AMERICAN EAGLE OUTFITTERS, INC. This section of this Form 10-K generally discusses 2019 and 2018 and year-to-year comparisons between 2019 and 2018. Discussions of 2017 and year-to-year comparisons between 2018 and 2017 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II. Item 7 of our Annual Report on Form 10-K for the fiscal year endedFebruary 2, 2019 .
Critical Accounting Policies and Estimates
Our Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted inthe United States ("GAAP"), which require us to make estimates and assumptions that may affect the reported financial condition and results of operations should actual results differ from these estimates and assumptions. We base our estimates and assumptions on the best available information and believe them to be reasonable for the circumstances. We believe that of our significant accounting policies, the following involve a higher degree of judgment and complexity. Refer to Note 2 to the Consolidated Financial Statements for a complete discussion of our significant accounting policies. Management has reviewed these critical accounting policies and estimates with the Audit Committee of our Board of Directors. Revenue Recognition. InMay 2014 , theFinancial Accounting Standards Board ("FASB") issued Accounting Standard Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC 606"). The Company adopted ASC 606 onFebruary 4, 2018 using the modified retrospective method applied to all contracts as ofFebruary 4, 2018 . Results for reporting periods beginning on or afterFebruary 4, 2018 are presented under ASC 606. Prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting practices, and a cumulative adjustment was made to retained earnings. Revenue is recorded for store sales upon the purchase of merchandise by customers. The Company's e-commerce operation records revenue upon the estimated customer receipt date of the merchandise. Shipping and handling revenues are included in total net revenue. Sales tax collected from customers is excluded from revenue and is included as part of accrued income and other taxes on the Company's Consolidated Balance Sheets. Revenue is recorded net of estimated and actual sales returns and deductions for coupon redemptions and other promotions. The Company records the impact of adjustments to its sales return reserve quarterly within total net revenue and cost of sales. The sales return reserve reflects an estimate of sales returns based on projected merchandise returns determined using historical average return percentages. Revenue is not recorded on the issuance of gift cards. A current liability is recorded upon issuance, and revenue is recognized when the gift card is redeemed for merchandise. Additionally, the Company recognizes revenue on unredeemed gift cards based on an estimate of the amounts that will not be redeemed ("gift card breakage"), determined through historical redemption trends. Gift card breakage revenue is recognized in proportion to actual gift card redemptions as a component of total net revenue.
The Company recognizes royalty revenue generated from its license or franchise agreements based upon a percentage of merchandise sales by the licensee/franchisee. This revenue is recorded as a component of total net revenue when earned.
Merchandise Inventory. Merchandise inventory is valued at the lower of average
cost or net realizable value, utilizing the retail method. Average cost includes
merchandise design and sourcing costs and related expenses. The Company records
merchandise receipts when control of the merchandise has transferred to the
Company.
We review our inventory in order to identify slow-moving merchandise and
generally use markdowns to clear merchandise. Additionally, we estimate a
markdown reserve for future planned markdowns related to current inventory. If
inventory exceeds customer demand for reasons of style, seasonal adaptation,
changes in customer preference, lack of consumer acceptance of fashion items,
competition, or if it is determined that the inventory in stock will not sell at
its currently ticketed price, additional markdowns may be necessary. These
markdowns may have a material adverse impact on earnings, depending on the
extent and amount of inventory affected.
We estimate an inventory shrinkage reserve for anticipated losses for the period
between the last physical count and the balance sheet date. The estimate for the
shrinkage reserve is calculated based on historical percentages and can be
affected by changes in merchandise mix and changes in actual shrinkage trends.
We do not believe there is a reasonable likelihood that there will be a material
change in the future estimates or assumptions we use to calculate our inventory
shrinkage reserve. However, if actual physical inventory losses differ
significantly from our estimate, our operating results could be adversely
affected.
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Asset Impairment. In accordance with ASC 360, Property, Plant, and Equipment
("ASC 360"), we evaluate the value of leasehold improvements, store fixtures,
and operating lease right-of-use assets associated with retail stores that have
been open for a period sufficient to reach maturity. We evaluate long-lived
assets for impairment at the individual retail store level, which is the lowest
level at which individual cash flows can be identified. Impairment losses are
recorded on long-lived assets used in operations when events and circumstances
indicate that the assets might be impaired and the projected undiscounted cash
flows estimated to be generated by those assets are less than the carrying
amounts. When events such as these occur, the impaired assets are adjusted to
their estimated fair value and an impairment loss is recorded separately as a
component of operating income.
Our impairment loss calculations require management to make assumptions and to
apply judgment to estimate future cash flows and asset fair values. Significant
assumptions used in our projected undiscounted cash flows analyses include
revenue growth rates and expense reductions. Additionally, significant
assumptions utilized in our fair value analyses include the aforementioned
assumptions, as well as market participant real estate assumptions and discount
rate. We do not believe there is a reasonable likelihood that there will be a
material change in the estimates or assumptions we use to calculate long-lived
asset impairment losses. However, if actual results are not consistent with our
estimates and assumptions, our operating results could be adversely affected.
Share-Based Payments. We account for share-based payments in accordance with ASC
718, Compensation - Stock Compensation ("ASC 718"). To determine the fair value
of our stock option awards, we use the Black-Scholes option-pricing model, which
requires management to apply judgment and make assumptions to determine the fair
value of our awards. These assumptions include estimating the length of time
employees will retain their vested stock options before exercising them (the
"expected term") and the estimated volatility of the price of our common stock
over the expected term.
We calculate a weighted-average expected term based on historical experience.
Expected stock price volatility is based on historical volatility of our common
stock. Changes in these assumptions can materially affect the estimate of the
fair value of our share-based payments and the related amount recognized in our
Consolidated Financial Statements.
Income Taxes. We calculate income taxes in accordance with ASC 740, Income Taxes
("ASC 740"), which requires the use of the asset and liability method. Under
this method, deferred tax assets and liabilities are recognized based on the
difference between the Consolidated Financial Statement carrying amounts of
existing assets and liabilities and their respective tax bases as computed
pursuant to ASC 740. Deferred tax assets and liabilities are measured using the
tax rates, based on certain judgments regarding enacted tax laws and published
guidance, in effect in the years when those temporary differences are expected
to reverse. A valuation allowance is established against the deferred tax assets
when it is more likely than not that some portion or all of the deferred taxes
may not be realized. Changes in our level and composition of earnings, tax laws
or the deferred tax valuation allowance, as well as the results of tax audits,
may materially impact the effective income tax rate.
We evaluate our income tax positions in accordance with ASC 740, which
prescribes a comprehensive model for recognizing, measuring, presenting, and
disclosing in the financial statements tax positions taken or expected to be
taken on a tax return, including a decision whether to file or not to file in a
particular jurisdiction. Under ASC 740, a tax benefit from an uncertain position
may be recognized only if it is more likely than not that the position is
sustainable based on its technical merits.
The calculation of the deferred tax assets and liabilities, as well as the
decision to recognize a tax benefit from an uncertain position and to establish
a valuation allowance require management to make estimates and assumptions. We
believe that our assumptions and estimates are reasonable, although actual
results may have a positive or negative material impact on the balances of
deferred tax assets and liabilities, valuation allowances or net income.
Key Performance Indicators
Our management evaluates the following items, which are considered key performance indicators, in assessing our performance:
Comparable sales - Comparable sales and comparable sales changes provide a
measure of sales growth for stores and channels open at least one year over the
comparable prior year period. In fiscal years following those with 53 weeks,
including Fiscal 2018, the prior year period is shifted by one week to compare
similar calendar weeks.
A store is included in comparable sales in its thirteenth month of operation.
When stores have a gross square footage increase of 25% or greater due to a
remodel, they are removed from the comparable sales base, but are included in
total sales. These stores are returned to the comparable sales base in the
thirteenth month following the remodel.
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Sales from company-owned stores, as well as sales from AEO Direct, are included
in total comparable sales. Sales from licensed stores are not included in
comparable sales. Individual American Eagle and Aerie brand comparable sales
disclosures represent sales from stores and AEO Direct. AEO Direct sales are
included in the individual American Eagle and Aerie brand comparable sales
metric for the following reasons:
• Our approach to customer engagement is "omni-channel," which provides a
seamless customer experience through both traditional and non-traditional
channels, including four wall store locations, web, mobile/tablet devices and
apps, social networks, email, in-store displays and kiosks. Additionally, we
fulfill online orders at stores through our buy online, ship from store
capability, maximizing store inventory exposure to digital traffic and accept
digital returns in stores; and
• Shopping behavior has continued to evolve across multiple channels that work
in tandem to meet customer needs. Management believes that presenting a brand
level performance metric that includes all channels (i.e., stores and AEO
Direct) to be the most appropriate given customer behavior.
Our management considers comparable sales to be an important indicator of our current performance, and investors may find it useful as such. Comparable sales results are important to achieve leveraging of our costs, including store payroll, store supplies, rent, etc. Comparable sales also have a direct impact on our total net revenue, cash, and working capital. Gross profit - Gross profit measures whether we are optimizing the profitability of our sales. Gross profit is the difference between total net revenue and cost of sales. Cost of sales consists of merchandise costs, including design, sourcing, importing, and inbound freight costs, as well as markdowns, shrinkage and certain promotional costs (collectively "merchandise costs") and buying, occupancy and warehousing costs. Design costs consist of compensation, rent, depreciation, travel, supplies, and samples. Buying, occupancy and warehousing costs consist of: compensation, employee benefit expenses and travel for our buyers and certain senior merchandising executives; rent and utilities related to our stores, corporate headquarters, distribution centers and other office space; freight from our distribution centers to the stores; compensation and supplies for our distribution centers, including purchasing, receiving and inspection costs; and shipping and handling costs related to our e-commerce operations.
The inability to obtain acceptable levels of sales, initial markups or any significant increase in our use of markdowns could have an adverse effect on our gross profit and results of operations.
Operating income - Our management views operating income as a key indicator of our performance. The key drivers of operating income are comparable sales, gross profit, our ability to control selling, general, and administrative expenses, and our level of capital expenditures. Omni-channel sales performance - Our management utilizes the following quality of sales metrics in evaluating our omni-channel sales performance: comparable sales, average unit retail price, total transactions, units per transaction, and consolidated comparable traffic. We include these metrics in our discussion within Item 7 of this report when we believe they enhance the understanding of the matter being discussed. Investors may find them useful as such. Each of these metrics is defined as follows (except comparable sales, which is defined separately above):
• Average unit retail price represents the selling price of our goods. It is
the cumulative net sales divided by the net units sold for a period of time.
• Total transactions represents the count of customer transactions over a
period of time (inclusive of company-owned stores and AEO Direct, unless
specified otherwise).
• Units per transaction represents the number of units sold divided by total
transactions over a period of time (inclusive of company-owned stores and AEO
Direct, unless specified otherwise).
• Consolidated comparable traffic represents visits to our company-owned
stores, limited to those stores that qualify to be included in comparable
sales as defined above, including AEO Direct, over a period of time.
Cash flow and liquidity - Our management evaluates cash flow from operations,
investing and financing in determining the sufficiency of our cash position and
capital allocation strategies. Cash flow has historically been sufficient to
cover our uses of cash. Our management believes that cash flow will be
sufficient to fund anticipated capital expenditures, dividends, and working
capital requirements.
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--------------------------------------------------------------------------------Results of Operations Overview Fiscal 2019 represented a challenging year; however, we were able to make good progress on our strategic pillars, posting record revenues. We saw strong customer engagement and positive traffic across brands and channels. Aerie delivered exceptional growth and has significant growth opportunity ahead. American Eagle saw growth in its signature jeans and bottoms categories. Total net revenue for the year increased 7% to$4.308 billion , compared to$4.036 billion last year. Total comparable sales increased 3%. By brand, American Eagle comparable sales were up slightly and comparable sales for Aerie increased 20%. Gross profit increased 2% to$1.522 billion and declined by 160 basis points to 35.3% as a percentage of revenue. Net income was$1.12 per diluted share this year, compared to$1.47 per diluted share last year. On an adjusted basis, net income per diluted share this year was flat to last year at$1.48 . Adjusted net income per diluted share this year excludes$0.36 of impairment, restructuring, and related charges. Adjusted net income per diluted share last year excludes$0.01 of restructuring charges. The preceding paragraph contains a discussion of earnings per share, excluding non-GAAP items, which is a non-GAAP or "adjusted" financial measure. This financial measure is not based on any standardized methodology prescribed byU.S. generally accepted accounting principles ("GAAP") and is not necessarily comparable to similar measures presented by other companies. We believe that this non-GAAP information more clearly reflects our financial results and is useful as an additional means for investors to evaluate our operating performance, when reviewed in conjunction with our GAAP financial statements. These amounts are not determined in accordance with GAAP and, therefore, should not be used exclusively in evaluating our business and operations. The table below reconciles the GAAP financial measure to the non-GAAP financial measure discussed above. Earnings per Share For the Fiscal Year EndedFebruary 1, 2020 Net income per diluted share - GAAP Basis $
1.12
Add: Asset Impairment & Restructuring (1)
0.36
Net income per diluted share - Non-GAAP Basis $
1.48
(1)
-
assets and a
-
severance,
transition costs in
to Company-owned and operated stores.
- GAAP tax rate included the impact of valuation allowances on impairment and
restructuring charges. Excluding the impact of those items resulted in a 22.5% tax
rate
for the year.
Earnings per Share
For the Fiscal
Year Ended
February 2,
2019
Net income per diluted share - GAAP Basis $ 1.47
Add: Restructuring (1)
0.01
Net income per diluted share - Non-GAAP Basis $
1.48
(1)
25
-------------------------------------------------------------------------------- We ended the year with$416.9 million in cash and short-term investments, a 2% decrease from$425.5 million in cash and short-term investments as of the end of the prior fiscal year. During Fiscal 2019, we generated$415.4 million of cash from operations, which was offset by$210.4 million of capital expenditures, the repurchase of 6.3 million shares for$112.4 million and dividend payments of$92.8 million . Merchandise inventory at the end of Fiscal 2019 was$446.3 million , an increase of 5% as compared to Fiscal 2018. We ended Fiscal 2019 with no short or long-term debt.
The following table shows, for the periods indicated, the percentage relationship to total net revenue of the listed items included in our Consolidated Statements of Operations.
For the Fiscal Years Ended
February 1, February 2, February 3,
2020 2019 2018
Total net revenue 100.0 % 100.0 % 100.0 %
Cost of sales, including certain buying,
occupancy
and warehousing expenses 64.7 63.1 63.9
Gross profit 35.3 36.9 36.1
Selling, general and administrative
expenses 23.9 24.3 23.2
Impairment and restructuring charges 1.9 0.0 0.5
Depreciation and amortization expense 4.1 4.2 4.4
Operating income 5.4 8.4 8.0
Other income (expense), net 0.3 0.2 (0.4 )
Income before income taxes 5.7 8.6 7.6
Provision for income taxes 1.3 2.1 2.2
Net income 4.4 % 6.5 % 5.4 %
Comparison of Fiscal 2019 to Fiscal 2018
Total Net Revenue
Total net revenue for Fiscal 2019 increased 7% to$4.308 billion compared to$4.036 billion for Fiscal 2018. For Fiscal 2019, total comparable sales increased 3% compared to an 8% increase for Fiscal 2018. Included in total net revenue this year is$40.0 million recognized for license royalties from a third-party operator of AE stores inJapan .
By brand, including the respective AEO Direct sales, American Eagle brand
comparable sales were up slightly, or
For the year, consolidated comparable traffic increased in the high single digits and total transactions increased in the high-single digits. Units per transaction increased slightly and average unit retail price decreased in the low-single digits. Gross Profit Gross profit increased 2% to$1.522 billion for Fiscal 2019 from$1.488 billion for Fiscal 2018. The gross profit margin declined 160 basis points to a 35.3% of total net revenue. Higher markdowns were the primary cause of the decline compared to last year. Increased distribution center and delivery costs also contributed to the decline.
There was
Our gross profit may not be comparable to that of other retailers, as some retailers include all costs related to their distribution network, as well as design costs, in cost of sales, and others may exclude a portion of these costs from cost of sales, including them in a line item such as selling, general, and administrative expenses. Refer to Note 2 to the Consolidated Financial Statements for a description of our accounting policy regarding cost of sales, including certain buying, occupancy and warehousing expenses.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses increased 5% to$1.029 billion for Fiscal 2019, compared to$980.6 million for Fiscal 2018. As a percentage of total net revenue, selling, general, and administrative expenses decreased 40 basis points to 23.9%, compared to 24.3% for Fiscal 2018. Increased expenses for Fiscal 2019 were driven mainly by higher store salaries and professional fees, partially offset by lower incentive expense. 26 --------------------------------------------------------------------------------
There was
Impairment and Restructuring Charges
In Fiscal 2019, total impairment and restructuring charges were$80.5 million . We recorded asset impairment charges of$64.5 million on the assets of 20 retail stores. Of the total,$39.5 million related to the impairment of leasehold improvements and store fixtures, and$25.0 million related to the impairment of operating lease right-of-use assets. We also concluded that certain goodwill was impaired resulting in a$1.7 million charge. Refer to Note 2 to the Consolidated Financial Statements for a description of our accounting policy regarding operating leases. Additionally, we recorded$6.7 million for corporate and field severance,$4.2 million of charges related to the planned exit of a joint business venture,$1.8 million related toJapan market transition costs, and$1.5 million ofChina severance and closure costs related to Company-owned stores.
In Fiscal 2018, restructuring charges were
Depreciation and Amortization Expense
Depreciation and amortization expense increased 6% to$179.1 million for Fiscal 2019 from$168.3 million for Fiscal 2018, driven by omni-channel and information technology investments and new and remodeled mainline AE stores. As a percentage of total net revenue, depreciation and amortization expense decreased 10 basis points to 4.1% from 4.2% for Fiscal 2018.
Other Income (Expense), Net
Other income was$11.9 million for Fiscal 2019, compared to other income of$8.0 million for Fiscal 2018. The increase was primarily attributable to increased interest income and foreign currency fluctuations.
Provision for Income Taxes
The effective income tax rate decreased to 22.0% for Fiscal 2019 from 24.1% for Fiscal 2018. The lower effective income tax rate this year primarily resulted from favorable federal and state legislative changes including tax reform guidance and a reduction in nondeductible executive compensation, offset by a reduction in excess tax benefits from share-based payments. Our effective income tax rate is also dependent upon the overall mix of earnings in jurisdictions with different tax rates. Refer to Notes 2 and 14 to the Consolidated Financial Statements for additional information regarding our accounting for income taxes.
Net Income
Net income decreased to$191.3 million for Fiscal 2019 from$261.9 million for Fiscal 2018. The change in net income was attributable to the factors described above. As a percentage of total net revenue, net income was 4.4% and 6.5% for Fiscal 2019 and Fiscal 2018, respectively. Net income per diluted share was$1.12 and included$80.5 million ($0.36 per diluted share) of pre-tax impairment, restructuring, and related charges.
Net income per diluted share for Fiscal 2018 was
Fair Value Measurements
ASC 820, Fair Value Measurement Disclosures ("ASC 820") defines fair value,
establishes a framework for measuring fair value in accordance with GAAP, and
expands disclosures about fair value measurements. Fair value is defined under
ASC 820 as the exit price associated with the sale of an asset or transfer of a
liability in an orderly transaction between market participants at the
measurement date:
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Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. In addition, ASC 820 establishes this three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:
• Level 1 - Quoted prices in active markets.
• Level 2 - Inputs other than Level 1 that are observable, either directly or
indirectly.
• Level 3 - Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets or
liabilities.
Our financial assets (cash and cash equivalents and short-term investments) are required to be measured at fair value on a recurring basis. The following table represents the fair value hierarchy for our financial assets as ofFebruary 1, 2020 . Fair Value
Measurements at
Quoted Market
Prices in Active
Markets for Significant
Identical Significant Other Unobservable
Assets Observable Inputs Inputs
(In thousands) Carrying Amount (Level 1) (Level 2) (Level 3)
Cash and cash equivalents
Cash $ 126,087 $ 126,087 - -
Interest bearing deposits 235,843 235,843 - -
Total cash and cash equivalents $ 361,930 $ 361,930 - -
Short-term investments
Certificates of deposits 55,000 55,000 - -
Total short-term investments 55,000 55,000 - -
Total $ 416,930 $ 416,930 - -
Liquidity and Capital Resources
Our uses of cash are generally for working capital, the construction of new stores and remodeling of existing stores, information technology and e-commerce upgrades and investments, distribution center improvements and expansion and the return of value to shareholders through the repurchase of common stock and the payment of dividends. Additionally, our uses of cash include the development of the Aerie brand, investments in technology and omni-channel capabilities, and our international expansion efforts. We also make key investments in the customer experience and our associates, including store payroll and higher wages, as well as incremental advertising expenses. Historically, these uses of cash have been funded with cash flow from operations and existing cash on hand. Also, we maintain an asset-based revolving credit facility that allows us to borrow up to$400 million , which will expire in January of 2024. We expect to be able to fund our future cash requirements through current cash holdings as well as cash generated from operations. Our growth strategy includes fortifying our brands and further e-commerce and store expansion or acquisitions. We periodically consider and evaluate these options to support future growth. In the event we do pursue such options, we could require additional equity or debt financing. There can be no assurance that we would be successful in closing any potential transaction, or that any endeavor we undertake would increase our profitability.
The following sets forth certain measures of our liquidity:
February 1, February 2,
2020 2019
Working Capital (in 000's) $ 296,174 $ 503,608
Current Ratio 1.39 1.93
Working capital as of February 1, 2020 decreased $207.4 million compared to
February 2, 2019 . The adoption of ASC 842, Leases, decreased working capital by
$246.5 million , due to the addition of $299.2 million of operating lease
liabilities (current portion), offset by $52.6 million of current deferred rent
balances. Excluding the impact of the adoption of ASC 842, there was a $39.1
million increase in working capital on February 1, 2020 compared to February 2,
2019 primarily driven by a $38.6 million decrease in accrued compensation, a
$24.6 million increase in accounts receivable, a $21.9 million increase in
inventory, and a $10.6 million decrease in accrued taxes, partially offset by a
$45.1 million increase in accounts payable, and a $8.5 million decrease in cash
and short-term investments.
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Cash Flows from Operating Activities of Operations
Net cash provided by operating activities totaled$415.4 million during Fiscal 2019, compared to$456.6 million during Fiscal 2018. For both periods, our major source of cash from operations was merchandise sales and our primary outflow of cash from operations was for the payment of operational costs.
Cash Flows from Investing Activities of Operations
Investing activities for Fiscal 2019 included$210.4 million in capital expenditures for property and equipment partially offset by$37.1 million of net short-term investment sales. Investing activities for Fiscal 2018 included$189.0 million in capital expenditures for property and equipment and$93.1 million of net short-term investment purchase, classified as available for sale. For further information on capital expenditures, refer to the Capital Expenditures for Property and Equipment caption below.
Cash Flows from Financing Activities of Operations
During Fiscal 2019, cash used for financing activities primarily consisted of$112.4 million of purchases of common stock under publically announced programs,$92.8 million for the payment of dividends, and$8.1 million for the repurchase of common stock from employees for the payment of taxes in connection with the vesting of share-based payments. During Fiscal 2018, cash used for financing activities primarily consisted of$144.4 million for purchases of common stock under publically announced programs,$97.1 million for the payment of dividends, and$19.7 million for the repurchase of common stock from employees for the payment of taxes in connection with the vesting of share-based payments.
Cash returned to shareholders through dividends and share repurchases was
Capital Expenditures for Property and Equipment
Fiscal 2019 capital expenditures were$210.4 million , compared to$189.0 million in Fiscal 2018. Fiscal 2019 expenditures included$124.8 million related to investments in our stores, including 66 AEO stores (27 AE, 37 Aerie stand-alone, 1 Tailgate, and 1 Todd Snyder), 45 remodeled and refurbished stores, and fixtures and visual investments. Additionally, we continued to support our infrastructure growth by investing in e-commerce ($34.2 million ), information technology ($31.1 million , our distribution centers ($15.0 million ), and other home office projects ($5.3 million ).
For Fiscal 2020, we expect capital expenditures to be in the range of
Credit Facilities
InJanuary 2019 , we entered into a credit agreement ("Credit Agreement") for five-year, syndicated, asset-based revolving credit facilities (the "Credit Facilities"). The Credit Agreement provides senior secured revolving credit for loans and letters of credit up to$400 million , subject to customary borrowing base limitations. The Credit Facilities provide increased financial flexibility and take advantage of a favorable credit environment. All obligations under the Credit Facilities are unconditionally guaranteed by certain subsidiaries. The obligations under the Credit Agreement are secured by a first-priority security interest in certain working capital assets of the borrowers and guarantors, consisting primarily of cash, receivables, inventory, and certain other assets and have been further secured by first-priority mortgages on certain real property. As ofFebruary 1, 2020 , we were in compliance with the terms of the Credit Agreement and had$7.9 million outstanding in stand-by letters of credit. No loans were outstanding under the Credit Facilities as ofFebruary 1, 2020 or at any time throughout Fiscal 2019. 29 --------------------------------------------------------------------------------
Stock Repurchases
During Fiscal 2019, as part of our publicly announced share repurchase program, we repurchased 6.3 million shares for approximately$112.4 million , at a weighted average price of$17.74 per share. During Fiscal 2018, we repurchased 7.3 million shares for approximately$144.4 million shares at a weighted average price of$19.76 per share. As ofFebruary 1, 2020 , 5.4 million shares remained available under the share repurchase program authorized by our Board inApril 2016 that expires onJanuary 30, 2021 . During Fiscal 2019, our board authorized the repurchase of 30.0 million shares under a new share repurchase program, which expires onFebruary 3, 2024 , bringing our total share repurchase authorization to 35.4 million shares.
During Fiscal 2019 and Fiscal 2018, we repurchased approximately 0.4 million and
0.9 million shares, respectively, from certain employees at market prices
totaling
The aforementioned share repurchases have been recorded as treasury stock.
Dividends
A$0.1375 per share dividend was paid for each quarter of Fiscal 2019, resulting in a dividend yield of 3.1% for Fiscal 2019. During Fiscal 2018, a$0.1375 per share dividend was paid for each quarter, resulting in a dividend yield of 2.5% for Fiscal 2018. The payment of future dividends is at the discretion of our Board and is based on future earnings, cash flow, financial condition, capital requirements, changes inU.S. taxation and other relevant factors. It is anticipated that any future dividends paid will be declared on a quarterly basis.
Obligations and Commitments
Disclosure about Contractual Obligations
The following table summarizes our significant contractual obligations as ofFebruary 1, 2020 : Payments Due by Period Less than 1-3 3-5 More than (In thousands) Total 1 Year Years Years 5 Years Operating leases (1)$ 1,895,797 $ 374,819 $ 609,532 $ 440,286 $ 471,160 Unrecognized tax benefits (2) 3,528 281 - - 3,247 Purchase obligations (3) 696,684 680,409 16,275 - -
Total contractual obligations
- $ 3,247 (1) Operating lease obligations consist primarily of future minimum lease
commitments related to store operating leases (refer to Note 10 to the
Consolidated Financial Statements). Operating lease obligations do not
include common area maintenance, insurance, or tax payments for which we are
also obligated.
(2) The amount of unrecognized tax benefits as of
penalties. Unrecognized tax benefits are positions taken or expected to be
taken on an income tax return that may result in additional payments to tax
authorities. We anticipate that
will be realized within one year. The remaining balance of unrecognized tax
benefits of
are not able to reasonably estimate the timing of the potential future
payouts.
(3) Purchase obligations primarily include binding commitments to purchase
merchandise inventory, as well as other legally binding commitments, made in
the normal course of business that are enforceable and specify all
significant terms.
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Disclosure about Commercial Commitments
The following table summarizes our significant commercial commitments as of
Amount of Commitment Expiration Per Period
Total Amount Less than 1-3 3-5 More than
(In thousands) Committed 1 Year Years Years 5 Years
Standby letters of credit (1)
- - -
Total commercial commitments
- - -
(1) Standby letters of credit represent commitments guaranteed by a bank to pay
vendors to the extent previously agreed criteria are not met.
Off-Balance Sheet Arrangements
We are not a party to any off-balance sheet arrangements.
Recent Accounting Pronouncements
Recent accounting pronouncements are disclosed in Note 2 of the Consolidated Financial Statements.
Impact of Inflation Historically, fluctuations in the price of raw materials used in the manufacture of merchandise we purchase from suppliers have affected our cost of sales. These fluctuations have not had a material impact over the last three fiscal years. Future changes in these costs, in addition to increases in the price of labor, energy and other inputs to the manufacture of our merchandise, could negatively impact our business and the industry in the future.
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