zumz-10q_20190504.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MAY 4, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 000-51300

 

 

ZUMIEZ INC.

(Exact name of registrant as specified in its charter)

 

 

Washington

 

91-1040022

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

4001 204th Street SW, Lynnwood, WA 98036

(Address of principal executive offices)  (Zip Code)

Registrant’s telephone number, including area code: (425) 551-1500

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes     No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes     No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes     No

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock

ZUMZ

Nasdaq Global Select

At June 3, 2019, there were 25,740,888 shares outstanding of common stock.

 

 


ZUMIEZ INC.

FORM 10-Q

TABLE OF CONTENTS

 

Part I.

Financial Information

 

 

 

 

 

 

Item 1.

Condensed Consolidated Financial Statements

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets at May 4, 2019 (unaudited) and February 2, 2019

3

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Income (Loss) for the three months ended May 4, 2019 and May 5, 2018

4

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three months ended May 4, 2019 and May 5, 2018

5

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three months ended May 4, 2019 and May 5, 2018

6

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended May 4, 2019 and May 5, 2018

7

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

8

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

 

 

 

 

 

Item 4.

Controls and Procedures

28

 

 

 

 

Part II.

Other Information

 

 

 

 

 

 

Item 1.

Legal Proceedings

29

 

 

 

 

 

Item 1A.

Risk Factors

29

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

29

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

29

 

 

 

 

 

Item 4.

Mine Safety Disclosures

29

 

 

 

 

 

Item 5.

Other Information

29

 

 

 

 

 

Item 6.

Exhibits

30

 

 

 

 

Signature

31

 

 

2


ZUMIEZ INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

 

May 4, 2019

 

 

February 2, 2019

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

 

$

60,616

 

 

 

$

52,422

 

Marketable securities

 

107,364

 

 

112,912

 

Receivables

 

15,083

 

 

17,776

 

Inventories

 

135,959

 

 

129,268

 

Prepaid expenses and other current assets

 

9,616

 

 

14,797

 

Total current assets

 

328,638

 

 

327,175

 

Fixed assets, net

 

116,830

 

 

120,503

 

Operating lease right-of-use assets

 

301,980

 

 

 

Goodwill

 

57,682

 

 

58,813

 

Intangible assets, net

 

14,852

 

 

15,260

 

Deferred tax assets, net

 

6,312

 

 

5,259

 

Other long-term assets

 

8,442

 

 

7,180

 

Total long-term assets

 

506,098

 

 

207,015

 

Total assets

 

 

$

834,736

 

 

 

$

534,190

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Trade accounts payable

 

 

$

54,454

 

 

 

$

35,293

 

Accrued payroll and payroll taxes

 

15,302

 

 

21,015

 

Income taxes payable

 

 

 

65

 

 

 

 

5,817

 

Deferred rent and tenant allowances

 

 

 

7,489

 

Operating lease liabilities

 

 

 

54,469

 

 

 

 

 

Other liabilities

 

19,675

 

 

23,494

 

Total current liabilities

 

143,965

 

 

93,108

 

Long-term deferred rent and tenant allowances

 

 

 

37,076

 

Long-term operating lease liabilities

 

293,375

 

 

 

Other long-term liabilities

 

3,436

 

 

3,550

 

Total long-term liabilities

 

296,811

 

 

40,626

 

Total liabilities

 

440,776

 

 

133,734

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

Preferred stock, no par value, 20,000 shares authorized; none issued and outstanding

 

 

 

 

 

 

Common stock, no par value, 50,000 shares authorized; 25,741 shares issued and outstanding at May 4, 2019 and 25,521 shares issued and outstanding at February 2, 2019

 

155,104

 

 

153,066

 

Accumulated other comprehensive loss

 

(12,275)

 

 

(9,224)

 

Retained earnings

 

251,131

 

 

256,614

 

Total shareholders’ equity

 

393,960

 

 

400,456

 

Total liabilities and shareholders’ equity

 

 

$

834,736

 

 

 

$

534,190

 

 

See accompanying notes to condensed consolidated financial statements

 

3


ZUMIEZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

May 4, 2019

 

 

 

May 5, 2018

 

Net sales

 

$

 

212,928

 

 

$

 

206,287

 

Cost of goods sold

 

 

 

146,464

 

 

 

 

143,700

 

Gross profit

 

 

 

66,464

 

 

 

 

62,587

 

Selling, general and administrative expenses

 

 

 

65,496

 

 

 

 

64,296

 

Operating profit (loss)

 

 

 

968

 

 

 

 

(1,709

)

Interest income, net

 

 

 

852

 

 

 

 

283

 

Other income (expense), net

 

 

 

153

 

 

 

 

(482

)

Earnings (loss) before income taxes

 

 

 

1,973

 

 

 

 

(1,908

)

Provision for income taxes

 

 

 

1,180

 

 

 

 

699

 

Net income (loss)

 

$

 

793

 

 

$

 

(2,607

)

Basic earnings (loss) per share

 

$

 

0.03

 

 

$

 

(0.10

)

Diluted earnings (loss) per share

 

$

 

0.03

 

 

$

 

(0.10

)

Weighted average shares used in computation of earnings (loss) per share:

 

 

 

 

 

 

Basic

 

 

 

25,090

 

 

 

 

24,831

 

Diluted

 

 

 

25,351

 

 

 

 

24,831

 

 

See accompanying notes to condensed consolidated financial statements

 

4


ZUMIEZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

May 4, 2019

 

 

May 5, 2018

 

Net income (loss)

 

$

793

 

 

$

(2,607

)

Other comprehensive loss, net of tax and reclassification adjustments:

 

 

 

 

 

 

 

 

Foreign currency translation

 

 

(3,035

)

 

 

(4,875

)

Net change in unrealized loss on available-for-sale debt securities

 

 

(16

)

 

 

(68

)

Other comprehensive loss, net

 

 

(3,051

)

 

 

(4,943

)

Comprehensive loss

 

$

(2,258

)

 

$

(7,550

)

 

See accompanying notes to condensed consolidated financial statements

 

5


ZUMIEZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands)

(Unaudited)

 

 

 

Common Stock

 

 

Accumulated

Other

Comprehensive

 

 

Retained

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Loss

 

 

Earnings

 

 

Total

 

Balance at February 2, 2019

 

 

25,521

 

 

$

153,066

 

 

$

(9,224

)

 

$

256,614

 

 

$

400,456

 

Net income

 

 

 

 

 

 

 

 

 

 

 

793

 

 

 

793

 

Other comprehensive loss, net

 

 

 

 

 

 

 

 

(3,051

)

 

 

 

 

 

(3,051

)

Issuance and exercise of stock-based awards

 

 

220

 

 

 

345

 

 

 

 

 

 

 

 

 

345

 

Stock-based compensation expense

 

 

 

 

 

1,693

 

 

 

 

 

 

 

 

 

1,693

 

Cumulative effect of accounting change under ASC 842 (Note 1)

 

 

 

 

 

 

 

 

 

 

 

(6,276

)

 

 

(6,276

)

Balance at May 4, 2019

 

 

25,741

 

 

$

155,104

 

 

$

(12,275

)

 

$

251,131

 

 

$

393,960

 

 

 

 

 

 

 

Common Stock

 

 

Accumulated

Other

Comprehensive

 

 

Retained

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Income (Loss)

 

 

Earnings

 

 

Total

 

Balance at February 3, 2018

 

 

25,249

 

 

$

146,523

 

 

$

35

 

 

$

209,357

 

 

$

355,915

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(2,607

)

 

 

(2,607

)

Other comprehensive loss, net

 

 

 

 

 

 

 

 

(4,943

)

 

 

 

 

 

(4,943

)

Issuance and exercise of stock-based awards

 

 

221

 

 

 

426

 

 

 

 

 

 

 

 

 

426

 

Stock-based compensation expense

 

 

 

 

 

1,642

 

 

 

 

 

 

 

 

 

1,642

 

Cumulative effect of accounting change under ASC 606

 

 

 

 

 

 

 

 

 

 

 

2,052

 

 

 

2,052

 

Balance at May 5, 2018

 

 

25,470

 

 

$

148,591

 

 

$

(4,908

)

 

$

208,802

 

 

$

352,485

 

 

See accompanying notes to condensed consolidated financial statements

 

6


ZUMIEZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

May 4, 2019

 

 

May 5, 2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

793

 

 

$

(2,607

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation, amortization and accretion

 

 

6,263

 

 

 

6,970

 

Noncash lease expense

 

 

13,371

 

 

 

 

Deferred taxes

 

 

1,249

 

 

 

217

 

Stock-based compensation expense

 

 

1,693

 

 

 

1,642

 

Other

 

 

224

 

 

 

588

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Receivables

 

 

4,708

 

 

 

(1,096

)

Inventories

 

 

(7,540

)

 

 

(3,781

)

Prepaid expenses and other assets

 

 

(167

)

 

 

857

 

Trade accounts payable

 

 

19,568

 

 

 

7,723

 

Accrued payroll and payroll taxes

 

 

(5,636

)

 

 

(5,383

)

Income taxes payable

 

 

(7,104

)

 

 

(5,993

)

Deferred rent and tenant allowances

 

 

 

 

 

(32

)

Operating lease liabilities

 

 

(13,770

)

 

 

 

Other liabilities

 

 

(3,790

)

 

 

(2,997

)

Net cash provided by (used in) operating activities

 

 

9,862

 

 

 

(3,892

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Additions to fixed assets

 

 

(3,331

)

 

 

(3,585

)

Purchases of marketable securities and other investments

 

 

(33,385

)

 

 

(12,932

)

Sales and maturities of marketable securities and other investments

 

 

39,001

 

 

 

21,590

 

Net cash provided by investing activities

 

 

2,285

 

 

 

5,073

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from revolving credit facilities

 

 

 

 

 

17,245

 

Payments on revolving credit facilities

 

 

 

 

 

(13,347

)

Proceeds from issuance and exercise of stock-based awards

 

 

583

 

 

 

621

 

Payments for tax withholdings on equity awards

 

 

(238

)

 

 

(195

)

Net cash provided by financing activities

 

 

345

 

 

 

4,324

 

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

 

(466

)

 

 

(497

)

Net increase in cash, cash equivalents, and restricted cash

 

 

12,026

 

 

 

5,008

 

Cash, cash equivalents, and restricted cash, beginning of period

 

 

54,271

 

 

 

25,803

 

Cash, cash equivalents, and restricted cash, end of period

 

$

66,297

 

 

$

30,811

 

Supplemental disclosure on cash flow information:

 

 

 

 

 

 

 

 

Cash paid during the period for income taxes

 

$

7,038

 

 

$

6,442

 

Accrual for purchases of fixed assets

 

 

1,583

 

 

 

2,872

 

 

See accompanying notes to condensed consolidated financial statements

 

7


ZUMIEZ INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

1. Nature of Business and Basis of Presentation

Nature of Business—Zumiez Inc., including its wholly owned subsidiaries, (the “Company,” “we,” “us,” “its” and “our”) is a leading specialty retailer of apparel, footwear, accessories and hardgoods for young men and women who want to express their individuality through the fashion, music, art and culture of action sports, streetwear, and other unique lifestyles.  At May 4, 2019, we operated 707 stores; 606 in the United States (“U.S.”), 50 in Canada, 42 in Europe, and 9 in Australia.  We operate under the names Zumiez, Blue Tomato and Fast Times.  Additionally, we operate ecommerce websites at zumiez.com, zumiez.ca, blue-tomato.com and fasttimes.com.au.

Fiscal Year—We use a fiscal calendar widely used by the retail industry that results in a fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to January 31.  Each fiscal year consists of four 13-week quarters, with an extra week added to the fourth quarter every five or six years.  The three months ended May 4, 2019 and May 5, 2018 were 13-week periods.

Basis of Presentation—The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting.  Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.  The unaudited condensed consolidated financial statements include the accounts of Zumiez Inc. and its wholly-owned subsidiaries.  All significant intercompany transactions and balances are eliminated in consolidation.

In our opinion, the unaudited condensed consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the condensed consolidated balance sheets, operating results and cash flows for the periods presented.

The financial data at February 2, 2019 is derived from audited consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended February 2, 2019, and should be read in conjunction with the audited consolidated financial statements and notes thereto.  Interim results are not necessarily indicative of results for the full fiscal year due to seasonality and other factors.

Use of Estimates—The preparation of financial statements in conformity with U.S. GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements as well as the reported amounts of revenues and expenses during the reporting period.  These estimates can also affect supplemental information disclosed by us, including information about contingencies, risk and financial condition.  Actual results could differ from these estimates and assumptions.

Reclassification—Certain prior period amounts have been reclassified to be consistent with current year presentation within our condensed consolidated statement of cash flows.

Restricted Cash— Cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual agreements are recorded as restricted cash in other long-term assets on our condensed consolidated balance sheets. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statement of cash flows (in thousands):

 

 

February 2, 2019

 

 

February 3, 2018

 

Cash and cash equivalents

 

$

 

52,422

 

 

$

24,041

 

Restricted cash included in other long-term assets

 

 

 

1,849

 

 

 

1,762

 

Total cash, cash equivalents, and restricted cash shown in the statement of cash flows

 

$

 

54,271

 

 

$

25,803

 

 

 

 

 

 

 

 

 

 

 

 

 

May 4, 2019

 

 

May 5, 2018

 

Cash and cash equivalents

 

$

 

60,616

 

 

$

29,063

 

Restricted cash included in other long-term assets

 

 

 

5,681

 

 

 

1,748

 

Total cash, cash equivalents, and restricted cash shown in the statement of cash flows

 

$

 

66,297

 

 

$

30,811

 

Restricted cash included in other long-term assets represents amounts held as insurance collateral and collateral for bank guarantees on certain store operating leases.

8


Significant Accounting Policies—Our significant accounting policies are detailed in Note 2, “Summary of Significant Accounting Policies” within Part IV Item 15 of the Annual Report on Form 10-K for the year ended February 2, 2019.  There have been no significant changes in accounting policies, with exception of the adoption of Accounting Standards Codification Topic 842, Leases (“ASC 842”).  Our significant accounting policies impacted by the adoption of ASC 842 are discussed below.

Leases – We determine at inception if a contract is or contains a lease. Upon modification of a contract, we reassess if a contract is or contains a lease.  For a contract that contains fixed payments for both lease and non-lease components, we allocate the consideration to components based on the relative standalone price.  At the commencement date of a lease, we recognize (1) a right-of-use asset representing our right to use the underlying asset during the lease term and (2) a lease liability for the present value of the lease payments not yet made.    

The majority of our store operating leases include ongoing co-tenancy requirements or early termination option that reduce lease payments, permit lease termination, or both, in the event that co-tenants cease to operate for specific periods or if stated sales levels are not met in specific periods. The lease term includes the options to extend the lease, only to the extent it is reasonably certain that we will exercise such extension options and not exercise such early termination options, respectively. The lease payments are discounted using the rate implicit in the lease, if available, or our incremental borrowing rate. Our incremental borrowing rate is based on information available at commencement date. The right-of-use asset is measured at the present value of lease payments not yet made with adjustments for initial direct costs, lease prepayments and lease incentives. We evaluate the carrying value of right-of-use assets for indicators of impairment and perform an analysis of the recoverability of the related asset group. If the carrying value of the asset group is determined to be in excess of the estimated fair value, we record an impairment loss in our consolidated statements of income.

Our store operating leases may include fixed minimum lease payments, as contractually stated in the lease agreement or variable lease payments, which are generally based on a percentage of the store’s net sales in excess of a specified threshold or are dependent on changes in an index. Operating lease expense relating to fixed lease payments is recognized on a straight-line basis over the lease term and lease expense relating to variable payments is expensed as incurred.

Recent Accounting Standards— In August 2018, the Financial Accounting Standards Board (“FASB”) issued a new standard over customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract.  The standard requires implementation costs incurred in a hosting arrangement that is a service contract be accounted for in accordance with ASC 350-40.  The new standard is effective for annual periods beginning after December 15, 2019, with early adoption permitted.  We adopted this standard prospectively during the three months ended May 4, 2019 and the impact on our condensed consolidated financial statements was not material.

In January 2017, the FASB issued a new standard simplifying the test for goodwill impairment.  The standard eliminates Step 2 from the goodwill impairment test. The standard requires entities perform the goodwill impairment test by comparing the fair value of a reporting unit to its carrying amount and recognize the impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total goodwill allocated to that reporting unit. The new standard is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted.  We do expect this standard to have a material impact on our condensed consolidated financial statements.

In February 2016, the FASB issued a comprehensive standard related to lease accounting to increase transparency and comparability among organizations.  The standard requires the recognition of right-of-use assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements.  In July 2018, the FASB issued an update that allows companies an optional transition method to recognize a cumulative effect adjustment to the opening balance of retained earnings recorded at the beginning of the period of adoption.  The new standard is effective for the fiscal year beginning after December 15, 2018.

 

We adopted this standard for the fiscal year beginning February 3, 2019, using the optional transition method.  We elected the package of practical expedients available upon adoption that allows us (1) to not reassess whether expired or existing contracts contain leases, (2) to not reassess lease classification for existing leases, and (3) to not reassess initial direct costs for existing leases.  

 

The adoption of this standard resulted in a material change to our condensed consolidated balance sheet, primarily related to the (1) recognition of $297.3 million of operating lease right-of-use assets and $342.7 million of operating lease liabilities, (2) de-recognition of $44.6 million of deferred rent and tenant allowances, and (3) a cumulative adjustment to retained earnings of $6.3 million related to impairment of operating lease right-of-use assets that were impaired upon adoption of this standard. This standard did not have a material impact on our condensed consolidated statement of income or cash flows. See Note 4, “Leases” for additional information regarding leases.

 

9


The following table summarizes the changes made to our consolidated balance sheet at February 3, 2019 (in thousands):

 

 

 

As Reported

February 2, 2019

 

 

Adjustment

for ASC 842

 

 

 

As Adjusted

February 3, 2019

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

$

 

14,797

 

 

$

 

(5,739

)

 

$

 

9,058

 

Operating lease right-of-use assets

 

 

 

 

 

 

 

297,326

 

 

 

 

297,326

 

Deferred tax assets, net

 

 

 

5,259

 

 

 

 

2,345

 

 

 

 

7,604

 

Other long-term assets

 

 

 

7,180

 

 

 

 

(2,094

)

 

 

 

5,086

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred rent and tenant allowances

 

 

 

7,489

 

 

 

 

(7,489

)

 

 

 

 

Operating lease liabilities

 

 

 

 

 

 

 

52,958

 

 

 

 

52,958

 

Long-term deferred rent and tenant allowances

 

 

 

37,076

 

 

 

 

(37,076

)

 

 

 

 

Long-term operating lease liabilities

 

 

 

 

 

 

 

289,721

 

 

 

 

289,721

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained Earnings

 

 

 

256,614

 

 

 

 

(6,276

)

 

 

 

250,338

 

 

 

2. Revenue

 

The following table disaggregates net sales by geographic region (in thousands):

 

 

 

Three Months Ended

 

 

 

May 4, 2019

 

 

May 5, 2018

 

United States

 

$

 

176,918

 

 

$

170,541

 

Canada

 

 

 

11,032

 

 

 

10,706

 

Europe

 

 

 

22,946

 

 

 

23,174

 

Australia

 

 

 

2,032

 

 

 

1,866

 

Net sales

 

$

 

212,928

 

 

$

206,287

 

 

Net sales for the three months ended May 4, 2019 included a $2.7 million decrease due to the change in foreign exchange rates, which consisted of $0.5 million in Canada, $2.0 million in Europe and $0.2 million in Australia.

 

Our contract liabilities include deferred revenue related to our customer loyalty program and gift cards. The current liability for gift cards was $3.2 million at May 4, 2019 and $4.3 million at February 2, 2019, respectively. Deferred revenue related to our STASH loyalty program was $2.2 million at May 4, 2019 and $2.1 million at February 2, 2019, respectively.

 

3. Cash, Cash Equivalents and Marketable Securities

The following tables summarize the estimated fair value of our cash, cash equivalents and marketable securities and the gross unrealized holding gains and losses (in thousands)

 

 

May 4, 2019

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Holding

Gains

 

 

Gross

Unrealized

Holding

Losses

 

 

Estimated

Fair Value

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

38,887

 

 

$

 

 

$

 

 

$

38,887

 

Money market funds

 

 

16,735

 

 

 

 

 

 

 

 

 

16,735

 

Corporate debt securities

 

 

4,994

 

 

 

 

 

 

 

 

 

4,994

 

Total cash and cash equivalents

 

 

60,616

 

 

 

 

 

 

 

 

 

60,616

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury and government agency securities

 

 

4,355

 

 

 

4

 

 

 

 

 

 

4,359

 

Corporate debt securities

 

 

54,822

 

 

 

70

 

 

 

(44

)

 

 

54,848

 

State and local government securities

 

 

46,207

 

 

 

27

 

 

 

(17

)

 

 

46,217

 

Variable-rate demand notes

 

 

1,940

 

 

 

 

 

 

 

 

 

1,940

 

Total marketable securities

 

$

107,324

 

 

$

101

 

 

$

(61

)

 

$

107,364

 

 

10


 

 

February 2, 2019

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Holding

Gains

 

 

Gross

Unrealized

Holding

Losses

 

 

Estimated

Fair Value

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

26,336

 

 

$

 

 

$

 

 

$

26,336

 

Money market funds

 

 

3,689

 

 

 

 

 

 

 

 

 

3,689

 

Corporate debt securities

 

 

22,397

 

 

 

 

 

 

 

 

 

22,397

 

Total cash and cash equivalents

 

 

52,422

 

 

 

 

 

 

 

 

 

52,422

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury and government agency securities

 

 

4,326

 

 

 

2

 

 

 

 

 

 

4,328

 

Corporate debt securities

 

 

55,122

 

 

 

98

 

 

 

(8

)

 

 

55,212

 

State and local government securities

 

 

51,462

 

 

 

13

 

 

 

(43

)

 

 

51,432

 

Variable-rate demand notes

 

 

1,940

 

 

 

 

 

 

 

 

 

1,940

 

Total marketable securities

 

$

112,850

 

 

$

113

 

 

$

(51

)

 

$

112,912

 

 

All of our marketable securities have an effective maturity date of five years or less and may be liquidated, at our discretion, prior to maturity.

The following tables summarize the gross unrealized holding losses and fair value for investments in an unrealized loss position, and the length of time that individual securities have been in a continuous loss position (in thousands):

 

 

 

May 4, 2019

 

 

 

Less Than 12 Months

 

 

12 Months or Greater

 

 

Total

 

 

 

Fair Value

 

 

Unrealized

Losses

 

 

Fair Value

 

 

Unrealized

Losses

 

 

Fair Value

 

 

Unrealized

Losses

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

9,035

 

 

$

(32

)

 

$

5,709

 

 

$

(11

)

 

$

14,744

 

 

$

(43

)

State and local government securities

 

 

21,802

 

 

 

(16

)

 

 

1,780

 

 

 

(1

)

 

 

23,582

 

 

 

(17

)

Total marketable securities

 

$

30,837

 

 

$

(48

)

 

$

7,489

 

 

$

(12

)

 

$

38,326

 

 

$

(60

)

 

 

 

February 2, 2019

 

 

 

Less Than 12 Months

 

 

12 Months or Greater

 

 

Total

 

 

 

Fair Value

 

 

Unrealized

Losses

 

 

Fair Value

 

 

Unrealized

Losses

 

 

Fair Value

 

 

Unrealized

Losses

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

14,523

 

 

$

(8

)

 

$

 

 

$

 

 

$

14,523

 

 

$

(8

)

State and local government securities

 

 

26,986

 

 

 

(20

)

 

 

9,548

 

 

 

(23

)

 

 

36,534

 

 

 

(43

)

Total marketable securities

 

$

41,509

 

 

$

(28

)

 

$

9,548

 

 

$

(23

)

 

$

51,057

 

 

$

(51

)

 

We did not record a realized loss for other-than-temporary impairments during the three months ended May 4, 2019 or May 5, 2018.

 

4. Leases

At May 4, 2019, we had operating leases for our retail stores, certain distribution and fulfillment facilities, vehicles and equipment. Our remaining lease terms vary from one month to ten years, with varying renewal and termination options. At May 4, 2019, the weighted-average of the remaining lease term was 6.3 years and the weighted-average discount rate was 3.4%.

The following table presents components of lease expense (in thousands):

 

 

Three Months Ended

 

 

 

May 4, 2019

 

Operating lease expense

 

$

17,082

 

Variable lease expense

 

 

894

 

Total lease expense

 

$

17,976

 

11


Supplemental cash flow information related to leases is as follows (in thousands):

 

 

May 4, 2019

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

Operating cash flows from operating leases

 

$

(13,770

)

Right-of-use assets obtained in exchange for new operating lease liabilities

 

 

20,296

 

At May 4, 2019, the maturities of our operating leases liabilities are as follows (in thousands):

 

Fiscal 2019

 

$

48,814

 

Fiscal 2020

 

 

68,812

 

Fiscal 2021

 

 

63,411

 

Fiscal 2022