Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

lululemon athletica inc.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm	37
Consolidated Balance Sheets	38
Consolidated Statements of Operations and Comprehensive Income	39
Consolidated Statements of Stockholders' Equity	40
Consolidated Statements of Cash Flows	42
Notes to the Consolidated Financial Statements	43

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders of lululemon athletica inc.

We have audited the accompanying consolidated balance sheets of lululemon athletica inc. and its subsidiaries as of January 31, 2016 and February 1, 2015 and the related consolidated statements of operations and comprehensive income, stockholders' equity and cash flows for the 52 week periods ended January 31, 2016, February 1, 2015 and February 2, 2014. In addition, we have audited the financial statement schedule listed in the index appearing under Item 15(a)(2). We also have audited lululemon athletica inc. and its subsidiaries' internal control over financial reporting as of January 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Management is responsible for these consolidated financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these consolidated financial statements, on the financial statement schedule, and on the company's internal control over financial reporting based on our integrated audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of lululemon athletica inc. and its subsidiaries as of January 31, 2016 and February 1, 2015 and the results of their operations and their cash flows for the 52 week periods ended January 31, 2016, February 1, 2015, and February 2, 2014, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also, in our opinion, lululemon athletica inc. and its subsidiaries maintained, in all material respects, effective internal control over financial reporting as of January 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

/s/ PricewaterhouseCoopers LLP
Chartered Professional Accountants
Vancouver, British Columbia
March 29, 2016

lululemon athletica inc.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except per share amounts)

		January 31, 2016				February 1, 2015
ASSETS
Current assets
Cash and cash equivalents		$	501,482			$	664,479
Accounts receivable		13,108				13,746
Inventories		284,009				208,116
Prepaid and receivable income taxes		91,453				40,547
Other prepaid expenses and other current assets		26,987				24,124
		917,039				951,012
Property and equipment, net		349,605				296,008
Goodwill and intangible assets, net		24,777				26,163
Deferred income tax assets		11,802				16,018
Other non-current assets		10,854				7,012
		$	1,314,077			$	1,296,213
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable		$	10,381			$	9,339
Accrued inventory liabilities		25,451				22,296
Accrued compensation and related expenses		43,524				29,932
Income taxes payable		37,736				20,073
Unredeemed gift card liability		57,736				46,252
Other accrued liabilities		50,676				31,989
		225,504				159,881
Deferred income tax liabilities		10,759				3,633
Other non-current liabilities		50,332				43,131
		286,595				206,645
Stockholders' equity
Undesignated preferred stock, $0.01 par value: 5,000 shares authorized; none issued and outstanding		—				—
Exchangeable stock, no par value: 60,000 shares authorized; 9,804 and 9,833 issued and outstanding		—				—
Special voting stock, $0.000005 par value: 60,000 shares authorized; 9,804 and 9,833 issued and outstanding		—				—
Common stock, $0.005 par value: 400,000 shares authorized; 127,482 and 132,112 issued and outstanding		637				661
Additional paid-in capital		245,533				241,695
Retained earnings		1,019,515				1,020,619
Accumulated other comprehensive loss		(238,203		)		(173,407		)
		1,027,482				1,089,568
		$	1,314,077			$	1,296,213

See accompanying notes to the consolidated financial statements

lululemon athletica inc.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands, except per share amounts)

		Fiscal Year Ended
		January 31, 2016				February 1, 2015				February 2, 2014
Net revenue		$	2,060,523			$	1,797,213			$	1,591,188
Cost of goods sold		1,063,357				883,033				751,112
Gross profit		997,166				914,180				840,076
Selling, general and administrative expenses		628,090				538,147				448,718
Income from operations		369,076				376,033				391,358
Other (expense) income, net		(581		)		7,102				5,768
Income before income tax expense		368,495				383,135				397,126
Income tax expense		102,448				144,102				117,579
Net income		$	266,047			$	239,033			$	279,547
Other comprehensive loss:
Foreign currency translation adjustment		(64,796		)		(105,339		)		(89,158		)
Comprehensive income		$	201,251			$	133,694			$	190,389
Basic earnings per share		$	1.90			$	1.66			$	1.93
Diluted earnings per share		$	1.89			$	1.66			$	1.91
Basic weighted-average number of shares outstanding		140,365				143,935				144,913
Diluted weighted-average number of shares outstanding		140,610				144,298				146,043

See accompanying notes to the consolidated financial statements

lululemon athletica inc.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Amounts in thousands)

		Exchangeable Stock					Special Voting Stock							Common Stock							Additional Paid-in Capital				Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Total
		Shares			Par Value		Shares			Par Value				Shares			Par Value
Balance at February 3, 2013		32,065					32,065			$	—			112,371			$	562			$	221,372			$	644,275			$	21,090			$	887,299
Net income																									279,547								279,547
Foreign currency translation adjustment																													(89,158		)		(89,158		)
Common stock issued upon exchange of exchangeable shares		(2,110	)				(2,110	)		—				2,110			11				(11		)										—
Stock-based compensation expense																					10,087												10,087
Tax benefits from stock-based compensation																					6,457												6,457
Common stock issued upon settlement of stock-based compensation														952			4				8,167												8,171
Shares withheld related to net share settlement of stock-based compensation														(91	)		—				(5,721		)										(5,721		)
Balance at February 2, 2014		29,955					29,955			$	—			115,342			$	577			$	240,351			$	923,822			$	(68,068	)		$	1,096,682
Net income																									239,033								239,033
Foreign currency translation adjustment																													(105,339		)		(105,339		)
Common stock issued upon exchange of exchangeable shares		(20,122	)				(20,122	)		—				20,122			101				(101		)										—
Stock-based compensation expense																					8,269												8,269
Tax benefits from stock-based compensation																					413												413
Common stock issued upon settlement of stock-based compensation														409			2				2,911												2,913
Shares withheld related to net share settlement of stock-based compensation														(104	)		(1		)		(4,971		)										(4,972		)
Repurchase of common stock														(3,657	)		(18		)		(5,177		)		(142,236		)						(147,431		)
Balance at February 1, 2015		9,833					9,833			$	—			132,112			$	661			$	241,695			$	1,020,619			$	(173,407	)		$	1,089,568
Net income																									266,047								266,047
Foreign currency translation adjustment																													(64,796		)		(64,796		)
Common stock issued upon exchange of exchangeable shares		(29	)				(29	)		—				29			—				—												—
Stock-based compensation expense																					10,356												10,356
Tax benefits from stock-based compensation																					(1,202		)										(1,202		)
Common stock issued upon settlement of stock-based compensation														350			2				4,702												4,704

		Exchangeable Stock					Special Voting Stock							Common Stock							Additional Paid-in Capital				Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Total
		Shares			Par Value		Shares			Par Value				Shares			Par Value
Shares withheld related to net share settlement of stock-based compensation														(50	)		—				(2,857		)										(2,857		)
Repurchase of common stock														(4,959	)		(26		)		(7,016		)		(267,151		)						(274,193		)
Registration fees associated with prospectus supplement																					(145		)										(145		)
Balance at January 31, 2016		9,804					9,804			$	—			127,482			$	637			$	245,533			$	1,019,515			$	(238,203	)		$	1,027,482

See accompanying notes to the consolidated financial statements

lululemon athletica inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

		Fiscal Year Ended
		January 31, 2016				February 1, 2015				February 2, 2014
Cash flows from operating activities
Net income		$	266,047			$	239,033			$	279,547
Items not affecting cash
Depreciation and amortization		73,383				58,364				49,068
Stock-based compensation expense		10,356				8,269				10,087
Derecognition of unredeemed gift card liability		(3,647		)		(1,468		)		(4,654		)
Deferred income taxes		11,142				2,087				820
Tax benefits from stock-based compensation		1,202				(413		)		(6,457		)
Changes in operating assets and liabilities
Inventories		(83,286		)		(26,806		)		(38,507		)
Prepaid and receivable income taxes		(52,110		)		(15,234		)		3,067
Other prepaid expenses and other current assets		(3,816		)		(6,444		)		(13,939		)
Accounts payable		1,247				(2,198		)		11,627
Accrued inventory liabilities		5,198				8,276				6,985
Accrued compensation and related expenses		14,937				11,561				(6,282		)
Income taxes payable		19,470				19,304				(35,075		)
Unredeemed gift card liability		16,574				11,326				9,306
Other accrued liabilities		19,563				3,788				7,998
Other non-current assets and liabilities		2,480				5,004				4,748
Net cash provided by operating activities		298,740				314,449				278,339
Cash flows from investing activities
Purchase of property and equipment		(143,487		)		(119,733		)		(106,408		)
Net cash used in investing activities		(143,487		)		(119,733		)		(106,408		)
Cash flows from financing activities
Proceeds from settlement of stock-based compensation		4,704				2,913				8,171
Tax benefits from stock-based compensation		(1,202		)		413				6,457
Taxes paid related to net share settlement of stock-based compensation		(2,857		)		(4,972		)		(5,721		)
Repurchase of common stock		(274,193		)		(147,431		)		—
Registration fees associated with prospectus supplement		(145		)		—				—
Net cash (used in) provided by financing activities		(273,693		)		(149,077		)		8,907
Effect of exchange rate changes on cash		(44,557		)		(79,809		)		(72,368		)
(Decrease) increase in cash and cash equivalents		(162,997		)		(34,170		)		108,470
Cash and cash equivalents, beginning of period		$	664,479			$	698,649			$	590,179
Cash and cash equivalents, end of period		$	501,482			$	664,479			$	698,649

See accompanying notes to the consolidated financial statements

lululemon athletica inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share amounts and store count information, unless otherwise indicated)

1 NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Nature of operations

lululemon athletica inc., a Delaware corporation, ("lululemon" and, together with its subsidiaries unless the context otherwise requires, the "Company") is engaged in the design, distribution, and retail of healthy lifestyle inspired athletic apparel, which is sold through a chain of company-operated stores, direct to consumer through e-commerce, outlets, showrooms, sales to wholesale accounts, warehouse sales, sales from temporary locations, and license and supply arrangement net revenue. The Company operates stores in the United States, Canada, Australia, New Zealand, the United Kingdom, Singapore, Hong Kong, Germany, and Puerto Rico. There were 363, 302, and 254 company-operated stores in operation as of January 31, 2016, February 1, 2015, and February 2, 2014, respectively.

Basis of presentation

The accompanying consolidated financial statements include the financial position, results of operations and cash flows of the Company during the three-year period ended January 31, 2016. The consolidated financial statements have been presented in U.S. dollars and are prepared in accordance with United States generally accepted accounting principles ("GAAP").

The Company's fiscal year ends on the Sunday closest to January 31 of the following year, typically resulting in a 52 week year, but occasionally giving rise to an additional week, resulting in a 53 week year. Fiscal 2015, 2014, and 2013 were each 52 week years. Fiscal 2015, 2014, and 2013 ended on January 31, 2016, February 1, 2015, and February 2, 2014, respectively.

The Company's business is affected by the pattern of seasonality common to most retail apparel businesses. Historically, the Company has recognized a significant portion of its operating profit in the fourth fiscal quarter of each year as a result of increased net revenue during the holiday season.

Certain comparative figures have been reclassified to conform to the financial presentation adopted for the current year.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

The consolidated financial statements include the accounts of lululemon athletica inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated.

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, bank balances and short-term deposits with original maturities of three months or less. The Company has not experienced any losses related to these balances, and management believes its credit risk to be minimal.

Accounts receivable

Accounts receivable primarily arise out of sales to wholesale accounts, landlord lease inducements, and license and supply arrangements. The allowance for doubtful accounts represents management's best estimate of probable credit losses in accounts receivable. Receivables are written off against the allowance when management believes that the amount receivable will not be recovered. As of January 31, 2016, February 1, 2015, and February 2, 2014, the Company recorded an insignificant allowance for doubtful accounts.

Inventories

Inventories, consisting of finished goods, inventories in transit, and raw materials, are stated at the lower of cost and market value. Cost is determined using weighted-average costs. For finished goods, market is defined as net realizable value, and for raw materials, market is defined as replacement cost. Cost of inventories includes all costs incurred to deliver inventory to the Company's distribution centers including freight, non-refundable taxes, duty and other landing costs.

The Company makes provisions as necessary to appropriately value obsolete or damaged goods. The amount of the provision is equal to the difference between the cost of the inventory and its estimated net realizable value based upon assumptions about future demand, selling prices and market conditions. In fiscal 2015, the Company wrote-off $14,247 of inventory, and in fiscal 2014 the Company wrote-off $12,361 of inventory. In addition, the Company provides for inventory shrinkage based on historical trends from actual physical inventory counts. Inventory shrinkage estimates are made to reduce the inventory value for lost or stolen items. The Company performs physical inventory counts and cycle counts throughout the year and adjusts the shrink reserve accordingly.

Property and equipment

Property and equipment are recorded at cost less accumulated depreciation. Direct internal and external costs related to software used for internal purposes which are incurred during the application development stage or for upgrades that add functionality are capitalized. All other costs related to internal use software are expensed as incurred.

Depreciation commences when an asset is ready for its intended use. Buildings are depreciated on a straight-line basis over the expected useful life of the asset, which is estimated to be 20 years. Leasehold improvements are depreciated on a straight-line basis over the lesser of the length of the lease and the estimated useful life of the improvement, to a maximum of five years. All other property and equipment are depreciated using the declining balance method as follows:

Furniture and fixtures		20	%
Computer hardware and software		30	%
Equipment and vehicles		30	%

Goodwill and intangible assets

Intangible assets are recorded at cost. Reacquired franchise rights are amortized on a straight-line basis over their estimated useful lives of 10 years.

Goodwill represents the excess of the aggregate of the consideration transferred, the fair value of any non-controlling interest in the acquiree, and the acquisition-date fair value of the Company's previously held equity interest over the net assets acquired and liabilities assumed. Goodwill and intangible assets with indefinite lives are tested annually for impairment or more frequently when an event or circumstance indicates that goodwill or indefinite life intangible assets might be impaired. The Company's operating segment for goodwill is its company-operated stores.

Impairment of long-lived assets

Long-lived assets, including intangible assets with finite lives, held for use are evaluated for impairment when the occurrence of events or a change in circumstances indicates that the carrying value of the assets may not be recoverable as measured by comparing their carrying value to the estimated undiscounted future cash flows generated by their use and eventual disposition. Impaired assets are recorded at fair value, determined principally by discounting the future cash flows expected from their use and eventual disposition. Reductions in asset values resulting from impairment valuations are recognized in income in the period that the impairment is determined.

Leased property and equipment

The Company leases stores, distribution centers, and administrative offices. Minimum rental payments, including any fixed escalation of rental payments and rent premiums, are amortized on a straight-line basis over the life of the lease beginning on the possession date. Rental costs incurred during a construction period, prior to store opening, are recognized as rental expense.

Deferred lease inducements, which include leasehold improvements paid for by the landlord and rent free periods, are recorded as liabilities on the consolidated balance sheets and recognized as a reduction of rent expense on a straight-line basis over the term of the lease.

The difference between the recognized rental expense and the total rental payments paid is reflected on the consolidated balance sheets as a deferred lease liability or a prepaid lease asset.

Contingent rental payments based on sales are recorded in the period in which the sales occur.

The Company recognizes a liability for the fair value of asset retirement obligations ("AROs") when such obligations are incurred. The Company's AROs are primarily associated with leasehold improvements which, at the end of a lease, the

Company is contractually obligated to remove in order to comply with the lease agreement. At the inception of a lease with such conditions, the Company records an ARO liability and a corresponding capital asset in an amount equal to the estimated fair value of the obligation. The liability is estimated based on a number of assumptions requiring management's judgment, including store closing costs, cost inflation rates and discount rates, and is accreted to its projected future value over time. The capitalized asset is depreciated using the convention for depreciation of leasehold improvement assets. Upon satisfaction of the ARO conditions, any difference between the recorded ARO liability and the actual retirement costs incurred is recognized as an operating gain or loss in the consolidated statements of operations.

The Company recognizes a liability for a cost associated with a lease exit or disposal activity when such obligation is incurred. A lease exit or disposal liability is measured initially at its fair value in the period in which the liability is incurred. The Company estimates fair value at the cease-use date of its operating leases as the remaining lease rentals, reduced by estimated sublease rentals that could be reasonably obtained for the property, even where the Company does not intend to enter into a sublease. Estimating the cost of certain lease exit costs involves subjective assumptions, including the time it would take to sublease the leased location and the related potential sublease income. The estimated accruals for these costs could be significantly affected if future experience differs from the assumptions used in the initial estimate.

Deferred revenue

Receipts from the sale of gift cards are treated as deferred revenue. Amounts received in respect of gift cards are recorded as unredeemed gift card liability. When gift cards are redeemed for apparel, the Company recognizes the related revenue.

Revenue recognition

Net revenue is comprised of company-operated store net revenue, direct to consumer sales through www.lululemon.com, www.ivivva.com and other country and region specific websites, and other net revenue, which includes outlet sales, showroom sales, sales to wholesale accounts, warehouse sales, sales from temporary locations, and license and supply arrangement net revenue, which consists of royalties as well as sales of the Company's products to licensees.

Sales to customers through company-operated stores are recognized at the point of sale, net of discounts and an estimated allowance for sales returns.

Sales of apparel to customers through the Company's retail internet sites are recognized when delivery has occurred, and collection is reasonably assured, net of an estimated allowance for sales returns.

Sales of apparel to wholesale accounts are recognized when delivery has occurred and collection is reasonably assured.

All revenue is reported net of sales taxes collected for various governmental agencies.

Revenue from the Company's gift cards is recognized when tendered for payment, or upon redemption. Outstanding customer balances are included in unredeemed gift card liability on the consolidated balance sheets. There are no expiration dates on the Company's gift cards, and lululemon does not charge any service fees that cause a decrement to customer balances.

While the Company will continue to honor all gift cards presented for payment, management may determine the likelihood of redemption to be remote for certain card balances due to, among other things, long periods of inactivity. In these circumstances, to the extent management determines there is no requirement for remitting card balances to government agencies under unclaimed property laws, card balances may be recognized in the consolidated statements of operations in net revenue. For the years ended January 31, 2016, February 1, 2015, and February 2, 2014, net revenue recognized on unredeemed gift card balances was $3,647, $1,468, and $4,654, respectively.

Cost of goods sold

Cost of goods sold includes:

•	the cost of purchased merchandise, which includes acquisition and production costs including raw material and labor, as applicable;

•	the cost incurred to deliver inventory to the Company's distribution centers including freight, non-refundable taxes, duty and other landing costs;

•	the cost of the Company's distribution centers (such as labor, rent and utilities) and the depreciation related to the Company's distribution centers;

•	the cost of the Company's production, design, distribution and merchandising departments including salaries, stock-based compensation and benefits, and other expenses;

•	occupancy costs such as minimum rent, contingent rent where applicable, property taxes, utilities and depreciation expense for the Company's company-operated store locations;

•	hemming; and

•	shrink and inventory provision expense.

Selling, general and administrative expenses

Selling, general and administrative expenses consist of all operating costs not otherwise included in cost of goods sold. The Company's selling, general and administrative expenses include the costs of corporate and store-level wages and benefits, costs to transport the Company's products from the distribution facilities to the Company's sales locations and e-commerce guests, professional fees, marketing, information technology, human resources, accounting, corporate facility and occupancy costs, and depreciation and amortization expense other than in cost of goods sold.

For the years ended January 31, 2016, February 1, 2015, and February 2, 2014, the Company incurred transportation costs of $40,586, $35,901, and $31,296, respectively.

Store pre-opening costs

Operating costs incurred prior to the opening of new stores are expensed as incurred.

Income taxes

The Company follows the liability method with respect to accounting for income taxes. Deferred income tax assets and liabilities are determined based on the temporary differences between the carrying amounts and the tax basis of assets and liabilities, and for tax losses, tax credit carry forwards, and other tax attributes. Deferred income tax assets and liabilities are measured using enacted tax rates that are expected to be in effect when these differences are anticipated to reverse.

Deferred income tax assets are reduced by a valuation allowance, if based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The evaluation as to the likelihood of realizing the benefit of a deferred income tax asset is based on the timing of scheduled reversals of deferred tax liabilities, taxable income forecasts, and tax-planning strategies. The recognition of a deferred income tax asset is based upon several assumptions and forecasts, including current and anticipated taxable income, the utilization of previously unrealized non-operating loss carry forwards, and regulatory reviews of tax filings. Given the judgments and estimates required and the sensitivity of the results to the significant assumptions used, the Company believes the accounting estimates used in relation to the valuation of deferred income tax assets are subject to measurement uncertainty and are susceptible to a material change if the underlying assumptions change.

The Company provides for taxes at the enacted rate applicable for the appropriate tax jurisdiction. U.S. income taxes on undistributed earnings of foreign subsidiaries which the Company has determined to be indefinitely reinvested have not been recognized. Management periodically assesses the need to utilize these undistributed earnings to finance foreign operations. This assessment is based on the cash flow projections and operational and fiscal objectives of each of the Company's foreign subsidiaries. Such estimates are inherently imprecise since many assumptions utilized in the projections are subject to revision in the future.

The Company evaluates its tax filing positions and recognizes the largest amount of tax benefit that is considered more likely than not to be sustained upon examination by the relevant taxing authorities based on the technical merits of the position. This determination requires the use of significant judgment. Income tax expense is adjusted in the period in which an uncertain tax position is effectively settled, the statute of limitations expires, facts or circumstances change, tax laws change, or new information becomes available. The Company's policy is to recognize interest expense and penalties related to income tax matters as part of other (expense) income, net.

Currency translation

The functional currency for each entity included in these consolidated financial statements that is domiciled outside of the United States is generally the applicable local currency. Assets and liabilities of each foreign entity are translated into U.S. dollars at the exchange rate in effect on the balance sheet date. Net revenue and expenses are translated at the average rate in effect during the period. Unrealized translation gains and losses are recorded as a foreign currency translation adjustment, which is included in other comprehensive income or loss, which is a component of accumulated other comprehensive income or loss included in stockholders' equity.

Foreign currency transactions denominated in a currency other than an entity's functional currency are remeasured into the functional currency with any resulting gains and losses recognized in selling, general and administrative expenses, except for gains and losses arising on intercompany foreign currency transactions that are of a long-term investment nature, which are recorded as a foreign currency translation adjustment in other comprehensive income or loss.

The aggregate foreign exchange gains (losses) included in selling, general and administrative expenses amount to $11,958, $6,372, and $17,314 for the years ended January 31, 2016, February 1, 2015, and February 2, 2014, respectively.

Fair value of financial instruments

The Company's financial instruments consist of cash and cash equivalents, accounts receivable, trade accounts payable, accrued liabilities, and other liabilities. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying value, unless otherwise noted.

Concentration of credit risk

The Company is not exposed to significant credit risk on its cash and cash equivalents and accounts receivable. Cash and cash equivalents are held with high quality financial institutions. Accounts receivable are primarily from wholesale accounts, for landlord lease inducements, and from license and supply arrangements. The Company does not require collateral to support the accounts receivable; however, in certain circumstances, the Company may require parties to provide payment for goods prior to delivery of the goods. The accounts receivable are net of an allowance for doubtful accounts, which is established based on management's assessment of the credit risk of the underlying accounts.

Stock-based compensation

The Company accounts for stock-based compensation using the fair value method. The fair value of awards granted is estimated at the date of grant and is recognized as employee compensation expense on a straight-line basis over the requisite service period with the offsetting credit to additional paid-in capital. For awards with service and/or performance conditions, the amount of compensation expense recognized is based on the number of awards expected to vest and is adjusted to reflect those awards that do ultimately vest. For awards with performance conditions, the Company recognizes the compensation expense if and when the Company concludes that it is probable that the performance condition will be achieved. The Company reassesses the probability of achieving the performance condition at each reporting date. The fair value of the restricted shares, performance-based restricted stock units, and restricted stock units is based on the closing price of the Company's common stock on the award date.

Earnings per share

Earnings per share is calculated using the weighted-average number of common and exchangeable shares outstanding during the period. Exchangeable shares are the equivalent of common shares in all material respects. All classes of stock have in effect the same rights and share equally in undistributed net income. Diluted earnings per share is calculated by dividing net income available to stockholders for the period by the diluted weighted-average number of shares outstanding during the period. Diluted earnings per share reflects the potential dilution from common shares issuable through stock options, performance-based restricted stock units that have satisfied their performance factor, restricted shares, and restricted stock units using the treasury stock method.

Contingencies

In the ordinary course of business, the Company is involved in legal proceedings regarding contractual and employment relationships and a variety of other matters. The Company records contingent liabilities resulting from claims against us, when a loss is assessed to be probable and the amount of the loss is reasonably estimable.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of net revenue and expenses during the reporting period. Actual results could differ from those estimates.

Recent accounting pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued ASC Topic 606, Revenue from Contracts with Customers ("ASC 606"), which supersedes the revenue recognition requirements in ASC Topic 605 Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. This guidance requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services, and expands the related disclosure requirements. In July 2015, the FASB deferred the effective date for public companies to years, and interim periods within those years, beginning after December 15, 2017, with early application permitted only as of years, and interim periods within those years, beginning after December 15, 2016. This guidance will be effective for the Company beginning in its first quarter of fiscal 2018. The Company is currently evaluating the timing of adoption and the impact that this new guidance may have on its consolidated financial statements.

In June 2014, the FASB amended ASC Topic 718, Compensation - Stock Compensation ("ASC 718") for share-based payments in which the terms of the award provide that a performance target can be achieved after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. This guidance is effective for public companies for years, and interim periods within those years, beginning on or after December 15, 2015, and early application is permitted. This guidance will be effective for the Company beginning in its first quarter of fiscal 2016. The Company is currently evaluating the impact that this new guidance may have on its consolidated financial statements.

In April 2015, the FASB amended ASC Subtopic 350-40, Intangibles - Goodwill and Other - Internal-Use Software ("ASC 350-40") to provide guidance to customers about whether a cloud computing arrangement includes a software license. This guidance requires that if a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. This guidance is effective for public companies for years, and interim periods within those years, beginning on or after December 15, 2015, and early application is permitted. This guidance will be effective for the Company beginning in its first quarter of fiscal 2016. The Company is currently evaluating the impact that this new guidance may have on its consolidated financial statements.

In July 2015, the FASB amended ASC Topic 330, Inventory ("ASC 330") to simplify the measurement of inventory. The amendments require that an entity measure inventory at the lower of cost and net realizable value instead of the lower of cost and market. This guidance is effective for public companies for years, and interim periods within those years, beginning on or after December 15, 2016, with earlier application permitted as of the beginning of an interim or annual reporting period. This guidance will be effective for the Company beginning in its first quarter of fiscal 2017. The Company is currently evaluating the impact that this new guidance may have on its consolidated financial statements.

In November 2015, the FASB amended ASC Topic 740, Income Taxes ("ASC 740") to simplify the presentation of deferred income taxes. The amendments in this update require that deferred income tax liabilities and assets be classified as noncurrent in a classified balance sheet. The guidance is effective for public entities for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, and early application is permitted. The Company early adopted this standard retrospectively in the fourth quarter of fiscal 2015, with no significant impact to its consolidated financial statements.

In February 2016 the FASB issued ASC Topic 842, Leases ("ASC 842") to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The standard is effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early application is permitted. The Company is currently evaluating the impact that this new guidance may have on its consolidated financial statements.

3 INVENTORIES

		January 31, 2016				February 1, 2015
Finished goods		$	290,791			$	214,113
Provision to reduce inventory to market value		(6,782		)		(5,997		)
		$	284,009			$	208,116

4 PROPERTY AND EQUIPMENT

		January 31, 2016				February 1, 2015
Land		$	55,488			$	60,548
Buildings		30,885				29,099
Leasehold improvements		225,604				176,677
Furniture and fixtures		73,254				55,320
Computer hardware		44,085				35,457
Computer software		112,161				84,854
Equipment and vehicles		11,929				11,908
Accumulated depreciation		(203,801		)		(157,855		)
		$	349,605			$	296,008

Included in the cost of computer software are capitalized costs of $3,721 and $2,620 at January 31, 2016 and February 1, 2015, respectively, associated with internally developed software.

Depreciation expense related to property and equipment was $72,573, $57,450, and $48,177 for the years ended January 31, 2016, February 1, 2015, and February 2, 2014, respectively.

5 GOODWILL AND INTANGIBLE ASSETS

		January 31, 2016				February 1, 2015
Goodwill		$	25,496			$	25,496
Changes in foreign currency exchange rates		(1,666		)		(1,083		)
		23,830				24,413
Intangibles—reacquired franchise rights		10,150				10,150
Accumulated amortization		(9,074		)		(8,264		)
Changes in foreign currency exchange rates		(129		)		(136		)
		947				1,750
Goodwill and intangible assets, net		$	24,777			$	26,163

Amortization expense related to intangible assets was $810, $914, and $891 for the years ended January 31, 2016, February 1, 2015, and February 2, 2014, respectively. The estimated aggregate future amortization expense is as follows:

Fiscal Year
2016		$	629
2017		247
2018		71
Thereafter		—
		$	947

The weighted-average remaining useful lives of the reacquired franchise rights was 1.73 years as of January 31, 2016 and 2.55 years as of February 1, 2015.

6 OTHER ACCRUED LIABILITIES

		January 31, 2016				February 1, 2015
Accrued duty, freight, and other operating expenses		$	26,017			$	10,313
Sales tax collected		10,506				8,579
Accrued rent		6,070				5,567
Other		8,083				7,530
		$	50,676			$	31,989

7 OTHER NON-CURRENT LIABILITIES

		January 31, 2016				February 1, 2015
Deferred lease liability		$	25,723			$	20,837
Tenant inducements		24,609				22,294
		$	50,332			$	43,131

8 LONG-TERM DEBT AND CREDIT FACILITIES

In November 2015, the Company renewed its unsecured demand revolving credit facilities with HSBC Bank Canada and Bank of America, N.A., Canada Branch for up to $15,000 in the aggregate to support the issuance of letters of credit and to fund the working capital requirements of the Company. Borrowings under the uncommitted credit facilities are made on a when-and-as-needed basis at the discretion of the Company. These facilities were renewed for a one year period.

Borrowings under the credit facility can be made either as (i) U.S. dollar loans - U.S. dollar loans bear interest at a rate equal to U.S. LIBOR plus 100 basis points or the U.S. prime rate, at the Company's option; (ii) Letters of Credit - Borrowings drawn down under standby letters of credit issued by the banks bear a fee of 100 basis points; and (iii) CDN dollar loans - CDN dollar loans bear interest at a rate equal to the CDOR rate plus 100 basis points or the Canadian prime rate, at the Company's option.

At January 31, 2016, aside from letters of credit, there were no borrowings outstanding under these credit facilities. At January 31, 2016, letters of credit totaling $1,560 had been issued under these credit facilities.

9 STOCKHOLDERS' EQUITY

Authorized share capital

The holders of the special voting stock are entitled to one vote for each share held. The special voting shares are not entitled to receive dividends or distributions or receive any consideration in the event of a liquidation, dissolution, or wind-up. To the extent that exchangeable shares as described below are exchanged for common stock, a corresponding number of special voting shares will be cancelled without consideration.

The holders of the exchangeable shares have dividend and liquidation rights equivalent to those of holders of the common shares of the Company. The exchangeable shares can be converted on a one for one basis by the holder at any time into common shares of the Company plus a cash payment for any accrued and unpaid dividends. Holders of exchangeable shares are entitled to the same or economically equivalent dividend as declared on the common stock of the Company. The exchangeable shares are non-voting. The Company has the right to convert the exchangeable shares into common shares of the Company at any time after the earlier of July 26, 2047, the date on which fewer than 4,188 exchangeable shares are outstanding, or in the event of certain events such as a change in control.

10 STOCK-BASED COMPENSATION

Stock-based compensation plans

The Company's employees participate in various stock-based compensation plans which are provided by the Company directly.

In June 2014, the Company's stockholders approved the adoption of the lululemon athletica inc. 2014 Equity Incentive Plan ("2014 Plan"). The 2014 Plan provides for awards in the form of stock options, stock appreciation rights, restricted stock

purchase rights, restricted share bonuses, restricted stock units, performance shares, performance-based restricted stock units, cash-based awards, other stock-based awards, and deferred compensation awards to employees (including officers and directors who are also employees), consultants, and directors of the Company.

The awards granted under the 2007 Equity Incentive Plan ("2007 Plan") remain outstanding and continue to vest under their original conditions. No further awards will be granted under the 2007 Plan.

The Company has granted stock options, performance-based restricted stock units, restricted stock units, and restricted shares. Stock options granted to date generally have a four-year vesting period, vest at a rate of 25% each year on the anniversary date of the grant, and expire seven years from the date of grant. Performance-based restricted stock units issued generally vest three years from the grant date and restricted shares generally vest one year from the grant date. Restricted stock units granted generally have a three-year vesting period and vest at a certain percentage each year on the anniversary date of the grant.

The Company's policy is to issue shares from treasury upon the exercise of Company options, vesting of performance-based restricted stock units or restricted stock units, and granting of restricted shares.

Stock-based compensation expense charged to income for the plans was $10,356, $8,269, and $10,087 for the years ended January 31, 2016, February 1, 2015, and February 2, 2014, respectively.

Total unrecognized compensation cost for all stock-based compensation plans was $30,263 as of January 31, 2016, which is expected to be recognized over a weighted-average period of 2.4 years, and was $25,720 as of February 1, 2015 over a weighted-average period of 2.5 years.

Employee stock purchase plan

The Company's board of directors and stockholders approved the Company's Employee Share Purchase Plan ("ESPP") in September 2007. Contributions are made by eligible employees, subject to certain limits as defined in the ESPP, and the Company matches one-third of the contribution. The maximum number of shares available under the ESPP is 6,000 shares. During the year ended January 31, 2016, there were 116 shares purchased under the ESPP in the open market.

Company stock options, performance-based restricted stock units, restricted shares and restricted stock units

A summary of the Company's stock option, performance-based restricted stock unit, restricted share and restricted stock unit activity as of January 31, 2016, February 1, 2015, and February 2, 2014, and changes during the fiscal years then ended is presented below:

		Stock Options							Performance-Based Restricted Stock Units							Restricted Shares							Restricted Stock Units
		Number			Weighted-Average Exercise Price				Number			Weighted-Average Grant Date Fair Value				Number			Weighted-Average Grant Date Fair Value				Number			Weighted-Average Grant Date Fair Value
Balance at February 3, 2013		1,377			$	19.51			491			$	45.47			16			$	63.97			—			$	—
Granted		118			64.86				290			52.41				59			52.35				—			—
Exercised/vested		686			11.90				208			21.72				16			63.97				—			—
Forfeited		140			41.33				145			59.03				2			64.30				—			—
Balance at February 2, 2014		669			$	30.76			428			$	57.08			57			$	51.99			—			$	—
Granted		447			48.16				321			49.67				34			39.00				195			45.76
Exercised/vested		158			18.50				217			40.04				29			56.28				—			—
Forfeited		79			59.09				80			61.34				—			—				9			45.92
Balance at February 1, 2015		879			$	39.25			452			$	59.27			62			$	42.86			186			$	45.75
Granted		399			57.43				156			63.35				19			66.07				238			61.60
Exercised/vested		235			20.26				58			67.50				46			42.73				41			46.04
Forfeited		176			55.22				155			62.06				4			38.25				50			53.35
Balance at January 31, 2016		867			$	49.54			395			$	58.58			31			$	57.67			333			$	55.91

A total of 14,691 of shares of the Company's common stock have been authorized for future issuance under the Company's 2014 Equity Incentive Plan.

The Company's performance-based restricted stock units are awarded to eligible employees and entitle the grantee to receive a maximum of two shares of common stock per performance-based restricted stock unit if the Company achieves specified performance goals and the grantee remains employed during the vesting period. The fair value of performance-based restricted stock units is based on the closing price of the Company's common stock on the award date. Expense for performance-based restricted stock units is recognized when it is probable that the performance goal will be achieved.

The fair value of the restricted shares and restricted stock units is based on the closing price of the Company's common stock on the award date.

The following table summarizes information about stock options outstanding and exercisable at January 31, 2016:

		Outstanding										Exercisable
Range of Exercise Prices		Number of Options				Weighted-Average Exercise Price				Weighted-Average Remaining Life (Years)		Number of Options				Weighted-Average Exercise Price				Weighted-Average Remaining Life (Years)
$0.25 – $38.25		116				$	17.45			1.6		114				$	17.23			1.6
$44.20 – $46.12		180				44.36				5.6		46				44.38				5.2
$48.30 – $53.44		151				51.55				5.4		33				51.86				4.7
$53.79 – $57.25		211				53.98				6.4		14				56.67				3.2
$57.88 – $76.49		209				65.72				5.5		45				68.37				4.1
		867				$	49.54			5.2		252				$	37.91			3.2
Intrinsic value		$	11,717									$	6,396

As of January 31, 2016, the unrecognized compensation cost related to these options was $10,218, which is expected to be recognized over a weighted-average period of 3.0 years; and the total aggregate intrinsic value for stock options outstanding and exercisable was $6,396. The weighted-average grant date fair value of options granted during the years ended January 31, 2016, February 1, 2015, and February 2, 2014 was $19.76, $17.69, and $31.96, respectively.

The following table summarizes the intrinsic value of options exercised and awards that vested during fiscal 2015, 2014, and 2013:

		Intrinsic Value of Options Exercised and Awards that Vested During the Fiscal Year Ended
		January 31, 2016				February 1, 2015				February 2, 2014
Stock options		$	10,554			$	4,382			$	37,591
Performance-based restricted stock units		3,592				10,242				13,057
Restricted shares		2,739				1,567				1,070
Restricted stock units		2,230				—				—
		$	19,115			$	16,191			$	51,718

The fair value of each stock option granted is estimated on date of grant using the Black-Scholes model. The assumptions used to calculate the fair value of options granted are evaluated and revised, as necessary, to reflect market conditions and the Company's historical experience. The expected term of the options is based upon historical experience of similar awards, giving consideration to expectations of future employee behavior. Expected volatility is based upon the historical volatility of the Company's common stock for the period corresponding with the expected term of the options. The risk-free interest rate is based on the U.S. Treasury yield curve for the period corresponding with the expected term of the options. The Company began using its own historical data in fiscal 2014 to determine the assumptions; prior to fiscal 2014, the assumptions were based upon a review of a peer group of publicly traded apparel retailers. The following assumptions were used in calculating the fair value of stock options granted in fiscal 2015, 2014, and 2013:

		Stock Options Granted During the Fiscal Year Ended
		January 31, 2016			February 1, 2015			February 2, 2014
Expected term		4.00 years			4.00 years			4.06 years
Expected volatility		42.73	%		45.93	%		64.65	%
Risk-free interest rate		0.98	%		1.04	%		0.72	%
Dividend yield		—	%		—	%		—	%

11 EARNINGS PER SHARE

The details of the computation of basic and diluted earnings per share are as follows:

		Fiscal Year Ended
		January 31, 2016				February 1, 2015				February 2, 2014
Net income		$	266,047			$	239,033			$	279,547
Basic weighted-average number of shares outstanding		140,365				143,935				144,913
Assumed conversion of dilutive stock options and awards		245				363				1,130
Diluted weighted-average number of shares outstanding		140,610				144,298				146,043
Basic earnings per share		$	1.90			$	1.66			$	1.93
Diluted earnings per share		$	1.89			$	1.66			$	1.91

The Company's calculation of weighted-average shares includes the common stock of the Company as well as the exchangeable shares. Exchangeable shares are the equivalent of common shares in all material respects. All classes of stock have in effect the same rights and share equally in undistributed net income. For the fiscal years ended January 31, 2016, February 1, 2015, and February 2, 2014, 64, 296, and 57 stock options and awards, respectively, were anti-dilutive to earnings per share and therefore have been excluded from the computation of diluted earnings per share.

On June 11, 2014, the Company's board of directors approved a program to repurchase shares of the Company's common stock up to an aggregate value of $450,000. The common stock is repurchased in the open market at prevailing market prices, with the timing and actual number of shares repurchased depending upon market conditions and other factors. The repurchases may be made up until June 2016. During the fiscal years ended January 31, 2016 and February 1, 2015, 4,959 and 3,657 shares, respectively, were repurchased under the program at a total cost of $274,193 and $147,431, respectively. Subsequent to January 31, 2016, and up to March 24, 2016, three shares were repurchased at a total cost of $165.

12 COMMITMENTS AND CONTINGENCIES

The Company has obligations under operating leases for its store and other retail locations, distribution centers, offices, and equipment. As of January 31, 2016, the lease terms of the various leases range from two to 15 years. A substantial number of the Company's leases include renewal options and certain of the Company's leases include rent escalation clauses, rent holidays and leasehold rental incentives. Certain of the Company's leases for store premises also include contingent rental payments based on sales volume. The Company is required to make deposits for rental payments pursuant to certain lease agreements, which have been included in other non-current assets. Minimum annual basic rent payments excluding other executory operating costs, pursuant to lease agreements are approximately as laid out in the table below. These amounts include commitments in respect of company-operated stores that have not yet opened but for which lease agreements have been executed.

		Payments Due by Fiscal Year
		Total				2016				2017				2018				2019				2020				Thereafter
Operating leases (minimum rent)		$	515,821			$	107,456			$	102,071			$	88,193			$	75,845			$	52,881			$	89,375

Rent expense for the years ended January 31, 2016, February 1, 2015, and February 2, 2014 was $124,481, $100,029, and $83,368, respectively, under operating lease agreements, consisting of minimum rental expense of $113,940, $89,943, and $72,227, respectively, and contingent rental amounts of $10,541, $10,086, and $11,141, respectively.

In January 2015, the Company entered into a license and supply arrangement with a partner in the Middle East which grants it the right to operate lululemon athletica branded retail locations in the United Arab Emirates, Kuwait, Qatar, Oman, and Bahrain for an initial term of five years. Under this arrangement, the Company supplies the partner with lululemon products, training, and other support. As of January 31, 2016, there were two licensed stores in the United Arab Emirates.

In addition to the legal matters described below, the Company is, from time to time, involved in routine legal matters incidental to the conduct of its business, including legal matters such as initiation and defense of proceedings to protect intellectual property rights, personal injury claims, product liability claims, and similar matters. The Company believes the ultimate resolution of any such current proceeding will not have a material adverse effect on its consolidated balance sheets, results of operations or cash flows.

On July 15, 2015, plaintiffs Hallandale Beach Police Officers and Firefighters' Personnel Retirement Fund and Laborers' District Council Industry Pension Fund filed in the Delaware Court of Chancery a derivative lawsuit on behalf of lululemon against certain current and former directors of lululemon, captioned Laborers' District Council Industry Pension Fund v. Bensoussan, et al., C.A. No. 11293-CB. Plaintiffs claim that the individual defendants breached their fiduciary duties to lululemon by allegedly failing to investigate certain trades of lululemon stock owned by Dennis J. Wilson in 2013. Plaintiffs also claim that Mr. Wilson breached his fiduciary duties by making his broker aware of certain non-public, material events prior to executing sales of lululemon stock on Mr. Wilson's behalf. The defendants have filed motions to dismiss the action for failure to adequately plead that demand on the board was excused and the individual defendants have filed motions for failure to state a claim upon which relief may be granted.

On October 9, 2015, certain current and former hourly employees of the Company filed a class action lawsuit in the Supreme Court of New York entitled Rebecca Gathmann-Landini et al v. lululemon USA inc. On December 2, 2015, the case was removed to the United States District Court for the Eastern District of New York. The lawsuit alleges that the Company violated various New York labor codes by failing to pay all earned wages, including overtime compensation. The plaintiffs are seeking an unspecified amount of damages. The Company intends to vigorously defend this matter.

13 RELATED PARTY BALANCES AND TRANSACTIONS

The Company entered into the following transactions with related parties, all of which were approved by the Company's Audit Committee in accordance with the Company's related party transaction policy:

		Fiscal Year Ended
		January 31, 2016				February 1, 2015				February 2, 2014
Payments to related parties
Lease costs for one company-operated store		$	112			$	140			$	150
Consulting fees		$	354			$	289			$	409

The Company's founder, who is a beneficial owner of more than 10% of the Company's total outstanding shares, and who was a member of the Company's board of directors up until February 2, 2015, owns a retail space that the Company leases for one of its company-operated stores. Consulting fees were paid to a relative of the Company's founder.

14 SUPPLEMENTAL CASH FLOW INFORMATION

		Fiscal Year Ended
		January 31, 2016				February 1, 2015				February 2, 2014
Cash paid for income taxes		$	113,534			$	146,376			$	155,394
Interest paid		$	52			$	14			$	117

15 INCOME TAXES

The Company's domestic and foreign income before income tax expense and current and deferred income taxes from federal, state, and foreign sources are as follows:

		Fiscal Year Ended
		January 31, 2016				February 1, 2015				February 2, 2014
Income before income tax expense
Domestic		$	84,286			$	94,234			$	81,688
Foreign		284,209				288,901				315,438
		368,495				383,135				397,126
Current income tax expense (recovery)
Federal		$	(18,662	)		$	54,172			$	27,818
State		3,363				8,203				4,017
Foreign		110,372				80,461				84,924
		95,073				142,836				116,759
Deferred income tax expense (recovery)
Federal		$	8,719			$	7,763			$	266
State		425				77				38
Foreign		(1,769		)		(6,574		)		516
		7,375				1,266				820
Income tax expense		$	102,448			$	144,102			$	117,579

The Company's income tax expense for fiscal 2015 and fiscal 2014 include certain tax adjustments, as follows:

		Fiscal Year Ended
		January 31, 2016				February 1, 2015				February 2, 2014
Transfer pricing adjustments, net		$	(4,826	)		$	—			$	—
Tax on repatriation of foreign earnings		7,838				33,746				—
Tax adjustment on foreign tax credit calculations		(10,455		)		—				—
Total tax adjustments		$	(7,443	)		$	33,746			$	—

A net interest expense of $3,467 related to the transfer pricing adjustments was recorded in fiscal 2015 in other (expense) income, net. There were no similar net interest expenses during fiscal 2014 and fiscal 2013.

Transfer pricing adjustments, net

The Company's tax positions include the Company's intercompany transfer pricing policies and the associated taxable income and deductions arising from intercompany charges between subsidiaries within the consolidated group. During fiscal 2015, the Company received new communications with respect to the anticipated bilateral Advance Pricing Arrangement ("APA") which the Company is in the process of finalizing with the Internal Revenue Service ("IRS") and the Canada Revenue Agency ("CRA"). This resulted in a reassessment of the expected amount of income tax due in each jurisdiction, for fiscal 2011 through fiscal 2015. The expected benefit of the APA has not previously been reflected in actual or anticipated filing positions by the Company, and it is anticipated that the APA will apply retroactively from the start of fiscal 2011.

The Company has determined that it is considered more likely than not that the outcome of the APA will result in a decrease in taxable income in the United States and an increase in taxable income in Canada. This resulted in an income tax receivable in the United States and an increase in income taxes payable in Canada. The Company has also recognized a related net interest expense of $3,467 in other (expense) income, net, representing the interest due on the Canadian income tax payable, partially offset by the interest income on the U.S. income tax receivable.

The change in the expected outcome of the APA, as well as the timing of its finalization, also has an impact on the foreign tax credits relating to the dividends paid in fiscal 2014.

These changes resulted in a net income tax recovery of $4,826 during fiscal 2015.

The Company anticipates that the APA will be finalized within the next twelve months. The final position of the tax authorities includes a range of outcomes. The Company's expected filing position represents the largest benefit considered by management to be more likely than not. However, the Company's tax position will be updated as new information becomes available. Should the terms of the final APA differ to the Company's assessment, it is reasonably possible that the Company may record additional income tax benefits of up to approximately $10,000 and this would impact the Company's effective tax rate.

Tax on repatriation of foreign earnings

In fiscal 2014, the Company recorded a tax expense of $33,746 representing the estimated U.S. income tax and foreign withholding tax payable on the repatriation of earnings in the form of dividends of $473,700, which were distributed during fiscal 2014 by foreign subsidiaries to the U.S. parent entity to fund the share repurchase program.

The cumulative undistributed earnings of the Company's foreign subsidiaries as of January 31, 2016 were $589,381, including $581,246 of cumulative undistributed earnings of a Canadian subsidiary.

In fiscal 2015, as a result of the change in the expected outcome of the APA described above, it is now expected that a significant intercompany debt between one of the Company's U.S. subsidiaries and a Canadian subsidiary will arise upon the finalization of the APA. As a result, it is intended that up to $156,000 will be distributed from a Canadian subsidiary to the U.S. parent entity to finance the payment of this intercompany debt. As these foreign earnings are no longer considered indefinitely reinvested, the Company has recorded an incremental tax expense and deferred tax liability as of January 31, 2016 of $7,838 to provide for U.S. income and applicable foreign withholding taxes on this expected distribution. The foreign exchange rates in effect at the time that the expected distribution is made may impact the calculation of foreign tax credits and the amount of tax payable.

U.S. income and foreign withholding taxes have not been provided on the remaining $425,246 of that Canadian subsidiary's undistributed earnings that are indefinitely reinvested outside of the United States. Income taxes of approximately $16,574 would be incurred if these earnings were repatriated to the United States. No income taxes have been provided on any of the undistributed earnings of the other subsidiaries as these earnings are indefinitely reinvested outside of the United States.

In reaching the conclusion that these undistributed earnings are indefinitely reinvested, the Company considers its international expansion plans, projected working capital needs, projected head office capital investments outside of the United States, forecasted cash flow requirements within the United States, and other factors the Company believes are relevant.

As of January 31, 2016, the Company had cash and cash equivalents of $437,458 outside of the United States. With the exception of the intended distribution of up to $156,000 described above, the Company does not intend to repatriate these funds to the United States. If the intentions of the Company change, the Company would be required to accrue the income taxes which would be due upon repatriation.

Tax adjustment on foreign tax credit calculations

During fiscal 2015, the Company finalized the amount of U.S. income tax payable on the dividends of $473,700 which were distributed in fiscal 2014 and recognized an adjustment on the foreign tax credits that had been initially estimated for the prior year distributions, which resulted in the recognition of an income tax recovery of $10,455 during fiscal 2015.

A summary reconciliation of the effective tax rate is as follows:

		Fiscal Year Ended
		January 31, 2016			February 1, 2015			February 2, 2014
Federal income tax at statutory rate		35.0	%		35.0	%		35.0	%
Foreign tax rate differentials		(6.9	)		(6.8	)		(7.1	)
U.S. state taxes		0.8			1.2			1.2
Non-deductible compensation expense		0.6			0.3			0.5
Permanent and other		—			(0.9	)		—
Tax and related interest adjustments
Transfer pricing adjustments, net		(1.0	)		—			—
Tax on repatriation of foreign earnings		2.1			8.8			—
Tax adjustment on foreign tax credit calculations		(2.8	)		—			—
Effective tax rate		27.8	%		37.6	%		29.6	%

The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and deferred income tax liabilities as of January 31, 2016 and February 1, 2015 are presented below:

		January 31, 2016				February 1, 2015
Deferred income tax assets
Net operating loss carry forward		$	11,753			$	8,803
Property and equipment		(35		)		(15,850		)
Deferred lease liability		55				6,977
Stock-based compensation		—				4,662
Inventory		—				3,058
Tenant inducements		29				6,965
Other		—				1,403
		11,802				16,018
Deferred income tax liabilities
Property and equipment		$	(29,214	)		$	(5,027	)
Tax and related interest adjustments		(8,245		)		—
Deferred lease liability		8,757				515
Tenant inducements		8,353				281
Inventory		4,015				—
Foreign tax credits		3,845				—
Stock-based compensation		2,192				—
Other		(462		)		598
		(10,759		)		(3,633		)
Net deferred income tax assets		$	1,043			$	12,385

The Company files income tax returns in the U.S., Canada and various foreign, state and provincial jurisdictions. The 2011 to 2014 tax years remain subject to examination by the U.S. federal and state tax authorities. The 2010 tax year is still open for certain state tax authorities. The 2007 to 2014 tax years remain subject to examination by Canadian tax authorities. The 2010 to 2014 tax years remain subject to examination by tax authorities in certain foreign jurisdictions. The Company does not have any significant unrecognized tax benefits arising from uncertain tax positions taken, or expected to be taken, in the Company's tax returns.

16 SEGMENTED FINANCIAL INFORMATION

The Company applies ASC Topic 280, Segment Reporting ("ASC 280"), in determining reportable segments for its financial statement disclosure. The Company reports segments based on the financial information it uses in managing its business. The Company's reportable segments are comprised of company-operated stores and direct to consumer. Direct to consumer represents sales from the Company's e-commerce websites. Outlets, showrooms, sales to wholesale accounts, warehouse sales, sales from temporary locations, and license and supply arrangement net revenue have been combined into other. Information for these segments is detailed in the table below:

		Fiscal Year Ended
		January 31, 2016				February 1, 2015				February 2, 2014
Net revenue
Company-operated stores		$	1,516,323			$	1,348,225			$	1,228,999
Direct to consumer		401,525				321,180				263,083
Other		142,675				127,808				99,106
		$	2,060,523			$	1,797,213			$	1,591,188
Income from operations before general corporate expense
Company-operated stores		$	346,802			$	356,589			$	372,267
Direct to consumer		166,418				132,877				109,999
Other		5,826				9,499				13,994
		519,046				498,965				496,260
General corporate expense		149,970				122,932				104,902
Income from operations		369,076				376,033				391,358
Other (expense) income, net		(581		)		7,102				5,768
Income before income tax expense		$	368,495			$	383,135			$	397,126
Capital expenditures
Company-operated stores		$	85,756			$	76,894			$	60,233
Direct to consumer		8,284				9,952				5,953
Corporate and other		49,447				32,887				40,222
		$	143,487			$	119,733			$	106,408
Depreciation and amortization
Company-operated stores		$	50,951			$	37,951			$	31,349
Direct to consumer		6,628				6,299				4,599
Corporate and other		15,804				14,114				13,120
		$	73,383			$	58,364			$	49,068

Intercompany amounts are excluded from the above table as they are not included in the materials reviewed by the chief operating decision maker.

The Company operates in five geographic areas — the United States, Canada, Australia and New Zealand, Europe, and Asia. Net revenue by region for the years ended January 31, 2016, February 1, 2015, and February 2, 2014 was as follows:

		Fiscal Year Ended
		January 31, 2016				February 1, 2015				February 2, 2014
United States		$	1,508,841			$	1,257,351			$	1,052,148
Canada		416,520				434,328				454,209
Outside of North America		135,162				105,534				84,831
		$	2,060,523			$	1,797,213			$	1,591,188

Property and equipment, net by geographic area as of January 31, 2016 and February 1, 2015 were as follows:

		January 31, 2016				February 1, 2015
United States		$	170,823			$	133,222
Canada		154,578				144,689
Outside of North America		24,204				18,097
		$	349,605			$	296,008

The Company's intangible assets and goodwill relate to the reporting segment consisting of company-operated stores.

17 QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following tables present the Company's unaudited quarterly results of operations and comprehensive income for each of the eight fiscal quarters in the periods ended January 31, 2016 and February 1, 2015. The following tables should be read in conjunction with the Company's audited consolidated financial statements and related notes appearing elsewhere in this Form 10-K. The Company has prepared the information below on a basis consistent with its audited consolidated financial statements and has included all adjustments, consisting of normal recurring adjustments, which, in the opinion of the Company's management, are necessary to fairly present its operating results for the quarters presented. The Company's historical unaudited quarterly results of operations are not necessarily indicative of results for any future quarter or for a full year.

		Fiscal 2015																Fiscal 2014
		Fourth Quarter				Third Quarter				Second Quarter				First Quarter				Fourth Quarter				Third Quarter				Second Quarter				First Quarter
		(Unaudited; Amounts in thousands, except per share amounts)
Consolidated statements of operations and comprehensive income:
Net revenue		$	704,276			$	479,693			$	453,010			$	423,544			$	602,491			$	419,396			$	390,708			$	384,618
Cost of goods sold		349,809				254,896				240,985				217,667				292,450				208,308				193,401				188,874
Gross profit		354,467				224,797				212,025				205,877				310,041				211,088				197,307				195,744
Selling, general and administrative expenses		188,184				156,619				145,446				137,841				152,853				129,932				129,419				125,943
Income from operations		166,283				68,178				66,579				68,036				157,188				81,156				67,888				69,801
Other (expense) income, net		938				(2,890		)		842				529				1,755				1,814				1,890				1,643
Income before income tax expense		167,221				65,288				67,421				68,565				158,943				82,970				69,778				71,444
Income tax expense		49,805				12,135				19,753				20,755				48,090				22,519				21,030				52,463
Net income		$	117,416			$	53,153			$	47,668			$	47,810			$	110,853			$	60,451			$	48,748			$	18,981
Other comprehensive (loss) income:
Foreign currency translation adjustment		(47,369		)		(665		)		(39,368		)		22,606				(92,137		)		(29,256		)		3,664				12,390
Comprehensive income		$	70,047			$	52,488			$	8,300			$	70,416			$	18,716			$	31,195			$	52,412			$	31,371
Basic earnings per share		$	0.85			$	0.38			$	0.34			$	0.34			$	0.78			$	0.42			$	0.34			$	0.13
Diluted earnings per share		$	0.85			$	0.38			$	0.34			$	0.34			$	0.78			$	0.42			$	0.33			$	0.13

The Company's quarterly results of operations have varied in the past and are likely to do so again in the future. As such, the Company believes that comparisons of its quarterly results of operations should not be relied upon as an indication of the Company's future performance.