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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 October 31, 2020
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from __________ to __________

Commission file number:0-14678

Ross Stores, Inc.
(Exact name of registrant as specified in its charter)
Delaware94-1390387
(State or other jurisdiction of incorporation or(I.R.S. Employer Identification No.)
organization)
 
 5130 Hacienda Drive, Dublin,
California
94568-7579
(Address of principal executive offices)(Zip Code)
 
Registrant's telephone number, including area code(925)965-4400
 
Former name, former address and former N/A
   fiscal year, if changed since last report.

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolName of each exchange on which registered
 Common stock, par value $.01ROSTNasdaq 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 ý No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 ý    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.

Large accelerated filer ý     Accelerated filer o Non-accelerated filer o 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

The number of shares of Common Stock, with $.01 par value, outstanding on November 13, 2020 was 356,463,102.
1


Ross Stores, Inc.
Form 10-Q
Table of Contents

Page
Item 1.
Condensed Consolidated Statements of Operations–Three and nine months ended October 31, 2020 and November 2, 2019
Condensed Consolidated Statements of Comprehensive Income (Loss)–Three and nine months ended October 31, 2020 and November 2, 2019
Condensed Consolidated Balance Sheets–October 31, 2020, February 1, 2020, and November 2, 2019
7
Condensed Consolidated Statements of Cash FlowsNine months ended October 31, 2020 and November 2, 2019
8
9
17
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.

2


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Condensed Consolidated Statements of Operations

Three Months EndedNine Months Ended
($000, except stores and per share data, unaudited)October 31, 2020November 2, 2019October 31, 2020November 2, 2019
Sales$3,754,509 $3,849,117 $8,281,894 $11,625,628 
Costs and Expenses
Cost of goods sold2,711,419 2,766,432 6,681,530 8,311,950 
Selling, general and administrative877,857 604,605 1,812,657 1,754,825 
Interest expense (income), net28,740 (4,402)64,261 (14,819)
Total costs and expenses3,618,016 3,366,635 8,558,448 10,051,956 
Earnings (loss) before taxes136,493 482,482 (276,554)1,573,672 
Provision (benefit) for taxes on earnings (loss) 5,296 111,550 (123,956)368,877 
Net earnings (loss) $131,197 $370,932 $(152,598)$1,204,795 
Earnings (loss) per share
Basic$0.37 $1.04 $(0.43)$3.35 
Diluted$0.37 $1.03 $(0.43)$3.32 
Weighted-average shares outstanding (000)
Basic352,481 356,879 352,320 359,919 
Diluted354,457 359,299 352,320 362,455 
Store count at end of period1,869 1,810 1,869 1,810 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3


Condensed Consolidated Statements of Comprehensive Income (Loss)

Three Months EndedNine Months Ended
($000, unaudited)October 31, 2020November 2, 2019October 31, 2020November 2, 2019
Net earnings (loss) $131,197 $370,932 $(152,598)$1,204,795 
Other comprehensive income (loss)    
Comprehensive income (loss)
$131,197 $370,932 $(152,598)$1,204,795 

The accompanying notes are an integral part of these condensed consolidated financial statements.
4


Condensed Consolidated Balance Sheets

($000, except share data, unaudited)October 31, 2020February 1, 2020November 2, 2019
Assets
Current Assets
Cash and cash equivalents$4,416,124 $1,351,205 $1,142,709 
Accounts receivable122,654 102,236 124,853 
Merchandise inventory1,630,390 1,832,339 2,168,796 
Prepaid expenses and other347,399 147,048 170,304 
Total current assets6,516,567 3,432,828 3,606,662 
Property and Equipment
Land and buildings1,185,442 1,177,262 1,173,131 
Fixtures and equipment3,201,940 3,115,003 3,032,151 
Leasehold improvements1,243,755 1,219,736 1,199,591 
Construction-in-progress372,950 189,536 145,756 
  6,004,087 5,701,537 5,550,629 
Less accumulated depreciation and amortization3,297,203 3,048,101 2,984,747 
Property and equipment, net2,706,884 2,653,436 2,565,882 
Operating lease assets3,132,056 3,053,782 3,042,298 
Other long-term assets215,159 208,321 200,999 
Total assets$12,570,666 $9,348,367 $9,415,841 
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable$2,426,390 $1,296,482 $1,480,205 
Accrued expenses and other655,408 462,111 496,623 
Current operating lease liabilities590,122 564,481 559,433 
Accrued payroll and benefits269,709 364,435 321,977 
Income taxes payable 14,425  
Total current liabilities3,941,629 2,701,934 2,858,238 
Long-term debt2,512,037 312,891 312,778 
Non-current operating lease liabilities2,672,139 2,610,528 2,601,372 
Other long-term liabilities290,795 214,086 225,934 
Deferred income taxes135,029 149,679 140,740 
Commitments and contingencies
Stockholders’ Equity
Common stock, par value $.01 per share
   Authorized 1,000,000,000 shares
   Issued and outstanding 356,449,000, 356,775,000
   and 359,378,000 shares, respectively
3,564 3,568 3,594 
Additional paid-in capital1,546,078 1,458,307 1,435,713 
Treasury stock(478,419)(433,328)(429,583)
Retained earnings1,947,814 2,330,702 2,267,055 
Total stockholders’ equity3,019,037 3,359,249 3,276,779 
Total liabilities and stockholders’ equity$12,570,666 $9,348,367 $9,415,841 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5


Condensed Consolidated Statements of Stockholders' Equity

Nine Months Ended October 31, 2020
Additional
paid-in
capital
Common stockTreasury
stock
Retained
earnings
(000)Shares  AmountTotal
Balance at February 1, 2020356,775 $3,568 $1,458,307 $(433,328)$2,330,702 $3,359,249 
Net loss— — — — (305,842)(305,842)
Common stock issued under stock
plans, net of shares
used for tax withholding318 3 5,441 (32,317)— (26,873)
Stock-based compensation— — 24,739 — — 24,739 
Common stock repurchased(1,171)(12)(3,576)— (128,879)(132,467)
Dividends declared ($0.285 per share)
— — — — (101,414)(101,414)
Balance at May 2, 2020355,922 $3,559 $1,484,911 $(465,645)$1,794,567 $2,817,392 
Net earnings— — — — 22,047 22,047 
Common stock issued under stock
plans, net of shares
used for tax withholding84 1 5,630 (29)— 5,602 
Stock-based compensation— — 22,158 — — 22,158 
Balance at August 1, 2020356,006 $3,560 $1,512,699 $(465,674)$1,816,614 $2,867,199 
Net earnings— — — — 131,197 131,197 
Common stock issued under stock
plans, net of shares
used for tax withholding443 4 6,009 (12,745)3 (6,729)
Stock-based compensation— — 27,370 — — 27,370 
Balance at October 31, 2020356,449 $3,564 $1,546,078 $(478,419)$1,947,814 $3,019,037 
The accompanying notes are an integral part of these condensed consolidated financial statements.
























6


Condensed Consolidated Statements of Stockholders' Equity

Nine Months Ended November 2, 2019
Additional
paid-in
capital
Common stockTreasury
stock
Retained
earnings
(000)Shares  AmountTotal
Balance at February 2, 2019368,242 $3,682 $1,375,965 $(372,663)$2,298,762 $3,305,746 
Net earnings— — — — 421,142 421,142 
Cumulative effect of adoption of
accounting standard
(leases), net— — — — (19,614)(19,614)
Common stock issued under stock
plans, net of shares
used for tax withholding390 4 5,291 (50,880)— (45,585)
Stock-based compensation— — 19,689 — — 19,689 
Common stock repurchased(3,372)(33)(9,387)— (310,710)(320,130)
Dividends declared ($0.255 per share)
— — — — (93,722)(93,722)
Balance at May 4, 2019365,260 $3,653 $1,391,558 $(423,543)$2,295,858 $3,267,526 
Net earnings— — — — 412,721 412,721 
Common stock issued under stock
plans, net of shares
used for tax withholding98 1 5,610 (1,469)— 4,142 
Stock-based compensation— — 24,924 — — 24,924 
Common stock repurchased(3,192)(32)(9,116)— (310,981)(320,129)
Dividends declared ($0.255 per share)
— — — — (92,920)(92,920)
Balance at August 3, 2019362,166 $3,622 $1,412,976 $(425,012)$2,304,678 $3,296,264 
Net earnings— — — — 370,932 370,932 
Common stock issued under stock
plans, net of shares
used for tax withholding227 2 5,543 (4,571)— 974 
Stock-based compensation— — 25,987  — 25,987 
Common stock repurchased(3,015)(30)(8,793)— (316,827)(325,650)
Dividends declared ($0.255 per share)
— — — — (91,728)(91,728)
Balance at November 2, 2019359,378 $3,594 $1,435,713 $(429,583)$2,267,055 $3,276,779 
The accompanying notes are an integral part of these condensed consolidated financial statements.

7


Condensed Consolidated Statements of Cash Flows
Nine Months Ended
($000, unaudited)October 31, 2020November 2, 2019
Cash Flows From Operating Activities
Net (loss) earnings$(152,598)$1,204,795 
Adjustments to reconcile net (loss) earnings to net cash provided
by operating activities:
Depreciation and amortization268,193 255,089 
Loss on early extinguishment of debt239,769  
Stock-based compensation74,267 70,600 
Deferred income taxes(14,650)23,070 
Change in assets and liabilities:
Merchandise inventory201,949 (418,354)
Other current assets(31,732)(46,161)
Accounts payable1,126,574 305,648 
Other current liabilities118,679 43,968 
Income taxes(119,513)(42,619)
Operating lease assets and liabilities, net8,979 12,911 
Other long-term, net63,206 1,983 
Net cash provided by operating activities1,783,123 1,410,930 
Cash Flows From Investing Activities
Additions to property and equipment(339,545)(401,251)
Proceeds from investments 517 
Net cash used in investing activities(339,545)(400,734)
Cash Flows From Financing Activities
Net proceeds from issuance of short-term debt805,601  
Payments of short-term debt (804,972) 
Net proceeds from issuance of long-term debt2,965,115  
Payments of long-term debt(775,009) 
Payments of debt extinguishment and debt issuance costs(232,000) 
Issuance of common stock related to stock plans17,088 16,451 
Treasury stock purchased(45,091)(56,920)
Repurchase of common stock(132,467)(965,909)
Dividends paid(101,411)(278,370)
Net cash provided by (used in) financing activities1,696,854 (1,284,748)
Net increase (decrease) in cash, cash equivalents, and restricted cash and cash equivalents3,140,432 (274,552)
Cash, cash equivalents, and restricted cash and cash equivalents:
Beginning of period1,411,410 1,478,079 
End of period$4,551,842 $1,203,527 
Supplemental Cash Flow Disclosures
Interest paid$70,347 $10,560 
Income taxes paid$10,207 $388,426 
The accompanying notes are an integral part of these condensed consolidated financial statements.
8


Notes to Condensed Consolidated Financial Statements

Three and Nine Months Ended October 31, 2020 and November 2, 2019
(Unaudited)

Note A: Summary of Significant Accounting Policies

Basis of presentation. The accompanying unaudited interim condensed consolidated financial statements have been prepared from the records of Ross Stores, Inc. and subsidiaries (the “Company”) without audit and, in the opinion of management, include all adjustments (consisting of only normal, recurring adjustments) necessary to present fairly the Company’s financial position as of October 31, 2020 and November 2, 2019, the results of operations, comprehensive income (loss), and stockholders' equity for the three and nine month periods ended October 31, 2020 and November 2, 2019, and cash flows for the nine month periods ended October 31, 2020 and November 2, 2019. The Condensed Consolidated Balance Sheet as of February 1, 2020, presented herein, has been derived from the Company’s audited consolidated financial statements for the fiscal year then ended.

Certain information and disclosures normally included in the notes to annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted for purposes of these interim condensed consolidated financial statements. The interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including notes thereto, contained in the Company’s Annual Report on Form 10-K for the year ended February 1, 2020.

The results of operations, comprehensive income (loss), and stockholders' equity for the three and nine month periods ended October 31, 2020 and November 2, 2019 and cash flows for the nine month periods ended October 31, 2020 and November 2, 2019 presented herein are not necessarily indicative of the results to be expected for the full fiscal year.

Use of accounting estimates. The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. The Company’s significant accounting estimates include valuation reserves for inventory, packaway inventory costs, useful lives of fixed assets, insurance reserves, reserves for uncertain tax positions, estimates for provisions of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), and legal claims. Given the global economic climate and additional, or unforeseen effects, from the COVID-19 pandemic, these estimates are more challenging, and actual results could differ materially from the Company's estimates.

Revenue recognition. All of the Company's store locations, its primary source of revenue, were temporarily closed from March 20, 2020 through a portion of the second fiscal quarter of 2020 due to the COVID-19 pandemic. The Company started a phased reopening of its stores on May 14, 2020. On average, the Company's stores were open for about 75 percent of the second quarter, with the vast majority of its store locations open and operating by the end of June 2020 and throughout the third quarter. The following sales mix table disaggregates revenue by merchandise category for the three and nine month periods ended October 31, 2020 and November 2, 2019:

Three Months EndedNine Months Ended
October 31, 2020

November 2, 2019October 31, 2020
1
November 2, 2019
Home Accents and Bed and Bath26 %24 %26 %24 %
Ladies23 %26 %24 %27 %
Men's15 %14 %14 %14 %
Accessories, Lingerie, Fine Jewelry, and Fragrances15 %13 %14 %13 %
Shoes12 %14 %13 %14 %
Children's9 %9 %9 %8 %
Total100 %100 %100 %100 %
1 Sales mix for the nine month period ended October 31, 2020 represents sales for the period the stores were open.

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Cash, restricted cash, and restricted investments. Restricted cash, cash equivalents, and investments serve as collateral for certain insurance and trade payable obligations of the Company. These restricted funds are invested in bank deposits, money market mutual funds, U.S. Government and agency securities, and corporate securities and cannot be withdrawn from the Company’s account without the prior written consent of the secured parties. The classification between current and long-term is based on the timing of expected payments of the obligations.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash and cash equivalents in the Condensed Consolidated Balance Sheets that reconcile to the amounts shown on the Condensed Consolidated Statements of Cash Flows:
($000)October 31, 2020February 1, 2020November 2, 2019
Cash and cash equivalents$4,416,124 $1,351,205 $1,142,709 
Restricted cash and cash equivalents included in:
  Prepaid expenses and other85,322 10,235 10,947 
  Other long-term assets50,396 49,970 49,871 
Total restricted cash and cash equivalents135,718 60,205 60,818 
Total cash, cash equivalents, and restricted cash and cash equivalents$4,551,842 $1,411,410 $1,203,527 

Property and equipment. As of October 31, 2020 and November 2, 2019, the Company had $22.4 million and $11.1 million, respectively, of property and equipment purchased but not yet paid. These purchases are included in Property and equipment, Accounts payable, and Accrued expenses and other in the accompanying Condensed Consolidated Balance Sheets.

Operating leases. In response to the COVID-19 pandemic, the Financial Accounting Standards Board (“FASB”) provided relief under Accounting Standards Update (“ASU”) 2016-02, Leases (Accounting Standards Codification "ASC" 842). Under this relief, companies can make a policy election on how to treat lease concessions resulting directly from the COVID-19 pandemic, provided that the modified contracts result in total cash flows that are substantially the same or less than the cash flows in the original contract.

The Company made the policy election to account for lease concessions that result from the COVID-19 pandemic as if they were made under enforceable rights in the original contract. Additionally, the Company made the policy election to account for these concessions outside of the lease modification framework described under ASC 842. The Company recorded accruals for deferred rental payments and recognized rent abatements or concessions as variable lease costs in the periods incurred. Accruals for rent payment deferrals are included in Accrued expenses and other in the accompanying Condensed Consolidated Balance Sheets.

Supplemental cash flow disclosures related to leases: Operating lease assets obtained in exchange for new operating lease liabilities (includes new leases and remeasurements or modifications of existing leases) were as follows:

Three Months EndedNine Months Ended
($000)October 31, 2020November 2, 2019October 31, 2020November 2, 2019
Operating lease assets obtained in exchange for new operating lease liabilities
$225,345 $251,465 $509,696 $586,840 

Cash dividends. The Company’s Board of Directors declared a cash dividend of $0.285 per common share in March 2020, and $0.255 per common share in March, May, August, and November 2019, respectively.

In May 2020, the Company suspended its quarterly dividends.

Litigation, claims, and assessments. Like many retailers, the Company has been named in class/representative action lawsuits, primarily in California, alleging violation of wage and hour/employment laws and consumer protection laws. Class/representative action litigation remains pending as of October 31, 2020.

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The Company is also party to various other legal and regulatory proceedings arising in the normal course of business. Actions filed against the Company may include commercial, product and product safety, consumer, intellectual property, environmental, and labor and employment-related claims, including lawsuits in which private plaintiffs or governmental agencies allege that the Company violated federal, state, and/or local laws. Actions against the Company are in various procedural stages. Many of these proceedings raise factual and legal issues and are subject to uncertainties.

In the opinion of management, the resolution of pending class/representative action litigation and other currently pending legal and regulatory proceedings will not have a material adverse effect on the Company’s financial condition, results of operations, or cash flows.

Recently adopted accounting standards. In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (ASC 740). ASU 2019-12 eliminates certain exceptions in ASC 740 related to the methodology for calculating income taxes in an interim period. It also clarifies and simplifies other aspects of the accounting for income taxes. The amendments in ASU 2019-12 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted, including adoption in any interim period. The Company adopted ASU 2019-12 on a prospective basis in the first quarter of fiscal 2020. The most significant impact to the Company is the removal of a limit on the tax benefit recognized on pre-tax losses in interim periods. The adoption of this standard is not expected to have a material impact on the Company's fiscal 2020 results.

Recently issued accounting standards. The Company considers the applicability and impact of all ASUs issued by the FASB. For the three and nine month periods ended October 31, 2020, the ASUs issued by the FASB were assessed and determined to be either not applicable or are expected to have minimal impact on the Company's condensed consolidated financial results.

Note B: Fair Value Measurements

The carrying value of cash and cash equivalents, short- and long-term investments, restricted cash and cash equivalents, restricted investments, accounts receivable, other long-term assets, accounts payable, and other long-term liabilities approximates their estimated fair value.

Accounting standards pertaining to fair value measurements establish a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The inputs used to measure fair value include: Level 1, observable inputs such as quoted prices in active markets; Level 2, inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, unobservable inputs in which little or no market data exists. This fair value hierarchy requires the Company to develop its own assumptions and maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Corporate, U.S. government and agency, and mortgage-backed securities are classified within Level 1 or Level 2 because these securities are valued using quoted market prices or alternative pricing sources and models utilizing market observable inputs.

There were no transfers between Level 1 and Level 2 categories during the three and nine month periods ended October 31, 2020. The fair value of the Company’s financial instruments are as follows:

($000)October 31, 2020February 1, 2020November 2, 2019
Cash and cash equivalents (Level 1)
$4,416,124 $1,351,205 $1,142,709 
Restricted cash and cash equivalents (Level 1)
$135,718 $60,205 $60,818 
Investments (Level 2)
$8 $8 $8 

11


The underlying assets in the Company’s non-qualified deferred compensation program as of October 31, 2020, February 1, 2020, and November 2, 2019 (included in Other long-term assets and in Other long-term liabilities) primarily consist of participant-directed money market, stable value, stock, and bond funds. The fair value measurement for funds with quoted market prices in active markets (Level 1) and for funds without quoted market prices in active markets (Level 2) are as follows:

($000)October 31, 2020February 1, 2020November 2, 2019
Level 1$134,991 $134,440 $129,461 
Level 210,391 7,003 7,409 
Total$145,382 $141,443 $136,870 

Note C: Management Incentive Plan and Stock-Based Compensation

Management incentive plan and performance share award modifications. In August 2020, the Compensation Committee of the Board of Directors approved modifications to the performance measurement goals for the management incentive plan and the performance share award program for fiscal 2020, to be based on the attainment of specific management priorities related to their response to business challenges from COVID-19, as measured and approved by the Compensation Committee, as an alternative to the previously established profitability-based performance goals. As of October 31, 2020, the Company has established an accrual for this incentive compensation based on the Compensation Committee's assessment of progress towards achievement of these specific priorities.

Stock-based compensation. For the three and nine month periods ended October 31, 2020 and November 2, 2019, the Company recognized stock-based compensation expense as follows:

Three Months EndedNine Months Ended
($000)October 31, 2020November 2, 2019October 31, 2020November 2, 2019
Restricted stock$17,330 $15,030 $51,450 $39,388 
Performance awards8,979 9,979 19,801 28,308 
Employee stock purchase plan1,061 978 3,016 2,904 
Total$27,370 $25,987 $74,267 $70,600 

Total stock-based compensation expense recognized in the Company’s Condensed Consolidated Statements of Operations for the three and nine month periods ended October 31, 2020 and November 2, 2019, is as follows:

Three Months EndedNine Months Ended
Statements of Operations Classification ($000)October 31, 2020November 2, 2019October 31, 2020November 2, 2019
Cost of goods sold$13,767 $13,823 $38,282 $40,757 
Selling, general and administrative13,603 12,164 35,985 29,843 
Total$27,370 $25,987 $74,267 $70,600 

The tax benefits related to stock-based compensation expense for the three and nine month periods ended October 31, 2020 were $5.1 million and $15.3 million, respectively. The tax benefits related to stock-based compensation expense for the three and nine month periods ended November 2, 2019 were $5.5 million and $14.2 million, respectively.

Restricted stock awards. The Company grants shares of restricted stock to directors, officers, and key employees. The market value of shares of restricted stock at the date of grant is amortized to expense over the vesting period of generally three to five years.
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During the three and nine month periods ended October 31, 2020 and November 2, 2019, shares purchased by the Company for tax withholding totaled 142,350 and 492,171, and 42,300 and 612,924, respectively, and are considered treasury shares which are available for reissuance.

Performance share awards. The Company has a performance share award program for senior executives. A performance share award represents a right to receive shares of restricted stock on a specified settlement date based on the Company’s attainment of a performance goal during the performance period, which is the Company’s fiscal year. If attained, the restricted stock then vests over a service period, generally two to three years from the date the performance award was granted.

As of October 31, 2020, shares related to unvested restricted stock and performance share awards totaled 4.3 million shares. A summary of restricted stock and performance share award activity for the nine month period ended October 31, 2020, is presented below:

(000, except per share data)Number of
shares
Weighted-average
grant date
fair value
Unvested at February 1, 20204,394 $76.20 
Awarded1,118 94.42 
Released(1,229)65.65 
Forfeited(20)81.67 
Unvested at October 31, 20204,263 $83.99 

The unamortized compensation expense at October 31, 2020, was $178.2 million, which is expected to be recognized over a weighted-average remaining period of 2.1 years. The unamortized compensation expense at November 2, 2019, was $169.6 million, which was expected to be recognized over a weighted-average remaining period of 2.2 years.

Employee stock purchase plan. Under the Employee Stock Purchase Plan (“ESPP”), eligible employees participating in the quarterly offering period can choose to have up to the lesser of 10% of their annual base earnings or the IRS annual share purchase limit of $25,000 in aggregate market value to purchase the Company’s common stock. The purchase price of the stock is 85% of the closing market price on the date of purchase. Purchases occur on a quarterly basis (on the last trading day of each calendar quarter). The Company recognizes expense for ESPP purchase rights equal to the value of the 15% discount given on the purchase date.

Note D: Earnings (Loss) Per Share

The Company computes and reports both basic earnings (loss) per share ("EPS") and diluted EPS. Basic EPS is computed by dividing net earnings (loss) by the weighted-average number of common shares outstanding for the period. Diluted EPS is computed by dividing net earnings (loss) by the sum of the weighted-average number of common shares and dilutive common stock equivalents outstanding during the period, except in cases where the effect of the common stock equivalents would be anti-dilutive. Diluted EPS reflects the total potential dilution that could occur from outstanding equity plan awards and unvested shares of both performance and non-performance based awards of restricted stock. For periods of net loss, basic and diluted EPS are the same as the effect of the assumed vesting of restricted stock units is anti-dilutive.

For the three month period ended October 31, 2020, approximately 80,600 weighted-average shares were excluded from the calculation of diluted EPS because their effect would have been anti-dilutive for the period presented. For the nine month period ended October 31, 2020, basic and diluted EPS were the same due to the Company's net loss. For the three and nine month periods ended November 2, 2019, approximately 11,800 and 19,100, respectively, weighted-average shares were excluded from the calculation of diluted EPS because their effect would have been anti-dilutive for the periods presented.
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The following is a reconciliation of the number of shares (denominator) used in the basic and diluted EPS computations:

Three Months EndedNine Months Ended
Shares in (000s)Basic EPSEffect of
dilutive
common stock
equivalents
Diluted
EPS
Basic EPSEffect of
dilutive
common
stock
equivalents
Diluted
EPS
October 31, 2020
Shares352,481 1,976 354,457 352,320  352,320 
Amount$0.37 $ $0.37 $(0.43)$ $(0.43)
November 2, 2019 
     Shares
356,879 2,420 359,299 359,919 2,536 362,455 
     Amount
$1.04 $(0.01)$1.03 $3.35 $(0.03)$3.32 

Note E: Debt

Long-term debt. Unsecured senior debt, net of unamortized discounts and debt issuance costs, consisted of the following:

($000)October 31, 2020February 1, 2020November 2, 2019
6.530% Series B Senior Notes due 2021
$64,883 $64,963 $64,958 
3.375% Senior Notes due 2024
248,256 247,928 247,820 
4.600% Senior Notes due 2025
694,310   
0.875% Senior Notes due 2026
493,297   
4.700% Senior Notes due 2027
238,944   
4.800% Senior Notes due 2030
132,220   
1.875% Senior Notes due 2031
493,998   
5.450% Senior Notes due 2050
146,129   
Total long-term debt$2,512,037 $312,891 $312,778 

Senior notes. As of October 31, 2020, the Company had outstanding Series B unsecured Senior Notes in the aggregate principal amount of $65 million held by various institutional investors. The Series B notes are due in December 2021, and bear interest at 6.530%. Borrowings under these Senior Notes are subject to certain financial covenants that were amended in June 2020, and are consistent with the corresponding covenants in the Company's existing revolving credit facility. As of October 31, 2020, the Company was in compliance with these covenants.

As of October 31, 2020, the Company also had outstanding unsecured 3.375% Senior Notes due September 2024 (the “2024 Notes”) with an aggregate principal amount of $250 million. Interest on the 2024 Notes is payable semi-annually.

In April 2020, the Company issued an aggregate of $2.0 billion in unsecured senior notes in four tenors as follows: 4.600% Senior Notes due April 2025 (the “2025 Notes”) with an aggregate principal amount of $700 million, 4.700% Senior Notes due April 2027 (the “2027 Notes”) with an aggregate principal amount of $400 million, 4.800% Senior Notes due April 2030 (the “2030 Notes”) with an aggregate principal amount of $400 million, and 5.450% Senior Notes due April 2050 (the “2050 Notes”) with an aggregate principal amount of $500 million. Cash proceeds, net of discounts and other issuance costs, were approximately $1.973 billion. Interest on the 2025, 2027, 2030, and 2050 Notes is payable semi-annually beginning October 2020.

In October 2020, the Company accepted for purchase approximately $775 million in aggregate principal amount of senior notes pursuant to cash tender offers as follows: $351 million of the 2050 Notes, $266 million of the 2030 Notes, and $158 million of the 2027 Notes. The Company paid approximately $1.003 billion aggregate consideration (including
14


transaction costs, and accrued and unpaid interest) and recorded an approximately $240 million loss on the early extinguishment for the accepted notes.

In October 2020, the Company issued an aggregate of $1.0 billion in unsecured senior notes in two tenors as follows: 0.875% Senior Notes due April 2026 (the "2026 Notes") with an aggregate principal amount of $500 million and 1.875% Senior Notes due April 2031 (the "2031 Notes") with an aggregate principal amount of $500 million. Cash proceeds, net of discounts and other issuance costs, were approximately $987.2 million. Interest on the 2026 and 2031 Notes is payable semi-annually beginning April 2021. The Company used the net proceeds from the offering of the 2026 and 2031 Notes to fund the purchase of the accepted notes from its tender offers.

The Series B and all of the Senior Notes are subject to prepayment penalties for early payment of principal.

As of October 31, 2020, February 1, 2020, and November 2, 2019, total unamortized discount and debt issuance costs were $28.0 million, $2.1 million, and $2.2 million, respectively, and were classified as a reduction of Long-term debt.

As of October 31, 2020, the aggregate fair value of the eight outstanding series of Senior Notes was approximately $2.8 billion. As of February 1, 2020 and November 2, 2019, the aggregate fair value of the two then outstanding series of Senior Notes was approximately $335 million and $333 million, respectively. The fair value is estimated by obtaining comparable market quotes which are considered to be Level 1 inputs under the fair value measurements and disclosures guidance.

Revolving credit facilities. In July 2019, the Company entered into an $800 million unsecured revolving credit facility, which replaced the Company’s previous $600 million unsecured revolving credit facility. This current credit facility expires in July 2024, and contains a $300 million sublimit for issuance of standby letters of credit. The facility also contains an option allowing the Company to increase the size of its credit facility by up to an additional $300 million, with the agreement of the lenders. Interest on borrowings under this facility is based on LIBOR (or an alternate benchmark rate, if LIBOR is no longer available) plus an applicable margin and is payable quarterly and upon maturity. The revolving credit facility may be extended, at the Company's option, for up to two additional one year periods, subject to customary conditions.

In March 2020, the Company borrowed $800 million available under its revolving credit facility. Interest on the loan was based on LIBOR plus 0.875% (or 1.76%).

In May 2020, the Company amended its $800 million unsecured revolving credit facility (the “Amended Credit Facility”) to temporarily suspend, for the second and third quarters of fiscal 2020, the Consolidated Adjusted Debt to EBITDAR ratio financial covenant, and to apply a transitional modification to that ratio effective in the fourth quarter of fiscal 2020. The Amended Credit Facility also established a new temporary minimum liquidity requirement, effective for the first quarter of fiscal 2020 and through the end of April 2021. As of October 31, 2020, the Company was in compliance with these amended covenants.

In October 2020, the Company repaid in full the $800 million it borrowed under the unsecured revolving credit facility. As a result, the Company currently has no borrowings or standby letters of credit outstanding under this facility, and the $800 million credit facility remains in place and available.

In May 2020, the Company also entered into an additional $500 million 364-day senior revolving credit facility which was scheduled to expire in April 2021. In October 2020, the Company terminated this senior revolving credit facility. The Company had no borrowings under that credit facility at any time.

15


The table below shows the components of interest expense and income for the three and nine month periods ended October 31, 2020 and November 2, 2019:

Three Months EndedNine Months Ended
($000)October 31, 2020November 2, 2019October 31, 2020November 2, 2019
Interest expense on long-term debt$27,826 $3,284 66,338 $9,850 
Interest expense on short-term debt2,565  7,861  
Other interest expense2,535 216