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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 July 31, 2021
 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 
o
Accelerated filer 
x
  
Non-accelerated filer 
o
Smaller reporting company 
(Do not check if a smaller reporting company)
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  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 August 25, 2021 was 14,721,208 shares.


Table of Contents
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES 
QUARTERLY REPORT ON FORM 10-Q 
FOR THE PERIOD ENDED JULY 31, 2021
 
TABLE OF CONTENTS
 
  
 
 
Consolidated Statements of Changes in StockholdersEquity
 
 
  
  



Table of Contents
PART I. FINANCIAL INFORMATION

Item 1.CONSOLIDATED FINANCIAL STATEMENTS

THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
July 31,
2021
January 30,
2021
August 1,
2020
(unaudited)(unaudited)
(in thousands, except par value)
ASSETS   
Current assets:   
Cash and cash equivalents$63,982 $63,548 $36,119 
Accounts receivable38,864 39,534 29,634 
Inventories461,391 388,141 381,022 
Prepaid expenses and other current assets45,011 55,860 23,085 
Total current assets609,248 547,083 469,860 
Long-term assets:   
Property and equipment, net165,558 181,801 200,963 
Right-of-use assets235,208 283,624 319,796 
Tradenames, net72,092 72,492 72,892 
Deferred income taxes36,362 45,579 91,926 
Other assets9,980 9,548 12,502 
Total assets$1,128,448 $1,140,127 $1,167,939 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
LIABILITIES:   
Current liabilities:   
Revolving loan$199,837 $169,778 $250,818 
Accounts payable227,579 252,124 279,014 
Current lease liabilities109,991 174,585 160,932 
Income taxes payable4,536 5,508 5,666 
Accrued expenses and other current liabilities130,452 116,504 113,112 
Total current liabilities672,395 718,499 809,542 
Long-term liabilities:   
Long-term debt74,209 75,346  
Long-term lease liabilities174,718 214,173 254,187 
Other tax liabilities6,350 6,304 6,811 
Income taxes payable14,939 14,939 17,589 
Other long-term liabilities17,652 17,489 18,295 
Total liabilities960,263 1,046,750 1,106,424 
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; 14,831, 14,641, and 14,637 issued; 14,772, 14,584, and 14,585 outstanding
1,483 1,464 1,464 
Additional paid-in capital164,290 148,519 138,350 
Treasury stock, at cost (59, 57, and 52)
(3,304)(3,164)(3,025)
Deferred compensation3,304 3,164 3,025 
Accumulated other comprehensive loss(13,285)(13,816)(14,437)
Retained earnings (deficit)15,697 (42,790)(63,862)
Total stockholders’ equity168,185 93,377 61,515 
Total liabilities and stockholders’ equity$1,128,448 $1,140,127 $1,167,939 
See accompanying notes to these consolidated financial statements.
1

Table of Contents
THE CHILDREN’S PLACE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 Thirteen Weeks EndedTwenty-six Weeks Ended
 July 31,
2021
August 1,
2020
July 31,
2021
August 1,
2020
(in thousands, except earnings per share)
Net sales$413,855 $368,923 $849,336 $624,130 
Cost of sales (exclusive of depreciation and amortization)245,994 301,843 493,269 576,723 
Gross profit167,861 67,080 356,067 47,407 
Selling, general, and administrative expenses115,620 114,312 222,358 212,803 
Depreciation and amortization14,392 16,708 29,953 34,596 
Asset impairment charges 544  37,635 
Operating income (loss)37,849 (64,484)103,756 (237,627)
Interest expense(4,700)(2,647)(9,114)(4,536)
Interest income4 8 7 57 
Income (loss) before benefit for income taxes33,153 (67,123)94,649 (242,106)
Provision (benefit) for income taxes9,058 (20,484)25,349 (80,657)
Net income (loss)$24,095 $(46,639)$69,300 $(161,449)
Earnings (loss) per common share
Basic$1.63 $(3.19)$4.71 $(11.04)
Diluted$1.60 $(3.19)$4.61 $(11.04)
Weighted average common shares outstanding
Basic14,780 14,634 14,725 14,623 
Diluted15,062 14,634 15,032 14,623 
 
See accompanying notes to these consolidated financial statements.

2

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


 Thirteen Weeks EndedTwenty-six Weeks Ended
 July 31, 2021August 1, 2020July 31, 2021August 1, 2020
(in thousands)
Net income (loss)$24,095 $(46,639)$69,300 $(161,449)
Other comprehensive income (loss):
Foreign currency translation adjustment(355)431 531 (1,092)
Change in fair value of cash flow hedges, net of income taxes 45 200 
Other comprehensive income (loss)(355)476 531 (892)
Total comprehensive income (loss) $23,740 $(46,163)$69,831 $(162,341)
 
See accompanying notes to these consolidated financial statements.

3

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


Thirteen Weeks Ended July 31, 2021
Accumulated
AdditionalRetainedOtherTotal
Common StockPaid-InDeferredEarningsComprehensiveTreasury Stock
Stockholders’
(in thousands, except dividends per share)SharesAmountCapitalCompensation(Deficit)Income (Loss)SharesValueEquity
BALANCE, May 1, 2021
14,693 $1,469 $155,908 $3,234 $563 $(12,930)(58)$(3,234)$145,010 
Vesting of stock awards255 26 (26) 
Stock-based compensation10,526 10,526 
Purchase and retirement of shares(117)(12)(2,118)(8,961)(11,091)
Change in cumulative translation
adjustment
(355)(355)
Deferral of common stock into
 deferred compensation plan
70 (1)(70) 
Net income24,095 24,095 
BALANCE, July 31, 2021
14,831 1,483 164,290 3,304 15,697 (13,285)(59)(3,304)168,185 


Twenty-six Weeks Ended July 31, 2021
Accumulated
AdditionalRetainedOtherTotal
Common StockPaid-InDeferredEarningsComprehensiveTreasury Stock
Stockholders’
(in thousands, except dividends per share)SharesAmountCapitalCompensation(Deficit)Income (Loss)SharesValueEquity
BALANCE, January 30, 2021
14,641 $1,464 $148,519 $3,165 $(42,790)$(13,816)(57)$(3,165)$93,377 
Vesting of stock awards336 34 (34) 
Stock-based compensation18,442 18,442 
Purchase and retirement of shares(146)(15)(2,637)(10,813)(13,465)
Change in cumulative translation
adjustment
531 531 
Deferral of common stock into
 deferred compensation plan
139 (2)(139) 
Net income69,300 69,300 
BALANCE, July 31, 2021
14,831 $1,483 $164,290 $3,304 $15,697 $(13,285)(59)$(3,304)$168,185 







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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 Stock
Stockholders’
(in thousands, except dividends per share)SharesAmountCapitalCompensation(Deficit)Income (Loss)SharesValueEquity
BALANCE, May 2, 2020
14,581$1,458 $135,328 $3,025 $(16,838)$(14,913)(52)$(3,025)$105,035 
Vesting of stock awards869 (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, 2020
14,637$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 Stock
Stockholders’
(in thousands, except dividends per share)SharesAmountCapitalCompensation(Deficit)Income (Loss)SharesValueEquity
BALANCE, February 1, 2020
14,762 $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, 2020
14,637 $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 CASH FLOWS
(Unaudited)
 
 Twenty-six Weeks Ended
 July 31,
2021
August 1,
2020
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net income (loss)$69,300 $(161,449)
Reconciliation of net income (loss) to net cash used in operating activities:  
Non-cash portion of operating lease expense52,075 57,345 
Depreciation and amortization29,953 34,596 
Non-cash stock-based compensation18,442 4,113 
Deferred income tax (benefit)9,390 (79,031)
Asset impairment charges 37,635 
Other non-cash changes, net743 199 
Changes in operating assets and liabilities:
Inventories(74,406)(53,644)
Accounts receivable and other assets520 4,635 
Prepaid expenses and other current assets(847)4,367 
Income taxes payable, net of prepayments12,056 (6,136)
Accounts payable and other current liabilities(13,090)93,634 
Other long-term liabilities139 (395)
Lease liabilities(107,572)(19,073)
Net cash used in operating activities(3,297)(83,204)
CASH FLOWS FROM INVESTING ACTIVITIES:  
Capital expenditures(13,496)(14,268)
Change in deferred compensation plan31 159 
Net cash used in investing activities(13,465)(14,109)
CASH FLOWS FROM FINANCING ACTIVITIES:  
Purchase and retirement of common stock, including shares surrendered for tax withholdings and transaction costs(13,465)(15,444)
Borrowings under revolving credit facility386,343 218,278 
Repayments under revolving credit facility(356,284)(138,269)
Payment of debt issuance costs(358) 
Net cash provided by financing activities16,236 64,565 
Effect of exchange rate changes on cash and cash equivalents960 380 
Net increase in cash and cash equivalents434 (32,368)
Cash and cash equivalents, beginning of period63,548 68,487 
Cash and cash equivalents, end of period$63,982 $36,119 
 
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
 July 31,
2021
August 1,
2020
(in thousands)
OTHER CASH FLOW INFORMATION:  
Net cash paid during the period for income taxes$3,793 $4,406 
Cash paid during the period for interest4,645 4,023 
Decrease in accrued capital expenditures(1,145)(2,060)
 
See accompanying notes to these consolidated financial statements.

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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 (collectively, 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 Canadian-based 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 July 31, 2021 and August 1, 2020, the results of its consolidated operations for the thirteen and twenty-six weeks ended July 31, 2021 and August 1, 2020, consolidated comprehensive income (loss) for the thirteen and twenty-six weeks ended July 31, 2021 and August 1, 2020, consolidated cash flows for the twenty-six weeks ended July 31, 2021 and August 1, 2020, and consolidated stockholders’ equity for the thirteen and twenty-six weeks ended July 31, 2021 and August 1, 2020. The consolidated financial position as of January 30, 2021 was derived from audited financial statements. Due to the seasonal nature of the Company’s business, the results of operations for the thirteen and twenty-six weeks ended July 31, 2021 and August 1, 2020 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 January 30, 2021.
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 health officials 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 2021 — The thirteen weeks ended July 31, 2021
Second Quarter 2020 — The thirteen weeks ended August 1, 2020
Year-To-Date 2021 — The twenty-six weeks ended July 31, 2021
Year-To-Date 2020 — The twenty-six weeks ended August 1, 2020
FASB — Financial Accounting Standards Board
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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
Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated. As of July 31, 2021 and August 1, 2020, the Company did not have any investments in unconsolidated affiliates. 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; intangible assets; valuation of stock-based compensation awards and related estimated forfeiture rates, among others.
Reclassifications
Certain reclassifications have been made to prior periods' financial statements to conform to the current period's 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 buying, design, and 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 trends 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 performs a recoverability test comparing estimated undiscounted future cash flows to the carrying value of the related long-lived 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 right-of-use (“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, 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.
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
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directors. Deferred Awards are granted in the form 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 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 300% of their Target Shares based on the terms of the award and 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 Deferred Awards and 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 Deferred Compensation Plan, a participant 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 are 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 of Directors 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
The Company’s 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
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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.
The Company’s 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.
The Company’s assets measured at fair value on a nonrecurring basis include long-lived assets, such as intangible assets, fixed assets, and ROU assets. The Company reviews 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 2021
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 adopted this guidance in the First Quarter 2021. This adoption did not have a material impact on our consolidated financial statements.
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
 July 31,
2021
August 1,
2020
July 31,
2021
August 1,
2020
Net sales:(in thousands)
South$164,630 $146,345 $330,368 $244,281 
Northeast84,954 82,937 179,976 134,767 
West59,854 55,314 122,077 92,576 
Midwest48,088 40,270 108,892 77,503 
International and other56,329 44,057 108,023 75,003 
Total net sales$413,855 $368,923 $849,336 $624,130 

The Company recognizes revenue, including shipping and handling fees billed to customers, upon purchase at the Company’s retail stores or when received by the customer if the product was purchased via e-commerce, net of coupon redemptions and anticipated sales returns. The Company deferred approximately $9.5 million and $5.7 million as of July 31, 2021 and August 1, 2020, respectively, based upon estimated time of delivery, at which point control passes to the customer, and is recorded in accrued expenses and other current liabilities. Sales tax collected from customers is excluded from revenue.
For the sale of goods with a right of return, the Company recognizes revenue for the consideration it expects to be entitled to and calculates an allowance for estimated sales returns based upon the Company’s sales return experience. Adjustments to the allowance for estimated sales returns in subsequent periods are generally not material based on historical data, thereby reducing the uncertainty inherent in such estimates. The allowance for estimated sales returns, which is recorded in accrued expenses and other current liabilities, was approximately $3.1 million and $1.3 million as of July 31, 2021 and August 1, 2020, respectively.
The Company’s private label credit card is issued to our customers for use exclusively at The Children’s Place stores and online at www.childrensplace.com and www.gymboree.com, and credit is extended to such customers by a third-party financial institution on a non-recourse basis to the Company. The private label credit card includes multiple performance obligations for the Company, including marketing and promoting the program on behalf of the bank and the operation of the loyalty rewards program. Included in the agreement with the third-party financial institution was an upfront bonus paid to the Company. The upfront bonus is recognized as revenue and allocated between brand and reward obligations. As the license of the Company’s brand is the predominant item in the performance obligation, the amount allocated to the brand obligation is recognized on a
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straight-line basis over the initial term. The amount allocated to the reward obligation is recognized on a point-in-time basis as redemptions under the loyalty program occur.
In measuring revenue and determining the consideration the Company is entitled to as part of a contract with a customer, the Company takes into account the related elements of variable consideration, such as additional bonuses, including profit-sharing, over the life of the program. Similar to the upfront bonus, the usage-based royalties and bonuses are recognized as revenue and allocated between the brand and reward obligations. The amount allocated to the brand obligation is recognized on a straight-line basis over the initial term. The amount allocated to the reward obligation is recognized on a point-in-time basis as redemptions under the loyalty program occur. In addition, the annual profit-sharing amount is estimated and recognized quarterly within an annual period when earned. The additional bonuses are amortized over the contract term based on anticipated progress against future targets and level of risk associated with achieving the targets.
The Company has a points-based customer loyalty program in which customers earn points based on purchases and other promotional activities. These points can be redeemed for coupons to discount future purchases. A contract liability is estimated based on the standalone selling price of benefits earned by customers through the program and the related redemption experience under the program. The value of each point earned is recorded as deferred revenue and is included within accrued expenses and other current liabilities. The total contract liabilities related to this program were $7.1 million and $3.3 million as of July 31, 2021 and August 1, 2020, respectively.
The Company’s policy with respect to gift cards is to record revenue as and when the gift cards are redeemed for merchandise. The Company recognizes gift card breakage income in proportion to the pattern of rights exercised by the customer when the Company expects to be entitled to breakage and the Company determines that it does not have a legal obligation to remit the value of the unredeemed gift card to the relevant jurisdiction as unclaimed or abandoned property and is recorded within net sales. Prior to their redemption, gift cards are recorded as a liability, included within accrued expenses and other current liabilities. The total contract liability related to gift cards issued was $12.8 million and $13.6 million as of July 31, 2021 and August 1, 2020, respectively. The liability is estimated based on expected breakage that considers historical patterns of redemption. The following table provides the reconciliation of the contract liability related to gift cards:
 Contract Liability
(in thousands)
Balance at January 30, 2021
$13,634 
Gift cards sold10,344 
Gift cards redeemed(9,803)
Gift card breakage(1,350)
Balance at July 31, 2021
12,825 
The Company has an international program of territorial agreements with franchisees. The Company generates revenues from the franchisees from the sale of product and, in certain cases, sales royalties. The Company records net sales and cost of goods sold on the sale of product to franchisees when the franchisee takes ownership of the product. The Company records net sales for royalties when the applicable franchisee sells the product to their customers. Under certain agreements, the Company receives a fee from each franchisee for exclusive territorial rights and based on the opening of new stores. The Company records these territorial fees as deferred revenue and amortizes the fee into net sales over the life of the territorial agreement.

3. LEASES
The Company has operating leases for retail stores, corporate offices, distribution facilities, and certain equipment. Our leases have remaining lease terms ranging from less than 1 year up to 9 years, some of which may include options to extend the leases for up to five years, and some of which may include options to terminate the lease early.
The lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date. For operating leases, the ROU asset is initially and subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, less any accrued lease payments and unamortized lease incentives. For finance leases, the ROU asset is initially measured at cost and subsequently amortized using the straight-line method generally from the lease commencement date to the earlier of the end of its useful life or the end of the lease term.
The discount rate is the rate implicit in the lease unless that rate cannot be readily determined. In that case, the Company is required to use its incremental borrowing rate. The discount rate for a lease is determined based on the information available at lease commencement. In general, the Company accounts for the underlying leased asset and applies a discount rate at the
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lease level. However, there are certain non-real estate leases for which the Company utilizes the portfolio method by aggregating similar leased assets based on the underlying lease term.
The Company has made an accounting policy election by class of underlying asset to not apply the recognition requirements of FASB ASC 842—Leases (“Topic 842”) to leases with an initial term of 12 months or less. Leases with an initial lease term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.
The Company has lease agreements with lease and non-lease components. The Company has elected a policy to account for lease and non-lease components as a single component for all asset classes.
In certain leases, the Company has the right to exercise lease renewal options. Renewal option periods are included in the measurement of lease ROU assets and lease liabilities where the exercise is reasonably certain to occur.
As of the periods presented, the Company’s finance leases were not material to the consolidated balance sheets, consolidated statements of operations, or consolidated statements of cash flows.
The Company has certain lease agreements structured with both a fixed base rent and a contingent rent based on a percentage of sales over contractual levels, others with only contingent rent based on a percentage of sales, and some with a fixed base rent adjusted periodically for inflation or changes in fair market value of the underlying real estate. Contingent rent is recognized as sales occur. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The Company records all occupancy costs in cost of sales, except administrative office buildings, which are recorded in selling, general, and administrative expenses.
In April 2020, the FASB staff released guidance regarding rent concessions related to the effects of the COVID-19 pandemic to allow for a temporary practical expedient (the “COVID-19 expedient”) to account for rent concessions as though enforceable rights and obligations for those concessions existed in the lease agreements. The election is available for concessions related to the effects of the COVID-19 pandemic that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract.
Upon the temporary closure of the Company’s store fleet in March 2020, the Company began negotiating for concessions of certain rent payments for the time the stores were impacted. While more than 99% of our stores have reopened, these discussions and negotiations have remained ongoing and were substantially completed at the end of Second Quarter 2021. For the lease concessions that have been agreed upon and executed, the Company did not reassess each existing contract to determine whether enforceable rights and obligations for concessions existed and elected not to apply the lease modification guidance in ASC 842 to those contracts that shared similar characteristics. Rather, the Company accounts for COVID-19 lease concessions as reductions to variable lease cost.
The following components of lease expense are included in the Company’s consolidated statements of operations.
 Thirteen Weeks EndedTwenty-six Weeks Ended
July 31, 2021August 1, 2020July 31, 2021August 1, 2020
(in thousands)
Operating lease cost$24,272 $39,042 $50,030 $79,194 
Variable lease cost (1)
10,847 8,692 14,221 19,825 
Total lease cost$35,119 $47,734 $64,251 $99,019 
____________________________________________
(1) Includes short term leases with lease periods of less than 12 months as well as lease abatements accounted for as reductions to variable lease costs under the COVID-19 expedient of approximately $2.3 million and $10.3 million during the Second Quarter 2021 and Year-To-Date 2021, respectively.
As of July 31, 2021, the weighted-average remaining operating lease term was 4.3 years, and the weighted-average discount rate for operating leases was 5.3%.
Cash paid for amounts included in the measurement of operating lease liabilities during Year-To-Date 2021 was approximately $107.6 million.
ROU assets obtained in exchange for new operating lease liabilities were approximately $6.1 million during Year-To-Date 2021.
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As of July 31, 2021, the maturities of lease liabilities were as follows:
July 31, 2021
(in thousands)
Remainder of 2021$82,045 
202272,304 
202349,041 
202427,693 
202518,549 
Thereafter50,872 
Total lease payments (1)
$300,504 
Less: imputed interest$(15,795)
Present value of lease liabilities$284,709 
____________________________________________
(1)For leases in which the Company applied the COVID-19 expedient, it did not remeasure its ROU assets and lease liabilities for rent concessions specific to Fiscal 2021 and beyond. These amounts will be recognized as variable rent costs in future periods in the amount of $27.0 million.

4. INTANGIBLE ASSETS
On April 4, 2019, the Company acquired certain intellectual property and related assets (the “Gymboree Assets”) of Gymboree Group, Inc. and related entities, which included the worldwide rights to the names “Gymboree” and “Crazy 8” and other intellectual property, including trademarks, domain names, copyrights, and customer databases. These intangible assets, inclusive of acquisition costs, are recorded in the long-term assets section of the consolidated balance sheets.
The Company’s intangible assets include both indefinite and finite assets. Intangible assets with indefinite lives consist primarily of trademarks and acquired trade names, which are tested for impairment annually or whenever circumstances indicate that a decline in value may have occurred. The Company estimates the fair value of these intangible assets based on an income approach using the relief-from-royalty method. The Company’s finite-lived intangible assets consist primarily of customer lists and other acquisition-related assets. Finite-lived intangible assets are amortized over their estimated useful economic lives and are reviewed for impairment when factors indicate that an impairment may have occurred. The Company recognizes an impairment charge when the estimated fair value of the intangible asset is less than its carrying value.
The Company’s intangible assets were as follows:
July 31, 2021
Useful lifeGross amountAccumulated amortizationNet amount
(in thousands)
Gymboree tradename(1)
Indefinite$69,953 $— $69,953 
Crazy 8 tradename(1)
5 years4,000 (1,861)2,139 
Customer databases(2)
3 years3,000 (2,328)672 
Total intangibles, net$76,953 $(4,189)$72,764 
: