10-Q
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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 4, 2024

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

 

https://cdn.kscope.io/2cd09ba026bda15ae55210a07bca64ae-img211778505_0.jpg 

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: (609) 387-7800

 

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 63,826,021 shares of common stock outstanding as of May 4, 2024.

 


 

BURLINGTON STORES, INC.

INDEX

 

 

 

Page

Part I—Financial Information

 

3

 

 

 

Item 1. Financial Statements (unaudited)

 

3

 

 

 

Condensed Consolidated Statements of Income - Three Months Ended May 4, 2024 and April 29, 2023

 

3

 

 

 

Condensed Consolidated Statements of Comprehensive Income – Three Months Ended May 4, 2024 and April 29, 2023

 

4

 

 

 

Condensed Consolidated Balance Sheets – May 4, 2024, February 3, 2024 and April 29, 2023

 

5

 

 

 

Condensed Consolidated Statements of Cash Flows – Three Months Ended May 4, 2024 and April 29, 2023

 

6

 

 

 

Notes to Condensed Consolidated Financial Statements

 

6

 

 

 

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

 

19

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

31

 

 

 

Item 4. Controls and Procedures

 

32

 

 

 

Part II—Other Information

 

32

 

 

 

Item 1. Legal Proceedings

 

32

 

 

 

Item 1A. Risk Factors

 

32

 

 

 

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

 

32

 

 

 

Item 3. Defaults Upon Senior Securities

 

33

 

 

 

Item 4. Mine Safety Disclosures

 

33

 

 

 

Item 5. Other Information

 

33

 

 

 

Item 6. Exhibits

 

34

 

 

 

SIGNATURES

 

35

 

 

 

 

2


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BURLINGTON STORES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(All amounts in thousands, except per share data)

 

 

Three Months Ended

 

 

 

May 4,

 

 

April 29,

 

 

 

2024

 

 

2023

 

REVENUES:

 

 

 

 

 

 

Net sales

 

$

2,357,318

 

 

$

2,132,793

 

Other revenue

 

 

4,235

 

 

 

4,163

 

Total revenue

 

 

2,361,553

 

 

 

2,136,956

 

COSTS AND EXPENSES:

 

 

 

 

 

 

Cost of sales

 

 

1,330,726

 

 

 

1,231,646

 

Selling, general and administrative expenses

 

 

825,226

 

 

 

755,628

 

Depreciation and amortization

 

 

81,965

 

 

 

70,529

 

Impairment charges - long-lived assets

 

 

8,210

 

 

 

844

 

Other income - net

 

 

(10,862

)

 

 

(8,998

)

Loss on extinguishment of debt

 

 

 

 

 

24,644

 

Interest expense

 

 

16,649

 

 

 

19,345

 

Total costs and expenses

 

 

2,251,914

 

 

 

2,093,638

 

Income before income tax expense

 

 

109,639

 

 

 

43,318

 

Income tax expense

 

 

31,125

 

 

 

10,570

 

Net income

 

$

78,514

 

 

$

32,748

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

Common stock - basic

 

$

1.23

 

 

$

0.50

 

Common stock - diluted

 

$

1.22

 

 

$

0.50

 

Weighted average number of common shares:

 

 

 

 

 

 

Common stock - basic

 

 

63,871

 

 

 

64,954

 

Common stock - diluted

 

 

64,267

 

 

 

65,291

 

 

See Notes to Condensed Consolidated Financial Statements.

 

 

3


 

BURLINGTON STORES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(All amounts in thousands)

 

 

 

Three Months Ended

 

 

 

May 4,

 

 

April 29,

 

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

Net income

 

$

78,514

 

 

$

32,748

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

Interest rate derivative contracts:

 

 

 

 

 

 

Net unrealized gain arising during the period

 

 

7,735

 

 

 

947

 

Net reclassification into earnings during the period

 

 

(3,343

)

 

 

(827

)

Other comprehensive income, net of tax

 

 

4,392

 

 

 

120

 

Total comprehensive income

 

$

82,906

 

 

$

32,868

 

 

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 4,

 

 

February 3,

 

 

April 29,

 

 

 

2024

 

 

2024

 

 

2023

 

ASSETS

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

742,332

 

 

$

925,359

 

 

$

532,443

 

Restricted cash and cash equivalents

 

 

 

 

 

 

 

 

6,582

 

Accounts receivable—net

 

 

100,654

 

 

 

74,361

 

 

 

78,477

 

Merchandise inventories

 

 

1,140,800

 

 

 

1,087,841

 

 

 

1,231,092

 

Assets held for disposal

 

 

27,963

 

 

 

23,299

 

 

 

5,120

 

Prepaid and other current assets

 

 

226,378

 

 

 

216,164

 

 

 

136,751

 

Total current assets

 

 

2,238,127

 

 

 

2,327,024

 

 

 

1,990,465

 

Property and equipment—net

 

 

1,934,547

 

 

 

1,880,325

 

 

 

1,678,461

 

Operating lease assets

 

 

3,149,161

 

 

 

3,132,768

 

 

 

2,968,247

 

Tradenames

 

 

238,000

 

 

 

238,000

 

 

 

238,000

 

Goodwill

 

 

47,064

 

 

 

47,064

 

 

 

47,064

 

Deferred tax assets

 

 

2,313

 

 

 

2,436

 

 

 

3,079

 

Other assets

 

 

86,040

 

 

 

79,223

 

 

 

78,563

 

Total assets

 

$

7,695,252

 

 

$

7,706,840

 

 

$

7,003,879

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

929,759

 

 

$

956,350

 

 

$

829,212

 

Current operating lease liabilities

 

 

395,948

 

 

 

411,395

 

 

 

402,622

 

Other current liabilities

 

 

602,973

 

 

 

647,338

 

 

 

472,926

 

Current maturities of long term debt

 

 

168,642

 

 

 

13,703

 

 

 

13,753

 

Total current liabilities

 

 

2,097,322

 

 

 

2,028,786

 

 

 

1,718,513

 

Long term debt

 

 

1,236,658

 

 

 

1,394,942

 

 

 

1,350,416

 

Long term operating lease liabilities

 

 

3,016,027

 

 

 

2,984,794

 

 

 

2,842,785

 

Other liabilities

 

 

73,210

 

 

 

73,793

 

 

 

70,082

 

Deferred tax liabilities

 

 

240,609

 

 

 

227,593

 

 

 

220,609

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

 

 

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: 82,636,872 shares, 82,399,577 shares and 82,157,501 shares, respectively

 

 

 

 

 

 

 

 

 

   Outstanding: 63,826,021 shares, 63,964,371 shares and 64,884,349 shares, respectively

 

 

8

 

 

 

8

 

 

 

8

 

Additional paid-in-capital

 

 

2,145,935

 

 

 

2,118,356

 

 

 

2,043,111

 

Accumulated earnings

 

 

1,062,578

 

 

 

984,064

 

 

 

677,163

 

Accumulated other comprehensive income

 

 

37,925

 

 

 

33,533

 

 

 

28,868

 

Treasury stock, at cost

 

 

(2,215,020

)

 

 

(2,139,029

)

 

 

(1,947,676

)

Total stockholders' equity

 

 

1,031,426

 

 

 

996,932

 

 

 

801,474

 

Total liabilities and stockholders' equity

 

$

7,695,252

 

 

$

7,706,840

 

 

$

7,003,879

 

 

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 4,

 

 

April 29,

 

 

 

2024

 

 

2023

 

OPERATING ACTIVITIES

 

 

 

 

 

Net income

 

$

78,514

 

 

$

32,748

 

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

 

 

 

 

 

Depreciation and amortization

 

 

81,965

 

 

 

70,529

 

Impairment chargeslong-lived assets

 

 

8,210

 

 

 

844

 

Amortization of deferred financing costs

 

 

755

 

 

 

855

 

Accretion of long term debt instruments

 

 

233

 

 

 

236

 

Deferred income taxes

 

 

11,520

 

 

 

14,699

 

Loss on extinguishment of debt

 

 

 

 

 

24,644

 

Non-cash stock compensation expense

 

 

19,107

 

 

 

16,722

 

Non-cash lease expense

 

 

(3,885

)

 

 

(970

)

Cash received from landlord allowances

 

 

2,830

 

 

 

4,349

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(26,397

)

 

 

(7,418

)

Merchandise inventories

 

 

(52,958

)

 

 

(49,110

)

Prepaid and other current assets

 

 

(10,215

)

 

 

(5,060

)

Accounts payable

 

 

(25,211

)

 

 

(125,241

)

Other current liabilities

 

 

(30,846

)

 

 

(53,943

)

Other long term assets and long term liabilities

 

 

(631

)

 

 

723

 

Other operating activities

 

 

(3,619

)

 

 

(2,559

)

Net cash provided by (used in) operating activities

 

 

49,372

 

 

 

(77,952

)

INVESTING ACTIVITIES

 

 

 

 

 

Cash paid for property and equipment

 

 

(164,837

)

 

 

(95,688

)

Lease acquisition costs

 

 

(233

)

 

 

(4,549

)

Net (removal costs) proceeds from sale of property and equipment and assets held for sale

 

 

(462

)

 

 

14,080

 

Net cash used in investing activities

 

 

(165,532

)

 

 

(86,157

)

FINANCING ACTIVITIES

 

 

 

 

 

 

Principal payments on long term debt—Term B-6 Loans

 

 

(2,404

)

 

 

(2,404

)

Principal payment on long term debt— 2025 Convertible Notes

 

 

 

 

 

(133,656

)

Purchase of treasury shares

 

 

(75,622

)

 

 

(53,393

)

Proceeds from stock option exercises

 

 

8,473

 

 

 

10,764

 

Other financing activities

 

 

2,686

 

 

 

2,618

 

Net cash used in financing activities

 

 

(66,867

)

 

 

(176,071

)

Decrease in cash, cash equivalents, restricted cash and restricted cash equivalents

 

 

(183,027

)

 

 

(340,180

)

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

 

 

925,359

 

 

 

879,205

 

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

 

$

742,332

 

 

$

539,025

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Interest paid

 

$

19,985

 

 

$

27,066

 

Income tax payments - net

 

$

1,380

 

 

$

1,539

 

Non-cash investing and financing activities:

 

 

 

 

 

 

Finance lease modification

 

$

(868

)

 

$

 

Accrued purchases of property and equipment

 

$

95,262

 

 

$

49,628

 

See Notes to Condensed Consolidated Financial Statements.

BURLINGTON STORES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 4, 2024

(Unaudited)

1. Summary of Significant Accounting Policies

Basis of Presentation

As of May 4, 2024, Burlington Stores, Inc., a Delaware corporation (collectively with its subsidiaries, the Company), through its indirect subsidiary Burlington Coat Factory Warehouse Corporation (BCFWC), operated 1,021 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

 

6


 

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 3, 2024 (Fiscal 2023 10-K). The balance sheet at February 3, 2024 presented herein has been derived from the audited Consolidated Financial Statements contained in the Fiscal 2023 10-K. Because the Company’s business is seasonal in nature, the operating results for the three month period ended May 4, 2024 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 2023 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. Fiscal 2024 is defined as the 52-week year ending February 1, 2025, and Fiscal 2023 is defined as the 53-week year ended February 3, 2024. The first quarters of Fiscal 2024 and Fiscal 2023 each consist of 13 weeks.

Recently Adopted Accounting Standards

There were no new accounting standards that had a material impact on the Company’s Condensed Consolidated Financial Statements and notes thereto during the three month period ended May 4, 2024.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topics 740): Improvements to Income Tax Disclosures" to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted and can be applied on either a prospective or retroactive basis. We are currently determining the impact that ASU 2023-09 will have on the Company's consolidated financial statement disclosures.

2. Stockholders’ Equity

Activity for the three month periods ended May 4, 2024 and April 29, 2023 in the Company’s stockholders’ equity is summarized below:

 

 

(in thousands, except share data)

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

Treasury Stock

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Income

 

 

Shares

 

 

Amount

 

 

Total

 

Balance at February 3, 2024

 

 

82,399,577

 

 

$

8

 

 

$

2,118,356

 

 

$

984,064

 

 

$

33,533

 

 

 

(18,435,206

)

 

$

(2,139,029

)

 

$

996,932

 

Net income

 

 

 

 

 

 

 

 

 

 

 

78,514

 

 

 

 

 

 

 

 

 

 

 

 

78,514

 

Stock options exercised

 

 

55,688

 

 

 

 

 

 

8,472

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,472

 

Shares used for tax withholding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(63,407

)

 

 

(12,222

)

 

 

(12,222

)

Shares purchased as part of publicly announced program, inclusive of $0.4 million related to excise tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(312,238

)

 

 

(63,769

)

 

 

(63,769

)

Vesting of restricted shares

 

 

181,607

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

 

 

 

 

 

 

19,107

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,107

 

Unrealized gains on interest rate derivative contracts, net of related taxes of $2.8 million

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,735

 

 

 

 

 

 

 

 

 

7,735

 

Amount reclassified from accumulated other comprehensive income into earnings, net of related taxes of $1.2 million

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,343

)

 

 

 

 

 

 

 

 

(3,343

)

Balance at May 4, 2024

 

 

82,636,872

 

 

$

8

 

 

$

2,145,935

 

 

$

1,062,578

 

 

$

37,925

 

 

 

(18,810,851

)

 

$

(2,215,020

)

 

$

1,031,426

 

 

 

 

7


 

 

 

(in thousands, except share data)

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated (Deficit)

 

 

Accumulated
Other
Comprehensive

 

 

Treasury Stock

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

(Loss) Income

 

 

Shares

 

 

Amount

 

 

Total

 

Balance at January 28, 2023

 

 

82,037,994

 

 

$

8

 

 

$

2,015,625

 

 

$

644,415

 

 

$

28,748

 

 

 

(17,018,281

)

 

$

(1,893,891

)

 

$

794,905

 

Net income

 

 

 

 

 

 

 

 

 

 

 

32,748

 

 

 

 

 

 

 

 

 

 

 

 

32,748

 

Stock options exercised

 

 

90,971

 

 

 

 

 

 

10,764

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,764

 

Shares used for tax withholding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,457

)

 

 

(1,962

)

 

 

(1,962

)

Shares purchased as part of publicly announced program, inclusive of $0.4 million related to excise tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(245,414

)

 

 

(51,823

)

 

 

(51,823

)

Vesting of restricted shares

 

 

28,536

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

 

 

 

 

 

 

16,722

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,722

 

Unrealized gains on interest rate derivative contracts, net of related taxes of $0.3 million

 

 

 

 

 

 

 

 

 

 

 

 

 

 

947

 

 

 

 

 

 

 

 

 

947

 

Amount reclassified from accumulated other comprehensive income into earnings, net of related taxes of $0.3 million

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(827

)

 

 

 

 

 

 

 

 

(827

)

Balance at April 29, 2023

 

 

82,157,501

 

 

$

8

 

 

$

2,043,111

 

 

$

677,163

 

 

$

28,868

 

 

 

(17,273,152

)

 

$

(1,947,676

)

 

$

801,474

 

 

3. Lease Commitments

The Company’s leases primarily consist of stores, distribution facilities and office space under operating and finance leases that will expire principally during the next 30 years. The leases typically include renewal options at five-year intervals and escalation clauses. Lease renewals are only included in the lease liability to the extent that they are reasonably assured of being exercised. The Company’s leases typically provide for contingent rentals based on a percentage of gross sales. Contingent rentals are not included in the lease liability, but are recognized as variable lease cost when incurred.

The following is a schedule of the Company’s future lease payments:

 

 

(in thousands)

 

Fiscal Year

 

Operating
Leases

 

 

Finance
Leases

 

2024 (remainder)

 

$

422,929

 

 

$

3,535

 

2025

 

 

615,594

 

 

 

3,526

 

2026

 

 

576,614

 

 

 

3,640

 

2027

 

 

535,608

 

 

 

3,640

 

2028

 

 

487,650

 

 

 

3,447

 

Thereafter

 

 

1,662,700

 

 

 

20,787

 

Total future minimum lease payments

 

 

4,301,095

 

 

 

38,575

 

Amount representing interest

 

 

(889,120

)

 

 

(11,258

)

Total lease liabilities

 

 

3,411,975

 

 

 

27,317

 

Less: current portion of lease liabilities

 

 

(395,948

)

 

 

(2,873

)

Total long term lease liabilities

 

$

3,016,027

 

 

$

24,444

 

 

 

 

 

 

 

 

Weighted average discount rate

 

5.8%

 

 

5.6%

 

Weighted average remaining lease term (years)

 

 

7.9

 

 

 

12.1

 

The above schedule excludes approximately $667.5 million for 84 stores and one warehouse that the Company has committed to open or relocate but has not yet taken possession of the space. The discount rates used in valuing the Company’s leases are not readily determinable, and are based on the Company’s incremental borrowing rate on a fully collateralized basis.

The Company has entered into a lease agreement for a new distribution center in Ellabell, GA, which is expected to commence in Spring 2025. The Company does not have control of the asset during construction, but it is involved in the design and construction of the distribution center. Additionally, the lease agreement has a purchase option, which can be exercised beginning after the earlier of (a) substantial completion of construction or (b) the date the Company commences business operations in the premises.

The following is a schedule of net lease costs for the periods indicated:

 

8


 

 

 

(in thousands)

 

 

 

Three Months Ended

 

 

 

May 4, 2024

 

 

April 29, 2023

 

Finance lease cost:

 

 

 

 

 

 

Amortization of finance lease asset (a)

 

$

798

 

 

$

877

 

Interest on lease liabilities (b)

 

 

383

 

 

 

495

 

Operating lease cost (c)

 

 

151,180

 

 

 

138,950

 

Variable lease cost (c)

 

 

60,957

 

 

 

54,071

 

Total lease cost

 

 

213,318

 

 

 

194,393

 

Impairment (gain) on sale and leaseback transaction (d)

 

 

8,210

 

 

 

(1,958

)

Less all rental income (e)

 

 

(1,379

)

 

 

(1,398

)

Total net rent expense (f)

 

$

220,149

 

 

$

191,037

 

 

(a)
Included in the line item “Depreciation and amortization” in the Company’s Condensed Consolidated Statements of Income.
(b)
Included in the line item “Interest expense” in the Company’s Condensed Consolidated Statements of Income.
(c)
Includes real estate taxes, common area maintenance, insurance and percentage rent. Included in the line item “Selling, general and administrative expenses” in the Company’s Condensed Consolidated Statements of Income.
(d)
Impairment included in the line item "Impairment charges - long-lived assets" and gain included in line item “Other income - net” in the Company’s Condensed Consolidated Statements of Income.
(e)
Included in the line item “Other revenue” in the Company’s Condensed Consolidated Statements of Income.
(f)
Excludes an immaterial amount of short-term lease cost.

Supplemental cash flow disclosures related to leases are as follows:

 

 

(in thousands)

 

 

 

Three Months Ended

 

 

 

May 4, 2024

 

 

April 29, 2023

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

 

 

Cash payments arising from operating lease liabilities (a)

 

$

155,077

 

 

$

139,950

 

Cash payments for the principal portion of finance lease liabilities (b)

 

$

884

 

 

$

963

 

Cash payments for the interest portion of finance lease liabilities (a)

 

$

383

 

 

$

495

 

Supplemental non-cash information:

 

 

 

 

 

 

Operating lease liabilities arising from obtaining right-of-use assets

 

$

183,529

 

 

$

122,802

 

 

(a) Included within operating activities in the Company’s Condensed Consolidated Statements of Cash Flows.

(b) Included within financing activities in the Company’s Condensed Consolidated Statements of Cash Flows.

 

 

4. Long Term Debt

Long term debt consists of:

 

 

(in thousands)

 

 

 

May 4,

 

 

February 3,

 

 

April 29,

 

 

 

2024

 

 

2024

 

 

2023

 

Senior secured term loan facility (Term B-6 Loans), adjusted SOFR (with a floor of 0.00%) plus 2.00%, matures on June 24, 2028

 

$

931,185

 

 

$

933,355

 

 

$

939,844

 

Convertible senior notes, 2.25%, mature on April 15, 2025

 

 

156,155

 

 

 

156,155

 

 

 

397,375

 

Convertible senior notes, 1.25%, mature on December 15, 2027

 

 

297,069

 

 

 

297,069

 

 

 

 

ABL senior secured revolving facility, SOFR plus spread based on average outstanding balance, matures on December 22, 2026

 

 

 

 

 

 

 

 

 

Finance lease obligations

 

 

27,317

 

 

 

29,069

 

 

 

32,484

 

Unamortized deferred financing costs

 

 

(6,426

)

 

 

(7,003

)

 

 

(5,534

)

Total debt

 

 

1,405,300

 

 

 

1,408,645

 

 

 

1,364,169

 

Less: current maturities

 

 

(168,642

)

 

 

(13,703

)

 

 

(13,753

)

Long term debt, net of current maturities

 

$

1,236,658

 

 

$

1,394,942

 

 

$

1,350,416

 

 

 

9


 

 

Term Loan Facility

BCFWC and certain of its subsidiaries and holding companies are party to a Credit Agreement (as amended, supplemented and otherwise modified, the Term Loan Facility) that provides for term loans in an aggregate principal amount as of May 4, 2024 of $931.2 million maturing on June 24, 2028.

The Term Loan Facility is collateralized by a first lien on BCFWC’s and each guarantor’s equity interests, equipment, intellectual property, and certain favorable leases and real estate, and certain related assets and proceeds thereof (subject to certain exceptions), and a second lien on BCFWC’s and each guarantor’s other assets and proceeds thereof (subject to certain exceptions). On May 11, 2023, the Company amended the Term Loan Credit Agreement to, effective as of June 30, 2023, change one of the reference interest rates for borrowings under the Term Loan Facility from the Term Loan Adjusted LIBOR Rate to the Adjusted Term Secured Overnight Financing Rate (SOFR) Rate (as defined in the Term Loan Credit Agreement). The Adjusted Term SOFR Rate includes a credit spread adjustment of 0.11% for an interest period of one-month’s duration, 0.26% for an interest period of three-months’ duration and 0.43% for an interest period of six-months’ duration, with a floor of 0.00%.

Interest rates for the Term Loan Facility are based on: (i) for SOFR loans, a rate per annum equal to the Adjusted Term SOFR Rate for the applicable interest period, plus a margin of 2.00%; and (ii) for prime rate loans, a rate per annum equal to the highest of (a) the variable annual rate of interest then announced by JPMorgan Chase Bank, N.A. at its head office as its “prime rate,” (b) the federal reserve bank of New York rate in effect on such date plus 0.50% per annum, and (c) the Adjusted Term SOFR Rate for the applicable class of term loans for one-month plus 1.00%, plus, in each case, a margin of 1.00%.

At May 4, 2024 and April 29, 2023, the interest rate related to the Term Loan Facility was 7.4% and 7.0%, respectively.

2025 Convertible Notes

On April 16, 2020, the Company issued $805.0 million of its 2.25% Convertible Senior Notes due 2025 (2025 Convertible Notes). The 2025 Convertible Notes are general unsecured obligations of the Company. The 2025 Convertible Notes bear interest at a rate of 2.25% per year, payable semi-annually in cash, in arrears, on April 15 and October 15 of each year. The 2025 Convertible Notes will mature on April 15, 2025, unless earlier converted, redeemed or repurchased.

During the first quarter of Fiscal 2023, the Company entered into separate, privately negotiated exchange agreements with certain holders of the 2025 Convertible Notes. Under the terms of the exchange agreements, the holders exchanged $110.3 million in aggregate principal amount of 2025 Convertible Notes held by them for $133.3 million in cash. These exchanges resulted in aggregate pre-tax debt extinguishment charges of $24.6 million.

Prior to the close of business on the business day immediately preceding January 15, 2025, the 2025 Convertible Notes will be convertible at the option of the holders only upon the occurrence of certain events and during certain periods. Thereafter, the 2025 Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. The 2025 Convertible Notes have an initial conversion rate of 4.5418 shares per $1,000 principal amount of 2025 Convertible Notes (equivalent to an initial conversion price of approximately $220.18 per share of the Company’s common stock), subject to adjustment if certain events occur. The initial conversion price represents a conversion premium of approximately 32.50% over $166.17 per share, the last reported sale price of the Company’s common stock on April 13, 2020 (the pricing date of the offering) on the New York Stock Exchange. During the first quarter of Fiscal 2021, the Company made an irrevocable settlement election for any conversions of the 2025 Convertible Notes. Upon conversion, the Company will pay cash for the principal amount. For any excess above principal, the Company will deliver shares of its common stock. The Company was not permitted to redeem the 2025 Convertible Notes prior to April 15, 2023. From and after April 15, 2023, the Company is able to redeem for cash all or any portion of the 2025 Convertible Notes, at its option, if the last reported sale price of the Company’s common stock is equal to or greater than 130% of the conversion price for a specified period of time, at a redemption price equal to 100% of the principal aggregate amount of the 2025 Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

Holders of the 2025 Convertible Notes may require the Company to repurchase their 2025 Convertible Notes upon the occurrence of certain events that constitute a fundamental change under the indenture governing the 2025 Convertible Notes at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest to, but excluding, the date of repurchase. In connection with certain corporate events or if the Company issues a notice of redemption, it will, under certain circumstances, increase the conversion rate for holders who elect to convert their 2025 Convertible Notes in connection with such corporate event or during the relevant redemption period for such 2025 Convertible Notes. The effective interest rate is 2.8%.

 

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2027 Convertible Notes

On September 12, 2023, the Company closed the issuance of approximately $297.1 million aggregate principal amount of its 1.25% Convertible Senior Notes due 2027 (2027 Convertible Notes) pursuant to separate, privately negotiated exchange and subscription agreements with a limited number of holders of its 2025 Convertible Notes and certain investors, in each case pursuant to exemptions from registration under the Securities Act of 1933. The Company exchanged approximately $241.2 million in aggregate principal amount of the 2025 Convertible Notes for approximately $255.0 million in aggregate principal amount of the 2027 Convertible Notes. This exchange resulted in aggregate pre-tax debt extinguishment charges of $13.6 million. The Company also issued approximately $42.1 million in aggregate principal amount of 2027 Convertible Notes in a private placement to certain investors. An aggregate of up to 1,422,568 shares of common stock may be issued upon conversion of the 2027 Convertible Notes, which number is subject to adjustment up to an aggregate of 1,911,372 shares following certain corporate events that occur prior to the maturity date or if the Company issues a notice of redemption, and which is also subject to certain anti-dilution adjustments.

The 2027 Convertible Notes will bear interest at a rate of 1.25% per year, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2023. The 2027 Convertible Notes will mature on December 15, 2027, unless earlier converted, redeemed or repurchased.

Prior to the close of business on the business day immediately preceding September 15, 2027, the 2027 Convertible Notes will be convertible at the option of the holders only upon the occurrence of certain events and during certain periods. Thereafter, the 2027 Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. The 2027 Convertible Notes have an initial conversion rate of 4.8560 shares per $1,000 principal amount of 2027 Convertible Notes (equivalent to an initial conversion price of approximately $205.93 per share of the Company’s common stock), subject to adjustment if certain events occur. The initial conversion price represents a conversion premium of approximately 32.50% over $155.42 per share, the last reported sale price of the Company’s common stock on September 7, 2023 on The New York Stock Exchange. Upon conversion, the Company will pay cash up to the aggregate principal amount of 2027 Convertible Notes being converted, and pay (and deliver, if applicable) cash, shares of the Company’s common stock or a combination thereof, at its election, in respect of the remainder (if any) of the Company’s conversion obligation in excess of such aggregate principal amount. The Company will not be able to redeem the 2027 Convertible Notes prior to December 20, 2025. On or after December 20, 2025 and prior to the 21st scheduled trading day immediately preceding December 15, 2027, the Company will be able to redeem for cash all or any portion of the 2027 Convertible Notes, at its option, if the last reported sale price of the Company’s common stock is equal to or greater than 130% of the conversion price for a specified period of time, at a redemption price equal to 100% of the aggregate principal amount of the 2027 Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

If the Company undergoes a fundamental change, subject to certain conditions, holders of the 2027 Convertible Notes may require the Company to repurchase for cash all or any portion of their 2027 New Convertible Notes. The fundamental change repurchase price will be 100% of the aggregate principal amount of the 2027 Convertible Notes to be repurchased plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. The effective interest rate is 1.7%.

ABL Line of Credit

BCFWC and certain of its subsidiaries and holding companies are party to a Second Amended and Restated Credit Agreement (as amended, supplemented and otherwise modified, the ABL Line of Credit) that provides for $900.0 million of revolving commitments (subject to a borrowing base limitation) maturing on December 22, 2026, and, subject to the satisfaction of certain conditions, BCFWC can increase the aggregate amount of commitments up to $1,200 million. The interest rate margin applicable under the ABL Line of Credit in the case of loans drawn at the SOFR is 1.125% to 1.375% in the case of a daily SOFR rate or a term SOFR rate (in each case, plus a credit spread adjustment of 0.10%), and 0.125% to 0.375% in the case of a prime rate, depending on the average daily availability of the lesser of (a) the total commitments or (b) the borrowing base. The ABL Line of Credit is collateralized by a first priority lien on BCFWC’s and each guarantor's inventory, receivables, bank accounts, and certain related assets and proceeds thereof (subject to certain exceptions), and a second priority lien on BCFWC’s and each guarantor's other assets and proceeds thereof (other than real estate and subject to certain exceptions).

On June 26, 2023, BCFWC entered into a Fifth Amendment to the Second Amended and Restated Credit Agreement, which increased the sublimit for letters of credit thereunder from $150 million to $250 million. The letter of credit sublimit was automatically reduced to $237.5 million on April 1, 2024, and will automatically be reduced to (i) $225 million on July 1, 2024, (ii) $212.5 million on October 1, 2024, and (iii) $200 million on January 1, 2025. BCFWC and the agent may extend the foregoing dates under clauses (i) and (ii), as long as the sublimit is reduced to $200 million no later than January 1, 2025.

 

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At May 4, 2024, the Company had $779.1 million available under the ABL Line of Credit. There were no borrowings under the ABL Line of Credit during the three month period ended May 4, 2024.

At April 29, 2023, the Company had $839.8 million available under the ABL Line of Credit. There were no borrowings under the ABL Line of Credit during the three month period ended April 29, 2023.

 

5. Derivative Instruments and Hedging Activities

The Company accounts for derivatives and hedging activities in accordance with ASC 815, “Derivatives and Hedging” (ASC 815). As required by ASC 815, the Company records all derivatives on the balance sheet at fair value and adjusts to market on a quarterly basis. In addition, to comply with the provisions of ASC 820, “Fair Value Measurements” (ASC 820), credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, are incorporated in the fair values to account for potential nonperformance risk. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered any applicable credit enhancements such as collateral postings, thresholds, mutual puts, and guarantees. In accordance with ASC 820, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. There is no impact of netting, because the Company has only one derivative. The Company classifies its derivative valuations in Level 2 of the fair value hierarchy.

On December 17, 2018, the Company entered into an interest rate swap, which hedged $450 million of the variable rate exposure under the Term Loan Facility at a rate of 2.72%. On June 24, 2021, the Company terminated this previous interest rate swap, and entered into a new interest rate swap, which hedges $450 million of the variable rate exposure on the Term Loan Facility at a blended rate of 2.19%, and is designated as a cash flow hedge.

During the second quarter of Fiscal 2023, the Company amended its interest rate swap to be based on SOFR rather than LIBOR, which resulted in an updated swap rate of 2.16%. This amendment was covered under the guidance in ASC 848 and did not impact the hedge accounting relationship.

The amount of loss deferred for the previous interest rate swap was $26.9 million. The Company amortized this amount from accumulated other comprehensive income into interest expense over the original life of the previous interest rate swap, which had an original maturity date of December 29, 2023. The new interest rate swap had a liability fair value at inception of $26.9 million. The Company will accrete this amount into accumulated other comprehensive income as a benefit to interest expense over the life of the new interest rate swap, which has a maturity date of June 24, 2028.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.