- On a GAAP basis, total sales rose
7.1%, net income increased 38%, and EPS increased 44%
- On a Non-GAAP basis,
- Comparable store sales increased
3.1%
- Adjusted EBITDA increased 22% to
$134 million, up 115 basis points
- Adjusted EPS rose 37% to
$0.70
- Increasing outlook for FY17 Adjusted
EPS to $4.23-$4.27, up from $4.11-$4.18
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 third quarter ended
October 28, 2017.
Tom Kingsbury, CEO, stated, “We are pleased to report strong
third quarter results, driven by a 3.1% comparable store sales
increase, which was on top of a 3.7% comparable increase in last
year’s third quarter. Our overall 7.1% sales growth, along with our
115 basis point Adjusted EBITDA margin improvement, enabled the
Company to drive a 37% increase in Adjusted EPS in the third
quarter, well ahead of our guidance. I would like to thank our
store, supply chain and corporate teams for contributing to these
strong results.”
Fiscal 2017 Third Quarter Operating
Results:
- Total sales increased 7.1% over
the prior year period to $1,438 million. This growth was driven by
an incremental $60 million from new and non-comparable stores, as
well as a 3.1% increase in comparable store sales. Consistent with
the Company’s policy regarding weather related incidents, the
comparable store sales calculation excludes 19 stores which were
closed for 7 or more days within a month during the third quarter.
The impact of these store closures, which is reflected in the total
sales results for the third quarter, reduced the incremental
contribution from new and non-comparable sales by $17 million.
- Gross margin expanded by 100
basis points over last year’s levels to 42.2% driven primarily by
increased merchandise margin. In addition, product sourcing costs
as a percent of sales were flat on a rate basis to the prior year’s
quarter. Product sourcing costs are included in selling, general
and administrative expenses (SG&A).
- SG&A, less product
sourcing costs, as a percentage of sales was 28.3%,
representing a 20 basis point improvement compared with the Fiscal
2016 third quarter.
- The effective tax rate on a GAAP
basis improved 120 basis points to 33.8% driven primarily by the
adoption of the new share-based compensation accounting, which
contributed 430 basis points of improvement. Exclusive of the
accounting change for share-based compensation, the effective tax
rate was 38.1% compared with 35.0% during last year’s third
quarter.
- Net income increased 38% over
the prior year period to $45 million, or $0.65 per share vs. $0.45
last year, and Adjusted Net Income increased 34% to $49 million, or
$0.70 per share, vs. $0.51 last year. These improvements were
driven primarily by top line growth, gross margin expansion, tight
expense control, share repurchases since the end of the third
quarter last year, and the $2.9 million benefit, or $0.04 per
share, from the accounting change for share-based
compensation.
- Fully diluted shares outstanding
amounted to 69.5 million at the end of the quarter compared with
71.6 million at the end of last year’s third quarter. The decrease
was primarily the result of share repurchases under the Company’s
share repurchase program. Since the end of the third quarter of
Fiscal 2016, the Company has repurchased 3.1 million shares of its
common stock under its share repurchase program.
- Adjusted EBITDA increased 22%,
or $24 million above the prior year period, to $134 million. The
115 basis point expansion in Adjusted EBITDA as a percentage of
sales was primarily driven by gross margin expansion.
First Nine Months Fiscal 2017
Results
- Total sales increased 6.9%, which
included a comparable store sales increase of 2.4% over the first
nine months of Fiscal 2016, on top of last year’s 4.5% comparable
store sales increase. Net income increased 60% over the prior year
period to $144 million, or $2.04 per share vs. $1.25 last year.
Adjusted EBITDA increased by 21%, or $68 million above last year,
to $398 million, representing a 110 basis point increase in rate
for the first nine months of Fiscal 2017 vs. the prior year period.
Adjusted Net Income of $157 million was up 48% vs. last year, while
Adjusted EPS was $2.22 for the first nine months of Fiscal 2017 vs.
$1.47 in the prior year period.
Inventory
- Merchandise inventories were $904
million vs. $822 million last year. The increase was primarily due
to an increase in pack and hold inventory, which was 15% of total
inventory at the end of the third quarter of Fiscal 2017 compared
to 12% at the end of the third quarter of Fiscal 2016, and
inventory related to 39 net new stores opened since the end of the
third quarter of Fiscal 2016. Comparable store inventory turnover
improved 10%, and comparable store inventory was down 2% at the end
of the third quarter of Fiscal 2017.
Share Repurchase
Activity
- During the third quarter, the Company
invested $70 million of cash to repurchase 804,577 shares of its
common stock. The Company utilized the remaining $39 million on its
previous share repurchase program, as well as $31 million of the
new $300 million share repurchase program authorized by the Board
of Directors on August 16, 2017. As of the end of the third
quarter, the Company had $269 million remaining on its current
share repurchase authorization.
Term Loan Repricing and
Extension
- On November 17, 2017, the Company
completed the repricing and extension of its senior secured term
loan facility, which reduced the applicable interest rate margin
from 2.75% to 2.50%, with the LIBOR floor remaining 0.75%. The new
senior secured term loan facility is comprised of a single tranche
of loans maturing in November 2024. The net proceeds of the new
senior secured term loan facility were used to repay all
indebtedness under the previous term loan B facility, which was set
to mature in 2021, as well as to pay related fees and expenses. Any
gains, losses or fees related to this transaction will be reflected
in the Company’s financial results for the fourth quarter of Fiscal
2017.
Full Year Fiscal 2017 and Fourth
Quarter 2017 Outlook
For the full Fiscal Year 2017 (the 53-weeks ending February
3, 2018), the Company now expects:
- Total sales to increase in the range of
8.1% to 8.4%, including 1.4% from the 53rd week; this assumes
comparable store sales to increase in the range of 2% to 3% for the
fourth quarter, resulting in a full year comparable store sales
increase of 2.3% to 2.6% on top of the 4.5% increase during Fiscal
2016. Note that the updated total sales increase is negatively
impacted by $17 million caused by the 19 store closures in the
third quarter, as well as approximately $25 million from 8 stores
that will remain closed during the fourth quarter;
- Interest expense of approximately $58
million;
- Adjusted EPS in the range of $4.23 to
$4.27, utilizing a fully diluted share count of approximately 70.3
million, as compared with $3.24 in Fiscal 2016. This includes an
expected benefit from the 53rd week of approximately $0.04 per
share, and an anticipated increase of approximately $0.20 per share
resulting from the accounting change for share-based
compensation.
- Adjusted EBITDA margin expansion to
increase 80 to 90 basis points; and
- To open 37 net new stores, and invest
Net Capital Expenditures of approximately $215 million.
For the fourth quarter of Fiscal 2017 (the 14 weeks ending
February 3, 2018), the Company expects:
- Total sales to increase in the range of
11.0% to 12.0%, including 5.0% from the 53rd week. This increase
includes the negative impact of $25 million from the 8 stores that
will remain closed during the fourth quarter;
- Comparable store sales to increase in
the range of 2% to 3% on top of a 4.6% increase during the fourth
quarter of Fiscal 2016; and
- Adjusted EPS in the range of $2.02 to
$2.06, which assumes no benefit from the accounting change for
share-based compensation and utilizing a fully diluted share count
of approximately 69.3 million shares, as compared to $1.78 last
year. Adjusted EPS for the fourth quarter includes a $0.04 benefit
from the 53rd week.
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 those adjustments could be significant.
Note regarding Non-GAAP financial
measures
The foregoing discussion of the Company’s operating results
includes references to Adjusted EBITDA, Adjusted Net Income,
Adjusted Earnings per Share (or Adjusted EPS) and Adjusted
Operating Margin. 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.
Third Quarter 2017 Conference Call
The Company will hold a conference call on Tuesday, November 21,
2017 at 8:30 a.m. Eastern Time to discuss the Company’s third
quarter results. The U.S. toll free dial-in for the conference
call is 1-877-407-0789 and the international dial-in number is
1-201-689-8562.
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 at
11:30 am ET, November 21, 2017 until 11:59 pm ET on December 5,
2017. The U.S. toll-free replay dial-in number is
1-844-512-2921 and the international replay dial-in number is
1-412-317-6671. The replay passcode is 13673387. 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 2016 revenue
of $5.6 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 631 stores as of the end
of the third quarter of Fiscal 2017, 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 65%
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.
Safe Harbor for Forward-Looking and Cautionary
Statements
This 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 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 competition in the retail
industry, seasonality of our business, adverse weather conditions,
changes in consumer preferences and consumer spending patterns,
import risks, inflation, general economic conditions, our ability
to implement our strategy, 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, events
affecting the delivery of merchandise to our stores, existence of
adverse litigation and risks, availability of desirable locations
on suitable terms and other 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)
Three Months Ended
Nine Months Ended October 28,
October 29, October 28, October
29, 2017 2016 2017 2016
REVENUES: Net sales $ 1,438,167 $ 1,342,600 $ 4,147,937 $
3,880,322 Other revenue 6,405 6,447
17,834 18,324
Total revenue
1,444,572 1,349,047 4,165,771 3,898,646
COSTS AND EXPENSES:
Cost of sales 831,728 789,858 2,436,250 2,316,162 Selling, general
and administrative expenses 480,194 451,072 1,338,247 1,261,559
Costs related to debt amendments — — — 1,346 Stock option
modification expense 26 106 131 520 Depreciation and amortization
50,836 46,472 147,547 136,630 Impairment charges - long-lived
assets — — 988 109 Other income - net (1,362 ) (1,473 ) (6,948 )
(7,361 ) Loss on extinguishment of debt — — — 3,805 Interest
expense 15,351 13,159 43,409
43,196
Total costs and expenses
1,376,773 1,299,194 3,959,624
3,755,966
Income before income tax expense
67,799 49,853 206,147 142,680 Income tax expense 22,920
17,449 61,998 52,368
Net income $ 44,879 $ 32,404 $ 144,149
$ 90,312
BURLINGTON STORES, INC.CONDENSED
CONSOLIDATED BALANCE SHEETS(unaudited)(All amounts in
thousands)
October 28,
January 28, October 29, 2017
2017 2016 ASSETS Current assets: Cash
and cash equivalents $ 48,080 $ 81,597 $ 32,799 Restricted cash and
cash equivalents 27,800 27,800 27,800 Accounts receivable—net
78,995 43,252 59,757 Merchandise inventories 903,663 701,891
822,469 Prepaid and other current assets 91,917
73,784 104,051
Total current
assets 1,150,455 928,324 1,046,876 Property and equipment—net
1,111,949 1,049,447 1,040,297 Goodwill and intangible assets—net
480,438 498,244 505,744 Deferred tax assets 7,939 7,973 — Other
assets 92,582 90,495 95,203
Total assets $ 2,843,363 $ 2,574,483 $
2,688,120
LIABILITIES AND STOCKHOLDERS'
DEFICIT Current liabilities: Accounts payable $ 764,563
$ 640,326 $ 691,971 Other current liabilities 361,170 354,870
326,114 Current maturities of long term debt 1,942
1,638 1,574
Total current
liabilities 1,127,675 996,834 1,019,659 Long term debt
1,294,300 1,128,843 1,303,001 Other liabilities 309,848 290,683
294,740 Deferred tax liabilities 222,073 207,935 206,124
Stockholders' deficit (110,533 ) (49,812 )
(135,404 )
Total liabilities and stockholders' deficit $
2,843,363 $ 2,574,483 $ 2,688,120
BURLINGTON STORES, INC.CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited)(All
amounts in thousands)
Nine Months Ended October
28, October 29, 2017 2016
OPERATING ACTIVITIES Net income $ 144,149 $ 90,312
Adjustments to reconcile net income to net cash provided by
operating activities Depreciation and amortization 147,547 136,630
Deferred income taxes 12,375 5,891 Non-cash loss on extinguishment
of debt — 3,805 Non-cash stock compensation expense 19,655 11,634
Non-cash rent (17,940 ) (22,052 ) Deferred rent incentives 33,557
17,884 Changes in assets and liabilities: Accounts receivable
(25,894 ) (13,671 ) Merchandise inventories (201,772 ) (39,518 )
Accounts payable 125,067 88,090 Other current assets and
liabilities (26,159 ) 9,981 Long term assets and liabilities 581
4,187 Other operating activities 10,330 5,047
Net cash provided by operating activities
221,496 298,220
INVESTING ACTIVITIES
Cash paid for property and equipment (192,491 ) (137,643 ) Proceeds
from insurance recoveries related to property and equipment 3,069 —
Other investing activities 990 104
Net cash (used in) investing activities (188,432 )
(137,539 )
FINANCING ACTIVITIES Proceeds from long
term debt—ABL Line of Credit 1,124,300 1,286,100 Principal payments
on long term debt—ABL Line of Credit (959,100 ) (1,279,200 )
Proceeds from long term debt—Term B-4 Loans — 1,114,208 Principal
payments on long term debt—Term B-3 Loans — (1,117,000 ) Purchase
of treasury shares (234,918 ) (151,781 ) Other financing activities
3,137 (1,124 )
Net cash used in financing
activities (66,581 ) (148,797 ) (Decrease)
increase in cash and cash equivalents (33,517 ) 11,884 Cash and
cash equivalents at beginning of period 81,597
20,915
Cash and cash equivalents at end of period $
48,080 $ 32,799
Reconciliation of Non-GAAP Financial
Measures
(Unaudited) (Amounts in thousands except per share data)
Adjusted Net Income, Adjusted EPS, Adjusted EBITDA and
Adjusted Operating Margin
The following tables calculate the Company’s Adjusted Net
Income, Adjusted EPS, Adjusted EBITDA (earnings before (i) net
interest expense, (ii) loss on the extinguishment of debt, (iii)
costs related to debt amendments, (iv) stock option modification
expense, (v) depreciation and amortization, (vi) impairment
charges, (vii) amounts related to certain ongoing litigation,
(viii) income tax expense (benefit) and (ix) other unusual,
non-recurring or extraordinary expenses, losses, charges or gains)
and Adjusted Operating Margin (EBIT), 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 Income is defined as net income for the period plus
(i) net favorable lease amortization, (ii) costs related
to debt amendments, (iii) stock option modification expense, (iv)
loss on extinguishment of debt, (v) impairment charges, (vi)
amounts related to certain ongoing litigation and (vii) 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 Operating Margin is defined as net income for the
period plus (i) net interest expense, (ii) net favorable lease
amortization, (iii) loss on the extinguishment of debt, (iv) costs
related to debt amendments, (v) stock option modification expense,
(vi) impairment charges, (vii) amounts related to certain ongoing
litigation, (viii) income tax expense (benefit) and (ix) other
unusual, non-recurring or extraordinary expenses, losses, charges
or gains.
The Company presents Adjusted Net Income, Adjusted EPS, Adjusted
EBITDA and Adjusted Operating Margin 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 operating income are useful supplemental
measures that assist in evaluating the Company’s ability to
generate earnings and leverage sales, and to more readily compare
these metrics between past and future periods.
The Company believes that Adjusted Net Income, Adjusted EPS,
Adjusted EBITDA and Adjusted Operating Margin 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
adjustments to these metrics are not in accordance with regulations
adopted by the SEC that apply to periodic reports presented under
the Exchange Act. Accordingly, Adjusted Net Income, Adjusted EPS,
Adjusted EBITDA and Adjusted Operating Margin may be presented
differently in filings made with the SEC than as presented in this
report or not presented at all.
The following table shows the Company’s reconciliation of net
income to Adjusted Net Income and Adjusted EPS for the three and
nine months ended October 28, 2017 compared with the three and nine
months ended October 29, 2016:
(unaudited) (in thousands,
except per share data) Three Months Ended
Nine Months Ended October 28,
October 29, October 28, October
29, 2017 2016 2017 2016
Reconciliation of net income to Adjusted Net Income: Net
income $ 44,879 $ 32,404 $ 144,149 $ 90,312 Net favorable lease
amortization (a) 5,830 5,852 17,751 17,926 Costs related to debt
amendments (b) — — — 1,346 Stock option modification expense (c) 26
106 131 520 Loss on extinguishment of debt (b) — — — 3,805
Impairment charges (d) — — 988 109 Litigation accrual (e) — — —
1,400 Tax effect (f) (1,944) (2,085) (6,265)
(9,285)
Adjusted Net Income $ 48,791 $ 36,277 $
156,754 $ 106,133 Fully diluted weighted average shares outstanding
(g) 69,541 71,597 70,616 72,002
Adjusted EPS $ 0.70 $ 0.51 $
2.22 $ 1.47
The following table shows the Company’s reconciliation of net
income to Adjusted EBITDA for the three and nine months ended
October 28, 2017 compared with the three and nine months ended
October 29, 2016:
(unaudited) (in thousands)
Three Months Ended Nine Months Ended
October 28, October 29, October
28, October 29, 2017 2016
2017 2016 Reconciliation of net income to Adjusted
EBITDA: Net income $ 44,879 $ 32,404 $ 144,149 $ 90,312
Interest expense 15,351 13,159 43,409 43,196 Interest income (63 )
(14 ) (132 ) (42 ) Loss on extinguishment of debt (b) — — — 3,805
Costs related to debt amendments (b) — — — 1,346 Stock option
modification expense (c) 26 106 131 520 Depreciation and
amortization 50,836 46,472 147,547 136,630 Impairment charges (d) —
— 988 109 Litigation accrual (e) — — — 1,400 Tax expense
22,920 17,449 61,998
52,368
Adjusted EBITDA $ 133,949 $ 109,576
$ 398,090 $ 329,644
The following table shows the Company’s reconciliation of net
income to Adjusted Operating Margin for the three and nine months
ended October 28, 2017 compared with the three and nine months
ended October 29, 2016:
(unaudited) (in thousands)
Three Months Ended Nine Months Ended
October 28, October 29, October
28, October 29, 2017 2016
2017 2016 Reconciliation of net income to Adjusted
Operating Margin: Net income $ 44,879 $ 32,404 $ 144,149 $
90,312 Interest expense 15,351 13,159 43,409 43,196 Interest income
(63 ) (14 ) (132 ) (42 ) Net favorable lease amortization (a) 5,830
5,852 17,751 17,926 Loss on extinguishment of debt (b) — — — 3,805
Costs related to debt amendments (b) — — — 1,346 Stock option
modification expense (c) 26 106 131 520 Impairment charges (d) — —
988 109 Litigation accrual (e) — — — 1,400 Tax expense
22,920 17,449 61,998
52,368
Adjusted Operating Margin $ 88,943 $
68,956 $ 268,294 $ 210,940 (a)
Net favorable lease amortization 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, and are recorded in
the line item “Depreciation and amortization” in our Condensed
Consolidated Statements of Income. (b) Represents costs related to
the repricing of our Term Loan Facility during the second quarter
of Fiscal 2016. (c) Represents expenses incurred as a result of our
May 2013 stock option modification. (d) Represents impairment
charges on long-lived assets. (e) Represents amounts charged for
certain ongoing litigation. (f) 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 (e). (g) 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171121005142/en/
Investor Relations:Burlington Stores, Inc.David J. Glick,
855-973-8445Info@BurlingtonInvestors.comorICR, Inc.Allison Malkin,
203-682-8225orCaitlin Morahan, 203-682-8225
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