Burlington Stores, Inc. (NYSE: BURL), a nationally recognized
off-price retailer of high-quality, branded apparel at everyday low
prices, today announced its results for the second quarter ended
August 3, 2019.
Tom Kingsbury, CEO, stated, “We are very pleased with our second
quarter results, driven by our 3.8% comparable store sales increase
and 10.5% overall sales growth, which resulted in a 19% increase in
Adjusted EPS, well ahead of our guidance. In addition, based on our
disciplined inventory management, our comparable store inventory
decreased 7%, putting us in a very good position to take advantage
of the abundant values available in the marketplace. I would like
to thank our store, supply chain and corporate teams for
contributing to these strong results.”
Fiscal 2019 Second Quarter Operating
Results (for the 13 week period ended August 3, 2019 compared with
the 13 week period ended August 4, 2018)
- Total sales increased 10.5% to $1,656 million,
while comparable store sales increased 3.8%. New and non-comparable
stores contributed an incremental $115 million in sales during the
quarter.
- Gross margin rate was flat vs. last year at
41.4%. Merchandise margin increased 30 basis points, which was
offset by a 30 basis point increase in freight costs. Product
sourcing costs, which are included in selling, general and
administrative expenses (SG&A), were 10 basis points lower as a
percentage of sales vs. the Fiscal 2018 second quarter. Product
sourcing costs include the costs of processing goods through our
supply chain and buying costs.
- SG&A increased $53 million to $532 million
for the second quarter of Fiscal 2019, primarily due to store
related costs associated with our new and non-comparable stores. As
a result of our adoption of the new Lease Accounting Standard,
favorable lease costs, initially recorded as a result of purchase
accounting that occurred in 2006, is now included in SG&A. In
prior periods, these costs were included in depreciation and
amortization.
- Adjusted SG&A, defined as SG&A less
product sourcing costs and favorable lease costs, as a percentage
of sales decreased 30 basis points to 26.6%. This decrease was
driven by leverage on fixed expenses due to strong sales growth, as
well as disciplined expense management and profit improvement
initiatives.
- Other Income and Revenue decreased by $3
million, or 20 basis points, driven primarily by $2 million in
insurance gains recorded in the second quarter of Fiscal
2018.
- The effective tax rate increased 110 basis
points to 11.6%. The Adjusted Effective Tax Rate was 12.8%
vs. last year’s Adjusted Effective Tax Rate of 17.1%, excluding the
revaluation of deferred tax liabilities resulting from changes to
New Jersey state tax law.
- Net income increased 19% to $85 million, or
$1.26 per share vs. $1.03 last year, and Adjusted Net Income
increased 16% to $91 million, or $1.36 per share, vs. $1.15 last
year. This increase in Adjusted Net Income was driven primarily by
higher sales growth, as well as leverage on fixed expenses,
disciplined expense management and profit improvement
initiatives.
- Fully diluted shares outstanding amounted to
67.3 million at the end of the quarter compared with 68.8 million
at the end of last year’s second quarter. The decrease was
primarily the result of share repurchases under the Company’s share
repurchase program, discussed in more detail below. From the end of
the second quarter of Fiscal 2018 through the end of the second
quarter of Fiscal 2019, the Company has repurchased approximately
1.8 million shares of its common stock under its share repurchase
program.
- Adjusted EBITDA increased 12%, or $18 million
higher than last year’s second quarter. The 10 basis point increase
in Adjusted EBITDA as a percentage of sales was primarily driven by
higher sales and leverage on fixed expenses, due to disciplined
expense management and profit improvement initiatives, which was
offset partially by lower other income and revenue. Adjusted EBIT
increased 13%, or $13 million above the prior year period, to $118
million.
First Six Months Fiscal 2019 Results
- Total sales increased 8.9%, which included a comparable store
sales increase of 1.9% over the first six months of Fiscal 2018, on
top of last year’s 3.8% comparable store sales increase. Net
income increased 6% over the prior year period to $162 million, or
$2.40 per share vs. $2.23 last year. Adjusted EBIT increased by 5%,
or $11 million above last year, to $236 million, representing a 30
basis point decrease as a percentage of sales vs. the prior year
period. Adjusted Net Income of $177 million was up 7% vs.
last year, while Adjusted EPS was $2.62 vs. $2.41 in the prior year
period.
Inventory
- Merchandise inventories were $824 million vs. $844 million last
year. The decrease was due primarily to a 7% decrease in comparable
store inventory at the end of the second quarter of Fiscal
2019. Pack and hold inventory was 29% of total inventory at
the end of the second quarter of Fiscal 2019 compared to 26% at the
end of the second quarter of Fiscal 2018.
Share Repurchase Activity
- During the second quarter, the Company invested $51 million of
cash to repurchase 300,742 shares of its common stock. As of the
end of the second quarter, the Company had $124 million remaining
on its current share repurchase authorization. In addition,
we are pleased to announce that the Company’s Board of Directors
authorized the repurchase of up to an additional $400 million of
common stock, which is authorized to be executed through August
2021.
Full Year Fiscal 2019 and Third Quarter
2019 Outlook
For Fiscal 2019 (the 52-weeks ending
February 1, 2020), the Company now expects:
- Total sales to increase in the range of 8.8% to 9.3%; this
assumes comparable store sales to increase in the range of 2% to 3%
for the third and fourth quarters of Fiscal 2019, resulting in a
full year comparable store sales increase of 2.0% to 2.5% on top of
the 3.2% increase during Fiscal 2018;
- Depreciation and amortization, exclusive of favorable lease
costs, to be approximately $210 million;
- Adjusted EBIT margin to be flat to up 10 basis points vs last
year;
- Interest expense of approximately $52 million;
- An effective tax rate of approximately 20 to 21%;
- To open 50 net new stores, and invest Net Capital Expenditures
of approximately $310 million; and
- Based on second quarter results, Adjusted EPS in the range of
$7.14 to $7.22, utilizing an updated fully diluted share count of
approximately 67.3 million, as compared to Fiscal 2018 net income
per share of $6.04 and Fiscal 2018 Adjusted EPS of $6.44. This
outlook excludes an expected $0.05 per share impact of management
transition costs.
For the third quarter of Fiscal 2019
(the 13 weeks ending November 2, 2019), the Company
expects:
- Total sales to increase in the range of 8.5% to 9.5%;
- Comparable store sales to increase 2% to 3%;
- An effective tax rate of approximately 20 to 21%; and
- Adjusted EPS in the range of $1.37 to $1.41, which assumes a
fully diluted share count of approximately 67.1 million, as
compared to Fiscal 2018 third quarter net income per share of $1.12
and Fiscal 2018 third quarter Adjusted EPS of $1.21. This outlook
excludes an expected $0.02 per share impact of management
transition costs.
The Company has not presented a quantitative reconciliation of
the forward-looking non-GAAP financial measures set out above to
their most comparable GAAP financial measures because it would
require the Company to create estimated ranges on a GAAP basis,
which would entail unreasonable effort. Adjustments required to
reconcile forward-looking non-GAAP measures cannot be predicted
with reasonable certainty but may include, among others, costs
related to debt amendments, loss on extinguishment of debt, and
impairment charges, as well as the tax effect of such items. Some
or all of those adjustments could be significant.
Note Regarding Non-GAAP Financial
Measures
The foregoing discussion of the Company’s
operating results includes references to Adjusted SG&A,
Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings per Share
(or Adjusted EPS), Adjusted EBIT (or Operating Margin), and
Adjusted Effective Tax Rate. The Company believes these measures
are useful in evaluating the operating performance of the business
and for comparing its historical results to that of other
retailers. These non-GAAP financial measures are defined and
reconciled to the most comparable GAAP measure later in this
document.
Publication of the Company’s Inaugural Corporate Social
Responsibility ReportThe Company has released its first
annual Corporate Social Responsibility report, which discloses the
Company’s approach to managing environmental, social and governance
(ESG) issues of import to the business and stakeholders. Covering
the Company’s Fiscal Year 2018, which ended on February 2, 2019,
the Corporate Social Responsibility report provides investors and
other interested parties with the Company’s overall performance on
a range of ESG issues and specific initiatives pertaining to
Burlington’s associates, environmental impacts, supply chain, and
governance and ethics, as well as the communities in which
Burlington operates. The report was informed by several reporting
frameworks, including the Global Reporting Initiative (GRI),
Sustainability Accounting Standards Board (SASB), and CDP, and
feedback from stakeholders to better understand the issues of most
interest to our stakeholders. Burlington’s 2018 Corporate Social
Responsibility report can be found at
www.burlingtoninvestors.com/corporate-social-responsibility.
Second Quarter 2019 Conference Call
The Company will hold a conference call on Thursday August 29,
2019 at 8:30 a.m. Eastern Time to discuss the Company’s second
quarter results. The U.S. toll-free dial-in for the conference
call is 1-866-437-5084 and the international dial-in number is
1-409-220-9374.
A live webcast of the conference call will also be available on
the investor relations page of the Company's website at
www.burlingtoninvestors.com. For those unable to participate
in the conference call, a replay will be available beginning after
the conclusion of the call on August 29, 2019 through September 5,
2019. The U.S. toll-free replay dial-in number is
1-855-859-2056 and the international replay dial-in number is
1-404-537-3406. The replay passcode is 3268106. Additionally,
a replay of the call will be available on the investor relations
page of the Company's website at www.burlingtoninvestors.com.
Investors and others should note that Burlington Stores
currently announces material information using SEC filings, press
releases, public conference calls and webcasts. In the future,
Burlington Stores will continue to use these channels to distribute
material information about the Company, and may also utilize its
website and/or various social media sites to communicate important
information about the Company, key personnel, new brands and
services, trends, new marketing campaigns, corporate initiatives
and other matters. Information that the Company posts on its
website or on social media channels could be deemed material;
therefore, the Company encourages investors, the media, our
customers, business partners and others interested in Burlington
Stores to review the information posted on its website, as well as
the following social media channels:
Facebook (https://www.facebook.com/BurlingtonCoatFactory/) and
Twitter (https://twitter.com/burlington).
Any updates to the list of social media channels the Company may
use to communicate material information will be posted on the
investor relations page of the Company's website at
www.burlingtoninvestors.com.
About Burlington Stores, Inc.
Burlington Stores, Inc., headquartered in New Jersey, is a
nationally recognized off-price retailer with Fiscal 2018 net sales
of $6.6 billion. The Company is a Fortune 500 company and its
common stock is traded on the New York Stock Exchange under the
ticker symbol “BURL.” The Company operated 691 stores as of the end
of the second quarter of Fiscal 2019, inclusive of an internet
store, in 45 states and Puerto Rico, principally under the name
Burlington Stores. The Company’s stores offer an extensive
selection of in-season, fashion-focused merchandise at up to 60%
off other retailers' prices, including women’s ready-to-wear
apparel, menswear, youth apparel, baby, beauty, footwear,
accessories, home and coats.
For more information about the Company, visit
www.burlingtonstores.com.
Investor Relations Contacts:David J.
Glick855-973-8445 Info@BurlingtonInvestors.com
Allison MalkinICR, Inc.203-682-8225
Safe Harbor for Forward-Looking and Cautionary
StatementsThis release contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended (Exchange Act). All statements other than statements of
historical fact included in this release, including those made in
the section describing our outlook for future periods, are
forward-looking statements. Forward-looking statements discuss our
current expectations and projections relating to our financial
condition, results of operations, plans, objectives, future
performance and business. You can identify forward-looking
statements by the fact that they do not relate strictly to
historical or current facts. We do not undertake to publicly update
or revise our forward-looking statements even if experience or
future changes make it clear that any projected results expressed
or implied in such statements will not be realized. If we do update
one or more forward-looking statements, no inference should be made
that we will make additional updates with respect to those or other
forward-looking statements. All forward-looking statements are
subject to risks and uncertainties that may cause actual results to
differ materially from those we expected, including general
economic conditions; our ability to successfully implement one or
more of our strategic initiatives and growth plans; the
availability of desirable store locations on suitable terms;
changing consumer preferences and demand; industry trends,
including changes in buying, inventory and other business
practices; competitive factors, including pricing and promotional
activities of major competitors and an increase in competition
within the markets in which we compete; the availability, selection
and purchasing of attractive merchandise on favorable terms; import
risks, including tax and trade policies, tariffs and
government regulations; weather patterns, including, among other
things, changes in year-over-year temperatures; our future
profitability; our ability to control costs and expenses;
unforeseen cyber-related problems or attacks; any unforeseen
material loss or casualty; the effect of inflation; regulatory and
tax changes; our relationships with employees; the impact of
current and future laws and the interpretation of such laws;
terrorist attacks, particularly attacks on or within markets in
which we operate; natural and man-made disasters, including fire,
snow and ice storms, flood, hail, hurricanes and earthquakes; our
substantial level of indebtedness and related debt-service
obligations; restrictions imposed by covenants in our debt
agreements; availability of adequate financing; our dependence on
vendors for our merchandise; domestic events affecting the delivery
of merchandise to our stores; existence of adverse litigation; and
each of the factors that may be described from time to time in our
filings with the Securities and Exchange Commission (SEC). For each
of these factors, the Company claims the protection of the safe
harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995, as amended.
BURLINGTON STORES,
INC.CONDENSED CONSOLIDATED STATEMENTS OF
INCOME (unaudited) (All amounts
in thousands, except per share data)
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
August 3, |
|
|
August 4, |
|
|
August 3, |
|
|
August 4, |
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
REVENUES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
1,656,363 |
|
|
$ |
1,498,633 |
|
|
$ |
3,284,910 |
|
|
$ |
3,017,079 |
|
Other revenue |
|
|
5,659 |
|
|
|
6,109 |
|
|
|
11,306 |
|
|
|
12,371 |
|
Total revenue |
|
|
1,662,022 |
|
|
|
1,504,742 |
|
|
|
3,296,216 |
|
|
|
3,029,450 |
|
COSTS AND
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
970,421 |
|
|
|
877,474 |
|
|
|
1,931,739 |
|
|
|
1,770,156 |
|
Selling, general and
administrative expenses |
|
|
531,843 |
|
|
|
479,077 |
|
|
|
1,049,221 |
|
|
|
947,424 |
|
Costs related to debt
amendments |
|
|
7 |
|
|
|
79 |
|
|
|
(375 |
) |
|
|
79 |
|
Depreciation and
amortization |
|
|
52,261 |
|
|
|
56,923 |
|
|
|
102,902 |
|
|
|
107,432 |
|
Other income - net |
|
|
(1,663 |
) |
|
|
(4,022 |
) |
|
|
(3,754 |
) |
|
|
(5,372 |
) |
Loss on extinguishment of
debt |
|
|
— |
|
|
|
1,361 |
|
|
|
— |
|
|
|
1,361 |
|
Interest expense |
|
|
13,435 |
|
|
|
14,581 |
|
|
|
26,805 |
|
|
|
29,103 |
|
Total costs and expenses |
|
|
1,566,304 |
|
|
|
1,425,473 |
|
|
|
3,106,538 |
|
|
|
2,850,183 |
|
Income before income
tax expense |
|
|
95,718 |
|
|
|
79,269 |
|
|
|
189,678 |
|
|
|
179,267 |
|
Income tax expense |
|
|
11,151 |
|
|
|
8,312 |
|
|
|
27,346 |
|
|
|
25,723 |
|
Net income |
|
$ |
84,567 |
|
|
$ |
70,957 |
|
|
$ |
162,332 |
|
|
$ |
153,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per common share |
|
$ |
1.26 |
|
|
$ |
1.03 |
|
|
$ |
2.40 |
|
|
$ |
2.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares - diluted |
|
|
67,274 |
|
|
$ |
68,769 |
|
|
|
67,502 |
|
|
|
68,870 |
|
|
BURLINGTON STORES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited) (All amounts in
thousands)
|
|
August 3, |
|
|
February 2, |
|
|
August 4, |
|
|
|
2019 |
|
|
2019 |
|
|
2018 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
97,207 |
|
|
$ |
112,274 |
|
|
$ |
89,585 |
|
Restricted cash and cash
equivalents |
|
|
21,882 |
|
|
|
21,882 |
|
|
|
21,882 |
|
Accounts receivable—net |
|
|
98,201 |
|
|
|
58,752 |
|
|
|
71,026 |
|
Merchandise inventories |
|
|
823,787 |
|
|
|
954,183 |
|
|
|
843,926 |
|
Prepaid and other current
assets |
|
|
144,832 |
|
|
|
124,809 |
|
|
|
147,574 |
|
Total current assets |
|
|
1,185,909 |
|
|
|
1,271,900 |
|
|
|
1,173,993 |
|
Property and
equipment—net |
|
|
1,317,562 |
|
|
|
1,253,705 |
|
|
|
1,178,989 |
|
Operating lease assets |
|
|
2,160,828 |
|
|
|
— |
|
|
|
— |
|
Goodwill and intangible
assets—net |
|
|
285,893 |
|
|
|
449,388 |
|
|
|
463,512 |
|
Deferred tax assets |
|
|
4,125 |
|
|
|
4,361 |
|
|
|
6,496 |
|
Other assets |
|
|
92,120 |
|
|
|
99,818 |
|
|
|
107,631 |
|
Total
assets |
|
$ |
5,046,437 |
|
|
$ |
3,079,172 |
|
|
$ |
2,930,621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
690,597 |
|
|
$ |
848,561 |
|
|
$ |
761,658 |
|
Current operating lease
liabilities |
|
|
277,411 |
|
|
|
— |
|
|
|
— |
|
Other current liabilities |
|
|
344,584 |
|
|
|
396,257 |
|
|
|
355,676 |
|
Current maturities of long
term debt |
|
|
3,176 |
|
|
|
2,924 |
|
|
|
2,755 |
|
Total current liabilities |
|
|
1,315,768 |
|
|
|
1,247,742 |
|
|
|
1,120,089 |
|
Long term debt |
|
|
1,079,775 |
|
|
|
983,643 |
|
|
|
1,155,671 |
|
Long term operating lease
liabilities |
|
|
2,069,613 |
|
|
|
— |
|
|
|
— |
|
Other liabilities |
|
|
94,601 |
|
|
|
346,298 |
|
|
|
320,343 |
|
Deferred tax liabilities |
|
|
171,543 |
|
|
|
178,779 |
|
|
|
181,225 |
|
Stockholders' equity |
|
|
315,137 |
|
|
|
322,710 |
|
|
|
153,293 |
|
Total liabilities and
stockholders' equity |
|
$ |
5,046,437 |
|
|
$ |
3,079,172 |
|
|
$ |
2,930,621 |
|
|
BURLINGTON STORES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) (All amounts in
thousands)
|
|
Six Months Ended |
|
|
|
August 3, |
|
|
August 4, |
|
|
|
2019 |
|
|
2018 |
|
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
Net income |
|
$ |
162,332 |
|
|
$ |
153,544 |
|
Adjustments to reconcile net
income to net cash provided by operating activities |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
102,902 |
|
|
|
107,432 |
|
Deferred income taxes |
|
|
(1,817 |
) |
|
|
1,434 |
|
Non-cash loss on extinguishment of debt |
|
|
— |
|
|
|
1,361 |
|
Non-cash stock compensation expense |
|
|
20,974 |
|
|
|
16,749 |
|
Non-cash lease expense |
|
|
7,318 |
|
|
|
— |
|
Non-cash rent |
|
|
— |
|
|
|
(12,663 |
) |
Deferred rent incentives |
|
|
23,427 |
|
|
|
14,477 |
|
Changes in assets and
liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(22,754 |
) |
|
|
(6,497 |
) |
Merchandise inventories |
|
|
129,890 |
|
|
|
(91,363 |
) |
Accounts payable |
|
|
(158,675 |
) |
|
|
25,180 |
|
Other current assets and liabilities |
|
|
(37,918 |
) |
|
|
(54,791 |
) |
Long term assets and liabilities |
|
|
1,829 |
|
|
|
7,921 |
|
Other operating
activities |
|
|
1,915 |
|
|
|
3,523 |
|
Net cash provided by
operating activities |
|
|
229,423 |
|
|
|
166,307 |
|
INVESTING
ACTIVITIES |
|
|
|
|
|
|
|
|
Cash paid for property and
equipment |
|
|
(163,480 |
) |
|
|
(121,966 |
) |
Lease acquisition costs |
|
|
(459 |
) |
|
|
(8,543 |
) |
Proceeds from insurance
recoveries related to property and equipment |
|
|
— |
|
|
|
2,147 |
|
Other investing activities |
|
|
(44 |
) |
|
|
3,178 |
|
Net cash (used in)
investing activities |
|
|
(163,983 |
) |
|
|
(125,184 |
) |
FINANCING
ACTIVITIES |
|
|
|
|
|
|
|
|
Proceeds from long term debt—ABL
Line of Credit |
|
|
1,053,500 |
|
|
|
694,100 |
|
Principal payments on long term
debt—ABL Line of Credit |
|
|
(956,600 |
) |
|
|
(523,800 |
) |
Principal payments on long term
debt—Term Loan Facility |
|
|
— |
|
|
|
(152,808 |
) |
Purchase of treasury
shares |
|
|
(193,165 |
) |
|
|
(117,227 |
) |
Other financing
activities |
|
|
15,758 |
|
|
|
8,993 |
|
Net cash (used in)
financing activities |
|
|
(80,507 |
) |
|
|
(90,742 |
) |
(Decrease) in cash, cash
equivalents, restricted cash and restricted cash equivalents |
|
|
(15,067 |
) |
|
|
(49,619 |
) |
Cash, cash equivalents,
restricted cash and restricted cash equivalents at beginning of
period |
|
|
134,156 |
|
|
|
161,086 |
|
Cash, cash
equivalents, restricted cash and restricted cash equivalents at end
of period |
|
$ |
119,089 |
|
|
$ |
111,467 |
|
Reconciliation of Non-GAAP Financial
Measures(Unaudited)(Amounts in thousands, except per share
data)
The following tables calculate the Company’s Adjusted Net
Income, Adjusted EPS, Adjusted EBITDA, Adjusted EBIT, Adjusted
SG&A and Adjusted Effective Tax Rate, all of which are
considered non-GAAP financial measures. Generally, a non-GAAP
financial measure is a numerical measure of a company’s
performance, financial position or cash flows that either excludes
or includes amounts that are not normally excluded or included in
the most directly comparable measure calculated and presented in
accordance with GAAP.
Adjusted Net Incomeis defined as net income, exclusive of
the following items if applicable: (i) net favorable lease
costs; (ii) costs related to debt amendments; (iii) loss
on extinguishment of debt; (iv) impairment charges; and (v)
other unusual, non-recurring or extraordinary expenses, losses,
charges or gains, all of which are tax effected to arrive
at Adjusted Net Income.
Adjusted EPS is defined as Adjusted Net Income divided by the
fully diluted weighted average shares outstanding, as defined in
the table below.
Adjusted EBITDA is defined as net income, exclusive of the
following items, if applicable: (i) interest expense; (ii)
interest income; (iii) loss on extinguishment of debt;
(iv) income tax expense; (v) depreciation and
amortization; (vi) impairment charges; (vii) costs
related to debt amendments; and (viii) other unusual, non-recurring
or extraordinary expenses, losses, charges or gains.
Adjusted EBIT (or Adjusted Operating Margin) is defined as net
income, exclusive of the following items, if applicable:
(i) interest expense; (ii) interest income; (iii) loss on
extinguishment of debt; (iv) income tax expense;
(v) impairment charges; (vi) net favorable lease costs;
(vii) costs related to debt amendments; and (viii) other
unusual, non-recurring or extraordinary expenses, losses, charges
or gains.
Adjusted SG&A is defined as SG&A less product sourcing
costs and favorable lease costs.
Adjusted Effective Tax Rate is defined as the GAAP effective tax
rate less the tax effect of the reconciling items to arrive at
Adjusted Net Income (footnote (e) in the table below).
The Company presents Adjusted Net Income, Adjusted EPS,
Adjusted EBITDA, Adjusted EBIT, Adjusted SG&A and Adjusted
Effective Tax Rate, because it believes they are useful
supplemental measures in evaluating the performance of the
Company’s business and provide greater transparency into the
results of operations. In particular, the Company believes that
excluding certain items that may vary substantially in frequency
and magnitude from what the Company considers to be its core
operating results are useful supplemental measures that assist in
evaluating the Company’s ability to generate earnings and leverage
sales, and to more readily compare core operating results between
past and future periods.
The Company believes that these non-GAAP measures provide
investors helpful information with respect to the Company’s
operations and financial condition. Other companies in the retail
industry may calculate these non-GAAP measures differently such
that the Company’s calculation may not be directly comparable.
The following table shows the Company’s reconciliation of net
income to Adjusted Net Income and Adjusted EPS for the periods
indicated:
|
|
(unaudited) |
|
|
|
(in thousands, except per share data) |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
August 3, |
|
|
August 4, |
|
|
August 3, |
|
|
August 4, |
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Reconciliation of net income to Adjusted Net
Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
84,567 |
|
|
$ |
70,957 |
|
|
$ |
162,332 |
|
|
$ |
153,544 |
|
Net favorable lease costs (a) |
|
|
9,205 |
|
|
|
9,551 |
|
|
|
19,907 |
|
|
|
14,876 |
|
Costs related to debt amendments (b) |
|
|
7 |
|
|
|
79 |
|
|
|
(375 |
) |
|
|
79 |
|
Loss on extinguishment of debt (c) |
|
|
— |
|
|
|
1,361 |
|
|
|
— |
|
|
|
1,361 |
|
Tax effect (e) |
|
|
(2,333 |
) |
|
|
(3,078 |
) |
|
|
(4,931 |
) |
|
|
(3,998 |
) |
Adjusted Net Income |
|
$ |
91,446 |
|
|
$ |
78,870 |
|
|
$ |
176,933 |
|
|
$ |
165,862 |
|
Fully diluted weighted average shares outstanding (f) |
|
|
67,274 |
|
|
|
68,769 |
|
|
|
67,502 |
|
|
|
68,870 |
|
Adjusted Earnings per Share |
|
$ |
1.36 |
|
|
$ |
1.15 |
|
|
$ |
2.62 |
|
|
$ |
2.41 |
|
The following table shows the Company’s reconciliation
of net income to Adjusted EBITDA for the periods
indicated:
|
|
(unaudited) |
|
|
|
(in thousands) |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
August 3, |
|
|
August 4, |
|
|
August 3, |
|
|
August 4, |
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Reconciliation of net income to Adjusted
EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
84,567 |
|
|
$ |
70,957 |
|
|
$ |
162,332 |
|
|
$ |
153,544 |
|
Interest expense |
|
|
13,435 |
|
|
|
14,581 |
|
|
|
26,805 |
|
|
|
29,103 |
|
Interest income |
|
|
(189 |
) |
|
|
(110 |
) |
|
|
(393 |
) |
|
|
(189 |
) |
Loss on extinguishment of debt (c) |
|
|
— |
|
|
|
1,361 |
|
|
|
— |
|
|
|
1,361 |
|
Costs related to debt amendments (b) |
|
|
7 |
|
|
|
79 |
|
|
|
(375 |
) |
|
|
79 |
|
Depreciation and amortization (g) |
|
|
61,355 |
|
|
|
56,923 |
|
|
|
122,535 |
|
|
|
107,432 |
|
Income tax expense |
|
|
11,151 |
|
|
|
8,312 |
|
|
|
27,346 |
|
|
|
25,723 |
|
Adjusted EBITDA |
|
$ |
170,326 |
|
|
$ |
152,103 |
|
|
$ |
338,250 |
|
|
$ |
317,053 |
|
The following table shows the Company’s reconciliation
of net income to Adjusted EBIT for the periods indicated:
|
|
(unaudited) |
|
|
|
(in thousands) |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
August 3, |
|
|
August 4, |
|
|
August 3, |
|
|
August 4, |
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Reconciliation of net income to Adjusted
EBIT: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
84,567 |
|
|
$ |
70,957 |
|
|
$ |
162,332 |
|
|
$ |
153,544 |
|
Interest expense |
|
|
13,435 |
|
|
|
14,581 |
|
|
|
26,805 |
|
|
|
29,103 |
|
Interest income |
|
|
(189 |
) |
|
|
(110 |
) |
|
|
(393 |
) |
|
|
(189 |
) |
Loss on extinguishment of debt (c) |
|
|
— |
|
|
|
1,361 |
|
|
|
— |
|
|
|
1,361 |
|
Costs related to debt amendments (b) |
|
|
7 |
|
|
|
79 |
|
|
|
(375 |
) |
|
|
79 |
|
Net favorable lease costs (a) |
|
|
9,205 |
|
|
|
9,551 |
|
|
|
19,907 |
|
|
|
14,876 |
|
Income tax expense |
|
|
11,151 |
|
|
|
8,312 |
|
|
|
27,346 |
|
|
|
25,723 |
|
Adjusted EBIT |
|
$ |
118,176 |
|
|
$ |
104,731 |
|
|
$ |
235,622 |
|
|
$ |
224,497 |
|
The following table shows the Company’s reconciliation of
SG&A to Adjusted SG&A for the periods indicated:
|
|
(unaudited) |
|
|
|
(in thousands) |
|
|
|
Three Months Ended |
|
|
|
Six Months Ended |
|
|
|
August 3, |
|
|
August 4, |
|
|
|
August 3, |
|
|
August 4, |
|
Reconciliation of
SG&A to Adjusted SG&A: |
|
2019 |
|
|
2018 |
|
|
|
2019 |
|
|
2018 |
|
SG&A |
|
$ |
531,843 |
|
|
$ |
479,077 |
|
|
|
$ |
1,049,221 |
|
|
$ |
947,424 |
|
Favorable lease costs (a) |
|
|
(9,094 |
) |
|
|
— |
|
|
|
|
(19,633 |
) |
|
|
— |
|
Product sourcing costs |
|
|
(82,152 |
) |
|
|
(75,632 |
) |
|
|
|
(160,710 |
) |
|
|
(147,248 |
) |
Adjusted SG&A |
|
$ |
440,597 |
|
|
$ |
403,445 |
|
|
|
$ |
868,878 |
|
|
$ |
800,176 |
|
The following table shows the reconciliation of the Company’s
effective tax rates on a GAAP basis to the Adjusted Effective Tax
Rates for the periods indicated:
|
|
(unaudited) |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
August 3, |
|
|
August 4, |
|
|
August 3, |
|
|
August 4, |
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Effective tax rate on a GAAP basis |
|
|
11.6 |
% |
|
|
10.5 |
% |
|
|
14.4 |
% |
|
|
14.3 |
% |
Adjustments to arrive at Adjusted Effective Tax Rate |
|
|
1.2 |
|
|
|
2.1 |
|
|
|
1.0 |
|
|
|
0.9 |
|
Adjusted Effective Tax Rate |
|
|
12.8 |
|
|
|
12.6 |
|
|
|
15.4 |
|
|
|
15.2 |
|
Effect of the New Jersey
deferred tax revaluation |
|
|
— |
|
|
|
4.5 |
|
|
|
— |
|
|
|
2.0 |
|
Adjusted Effective Tax Rate, excluding the effect of the
New Jersey deferred tax revaluation |
|
|
12.8 |
% |
|
|
17.1 |
% |
|
|
15.4 |
% |
|
|
17.2 |
% |
The following table shows the Company’s reconciliation of net
income to Adjusted Net Income for the prior period Adjusted EPS
amounts used in this press release for the periods indicated:
|
|
(unaudited) |
|
|
|
(in thousands, except per share data) |
|
|
|
Three Months Ended |
|
|
Twelve Months Ended |
|
|
|
November 3, 2018 |
|
|
February 2, 2019 |
|
Reconciliation of net income to Adjusted Net
Income: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
76,849 |
|
|
$ |
414,745 |
|
Net favorable lease costs (a) |
|
|
5,286 |
|
|
|
26,081 |
|
Costs related to debt amendments (b) |
|
|
2,418 |
|
|
|
2,496 |
|
Loss on extinguishment of debt (c) |
|
|
462 |
|
|
|
1,823 |
|
Impairment charges (d) |
|
|
— |
|
|
|
6,844 |
|
Tax effect (e) |
|
|
(2,075 |
) |
|
|
(9,449 |
) |
Adjusted Net Income |
|
$ |
82,940 |
|
|
$ |
442,540 |
|
Fully diluted weighted average shares outstanding (f) |
|
|
68,628 |
|
|
|
68,679 |
|
Adjusted Earnings per Share |
|
$ |
1.21 |
|
|
$ |
6.44 |
|
(a) |
Net favorable lease costs represents the non-cash amortization
expense associated with favorable and unfavorable leases that were
recorded as a result of purchase accounting related to the April
13, 2006 Bain Capital acquisition of Burlington Coat Factory
Warehouse Corporation. As a result of adoption of ASC 2016-02,
these expenses are recorded in the line item “Selling, general and
administrative expenses” in our Condensed Consolidated Statement of
Income for the three and six months ended August 3, 2019. These
expenses are recorded in the line item “Depreciation and
amortization” in our Condensed Consolidated Statements of Income
for the three and six months ended August 4, 2018, the three months
ended November 3, 2018 and the twelve months ended February 2,
2019. |
(b) |
For the three and six months ended August 3, 2019, amounts relate
to the reversal of previously estimated costs related to the
repricing of our Term Loan Facility in Fiscal 2018. For the three
and six months ended August 4, 2018 and the twelve months ended
February 2, 2019, amounts relate to costs incurred in connection
with the review and execution of refinancing opportunities. |
(c) |
Amounts relate to the refinancing of our Term Loan Facility, the
$150.0 million prepayment on our Term Loan Facility, as well as the
amendment to our ABL Credit Agreement. |
(d) |
Represents impairment charges on long-lived assets |
(e) |
Tax effect is calculated based on the effective tax rates (before
discrete items) for the respective periods for the tax impact of
items (a) through (d). |
(f) |
Fully diluted weighted average shares outstanding starts with basic
shares outstanding and adds back any potentially dilutive
securities outstanding during the period. Fully diluted weighted
average shares outstanding is equal to basic shares outstanding if
the Company is in an Adjusted Net Loss position. |
(g) |
Includes $9.1 million and $19.6 million of favorable lease costs
included in the line item “Selling, general and administrative
expenses” in our Condensed Consolidated Statement of Income for the
three and six months ended August 4, 2019. |
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