What changed in this filing

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Item 1. Financial Statements

2020-12-04 compared with 2020-09-04 · 128 added, 131 removed, 313 unchanged (45% of the section changed)

3 unchanged sentences

(In thousands, except share data)

August 1, 2020

October 31, 2020

February 1, 2020

August 3, 2019

November 2, 2019

Current Assets:

29 unchanged sentences

(In thousands, except per share data)

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

October 31, 2020

November 2, 2019

October 31, 2020

November 2, 2019

Cost of sales (including buying, distribution

1 unchanged sentence

Selling, general and administrative expenses

Operating income/(loss)

Operating income

Interest income

Interest expense

Income/(loss) before income taxes

Income tax expense/(benefit)

Net income/(loss)

Net income/(loss) per share:

Income before income taxes

Income tax expense

Net income per share:

Weighted average shares:

4 unchanged sentences

(In thousands, except per share data)

Balance at May 2, 2020

Balance at August 1, 2020

Dividends declared ($ 0.090 per share)

4 unchanged sentences

Stock-based compensation expense

Balance at October 31, 2020

Balance at August 3, 2019

Balance at May 4, 2019

Dividends declared ($ 0.085 per share)

1 unchanged sentence

Restricted stock awards

Shares surrendered by employees to pay taxes

on restricted stock

Purchase of common stock for treasury

Stock-based compensation expense

Balance at August 3, 2019

Twenty-six Weeks Ended

Balance at November 2, 2019

Thirty-nine Weeks Ended

(In thousands, except per share data)

6 unchanged sentences

Stock-based compensation expense

Balance at August 1, 2020

Balance at October 31, 2020

Balance at February 2, 2019

8 unchanged sentences

Stock-based compensation expense

Balance at August 3, 2019

Balance at November 2, 2019

See notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(In thousands)

August 1, 2020

August 3, 2019

October 31, 2020

November 2, 2019

Cash Flows From Operating Activities

Net income/(loss)

Adjustments to reconcile net income/(loss) to net cash provided by operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

20 unchanged sentences

Net cash used in financing activities

Net increase (decrease) in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

10 unchanged sentences

Shoe Carnival, Inc.

is one of the nation’s largest family footwear retailers, providing the convenience of shopping at any of our store locations or online.

is one of the nation’s largest family footwear retailers, providing customers the convenience of shopping at any of our store locations or online.

We offer customers a broad assortment of moderately priced dress, casual and athletic footwear for men, women and children with an emphasis on national name brands.

4 unchanged sentences

In our opinion, the accompanying unaudited Condensed Consolidated Financial Statements and notes have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information and contain all normal recurring adjustments necessary to fairly present our financial position and the results of our operations and our cash flows for the periods presented.

Certain information and disclosures normally included in the notes to Condensed Consolidated Financial Statements have been condensed or omitted according to the rules and regulations of the SEC, although we believe that the disclosures are adequate to make the information presented not misleading.

Certain information and disclosures normally included in the notes to Condensed Consolidated Financial Statements have been condensed or omitted as permitted by the rules and regulations of the SEC although we believe that the disclosures are adequate to make the information presented not misleading.

The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.

The unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended February 1, 2020.

Note 2 - Net Income/(Loss) Per Share

The following tables set forth the computation of basic and diluted net income/(loss) per share as shown on the face of the accompanying Condensed Consolidated Statements of Income:

Note 2 - Net Income Per Share

The following tables set forth the computation of basic and diluted net income per share as shown on the face of the accompanying Condensed Consolidated Statements of Income:

Thirteen Weeks Ended

August 1, 2020

August 3, 2019

October 31, 2020

November 2, 2019

(In thousands, except per share data)

Basic Net Income per Share:

Conversion of share-based compensation

Conversion of stock-based compensation

Net income available for basic common shares

1 unchanged sentence

Diluted Net Income per Share:

Conversion of share-based compensation

Conversion of stock-based compensation

Net income available for diluted common

shares and diluted net income per share

Twenty-six Weeks Ended

August 1, 2020

August 3, 2019

Thirty-nine Weeks Ended

October 31, 2020

November 2, 2019

(In thousands, except per share data)

Basic Net Income/(Loss) per Share:

Net income/(loss)

Basic Net Income per Share:

Conversion of share-based compensation

Net income/(loss) available for basic common shares

and basic net income/(loss) per share

Diluted Net Income/(Loss) per Share:

Net income/(loss)

Net income available for basic common shares

and basic net income per share

Diluted Net Income per Share:

Conversion of share-based compensation

Net income/(loss) available for diluted common

shares and diluted net income/(loss) per share

The computation of basic net income/(loss) per share of common stock is based on the weighted average number of common shares outstanding during the period.

The computation of diluted net income/(loss) per share is based on the weighted average number of shares outstanding plus the dilutive incremental shares that would be outstanding assuming the vesting of restricted stock awards, restricted stock units and performance stock units, of which a small portion have a non-forfeitable right to dividends.

The computation of diluted net income/(loss) per share excluded approximately 162,000 unvested share-settled equity awards for the first six months of fiscal 2020 because the impact would be anti-dilutive.

Net income available for diluted common

shares and diluted net income per share

The computation of basic net income per share of common stock is based on the weighted average number of common shares outstanding during the period.

The computation of diluted net income per share is based on the weighted average number of shares outstanding plus the dilutive incremental shares that would be outstanding assuming the vesting of restricted stock awards, restricted stock units and performance stock units.

A small portion of these awards that were outstanding at the beginning of fiscal 2020 and vested during the thirty-nine weeks ended October 31, 2020, had a non-forfeitable right to dividends.

The computation of diluted net income per share excluded approximately 2,000 unvested share-settled awards for the third quarter of fiscal 2020 and 3,000 unvested share-settled equity awards for the first nine months of fiscal 2020 because the impact would be anti-dilutive.

For the other periods presented, all unvested share-settled equity awards were dilutive.

Note 3 – COVID-19 Impacts

Our operations are currently experiencing significant disruption associated with the outbreak of a novel strain of coronavirus (“COVID-19”).

Our operations have been significantly disrupted by the outbreak of a novel strain of coronavirus (“COVID-19”).

On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic.

Government, as well as the vast majority of states and local municipalities, have taken unprecedented measures to control the spread of COVID-19 and to provide stimulus as a mitigating measure to deteriorating economic conditions and increasing unemployment.

The COVID-19 pandemic began significantly impacting our store operations, sales and costs beginning in the first quarter of fiscal 2020.

Impacts included the temporary closure of our brick-and-mortar stores effective March 19, 2020, reduced foot traffic and sales, deteriorating economic conditions for our customer base and some disruption to our global supply chain.

As a result, substantially all of our brick-and-mortar stores were closed for approximately 50 % of the first quarter of fiscal 2020.

We reopened stores in accordance with applicable public health guidelines, and by the beginning of our second quarter, approximately 50 % of our stores were reopened.

By early June of fiscal 2020 , substantially all stores had reopened.

As a result of these temporary closures, our year-to-date net sales and gross profit significantly declined compared to fiscal 2019.

Our website and mobile app continued to process e-commerce orders and have been fully operational during the pandemic.

These orders were generally fulfilled at our store locations.

The COVID-19 pandemic will likely continue to impact our financial condition and results of operations for the foreseeable future.

The COVID-19 pandemic began significantly impacting our operations, sales and costs beginning in the first quarter of fiscal 2020.

Impacts included the temporary closure of our physical stores effective March 19, 2020, reduced foot traffic and sales, deteriorating economic conditions for our customer base, and some disruption to our global supply chain.

We began reopening physical stores in accordance with applicable public health guidelines in late April.

By the beginning of the second fiscal quarter, approximately 50 percent of our stores were reopened, and by early June , substantially all of our stores had reopened.

Our website and mobile app have been fully operational during the pandemic with digital orders generally fulfilled by our store locations.

As of October 31, 2020, we do not have any stores closed due to the pandemic;

however, the COVID-19 pandemic will likely continue to impact our financial condition and results of operations for the foreseeable future.

Note 4 - Fair Value Measurements

11 unchanged sentences

Fair Value of Financial Instruments

The following table presents financial instruments that are measured at fair value on a recurring basis at August 1, 2020, February 1, 2020 and August 3, 2019.

The following table presents financial instruments that are measured at fair value on a recurring basis at October 31, 2020, February 1, 2020 and November 2, 2019.

Fair Value Measurements

(In thousands)

As of August 1, 2020

As of October 31, 2020

Cash equivalents - money market mutual funds

1 unchanged sentence

Cash equivalents - money market mutual funds

As of August 3, 2019

As of November 2, 2019

Cash equivalents - money market mutual funds

The fair values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other current liabilities approximate their carrying values because of their short-term nature.

We have no material liabilities measured at fair value on a recurring or non-recurring basis.

Long-Lived Asset Impairment Testing

8 unchanged sentences

Our estimates are derived from an income-based approach considering the cash flows expected over the remaining lease term for each location.

These projections are primarily based on management’s estimates of store-level sales, gross margins, direct expenses, exercise of future lease renewal options and resulting cash flows and, by their nature, include judgments about how current initiatives will impact future performance.

We estimate the fair value of operating right-of-use assets using the market value of rents applicable to the leased asset, discounted using the remaining lease term.

External factors, such as the local environment in which the store resides, including store traffic and competition, are evaluated in terms of their effect on sales trends.

These projections are primarily based on management’s estimates of store-level sales, exercise of future lease renewal options and the store’s contribution to cash flows and, by their nature, include judgments about how current initiatives will impact future performance.

We estimate the fair value of operating lease right-of-use assets using the market value of rents applicable to the leased asset, discounted using the remaining lease term.

External factors, such as the local environment in which the store is located, including store traffic and competition, are evaluated in terms of their effect on sales trends.

Changes in sales and operating income assumptions or unfavorable changes in external factors can significantly impact the estimated future cash flows.

1 unchanged sentence

If actual operating results or market conditions differ from those anticipated, the carrying value of certain of our assets may prove unrecoverable and we may incur additional impairment charges in the future.

During the thirteen weeks ended August 1, 2020, we recorded an impairment charge of $ 182,000 associated with one store.

During the twenty-six weeks ended August 1, 2020, we recorded impairment charges of $ 2.5 million associated with eight stores.

There were no impairments recorded during the thirteen weeks ended August 3, 2019.

During the twenty-six weeks ended August 3, 2019, we recorded an impairment charge of $ 40,000 associated with one store.

During the thirteen weeks ended October 31, 2020, we recorded an impairment charge of $ 211,000 associated with one store.

During the thirty-nine weeks ended October 31, 2020, we recorded impairment charges of $ 2.7 million associated with nine stores.

During the thirteen weeks ended November 2 , 2019, we recorded impairment charges of $ 561,000 related to three stores.

During the thirty-nine weeks ended November 2, 2019, we recorded an impairment charges of $ 604,000 associated with four stores.

These charges were included in selling, general and administrative expenses.

9 unchanged sentences

Additionally, we recognize stock-based compensation expense for the discount on shares sold to employees through our employee stock purchase plan.

For the thirteen and twenty-six weeks ended August 1, 2020, stock-based compensation expense for the employee stock purchase plan was $ 7,000 before the income tax benefit of $ 2,000 and $ 18,000 before the income tax benefit of $ 6,000 , respectively.

For the thirteen and twenty-six weeks ended August 3, 2019, stock-based compensation expense for the employee stock purchase plan was $ 7,000 before the income tax benefit of $ 2,000 and $ 18,000 before the income tax benefit of $ 3,000 , respectively.

For the thirteen and thirty-nine weeks ended October 31, 2020, stock-based compensation expense for the employee stock purchase plan was $ 8,000 before the income tax benefit of $ 2,000 and $ 27,000 before the income tax benefit of $ 6,000 , respectively.

For the thirteen and thirty-nine weeks ended November 2, 2019, stock-based compensation expense for the employee stock purchase plan was $ 8,000 before the income tax benefit of $ 2,000 and $ 25,000 before the income tax benefit of $ 5,000 , respectively.

Share-Settled Equity Awards

4 unchanged sentences

February 1, 2020

Forfeited or expired

Restricted stock units and performance stock units at

August 1, 2020

The total fair value at grant date of restricted stock units and performance stock units that vested during the twenty-six weeks ended August 1, 2020 and August 3, 2019 was $ 4.4 million and $ 2.0 million, respectively.

The weighted-average grant date fair value of restricted stock units and performance stock units granted during the twenty-six weeks ended August 1, 2020 and August 3, 2019 was $ 14.88 and $ 31.28 , respectively.

October 31, 2020

The total fair value at grant date of restricted stock units and performance stock units that vested during the thirty-nine weeks ended October 31, 2020 and November 2, 2019 was $ 4.4 million and $ 2.3 million, respectively.

The weighted-average grant date fair value of restricted stock units and performance stock units granted during the thirty-nine weeks ended October 31, 2020 and November 2, 2019 was $ 14.88 and $ 31.29 , respectively.

The following table summarizes transactions for our restricted stock awards pursuant to our stock-based compensation plans:

3 unchanged sentences

Forfeited or expired

Restricted stock at August 1, 2020

The weighted-average grant date fair value of restricted stock awards granted during the twenty-six weeks ended August 1, 2020 and August 3, 2019 was $ 24.91 and $ 26.58 , respectively.

The total fair value at grant date of restricted stock awards that vested during the twenty-six weeks ended August 1, 2020 and August 3, 2019 was $ 1.3 million and $ 16.9 million, respectively.

Restricted stock at October 31, 2020

The total fair value at grant date of restricted stock awards that vested during the thirty-nine weeks ended October 31, 2020 and November 2, 2019 was $ 1.3 million and $ 17.0 million, respectively.

The weighted-average grant date fair value of restricted stock awards granted during the thirty-nine weeks ended October 31, 2020 and November 2, 2019 was $ 24.91 and $ 26.58 , respectively.

The following table summarizes information regarding stock-based compensation expense recognized for all share-settled equity awards (restricted stock units, performance stock units and restricted stock awards):

(In thousands)

Weeks Ended August 1, 2020

Weeks Ended August 3, 2019

Weeks Ended August 1, 2020

Weeks Ended August 3, 2019

Weeks Ended October 31, 2020

Weeks Ended November 2, 2019

Weeks Ended October 31, 2020

Weeks Ended November 2, 2019

Stock-based compensation expense before the

1 unchanged sentence

Income tax effect

Included in the twenty-six week period ended August 1, 2020 was a tax expense of $ 79,000 in connection with the vesting of equity-based compensation.

The twenty-six week period ended August 3, 2019 included a tax benefit in connection with the vesting of equity-based compensation of approximately $ 1.9 million.

As of August 1, 2020, there was approximately $ 3.4 million of unrecognized compensation expense remaining related to our restricted stock units, performance stock units and service-based restricted stock awards.

Included in the thirty-nine week period ended October 31, 2020 was a tax expense of $ 81,000 in connection with the vesting of stock-based compensation.

The thirty-nine week period ended November 2, 2019 included a tax benefit in connection with the vesting of stock-based compensation of approximately $ 2.0 million.

As of October 31, 2020, approximately $ 2.6 million of unrecognized compensation expense remained related to our restricted stock units, performance stock units and service-based restricted stock awards.

The cost is expected to be recognized over a weighted average period of approximately 1.4 years.

This incorporates our current assumptions with respect to the estimated requisite service period required to achieve the designated performance conditions for performance-based stock awards.

Cash-Settled Stock Appreciation Rights

Cash-settled stock appreciation rights (“SARs”) are granted to certain non-executive employees.

Each SAR entitles the holder, upon exercise of their vested shares, to receive cash in an amount equal to the closing price of our stock on the date of exercise less the exercise price, with a maximum amount of gain defined.

Each SAR entitles holders, upon exercise of their vested shares, to receive cash in an amount equal to the closing price of our stock on the date of exercise less the exercise price, with a maximum amount of gain defined.

The SARs granted during the first quarter of fiscal 2020 will vest and become fully exercisable on March 31, 2021 and any unexercised SARs will expire on March 31, 2023.

SARs granted during the first quarter of fiscal 2019 vested and became fully exercisable on March 31, 2020 and any unexercised SARs will expire on March 31, 2022.

SARs issued have a defined maximum gain of $ 10.00 over the exercise price of $ 13.79 for awards granted in fiscal 2020 and over the exercise price of $ 34.95 for awards granted in fiscal 2019 .

The SARs issued have a defined maximum gain of $ 10.00 over the exercise price of $ 13.79 for awards granted in fiscal 2020 and over the exercise price of $ 34.95 for awards granted in fiscal 2019.

The following table summarizes the SARs activity:

1 unchanged sentence

Outstanding at February 1, 2020

Outstanding at August 1, 2020

Forfeited or expired

Outstanding at October 31, 2020

The fair value of these liability awards are remeasured, using a trinomial lattice model, at each reporting period until the date of settlement.

Increases or decreases in stock-based compensation expense are recognized over the vesting period, or immediately for vested awards.

The weighted-average fair value of outstanding, non-vested SAR awards as of August 1, 2020 was $ 4.95 .

The weighted-average fair value of outstanding, non-vested SAR awards as of October 31, 2020 was $ 8.54 .

The fair value was estimated using a trinomial lattice model with the following assumptions:

August 1, 2020

August 3, 2019

October 31, 2020

November 2, 2019

Risk free interest rate yield curve

13 unchanged sentences

(In thousands)

Weeks Ended August 1, 2020

Weeks Ended August 3, 2019

Weeks Ended August 1, 2020

Weeks Ended August 3, 2019

Weeks Ended October 31, 2020

Weeks Ended November 2, 2019

Weeks Ended October 31, 2020

Weeks Ended November 2, 2019

Stock-based compensation expense before the

1 unchanged sentence

Income tax effect

As of August 1, 2020, approximately $ 182,000 in unrecognized compensation expense remained related to non-vested SARs.

As of October 31, 2020, approximately $ 145,000 in unrecognized compensation expense remained related to non-vested SARs.

This expense is expected to be recognized over a period of approximately 0.4 years.

2 unchanged sentences

Revenue is disaggregated by product category below.

Net sales and percentage of net sales for the thirteen and twenty-six weeks ended August 1, 2020 and August 3, 2019 were as follows:

Net sales and percentage of net sales for the thirteen and thirty-nine weeks ended October 31, 2020 and November 2, 2019 were as follows:

(In thousands)

Thirteen Weeks

Ended August 1, 2020

Ended October 31, 2020

Thirteen Weeks

Ended August 3, 2019

Ended November 2, 2019

Non-Athletics:

1 unchanged sentence

(In thousands)

Twenty-six Weeks

Ended August 1, 2020

Twenty-six Weeks

Ended August 3, 2019

Thirty-nine Weeks

Ended October 31, 2020

Thirty-nine Weeks

Ended November 2, 2019

Non-Athletics:

1 unchanged sentence

Accounting Policy and Performance Obligations

We operate as a multi-channel, family footwear retailer and provide the convenience of shopping at our brick-and-mortar stores or shopping online through our e-commerce and mobile platforms.

As part of our multi-channel strategy, we offer Shoes 2U, a program that enables us to ship product to a customer’s home or selected store if the product is not in stock.

We operate as a multi-channel, family footwear retailer and provide the convenience of shopping at our physical stores or shopping online through our e-commerce and mobile platforms.

As part of our multi-channel strategy, we offer Shoes 2U, a program that enables us to ship product to a customer’s home or selected store if the product is not in stock at a particular store.

We also offer “buy online, pick up in store” services for our customers.

“Buy online, pick up in store” provides the convenience of local pickup for our customers.

For our brick-and-mortar stores, we satisfy our performance obligation and control is transferred at the point of sale when the customer takes possession of the products.

This also includes the “buy online, pick up in store” scenario described above and includes sales made via our Shoes 2U program when customers choose to pick up their goods in-store.

For our physical stores, we satisfy our performance obligation and control is transferred at the point of sale when the customer takes possession of the products.

This also includes the “buy online, pick up in store” scenario described above and includes sales made via our Shoes 2U program when customers choose to pick up their goods at a physical store.

For sales made through our e-commerce site or mobile app in which the customer chooses home delivery, we transfer control and recognize revenue when the product is shipped from our stores or distribution center.

4 unchanged sentences

Gift card revenue is recognized at the time of redemption.

When a customer makes a purchase as part of our

rewards program, we allocate the transaction price between the goods purchased and the loyalty reward points and recognize the loyalty revenue based on estimated customer redemptions.

When a customer makes a purchase as part of our rewards program, we allocate the transaction price between the goods purchased and the loyalty reward points and recognize the loyalty revenue based on estimated customer redemptions.

Transaction Price and Payment Terms

4 unchanged sentences

Taxes imposed by governmental authorities such as sales taxes are excluded from net sales.

Our brick-and-mortar stores accept various forms of payment from customers at the point of sale.

Our physical stores accept various forms of payment from customers at the point of sale.

These include cash, checks, credit/debit cards and gift cards.

Our e-commerce and mobile platforms accept credit/debit cards, PayPal, Apple Pay, gift cards and a third-party installment payment option as forms of payment.

Our e-commerce and mobile platforms accept credit/debit cards, PayPal, Apple Pay, Klarna and gift cards as forms of payment.

Payments made for products are generally collected when control passes to the customer, either at the point of sale or at the time the customer order is shipped.

2 unchanged sentences

We recognize the related revenue when control has been transferred to the customer (i.e., when the product is picked up by the customer or shipped to the customer).

Unearned revenue related to our Shoes 2U program was not material to our Condensed Consolidated Financial Statements at August 1, 2020, February 1, 2020 and August 3, 2019.

Unearned revenue related to our Shoes 2U program was not material to our Condensed Consolidated Financial Statements at October 31, 2020, February 1, 2020 and November 2, 2019.

Returns and Refunds

3 unchanged sentences

The estimated cost of merchandise inventory is recorded as a reduction to cost of sales and an increase in merchandise inventories.

Approximately $ 718,000 of refund liabilities and $ 500,000 of right of return assets associated with estimated product returns were recorded in our Condensed Consolidated Balance Sheets at each of August 1, 2020 and February 1, 2020.

Approximately $ 600,000 of refund liabilities and $ 410,000 of right of return assets associated with estimated product returns were recorded in our Condensed Consolidated Balance Sheet at August 3, 2019.

Approximately $ 718,000 of refund liabilities and $ 500,000 of right of return assets associated with estimated product returns were recorded in accrued and other liabilities at each of October 31, 2020 and February 1, 2020.

Approximately $ 600,000 of refund liabilities and $ 410,000 of right of return assets associated with estimated product returns were recorded in accrued and other liabilities at November 2, 2019.

Contract Liabilities

We sell gift cards in our brick-and-mortar stores and through our e-commerce and mobile platforms.

Gift card purchases are recorded as an increase to contract liabilities at the time of purchase and a decrease to contract liabilities when a customer redeems a gift card.

We offer gift cards in our stores and through our e-commerce and mobile platforms.

When a gift card is issued, the issuance is recorded as an increase to contract liabilities at the time of issuance and a decrease to contract liabilities when a customer redeems a gift card.

Estimated breakage is determined based on historical breakage percentages and recognized as revenue based on expected gift card usage.

We do not record breakage revenue when escheat liability to relevant jurisdictions exists.

At August 1, 2020, February 1, 2020 and August 3, 2019, approximately $ 1.3 million, $ 1.5 million and $ 1.2 million of contract liabilities associated with unredeemed gift cards were recorded in our Condensed Consolidated Balance Sheets, respectively.

At October 31, 2020, February 1, 2020 and November 2, 2019, approximately $ 1.2 million, $ 1.5 million and $ 1.1 million of contract liabilities associated with unredeemed gift cards were recorded in accrued and other liabilities, respectively.

We expect the revenue associated with these liabilities to be recognized in proportion to the pattern of customer redemptions within two years.

Breakage revenue associated with our gift cards of $ 23,000 and $ 42,000 was recognized in net sales during the thirteen and twenty-six weeks ended August 1, 2020, respectively.

Breakage revenue associated with our gift cards of $ 30,000 and $ 63,000 was recognized in net sales during the thirteen and twenty-six weeks ended August 3, 2019, respectively.

Breakage revenue associated with our gift cards of $ 27,000 and $ 69,000 was recognized in net sales during the thirteen and thirty-nine weeks ended October 31, 2020, respectively.

Breakage revenue associated with our gift cards of $ 29,000 and $ 91,000 was recognized in net sales during the thirteen and thirty-nine weeks ended November 2, 2019, respectively.

Our Shoe Perks rewards program allows customers to accrue points and provides customers with the opportunity to earn rewards.

4 unchanged sentences

We then recognize revenue based on an estimate of when customers redeem rewards, which incorporates an estimate of points expected to expire using historical rates.

During the thirteen and twenty-six weeks ended August 1, 2020, approximately $ 922,000 and $ 1.9 million, respectively, of loyalty rewards were recognized in net sales.

During the thirteen and twenty-six weeks ended August 3, 2019, approximately $ 448,000 and $ 854,000 , respectively, of loyalty rewards were recognized in net sales.

At August 1, 2020, February 1, 2020 and August 3, 2019, approximately $ 827,000 , $ 679,000 and $ 352,000 , of contract liabilities associated with loyalty rewards were recorded in our Condensed Consolidated Balance Sheets, respectively.

During the thirteen and thirty-nine weeks ended October 31, 2020, approximately $ 1.3 million and $ 3.2 million, respectively, of loyalty rewards were recognized in net sales.

During the thirteen and thirty-nine weeks ended November 2, 2019, approximately $ 632,000 and $ 1.5 million, respectively, of loyalty rewards were recognized in net sales.

At October 31, 2020, February 1, 2020 and November 2, 2019, approximately $ 828,000 , $ 679,000 and $ 533,000 , respectively, of contract liabilities associated with loyalty rewards were recorded in accrued and other liabilities.

We expect the revenue associated with these liabilities to be recognized in proportion to the pattern of customer redemptions in less than one year.

19 unchanged sentences

Should a default condition be reported, the lenders may preclude additional borrowings and call all loans and accrued interest at their discretion.

We were in compliance with these covenants at August 1, 2020.

We were in compliance with these covenants at October 31, 2020.

The credit facility bears interest, at our option, at (1) the agent bank’s prime rate as defined in the Credit Agreement plus 1.0%, with the prime rate defined as the greater of (a) the Federal Fund rate plus 0.50% or (b) the interest rate announced from time to time by the agent bank as its “prime rate” or (2) LIBOR plus 1.50% to 2.50%, depending on our achievement of certain performance criteria.

2 unchanged sentences

The Credit Agreement expires on March 27, 2022 .

No borrowings were outstanding under the Credit Agreement as of August 1, 2020, February 1, 2020 or August 3, 2019.

The maximum borrowings outstanding during the thirteen weeks ended August 1, 2020 and August 3, 2019 were $ 7.0 million and $ 20.0 million, respectively.

The maximum borrowings outstanding during the twenty-six weeks ended August 1, 2020 and August 3, 2019 were $ 8.7 million and $ 20.0 million, respectively.

As of August 1, 2020, there were $ 1.2 million in letters of credit outstanding and $ 98.8 million available to us for borrowing under the Credit Agreement.

No borrowings were outstanding under the Credit Agreement as of October 31, 2020, February 1, 2020 or November 2, 2019.

There were no borrowings outstanding during the thirteen weeks ended October 31, 2020 and November 2, 2019.

The maximum borrowings outstanding during the thirty-nine weeks ended October 31, 2020 and November 2, 2019 were $ 8.7 million and $ 20.0 million, respectively.

As of October 31, 2020, there were $ 1.2 million in letters of credit outstanding and $ 98.8 million available to us for borrowing under the Credit Agreement.

Note 8 – Leases

We lease all of our retail stores and our single distribution center, which has a current lease term of 15 years, expiring in 2034 .

We lease all of our physical stores and our single distribution center, which has a current lease term of 15 years, expiring in 2034 .

We also enter into leases of equipment, copiers and billboards.

All of our leases are operating leases.

Leases with terms of twelve months or less are immaterial and are expensed as incurred, and we did not have any leases with related parties as of August 1, 2020.

Leases with terms of twelve months or less are immaterial and are expensed as incurred, and we did not have any leases with related parties as of October 31, 2020.

In response to the COVID-19 pandemic and related government restrictions impacting our operations, we began seeking relief from our landlords while our stores were temporarily closed to customers.

2 unchanged sentences

Based on the nature of the agreements reached with many of our landlords, we have accounted for lease concessions as if they were part of the enforceable rights and obligations of the existing lease contracts and did not account for the concessions as lease modifications.

When agreements with landlords to defer rent payments were reached, amounts that would have otherwise been due were reclassified as operating lease liabilities, all of which are reflected in the current portion of operating lease liabilities on our Condensed Consolidated Balance Sheet as of August 1, 2020.

For negotiations with landlords that did not result in lease concessions, we have increased accounts payable for rents that are due.

We have continued to recognize lease expense on a straight-line basis for our leases over the related lease terms.

Lease-related costs reported in our Condensed Consolidated Statements of Income were as follows for the thirteen and twenty-six weeks ended August 1, 2020 and August 3, 2019:

Lease costs, including related common area maintenance (“CAM”), property taxes, and insurance, reported in our Condensed Consolidated Statements of Income were as follows for the thirteen and thirty-nine weeks ended October 31, 2020 and November 2, 2019:

(In thousands)

Weeks Ended August 1, 2020

Weeks Ended August 3, 2019

Weeks Ended August 1, 2020

Weeks Ended August 3, 2019

Weeks Ended October 31, 2020

Weeks Ended November 2, 2019

Weeks Ended October 31, 2020

Weeks Ended November 2, 2019

Operating lease cost

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements