Company Quick10K Filing
Zumiez
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 26 $834
10-Q 2019-12-09 Quarter: 2019-11-02
10-Q 2019-09-09 Quarter: 2019-08-03
10-Q 2019-06-10 Quarter: 2019-05-04
10-K 2019-03-18 Annual: 2019-02-02
10-Q 2018-12-10 Quarter: 2018-11-03
10-Q 2018-09-10 Quarter: 2018-08-04
10-Q 2018-06-11 Quarter: 2018-05-05
10-K 2018-03-19 Annual: 2018-02-03
10-Q 2017-12-04 Quarter: 2017-10-28
10-Q 2017-09-07 Quarter: 2017-07-29
10-Q 2017-06-06 Quarter: 2017-04-29
10-K 2017-03-13 Annual: 2017-01-28
10-Q 2016-12-06 Quarter: 2016-10-29
10-Q 2016-09-08 Quarter: 2016-07-30
10-Q 2016-06-07 Quarter: 2016-04-30
10-K 2016-03-14 Annual: 2016-01-30
10-Q 2015-12-08 Quarter: 2015-10-31
10-Q 2015-09-10 Quarter: 2015-08-01
10-Q 2015-06-09 Quarter: 2015-05-02
10-K 2015-03-17 Annual: 2015-01-31
10-Q 2014-12-09 Quarter: 2014-11-01
10-Q 2014-09-10 Quarter: 2014-08-02
10-Q 2014-05-28 Quarter: 2014-05-03
10-K 2014-03-18 Annual: 2014-02-01
10-Q 2013-09-11 Quarter: 2013-08-03
10-Q 2013-05-29 Quarter: 2013-05-04
10-K 2013-03-19 Annual: 2013-02-02
10-Q 2012-12-05 Quarter: 2012-10-27
10-Q 2012-09-05 Quarter: 2012-07-28
10-Q 2012-05-22 Quarter: 2012-04-28
10-K 2012-03-13 Annual: 2012-01-28
10-Q 2011-12-02 Quarter: 2011-10-29
10-Q 2011-09-01 Quarter: 2011-07-30
10-Q 2011-05-24 Quarter: 2011-04-30
10-K 2011-03-15 Annual: 2011-01-29
10-Q 2010-12-02 Quarter: 2010-10-30
10-Q 2010-09-01 Quarter: 2010-07-31
10-Q 2010-05-27 Quarter: 2010-05-01
10-K 2010-03-23 Annual: 2010-01-30
8-K 2020-01-13 Other Events, Exhibits
8-K 2019-12-05 Earnings, Other Events, Exhibits
8-K 2019-09-05 Earnings, Exhibits
8-K 2019-07-24 Officers
8-K 2019-06-06 Earnings, Exhibits
8-K 2019-06-05 Shareholder Vote
8-K 2019-03-14 Earnings, Exhibits
8-K 2019-02-06 Regulation FD, Exhibits
8-K 2019-01-09 Regulation FD, Exhibits
8-K 2018-12-13 Other Events
8-K 2018-12-07 Enter Agreement, Leave Agreement, Off-BS Arrangement, Exhibits
8-K 2018-12-06 Earnings, Exhibits
8-K 2018-11-07 Regulation FD, Exhibits
8-K 2018-10-10 Regulation FD, Exhibits
8-K 2018-09-06 Earnings, Exhibits
8-K 2018-08-08 Regulation FD, Exhibits
8-K 2018-07-11 Regulation FD, Exhibits
8-K 2018-06-07 Earnings, Exhibits
8-K 2018-06-06 Shareholder Vote
8-K 2018-05-09 Regulation FD, Exhibits
8-K 2018-04-11 Regulation FD, Exhibits
8-K 2018-03-15 Earnings, Exhibits
8-K 2018-02-07 Regulation FD, Exhibits
8-K 2018-01-03 Regulation FD, Exhibits
ZUMZ 2019-11-02
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3: Quantitative and Qualitative Disclosures About Market Risk
Item 4: Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 zumz-ex311_7.htm
EX-31.2 zumz-ex312_8.htm
EX-32.1 zumz-ex321_6.htm

Zumiez Earnings 2019-11-02

ZUMZ 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
ANF 1,065 3,407 2,404 3,592 2,153 75 290 795 60% 2.7 2%
BOOT 1,012 811 535 801 262 42 70 1,098 33% 15.6 5%
BKE 1,003 872 469 885 363 93 115 825 41% 7.2 11%
ZUMZ 834 882 478 995 344 53 102 764 35% 7.5 6%
GCO 699 1,756 1,171 2,371 1,150 -43 35 717 49% 20.5 -2%
CHS 497 1,626 1,077 2,051 699 -10 86 447 34% 5.2 -1%
SCVL 481 693 390 1,026 305 39 74 443 30% 6.0 6%
LE 456 1,110 797 1,405 595 10 65 759 42% 11.7 1%
CATO 404 657 323 863 346 51 72 376 40% 5.2 8%
DLTH 322 434 281 593 318 12 40 344 54% 8.6 3%

10-Q 1 zumz-10q_20191102.htm 10-Q zumz-10q_20191102.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 NOVEMBER 2, 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 December 9, 2019, there were 25,802,906 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 November 2, 2019 (unaudited) and February 2, 2019

3

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Income for the three and nine months ended November 2, 2019 and November 3, 2018

4

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended November 2, 2019 and November 3, 2018

5

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended November 2, 2019 and November 3, 2018

6

 

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended November 2, 2019 and November 3, 2018

7

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

8

 

 

 

 

 

Item 2.

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

18

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

 

 

 

 

 

Item 4.

Controls and Procedures

30

 

 

 

 

Part II.

Other Information

 

 

 

 

 

 

Item 1.

Legal Proceedings

31

 

 

 

 

 

Item 1A.

Risk Factors

31

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

31

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

31

 

 

 

 

 

Item 4.

Mine Safety Disclosures

31

 

 

 

 

 

Item 5.

Other Information

31

 

 

 

 

 

Item 6.

Exhibits

32

 

 

 

 

Signature

33

 

 

2


ZUMIEZ INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

 

November 2, 2019

 

 

February 2, 2019

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

31,929

 

 

$

52,422

 

Marketable securities

 

 

146,718

 

 

 

112,912

 

Receivables

 

 

16,790

 

 

 

17,776

 

Inventories

 

 

183,381

 

 

 

129,268

 

Prepaid expenses and other current assets

 

 

10,757

 

 

 

14,797

 

Total current assets

 

 

389,575

 

 

 

327,175

 

Fixed assets, net

 

 

115,170

 

 

 

120,503

 

Operating lease right-of-use assets

 

 

301,736

 

 

 

 

Goodwill

 

 

57,580

 

 

 

58,813

 

Intangible assets, net

 

 

14,772

 

 

 

15,260

 

Deferred tax assets, net

 

 

7,424

 

 

 

5,259

 

Other long-term assets

 

 

8,773

 

 

 

7,180

 

Total long-term assets

 

 

505,455

 

 

 

207,015

 

Total assets

 

$

895,030

 

 

$

534,190

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Trade accounts payable

 

$

73,418

 

 

$

35,293

 

Accrued payroll and payroll taxes

 

 

21,929

 

 

 

21,015

 

Income taxes payable

 

 

3,430

 

 

 

5,817

 

Deferred rent and tenant allowances

 

 

 

 

 

7,489

 

Operating lease liabilities

 

 

59,742

 

 

 

 

Other liabilities

 

 

18,815

 

 

 

23,494

 

Total current liabilities

 

 

177,334

 

 

 

93,108

 

Long-term deferred rent and tenant allowances

 

 

 

 

37,076

 

Long-term operating lease liabilities

 

 

287,400

 

 

 

 

Other long-term liabilities

 

 

3,457

 

 

 

3,550

 

Total long-term liabilities

 

 

290,857

 

 

 

40,626

 

Total liabilities

 

 

468,191

 

 

 

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; 25,805 shares issued and outstanding at November 2, 2019 and 25,521 shares issued and outstanding at February 2, 2019

 

 

159,251

 

 

 

153,066

 

Accumulated other comprehensive loss

 

 

(11,747

)

 

 

(9,224

)

Retained earnings

 

 

279,335

 

 

 

256,614

 

Total shareholders’ equity

 

 

426,839

 

 

 

400,456

 

Total liabilities and shareholders’ equity

 

$

895,030

 

 

$

534,190

 

 

See accompanying notes to condensed consolidated financial statements

 

3


ZUMIEZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

November 2, 2019

 

 

 

November 3, 2018

 

 

November 2, 2019

 

 

 

November 3, 2018

 

Net sales

 

$

 

264,022

 

 

$

 

248,795

 

 

$

 

705,376

 

 

 

 

674,052

 

Cost of goods sold

 

 

 

169,446

 

 

 

 

161,922

 

 

 

 

467,140

 

 

 

 

452,057

 

Gross profit

 

 

 

94,576

 

 

 

 

86,873

 

 

 

 

238,236

 

 

 

 

221,995

 

Selling, general and administrative expenses

 

 

 

70,266

 

 

 

 

68,479

 

 

 

 

201,285

 

 

 

 

198,613

 

Operating profit

 

 

 

24,310

 

 

 

 

18,394

 

 

 

 

36,951

 

 

 

 

23,382

 

Interest income, net

 

 

 

1,002

 

 

 

 

493

 

 

 

 

2,652

 

 

 

 

1,015

 

Other income (expense), net

 

 

 

275

 

 

 

 

(74

)

 

 

 

987

 

 

 

 

(308

)

Earnings before income taxes

 

 

 

25,587

 

 

 

 

18,813

 

 

 

 

40,590

 

 

 

 

24,089

 

Provision for income taxes

 

 

 

6,408

 

 

 

 

4,990

 

 

 

 

11,593

 

 

 

 

8,496

 

Net income

 

$

 

19,179

 

 

$

 

13,823

 

 

$

 

28,997

 

 

 

 

15,593

 

Basic earnings per share

 

$

 

0.76

 

 

$

 

0.55

 

 

$

 

1.15

 

 

 

 

0.63

 

Diluted earnings per share

 

$

 

0.75

 

 

$

 

0.55

 

 

$

 

1.14

 

 

 

 

0.62

 

Weighted average shares used in computation of earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

25,231

 

 

 

 

24,974

 

 

 

 

25,173

 

 

 

 

24,920

 

Diluted

 

 

 

25,560

 

 

 

 

25,261

 

 

 

 

25,480

 

 

 

 

25,220

 

 

See accompanying notes to condensed consolidated financial statements

 

4


ZUMIEZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

Nine Months Ended

 

 

 

November 2, 2019

 

 

November 3, 2018

 

 

 

November 2, 2019

 

 

November 3, 2018

 

Net income

 

$

19,179

 

 

$

13,823

 

 

 

$

28,997

 

 

$

15,593

 

Other comprehensive income (loss), net of tax and reclassification adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

 

817

 

 

 

(1,672

)

 

 

 

(2,881

)

 

 

(9,840

)

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

 

 

10

 

 

 

(115

)

 

 

 

358

 

 

 

(83

)

Other comprehensive income (loss), net

 

 

827

 

 

 

(1,787

)

 

 

 

(2,523

)

 

 

(9,923

)

Comprehensive income

 

$

20,006

 

 

$

12,036

 

 

 

$

26,474

 

 

$

5,670

 

 

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 August 3, 2019

 

 

25,770

 

 

$

156,625

 

 

$

(12,574

)

 

$

260,156

 

 

$

404,207

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,179

 

 

 

19,179

 

Other comprehensive income, net

 

 

 

 

 

 

 

 

 

 

827

 

 

 

 

 

 

 

827

 

Issuance and exercise of stock-based awards

 

 

35

 

 

 

1,021

 

 

 

 

 

 

 

 

 

 

 

1,021

 

Stock-based compensation expense

 

 

 

 

 

 

1,605

 

 

 

 

 

 

 

 

 

 

 

1,605

 

Balance at November 2, 2019

 

 

25,805

 

 

$

159,251

 

 

$

(11,747

)

 

$

279,335

 

 

$

426,839

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Accumulated

Other

Comprehensive

 

 

Retained

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Loss

 

 

Earnings

 

 

Total

 

Balance at August 4, 2018

 

 

25,520

 

 

$

149,961

 

 

$

(8,101

)

 

$

213,179

 

 

$

355,039

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

13,823

 

 

 

13,823

 

Other comprehensive loss, net

 

 

 

 

 

 

 

 

 

(1,787

)

 

 

 

 

 

 

(1,787

)

Issuance and exercise of stock-based awards

 

 

12

 

 

 

279

 

 

 

 

 

 

 

 

 

 

 

279

 

Stock-based compensation expense

 

 

 

 

 

 

1,418

 

 

 

 

 

 

 

 

 

 

 

1,418

 

Balance at November 3, 2018

 

 

25,532

 

 

$

151,658

 

 

$

(9,888

)

 

$

227,002

 

 

$

368,772

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28,997

 

 

 

28,997

 

Other comprehensive loss, net

 

 

 

 

 

 

 

 

 

 

(2,523

)

 

 

 

 

 

 

(2,523

)

Issuance and exercise of stock-based awards

 

 

284

 

 

 

1,366

 

 

 

 

 

 

 

 

 

 

 

1,366

 

Stock-based compensation expense

 

 

 

 

 

 

4,819

 

 

 

 

 

 

 

 

 

 

 

4,819

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,276

)

 

 

(6,276

)

Balance at November 2, 2019

 

 

25,805

 

 

$

159,251

 

 

$

(11,747

)

 

$

279,335

 

 

$

426,839

 

 

 

 

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 income

 

 

 

 

 

 

 

 

 

 

 

15,593

 

 

 

15,593

 

Other comprehensive loss, net

 

 

 

 

 

 

 

 

(9,923

)

 

 

 

 

 

(9,923

)

Issuance and exercise of stock-based awards

 

 

283

 

 

 

704

 

 

 

 

 

 

 

 

 

704

 

Stock-based compensation expense

 

 

 

 

 

4,431

 

 

 

 

 

 

 

 

 

4,431

 

Cumulative effect of accounting change under ASC 606

 

 

 

 

 

 

 

 

 

 

 

2,052

 

 

 

2,052

 

Balance at November 3, 2018

 

 

25,532

 

 

$

151,658

 

 

$

(9,888

)

 

$

227,002

 

 

$

368,772

 

 

See accompanying notes to condensed consolidated financial statements

 

6


ZUMIEZ INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended

 

 

 

November 2, 2019

 

 

November 3, 2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

28,997

 

 

$

15,593

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation, amortization and accretion

 

 

18,776

 

 

 

21,249

 

Noncash lease expense

 

 

42,960

 

 

 

 

Deferred taxes

 

 

29

 

 

 

(919

)

Stock-based compensation expense

 

 

4,819

 

 

 

4,431

 

Other

 

 

(439

)

 

 

482

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Receivables

 

 

3,190

 

 

 

(1,680

)

Inventories

 

 

(54,687

)

 

 

(63,892

)

Prepaid expenses and other assets

 

 

(934

)

 

 

(1,904

)

Trade accounts payable

 

 

38,186

 

 

 

53,037

 

Accrued payroll and payroll taxes

 

 

971

 

 

 

1,342

 

Income taxes payable

 

 

(2,586

)

 

 

(2,206

)

Deferred rent and tenant allowances

 

 

 

 

 

(1,564

)

Operating lease liabilities

 

 

(45,512

)

 

 

 

Other liabilities

 

 

(4,316

)

 

 

(6,820

)

Net cash provided by operating activities

 

 

29,454

 

 

 

17,149

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Additions to fixed assets

 

 

(13,871

)

 

 

(15,683

)

Purchases of marketable securities and other investments

 

 

(165,912

)

 

 

(116,430

)

Sales and maturities of marketable securities and other investments

 

 

132,974

 

 

 

115,536

 

Net cash used in investing activities

 

 

(46,809

)

 

 

(16,577

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from revolving credit facilities

 

 

 

 

 

32,776

 

Payments on revolving credit facilities

 

 

 

 

 

(27,651

)

Proceeds from issuance and exercise of stock-based awards

 

 

1,604

 

 

 

899

 

Payments for tax withholdings on equity awards

 

 

(238

)

 

 

(195

)

Net cash provided by financing activities

 

 

1,366

 

 

 

5,829

 

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

 

 

(242

)

 

 

(777

)

Net (decrease) increase in cash, cash equivalents, and restricted cash

 

 

(16,231

)

 

 

5,624

 

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

 

 

54,271

 

 

 

25,803

 

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

 

$

38,040

 

 

$

31,427

 

Supplemental disclosure on cash flow information:

 

 

 

 

 

 

 

 

Cash paid during the period for income taxes

 

$

14,024

 

 

$

11,893

 

Accrual for purchases of fixed assets

 

 

1,412

 

 

 

1,477

 

 

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 November 2, 2019, we operated 718 stores; 608 in the United States (“U.S.”), 52 in Canada, 47 in Europe, and 11 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 November 2, 2019 and November 3, 2018 were 13-week periods. The nine months ended November 2, 2019 and November 3, 2018 were 39-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

 

 

 

 

 

 

 

 

 

 

 

 

 

November 2, 2019

 

 

November 3, 2018

 

Cash and cash equivalents

 

$

 

31,929

 

 

$

29,640

 

Restricted cash included in other long-term assets

 

 

 

6,111

 

 

 

1,787

 

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

 

$

 

38,040

 

 

$

31,427

 

 

8


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

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 for the fiscal year beginning February 3, 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 was 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

 

 

Nine Months Ended

 

 

 

November 2, 2019

 

 

November 3, 2018

 

 

November 2, 2019

 

 

November 3, 2018

 

United States

 

$

 

221,800

 

 

$

210,690