rate swap were designated as effective or ineffective. The effective portion of such gains or losses was recorded as a component of AOCI or loss, while the ineffective portion of such gains or losses was recorded as a component of interest expense. Realized gains and losses in connection with each required interest payment were reclassified from AOCI or loss to interest expense. Covert Transition Payments In September 2015, the Company entered into an employment agreement with Geoffrey J. Covert’s as the President and Chief Executive Officer of each of the Company and Parent. In connection with this agreement, Mr. Covert is entitled to receive amounts under a transition program based on the value of certain equity awards from his former employer that he forfeited in connection with his previous employment. The maximum amount of payments due under this agreement is approximately $5.0 million, payable over a period of four years. The Company accounts for these transition payments as derivatives that are not designated as hedging instruments and has measured the obligation at fair value at October 28, 2016 and January 29, 2016. The Company recognizes the expense associated with these payments over the requisite service period. Fair Value The fair value of the interest rate swap agreement was estimated using industry standard valuation models using market-based observable inputs, including interest rate curves (Level 2, as defined in Note 7, “Fair Value of Financial Instruments”). The fair value of the transition payments is estimated using a valuation model that includes unobservable inputs (Level 3, as defined in Note 7, “Fair Value of Financial Instruments”). A summary of the recorded amounts included in the consolidated balance sheets is as follows (in thousands): October 28, January 29, Derivatives designated as cash flow hedging instruments Interest rate swap (included in other current liabilities) $ — $ Accumulated other comprehensive loss, net of tax (included in member’s equity) $ — $ Derivatives not designated as hedging instruments Transition payments (included in other current liabilities) $ $ Transition payments (included in other long-term liabilities) $ $ A summary of recorded amounts included in the unaudited consolidated statements of comprehensive income (loss) is as follows (in thousands): For the Third Quarter Ended For the First Three Quarters Ended October 28, October 30, October 28, October 30, Derivatives designated as cash flow hedging instruments: Loss related to effective portion of derivative recognized in OCI $ — $ $ $ Loss related to effective portion of derivatives reclassified from AOCI to interest expense $ — $ $ $ (Loss) gain related to ineffective portion of derivative recognized in interest expense $ — $ ) $ $ ) Derivatives not designated as hedging instruments: Loss recognized in selling, general and administrative expenses $ $ $ $ |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 9 Months Ended |
Oct. 28, 2016 | |
Fair Value of Financial Instruments | |
Fair Value of Financial Instruments | 7. The Company complies with authoritative guidance for fair value measurement and disclosures which establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: Level 1: Defined as observable inputs such as quoted prices in active markets for identical assets or liabilities. Level 2: Defined as observable inputs other than Level 1 prices. These include quoted prices for similar assets or liabilities in an active market, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3: Defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company uses the best available information in measuring fair value. The following table summarizes, by level within the fair value hierarchy, the financial assets and liabilities recorded at fair value on a recurring basis (in thousands) as of October 28, 2016: October 28, 2016 Total Level 1 Level 2 Level 3 ASSETS Other assets — assets that fund deferred compensation $ $ $ — $ — LIABILITIES Other current liabilities — transition payments $ $ — $ — $ Other long-term liabilities — transition payments $ $ — $ — $ Other long-term liabilities — deferred compensation $ $ $ — $ — Level 1 measurements include $0.8 million of deferred compensation assets that fund the liabilities related to the Company’s deferred compensation plan, including investments in trust funds. The fair values of these funds are based on quoted market prices in an active market. There were no Level 2 assets or liabilities as of October 28, 2016. Level 3 measurements include transition payments to Mr. Covert (See Note 6, “Derivative Financial Instruments”) estimated using a valuation model that includes Level 3 unobservable inputs. Significant assumptions used in the analysis include projected stock prices, stock volatility and the Company’s credit spread. The Company did not have any transfers in and out of Levels 1 and 2 during the first three quarters of fiscal 2017. The following table summarizes, by level within the fair value hierarchy, the financial assets and liabilities recorded at fair value on a recurring basis (in thousands) as of January 29, 2016: January 29, 2016 Total Level 1 Level 2 Level 3 ASSETS Other assets — assets that fund deferred compensation $ $ $ — $ — LIABILITES Other current liabilities — interest rate swap $ $ — $ $ — Other current liabilities — transition payments $ $ — $ — $ Other long-term liabilities — transition payments $ $ — $ — $ Other long-term liabilities — deferred compensation $ $ $ — $ — Level 1 measurements include $0.7 million of deferred compensation assets that fund the liabilities related to the Company’s deferred compensation plan, including investments in trust funds. The fair values of these funds are based on quoted market prices in an active market. Level 2 measurements include interest rate swap agreement estimated using industry standard valuation models using market-based observable inputs, including interest rate curves. Level 3 measurements include transition payments to Mr. Covert estimated using a valuation model that includes Level 3 unobservable inputs. Significant assumptions used in the analysis include projected stock prices, stock volatility and the Company’s credit spread. The following table summarizes the activity for the period of changes in fair value of the Company’s Level 3 instruments (in thousands): For the Third Quarter Ended For the First Three Quarters Ended Transition Payments October 28, 2016 October 30, 2015 October 28, 2016 October 30, 2015 Description Beginning balance $ ) $ — $ ) $ — Transfers in and/or out of Level 3 — — — — Total realized/unrealized loss: Included in earnings (1) ) ) ) ) Included in other comprehensive loss — — — — Purchases, redemptions and settlements: Settlements — — — Ending balance $ ) $ ) $ ) $ ) Total amount of unrealized losses for the period included in earnings relating to liabilities held at the reporting period $ ) $ ) $ ) $ ) (1) Losses are included in selling, general and administrative expenses. The outstanding debt under the Credit Facilities and the Senior Notes is recorded in the financial statements at historical cost, net of applicable unamortized discounts and deferred financing costs. The ABL Facility is tied directly to market rates and fluctuates as market rates change; as a result, the carrying value of the ABL Facility approximates fair value as of October 28, 2016 and January 29, 2016. The fair value of the First Lien Term Loan Facility was estimated at $467.4 million, or $128.0 million lower than its carrying value, as of October 28, 2016, based on quoted market prices of the debt (Level 1 inputs). The fair value of the First Lien Term Loan Facility was estimated at $393.0 million, or $207.0 million lower than its carrying value, as of January 29, 2016, based on quoted market prices of the debt (Level 1 inputs). The fair value of the Senior Notes was estimated at $148.1 million, or $101.9 million lower than the carrying value, as of October 28, 2016, based on quoted market prices of the debt (Level 1 inputs). The fair value of the Senior Notes was estimated at $103.1 million, or $146.9 million lower than the carrying value, as of January 29, 2016, based on quoted market prices of the debt (Level 1 inputs). See Note 5, “Debt” for more information on the Company’s debt. Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis During the third quarter of fiscal 2017, the Company recognized an impairment charge of approximately $0.1 million relating to the anticipated closure of three stores. The remaining net book value of assets measured at fair value was $0.1 million. During the third quarter of fiscal 2017, the Company also recorded impairment charges of $0.1 million related to fixtures that will be disposed of and for which the Company concluded the fair value was zero. The fair value measurements used in these impairment evaluations were based on discounted cash flow estimates using unobservable inputs (Level 3). During the third quarter of fiscal 2017, the Company also reduced the carrying value of a held for sale property to its fair value of $1.5 million from $1.7 million, resulting in an impairment charge of $0.2 million. Fair value was determined on the basis of a broker quote, less estimated cost to sell (Level 2). |
Stock-Based Compensation
Stock-Based Compensation | 9 Months Ended |
Oct. 28, 2016 | |
Stock-Based Compensation | |
Stock-Based Compensation | 8. Number Holdings, Inc. 2012 Equity Incentive Plan On February 27, 2012, the board of directors of Parent (the “Board”) adopted the Number Holdings, Inc. 2012 Stock Incentive Plan (the “2012 Plan”). On July 26, 2016, the 2012 Plan was amended to increase the aggregate number of shares authorized for issuance under the 2012 Plan to 87,500 shares of Class A Common Stock of Parent and 87,500 shares of Class B Common Stock of Parent. Prior to the increase, the 2012 Plan authorized equity awards to be granted for up to 85,000 shares of Class A Common Stock of Parent and 85,000 shares of Class B Common Stock of Parent. As of October 28, 2016, options for 82,155 shares of each of Class A Common Stock and Class B Common Stock were outstanding and held by employees, members of management and directors. Options upon vesting may be exercised only for units consisting of an equal number of Class A Common Stock and Class B Common Stock. Class B Common Stock has de minimis economic rights and the right to vote solely for election of directors. Employee Option Grants Options subject to time-vesting conditions granted to employees generally become exercisable over a four or five year service period and have terms of ten years from the date of grant. Options with performance-vesting conditions granted to employees generally become exercisable based on the achievement of certain performance targets and have terms of ten years from the date of grant. Under the standard form of option award agreement for the 2012 Plan, Parent has a right to repurchase from the participant all or a portion of (i) Class A and Class B Common Stock of Parent issued upon the exercise of the options awarded to a participant and still held by such participant or his or her transferee and (ii) vested but unexercised options. The repurchase price for the shares of Class A and Class B Common Stock of Parent received from option exercises prior to termination of employment is the fair market value of such shares as of the date of such termination, and, for the vested but unexercised options, the repurchase price is the difference between the fair market value of the Class A and Class B Common Stock of Parent as of the date of termination of employment and the exercise price of the option. However, upon (i) a termination of employment for cause, (ii) a voluntary resignation without good reason, or (iii) upon discovery that the participant engaged in detrimental activity, the repurchase price is the lesser of the exercise price paid by the participant to exercise the option or the fair market value of the Class A and Class B Common Stock of Parent. If Parent elects to exercise its repurchase right for any shares acquired pursuant to the exercise of an option, it must do so no later than (i) 180 days after the date of participant’s termination of employment if the option is exercised prior to the date of termination, or (ii) no later than 90 days from the latest date that such option can be exercised if the option is exercised after the date of termination. If Parent elects to exercise its repurchase right for any vested and unexercised option, it must do so for no longer than the latest date that such option can be exercised. The options also contain transfer restrictions that lapse upon registration of an offering of Parent common stock under the Securities Act of 1933 (a “liquidity event”). The Company defers recognition of substantially all of the stock-based compensation expense related to these stock options. The nature of repurchase rights and transfer restrictions create a performance condition that is not considered probable of being achieved until a liquidity event or certain employment termination events are probable of occurrence. Additionally, the Company has deferred recognition of the stock-based compensation expense for performance-based options until it is probable that the performance targets will be achieved. These options are accounted for as equity-based awards. The fair value of these stock options was estimated at the date of grant using the Black-Scholes pricing model. There were 21,896 time-based and 18,009 performance-based employee options outstanding (for individuals other than board members, Mr. Covert and Ms. Thornton) as of October 28, 2016. During the second quarter of fiscal 2017, Parent provided certain employee option holders an opportunity to exchange their outstanding non-qualified stock options for options with an exercise price of $757 per share. On July 26, 2016, the Compensation Committee of Parent canceled 15,555 of the outstanding options with an exercise price higher than $757 per share and granted new options to holders of the canceled options with an exercise price of $757 per share. In the third quarter of fiscal 2017, the Compensation Committee of Parent canceled an additional 260 of the outstanding options with an exercise price higher than $757 per share and granted new options to holders of the canceled options with an exercise price of $757 per share. The new options are generally vested to the same extent as the canceled options and have terms of ten years. New options subject to time-vesting conditions vest over a five-year service period and performance-vested options vest upon achievement of certain performance targets. The exchanges were treated as a modification of stock options for accounting purposes and had no impact on compensation expense. The fair value of new time-vested and performance-vested options was estimated at the date of modification using the Black-Scholes pricing model. In the fourth quarter of fiscal 2016, 5,000 options were granted to the new Chief Merchandising Officer of the Company and Parent, which will vest based on the achievement of certain performance targets. The Company has deferred recognition of the stock-based compensation expense for these performance-based stock options due to repurchase rights and transfer restrictions included in the terms of the award. The nature of the repurchase rights and transfer restrictions create a performance condition that is not considered probable of being achieved until a liquidity event or certain employment termination events are probable of occurrence. Additionally, the Company has deferred recognition of the stock-based compensation expense for these performance-based options until it is probable that the performance targets will be achieved. The fair value of these performance-based options was estimated at the date of grant using the Black-Scholes pricing model. On July 26, 2016, the Compensation Committee of Parent amended these options to conform the vesting conditions for the performance-vested options with those granted to other employees. The amendment of the performance hurdles was treated as a modification of stock options for accounting purposes and had no impact on compensation expense. The Company has continued to defer recognition of the stock-based compensation expense for the amended performance-based options. The fair value of these performance-based options was estimated at the date of modification using the Black-Scholes pricing model. Director Option Grants Options granted to board members generally become exercisable over a three, four or five year service period and have terms of ten years from the date of grant. Options granted to board members do not contain repurchase rights that would allow the Parent to repurchase these options at less than fair value. The Company recognizes stock-based compensation expense for these option grants over the service period. These options are accounted for as equity awards. The fair value of these stock options was estimated at the date of grant using the Black-Scholes pricing model. On July 26, 2016, the Compensation Committee of Parent amended 1,000 previously granted board member options with exercise prices in excess of $757 per share to lower the exercise price to $757 per share. The reduction in the exercise price was treated as a modification of stock options for accounting purposes. The modification, based on the fair value of the options both immediately before and after such modification, resulted in a total incremental compensation expense of less than $0.1 million in the second quarter of fiscal 2017. Chief Financial Officer Equity Awards In October 2015, the Company entered into an employment agreement with Felicia Thornton as the Chief Financial Officer and Treasurer of each of the Company and Parent. In connection with this agreement, Ms. Thornton was granted options to purchase 10,000 shares of Class A and Class B Common Stock of Parent. One-half of the options vest on each of the first four anniversaries of Ms. Thornton’s start date, and the other half of the options vest based on the achievement of certain performance targets. Options granted to Ms. Thornton contain repurchase rights as described above that would allow the Parent to repurchase these options at less than fair value, except that repurchase rights at less than fair value in the case of voluntary resignation without good reason lapse after November 2, 2017. The Company records stock-based compensation for the time-based options in accordance with the four year vesting period. The Company has deferred recognition of the stock-based compensation expense for the performance-based options until it is probable that the performance targets will be achieved. The time-based and performance-based options are accounted for as equity awards. The fair value of these time-based and performance-based options was estimated at the date of grant using the Black-Scholes pricing model. On July 26, 2016, the Compensation Committee of Parent amended Ms. Thornton’s performance-based options to conform the vesting conditions for the performance-vested options with those granted to other employees. The amendment of the performance targets was treated as a modification of stock options for accounting purposes and had no impact on compensation expense. The Company has continued to defer recognition of the stock-based compensation expense for the amended performance-based options. The fair value of these amended performance-based options was estimated at the date of modification using the Black-Scholes pricing model. Chief Executive Officer Equity Awards In September 2015, the Company entered into an employment agreement with Geoffrey J. Covert as the President and Chief Executive Officer of each of the Company and Parent. In connection with this agreement, Mr. Covert was granted two options, each to purchase 15,500 shares of Class A and Class B Common Stock of Parent. One of the grants has an exercise price of $1,000 per share. The other grant has an exercise price equal to $750 per share plus the amount by which the fair market value of the underlying share exceeds $1,000 on the date of exercise. One-half of each grant vests on each of the first four installments of the grant date, and the other half of each grant vests based on the achievement of certain performance targets. The vesting of the options is subject to Mr. Covert’s continued employment through the applicable vesting date. The options are subject to the terms of the 2012 Plan and the award agreements under which they were granted. The Company has deferred recognition of the stock-based compensation expense for these time-based and performance-based stock options due to repurchase rights and transfer restrictions included in the terms of the award. The nature of the repurchase rights and transfer restrictions create a performance condition that is not considered probable of being achieved until a liquidity event or certain employment termination events are probable of occurrence. Additionally, the Company has deferred recognition of the stock-based compensation expense for performance-based options until it is probable that the performance targets will be achieved. The fair value of the grant with an exercise price of $1,000 per share was estimated at the date of grant using a binomial model. The fair value of the other grant was estimated at the date of grant using a Monte Carlo simulation method. On July 26, 2016, the Compensation Committee of Parent amended Mr. Covert’s performance-based options to conform the vesting conditions for the performance-vested options with those granted to other employees. The amendment of the performance hurdles was treated as a modification of stock options for accounting purposes and had no impact on compensation expense. The Company has continued to defer recognition of the stock-based compensation expense for the amended performance-based options. The fair value of the grant with an exercise price of $1,000 per share was estimated at the date of modification using a binomial model. The fair value of the other grant was estimated at the date of modification using a Monte Carlo simulation method. Accounting for stock-based compensation Determining the fair value of options at the grant date requires judgment, including estimating the expected term that stock options will be outstanding prior to exercise and the associated volatility. At the grant date, the Company estimates an amount of forfeitures that will occur prior to vesting. During the third quarter and first three quarters of fiscal 2017, the Company recorded stock-based compensation expense of $0.2 million and $0.5 million, respectively. During the third quarter and first three quarters of fiscal 2016, the Company recorded stock-based compensation expense of less than $0.1 million and $1.5 million, respectively. The following summarizes stock option activity in the first three quarters of fiscal 2017: Number of Weighted Average Weighted Average Options outstanding at the beginning of the period $ Granted (a) $ Exercised — $ — Cancelled )(b) $ Outstanding at the end of the period $ 9.2 Exercisable at the end of the period $ 9.3 (a) Includes 13,146 options granted to employees that will vest based on the achievement of certain performance targets. (b) Includes cancellation of 15,815 options in exchange for options with new terms. The following table summarizes the stock awards available for grant under the 2012 Plan as of October 28, 2016: Number of Shares Available for grant as of January 29, 2016 Authorized Granted ) Cancelled Available for grant at October 28, 2016 |
Related-Party Transactions
Related-Party Transactions | 9 Months Ended |
Oct. 28, 2016 | |
Related-Party Transactions | |
Related-Party Transactions | 9. Related-Party Transactions First Lien Term Loan Facility In connection with the Merger, the Company entered into the First Lien Term Loan Facility, under which various funds affiliated with Ares were lenders. As of January 29, 2016, these affiliates no longer held any term loans under the First Lien Term Loan. As of October 28, 2016, funds affiliated with Ares and CPPIB held approximately $130.9 million of term loans under the First Lien Term Loan Facility. The terms of the term loans are the same as those held by unaffiliated third party lenders under the First Lien Term Loan Facility. Senior Notes As of October 28, 2016 and January 29, 2016 various funds affiliated with Ares and CPPIB have collectively acquired $102.1 million aggregate principal amount of the Company’s Senior Notes in open market transactions. From time to time, these or other affiliated funds may acquire additional Senior Notes. |
Income Taxes
Income Taxes | 9 Months Ended |
Oct. 28, 2016 | |
Income Taxes | |
Income Taxes | 10. Income Taxes The effective income tax rate for the first three quarters of fiscal 2017 was a provision rate of (0.2)% compared to a provision rate of rate of (16.5)% for the first three quarters of fiscal 2016. Income tax expense for the interim periods was computed using the effective tax rate estimated to be applicable for the full fiscal year. The change in the effective tax rate is primarily due to the tax effect of the establishment of a valuation allowance against deferred tax assets in the second quarter of fiscal 2016 as discussed below, and the effect of not recognizing the benefit of losses incurred in fiscal 2017 in jurisdictions where the Company concluded it is more likely than not that such benefits would not be realized. The Company assesses its ability to realize deferred tax assets throughout the fiscal year. As a result of this assessment during the second quarter of fiscal 2016, the Company concluded that it was more likely than not that the Company would not realize its deferred tax assets. In the quarters prior to the recording of a valuation allowance in the second quarter of fiscal 2016, the Company weighed all available positive and negative evidence and determined that it was more likely than not that the deferred tax assets were fully realizable. In fiscal 2016, the Company’s management had begun to take meaningful steps to focus on the operational execution of the initiatives launched in fiscal 2015, which were expected to drive performance improvements over the second and third quarters of fiscal 2016. However, in the second quarter of fiscal 2016, the Company’s experienced (i) margin declines due to short-term sales promotions, (ii) delays in sales growth due to cannibalization from new store openings, (iii) increased inventory shrinkage from a buildup of inventory levels, and (iv) increases in support costs as a percentage of sales. As a result of these second quarter of fiscal 2016 events, the Company decided to adjust merchandise pricing strategies, delay the pace of future store openings for the remainder of fiscal 2016, revise inventory shrinkage processes and establish selling, general and administrative cost control measures. The Company concluded that until the performance issues identified in the second quarter of fiscal 2016 showed improvement, it was more likely than not that the Company would not realize its net deferred tax assets, and therefore the Company recorded a $31.7 million increase to provision for income taxes in order to establish a valuation allowance against such net deferred tax assets. As of January 29, 2016, the valuation allowance increased to $81.8 million, which was primarily related to an increase in losses incurred during fiscal 2016. The Company will continue to evaluate all of the positive and negative evidence in future periods and will make a determination as to whether it is more likely than not that all or a portion of its deferred tax assets will be realized in such future periods. At such time as the Company determines that it is more likely than not that all or a portion of its deferred tax assets are realizable, the valuation allowance will be reduced or released in its entirety, and the corresponding benefit will be reflected in the Company’s tax provision. Deferred tax liabilities associated with indefinite-lived intangibles cannot be considered a source of taxable income to support the realization of deferred tax assets because these deferred tax liabilities will not reverse until some indefinite future period when these assets are either sold or impaired for book purposes. The establishment of a valuation allowance does not have any impact on cash, nor does such an allowance preclude the Company from using its loss carryforwards or utilizing other deferred tax assets in the future. As of October 28, 2016 and January 29, 2016, the Company had not accrued any liabilities related to unrecognized tax benefits, and had also not accrued any interest and penalties related to uncertain tax positions for the relevant periods. The Company files income tax returns in the U.S. federal jurisdiction and in various states. The Company is subject to examinations by the major tax jurisdictions in which it files for the tax years 2011 forward. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Oct. 28, 2016 | |
Commitments and Contingencies | |
Commitments and Contingencies | 11. Credit Facilities The Company’s Credit Facilities and commitments are discussed in detail in Note 5, “Debt.” Mid-Term Cash Incentive Plan and Special Bonus Letters On July 26, 2016, the Compensation Committee of the Board (the “Compensation Committee”) adopted the 99 Cents Only Stores LLC 2016 Mid-Term Cash Incentive Plan (the “Mid-Term Cash Incentive Plan”). The Mid-Term Cash Incentive Plan is intended to promote the success of the Company by rewarding certain employees for their service to the Company and to provide incentives for such employees to remain in the employ or other service of the Company and to contribute to the performance of the Company. Under the Mid-Term Cash Incentive Plan, if the Company achieves an initial Adjusted EBITDA (as defined in the Mid-Term Cash Incentive Plan) goal for either fiscal 2017 or the fiscal year ending January 26, 2018 (the “Initial Mid-Term Plan Goal”), 50% of a participant’s award will be eligible for payment. No amounts will be paid under the Mid-Term Cash Incentive Plan if the Initial Mid-Term Plan Goal is not achieved. If the Company achieves the Initial Mid-Term Plan Goal and then achieves the same Adjusted EBITDA goal for the fiscal year immediately following the year in which the Initial Mid-Term Plan Goal was achieved, the remaining 50% of the participant’s award will be eligible for payment. Payment of eligible awards will only be made to the extent the Company’s Free Cash Flow (as defined in the Mid-Term Cash Incentive Plan) exceeds the amount eligible for payment, as measured at the end of each second quarter and fourth quarter of each fiscal year after an amount becomes eligible for payment until the end of the fiscal year ending January 31, 2020. The Company does not expect to maintain the Mid-Term Cash Incentive Plan for periods after the fiscal year ending July 31, 2020. The maximum payout under the Mid-Term Cash Incentive Plan is $22.5 million. The Company recognizes the expense associated with this Mid-Term Cash Incentive Plan over the requisite service periods and has accrued $3.0 million as of October 28, 2016. On July 26, 2016, the Compensation Committee approved special bonus letters for three executives. Pursuant to the terms thereof, if a Refinancing Transaction (as defined in the special bonus letters) occurs prior to October 1, 2018, each of the applicable executives will be eligible to receive a special bonus payable within 30 days of such transaction. The special bonuses to be earned by the applicable executives total $4.0 million. No amounts have been accrued as of October 28, 2016. Workers’ Compensation The Company self-insures its workers’ compensation claims in California and Texas and provides for losses of estimated known and incurred but not reported insurance claims. The Company does not discount the projected future cash outlays for the time value of money for claims and claim related costs when establishing its workers’ compensation liability. As of October 28 2016 and January 29, 2016, the Company had recorded a liability of $75.5 million and $76.3 million, respectively, for estimated workers’ compensation claims in California. The Company has limited self-insurance exposure in Texas and had recorded a liability of $0.1 million as of each of October 28, 2016 and January 29, 2016 for workers’ compensation claims in Texas. The Company purchases workers’ compensation insurance coverage in Arizona and Nevada and is not self-insured in those states. Self-Insured Health Insurance Liability The Company self-insures for a portion of its employee medical benefit claims. As of each of October 28, 2016 and January 29, 2016, the Company had recorded a liability of $0.4 million for estimated health insurance claims. The Company maintains stop loss insurance coverage to limit its exposure for the self-funded portion of its health insurance program. Sale of Warehouse Facility On July 6, 2016, the Company sold and concurrently licensed (through February 28, 2017) a warehouse facility in the City of Commerce, California with a carrying value of $12.1 million and received net proceeds from this transaction of $28.5 million. In addition to the proceeds, $1.0 million purchase price consideration has been held in escrow for the buyer to make certain repairs, and any amount not used for such repairs will be paid to the Company. The Company expects the buyer to complete such repairs within 18 months of the closing date. The Company was deemed to have “continuing involvement,” which precluded the de-recognition of the assets from the consolidated balance sheet when the transactions closed. The resulting lease is accounted for as a financing lease and the Company has recorded a financing lease obligation of $29.1 million (as a component of current liabilities) as of October 28, 2016. The Company will derecognize the assets and financing lease obligation at the earlier of when the lease term ends or when the Company no longer has continuing involvement and depreciate the assets over their remaining useful lives. Legal Matters Wage and Hour Matters Shelley Pickett v. 99¢ Only Stores. Plaintiff Shelley Pickett, a former cashier for the Company, filed a representative action complaint against the Company on November 4, 2011 in the Superior Court of the State of California, County of Los Angeles alleging a Private Attorneys General Act of 2004 (“PAGA”) claim that the Company violated section 14 of Wage Order 7-2001 by failing to provide seats for its cashiers behind checkout counters. Pickett seeks civil penalties of $100 to $200 per violation, per each pay period for each affected employee, and attorney’s fees. The court denied the Company’s motion to compel arbitration of Pickett’s individual claims or, in the alternative, to strike the representative action allegations in the complaint, and the Court of Appeals affirmed the trial court’s ruling. On June 27, 2013, Pickett entered into a settlement agreement and release with the Company in another matter. Payment has been made to the plaintiff under that agreement and the other action has been dismissed. The Company’s position is that the release Pickett executed in that matter waives the claims she asserts in this action, waives her right to proceed on a class or representative basis or as a private attorney general and requires her to dismiss this action with prejudice as to her individual claims. The Company notified Pickett of its position by a letter dated as of July 30, 2013, but she refused to dismiss the lawsuit. On February 11, 2014, the Company answered the complaint, denying all material allegations, and filed a cross-complaint against Pickett seeking to enforce her agreement to dismiss this action. Through the cross-complaint, the Company seeks declaratory relief, specific performance and damages. Pickett has answered the cross-complaint, asserting a general denial of all material allegations and various affirmative defenses. On September 30, 2014, the court denied the Company’s motion for judgment on the pleadings as to its cross-complaint and granted leave to Pickett to amend her complaint to add another representative plaintiff, Tracy Humphrey. Plaintiffs filed their amended complaint on October 8, 2014, and the Company answered on October 10, 2014, denying all material allegations. On April 4, 2016, in an unrelated matter involving similar claims against a different employer, the California Supreme Court issued a ruling that provides guidance to lower courts as to California’s employee seating requirement, which is a largely untested area of law. The instant action had been stayed pending the issuance of the California Supreme Court ruling. The stay has been lifted and the parties mediated this matter on October 19, 2016. The mediation did not result in a settlement, and a bench trial has been set to commence on May 31, 2017. The Company cannot predict the outcome of this lawsuit or the amount of potential loss, if any, that could result from such lawsuit. Sofia Wilton Barriga v. 99¢ Only Stores. Plaintiff, a former store associate, filed an action against the Company on August 5, 2013, in the Superior Court of the State of California, County of Riverside alleging on behalf of the plaintiff and all others allegedly similarly situated under the California Labor Code that the Company failed to pay wages for all hours worked, provide meal periods, pay wages timely upon termination, and provide accurate wage statements. The plaintiff also asserted a derivative claim for unfair competition under the California Business and Professions Code. The plaintiff seeks to represent a class of all non-exempt employees who were employed in California in the Company’s retail stores who worked the graveyard shift at any time from January 1, 2012, through the date of trial or settlement. Although the class period as originally pled would extend back to August 5, 2009, the parties have agreed that any class period would run beginning January 1, 2012, because of the preclusive effect of a judgment in a previous matter. The plaintiff seeks to recover alleged unpaid wages, statutory penalties, interest, attorney’s fees and costs, and restitution. On September 23, 2013, the Company filed an answer denying all material allegations. A case management conference was held on October 4, 2013, at which the court ordered that discovery may proceed as to class certification issues only. After discovery commenced, a mediation was held on March 12, 2015, resulting in a confidential mediator’s proposal, which the parties verbally accepted. The parties were unable to negotiate and finalize a written settlement agreement. Subsequent settlement discussions directly and through the mediator, as well as a court-ordered settlement conference, were unsuccessful. Discovery resumed and plaintiff’s motion for class certification has been fully briefed. Plaintiff has also brought a motion to strike the evidence submitted in support of the Company’s opposition to class certification. At the Court’s request the parties have agreed, to mediate this matter on March 2, 2017, prior to any ruling on the class certification motion and the motion to strike. On October 26, 2015, plaintiffs’ counsel filed another action in Los Angeles Superior Court, entitled Ivan Guerra v. 99 Cents Only Stores LLC (Case No. BC599119), which asserts PAGA claims based in part on the allegations at issue in the Barriga action. By stipulation of the parties, the Guerra action has been transferred to Riverside Superior Court and will be mediated along with the Barriga action on March 2, 2017. The Company cannot predict the outcome of these lawsuits or the amount of potential loss, if any, that could result from such lawsuits. Phillip Clavel v. 99 Cents Only Stores LLC, et al. Former warehouse worker Phillip Clavel filed an action against the Company on March 30, 2016, on behalf of himself and all other alleged aggrieved employees, seeking civil penalties under the PAGA for the following alleged Labor Code violations: failure to pay regular, overtime and minimum wages for all hours worked, failure to provide proper meal and rest periods, failure to pay wages timely during employment and upon termination, failure to provide proper wage statements, failure to reimburse business expenses, and failure to provide notice of the material terms of employment under the Wage Theft Prevention Act. Mr. Clavel alleges that his claims arose during two periods of employment—one from March 2015 through mid-October 2015, during which he was employed by the Company as a forklift operator in the Commerce Distribution Center, and a second period from late October 2015 through February 2016, when he was similarly employed (through a staffing agency, BaronHR) at the Company’s Washington Boulevard warehouse. On June 9, 2016, Plaintiff filed a First Amended Complaint. The Company answered the First Amended Complaint on June 14, 2016, generally denying the allegations in the complaint and asserting a number of affirmative defenses. BaronHR has also answered the First Amended Complaint. Trial has been set to commence on July 18, 2017, and a mediation has been set for January 19, 2017. The Company cannot predict the outcome of this lawsuit or the amount of potential loss, if any, that could result from such lawsuit. Jimmy Mejia, et al. v. 99 Cents Only Stores LLC . Former store associates Jimmy Mejia and Yamilet Serrano filed an action against the Company on September 16, 2016, on behalf of themselves and all other alleged aggrieved employees, seeking civil penalties under the PAGA for the following alleged Labor Code violations: failure to pay overtime and minimum wages for all hours worked, failure to provide proper meal and rest periods, failure to pay timely wages during employment and upon termination, and failure to provide proper wage statements. On November 14, 2016, the Company answered the complaint, generally denying the allegations in the complaint and asserting a number of affirmative defenses. A case management conference has been set for January 19, 2017. The Company cannot predict the outcome of this lawsuit or the amount of potential loss, if any, that could result from such lawsuit. Environmental Matters People of the State of California v. 99 Cents Only Stores LLC. This action was brought by the San Joaquin District Attorney and a number of other public prosecutors against the Company alleging that the Company had violated hazardous waste statutory and regulatory requirements at its retail stores in California. The Company settled this case through the entry of a stipulated judgment in December 2014 which contained injunctive relief requiring the Company to comply with applicable hazardous waste requirements at these stores. On June 29, 2015, the District Attorney informed the Company of alleged hazardous waste violations identified during a March 2015 inspection of a recently-opened store in Sonora, Tuolumne County and requested a meeting with the Company. Since that time, the Company has been cooperating with the District Attorney to provide information regarding the alleged violations. The District Attorney has demanded that the Company pay $187,500 to resolve this matter and to agree to additional injunctive relief in the existing settlement. In May 2016, the discussions with the District Attorney were extended to include non-compliance issues identified at an existing store in San Jose during an inspection on March 16, 2016. In connection with this matter, the Company has accrued an immaterial amount. Although any monetary damages ultimately paid by the Company may exceed the accrued amount, it is not currently possible to estimate the amount of any such excess or the impact that any injunctive relief may have on the Company’s business, financial condition and results of operations. Other Matters The Company is also subject to other private lawsuits, administrative proceedings and claims that arise in its ordinary course of business. A number of these lawsuits, proceedings and claims may exist at any given time. While the resolution of such a lawsuit, proceeding or claim may have an impact on the Company’s financial results for the period in which it is resolved, and litigation is inherently unpredictable, in management’s opinion, none of these matters arising in the ordinary course of business is expected to have a material adverse effect on the Company’s financial position, results of operations or overall liquidity. |
Assets Held for Sale
Assets Held for Sale | 9 Months Ended |
Oct. 28, 2016 | |
Assets Held for Sale | |
Assets Held for Sale | 12. Assets held for sale as of October 28, 2016 consisted of vacant land in Rancho Mirage and Los Angeles, California and land in Bullhead, Arizona with an aggregate carrying value of $4.9 million. Assets held for sale as of January 29, 2016 consisted of vacant land in Rancho Mirage, California and land in Bullhead, Arizona with an aggregate carrying value of $2.3 million. |
Other Accrued Expenses
Other Accrued Expenses | 9 Months Ended |
Oct. 28, 2016 | |
Other Accrued Expenses | |
Other Accrued Expenses | 13. Other Accrued Expenses Other accrued expenses as of October 28, 2016 and January 29, 2016 are as follows (in thousands): October 28, January 29, Accrued interest $ $ Accrued occupancy costs Accrued legal reserves and fees Accrued interest swap — Accrued California Redemption Value Accrued transportation Other Total other accrued expenses $ $ |
New Authoritative Standards
New Authoritative Standards | 9 Months Ended |
Oct. 28, 2016 | |
New Authoritative Standards | |
New Authoritative Standards | 14. In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, “Revenue from Contracts with Customers.” ASU 2014-09 is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The ASU also requires expanded disclosures about revenue recognition. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. ASU 2014-09 was to be effective for the first interim period within annual reporting periods beginning after December 15, 2016, and early adoption is not permitted In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers: Deferral of the Effective Date”, which defers the effective date of ASU 2014-09 for all entities by one year. The Company is currently evaluating this guidance and the impact it will have on its consolidated financial statements. In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” This ASU requires management to assess whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued. If substantial doubt exists, additional disclosures are required. This ASU is effective for annual periods ending after December 15, 2016, and interim periods within those fiscal years, with early adoption permitted. The Company will adopt this standard in the annual period ended January 27, 2017 and such adoption is not expected to have a material impact on the Company or its consolidated financial statements. In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs.” This ASU requires companies to present debt issuance costs related to a recognized debt liability on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts. Debt issuance costs will continue to be amortized to interest expense using the effective interest method. In August 2015, FASB issued ASU No. 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangement.” ASU 2015-15 clarifies the presentation and measurement of debt issuance costs incurred in connection with line-of-credit arrangements given the lack of guidance on this topic in ASU 2015-03. For line-of-credit arrangements, an entity can continue to present debt issuance costs as an asset and amortize the deferred debt issuance costs ratably over the term of the line-of-credit arrangement. These standards are effective for public companies for annual periods beginning after December 15, 2015 as well as interim periods within those annual periods using the retrospective approach. The Company adopted this guidance retrospectively in the first quarter of fiscal 2017. As a result, the presentation of $11.5 million of debt issuance costs (net of accumulated amortization) have been reclassified from deferred financing costs, net to long-term debt, net of current portion as of January 29, 2016. In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory.” This ASU simplifies the subsequent measurement of inventories by replacing the lower of cost or market test with a lower of cost or net realizable value test. Net realizable value is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The guidance is effective for reporting periods beginning after December 15, 2016 and interim periods within those fiscal years, with early adoption permitted. This ASU should be applied prospectively. The Company will adopt ASU 2015-11 in the first quarter of fiscal 2018 and such adoption is not expected to have a material impact on the Company or its consolidated financial statements. In November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes.” This ASU simplifies the presentation of deferred income taxes by requiring that all deferred tax liabilities and assets be classified as long-term on the balance sheet. This guidance is effective for fiscal years beginning after December 15, 2017, and allows for either prospective or retrospective adoption, with early adoption permitted. The Company adopted this guidance retrospectively in the first quarter of fiscal 2017. As a result, the presentation of $16.6 million of deferred income taxes was reclassified from current assets to long-term deferred income tax liabilities as of January 29, 2016. In January 2016, the FASB issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.” This ASU revises an entity’s accounting on the classification and measurement of financial instruments. Although the ASU retains many current requirements, it significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments. This ASU becomes effective for public entities in the fiscal year beginning after December 15, 2017. Early adoption is not permitted except for the provisions related to the presentation of certain fair value changes for financial liabilities measured at fair value. The Company will adopt ASU 2016-01 in the first quarter of fiscal 2019 and such adoption is not expected to have a material impact on the Company or its consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, “Leases,” which requires lessees to recognize right-of-use assets and lease liabilities, for all leases, with the exception of short-term leases, at the commencement date of each lease. This ASU requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. This ASU is effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods. Early adoption is permitted. The amendments of this update should be applied using a modified retrospective approach, which requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements and is anticipating a material impact because the Company is party to a significant number of lease contracts. In March 2016, the FASB issued ASU 2016-04 , “ Recognition of Breakage for Certain Prepaid Stored-Value Products,” which is designed to provide guidance and eliminate diversity in the accounting for the derecognition of financial liabilities related to certain prepaid stored-value products using a revenue-like breakage model. Breakage should be recognized in proportion to the pattern of rights expected to be exercised by the product holder to the extent that it is probable a significant reversal of the recognized breakage amount will not subsequently occur. The new standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted, and is to be applied retrospectively or using a modified retrospective approach. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-08, “Revenue Recognition: Clarifying the new Revenue Standard’s Principal-Versus-Agent Guidance.” The amendments finalize the guidance in the new revenue standard on assessing whether an entity is a principal or an agent in a revenue transaction. The conclusion impacts whether an entity reports revenue on a gross or net basis. The effective date and transition of these amendments is the same as the effective date and transition of ASU 2014-09, “Revenue from Contracts with Customers,” as amended by the one-year deferral and early adoption provisions in ASU 2015-14. The Company is currently in the process of evaluating the impact of this standard on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation, Improvements to Employee Share-Based Payment Accounting”. This ASU will require companies to recognize the income tax effects of awards in the income statement when the awards vest or are settled. The guidance requires companies to present excess tax benefits as an operating activity and cash paid to a taxing authority to satisfy statutory withholding as a financing activity on the statement of cash flows. The guidance will also allow entities to make an alternative policy election to account for forfeitures as they occur. This ASU is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any interim or annual period. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements. In April 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing”. This ASU provides guidance on accounting for licenses of intellectual property and identifying performance obligations. The amendments clarify how an entity should evaluate its promise when granting a license of intellectual property. They also clarify when a promised good or service is separately identifiable and allow entities to disregard items that are immaterial in the context of the contract. The effective date and transition of these amendments is the same as the effective date and transition of ASU 2014-09, “Revenue from Contracts with Customers,” as amended by the one-year deferral and early adoption provisions in ASU 2015-14. The Company is currently in the process of evaluating the impact of this standard on its consolidated financial statements. In May 2016, the FASB issued ASU No. 2016-11, “Revenue Recognition and Derivatives and Hedging: Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting”. This ASU rescinds certain SEC guidance from the applicable Accounting Standards Codification in response to announcements made by the SEC staff at the Emerging Issues Task Force’s March 3, 2016 meeting, and which supersedes certain SEC observer comments on the topics of revenue and expense recognition for freight services in process, accounting for shipping and handling fees and costs, accounting for consideration given by a vendor to a customer and accounting for gas-balancing arrangements upon the adoption of ASU 2014-09. The effective date and transition of these amendments is the same as the effective date and transition of ASU 2014-09, “Revenue from Contracts with Customers,” as amended by the one-year deferral and early adoption provisions in ASU 2015-14. The Company is currently in the process of evaluating the impact of this standard on its consolidated financial statements. In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients”. This ASU provides narrow scope improvements and technical expedients on assessing collectability, the presentation of sales tax and other similar taxes collected from customers, non-cash consideration, contract modifications and completed contracts at transition, and the disclosure requirement for the effect of the accounting change for the period of adoption. The effective date and transition of these amendments is the same as the effective date and transition of ASU 2014-09, “Revenue from Contracts with Customers,” as amended by the one-year deferral and early adoption provisions in ASU 2015-14. The Company is currently in the process of evaluating the impact of this standard on its consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments”. This ASU replaces the current incurred loss impairment methodology of recognizing credit losses when a loss is probable, with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to assess credit loss estimates. The standard will be effective for fiscal years beginning after December 15, 2019, with early adoption permitted for periods after December 15, 2018. The Company is currently in the process of evaluating the impact of this standard on its consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments”, which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted, and is to be applied retrospectively. The adoption is not expected to have a material impact on the Company or its consolidated financial statements. In October 2016, the FASB has issued ASU No. 2016-17, “Interest Held through Related Parties that are under Common Control”, which provides guidance on the evaluation of whether a reporting entity is the primary beneficiary of a variable interest entity (“VIE”) by amending how a reporting entity, that is a single decision maker of a VIE, treats indirect interests in that entity held through related parties that are under common control. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, with early adoption permitted. The adoption is not expected to have a material impact on the Company or its consolidated financial statements. In October 2016 the FASB has issued ASU No. 2016-16, “Intra-Entity Transfers of Assets Other Than Inventory”, which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. The new standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted as of the beginning of a fiscal year. The Company is currently in the process of evaluating the impact of this standard on its consolidated financial statements. |
Financial Guarantees
Financial Guarantees | 9 Months Ended |
Oct. 28, 2016 | |
Financial Guarantees | |
Financial Guarantees | 15. On December 29, 2011, the Company issued $250.0 million principal amount of the Senior Notes. The Senior Notes are irrevocably and unconditionally guaranteed, jointly and severally, by each of the Company’s existing and future restricted subsidiaries that are guarantors under the Credit Facilities and certain other indebtedness. As of October 28, 2016 and January 29, 2016, the Senior Notes are fully and unconditionally guaranteed by the Subsidiary Guarantors. The tables in the following pages present the condensed consolidating financial information for the Company and the Subsidiary Guarantors together with consolidating entries, as of and for the periods indicated. The subsidiaries that are not Subsidiary Guarantors are minor. The condensed consolidating financial information may not necessarily be indicative of the financial position, results of operations or cash flows had the Company, and the Subsidiary Guarantors operated as independent entities. CONDENSED CONSOLIDATING BALANCE SHEETS As of October 28, 2016 (In thousands) (Unaudited) Issuer Subsidiary Non- Consolidating Consolidated ASSETS Current Assets: Cash $ $ $ $ — $ Accounts receivable, net — — Income taxes receivable ) — — Inventories, net — — Assets held for sale — — — Other — Total current assets — Property and equipment, net — Deferred financing costs, net — — — Equity investments and advances to subsidiaries ) — Intangible assets, net — — Goodwill — — — Deposits and other assets — Total assets $ $ $ $ ) $ LIABILITIES AND MEMBER’S EQUITY Current Liabilities: Accounts payable $ $ $ — $ — $ Intercompany payable ) — Payroll and payroll-related — — Sales tax — — Other accrued expenses — Workers’ compensation — — Current portion of long-term debt — — — Current portion of capital and financing lease obligation — — — Total current liabilities ) Long-term debt, net of current portion — — — Unfavorable lease commitments, net — — Deferred rent — Deferred compensation liability — — — Capital and financing lease obligation, net of current portion — — — Deferred income taxes — — — Other liabilities — — — Total liabilities ) Member’s Equity: Member units — ) Additional paid-in capital — — ) — Investment in Number Holdings, Inc. preferred stock ) — — — ) Accumulated deficit ) ) ) ) Other comprehensive income — — — — — Total equity ) ) Total liabilities and equity $ $ $ $ ) $ CONDENSED CONSOLIDATING BALANCE SHEETS As of January 29, 2016 (In thousands) Issuer Subsidiary Non- Consolidating Consolidated ASSETS Current Assets: Cash $ $ $ $ — $ Accounts receivable, net — — Income taxes receivable — — — Deferred income taxes — — — — — Inventories, net — — Assets held for sale — — — Other — Total current assets — Property and equipment, net — Deferred financing costs, net — — — Equity investments and advances to subsidiaries ) — Intangible assets, net — — Goodwill — — — Deposits and other assets — Total assets $ $ $ $ ) $ LIABILITIES AND MEMBER’S EQUITY Current Liabilities: Accounts payable $ $ $ — $ — $ Intercompany payable ) — Payroll and payroll-related — — Sales tax — — Other accrued expenses — Workers’ compensation — — Current portion of long-term debt — — — Current portion of capital and financing lease obligation — — — Total current liabilities ) Long-term debt, net of current portion — — — Unfavorable lease commitments, net — — Deferred rent — Deferred compensation liability — — — Capital and financing lease obligation, net of current portion — — — Deferred income taxes — — — Other liabilities — — — Total liabilities ) Member’s Equity: Member units — ) Additional paid-in capital — — ) — Investment in Number Holdings, Inc. preferred stock ) — — — ) Accumulated deficit ) ) ) ) Other comprehensive loss ) — — — ) Total equity ) ) Total liabilities and equity $ $ $ $ ) $ CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) For the Third Quarter Ended October 28, 2016 (In thousands) (Unaudited) Issuer Subsidiary Non- Consolidating Consolidated Net Sales: Total sales $ $ $ $ ) $ Cost of sales — — Gross profit ) Selling, general and administrative expenses ) Operating (loss) income ) ) — ) Other (income) expense: Interest income ) — — — ) Interest expense — — — Loss on extinguishment of debt — — — — — Equity in loss (earnings) of subsidiaries — — ) — Total other expense, net — — ) (Loss) income before provision for income taxes ) ) ) Provision for income taxes — — — Net (loss) income $ ) $ ) $ $ $ ) Comprehensive (loss) income $ ) $ ) $ $ $ ) CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) For the First Three Quarters Ended October 28, 2016 (In thousands) (Unaudited) Issuer Subsidiary Non- Consolidating Consolidated Net Sales: Total sales $ $ $ $ ) $ Cost of sales — — Gross profit ) Selling, general and administrative expenses ) Operating (loss) income ) ) — ) Other (income) expense: Interest income ) — — — ) Interest expense — — — Loss on extinguishment of debt — — — Equity in loss (earnings) of subsidiaries — — ) — Total other expense, net — — ) (Loss) income before provision for income taxes ) ) ) Provision for income taxes — — — Net (loss) income $ ) $ ) $ $ $ ) Comprehensive (loss) income $ ) $ ) $ $ $ ) CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) For the Third Quarter Ended October 30, 2015 (In thousands) (Unaudited) Issuer Subsidiary Non- Consolidating Consolidated Net Sales: Total sales $ $ $ $ ) $ Cost of sales — — Gross profit ) Selling, general and administrative expenses ) Goodwill impairment — — — Operating (loss) income ) ) — ) Other (income) expense: Interest income — — — — — Interest expense — — — Equity in (earnings) loss of subsidiaries — — ) — Total other expense, net — — ) (Loss) income before provision for income taxes ) ) ) Provision (benefit) for income taxes — ) — Net (loss) income $ ) $ ) $ $ $ ) Comprehensive (loss) income $ ) $ ) $ $ $ ) CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) For the First Three Quarters Ended October 30, 2015 (In thousands) (Unaudited) Issuer Subsidiary Non- Consolidating Consolidated Net Sales: Total sales $ $ $ $ ) $ Cost of sales — — Gross profit ) Selling, general and administrative expenses ) Goodwill impairment — — — Operating (loss) income ) ) — ) Other (income) expense: Interest income ) — — — ) Interest expense — — — Equity in (earnings) loss of subsidiaries — — ) — Total other expense, net — — ) (Loss) income before provision for income taxes ) ) ) Provision (benefit) for income taxes — ) — Net (loss) income $ ) $ ) $ $ $ ) Comprehensive (loss) income $ ) $ ) $ $ $ ) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the First Three Quarters Ended October 28, 2016 (In thousands) (Unaudited) Issuer Subsidiary Non- Consolidating Consolidated Cash flows from operating activities: Net cash provided by (used in) operating activities $ $ $ ) $ — $ Cash flows from investing activities: Purchases of property and equipment ) ) — — ) Proceeds from sales of fixed assets — — — Insurance recoveries for replacement assets — — — Net cash used in investing activities ) ) — — ) Cash flows from financing activities: Payments of long-term debt ) — — — ) Proceeds under revolving credit facility — — — Payments under revolving credit facility ) — — — ) Payments of debt issuance costs ) — — — ) Proceeds from financing lease obligations — — — Payments of capital and financing lease obligations ) — — — ) Net cash provided by financing activities — — — Net (decrease) increase in cash ) ) — Cash — beginning of period — Cash — end of period $ $ $ $ — $ CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the First Three Quarters Ended October 30, 2015 (In thousands) (Unaudited) Issuer Subsidiary Non- Consolidating Consolidated Cash flows from operating activities: Net cash provided by operating activities $ $ $ $ — $ Cash flows from investing activities: Purchases of property and equipment ) ) ) — ) Proceeds from sales of fixed assets — — Net cash used in investing activities ) ) ) — ) Cash flows from financing activities: Payments of long-term debt ) — — — ) Proceeds under revolving credit facility — — — Payments under revolving credit facility ) — — — ) Payments of debt issuance costs ) — — — ) Proceeds from financing lease obligations — — — Payments of capital and financing lease obligations ) — — — ) Payments to repurchase stock options of Number Holdings, Inc ) — — — ) Net settlement of stock options of Number Holdings, Inc. for tax withholdings ) — — — ) Net cash provided by financing activities — — — Net (decrease) increase in cash ) — ) Cash — beginning of period — Cash — end of period $ $ $ $ — $ |
Basis of Presentation and Sum21
Basis of Presentation and Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Oct. 28, 2016 | |
Basis of Presentation and Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). However, certain information and footnote disclosures normally included in financial statements prepared in conformity with GAAP have been omitted or condensed pursuant to the rules and regulations of the Securities and Exchange Commission. These statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2016. In the opinion of the Company’s management, these interim unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the consolidated financial position and results of operations for each of the periods presented. The results of operations and cash flows for such periods are not necessarily indicative of results to be expected for the full fiscal year ending January 27, 2017 (“fiscal 2017”). |
Fiscal Year | Fiscal Year The Company follows a fiscal calendar consisting of four quarters with 91 days, each ending on the Friday closest to the last day of April, July, October or January, as applicable, and a 52-week fiscal year with 364 days, with a 53-week year every five to six years. Unless otherwise stated, references to years in this Report relate to fiscal years rather than calendar years. The Company’s fiscal 2017 began on January 30, 2016, will end on January 27, 2017 and will consist of 52 weeks. The Company’s fiscal year 2016 (“fiscal 2016”) began on January 31, 2015, ended on January 29, 2016 and consisted of 52 weeks. The third quarter ended October 28, 2016 (the “third quarter of fiscal 2017”) and the third quarter ended October 30, 2015 (the “third quarter of fiscal 2016”) were each comprised of 91 days. The nine-month period ended October 28, 2016 (the “first three quarters of fiscal 2017”) and the nine-month period ended October 30, 2015 (the “first three quarters of fiscal 2016”) were each comprised of 273 days. |
Use of Estimates | Use of Estimates The preparation of the unaudited consolidated financial statements, in conformity with GAAP, requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Reclassification | Reclassification Certain prior year amounts have been reclassified to conform to the current year’s presentation. Specifically, the Company adopted Accounting Standard Update (“ASU”) No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs” in the first quarter of fiscal 2017, which requires the Company to present debt issuance costs related to a recognized debt liability on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts. The adoption of this accounting standard resulted in the reclassification of $11.5 million of debt issuance costs (net of accumulated amortization) from deferred financing costs, net to long-term debt, net of current portion on the Company’s consolidated balance sheet at January 29, 2016. The Company also early adopted ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes” in the first quarter of fiscal 2017, which requires that all deferred tax assets and liabilities be classified as long-term on the balance sheet. The adoption of this accounting standard resulted in the reclassification of $16.6 million of deferred income tax from current assets to long-term deferred income taxes liability on the Company’s consolidated balance sheet at January 29, 2016. |
Cash | Cash For purposes of reporting cash flows, cash includes cash on hand, cash at the stores and cash in financial institutions. The majority of payments due from financial institutions for the settlement of debit card and credit card transactions are processed within three business days and therefore are also classified as cash. Cash balances held at financial institutions are generally in excess of federally insured limits. These accounts are only insured by the Federal Deposit Insurance Corporation up to $250,000. The Company historically has not experienced any losses in such accounts. The Company places its temporary cash investments with what it believes to be high credit, quality financial institutions. Under the Company’s cash management system, checks issued but not presented to the bank may result in book cash overdraft balances for accounting purposes. The Company reclassifies book overdrafts to accounts payable, which are reflected as an operating activity in its unaudited consolidated statements of cash flows. Book overdrafts included in accounts payable were $3.2 million and $7.9 million as of October 28, 2016 and January 29, 2016, respectively. |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts In connection with its wholesale business, the Company evaluates the collectability of accounts receivable based on a combination of factors. In cases where the Company is aware of circumstances that may impair a specific customer’s or tenant’s ability to meet its financial obligations subsequent to the original sale, the Company will record an allowance against amounts due and thereby reduce the net recognized receivable to the amount the Company reasonably believes will be collected. For all other customers and tenants, the Company recognizes allowances for doubtful accounts based on the length of time the receivables are past due, industry and geographic concentrations, the current business environment and the Company’s historical experiences. |
Inventories | Inventories Inventories are valued at the lower of cost or market. Inventory costs are established using a methodology that approximates first in, first out, which for store inventories is based on a retail inventory method. Valuation allowances for shrinkage as well as excess and obsolete inventory are also recorded. The Company includes spoilage, scrap and shrink in its definition of shrinkage. Shrinkage is estimated as a percentage of sales for the period from the last physical inventory date to the end of the applicable period. Such estimates are based on experience and the most recent physical inventory results. Physical inventory counts are completed at each of the Company’s retail stores at least once a year by an outside inventory service company. The Company performs inventory cycle counts at its warehouses throughout the year. The Company also performs inventory reviews and analysis on a quarterly basis for both warehouse and store inventory to determine inventory valuation allowances for excess and obsolete inventory. The valuation allowances for excess and obsolete inventory are based on the age of the inventory, sales trends and future merchandising plans. The valuation allowances for excess and obsolete inventory require management judgment and estimates that may impact the ending inventory valuation and valuation allowances that may have a material effect on the reported gross margin for the period. These estimates are subject to change based on management’s evaluation of, and response to, a variety of factors and trends, including, but not limited to, consumer preferences and buying patterns, age of inventory, increased competition, inventory management, merchandising strategies and historical sell through trends. The Company’s ability to adequately evaluate the impact of inventory management and merchandising strategies executed in response to such factors and trends in future periods could have a material impact on such estimates. In order to obtain inventory at attractive prices, the Company takes advantage of large volume purchases, closeouts and other similar purchase opportunities. Consequently, the Company’s inventory fluctuates from period to period and the inventory balances vary based on the timing and availability of such opportunities. |
Property and Equipment | Property and Equipment Property and equipment are carried at cost and are depreciated or amortized on a straight-line basis over the following useful lives: Owned buildings and improvements Lesser of 30 years or the estimated useful life of the improvement Leasehold improvements Lesser of the estimated useful life of the improvement or remaining lease term Fixtures and equipment 3-5 years Transportation equipment 3-5 years Information technology systems For major corporate systems, estimated useful life up to 7 years; for functional standalone systems, estimated useful life up to 5 years The Company’s policy is to capitalize expenditures that materially increase asset lives and expense ordinary repairs and maintenance as incurred. |
Long-Lived Assets | Long-Lived Assets The Company assesses the impairment of depreciable long-lived assets when events or changes in circumstances indicate that the carrying value may not be recoverable. The Company groups and evaluates long-lived assets for impairment at the individual store level, which is the lowest level at which individual identifiable cash flows are available. Recoverability is measured by comparing the carrying amount of an asset to expected future net cash flows generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, the carrying amount is compared to its fair value and an impairment charge is recognized to the extent of the difference. Factors that the Company considers important that could individually or in combination trigger an impairment review include the following: (1) significant underperformance relative to expected historical or projected future operating results; (2) significant changes in the manner of the Company’s use of the acquired assets or the strategy for the Company’s overall business; and (3) significant changes in the Company’s business strategies and/or negative industry or economic trends. On a quarterly basis, the Company assesses whether events or changes in circumstances occur that potentially indicate that the carrying value of long-lived assets may not be recoverable (Level 3 measurement, see Note 7, “Fair Value of Financial Instruments”). Considerable management judgment is necessary to estimate projected future operating cash flows. Accordingly, if actual results fall short of such estimates, significant future impairments could result. During the third quarter of fiscal 2017, the Company decided to close five retail stores in California by the end of fiscal 2017 upon the expiration of their respective lease terms. As a result of this decision, the Company recognized an impairment charge of approximately $0.1 million related to the closure of three of these stores and recorded an impairment charge of $0.1 million related to fixtures that will be disposed of and for which the Company concluded the fair value was zero. During the third quarter of fiscal 2017, the Company also reduced the carrying value of a held for sale property to the estimated net realizable value, net of expected disposal costs, and accordingly recorded an asset impairment charge of $0.2 million. During the second quarter of fiscal 2016, due to the underperformance of one store in Texas, the Company concluded that the carrying value of its long-lived assets was not recoverable and accordingly recorded an asset impairment charge of $0.5 million. |
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets In connection with the Merger purchase price allocation, the fair values of long-lived and intangible assets were determined based upon assumptions related to the future cash flows, discount rates and asset lives using then available information, and in some cases were obtained from independent professional valuation experts. The Company amortizes intangible assets over their estimated useful lives unless such lives are deemed indefinite. Amortizable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable based on undiscounted cash flows, and, if impaired, written down to fair value based on either discounted cash flows or appraised values. Significant judgment is required in determining whether a potential indicator of impairment of long-lived assets exists and in estimating future cash flows used in the impairment tests (Level 3 measurement, see Note 7, “Fair Value of Financial Instruments”). Goodwill and indefinite-lived intangible assets are not amortized but instead tested annually for impairment or more frequently when events or changes in circumstances indicate that the assets might be impaired. Goodwill is tested for impairment by comparing the carrying amount of the reporting unit to the fair value of the reporting unit to which the goodwill is assigned. The Company has the option of performing a qualitative assessment before calculating the fair value of the reporting unit (i.e., step zero of the goodwill impairment test). If the Company does not perform a qualitative assessment, or determines, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, the two-step impairment test would be required. The first step is to compare the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is considered not impaired; otherwise, goodwill is impaired and the loss is measured by performing step two. Under step two, the impairment loss is measured by comparing the implied fair value of the reporting unit’s goodwill with the carrying amount of goodwill. Management has determined that the Company has two reporting units, the retail reporting unit and the wholesale reporting unit. The Company, assisted by an independent third party valuation firm, performs the annual test for impairment in January of the fiscal year and determines fair value based on a combination of the income approach and the market approach. The income approach is based on discounted cash flows to determine fair value. The market approach uses a selection of comparable companies and transactions in determining fair value. The fair value of the trade name is also tested for impairment in the fourth quarter by comparing the carrying value to the fair value. Fair value of a trade name is determined using a relief from royalty method under the income approach, which uses projected revenue allocable to the trade name and an assumed royalty rate (Level 3 measurement, see Note 7, “Fair Value of Financial Instruments”). These approaches involve making key assumptions about future cash flows, discount rates and asset lives using then best available information. These assumptions are subject to a high degree of complexity and judgment and are subject to change. During the third quarter of fiscal 2016, the Company determined that indicators of impairment existed to require an interim impairment analysis of goodwill and trade name, including (i) overall performance deterioration reflected in decreased comparable same-store sales and cannibalization from stores opened in fiscal 2015 under an accelerated expansion program, (ii) increases in inventory shrinkage and buildup of excess inventory, (iii) decreased margin due to disappointing results from sales promotions and (iv) a decision to delay the pace of future store openings. The first step evaluation concluded that the fair value of the retail reporting unit was below its carrying value. The Company performed step two of the goodwill impairment test that requires the retail reporting unit’s fair value to be allocated to all of the assets and liabilities of the reporting unit, including any intangible assets, in a hypothetical analysis that calculates the implied fair value of goodwill in the same manner as if the reporting unit was being acquired in a business combination, including consideration of the fair value of tangible property and intangible assets. As a result of this preliminary analysis and based on best estimate, the Company recorded a $120.0 million non-cash goodwill impairment charge in the third quarter of fiscal 2016, which was reflected as goodwill impairment in the consolidated statements of comprehensive income (loss). The finalization of the preliminary goodwill impairment test was completed in the fourth quarter of fiscal 2016 and resulted in a $28.0 million adjustment in goodwill, lowering the estimated third quarter of fiscal 2016 goodwill impairment charge from $120.0 million to $92.0 million. The remaining amount of goodwill allocated to the retail reporting unit and wholesale reporting unit was $375.2 million and $12.5 million, respectively, as of January 29, 2016. During the fourth quarter of fiscal 2016, the Company completed step one of its annual goodwill impairment test for the two reporting units and determined that there was no impairment of goodwill since the fair value of the Company’s reporting units exceeded their carrying amounts. As discussed above, considerable management judgment is necessary in estimating future cash flows, market interest rates, discount rates and other factors affecting the valuation of goodwill. The Company’s forecasts used in its fiscal 2016 annual impairment test include growth in net sales, new store openings and same-store sales, positive trends in cost of sales and selling, general and administrative expense. In each case, these estimates and assumptions could be materially affected by factors such as unforeseen events or changes in general economic conditions, a decline in comparable company market multiples, changes to discount rates, increased competitive forces, inability to maintain pricing structure, deterioration of vendor relationships, failure to adequately manage and improve inventory processes and procedures and changes in customer behavior which could result in changes to management’s strategies. If operating results continue to change versus the Company’s expectations, additional impairment charges may be recorded in the future. Additionally, during the fourth quarter of fiscal 2016, the Company completed its annual indefinite-lived intangible asset impairment test and determined there was no impairment to the trade name since the fair value of the trade name exceeded its carrying amount. The results of this test showed that the fair value of trade name exceeded carrying value by approximately 12%. The relief from royalty method estimates our theoretical royalty savings from ownership of the intangible asset. Key assumptions used in this model included sales projections, discount rates and royalty rates, and considerable management judgment is necessary in developing and evaluating such assumptions. If future results are not consistent with current estimates and assumptions, impairment charges maybe recorded in future. During the first three quarters of fiscal 2017, the Company did not record any impairment charges related to goodwill or other intangible assets. |
Derivatives | Derivatives The Company accounts for derivative financial instruments in accordance with authoritative guidance for derivative instrument and hedging activities. Financial instrument positions taken by the Company are primarily intended to be used to manage risks associated with interest rate exposures. The Company’s derivative financial instruments are recorded on the balance sheet at fair value, and are recorded in either current or noncurrent assets or liabilities based on their maturity. Changes in the fair values of derivatives are recorded in net earnings or other comprehensive income (“OCI”), based on whether the instrument is designated and effective as a hedge transaction and, if so, the type of hedge transaction. Gains or losses on derivative instruments reported in accumulated other comprehensive income (“AOCI”) are reclassified to earnings in the period the hedged item affects earnings. Any ineffectiveness is recognized in earnings in the period incurred. |
Income Taxes | Income Taxes The Company uses the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company’s ability to realize deferred tax assets is assessed throughout the year and a valuation allowance is established accordingly. The Company recognizes the impact of a tax position only if it is more likely than not to be sustained upon examination based on the technical merits of the position. The Company recognizes potential interest and penalties related to uncertain tax positions in income tax expense. Refer to Note 10, “Income Taxes,” for further discussion of income taxes. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for stock-based payment awards based on their fair value. The value of the portion of the award that is ultimately expected to vest is recognized as an expense ratably over the requisite service periods. For awards classified as equity, the Company estimates the fair value for each option award as of the date of grant using the Black-Scholes option pricing model or other appropriate valuation models. The Black-Scholes model considers, among other factors, the expected life of the award and the expected volatility of the stock price. Stock options are generally granted to employees at exercise prices equal to or greater than the fair market value of the stock at the dates of grant. The fair value of options that vest based on the Company’s and Parent’s achievement of certain performance hurdles were valued using a Monte Carlo simulation method. The fair value of options granted to the current Chief Executive Officer were valued using a binomial model and the Monte Carlo simulation method. Refer to Note 8, “Stock-Based Compensation” for further discussion of the Company’s stock-based compensation. |
Revenue Recognition | Revenue Recognition The Company recognizes retail sales in its retail stores at the time the customer takes possession of merchandise. All sales are net of discounts and returns and exclude sales tax. Wholesale sales are recognized in accordance with the shipping terms agreed upon on the purchase order. Wholesale sales are typically recognized free on board origin, where title and risk of loss pass to the buyer when the merchandise leaves the Company’s distribution facility. The Company has a gift card program. The Company does not charge administrative fees on gift cards and the Company’s gift cards do not have expiration dates. The Company records the sale of gift cards as a current liability and recognizes a sale when a customer redeems a gift card. The liability for outstanding gift cards is recorded in accrued expenses. |
Cost of Sales | Cost of Sales Cost of sales includes the cost of inventory, freight in, obsolescence, spoilage, scrap and inventory shrink, and is net of discounts and allowances. Cost of sales also includes receiving, warehouse costs and distribution costs (which include payroll and associated costs, occupancy, transportation to and from stores and depreciation expense). Cash discounts for satisfying early payment terms are recognized when payment is made, and allowances and rebates based upon milestone achievements such as reaching a certain volume of purchases of a vendor’s products are included as a reduction of cost of sales when such contractual milestones are reached or based on other systematic and rational approaches where possible. |
Selling, General and Administrative Expenses | Selling, General and Administrative Expenses Selling, general and administrative expenses include the costs of selling merchandise in stores (which include payroll and associated costs, occupancy and other store-level costs) and corporate costs (which include payroll and associated costs, occupancy, advertising, professional fees and other corporate administrative costs). Selling, general and administrative expenses also include depreciation and amortization expense relating to these costs. |
Leases | Leases The Company follows the policy of capitalizing allowable expenditures that relate to the acquisition and signing of its retail store leases. These costs are amortized on a straight-line basis over the applicable lease term. The Company recognizes rent expense for operating leases on a straight-line basis (including the effect of reduced or free rent and rent escalations) over the applicable lease term. The difference between the cash paid to the landlord and the amount recognized as rent expense on a straight-line basis is included in deferred rent. Cash reimbursements received from landlords for leasehold improvements and other cash payments received from landlords as lease incentives are recorded as deferred rent. Deferred rent related to landlord incentives is amortized as an offset to rent expense using the straight-line method over the applicable lease term. In certain lease arrangements, the Company can be involved with the construction of the building. If it is determined that the Company has substantially all of the risks of ownership during construction of the leased property and therefore is deemed to be the owner of the construction project, the Company records an asset for the amount of the total project costs and an amount related to the value attributed to the pre-existing leased building in property and equipment, net and the related financing obligation as part of current and non-current liabilities. Once construction is complete, if it is determined that the asset does not qualify for sale-leaseback accounting treatment, the Company amortizes the obligation over the lease term and depreciates the asset over the life of the lease. The Company does not report rent expense for the portion of the rent payment determined to be related to the assets which are owned for accounting purposes. Rather, this portion of the rent payment under the lease is recognized as a reduction of the financing obligation and interest expense. For store closures where a lease obligation still exists, the Company records the estimated future liability associated with the rental obligation on the cease use date (when the store is closed). Liabilities are established at the cease use date for the present value of any remaining operating lease obligations, net of estimated sublease income, and at the communication date for severance and other exit costs. Key assumptions in calculating the liability include the timeframe expected to terminate lease agreements, estimates related to the sublease potential of closed locations, and estimates of other related exit costs. If actual timing and potential termination costs or realization of sublease income differ from the Company’s estimates, the resulting liabilities could vary from recorded amounts. These liabilities are reviewed periodically and adjusted when necessary. During the third quarter of fiscal 2017, the Company sold and concurrently leased back two stores with an aggregate carrying value of $7.6 million and received net proceeds from these transactions of $10.5 million. The Company was deemed to have “continuing involvement,” which precluded the de-recognition of the assets from the consolidated balance sheet when the transactions closed. The resulting leases are accounted for as financing leases and the Company has recorded a corresponding financing lease obligation of $10.5 million (as a component of current and non-current liabilities). The Company will amortize the financing lease obligation over the lease term and depreciate the assets over their remaining useful lives. |
Self-Insured Workers' Compensation Liability | Self-Insured Workers’ Compensation Liability The Company self-insures for workers’ compensation claims in California and Texas. The Company establishes a liability for losses from both estimated known and incurred but not reported insurance claims based on reported claims and actuarial valuations of estimated future costs of known and incurred but not yet reported claims. Should an amount of claims greater than anticipated occur, the liability recorded may not be sufficient and additional workers’ compensation costs, which may be significant, could be incurred. The Company has not discounted the projected future cash outlays for the time value of money for claims and claim-related costs when establishing its workers’ compensation liability in its financial reports for each of October 28, 2016 and January 29, 2016. |
Self-Insured Health Insurance Liability | Self-Insured Health Insurance Liability The Company self-insures for a portion of its employee medical benefit claims. The liability for the self-funded portion of the Company health insurance program is determined actuarially, based on claims filed and an estimate of claims incurred but not yet reported. The Company maintains stop loss insurance coverage to limit its exposure for the self-funded portion of its health insurance program. |
Pre-Opening Costs | Pre-Opening Costs The Company expenses, as incurred, pre-opening costs such as payroll, rent and marketing related to the opening of new retail stores. |
Advertising | Advertising The Company expenses advertising costs as incurred. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company’s financial instruments consist principally of cash, accounts receivable, interest rate and other derivatives, accounts payable, accruals, debt, and other liabilities. Cash and derivatives are measured and recorded at fair value. Accounts receivable and other receivables are financial assets with carrying values that approximate fair value. Accounts payable and other accrued expenses are financial liabilities with carrying values that approximate fair value. Refer to Note 7, “Fair Value of Financial Instruments” for further discussion of the fair value of debt. The Company uses the authoritative guidance for fair value, which includes the definition of fair value, the framework for measuring fair value, and disclosures about fair value measurements. Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value measurements reflect the assumptions market participants would use in pricing an asset or liability based on the best information available. Assumptions include the risks inherent in a particular valuation technique (such as a pricing model) and/or the risks inherent in the inputs to the model. |
Comprehensive Income | Comprehensive Income OCI includes unrealized gains or losses on interest rate derivatives designated as cash flow hedges. |
Basis of Presentation and Sum22
Basis of Presentation and Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Oct. 28, 2016 | |
Basis of Presentation and Summary of Significant Accounting Policies | |
Schedule of property and equipment useful lives | Owned buildings and improvements Lesser of 30 years or the estimated useful life of the improvement Leasehold improvements Lesser of the estimated useful life of the improvement or remaining lease term Fixtures and equipment 3-5 years Transportation equipment 3-5 years Information technology systems For major corporate systems, estimated useful life up to 7 years; for functional standalone systems, estimated useful life up to 5 years |
Goodwill and Other Intangibles
Goodwill and Other Intangibles (Tables) | 9 Months Ended |
Oct. 28, 2016 | |
Goodwill and Other Intangibles | |
Schedule of goodwill and other intangible assets and liabilities, and unfavorable leases | The following tables set forth the value of the goodwill and other intangible assets and liabilities, and unfavorable leases, respectively (in thousands): October 28, 2016 January 29, 2016 Gross Impairment Accumulated Net Gross Impairment Accumulated Net Indefinite lived intangible assets: Goodwill $ $ ) $ — $ $ $ ) $ — $ Trade name — — — — Total indefinite lived intangible assets $ $ ) $ — $ $ $ ) $ — $ Finite lived intangible assets: Trademarks $ $ ) $ ) $ $ $ ) $ ) $ Bargain Wholesale customer relationships — ) — ) Favorable leases ) ) ) ) Total finite lived intangible assets ) ) ) ) Total goodwill and other intangible assets $ $ ) $ ) $ $ $ ) $ ) $ October 28, 2016 January 29, 2016 Gross Accumulated Net Gross Accumulated Net Unfavorable leases $ $ ) $ $ $ ) $ |
Property and Equipment, net (Ta
Property and Equipment, net (Tables) | 9 Months Ended |
Oct. 28, 2016 | |
Property and Equipment, net | |
Schedule of details of property and equipment | The following table provides details of property and equipment (in thousands): October 28, January 29, Land $ $ Buildings Buildings improvements Leasehold improvements Fixtures and equipment Transportation equipment Construction in progress Total property and equipment Less: accumulated depreciation and amortization ) ) Property and equipment, net $ $ |
Comprehensive Loss (Tables)
Comprehensive Loss (Tables) | 9 Months Ended |
Oct. 28, 2016 | |
Comprehensive Loss | |
Schedule of comprehensive loss, net of tax effects | The following table sets forth the calculation of comprehensive loss, net of tax effects (in thousands): For the Third Quarter Ended For the First Three Quarters Ended October 28, October 30, October, 28 October 30, Net loss $ ) $ ) $ ) $ ) Unrealized loss on interest rate cash flow hedge, net of tax effects of $0, $94, $(112) and $0 for the third quarter and first three quarters of fiscal 2017 and fiscal 2016, respectively — ) ) ) Reclassification adjustment, net of tax effects of $0, $(321), $220 and $0 for the third quarter and first three quarters of fiscal 2017 and fiscal 2016, respectively — Total gains, net — Total comprehensive loss $ ) $ ) $ ) $ ) |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Oct. 28, 2016 | |
Debt | |
Schedule of short and long-term debt | Short and long-term debt consists of the following (in thousands): October 28, January 29, ABL Facility $ $ First Lien Term Loan Facility , maturing on January 13, 2019, payable in quarterly installments of $1,535, plus interest through December 31, 2018, with unpaid principal and accrued interest due on January 13, 2019, net of unamortized OID of $3,240 and $4,724 as of October 28, 2016 and January 29, 2016, respectively Senior Notes (unsecured) maturing on December 15, 2019, unpaid principal and accrued interest due on December 15, 2019 Deferred financing costs ) ) Total debt Less: current portion Long-term debt, net of current portion $ $ |
Schedule of net deferred financing costs | As of October 28, 2016 and January 29, 2016, the net deferred financing costs are as follows (in thousands): Deferred financing costs October 28, January 29, ABL Facility (included in non-current deferred financing costs) $ $ First Lien Term Loan Facility (included in long-term debt, net of current portion) Senior Notes (included in long-term debt, net of current portion) Total deferred financing costs, net $ $ |
Schedule of significant components of interest expense | The significant components of interest expense are as follows (in thousands): For the Third Quarter Ended For the First Three Quarters Ended October 28, October 30, October 28, October 30 First Lien Term Loan Facility $ $ $ $ ABL Facility Senior Notes Amortization of deferred financing costs and OID Other interest expense Interest expense $ $ $ $ |
Derivative Financial Instrume27
Derivative Financial Instruments (Tables) | 9 Months Ended |
Oct. 28, 2016 | |
Derivative Financial Instruments | |
Summary of the recorded amounts included in the consolidated balance sheet | A summary of the recorded amounts included in the consolidated balance sheets is as follows (in thousands): October 28, January 29, Derivatives designated as cash flow hedging instruments Interest rate swap (included in other current liabilities) $ — $ Accumulated other comprehensive loss, net of tax (included in member’s equity) $ — $ Derivatives not designated as hedging instruments Transition payments (included in other current liabilities) $ $ Transition payments (included in other long-term liabilities) $ $ |
Summary of recorded amounts included in the consolidated statements of comprehensive income (loss) | A summary of recorded amounts included in the unaudited consolidated statements of comprehensive income (loss) is as follows (in thousands): For the Third Quarter Ended For the First Three Quarters Ended October 28, October 30, October 28, October 30, Derivatives designated as cash flow hedging instruments: Loss related to effective portion of derivative recognized in OCI $ — $ $ $ Loss related to effective portion of derivatives reclassified from AOCI to interest expense $ — $ $ $ (Loss) gain related to ineffective portion of derivative recognized in interest expense $ — $ ) $ $ ) Derivatives not designated as hedging instruments: Loss recognized in selling, general and administrative expenses $ $ $ $ |
Fair Value of Financial Instr28
Fair Value of Financial Instruments (Tables) | 9 Months Ended |
Oct. 28, 2016 | |
Fair Value of Financial Instruments | |
Schedule of financial assets and liabilities recorded at fair value on a recurring basis, by level within the fair value hierarchy | The following table summarizes, by level within the fair value hierarchy, the financial assets and liabilities recorded at fair value on a recurring basis (in thousands) as of October 28, 2016: October 28, 2016 Total Level 1 Level 2 Level 3 ASSETS Other assets — assets that fund deferred compensation $ $ $ — $ — LIABILITIES Other current liabilities — transition payments $ $ — $ — $ Other long-term liabilities — transition payments $ $ — $ — $ Other long-term liabilities — deferred compensation $ $ $ — $ — The following table summarizes, by level within the fair value hierarchy, the financial assets and liabilities recorded at fair value on a recurring basis (in thousands) as of January 29, 2016: January 29, 2016 Total Level 1 Level 2 Level 3 ASSETS Other assets — assets that fund deferred compensation $ $ $ — $ — LIABILITES Other current liabilities — interest rate swap $ $ — $ $ — Other current liabilities — transition payments $ $ — $ — $ Other long-term liabilities — transition payments $ $ — $ — $ Other long-term liabilities — deferred compensation $ $ $ — $ — |
Summary of activity for the period of changes in fair value of the Company's Level 3 investments | The following table summarizes the activity for the period of changes in fair value of the Company’s Level 3 instruments (in thousands): For the Third Quarter Ended For the First Three Quarters Ended Transition Payments October 28, 2016 October 30, 2015 October 28, 2016 October 30, 2015 Description Beginning balance $ ) $ — $ ) $ — Transfers in and/or out of Level 3 — — — — Total realized/unrealized loss: Included in earnings (1) ) ) ) ) Included in other comprehensive loss — — — — Purchases, redemptions and settlements: Settlements — — — Ending balance $ ) $ ) $ ) $ ) Total amount of unrealized losses for the period included in earnings relating to liabilities held at the reporting period $ ) $ ) $ ) $ ) (1) Losses are included in selling, general and administrative expenses. |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 9 Months Ended |
Oct. 28, 2016 | |
Stock-Based Compensation | |
Summary of stock option activity | The following summarizes stock option activity in the first three quarters of fiscal 2017: Number of Weighted Average Weighted Average Options outstanding at the beginning of the period $ Granted (a) $ Exercised — $ — Cancelled )(b) $ Outstanding at the end of the period $ 9.2 Exercisable at the end of the period $ 9.3 (a) Includes 13,146 options granted to employees that will vest based on the achievement of certain performance targets. (b) Includes cancellation of 15,815 options in exchange for options with new terms. |
Summary of stock awards available for grant | Number of Shares Available for grant as of January 29, 2016 Authorized Granted ) Cancelled Available for grant at October 28, 2016 |
Other Accrued Expenses (Tables)
Other Accrued Expenses (Tables) | 9 Months Ended |
Oct. 28, 2016 | |
Other Accrued Expenses | |
Schedule of other accrued expenses | Other accrued expenses as of October 28, 2016 and January 29, 2016 are as follows (in thousands): October 28, January 29, Accrued interest $ $ Accrued occupancy costs Accrued legal reserves and fees Accrued interest swap — Accrued California Redemption Value Accrued transportation Other Total other accrued expenses $ $ |
Financial Guarantees (Tables)
Financial Guarantees (Tables) | 9 Months Ended |
Oct. 28, 2016 | |
Financial Guarantees | |
Schedule of condensed consolidating balance sheets | CONDENSED CONSOLIDATING BALANCE SHEETS As of October 28, 2016 (In thousands) (Unaudited) Issuer Subsidiary Non- Consolidating Consolidated ASSETS Current Assets: Cash $ $ $ $ — $ Accounts receivable, net — — Income taxes receivable ) — — Inventories, net — — Assets held for sale — — — Other — Total current assets — Property and equipment, net — Deferred financing costs, net — — — Equity investments and advances to subsidiaries ) — Intangible assets, net — — Goodwill — — — Deposits and other assets — Total assets $ $ $ $ ) $ LIABILITIES AND MEMBER’S EQUITY Current Liabilities: Accounts payable $ $ $ — $ — $ Intercompany payable ) — Payroll and payroll-related — — Sales tax — — Other accrued expenses — Workers’ compensation — — Current portion of long-term debt — — — Current portion of capital and financing lease obligation — — — Total current liabilities ) Long-term debt, net of current portion — — — Unfavorable lease commitments, net — — Deferred rent — Deferred compensation liability — — — Capital and financing lease obligation, net of current portion — — — Deferred income taxes — — — Other liabilities — — — Total liabilities ) Member’s Equity: Member units — ) Additional paid-in capital — — ) — Investment in Number Holdings, Inc. preferred stock ) — — — ) Accumulated deficit ) ) ) ) Other comprehensive income — — — — — Total equity ) ) Total liabilities and equity $ $ $ $ ) $ CONDENSED CONSOLIDATING BALANCE SHEETS As of January 29, 2016 (In thousands) Issuer Subsidiary Non- Consolidating Consolidated ASSETS Current Assets: Cash $ $ $ $ — $ Accounts receivable, net — — Income taxes receivable — — — Deferred income taxes — — — — — Inventories, net — — Assets held for sale — — — Other — Total current assets — Property and equipment, net — Deferred financing costs, net — — — Equity investments and advances to subsidiaries ) — Intangible assets, net — — Goodwill — — — Deposits and other assets — Total assets $ $ $ $ ) $ LIABILITIES AND MEMBER’S EQUITY Current Liabilities: Accounts payable $ $ $ — $ — $ Intercompany payable ) — Payroll and payroll-related — — Sales tax — — Other accrued expenses — Workers’ compensation — — Current portion of long-term debt — — — Current portion of capital and financing lease obligation — — — Total current liabilities ) Long-term debt, net of current portion — — — Unfavorable lease commitments, net — — Deferred rent — Deferred compensation liability — — — Capital and financing lease obligation, net of current portion — — — Deferred income taxes — — — Other liabilities — — — Total liabilities ) Member’s Equity: Member units — ) Additional paid-in capital — — ) — Investment in Number Holdings, Inc. preferred stock ) — — — ) Accumulated deficit ) ) ) ) Other comprehensive loss ) — — — ) Total equity ) ) Total liabilities and equity $ $ $ $ ) $ |
Schedule of condensed consolidated statements of comprehensive income (loss) | CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) For the Third Quarter Ended October 28, 2016 (In thousands) (Unaudited) Issuer Subsidiary Non- Consolidating Consolidated Net Sales: Total sales $ $ $ $ ) $ Cost of sales — — Gross profit ) Selling, general and administrative expenses ) Operating (loss) income ) ) — ) Other (income) expense: Interest income ) — — — ) Interest expense — — — Loss on extinguishment of debt — — — — — Equity in loss (earnings) of subsidiaries — — ) — Total other expense, net — — ) (Loss) income before provision for income taxes ) ) ) Provision for income taxes — — — Net (loss) income $ ) $ ) $ $ $ ) Comprehensive (loss) income $ ) $ ) $ $ $ ) CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) For the First Three Quarters Ended October 28, 2016 (In thousands) (Unaudited) Issuer Subsidiary Non- Consolidating Consolidated Net Sales: Total sales $ $ $ $ ) $ Cost of sales — — Gross profit ) Selling, general and administrative expenses ) Operating (loss) income ) ) — ) Other (income) expense: Interest income ) — — — ) Interest expense — — — Loss on extinguishment of debt — — — Equity in loss (earnings) of subsidiaries — — ) — Total other expense, net — — ) (Loss) income before provision for income taxes ) ) ) Provision for income taxes — — — Net (loss) income $ ) $ ) $ $ $ ) Comprehensive (loss) income $ ) $ ) $ $ $ ) CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) For the Third Quarter Ended October 30, 2015 (In thousands) (Unaudited) Issuer Subsidiary Non- Consolidating Consolidated Net Sales: Total sales $ $ $ $ ) $ Cost of sales — — Gross profit ) Selling, general and administrative expenses ) Goodwill impairment — — — Operating (loss) income ) ) — ) Other (income) expense: Interest income — — — — — Interest expense — — — Equity in (earnings) loss of subsidiaries — — ) — Total other expense, net — — ) (Loss) income before provision for income taxes ) ) ) Provision (benefit) for income taxes — ) — Net (loss) income $ ) $ ) $ $ $ ) Comprehensive (loss) income $ ) $ ) $ $ $ ) CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) For the First Three Quarters Ended October 30, 2015 (In thousands) (Unaudited) Issuer Subsidiary Non- Consolidating Consolidated Net Sales: Total sales $ $ $ $ ) $ Cost of sales — — Gross profit ) Selling, general and administrative expenses ) Goodwill impairment — — — Operating (loss) income ) ) — ) Other (income) expense: Interest income ) — — — ) Interest expense — — — Equity in (earnings) loss of subsidiaries — — ) — Total other expense, net — — ) (Loss) income before provision for income taxes ) ) ) Provision (benefit) for income taxes — ) — Net (loss) income $ ) $ ) $ $ $ ) Comprehensive (loss) income $ ) $ ) $ $ $ ) |
Schedule of condensed consolidated statements of cash flows | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the First Three Quarters Ended October 28, 2016 (In thousands) (Unaudited) Issuer Subsidiary Non- Consolidating Consolidated Cash flows from operating activities: Net cash provided by (used in) operating activities $ $ $ ) $ — $ Cash flows from investing activities: Purchases of property and equipment ) ) — — ) Proceeds from sales of fixed assets — — — Insurance recoveries for replacement assets — — — Net cash used in investing activities ) ) — — ) Cash flows from financing activities: Payments of long-term debt ) — — — ) Proceeds under revolving credit facility — — — Payments under revolving credit facility ) — — — ) Payments of debt issuance costs ) — — — ) Proceeds from financing lease obligations — — — Payments of capital and financing lease obligations ) — — — ) Net cash provided by financing activities — — — Net (decrease) increase in cash ) ) — Cash — beginning of period — Cash — end of period $ $ $ $ — $ CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the First Three Quarters Ended October 30, 2015 (In thousands) (Unaudited) Issuer Subsidiary Non- Consolidating Consolidated Cash flows from operating activities: Net cash provided by operating activities $ $ $ $ — $ Cash flows from investing activities: Purchases of property and equipment ) ) ) — ) Proceeds from sales of fixed assets — — Net cash used in investing activities ) ) ) — ) Cash flows from financing activities: Payments of long-term debt ) — — — ) Proceeds under revolving credit facility — — — Payments under revolving credit facility ) — — — ) Payments of debt issuance costs ) — — — ) Proceeds from financing lease obligations — — — Payments of capital and financing lease obligations ) — — — ) Payments to repurchase stock options of Number Holdings, Inc ) — — — ) Net settlement of stock options of Number Holdings, Inc. for tax withholdings ) — — — ) Net cash provided by financing activities — — — Net (decrease) increase in cash ) — ) Cash — beginning of period — Cash — end of period $ $ $ $ — $ |
Basis of Presentation and Sum32
Basis of Presentation and Summary of Significant Accounting Policies - General Information (Details) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Oct. 28, 2016USD ($)item | Oct. 30, 2015 | Oct. 28, 2016USD ($)item | Oct. 30, 2015 | Jan. 27, 2017item | Jan. 29, 2016USD ($)item | |
Nature of Business | ||||||
Stores in operation | 394 | 394 | ||||
Change in Fiscal Year | ||||||
Days in each fiscal quarter | 91 days | 91 days | ||||
Number of weeks in period | 52 | 52 | 52 | |||
Number of days in a fiscal year | 364 | |||||
Number of weeks in a fiscal year every five to six years | 53 | |||||
Days in first three quarters of fiscal year | 273 days | 273 days | ||||
Cash | ||||||
Number of business days within which the majority of payments are due for the settlement of debit and credit card transactions | 3 days | |||||
Cash, FDIC Uninsured Amount | $ | $ 250,000 | $ 250,000 | ||||
Book overdrafts included in accounts payable | $ | $ 3,200,000 | $ 7,900,000 | ||||
Minimum | ||||||
Change in Fiscal Year | ||||||
Period during which fiscal years includes 53 weeks | 5 years | |||||
Maximum | ||||||
Change in Fiscal Year | ||||||
Period during which fiscal years includes 53 weeks | 6 years | |||||
California | ||||||
Nature of Business | ||||||
Stores in operation | 287 | 287 | ||||
Texas | ||||||
Nature of Business | ||||||
Stores in operation | 48 | 48 | ||||
Arizona | ||||||
Nature of Business | ||||||
Stores in operation | 38 | 38 | ||||
Nevada | ||||||
Nature of Business | ||||||
Stores in operation | 21 | 21 |
Basis of Presentation and Sum33
Basis of Presentation and Summary of Significant Accounting Policies - Reclassification (Details) - USD ($) $ in Thousands | Oct. 28, 2016 | Jan. 29, 2016 |
Reclassification | ||
Deferred financing costs, net | $ 3,992 | $ 916 |
Long-term debt, net of current portion | 868,382 | 875,843 |
Long-term deferred income tax liabilities | $ 163,045 | 163,045 |
ASU 2015-03 | Retrospective adjustment | ||
Reclassification | ||
Deferred financing costs, net | (11,500) | |
Long-term debt, net of current portion | (11,500) | |
ASU 2015-17 | Retrospective adjustment | ||
Reclassification | ||
Current deferred income tax assets | (16,600) | |
Long-term deferred income tax liabilities | $ (16,600) |
Basis of Presentation and Sum34
Basis of Presentation and Summary of Significant Accounting Policies - Property and Equipment and Long-Lived Assets (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 28, 2016USD ($)store | Jul. 31, 2015USD ($)store | Oct. 28, 2016USD ($)store | Oct. 30, 2015USD ($) | |
Long-Lived Assets | ||||
Asset impairment | $ 491 | $ 509 | ||
Held-for-sale | ||||
Long-Lived Assets | ||||
Asset impairment | $ 200 | |||
Owned buildings and improvements | Maximum | ||||
Property and equipment | ||||
Property, Plant and Equipment, Useful Life | 30 years | |||
Fixtures and equipment | Minimum | ||||
Property and equipment | ||||
Property, Plant and Equipment, Useful Life | 3 years | |||
Fixtures and equipment | Maximum | ||||
Property and equipment | ||||
Property, Plant and Equipment, Useful Life | 5 years | |||
Transportation equipment | Minimum | ||||
Property and equipment | ||||
Property, Plant and Equipment, Useful Life | 3 years | |||
Transportation equipment | Maximum | ||||
Property and equipment | ||||
Property, Plant and Equipment, Useful Life | 5 years | |||
Information technology major corporate systems | Maximum | ||||
Property and equipment | ||||
Property, Plant and Equipment, Useful Life | 7 years | |||
Information technology standalone systems | Maximum | ||||
Property and equipment | ||||
Property, Plant and Equipment, Useful Life | 5 years | |||
Texas | Stores | ||||
Long-Lived Assets | ||||
Asset impairment | $ 500 | |||
Number of stores in underperformance | store | 1 | |||
California | Held-for-sale | ||||
Long-Lived Assets | ||||
Asset impairment | 200 | |||
California | Fixtures | ||||
Long-Lived Assets | ||||
Asset impairment | 100 | |||
Fair value of assets after impairment | $ 0 | $ 0 | ||
California | Stores | ||||
Long-Lived Assets | ||||
Number of stores closed | store | 5 | 5 | ||
Asset impairment | $ 100 | |||
Number of stores impaired | store | 3 | 3 |
Basis of Presentation and Sum35
Basis of Presentation and Summary of Significant Accounting Policies - Goodwill and Other Intangible Assets, Leases and Advertising (Details) | 3 Months Ended | 9 Months Ended | |||
Oct. 28, 2016USD ($)item | Jan. 29, 2016USD ($)item | Oct. 30, 2015USD ($) | Oct. 28, 2016USD ($)item | Oct. 30, 2015USD ($) | |
Goodwill and Other Intangible assets | |||||
Number of reporting units | item | 2 | 2 | |||
Goodwill | $ 387,772,000 | $ 387,772,000 | $ 387,772,000 | ||
Goodwill impairment loss | 0 | $ 120,000,000 | 0 | $ 120,000,000 | |
Leases | |||||
Net proceeds from the sale-leaseback transactions | 41,993,000 | $ 8,666,000 | |||
Leased back two stores | |||||
Leases | |||||
Number of stores sold and concurrently leased back | item | 2 | ||||
Carrying value of sale-leaseback transactions | $ 7,600,000 | 7,600,000 | |||
Net proceeds from the sale-leaseback transactions | 10,500,000 | ||||
Sale Leaseback obligation | $ 10,500,000 | $ 10,500,000 | |||
Retail reporting unit | |||||
Goodwill and Other Intangible assets | |||||
Goodwill | 375,200,000 | ||||
Goodwill impairment loss | 120,000,000 | ||||
Decrease in goodwill impairment | 28,000,000 | ||||
Goodwill impairment loss after preliminary analysis | $ 92,000,000 | ||||
Wholesale reporting unit | |||||
Goodwill and Other Intangible assets | |||||
Goodwill | 12,500,000 | ||||
Trade name | |||||
Goodwill and Other Intangible assets | |||||
Indefinite-lived intangible asset impairment loss | $ 0 | ||||
Fair value in excess of carrying value (as a percent) | 12.00% |
Goodwill and Other Intangible36
Goodwill and Other Intangibles - Finite and Indefinite Lived Intangible Assets (Details) - USD ($) $ in Thousands | Oct. 28, 2016 | Jan. 29, 2016 |
Indefinite lived intangible assets: | ||
Goodwill Gross Carrying Amount | $ 479,745 | $ 479,745 |
Goodwill Impairment Losses | (91,973) | (91,973) |
Goodwill Net Carrying Amount | 387,772 | 387,772 |
Indefinite Lived Assets Gross Carrying Amount | 889,745 | 889,745 |
Indefinite Lived Assets Impairment Losses | (91,973) | (91,973) |
Indefinite Lived Assets Net Carrying Amount | 797,772 | 797,772 |
Finite lived intangible assets: | ||
Gross Carrying Amount | 68,543 | 68,543 |
Finite Lived Intangible Assets Impairment Losses | (1,136) | (1,136) |
Accumulated Amortization | (28,577) | (24,165) |
Net Carrying Amount | 38,830 | 43,242 |
Total goodwill and other intangible assets, Gross Carrying Amount | 958,288 | 958,288 |
Total goodwill and other intangible assets, Impairment Losses | (93,109) | (93,109) |
Total goodwill and other intangible assets, accumulated amortization | (28,577) | (24,165) |
Total goodwill and other intangible assets, Net Carrying Amount | 836,602 | 841,014 |
Trademarks | ||
Finite lived intangible assets: | ||
Gross Carrying Amount | 2,000 | 2,000 |
Finite Lived Intangible Assets Impairment Losses | (570) | (570) |
Accumulated Amortization | (454) | (405) |
Net Carrying Amount | 976 | 1,025 |
Bargain Wholesale customer relationships | ||
Finite lived intangible assets: | ||
Gross Carrying Amount | 20,000 | 20,000 |
Accumulated Amortization | (7,994) | (6,752) |
Net Carrying Amount | 12,006 | 13,248 |
Favorable leases | ||
Finite lived intangible assets: | ||
Gross Carrying Amount | 46,543 | 46,543 |
Finite Lived Intangible Assets Impairment Losses | (566) | (566) |
Accumulated Amortization | (20,129) | (17,008) |
Net Carrying Amount | 25,848 | 28,969 |
Trade name | ||
Indefinite lived intangible assets: | ||
Indefinite-Lived Intangible Assets (Excluding Goodwill), Total | $ 410,000 | $ 410,000 |
Goodwill and Other Intangible37
Goodwill and Other Intangibles - Unfavorable Leases (Details) - USD ($) $ in Thousands | Oct. 28, 2016 | Jan. 29, 2016 |
Unfavorable leases | ||
Gross Carrying Amount | $ 19,835 | $ 19,835 |
Accumulated Amortization | (15,409) | (14,089) |
Net Carrying Amount | $ 4,426 | $ 5,746 |
Property and Equipment, net (De
Property and Equipment, net (Details) - USD ($) $ in Thousands | Oct. 28, 2016 | Jan. 29, 2016 |
Property and equipment | ||
Total property and equipment | $ 801,368 | $ 773,217 |
Less: accumulated depreciation and amortization | (279,366) | (230,647) |
Property and equipment, net | 522,002 | 542,570 |
Land | ||
Property and equipment | ||
Total property and equipment | 169,145 | 170,871 |
Buildings | ||
Property and equipment | ||
Total property and equipment | 111,205 | 111,205 |
Buildings improvements | ||
Property and equipment | ||
Total property and equipment | 77,218 | 74,157 |
Leasehold improvements | ||
Property and equipment | ||
Total property and equipment | 202,335 | 192,405 |
Fixtures and equipment | ||
Property and equipment | ||
Total property and equipment | 210,503 | 194,671 |
Transportation equipment | ||
Property and equipment | ||
Total property and equipment | 11,917 | 11,835 |
Construction in progress | ||
Property and equipment | ||
Total property and equipment | $ 19,045 | $ 18,073 |
Comprehensive Loss (Details)
Comprehensive Loss (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 28, 2016 | Oct. 30, 2015 | Oct. 28, 2016 | Oct. 30, 2015 | |
Comprehensive Loss | ||||
Net loss | $ (36,991) | $ (152,636) | $ (97,270) | $ (229,566) |
Unrealized loss on interest rate cash flow hedge, net of tax effects of $0, $94, $(112) and $0 for the third quarter and first three quarters of fiscal 2017 and fiscal 2016, respectively | (192) | (168) | (333) | |
Reclassification adjustment, net of tax effects of $0, $(321), $220 and $0 for the third quarter and first three quarters of fiscal 2017 and fiscal 2016, respectively | 724 | 330 | 1,207 | |
Other comprehensive income, net of tax | 532 | 162 | 874 | |
Comprehensive loss | (36,991) | (152,104) | (97,108) | (228,692) |
Tax effects of unrealized loss on interest rate cash flow hedge | 0 | (112) | 94 | 0 |
Tax effect of reclassification adjustment | $ 0 | $ 220 | $ (321) | $ 0 |
Debt (Details)
Debt (Details) - USD ($) $ in Thousands | Apr. 08, 2016 | Aug. 24, 2015 | Oct. 08, 2013 | Apr. 04, 2012 | Apr. 03, 2012 | Jan. 13, 2012 | Oct. 28, 2016 | Apr. 29, 2016 | Oct. 30, 2015 | Oct. 28, 2016 | Oct. 30, 2015 | Jan. 29, 2016 | Apr. 07, 2016 | Dec. 29, 2011 |
Debt | ||||||||||||||
Deferred financing costs | $ 13,429 | $ 13,429 | $ 12,461 | |||||||||||
Total debt | 874,520 | 874,520 | 881,981 | |||||||||||
Less: current portion | 6,138 | 6,138 | 6,138 | |||||||||||
Long-term debt, net of current portion | 868,382 | 868,382 | 875,843 | |||||||||||
Debt Instruments | ||||||||||||||
Loss on extinguishment of debt | 335 | |||||||||||||
Significant components of interest expense | ||||||||||||||
Amortization of deferred financing costs and OID | 1,514 | $ 1,238 | 4,454 | $ 3,543 | ||||||||||
Other interest expense | 1,046 | 552 | 2,406 | 1,480 | ||||||||||
Interest expense | 16,920 | 16,549 | 50,230 | 49,302 | ||||||||||
Long term debt | ||||||||||||||
Debt | ||||||||||||||
Deferred financing costs | 9,437 | 9,437 | 11,545 | |||||||||||
ABL Facility | ||||||||||||||
Debt | ||||||||||||||
Debt | 41,800 | $ 41,800 | 47,800 | |||||||||||
Debt Instruments | ||||||||||||||
Maximum borrowing capacity | $ 175,000 | |||||||||||||
Increase in borrowing capacity available under certain circumstances | 50,000 | |||||||||||||
Commitment fee on unused commitments (as a percent) | 0.50% | |||||||||||||
Amount outstanding | 41,800 | $ 41,800 | 47,800 | |||||||||||
Outstanding letters of credit | 31,600 | 31,600 | 2,500 | |||||||||||
Amount available | 48,600 | 48,600 | 90,900 | |||||||||||
Significant components of interest expense | ||||||||||||||
Interest debt expense | 700 | 654 | 1,824 | 1,843 | ||||||||||
ABL Facility | Non-current deferred financing costs | ||||||||||||||
Debt | ||||||||||||||
Deferred financing costs | $ 3,992 | $ 3,992 | 916 | |||||||||||
ABL Facility | Minimum | ||||||||||||||
Debt Instruments | ||||||||||||||
Inventory advance rate (as a percent) | 90.00% | |||||||||||||
ABL Facility | Maximum | ||||||||||||||
Debt Instruments | ||||||||||||||
Inventory advance rate (as a percent) | 92.50% | |||||||||||||
ABL Facility | Base rate | ||||||||||||||
Debt Instruments | ||||||||||||||
Applicable margin (as a percent) | 2.00% | 2.00% | ||||||||||||
ABL Facility | LIBOR | ||||||||||||||
Debt Instruments | ||||||||||||||
Applicable margin (as a percent) | 3.00% | |||||||||||||
ABL Facility Amended August 2015 | ||||||||||||||
Debt Instruments | ||||||||||||||
Amount of increase (decrease) in available credit facility due to amendment | $ 10,000 | |||||||||||||
Maximum borrowing capacity | 185,000 | |||||||||||||
Amendment fees | $ 500 | |||||||||||||
ABL Facility Amended April 2016 | ||||||||||||||
Debt Instruments | ||||||||||||||
Amount of increase (decrease) in available credit facility due to amendment | $ (25,000) | |||||||||||||
Maximum borrowing capacity | $ 160,000 | |||||||||||||
Loss on extinguishment of debt | $ 300 | |||||||||||||
Additional debt issuance costs | $ 4,700 | |||||||||||||
Maturity period prior to First Lien Term Loan Facility maturity date | 90 days | |||||||||||||
Maturity period prior to Senior Notes maturity date | 90 days | |||||||||||||
Minimum period after the maturity date of the credit facility that other refinanced debt obligations maturity date must exceed | 180 days | |||||||||||||
Decrease in applicable margin upon refinancing of debt (as a percent) | 0.50% | |||||||||||||
Maximum borrowing capacity of letters of credit | $ 45,000 | $ 50,000 | ||||||||||||
ABL Facility Amended April 2016 | Revolving Credit Facility | ||||||||||||||
Debt Instruments | ||||||||||||||
Increase in borrowing capacity available under certain circumstances | $ 25,000 | $ 50,000 | ||||||||||||
ABL Facility Amended April 2016 | Base rate | ||||||||||||||
Debt Instruments | ||||||||||||||
Applicable margin (as a percent) | 2.00% | |||||||||||||
ABL Facility Amended April 2016 | Eurocurrency loan | ||||||||||||||
Debt Instruments | ||||||||||||||
Applicable margin (as a percent) | 3.00% | |||||||||||||
First Lien Term Loan Facility | ||||||||||||||
Debt | ||||||||||||||
Debt | $ 592,157 | $ 592,157 | 595,726 | |||||||||||
Scheduled quarterly payments | 1,535 | |||||||||||||
Unamortized OID | $ 3,240 | $ 3,240 | 4,724 | |||||||||||
Debt Instruments | ||||||||||||||
Amount borrowed | $ 525,000 | |||||||||||||
Interest rate at the end of the period (as a percent) | 4.50% | 4.50% | ||||||||||||
Percentage of excess cash flow to be used for prepayment of debt | 50.00% | |||||||||||||
Step down percentage one of excess cash flow to be used for prepayment of debt | 25.00% | |||||||||||||
Stepdown percentage two of excess cash flow to be used for prepayment of debt (as a percent) | 0.00% | |||||||||||||
Excess cash flow payment required | 0 | |||||||||||||
Amount outstanding | $ 595,400 | $ 595,400 | ||||||||||||
Scheduled quarterly payments as a percentage of original principal amount | 0.25% | |||||||||||||
Significant components of interest expense | ||||||||||||||
Interest debt expense | 6,785 | 7,230 | 20,921 | 21,735 | ||||||||||
First Lien Term Loan Facility | Long term debt | ||||||||||||||
Debt | ||||||||||||||
Deferred financing costs | $ 3,326 | $ 3,326 | 4,387 | |||||||||||
First Lien Term Loan Facility | Base rate | ||||||||||||||
Debt Instruments | ||||||||||||||
Applicable margin (as a percent) | 4.50% | |||||||||||||
First Lien Term Loan Facility | Federal funds rate | ||||||||||||||
Debt Instruments | ||||||||||||||
Applicable margin (as a percent) | 0.50% | |||||||||||||
First Lien Term Loan Facility | One month adjusted Eurocurrency rate | ||||||||||||||
Debt Instruments | ||||||||||||||
Applicable margin (as a percent) | 1.00% | |||||||||||||
First Lien Term Loan Facility | LIBOR | ||||||||||||||
Debt Instruments | ||||||||||||||
Applicable margin (as a percent) | 5.50% | |||||||||||||
Interest rate, variable interest rate floor (as a percent) | 1.50% | |||||||||||||
First Lien Term Loan Facility | Prime rate | ||||||||||||||
Debt Instruments | ||||||||||||||
Variable rate (as a percent) | 3.50% | |||||||||||||
Eurocurrency loans | Eurocurrency loan | ||||||||||||||
Debt Instruments | ||||||||||||||
Variable rate at the end of the period (as a percent) | 1.00% | 1.00% | ||||||||||||
Applicable margin at the end of the period (as a percent) | 3.50% | 3.50% | ||||||||||||
Senior Notes | ||||||||||||||
Debt | ||||||||||||||
Debt | $ 250,000 | $ 250,000 | 250,000 | $ 250,000 | ||||||||||
Debt Instruments | ||||||||||||||
Interest rate (as a percent) | 11.00% | |||||||||||||
Significant components of interest expense | ||||||||||||||
Interest debt expense | 6,875 | $ 6,875 | 20,625 | $ 20,701 | ||||||||||
Senior Notes | Long term debt | ||||||||||||||
Debt | ||||||||||||||
Deferred financing costs | $ 6,111 | $ 6,111 | $ 7,158 | |||||||||||
First Lien Term Loan Facility Amended April 2012 | ||||||||||||||
Debt Instruments | ||||||||||||||
Refinancing costs | $ 11,200 | |||||||||||||
First Lien Term Loan Facility Amended April 2012 | Base rate | ||||||||||||||
Debt Instruments | ||||||||||||||
Applicable margin (as a percent) | 3.00% | |||||||||||||
First Lien Term Loan Facility Amended April 2012 | LIBOR | ||||||||||||||
Debt Instruments | ||||||||||||||
Applicable margin (as a percent) | 4.00% | |||||||||||||
Interest rate, variable interest rate floor (as a percent) | 1.25% | |||||||||||||
First Lien Term Loan Facility Amended October 2013 | ||||||||||||||
Debt | ||||||||||||||
Scheduled quarterly payments | $ 1,500 | |||||||||||||
Debt Instruments | ||||||||||||||
Amount borrowed | 100,000 | |||||||||||||
Increase in borrowing capacity available under certain circumstances | $ 100,000 | |||||||||||||
Percentage of positive consolidated net income to determine a restricted payment under terms of debt instruments | 50.00% | |||||||||||||
Percentage of negative consolidated net income to determine a restricted payment under terms of debt instruments | 100.00% | |||||||||||||
Amount used to determine dividend and other payments | $ 20,000 | |||||||||||||
Scheduled quarterly payments as a percentage of original principal amount | 0.25% | |||||||||||||
First Lien Term Loan Facility Amended October 2013 | Base rate | ||||||||||||||
Debt Instruments | ||||||||||||||
Applicable margin (as a percent) | 2.50% | |||||||||||||
First Lien Term Loan Facility Amended October 2013 | LIBOR | ||||||||||||||
Debt Instruments | ||||||||||||||
Applicable margin (as a percent) | 3.50% | |||||||||||||
Interest rate, variable interest rate floor (as a percent) | 1.00% | |||||||||||||
99 Cents Only Stores Texas, Inc. | ||||||||||||||
Debt Instruments | ||||||||||||||
Ownership percentage in subsidiary | 100.00% | 100.00% |
Derivative Financial Instrume41
Derivative Financial Instruments (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Oct. 28, 2016 | Oct. 30, 2015 | Oct. 28, 2016 | Oct. 30, 2015 | Jan. 29, 2016 | May 31, 2012 | |
Derivatives not designated as hedging instruments | Chief Executive Officer | ||||||
Derivative Financial Instruments | ||||||
Payment period | 4 years | |||||
Derivatives not designated as hedging instruments | Maximum | Chief Executive Officer | ||||||
Derivative Financial Instruments | ||||||
Derivative liabilities | $ 5,000 | $ 5,000 | ||||
Derivatives not designated as hedging instruments | Selling, general and administrative expenses | ||||||
Recorded amounts included in the consolidated statements of comprehensive income (loss) | ||||||
Loss recognized in selling, general and administrative expenses | $ 253 | $ 713 | 1,787 | $ 713 | ||
Derivatives designated as cash flow hedging instruments | OCI | ||||||
Recorded amounts included in the consolidated statements of comprehensive income (loss) | ||||||
Loss related to effective portion of derivative recognized in OCI | 192 | 168 | 333 | |||
Derivatives designated as cash flow hedging instruments | Interest expense. | ||||||
Recorded amounts included in the consolidated statements of comprehensive income (loss) | ||||||
Loss related to effective portion of derivatives reclassified from AOCI to interest expense | 724 | 330 | 1,207 | |||
(Loss) gain related to ineffective portion of derivative recognized in interest expense | $ (27) | $ 36 | $ (88) | |||
Interest Rate Swap | Derivatives designated as cash flow hedging instruments | ||||||
Derivative Financial Instruments | ||||||
Aggregate notional amount | $ 261,800 | |||||
Effective fixed interest rate (as a percent) | 1.36% | 1.36% | ||||
Applicable margin (as a percent) | 3.50% | 3.50% | ||||
Interest Rate Swap | Derivatives designated as cash flow hedging instruments | other current liabilities | ||||||
Fair Value | ||||||
Derivative liabilities | $ 569 | |||||
Interest Rate Swap | Derivatives designated as cash flow hedging instruments | Accumulated other comprehensive loss | ||||||
Fair Value | ||||||
Derivative liabilities | 162 | |||||
Transition Payments | Derivatives not designated as hedging instruments | other current liabilities | ||||||
Fair Value | ||||||
Derivative liabilities | $ 934 | $ 934 | 1,033 | |||
Transition Payments | Derivatives not designated as hedging instruments | other long-term liabilities | ||||||
Fair Value | ||||||
Derivative liabilities | $ 146 | $ 146 | $ 172 |
Fair Value of Financial Instr42
Fair Value of Financial Instruments - Fair Value Hierarchy (Details) - USD ($) $ in Thousands | Oct. 28, 2016 | Jan. 29, 2016 |
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Transfers, Net [Abstract] | ||
Transfer of assets from level 1 to 2 | $ 0 | |
Transfer of assets from level 2 to 1 | 0 | |
Transfer of liabilities from level 1 to 2 | 0 | |
Transfer of liabilities from level 2 to 1 | 0 | |
Level 2 | ||
Fair value of financial instruments | ||
Assets | 0 | |
Liabilities | 0 | |
Fair value measurements on a recurring basis | ||
ASSETS | ||
Other assets - assets that fund deferred compensation | 773 | $ 709 |
LIABILITIES | ||
Other long-term liabilities - deferred compensation | 773 | 709 |
Fair value measurements on a recurring basis | Interest Rate Swap | ||
LIABILITIES | ||
Other current liabilities | 569 | |
Fair value measurements on a recurring basis | Transition Payments | ||
LIABILITIES | ||
Other current liabilities | 934 | 1,033 |
Other long-term liabilities | 146 | 172 |
Fair value measurements on a recurring basis | Level 1 | ||
ASSETS | ||
Other assets - assets that fund deferred compensation | 773 | 709 |
LIABILITIES | ||
Other long-term liabilities - deferred compensation | 773 | 709 |
Fair value measurements on a recurring basis | Level 2 | Interest Rate Swap | ||
LIABILITIES | ||
Other current liabilities | 569 | |
Fair value measurements on a recurring basis | Level 3 | Transition Payments | ||
LIABILITIES | ||
Other current liabilities | 934 | 1,033 |
Other long-term liabilities | $ 146 | $ 172 |
Fair Value of Financial Instr43
Fair Value of Financial Instruments - Change in level 3 investments (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 28, 2016 | Oct. 30, 2015 | Oct. 28, 2016 | Oct. 30, 2015 | |
Fair Value Measurements Using Significant Unobservable Inputs | ||||
Beginning balance | $ (827) | $ (1,205) | ||
Total realized/unrealized loss: | ||||
Included in earnings | (253) | $ (713) | (1,787) | $ (713) |
Purchases, redemptions and settlements: | ||||
Settlements | 1,912 | |||
Ending balance | (1,080) | (713) | (1,080) | (713) |
Total amount of unrealized losses for the period included in earnings relating to liabilities held at the reporting period | $ (253) | $ (713) | $ (817) | $ (713) |
Fair Value of Financial Instr44
Fair Value of Financial Instruments - Estimated Fair Value and Fair Value Adjustment (Details) - Level 1 - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended |
Jan. 29, 2016 | Oct. 28, 2016 | |
Senior Notes | ||
Fair value of financial instruments | ||
Estimated fair value of debt instrument | $ 103.1 | $ 148.1 |
Fair value adjustment to liability incurred or settled | (146.9) | (101.9) |
First Lien Term Loan Facility | ||
Fair value of financial instruments | ||
Estimated fair value of debt instrument | 393 | 467.4 |
Fair value adjustment to liability incurred or settled | $ (207) | $ (128) |
Fair Value of Financial Instr45
Fair Value of Financial Instruments - Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |
Oct. 28, 2016USD ($)store | Oct. 28, 2016USD ($)store | Oct. 30, 2015USD ($) | |
Assets and liabilities that are measured at fair value on a nonrecurring basis | |||
Asset impairment | $ 491 | $ 509 | |
Held-for-sale | |||
Assets and liabilities that are measured at fair value on a nonrecurring basis | |||
Asset impairment | $ 200 | ||
Level 2 | Held-for-sale | |||
Assets and liabilities that are measured at fair value on a nonrecurring basis | |||
Carrying value of property held for sale | 1,700 | 1,700 | |
Fair value of assets held for sale after impairment | 1,500 | $ 1,500 | |
Nonrecurring | Stores | |||
Assets and liabilities that are measured at fair value on a nonrecurring basis | |||
Asset impairment | $ 100 | ||
Number of stores impaired | store | 3 | 3 | |
Fair value of assets after impairment | $ 100 | $ 100 | |
Nonrecurring | Fixtures | |||
Assets and liabilities that are measured at fair value on a nonrecurring basis | |||
Asset impairment | 100 | ||
Fair value of assets after impairment | $ 0 | $ 0 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) $ / shares in Units, $ in Thousands | Jul. 26, 2016$ / sharesshares | Oct. 30, 2015shares | Oct. 02, 2015item$ / sharesshares | Oct. 28, 2016USD ($)$ / sharesshares | Jul. 29, 2016USD ($)$ / shares | Jan. 29, 2016$ / sharesshares | Oct. 30, 2015USD ($) | Oct. 28, 2016USD ($)$ / sharesshares | Oct. 30, 2015USD ($) | Oct. 28, 2016$ / sharesshares | Feb. 27, 2012shares |
Stock awards available for grant under the 2012 Plan | |||||||||||
Total incremental compensation expense | $ | $ 200 | $ 543 | $ 1,456 | ||||||||
Maximum | |||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Total incremental compensation expense | $ | $ 100 | ||||||||||
2012 Plan | |||||||||||
Stock-based compensation | |||||||||||
Granted (in shares) | 30,240 | ||||||||||
Number of Shares | |||||||||||
Granted (in shares) | 30,240 | ||||||||||
Cancelled (in shares) | (17,670) | ||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Available for grant at the beginning of the period (in shares) | 14,725 | ||||||||||
Authorized (in shares) | 2,500 | ||||||||||
Granted (in shares) | (30,240) | ||||||||||
Cancelled (in shares) | 17,670 | ||||||||||
Available for grant at the end of the period (in shares) | 4,655 | 14,725 | 4,655 | ||||||||
Class A Common Stock | 2012 Plan | Number Holdings, Inc. | |||||||||||
Stock-based compensation | |||||||||||
Number of shares authorized under the plan | 87,500 | 85,000 | |||||||||
Class B Common Stock | 2012 Plan | Number Holdings, Inc. | |||||||||||
Stock-based compensation | |||||||||||
Number of shares authorized under the plan | 87,500 | 85,000 | |||||||||
Employee Option Grants | |||||||||||
Stock-based compensation | |||||||||||
Expiration term | 10 years | ||||||||||
Employee Option Grants | Options vesting on the achievement of performance | |||||||||||
Stock-based compensation | |||||||||||
Options outstanding (in shares) | 18,009 | 18,009 | 18,009 | ||||||||
Expiration term | 10 years | ||||||||||
Number of Shares | |||||||||||
Outstanding at the end of the period (in shares) | 18,009 | 18,009 | |||||||||
Employee Option Grants | Time-based service options | |||||||||||
Stock-based compensation | |||||||||||
Options outstanding subject to repurchase rights (in shares) | 21,896 | ||||||||||
Employee Option Grants | Maximum | |||||||||||
Stock-based compensation | |||||||||||
Vesting period | 5 years | ||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Vesting period | 5 years | ||||||||||
Employee Option Grants | Minimum | |||||||||||
Stock-based compensation | |||||||||||
Vesting period | 4 years | ||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Vesting period | 4 years | ||||||||||
Employee Option Grants | Number Holdings, Inc. | |||||||||||
Stock-based compensation | |||||||||||
Options outstanding (in shares) | 82,155 | 69,585 | 69,585 | 82,155 | |||||||
Granted (in shares) | 30,240 | ||||||||||
Number of Shares | |||||||||||
Options outstanding at the beginning of the period (in shares) | 69,585 | ||||||||||
Granted (in shares) | 30,240 | ||||||||||
Cancelled (in shares) | (17,670) | ||||||||||
Outstanding at the end of the period (in shares) | 82,155 | 69,585 | 82,155 | ||||||||
Exercisable at the end of the period (in shares) | 14,470 | ||||||||||
Weighted Average Exercise Price | |||||||||||
Options outstanding at the beginning of the period (in dollars per share) | $ / shares | $ 910 | ||||||||||
Granted (in dollars per share) | $ / shares | 757 | ||||||||||
Cancelled (in dollars per share) | $ / shares | 1,184 | ||||||||||
Outstanding at the end of the period (in dollars per share) | $ / shares | $ 800 | $ 910 | $ 800 | ||||||||
Exercisable at the end of the period (in dollars per share) | $ / shares | $ 788 | ||||||||||
Weighted Average Remaining Contractual Life | |||||||||||
Outstanding at the end of the period | 9 years 2 months 12 days | ||||||||||
Exercisable at the end of the period | 9 years 3 months 18 days | ||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Options cancelled in exchange for options with new terms | 15,815 | ||||||||||
Granted (in shares) | (30,240) | ||||||||||
Cancelled (in shares) | 17,670 | ||||||||||
Employee Option Grants | Number Holdings, Inc. | Options vesting on the achievement of performance | |||||||||||
Stock-based compensation | |||||||||||
Granted (in shares) | 13,146 | ||||||||||
Number of Shares | |||||||||||
Granted (in shares) | 13,146 | ||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Granted (in shares) | (13,146) | ||||||||||
Employee Option Grants | Board Members | |||||||||||
Stock-based compensation | |||||||||||
Expiration term | 10 years | ||||||||||
Employee Option Grants | Board Members | Tranche One Member | |||||||||||
Stock-based compensation | |||||||||||
Vesting period | 3 years | ||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Vesting period | 3 years | ||||||||||
Employee Option Grants | Board Members | Tranche Two Member | |||||||||||
Stock-based compensation | |||||||||||
Vesting period | 4 years | ||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Vesting period | 4 years | ||||||||||
Employee Option Grants | Board Members | Tranche Three Member | |||||||||||
Stock-based compensation | |||||||||||
Vesting period | 5 years | ||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Vesting period | 5 years | ||||||||||
Employee Option Grants | Chief Merchandising Officer Member | Options vesting on the achievement of performance | |||||||||||
Stock-based compensation | |||||||||||
Granted (in shares) | 5,000 | ||||||||||
Number of Shares | |||||||||||
Granted (in shares) | 5,000 | ||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Granted (in shares) | (5,000) | ||||||||||
Employee Option Grants | Felicia Thornton | |||||||||||
Stock-based compensation | |||||||||||
Vesting percentage | 50.00% | ||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Vesting percentage | 50.00% | ||||||||||
Employee Option Grants | Felicia Thornton | Options vesting on the achievement of performance | |||||||||||
Stock-based compensation | |||||||||||
Vesting percentage | 50.00% | ||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Vesting percentage | 50.00% | ||||||||||
Employee Option Grants | Felicia Thornton | Number Holdings, Inc. | Time-based service options | |||||||||||
Stock-based compensation | |||||||||||
Vesting period | 4 years | ||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Vesting period | 4 years | ||||||||||
Employee Option Grants | 2012 Plan | Number Holdings, Inc. | |||||||||||
Stock-based compensation | |||||||||||
Period of rights repurchases after the date of participant's termination of employment | 180 days | ||||||||||
Period of rights repurchases from the latest date that an option can be exercised | 90 days | ||||||||||
Employee Option Grants | 2012 Plan | Chief Executive Officer | |||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Number of grants issued | item | 2 | ||||||||||
Employee Option Grants | Class A Common Stock | Employees, Management and Directors | Number Holdings, Inc. | |||||||||||
Stock-based compensation | |||||||||||
Options outstanding (in shares) | 82,155 | 82,155 | 82,155 | ||||||||
Number of Shares | |||||||||||
Outstanding at the end of the period (in shares) | 82,155 | 82,155 | |||||||||
Employee Option Grants | Class B Common Stock | Employees, Management and Directors | Number Holdings, Inc. | |||||||||||
Stock-based compensation | |||||||||||
Options outstanding (in shares) | 82,155 | 82,155 | 82,155 | ||||||||
Number of Shares | |||||||||||
Outstanding at the end of the period (in shares) | 82,155 | 82,155 | |||||||||
Employee Option Grants | Class A and Class B Common Stock | Employees | |||||||||||
Number of Shares | |||||||||||
Cancelled (in shares) | (15,555) | (260) | |||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Exercise price of options (in dollars per share) | $ / shares | $ 757 | ||||||||||
Minimum exercise price of options cancelled (in dollars per share) | $ / shares | $ 757 | $ 757 | |||||||||
Exercise price of reissued options (in dollars per share) | $ / shares | $ 757 | 757 | |||||||||
Vesting period of reissued options | 5 years | ||||||||||
Cancelled (in shares) | 15,555 | 260 | |||||||||
Term of reissued options | 10 years | ||||||||||
Employee Option Grants | Class A and Class B Common Stock | Board Members | |||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Number of options amended | 1,000 | ||||||||||
Minimum exercise price of options amended (in dollars per share) | $ / shares | $ 757 | ||||||||||
Exercise price of amended options (in dollars per share) | $ / shares | 757 | ||||||||||
Employee Option Grants | Class A and Class B Common Stock | Board Members | Maximum | |||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Total incremental compensation expense | $ | $ 100 | ||||||||||
Employee Option Grants | Class A and Class B Common Stock | Felicia Thornton | Number Holdings, Inc. | |||||||||||
Stock-based compensation | |||||||||||
Granted (in shares) | 10,000 | ||||||||||
Number of Shares | |||||||||||
Granted (in shares) | 10,000 | ||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Granted (in shares) | (10,000) | ||||||||||
Employee Option Grants | Class A and Class B Common Stock | 2012 Plan | Chief Executive Officer | Exercise price 1 | |||||||||||
Stock-based compensation | |||||||||||
Granted (in shares) | 15,500 | ||||||||||
Number of Shares | |||||||||||
Granted (in shares) | 15,500 | ||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Exercise price of options (in dollars per share) | $ / shares | $ 1,000 | ||||||||||
Granted (in shares) | (15,500) | ||||||||||
Employee Option Grants | Class A and Class B Common Stock | 2012 Plan | Chief Executive Officer | Exercise price 2 | |||||||||||
Stock-based compensation | |||||||||||
Granted (in shares) | 15,500 | ||||||||||
Number of Shares | |||||||||||
Granted (in shares) | 15,500 | ||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Granted (in shares) | (15,500) | ||||||||||
Employee Option Grants | Class A and Class B Common Stock | 2012 Plan | Chief Executive Officer | Options vesting on the achievement of performance | |||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Exercise price of options (in dollars per share) | $ / shares | $ 1,000 | $ 1,000 | |||||||||
Employee Option Grants | Class A and Class B Common Stock | 2012 Plan | Chief Executive Officer | Options vesting on the achievement of performance | Exercise price 1 | |||||||||||
Stock-based compensation | |||||||||||
Vesting percentage | 50.00% | ||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Vesting percentage | 50.00% | ||||||||||
Employee Option Grants | Class A and Class B Common Stock | 2012 Plan | Chief Executive Officer | Options vesting on the achievement of performance | Exercise price 2 | |||||||||||
Stock-based compensation | |||||||||||
Vesting percentage | 50.00% | ||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Vesting percentage | 50.00% | ||||||||||
Employee Option Grants | Class A and Class B Common Stock | 2012 Plan | Chief Executive Officer | Time-based service options | Exercise price 1 | |||||||||||
Stock-based compensation | |||||||||||
Vesting period | 4 years | ||||||||||
Vesting percentage | 50.00% | ||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Vesting percentage | 50.00% | ||||||||||
Vesting period | 4 years | ||||||||||
Employee Option Grants | Class A and Class B Common Stock | 2012 Plan | Chief Executive Officer | Time-based service options | Exercise price 2 | |||||||||||
Stock-based compensation | |||||||||||
Vesting period | 4 years | ||||||||||
Vesting percentage | 50.00% | ||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Vesting percentage | 50.00% | ||||||||||
Vesting period | 4 years | ||||||||||
Employee Option Grants | Class A and Class B Common Stock | 2012 Plan | Chief Executive Officer | Minimum | Exercise price 2 | |||||||||||
Stock awards available for grant under the 2012 Plan | |||||||||||
Exercise price of options (in dollars per share) | $ / shares | $ 750 | ||||||||||
Fair value base for exercise price adjustment (in dollars per share) | $ / shares | $ 1,000 |
Related-Party Transactions (Det
Related-Party Transactions (Details) - Ares and CPPIB - USD ($) $ in Millions | Oct. 28, 2016 | Jan. 29, 2016 |
First Lien Term Loan Facility Amended October 2013 | ||
Related-Party Transactions | ||
Debt owned by affiliate | $ 130.9 | |
Senior Notes | ||
Related-Party Transactions | ||
Debt owned by affiliate | $ 102.1 | $ 102.1 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2015 | Oct. 28, 2016 | Oct. 30, 2015 | Jan. 29, 2016 | |
Difference between the provision for income taxes and income taxes at the statutory federal income tax rate, tax rate reconciliation | ||||
Effective income tax rate (as a percent) | (0.20%) | (16.50%) | ||
DEFERRED TAX ASSETS | ||||
Increase in provision for income tax | $ 31.7 | |||
Valuation Allowance | $ 81.8 |
Commitments and Contingencies (
Commitments and Contingencies (Details) | Jul. 26, 2016USD ($)item | Jul. 06, 2016USD ($) | Jun. 29, 2015USD ($) | Oct. 28, 2016USD ($) | Oct. 30, 2015USD ($) | Mar. 30, 2016item | Jan. 29, 2016USD ($) |
Commitments and contingencies | |||||||
Estimated workers' compensation claims | $ 75,542,000 | $ 76,389,000 | |||||
Net proceeds from sale-leaseback transactions | 41,993,000 | $ 8,666,000 | |||||
Warehouse | |||||||
Commitments and contingencies | |||||||
Carrying value of warehouse facility | $ 12,100,000 | ||||||
Net proceeds from sale-leaseback transactions | 28,500,000 | ||||||
Escrow deposit amount | $ 1,000,000 | ||||||
Maximum period within which repairs will be completed | 18 months | ||||||
Finance lease obligation | 29,100,000 | ||||||
Mid-Term Cash Incentive Plan | |||||||
Commitments and contingencies | |||||||
Percentage of participant's award eligible for payment based on initial EBITDA achievement | 50.00% | ||||||
Amount paid under the incentive plan | $ 0 | ||||||
Percentage of participant's award eligible for payment based on subsequent EBITDA achievement | 50.00% | ||||||
Amount accrued under the incentive plan | 3,000,000 | ||||||
Mid-Term Cash Incentive Plan | Maximum | |||||||
Commitments and contingencies | |||||||
Maximum payout under the incentive plan | 22,500,000 | ||||||
Special bonus letters | |||||||
Commitments and contingencies | |||||||
Number of executives approved for special bonus | item | 3 | ||||||
Number of days within which executives eligible to receive special bonus after the refinancing transaction | 30 days | ||||||
Total amount of special bonus to be earned by the executives | $ 4,000,000 | ||||||
Amount accrued under the special bonus | 0 | ||||||
Phillip Clavel v. 99 Cents Only Stores | |||||||
Commitments and contingencies | |||||||
Number of periods of employment | item | 2 | ||||||
Wage and Hour Matters | Shelley Pickett v. 99 Cents Only Stores | Minimum | |||||||
Commitments and contingencies | |||||||
Civil penalties per violation, per each pay period for each affected employee | 100 | ||||||
Wage and Hour Matters | Shelley Pickett v. 99 Cents Only Stores | Maximum | |||||||
Commitments and contingencies | |||||||
Civil penalties per violation, per each pay period for each affected employee | 200 | ||||||
Health Insurance | |||||||
Commitments and contingencies | |||||||
Self Insured Health Insurance Liability | 400,000 | 400,000 | |||||
Environmental Matters | |||||||
Commitments and contingencies | |||||||
Amount demanded by District Attorney | $ 187,500 | ||||||
California | Workers' Compensation | |||||||
Commitments and contingencies | |||||||
Estimated workers' compensation claims | 75,500,000 | 76,300,000 | |||||
Texas | Workers' Compensation | |||||||
Commitments and contingencies | |||||||
Estimated workers' compensation claims | $ 100,000 | $ 100,000 |
Assets Held for Sale (Details)
Assets Held for Sale (Details) - USD ($) $ in Thousands | Oct. 28, 2016 | Jan. 29, 2016 |
Assets held for sale | ||
Carrying value of land held for sale | $ 4,903 | $ 2,308 |
Rancho Mirage land and Bullhead land | Held for sale | ||
Assets held for sale | ||
Carrying value of land held for sale | $ 2,300 | |
Rancho Mirage land, Bullhead land and Las Angeles land | Held for sale | ||
Assets held for sale | ||
Carrying value of land held for sale | $ 4,900 |
Other Accrued Expenses (Details
Other Accrued Expenses (Details) - USD ($) $ in Thousands | Oct. 28, 2016 | Jan. 29, 2016 |
Other accrued expenses | ||
Accrued interest | $ 13,862 | $ 6,875 |
Accrued occupancy costs | 13,195 | 9,489 |
Accrued legal reserves and fees | 9,031 | 8,371 |
Accrued interest swap | 569 | |
Accrued California Redemption Value | 2,488 | 2,225 |
Accrued transportation | 4,606 | 3,508 |
Other | 11,062 | 8,483 |
Total other accrued expenses | $ 54,244 | $ 39,520 |
New Authoritative Standards (De
New Authoritative Standards (Details) - USD ($) $ in Thousands | Oct. 28, 2016 | Jan. 29, 2016 |
New Authoritative Standards | ||
Deferred financing costs, net | $ 3,992 | $ 916 |
Long-term debt, net of current portion | 868,382 | 875,843 |
Long-term deferred income tax liabilities | $ 163,045 | 163,045 |
ASU 2015-03 | Retrospective adjustment | ||
New Authoritative Standards | ||
Deferred financing costs, net | (11,500) | |
Long-term debt, net of current portion | (11,500) | |
ASU 2015-17 | Retrospective adjustment | ||
New Authoritative Standards | ||
Current deferred income tax assets | (16,600) | |
Long-term deferred income tax liabilities | $ (16,600) |
Financial Guarantees - Balance
Financial Guarantees - Balance Sheets (Details) - USD ($) $ in Thousands | Oct. 28, 2016 | Jan. 29, 2016 | Oct. 30, 2015 | Jan. 30, 2015 | Dec. 29, 2011 |
Current Assets: | |||||
Cash | $ 2,426 | $ 2,312 | $ 2,585 | $ 12,463 | |
Accounts receivable, net | 3,142 | 1,674 | |||
Income taxes receivable | 2,235 | 3,665 | |||
Inventories, net | 188,380 | 196,651 | |||
Assets held for sale | 4,903 | 2,308 | |||
Other | 11,293 | 18,570 | |||
Total current assets | 212,379 | 225,180 | |||
Property and equipment, net | 522,002 | 542,570 | |||
Deferred financing costs, net | 3,992 | 916 | |||
Intangible assets, net | 448,830 | 453,242 | |||
Goodwill | 387,772 | 387,772 | |||
Deposits and other assets | 8,384 | 7,352 | |||
Total assets | 1,583,359 | 1,617,032 | |||
Current Liabilities: | |||||
Accounts payable | 88,049 | 79,197 | |||
Payroll and payroll-related | 22,034 | 18,421 | |||
Sales tax | 15,002 | 13,314 | |||
Other accrued expenses | 54,244 | 39,520 | |||
Workers' compensation | 75,542 | 76,389 | |||
Current portion of long-term debt | 6,138 | 6,138 | |||
Current portion of capital and financing lease obligation | 30,251 | 989 | |||
Total current liabilities | 291,260 | 233,968 | |||
Long-term debt, net of current portion | 868,382 | 875,843 | |||
Unfavorable lease commitments, net | 4,426 | 5,746 | |||
Deferred rent | 29,717 | 29,333 | |||
Deferred compensation liability | 774 | 709 | |||
Capital and financing lease obligation, net of current portion | 46,856 | 34,817 | |||
Deferred income taxes | 163,045 | 163,045 | |||
Other liabilities | 7,011 | 5,118 | |||
Total liabilities | 1,411,471 | 1,348,579 | |||
Member's Equity | |||||
Member units | 550,769 | 550,226 | |||
Investment in Number Holdings, Inc. preferred stock | (19,200) | (19,200) | |||
Accumulated deficit | (359,681) | (262,411) | |||
Other comprehensive loss | (162) | ||||
Total equity | 171,888 | 268,453 | |||
Total liabilities and equity | 1,583,359 | 1,617,032 | |||
Consolidating Adjustments | |||||
Current Assets: | |||||
Equity investments and advances to subsidiaries | (1,369,014) | (1,134,283) | |||
Total assets | (1,369,014) | (1,134,283) | |||
Current Liabilities: | |||||
Intercompany payable | (1,321,347) | (1,076,160) | |||
Total current liabilities | (1,321,347) | (1,076,160) | |||
Total liabilities | (1,321,347) | (1,076,160) | |||
Member's Equity | |||||
Member units | (1) | (1) | |||
Additional paid-in capital | (99,943) | (99,943) | |||
Accumulated deficit | 52,277 | 41,821 | |||
Total equity | (47,667) | (58,123) | |||
Total liabilities and equity | (1,369,014) | (1,134,283) | |||
Issuer | |||||
Current Assets: | |||||
Cash | 1,263 | 1,266 | 1,303 | 11,333 | |
Accounts receivable, net | 3,083 | 1,568 | |||
Income taxes receivable | 2,244 | 3,665 | |||
Inventories, net | 163,157 | 171,691 | |||
Assets held for sale | 4,903 | 2,308 | |||
Other | 10,702 | 17,279 | |||
Total current assets | 185,352 | 197,777 | |||
Property and equipment, net | 468,446 | 484,764 | |||
Deferred financing costs, net | 3,992 | 916 | |||
Equity investments and advances to subsidiaries | 717,928 | 604,542 | |||
Intangible assets, net | 447,037 | 451,245 | |||
Goodwill | 387,772 | 387,772 | |||
Deposits and other assets | 8,027 | 6,949 | |||
Total assets | 2,218,554 | 2,133,965 | |||
Current Liabilities: | |||||
Accounts payable | 82,321 | 74,313 | |||
Intercompany payable | 649,684 | 528,767 | |||
Payroll and payroll-related | 20,576 | 17,024 | |||
Sales tax | 14,393 | 12,801 | |||
Other accrued expenses | 49,924 | 37,019 | |||
Workers' compensation | 75,467 | 76,314 | |||
Current portion of long-term debt | 6,138 | 6,138 | |||
Current portion of capital and financing lease obligation | 30,251 | 989 | |||
Total current liabilities | 928,754 | 753,365 | |||
Long-term debt, net of current portion | 868,382 | 875,843 | |||
Unfavorable lease commitments, net | 4,404 | 5,702 | |||
Deferred rent | 27,440 | 26,913 | |||
Deferred compensation liability | 774 | 709 | |||
Capital and financing lease obligation, net of current portion | 46,856 | 34,817 | |||
Deferred income taxes | 163,045 | 163,045 | |||
Other liabilities | 7,011 | 5,118 | |||
Total liabilities | 2,046,666 | 1,865,512 | |||
Member's Equity | |||||
Member units | 550,769 | 550,226 | |||
Investment in Number Holdings, Inc. preferred stock | (19,200) | (19,200) | |||
Accumulated deficit | (359,681) | (262,411) | |||
Other comprehensive loss | (162) | ||||
Total equity | 171,888 | 268,453 | |||
Total liabilities and equity | 2,218,554 | 2,133,965 | |||
Issuer | Senior Notes | Predecessor | |||||
Supplemental financial information | |||||
Principal amount of debt instrument issued | $ 250,000 | ||||
Subsidiary Guarantors | |||||
Current Assets: | |||||
Cash | 1,130 | 1,009 | 1,246 | 1,097 | |
Accounts receivable, net | 59 | 106 | |||
Income taxes receivable | (9) | ||||
Inventories, net | 25,223 | 24,960 | |||
Other | 578 | 1,278 | |||
Total current assets | 26,981 | 27,353 | |||
Property and equipment, net | 53,535 | 57,780 | |||
Equity investments and advances to subsidiaries | 648,186 | 527,905 | |||
Intangible assets, net | 1,793 | 1,997 | |||
Deposits and other assets | 343 | 395 | |||
Total assets | 730,838 | 615,430 | |||
Current Liabilities: | |||||
Accounts payable | 5,728 | 4,884 | |||
Intercompany payable | 668,622 | 545,012 | |||
Payroll and payroll-related | 1,458 | 1,397 | |||
Sales tax | 609 | 513 | |||
Other accrued expenses | 4,301 | 2,477 | |||
Workers' compensation | 75 | 75 | |||
Total current liabilities | 680,793 | 554,358 | |||
Unfavorable lease commitments, net | 22 | 44 | |||
Deferred rent | 2,272 | 2,409 | |||
Total liabilities | 683,087 | 556,811 | |||
Member's Equity | |||||
Additional paid-in capital | 99,943 | 99,943 | |||
Accumulated deficit | (52,192) | (41,324) | |||
Total equity | 47,751 | 58,619 | |||
Total liabilities and equity | 730,838 | 615,430 | |||
Non-Guarantor Subsidiaries | |||||
Current Assets: | |||||
Cash | 33 | 37 | $ 36 | $ 33 | |
Other | 13 | 13 | |||
Total current assets | 46 | 50 | |||
Property and equipment, net | 21 | 26 | |||
Equity investments and advances to subsidiaries | 2,900 | 1,836 | |||
Deposits and other assets | 14 | 8 | |||
Total assets | 2,981 | 1,920 | |||
Current Liabilities: | |||||
Intercompany payable | 3,041 | 2,381 | |||
Other accrued expenses | 19 | 24 | |||
Total current liabilities | 3,060 | 2,405 | |||
Deferred rent | 5 | 11 | |||
Total liabilities | 3,065 | 2,416 | |||
Member's Equity | |||||
Member units | 1 | 1 | |||
Accumulated deficit | (85) | (497) | |||
Total equity | (84) | (496) | |||
Total liabilities and equity | $ 2,981 | $ 1,920 |
Financial Guarantees - Statemen
Financial Guarantees - Statements of Comprehensive Income (Loss) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Oct. 28, 2016 | Jan. 29, 2016 | Oct. 30, 2015 | Oct. 28, 2016 | Oct. 30, 2015 | |
Net Sales: | |||||
Total sales | $ 500,144,000 | $ 491,465,000 | $ 1,509,531,000 | $ 1,486,156,000 | |
Cost of sales | 354,982,000 | 359,796,000 | 1,074,202,000 | 1,061,989,000 | |
Gross profit | 145,162,000 | 131,669,000 | 435,329,000 | 424,167,000 | |
Selling, general and administrative expenses | 165,219,000 | 147,149,000 | 481,933,000 | 451,865,000 | |
Goodwill impairment | $ 0 | 120,000,000 | 0 | 120,000,000 | |
Operating loss | (20,057,000) | (135,480,000) | (46,604,000) | (147,698,000) | |
Other (income) expense: | |||||
Interest income | (7,000) | (45,000) | (3,000) | ||
Interest expense | 16,920,000 | 16,549,000 | 50,230,000 | 49,302,000 | |
Loss on extinguishment of debt | 335,000 | ||||
Total other expense, net | 16,913,000 | 16,549,000 | 50,520,000 | 49,299,000 | |
Loss before provision for income taxes | (36,970,000) | (152,029,000) | (97,124,000) | (196,997,000) | |
Provision (benefit) for income taxes | 21,000 | 607,000 | 146,000 | 32,569,000 | |
Net loss | (36,991,000) | (152,636,000) | (97,270,000) | (229,566,000) | |
Comprehensive loss | (36,991,000) | (152,104,000) | (97,108,000) | (228,692,000) | |
Consolidating Adjustments | |||||
Net Sales: | |||||
Total sales | (459,000) | (197,000) | (570,000) | (578,000) | |
Gross profit | (459,000) | (197,000) | (570,000) | (578,000) | |
Selling, general and administrative expenses | (459,000) | (197,000) | (570,000) | (578,000) | |
Other (income) expense: | |||||
Equity in loss (earnings) of subsidiaries | (3,647,000) | (4,281,000) | (10,456,000) | (10,794,000) | |
Total other expense, net | (3,647,000) | (4,281,000) | (10,456,000) | (10,794,000) | |
Loss before provision for income taxes | 3,647,000 | 4,281,000 | 10,456,000 | 10,794,000 | |
Net loss | 3,647,000 | 4,281,000 | 10,456,000 | 10,794,000 | |
Comprehensive loss | 3,647,000 | 4,281,000 | 10,456,000 | 10,794,000 | |
Issuer | |||||
Net Sales: | |||||
Total sales | 458,013,000 | 447,617,000 | 1,382,473,000 | 1,354,980,000 | |
Cost of sales | 322,306,000 | 325,304,000 | 975,681,000 | 960,445,000 | |
Gross profit | 135,707,000 | 122,313,000 | 406,792,000 | 394,535,000 | |
Selling, general and administrative expenses | 152,117,000 | 133,506,000 | 442,940,000 | 411,433,000 | |
Goodwill impairment | 120,000,000 | 120,000,000 | |||
Operating loss | (16,410,000) | (131,193,000) | (36,148,000) | (136,898,000) | |
Other (income) expense: | |||||
Interest income | (7,000) | (45,000) | (3,000) | ||
Interest expense | 16,920,000 | 16,549,000 | 50,230,000 | 49,302,000 | |
Loss on extinguishment of debt | 335,000 | ||||
Equity in loss (earnings) of subsidiaries | 3,647,000 | 4,281,000 | 10,456,000 | 10,794,000 | |
Total other expense, net | 20,560,000 | 20,830,000 | 60,976,000 | 60,093,000 | |
Loss before provision for income taxes | (36,970,000) | (152,023,000) | (97,124,000) | (196,991,000) | |
Provision (benefit) for income taxes | 21,000 | 613,000 | 146,000 | 32,575,000 | |
Net loss | (36,991,000) | (152,636,000) | (97,270,000) | (229,566,000) | |
Comprehensive loss | (36,991,000) | (152,104,000) | (97,108,000) | (228,692,000) | |
Subsidiary Guarantors | |||||
Net Sales: | |||||
Total sales | 42,131,000 | 43,848,000 | 127,058,000 | 131,176,000 | |
Cost of sales | 32,676,000 | 34,492,000 | 98,521,000 | 101,544,000 | |
Gross profit | 9,455,000 | 9,356,000 | 28,537,000 | 29,632,000 | |
Selling, general and administrative expenses | 13,465,000 | 13,652,000 | 39,405,000 | 40,459,000 | |
Operating loss | (4,010,000) | (4,296,000) | (10,868,000) | (10,827,000) | |
Other (income) expense: | |||||
Loss before provision for income taxes | (4,010,000) | (4,296,000) | (10,868,000) | (10,827,000) | |
Net loss | (4,010,000) | (4,296,000) | (10,868,000) | (10,827,000) | |
Comprehensive loss | (4,010,000) | (4,296,000) | (10,868,000) | (10,827,000) | |
Non-Guarantor Subsidiaries | |||||
Net Sales: | |||||
Total sales | 459,000 | 197,000 | 570,000 | 578,000 | |
Gross profit | 459,000 | 197,000 | 570,000 | 578,000 | |
Selling, general and administrative expenses | 96,000 | 188,000 | 158,000 | 551,000 | |
Operating loss | 363,000 | 9,000 | 412,000 | 27,000 | |
Other (income) expense: | |||||
Loss before provision for income taxes | 363,000 | 9,000 | 412,000 | 27,000 | |
Provision (benefit) for income taxes | (6,000) | (6,000) | |||
Net loss | 363,000 | 15,000 | 412,000 | 33,000 | |
Comprehensive loss | $ 363,000 | $ 15,000 | $ 412,000 | $ 33,000 |
Financial Guarantees - Cash Flo
Financial Guarantees - Cash Flows (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Oct. 28, 2016 | Oct. 30, 2015 | |
Cash flows from operating activities: | ||
Net cash provided by (used in) operating activities | $ 7,931 | $ 1,827 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (35,273) | (55,710) |
Proceeds from sales of fixed assets | 617 | 22,320 |
Insurance recoveries for replacement assets | 937 | |
Net cash used in investing activities | (33,719) | (33,390) |
Cash flows from financing activities: | ||
Payments of long-term debt | (4,604) | (4,604) |
Proceeds under revolving credit facility | 168,500 | 404,050 |
Payments under revolving credit facility | (174,500) | (385,350) |
Payments of debt issuance costs | (4,725) | (487) |
Proceeds from financing lease obligations | 41,993 | 8,666 |
Payments of capital and financing lease obligations | (762) | (143) |
Payments to repurchase stock options of Number Holdings, Inc. | (390) | |
Net settlement of stock options of Number Holdings, Inc. for tax withholdings | (57) | |
Net cash provided by financing activities | 25,902 | 21,685 |
Net increase (decreased) in cash | 114 | (9,878) |
Cash - beginning of period | 2,312 | 12,463 |
Cash - end of period | 2,426 | 2,585 |
Issuer | ||
Cash flows from operating activities: | ||
Net cash provided by (used in) operating activities | 6,193 | 1,447 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (33,652) | (53,998) |
Proceeds from sales of fixed assets | 617 | 20,836 |
Insurance recoveries for replacement assets | 937 | |
Net cash used in investing activities | (32,098) | (33,162) |
Cash flows from financing activities: | ||
Payments of long-term debt | (4,604) | (4,604) |
Proceeds under revolving credit facility | 168,500 | 404,050 |
Payments under revolving credit facility | (174,500) | (385,350) |
Payments of debt issuance costs | (4,725) | (487) |
Proceeds from financing lease obligations | 41,993 | 8,666 |
Payments of capital and financing lease obligations | (762) | (143) |
Payments to repurchase stock options of Number Holdings, Inc. | (390) | |
Net settlement of stock options of Number Holdings, Inc. for tax withholdings | (57) | |
Net cash provided by financing activities | 25,902 | 21,685 |
Net increase (decreased) in cash | (3) | (10,030) |
Cash - beginning of period | 1,266 | 11,333 |
Cash - end of period | 1,263 | 1,303 |
Subsidiary Guarantors | ||
Cash flows from operating activities: | ||
Net cash provided by (used in) operating activities | 1,742 | 374 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (1,621) | (1,709) |
Proceeds from sales of fixed assets | 1,484 | |
Net cash used in investing activities | (1,621) | (225) |
Cash flows from financing activities: | ||
Net increase (decreased) in cash | 121 | 149 |
Cash - beginning of period | 1,009 | 1,097 |
Cash - end of period | 1,130 | 1,246 |
Non-Guarantor Subsidiaries | ||
Cash flows from operating activities: | ||
Net cash provided by (used in) operating activities | (4) | 6 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (3) | |
Net cash used in investing activities | (3) | |
Cash flows from financing activities: | ||
Net increase (decreased) in cash | (4) | 3 |
Cash - beginning of period | 37 | 33 |
Cash - end of period | $ 33 | $ 36 |