Company Quick10K Filing
Burlington Stores
Price200.15 EPS7
Shares67 P/E30
MCap13,488 P/FCF28
Net Debt839 EBIT552
TEV14,326 TEV/EBIT26
TTM 2019-11-02, in MM, except price, ratios
10-Q 2020-08-01 Filed 2020-08-27
10-Q 2020-05-02 Filed 2020-05-29
10-K 2020-02-01 Filed 2020-03-13
10-Q 2019-11-02 Filed 2019-11-26
10-Q 2019-08-03 Filed 2019-08-29
10-Q 2019-05-04 Filed 2019-06-03
10-K 2019-02-02 Filed 2019-03-20
10-Q 2018-11-03 Filed 2018-11-28
10-Q 2018-08-04 Filed 2018-08-30
10-Q 2018-05-05 Filed 2018-05-31
10-K 2018-02-03 Filed 2018-03-20
10-Q 2017-10-30 Filed 2017-11-21
10-Q 2017-07-29 Filed 2017-08-24
10-Q 2017-04-29 Filed 2017-05-25
10-K 2017-01-28 Filed 2017-03-16
10-Q 2016-10-29 Filed 2016-11-23
10-Q 2016-07-30 Filed 2016-08-25
10-Q 2016-04-30 Filed 2016-05-26
10-K 2016-01-30 Filed 2016-03-15
10-Q 2015-10-31 Filed 2015-11-24
10-Q 2015-08-01 Filed 2015-08-31
10-Q 2015-05-02 Filed 2015-06-09
10-K 2015-01-31 Filed 2015-03-25
10-Q 2014-11-01 Filed 2014-12-09
10-Q 2014-08-02 Filed 2014-09-11
10-Q 2014-05-03 Filed 2014-06-12
10-K 2014-02-01 Filed 2014-03-31
8-K 2020-08-27 Earnings, Exhibits
8-K 2020-07-20 Exhibits
8-K 2020-06-29
8-K 2020-05-28
8-K 2020-05-20
8-K 2020-05-04
8-K 2020-04-13
8-K 2020-04-13
8-K 2020-03-20
8-K 2020-03-17
8-K 2020-03-05
8-K 2020-02-26
8-K 2020-02-10
8-K 2019-11-26
8-K 2019-09-13
8-K 2019-08-29
8-K 2019-05-30
8-K 2019-05-22
8-K 2019-04-23
8-K 2019-03-07
8-K 2018-11-28
8-K 2018-11-02
8-K 2018-10-01
8-K 2018-08-30
8-K 2018-06-29
8-K 2018-06-29
8-K 2018-05-31
8-K 2018-05-16
8-K 2018-03-08
8-K 2018-02-21

BURL 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-10.1 burl-ex101_50.htm
EX-10.2 burl-ex102_49.htm
EX-31.1 burl-ex311_7.htm
EX-31.2 burl-ex312_6.htm
EX-32.1 burl-ex321_10.htm
EX-32.2 burl-ex322_9.htm

Burlington Stores Earnings 2020-08-01

Balance SheetIncome StatementCash Flow
10.07.95.93.81.8-0.32012201420172020
Assets, Equity
2.01.61.20.70.3-0.12012201420172020
Rev, G Profit, Net Income
0.40.30.1-0.0-0.2-0.32012201420172020
Ops, Inv, Fin

burl-10q_20200801.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 1, 2020

OR

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 001-36107

 

BURLINGTON STORES, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

80-0895227

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

2006 Route 130 North

Burlington, New Jersey

 

08016

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s Telephone Number, Including Area Code: (609387-7800

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock

 

BURL

 

New York Stock Exchange

 

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      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

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

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-Accelerated filer

☐  

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  

The registrant had 66,163,573 shares of common stock outstanding as of August 1, 2020.

 


BURLINGTON STORES, INC.

INDEX

 

 

 

Page

Part I—Financial Information

 

3

 

 

 

Item 1. Financial Statements (unaudited)

 

3

 

 

 

Condensed Consolidated Statements of (Loss) Income - Three and Six Months Ended August 1, 2020 and August 3, 2019  

 

3

 

 

 

Condensed Consolidated Statements of Comprehensive (Loss) Income – Three and Six Months Ended August 1, 2020 and August 3, 2019

 

4

 

 

 

Condensed Consolidated Balance Sheets – August 1, 2020, February 1, 2020 and August 3, 2019

 

5

 

 

 

Condensed Consolidated Statements of Cash Flows – Six Months Ended August 1, 2020 and August 3, 2019

 

6

 

 

 

Notes to Condensed Consolidated Financial Statements

 

7

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

23

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

40

 

 

 

Item 4. Controls and Procedures

 

41

 

 

 

Part II—Other Information

 

41

 

 

 

Item 1. Legal Proceedings

 

41

 

 

 

Item 1A. Risk Factors

 

41

 

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

42

 

 

 

Item 3. Defaults Upon Senior Securities

 

42

 

 

 

Item 4. Mine Safety Disclosures

 

43

 

 

 

Item 5. Other Information

 

43

 

 

 

Item 6. Exhibits

 

43

 

 

 

SIGNATURES

 

44

 

 

 

 

2


Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

BURLINGTON STORES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME

(Unaudited)

(All amounts in thousands, except per share data)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

August 1,

 

 

August 3,

 

 

August 1,

 

 

August 3,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,009,882

 

 

$

1,656,363

 

 

$

1,807,877

 

 

$

3,284,910

 

Other revenue

 

 

2,446

 

 

 

5,659

 

 

 

5,974

 

 

 

11,306

 

Total revenue

 

 

1,012,328

 

 

 

1,662,022

 

 

 

1,813,851

 

 

 

3,296,216

 

COSTS AND EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

547,550

 

 

 

970,421

 

 

 

1,329,734

 

 

 

1,931,739

 

Selling, general and administrative expenses

 

 

491,598

 

 

 

531,843

 

 

 

976,686

 

 

 

1,049,221

 

Costs related to debt issuances and amendments

 

 

 

 

 

7

 

 

 

4,352

 

 

 

(375

)

Depreciation and amortization

 

 

54,404

 

 

 

52,261

 

 

 

108,694

 

 

 

102,902

 

Impairment charges - long-lived assets

 

 

1,077

 

 

 

 

 

 

3,001

 

 

 

 

Other income - net

 

 

(824

)

 

 

(1,663

)

 

 

(2,946

)

 

 

(3,754

)

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

202

 

 

 

 

Interest expense

 

 

28,359

 

 

 

13,435

 

 

 

43,052

 

 

 

26,805

 

Total costs and expenses

 

 

1,122,164

 

 

 

1,566,304

 

 

 

2,462,775

 

 

 

3,106,538

 

(Loss) income before income tax (benefit) expense

 

 

(109,836

)

 

 

95,718

 

 

 

(648,924

)

 

 

189,678

 

Income tax (benefit) expense

 

 

(63,055

)

 

 

11,151

 

 

 

(268,415

)

 

 

27,346

 

Net (loss) income

 

$

(46,781

)

 

$

84,567

 

 

$

(380,509

)

 

$

162,332

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock - basic

 

$

(0.71

)

 

$

1.28

 

 

$

(5.79

)

 

$

2.46

 

Common stock - diluted

 

$

(0.71

)

 

$

1.26

 

 

$

(5.79

)

 

$

2.40

 

Weighted average number of common shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock - basic

 

 

65,947

 

 

 

65,918

 

 

 

65,760

 

 

 

66,011

 

Common stock - diluted

 

 

65,947

 

 

 

67,274

 

 

 

65,760

 

 

 

67,502

 

 

See Notes to Condensed Consolidated Financial Statements.

 

 

 

 

3


BURLINGTON STORES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)

(All amounts in thousands)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

August 1,

 

 

August 3,

 

 

August 1,

 

 

August 3,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(46,781

)

 

$

84,567

 

 

$

(380,509

)

 

$

162,332

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate derivative contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized losses arising during the period

 

 

(1,982

)

 

 

(10,222

)

 

 

(11,591

)

 

 

(13,494

)

Reclassification into earnings during the period

 

 

2,049

 

 

 

150

 

 

 

3,157

 

 

 

(35

)

Other comprehensive income (loss), net of tax

 

 

67

 

 

 

(10,072

)

 

 

(8,434

)

 

 

(13,529

)

Total comprehensive (loss) income

 

$

(46,714

)

 

$

74,495

 

 

$

(388,943

)

 

$

148,803

 

 

See Notes to Condensed Consolidated Financial Statements.

 


 

4


BURLINGTON STORES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(All amounts in thousands, except share and per share data)

 

 

 

 

August 1,

 

 

February 1,

 

 

August 3,

 

 

 

2020

 

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,077,146

 

 

$

403,074

 

 

$

97,207

 

Restricted cash and cash equivalents

 

 

6,582

 

 

 

6,582

 

 

 

21,882

 

Accounts receivablenet

 

 

50,255

 

 

 

91,508

 

 

 

98,201

 

Merchandise inventories

 

 

607,554

 

 

 

777,248

 

 

 

823,787

 

Assets held for disposal

 

 

 

 

 

2,261

 

 

 

 

Prepaid and other current assets

 

 

150,253

 

 

 

136,698

 

 

 

144,832

 

Total current assets

 

 

1,891,790

 

 

 

1,417,371

 

 

 

1,185,909

 

Property and equipment—net

 

 

1,431,476

 

 

 

1,403,173

 

 

 

1,317,562

 

Operating lease assets

 

 

2,456,919

 

 

 

2,397,111

 

 

 

2,160,828

 

Tradenames

 

 

238,000

 

 

 

238,000

 

 

 

238,000

 

Favorable leases—net

 

 

634

 

 

 

731

 

 

 

829

 

Goodwill

 

 

47,064

 

 

 

47,064

 

 

 

47,064

 

Deferred tax assets

 

 

4,678

 

 

 

4,678

 

 

 

4,125

 

Other assets

 

 

299,373

 

 

 

85,731

 

 

 

92,120

 

Total assets

 

$

6,369,934

 

 

$

5,593,859

 

 

$

5,046,437

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

492,349

 

 

$

759,107

 

 

$

690,597

 

Current operating lease liabilities

 

 

277,211

 

 

 

302,185

 

 

 

277,411

 

Other current liabilities

 

 

451,877

 

 

 

397,032

 

 

 

344,584

 

Current maturities of long term debt

 

 

3,760

 

 

 

3,577

 

 

 

3,176

 

Total current liabilities

 

 

1,225,197

 

 

 

1,461,901

 

 

 

1,315,768

 

Long term debt

 

 

2,161,166

 

 

 

1,001,723

 

 

 

1,079,775

 

Long term operating lease liabilities

 

 

2,390,344

 

 

 

2,322,000

 

 

 

2,069,613

 

Other liabilities

 

 

113,580

 

 

 

97,798

 

 

 

94,601

 

Deferred tax liabilities

 

 

217,387

 

 

 

182,288

 

 

 

171,543

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value: authorized: 50,000,000

   shares; no shares issued and outstanding

 

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value:

 

 

 

 

 

 

 

 

 

 

 

 

   Authorized: 500,000,000 shares;

 

 

 

 

 

 

 

 

 

 

 

 

   Issued: 80,414,151 shares, 79,882,506 shares and 79,605,368 shares, respectively;

 

 

 

 

 

 

 

 

 

 

 

 

   Outstanding: 66,163,573 shares, 65,929,972 shares and 66,270,608 shares, respectively

 

 

7

 

 

 

7

 

 

 

7

 

Additional paid-in-capital

 

 

1,770,091

 

 

 

1,587,146

 

 

 

1,545,185

 

Accumulated (deficit) earnings

 

 

(175,712

)

 

 

204,797

 

 

 

(97,987

)

Accumulated other comprehensive loss

 

 

(27,394

)

 

 

(18,960

)

 

 

(17,142

)

Treasury stock, at cost

 

 

(1,304,732

)

 

 

(1,244,841

)

 

 

(1,114,926

)

Total stockholders' equity

 

 

262,260

 

 

 

528,149

 

 

 

315,137

 

Total liabilities and stockholders' equity

 

$

6,369,934

 

 

$

5,593,859

 

 

$

5,046,437

 

 

See Notes to Condensed Consolidated Financial Statements.

 

 

5


BURLINGTON STORES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(All amounts in thousands)

 

 

Six Months Ended

 

 

 

August 1,

 

 

August 3,

 

 

 

2020

 

 

2019

 

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(380,509

)

 

$

162,332

 

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

108,694

 

 

 

102,902

 

Impairment chargeslong-lived assets

 

 

3,001

 

 

 

 

Amortization of deferred financing costs

 

 

1,786

 

 

 

641

 

Accretion of long term debt instruments

 

 

9,146

 

 

 

406

 

Deferred income taxes

 

 

(5,923

)

 

 

(1,817

)

Non-cash loss on extinguishment of debt

 

 

202

 

 

 

 

Non-cash stock compensation expense

 

 

30,045

 

 

 

20,974

 

Non-cash lease expense

 

 

1,226

 

 

 

7,318

 

Cash received from landlord allowances

 

 

12,825

 

 

 

23,427

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

59,304

 

 

 

(22,754

)

Merchandise inventories

 

 

169,694

 

 

 

129,890

 

Prepaid and other current assets

 

 

(13,553

)

 

 

(21,729

)

Accounts payable

 

 

(269,750

)

 

 

(158,675

)

Other current liabilities

 

 

10,131

 

 

 

(16,189

)

Other long term assets and long term liabilities

 

 

(216,888

)

 

 

1,829

 

Other operating activities

 

 

7,539

 

 

 

868

 

Net cash (used in) provided by operating activities

 

 

(473,030

)

 

 

229,423

 

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Cash paid for property and equipment

 

 

(133,722

)

 

 

(163,480

)

Lease acquisition costs

 

 

 

 

 

(459

)

Other investing activities

 

 

(395

)

 

 

(44

)

Net cash (used in) investing activities

 

 

(134,117

)

 

 

(163,983

)

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from long term debt—ABL Line of Credit

 

 

400,000

 

 

 

1,053,500

 

Principal payments on long term debt—ABL Line of Credit

 

 

(150,000

)

 

 

(956,600

)

Proceeds from long term debt—Convertible Note

 

 

805,000

 

 

 

 

Proceeds from long term debt—Secured Note

 

 

300,000

 

 

 

 

Purchase of treasury shares

 

 

(59,891

)

 

 

(193,165

)

Proceeds from stock option exercises

 

 

20,984

 

 

 

15,216

 

Deferred financing costs

 

 

(28,815

)

 

 

 

Other financing activities

 

 

(6,059

)

 

 

542

 

Net cash provided by (used in) financing activities

 

 

1,281,219

 

 

 

(80,507

)

Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents

 

 

674,072

 

 

 

(15,067

)

Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period

 

 

409,656

 

 

 

134,156

 

Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period

 

$

1,083,728

 

 

$

119,089

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

17,722

 

 

$

25,461

 

Income tax payments - net

 

$

8,754

 

 

$

70,628

 

Non-cash investing activities:

 

 

 

 

 

 

 

 

Accrued purchases of property and equipment

 

$

60,693

 

 

$

47,754

 

See Notes to Condensed Consolidated Financial Statements.

 

6


BURLINGTON STORES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 1, 2020

(Unaudited)

 

1. Summary of Significant Accounting Policies

Basis of Presentation

As of August 1, 2020, Burlington Stores, Inc., a Delaware corporation (collectively with its subsidiaries, the Company), through its indirect subsidiary Burlington Coat Factory Warehouse Corporation (BCFWC), operated 739 retail stores.

These unaudited Condensed Consolidated Financial Statements include the accounts of Burlington Stores, Inc. and its subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation. The Condensed Consolidated Financial Statements are unaudited, but in the opinion of management reflect all adjustments (which are of a normal and recurring nature) necessary for the fair presentation of the results of operations for the interim periods presented. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted. These Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 2020 (Fiscal 2019 10-K). The balance sheet at February 1, 2020 presented herein has been derived from the audited Consolidated Financial Statements contained in the Fiscal 2019 10-K. Because of the COVID-19 pandemic discussed below, and because the Company’s business is seasonal in nature, the operating results for the three and six month periods ended August 1, 2020 are not necessarily indicative of results for the fiscal year.

Accounting policies followed by the Company are described in Note 1, “Summary of Significant Accounting Policies,” included in Part II, Item 8 of the Fiscal 2019 10-K.

Fiscal Year

The Company defines its fiscal year as the 52- or 53-week period ending on the Saturday closest to January 31. The current fiscal year ending January 30, 2021 (Fiscal 2020) and the prior fiscal year ended February 1, 2020 (Fiscal 2019) both consist of 52 weeks.

COVID-19

On March 11, 2020, the World Health Organization declared the novel coronavirus (known as COVID-19) outbreak to be a global pandemic. As a result, the Company began the temporary closing of some of its stores, and effective March 22, 2020, it made the decision to temporarily close all of its stores, distribution centers (other than sporadic processing of received inventory) and corporate offices to combat the rapid spread of COVID-19.

 

These developments have caused significant disruptions to the Company’s business and have had a significant adverse impact on its financial condition, results of operations and cash flows, the continuing extent of which will be primarily based on a variety of factors, including the timing and extent of any recovery in traffic and consumer spending at the Company’s stores, as well as any future required store closures because of COVID-19 resurgences. The Company began reopening stores on May 11, 2020, with the majority of stores, as well as all distribution centers, re-opened by mid-June 2020, and substantially all stores re-opened by the end of the second quarter. However, the Company is currently unable to determine whether, when or how the conditions surrounding the COVID-19 pandemic will change, including the impact that social distancing protocols will have on the Company’s operations, the degree to which the Company’s customers will patronize its stores and any impact from potential subsequent additional outbreaks, including additional temporary store closures.

In response to the COVID-19 pandemic and the temporary closing of stores, the Company provided two weeks of financial support to associates impacted by these store closures and by the shutdown of distribution centers. The Company temporarily furloughed most store and distribution center associates, as well as some corporate associates, but continued to provide benefits to furloughed associates, including paying 100% of their current medical benefit premiums. As of August 1, 2020, the Company has recalled all furloughed associates at its re-opened stores, as well as its corporate and distribution facilities.

In order to maintain maximum financial flexibility during these uncertain times, the Company completed several debt transactions in the first quarter of Fiscal 2020. In March 2020, the Company borrowed $400 million on its existing $600 million senior

 

7


secured asset-based revolving credit facility (the ABL Line of Credit), $150 million of which was repaid during the second quarter. In April 2020, the Company issued $805 million of 2.25% Convertible Senior Notes due 2025 (the Convertible Notes), and BCFWC issued $300 million of 6.25% Senior Secured Notes due 2025 (the Secured Notes). Refer to Note 4, “Long Term Debt,” for further discussion regarding these debt transactions.

Additionally, the Company took the following steps to further enhance its financial flexibility:

 

Carefully managed operating expenses, working capital and capital expenditures, including ceasing substantially all buying activity while stores were closed. The Company has subsequently resumed its buying activities, while continuing its conservative approach toward operating expenses and capital expenditures.

 

Negotiated rent deferral agreements with landlords.

 

Suspended the Company’s share repurchase program.

 

The Company’s CEO voluntarily agreed to not take a salary; the Company’s board of directors voluntarily forfeited their cash compensation; the Company’s executive leadership team voluntarily agreed to decrease their salary by 50%, and smaller salary reductions were temporarily put in place for all employees through a certain level. This compensation has been reinstated now that substantially all of the Company’s stores have reopened.

 

The annual incentive bonus payments related to Fiscal 2019 performance were delayed to the second quarter of Fiscal 2020, and merit pay increases for Fiscal 2020 were delayed to the third quarter of Fiscal 2020.

Due to the aging of inventory related to the temporary store closures discussed above, as well as the impact of seasonality on the Company’s merchandise, the Company recognized inventory markdown reserves of $271.9 million during the three month period ended May 2, 2020. These reserves covered markdowns taken during the second quarter of Fiscal 2020. These charges were included in “Cost of sales” on the Company’s Condensed Consolidated Statement of (Loss) Income.

 

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law, which provides emergency economic assistance for American workers, families and businesses affected by the COVID-19 pandemic. The economic relief package includes government loan enhancement programs and various tax provisions to help improve liquidity for American businesses. Based on the Company’s evaluation of the CARES Act, the Company believes that it qualifies for certain employer refundable payroll credits, deferral of applicable payroll taxes, net operating loss (NOL) carrybacks and immediate expensing for eligible qualified improvement property. The Company recorded a tax benefit of $24.8 million and $87.3 million in its effective income tax rate for the three and six month periods ended August 1, 2020, respectively, for the increased benefit from NOL carrybacks to earlier years when the tax rate was higher than the current year. The Company estimates that it will obtain a tax refund of $221.2 million from the carryback of federal NOLs, which is included in the line item “Other assets” on the Company’s Condensed Consolidated Balance Sheet. Refer to Note 8, “Income Taxes” for further discussion.

 

The Company could experience other potential adverse impacts as a result of the COVID-19 pandemic, including, but not limited to, charges from adjustments to the carrying amount of goodwill and other intangible assets or long-lived asset impairment charges. In addition, the negative impacts of the COVID-19 pandemic may result in further changes in the amount of valuation allowance required. Actual results may differ materially from the Company’s current estimates as the scope of the COVID-19 pandemic evolves, depending largely, though not exclusively, on the duration and extent of the disruption to its business.

Recently Adopted Accounting Standards

Reference Rate Reform

On March 12, 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which aims to address accounting consequences that could result from the global markets’ anticipated transition away from the use of the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The amendments in this update provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The optional amendments are effective for all entities as of March 12, 2020, through December 31, 2022. The Company intends to elect to apply certain of the optional expedients when evaluating the impact of reference rate reform on its debt and derivative instruments that reference LIBOR.

 

8


Intangible Assets

On January 26, 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment,” which aims to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under the new guidance, goodwill impairment will be measured as the amount by which the carrying value exceeds the fair value. The loss recognized should not exceed the total amount of goodwill allocated to the reporting unit. The new guidance became effective for the Company as of the beginning of Fiscal 2020. Adoption of this guidance did not have a significant impact on the Company’s consolidated financial statements and notes thereto.

In August 2018, the FASB issued ASU 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” This ASU requires that implementation costs incurred in a hosting arrangement that is a service contract be assessed in accordance with the existing guidance in Subtopic 350-40, “Internal-Use Software.” Accordingly, costs incurred during the preliminary project stage must be expensed as incurr