UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(mark one)
þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 28, 2017.29, 2022.
OR
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to             
Commission file number: 001-35600
Five Below, Inc.
(Exact name of Registrant as Specified in its Charter)
Pennsylvania75-3000378
(State or Other Jurisdiction of
Incorporation or Organization)		(I.R.S. Employer
Identification No.)
Pennsylvania701 Market Street75-3000378
(State or Other Jurisdiction of
Incorporation or Organization)
Suite 300
(I.R.S. Employer
Identification No.)
Philadelphia
1818 Market Street, Suite 2000Pennsylvania19106
Philadelphia, PA19103
(Address of Principal Executive Offices)(Zip Code)

(215) 546-7909
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stockFIVENASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý☒    No  ¨☐


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý☒    No  ¨☐


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large���large accelerated filer,” “accelerated filer” andfiler,” “smaller reporting company”company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):




Large accelerated filer☒Accelerated filer☐
Large accelerated filerýAccelerated filer¨
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
☐		Smaller reporting company¨☐
Emerging growth company¨☐


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨☐    No  ý☒
The number of shares of the registrant’s common stock, $0.01 par value, outstanding as of November 30, 20172022 was 55,235,141.

55,513,690.




INDEX
INDEX
Page
Item 1.
4
4
5
6
78
89
Item 2.
1518
Item 3.
2427
Item 4.
2528
Item 1.
2629
Item 1A.
2730
Item 2.
2730
Item 3.
2730
Item 4.
2730
Item 5.
2730
Item 6.
2831









3



PART I - FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS


FIVE BELOW, INC.
Consolidated Balance Sheets
(Unaudited)
(in thousands, except share and per share data)
October 28, 2017 January 28, 2017 October 29, 2016October 29, 2022January 29, 2022October 30, 2021
Assets     Assets
Current assets:     Current assets:
Cash and cash equivalents$54,917
 $76,088
 $53,537
Cash and cash equivalents$44,229 $64,973 $86,753 
Short-term investment securities56,678
 77,791
 9,912
Short-term investment securities72,722 277,141 224,563 
Inventories271,685
 154,448
 228,175
Inventories701,561 455,104 521,107 
Prepaid income taxes4,891
 1,552
 5,789
Prepaid income taxes and tax receivablePrepaid income taxes and tax receivable25,389 11,325 24,013 
Prepaid expenses and other current assets41,894
 29,910
 33,200
Prepaid expenses and other current assets113,147 96,196 77,480 
Total current assets430,065
 339,789
 330,613
Total current assets957,048 904,739 933,916 
Property and equipment, net of accumulated depreciation and amortization of $123,248, $100,200 and $93,312, respectively.177,903
 138,376
 135,939
Deferred income taxes10,512
 11,039
 9,045
Property and equipment, net of accumulated depreciation and amortization of $439,890, $363,254, and $340,637, respectively.Property and equipment, net of accumulated depreciation and amortization of $439,890, $363,254, and $340,637, respectively.880,469 777,497 728,319 
Operating lease assetsOperating lease assets1,312,437 1,151,395 1,151,632 
Long-term investment securities23,177
 10,514
 —
Long-term investment securities— 37,717 — 
Other assets1,659
 818
 1,312
Other assets13,761 9,112 9,585 

$643,316
 $500,536
 $476,909
$3,163,715 $2,880,460 $2,823,452 

     
Liabilities and Shareholders’ Equity     Liabilities and Shareholders’ Equity
Current liabilities:     Current liabilities:
Line of credit$—
 $—
 $—
Line of credit$— $— $— 
Accounts payable124,187
 51,178
 104,684
Accounts payable279,836 196,461 253,817 
Income taxes payable55
 23,939
 126
Income taxes payable— 28,096 811 
Accrued salaries and wages14,770
 10,794
 8,677
Accrued salaries and wages14,140 53,539 28,697 
Other accrued expenses55,154
 30,652
 32,051
Other accrued expenses152,260 145,268 167,468 
Operating lease liabilitiesOperating lease liabilities193,614 163,537 162,809 
Total current liabilities194,166
 116,563
 145,538
Total current liabilities639,850 586,901 613,602 
Deferred rent and other67,839
 52,568
 53,220
Other long-term liabilitiesOther long-term liabilities4,307 1,663 1,536 
Long-term operating lease liabilitiesLong-term operating lease liabilities1,293,692 1,135,456 1,137,658 
Deferred income taxesDeferred income taxes41,378 36,156 37,407 
Total liabilities262,005
 169,131
 198,758
Total liabilities1,979,227 1,760,176 1,790,203 
Commitments and contingencies (note 4)

 

 

Commitments and contingencies (note 6)Commitments and contingencies (note 6)
Shareholders’ equity:
     Shareholders’ equity:
Common stock, $0.01 par value. Authorized 120,000,000 shares; issued and outstanding 55,235,031, 54,904,954 and 54,879,306 shares, respectively.552
 549
 549
Common stock, $0.01 par value. Authorized 120,000,000 shares; issued and outstanding 55,512,425, 55,662,400, and 56,025,753 shares, respectively.Common stock, $0.01 par value. Authorized 120,000,000 shares; issued and outstanding 55,512,425, 55,662,400, and 56,025,753 shares, respectively.555 556 560 
Additional paid-in capital336,432
 321,603
 318,137
Additional paid-in capital254,663 280,666 333,823 
Retained earnings (accumulated deficit)44,327
 9,253
 (40,535)
Retained earningsRetained earnings929,270 839,062 698,866 
Total shareholders’ equity381,311
 331,405
 278,151
Total shareholders’ equity1,184,488 1,120,284 1,033,249 
$643,316
 $500,536
 $476,909
$3,163,715 $2,880,460 $2,823,452 
See accompanying notes to consolidated financial statements.


4




FIVE BELOW, INC.
Consolidated Statements of Operations
(Unaudited)
(in thousands, except share and per share data)
Thirteen Weeks Ended Thirty-Nine Weeks Ended Thirteen Weeks EndedThirty-Nine Weeks Ended
October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016October 29, 2022October 30, 2021October 29, 2022October 30, 2021
Net sales$257,175
 $199,475
 $773,376
 $612,320
Net sales$645,034 $607,645 $1,953,557 $1,852,022 
Cost of goods sold173,544
 135,472
 517,453
 414,700
Cost of goods sold437,226 405,283 1,310,463 1,218,472 
Gross profit83,631
 64,003
 255,923
 197,620
Gross profit207,808 202,362 643,094 633,550 
Selling, general and administrative expenses68,818
 55,372
 202,027
 162,523
Selling, general and administrative expenses186,874 159,913 523,820 441,246 
Operating income14,813
 8,631
 53,896
 35,097
Operating income20,934 42,449 119,274 192,304 
Interest income, net334
 64
 902
 211
Interest income (expense) and other income (expense), netInterest income (expense) and other income (expense), net483 (10,624)341 (12,672)
Income before income taxes15,147
 8,695
 54,798
 35,308
Income before income taxes21,417 31,825 119,615 179,632 
Income tax expense5,268
 3,248
 19,724
 13,256
Income tax expense5,271 7,648 29,407 41,018 
Net income$9,879
 $5,447
 $35,074
 $22,052
Net income$16,146 $24,177 $90,208 $138,614 
Basic income per common share$0.18
 $0.10
 $0.64
 $0.40
Basic income per common share$0.29 $0.43 $1.62 $2.48 
Diluted income per common share$0.18
 $0.10
 $0.63
 $0.40
Diluted income per common share$0.29 $0.43 $1.62 $2.46 
Weighted average shares outstanding:       Weighted average shares outstanding:
Basic shares55,215,850
 54,871,172
 55,148,316
 54,809,768
Basic shares55,509,525 56,023,961 55,551,382 56,001,437 
Diluted shares55,608,035
 55,170,686
 55,493,452
 55,100,534
Diluted shares55,683,609 56,340,635 55,720,792 56,305,456 
See accompanying notes to consolidated financial statements.

5




FIVE BELOW, INC.
Consolidated StatementStatements of Shareholders’ Equity
(Unaudited)
(in thousands, except share data)

Common stockAdditional
paid-in capital		Retained earningsTotal
shareholders’ equity
SharesAmount
Balance, January 29, 202255,662,400 $556 $280,666 $839,062 $1,120,284 
Share-based compensation expense— — 5,857 — 5,857 
Issuance of unrestricted stock awards718 — 117 — 117 
Exercise of options to purchase common stock2,402 — 79 — 79 
Vesting of restricted stock units and performance-based restricted stock units99,124 1 — — 1 
Common shares withheld for taxes(26,151)— (4,107)— (4,107)
Repurchase and retirement of common stock(247,132)(2)(40,005)— (40,007)
Net Income— — — 32,718 32,718 
Balance, April 30, 202255,491,361 $555 $242,607 $871,780 $1,114,942 
Share-based compensation expense— — 6,007 — 6,007 
Issuance of unrestricted stock awards864 — 116 — 116 
Exercise of options to purchase common stock550 — 22 — 22 
Vesting of restricted stock units and performance-based restricted stock units13,625 — — — — 
Common shares withheld for taxes(2,681)— (314)— (314)
Issuance of common stock to employees under employee stock purchase plan4,212 — 464 — 464 
Net Income— — — 41,344 41,344 
Balance, July 30, 202255,507,931 $555 $248,902 $913,124 $1,162,581 
Share-based compensation expense— — 5,802 — 5,802 
Issuance of unrestricted stock awards1,079 — 158 — 158 
Exercise of options to purchase common stock260 — 9 — 9 
Vesting of restricted stock units and performance-based restricted stock units4,703 — — — — 
Common shares withheld for taxes(1,548)— (208)— (208)
Net Income— — — 16,146 16,146 
Balance, October 29, 202255,512,425 $555 $254,663 $929,270 $1,184,488 



6
   Common stock 
Additional
paid-in capital
 Retained earnings 
Total
shareholders’ equity
 
 Shares Amount 
 Balance, January 28, 2017 54,904,954
 $549
 $321,603
 $9,253
 $331,405
 Share-based compensation expense —
 —
 11,785
 —
 11,785
 Issuance of unrestricted stock awards 3,472
 —
 176
 —
 176
 Exercise of options to purchase common stock 138,312
 1
 3,796
 —
 3,797
 Vesting of restricted stock units and performance-based restricted stock units 211,810
 2
 —
 —
 2
 Common shares withheld for taxes (26,117) —
 (1,063) —
 (1,063)
 Issuance of common stock to employees under employee stock purchase plan 2,600
 —
 135
 —
 135
 Net income —
 —
 —
 35,074
 35,074
 Balance, October 28, 2017 55,235,031
 $552
 $336,432
 $44,327
 $381,311





Common stockAdditional
paid-in capital		Retained earningsTotal
shareholders’ equity
SharesAmount
Balance, January 30, 202155,935,237 $559 $321,075 $560,252 $881,886 
Share-based compensation expense— — 5,695 — 5,695 
Issuance of unrestricted stock awards400 — 81 — 81 
Exercise of options to purchase common stock200 — 6 — 6 
Vesting of restricted stock units and performance-based restricted stock units92,914 1 — — 1 
Common shares withheld for taxes(34,682)— (6,623)— (6,623)
Net income— — — 49,596 49,596 
Balance, May 1, 202155,994,069 $560 $320,234 $609,848 $930,642 
Share-based compensation expense— — 6,457 — 6,457 
Issuance of unrestricted stock awards413 — 80 — 80 
Exercise of options to purchase common stock10,246 — 352 — 352 
Vesting of restricted stock units and performance-based restricted stock units17,339 — — — — 
Common shares withheld for taxes(1,879)— (355)— (355)
Issuance of common stock to employees under employee stock purchase plan2,090 — 443 — 443 
Net income— — — 64,841 64,841 
Balance, July 31, 202156,022,278 $560 $327,211 $674,689 $1,002,460 
Share-based compensation expense— — 6,707 — 6,707 
Issuance of unrestricted stock awards379 — 75 — 75 
Exercise of options to purchase common stock1,192 — 8 — 8 
Vesting of restricted stock units and performance-based restricted stock units2,834 — — — — 
Common shares withheld for taxes(930)— (178)— (178)
Net income— — — 24,177 24,177 
Balance, October 30, 202156,025,753 $560 $333,823 $698,866 $1,033,249 
See accompanying notes to consolidated financial statements.

7



FIVE BELOW, INC.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
 Thirty-Nine Weeks Ended
October 28, 2017 October 29, 2016
Operating activities:   
Net income$35,074
 $22,052
Adjustments to reconcile net income to net cash provided by (used in) operating activities:   
Depreciation and amortization24,193
 19,449
Share-based compensation expense11,977
 9,014
Deferred income tax expense (benefit)527
 (538)
Other non-cash expenses
67
 53
Changes in operating assets and liabilities:
 
Inventories(117,237) (79,805)
Prepaid income taxes(3,339) (4,448)
Prepaid expenses and other assets(12,865) (18,656)
Accounts payable69,933
 47,240
Income taxes payable(23,884) (11,816)
Accrued salaries and wages3,976
 1,016
Deferred rent12,799
 7,623
Other accrued expenses15,806
 5,946
Net cash provided by (used in) operating activities17,027
 (2,870)
Investing activities:  

Purchases of investment securities(124,406) (35,856)
Sales, maturities, and redemptions of investment securities132,855
 72,279
Capital expenditures(49,518) (35,714)
Net cash (used in) provided by investing activities(41,069) 709
Financing activities:  
Net proceeds from issuance of common stock135
 93
Proceeds from exercise of options to purchase common stock3,797
 2,736
Common shares withheld for taxes(1,063) (1,819)
Excess tax benefit related to exercises of stock options, vesting of restricted stock units, and vesting of performance-based restricted units—
 1,607
Other2
 —
Net cash provided by financing activities2,871
 2,617
Net (decrease) increase in cash and cash equivalents(21,171) 456
Cash and cash equivalents at beginning of period76,088
 53,081
Cash and cash equivalents at end of period$54,917
 $53,537
    
Supplemental disclosures of cash flow information:   
Non-cash investing activities   
Increase (decrease) in accrued purchases of property and equipment$11,266
 $(80)
 Thirty-Nine Weeks Ended
October 29, 2022October 30, 2021
Operating activities:
Net income$90,208 $138,614 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization76,698 62,598 
Share-based compensation expense18,117 19,154 
Deferred income tax expense5,222 8,496 
Other non-cash expenses364 530 
Changes in operating assets and liabilities:
Inventories(246,457)(239,840)
Prepaid income taxes and tax receivable(14,064)(17,663)
Prepaid expenses and other assets(21,787)(7,868)
Accounts payable79,046 115,589 
Income taxes payable(28,096)(1,214)
Accrued salaries and wages(39,399)(14,748)
Operating leases27,271 14,368 
Other accrued expenses7,895 46,649 
Net cash (used in) provided by operating activities(44,982)124,665 
Investing activities:
Purchases of investment securities and other investments(31,815)(285,429)
Sales, maturities, and redemptions of investment securities273,951 198,295 
Capital expenditures(173,589)(213,215)
Net cash provided by (used in) investing activities68,547 (300,349)
Financing activities:
Cash paid for Revolving Credit Facility financing costs(248)— 
Net proceeds from issuance of common stock464 443 
Repurchase and retirement of common stock(40,007)— 
Proceeds from exercise of options to purchase common stock and vesting of restricted and performance-based restricted stock units111 368 
Common shares withheld for taxes(4,629)(7,157)
Net cash used in financing activities(44,309)(6,346)
Net decrease in cash and cash equivalents(20,744)(182,030)
Cash and cash equivalents at beginning of period64,973 268,783 
Cash and cash equivalents at end of period$44,229 $86,753 
Supplemental disclosures of cash flow information:
Non-cash investing activities
Increase in accrued purchases of property and equipment$6,008 $12,350 
See accompanying notes to consolidated financial statements.
8
FIVE BELOW, INC.
Notes to Consolidated Financial Statements
(Unaudited)



(1) Summary of Significant Accounting Policies
(1)Summary of Significant Accounting Policies
(a)Nature of Business
(a)Description of Business
Five Below, Inc. (collectively referred to herein with its wholly owned subsidiary as the "Company") is a specialty value retailer offering merchandise targeted at the teentween and pre-teenteen demographic. The Company offers an edited assortment of products, with most priced at $5$5 and below. In August 2016, the Company commenced selling merchandise on the internet, through the Company's fivebelow.com e-commerce website.
The Company’s edited assortment of products includes select brands and licensed merchandise. The Company believes its merchandise is readily available, and that there are a number of potential vendors that could be utilized, if necessary, under approximately the same terms the Company is currently receiving; thus, it is not dependent on a single vendor or a group of vendors.
The Company is incorporated in the Commonwealth of Pennsylvania and, as of October 28, 2017,29, 2022, operated in 3242 states that include Pennsylvania, New Jersey, Delaware, Maryland, Virginia, Massachusetts, New Hampshire, West Virginia, North Carolina, New York, Connecticut, Rhode Island, Ohio, Illinois, Indiana, Michigan, Missouri, Georgia, Texas, Tennessee, Maine, Alabama, Kentucky, Kansas, Florida, South Carolina, Mississippi, Louisiana, Wisconsin, Oklahoma, Minnesota, California, Arkansas, Iowa, Nebraska, Arizona, Nevada, Colorado, Utah, New Mexico, North Dakota and California.South Dakota . As of October 28, 2017 and October 29, 2016,2022 and October 30, 2021, the Company operated 6251,292 stores and 5171,173 stores, respectively, each operating under the name “Five Below.Below,” and sold merchandise on the internet, through the Company's fivebelow.com e-commerce website as well as with an on demand third party delivery service to enable our customers to shop online and receive convenient same day delivery.
(b)Fiscal Year
(b)Fiscal Year
The Company operates on a 52/53-week fiscal year ending on the Saturday closest to January 31. References to "fiscal year 2017"2022" or "fiscal 2017"2022" refer to the period from January 29, 201730, 2022 to February 3, 2018 and consists ofJanuary 28, 2023, which is a 53-week52-week fiscal year. References to "fiscal year 2016"2021" or "fiscal 2016"2021" refer to the period from January 31, 20162021 to January 28, 2017 and consists of29, 2022, which is a 52-week fiscal year. The fiscal quarters ended October 28, 201729, 2022 and October 29, 201630, 2021 refer to the thirteen weeks ended as of those dates. The year-to-date periods ended October 28, 201729, 2022 and October 29, 201630, 2021 refer to the thirty-nine weeks ended as of those dates.
(c)Basis of Presentation
The consolidated balance sheets as of October 28, 201729, 2022 and October 29, 2016,30, 2021, the consolidated statements of operations for the thirteen and thirty-nine weeks ended October 28, 201729, 2022 and October 29, 2016,30, 2021, the consolidated statementstatements of shareholders’ equity for the thirteen and thirty-nine weeks ended October 28, 201729, 2022 and October 30, 2021 and the consolidated statements of cash flows for the thirty-nine weeks ended October 28, 201729, 2022 and October 29, 201630, 2021 have been prepared by the Company in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim reporting and are unaudited. In the opinion of management, the aforementioned financial statements include all known adjustments (which consist primarily of normal, recurring accruals, estimates and assumptions that impact the financial statements) necessary to present fairly the financial position at the balance sheet dates and the results of operations and cash flows for the periods ended October 28, 201729, 2022 and October 29, 2016.30, 2021. The balance sheet as of January 28, 2017,29, 2022, presented herein, has been derived from the audited balance sheet included in the Company's Annual Report on Form 10-K for fiscal 20162021 as filed with the Securities and Exchange Commission on March 23, 201730, 2022 and referred to herein as the “Annual Report,” but does not include all annual disclosures required by U.S. GAAP. These consolidated financial statements should be read in conjunction with the consolidated financial statements for the fiscal year ended January 28, 201729, 2022 and footnotes thereto included in the Annual Report. The consolidated results of operations for the thirteen and thirty-nine weeks ended October 28, 201729, 2022 and October 29, 201630, 2021 are not necessarily indicative of the consolidated operating results for the year ending February 3, 2018January 28, 2023 or any other period. The Company's business is seasonal and as a result, the Company's net sales fluctuate from quarter to quarter. Net sales are usually highest in the fourth fiscal quarter due to the year-end holiday season.

(d)Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, "Revenue from Contracts with Customers." ASU 2014-09 clarifies the principles for recognizing revenue from contracts with customers. The update outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. In August 2015,March 2020, the FASB issued ASU 2015-14, "Revenue from Contracts with Customers: Deferral2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effective Date." Effects of Reference Rate Reform on Financial Reporting" ("ASU 2015-14 deferred2020-04"). The pronouncement provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. The guidance was effective date of ASU 2014-09upon issuance and may be applied prospectively to fiscal years beginning aftercontract modifications made and hedging relationships entered into or evaluated on or before December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for annual reporting periods beginning after December 15, 2016, including interim periods within those annual periods. In the first six months of fiscal 2016, the FASB issued guidance clarifying the interpretation of certain principles of ASU 2014-09. On the effective date, the31, 2022. The Company may use either a full retrospective approach or a modified retrospective approach to adopt ASU 2014-09. While the Company is currently evaluatingdetermined that the impact of thisthe adoption of ASU it is not expected to materially2020-04 will have an immaterial impact ouron its consolidated financial statements. Other areas which could be impacted, including the recognition of gift card breakage income, may be identified as the Company continues its evaluation of the ASU.
In February 2016, the FASB issued ASU 2016-02, “Leases.” ASU 2016-02 requires that lease arrangements longer than 12 months result in an entity recognizing an asset and a liability. The updated guidance is effective for interim and annual periods beginning after December 15, 2018, and early adoption is permitted. The standard requires use of the modified retrospective transition approach. While the Company is currently evaluating this standard, given the significant amount of leases the Company is party to, the Company expects this standard will have a significant impact on the Company's consolidated financial statements from the recognition of right of use assets and related liabilities. The Company plans to adopt this standard in the first quarter of fiscal 2019, coinciding with the standard’s effective date.
9
In March 2016, the FASB issued ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting." ASU 2016-09 affects all entities that issue share-based payment awards to their employees. This accounting standards update makes several modifications to the accounting for employee share-based payment transactions, including the requirement that the excess income tax benefits or deficiencies that arise when the tax consequences of share-based compensation differ from amounts previously recognized in the consolidated statement of operations be recognized as income tax benefit or expense in the consolidated statement of operations rather than as additional paid-in capital in the consolidated balance sheets. The guidance also clarifies the classification of components of share-based awards on the consolidated statement of cash flows such that excess income tax benefits should not be presented separately from other income taxes in the consolidated statement of cash flows and, thus, should be classified as an operating activity rather than a financing activity as they are under the current guidance. ASU 2016-09 is effective for financial statements issued for annual reporting periods beginning after December 15, 2016 and interim periods within those years. The Company adopted this standard prospectively in the first quarter of fiscal 2017. This standard will result in a decrease or increase to the Company's effective tax rate, net income, and earnings per share based upon the requirement to recognize the excess income tax benefits or deficiencies in the consolidated statements of operations and change the Company's earnings per share calculation to exclude excess tax benefits previously assumed under the treasury stock method. No changes were required related to the classification of employee taxes paid for withheld shares in the Company's consolidated statements of cash flows since the Company has historically classified these within financing cash flows.

(e)Use of Estimates
The preparation of the consolidated financial statements requires management of the Company to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, valuation allowancesnet realizable value for inventories, income taxes, and share-based compensation expense.expense, the incremental borrowing rate utilized in operating lease liabilities, equity method investments and notes receivable.
(f)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. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation at the measurement date:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Inputs, other than Level 1, that are either directly or indirectly observable.
Level 3: Unobservable inputs developed using the Company’s estimates and assumptions which reflect those that market participants would use.
The classification of fair value measurements within the hierarchy isare based upon the lowest level of input that is significant to the measurement.

The Company’s financial instruments consist primarily of cash equivalents, short-term and long-term investment securities, accounts payable, and borrowings, if any, under a line of credit.credit, equity method investments and notes receivable. The Company believes that: (1) the carrying value of cash equivalents and accounts payable are representative of their respective fair value due to the short-term nature of these instruments; and (2) the carrying value of the borrowings, if any, under the line of credit approximates fair value because the line of credit’s interest rates vary with market interest rates. Under the fair value hierarchy, the fair market values of the short-termcash equivalents and long-termthe investments in corporate bonds are levelLevel 1 while the short-term and long-term investments in certificates of deposits and municipalsmunicipal bonds are levelLevel 2. The fair market values of levelLevel 2 instruments are determined by management with the assistance of a third partythird-party pricing service. Since quoted prices in active markets for identical assets are not available, these prices are determined by the third partythird-party pricing service using observable market information such as quotes from less active markets and quoted prices of similar securities.
As of October 28, 2017,29, 2022, January 28, 2017,29, 2022 and October 29, 2016,30, 2021, the Company had cash equivalents of $16.7$21.7 million, $36.3$41.3 million and $35.8$60.8 million, respectively. The Company’s cash equivalents consist of cash management solutions, credit and debit card receivables, money market funds, certificates of deposit,corporate bonds and short-term municipal bonds and corporate bonds.with original maturities of 90 days or less. Fair value for cash equivalents was determined based on Level 1 inputs.
As of October 28, 2017,29, 2022, January 28, 2017,29, 2022 and October 29, 2016,30, 2021, the Company's short-term investment securities are classified as held-to-maturity since the Company has the intent and ability to hold the investments to maturity. Such securities are carried at amortized cost plus accrued interest and consist of the following (in thousands):
As of October 29, 2022
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Market Value
Short-term:
Corporate bonds$72,522 $— $813 $71,709 
Municipal bonds200 — — 200 
Total$72,722 $— $813 $71,909 
10

 As of October 28, 2017As of January 29, 2022
 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Market ValueAmortized CostGross Unrealized GainsGross Unrealized LossesFair Market Value
Short-term:        Short-term:
Corporate bonds $50,778
 $—
 $46
 $50,732
Corporate bonds$236,069 $— $286 $235,783 
Municipal bonds 5,900
 —
 —
 5,900
Municipal bonds41,072 — 44 41,028 
Total $56,678
 $—
 $46
 $56,632
Total$277,141 $— $330 $276,811 
        
Long-term:        Long-term:
Corporate bonds $23,177
 $—
 $98
 $23,079
Corporate bonds$37,717 $— $199 $37,518 
Total $23,177
 $—

$98

$23,079
Total$37,717 $— $199 $37,518 
  As of January 28, 2017
  Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Market Value
Short-term:        
Corporate bonds $45,558
 $—
 $98
 $45,460
Municipal bonds 32,233
 —
 14
 32,219
Total $77,791
 $—
 $112
 $77,679
         
Long-term:        
Corporate bonds $6,265
 $—
 $11
 $6,254
Municipal bonds 4,249
 8
 —
 4,257
Total $10,514
 $8
 $11
 $10,511

 As of October 29, 2016As of October 30, 2021
 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Market ValueAmortized CostGross Unrealized GainsGross Unrealized LossesFair Market Value
Short-term:        Short-term:
Corporate bonds $6,366
 $—
 $7
 $6,359
Corporate bonds$190,700 $6 $82 $190,624 
Municipal bonds 3,546
 
 1
 3,545
Municipal bonds33,863 — 11 33,852 
Total $9,912
 $—
 $8
 $9,904
Total$224,563 $6 $93 $224,476 
Short-term investment securities as of October 28, 2017,29, 2022, January 28, 2017,29, 2022 and October 29, 201630, 2021 all mature in one year or less. Long-term investment securities as of October 28, 2017 and January 28, 201729, 2022 all mature after one year but in less than three years.
(2)Income Per Common Share
(g)Prepaid Expenses and Other Current Assets
Prepaid expenses as of October 29, 2022, January 29, 2022 and October 30, 2021 were $27.6 million, $26.4 million, and $26.5 million, respectively. Other current assets as of October 29, 2022, January 29, 2022 and October 30, 2021 were $85.5 million, $69.8 million, and $51.0 million, respectively.
(h)Other Accrued Expenses
Other accrued expenses include accrued capital expenditures of $43.4 million, $41.7 million, and $42.0 million as of October 29, 2022, January 29, 2022 and October 30, 2021, respectively.
(i)Deferred Compensation
The Five Below, Inc. Nonqualified Deferred Compensation Plan (the "Deferred Comp Plan") and a related, irrevocable grantor trust (the "Trust") provides eligible key employees with the opportunity to elect to defer up to 80% of their eligible compensation. The Company may make discretionary contributions, at the discretion of the Board. Payments under the Deferred Comp Plan will be made from the general assets of the Company or from the assets of the Trust, funded by the Company. The related liability is recorded as deferred compensation and included in other long-term liabilities in the consolidated balance sheets.
(j)Equity Method Investments
The Company uses the equity method to account for its investments in which the Company is deemed to have the ability to exercise significant influence over an investee’s operating and financial policies or in which the Company holds a significant partnership or limited liability company interest. Equity method investments are initially recorded at cost in other assets in the consolidated balance sheets. The cost is adjusted to recognize the Company's proportionate share of the investee’s net income or loss after the date of investment and is also adjusted for any impairments resulting from other-than-temporary declines in fair value that is less than its carrying value. During the thirteen weeks ended October 30, 2021, the Company recorded an other-than-temporary impairment utilizing the market and cost approach considering historical and projected financial results to calculate fair value. Also related to this investment, management recorded a reserve against outstanding debt owed to the Company based on management's evaluation of collectability. The total amount of impairment and reserve was approximately $9.7 million and was recorded in interest income (expense) and other income (expense), net in the consolidated statements of operations.
11

(2)Revenue from Contracts with Customers
Revenue Transactions
Revenue from store operations is recognized at the point of sale when control of the product is transferred to the customer at such time. Internet sales, through the Company's fivebelow.com e-commerce website, are recognized when the customer receives the product as control transfers upon delivery. Returns subsequent to the period end are immaterial; accordingly, no significant reserve has been recorded. Gift card sales to customers are initially recorded as liabilities and recognized as sales upon redemption for merchandise or as breakage revenue in proportion to the pattern of redemption of the gift cards by the customer in net sales.
The transaction price for the Company’s sales is based on the item’s stated price. To the extent that the Company charges customers for shipping and handling on e-commerce sales, the Company records such amounts in net sales. Shipping and handling costs, which include fulfillment and shipping costs related to the Company's e-commerce operations, are included in costs of goods sold. As permitted by applicable accounting guidance, ASU 2014-09 "Revenue from Contracts with Customers," the Company has elected to exclude all sales taxes collected from customers and remitted to governmental authorities from net sales in the accompanying consolidated statements of operations.
Disaggregation of Revenue
The following table provides information about disaggregated revenue by groups of products: leisure, fashion and home, and party and snack (dollars in thousands):
Thirteen Weeks EndedThirteen Weeks Ended
October 29, 2022October 30, 2021
AmountPercentage of Net SalesAmountPercentage of Net Sales
Leisure$283,464 44.0 %$305,600 50.3 %
Fashion and home203,893 31.6 %192,472 31.7 %
Party and snack157,677 24.4 %109,573 18.0 %
Total$645,034 100.0 %$607,645 100.0 %
Thirty-Nine Weeks EndedThirty-Nine Weeks Ended
October 29, 2022October 30, 2021
AmountPercentage of Net SalesAmountPercentage of Net Sales
Leisure$895,018 45.8 %$930,890 50.3 %
Fashion and home576,430 29.5 %563,401 30.4 %
Party and snack482,109 24.7 %357,731 19.3 %
Total$1,953,557 100.0 %$1,852,022 100.0 %
(3) Leases
The Company determines if an arrangement contains a lease at the inception of a contract. Operating lease assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease.
During the thirteen weeks ended October 29, 2022, the Company committed to 28 new store leases with average terms of approximately 10 years that have future minimum lease payments of approximately $55.7 million.
All of the Company's leases are classified as operating leases and the associated assets and liabilities are presented as separate captions in the consolidated balance sheets. As of October 29, 2022 and October 30, 2021, the weighted average remaining lease term for the Company's operating leases was 7.7 years and 7.9 years, respectively, and the weighted average discount rate was 5.2% and 5.6%, respectively.
12

The following table is a summary of the Company's components for net lease costs (in thousands):
Thirteen Weeks EndedThirty-Nine Weeks Ended
Lease CostOctober 29, 2022October 30, 2021October 29, 2022October 30, 2021
Operating lease cost$59,401 $51,477 $171,080 $148,272 
Variable lease cost16,012 14,951 46,134 42,602 
Net lease cost*$75,413 $66,428 $217,214 $190,874 

* Excludes short-term lease cost, which is immaterial.


The following table summarizes the maturity of lease liabilities under operating leases as of October 29, 2022 (in thousands):
Maturity of Lease LiabilitiesOperating Leases
2022$64,372 
2023257,370 
2024249,342 
2025235,106 
2026219,633 
After 2026744,076 
Total lease payments1,769,899 
Less: imputed interest282,593 
Present value of lease liabilities$1,487,306 

The following table summarizes the supplemental cash flow disclosures related to leases (in thousands):
Thirty-Nine Weeks Ended
October 29, 2022October 30, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Cash payments arising from operating lease liabilities (1)
$154,840 $144,030 
Supplemental non-cash information:
Operating lease liabilities arising from obtaining right-of-use assets$274,097 $266,717 
(1) Included within operating activities in the Company's Consolidated Statements of Cash Flows.
(4) Income Per Common Share
Basic income per common share amounts are calculated using the weighted-averageweighted average number of common shares outstanding for the period. Diluted income per common share amounts are calculated using the weighted-averageweighted average number of common shares outstanding for the period and include the dilutive impact of exercise ofexercised stock options as well as assumed lapsevesting of restrictions on restricted stock awards and shares currently available for purchase under the Company's Employee Stock Purchase Plan, using the treasury stock method. Performance-based restricted stock units are considered contingently issuable shares for diluted income per common share purposes and the dilutive impact, if any, is not included in the weighted-averageweighted average shares until the performance conditions are met. The dilutive impact, if any, for performance-based restricted stock units, which are subject to market conditions based on the Company's total shareholder return relative to a pre-defined peer group, are included in the weighted average shares.
13

The following table reconciles net income and the weighted average common shares outstanding used in the computations of basic and diluted income per common share (in thousands, except for share and per share data):
Thirteen Weeks Ended Thirty-Nine Weeks EndedThirteen Weeks EndedThirty-Nine Weeks Ended
October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016 October 29, 2022October 30, 2021October 29, 2022October 30, 2021
Numerator:       Numerator:
Net income$9,879
 $5,447
 $35,074
 $22,052
Net income$16,146 $24,177 $90,208 $138,614 
Denominator:       Denominator:
Weighted average common shares outstanding - basic55,215,850
 54,871,172
 55,148,316
 54,809,768
Weighted average common shares outstanding - basic55,509,525 56,023,961 55,551,382 56,001,437 
Dilutive impact of options, restricted stock units and employee stock purchase plan392,185
 299,514
 345,136
 290,766
Dilutive impact of options, restricted stock units and employee stock purchase plan174,084 316,674 169,410 304,019 
Weighted average common shares outstanding - diluted55,608,035
 55,170,686
 55,493,452
 55,100,534
Weighted average common shares outstanding - diluted55,683,609 56,340,635 55,720,792 56,305,456 
Per common share:       Per common share:
Basic income per common share$0.18
 $0.10
 $0.64
 $0.40
Basic income per common share$0.29 $0.43 $1.62 $2.48 
Diluted income per common share$0.18
 $0.10
 $0.63
 $0.40
Diluted income per common share$0.29 $0.43 $1.62 $2.46 
The effects of the assumed exercisevesting of restricted stock optionsunits for 88,82554,833 shares of common stock for the thirty-ninethirteen weeks ended October 28, 201729, 2022 were excluded from the calculation of diluted net income per share, as their impact would have been anti-dilutive.
The effects of the assumed exercisevesting of restricted stock units for 17,76269 shares of common stock for the thirty-ninethirteen weeks ended October 28, 201730, 2021 were excluded from the calculation of diluted net income per share, as their impact would have been anti-dilutive.
The effects of the assumed exercisevesting of restricted stock optionsunits for 61,611 and 196,04287,225 shares of common stock for the thirteen weeks ended and thirty-nine weeks ended October 29, 2016, respectively,2022 were excluded from the calculation of diluted net income per share, as their impact would have been anti-dilutive.
The effects of the assumed exercisevesting of restricted stock units for 1,3767,775 shares of common stock for the thirty-nine weeks ended October 29, 201630, 2021 were excluded from the calculation of diluted net income per share, as their impact would have been anti-dilutive.

The aforementioned excluded shares do not reflect the impact of any incremental repurchases under the treasury stock method.
(3)Line of Credit
(5)Line of Credit
On May 10, 2017,September 16, 2022, the Company entered into a FourthSecond Amendment to Credit Agreement (the "Second Amendment") which amended the Fifth Amended and Restated LoanCredit Agreement, dated as of April 24, 2020, as previously amended by that certain First Amendment to Credit Agreement, dated as of January 27, 2021 (the "First Amendment"; the Fifth Amended and SecurityRestated Credit Agreement (the “Amended Loanas amended by the First Amendment and Securitythe Second Amendment, the “Credit Agreement”), among the Company, Five Below Merchandising,1616 Holdings, Inc. and Wells Fargo Bank, National Association. The Amended Loan and Security Agreement amends and restates the Third Amended and Restated Loan and Security Agreement, dated June 12, 2013, among, a wholly-owned subsidiary of the Company Five Below Merchandising, Inc.("1616 Holdings" and together with the Company, the "Loan Parties"), Wells Fargo Bank, National Association which governed the Revolving Credit Facility.as administrative agent (the "Agent"), and other lenders party thereto (the "Lenders").
The Amended Loan and SecurityCredit Agreement includesprovides for a secured asset-based revolving line of credit in the amount of up to $20.0$225.0 million (the “Amended Revolving"Revolving Credit Facility”Facility"). Pursuant to the Amended Loan and Security Agreement, advancesAdvances under the Amended Revolving Credit Facility are no longer tied to a borrowing base; however,base consisting of eligible credit card receivables and inventory, as reduced by certain reserves in effect from time to time. Pursuant to the Company is requiredCredit Agreement, inventory appraisals and certain other diligence items are deferred, with reduced advance rates during the period that such appraisals have not been delivered. Pursuant to maintain eligible inventory at all times in an amount equal to at least $100.0 million. The Amendedthe Second Amendment, the Revolving Credit Facility expires on the earliest to occur of (i) May 10, 2022September 16, 2027 or (ii) an event of default.
The AmendedSecond Amendment also replaced the existing LIBOR rate provisions with SOFR rate provisions which converted then outstanding LIBOR loans into SOFR loans and additionally makes a number of other revisions to other provisions of the Credit Agreement. Giving effect to the Second Amendment, outstanding borrowings under the Revolving Credit Facility would accrue interest at floating rates plus an applicable margin ranging from 1.12% to 1.50% for SOFR loans and 0.125% to 0.50% for base rate loans, and letter of credit fees range from 1.125% to 1.50%, in each case based on the average availability under the Revolving Credit Facility.
14

The Revolving Credit Facility may be increased up to $150.0 million, subject to certain conditions, including obtaining commitments from one or more Lenders (the "Accordion"). Pursuant to the First Amendment, the Company obtained commitments from the Lenders that would allow the Company at its election (subject only to satisfaction of certain customary conditions such as the absence of any Event of Default), to increase the amount of the Revolving Credit Facility by an aggregate principal amount up to $50.0 million subject to certain conditions.within the Accordion (the "Committed Increase"). The Amendedentire amount of the Revolving Credit Facility also includes a $20.0 million sub limitis available for the issuance of letters of credit.credit and allows for swingline loans.
The Amended LoanCredit Agreement contains customary covenants that limit, absent lender approval, the ability of the Company and Security Agreement reducescertain of its affiliates to, among other things, pay cash dividends, incur debt, create liens and encumbrances, redeem or repurchase stock, enter into certain acquisition transactions with affiliates, merge, dissolve, repay certain indebtedness, change the interest rate payable on borrowings to be, atnature of the Company’s option, a per annum rate equal to (a) a prime ratebusiness, enter sale or (b) a LIBOR-based rate plus a marginleaseback transactions, make investments or dispose of 1.00%. Letter of credit fees are equal to the interest rate payable on LIBOR-based loans. The interest rate and letter of credit fees under the Amended Loan and Security Agreementassets. In some cases, these restrictions are subject to an increasecertain negotiated exceptions or permit the Company to undertake otherwise restricted activities if it satisfies certain conditions. In addition, the Company will be required to maintain availability of 2.00% per annum uponnot less than (i) 12.5% of the lesser of (x) aggregate commitments under the Revolving Credit Facility and (y) the borrowing base (the "loan cap") during the period that inventory appraisals have not been delivered as described above and (ii) at all other times 10.0% of the loan cap.
If there exists an event of default.default or availability under the Revolving Credit Facility is less than 15% of the loan cap, amounts in any of the Loan Parties’ or subsidiary guarantors' designated deposit accounts will be transferred daily into a blocked account held by the Agent and applied to reduce outstanding amounts under the Revolving Credit Facility (the "Cash Dominion Event"), so long as (i) such event of default has not been waived and/or (ii) until availability has exceeded 15% of the loan cap for sixty (60) consecutive calendar days (provided that such ability to discontinue the Cash Dominion Event shall be limited to two times during the term of the Credit Agreement).
The Amended Loan and SecurityCredit Agreement removes restrictions on the Company’s ability to pay or make dividends and distributions or repurchase its stock, but the Amended Loan and Security Agreement continues to include othercontains customary negative and affirmative covenantsevents of default including, among other things, limitationsfailure to pay obligations when due, initiation of bankruptcy or insolvency proceedings, defaults on the Company’s ability to (i) incur additional debt; (ii) create liens; (iii) make certain investments, loans and advances; (iv) sell assets; (v) engage in mergers or consolidations; or (vi)other indebtedness, change its business.
The Amended Loan and Security Agreement also removes the provisions that required the Company to make prepayments on outstanding Amended Revolving Credit Facility balances upon the receiptof control, incurrence of certain proceeds, including those frommaterial judgments that are not stayed, satisfied, bonded or discharged within 30 days, certain ERISA events, invalidity of the salecredit documents, and violation of certain assets.affirmative and negative covenants or breach of representations and warranties set forth in the Credit Agreement. Amounts under the Amended Revolving Credit Facility may become due upon certain events of default including, among other things, the Company’s failure(subject to comply with the Amended Revolving Credit Facility’s covenants, bankruptcy, default on certain other indebtednessany applicable grace or a change in control.cure periods).
Under the Amended Loan and Security Agreement, allAll obligations under the Amended Revolving Credit Facility continue to beare guaranteed by Five Below Merchandising, Inc., a wholly-owned subsidiary of the Company,1616 Holdings and are secured by substantially all of the assets of the Company and Five Below Merchandising, Inc.1616 Holdings.
As of October 28, 2017,29, 2022, the Company had no borrowings under the Amended Revolving Credit Facility and had approximately $20$225 million available on the line of credit.
All obligations under the Amended Revolving Credit Facility are secured by substantially all of the Company's assets and are guaranteed by the Company's subsidiary. Facility.
As of October 28, 201729, 2022 and October 29, 2016,30, 2021, the Company was in compliance with the covenants applicable to it under the Amended Revolving Credit Facility.Agreement.
(4)Commitments and Contingencies
(6)Commitments and Contingencies
Commitments
Leases
The Company leases property and equipment under non-cancelable operating leases. Certain retail store lease agreements provide for contingent rental payments if the store’s net sales exceed stated levels (percentage rents) and/or contain escalation clauses, which provide for increases in base rental for increases in future operating costs. Many of the Company’s leases provide for one or more renewal options for periods of five years. The Company’s operating lease agreements, including assumed extensions, which are generally those that take the lease to a ten-year term, expire through fiscal 2033.
During the thirteen weeks ended October 28, 2017, the Company committed to 24 new store leases with terms of 10 to 15 years that have future minimum lease payments of approximately $42.9 million.

In September 2016, the Company signed a fifteen-year lease for a new corporate headquarters location in Philadelphia, Pennsylvania to accommodate the Company’s current and anticipated future growth. The Company expects to initially occupy approximately 115,000 square feet of office space in early 2018 and expects to expand into approximately 20,000 square feet of additional office space by no later than 2023. The lease agreement has future minimum lease payments of approximately $50 million and expires in early 2033 with three successive options to renew for an additional term up to approximately fifteen years.
Other contractual commitmentsContractual Commitments
As of October 28, 2017,29, 2022, the Company has other purchase commitments of approximately $5.3$26.9 million consisting of purchase agreements for materials that will be used in the construction of new stores.
Contingencies
Legal Matters
From time to time, theThe Company is involved in certain legal actionssubject to various proceedings, lawsuits, disputes, and claims arising in the ordinary course of the Company's business. In management’s opinion,Many of these actions raise complex factual and legal issues and are subject to uncertainties. Actions filed against the Company from time to time include commercial, intellectual property, customer, and employment actions, including class action lawsuits. The plaintiffs in some actions seek unspecified damages or injunctive relief, or both. Actions are in various procedural stages, and some are covered in part by insurance. The Company cannot predict with assurance the outcome of actions brought against the Company. Accordingly, adverse developments, settlements, or resolutions may occur and negatively impact income in the quarter of such development, settlement or resolution. If a potential loss arising from these lawsuits, claims and pending actions is probable and reasonably estimable, the Company records the estimated liability based on circumstances and assumptions existing at the time. Although the outcome of these and other claims cannot be predicted with certainty, management does not believe that the ultimate resolution of these matters will not have a material adverse effect on the Company’sCompany's financial condition or results of operations.
(5)Share-Based Compensation
(7)Share-Based Compensation
15

Equity Incentive Plan
Pursuant to the Company's 20022022 Equity Incentive Plan (the “Plan”), which was approved in June 2022, the Company’s boardBoard of directorsDirectors may grant stock options, restricted shares, and restricted stock units to officers, directors, key employees and professional service providers. The Plan as amended, allows for the issuance of up to a total of 7,600,0004.3 million shares under the Plan. As of October 28, 2017, 3,401,70729, 2022, approximately 3.5 million stock options, restricted shares, or restricted stock units were available for grant.
Common Stock Options
All stock options have a term not greater than ten years. Stock options vest and become exercisable in whole or in part, in accordance with vesting conditions set by the compensation committeeCompany’s Board of the Company’s board of directors.Directors. Options granted to date generally vest over four years from the date of grant.
Stock option activity underduring the Planthirty-nine weeks ended October 29, 2022 was as follows:
Options
Outstanding		Weighted
Average
Exercise
Price		Weighted
Average
Remaining
Contractual
Term
(in years)
Balance as of January 29, 202239,763 $34.48 2.3
Exercised(3,212)23.51
Balance as of October 29, 202236,551 35.441.7
Exercisable as of October 29, 202236,551 $35.44 1.7
 Options
Outstanding		 Weighted
Average
Exercise
Price		 Weighted
Average
Remaining
Contractual
Term
(in years)
Balance as of January 28, 2017866,637
 $29.60
 6.7
Forfeited(18,972) 37.11
 
Exercised(138,312) 27.45
 
Balance as of October 28, 2017709,353
 29.82
 6.0
Exercisable as of October 28, 2017564,365
 $28.69
 5.6


The fair value of each option award granted to employees, including outside directors, is estimated on the date of grant using the Black-Scholes option-pricing model. There were no stock options issuedgranted or forfeited during the thirty-nine weeks ended October 28, 2017.29, 2022.

Restricted Stock Units and Performance-Based Restricted Stock Units
All restricted stock units ("RSU") and performance-based restricted stock units ("PSU") vest in accordance with vesting conditions set by the compensation committee of the Company’s boardBoard of directors. RSU'sDirectors. RSUs and PSUs granted to date generally have vesting periods ranging from less than one year to fivefour years from the date of grant. PSU's granted to date have vesting periods ranging from one year to five years fromThe fair value of RSUs is the market price of the underlying common stock on the date of grant, including grantsgrant.
PSUs that have a cumulative three year performance period,condition are subject to satisfaction of the applicable performance goals established for the respective grant. The Company periodically assesses the probability of achievement of the performance criteria and adjusts the amount of compensation expense accordingly. The fair value of these PSUs is the market price of the underlying common stock on the date of grant. Compensation is recognized over the vesting period and adjusted for the probability of achievement of the performance criteria.

PSUs that have a market condition based on our total shareholder return relative to a pre-defined peer group are subject to multi-year performance objectives with vesting periods of approximately three years from the date of grant (if the applicable performance objectives are achieved). The fair value of these PSUs are determined using a Monte Carlo valuation model.
RSU and PSU activity during the thirty-nine weeks ended October 28, 201729, 2022 was as follows:
Restricted Stock UnitsPerformance-Based Restricted Stock Units
NumberWeighted-Average Grant Date Fair ValueNumberWeighted-Average Grant Date Fair Value
Non-vested balance as of January 29, 2022254,295 $126.93 349,236 $163.16 
Granted117,650 140.81 127,598 165.90 
Vested(117,452)108.71 — — 
Forfeited(25,076)140.85 (17,738)171.16 
Non-vested balance as of October 29, 2022229,417 $133.76 459,096 $163.61 
16

 Restricted Stock Units Performance-Based Restricted Stock Units
 Number Weighted-Average Grant Date Fair Value Number Weighted-Average Grant Date Fair Value
Non-vested balance as of January 28, 2017275,176
 $36.27
 504,556
 $36.91
Granted153,915
 39.99
 147,552
 39.65
Vested(70,807) 34.17
 (141,003) 38.15
Forfeited(25,327) 42.40
 (9,541) 33.40
Non-vested balance as of October 28, 2017332,957
 $37.97
 501,564
 $37.43
In connection with the vesting of RSU'sRSUs and PSU'sPSUs during the thirty-nine weeks ended October 28, 2017,29, 2022, the Company withheld 26,11730,380 shares with an aggregate value of $1.1$4.6 million in satisfaction of minimum tax withholding obligations due upon vesting.
In connection with the vesting of RSUs and PSUs during the thirty-nine weeks ended October 30, 2021, the Company withheld 37,491 shares with an aggregate value of $7.2 million in satisfaction of minimum tax withholding obligations due upon vesting.
As of October 28, 2017,29, 2022, there was $17.0was $37.1 million of total unrecognized compensation costs related to non-vested share-based compensation arrangements (including stock options, restricted stock unitsRSUs and performance-based restricted stock units)PSUs) granted under the Plan. ThatThe cost is expected to be recognized over a weighted average vesting period of 2.3 years.years.
(6)Income Taxes
Share Repurchase Programs
On March 20, 2018, the Company's Board of Directors approved a share repurchase program authorizing the repurchase of up to $100 million of the Company's common stock through March 31, 2021, on the open market, in privately negotiated transactions, or otherwise. This program expired on March 31, 2021.
On March 9, 2021, the Company's Board of Directors approved a new share repurchase program for up to $100 million of the Company's common stock through March 31, 2024. In fiscal 2021, the Company purchased 368,699 shares at an aggregate cost of approximately $60.0 million, or average price of $162.75 per share. During the thirty-nine weeks ended October 29, 2022, the Company purchased 247,132 shares at an aggregate cost of approximately $40.0 million, or average price of $161.88 per share. The Company has exhausted repurchases under this program.
On June 14, 2022, the Company's Board of Directors approved a new share repurchase program for up to $100 million of the Company's common stock through June 30, 2025. As of October 29, 2022, the Company has not made any repurchases under this program.
Since approval of the share repurchase programs in March 2018, the Company has purchased approximately 1,100,000 shares for an aggregate cost of approximately $150 million.
(8)Income Taxes
The following table summarizes the Company’s income tax expense and effective tax rates for the thirteen and thirty-nine weeks ended October 28, 201729, 2022 and October 29, 201630, 2021 (dollars in thousands):
Thirteen Weeks Ended Thirty-Nine Weeks EndedThirteen Weeks EndedThirty-Nine Weeks Ended
October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016October 29, 2022October 30, 2021October 29, 2022October 30, 2021
Income before income taxes$15,147
 $8,695
 $54,798
 $35,308
Income before income taxes$21,417 $31,825 $119,615 $179,632 
Income tax expense$5,268
 $3,248
 $19,724
 $13,256
Income tax expense$5,271 $7,648 $29,407 $41,018 
Effective tax rate34.8% 37.4% 36.0% 37.5%Effective tax rate24.6 %24.0 %24.6 %22.8 %
The effective tax rates for the thirteen and thirty-nine weeks ended October 28, 201729, 2022 and October 29, 201630, 2021 were based on the Company’s forecasted annualized effective tax rates and were adjusted for discrete items that occurred within the periods presented. The effective tax rate for the thirteen and thirty-nine weeks ended October 28, 201729, 2022 was lowerhigher than the thirteen andweeks ended October 30, 2021 primarily due to discrete items. The effective tax rate for the thirty-nine weeks ended October 29, 20162022 was higher than the thirty-nine weeks ended October 30, 2021 primarily due to discrete items, which includeincludes the impact of the adoption of ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting" with respect to the requirement to recognize excess income tax benefits or deficiencies as income tax benefit or expense in the Company's consolidated statements of operations rather than as additional paid-in capital in the consolidated balance sheets.operations."
The Company had no material accrual for uncertain tax positions or interest and/or penalties related to income taxes on the Company’s balance sheets as of October 28, 2017, 29, 2022, January 28, 2017,29, 2022 or October 29, 201630, 2021 and has not recognized any material uncertain tax positions or interest and/or penalties related to income taxes in the consolidated statements of operations for the thirteen and thirty-nine weeks ended October 28, 201729, 2022 or October 29, 2016.30, 2021.
The Company files a federal income tax return as well as state tax returns. The Company’s U.S. federal income tax returns for the fiscal years ended February 1, 20142, 2019 and thereafter remain subject to examination by the U.S. Internal Revenue Service. State returns are filed in various state jurisdictions, as appropriate, with varying statutes of limitation and remain subject to examination for varying periods up to three years to four years depending on the state.

17

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion together with “Selected Financial Data,”Data” and the consolidated financial statements and related notes included in our Annual Report on Form 10-K for our fiscal year ended January 28, 201729, 2022 and referred to herein as the "Annual Report," and the consolidated financial statements and related notes as of and for the thirteen and thirty-nine weeks endedOctober 28, 201729, 2022 included in Part I, Item I of this Quarterly Report on Form 10-Q. The statements in this discussion regarding expectations of our future performance, liquidity and capital resources and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described below in “Special Note Regarding Forward-Looking Statements” and in Part II, Item 1A "Risk Factors." Our actual results may differ materially from those contained in or implied by any forward-looking statements.
We operate on a fiscal calendar widely used by the retail industry that results in a given fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to January 31 of the following year. References to "fiscal year 2017"2022" or "fiscal 2017"2022" refer to the period from January 29, 201730, 2022 to February 3, 2018 and consists ofJanuary 28, 2023, which is a 53-week52-week fiscal year. References to "fiscal year 2016"2021" or "fiscal 2016"2021" refer to the period from January 31, 20162021 to January 28, 2017 and consists of29, 2022, which is a 52-week fiscal year. The fiscal quarters ended October 28, 201729, 2022 and October 29, 201630, 2021 refer to the thirteen weeks ended as of those dates. The year-to-date periods ended October 28, 201729, 2022 and October 29, 201630, 2021 refer to the thirty-nine weeks ended as of those dates. Historical results are not necessarily indicative of the results to be expected for any future period and results for any interim period may not necessarily be indicative of the results that may be expected for a full year.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS


This Quarterly Report on Form 10-Q contains forward-looking statements pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts or present facts or conditions, such as statements regarding our future financial condition or results of operations, our prospects and strategies for future growth, the introduction of new merchandise, and the implementation of our marketing and branding strategies. In many cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or the negative of these terms or other comparable terminology.
The forward-looking statements contained in this Quarterly Report on Form 10-Q reflect our views as of the date of this report about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or achievements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to, those factors described in Part I, Item 1A “Risk Factors” in our Annual Report, as amended by the risk factors included in Part II, Item 1A "Risk Factors" in this Quarterly Report on Form 10-Q. These factors include without limitation:
•uncertainties associated with the Coronavirus (or COVID-19) pandemic, including closures of our stores, adverse impacts on our sales and operations, future impairment charges, the risk of global recession, and the impact of related government regulations;
•failure to successfully implement our growth strategy;
•the impacts of inflation and increasing commodity prices;
•disruptions in our ability to select, obtain, distribute and market merchandise profitably;
•reliance on merchandise manufactured outside of the United States;
•the direct and indirect impact of current and potential tariffs imposed and proposed by the United States on foreign imports, including, without limitation, the tariffs themselves, any counter-measures thereto and any indirect effects on consumer discretionary spending, which could increase the cost to us of certain products, lower our margins, increase our import related expenses, and reduce consumer spending for discretionary items, each of which could have a material adverse effect on our business, financial condition and results of future operations;
•the impact of price increases, such as, a reduction in our unit sales, damage to our reputation with our customers, and our becoming less competitive in the marketplace;
•dependence on athe volume of traffic to our stores;stores and website;
•inability to attract and retain qualified employees;
•inability to successfully build, operate or expand our distribution centers or network capacity;
18

•disruptions to our distribution networkthe global supply chain, increased cost of freight, constraints on shipping capacity to transport inventory or the timely receipt of inventory;
•extreme weather conditions in the areas in which our stores are located could negatively affect our business and results of operations;
•disruptions in our information technology systems and our inability to maintain and update those systems could adversely affect operations and our customers;
•the risks of cyberattacks or other cyber incidents, such as the failure to secure customers’customers' confidential or credit card information, or other private data relating to our employees or our company;company, including the costs associated with protection against or remediation of such incidents;

•increased operating costs or exposure to fraud or theft due to customer payment-related risk;risks;
•inability to increase sales and improve the efficiencies, costs and effectiveness of our operations;
•dependence on our executive officers, senior management and other key personnel or inability to hire additional qualified personnel;
•inability to successfully manage our inventory balances and inventory shrinkage;
•inability to meet our lease obligations;
•the costs and risks of constructing and owning real property;
•changes in our competitive environment, including increased competition from other retailers and the presence of online retailers;
•increasing costs due to inflation, increased operating costs, wage rate increases or energy prices;
•the seasonality of our business;
•inability to successfully implement our expansion tointo online retail;
•disruptions to our information technology systems in the ordinary course or as a result of system upgrades;
•failure to maintain adequate internal controls;
•complications with the design or implementation of the new enterprise resource system;
•natural disasters, adverse weather conditions, pandemic outbreaks (in addition to COVID-19), global political events, war, and terrorism;terrorism or civil unrest;
•current economic conditions and other economic factors;
•the impact of governmental laws and regulations;changes in tax legislation;
•the costs and consequences of legal proceedings;impact to our financial performance related to insurance programs;
•inability to protect our brand name, trademarks and other intellectual property rights;
•the impact of product and food safety claims and effects of legislation; and
•inability to obtain additional financing, if needed;
•restrictions imposed by our indebtedness on our current and future operations; and
•regulations related to conflict minerals.operations.
Readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on these forward-looking statements. All of the forward-looking statements we have included in this Quarterly Report on Form 10-Q are based on information available to us on the date of this report. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as otherwise required by law.
Overview
Five Below, Inc. (collectively referred to herein with its wholly owned subsidiary as "we," "us," or "our") is a rapidly growing specialty value retailer offering a broad range of trend-right, high-quality merchandise targeted at the teentween and pre-teenteen customer. We offer a dynamic, edited assortment of exciting products, allwith most priced at $5 and below, including select brands and licensed merchandise across our category worlds. In addition, in Fall 2019, we rolled out new pricing to our full chain, increasing prices on certain products over $5. Most of our products remain at $5 and below. As of October 28, 2017,29, 2022, we operated 6251,292 stores in 3242 states.
In August 2016, we commenced sellingWe also offer our merchandise on the internet, through our fivebelow.com e-commerce website. We launchedwebsite as well as with an on demand third party delivery service to enable our e-commerce operation as an additional channelcustomers to service our customers.shop online and receive convenient same day delivery. All e-commerce sales, which includes shipping and handling revenue, are included in net sales and beginning with the third fiscal quarter of 2016, are included in comparable sales. Our e-commerce expenses will have components classified as both cost of goods sold and selling, general and administrative expenses.

19


How We Assess the Performance of Our Business
In assessing the performance of our business, we consider a variety of performance and financial measures. These key measures include net sales, comparable sales, cost of goods sold and gross profit, selling, general and administrative expenses and operating income.
Net Sales
Net sales constitute gross sales net of merchandise returns for damaged or defective goods. Net sales consist of sales from comparable stores, non-comparable stores, and e-commerce, which includes shipping and handling revenue. Revenue from the sale of gift cards is deferred and not included in net sales until the gift cards are redeemed to purchase merchandise.merchandise or as breakage revenue in proportion to the pattern of redemption of the gift cards by the customer.
Our business is seasonal and as a result, our net sales fluctuate from quarter to quarter. Net sales are usually highest in the fourth fiscal quarter due to the year-end holiday season.
Comparable Sales
Comparable sales include net sales from stores that have been open for at least 15 full months from their opening date, and e-commerce sales. Comparable stores include the following:
•Stores that have been remodeled while remaining open;
•Stores that have been relocated within the same trade area, to a location that is not significantly different in size, in which the new store opens at about the same time as the old store closes; and
•Stores that have expanded, but are not significantly different in size, within their current locations.
For stores that are relocated or expanded, the following periods are excluded when calculating comparable sales:

•The period beginning when the closing store receives its last merchandise delivery from one of our distribution centers through:
▪the last day of the fiscal year in which the store was relocated or expanded (for stores that increased significantly in size); or
▪the last day of the fiscal month in which the store re-opens (for all other stores); and
▪the last day of the fiscal year in which the store was relocated or expanded (for stores that increased significantly in size); or
▪the last day of the fiscal month in which the store re-opens (for all other stores); and
•The period beginning on the first anniversary of the date the store received its last merchandise delivery from one of our distribution centers through the first anniversary of the date the store re-opened.
Comparable sales exclude the 53rd week of sales for 53-week fiscal years. In the 52-week fiscal year subsequent to a 53-week fiscal year, we exclude the sales in the non-comparable week from the same-store sales calculation. Due to the 53rd week in fiscal 2017, all comparable sales related to any reporting period during the year ended February 2, 2019 are reported on a restated calendar basis using the National Retail Federation's restated calendar comparing similar weeks.
There may be variations in the way in which some of our competitors and other retailers calculate comparable or “same store” sales. As a result, data in this Quarterly Report on Form 10-Q regarding our comparable sales may not be comparable to similar data made available by other retailers. Non-comparable sales are comprised of new store sales, sales for stores not open for a full 15 months, and sales from existing store relocation and expansion projects that were temporarily closed (or not receiving deliveries) and not included in comparable sales.

20

Measuring the change in fiscal year-over-year comparable sales allows us to evaluate how our store base iswe are performing. Various factors affect comparable sales, including:

•consumer preferences, buying trends and overall economic trends;
•our ability to identify and respond effectively to customer preferences and trends;
•our ability to provide an assortment of high-quality, trend-right and everyday product offerings that generate new and repeat visits to our stores;
•the customer experience we provide in our stores and online;
•the level of traffic near our locations in the power, community and lifestyle centers in which we operate;
•competition;
•changes in our merchandise mix;
•pricing;
•our ability to source and distribute products efficiently;
•the timing of promotional events and holidays;
•the timing of introduction of new merchandise and customer acceptance of new merchandise;
•our opening of new stores in the vicinity of existing stores;
•the number of items purchased per store visit;
•weather conditions; and
weather conditions.•the impacts associated with the COVID-19 pandemic, including closures of our stores, adverse impacts on our operations, and consumer sentiment regarding discretionary spending.
Opening new stores is an important part of our growth strategy. As we continue to pursue our growth strategy, we expect that a significant percentage of our net sales will continue to come from new stores not included in comparable sales. Accordingly, comparable sales is only one measure we use to assess the success of our growth strategy.
Cost of Goods Sold and Gross Profit
Gross profit is equal to our net sales less our cost of goods sold. Gross margin is gross profit as a percentage of our net sales. Cost of goods sold reflects the direct costs of purchased merchandise and inbound freight and tariffs, as well as shipping and handling costs, store occupancy, distribution and buying expenses. Shipping and handling costs include third-partyinternal fulfillment and shipping costs related to our e-commerce operations. Store occupancy costs include rent, common area maintenance, utilities and property taxes for all store locations. Distribution costs include costs for receiving, processing, warehousing and shipping of merchandise to or from our distribution centers and between store locations. Buying costs include compensation expense and other costs for our internal buying organization, including our merchandising and product development team and our planning and allocation group. These costs are significant and can be expected to continue to increase as our companyCompany grows.
The components of our cost of goods sold may not be comparable to the components of cost of goods sold or similar measures of our competitors and other retailers. As a result, data in this Quarterly Report on Form 10-Q regarding our gross profit and gross margin may not be comparable to similar data made available by our competitors and other retailers.
The variable component of our cost of goods sold is higher in higher volume quarters because the variable component of our cost of goods sold generally increases as net sales increase. We regularly analyze the components of gross profit as well as gross margin. Any inability to obtain acceptable levels of initial markups, a significant increase in our use of markdowns, and a significant increase in inventory shrinkage or inability to generate sufficient sales leverage on the store occupancy, distribution and buying components of cost of goods sold could have an adverse impact on our gross profit and results of operations. In addition, current global supply chain disruptions, the cost of freight and constraints on shipping capacity to transport inventory may have an adverse impact on our gross profit and results of operations, as well as our sales. Changes in the mix of our products may also impact our overall cost of goods sold.
21

Selling, General and Administrative Expenses
Selling, general and administrative, or SG&A, expenses are composed of payroll and other compensation, marketing and advertising expense, depreciation and amortization expense and other selling and administrative expenses. SG&A expenses as a percentage of net sales are usually higher in lower sales volume quarters and lower in higher sales volume quarters.
The components of our SG&A expenses may not be comparable to those of other retailers. We expect that our SG&A expenses will increase in future periods due to our continuing store growth. In addition, any increase in future share-based grants or modifications will increase our share-based compensation expense included in SG&A expenses.
Operating Income
Operating income equals gross profit less SG&A expenses. Operating income excludes interest expense or income, other expense or income, and income tax expense or benefit. We use operating income as an indicator of the productivity of our business and our ability to manage SG&A expenses. Operating income percentage measures operating income as a percentage of our net sales.

Results of Consolidated Operations
The following tables summarize key components of our results of consolidated operations for the periods indicated, both in dollars and as a percentage of our net sales.
 Thirteen Weeks EndedThirty-Nine Weeks Ended
October 29, 2022October 30, 2021October 29, 2022October 30, 2021
(in millions, except percentages and total stores)
Consolidated Statements of Operations Data (1):
Net sales$645.0 $607.6 $1,953.6 $1,852.0 
Cost of goods sold437.2 405.3 1,310.5 1,218.5 
Gross profit207.8 202.4 643.1 633.6 
Selling, general and administrative expenses186.9 159.9 523.8 441.2 
Operating income20.9 42.4 119.3 192.3 
Interest income (expense) and other income (expense), net0.5 (10.6)0.3 (12.7)
Income before income taxes21.4 31.8 119.6 179.6 
Income tax expense5.3 7.6 29.4 41.0 
Net income$16.1 $24.2 $90.2 $138.6 
Percentage of Net Sales (1):
Net sales100.0 %100.0 %100.0 %100.0 %
Cost of goods sold67.8 66.7 67.1 65.8 
Gross profit32.2 33.3 32.9 34.2 
Selling, general and administrative expenses29.0 26.3 26.8 23.8 
Operating income3.2 7.0 6.1 10.4 
Interest income (expense) and other income (expense), net0.1 (1.7)— (0.7)
Income before income taxes3.3 5.2 6.1 9.7 
Income tax expense0.8 1.3 1.5 2.2 
Net income2.5 %4.0 %4.6 %7.5 %
Operational Data:
Total stores at end of period1,292 1,173 1,292 1,173 
Comparable sales (decrease) increase(2.7)%14.8 %(4.1)%52.0 %
Average net sales per store (2)
$0.5 $0.5 $1.6 $1.7 

(1)Components may not add to total due to rounding.
(2)Only includes stores that opened before the beginning of the thirteen weeks ended. and thirty-nine weeks ended.
22

 Thirteen Weeks Ended Thirty-Nine Weeks Ended
October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
(in millions, except percentages and total stores)
Consolidated Statements of Operations Data (1):
       
Net sales$257.2
 $199.5
 $773.4
 $612.3
Cost of goods sold173.5
 135.5
 517.5
 414.7
Gross profit83.6
 64.0
 255.9
 197.6
Selling, general and administrative expenses68.8
 55.4
 202.0
 162.5
Operating income14.8
 8.6
 53.9
 35.1
Interest income, net0.3
 0.1
 0.9
 0.2
Income before income taxes15.1
 8.7
 54.8
 35.3
Income tax expense5.3
 3.2
 19.7
 13.3
Net income$9.9
 $5.4
 $35.1
 $22.1
Percentage of Net Sales (1):
       
Net sales100.0% 100.0 % 100.0% 100.0%
Cost of goods sold67.5
 67.9
 66.9
 67.7
Gross profit32.5
 32.1
 33.1
 32.3
Selling, general and administrative expenses26.8
 27.8
 26.1
 26.5
Operating income5.8
 4.3
 7.0
 5.7
Interest income, net0.1
 —
 0.1
 —
Income before income taxes5.9
 4.4
 7.1
 5.8
Income tax expense2.0
 1.6
 2.6
 2.2
Net income3.8% 2.7 % 4.5% 3.6%
Operational Data:       
Total stores at end of period625 517 625 517
Comparable sales growth8.5% (0.2)% 6.9% 2.6%
Average net sales per store (2)
$0.4
 $0.4
 $1.3
 $1.3


(1)
Components may not add to total due to rounding.
(2)
Only includes stores open during the full thirteen and thirty-nine weeks ended.

Thirteen Weeks Ended October 28, 201729, 2022 Compared to the Thirteen Weeks Ended October 29, 201630, 2021
Net Sales
Net sales increased to $257.2 million in the thirteen weeks ended October 28, 2017 from $199.5$645.0 million in the thirteen weeks ended October 29, 2016,2022 from $607.6 million in the thirteen weeks ended October 30, 2021, an increase of $57.7$37.4 million, or 28.9%6.2%. The increase was the result of a non-comparable sales increase of $42.4$53.1 million, andpartially offset by a comparable sales increasedecrease of $15.3$15.7 million. The increase in non-comparablenon-comparable sales was primarily driven by new stores that opened in fiscal 20172022 and the number of stores that opened in fiscal 20162021 but have not been open for 15 full months. We plan to open 103 net new stores in fiscal 2017.months.
Comparable sales increased 8.5% for the thirteen weeks ended October 28, 2017 compared to the thirteen weeks ended October 29, 2016.decreased 2.7%. This increasedecrease resulted from an increasedecreases of approximately 7.1% in the number of transactions in our stores and an increase of approximately 1.4%1.8% in the average dollar value of transactions and approximately 0.9% in the number of transactions.

Cost of Goods Sold and Gross Profit
Cost of goods sold increased to $173.5 million in the thirteen weeks ended October 28, 2017 from $135.5$437.2 million in the thirteen weeks ended October 29, 2016,2022 from $405.3 million in the thirteen weeks ended October 30, 2021, an increase of $38.0$31.9 million, or 28.1%7.9%. The increase in cost of goods sold was primarily the result of an increase in the merchandise cost of goods sold resulting from the increase in net sales. Also contributing to the increase in cost of goods sold werewas an increase in store occupancy costs resulting from new store openings.
Gross profit increased to $83.6 million in the thirteen weeks ended October 28, 2017 from $64.0$207.8 million in the thirteen weeks ended October 29, 2016, an increase of $19.62022 from $202.4 million or 30.7%. Gross margin increased to 32.5% forin the thirteen weeks ended October 28, 2017 from 32.1%30, 2021, an increase of $5.4 million, or 2.7%. Gross margin decreased to 32.2% in the thirteen weeks ended October 29, 2016, an increase2022 from 33.3% in the thirteen weeks ended October 30, 2021, a decrease of approximately 40 basis110 basis points. The increasedecrease in gross margin was primarily the result of a decreasean increase as a percentage of net sales in store occupancy costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $68.8 million in the thirteen weeks ended October 28, 2017 from $55.4$186.9 million in the thirteen weeks ended October 29, 2016,2022 from $159.9 million in the thirteen weeks ended October 30, 2021, an increase of $13.4$27.0 million, or 24.3%16.9%. As a percentage of net sales, selling, general and administrative expenses decreasedincreased approximately 100270 basis points to 26.8% in the thirteen weeks ended October 28, 2017 compared to 27.8%29.0% in the thirteen weeks ended October 29, 2016.2022 from 26.3% in the thirteen weeks ended October 30, 2021. The increase in selling, general and administrative expenses was primarily the result of increases of $9.6$21.4 million in store-related expenses to support new store growth and $3.8$5.6 million ofin corporate-related expenses.
Interest Income (Expense) and Other Income (Expense), net
Interest income and other, net increased to $0.5 million in the thirteen weeks ended October 29, 2022 from interest expense and other, net of $10.6 million in the thirteen weeks ended October 30, 2021, an increase of $11.1 million. The increase in interest income and other, net was primarily driven by an other than temporary impairment related to an equity method investment in the thirteen weeks ended October 30, 2021.
Income Tax Expense
Income tax expense increaseddecreased to $5.3 million in the thirteen weeks ended October 28, 201729, 2022 from $3.2$7.6 million in the thirteen weeks ended October 29, 2016, an increase30, 2021, a decrease of $2.1$2.3 million or 62.2%31.1%. The increasedecrease in income tax expense was primarily due to the result of a $6.5$10.4 million increasedecrease in pre-tax income. income, partially offset by discrete items.
Our effective tax rate for the thirteen weeks ended October 28, 2017 was 34.8%29, 2022 was 24.6% compared to 37.4% 24.0% in the thirteen weeks ended October 29, 2016.30, 2021. Our effective tax rate for the thirteen weeks ended October 28, 201729, 2022 was lowerhigher than the comparable prior year period primarily due to discrete items.
Net Income
As a result of the foregoing, net income decreased to $16.1 million in the thirteen weeks ended October 29, 2022 from $24.2 million in the thirteen weeks ended October 30, 2021, a decrease of $8.1 million or 33.2%.
23

Thirty-Nine Weeks Ended October 29, 2022 Compared to the Thirty-Nine Weeks Ended October 30, 2021
Net Sales
Net sales increased to $1,953.6 million in the thirty-nine weeks ended October 29, 2022 from $1,852.0 million in the thirty-nine weeks ended October 30, 2021, an increase of $101.6 million, or 5.5%. The increase was the result of a non-comparable sales increase of $173.9 million, partially offset by a comparable sales decrease of $72.3 million. The increase in non-comparable sales was primarily driven by the number of stores that opened in fiscal 2021 but have not been open for 15 full months and new stores that opened in fiscal 2022.
Comparable sales decreased 4.1%. This decrease resulted from decreases of approximately 2.8% in the average dollar value of transactions and approximately 1.3% in the number of transactions.
Cost of Goods Sold and Gross Profit
Cost of goods sold increased to $1,310.5 million in the thirty-nine weeks ended October 29, 2022 from $1,218.5 million in the thirty-nine weeks ended October 30, 2021, an increase of $92.0 million, or 7.5%. The increase in cost of goods sold was primarily the result of an increase in the merchandise cost of goods sold resulting from the increase in net sales. Also contributing to the increase in cost of goods sold was an increase in store occupancy costs resulting from new store openings.
Gross profit increased to $643.1 million in the thirty-nine weeks ended October 29, 2022 from $633.6 million in the thirty-nine weeks ended October 30, 2021, an increase of $9.5 million, or 1.5%. Gross margin decreased to 32.9% in the thirty-nine weeks ended October 29, 2022 from 34.2% in the thirty-nine weeks ended October 30, 2021, a decrease of approximately 130 basis points. The decrease in gross margin was primarily the result of an increase as a percentage of net sales in store occupancy costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $523.8 million in the thirty-nine weeks ended October 29, 2022 from $441.2 million in the thirty-nine weeks ended October 30, 2021, an increase of $82.6 million, or 18.7%. As a percentage of net sales, selling, general and administrative expenses increased approximately 300 basis points to 26.8% in the thirty-nine weeks ended October 29, 2022 from 23.8% in the thirty-nine weeks ended October 30, 2021. The increase in selling, general and administrative expenses was primarily the result of increases of $63.8 million in store-related expenses to support new store growth and $18.8 million in corporate-related expenses.
Interest Income (Expense) and Other Income (Expense), net
Interest income and other, net increased to $0.3 million in the thirty-nine weeks ended October 29, 2022 from interest expense and other, net of $12.7 million in the thirty-nine weeks ended October 30, 2021, an increase of $13.0 million. The increase in interest income and other, net was primarily driven by an other than temporary impairment related to an equity method investment in the thirty-nine weeks ended October 30, 2021.

Income Tax Expense
Income tax expense decreased to $29.4 million in the thirty-nine weeks ended October 29, 2022 from $41.0 million in the thirty-nine weeks ended October 30, 2021, a decrease of $11.6 million, or 28.3%. The decrease in income tax expense was primarily due to the $60.0 million decrease in pre-tax income, partially offset by discrete items, which includeincludes the impact of the adoption of ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting" with respect to the requirement to recognize excess income tax benefits or deficiencies as income tax benefit or expense in the Company's consolidated statements of operations rather than as additional paid-in capitaloperations."
Our effective tax rate for the thirty-nine weeks ended October 29, 2022 was 24.6% compared to 22.8% in the consolidated balance sheets.thirty-nine weeks ended October 30, 2021. Our effective tax rate for the thirty-nine weeks ended October 29, 2022 was higher than the comparable prior year period primarily due to discrete items, which includes the impact of ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting."
Net Income
As a result of the foregoing, net income increaseddecreased to $9.9 million in the thirteen weeks ended October 28, 2017 from $5.4 million in the thirteen weeks ended October 29, 2016, an increase of $4.5 million or 81.4%.

Thirty-Nine Weeks Ended October 28, 2017 Compared to the Thirty-Nine Weeks Ended October 29, 2016
Net Sales
Net sales increased to $773.4 million in the thirty-nine weeks ended October 28, 2017 from $612.3$90.2 million in the thirty-nine weeks ended October 29, 2016, an increase of $161.1 million, or 26.3%. The increase was the result of a non-comparable sales increase of $122.4 million and a comparable sales increase of $38.7 million. The increase in non-comparable sales was primarily driven by new stores that opened in fiscal 2017 and the number of stores that opened in fiscal 2016 but have not been open for 15 full months. We plan to open 103 net new stores in fiscal 2017.
Comparable sales increased 6.9% for the thirty-nine weeks ended October 28, 2017 compared to the thirty-nine weeks ended October 29, 2016. This increase resulted2022 from an increase of approximately 6.7% in the number of transactions in our stores and an increase of approximately 0.2% in the average dollar value of transactions.
Cost of Goods Sold and Gross Profit
Cost of goods sold increased to $517.5$138.6 million in the thirty-nine weeks ended October 28, 2017 from $414.7 million in the thirty-nine weeks ended October 29, 2016, an increase30, 2021, a decrease of $102.8$48.4 million or 24.8%. The increase in cost of goods sold was primarily the result of an increase in the merchandise cost of goods resulting from the increase in net sales. Also contributing to the increase in cost of goods sold were an increase in store occupancy costs resulting from new store openings.

Gross profit increased to $255.9 million in the thirty-nine weeks ended October 28, 2017 from $197.6 million in the thirty-nine weeks ended October 29, 2016, an increase of $58.3 million, or 29.5%. Gross margin increased to 33.1% for the thirty-nine weeks ended October 28, 2017 from 32.3% in the thirty-nine weeks ended October 29, 2016, an increase of approximately 80 basis points. The increase in gross margin was primarily the result of decreases as a percentage of net sales in merchandise cost of goods sold and store occupancy costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $202.0 million in the thirty-nine weeks ended October 28, 2017 from $162.5 million in the thirty-nine weeks ended October 29, 2016, an increase of $39.5 million, or 24.3%. As a percentage of net sales, selling, general and administrative expenses decreased approximately 40 basis points to 26.1% in the thirty-nine weeks ended October 28, 2017 compared to 26.5% in the thirty-nine weeks ended October 29, 2016. The increase in selling, general and administrative expenses was primarily the result of increases of $26.5 million in store-related expenses to support new store growth and $13.0 million of corporate-related expenses.
Income Tax Expense
Income tax expense increased to $19.7 million in the thirty-nine weeks ended October 28, 2017 from $13.3 million in the thirty-nine weeks ended October 29, 2016, an increase of $6.4 million, or 48.8%. The increase in income tax expense was primarily the result of a $19.5 million increase in pre-tax income. Our effective tax rate for the thirty-nine weeks ended October 28, 2017 was 36.0% compared to 37.5% in the thirty-nine weeks ended October 29, 2016. Our effective tax rate for the thirty-nine weeks ended October 28, 2017 was lower than the comparable period primarily due to discrete items, which include the impact of the adoption of ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting," with respect to the requirement to recognize excess income tax benefits or deficiencies as income tax benefit or expense in the consolidated statements of operations rather than as additional paid-in capital in the consolidated balance sheets.
Net Income
As a result of the foregoing, net income increased to $35.1 million in the thirty-nine weeks ended October 28, 2017 from $22.1 million in the thirty-nine weeks ended October 29, 2016, an increase of $13.0 million or 59.1%34.9%.
Liquidity and Capital Resources
24

Overview
Our primary source of liquidity is cash flows from operations. Our primary cash needs are forCash capital expenditures and working capital.
Capital expenditures typically vary depending on the timing of new store openings and infrastructure-related investments. We plan to make cash capital expenditures of approximately $75$235 million in fiscal 2017,2022, which exclude the impact of tenant allowances, and which we expect to fund from cash generated from operations.operations, cash on hand, investments and, as needed, borrowings under our Revolving Credit Facility. We expect to incur approximately $35$90 million of our cash capital expenditure budget in fiscal 20172022 to construct and open 103 netapproximately 150 new stores of the planned approximately 375 new stores over the next two fiscal years, with the remainder projected to be spent on our new corporate headquarters, store relocations and remodels, our distribution centers, and our corporate infrastructure.
Our primary working capital requirements are for the purchase of store inventory and payment of payroll, rent, other store operating costs and distribution costs. Our working capital requirements fluctuate during the year, rising in the third and fourth fiscal quarters as we take title to increasing quantities of inventory in anticipation of our peak, year-end holiday shopping season in the fourth fiscal quarter. Fluctuations in working capital are also driven by the timing of new store openings.
Historically, we have funded our capital expenditures and working capital requirements during the fiscal year with cash on hand,on-hand, net cash provided by operating activities and borrowings under our Amended Revolving Credit Facility.Facility, which expires in September 2027, as needed, and we expect that funding to continue. When we have used our Amended Revolving Credit Facility, the amount of indebtedness outstanding under it has tended to be the highest in the beginning of the fourth quarter of each fiscal year. Over the past three fiscal years, toTo the extent that we have drawn on the facility, we have paid down the borrowings before the end of the fiscal year with cash generated during our peak selling season in the fourth quarter. WeAlthough it is not possible to reliably estimate the duration or severity of the COVID-19 pandemic and the resulting financial impact on our results of operations, financial position and liquidity, we have the ability to draw down on our Revolving Credit Facility if and as needed. As of October 29, 2022, we did not have any direct borrowings under our Amended Revolving Credit Facility during the thirty-nine weeks ended October 28, 2017. As of October 28, 2017, weand had approximately $20.0$225 million available on the line of credit.

On March 20, 2018, our Board of Directors approved a share repurchase program authorizing the repurchase of up to $100 million of our common stock through March 31, 2021, on the open market, in privately negotiated transactions, or otherwise. This program expired on March 31, 2021.
On March 9, 2021, our Board of Directors approved a new share repurchase program for up to $100 million of our common stock through March 21, 2024. In fiscal 2021, we purchased 368,699 shares at an aggregate cost of approximately $60.0 million, or average price of $162.75 per share. During the thirty-nine weeks ended October 29, 2022, we purchased 247,132 shares at an aggregate cost of approximately $40.0 million, or an average price of $161.88 per share. We have exhausted repurchases under this program.
On June 14, 2022, our Board of Directors approved a new share repurchase program for up to $100 million of the Company's common stock through June 30, 2025. As of October 29, 2022, we have not made any repurchases under this program.
Since approval of the share repurchase program in March 2018, we have purchased approximately 1,100,000 shares for an aggregate cost of approximately $150 million.
Based on our growth plans, we believe that our cash position, which includes our cash equivalents and short-term investments, net cash provided by operating activities and availability under our Amended Revolving Credit Facility, which expires in September 2027, will be adequate to finance our planned capital expenditures, authorized share repurchases and working capital requirements over the next 12 months and for the foreseeable future thereafter. If cash flows from operations and borrowings under our Amended Revolving Credit Facility are not sufficient or available to meet our requirements, then we will be required to obtain additional equity or debt financing in the future. There can be no assurance that equity or debt financing will be available to us when we need it or, if available, that the terms will be satisfactory to us and not dilutive to our then-current shareholders.
Cash Flows
A summary of our cash flows from operating, investing and financing activities is presented in the following table (in millions):
 Thirty-Nine Weeks Ended
October 29, 2022October 30, 2021
Net cash (used in) provided by operating activities$(45.0)$124.7 
Net cash provided by (used in) investing activities68.5 (300.3)
Net cash used in financing activities(44.3)(6.3)
Net decrease during period in cash and cash equivalents (1)
$(20.7)$(182.0)
 Thirty-Nine Weeks Ended
October 28, 2017 October 29, 2016
Net cash provided by (used in) operating activities$17.0
 $(2.9)
Net cash (used in) provided by investing activities(41.1) 0.7
Net cash provided by financing activities2.9
 2.6
Net (decrease) increase during period in cash and cash equivalents (1)
$(21.2) $0.5
(1) Components may not add to total due to rounding.
25



Cash (Used in) Provided by (Used in) Operating Activities
Net cash provided byused in operating activities for the thirty-nine weeks ended October 28, 201729, 2022 was $17.0$45.0 million, an increase of $19.9$169.7 million compared to the thirty-nine weeks ended October 30, 2021. The increase was primarily due to changes in working capital, a decrease in operating cash flows from store performance and an increase in income taxes paid.
Cash Provided by (Used in) Investing Activities
Net cash provided by investing activities for the thirty-nine weeks ended October 29, 2016.2022 was $68.5 million, an increase of $368.8 million compared to the thirty-nine weeks ended October 30, 2021. The increase was primarily due to an increase in operating cash flows from store performance partially offset by an increase in income taxes paid and changes in overall working capital.
Cash (Used in) Provided by Investing Activities
Net cash used in investing activities for the thirty-nine weeks ended October 28, 2017 was $41.1 million, an increase of $41.8 million compared to the thirty-nine weeks ended October 29, 2016. The increase was primarily due to increases in net sales, maturities and redemptions of investment securities and capital expenditures. The increasea decrease in capital expenditures was primarily for our new store construction, our corporate infrastructure, and our distribution facilities.expenditures.
Cash Provided byUsed in Financing Activities
Net cash provided byused in financing activities for the thirty-nine weeks ended October 28, 201729, 2022 was $2.9$44.3 million, an increase of $0.3$38.0 million compared to the thirty-nine weeks ended October 29, 2016.30, 2021. The increase was primarily the result ofdue to an increase in the proceeds from the exerciserepurchase and retirement of options to purchase common stock and a decrease in the common shares withheld for taxes offset by a decrease in excess tax benefits related to exercises of stock options and the vesting of restricted stock units and performance-based restricted stock units driven by the impact of the adoption of ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting," with respect to excess income tax benefits and deficiencies being classified as an operating activity rather than a financing activity.stock.
Line of Credit
On May 10, 2017,September 16, 2022, we entered into a FourthSecond Amendment to Credit Agreement (the "Second Amendment") which amended the Fifth Amended and Restated LoanCredit Agreement, dated as of April 24, 2020, as previously amended by that certain First Amendment to Credit Agreement, dated as of January 27, 2021 (the "First Amendment"; the Fifth Amended and SecurityRestated Credit Agreement (the “Amended Loanas amended by the First Amendment and Securitythe Second Amendment, the “Credit Agreement”), among Five Belowthe Company, 1616 Holdings, Inc., Five Below Merchandising, Inc.a wholly-owned subsidiary of the Company ("1616 Holdings" and Wells Fargo Bank, National Association. The Amended Loan and Security Agreement amends and restatestogether with the Third Amended and Restated Loan and Security Agreement, dated June 12, 2013, among Five Below Inc.Company, the "Loan Parties"), Five Below Merchandising, Inc. and Wells Fargo Bank, National Association which governed the Revolving Credit Facility.as administrative agent (the "Agent"), and other lenders party thereto (the "Lenders").
The Amended Loan and SecurityCredit Agreement includesprovides for a secured asset-based revolving line of credit in the amount of up to $20.0$225.0 million (the “Amended Revolving"Revolving Credit Facility”Facility"). Pursuant to the Amended Loan and Security Agreement, advancesAdvances under the Amended Revolving Credit Facility are no longer tied to a borrowing base; however, webase consisting of eligible credit card receivables and inventory, as reduced by certain reserves in effect from time to time. Pursuant to the Credit Agreement, inventory appraisals and certain other diligence items are requireddeferred, with reduced advance rates during the period that such appraisals have not been delivered. Pursuant to maintain eligible inventory at all times in an amount equal to at least $100.0 million. The Amendedthe Second Amendment, the Revolving Credit Facility expires on the earliest to occur of (i) May 10, 2022September 16, 2027 or (ii) an event of default.
The AmendedSecond Amendment also replaced the existing LIBOR rate provisions with SOFR rate provisions which converted then outstanding LIBOR loans into SOFR loans and additionally makes a number of other revisions to other provisions of the Credit Agreement. Giving effect to the Second Amendment, outstanding borrowings under the Revolving Credit Facility would accrue interest at floating rates plus an applicable margin ranging from 1.12% to 1.50% for SOFR loans and 0.125% to 0.50% for base rate loans, and letter of credit fees range from 1.125% to 1.50%, in each case based on the average availability under the Revolving Credit Facility.
The Revolving Credit Facility may be increased up to $150.0 million, subject to certain conditions, including obtaining commitments from one or more Lenders (the "Accordion"). Pursuant to the First Amendment, we obtained commitments from the Lenders that would allow us at our election (subject only to satisfaction of certain customary conditions such as the absence of any Event of Default), to increase the amount of the Revolving Credit Facility by an aggregate principal amount up to $50.0 million subject to certain conditions.within the Accordion (the "Committed Increase"). The Amendedentire amount of the Revolving Credit Facility also includes a $20.0 million sub limitis available for the issuance of letters of credit.credit and allows for swingline loans.
The Amended LoanCredit Agreement contains customary covenants that limit, absent lender approval, the ability of the Company and Security Agreement reducescertain of its affiliates to, among other things, pay cash dividends, incur debt, create liens and encumbrances, redeem or repurchase stock, enter into certain acquisition transactions with affiliates, merge, dissolve, repay certain indebtedness, change the interest rate payable on borrowings to be, atnature of our option, a per annum rate equal to (a) a prime ratebusiness, enter sale or (b) a LIBOR-based rate plus a marginleaseback transactions, make investments or dispose of 1.00%. Letter of credit fees are equal to the interest rate payable on LIBOR-based loans. The interest rate and letter of credit fees under the Amended Loan and Security Agreementassets. In some cases, these restrictions are subject to an increasecertain negotiated exceptions or permit us to undertake otherwise restricted activities if it satisfies certain conditions. In addition, we will be required to maintain availability of 2.00% per annum uponnot less than (i) 12.5% of the lesser of (x) aggregate commitments under the Revolving Credit Facility and (y) the borrowing base (the "loan cap") during the period that inventory appraisals have not been delivered as described above and (ii) at all other times 10% of the loan cap.
If there exists an event of default.default or availability under the Revolving Credit Facility is less than 15% of the loan cap, amounts in any of the Loan Parties’ or subsidiary guarantors' designated deposit accounts will be transferred daily into a blocked account held by the Agent and applied to reduce outstanding amounts under the Revolving Credit Facility (the "Cash Dominion Event"), so long as (i) such event of default has not been waived and/or (ii) until availability has exceeded 15% of

26

the loan cap for sixty (60) consecutive calendar days (provided that such ability to discontinue the Cash Dominion Event shall be limited to two times during the term of the Credit Agreement).
The Amended Loan and SecurityCredit Agreement removes restrictions related to our ability to pay or make dividends and distributions or repurchase our stock, but the Amended Loan and Security Agreement continues to include othercontains customary negative and affirmative covenantsevents of default including, among other things, limitationsfailure to pay obligations when due, initiation of bankruptcy or insolvency proceedings, defaults on our ability to (i) incur additional debt; (ii) create liens; (iii) make certain investments, loans and advances; (iv) sell assets; (v) engage in mergers or consolidations; or (vi)other indebtedness, change our business.
The Amended Loan and Security Agreement also removes the provisions that required us to make prepayments on outstanding Amended Revolving Credit Facility balances upon the receiptof control, incurrence of certain proceeds, including those frommaterial judgments that are not stayed, satisfied, bonded or discharged within 30 days, certain ERISA events, invalidity of the salecredit documents, and violation of certain assets.affirmative and negative covenants or breach of representations and warranties set forth in the Credit Agreement. Amounts under the Amended Revolving Credit Facility may become due upon certain events of default including, among other things, our failure(subject to comply with the Amended Revolving Credit Facility’s covenants, bankruptcy, default on certain other indebtednessany applicable grace or a change in control.cure periods).
Under the Amended Loan and Security Agreement, allAll obligations under the Amended Revolving Credit Facility continue to beare guaranteed by our subsidiary1616 Holdings and are secured by substantially all of ourthe assets of the Company and our subsidiary's assets.1616 Holdings.
As of October 28, 2017,29, 2022, we had approximately $20.0 million available on the line of credit.
All obligationsno borrowings under the Amended Revolving Credit Facility are secured by substantially all of our assets and are guaranteed by our subsidiary. had approximately $225 million available under the Revolving Credit Facility.
As of October 28, 201729, 2022 and October 29, 2016,30, 2021, we were in compliance with the covenants applicable to usit under the Amended Revolving Credit Facility.Agreement.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions. Predicting future events is inherently an imprecise activity and, as such, requires the use of judgment. Actual results may vary from estimates in amounts that may be material to the financial statements. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our consolidated financial statements. Our critical accounting policies and estimates are discussed in the Annual Report. We believe that there have been no significant changes to our critical accounting policies during the thirty-nine weeks ended October 28, 2017.
Contractual Obligations
Except as set forth below, there have been no material changes to our contractual obligations as disclosed in the Annual Report, other than those which occur in the ordinary course of business.
From January 29, 201730, 2022 to October 28, 2017,29, 2022, we have entered into 87116 new fully executed retail leases with average terms of approximately 10 to 15 years and other lease modifications that have future minimum lease payments of approximately $158.2$233.0 million.
In September 2016, we signed a fifteen-year lease for a new corporate headquarters location in Philadelphia, Pennsylvania to accommodate our current and anticipated future growth. We expect to initially occupy approximately 115,000 square feet of office space in early 2018 and expect to expand into approximately 20,000 square feet of additional office space by no later than 2023. The lease agreement has future minimum lease payments of approximately $50 million and expires in early 2033 with three successive options to renew for additional term up to approximately fifteen years.
Off-Balance Sheet Arrangements
For the quarterly periodthirteen weeks endedOctober 28, 2017, except for operating leases entered into in the normal course of business,29, 2022, we were not party to any material off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, net sales, expenses, results of operations, liquidity, capital expenditures or capital resources.

Recently Issued Accounting Pronouncements
In May 2014,See "Note 1 - Summary of Significant Accounting Policies" to the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, "Revenue from Contracts with Customers." ASU 2014-09 clarifies the principles for recognizing revenue from contracts with customers. The update outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. In August 2015, the FASB issued ASU 2015-14, "Revenue from Contract with Customers: Deferral of the Effective Date." ASU 2015-14 deferred the effective date of ASU 2014-09 to fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for annual reporting periods beginning after December 15, 2016, including interim periods within those annual periods. In the first six months of fiscal 2016, the FASB issued guidance clarifying the interpretation of certain principles of ASU 2014-09. On the effective date, we may use either a full retrospective approach or a modified retrospective approach to adopt ASU 2014-09. While we are currently evaluating the impact of this ASU, it is not expected to materially impact our consolidated financial statements. Other areas which could be impacted, including the recognition of gift card breakage income, may be identified as we continue our evaluation of the ASU.
In February 2016, the FASB issued ASU 2016-02, “Leases.” ASU 2016-02 requires that lease arrangements longer than 12 months result in an entity recognizing an asset and a liability. The updated guidance is effective for interim and annual periods beginning after December 15, 2018, and early adoption is permitted. The standard requires use of the modified retrospective transition approach. While we are currently evaluating this standard, given the significant amount of leases that we are party to, we expect this standard will have a significant impact on ourunaudited consolidated financial statements from the recognitionincluded in "Part I. Financial Information, Item 1. Consolidated Financial Statements" of right to use assets and related liabilities. We plan to adopt this standard in the first quarterForm 10-Q, for a detailed description of fiscal 2019, coinciding with the standard’s effective date.recently issued accounting pronouncements.
In March 2016, the FASB issued ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting." ASU 2016-09 affects all entities that issue share-based payment awards to their employees. This accounting standards update makes several modifications to the accounting for employee share-based payment transactions, including the requirement that the excess income tax benefits or deficiencies that arise when the tax consequences of share-based compensation differ from amounts previously recognized in the consolidated statement of operations be recognized as income tax benefit or expense in the consolidated statement of operations rather than as additional paid-in capital in the consolidated balance sheet. The guidance also clarifies the classification of components of share-based awards on the consolidated statement of cash flows such that excess income tax benefits should not be presented separately from other income taxes in the consolidated statement of cash flows and, thus, should be classified as an operating activity rather than a financing activity as they are under the current guidance. ASU 2016-09 is effective for financial statements issued for annual reporting periods beginning after December 15, 2016 and interim periods within those years. We adopted this standard prospectively in the first quarter of fiscal 2017. This standard will result in a decrease or increase to our effective tax rate, net income, and earnings per share based upon the requirement to recognize the excess income tax benefits or deficiencies in the consolidated statements of operations and change our earnings per share calculation to exclude excess tax benefits previously assumed under the treasury stock method. No changes were required related to the classification of employee taxes paid for withheld shares in our consolidated statements of cash flows since we have historically classified these within financing cash flows.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
Our principal market risk relates to interest rate sensitivity, which is the risk that future changes in interest rates will reduce our net income or net assets. We have short-term investment securities that are interest-bearing securities and if there are changes in interest rates, those changes would affect the interest income we earn on these investments and, therefore, impact our cash flows and results of operations. However, due to the short term nature of our investment portfolio, we do not believe an immediate 100 basis point increase or decrease in interest rates would have a material effect on the fair market value of our portfolio, and accordingly we do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates.
27

We also have an Amendeda Revolving Credit Facility which includes a revolving line of credit, which bears interest at a variable rate. Because our Amended Revolving Credit Facility bears interest at a variable rate, we will be exposed to market risks relating to changes in interest rates.rates, which could materially impact our consolidated statements of operations should we have any material borrowings under our Revolving Credit Facility.
As of October 28, 2017,29, 2022, we had approximately $20$225 million available on the line of credit. The Amended Revolving Credit Facility reducesAgreement provides that the interest rate payable on borrowings toshall be, at the ourCompany’s option, a per annum rate equal to (a) a primebase rate plus an applicable margin ranging from 0.125% to 0.50% or (b) a LIBOR-basedSOFR rate plus a margin of 1.00%ranging from 1.12% to 1.50%. Letter of credit fees are equalrange from 1.125% to the interest rate payable on LIBOR-based loans. The interest rate and letter of credit fees under the Amended Revolving Credit Facility are subject to an increase of 2.00% per annum upon an event of default.1.50%. We do not use derivative financial instruments for speculative or trading purposes, but this does not preclude our adoption of specific hedging strategies in the future.

Impact of Inflation
Our results of operations and financial condition are presented based on historical cost. While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we believe the effects of inflation, if any, on our historical results of operations and financial condition have been immaterial. We seek to minimize the impact of increasing prices and general inflation in a variety of ways, including, with respect to our merchandise, by sourcing from different vendors and changing our product mix. We cannot assure you, however, that our results of operations and financial condition will not be materially impacted by inflation in the future.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”"Exchange Act"), as of the end of the period covered by this Quarterly Report on Form 10-Q pursuant to Rule 13a-15(b) of the Exchange Act. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q are effective at a reasonable assurance level in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures will prevent or detect all errors and all fraud. While our disclosure controls and procedures are designed to provide reasonable assurance of their effectiveness, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
Changes in Internal Control over Financial Reporting
There were no changes to our internal control over financial reporting during the thirteen weeks ended October 28, 201729, 2022, as defined in Exchange Act Rules 13a-15(f) and 15d-15(f), that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.



28

PART II - OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS
We are subject to various proceedings, lawsuits, disputes, and claims arising in the ordinary course of our business. Many of these actions raise complex factual and legal issues and are subject to uncertainties. Actions filed against us from time to time include commercial, intellectual property, customer, and employment actions, including class action lawsuits. The plaintiffs in some actions seek unspecified damages or injunctive relief, or both. Actions are in various procedural stages, and some are covered in part by insurance. We cannot predict with assurance the outcome of actions brought against us. Accordingly, adverse developments, settlements, or resolutions may occur and negatively impact income in the quarter of such development, settlement or resolution. If a potential loss arising from these lawsuits, claims and pending actions is probable and reasonably estimable, we record the estimated liability based on circumstances and assumptions existing at the time. Although the outcome of these and other claims cannot be predicted with certainty, management does not believe that the ultimate resolution of these matters will have a material adverse effect on our financial condition or results of operations.



29

ITEM 1A. RISK FACTORS
Risk factors that affect our business and financial results are discussed in Part I, Item 1A “Risk Factors”"Risk Factors" in our Annual Report. There have been no material changes in our risk factors from those previously disclosed in our Annual Report. You should carefully consider the risks described in our Annual Report, which could materially affect our business, financial condition or future results. The risks described in our Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.

30

ITEM 6.EXHIBITS
(a)Exhibits
 
No.Description
No.Description
10.1
10.1
10.2
Fourth Amended and Restated Loan and SecuritySecond Amendment to Credit Agreement, dated May 10, 2017,September 16, 2022, among the Company, Five Below Merchandising,1616 Holdings, Inc. and, Wells Fargo Bank, National Association, and the lenders party thereto (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on May 11, 2017).September 16, 2022)
31.1
31.1
31.2
32.1
32.2
101†101*
The following financial information from this Quarterly Report on Form 10-Q for the fiscal quarter ended October 28, 2017,29, 2022, formatted in XBRL (Extensible Business Reporting Language) and furnished electronically herewith: (i) the Unaudited Consolidated Balance Sheets as of October 28, 2017,29, 2022, January 28, 201729, 2022 and October 29, 2016;30, 2021; (ii) the Unaudited Consolidated Statements of Operations for the Thirteen Weeks Ended and Thirty-Nine Weeks Ended October 28, 201729, 2022 and October 29, 2016;30, 2021; (iii) the Unaudited Consolidated StatementStatements of Shareholders’ Equity for the Thirteen and Thirty-Nine Weeks Ended October 28, 2017;29, 2022 and October 30, 2021; (iv) the Unaudited Consolidated Statements of Cash Flows for the Thirty-Nine Weeks Ended October 28, 201729, 2022 and October 29, 201630, 2021 and (v) the Notes to Unaudited Consolidated Financial Statements, tagged in detail.
104*Coverage Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
†Management contract or compensatory plan or arrangement.
†*Pursuant to applicable securities laws and regulations, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Exchange Act of 1934, as amended, and otherwise is not subject to liability under those sections.



31

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
FIVE BELOW, INC.
FIVE BELOW, INC.
Date: December 1, 20172022/s/ Joel D. Anderson
Joel D. Anderson
President and Chief Executive Officer (Principal Executive Officer)
Date: December 1, 20172022/s/ Kenneth R. Bull
Kenneth R. Bull
Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)



EXHIBIT INDEX
No.Description
10.1
Employment Letter, dated October 29, 2017, by and between David Makuen and Five Below, Inc.
31.1
Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101†
The following financial information from this Quarterly Report on Form 10-Q for the fiscal quarter ended October 28, 2017, formatted in XBRL (Extensible Business Reporting Language) and furnished electronically herewith: (i) the Unaudited Consolidated Balance Sheets as of October 28, 2017, January 28, 2017 and October 29, 2016; (ii) the Unaudited Consolidated Statements of Operations for the Thirteen Weeks Ended and Thirty-Nine Weeks Ended October 28, 2017 and October 29, 2016; (iii) the Unaudited Consolidated Statement of Shareholders’ Equity for the Thirty-Nine Weeks Ended October 28, 2017; (iv) the Unaudited Consolidated Statements of Cash Flows for the Thirty-Nine Weeks Ended October 28, 2017 and October 29, 2016 and (v) the Notes to Unaudited Consolidated Financial Statements, tagged in detail.
32
†Pursuant to applicable securities laws and regulations, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Exchange Act of 1934, as amended, and otherwise is not subject to liability under those sections.


30