| Organization and Summary of Significant Accounting Policies | (1) Organization and Summary of
Significant Accounting Policies
(a) Description of
Business
Ollie’s Bargain Outlet Holdings, Inc., operates through its
sole operating subsidiary, Ollie’s Bargain Outlet, Inc., a
chain of retail stores which offer brand name products at deeply
discounted and closeout prices across a broad selection of product
categories. Ollie’s Bargain Outlet Holdings, Inc. together
with its subsidiaries will be referenced herein as the Company or
Ollie’s. Ollie’s principally buys overproduced,
overstocked, and closeout merchandise from manufacturers,
wholesalers, and other retailers. In addition, the Company augments
brand name closeout deals with directly sourced private label
products featuring names exclusive to Ollie’s in order to
provide consistent assortment of value-priced goods in select key
merchandise categories.
Since the first store opened in 1982, the Company has grown to 200
retail locations as of October 31, 2015 compared to 173
locations as of November 1, 2014. Ollie’s Bargain Outlet
retail locations are located in 17 states (Alabama, Connecticut,
Delaware, Georgia, Indiana, Kentucky, Maryland, Michigan, New
Jersey, New York, North Carolina, Ohio, Pennsylvania, South
Carolina, Tennessee, Virginia, and West Virginia).
(b) Fiscal Year
Ollie’s follows a 52/53-week fiscal year, which ends on the
Saturday nearest to January 31st. References to the fiscal
year ended January 31, 2015 refer to the period from
February 2, 2014 to January 31, 2015. The fiscal quarters
ended October 31, 2015 and November 1, 2014 refer to the
thirteen weeks from August 2, 2015 to October 31, 2015
and from August 3, 2014 to November 1, 2014,
respectively. The year-to-date periods ended October 31, 2015
and November 1, 2014 refer to the thirty-nine weeks from
February 1, 2015 to October 31, 2015 and from
February 2, 2014 to November 1, 2014, respectively.
(c) Basis of
Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with U.S. generally
accepted accounting principles (“GAAP”) for interim
financial information and applicable rules and regulations of
the SEC regarding interim financial reporting. The condensed
consolidated financial statements reflect all normal recurring
adjustments which management believes are necessary to present
fairly the Company’s financial condition, results of
operations, and cash flows for all periods presented. The condensed
consolidated balance sheets as of October 31, 2015 and
November 1, 2014, the condensed consolidated statements of
income for the thirteen weeks and thirty-nine weeks ended
October 31, 2015 and November 1, 2014, and the condensed
consolidated statements of stockholders’ equity and cash
flows for the thirty-nine weeks ended October 31, 2015 and
November 1, 2014 have been prepared by the Company and are
unaudited. The Company’s business is seasonal in nature and
results of operations for the interim periods presented are not
necessarily indicative of operating results for the year ending
January 30, 2016 or any other period. All intercompany
accounts, transactions, and balances have been eliminated in
consolidation.
The Company’s balance sheet as of January 31, 2015,
presented herein, has been derived from the audited balance sheet
included in the Company’s prospectus, dated July 15,
2015 related to the Company’s initial public offering
(“IPO”) and filed with the Securities and Exchange
Commission (“SEC”) pursuant to Rule 424(b) under the
Securities Act of 1933, and referred to herein as the
“Prospectus,” but does not include all disclosures
required by GAAP. These financial statements should be read in
conjunction with the financial statements for the fiscal year ended
January 31, 2015 and footnotes thereto included in the
Prospectus.
For purposes of the disclosure requirements for segments of a
business enterprise, it has been determined that the Company is
comprised of one operating segment.
(d) Use of Estimates
The preparation of condensed consolidated financial statements in
conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the condensed consolidated financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(e) Fair Value
Disclosures
Fair value is defined as the price which the Company would receive
to sell an asset or pay to transfer a liability (an exit price) in
an orderly transaction between market participants on the
measurement date. In determining fair value, GAAP establishes a
three-level
• Level 1 inputs are quoted prices
available for identical assets and liabilities in active
markets.
• Level 2 inputs are observable
for the asset or liability, either directly or indirectly,
including quoted prices for similar assets and liabilities in
active markets or other inputs which are observable or can be
corroborated by observable market data.
• Level 3 inputs are less
observable and reflect the Company’s assumptions.
Ollie’s financial instruments consist of cash, accounts
receivable, accounts payable, revolving credit facility and our
term loan. The carrying amount of cash, accounts receivable and
accounts payable approximates fair value because of their short
maturities. The carrying amount of the revolving credit facility
and term loan facility approximates its fair value because the
interest rates are adjusted regularly based on current market
conditions.
(f) Supplemental Cash Flow
Information
As of October 31, 2015 and November 1, 2014, capital
expenditures of $0.8 million and $0.5 million, respectively, had
been incurred but not yet paid in cash and, accordingly, were
accrued in accounts payable and accrued expenses.
(g) Stock Split
On June 17, 2015, the Company effected a stock split of the
Company’s common stock at a ratio of 115 shares for every
share previously held. All common stock share and common stock per
share amounts for all periods presented in these financial
statements have been adjusted retroactively to reflect the stock
split.
(h) Initial Public
Offering
On July 15, 2015, the Company priced its initial public
offering of 8,925,000 shares of its common stock. In addition, on
July 17, 2015, the underwriters of the IPO exercised their
option to purchase an additional 1,338,750 shares of common stock
from the Company. As a result, 10,263,750 shares of common stock
were issued and sold by the Company at a price of $16.00 per
share.
As a result of the IPO, the Company received net proceeds of $153.1
million, after deducting the underwriting fees of $11.1 million.
The Company used the net proceeds from the IPO to pay off
outstanding borrowings under the Revolving Credit Facility and a
portion of the outstanding principal balance of the Term Loan. See
Note 4, “Debt Obligations and Financing
Arrangements.”
Immediately prior to the IPO, the Company amended and restated its
certificate of incorporation to reflect the conversion of all Class
B common stock to Class A common stock. In addition, all
shares of Class A common stock were recapitalized into a
single class of common stock. As part of the IPO, the Company
increased its authorized common stock shares to 500,000,000 at
$0.001 par value per share and authorized 50,000,000 shares of
preferred stock at $0.001 par value per share.
(i) Goodwill/intangible
assets
The Company amortizes intangible assets over their useful lives
unless it determines such lives to be indefinite. Goodwill and
intangible assets having indefinite useful lives are not amortized
to earnings, but instead are subject to annual impairment testing
or more frequently if events or circumstances indicate that the
value of goodwill or intangible assets having indefinite useful
lives might be impaired.
Entities have an option to perform a qualitative assessment to
determine whether further impairment testing on goodwill is
necessary. Specifically, an entity has the option to first assess
qualitative factors to determine whether it is necessary to perform
the two-step quantitative test. The goodwill quantitative
impairment test is a two-step test. Under the first step, the fair
value of the reporting unit is compared with its carrying value
(including goodwill). If the fair value of the reporting unit is
less than its carrying value, an indication of goodwill impairment
exists for the reporting unit and the enterprise must perform step
two of the impairment test (measurement). Under step two, an
impairment loss is recognized for any excess of the carrying amount
of the reporting unit’s goodwill over the implied fair value
of that goodwill. If an entity believes, as a result of its
qualitative assessment, that it is more-likely than-not that the
fair value of a reporting unit is less than its carrying amount,
the quantitative impairment test is required. Otherwise, no further
testing is required. The Company has selected the fiscal month
ending date of October as the annual impairment testing date. As of
October 31, 2015 and November 1, 2014, the Company
completed a qualitative impairment test. Based upon the results of
the qualitative tests, no impairment of goodwill existed.
The Company is also required to perform impairment tests annually
or more frequently if events or circumstances indicate that the
value of its non-amortizing intangible assets might be impaired.
The Company’s non-amortizing intangible assets as of
October 31, 2015 and November 1, 2014 consisted of a
tradename. Entities have an option to perform a qualitative
assessment to determine whether further impairment testing of
non-amortizing intangible assets is necessary. Specifically, an
entity has the option to first assess qualitative factors to
determine whether it is necessary to perform a quantitative test.
The Company performs the quantitative impairment test using the
discounted cash flow method based on management’s projections
to determine the fair value of the asset. The carrying amount of
the asset is then compared to the fair value. If the carrying
amount is greater than fair value, an impairment loss is recorded
for the amount that fair value is less than the carrying amount. If
an entity believes, as a result of its qualitative assessment, that
it is more-likely than-not that the fair value is less than its
carrying amount, the quantitative impairment test is required.
Otherwise, no further testing is required. As of October 31,
2015 and November 1, 2014, the Company completed a qualitative
impairment test. Based upon the results of the qualitative tests,
no impairment of the tradename existed.
(j) Recently Issued Accounting
Pronouncements
Contracts with Customers
In May 2014, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update
(“ASU”) No. 2014-09, Revenue from Contracts with
Customers, which requires an entity to recognize the amount of
revenue to which it expects to be entitled for the transfer of
promised goods or services to customers. ASU No. 2014-09 will
replace most existing revenue recognition guidance in GAAP when it
becomes effective. In August 2015, the FASB issued ASU 2015-14,
Revenue from Contracts with Customers: Deferral of the Effective
Date which defers the effective date for ASU 2014-09 by one year to
January 1, 2018; however, public business entities would be
permitted to adopt the standard as of the original effective date.
The Company has not selected a transition method and is currently
evaluating the impact this guidance will have on the consolidated
balance sheet, results of operations and cash flows.
Deferred Taxes
In November 2015, the FASB issued ASU 2015-17, Balance Sheet
Classification of Deferred Taxes. This update requires an entity to
classify deferred tax liabilities and assets as noncurrent within a
classified balance sheet. ASU 2015-17 is effective for annual
reporting periods, and interim periods therein, beginning after
December 15, 2016. This update may be applied either
prospectively to all deferred tax liabilities and assets or
retrospectively to all periods presented. Early application is
permitted as of the beginning of the interim or annual reporting
period. The Company is currently reviewing the revised guidance and
assessing the potential impact on its consolidated financial
statements. |
