Delaware

001-36107

80-0895227

(State or Other Jurisdiction

of Incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Exhibit

No.

Description

99.1

Press Release dated August 30, 2018.

BURLINGTON STORES, INC.

/s/ Robert L. LaPenta, Jr.

Robert L. LaPenta, Jr.

Vice President and Treasurer

o

On a GAAP basis, total sales rose 9.9%, net income increased 51%, and EPS increased 56%

o

On a Non-GAAP basis,

-

Comparable store sales increased 2.9% on a shifted basis

-

Adjusted EBIT margin increased 80 basis points

-

Adjusted EPS rose 51% to $1.09, excluding the impact of recent changes to New Jersey state tax laws

o

Increasing outlook for FY18 Adjusted EPS to $6.13 - $6.20, up from $5.90-$6.00  

•

Total sales for the 13 week period ended August 4, 2018 increased 9.9% over the 13 week period ended July 29, 2017 to $1,499 million. New and non-comparable stores contributed an incremental $94 million in sales during the quarter. Comparable store sales increased 2.9% for the 13 weeks ended August 4, 2018, on top of last year’s 3.5% comparable store sales increase.

•

Gross margin expanded by approximately 70 basis points over last year’s levels to 41.4% driven primarily by increased merchandise margin, which was slightly offset by higher freight costs. Product sourcing costs, which are included in selling, general and administrative expenses (SG&A), were approximately 10 basis points higher as a percentage of sales vs. the Fiscal 2017 second quarter.

•

SG&A, less product sourcing costs, was 26.9% of sales, representing an approximately 20 basis point improvement compared with the Fiscal 2017 second quarter. This improvement was driven primarily by disciplined expense management, partially offset by increased stock compensation expense.

•

The effective tax rate was 10.5%, driven lower by the impact of the Tax Cuts and Jobs Act, enacted in December 2017 (“2017 Tax Reform”), the accounting for stock based compensation, and the revaluation of deferred tax liabilities resulting from recent changes to New Jersey state tax law. The Adjusted Effective Tax Rate was 12.6%; excluding the revaluation of deferred tax liabilities, the Adjusted Effective Tax Rate was 17.1%.    

•

Net income increased 51% over the prior year period to $71 million, or $1.03 per share vs. $0.66 last year. Adjusted Net Income increased 54% to $79 million, or $1.15 per share, vs. $0.72 last year. Excluding the benefit from the revaluation of deferred tax liabilities, Adjusted Net Income increased 46% to $75 million, or $1.09 per share.

•

Fully diluted shares outstanding amounted to 68.8 million at the end of the quarter compared with 70.8 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. During the twelve months ended August 4, 2018, the Company has repurchased approximately two million shares of its common stock under its share repurchase program.

•

Adjusted EBIT increased 24%, or $20 million above the prior year period, to $105 million. The 80 basis point expansion in Adjusted EBIT as a percentage of sales was primarily driven by gross margin expansion and disciplined expense management.

•

Total sales increased 11.3%, which included a comparable store sales increase on a shifted basis of 3.8% over the first six months of Fiscal 2017, on top of last year’s 2.0% comparable store sales increase.  Net income increased 55% over the prior year period to $154 million, or $2.23 per share vs. $1.40 last year. Adjusted EBIT increased by 25%, or $45 million above last year, to $224 million, representing an 80 basis point increase vs. the prior year period.  Adjusted Net Income of $166 million was up 54% vs. last year, while Adjusted EPS was $2.41 vs. $1.51 in the prior year period.  Excluding the benefit from the revaluation of deferred tax liabilities, Adjusted Net Income of $162 million was up 51% vs. last year, while Adjusted EPS was $2.35, up 56% vs. last year.

•

Merchandise inventories were $844 million vs. $727 million last year. The increase was primarily due to inventory related to 51 net new stores opened since the end of the second quarter of Fiscal 2017, as well as a back to school receipt acceleration into the second quarter of Fiscal 2018 due to the calendar shift from the 53^rd week in Fiscal 2017. Pack and hold inventory was 26% of total inventory at the end of the second quarter of Fiscal 2018 compared to 27% last year. Comparable store inventory turnover improved 11% for the second quarter of Fiscal 2018, while comparable store inventory was down 2%. Excluding the aforementioned back to school receipt acceleration, comparable store inventory was down 7% vs. last year.

•

In June 2018, the Company extended the maturity of its ABL Facility to June 2023. Also in June 2018, the Company utilized the excess capacity on its ABL Facility to finance a $150 million reduction in the amount outstanding on its Term Loan Facility, which resulted in $961 million outstanding as of the end of the second quarter of Fiscal 2018. In light of the Company’s anticipated cash flow, the Company expects that the incremental $150 million borrowed on the ABL Facility will be fully paid down by the end of Fiscal 2018.

•

During the second quarter of Fiscal 2018, the Company invested $47 million of cash to repurchase 310,796 shares of its common stock. As of the end of the second quarter of Fiscal 2018, the Company had $107 million remaining on the share repurchase authorization approved by the Company’s Board of Directors in August 2017.  In addition, we are pleased to announce that on August 15, 2018, the

Company’s Board of Directors authorized the repurchase of up to an additional $300 million of common stock, which is authorized to be executed through August 2020.  

•

Total sales to increase in the range of 10.1% to 10.6%, excluding the 53^rd week impact in 2017; this assumes shifted comparable store sales to increase in the range of 2% to 3% for the balance of Fiscal 2018, resulting in a full year shifted comparable store sales increase of 2.9% to 3.4% on top of the 3.4% increase during Fiscal 2017;

•

Depreciation and amortization, exclusive of favorable lease amortization, to be approximately $200 million;

•

Adjusted EBIT margin to increase 30 to 40 basis points;

•

Interest expense of approximately $60 million;

•

An effective tax rate of 20% to 21%;

•

To open 43 net new stores, and invest Net Capital Expenditures of approximately $275 million;

•

Adjusted EPS in the range of $6.13 to $6.20, utilizing a fully diluted share count of approximately 68.8 million. This guidance includes the $0.06 benefit from the revaluation of deferred tax liabilities resulting from recent changes in New Jersey state tax law, and compares to the previous outlook for Adjusted EPS of $5.90-$6.00; and

•

Adjusted EPS, excluding the estimated impact of 2017 Tax Reform, the accounting for share based compensation, and the revaluation of deferred tax liabilities to be in the range of $4.94 to $5.01 as compared with the comparable 52 week Adjusted EPS of $4.14 in Fiscal 2017. This represents growth of 19% to 21%.

•

Total sales to increase in the range of 11% to 12%;

•

Shifted comparable store sales for the 13 weeks ended November 3, 2018 compared to the 13 weeks ended November 4, 2017 to increase in the range of 2% to 3% on top of a 3.1% increase during the third quarter of Fiscal 2017;

•

Effective tax rate of approximately 21%; and

•

Adjusted EPS in the range of $1.00 to $1.04, which assumes a fully diluted share count of approximately 68.7 million shares, as compared to $0.70 last year.

Three Months Ended

Six Months Ended

August 4,

July 29,

August 4,

July 29,

2018

2017

2018

2017

REVENUES:

Net sales

$

1,498,633

$

1,363,224

$

3,017,079

$

2,709,769

Other revenue

6,109

5,756

12,371

11,430

Total revenue

1,504,742

1,368,980

3,029,450

2,721,199

COSTS AND EXPENSES:

Cost of sales

877,474

808,126

1,770,156

1,604,522

Selling, general and administrative expenses

479,077

437,196

947,424

858,052

Costs related to debt amendments

79

—

79

—

Stock option modification expense

—

42

—

105

Depreciation and amortization

56,923

48,700

107,432

96,712

Impairment charges - long-lived assets

—

988

—

988

Other income - net

(4,022

)

(3,680

)

(5,372

)

(5,586

)

Loss on extinguishment of debt

1,361

—

1,361

—

Interest expense

14,581

14,544

29,103

28,058

Total costs and expenses

1,425,473

1,305,916

2,850,183

2,582,851

Income before income tax expense

79,269

63,064

179,267

138,348

Income tax expense

8,312

16,162

25,723

39,078

Net income

$

70,957

$

46,902

$

153,544

$

99,270

August 4,

February 3,

July 29,

2018

2018

2017

ASSETS

Current assets:

Cash and cash equivalents

$

89,585

$

133,286

$

32,648

Restricted cash and cash equivalents

21,882

27,800

27,800

Accounts receivable—net

71,026

71,649

58,941

Merchandise inventories

843,926

752,562

726,985

Prepaid and other current assets

147,574

115,136

102,089

Total current assets

1,173,993

1,100,433

948,463

Property and equipment—net

1,178,989

1,134,772

1,080,181

Goodwill and intangible assets—net

463,512

474,011

486,285

Deferred tax assets

6,496

6,952

7,282

Other assets

107,631

96,661

89,557

Total assets

$

2,930,621

$

2,812,829

$

2,611,768

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:

Accounts payable

$

761,658

$

736,252

$

603,960

Other current liabilities

355,676

370,215

317,513

Current maturities of long term debt

2,755

13,164

1,823

Total current liabilities

1,120,089

1,119,631

923,296

Long term debt

1,155,671

1,113,808

1,276,443

Other liabilities

320,343

313,130

289,891

Deferred tax liabilities

181,225

179,486

218,038

Stockholders' equity (deficit)

153,293

86,774

(95,900

)

Total liabilities and stockholders' equity (deficit)

$

2,930,621

$

2,812,829

$

2,611,768

Six Months Ended

August 4,

July 29,

2018

2017

OPERATING ACTIVITIES

Net income

$

153,544

$

99,270

Adjustments to reconcile net income to net cash provided by operating activities

Depreciation and amortization

107,432

96,712

Deferred income taxes

1,434

10,365

Non-cash loss on extinguishment of debt

1,361

—

Non-cash stock compensation expense

16,749

12,487

Non-cash rent

(12,663

)

(13,667

)

Deferred rent incentives

14,477

10,275

Changes in assets and liabilities:

Accounts receivable

(6,497

)

(11,111

)

Merchandise inventories

(91,363

)

(25,094

)

Accounts payable

25,180

(35,447

)

Other current assets and liabilities

(54,791

)

(77,635

)

Long term assets and liabilities

7,921

(1,105

)

Other operating activities

3,523

7,127

Net cash provided by operating activities

166,307

72,177

INVESTING ACTIVITIES

Cash paid for property and equipment

(121,966

)

(107,800

)

Lease acquisition costs

(8,543

)

—

Proceeds from insurance recoveries related to property and equipment

2,147

—

Other investing activities

3,178

1,100

Net cash (used in) investing activities

(125,184

)

(106,700

)

FINANCING ACTIVITIES

Proceeds from long term debt—ABL Line of Credit

694,100

680,900

Principal payments on long term debt—ABL Line of Credit

(523,800

)

(533,500

)

Principal payments on long term debt—Term Loan Facility

(152,808

)

—

Purchase of treasury shares

(117,227

)

(164,238

)

Other financing activities

8,993

2,412

Net cash (used in) financing activities

(90,742

)

(14,426

)

(Decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents

(49,619

)

(48,949

)

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

161,086

109,397

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

$

111,467

$

60,448

(unaudited)

(in thousands, except per share data)

Three Months Ended

Six Months Ended

August 4,

July 29,

August 4,

July 29,

2018

2017

2018

2017

Reconciliation of net income to Adjusted Net Income:

Net income

$

70,957

$

46,902

$

153,544

$

99,270

Net favorable lease amortization (a)

9,551

5,912

14,876

11,921

Costs related to debt amendments (b)

79

—

79

—

Stock option modification expense (c)

—

42

—

105

Loss on extinguishment of debt (d)

1,361

—

1,361

—

Impairment charges (e)

—

988

—

988

Tax effect (f)

(3,078

)

(2,569

)

(3,998

)

(4,815

)

Adjusted Net Income

$

78,870

$

51,275

$

165,862

$

107,469

Fully diluted weighted average shares outstanding (g)

68,769

70,801

68,870

71,153

Adjusted Earnings per Share

$

1.15

$

0.72

$

2.41

$

1.51

(unaudited)

(in thousands)

Three Months Ended

Six Months Ended

August 4,

July 29,

August 4,

July 29,

2018

2017

2018

2017

Reconciliation of net income to Adjusted EBITDA:

Net income

$

70,957

$

46,902

$

153,544

$

99,270

Interest expense

14,581

14,544

29,103

28,058

Interest income

(110

)

(35

)

(189

)

(70

)

Loss on extinguishment of debt (d)

1,361

—

1,361

—

Costs related to debt amendments (b)

79

—

79

—

Stock option modification expense (c)

—

42

—

105

Depreciation and amortization

56,923

48,700

107,432

96,712

Impairment charges (e)

—

988

—

988

Income tax expense

8,312

16,162

25,723

39,078

Adjusted EBITDA

$

152,103

$

127,303

$

317,053

$

264,141

(unaudited)

(in thousands)

Three Months Ended

Six Months Ended

August 4,

July 29,

August 4,

July 29,

2018

2017

2018

2017

Reconciliation of net income to Adjusted EBIT:

Net income

$

70,957

$

46,902

$

153,544

$

99,270

Interest expense

14,581

14,544

29,103

28,058

Interest income

(110

)

(35

)

(189

)

(70

)

Loss on extinguishment of debt (d)

1,361

—

1,361

—

Costs related to debt amendments (b)

79

—

79

—

Stock option modification expense (c)

—

42

—

105

Net favorable lease amortization (a)

9,551

5,912

14,876

11,921

Impairment charges (e)

—

988

—

988

Income tax expense

8,312

16,162

25,723

39,078

Adjusted EBIT

$

104,731

$

84,515

$

224,497

$

179,350

(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 incurred in connection with review of refinancing opportunities.

(c)

Represents expenses incurred as a result of our May 2013 stock option modification, which became fully vested during Fiscal 2017.

(d)

Amounts relate to a $150.0 million prepayment on our Term Loan Facility, as well as an amendment to our ABL Credit Agreement.

(e)

Represents impairment charges on long-lived assets.

(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.

(unaudited)

Three Months Ended

Six Months Ended

August 4,

July 29,

August 4,

July 29,

2018

2017

2018

2017

Effective tax rate on a GAAP basis

10.5

%

25.6

%

14.3

%

28.2

%

Adjustments to arrive at Adjusted Effective Tax Rate

2.1

1.2

0.9

0.8

Adjusted Effective Tax Rate

12.6

%

26.8

%

15.2

%

29.0

%

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

17.1

%

26.8

%

17.2

%

29.0

%