EXPRESS, INC. The following discussion summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity, and cash flows of the Company as of the dates and for the periods presented below. The following discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the year endedFebruary 1, 2020 and our unaudited Consolidated Financial Statements and the related notes included in Item 1 of this Quarterly Report on Form 10-Q ("Quarterly Report"). This discussion contains forward-looking statements that are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors. See " Forward-Looking Statements ." Our management's discussion and analysis of financial condition and results of operations is presented in the following sections: Page Overview 21 COVID-19 Pandemic 21 Financial Highlights 22 Business Outlook 23 How We Assess the Performance of Our Business 24 Results of Operations 26 Liquidity and Capital Resources 29 Contractual Obligations 30 Critical Accounting Policies 30 OVERVIEW Express is a leading fashion brand for women and men. Since 1980, Express has provided the latest apparel and accessories to help customers build a wardrobe for every occasion, offering fashion and quality at an attractive value. The Company operates 594 retail and factory outlet stores inthe United States andPuerto Rico , as well as an online destination.
COVID-19 PANDEMIC
InMarch 2020 , theWorld Health Organization declared the novel strain of coronavirus ("COVID-19") a global pandemic and recommended containment and mitigation measures. In response to the pandemic, many states and localities in which we operate have issued stay-at-home orders and other social distancing measures. EffectiveMarch 17, 2020 , we temporarily closed all of our retail and factory outlet stores and offices, and as a result all store associates and a number of home office employees were furloughed. As mandated shutdowns and stay-at-home orders went into effect across the country, we experienced an immediate reduction in sales levels compared to the prior year. In response to the uncertainty of the circumstances described above, and in accordance with the latest federal and state guidelines, we continue to implement plans to adapt to changing circumstances arising from this pandemic and have implemented the following actions to provide a safe and comfortable environment for our associates and customers: ?Training associates on the new health and safety protocols ?Practicing proper social distancing, and providing contact-free customer service and payment options ?Implementing enhanced cleaning and sanitizing procedures across all stores ?Designating a maximum capacity for each store ?Installing Plexiglas shields at all checkout counters ?Requiring all associates to wear face coveringsEXPRESS, INC. | Q1 2020 Form 10-Q | 21 -------------------------------------------------------------------------------- Table of Contents ?Offering curbside pickup atEaston inColumbus, OH andChicago, IL test locations with a plan to expand to more stores ?Introducing enhanced buy online pick-up in stores ("BOPIS") customer experience in select reopened stores, with plans to roll out to the entire store base by the end of the third quarter We are taking a phased approach with respect to store openings, with the pace and staffing calibrated to mall traffic and consumer demand, and the overall plan may be accelerated or modified based on updated guidance from local, state and federal government officials or new measures to ensure associate and customer safety. As ofJune 3, 2020 , we have re-opened approximately 300 stores in theU.S. We are continuously monitoring the performance of our stores to ensure the locations are sustainable during the pandemic.
We have also enhanced our liquidity position through several actions. In
To further improve our liquidity, we have also significantly reduced expenses, capital expenditures and working capital; this included inventory reductions, furloughing most store associates and a number of corporate associates while stores were closed, suspending merit pay increases, and freezing hiring. See " Liquidity and Capital Resources " included elsewhere in this Quarterly Report for more information. There can be no assurance as to the time required to fully recover operations and sales to pre-pandemic levels. As we begin to re-open, we will work closely with local authorities and our landlords, and comply withCenters for Disease Control , state, and local guidelines during the process, including social distancing and other safety restrictions and recommendations. As we move through this transition, we expect to incur some labor inefficiencies as we adjust to new protocols and operating models with a goal to remain as efficient as possible while still offering safe and high quality service to our communities. The further spread of COVID-19, and the requirements to take action to help limit the spread of the illness, will impact our ability to carry out our business as usual and may materially adversely impact global economic conditions, our business, results of operations, cash flows and financial condition. The extent of the impact of COVID-19 on our business and financial results will depend on future developments, including the duration and spread of the outbreak within the markets in which we operate, the related impact on consumer confidence and spending, any disruptions in our supply chain, and the effect of governmental regulations imposed in response to the pandemic, all of which are highly uncertain and ever-changing. The sweeping nature of the COVID-19 pandemic makes it extremely difficult to predict how our business and operations will be affected in the long run. However, the likely overall economic impact of the pandemic is viewed as highly negative to the general economy. Any of the foregoing factors, or other cascading effects of the COVID-19 pandemic, could materially increase our costs, negatively impact our sales and damage our results of operations and liquidity, possibly to a significant degree. The duration of any such impacts cannot be predicted with certainty. Given the dynamic and unpredictable nature of this situation, we cannot reasonably estimate with certainty the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future. We will continue to monitor the rapidly evolving situation and guidance from domestic authorities.
FINANCIAL HIGHLIGHTS FOR THE FIRST QUARTER 2020
?Net sales decreased 53% to
?Gross margin percentage decreased 4,910 basis points to (22.0)%
?Operating loss increased
As a result of the store closures due to COVID-19, we do not believe providing
comparable sales for the first quarter would be meaningful and therefore will
not report comparable sales for the first quarter of 2020.
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The following charts show key performance metrics for the first quarter of 2020
compared to the first quarter of 2019.
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OUTLOOK & FIRST QUARTER UPDATE
As previously mentioned, COVID-19 led to the temporary closure of all Express
stores in mid-March through the remainder of the first quarter. These closures
and reduced consumer spending negatively impacted our first quarter results.
This occurred while we were in the early stages of a transformation. Our new
corporate strategy, the EXPRESSway Forward, had been set in motion, and while
much work was ahead of us, a great deal had been accomplished. We had completed
a comprehensive restructure of our organization, in order to better align our
teams with our objective. We had implemented a more streamlined and efficient
go-to-market process, established a new design & merchandising vision, called
Express Edit, and developed a new brand positioning to stake our claim to
territory our customers told us would be relevant and compelling to them. We had
also identified a total of $80.0 million dollars in cost savings opportunities
that we expect to achieve over a three year period. While we expect our results
to remain challenging in the near-term as a result of COVID-19, we believe that
by focusing on these foundational elements we have a significant opportunity to
improve the trend of the business and return the business to long term
profitable growth. The following defines each foundational element of the
EXPRESSway Forward:
?Product
?Brand
?Customer
?Execution
EXPRESS, INC. | Q1 2020 Form 10-Q | 23-------------------------------------------------------------------------------- Table of Contents Product We will put product first. The new product vision is called the Express Edit. This vision is about standing for certain elements of fashion and style that we know matter to our customers. This includes providing the customer with a wardrobe that has the functionality to cover multiple needs and wearing occasions. In the fourth quarter, we introduced new products that resonated with our customers. We expect that implementation of this new product vision will take some time and we will see incremental impact throughout the year.
Brand
We believe we have an opportunity to reinvigorate our brand. To accomplish this we have clarified our new brand purpose: Creating Confidence and Inspiring Self Expression. We have realized and accelerated this new brand positioning through the launch of multiple content series under the heading hashtag ExpressTogether. We believe this will allow us to capture the position in the market for a dual fashion brand that helps customers dress for every day and any occasion.
Customer
We need to be more effective at engaging our customers and attracting new ones. We are building strategies and developing tactics to communicate with customers differently. We are using a marketing mix model tool to assess where we are spending our marketing dollars and which channels deliver the best return on investment. We are also using a multi-touch attribution tool to evaluate the real-time performance of our in-market messages and track the customer's journey to purchase, both online and offline. Going forward we plan to relaunch the Express loyalty program and reissue the Express credit card.
Execution
We will execute with precision to accelerate sales and profitability. To this end, we have completed the redesign of our go-to-market process and have begun driving stronger cross functional alignment. The goal is to increase our speed to market by 20-25%. In addition, we have been focused on inventory optimization, which includes eliminating unproductive inventory and optimizing the composition of our assortment. We are focused on improving the performance of our brick and mortar stores by reducing time spent on non-selling activities and improving conversion and other metrics through improved merchandise flow and a better customer experience.
HOW WE ASSESS THE PERFORMANCE OF OUR BUSINESS
In assessing the performance of our business, we consider a variety of performance and financial measures. These key measures include net sales, comparable sales, cost of goods sold, buying and occupancy costs, gross (loss)/profit/gross margin, and selling, general, and administrative expenses. The following table describes and discusses these measures.
Financial Measures Description Discussion
Net Sales Revenue from the sale of merchandise, Our
business is seasonal, and we have
less returns and discounts, as well as historically realized a higher portion of
shipping and handling revenue related to our net sales in the third and fourth
e-commerce, revenue from the rental of quarters, due primarily to the impact of
our LED sign in Times Square , gift card the holiday season. Generally,
breakage, revenue earned from our private approximately 46% of our annual net sales
label credit card agreement, and revenue occur in the Spring season (first and
earned from our franchise agreements. second quarters) and 54% occur in the Fall
season (third and fourth quarters). We
expect this ratio to be higher in the Fall
season in 2020 due to COVID-19.
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Financial Measures Description Discussion
Comparable Sales Comparable sales is a measure of the amount of Our business and our comparable sales are
sales generated in a period relative to the subject, at certain times, to calendar shifts,
amount of sales generated in the comparable prior which may occur during key selling periods close
year period. As a result of the temporary
store to holidays such as Easter,
closures due to COVID-19, we will not present Christmas, and regional fluctuations for events
comparable sales for the first quarter of 2020. such as sales tax holidays. We believe
comparable sales provides a useful measure for
investors by removing the impact of new stores
and closed stores. Management considers
comparable sales a useful measure in evaluating
continuing store performance.
Cost of goods sold, buying and Includes the following: Our cost of goods sold typically increases in occupancy costs
•Direct cost of purchased merchandise higher volume quarters because the direct cost
•Inventory shrink and other adjustments of purchased merchandise is tied to sales.
•Inbound and outbound freight
•Merchandising, design, planning andallocation, The primary drivers of the costs of individual
and manufacturing/production costs goods are raw materials, labor in the countries
•Occupancy costs related to store operations where our merchandise is sourced, and logistics
(such as rent and common area maintenance, costs associated with transporting our
utilities, and depreciation on assets) merchandise.
•Logistics costs associated with our e-commerce
business Buying and occupancy costs related to stores are
•Impairments on long-lived assets and right of largely fixed and do not necessarily increase as
use lease assets volume increases.
Changes in the mix of products sold by type of
product or by channel may also impact our
overall cost of goods sold, buying and occupancy
costs.Gross (Loss)/Profit/Gross Margin Gross (loss)/profit is net sales minus cost of Gross (loss)/profit/gross margin is impacted by
goods sold, buying and occupancy costs. Gross the price at which we are able to sell our
margin measures gross (loss)/profit as a merchandise and the cost of our product.
percentage of net sales.
We review our inventory levels on an on-going
basis in order to identify slow-moving
merchandise and generally use markdowns to clear
such merchandise. The timing and level of
markdowns are driven primarily by seasonality
and customer acceptance of our merchandise and
have a direct effect on our gross margin.
Any marked down merchandise that is not sold is
marked-out-of-stock. We use third-party vendors
to dispose of this marked-out-of-stock
merchandise.
Selling, General, and Includes operating costs not included in cost of With the exception of store payroll, certain Administrative Expenses goods sold, buying and occupancy costs such as: marketing expenses, and incentive compensation,
•Payroll and other expenses related to operations selling, general, and administrative expenses
at our corporate offices generally do not vary proportionally with net
•Store expenses other than occupancy costs sales. As a result, selling, general, and
•Marketing expenses, including production, administrative expenses as a percentage of net
mailing, print, and digital advertisingcosts, sales are usually higher in lower volume
among other things quarters and lower in higher volume quarters.
EXPRESS, INC. | Q1 2020 Form 10-Q | 25-------------------------------------------------------------------------------- Table of Contents RESULTS OF OPERATIONS The First Quarter of 2020 compared to the First Quarter of 2019Net Sales Thirteen Weeks Ended May 2, 2020 May 4, 2019 Net sales (in thousands)$ 210,275 $ 451,271
Gross square footage at end of period (in thousands) 5,045
5,349
Number of: Stores open at beginning of period 595 631 New retail stores - - New outlet stores - 15 Retail stores converted to outlets - (15) Closed stores (1) (2) Stores open at end of period 594 629 Net sales in the first quarter of 2020 decreased approximately$241.0 million compared to the first quarter of 2019. The sales decrease is primarily attributed to the temporary closure of all Express stores from mid-March through the end of the first quarter of 2020. Gross (Loss)/Profit The following table shows cost of goods sold, buying and occupancy costs, gross (loss)/profit in dollars, and gross margin percentage for the stated periods:
Thirteen Weeks Ended
May 2, 2020 May 4, 2019
(in thousands, except percentages)
Cost of goods sold, buying and occupancy costs $ 256,482 $ 328,768
Gross (loss)/profit $ (46,207) $ 122,503
Gross margin percentage (22.0) % 27.1 %
The 4,910 basis point decrease in gross margin percentage, or gross
(loss)/profit as a percentage of net sales, in the first quarter of 2020
compared to the first quarter of 2019 was comprised of a decrease in merchandise
margin and an increase in buying and occupancy costs as a percentage of net
sales. The decrease in merchandise margin was primarily driven by increased
promotions as we shifted to a highly competitive online only environment while
our stores were temporarily closed as a result of COVID-19. In addition, we
recorded higher valuation reserves related to our inventory as well as higher
levels of reserves against certain fabric commitments. Buying and occupancy
costs deleveraged as a result of the reduction in sales and were also impacted
by $14.7 million due to an impairment charge of certain long-lived store related
assets and right of use assets. Refer to Note 4 in our unaudited
Consolidated Financial Statements included elsewhere in this Quarterly Report
for further discussion regarding the impairment charges for the thirteen weeks
ended May 2, 2020 .
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Selling, General, and Administrative Expenses
The following table shows selling, general, and administrative expenses in
dollars and as a percentage of net sales for the stated periods:
Thirteen Weeks Ended
May 2, 2020 May 4, 2019
(in thousands, except percentages)
Selling, general, and administrative expenses $ 99,165 $ 135,367 Selling, general, and administrative expenses, as a percentage of net sales
47.2 % 30.0 %
The $36.2 million decrease in selling, general, and administrative expenses in
the first quarter of 2020 as compared to the first quarter of 2019 was the
result of the previously announced cost savings from the corporate
restructuring, the mitigation actions we took in response to COVID-19, and the
reduction of certain variable costs associated with operations.
Other Expense, Net
The following table shows other expense in dollars for the stated periods:
Thirteen Weeks Ended
May 2, 2020 May 4, 2019
(in thousands)
Other expense, net $ 2,733 $ -
The $2.7 million increase in other expense in the first quarter of 2020 as
compared to the first quarter of 2019 was the result of a pretax write-off of
our 2016 investment in Homage. Refer to Note 10 in our unaudited
Consolidated Financial Statements included elsewhere in this Quarterly Report
for further discussion regarding the write-off during the thirteen weeks ended
May 2, 2020 .
Income Tax Expense/(Benefit)
The following table shows income tax expense/(benefit) in dollars for the stated
periods:
Thirteen Weeks Ended
May 2, 2020 May 4, 2019
(in thousands)
Income tax expense/(benefit) $ 5,982 $ (908)
The effective tax rate was (4.0)% for the thirteen weeks ended May 2, 2020
compared to 8.4% for the thirteen weeks ended May 4, 2019 . The effective tax
rate for the thirteen weeks ended May 2, 2020 reflects the impact of
establishing a valuation allowance against the Company's net deferred tax
assets, which includes $54.3 million of discrete tax expense from a valuation
allowance on previously recognized deferred tax assets and $6.8 million
valuation allowance on 2020 U.S. state taxes and other tax credits. This tax
expense was partially offset by a $19.5 million tax benefit related to the CARES
Act, which includes the benefit for the portion of the estimated 2019 and 2020
U.S. Federal net operating losses that are able to be carried back to offset
taxable income in the five-year carryback period. The effective tax rate for the
thirteen weeks ended May 4, 2019 reflects a tax benefit from a pre-tax loss
offset by $1.4 million of discrete tax expense related to a tax shortfall for
share-based compensation. The effective tax rate, excluding discrete items, was
33.2% and 22.1% for the thirteen weeks ended May 2, 2020 and May 4, 2019 ,
respectively. The effective tax rate, excluding discrete items, is higher for
the current year due to the ability to carryback current year net operating
losses allowed under the CARES Act to tax years with higher statutory tax rates.
Operating Loss, Net Loss and Diluted Earnings Per Share
Included in the table below is operating loss, net loss and diluted earnings per
share for the thirteen weeks ended May 2, 2020 and May 4, 2019 , respectively. We
supplement the reporting of our financial information determined
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under United States generally accepted accounting principles ("GAAP") with
certain non-GAAP financial measures: adjusted operating loss, adjusted net loss,
and adjusted diluted earnings per share. The following table presents these
financial measures, each a non-GAAP financial measure, for the stated periods
which eliminate certain non-core operating costs:
Thirteen Weeks Ended
May 2, 2020 May 4, 2019
(in thousands, except per share amounts)
Operating loss $ (145,279) $ (11,554)
Adjusted operating loss (Non-GAAP) $ (130,601) $ (11,554) *
Net loss $ (154,050) $ (9,934)
Adjusted net loss (Non-GAAP) $ (99,424) $ (9,934) *
Diluted earnings per share $ (2.41) $ (0.15)
Adjusted diluted earnings per share (Non-GAAP) $ (1.55)
* No adjustments were made to operating loss, net loss or diluted earnings per
share for the thirteen weeks ended
We believe that these non-GAAP measures provide additional useful information to assist stockholders in understanding our financial results and assessing our prospects for future performance. Management believes adjusted operating loss, adjusted net loss, and adjusted diluted earnings per share are important indicators of our business performance because they exclude items that may not be indicative of, or are unrelated to, our underlying operating results, and provide a better baseline for analyzing trends in our business. In addition, adjusted diluted earnings per share is used as a performance measure in our long-term executive compensation program for purposes of determining the number of equity awards that are ultimately earned, and adjusted operating loss is a metric used in our short-term cash incentive compensation plan. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. These adjusted financial measures should not be considered in isolation or as a substitute for reported operating loss, net loss or diluted earnings per share. These non-GAAP financial measures reflect an additional way of viewing our operations that, when viewed with the GAAP results and the below reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of our business. Management strongly encourages investors and stockholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. The following table reconciles the non-GAAP financial measures, adjusted operating loss, adjusted net loss, and adjusted diluted earnings per share, with the most directly comparable GAAP financial measures, operating loss, net loss, and diluted earnings per share for the thirteen weeks endedMay 2, 2020 .
Thirteen Weeks Ended
Weighted Average
(in thousands, except per share Income Tax Diluted Earnings Diluted Shares
amounts) Operating Loss Impact Net Loss per Share Outstanding
Reported GAAP Measure $ (145,279) $ (154,050) $ (2.41) 64,030
Impairment of property, equipment and
lease assets 14,678 (3,856) 10,822 0.17
Equity method investment impairment
(a) - (642) 2,091 0.03
Valuation allowance on deferred taxes
(b) 61,075 61,075 0.95
Tax impact of the CARES Act (c) (19,473) (19,473) (0.30)
Tax impact of executive departures (d) - 111 111 -
Adjusted Non-GAAP Measure $ (130,601) $ (99,424) $ (1.55)
a.Impairment before tax was $2.7 million and was recorded in Other Expense, net
b.Valuation allowance provided against incurred and potential 2020 losses and
previously recognized deferred tax assets, less net operating losses utilized
within CARES Act
c.The Company recognized an income tax benefit of $19.5 million primarily due to
a net operating loss carryback under the enacted CARES Act.
d.Represents the tax impact related to the expiration of former executive
non-qualified stock options.
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LIQUIDITY AND CAPITAL RESOURCES
COVID-19 Pandemic As previously announced, we took a number of actions to maintain liquidity throughout the COVID-19 pandemic, which are as follows:
?Accessed$165.0 million from our$250.0 million asset based credit facility ?Cut second quarter inventory receipts by over$100.0 million ?Identified cost savings of approximately$75.0 million dollars to be realized in 2020, including the impact from our previously announced COVID-19 mitigation actions, and a decrease in our variable costs as a result of the decline in sales ?Lowered expected annual capital expenditures by approximately$25.0 million ?Anticipated cash benefits in 2020 from the CARES Act of approximately$20.0 million , including the expanded operating loss carry back, employer payroll tax credit and deferral provisions. Additional significant cash benefits from the CARES Act are also expected to be realized in 2021. The total liquidity benefits from these actions in 2020 are expected to be approximately$385.0 million , of which$195.0 million was realized in the first quarter of 2020. These benefits are incremental to the previously announced cost savings associated with the EXPRESSway Forward strategy. Forward-Looking Liquidity Discussion Our liquidity position benefits from the fact that we generally collect cash from sales to customers the same day or, in the case of credit or debit card transactions, within three to five days of the related sale, and we have up to 75 days to pay certain merchandise vendors and 45 days to pay the majority of our non-merchandise vendors. We believe our existing cash and cash generated from future operations combined with the actions we have taken in response to COVID-19 will be sufficient to fund our operating lease obligations, capital expenditures and working capital needs for at least the next 12 months and the foreseeable future. Analysis of Cash Flows A summary of cash provided by or used in operating, investing, and financing activities is shown in the following table: Thirteen Weeks Ended May 2, 2020 May 4, 2019 (in thousands) Used in operating activities$ (131,238) $ (16,945) Used in investing activities (4,176) (4,078) Provided by (used in) financing activities 164,460
(6,414)
Increase (decrease) in cash and cash equivalents 29,046 (27,437)
Cash and cash equivalents at end of period
Operating Activities Our business relies on cash flows from operations as our primary source of liquidity, with the majority of those cash flows being generated in the fourth quarter of the year. Our primary operating cash needs are for merchandise inventories, payroll, store rent and marketing. For the thirteen weeks endedMay 2, 2020 , our cash flows used in operating activities were$131.2 million compared to$16.9 million used in operating activities for the thirteen weeks endedMay 4, 2019 . This$114.3 million decrease in cash flows from operating activities for the thirteen weeks EXPRESS, INC. | Q1 2020 Form 10-Q | 29 -------------------------------------------------------------------------------- Table of Contents endedMay 2, 2020 was primarily driven by the temporary closure of our stores as a result of COVID-19. Also, as a result of COVID-19, we did not make our store rent payments for April, May orJune 2020 . Investing Activities We also use cash for capital expenditures and financing transactions. For the thirteen weeks endedMay 2, 2020 , we had capital expenditures of approximately$4.2 million . These relate primarily to new and remodeled store construction and fixtures and investments in information technology. We expect capital expenditures for the remainder of 2020 to be approximately$16.0 million to$20.0 million , primarily driven by new and remodeled store construction and investments in information technology. These capital expenditures do not include the impact of landlord allowances, which are expected to be approximately$2.0 million for the remainder of 2020. Financing Activities OnMarch 17, 2020 , we provided notice to the lenders under our Revolving Credit Facility of our request to borrow$165.0 million in order to strengthen our liquidity position and preserve financial flexibility in response to the COVID-19 outbreak that led to the temporary closure of all of ourExpress and Express Factory Outlet stores. As ofMay 2, 2020 , amounts outstanding under our Revolving Credit Facility were$165.0 million , which is classified as long-term debt on the unaudited Consolidated Balance Sheet and approximately$67.8 million was available for borrowing under the Revolving Credit Facility subject to certain borrowing base limitations and after outstanding letters of credit in the amount of$17.2 million , primarily related to our third party logistics contract. Refer to Note 7 to our unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report for additional information on our Revolving Credit Facility. OnNovember 28, 2017 , the Board approved a share repurchase program that authorizes us to repurchase up to$150.0 million of our outstanding common stock using available cash. During the thirteen weeks endedMay 2, 2020 , we did not repurchase shares under the stock repurchase program. During the thirteen weeks endedMay 4, 2019 , we repurchased 0.9 million shares under the share repurchase program for an aggregate amount equal to$4.9 million , including commissions. As ofMay 2, 2020 , we had approximately$34.2 million remaining under the share repurchase program. CONTRACTUAL OBLIGATIONS Our contractual obligations and other commercial commitments did not change materially betweenFebruary 1, 2020 andMay 2, 2020 , except for the borrowing of the$165.0 million under our Revolving Credit Facility. Refer to Note 7 to our unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report for additional information on our Revolving Credit Facility. For additional information regarding our contractual obligations as ofFebruary 1, 2020 , see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year endedFebruary 1, 2020 . CRITICAL ACCOUNTING POLICIES Management has determined that our most critical accounting policies are those related to revenue recognition, merchandise inventory valuation, long-lived asset valuation, claims and contingencies, and income taxes. We continue to monitor our accounting policies to ensure proper application of current rules and regulations. There have been no significant changes to the policies discussed in our Annual Report on Form 10-K for the year endedFebruary 1, 2020 .
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