Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

lululemon athletica inc.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	42
Consolidated Balance Sheets	44
Consolidated Statements of Operations and Comprehensive Income	45
Consolidated Statements of Stockholders' Equity	46
Consolidated Statements of Cash Flows	48
Index for Notes to the Consolidated Financial Statements	49

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of lululemon athletica inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the consolidated balance sheets of lululemon athletica inc. and its subsidiaries (together, the Company) as of February 3, 2019 and January 28, 2018, and the related consolidated statements of operations and comprehensive income, stockholders' equity and cash flows for the 53 week period ended February 3, 2019 and each of the 52 week periods ended January 28, 2018 and January 29, 2017, including the related notes, listed in the index appearing under Item 15(a)(1) and the financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the consolidated financial statements). We also have audited the Company's internal control over financial reporting as of February 3, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of February 3, 2019 and January 28, 2018, and their results of operations and their cash flows for the 53 week period ended February 3, 2019 and each of the 52 week periods ended January 28, 2018 and January 29, 2017, in conformity with accounting principles generally accepted in the United States of America (US GAAP). Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 3, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting, appearing under Item 9A. Our responsibility is to express opinions on the Company's consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. 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, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. 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.

Definition and Limitations of Internal Control over Financial Reporting

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.

/s/ PricewaterhouseCoopers LLP
Chartered Professional Accountants
Vancouver, Canada
March 27, 2019

We have served as the Company's auditor since 2006.

lululemon athletica inc.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except per share amounts)

		February 3, 2019				January 28, 2018
ASSETS
Current assets
Cash and cash equivalents		$	881,320			$	990,501
Accounts receivable		35,786				19,173
Inventories		404,842				329,562
Prepaid and receivable income taxes		49,385				48,948
Other prepaid expenses and other current assets		57,949				48,098
		1,429,282				1,436,282
Property and equipment, net		567,237				473,642
Goodwill and intangible assets, net		24,239				24,679
Deferred income tax assets		26,549				32,491
Other non-current assets		37,404				31,389
		$	2,084,711			$	1,998,483
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable		$	95,533			$	24,646
Accrued inventory liabilities		16,241				13,027
Accrued compensation and related expenses		109,181				70,141
Current income taxes payable		67,412				15,700
Unredeemed gift card liability		99,412				82,668
Other current liabilities		112,698				86,416
		500,477				292,598
Non-current income taxes payable		42,099				48,268
Deferred income tax liabilities		14,249				1,336
Other non-current liabilities		81,911				59,321
		638,736				401,523
Commitments and contingencies
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; 9,332 and 9,781 issued and outstanding		—				—
Special voting stock, $0.000005 par value: 60,000 shares authorized; 9,332 and 9,781 issued and outstanding		—				—
Common stock, $0.005 par value: 400,000 shares authorized; 121,600 and 125,650 issued and outstanding		608				628
Additional paid-in capital		315,285				284,253
Retained earnings		1,346,890				1,455,002
Accumulated other comprehensive loss		(216,808		)		(142,923		)
		1,445,975				1,596,960
		$	2,084,711			$	1,998,483

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
		February 3, 2019				January 28, 2018				January 29, 2017
Net revenue		$	3,288,319			$	2,649,181			$	2,344,392
Cost of goods sold		1,472,032				1,250,391				1,144,775
Gross profit		1,816,287				1,398,790				1,199,617
Selling, general and administrative expenses		1,110,451				904,264				778,465
Asset impairment and restructuring costs		—				38,525				—
Income from operations		705,836				456,001				421,152
Other income (expense), net		9,414				3,997				1,577
Income before income tax expense		715,250				459,998				422,729
Income tax expense		231,449				201,336				119,348
Net income		$	483,801			$	258,662			$	303,381
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment		(73,885		)		58,577				36,703
Comprehensive income		$	409,916			$	317,239			$	340,084
Basic earnings per share		$	3.63			$	1.90			$	2.21
Diluted earnings per share		$	3.61			$	1.90			$	2.21
Basic weighted-average number of shares outstanding		133,413				135,988				137,086
Diluted weighted-average number of shares outstanding		133,971				136,198				137,302

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 Loss				Total
		Shares			Shares			Par Value				Shares			Par Value
Balance at January 31, 2016		9,804			9,804			$	—			127,482			$	637			$	245,533			$	1,019,515			$	(238,203	)		$	1,027,482
Net income																							303,381								303,381
Foreign currency translation adjustment																											36,703				36,703
Common stock issued upon exchange of exchangeable shares		(23	)		(23	)		—				23			—				—												—
Stock-based compensation expense																			16,822												16,822
Tax benefits from stock-based compensation																			1,273												1,273
Common stock issued upon settlement of stock-based compensation												304			2				6,905												6,907
Shares withheld related to net share settlement of stock-based compensation												(50	)		—				(3,268		)										(3,268		)
Repurchase of common stock												(455	)		(2		)		(643		)		(28,682		)						(29,327		)
Balance at January 29, 2017		9,781			9,781			$	—			127,304			$	637			$	266,622			$	1,294,214			$	(201,500	)		$	1,359,973
Net income																							258,662								258,662
Foreign currency translation adjustment																											58,577				58,577
Stock-based compensation expense																			17,610												17,610
Common stock issued upon settlement of stock-based compensation												267			1				5,627												5,628
Shares withheld related to net share settlement of stock-based compensation												(60	)		—				(3,229		)										(3,229		)
Repurchase of common stock												(1,861	)		(10		)		(2,377		)		(97,874		)						(100,261		)
Balance at January 28, 2018		9,781			9,781			$	—			125,650			$	628			$	284,253			$	1,455,002			$	(142,923	)		$	1,596,960

		Exchangeable Stock			Special Voting Stock							Common Stock							Additional Paid-in Capital				Retained Earnings				Accumulated Other Comprehensive Loss				Total
		Shares			Shares			Par Value				Shares			Par Value
Net income																							483,801								483,801
Foreign currency translation adjustment																											(73,885		)		(73,885		)
Common stock issued upon exchange of exchangeable shares		(449	)		(449	)		—				449			2				(2		)										—
Stock-based compensation expense																			28,568												28,568
Common stock issued upon settlement of stock-based compensation												535			3				17,647												17,650
Shares withheld related to net share settlement of stock-based compensation												(94	)		—				(8,779		)										(8,779		)
Repurchase of common stock												(4,940	)		(25		)		(6,402		)		(591,913		)						(598,340		)
Balance at February 3, 2019		9,332			9,332			$	—			121,600			$	608			$	315,285			$	1,346,890			$	(216,808	)		$	1,445,975

See accompanying notes to the consolidated financial statements

lululemon athletica inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

		Fiscal Year Ended
		February 3, 2019				January 28, 2018				January 29, 2017
Cash flows from operating activities
Net income		$	483,801			$	258,662			$	303,381
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		122,484				108,235				87,697
Stock-based compensation expense		28,568				17,610				16,822
Derecognition of unredeemed gift card liability		(6,859		)		(6,202		)		(4,548		)
Asset impairment for ivivva restructuring		—				11,593				—
Settlement of derivatives not designated in a hedging relationship		(14,876		)		6,227				—
Deferred income taxes		16,786				(11,416		)		(17,563		)
Changes in operating assets and liabilities:
Inventories		(85,942		)		(21,178		)		(5,403		)
Prepaid and receivable income taxes		(437		)		32,242				11,537
Other prepaid expenses and other current and non-current assets		(30,653		)		(7,755		)		(15,688		)
Accounts payable		71,962				(1,551		)		14,080
Accrued inventory liabilities		4,312				3,680				(18,900		)
Accrued compensation and related expenses		41,600				12,873				9,943
Current income taxes payable		52,597				(16,470		)		(10,020		)
Unredeemed gift card liability		24,885				17,282				16,010
Lease termination liabilities		(3,860		)		6,427				—
Non-current income taxes payable		(6,169		)		48,268				—
Other current and non-current liabilities		44,580				30,810				(956		)
Net cash provided by operating activities		742,779				489,337				386,392
Cash flows from investing activities
Purchase of property and equipment		(225,807		)		(157,864		)		(149,511		)
Settlement of net investment hedges		(16,216		)		(7,203		)		—
Other investing activities		(771		)		(8,325		)		—
Net cash used in investing activities		(242,794		)		(173,392		)		(149,511		)
Cash flows from financing activities
Proceeds from settlement of stock-based compensation		17,650				5,628				6,907
Taxes paid related to net share settlement of stock-based compensation		(8,779		)		(3,229		)		(3,268		)
Repurchase of common stock		(598,340		)		(100,261		)		(29,327		)
Other financing activities		(745		)		—				(923		)
Net cash used in financing activities		(590,214		)		(97,862		)		(26,611		)
Effect of exchange rate changes on cash		(18,952		)		37,572				23,094
(Decrease) increase in cash and cash equivalents		(109,181		)		255,655				233,364
Cash and cash equivalents, beginning of period		$	990,501			$	734,846			$	501,482
Cash and cash equivalents, end of period		$	881,320			$	990,501			$	734,846

See accompanying notes to the consolidated financial statements

lululemon athletica inc.

INDEX FOR NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1	Nature of Operations and Basis of Presentation	50
Note 2	Summary of Significant Accounting Policies	50
Note 3	Inventories	58
Note 4	Property and Equipment	58
Note 5	Goodwill and Intangible Assets	59
Note 6	Other Current Liabilities	59
Note 7	Other Non-Current Liabilities	59
Note 8	Long-Term Debt and Credit Facilities	59
Note 9	Stockholders' Equity	60
Note 10	Stock-Based Compensation and Benefit Plans	60
Note 11	Fair Value Measurement	63
Note 12	Derivative Financial Instruments	64
Note 13	Asset Impairment and Restructuring	65
Note 14	Income Taxes	66
Note 15	Earnings Per Share	70
Note 16	Commitments and Contingencies	70
Note 17	Related Party Balances and Transactions	72
Note 18	Supplemental Cash Flow Information	72
Note 19	Segmented Information and Disaggregated Net Revenue	73
Note 20	Quarterly Financial Information (Unaudited)	75

lululemon athletica inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 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, sales from temporary locations, sales to wholesale accounts, showrooms, license and supply arrangements, and warehouse sales. The Company operates stores in the United States, Canada, Australia, China, the United Kingdom, New Zealand, Germany, Japan, South Korea, Singapore, France, Ireland, Sweden, and Switzerland. There were 440, 404, and 406 company-operated stores in operation as of February 3, 2019, January 28, 2018, and January 29, 2017, respectively.

During fiscal 2017, the Company restructured its ivivva operations. On August 20, 2017, as part of this plan, the Company closed 48 of its 55 ivivva branded company-operated stores and all other ivivva branded temporary locations. The Company continues to offer ivivva branded products on its e-commerce websites. Please refer to Note 13 of these consolidated financial statements for further details regarding the ivivva restructuring.

Basis of presentation

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 2018 was a 53 week year. Fiscal 2017 and fiscal 2016 were each 52 week years. Fiscal 2018, 2017, and 2016 ended on February 3, 2019, January 28, 2018, and January 29, 2017, 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.

NOTE 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 the Company's 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 February 3, 2019, January 28, 2018, and January 29, 2017, 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 net realizable value. Cost is determined using weighted-average costs, and 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 goods that are obsolete, have quality issues, or are damaged. 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 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 individually assessed, and estimated to be up to 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		20% - 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.

Lease inducements, which include leasehold improvements paid for by the landlord and rent free periods, are recorded within other non-current 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 within deferred lease liabilities or prepaid lease assets within other non-current liabilities and other non-current assets, respectively.

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.

Revenue recognition

Net revenue is comprised of company-operated store net revenue, direct to consumer net revenue through websites and mobile apps, including mobile apps on in-store devices that allow demand to be fulfilled via the Company's distribution centers, and other net revenue, which includes revenue from outlets, temporary locations, sales to wholesale accounts, showrooms, warehouse sales, and license and supply arrangement net revenue, which consists of royalties as well as sales of the Company's products to licensees. All revenue is reported net of sales taxes collected from customers on behalf of taxing authorities.

Revenue is recognized when performance obligations are satisfied through the transfer of control of promised goods to the Company's customers. Control transfers once a customer has the ability to direct the use of, and obtain substantially all of the benefits from, the product. This includes the transfer of legal title, physical possession, the risks and rewards of ownership, and customer acceptance. Revenue from company-operated stores and other retail locations is recognized at the point of sale. Direct to consumer revenue and sales to wholesale accounts are recognized upon receipt by the customer. In certain arrangements the Company receives payment before the customer receives the promised good. These payments are initially recorded as deferred revenue, and recognized as revenue in the period when control is transferred to the customer.

Revenue is presented net of an allowance for estimated returns, which is based on historic experience. The Company's liability for sales return refunds is recognized within other current liabilities, and an asset for the value of inventory which is expected to be returned is recognized within other prepaid expenses and other current assets on the consolidated balance sheets.

Shipping fees billed to customers are recorded as revenue, and shipping costs are recognized within selling, general and administrative expenses in the same period the related revenue is recognized.

Proceeds from the sale of gift cards are initially deferred and recognized within unredeemed gift card liability on the consolidated balance sheets, and are recognized as revenue when tendered for payment. Based on historical experience, and to the extent there is no requirement to remit unclaimed card balances to government agencies, an estimate of the gift card balances that will never be redeemed is recognized as revenue in proportion to gift cards which have been redeemed.

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, the portion of card balances not expected to be redeemed are recognized in net revenue in proportion to the gift cards which have been redeemed, under the redemption recognition method. For the years ended February 3, 2019, January 28, 2018, and January 29, 2017, net revenue recognized on unredeemed gift card balances was $6.9 million, $6.2 million, and $4.5 million, respectively.

See Note 19 of these consolidated financial statements for disaggregated net revenue by channel and geographic area.

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, utilities, and depreciation;

•	the cost of the Company's production, design, research and development, 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 or asset impairment and restructuring costs. The Company's selling, general and administrative expenses include the costs of corporate and retail employee 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, legal, corporate facility and occupancy costs, and depreciation and amortization expense other than in cost of goods sold.

For the years ended February 3, 2019, January 28, 2018, and January 29, 2017, the Company incurred outbound transportation costs of $79.5 million, $53.8 million, and $44.9 million, respectively.

Asset impairment and restructuring costs

Asset impairment and restructuring costs consist of the lease termination, impairment of property and equipment, employee related costs, and other restructuring costs recognized in connection with the restructuring of our ivivva operations.

Store pre-opening costs

Operating costs incurred prior to the opening of new stores are expensed as incurred as selling, general and administrative expenses.

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 carryforwards, 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 carryforwards, 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 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 and foreign withholding 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 income (expense), net. Accrued interest and penalties are included within the related tax liability on the Company's consolidated balance sheets.

The U.S. Tax Cuts and Jobs Act ("U.S. tax reform") was enacted on December 22, 2017 and introduced significant changes to U.S. income tax law. The United States Securities Exchange Commission ("SEC") issued Staff Accounting Bulletin 118 ("SAB 118") which allowed companies to record provisional estimates of the impacts of U.S. tax reform within a one year measurement period. The Company recorded certain provisional amounts in fiscal 2017 and completed the accounting for the income tax effects of U.S. tax reform during fiscal 2018. U.S. tax reform changes and their impact to the Company are outlined in Note 14 of these consolidated financial statements.

Fair value of financial instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are made using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value:

•	Level 1 - defined as observable inputs such as quoted prices in active markets;

•	Level 2 - defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and

•	Level 3 - defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The fair value measurement is categorized in its entirety by reference to its lowest level of significant input.

The Company records accounts receivable, accounts payable, and accrued liabilities at cost. The carrying values of these instruments approximate their fair value due to their short-term maturities. 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 Company holds certain assets and liabilities that are required to be measured at fair value on a recurring basis, which are outlined in Note 11 of these consolidated financial statements.

Foreign currency

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.

Derivative financial instruments

The Company uses derivative financial instruments to manage its exposure to certain foreign currency exchange rate risks.

Net investment hedges. The Company enters into certain forward currency contracts that are designated as net investment hedges. The effective portions of the hedges are reported in accumulated other comprehensive income or loss, net of tax, and will subsequently be reclassified to net earnings in the period in which the hedged investment is either sold or substantially liquidated. Hedge effectiveness is measured using a method based on changes in forward exchange rates. The Company classifies the cash flows at settlement of its net investment hedges within investing activities in the consolidated statements of cash flows.

Derivatives not designated as hedging instruments. The Company also enters into certain forward currency contracts that are not designated as net investment hedges. They are designed to economically hedge the foreign exchange revaluation gains and losses of certain monetary assets and liabilities. The Company has not applied hedge accounting to these instruments and the change in fair value of these derivatives is recorded within selling, general and administrative expenses. The Company classifies the cash flows at settlement of its forward currency contracts which are not designated in hedging relationships within operating activities in the consolidated statements of cash flows.

The Company presents its derivative assets and derivative liabilities at their gross fair values within other prepaid expenses and other current assets and other current liabilities on the consolidated balance sheets. However, the Company's Master International Swap Dealers Association, Inc., Agreements and other similar arrangements allow net settlements under certain conditions.

The Company does not enter into derivative contracts for speculative or trading purposes. Additional information on the Company's derivative financial instruments is included in Notes 11 and 12 of these consolidated financial statements.

Concentration of credit risk

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.

Cash and cash equivalents are held with high quality financial institutions. The amount of cash and cash equivalents held with certain financial institutions exceeds government-insured limits. The Company is also exposed to credit-related losses in the event of nonperformance by the counterparties to the forward currency contracts. The credit risk amount is the Company's unrealized gains on its derivative instruments, based on foreign currency rates at the time of nonperformance. The Company has not experienced any losses related to these items, and it believes credit risk to be minimal. The Company seeks to minimize its credit risk by entering into transactions with credit worthy and reputable financial institutions and by monitoring the credit standing of the financial institutions with whom it transacts. It seeks to limit the amount exposure with any one counterparty.

The Company's derivative contracts contain certain credit risk-related contingent features. Under certain circumstances, including an event of default, bankruptcy, termination, and cross default under the Company's revolving credit facility, the Company may be required to make immediate payment for outstanding liabilities under its derivative contracts.

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. Awards settled in cash or common stock at the election of the employee are remeasured to fair value at the end of each reporting period until settlement. The employee compensation expense is recognized on a straight-line basis over the requisite service period with the offsetting credit to additional paid-in capital for awards that are settled in common shares, and with the offsetting credit to accrued compensation and related expenses for awards that are settled in cash or common stock at the election of the employee.

For awards with service and/or performance conditions, the amount of compensation expense recognized is based on the number of awards expected to vest, reflecting estimated expected forfeitures, 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 grant date fair value of each stock option granted is estimated on the award date using the Black-Scholes model, and the grant date fair value of 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. Restricted stock units that are settled in cash or common stock at the election of the employee are remeasured to fair value at the end of each reporting period until settlement. This fair value is based on the closing price of the Company's common stock on the last business day before each period end.

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 GAAP 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.

Recently adopted accounting pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers ("ASC 606") which supersedes the revenue recognition requirements in ASC 605 Revenue Recognition. This ASU 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.

The Company adopted ASC 606 on January 29, 2018 on a modified retrospective basis. There were no changes to the consolidated statement of operations as a result of the adoption, and the timing and amount of its revenue recognition remained substantially unchanged under this new guidance. Under the provisions of ASC 606, the Company is now required to present its provision for sales returns on a gross basis, rather than a net basis. The Company's liability for sales return refunds is recognized within other current liabilities, and the Company now presents an asset for the value of inventory which is expected to be returned within other prepaid expenses and other current assets on the consolidated balance sheets. Under the modified retrospective approach, the comparative prior period information has not been restated for this change.

The effect of adoption of ASC 606 on the Company's consolidated balance sheet as of February 3, 2019 was as follows:

		February 3, 2019
		As Reported				Adjustment for ASC 606				Balances Without Adoption of ASC 606
		(In thousands)
Other prepaid expenses and other current assets		$	57,949			$	(3,719	)		$	54,230
Current assets		1,429,282				(3,719		)		1,425,563
Total assets		2,084,711				(3,719		)		2,080,992
Other current liabilities		112,698				3,719				116,417
Current liabilities		500,477				3,719				504,196
Total liabilities		638,736				3,719				642,455

In May 2017, the FASB amended ASC 718, Stock Compensation, to reduce diversity in practice and to clarify when a change to the terms or conditions of a share-based payment award must be accounted for as a modification and will result in fewer changes to the terms of an award being accounted for as modifications. The new guidance was effective beginning in the first quarter of fiscal 2018 and will apply on a prospective basis. The adoption does not have a material impact on the Company's consolidated financial statements.

In January 2018, the FASB released guidance on the accounting for the global intangible low-taxed income ("GILTI") provisions of the tax bill H.R.1, commonly known as the U.S. Tax Cuts and Jobs Act ("U.S. tax reform"). The GILTI provisions impose a tax on foreign subsidiary earnings in excess of a deemed return on the foreign subsidiary's tangible assets. The Company has made an accounting policy election to treat the GILTI tax as an in period tax, which is consistent with the treatment prior to the accounting policy election.

In February 2018, the FASB amended ASC 220, Income Statement—Reporting Comprehensive Income. ASC 740, Income Taxes, requires that the effect of a change in tax laws or rates on deferred tax assets and liabilities be included in income from continuing operations. In situations in which the tax effects of a transaction were initially recognized directly in other comprehensive income, this results in "stranded" amounts in accumulated other comprehensive income related to the income tax rate differential. The amendments to ASC 220 allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the enactment of U.S. tax reform. As permitted by the ASU the Company early adopted the amendments to ASC 220, and made the policy election to not reclassify "stranded" amounts from accumulated other comprehensive income to retained earnings.

Recently issued accounting pronouncements

In February 2016, the FASB issued ASC 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. Under the new guidance, lessees are required to recognize a lease liability, which represents the discounted obligation to make future minimum lease payments, and a corresponding right-of-use asset on the balance sheet. This guidance is effective for the Company beginning in its first quarter of fiscal 2019. The new guidance can be applied using a modified retrospective approach at the beginning of the earliest period presented, or at the beginning of the period in which it is adopted.

The Company adopted ASC 842 on February 4, 2019 using the modified retrospective approach and will not be restating comparative periods.

The Company has chosen to apply the transition package of three practical expedients which allow companies not to reassess whether agreements contain leases, the classification of leases, and the capitalization of initial direct costs. The Company has also made an accounting policy election to recognize lease expense for leases with a term of 12 months or less on a straight-line basis over the lease term and will not recognize any right of use assets or lease liabilities for those leases.

The Company has completed the implementation of new lease accounting software, and updated its internal controls to address the requirements of the new standard.

The primary financial statement impact upon adoption will be the recognition, on a discounted basis, of the Company's minimum commitments under noncancelable operating leases as right of use assets and obligations on the consolidated balance

sheets. The adoption of ASC 842 results in the recognition of lease-related assets and liabilities of approximately $620.0 million and $650.0 million, respectively. Pre-existing net lease-related assets and liabilities of approximately $30.0 million have been reclassified as part of the adoption of the new standard, and there is no adjustment to opening retained earnings. The standard is not expected to have a material impact on the Company's net income or cash flows.

In August 2017, the FASB amended ASC 815, Derivatives and Hedging to more closely align hedge accounting with companies' risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of hedging programs. It makes more financial and nonfinancial hedging strategies eligible for hedge accounting. It also amends the presentation and disclosure requirements and changes how companies assess effectiveness. This guidance is effective for the Company beginning in its first quarter of fiscal 2019. This standard will not have a material impact on the Company's consolidated financial statements.

NOTE 3. INVENTORIES

		February 3, 2019				January 28, 2018
		(In thousands)
Finished goods		$	420,931			$	344,695
Provision to reduce inventories to net realizable value		(16,089		)		(15,133		)
Inventories		$	404,842			$	329,562

The Company had net write-offs of $25.3 million, $16.4 million, and $16.1 million of inventory in fiscal 2018, fiscal 2017, and fiscal 2016, respectively for goods that were obsolete, had quality issues, or were damaged.

NOTE 4. PROPERTY AND EQUIPMENT

		February 3, 2019				January 28, 2018
		(In thousands)
Land		$	78,636			$	83,048
Buildings		38,030				39,278
Leasehold improvements		362,571				301,449
Furniture and fixtures		103,733				91,778
Computer hardware		69,542				61,734
Computer software		230,689				173,997
Equipment and vehicles		15,009				14,806
Work in progress		74,271				51,260
Property and equipment, gross		972,481				817,350
Accumulated depreciation		(405,244		)		(343,708		)
Property and equipment, net		$	567,237			$	473,642

Included in the cost of computer software are capitalized costs of $13.2 million and $12.4 million as of February 3, 2019 and January 28, 2018, respectively, associated with internally developed software.

Depreciation expense related to property and equipment was $122.4 million, $108.0 million, and $87.0 million for the years ended February 3, 2019, January 28, 2018, and January 29, 2017, respectively.

See Note 13 of these consolidated financial statements for information on the impairment of long-lived assets the Company recognized as part of the restructuring of its ivivva operations.

NOTE 5. GOODWILL AND INTANGIBLE ASSETS

		February 3, 2019				January 28, 2018
		(In thousands)
Goodwill		$	25,496			$	25,496
Changes in foreign currency exchange rates		(1,257		)		(890		)
		24,239				24,606
Intangible assets, net		—				73
Goodwill and intangible assets, net		$	24,239			$	24,679

NOTE 6. OTHER CURRENT LIABILITIES

		February 3, 2019				January 28, 2018
		(In thousands)
Accrued duty, freight, and other operating expenses		$	49,945			$	33,695
Sales tax collected		16,091				11,811
Sales return allowances		11,318				6,293
Accrued capital expenditures		11,295				5,714
Deferred revenue		8,045				2,453
Accrued rent		7,331				7,074
Lease termination liabilities		2,293				6,427
Forward currency contract liabilities		1,042				8,771
Other		5,338				4,178
Other current liabilities		$	112,698			$	86,416

NOTE 7. OTHER NON-CURRENT LIABILITIES

		February 3, 2019				January 28, 2018
		(In thousands)
Tenant inducements		$	42,360			$	26,250
Deferred lease liabilities		34,018				27,186
Other		5,533				5,885
Other non-current liabilities		$	81,911			$	59,321

NOTE 8. LONG-TERM DEBT AND CREDIT FACILITIES

Revolving credit facility

On December 15, 2016, the Company entered into a $150.0 million unsecured, revolving credit facility. Any amounts outstanding under the revolving credit facility will be due and payable in full on December 15, 2021, subject to provisions that permit the Company to request a limited number of one year extensions annually.

Up to $35.0 million of the revolving credit facility is available for the issuance of letters of credit and up to $25.0 million is available for swing line loans. Commitments under the revolving credit facility may be increased by up to $200.0 million, subject to certain conditions, including the approval of the lenders.

Borrowings under the revolving credit facility may be made in U.S. Dollars, Euros, Canadian Dollars, and in other currencies, subject to the approval of the administrative agent and the lenders. Borrowings under the agreement may be prepaid and commitments may be reduced or terminated without premium or penalty (other than customary breakage costs).

Borrowings made under the revolving credit facility bear interest at a variable rate per annum equal to, at the Company's option, either (a) LIBOR or (b) an alternate base rate, plus, in each case, an applicable margin. The applicable margin is determined by reference to a pricing grid, based on the ratio of indebtedness to earnings before interest, tax, depreciation, amortization, and rent ("EBITDAR") and ranges between 1.00%-1.75% for LIBOR loans and 0.00%-0.75% for alternate base

rate loans. Additionally, a commitment fee of between 0.125%-0.200%, also determined by reference to the pricing grid, is payable on the average daily unused amounts under the revolving credit facility.

The credit agreement contains negative covenants that, among other things and subject to certain exceptions, limit the ability of the Company's subsidiaries to incur indebtedness, incur liens, undergo fundamental changes, make dispositions of all or substantially all of their assets, alter their businesses and enter into agreements limiting subsidiary dividends and distributions.

The Company is also required to maintain a consolidated rent-adjusted leverage ratio of not greater than 3.50:1.00 and it is not permitted to allow the ratio of consolidated EBITDAR to consolidated interest charges (plus rent) to be less than 2.00:1.00. The credit agreement also contains certain customary representations, warranties, affirmative covenants, and events of default (including, among others, an event of default upon the occurrence of a change of control). As of February 3, 2019, the Company was in compliance with all applicable covenants.

On June 6, 2018, we entered into Amendment No. 1 to the credit agreement. The Amendment amends the credit agreement to provide for (i) an increase in the aggregate commitments under the unsecured five-year revolving credit facility to $400.0 million, with an increase of the sub-limits for the issuance of letters of credit and extensions of swing line loans to $50.0 million for each, (ii) an increase in the option, subject to certain conditions as set forth in the credit agreement, to request increases in commitments under the revolving facility from $400.0 million to $600.0 million and (iii) an extension in the maturity of the revolving facility from December 15, 2021 to June 6, 2023.

In addition, the Amendment decreases the applicable margins for LIBOR loans from 1.00%-1.75% to 1.00%-1.50% and for alternate base rate loans from 0.00%-0.75% to 0.00%-0.50%, reduces the commitment fee on average daily unused amounts under the revolving facility from 0.125%-0.200% to 0.10%-0.20%, and reduces fees for unused letters of credit from 1.00%-1.75% to 1.00%-1.50%.

As of February 3, 2019, aside from letters of credit of $1.5 million, there were no other borrowings outstanding under this credit facility.

NOTE 9. STOCKHOLDERS' EQUITY

Special voting stock and exchangeable shares

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 4.2 million exchangeable shares are outstanding, or in the event of certain events such as a change in control.

NOTE 10. STOCK-BASED COMPENSATION AND BENEFIT PLANS

Stock-based compensation plans

The Company's eligible 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 and vest at a rate of 25% each year on the

anniversary date of the grant. Stock options generally expire on the earlier of seven years from the date of grant, or a specified period of time following termination, in accordance with the 2014 Plan and the related grant agreement. 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 issues previously unissued shares upon the exercise of Company options, vesting of performance-based restricted stock units or restricted stock units that are settled in common stock, and granting of restricted shares.

Stock-based compensation expense charged to income for the plans was $29.6 million, $17.6 million, and $16.8 million for the years ended February 3, 2019, January 28, 2018, and January 29, 2017, respectively.

Total unrecognized compensation cost for all stock-based compensation plans was $55.6 million as of February 3, 2019, which is expected to be recognized over a weighted-average period of 2.1 years, and was $44.6 million as of January 28, 2018 over a weighted-average period of 2.0 years.

A summary of the balances of the Company's stock-based compensation plans as of February 3, 2019, January 28, 2018, and January 29, 2017, and changes during the fiscal years then ended is presented below:

		Stock Options							Performance-Based Restricted Stock Units							Restricted Shares							Restricted Stock Units							Restricted Stock Units (Liability Accounting)
		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				Number			Weighted-Average Fair Value
		(In thousands, except per share amounts)
Balance at January 31, 2016		867			$	49.54			395			$	58.58			31			$	57.67			333			$	55.91			—			$	—
Granted		428			68.63				164			68.64				17			69.94				216			68.15				—			—
Exercised/vested		191			36.76				7			64.36				34			58.39				91			56.87				—			—
Forfeited/expired		186			58.87				162			62.54				—			—				98			55.95				—			—
Balance at January 29, 2017		918			$	59.20			390			$	61.05			14			$	70.54			360			$	62.99			—			$	—
Granted		619			52.34				192			52.38				24			52.38				336			52.83				—			—
Exercised/vested		109			51.62				—			—				14			70.29				135			60.64				—			—
Forfeited/expired		311			58.09				253			55.30				3			51.72				134			57.28				—			—
Balance at January 28, 2018		1,117			$	56.44			329			$	60.42			21			$	52.45			427			$	57.54			—			$	—
Granted		388			96.96				123			102.49				6			124.19				257			88.75				44			136.67
Exercised/vested		316			56.29				39			63.04				21			52.45				174			58.94				—			—
Forfeited/expired		319			59.76				133			61.71				—			—				70			66.90				—			—
Balance at February 3, 2019		870			$	73.34			280			$	78.01			6			$	124.19			440			$	73.73			44			$	146.12

A total of 13.5 million 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 grant date 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. Restricted stock units that are settled in cash or common stock at the election of the employee are remeasured to fair value at the end of each reporting period until settlement. This fair value is based on the closing price of the Company's common stock on the last business day before each period end.

The grant date fair value of each stock option granted is estimated on the date of grant using the Black-Scholes model. The assumptions used to calculate the fair value of the 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 the 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 following are weighted averages of the assumptions that were used in calculating the fair value of stock options granted in fiscal 2018, 2017, and 2016:

		Fiscal Year Ended
		February 3, 2019			January 28, 2018			January 29, 2017
Expected term		3.75 years			4.00 years			4.00 years
Expected volatility		36.87	%		38.28	%		40.07	%
Risk-free interest rate		2.46	%		1.72	%		1.08	%
Dividend yield		—	%		—	%		—	%

The following table summarizes information about stock options outstanding and exercisable as of February 3, 2019:

		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)
		(In thousands, except per share amounts and years)
$11.75 - $51.72		74				$	46.56			3.7		50				$	44.83			3.2
$51.87 - $51.87		225				51.87				5.2		29				51.87				5.1
$52.39 - $68.69		203				63.68				4.0		83				61.50				3.7
$69.30 - $85.96		278				85.11				6.1		4				72.39				3.5
$113.87 - $155.97		90				134.28				6.5		—				—				0.0
		870				$	73.34			5.2		166				$	55.05			3.8
Intrinsic value		$	63,329									$	15,105

As of February 3, 2019, the unrecognized compensation cost related to these options was $11.6 million, which is expected to be recognized over a weighted-average period of 2.8 years. The weighted-average grant date fair value of options granted during the years ended February 3, 2019, January 28, 2018, and January 29, 2017 was $30.30, $16.88, and $22.39, respectively.

The following table summarizes the intrinsic value of options exercised and awards that vested during fiscal 2018, 2017, and 2016:

		Fiscal Year Ended
		February 3, 2019				January 28, 2018				January 29, 2017
		(In thousands)
Stock options		$	17,268			$	1,856			$	6,072
Performance-based restricted stock units		3,413				—				471
Restricted shares		2,600				743				2,283
Restricted stock units		17,142				7,447				6,084
		$	40,423			$	10,046			$	14,910

Employee share 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 defined in the ESPP, and the Company matches one-third of the contribution. The maximum number of shares authorized to be purchased under the ESPP is 6.0

million shares. All shares purchased under the ESPP are purchased in the open market. During the year ended February 3, 2019, there were 0.1 million shares purchased.

Defined contribution pension plans

During fiscal 2016, the Company began offering defined contribution pension plans to its eligible employees in Canada and the United States. Participating employees may elect to defer and contribute a portion of their eligible compensation to a plan up to limits stated in the plan documents, not to exceed the dollar amounts set by applicable laws. The Company matches 50% to 75% of the contribution depending on the participant's length of service, and the contribution is subject to a two year vesting period. The Company's net expense for the defined contribution plans was $6.4 million, $5.2 million, and $3.2 million for the years ended February 3, 2019, January 28, 2018, and January 29, 2017, respectively.

NOTE 11. FAIR VALUE MEASUREMENT

Assets and liabilities measured at fair value on a recurring basis

As of February 3, 2019 and January 28, 2018, the Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis:

		February 3, 2019				Level 1				Level 2				Level 3				Balance Sheet Classification
		(In thousands)
Money market funds		$	471,888			$	471,888			$	—			$	—			Cash and cash equivalents
Treasury bills		99,958				99,958				—				—				Cash and cash equivalents
Term deposits		63,522				—				63,522				—				Cash and cash equivalents
Net forward currency contract assets		516				—				516				—				Other prepaid expenses and other current assets
Net forward currency contract liabilities		1,042				—				1,042				—				Other current liabilities

		January 28, 2018				Level 1				Level 2				Level 3				Balance Sheet Classification
		(In thousands)
Term deposits		$	258,238			$	—			$	258,238			$	—			Cash and cash equivalents
Net forward currency contract assets		7,889				—				7,889				—				Other prepaid expenses and other current assets
Net forward currency contract liabilities		8,771				—				8,771				—				Other current liabilities

The Company records accounts receivable, accounts payable, and accrued liabilities at cost. The carrying values of these instruments approximate their fair value due to their short-term maturities.

The Company has short-term, highly liquid investments classified as cash equivalents, which are invested in money market funds, Treasury bills, and term deposits. The Company records cash equivalents at their original purchase prices plus interest that has accrued at the stated rate.

The fair values of the forward currency contract assets and liabilities are determined using observable Level 2 inputs, including foreign currency spot exchange rates, forward pricing curves, and interest rates. The fair values consider the credit risk of the Company and its counterparties. They are presented at their gross fair values. However, the Company's Master International Swap Dealers Association, Inc., Agreements and other similar arrangements allow net settlements under certain conditions.

Assets and liabilities measured at fair value on a non-recurring basis

In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company has impaired certain long-lived assets and recorded them at their estimated fair value on a non-recurring basis. The fair value of these long-lived assets was determined using Level 3 inputs, principally the present value of the estimated future cash flows expected from their use and eventual disposition. Please refer to Note 13 of these audited consolidated financial statements for further details regarding the impairment of long-lived assets as a result of the ivivva restructuring.

The Company has also recorded lease termination liabilities at fair value on a non-recurring basis, determined using Level 3 inputs based on remaining lease rentals and reduced by estimated sublease income. As of February 3, 2019 and January 28, 2018, the Company had lease termination liabilities of $2.3 million and $6.4 million, respectively. This was primarily as a result of the ivivva restructuring.

NOTE 12. DERIVATIVE FINANCIAL INSTRUMENTS

The Company currently hedges against changes in the Canadian dollar to U.S. dollar exchange rate using forward currency contracts.

Net investment hedges

The Company holds a significant portion of its assets in Canada and during the year ended February 3, 2019, it entered into forward currency contracts designed to hedge a portion of the foreign currency exposure that arises on translation of a Canadian subsidiary into U.S. dollars. These forward currency contracts are designated as net investment hedges. The Company assesses hedge effectiveness based on changes in forward rates. The Company recorded no ineffectiveness from net investment hedges for the year ended February 3, 2019.

Derivatives not designated as hedging instruments

During the year ended February 3, 2019 the Company entered into certain forward currency contracts designed to economically hedge the foreign exchange revaluation gains and losses that are recognized by its Canadian subsidiaries on U.S. dollar denominated monetary assets and liabilities.

Outstanding notional amounts

The Company had foreign exchange forward contracts outstanding with the following notional amounts:

		February 3, 2019				January 28, 2018
		(In thousands)
Derivatives designated as net investment hedges		$	328,000			$	262,000
Derivatives not designated in a hedging relationship		309,000				240,000

The forward currency contracts designated as net investment hedges mature on different dates between February 2019 and October 2019.

The forward currency contracts not designated in a hedging relationship mature on different dates between February 2019 and September 2019.

Quantitative disclosures about derivative financial instruments

The fair values of forward currency contracts were as follows:

		February 3, 2019				January 28, 2018
		(In thousands)
Net forward currency contract assets, recognized within other prepaid expenses and other current assets:
Derivatives not designated in a hedging relationship		$	516			$	7,889
Net forward currency contract liabilities, recognized within other current liabilities:
Derivatives designated as net investment hedges		1,042				8,771

As of February 3, 2019, there were derivative assets of $0.5 million and derivative liabilities of $1.0 million subject to enforceable netting arrangements.

The pre-tax gains and losses on foreign exchange forward contracts recorded in accumulated other comprehensive income are as follows:

		Fiscal Year Ended
		February 3, 2019				January 28, 2018				January 29, 2017
		(In thousands)
Gains (losses) recognized in foreign currency translation adjustment:
Derivatives designated as net investment hedges		$	23,946			$	(15,974	)		$	—

No gains or losses have been reclassified from accumulated other comprehensive income into net income for derivative financial instruments in a net investment hedging relationship, as the Company has not sold or liquidated (or substantially liquidated) its hedged subsidiary.

The pre-tax net foreign exchange and derivative gains and losses recorded in the consolidated statement of operations are as follows:

		Fiscal Year Ended
		February 3, 2019				January 28, 2018				January 29, 2017
		(In thousands)
Gains (losses) recognized in selling, general and administrative expenses:
Foreign exchange gains (losses)		$	23,642			$	(6,798	)		$	(8,314	)
Derivatives not designated in a hedging relationship		(22,249		)		14,115				—
Net foreign exchange and derivative gains (losses)		$	1,393			$	7,317			$	(8,314	)

NOTE 13. ASSET IMPAIRMENT AND RESTRUCTURING

During fiscal 2017, the Company restructured its ivivva operations. On August 20, 2017, the Company closed 48 of its 55 ivivva branded company-operated stores and all other ivivva branded temporary locations. As a result of this restructuring, the Company recognized aggregate pre-tax charges of $47.2 million during fiscal 2017.

A summary of the pre-tax charges recognized in connection with the Company's restructuring of its ivivva operations is as follows:

		Fiscal Year Ended
		February 3, 2019				January 28, 2018
		(In thousands)
Costs recorded in cost of goods sold:
Provision to reduce inventories to net realizable value		$	—			$	4,945
Accelerated depreciation		—				3,753
		—				8,698
Costs recorded in operating expenses:
Lease termination costs		—				21,069
Impairment of property and equipment		—				11,593
Employee related costs		—				4,226
Other restructuring costs		—				1,637
Asset impairment and restructuring costs		—				38,525
Restructuring and related costs		$	—			$	47,223

Income tax recoveries of $12.7 million were recorded on the above items in fiscal 2017. These income tax recoveries are based on the annual tax rate of the applicable tax jurisdictions.

Costs recorded in cost of goods sold

During fiscal 2017, the Company recognized expenses of $8.7 million in cost of goods sold as a result of the restructuring of its ivivva operations. This included $4.9 million to reduce inventories to their estimated net realizable value, and $3.8 million in accelerated depreciation primarily related to leasehold improvements and furniture and fixtures for stores that were closed on August 20, 2017.

Costs recorded in operating expenses

The Company recognized asset impairment and restructuring costs of $38.5 million during fiscal 2017 as a result of the restructuring of its ivivva operations.

As a result of the plan to close the majority of the ivivva branded locations, the long-lived assets of each ivivva branded location were tested for impairment as of April 30, 2017. For impaired locations, a loss was recognized representing the difference between the net book value of the long-lived assets and their estimated fair value. Impairment losses totaling $11.6 million were recognized during the first quarter of fiscal 2017. These losses primarily relate to leasehold improvements and furniture and fixtures of the company-operated stores segment. These assets were retired during fiscal 2017 in conjunction with the closures of the company-operated stores.

During fiscal 2017, the Company recognized lease termination costs of $21.1 million, employee related expenses as a result of the restructuring of $4.2 million as well as other restructuring costs of $1.6 million.

NOTE 14. 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
		February 3, 2019				January 28, 2018				January 29, 2017
		(In thousands)
Income (loss) before income tax expense
Domestic		$	132,563			$	123,942			$	(30,955	)
Foreign		582,687				336,056				453,684
		$	715,250			$	459,998			$	422,729
Current income tax expense
Federal		$	73,213			$	79,724			$	36,245
State		16,153				11,573				6,690
Foreign		123,129				109,322				94,581
		$	212,495			$	200,619			$	137,516
Deferred income tax expense (recovery)
Federal		$	(13,068	)		$	14,443			$	(11,065	)
State		(8,566		)		3,988				(1,840		)
Foreign		40,588				(17,714		)		(5,263		)
		18,954				717				(18,168		)
Income tax expense		$	231,449			$	201,336			$	119,348

The Company's income tax expense for fiscal 2018, fiscal 2017 and fiscal 2016 include certain discrete tax amounts, as follows:

		Fiscal Year Ended
		February 3, 2019				January 28, 2018				January 29, 2017
		(In thousands)
U.S. tax reform:
One-time transition tax		$	7,464			$	58,896			$	—
Deferred income tax effects		—				398				—
Tax on repatriation of foreign earnings		23,714				—				(38		)
Tax recovery on ivivva restructuring costs		—				(12,741		)		—
Transfer pricing adjustments, net		—				—				(10,706		)
Total discrete amounts		$	31,178			$	46,553			$	(10,744	)

U.S. tax reform

The U.S. tax reform enacted on December 22, 2017 introduced significant changes to the U.S. income tax laws, including reduction in the U.S. federal income tax rate from 35% to 21%, a shift to a territorial tax system which changed how foreign earnings are subject to U.S. tax, and the imposition of a mandatory one-time transition tax on the accumulated undistributed earnings of foreign subsidiaries.

One-time transition tax. U.S. tax reform required the Company to pay U.S. income taxes on accumulated foreign subsidiary earnings not previously subject to U.S. income tax at a rate of 15.5% on cash and cash equivalents and 8% on the remaining earnings, net of foreign tax credits. The one-time transition tax is payable over eight years.

The Company recognized a provisional amount of $58.9 million for the mandatory one-time transition tax on the deemed repatriation of accumulated undistributed earnings of foreign subsidiaries. As a result of completing its fiscal 2017 U.S. tax returns and incorporating newly issued guidance into its calculations the Company recognized an additional current tax expense of $7.5 million during fiscal 2018 for the mandatory one-time transition tax.

Deferred income tax effects. U.S. tax reform reduced the U.S. federal income tax rate from 35% to 21%. Accordingly, the Company remeasured its deferred income tax assets and liabilities to reflect the reduced rate that is expected to apply in future periods when these balances reverse. The Company recognized a provisional deferred income tax expense of $0.4 million during fiscal 2017 to reflect the reduced U.S. tax rate and other effects of U.S. tax reform. There were no adjustments to this provisional amount in fiscal 2018.

The Company completed the accounting for the income tax effects of U.S. tax reform in fiscal 2018.

Tax on repatriation of foreign earnings

U.S. tax reform and the shift to a territorial tax system eliminates U.S. federal income taxes upon the repatriation of foreign earnings. However, U.S. tax reform does not eliminate foreign withholding taxes, or certain state income taxes.

During fiscal 2018, the Company completed its evaluation of the impact that U.S. tax reform has upon repatriation taxes, its reinvestment plans, and the most efficient means of deploying its capital resources. As a result of these evaluations, the Company repatriated $778.9 million from a Canadian subsidiary to the U.S. parent entity in fiscal 2018. A net tax current expense of $23.7 million was recognized in fiscal 2018 on this distribution.

As at February 3, 2019, the Company has not provided for U.S. income taxes or foreign withholding taxes on its remaining net investment in this Canadian subsidiary of $777.5 million. This net investment remains indefinitely reinvested and is considered necessary to sustain its existing business operations. The amount of tax that is payable upon the repatriation is dependent on the elections made by the Company under Canadian withholding tax legislation and the interaction between U.S. federal and state income tax laws. The unrecognized deferred tax liability on the indefinitely reinvested amount of the Canadian subsidiary is approximately $2.3 million, which principally represents U.S. state income taxes which would be payable in the event of repatriation.

The Company will not assert indefinite reinvestment of the future earnings made by this Canadian subsidiary. No deferred income tax liabilities have been recognized on any of the undistributed earnings of the Company's other foreign subsidiaries as these earnings are indefinitely reinvested outside of the United States.

Excluding this Canadian subsidiary, cumulative undistributed earnings of the Company's foreign subsidiaries as of February 3, 2019 were $26.0 million.

As of February 3, 2019, the Company had cash and cash equivalents of $191.0 million outside of the United States.

Tax recovery on ivivva restructuring costs

As outlined in Note 13 of these consolidated financial statements, the Company restructured its ivivva operations during fiscal 2017. Income tax recoveries of $12.7 million were recorded on total restructuring costs of $47.2 million in fiscal 2017. These income tax recoveries are based on the tax rate of the applicable tax jurisdictions.

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 2016, the Company finalized an Advance Pricing Arrangement ("APA") with the IRS and the Canada Revenue Agency ("CRA"). This agreement determined the amount of income which is taxable in each respective jurisdiction.

The final terms of the arrangement resulted in an increased amount of income tax recoverable in the United States compared to the previous benefit that was considered more likely than not to be realized upon finalization of the APA. This resulted in the recognition of a further net income tax recovery of $10.7 million in the year ended fiscal 2016.

In accordance with the terms of the APA, the adjustments necessary to reflect the reduction in pre-tax income in the United States for fiscal 2011 to fiscal 2015 were recorded by way of a cumulative catchup reduction in pre-tax income in fiscal 2016. This resulted in a decrease in domestic income (loss) before income tax expense of $129.9 million and a corresponding increase in foreign income before income tax expense in the year ended January 29, 2017.

During fiscal 2016, the Company recorded a net interest expense related to the APA of $1.7 million. This represented accrued interest on the Canadian income tax payable related to the APA. The APA resulted in an increase in income tax payable in Canada. The interest costs were recognized in other income (expense), net.

There were no significant adjustments related to the APA in fiscal 2017 or fiscal 2018.

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

		Fiscal Year Ended
		February 3, 2019			January 28, 2018			January 29, 2017
		(Percentages)
Federal income tax at statutory rate		21.0	%		33.9	%		35.0	%
Foreign tax rate differentials		4.7			(5.9	)		(7.0	)
U.S. state taxes		0.9			1.5			1.6
Non-deductible compensation expense		0.8			0.9			0.6
Permanent and other		0.6			0.5			0.5
U.S. tax reform		1.1			12.9			—
Tax on repatriation of foreign earnings		3.3			—			—
Transfer pricing adjustments, net		—			—			(2.5	)
Effective tax rate		32.4	%		43.8	%		28.2	%

The Company's U.S. federal income tax rate of 33.9% for the year ended January 28, 2018 is a blended rate that includes the rate decrease which became effective on January 1, 2018.

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 February 3, 2019 and January 28, 2018 are presented below:

		February 3, 2019				January 28, 2018
		(In thousands)
Deferred income tax assets:
Net operating loss carryforwards		$	3,163			$	37,436
Inventories		8,684				4,691
Deferred lease liabilities		8,206				7,956
Tenant inducements		10,444				7,386
Stock-based compensation		2,440				740
Accrued bonuses		3,265				—
Unredeemed gift card liability		5,015				515
Foreign tax credits		—				877
Other		4,813				4,794
Deferred income tax assets		46,030				64,395
Valuation allowance		(507		)		(1,843		)
Deferred income tax assets, net of valuation allowance		$	45,523			$	62,552
Deferred income tax liabilities:
Property and equipment, net		$	(33,055	)		$	(30,429	)
Other		(168		)		(968		)
Deferred income tax liabilities		(33,223		)		(31,397		)
Net deferred income tax assets		$	12,300			$	31,155
Balance sheet classification:
Deferred income tax assets		$	26,549			$	32,491
Deferred income tax liabilities		(14,249		)		(1,336		)
Net deferred income tax assets		$	12,300			$	31,155

As of February 3, 2019, the Company had net operating loss carryforwards of $21.2 million. The majority of the net operating loss carryforwards expire, if unused, between fiscal 2030 and fiscal 2034.

The Company files income tax returns in the U.S., Canada, and various foreign, state, and provincial jurisdictions. The 2013 to 2018 tax years remain subject to examination by the U.S. federal and state tax authorities. The 2012 tax year is still open for certain state tax authorities. The 2010 to 2018 tax years remain subject to examination by Canadian tax authorities. The 2011 to 2018 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.

NOTE 15. EARNINGS PER SHARE

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

		Fiscal Year Ended
		February 3, 2019				January 28, 2018				January 29, 2017
		(In thousands, except per share amounts)
Net income		$	483,801			$	258,662			$	303,381
Basic weighted-average number of shares outstanding		133,413				135,988				137,086
Assumed conversion of dilutive stock options and awards		558				210				216
Diluted weighted-average number of shares outstanding		133,971				136,198				137,302
Basic earnings per share		$	3.63			$	1.90			$	2.21
Diluted earnings per share		$	3.61			$	1.90			$	2.21

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 February 3, 2019, January 28, 2018, and January 29, 2017, 32.2 thousand, 0.1 million, and 0.1 million 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 $450.0 million. This stock repurchase program was completed during the second quarter of fiscal 2016. On December 1, 2016, the Company's board of directors approved a program to repurchase shares of the Company's common stock up to an aggregate value of $100.0 million. This stock repurchase program was completed during the third quarter of fiscal 2017.

On November 29, 2017, the Company's board of directors approved a stock repurchase program for up to $200.0 million and on June 6, 2018, the board of directors approved an increase to this stock repurchase program, authorizing the repurchase of up to a total of $600.0 million of the Company's common shares. On January 31, 2019, the Company's board of directors approved an additional stock repurchase program for up to $500.0 million of the Company's common shares on the open market or in privately negotiated transactions. Common shares repurchased on the open market are at prevailing market prices, including under plans complying with the provisions of Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934. The timing and actual number of common shares to be repurchased will depend upon market conditions, eligibility to trade, and other factors, in accordance with Securities and Exchange Commission requirements, and the repurchase program is expected to be completed by January 2021. As of February 3, 2019, the remaining aggregate value of shares available to be repurchased under these programs was $500.7 million.

During the fiscal years ended February 3, 2019, January 28, 2018, and January 29, 2017, 4.9 million, 1.9 million, and 0.5 million shares, respectively, were repurchased under the programs at a total cost of $598.3 million, $100.3 million, and $29.3 million, respectively.

Subsequent to February 3, 2019, and up to March 21, 2019, no shares were repurchased.

NOTE 16. COMMITMENTS AND CONTINGENCIES

Commitments

Leases. The Company has obligations under operating leases for its store and other retail locations, distribution centers, offices, and equipment. As of February 3, 2019, 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. The majority 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.

Total rent expense for the years ended February 3, 2019, January 28, 2018, and January 29, 2017 was $198.0 million, $167.3 million, and $147.4 million, respectively, under operating lease agreements, consisting of minimum rent expense of

$161.8 million, $135.9 million, and $119.0 million, respectively, common area expenses of $23.3 million, $20.0 million, and $18.0 million, respectively, and rent contingent on sales of $12.9 million, $11.4 million, and $10.4 million, respectively.

License and supply arrangements. The Company has entered into license and supply arrangements with partners in the Middle East and Mexico which grant them the right to operate lululemon branded retail locations in the United Arab Emirates, Kuwait, Qatar, Oman, Bahrain, and Mexico. The Company retains the rights to sell lululemon products through its e-commerce websites in these countries. Under these arrangements, the Company supplies the partners with lululemon products, training, and other support. The initial term of the agreement for the Middle East expires in January 2020, and the initial term of the agreement for Mexico expires in November 2026. As of February 3, 2019, there were three licensed retail locations in Mexico, three in the United Arab Emirates, and one in Qatar.

One-time transition tax. As outlined in Note 14 of these consolidated financial statements, U.S. tax reform imposed a mandatory transition tax on accumulated foreign subsidiary earnings which have not previously been subject to U.S. income tax. The one-time transition tax is payable over eight years beginning in fiscal 2018. The Company recognized a provisional income tax expense of $58.9 million in fiscal 2017 and an additional expense of $7.5 million during fiscal 2018 for the mandatory transition tax. The one-time transition tax payable is net of foreign tax credits, and the table below outlines the expected payments due by fiscal year.

The following table summarizes the Company's contractual arrangements as of February 3, 2019, and the timing and effect that such commitments are expected to have on its liquidity and cash flows in future periods:

		Payments Due by Fiscal Year
		Total				2019				2020				2021				2022				2023				Thereafter
		(In thousands)
Operating leases (minimum rent)		$	783,913			$	169,822			$	147,541			$	123,032			$	99,471			$	73,213			$	170,834
One-time transition tax payable		46,108				4,009				4,009				4,009				4,009				7,518				22,554

Contingencies

Legal proceedings. In addition to the legal proceedings described below, the Company is, from time to time, involved in routine legal matters, and audits and inspections by governmental agencies and other third parties which are incidental to the conduct of its business. This includes legal matters such as initiation and defense of proceedings to protect intellectual property rights, personal injury claims, product liability claims, employment claims, and similar matters. The Company believes the ultimate resolution of any such legal proceedings, audits, and inspections will not have a material adverse effect on its consolidated balance sheets, results of operations or cash flows.

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 moved 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.

On November 21, 2018, plaintiff David Shabbouei filed in the Delaware Court of Chancery a derivative lawsuit on behalf of lululemon against certain of our current and former directors and officers, captioned David Shabbouei v. Laurent Potdevin, et al., 2018-0847-JRS. Plaintiff claims that the defendants breached their fiduciary duties to lululemon by allegedly failing to address alleged sexual harassment, gender discrimination, and related conduct at lululemon. Plaintiff also claims that the defendants breached their fiduciary duties to lululemon and wasted corporate assets with respect to the separation agreement entered into by lululemon and Laurent Potdevin in connection with his departure from lululemon in February 2018. Plaintiff also further brings an unjust enrichment claim against Mr. Potdevin with respect to the separation agreement. Plaintiff seeks unspecified money damages for lululemon for the defendants' alleged breaches of fiduciary duty, waste and unjust enrichment, disgorgement of all profits, benefits and other compensation Mr. Potdevin received as a result of defendants' alleged conduct for lululemon, an order directing lululemon to implement corporate governance and internal procedures, and an award of plaintiff's attorneys' fees, costs and expenses. The defendants and lululemon have moved to dismiss the action.

NOTE 17. 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
		February 3, 2019				January 28, 2018				January 29, 2017
		(In thousands)
Payments to related parties:
Lease costs for one company-operated store		$	124			$	138			$	108
Consulting fees		—				—				167

The Company's founder, who was a beneficial owner of more than 10% of the Company's total outstanding shares during fiscal 2018, 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; the agreements related to this were not renewed beginning in fiscal 2017.

NOTE 18. SUPPLEMENTAL CASH FLOW INFORMATION

		Fiscal Year Ended
		February 3, 2019				January 28, 2018				January 29, 2017
		(In thousands)
Cash paid for income taxes		$	177,040			$	137,826			$	132,422
Interest paid		1,394				8				5,178

NOTE 19. SEGMENTED INFORMATION AND DISAGGREGATED NET REVENUE

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 and mobile apps. Outlets, temporary locations, sales to wholesale accounts, showrooms, license and supply arrangements, and warehouse sale net revenue have been combined into other. During the first quarter of fiscal 2018, the Company reviewed its general corporate expenses and determined certain costs which were previously classified as general corporate expense are more appropriately classified within the direct to consumer segment. Accordingly, comparative figures have been reclassified to conform to the financial presentation adopted for the current year.

		Fiscal Year Ended
		February 3, 2019				January 28, 2018				January 29, 2017
		(In thousands)
Net revenue:
Company-operated stores		$	2,126,363			$	1,837,065			$	1,704,357
Direct to consumer		858,856				577,590				453,287
Other		303,100				234,526				186,748
		$	3,288,319			$	2,649,181			$	2,344,392
Segmented income from operations:
Company-operated stores		$	575,536			$	464,321			$	415,635
Direct to consumer		354,107				224,076				179,995
Other		62,558				35,580				22,312
		992,201				723,977				617,942
General corporate expenses		286,365				220,753				196,790
Restructuring and related costs		—				47,223				—
Income from operations		705,836				456,001				421,152
Other income (expense), net		9,414				3,997				1,577
Income before income tax expense		$	715,250			$	459,998			$	422,729
Capital expenditures:
Company-operated stores		$	129,155			$	80,240			$	75,304
Direct to consumer		6,420				19,928				11,461
Corporate and other		90,232				57,696				62,746
		$	225,807			$	157,864			$	149,511
Depreciation and amortization:
Company-operated stores		$	76,303			$	64,870			$	59,585
Direct to consumer		10,018				12,997				7,015
Corporate and other		36,163				30,368				21,097
		$	122,484			$	108,235			$	87,697

The accelerated depreciation related to the restructuring of the ivivva operations is included in corporate and other in the above breakdown of depreciation and amortization.

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

The following table disaggregates the Company's net revenue by geographic area for the years ended February 3, 2019, January 28, 2018, and January 29, 2017. The economic conditions in these areas could affect the amount and timing of the Company's net revenue and cash flows.

		Fiscal Year Ended
		February 3, 2019				January 28, 2018				January 29, 2017
		(In thousands)
United States		$	2,363,374			$	1,911,763			$	1,726,076
Canada		565,105				491,779				447,167
Outside of North America		359,840				245,639				171,149
		$	3,288,319			$	2,649,181			$	2,344,392

Property and equipment, net by geographic area as of February 3, 2019 and January 28, 2018 were as follows:

		February 3, 2019				January 28, 2018
		(In thousands)
United States		$	217,874			$	161,699
Canada		303,061				271,441
Outside of North America		46,302				40,502
		$	567,237			$	473,642

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

NOTE 20. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following tables present the Company's unaudited quarterly results of operations and comprehensive income for each of the quarters in the fiscal years ended February 3, 2019 and January 28, 2018. The following tables should be read in conjunction with the Company's audited consolidated financial statements and related notes. 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 2018																Fiscal 2017
		Fourth Quarter				Third Quarter				Second Quarter				First Quarter				Fourth Quarter				Third Quarter				Second Quarter				First Quarter
		(Unaudited; Amounts in thousands, except per share amounts)
Net revenue		$	1,167,458			$	747,655			$	723,500			$	649,706			$	928,802			$	619,018			$	581,054			$	520,307
Cost of goods sold		498,875				340,878				327,306				304,973				406,291				297,056				283,632				263,412
Gross profit		668,583				406,777				396,194				344,733				522,511				321,962				297,422				256,895
Selling, general and administrative expenses		337,163				270,874				261,986				240,428				264,232				215,367				225,524				199,141
Asset impairment and restructuring costs		—				—				—				—				2,001				21,007				3,186				12,331
Income from operations		331,420				135,903				134,208				104,305				256,278				85,588				68,712				45,423
Other income (expense), net		2,861				2,044				1,591				2,918				1,226				1,052				812				907
Income before income tax expense		334,281				137,947				135,799				107,223				257,504				86,640				69,524				46,330
Income tax expense		115,816				43,534				40,029				32,070				137,743				27,696				20,813				15,084
Net income		$	218,465			$	94,413			$	95,770			$	75,153			$	119,761			$	58,944			$	48,711			$	31,246
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment		(5,346		)		(7,318		)		(18,249		)		(42,972		)		48,516				(31,018		)		72,854				(31,775		)
Comprehensive income		$	213,119			$	87,095			$	77,521			$	32,181			$	168,277			$	27,926			$	121,565			$	(529	)
Basic earnings per share		$	1.66			$	0.71			$	0.71			$	0.55			$	0.88			$	0.44			$	0.36			$	0.23
Diluted earnings per share		$	1.65			$	0.71			$	0.71			$	0.55			$	0.88			$	0.43			$	0.36			$	0.23

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.