Recent Accounting Pronouncements

3 Months Ended

May 04, 2019

ASU 2018-12 Transition [Abstract]

Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block]

Note 3. Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-02, Leases (Topic 842). Lessees are required to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liability is equal to the present value of lease payments. The asset is based on the liability, subject to certain adjustments, such as for initial direct costs. For income statement purposes, a dual model was retained, requiring leases to be classified as either operating or finance leases. Operating leases result in straight-line expense (similar to operating leases under the prior accounting standard) while finance leases result in a frontloaded expense pattern (similar to capital leases under the prior accounting standard).

The Company adopted this new accounting standard on February 3, 2019 on a modified retrospective basis and applied the new standard to all leases greater than one year. As a result, comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which includes, among other things, the ability to carry forward the existing lease classification. The Company does not engage in any Lessor transactions, and as a Lessee, the Company does not have any finance leases. As a result, the new standard had a material impact on the unaudited condensed consolidated balance sheet, but did not materially impact the Company’s consolidated operating results and did not materially impact the Company’s cash flows.

The following is a discussion of the Company’s lease policy under the new lease accounting standard:

The Company determines if an arrangement contains a lease at the inception of a contract. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of the remaining future minimum lease payments. As the interest rate implicit in the Company’s leases is not readily determinable, the Company utilizes its incremental borrowing rate to discount the lease payments. The operating lease right-of-use assets also include lease payments made before commencement and exclude lease incentives. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet and lease expense is recognized on a straight-line basis over the term of the short-term lease.

For real estate leases, the Company accounts for lease components and non-lease components as a single lease component. Certain real estate leases require additional payments based on reimbursement for real estate taxes, common area maintenance and insurance, which are expensed as incurred as variable lease costs. Other real estate leases contain one fixed lease payment that includes real estate taxes, common area maintenance and insurance. These fixed payments are considered part of the lease payment and included in the right-of-use assets and lease liabilities.

We elected the following practical expedients permitted under the lease standard: We do not record leases with an initial term of 12 months or less on the balance sheet but continue to expense them on a straight-line basis over the lease term. As of May 4, 2019, 157 leases were short-term in nature and were exempt from being recorded on the balance sheet.

The Company leases its 181,300 square foot distribution center/office facility in Albany, New York from an entity controlled by the estate of Robert J. Higgins, its former Chairman and largest shareholder. The distribution center/office lease commenced on January 1, 2016, and expires on December 31, 2020. Under the lease, accounted for as an operating lease, the Company is responsible for monthly payments in the amount of $103 thousand a month. Under the terms of the lease agreement, the Company is also responsible for property taxes and other operating costs with respect to the premises.

Impact of New Lease Standard on Balance Sheet Line Items

As a result of applying the new lease standard using a modified retrospective method, the following adjustments were made to accounts on the condensed consolidated balance sheet as of February 3, 2019:

	Impact of Change in Accounting Policy
	As Reported February 2, 2019		Adjustments		Adjusted February 3, 2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	4,355	$	-	$	4,355
Restricted cash		4,126		-		4,126
Accounts receivable		5,383		-		5,383
Merchandise inventory		94,842		-		94,842
Prepaid expenses and other current assets		6,657		(748)		5,909
Total current assets		115,363		(748)		114,615
Restricted cash		5,745		-		5,745
Fixed assets, net		7,529		-		7,529
Operating lease right-of-use assets		-		28,044		28,044
Intangible assets, net		3,668		-		3,668
Other assets		5,708		-		5,708
TOTAL ASSETS	$	138,013	$	27,296	$	165,309
LIABILITIES
CURRENT LIABILITIES
Accounts payable	$	34,329	$	-	$	34,329
Accrued expenses and other current liabilities		8,132		(1,319)		6,813
Deferred revenue		6,955		-		6,955
Current portion of operating lease liabilities		-		9,064		9,064
Total current liabilities		49,416		7,745		57,161
Operating lease liabilities		-		22,728		22,728
Other long-term liabilities		24,867		(3,177)		21,690
TOTAL LIABILITIES		74,283		27,296		101,579
SHAREHOLDERS’ EQUITY
Preferred stock ($0.01 par value; 5,000,000 shares authorized; none issued)		-		-		-
Common stock ($0.01 par value; 200,000,000 shares authorized; 64,436,671, 64,436,671 and 64,369,171 shares issued, respectively)		644		-		644
Additional paid-in capital		344,214		-		344,214
Treasury stock at cost (28,177,832, 28,177,832 and 28,156,601 shares, respectively)		(230,166)		-		(230,166)
Accumulated other comprehensive loss		(735)		-		(735)
(Accumulated deficit) Retained earnings		(50,227)		-		(50,227)
TOTAL SHAREHOLDERS’ EQUITY		63,730		-		63,730
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	138,013	$	27,296	$	165,309

The following table is a summary of the Company’s components of net lease cost for the three months ended May 4, 2019:

Lease Cost

(amounts in thousands)	Classification	Three Months Ended May 4, 2019
Operating lease cost	Selling, general and administrative expense (SG&A)	$	4,627
Variable lease cost	Selling, general and administrative expense (SG&A)		125
Net lease cost		$	4,752

As of May 4, 2019, future lease payments were as follows:

(amounts in thousands)		Operating Leases
2019 (remaining nine months)	$	7,859
2020		10,544
2021		7,057
2022		2,923
2023		2,069
Thereafter		2,071
Total lease payments		32,966
Less: amounts representing interest		(2,933)
Present value of lease liabilities	$	29,590

Lease term and discount rate are as follows:

	May 4, 2019
Weighted-average remaining lease term (years)
Operating leases		1.4
Weighted-average discount rate
Operating leases		5	%

Other information:

	Three Months Ended
(amounts in thousands)	May 4,
	2019
Cash paid for amounts included in the measurement of these liabilities
Operating cash flows from operating leases	$	2,202

As determined prior to the adoption of the new lease standard, the future minimum lease payments under operating leases in effect as of February 2, 2019 were as follows:

(amounts in thousands)
2019	$	24,426
2020		8,393
2021		5,239
2022		1,881
2023		1,137
Thereafter		1,060
Total minimum lease payments	$	42,136