Express 2015 Annual Report Download - page 34

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Table of Contents
  

Uncertain tax positions arise from the fact that we
may be subject to periodic audits by the Internal
Revenue Service and other taxing authorities.
Internal Revenue Service audits may challenge
certain of our tax positions, such as the timing and
amount of deductions and allocation of taxable
income to various jurisdictions.
To the extent that we prevail in matters for which
unrecognized tax benefit liabilities have been
established or are required to pay amounts in
excess of recorded unrecognized tax benefit
liabilities, our effective tax rate in a given
financial statement period could be materially
affected. An unfavorable tax settlement would
require use of our cash and result in an increase in
our effective tax rate in the period of resolution. A
favorable tax settlement would be recognized as a
reduction in our effective tax rate in the period of
resolution.


Interest Rate Risk
Our Revolving Credit Facility bears interest at variable rates. See Note 8 to our Consolidated Financial Statements for further information on the calculation
of the rates. We did not borrow any amounts under our Revolving Credit Facility during 2015. Changes in interest rates are not expected to have a material
impact on our future earnings or cash flows given our limited exposure to such changes.
Foreign Currency Exchange Risk
All of our merchandise purchases are denominated in U.S. dollars, therefore we are not exposed to foreign currency exchange risk on these purchases.
However, we currently operate 17 stores in Canada, with the functional currency of our Canadian operations being the Canadian dollar. Our Canadian
operations have intercompany accounts with our U.S. subsidiaries that eliminate upon consolidation, but the transactions resulting in such accounts do
expose us to foreign currency exchange risk. Currently, we do not utilize hedging instruments to mitigate foreign currency exchange risks. As of January 30,
2016, a hypothetical 10% change in the Canadian foreign exchange rate would not have had a material impact on the results of operations.
Impact of Inflation
Inflationary factors such as increases in the cost of our products and overhead may adversely affect our operating results. Although we do not believe that
inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect
on our ability to maintain current levels of gross profit and selling, general, and administrative expenses as a percentage of net sales if the selling prices of our
products do not rise with these increased costs.
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