Commitments and Contingencies

6 Months Ended

Aug. 01, 2020

Commitments and Contingencies [Abstract]

(4)	Commitments and Contingencies

Commitments

The Company accounts for leases in accordance with Accounting Standards Update (“ASU”) 2016-02, Leases, which was adopted as of February 3, 2019. Pursuant to the adoption of the new standard, the Company elected the practical expedients upon transition that did not require it to reassess existing contracts to determine if they contain leases under the new definition of a lease, or to reassess historical lease classification or initial direct costs. The Company also adopted the practical expedient to not separate lease and non-lease components for new leases after adoption of the new standard. In addition, the Company applied a policy election to exclude leases with an initial term of 12 months or less from balance sheet recognition. The Company did not adopt the hindsight practical expedient and, therefore, will continue to utilize lease terms determined under previous lease guidance for leases existing at the date of adoption that are not subsequently modified.

Ollie’s generally leases its stores, offices and distribution facilities under operating leases that expire at various dates through 2034. These leases generally provide for fixed annual rentals; however, several provide for minimum annual rentals plus contingent rentals based on a percentage of annual sales. A majority of the Company’s leases also require a payment for all or a portion of common-area maintenance, insurance, real estate taxes, water and sewer costs and repairs, on a fixed or variable payment basis, the cost of which, for leases existing as of the adoption of ASU 2016-02, is charged to the related expense category rather than being accounted for as rent expense. For leases entered into after the adoption of ASU 2016-02, the Company accounts for lease components together with non-lease components as a single component for all classes of underlying assets. Most of the leases contain options to renew for three to five successive five-year periods. The Company is generally not reasonably certain to exercise renewal options; therefore, the options are not considered in determining the lease term, and associated potential option payments are excluded from the lease payments. Ollie’s lease agreements generally do not contain any material residual value guarantees or material restrictive covenants.

Store and office lease costs are classified in selling, general and administrative expenses and distribution center lease costs are classified in cost of goods sold on the condensed consolidated statements of income.

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

2020	$	31,741
2021		77,089
2022		71,454
2023		68,566
2024		51,879
Thereafter		132,333
Total undiscounted lease payments⁽¹⁾		433,062
Less: Imputed interest		(59,052	)
Total lease obligations		374,010
Less: Current obligations under leases		(56,062	)
Long-term lease obligations	$	317,948

(1)

Lease obligations exclude $37.8 million of minimum lease payments for leases signed, but not commenced.

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

	Twenty-six weeks ended
	August 1, 2020			August 3, 2019

Cash paid for operating leases	$	37,663		$	31,846
Operating lease cost		37,688			31,678
Variable lease cost		2,341			727
Non-cash right-of-use assets obtained in exchange for lease obligations		33,632			56,461
Weighted-average remaining lease term	6.9 years			7.2 years
Weighted-average discount rate		4.3	%		4.5	%

Related Party Leases

The Company has entered into five non-cancelable operating leases with related parties for office and store locations that expire at various dates through 2033. Ollie’s made $0.8 million and $0.7 million in rent payments to such related parties during the twenty-six weeks ended August 1, 2020 and August 3, 2019, respectively. The lease payments are included in the operating lease disclosures stated above.

Contingencies

From time to time the Company may be involved in claims and legal actions that arise in the ordinary course of its business. The Company cannot predict the outcome of any litigation or suit to which it is a party. However, the Company does not believe that an unfavorable decision of any of the current claims or legal actions against it, individually or in the aggregate, will have a material adverse effect on its financial position, results of operations, liquidity or capital resources.

Sale-Leaseback

On May 31, 2019, OBO Ventures, Inc. (“OBO”), a wholly owned subsidiary of the Company, entered into a sale-leaseback transaction with an unaffiliated third-party involving 12 former Toys “R” Us store locations which were acquired by OBO on August 29, 2018. OBO received approximately $42.0 million for the 12 locations, which resulted in no net gain or loss. Each of the 12 leased location has 15-year lease terms with options for renewal and are included in operating lease liabilities in the accompanying condensed consolidated balance sheets.