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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.
OR
 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: 001-35600
Five Below, Inc.
(Exact name of Registrant as Specified in its Charter)
Pennsylvania75-3000378
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
701 Market Street
Suite 300 
Philadelphia
Pennsylvania 19106
(Address of Principal Executive Offices)(Zip Code)

(215) 546-7909
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stockFIVENASDAQ 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      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

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.



Large accelerated filer   Accelerated filer 
Non-accelerated filer   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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
The number of shares of the registrant’s common stock, $0.01 par value, outstanding as of September 2, 2020 was 55,841,598.



INDEX
Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
  




3


PART I - FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

FIVE BELOW, INC.
Consolidated Balance Sheets
(Unaudited)
(in thousands, except share and per share data) 
August 1, 2020February 1, 2020August 3, 2019
Assets
Current assets:
Cash and cash equivalents$160,338 $202,490 $178,800 
Short-term investment securities41,670 59,229 90,325 
Inventories294,057 324,028 272,689 
Prepaid income taxes and tax receivable15,496 4,063 10,853 
Prepaid expenses and other current assets58,965 75,903 52,436 
Total current assets570,526 665,713 605,103 
Property and equipment, net of accumulated depreciation and amortization of $244,453, $215,071, and $187,070, respectively
505,299 439,086 337,193 
Operating lease assets911,631 842,988 709,325 
Deferred income taxes  2,924 
Long-term investment securities  1,043 
Other assets12,791 10,874 3,830 
$2,000,247 $1,958,661 $1,659,418 
Liabilities and Shareholders’ Equity
Current liabilities:
Line of credit$ $ $ 
Accounts payable121,372 130,242 108,667 
Income taxes payable775 9,505 593 
Accrued salaries and wages18,992 19,873 14,218 
Other accrued expenses90,117 81,255 83,876 
Operating lease liabilities134,937 110,470 98,507 
Total current liabilities366,193 351,345 305,861 
Other long-term liabilities1,540 1,199  
Long-term operating lease liabilities 908,554 837,623 701,621 
Deferred income taxes5 8,716  
Total liabilities1,276,292 1,198,883 1,007,482 
Commitments and contingencies (note 6)
Shareholders’ equity:
Common stock, $0.01 par value. Authorized 120,000,000 shares; issued and outstanding 55,837,096, 55,712,067, and 55,851,643 shares, respectively.
559 557 558 
Additional paid-in capital307,506 322,330 335,050 
Retained earnings 415,890 436,891 316,328 
Total shareholders’ equity723,955 759,778 651,936 
$2,000,247 $1,958,661 $1,659,418 
See accompanying notes to consolidated financial statements.
4


FIVE BELOW, INC.
Consolidated Statements of Operations
(Unaudited)
(in thousands, except share and per share data) 
 Thirteen Weeks EndedTwenty-Six Weeks Ended
August 1, 2020August 3, 2019August 1, 2020August 3, 2019
Net sales$426,110 $417,400 $627,009 $782,162 
Cost of goods sold286,271 271,229 466,709 516,006 
Gross profit139,839 146,171 160,300 266,156 
Selling, general and administrative expenses106,697 110,142 199,354 205,658 
Operating income (loss)33,142 36,029 (39,054)60,498 
Interest (expense) income and other (expense) income, net(500)1,512 (357)3,199 
Income (loss) before income taxes32,642 37,541 (39,411)63,697 
Income tax expense (benefit)3,061 8,710 (18,410)9,204 
Net income (loss)$29,581 $28,831 $(21,001)$54,493 
Basic income (loss) per common share$0.53 $0.52 $(0.38)$0.97 
Diluted income (loss) per common share$0.53 $0.51 $(0.38)$0.97 
Weighted average shares outstanding:
Basic shares55,786,823 55,950,733 55,844,418 55,930,313 
Diluted shares55,966,840 56,294,109 55,844,418 56,286,632 
See accompanying notes to consolidated financial statements.

5


FIVE BELOW, INC.
Consolidated Statements of Shareholders’ Equity
(Unaudited)
(in thousands, except share data)
Common stockAdditional
paid-in capital
Retained earningsTotal
shareholders’ equity
SharesAmount
Balance, February 1, 202055,712,067 $557 $322,330 $436,891 $759,778 
Share-based compensation benefit  (3,536) (3,536)
Exercise of options to purchase common stock2,136  65  65 
Vesting of restricted stock units and performance-based restricted stock units204,769 2   2 
Common shares withheld for taxes(46,532) (3,299) (3,299)
Repurchase and retirement of common stock(137,023)(1)(12,662) (12,663)
Net loss   (50,582)(50,582)
Balance, May 2, 202055,735,417 $558 $302,898 $386,309 $689,765 
Share-based compensation expense  2,416  2,416 
Issuance of unrestricted stock awards584  64  64 
Exercise of options to purchase common stock83,814 1 2,196  2,197 
Vesting of restricted stock units and performance-based restricted stock units18,030     
Common shares withheld for taxes(2,885) (297) (297)
Issuance of common stock to employees under employee stock purchase plan2,136  229  229 
Net income   29,581 29,581 
Balance, August 1, 202055,837,096 $559 $307,506 $415,890 $723,955 













6


FIVE BELOW, INC.
Consolidated Statements of Shareholders’ Equity
(Unaudited)
(in thousands, except share data)
Common stockAdditional
paid-in capital
Retained earningsTotal
shareholders’ equity
SharesAmount
Balance, February 2, 201955,759,048 $557 $352,702 $261,835 $615,094 
Share-based compensation expense  2,822  2,822 
Issuance of unrestricted stock awards307  45  45 
Exercise of options to purchase common stock72,365 1 2,246  2,247 
Vesting of restricted stock units and performance-based restricted stock units203,429 2   2 
Common shares withheld for taxes(79,256)(1)(9,872) (9,873)
Net income   25,662 25,662 
Balance, May 4, 201955,955,893 $559 $347,943 $287,497 $635,999 
Share-based compensation expense  3,055  3,055 
Issuance of unrestricted stock awards411  45  45 
Exercise of options to purchase common stock24,688  685  685 
Vesting of restricted stock units and performance-based restricted stock units17,099     
Common shares withheld for taxes(2,110) (275) (275)
Repurchase and retirement of common stock(146,185)(1)(16,598) (16,599)
Issuance of common stock to employees under employee stock purchase plan1,847  195  195 
Net income   28,831 28,831 
Balance, August 3, 201955,851,643 $558 $335,050 $316,328 $651,936 

See accompanying notes to consolidated financial statements.
7


FIVE BELOW, INC.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
 Twenty-Six Weeks Ended
August 1, 2020August 3, 2019
Operating activities:
Net (loss) income$(21,001)$54,493 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization33,200 25,459 
Share-based compensation (benefit) expense(1,033)5,986 
Deferred income tax (benefit) expense(8,711)3,202 
Other non-cash expenses (income)1,278 (58)
Changes in operating assets and liabilities:
Inventories29,971 (29,053)
Prepaid income taxes and tax receivable(11,433)(9,516)
Prepaid expenses and other assets21,631 6,442 
Accounts payable(13,965)6,502 
Income taxes payable(8,730)(20,033)
Accrued salaries and wages(881)(10,368)
Operating leases26,755 (1,579)
Other accrued expenses14,381 15,567 
Net cash provided by operating activities61,462 47,044 
Investing activities:
Purchases of investment securities and other investments(48,344)(95,753)
Sales, maturities, and redemptions of investment securities60,903 89,797 
Capital expenditures(100,652)(100,139)
Net cash used in investing activities(88,093)(106,095)
Financing activities:
Borrowing on note payable under Amended Revolving Credit Facility50,000  
Repayment of note payable under Amended Revolving Credit Facility(50,000) 
Cash paid for credit facility financing costs(1,755) 
Net proceeds from issuance of common stock229 195 
Repurchase and retirement of common stock
(12,663)(6,878)
Proceeds from exercise of options to purchase common stock and vesting of restricted and performance-based restricted stock units
2,264 2,934 
Common shares withheld for taxes(3,596)(10,148)
Net cash used in financing activities(15,521)(13,897)
Net decrease in cash and cash equivalents(42,152)(72,948)
Cash and cash equivalents at beginning of period202,490 251,748 
Cash and cash equivalents at end of period$160,338 $178,800 
Supplemental disclosures of cash flow information:
Non-cash investing activities
Decrease in accrued purchases of property and equipment$(106)$(38,842)
See accompanying notes to consolidated financial statements.
8

FIVE BELOW, INC.
Notes to Consolidated Financial Statements
(Unaudited)

(1) Summary of Significant Accounting Policies
(a)Description of Business
Five Below, Inc. (collectively referred to herein with its wholly owned subsidiary as the "Company") is a specialty value retailer offering merchandise targeted at the tween and teen demographic. The Company offers an edited assortment of products, with most priced at $5 and below.
The Company’s edited assortment of products includes select brands and licensed merchandise. The Company believes its merchandise is readily available, and that there are a number of potential vendors that could be utilized, if necessary, under approximately the same terms the Company is currently receiving; thus, it is not dependent on a single vendor or a group of vendors.
The Company is incorporated in the Commonwealth of Pennsylvania and, as of August 1, 2020, operated in 38 states that include Pennsylvania, New Jersey, Delaware, Maryland, Virginia, Massachusetts, New Hampshire, West Virginia, North Carolina, New York, Connecticut, Rhode Island, Ohio, Illinois, Indiana, Michigan, Missouri, Georgia, Texas, Tennessee, Maine, Alabama, Kentucky, Kansas, Florida, South Carolina, Mississippi, Louisiana, Wisconsin, Oklahoma, Minnesota, California, Arkansas, Iowa, Nebraska, Arizona, Nevada and Colorado. As of August 1, 2020 and August 3, 2019, the Company operated 982 stores and 833 stores, respectively, each operating under the name “Five Below,” and sells merchandise on the internet, through the Company's fivebelow.com e-commerce website.
(b) Impact of COVID-19
As a result of the coronavirus (or COVID-19) pandemic, federal, state and local governments and private entities mandated various restrictions, including travel restrictions, restrictions on public gatherings, stay at home orders and advisories, and quarantining of people who may have been exposed to the virus. Such mandates required reduction of operating hours and forced temporary closures of certain retailers and other businesses. It is impossible to predict the effect and ultimate impact of the pandemic and measures taken to control the spread, as the situation continues to evolve.
As a result of these restrictions and out of concern for its customers and employees, the Company temporarily closed all of its stores as of March 20, 2020. The Company began reopening its stores at the end of April in compliance with federal, state and local requirements. As a result of the temporary store closures, the Company withheld store rent for the closure period. With respect to the substantial majority of the Company's lease portfolio, the Company has either resumed rent payments or has agreed to rent deferrals and abatements related to this closure period with landlords. As a result, the Company does not expect that its prior rent withholdings or the associated deferrals and abatements agreed upon with landlords will have a material adverse impact on the Company's business, financial condition and results of future operations.
As of the end of June, the Company had reopened substantially all of its stores to the general public. Additionally, the Company launched a new service, offering curbside pick-up in the event any store is not otherwise permitted to reopen to the public.
While the ultimate health and economic impact of the COVID-19 pandemic are highly uncertain, the Company expects that its business operations and results of operations, including net sales, earnings and cash flows, may be materially impacted for the foreseeable future, as a result of:
temporary closures of Company stores;
decreased customer traffic in stores, including, without limitation, as the result of limitations on the number of persons permitted in stores at one time by certain local and state regulations;
uncertainty of the extent to which customers will maintain purchases through our e-commerce website and through curbside pickup (where stores remain closed to the public);
changes in consumer confidence and consumer spending habits, including spending for the merchandise that the Company sells, and negative trends in consumer purchasing patterns due to changes in consumers’ disposable income, credit availability and debt levels;
disruption to the Company’s supply chain including the manufacturing, supply, distribution, transportation and delivery of products;
increased safety measures for the Company's employees and customers at the Company's stores, distribution centers and home office; and
a slowdown in the U.S. and global economies, and an uncertain global economic outlook or a potential credit crisis.
9


To seek to mitigate the effects of the pandemic and to create financial flexibility, the Company has taken the following actions:
a majority of its store and distribution center employees were furloughed in March and the Company covered the cost of health benefits for such furloughed employees through the end of May;
the Company implemented a voluntary temporary base salary reduction of 50% for Joel Anderson, its Chief Executive Officer, and a 25% base salary reduction for the remainder of the executive leadership team that reports into Mr. Anderson. This compensation has been reinstated now that substantially all of the Company's stores have reopened;
its Board of Directors elected to forgo its quarterly cash retainers for the first quarter of 2020;
the Company implemented a temporary pay reduction for all salaried corporate associates and certain field and supply chain leadership (that has been reinstated now that substantially all of our stores have reopened) and delayed annual salary increases for corporate associates;
as permitted by the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, the Company has applied for payroll tax credits with the IRS, and elected to defer the payment of the employer's portion of FICA taxes;
the Company implemented significant non-payroll expense reductions, including advertising, occupancy and other store operating expenses, distribution and corporate office operating expenses, as well as professional and consulting fees;
the Company temporarily ceased paying rent on all closed store locations;
the Company cancelled certain vendor orders and delayed receipts on others in order to manage inventory levels, and extended payment terms for product and non-product vendors;
the Company significantly reduced its 2020 capital expenditure budget, including reducing the number of new stores to be opened in 2020 and delaying the purchase and construction of a new Midwest distribution center;
the Company amended its credit facility and increased its line of credit from $50 million to $225 million; and
the Company evolved its product mix to meet the needs of its customers by adding to its assortment of essential products, including consumables (such as cleaning and personal hygiene products), food and drink, fitness products, pet accessories, and products needed to support work-from-home and school-from-home.
(c) Fiscal Year
The Company operates on a 52/53-week fiscal year ending on the Saturday closest to January 31. References to "fiscal year 2020" or "fiscal 2020" refer to the period from February 2, 2020 to January 30, 2021, which is a 52-week fiscal year. References to "fiscal year 2019" or "fiscal 2019" refer to the period from February 3, 2019 to February 1, 2020, which is a 52-week fiscal year. The fiscal quarters ended August 1, 2020 and August 3, 2019 refer to the thirteen weeks ended as of those dates. The year-to-date periods ended August 1, 2020 and August 3, 2019 refer to the twenty-six weeks ended as of those dates.
10


(d) Basis of Presentation
The consolidated balance sheets as of August 1, 2020 and August 3, 2019, the consolidated statements of operations for the thirteen and twenty-six weeks ended August 1, 2020 and August 3, 2019, the consolidated statements of shareholders’ equity for the thirteen and twenty-six weeks ended August 1, 2020 and August 3, 2019 and the consolidated statements of cash flows for the twenty-six weeks ended August 1, 2020 and August 3, 2019 have been prepared by the Company in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim reporting and are unaudited. In the opinion of management, the aforementioned financial statements include all known adjustments (which consist primarily of normal, recurring accruals, estimates and assumptions that impact the financial statements) necessary to present fairly the financial position at the balance sheet dates and the results of operations and cash flows for the periods ended August 1, 2020 and August 3, 2019. The balance sheet as of February 1, 2020, presented herein, has been derived from the audited balance sheet included in the Company's Annual Report on Form 10-K for fiscal 2019 as filed with the Securities and Exchange Commission on March 19, 2020 and referred to herein as the “Annual Report,” but does not include all annual disclosures required by U.S. GAAP. These consolidated financial statements should be read in conjunction with the financial statements for the fiscal year ended February 1, 2020 and footnotes thereto included in the Annual Report. The consolidated results of operations for the thirteen and twenty-six weeks ended August 1, 2020 and August 3, 2019 are not necessarily indicative of the consolidated operating results for the year ending January 30, 2021 or any other period. The Company's business is seasonal and as a result, the Company's net sales fluctuate from quarter to quarter. Net sales are usually highest in the fourth fiscal quarter due to the year-end holiday season.
(e) Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, “Leases.” ASU 2016-02 requires lessees to record assets and liabilities on the balance sheet for all leases with terms longer than 12 months. The updated guidance is effective for interim and annual periods beginning after December 15, 2018, and early adoption is permitted. On February 3, 2019, the Company adopted this pronouncement on a modified retrospective basis and applied the new standard to all leases. As a result, comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which includes, among other things, the ability to carry forward the existing lease classification. The Company also elected the practical expedient related to land easements, allowing the Company to carry forward its accounting treatment for land easements on existing agreements. At adoption, the new standard had a material impact on the Company's balance sheets resulting in an increase in net assets and liabilities of approximately $618 million, as the Company has a significant number of leases for its stores. Although the standard impacts the treatment of certain initial direct leases costs that were previously capitalizable, it did not materially impact the Company's consolidated statements of operations and had no impact on the Company's cash flows.
See Note 3 ‘‘Leases’’ for additional information.
In August 2018, the FASB issued ASU 2018-15, "Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract." ASU 2018-15 requires implementation costs incurred by customers in cloud computing arrangements to be deferred over the noncancelable term of the cloud computing arrangements plus any optional renewal periods (1) that are reasonably certain to be exercised by the customer or (2) for which exercise of the renewal option is controlled by the cloud service provider. The effective date of this pronouncement is for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, and early adoption is permitted. The standard can be adopted either using the prospective or retrospective transition approach. During the thirteen weeks ended November 3, 2018, the Company adopted the pronouncement using the prospective transition method and it did not have a significant impact to the Company's financial statements.
In April 2019, the FASB issued ASU 2019-04, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses," which addresses certain fair value disclosure requirements, the measurement basis under the measurement alternative and which equity securities have to be remeasured at historical exchange rates. In May 2019, the FASB issued ASU 2019-05, "Financial Instruments - Credit Losses (Topic 326), Targeted Transition Relief," which gives entities the ability to irrevocably elect the fair value option in Subtopic 825-10 for certain existing financial assets upon transition to ASU 2016-13. The effective date of the standards will be for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 and early adoption is permitted for annual periods beginning after December 15, 2018. The new standard will be applied using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date to align the Company's credit loss methodology with the new standard. The Company adopted the standard on February 2, 2020. The adoption did not impact the Company's financial statements.
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In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("ASU 2020-04"). The pronouncement provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. The guidance was effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company is currently evaluating the impact the adoption of ASU 2020-04 will have on its consolidated financial statements.
(f) Use of Estimates
The preparation of the consolidated financial statements requires management of the Company to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, valuation allowances for inventories, income taxes, share-based compensation expense and the incremental borrowing rate utilized in operating lease liabilities.
(g) Fair Value of Financial Instruments
Fair value is defined 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. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation at the measurement date:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Inputs, other than Level 1, that are either directly or indirectly observable.
Level 3: Unobservable inputs developed using the Company’s estimates and assumptions which reflect those that market participants would use.
The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement.
The Company’s financial instruments consist primarily of cash equivalents, short-term investment securities, accounts payable, and borrowings, if any, under a line of credit. The Company believes that: (1) the carrying value of cash equivalents and accounts payable are representative of their respective fair value due to the short-term nature of these instruments; and (2) the carrying value of the borrowings, if any, under the line of credit approximates fair value because the line of credit’s interest rates vary with market interest rates. Under the fair value hierarchy, the fair market values of the short-term investments in corporate bonds are level 1 while the short-term investments in municipal bonds are level 2. The fair market values of level 2 instruments are determined by management with the assistance of a third-party pricing service. Since quoted prices in active markets for identical assets are not available, these prices are determined by the third-party pricing service using observable market information such as quotes from less active markets and quoted prices of similar securities.
As of August 1, 2020, February 1, 2020, and August 3, 2019, the Company had cash equivalents of $144.1 million, $200.1 million and $167.9 million, respectively. The Company’s cash equivalents consist of credit and debit card receivables, money market funds, and corporate bonds with original maturities of 90 days or less. Fair value for cash equivalents was determined based on level 1 inputs.
As of August 1, 2020, February 1, 2020, and August 3, 2019, the Company's investment securities are classified as held-to-maturity since the Company has the intent and ability to hold the investments to maturity. Such securities are carried at amortized cost plus accrued interest and consist of the following (in thousands):
As of August 1, 2020
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Market Value
Short-term:
Corporate bonds$41,670 $65 $ $41,735 
Total$41,670 $65 $ $41,735 
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As of February 1, 2020
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Market Value
Short-term:
Corporate bonds$58,625 $ $4 $58,621 
Municipal bonds604   604 
Total$59,229 $ $4 $59,225 
As of August 3, 2019
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Market Value
Short-term:
Corporate bonds$89,018 $7 $ $89,025 
Municipal bonds1,307 1  1,308 
Total$90,325 $8 $ $90,333 
Long-term:
Corporate bonds$1,043 $ $ $1,043 
Total$1,043 $ $ $1,043 
Short-term investment securities as of August 1, 2020, February 1, 2020, and August 3, 2019 all mature in one year or less. Long-term investment securities as of August 3, 2019 all mature after one year but in less than three years.
(h) Prepaid Expenses and Other Current Assets
Prepaid expenses as of August 1, 2020, February 1, 2020, and August 3, 2019 were $18.8 million, $17.2 million, and $19.6 million, respectively. Other current assets as of August 1, 2020, February 1, 2020, and August 3, 2019 were $40.2 million, $58.7 million, and $32.8 million, respectively.
(i) Other Accrued Expenses
Other accrued expenses include accrued capital expenditures of $23.7 million, $28.9 million, and $16.8 million as of August 1, 2020, February 1, 2020, and August 3, 2019, respectively.
(2)Revenue from Contracts with Customers
Revenue Transactions
Revenue from store operations is recognized at the point of sale when control of the product is transferred to the customer at such time. Internet sales, through the Company's fivebelow.com e-commerce website, are recognized when the consumer receives the product as control transfers upon delivery. Returns subsequent to the period end are immaterial; accordingly, no significant reserve has been recorded. Gift card sales to customers are initially recorded as liabilities and recognized as sales upon redemption for merchandise or as breakage revenue in proportion to the pattern of redemption of the gift cards by the customer in net sales.
The transaction price for the Company’s sales is based on the item’s stated price. To the extent that the Company charges customers for shipping and handling on e-commerce sales, the Company records such amounts in net sales. Shipping and handling costs, which include fulfillment and shipping costs related to the Company's e-commerce operations, are included in costs of goods sold. The Company has chosen the pronouncement's policy election which allows it to exclude all sales taxes from net sales in the accompanying consolidated statements of operations.
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Disaggregation of Revenue
The following table provides information about disaggregated revenue by groups of products: leisure, fashion and home, and party and snack (in thousands):
Thirteen Weeks EndedThirteen Weeks Ended
August 1, 2020August 3, 2019
AmountPercentage of Net SalesAmountPercentage of Net Sales
Leisure$206,362 48.4 %$220,703 52.9 %
Fashion and home156,665 36.8 %122,105 29.3 %
Party and snack63,083 14.8 %74,592 17.8 %
Total$426,110 100.0 %$417,400 100.0 %
Twenty-Six Weeks EndedTwenty-Six Weeks Ended
August 1, 2020August 3, 2019
AmountPercentage of Net SalesAmountPercentage of Net Sales
Leisure$302,712 48.3 %$399,023 51.0 %
Fashion and home223,843 35.7 %231,953 29.7 %
Party and snack100,454 16.0 %151,186 19.3 %
Total$627,009 100.0 %$782,162 100.0 %
(3) Leases
The Company determines if an arrangement contains a lease at the inception of a contract. Operating lease assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease assets and operating lease liabilities are recognized at the commencement date based on the present value of the remaining future minimum lease payments. As the rate implicit in the lease is not readily determinable for the Company's leases, the Company utilizes its incremental borrowing rate to determine the present value of future lease payments. The incremental borrowing rate represents a significant judgment and is determined based on an analysis of the Company's synthetic credit rating, prevailing financial market conditions, corporate bond yields, treasury bond yields, and the effect of collateralization. The operating lease assets also include lease payments made before commencement and exclude lease incentives.
The Company’s real estate leases typically contain options that permit renewals for additional periods of up to five years. For real estate leases, except for renewals that generally take the lease to a ten-year term, the options to renew are not considered reasonably certain at lease commencement because the Company reevaluates each lease on a regular basis to consider the economic and strategic benefits of exercising the renewal options, and regularly opens, relocates or closes stores to align with its operating strategy. Therefore, generally, except for renewals that take the lease to a ten-year term, the renewal option periods are not included within the lease term and the associated payments are not included in the measurement of the operating lease asset and operating lease liability as the exercise of such options is not reasonably certain. The Company’s operating lease agreements, including assumed renewals, which are generally those that take the lease to a ten-year term, expire through fiscal 2034. Similarly, renewal options are not included in the lease term for non-real estate leases because they are not considered reasonably certain of being exercised at lease commencement. Leases with an initial term of 12 months or less are not recorded on the balance sheets and lease expense is recognized on a straight-line basis over the term of the short-term lease.
For certain real estate leases, the Company accounts for lease components and nonlease components as a single lease component. Certain real estate leases require additional payments for reimbursement of real estate taxes, common area maintenance and insurance as well as payments based on sales volume, all of which are expensed as incurred as variable lease costs. Other real estate leases contain one fixed lease payment that includes real estate taxes, common area maintenance and insurance. These fixed payments are considered part of the lease payment and included in the operating lease assets and operating lease liabilities.
In response to the COVID-19 pandemic, certain of the Company's landlords have agreed to temporary rent concessions. These rent concessions generally relate to abatements and deferrals of certain rent payments for April, May, June and July until future periods. Additional negotiations of payment terms are still in process.
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In accordance with the Financial Accounting Standards Board's recent staff guidance regarding rent concessions related to the effects of the COVID-19 pandemic, the Company has elected to account for the concessions agreed to by landlords that do not result in a substantial increase in the obligations of the lessee as if the enforceable rights and obligations for those concessions existed in the original lease agreements and the Company has elected to not remeasure the related lease liabilities and right-of-use assets. For qualifying rent abatement concessions, the Company has recorded negative variable lease expense for the amount of the concession during the period of relief, and for qualifying deferrals of rental payments, the Company has recognized a non-interest bearing payable in lieu of recognizing a decrease in cash for the lease payment that would have been made based on the original terms of the lease agreement, which will be reduced when the deferred payment is made in the future.
During the thirteen weeks ended August 1, 2020, the Company committed to 25 new store leases with average terms of approximately 10 years that have future minimum lease payments of approximately $53.1 million.
All of the Company's leases are classified as operating leases and the associated assets and liabilities are presented as separate captions in the consolidated balance sheets. As of August 1, 2020 and August 3, 2019, the weighted average remaining lease term for the Company's operating leases was 8.0 years and 7.6 years, respectively, and the weighted average discount rate was 6.6% and 7.4%, respectively.
The following table is a summary of the Company's components for net lease costs (in thousands):
Thirteen Weeks EndedTwenty-Six Weeks Ended
Lease CostAugust 1, 2020August 3, 2019August 1, 2020August 3, 2019
Operating lease cost$42,273 $35,319 $82,621 $69,031 
Variable lease cost10,619 9,922 21,962 19,212 
Net lease cost*$52,892 $45,241 $104,583 $88,243 

* Excludes short-term lease cost, which is immaterial.


The following table summarizes the maturity of lease liabilities under operating leases as of August 1, 2020 (in thousands):
Maturity of Lease LiabilitiesOperating Leases
2020$105,576 
2021180,002 
2022173,153 
2023165,692 
2024154,702 
After 2024551,316 
Total lease payments1,330,441 
Less: imputed interest286,950 
Present value of lease liabilities$1,043,491 

The following table summarizes the supplemental cash flow disclosures related to leases (in thousands):
Twenty-Six Weeks Ended
August 1, 2020August 3, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Cash payments arising from operating lease liabilities (1)
$57,311 $61,984 
Supplemental non-cash information:
Operating lease liabilities arising from obtaining right-of-use assets$118,189 $119,853 

(1) Included within operating activities in the Company's Consolidated Statements of Cash Flows.
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(4) Income (Loss) Per Common Share
Basic income (loss) per common share amounts are calculated using the weighted average number of common shares outstanding for the period. Diluted income (loss) per common share amounts are calculated using the weighted average number of common shares outstanding for the period and include the dilutive impact of exercised stock options as well as assumed vesting of restricted stock awards and shares currently available for purchase under the Company's Employee Stock Purchase Plan, using the treasury stock method. Performance-based restricted stock units are considered contingently issuable shares for diluted income per common share purposes and the dilutive impact, if any, is not included in the weighted average shares until the performance conditions are met.
The following table reconciles net income (loss) and the weighted average common shares outstanding used in the computations of basic and diluted income (loss) per common share (in thousands, except for share and per share data):
Thirteen Weeks EndedTwenty-Six Weeks Ended
 August 1, 2020August 3, 2019August 1, 2020August 3, 2019
Numerator:
Net income (loss)$29,581 $28,831 $(21,001)$54,493 
Denominator:
Weighted average common shares outstanding - basic55,786,823 55,950,733 55,844,418 55,930,313 
Dilutive impact of options, restricted stock units and employee stock purchase plan180,017 343,376  356,319 
Weighted average common shares outstanding - diluted55,966,840 56,294,109 55,844,418 56,286,632 
Per common share:
Basic income (loss) per common share$0.53 $0.52 $(0.38)$0.97 
Diluted income (loss) per common share$0.53 $0.51 $(0.38)$0.97 
The effects of the assumed vesting of restricted stock units for 7,837 shares of common stock for the thirteen weeks ended August 1, 2020 were excluded from the calculation of diluted net income per share, as their impact would have been anti-dilutive.
For twenty-six weeks ended August 1, 2020, all common stock equivalents related to outstanding stock options and unvested restricted units were excluded from the calculation of diluted net loss per share, as their impact would have been anti-dilutive due to the Company's net loss for the period.
The aforementioned excluded shares do not reflect the impact of any incremental repurchases under the treasury stock method.
(5)Line of Credit
On March 20, 2020, the Company exercised its right under the Fourth Amended and Restated Loan and Security Agreement, executed on May 10, 2017 (the "Prior Credit Agreement') to increase the aggregate commitments under the Revolving Credit Facility from $20 million to $50 million.
On April 24, 2020, the Company entered into a Fifth Amended and Restated Credit Agreement (the “Fifth Restated Credit Agreement”), among the Company, 1616 Holdings, Inc., a wholly-owned subsidiary of the Company ("1616 Holdings"), and Wells Fargo Bank, National Association as administrative agent (the “Agent”), and other lenders. The Fifth Restated Credit Agreement amends and restates the Prior Credit Agreement which governed the Revolving Credit Facility.
The Fifth Restated Credit Agreement includes a secured asset-based revolving line of credit in the amount of up to $225.0 million (the “Amended Revolving Credit Facility”). Pursuant to the Fifth Restated Credit Agreement, advances under the Amended Revolving Credit Facility are tied to a borrowing base consisting of eligible credit card receivables and inventory, as reduced by certain reserves in effect from time to time. The Amended Revolving Credit Facility expires on the earliest to occur of (i) April 24, 2023 or (ii) an event of default. The Amended Revolving Credit Facility may be increased by up to $150.0 million, subject to certain conditions, including obtaining commitments from one or more lenders. The entire amount of the Amended Revolving Credit Facility is available for the issuance of letters of credit and allows for swingline loans.
The Fifth Restated Credit Agreement provides that the interest rate payable on borrowings shall be, at the Company’s option, a per annum rate equal to (a) a base rate plus an applicable margin ranging from 1.00% to 1.25% or (b) a LIBOR rate plus a margin ranging from 2.00% to 2.25%. Letter of credit fees will range from 2.00% to 2.25%. The interest rate and letter of credit fees under the Fifth Restated Credit Agreement are subject to an increase of