Significant Accounting Policies (Tables)

12 Months Ended

Feb. 01, 2020

Summary of Condensed Consolidated Statements of Cash Flows Illustrating Effect of Corrections

The following are selected line items from the Company’s consolidated statements of cash flows illustrating the effect of the corrections, prior to the adoption of the modified retrospective application of the new lease accounting standard (in thousands):


	Year Ended February 2, 2019
	As Reported		Adjustment		As Revised
Cash flows from operating activities:
Change in accounts payable and accrued expenses	$	(452)	$	9,201	$	8,749
Net cash provided by operating activities		300,556		9,201		309,757
Cash flows from investing activities:
Capital expenditures		(136,736)		(9,201)		(145,937)
Net cash used in investing activities		(136,736)		(9,201)		(145,937)

Schedule of Product Recall Adjustments Effect on Income Before Taxes


	Year Ended
	February 1,		February 2,		February 3,
	2020		2019		2018
(Increase) decrease to net revenues	$	(391)	$	4,733	$	3,207
Increase (decrease) to cost of goods sold		(3,372)		(4,139)		4,315
(Increase) decrease to gross profit		(3,763)		594		7,522
Increase (decrease) to selling, general and administrative expenses		(225)		1,025		185
(Increase) decrease to income before income taxes	$	(3,988)	$	1,619	$	7,707

Schedule of Property and Equipment Useful Lives


Category of Property and Equipment		Useful Life
Building and building improvements		40 years
Machinery, equipment and aircraft		3 to 10 years
Furniture, fixtures and equipment		3 to 7 years
Computer software		3 to 10 years

Summary of Allowance for Sales Returns

A summary of the allowance for sales returns is as follows (in thousands):


	Year Ended
	February 1,		February 2,		February 3,
	2020		2019		2018
Balance at beginning of fiscal year	$	19,821	$	10,565	$	10,077
Impact of Topic 606 adoption		—		5,862		—
Provision for sales returns		107,811		112,218		108,134
Actual sales returns		(108,426)		(108,824)		(107,646)
Balance at end of fiscal year	$	19,206	$	19,821	$	10,565

Summary of Impact of Adopting ASUs on the Statement of Income and the Balance Sheet

The following tables summarize the impact of adopting Topic 606 on the Company’s consolidated statement of income (in thousands):

The following table presents the impact of adopting the ASUs, as well as the correction of an immaterial error as discussed in “Revision” above, on the Company’s consolidated balance sheet (in thousands):


	February 2, 2019
	As Reported		Adjustments and Other⁽¹⁾			As Adjusted and Revised
ASSETS
Current assets:
Cash and cash equivalents	$	5,803	$	—		$	5,803
Accounts receivable—net		40,224		—			40,224
Merchandise inventories		531,947		—			531,947
Asset held for sale		—		21,795	⁽²⁾		21,795
Prepaid expense and other current assets		104,719		(521)	⁽³⁾		104,198
Total current assets		682,693		21,274			703,967
Property and equipment—net		863,562		89,395	⁽⁴⁾		952,957
Operating lease right-of-use assets		—		440,504	⁽⁵⁾		440,504
Goodwill		124,379		—			124,379
Tradenames, trademarks and domain names		86,022		—			86,022
Deferred tax assets		30,033		5,570	⁽⁶⁾		35,603
Other non-current assets		19,345		60,241	⁽⁷⁾		79,586
Total assets	$	1,806,034	$	616,984		$	2,423,018
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued expenses	$	320,441	$	56	⁽⁸⁾	$	320,497
Deferred revenue and customer deposits		152,595		—			152,595
Convertible senior notes due 2019—net		343,789		—			343,789
Operating lease liabilities		—		66,249	⁽⁵⁾		66,249
Other current liabilities		101,347		8,109	⁽¹⁾⁽⁹⁾		109,456
Total current liabilities		918,172		74,414			992,586
Asset based credit facility		57,500		—			57,500
Convertible senior notes due 2020—net		271,157		—			271,157
Convertible senior notes due 2023—net		249,151		—			249,151
Financing obligations under build-to-suit lease transactions		228,928		(228,928)	⁽¹⁰⁾		—
Deferred rent and lease incentives		53,742		(53,742)	⁽¹⁰⁾		—
Non-current operating lease liabilities		—		437,557	⁽⁵⁾		437,557
Non-current finance lease liabilities		—		421,245	⁽⁹⁾		421,245
Other non-current obligations		50,346		(17,834)	^(1)(11)		32,512
Total liabilities		1,828,996		632,712			2,461,708
Stockholders’ deficit:
Preferred stock		—		—			—
Common stock		2		—			2
Additional paid-in capital		356,422		—			356,422
Accumulated other comprehensive loss		(2,333)		(1)			(2,334)
Accumulated deficit		(376,810)		(15,727)	^(1)(12)		(392,537)
Treasury stock		(243)		—			(243)
Total stockholders’ deficit		(22,962)		(15,728)			(38,690)
Total liabilities and stockholders’ deficit	$	1,806,034	$	616,984		$	2,423,018

(1)	During the adoption process of the ASUs, the Company identified a lease agreement that was incorrectly accounted for as an impaired lease under ASC 420—Exit or Disposal Cost Obligations in fiscal 2017 and the first quarter of fiscal 2018. Refer to “Revision” above.

(2)	Represents recognition of asset held for sale under a sale-leaseback transaction.

(3)	Represents reclassification of prepaid rent to operating lease liabilities and other current liabilities (for finance leases).

(4)

Represents (i) recognition of finance lease right-of-use assets, partially offset by (ii) derecognition of non-Company owned properties that were capitalized under previously existing build-to-suit accounting policies, (iii) reclassification of construction in progress assets determined to be landlord assets to other non-current assets and (iv) reclassification of initial direct costs related to operating leases to operating lease right-of-use assets.

(5)

Represents recognition of operating lease right-of-use assets and corresponding current and non-current lease liabilities. The operating lease right-of-use asset also includes the reclassification of deferred rent and unamortized lease incentives related to operating leases and the reclassification of initial direct costs from property and equipment—net.

(6)	Represents recognition of net deferred tax assets related to the adoption of the ASUs.

(7)	Primarily represents reclassification from property and equipment—net of construction in progress assets determined to be landlord assets for which the lease has not yet commenced.

(8)	Represents a reclassification of an accrual for real estate taxes.

(9)	Represents recognition of the current and non-current finance lease liabilities. The other current liabilities line item also includes the reclassification of current obligations associated with leases previously reported as capital leases to finance lease liabilities.

(10)

Represents (i) derecognition of liabilities related to non-Company owned properties that were consolidated under previously existing build-to-suit accounting policies and (ii) reclassification of deferred rent and unamortized lease incentives to operating lease right-of-use assets upon adoption of the ASUs.

(11)

Represents (i) derecognition of the net lease loss liabilities as such balances were reclassified to operating lease right-of-use assets and operating current and non-current liabilities and (ii) the reclassification of non-current obligations associated with leases previously reported as capital leases to finance lease liabilities.

(12)	Represents a decrease to the consolidated net income for fiscal 2017 and fiscal 2018, as well as an increase of $4.0 million to beginning fiscal 2017 retained earnings related to the adoption of the ASUs.