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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
______________________________________________________
 FORM 10-Q
 (Mark One)
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 1, 2020
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from               to              

Commission file number 0-23071
______________________________________________________
 THE CHILDRENS PLACE, INC.
(Exact name of registrant as specified in its charter)
Delaware 31-1241495
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
500 Plaza Drive  
Secaucus, New Jersey 07094
(Address of Principal Executive Offices) (Zip Code)

(201) 558-2400
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: Common Stock, $0.10 par value
Trading Symbol: PLCE
Name of each exchange on which registered: Nasdaq Global Select Market
___________________________________________
 
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 x No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
 
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 the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one).
Large accelerated filer x
Accelerated filer o
  
Non-accelerated filer o
Smaller reporting company o
(Do not check if a smaller reporting company)
Emerging growth company o
 
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.  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No x
 
The number of shares outstanding of the registrant’s common stock with a par value of $0.10 per share, as of September 1, 2020 was 14,587,813 shares.


Table of Contents
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
 
QUARTERLY REPORT ON FORM 10-Q
 
FOR THE PERIOD ENDED AUGUST 1, 2020
 
TABLE OF CONTENTS
 
  
 
 
Consolidated Statements of Changes in Stockholders' Equity
 
 
  
  



Table of Contents
PART I. FINANCIAL INFORMATION

Item 1.CONSOLIDATED FINANCIAL STATEMENTS
1

Table of Contents
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
August 1,
2020
February 1,
2020
August 3,
2019
(unaudited)(unaudited)
(in thousands, except par value)
ASSETS   
Current assets:   
Cash and cash equivalents$36,119 $68,487 $65,357 
Accounts receivable29,634 32,812 39,638 
Inventories381,022 327,165 386,174 
Prepaid expenses and other current assets23,085 21,416 30,258 
Total current assets469,860 449,880 521,427 
Long-term assets:   
Property and equipment, net200,963 236,898 248,777 
Right-of-use assets319,796 393,820 430,145 
Tradenames, net72,892 73,291 73,456 
Deferred income taxes91,926 12,941 15,590 
Other assets12,502 14,567 14,142 
Total assets$1,167,939 $1,181,397 $1,303,537 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
LIABILITIES:   
Current liabilities:   
Revolving loan$250,818 $170,808 $196,352 
Accounts payable279,014 213,115 236,619 
Current lease liabilities160,932 121,868 127,695 
Income taxes payable5,666 5,607 5,068 
Accrued expenses and other current liabilities113,112 83,609 108,463 
Total current liabilities809,542 595,007 674,197 
Long-term liabilities:   
Long-term lease liabilities254,187 311,908 341,828 
Other tax liabilities6,811 6,782 5,043 
Income taxes payable17,589 17,589 18,939 
Other long-term liabilities18,295 14,924 14,274 
Total liabilities1,106,424 946,210 1,054,281 
COMMITMENTS AND CONTINGENCIES   
STOCKHOLDERS’ EQUITY:   
Preferred stock, $1.00 par value, 1,000 shares authorized, 0 shares issued and outstanding   
Common stock, $0.10 par value, 100,000 shares authorized; 14,637, 14,762, and 15,719 issued; 14,585, 14,711, and 15,670 outstanding1,464 1,476 1,572 
Additional paid-in capital138,350 139,041 149,140 
Treasury stock, at cost (52, 51, and 49 shares)(3,025)(2,956)(2,816)
Deferred compensation3,025 2,956 2,816 
Accumulated other comprehensive loss(14,437)(13,545)(15,245)
Retained earnings (deficit)(63,862)108,215 113,789 
Total stockholders’ equity61,515 235,187 249,256 
Total liabilities and stockholders’ equity$1,167,939 $1,181,397 $1,303,537 
See accompanying notes to these consolidated financial statements.
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THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 Thirteen Weeks EndedTwenty-six Weeks Ended
 August 1,
2020
August 3,
2019
August 1,
2020
August 3,
2019
(In thousands, except earnings and dividends per share)
Net sales$368,923 $420,470 $624,130 $832,851 
Cost of sales (exclusive of depreciation and amortization)301,843 281,624 576,723 542,030 
Gross profit 67,080 138,846 47,407 290,821 
Selling, general, and administrative expenses114,312 116,417 212,803 244,423 
Depreciation and amortization16,708 18,472 34,596 37,056 
Asset impairment charges544 121 37,635 469 
Operating income (loss)(64,484)3,836 (237,627)8,873 
Interest expense(2,647)(2,321)(4,536)(4,120)
Interest income8 43 57 131 
Income (loss) before benefit for income taxes(67,123)1,558 (242,106)4,884 
Provision (benefit) for income taxes(20,484)35 (80,657)(1,128)
Net income (loss)$(46,639)$1,523 $(161,449)$6,012 
Earnings (loss) per common share
Basic$(3.19)$0.10 $(11.04)$0.38 
Diluted$(3.19)$0.10 $(11.04)$0.38 
Weighted average common shares outstanding
Basic14,634 15,818 14,623 15,832 
Diluted14,634 15,859 14,623 15,983 
Cash dividends declared per common share$ $0.56 $ $1.12 
 
See accompanying notes to these consolidated financial statements.

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THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)



 Thirteen Weeks EndedTwenty-six Weeks Ended
 August 1, 2020August 3, 2019August 1, 2020August 3, 2019
(In thousands)
Net income (loss)$(46,639)$1,523 $(161,449)$6,012 
Other comprehensive income (loss):
Foreign currency translation adjustment431 286 (1,092)(397)
Change in fair value of cash flow hedges, net of income taxes45 11 200 86 
Total comprehensive income (loss) $(46,163)$1,820 $(162,341)$5,701 
 
See accompanying notes to these consolidated financial statements.

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THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)


Thirteen Weeks Ended August 1, 2020
Accumulated
AdditionalRetainedOtherTotal
Common StockPaid-InDeferredEarningsComprehensiveTreasury StockStockholders'
(in thousands, except dividends per share)SharesAmountCapitalCompensation(Deficit)LossSharesValueEquity
BALANCE, May 2, 202014,581 $1,458 $135,328 $3,025 $(16,838)$(14,913)(52)$(3,025)$105,035 
Vesting of stock awards86 9 (9) 
Stock-based compensation3,528 3,528 
Purchase and retirement of shares(30)(3)(497)(385)(885)
Change in cumulative translation
adjustment
431 431 
Change in fair value of cash flow
hedges, net of income taxes
45 45 
Deferral of common stock into
deferred compensation plan
    
Net income (loss)(46,639)(46,639)
BALANCE, August 1, 202014,637 $1,464 $138,350 $3,025 $(63,862)$(14,437)(52)$(3,025)$61,515 




Twenty-six Weeks Ended August 1, 2020
Accumulated
AdditionalRetainedOtherTotal
Common StockPaid-InDeferredEarningsComprehensiveTreasury StockStockholders'
(in thousands, except dividends per share)SharesAmountCapitalCompensation(Deficit)LossSharesValueEquity
BALANCE, February 1, 202014,762 $1,476 $139,041 $2,956 $108,215 $(13,545)(51)$(2,956)$235,187 
Vesting of stock awards167 17 (17) 
Stock-based compensation4,113 4,113 
Purchase and retirement of shares(292)(29)(4,787)(10,628)(15,444)
Change in cumulative translation
adjustment
(1,092)(1,092)
Change in fair value of cash flow
hedges, net of income taxes
200 200 
Deferral of common stock into
deferred compensation plan
69 (1)(69) 
Net income (loss)(161,449)(161,449)
BALANCE, August 1, 202014,637 $1,464 $138,350 $3,025 $(63,862)$(14,437)(52)$(3,025)$61,515 

















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THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)


Thirteen Weeks Ended August 3, 2019
Accumulated
AdditionalOtherTotal
Common StockPaid-InDeferredRetainedComprehensiveTreasury StockStockholders'
(in thousands, except dividends per share)SharesAmountCapitalCompensationEarningsLossSharesValueEquity
BALANCE, May 4, 201915,913 $1,592 $149,435 $2,747 $144,889 $(15,542)(48)$(2,747)$280,374 
Vesting of stock awards63 6 (1)5 
Stock-based compensation3,514 3,514 
Purchase and retirement of shares(257)(26)(4,133)(23,428)(27,587)
Dividends declared ($0.56 per share)(8,869)(8,869)
Unvested dividends325 (325) 
Change in cumulative translation
adjustment
286 286 
Change in fair value of cash flow
hedges, net of income taxes
11 11 
Deferral of common stock into
deferred compensation plan
69 (1)(69) 
Net income1,523 1,523 
BALANCE, August 3, 201915,719 $1,572 $149,140 $2,816 $113,789 $(15,245)(49)$(2,816)$249,256 




Twenty-six Weeks Ended August 3, 2019
Accumulated
AdditionalOtherTotal
Common StockPaid-InDeferredRetainedComprehensiveTreasury StockStockholders'
(in thousands, except dividends per share)SharesAmountCapitalCompensationEarningsLossSharesValueEquity
BALANCE, February 2, 201915,873 $1,588 $146,991 $2,685 $180,792 $(14,934)(47)$(2,685)$314,437 
Vesting of stock awards466 46 (5)41 
Stock-based compensation11,273 11,273 
Purchase and retirement of shares(620)(62)(9,659)(53,009)(62,730)
Dividends declared ($0.56 per share)(17,799)(17,799)
Unvested dividends540 (540) 
ASC Topic 842 Adjustment(1,667)(1,667)
Change in cumulative translation
adjustment
(397)(397)
Change in fair value of cash flow
hedges, net of income taxes
86 86 
Deferral of common stock into
deferred compensation plan
131 (2)(131) 
Net income 6,012 6,012 
BALANCE, August 3, 201915,719 $1,572 $149,140 $2,816 $113,789 $(15,245)(49)$(2,816)$249,256 













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THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 Twenty-six Weeks Ended
 August 1,
2020
August 3,
2019
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net income (loss)$(161,449)$6,012 
Reconciliation of net income (loss) to net cash provided by operating activities:  
Non-cash portion of operating lease expense57,345 66,387 
Depreciation and amortization34,596 37,056 
Stock-based compensation4,113 11,273 
Deferred taxes(79,031)2,132 
Asset impairment charges37,635 469 
Other199 544 
Changes in operating assets and liabilities:
Inventories(53,644)(82,807)
Accounts receivable and other assets4,635 (2,197)
Prepaid expenses and other current assets4,367 10,521 
Income taxes payable, net of prepayments(6,136)(3,290)
Accounts payable and other current liabilities93,634 59,301 
Other long-term liabilities(19,468)(82,106)
Net cash provided by (used in) operating activities(83,204)23,295 
CASH FLOWS FROM INVESTING ACTIVITIES:  
Capital expenditures(14,268)(21,840)
Acquisition of assets (76,000)
Change in deferred compensation plan159 372 
Net cash used in investing activities(14,109)(97,468)
CASH FLOWS FROM FINANCING ACTIVITIES:  
Repurchase of common stock, including shares surrendered for tax withholdings and transaction costs(15,444)(60,386)
Payment of dividends (17,799)
Borrowings under revolving loan218,278 519,757 
Repayments under revolving loan(138,269)(372,266)
Net cash provided by financing activities64,565 69,306 
Effect of exchange rate changes on cash and cash equivalents380 1,088 
Net decrease in cash and cash equivalents(32,368)(3,779)
Cash and cash equivalents, beginning of period68,487 69,136 
Cash and cash equivalents, end of period$36,119 $65,357 
 
See accompanying notes to these consolidated financial statements.
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THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 Twenty-six Weeks Ended
 August 1,
2020
August 3,
2019
(In thousands)
OTHER CASH FLOW INFORMATION:  
Net cash paid (refunded) during the period for income taxes$4,406 $(671)
Cash paid during the period for interest4,023 2,608 
Decrease in accrued purchases of property and equipment(2,060)(359)
 
See accompanying notes to these consolidated financial statements.

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Table of Contents
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
1.BASIS OF PRESENTATION
Description of Business
The Children’s Place, Inc. and subsidiaries (the “Company”) is the largest pure-play children’s specialty apparel retailer in North America. The Company provides apparel, footwear, accessories, and other items for children. The Company designs, contracts to manufacture, sells at retail and wholesale, and licenses to sell trend right, high-quality merchandise predominately at value prices, primarily under our proprietary “The Children’s Place”, “Place”, “Baby Place”, and “Gymboree” brand names.
The Company classifies its business into two segments: The Children’s Place U.S. and The Children’s Place International.  Included in The Children’s Place U.S. segment are the Company’s U.S. and Puerto Rico-based stores and revenue from its U.S.- based wholesale business. Included in The Children’s Place International segment are its Canadian-based stores, revenue from the Company’s Canada wholesale business, as well as revenue from international franchisees. Each segment includes an e-commerce business located at www.childrensplace.com and www.gymboree.com.
Interim Financial Statements
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”).  Accordingly, certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the consolidated financial position of the Company as of August 1, 2020 and August 3, 2019, the results of its consolidated operations for the thirteen and twenty-six weeks ended August 1, 2020 and August 3, 2019, cash flows for the twenty-six weeks ended August 1, 2020 and August 3, 2019 and stockholders’ equity for the thirteen and twenty-six weeks ended August 1, 2020 and August 3, 2019. The consolidated financial position as of February 1, 2020 was derived from audited financial statements.  Due to the seasonal nature of the Company’s business, the results of operations for the twenty-six weeks ended August 1, 2020 and August 3, 2019 are not necessarily indicative of operating results for a full fiscal year.  These consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 2020.
In December 2019, there was an outbreak of a new strain of coronavirus (“COVID-19”) that began in Wuhan, China and has since spread to the other regions of the world. In March 2020, the World Health Organization declared COVID-19 a global pandemic, and the President of the United States declared a national emergency. Federal, state, and local governments and private entities mandated and continue to mandate various restrictions, including closures of businesses and other activities, travel restrictions, restrictions on public gatherings, stay at home orders and advisories, quarantining of people who may have been exposed to the virus, and the adoption of remote or hybrid learning models for schools. The COVID-19 pandemic has significantly negatively affected the global economy, significantly disrupted global supply chains, and created significant disruption of the financial and retail markets, including a significant disruption in consumer demand for children’s clothing and accessories. As such, the comparability of the Company’s operating results has been affected by significant adverse impacts related to the COVID-19 pandemic.

Terms that are commonly used in the Company’s notes to consolidated financial statements are defined as follows:
Second Quarter 2020 — The thirteen weeks ended August 1, 2020
Second Quarter 2019 — The thirteen weeks ended August 3, 2019
Year-To-Date 2020 — The twenty-six weeks ended August 1, 2020
Year-To-Date 2019 — The twenty-six weeks ended August 3, 2019
FASB — Financial Accounting Standards Board
SEC — U.S. Securities and Exchange Commission
U.S. GAAP — Generally Accepted Accounting Principles in the United States
FASB ASC — FASB Accounting Standards Codification, which serves as the source for authoritative U.S. GAAP, except that rules and interpretive releases by the SEC are also sources of authoritative U.S. GAAP for SEC registrants

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Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated. FASB ASC 810--Consolidation is considered when determining whether an entity is subject to consolidation.
Fiscal Year
The Company’s fiscal year is a 52-week or 53-week period ending on the Saturday on or nearest to January 31.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and amounts of revenues and expenses reported during the period. Actual results could differ from the assumptions used and estimates made by management, which could have a material impact on the Company’s financial position or results of operations. Significant estimates inherent in the preparation of the consolidated financial statements include: reserves for the realizability of inventory; reserves for litigation and other contingencies; useful lives and impairments of long-lived assets; fair value measurements; accounting for income taxes and related uncertain tax positions; insurance reserves; valuation of stock-based compensation awards and related estimated forfeiture rates, among others.
Reclassifications
Certain reclassifications have been made to prior period financial statements to conform to the current period presentation.
Inventories
Inventories, which consist primarily of finished goods, are stated at the lower of cost or net realizable value, with cost determined on an average cost basis. The Company capitalizes certain supply chain costs in inventory, and these costs are reflected within cost of sales as the inventories are sold. Inventory shrinkage is estimated in interim periods based upon the historical results of physical inventory counts in the context of current year facts and circumstances.
Impairment of Long-Lived Assets
The Company periodically reviews its long-lived assets when events indicate that their carrying value may not be recoverable. Such events include historical trends or projected trend of cash flow losses or a future expectation that the Company will sell or dispose of an asset significantly before the end of its previously estimated useful life. In reviewing for impairment, the Company groups its long-lived assets at the lowest possible level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.
The Company reviews all stores that have reached comparable sales status, or sooner if circumstances should dictate, on at least an annual basis. The Company believes waiting this period of time allows a store to reach a maturity level where a more comprehensive analysis of financial performance can be performed. For each store that shows indications of impairment, the Company projects future cash flows over the remaining life of the lease, adjusted for lease payments, and compares the total undiscounted cash flows to the net book value of the related long-lived assets, including right-of-use (“ROU”) assets. If the undiscounted cash flows are less than the related net book value of the long-lived assets, they are written down to their fair market value. The Company primarily uses discounted future cash flows directly associated with those assets to determine fair market value of long-lived assets and ROU assets. In evaluating future cash flows, the Company considers external and internal factors. External factors comprise the local environment in which the store resides, including mall traffic and competition and their effect on sales trends, as well as macroeconomic factors, such as global pandemics. Internal factors include the Company’s ability to gauge the fashion taste of its customers, control variable costs such as cost of sales and payroll and, in certain cases, its ability to renegotiate lease costs.
Asset impairment charges during Year-To-Date 2020 were related to underperforming stores identified in our ongoing store portfolio evaluation primarily as a result of decreased net revenues and cash flow projections resulting from the COVID-19 disruption.
Stock-based Compensation
The Company generally grants time vesting stock awards (“Deferred Awards”) and performance-based stock awards (“Performance Awards”) to employees at management levels.  The Company also grants Deferred Awards to its non-employee directors.  Deferred Awards are granted in the form of a defined number of restricted stock units that require each recipient to complete a service period. Deferred Awards generally vest ratably over three years, except for those granted to non-employee directors, which generally vest after one year. Performance Awards are granted in the form of restricted stock units which have
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performance criteria that must be achieved for the awards to vest (the “Target Shares”) in addition to a service period requirement. For Performance Awards, an employee may earn from 0% to 250% of their Target Shares based on the Company’s achievement of certain performance goals established at the beginning of the applicable performance period. The Performance Awards cliff vest, if earned, after completion of the applicable performance period, which is generally three years. The fair value of these Performance Awards granted is based on the closing price of our common stock on the grant date.

Stock-based compensation expense is recognized ratably over the related service period reduced for estimated forfeitures of those awards not expected to vest due to employee turnover. Stock-based compensation expense, as it relates to Performance Awards, is also adjusted based on the probability that the performance criteria will be achieved.
Deferred Compensation Plan
The Company has a deferred compensation plan (the “Deferred Compensation Plan”), which is a nonqualified plan, for eligible senior level employees.  Under the plan, participants may elect to defer up to 80% of his or her base salary and/or up to 100% of his or her bonus to be earned for the year following the year in which the deferral election is made.  The Deferred Compensation Plan also permits members of the Board of Directors to elect to defer payment of all or a portion of their retainer and other fees to be earned for the year following the year in which a deferral election is made.  In addition, eligible employees and directors of the Company may also elect to defer payment of any shares of Company stock that is earned with respect to stock-based awards.  Directors may elect to have all or a certain portion of their fees earned for their service on the Board invested in shares of the Company’s common stock.  Such elections are irrevocable.  The Company is not required to contribute to the Deferred Compensation Plan, but at its sole discretion, can make additional contributions on behalf of the participants. Deferred amounts are not subject to forfeiture and are deemed invested among investment funds offered under the Deferred Compensation Plan, as directed by each participant.  Payments of deferred amounts (as adjusted for earnings and losses) are payable following separation from service or at a date or dates elected by the participant at the time the deferral is elected.  Payments of deferred amounts are generally made in either a lump sum or in annual installments over a period not exceeding 15 years.  All deferred amounts are payable in the form in which they were made, except for board fees invested in shares of the Company’s common stock, which will be settled in shares of Company common stock.  Earlier distributions are not permitted except in the case of an unforeseen hardship.
The Company has established a rabbi trust that serves as an investment to shadow the Deferred Compensation Plan liability. The assets of the rabbi trust are general assets of the Company and, as such, would be subject to the claims of creditors in the event of bankruptcy or insolvency.  Investments of the rabbi trust consist of mutual funds and Company common stock.  The Deferred Compensation Plan liability, excluding Company common stock, is included within other long-term liabilities and changes in the balance, except those relating to payments, are recognized as compensation expense within selling, general, and administrative expenses.  The value of the mutual funds is included in other assets and related earnings and losses are recognized as investment income or loss, which is included within selling, general, and administrative expenses.  Company stock deferrals are included within the equity section of the Company’s consolidated balance sheet as treasury stock and as a deferred compensation liability.  Deferred stock is recorded at fair market value at the time of deferral, and any subsequent changes in fair market value are not recognized.
Fair Value Measurement and Financial Instruments
FASB ASC 820--Fair Value Measurement provides a single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the use of fair value to measure assets and liabilities.
This topic defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and establishes a three-level hierarchy, which encourages an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  The three levels of the hierarchy are defined as follows:
Level 1 - inputs to the valuation techniques that are quoted prices in active markets for identical assets or liabilities
Level 2 - inputs to the valuation techniques that are other than quoted prices but are observable for the assets or liabilities, either directly or indirectly
Level 3 - inputs to the valuation techniques that are unobservable for the assets or liabilities
Our cash and cash equivalents, accounts receivable, assets of the Company’s Deferred Compensation Plan, accounts payable, and revolving loan are all short-term in nature.  As such, their carrying amounts approximate fair value and fall within Level 1 of the fair value hierarchy. The Company stock included in the Deferred Compensation Plan is not subject to fair value measurement.
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Our derivative assets and liabilities include foreign exchange forward contracts that are measured at fair value using observable market inputs such as forward rates, our credit risk, and our counterparties’ credit risks. Based on these inputs, our derivative assets and liabilities are classified within Level 2 of the fair value hierarchy.
Our assets measured at fair value on a nonrecurring basis include long-lived assets, such as intangible assets, fixed assets, and ROU assets. We review the carrying amounts of such assets when events indicate that their carrying amounts may not be recoverable. Any resulting asset impairment would require that the asset be recorded at its fair value. The resulting fair value measurements of the assets are considered to fall within Level 3 of the fair value hierarchy.

Recently Issued Accounting Standards
Adopted in Fiscal 2020
In August 2018, the FASB issued guidance related to the accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. The guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software and hosting arrangements that include an internal-use software license. We adopted this guidance in the first quarter of fiscal 2020. This adoption did not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued guidance related to disclosure requirements for fair value measurement. The amendments modify current fair value measurement disclosure requirements by removing, adding, or modifying certain fair value measurement disclosures. We adopted this guidance in the first quarter of fiscal 2020. This adoption did not have a material impact on our consolidated financial statements.
In June 2016, the FASB issued guidance related to the accounting for financial instrument credit losses. The guidance provides more decision useful information about the expected credit losses on financial instruments by replacing the incurred loss impairment methodology under current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. We adopted this guidance in the first quarter of fiscal 2020. This adoption did not have a material impact on our consolidated financial statements.
To Be Adopted After Fiscal 2020
In December 2019, the FASB issued guidance related to the accounting for income taxes. The guidance aims to simplify the accounting for income taxes by removing certain exceptions to the general principles within the current guidance and by clarifying and amending the current guidance. The guidance is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2020. We do not expect the guidance to have a material impact on our consolidated financial statements.
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2. REVENUES
Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

The following table presents our revenues disaggregated by geography:

 Thirteen Weeks EndedTwenty-six Weeks Ended
 August 1,
2020
August 3,
2019
August 1,
2020
August 3,
2019
Net sales:(In thousands)
South$146,345 $152,645 $244,281 $299,709 
Northeast82,937 92,240 134,767 190,143 
West55,314 67,137 92,576 129,131 
Midwest40,270 49,307 77,503 103,955 
International and other44,057