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 2021-05-01 Filed 2021-05-27
10-K 2021-01-30 Filed 2021-03-15
10-Q 2020-10-31 Filed 2020-11-24
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 2020-11-24
8-K 2020-11-24
8-K 2020-08-27
8-K 2020-07-20
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-10.6 burl-ex106_10.htm
EX-31.1 burl-ex311_7.htm
EX-31.2 burl-ex312_9.htm
EX-32.1 burl-ex321_8.htm
EX-32.2 burl-ex322_6.htm

Burlington Stores Earnings 2020-05-02

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

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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 May 2, 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 65,846,701 shares of common stock outstanding as of May 2, 2020.

 


BURLINGTON STORES, INC.

INDEX

 

 

 

Page

Part I—Financial Information

 

3

 

 

 

Item 1. Financial Statements (unaudited)

 

3

 

 

 

Condensed Consolidated Statements of (Loss) Income - Three Months Ended May 2, 2020 and May 4, 2019  

 

3

 

 

 

Condensed Consolidated Statements of Comprehensive (Loss) Income – Three Months Ended May 2, 2020 and May 4, 2019

 

4

 

 

 

Condensed Consolidated Balance Sheets – May 2, 2020, February 1, 2020 and May 4, 2019

 

5

 

 

 

Condensed Consolidated Statements of Cash Flows – Three Months Ended May 2, 2020 and May 4, 2019

 

6

 

 

 

Notes to Condensed Consolidated Financial Statements

 

7

 

 

 

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

 

22

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

38

 

 

 

Item 4. Controls and Procedures

 

38

 

 

 

Part II—Other Information

 

38

 

 

 

Item 1. Legal Proceedings

 

38

 

 

 

Item 1A. Risk Factors

 

38

 

 

 

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

 

40

 

 

 

Item 3. Defaults Upon Senior Securities

 

40

 

 

 

Item 4. Mine Safety Disclosures

 

40

 

 

 

Item 5. Other Information

 

40

 

 

 

Item 6. Exhibits

 

41

 

 

 

SIGNATURES

 

43

 

 

 

 

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

 

 

 

May 2,

 

 

May 4,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

 

REVENUES:

 

 

 

 

 

 

 

 

Net sales

 

$

797,996

 

 

$

1,628,547

 

Other revenue

 

 

3,527

 

 

 

5,647

 

Total revenue

 

 

801,523

 

 

 

1,634,194

 

COSTS AND EXPENSES:

 

 

 

 

 

 

 

 

Cost of sales

 

 

782,184

 

 

 

961,318

 

Selling, general and administrative expenses

 

 

485,088

 

 

 

517,378

 

Costs related to debt amendments

 

 

4,352

 

 

 

(382

)

Depreciation and amortization

 

 

54,291

 

 

 

50,641

 

Impairment charges - long-lived assets

 

 

1,924

 

 

 

 

Other income - net

 

 

(2,124

)

 

 

(2,092

)

Loss on extinguishment of debt

 

 

202

 

 

 

 

Interest expense

 

 

14,693

 

 

 

13,371

 

Total costs and expenses

 

 

1,340,610

 

 

 

1,540,234

 

(Loss) income before income tax (benefit) expense

 

 

(539,087

)

 

 

93,960

 

Income tax (benefit) expense

 

 

(205,359

)

 

 

16,195

 

Net (loss) income

 

$

(333,728

)

 

$

77,765

 

 

 

 

 

 

 

 

 

 

Net (loss) income per common share:

 

 

 

 

 

 

 

 

Common stock - basic

 

$

(5.09

)

 

$

1.18

 

Common stock - diluted

 

$

(5.09

)

 

$

1.15

 

Weighted average number of common shares:

 

 

 

 

 

 

 

 

Common stock - basic

 

 

65,572

 

 

 

66,104

 

Common stock - diluted

 

 

65,572

 

 

 

67,730

 

 

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

 

 

 

May 2,

 

 

May 4,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(333,728

)

 

$

77,765

 

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

Interest rate derivative contracts:

 

 

 

 

 

 

 

 

Net unrealized losses arising during the period

 

 

(9,609

)

 

 

(3,272

)

Reclassification into earnings during the period

 

 

1,108

 

 

 

(185

)

Other comprehensive loss, net of tax

 

 

(8,501

)

 

 

(3,457

)

Total comprehensive (loss) income

 

$

(342,229

)

 

$

74,308

 

 

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)

 

 

 

 

May 2,

 

 

February 1,

 

 

May 4,

 

 

 

2020

 

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,488,470

 

 

$

403,074

 

 

$

105,031

 

Restricted cash and cash equivalents

 

 

6,582

 

 

 

6,582

 

 

 

21,882

 

Accounts receivablenet

 

 

12,375

 

 

 

91,508

 

 

 

99,461

 

Merchandise inventories

 

 

625,908

 

 

 

777,248

 

 

 

895,813

 

Assets held for disposal

 

 

2,261

 

 

 

2,261

 

 

 

 

Prepaid and other current assets

 

 

94,284

 

 

 

136,698

 

 

 

129,614

 

Total current assets

 

 

2,229,880

 

 

 

1,417,371

 

 

 

1,251,801

 

Property and equipment—net

 

 

1,407,082

 

 

 

1,403,173

 

 

 

1,288,180

 

Operating lease assets

 

 

2,436,761

 

 

 

2,397,111

 

 

 

2,144,757

 

Tradenames

 

 

238,000

 

 

 

238,000

 

 

 

238,000

 

Favorable leases—net

 

 

683

 

 

 

731

 

 

 

941

 

Goodwill

 

 

47,064

 

 

 

47,064

 

 

 

47,064

 

Deferred tax assets

 

 

4,661

 

 

 

4,678

 

 

 

4,191

 

Other assets

 

 

276,546

 

 

 

85,731

 

 

 

90,305

 

Total assets

 

$

6,640,677

 

 

$

5,593,859

 

 

$

5,065,239

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

701,922

 

 

$

759,107

 

 

$

707,672

 

Current operating lease liabilities

 

 

269,016

 

 

 

302,185

 

 

 

273,348

 

Other current liabilities

 

 

380,789

 

 

 

397,032

 

 

 

359,818

 

Current maturities of long term debt

 

 

3,679

 

 

 

3,577

 

 

 

3,052

 

Total current liabilities

 

 

1,355,406

 

 

 

1,461,901

 

 

 

1,343,890

 

Long term debt

 

 

2,304,094

 

 

 

1,001,723

 

 

 

1,133,385

 

Long term operating lease liabilities

 

 

2,370,861

 

 

 

2,322,000

 

 

 

2,045,743

 

Other liabilities

 

 

112,092

 

 

 

97,798

 

 

 

83,393

 

Deferred tax liabilities

 

 

219,123

 

 

 

182,288

 

 

 

180,280

 

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: 80,084,171 shares, 79,882,506 shares and 79,332,577 shares, respectively;

 

 

 

 

 

 

 

 

 

 

 

 

   Outstanding: 65,846,701 shares, 65,929,972 shares and 66,366,098 shares, respectively

 

 

7

 

 

 

7

 

 

 

7

 

Additional paid-in-capital

 

 

1,737,868

 

 

 

1,587,146

 

 

 

1,520,244

 

Accumulated (deficit) earnings

 

 

(128,931

)

 

 

204,797

 

 

 

(182,554

)

Accumulated other comprehensive loss

 

 

(27,461

)

 

 

(18,960

)

 

 

(7,070

)

Treasury stock, at cost

 

 

(1,302,382

)

 

 

(1,244,841

)

 

 

(1,052,079

)

Total stockholders' equity

 

 

279,101

 

 

 

528,149

 

 

 

278,548

 

Total liabilities and stockholders' equity

 

$

6,640,677

 

 

$

5,593,859

 

 

$

5,065,239

 

 

See Notes to Condensed Consolidated Financial Statements.

 

 

5


BURLINGTON STORES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(All amounts in thousands)

 

 

Three Months Ended

 

 

 

May 2,

 

 

May 4,

 

 

 

2020

 

 

2019

 

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(333,728

)

 

$

77,765

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

54,291

 

 

 

50,641

 

Impairment chargeslong-lived assets

 

 

1,924

 

 

 

 

Amortization of deferred financing costs

 

 

479

 

 

 

330

 

Accretion of long term debt instruments

 

 

1,562

 

 

 

203

 

Deferred income taxes

 

 

(4,146

)

 

 

2,993

 

Non-cash loss on extinguishment of debt

 

 

202

 

 

 

 

Non-cash stock compensation expense

 

 

17,352

 

 

 

9,427

 

Non-cash lease expense

 

 

1,174

 

 

 

4,057

 

Cash received from landlord allowances

 

 

5,807

 

 

 

12,213

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

89,367

 

 

 

(20,170

)

Merchandise inventories

 

 

151,340

 

 

 

57,864

 

Prepaid and other current assets

 

 

42,415

 

 

 

(6,028

)

Accounts payable

 

 

(70,377

)

 

 

(140,767

)

Other current liabilities

 

 

(40,553

)

 

 

2,515

 

Other long term assets and long term liabilities

 

 

(192,735

)

 

 

3,080

 

Other operating activities

 

 

3,891

 

 

 

68

 

Net cash (used in) provided by operating activities

 

 

(271,735

)

 

 

54,191

 

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Cash paid for property and equipment

 

 

(62,463

)

 

 

(83,781

)

Other investing activities

 

 

(146

)

 

 

(72

)

Net cash (used in) investing activities

 

 

(62,609

)

 

 

(83,853

)

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from long term debt—ABL Line of Credit

 

 

400,000

 

 

 

588,300

 

Principal payments on long term debt—ABL Line of Credit

 

 

 

 

 

(438,300

)

Proceeds from long term debt—Convertible Note

 

 

805,000

 

 

 

 

Proceeds from long term debt—Secured Note

 

 

300,000

 

 

 

 

Purchase of treasury shares

 

 

(57,542

)

 

 

(130,319

)

Proceeds from stock option exercises

 

 

1,454

 

 

 

1,821

 

Deferred financing costs

 

 

(26,846

)

 

 

 

Other financing activities

 

 

(2,326

)

 

 

917

 

Net cash provided by financing activities

 

 

1,419,740

 

 

 

22,419

 

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

 

 

1,085,396

 

 

 

(7,243

)

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

 

$

1,495,052

 

 

$

126,913

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

8,566

 

 

$

12,543

 

Income tax payments - net

 

$

104

 

 

$

1,179

 

Non-cash investing activities:

 

 

 

 

 

 

 

 

Accrued purchases of property and equipment

 

$

57,219

 

 

$

46,702

 

See Notes to Condensed Consolidated Financial Statements.

 

6


BURLINGTON STORES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 2, 2020

(Unaudited)

 

1. Summary of Significant Accounting Policies

Basis of Presentation

As of May 2, 2020, Burlington Stores, Inc., a Delaware corporation (collectively with its subsidiaries, the Company), through its indirect subsidiary Burlington Coat Factory Warehouse Corporation (BCFWC), has expanded its store base to 736 retail stores, which includes temporarily closed 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 month period ended May 2, 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. All stores, distribution centers and corporate offices remained temporarily closed as of May 2, 2020.

 

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 extent of which will be primarily based on the duration of the store closures, as well as the timing and extent of any recovery in traffic and consumer spending at the Company’s stores. As of May 29, 2020, approximately 400 of the Company’s stores, as well as its distribution centers, have been reopened, and the Company expects the majority of its stores to reopen by mid-June 2020. 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.

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 continues to provide benefits to furloughed associates, including paying 100% of their current medical benefit premiums. As the Company reopens its stores, it has begun to recall furloughed associates.

 

7


In order to maintain maximum financial flexibility during these uncertain times, the Company initiated several debt transactions. During March 2020, the Company borrowed $400 million on its existing $600 million senior secured asset-based revolving credit facility (the ABL Line of Credit). On April 16, 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.

 

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 have been temporarily put in place for all employees through a certain level. It is anticipated that this compensation will be reinstated when a significant number of the Company’s stores reopen.

 

The annual incentive bonus payments related to Fiscal 2019 performance, as well as merit pay increases for Fiscal 2020, have been delayed to later in the fiscal year after the Company has more clarity regarding the impact of COVID-19.

Although the Company has ceased most of its merchandise purchasing activity during this period, a significant amount of inventory remained at stores and in distribution centers prior to the temporary closures discussed above. Due to the aging of this inventory, as well as the impact of seasonality on the Company’s merchandise, the Company recognized inventory markdowns of $271.9 million during the three month period ended May 2, 2020. These charges are 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 preliminary evaluation of the CARES Act, the Company currently believes that it qualifies for certain employer refundable payroll credits, deferral of applicable payroll taxes, net operating loss carryback and immediate expensing for eligible qualified improvement property. The Company recorded a tax benefit of $62.5 million in its effective income tax rate for the three month period ended May 2, 2020, for the increased benefit from net operating loss carryback to earlier years when the tax rate was higher than the current year. The Company intends to continue to review and consider any available potential benefits under the CARES Act for which it qualifies, including those described above.

 

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.

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 incurred, while costs incurred during the application development stage must be capitalized. Capitalized implementation costs associated with a hosting arrangement that is a service contract must be expensed over the term of the hosting arrangement. Additionally, the new guidance requires that the expense of these capitalized costs be presented in the same line item in the statements of income as the fees associated with the hosting element of the arrangement. 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.

There were no other new accounting standards that had a material impact on the Company’s Condensed Consolidated Financial Statements during the three month period ended May 2, 2020, and there were no new accounting standards or pronouncements that were issued but not yet effective as of May 2, 2020 that the Company expects to have a material impact on its financial position or results of operations upon becoming effective.

2. Stockholders’ Equity

Activity for the three month periods ended May 2, 2020 and May 4, 2019 in the Company’s stockholders’ equity are summarized below:

 

 

(in thousands, except share data)

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Treasury Stock

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit (Earnings)

 

 

Loss

 

 

Shares

 

 

Amount

 

 

Total

 

Balance at February 1, 2020

 

 

79,882,506

 

 

$

7

 

 

$

1,587,146

 

 

$

204,797

 

 

$

(18,960

)

 

 

(13,952,534

)

 

$

(1,244,841

)

 

$

528,149

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(333,728

)

 

 

 

 

 

 

 

 

 

 

 

(333,728

)

Stock options exercised

 

 

180,950

 

 

 

 

 

 

1,454

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,454

 

Shares used for tax withholding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(41,363

)

 

 

(7,383

)

 

 

(7,383

)

Shares purchased as part of publicly announced programs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(243,573

)

 

 

(50,158

)

 

 

(50,158

)

Vesting of restricted shares, net of forfeitures of 4,166 restricted shares

 

 

20,715

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

 

 

 

 

 

 

17,352

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,352

 

Equity component of convertible notes issuance, net

 

 

 

 

 

 

 

 

131,916

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

131,916

 

Unrealized losses on interest rate derivative contracts, net of related tax benefit of $3.6 million

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,609

)

 

 

 

 

 

 

 

 

(9,609

)

Amount reclassified into earnings, net of related taxes of $0.4 million

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,108

 

 

 

 

 

 

 

 

 

1,108