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Item 8. Financial Statements and Supplementary Data

2023-03-16 compared with 2022-03-17 · 362 added, 350 removed, 681 unchanged (51% of the section changed)

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Consolidated Balance Sheets as of January 2 8 , 202 3 and January 29, 2022

Consolidated Statements of Operations and Comprehensive Income for the Fiscal Years Ended January 29 , 202 2 , January 30, 2021 and February 1, 2020

Consolidated Statements of Shareholders’ Equity (Deficit) for the Fiscal Years Ended January 29, 2022, January 30, 2021 and February 1, 2020

Consolidated Statements of Cash Flows for the Fiscal Years Ended January 29 , 202 2 , January 30 , 202 1 and February 1 , 20 20

Consolidated Statements of Operations and Comprehensive Income for the Fiscal Years Ended January 2 8 , 202 3 , January 29 , 202 2 and January 30, 2021

Consolidated Statements of S tock holders’ Equity (Deficit) for the Fiscal Years Ended January 2 8 , 202 3 , January 29 , 202 2 and January 30, 2021

Consolidated Statements of Cash Flows for the Fiscal Years Ended January 2 8 , 202 3 , January 29 , 202 2 and January 30, 2021

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of BJ’s Wholesale Club Holdings, Inc.

To the Board of Directors and Stockholders of BJ’s Wholesale Club Holdings, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of BJ’s Wholesale Club Holdings, Inc.

and its subsidiaries (the “Company”) as of January 29, 2022 and January 30, 2021, and the related consolidated statements of operations and comprehensive income, of shareholders' equity (deficit) and of cash flows for each of the three years in the period ended January 29, 2022, including the related notes (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the “Company”) as of January 28, 2023 and January 29, 2022, and the related consolidated statements of operations and comprehensive income, of stockholders' equity (deficit) and of cash flows for each of the three years in the period ended January 28, 2023, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of January 28, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 28, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinions

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We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded the four distribution centers and the related private transportation fleet acquired from Burris Logistics, LLC, from its assessment of internal control over financial reporting as of January 28, 2023 because the four distribution centers and the related private transportation fleet were acquired by the Company in a purchase business combination during 2022.

We have also excluded the four distribution centers and the related private transportation fleet acquired from Burris Logistics, LLC, from our audit of internal control over financial reporting.

The four distribution centers and the related private transportation fleet acquired from Burris Logistics, LLC whose total assets and total net sales excluded from management’s assessment and our audit of internal control over financial reporting represent 6.2% and 0.4%, respectively, of the related consolidated financial statement amounts as of and for the year ended January 28, 2023.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

A company’s internal control over financial reporting includes those policies and procedures

that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Workers’ Compensation and General Liability Reserves

As described in Notes 2, 14 and 15 to the consolidated financial statements, the Company is primarily self-insured for workers’ compensation and general liability claims.

As of January 29, 2022, workers’ compensation and general liability reserves were approximately $99 million within other non-current liabilities and a significant portion of insurance reserves of $48 million within accrued expenses and other current liabilities.

As of January 28, 2023, workers’ compensation and general liability reserves were a significant portion of insurance reserves of $110.8 million within other non-current liabilities and a significant portion of insurance reserves of $53.2 million within accrued expenses and other current liabilities.

The reported reserves for workers’ compensation and general liability claims are derived from estimated ultimate costs based upon individual claim file reserves and estimates for incurred but not reported claims.

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Developing the independent estimate involved (i) testing the completeness and accuracy of underlying data provided by management and (ii) independently developing the loss development factors and applying actuarial methods.

Acquisition of assets and operations of four distribution centers and the related private transportation fleet from Burris Logistics, LLC.

As described in Notes 1 and 19 to the consolidated financial statements, the Company completed its acquisition of the assets and operations of four distribution centers and the related private transportation fleet from Burris Logistics, LLC for total consideration of approximately $375.6 million.

The transaction was accounted for as a business combination.

The most significant items recorded included property and equipment of $203.4 million, merchandise inventories of $88.1 million, and resulting goodwill of $84.7 million.

As disclosed by management, the Company allocated the consideration paid to the identifiable assets, intangible assets and liabilities based on the estimated fair values as of the closing date of the acquisition.

The excess of the fair value of the purchase price over the fair values of these identifiable assets, intangible assets and liabilities was recorded as goodwill.

Management utilized third-party valuation specialists to assist in the determination of the fair value of the assets acquired.

Specifically, the fair value of the buildings and site improvements were determined using a combination of the cost, income and sales comparison approaches.

The methods used to estimate the fair value involved significant assumptions.

The principal considerations for our determination that performing procedures relating to the acquisition of assets and operations of four distribution centers and the related private transportation fleet from Burris Logistics, LLC is a critical audit matter are (i) the significant judgment by management when developing the fair value estimates of the assets acquired;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management's fair value estimates of the assets acquired;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the assets acquired.

These procedures also included, among others, (i) reading the purchase agreement, (ii) testing management’s process for developing the fair value estimates of the assets acquired, (iii) evaluating the appropriateness of the valuation methods, (iv) testing the completeness and accuracy of data used in the valuation methods, (v) testing the accuracy of the purchase price allocation and goodwill recorded, and (vi) testing inventory existence and valuation, including performing physical inventory observations and cost testing.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the Company’s valuation methods and (ii) the reasonableness of the significant assumptions.

/s/ PricewaterhouseCoopers LLP

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CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

(Amounts in thousands, except par value)

January 28, 2023 January 29, 2022

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Current liabilities:

Current portion of long-term debt $ — $ 260,000

Short-term debt $ 405,000 $ —

Current portion of operating lease liabilities 177,233 141,453

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Commitments and contingencies (see Note 8 )

SHAREHOLDERS’ EQUITY (DEFICIT)

STOCKHOLDERS’ EQUITY

Preferred stock;

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Additional paid-in capital 958,555 902,704

Retained earnings (accumulated deficit) 131,313 ( 295,339 )

Accumulated other comprehensive income (loss) 1,305 ( 20,528 )

Retained earnings 644,490 131,313

Accumulated other comprehensive income 1,550 1,305

Treasury stock, at cost, 12,444 shares at January 28, 2023 and 9,945 shares at January 29, 2022

( 559,221 ) ( 388,668 )

Total shareholders’ equity 648,108 319,327

Total liabilities and shareholders’ equity $ 5,668,894 $ 5,411,530

Total stockholders’ equity 1,046,837 648,108

Total liabilities and stockholders’ equity $ 6,349,956 $ 5,668,894

The accompanying notes are an integral part of the consolidated financial statements.

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Fiscal Year Ended

January 29, 2022 Fiscal Year Ended

January 30, 2021 Fiscal Year Ended

February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021

Net sales $ 18,918,435 $ 16,306,365 $ 15,096,913

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Net income $ 513,177 $ 426,652 $ 421,030

Basic income per share

Income per share attributable to common stockholders—basic:

Income from continuing operations $ 3.84 $ 3.15 $ 3.09

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Net income $ 3.83 $ 3.15 $ 3.09

Diluted income per share

Income per share attributable to common stockholders—diluted:

Income from continuing operations $ 3.77 $ 3.09 $ 3.03

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Net income $ 3.76 $ 3.09 $ 3.03

Weighted-average number of common shares outstanding:

Weighted-average number of shares outstanding:

Basic 134,017 135,386 136,111

Diluted 136,473 138,045 138,876

Other comprehensive income (loss):

Postretirement medical plan adjustment, net of income tax of $ 43 , $ 12 and $ 385 , respectively

Other comprehensive income:

Postretirement medical plan adjustment, net of income tax (benefit) expense of $ 26 , $( 43 ) and $( 12 ), respectively

$ 78 $ ( 110 ) $ ( 33 )

Amounts reclassified from other comprehensive income, net of tax 9,526 6,081 —

Unrealized gain (loss) on cash flow hedge, net of income tax of $ 4,827 , $ 4 and $ 5,554 , respectively

Amounts reclassified from accumulated other comprehensive income, net of tax ( 421 ) 9,526 6,081

Unrealized gain on cash flow hedge, net of income tax of $ 229 , $ 4,827 and $ 4 , respectively

588 12,417 10

Total other comprehensive income (loss) 21,833 6,058 ( 15,271 )

Total other comprehensive income 245 21,833 6,058

Total comprehensive income $ 513,422 $ 448,485 $ 427,088

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BJ’S WHOLESALE CLUB HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Amount in thousands)

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Income (Loss) Treasury Stock Total

Shareholders’

Stockholders’

Shares Amount Shares Amount

Balance, Balance, February 2, 2019 138,099 $ 1,381 $ 742,072 $ ( 915,113 ) $ ( 11,315 ) ( 782 ) $ ( 19,109 ) $ ( 202,084 )

Balance, February 1, 2020 140,723 $ 1,407 $ 773,618 $ ( 716,369 ) $ ( 26,586 ) ( 3,425 ) $ ( 86,414 ) $ ( 54,344 )

Net income — — — 421,030 — — — 421,030

Postretirement medical plan adjustment, net of tax — — — — ( 33 ) — — ( 33 )

Unrealized loss on cash flow hedge, net of tax — — — — ( 14,281 ) — — ( 14,281 )

Unrealized gain on cash flow hedge, net of tax — — — — 10 — — 10

Amounts reclassified from accumulated other comprehensive income, net of tax — — — — 6,081 — — 6,081

Dividends paid — — ( 25 ) — — — — ( 25 )

Common stock issued under stock incentive plans 2,598 26 ( 26 ) — — — — —

Common stock issued under ESPP plan 88 1 1,728 — — — — 1,729

Stock compensation expense — — 18,796 — — — — 18,796

Net cash received on option exercises — — 11,072 — — — — 11,072

Treasury stock purchases — — — — — ( 2,643 ) ( 67,305 ) ( 67,305 )

Cumulative effect of change in accounting principle — — — 11,568 — — — 11,568

Balance, February 1, 2020 140,723 $ 1,407 $ 773,618 $ ( 716,369 ) $ ( 26,586 ) ( 3,425 ) $ ( 86,414 ) $ ( 54,344 )

Common stock issued under ESPP 107 1 2,675 — — — — 2,676

Stock-based compensation expense — — 32,150 — — — — 32,150

Net cash received from stock option exercises — — 17,985 — — — — 17,985

Acquisition of treasury stock — — — — — ( 2,811 ) ( 106,203 ) ( 106,203 )

Balance, January 30, 2021 143,428 $ 1,434 $ 826,377 $ ( 295,339 ) $ ( 20,528 ) ( 6,236 ) $ ( 192,617 ) $ 319,327

Net income — — — 426,652 — — — 426,652

Postretirement medical plan adjustment, net of tax — — — — ( 110 ) — — ( 110 )

Unrealized loss on cash flow hedge, net of tax — — — — 10 — — 10

Amounts reclassified from other comprehensive income, net of tax — — — — 6,081 — — 6,081

Unrealized gain on cash flow hedge, net of tax — — — — 12,417 — — 12,417

Amounts reclassified from accumulated other comprehensive income, net of tax — — — — 9,526 — — 9,526

Dividends paid — — ( 25 ) — — — — ( 25 )

Common stock issued under stock incentive plans 1,915 19 ( 19 ) — — — — —

Common stock issued under ESPP plan 107 1 2,675 — — — — 2,676

Stock compensation expense — — 32,150 — — — — 32,150

Net cash received on option exercises — — 17,985 — — — — 17,985

Treasury stock purchases — — — — — ( 2,811 ) ( 106,203 ) ( 106,203 )

Common stock issued under ESPP 108 1 3,821 — — — — 3,822

Stock-based compensation expense — — 53,837 — — — — 53,837

Net cash received from stock option exercises — — 18,713 — — — — 18,713

Acquisition of treasury stock — — — — — ( 3,709 ) ( 196,051 ) ( 196,051 )

Balance, January 29, 2022 145,451 $ 1,454 $ 902,704 $ 131,313 $ 1,305 ( 9,945 ) $ ( 388,668 ) $ 648,108

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Postretirement medical plan adjustment, net of tax — — — — 78 — — 78

Unrealized loss on cash flow hedge, net of tax — — — — 12,417 — — 12,417

Amounts reclassified from other comprehensive income, net of tax — — — — 9,526 — — 9,526

Unrealized gain on cash flow hedge, net of tax — — — — 588 — — 588

Amounts reclassified from accumulated other comprehensive income, net of tax — — — — ( 421 ) — — ( 421 )

Dividends paid — — ( 25 ) — — — — ( 25 )

Common stock issued under stock incentive plans 806 8 ( 8 ) — — — — —

Common stock issued under ESPP plan 108 1 3,821 — — — — 3,822

Stock compensation expense — — 53,837 — — — — 53,837

Net cash received on option exercises — — 18,713 — — — — 18,713

Treasury stock purchases — — — — — ( 3,709 ) ( 196,051 ) ( 196,051 )

Common stock issued under ESPP 90 1 4,829 — — — — 4,830

Stock-based compensation expense — — 42,617 — — — — 42,617

Net cash received from stock option exercises — — 8,438 — — — — 8,438

Acquisition of treasury stock — — — — — ( 2,499 ) ( 170,553 ) ( 170,553 )

Balance, January 28, 2023 146,347 $ 1,463 $ 958,555 $ 644,490 $ 1,550 ( 12,444 ) $ ( 559,221 ) $ 1,046,837

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Fiscal Year Ended

January 29, 2022 Fiscal Year Ended

January 30, 2021 Fiscal Year Ended

February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021

CASH FLOWS FROM OPERATING ACTIVITIES

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Depreciation and amortization 200,934 180,548 167,454

Amortization of debt issuance costs and accretion of original issues discount 3,387 4,362 5,172

Amortization of debt issuance costs and accretion of original issue discount 2,765 3,387 4,362

Debt extinguishment and refinancing charges 3,256 657 4,077

Impairment charges — — 13,306

Stock-based compensation expense 42,617 53,837 32,150

Deferred income tax provision (benefit) ( 507 ) ( 9,197 ) 10,246

Deferred income tax benefit ( 1,938 ) ( 507 ) ( 9,197 )

Changes in operating leases and other non-cash items 27,730 9,226 9,389

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Accounts payable 82,914 124,709 201,663

Accrued expenses 81,419 97,690 15,640

Accrued expenses and other current liabilities 4,784 81,419 97,690

Other non-current liabilities 22,882 4,453 35,665

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Proceeds from sale leaseback transactions 27,266 19,080 25,893

Acquisitions ( 376,521 ) — —

Net cash used in investing activities ( 747,058 ) ( 304,511 ) ( 192,440 )

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from the issuance of long-term debt 67,610 — —

Payments on long-term debt ( 50,000 ) — ( 3,297 )

Paydown of the First Lien Term Loan and extinguishment of Second Lien Term Loan ( 100,000 ) ( 510,000 ) ( 200,000 )

Proceeds from ABL facility — 996,000 1,390,000

Payments on ABL facility ( 260,000 ) ( 1,064,000 ) ( 1,301,000 )

Payments on First Lien Term Loan ( 320,655 ) ( 100,000 ) ( 510,000 )

Proceeds from revolving lines of credit 1,402,000 — 996,000

Payments on revolving lines of credit ( 997,000 ) ( 260,000 ) ( 1,064,000 )

Debt issuance costs paid ( 4,783 ) — —

Dividends paid ( 25 ) ( 25 ) ( 25 )

Financing obligations payments ( 1,112 ) ( 984 ) ( 612 )

Net cash received from stock option exercises 8,438 18,713 17,985

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Proceeds from financing obligations 15,388 7,692 5,056

Other financing activities ( 6,143 ) ( 1,112 ) ( 984 )

Net cash used in financing activities ( 52,628 ) ( 525,226 ) ( 662,792 )

Net increase in cash and cash equivalents 1,918 13,314 3,058

Net (decrease) increase in cash and cash equivalents ( 11,521 ) 1,918 13,314

Cash and cash equivalents, beginning of period 45,436 43,518 30,204

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Non-cash financing and investing activities:

Lease liabilities arising from obtaining right-of-use assets 261,228 154,714 166,602

Property additions included in accrued expenses 37,629 29,640 13,131

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BJ’s Wholesale Club Holdings, Inc.

and its wholly-owned subsidiaries (the "Company" or "BJ’s") is a leading warehouse club operator concentrated primarily on the east coast of the United States of America.

As of January 29, 2022, BJ’s operated 226 warehouse clubs in 17 states.

and its wholly-owned subsidiaries (the "Company" or "BJ’s") is a leading warehouse club operator concentrated primarily in the eastern half of the United States.

As of January 28, 2023, BJ’s operated 235 warehouse clubs and 164 gas stations in 18 states.

BJ’s business is moderately seasonal in nature.

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As a result of these factors, the financial results for any single quarter or for periods of less than a year are not necessarily indicative of the results that may be achieved for a full fiscal year.

The novel coronavirus ("COVID-19") pandemic has severely impacted the economies of the U.S.

and other countries around the world.

In the preparation of these financial statements and related disclosures we have assessed the impact that COVID-19 has had on our estimates, assumptions and accounting policies and made additional disclosures, as necessary.

On January 25, 2022, the Company entered into an agreement to acquire the assets and operations of four distribution centers and the related private transportation fleet from Burris Logistics.

The transaction is expected to close in the second quarter of fiscal year 2022 and the Company expects to finance the purchase price with a combination of available cash and borrowings under the Company’s revolving credit facility.

Events and global business conditions such as inflation, the coronavirus ("COVID-19") pandemic, and the war in Ukraine have resulted in certain impacts to the global economy, including market disruptions, volatility in fuel costs, and supply chain challenges.

Throughout fiscal year 2022, we continued to experience elevated supply chain costs, including increased commodity prices, logistics, and procurement costs.

We expect these market disruptions and inflationary pressures to continue into fiscal year 2023.

On May 2, 2022, the Company closed the previously announced acquisition of the assets and operations of four distribution centers and the related private transportation fleet from Burris Logistics, LLC.

The Company financed the purchase price with a combination of available cash and borrowings under the ABL Facility.

See Note 1 9 , "Acquisitions" for additional information.

Summary of Significant Accounting Policies

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The Company’s fiscal year ends on the Saturday closest to January 31.

Fiscal year 2021 ("2021") consists of the 52 weeks ended January 29, 2022, fiscal year 2020 ("2020") consists of the 52 weeks ended January 30, 2021 and fiscal year 2019 ("2019") consists of the 52 weeks ended February 1, 2020 .

Secondary Offerings

On March 11, 2019, certain selling shareholders completed a registered sale (the "March 2019 Secondary Offering") of 19,550,000 shares of the Company’s common stock at a public offering price of $ 25.08 per share.

Of the 19,550,000 shares sold, 2,550,000 shares represented the underwriters’ exercise of their overallotment option.

The Company did not receive any proceeds from the March 2019 Secondary Offering or incur underwriters’ discounts or commissions on the sale.

The Company incurred transaction costs of $ 1.2 million primarily for legal, accounting and printer services related to the March 2019 Secondary Offering.

On June 6, 2019, certain selling shareholders completed a registered sale (the "June 2019 Secondary Offering") of 17,500,000 shares of the Company’s common stock at a public offering price of $ 24.65 per share.

The Company did not receive any proceeds from the June 2019 Secondary Offering or incur underwriters’ discounts or commissions on the sale.

The Company incurred immaterial transaction costs related to the June 2019 Secondary Offering.

On June 27, 2019, the Company completed a registered sale of 9,977,024 shares of the Company’s common stock at a price of $ 25.41 per share.

In connection with this offering, the Company repurchased 2,500,000 shares at $ 25.41 per share.

The Company did not receive any proceeds from this offering or incur underwriters’ discounts or commissions on the sale.

The Company incurred immaterial transaction costs related to the June 27, 2019 offering.

Fiscal year 2022 ("2022") consists of the 52 weeks ended January 28, 2023, fiscal year 2021 ("2021") consists of the 52 weeks ended January 29, 2022, and fiscal year 2020 ("2020") consists of the 52 weeks ended January 30, 2021 .

Estimates Included in Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and shareholders’ equity, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the

reporting period.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and stockholders’ equity, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The significant estimates relied upon in preparing these consolidated financial statements are estimating workers’ compensation and general liability self-insurance reserves.

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Segment Reporting

The Company’s retail operations, which include retail club and other sales procured from our clubs and DC’s, represent substantially all of the consolidated total revenues, and are the only reportable segment.

The Company’s retail operations, which include retail club and other sales procured from our clubs and distribution centers, represent substantially all of the consolidated total revenues, and are the only reportable segment.

All of the Company’s identifiable assets are located in the United States.

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The following table summarizes the percentage of net sales by category:

2021 2020 2019

Fiscal Year Ended

January 28, 2023 January 29, 2022 January 30, 2021

Grocery 67 % 71 % 77 %

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Concentration Risk

An adverse change in the Company’s relationships with its key suppliers could have a material effect on the business and results of operations of the Company.

Currently, one distributor, Burris Logistics, consolidates a substantial majority of perishables for shipment to the clubs.

The Company has entered into an agreement to acquire four distribution centers and related private transportation fleet from Burris Logistics, which is expected to bring end-to-end perishable supply chain in-house.

However, disruption in logistics processes could materially impact sales and profitability for the near term while the Company is integrating the assets into its operations.

The warehouse clubs are primarily located in the eastern United States.

Sales from the New York metropolitan area made up approximately 23 % of net sales in fiscal year 2021 and approximately 25 % in fiscal years 2020 and 2019.

The Company's clubs are primarily located in the eastern United States.

Sales from the New York metropolitan area comprised approximately 21 %, 23 %, and 25 % of net sales in fiscal years 2022, 2021, and 2020, respectively.

Financial instruments that potentially subject the Company to concentrations of credit risk principally consist of cash held in financial institutions.

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Merchandise Inventories

Inventories are stated at the lower of cost and determined under the average cost method, or net realizable value.

Inventories are stated at the lower of cost, determined under the average cost method, or net realizable value.

The Company recognizes the write-down of slow-moving or obsolete inventory in cost of sales when such write-downs are probable and estimable.

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Property and equipment which is not ready for its intended use is recorded as construction in progress.

Buildings and

improvements are depreciated over estimated useful lives of 33 years.

Buildings and improvements are depreciated over estimated useful lives of 33 years.

Interest related to the development of buildings is capitalized during the construction period.

Leasehold costs and improvements are amortized over the remaining lease term (which includes renewal periods that are reasonably assured) or the asset’s estimated useful life, whichever is shorter.

Furniture, fixtures and equipment are depreciated over estimated useful lives, ranging from three to ten years .

Depreciation expense was $ 170.1 million in fiscal year 2021, $ 155.6 million in fiscal year 2020 and $ 143.5 million in fiscal year 2019.

Leasehold costs and improvements are amortized over the shorter of the remaining lease term, which includes renewal periods that are reasonably assured, or the asset’s estimated useful life.

Furniture, fixtures and equipment are depreciated over their estimated useful lives, ranging from three to ten years .

Depreciation expense was $ 191.7 million, $ 170.1 million, and $ 155.6 million in fiscal years 2022, 2021, and 2020, respectively.

Certain costs incurred in connection with developing or obtaining computer software for internal use are capitalized.

Capitalized software costs are included in furniture, fixtures, and equipment and are amortized on a straight-line basis over the estimated useful life of the software, which is three years .

Capitalized software costs are included in furniture, fixtures, and equipment and are amortized on a straight-line basis over the estimated useful life of the software, which is generally three years .

Software costs not meeting the criteria for capitalization are expensed as incurred.

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The Company defers costs directly associated with acquiring third-party financing.

Debt issuance costs related to the term loans are recorded as a direct deduction from the carrying amount of the debt.

Debt issuance costs associated with the ABL Facility (as defined in Note 5) are recorded within other assets.

Debt issuance costs are amortized over the term of the related financing arrangements on a straight-line basis, which is materially consistent with the effective interest method.

Amortization of deferred debt issuance costs is recorded in interest expense and was $ 2.2 million in fiscal year 2021, $ 2.5 million in fiscal year 2020 and $ 2.7 million in fiscal year 2019.

Debt issuance costs related to the term loan are recorded as a direct deduction of the carrying amount of long-term debt, while debt issuance costs associated with the ABL Revolving Facility are recorded within other assets in the consolidated balance sheets.

Debt issuance costs are amortized over the respective terms of the related financing arrangements on a straight-line basis, which is materially consistent with the effective interest method.

Amortization of deferred debt issuance costs of $ 1.7 million, $ 2.2 million, $ 2.5 million in fiscal years 2022, 2021, and 2020, respectively, included in interest expense, net in the consolidated statements of operations and comprehensive income.

Goodwill and Indefinite-Lived Intangible Assets

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If the fair value of the reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and no further testing is required.

If the carrying amount of the reporting unit exceeds its fair value, an impairment charge is recorded to write down goodwill to its implied fair value and is recorded as a component of selling, general and administrative expenses ("SG&A").

The Company assessed the recoverability of goodwill in fiscal years 2022, 2021 and 2020 and determined that there was no impairment.

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Impairment losses are measured as the difference between the carrying amount and the estimated fair value of the assets being evaluated.

In fiscal years 2021 and 2020, the Company recorded no impairment charges.

In fiscal year 2019, the Company recorded $ 13.3 million of impairment charges to lower the carrying value of the assets to their estimated fair value.

The total impairment charges consisted of $ 1.7 million related to IT assets, $ 2.0 million related to fixed assets and $ 9.6 million related to operating lease right of use ("ROU") assets.

The fixed asset impairment charges and operating lease

ROU asset impairment charges related to four club locations.

The combined fixed assets and ROU asset carrying value of these four locations after the impairment charge was $ 10.5 million.

In fiscal year 2022, the Company recorded a lease asset impairment charge of $ 1.2 million included in loss from discontinued operations, net of taxes within the consolidated statements of operations and comprehensive income.

The Company did no t record impairment charges in fiscal years 2021 or 2020.

Asset Retirement Obligations

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The asset retirement obligation is subsequently adjusted for changes in fair value.

The associated estimated asset retirement costs are capitalized in leasehold improvements and depreciated over their useful life.

The associated estimated asset retirement costs are capitalized in leasehold improvements and depreciated over their useful lives.

The Company’s asset retirement obligations relate to the future removal of gasoline tanks and solar panels installed at leased clubs and the related assets associated with the gas stations and solar panel locations.

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Workers’ Compensation and General Liability Self-insurance Reserves

We are primarily self-insured for workers’ compensation and general liability claims.

Amounts in excess of certain levels, which range from $ 0.3 million to $ 1.0 million per occurrence, are insured as a risk reduction strategy to mitigate the impact of catastrophic losses on net income.

The Company is primarily self-insured for workers’ compensation, general liability claims, and auto liability claims.

Amounts in excess of certain levels, which range from $ 0.3 million to $ 1.0 million per occurrence for workers' compensation

and general liability, and up to $ 2.0 million per occurrence for auto liability, are insured as a risk reduction strategy to mitigate the impact of catastrophic losses on net income.

Reported reserves for claims are derived from estimated ultimate costs based upon individual claim file reserves and estimates for incurred but not reported claims.

The estimates are developed utilizing actuarial methods and are based on historical claims experience and other actuarial assumptions related to loss development factors.

The inherent uncertainty of future loss projections could cause actual claims to differ from our estimates.

When historical losses are not a good measure of future liability, such as in the event of COVID-19, we base our estimates of ultimate liability on our interpretation of current law, claims filed to date and other relevant factors which are subject to change.

These accruals, if any, are included in accrued expenses and other current liabilities and other non-current liabilities in the Company’s Consolidated Balance Sheets.

The inherent uncertainty of future loss projections could cause actual claims to differ from the Company's estimates.

When historical losses are not a good measure of future liability, such as in the event of COVID-19, the Company bases its estimates of ultimate liability on its interpretation of current law, claims filed to date, and other relevant factors which are subject to change.

Accruals for such claims, if any, are included in accrued expenses and other current liabilities and other non-current liabilities in the consolidated balance sheets.

Revenue Recognition - Performance Obligations

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Fiscal Year Ended

January 29, 2022 January 30, 2021 February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021

Point of sale transactions, excluding sales tax, as a percent of net sales 92 % 93 % 95 %

Point of sale transactions, excluding sales tax, as a percent of total revenues 90 % 91 % 93 %

BJ’s Perks Rewards and My BJ’s Perks programs— The Company’s BJ’s Perks Rewards® membership program allows participating members to earn 2 % cash back, up to a maximum of $ 500 per year, on qualified purchases made at BJ’s.

The Company also offers a co-branded credit card program, the My BJ’s Perks® program, which allows My BJ’s Perks® Mastercard credit card holders to earn up to 5 % cash back on eligible purchases made at BJ’s and up to 2 % cash back on purchases made with the card outside of BJ’s.

BJ’s Perks Rewards and My BJ’s Perks programs— The Company’s BJ’s Perks Rewards® membership program, which was in place in fiscal 2022, allowed participating members to earn 2 % cash back, up to a maximum of $ 500 per year, on qualified purchases made at BJ’s.

The Company also offered a co-branded credit card program, the My BJ’s Perks® program, which allows My BJ’s Perks® Mastercard credit card holders to earn up to 5 % cash back on eligible purchases made at BJ’s and up to 2 % cash back on purchases made with the card outside of BJ’s.

Cash back is in the form of electronic awards issued in $ 10 increments that may be used online or in-club at the register and expire six months from the date issued.

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The Company includes the fair value of award dollars earned in deferred revenue at the time the award dollars are earned.

This liability was $ 30.3 million at January 29, 2022 and $ 25.5 million at January 30, 2021.

This liability was $ 34.7 million and $ 30.3 million at January 28, 2023 and January 29, 2022, respectively, and is included in accrued expenses and other current liabilities in the consolidated balance sheets.

Royalty revenue received in connection with the My BJ’s Perks co-brand credit card program is variable consideration and is considered deferred until the card holder makes a purchase.

The Company’s total deferred royalty revenue related to the outstanding My BJ’s Perks credit card program was $ 17.8 million and $ 13.5 million at January 29, 2022 and January 30, 2021, respectively.

The Company’s total deferred royalty revenue related to the outstanding My BJ’s Perks credit card program was $ 17.9 million and $ 17.8 million at January 28, 2023 and January 29, 2022, respectively, and is included in accrued expenses and other current liabilities in the consolidated balance sheets.

The timing of revenue recognition of these awards is driven by actual customer activities, such as redemptions and expirations.

At January 29, 2022, the Company expects to recognize $ 17.3 million of the deferred revenue in fiscal year 2022, and expects the remainder will be recognized in the years thereafter.

Membership—The Company charges a membership fee to its customers.

That fee allows customers to shop in the Company’s clubs, shop on the Company’s website and purchase gasoline at the Company’s gas stations for the duration of the membership, which is generally 12 months.

Because the Company has the obligation to provide access to its clubs, website and gas stations for the duration of the membership term, the Company recognizes membership fees on a straight-line basis over the life of the membership.

The Company’s deferred revenue related to membership fees was $ 174.9 million and $ 155.6 million at January 29, 2022 and January 30, 2021, respectively.

At January 28, 2023, the Company expects to recognize $ 17.9 million of the deferred revenue in fiscal year 2023.

In connection with the new co-brand credit card program, the Company has deferred approximately $ 18.9 million for funds related to marketing and other integration costs in fiscal 2022.

The Company expects to recognize approximately $ 7.0 million in fiscal year 2023, which is included in accrued expenses and other current liabilities, and $ 11.9 million thereafter, which is included in other non-current liabilities in the consolidated balance sheets.

Membership—The Company charges a membership fee to its customers, which allows customers to shop in the Company’s clubs, shop on the Company’s website and purchase gasoline at the Company’s gas stations for the duration of the

membership, which is generally 12 months.

As the Company has the obligation to provide access to its clubs, website, and gas stations for the duration of the membership term, the Company recognizes membership fees on a straight-line basis over the life of the membership.

The Company’s deferred revenue related to membership fees was $ 183.7 million and $ 174.9 million at January 28, 2023 and January 29, 2022, respectively, and is included in accrued expenses and other current liabilities in the consolidated balance sheets.

Gift Card Programs—The Company sells BJ’s gift cards that allow customers to redeem the card for future purchases equal to the amount of the original purchase price of the gift card.

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Deferred revenue related to gift cards was $ 14.1 million and $ 11.8 million at January 28, 2023 and January 29, 2022, respectively.

The Company recognized revenue from gift card redemptions of approximately $ 39.7 million in fiscal year 2021, $ 39.7 million in fiscal year 2020 and $ 49.1 million in fiscal year 2019.

The Company recognized revenue from gift card redemptions of approximately $ 50.1 million in fiscal year 2022, and $ 39.7 million in each of the fiscal years 2021 and 2020.

Warranty Programs

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The Company is not the primary obligor under these warranties, and as such net revenue is recorded on these arrangements at the time of sale.

Revenue from warranty sales is included in net sales on the income statement.

Revenue from warranty sales is included in net sales in the consolidated statements of operations and comprehensive income.

Determine the Transaction Price

The transaction price is the amount of consideration the Company expects to receive under the arrangement.

The Company is required to estimate variable consideration (if any) and to factor that estimate into the determination of the transaction price.

The Company is required to include estimated variable consideration, if any, in the determination of the transaction price.

The Company may offer sales incentives to customers, including discounts.

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The Company analyzes actual historical returns, current economic trends, changes in sales volume and acceptance of the Company’s products when evaluating the adequacy of the sales returns allowance in any accounting period.

The sales returns reserve, which reduces sales and cost of sales for the estimated impact of returns, was $ 6.7 million in fiscal year 2021, $ 7.2 million in fiscal year 2020 and $ 6.5 million in fiscal year 2019.

The sales returns reserve, which reduces sales and cost of sales for the estimated impact of returns, was $ 6.1 million, $ 6.7 million, and $ 7.2 million in fiscal years 2022, 2021, and 2020, respectively.

Customer Discounts—Discounts given to customers are usually in the form of coupons and instant markdowns and are recognized as redeemed and recorded in contra-revenue accounts, as they are part of the transaction price of the merchandise sale.

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In exchange, the Company receives payments in the form of commissions and other fees.

evaluates the relevant criteria to determine whether they serve as the principal or agent in these contracts with customers, in determining whether it is appropriate in these arrangements to record the gross amount of merchandise sales and related costs, or the net amount earned as commissions.

The Company evaluates the relevant criteria to determine whether they serve as the principal or agent in these contracts with customers, in determining whether it is appropriate in these arrangements to record the gross amount of merchandise sales and related costs, or the net amount earned as commissions.

When the Company is considered the principal in a transaction, revenue is recorded gross;

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The Company recognizes product placement allowances as a reduction of cost of sales in the period in which the product placement is completed.

Time-based rebates or allowances are recognized as a reduction of cost of

sales over the performance period on a straight-line basis.

Time-based rebates or allowances are recognized as a reduction of cost of sales over the performance period on a straight-line basis.

All other vendor rebates and allowances are recognized as a reduction of cost of sales when the merchandise is sold or otherwise disposed.

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Such cash consideration is recognized as a reduction of SG&A to the extent it represents a reimbursement of specific, incremental and identifiable SG&A costs incurred by BJ’s to sell the vendors’ products.

If the cash consideration exceeds the costs being reimbursed, the excess is characterized as a reduction of cost of sales.

If the cash consideration exceeds the costs being reimbursed, the

excess is characterized as a reduction of cost of sales.

Cash consideration for advertising vendors’ products is recognized in the period in which the advertising takes place.

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If these conditions are not met, such consideration is recorded as a decrease in cost of sales.

The Company adopted Accounting Standards Codification ("ASC") Topic 842, Leases ("ASC 842") using the modified retrospective method at the beginning of fiscal year 2019.

The adoption of this standard had a $ 11.6 million impact on beginning retained earnings in fiscal year 2019 primarily associated with the impact of the Company’s deferred gain on prior years’ sale leaseback transactions, net of tax.

In accordance with ASC 842, the Company determines if an arrangement is a lease at inception or modification of a contract and classifies each lease as either an operating or finance lease at commencement.

The Company only reassesses lease classification subsequent to commencement upon a change to the expected lease term or the contract being modified.

The Company has operating and finance leases for the Company’s clubs, and operating leases for the Company’s distribution centers, home office, and stand-alone gas stations.

Operating leases, net of accumulated amortization, are included in operating lease ROU assets, and current and non-current operating lease liabilities, on the Consolidated Balance Sheets.

Finance leases are included in property and equipment , accrued expenses and other current liabilities , and other non-current liabilities on the Consolidated Balance Sheets.

Lease liabilities are calculated using the effective interest method, regardless of classification, while the amortization of the ROU assets varies depending upon classification.

Finance lease classification results in a front-loaded expense recognition pattern over the lease term, which amortizes the ROU assets by recognizing interest expense and amortization expense as separate components of lease expense and calculates the amortization expense component on a straight-line basis.

Conversely, operating lease classification results in a straight-line expense recognition pattern over the lease term and recognizes lease expense as a single expense component, which results in amortization of the ROU assets that equals the difference between lease expense and interest expense.

Lease expense for finance and operating leases are included in SG&A on the Consolidated Statement of Operations and Comprehensive Income.

Leases with an initial term of twelve months or less are not recorded on the Consolidated Balance Sheets.

Please refer to Note 4 for additional information.

Leases that are economically similar to the purchase of assets are generally classified as finance leases;

otherwise, the leases are classified as operating leases.

The Company only reassesses lease classification subsequent to commencement upon a change to the expected lease term or modification of the contract.

Right-of-use assets (“lease assets”) represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease.

Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term, which reflects options to extend or terminate the lease when it is reasonably certain those options will be exercised.

Options to extend have varying rates and terms for each lease.

Generally, the Company’s leases do not provide a readily determinable implicit rate, and therefore, the Company uses a collateralized incremental borrowing rate ("IBR") as of the lease commencement date to determine the present value of lease payments.

The IBR is based on a yield curve that approximates the Company’s credit rating and market risk profile.

The lease asset also reflects any prepaid rent, initial direct costs incurred, and lease incentives received.

Lease liabilities are accounted for using the effective interest method, regardless of classification, while the amortization of lease assets varies depending upon classification.

Operating lease classification results in a straight-line expense recognition pattern over the lease term and recognizes lease expense as a single expense component, which results in amortization of a lease asset equal to the difference between lease expense and interest expense.

Conversely, finance lease classification results in a front-loaded expense recognition pattern over the lease term, which amortizes a lease asset by recognizing interest expense and straight-line amortization expense as separate components of lease expense.

Certain of the Company’s lease agreements provide for lease payments based on future sales volumes at the leased locations, or include rental payments adjusted periodically based on inflation or an index, which are not measurable at lease commencement.

The Company recognizes such variable amounts in the period incurred.

For leases with lease payments based on future sales volumes, variable lease expense is recognized when it becomes probable that the specified sales target will be achieved.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company is generally obligated for the cost of property taxes, insurance, and maintenance relating to its leases, which are often variable lease payments.

Such costs are presented as occupancy costs for finance and operating leases included in selling, general, and administrative expenses in the consolidated statement of operations and comprehensive income.

Leases with an initial term of twelve months or less are not recorded on the consolidated balance sheets and the related lease expense is recognized on a straight-line basis over the lease term.

Pre-opening Expenses

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The fair value of the performance-based awards is recognized as compensation expense ratably over the service period of each performance tranche.

The fair value of the stock-based awards is determined using the Black-Scholes option pricing model.

The fair value of the stock-based option awards is determined using the Black-Scholes option pricing model.

Determining the fair value of options at the grant date requires judgment, including estimating the expected term that stock options will be outstanding prior to exercise and the associated volatility.

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Earnings Per Share

Basic income per share is calculated by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the period.

Basic income from continuing operations per share is calculated by dividing income from continuing operations by the weighted-average number of common shares outstanding for the period.

Basic loss from discontinuing operations per share is calculated by dividing loss from discontinuing operations by the weighted-average number of common shares outstanding for the period.

Diluted income per share is calculated by dividing net income available to common shareholders by the diluted weighted-average number of common shares outstanding for the period.

Diluted income from continuing operations per share is calculated by dividing income from continuing operations by the diluted weighted-average number of common shares outstanding for the period.

Diluted loss from discontinuing operations per share is calculated by dividing loss from discontinuing operations by the diluted weighted-average number of common shares outstanding for the period.

Basic income per share is calculated by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding for the period.

Basic income from continuing operations per share is calculated by dividing income from continuing operations by the weighted-average number of shares of common stock outstanding for the period.

Basic loss from discontinuing operations per share is calculated by dividing loss from discontinuing operations by the weighted-average number of shares of common stock outstanding for the period.

Diluted income per share is calculated by dividing net income available to common stockholders by the diluted weighted-average number of shares of common stock outstanding for the period.

Diluted income from continuing operations per share is calculated by dividing income from continuing operations by the diluted weighted-average number of shares of common stock outstanding for the period.

Diluted loss from discontinuing operations per share is calculated by dividing loss from discontinuing operations by the diluted weighted-average number of shares of common stock outstanding for the period.

The Company accounts for income taxes using the asset and liability method.

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All derivatives are recognized as either assets or liabilities on the consolidated balance sheets and measurement of these instruments is at fair value.

If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded as a component of accumulated other comprehensive income and are recognized in the consolidated statement of operations when the hedged item affects earnings.

If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded as a component of accumulated other comprehensive income on the consolidated balance sheets and are recognized in the consolidated statements of operations when the hedged item affects earnings.

Any portion of the change in fair value that is determined to be ineffective is immediately recognized in earnings as SG&A.

Derivative gains or losses included in accumulated other comprehensive income are reclassified into earnings at the time the hedged transaction occurs as a component of SG&A.

Derivative gains or losses included in accumulated other comprehensive income are released into earnings at the time the hedged transaction occurs as a component of SG&A.

Fair Value of Financial Instruments

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This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs.

Financial assets and liabilities

carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

• Level 1 - Quoted market prices in active markets for identical assets or liabilities.

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Comprehensive Income

Comprehensive income is a measure of net income and all other changes in equity that result from transactions other than with equity holders, and would normally be recorded in the consolidated statements of shareholders’ equity and the consolidated statements of comprehensive income.

Comprehensive income is a measure of net income and all other changes in equity that result from transactions other than with equity holders, and would normally be recorded in the consolidated statements of stockholders’ equity and the consolidated statements of comprehensive income.

Other comprehensive income consists of unrealized gains and losses from derivative instruments designated as cash flow hedges and postretirement medical plan adjustments.

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The Company records the repurchase of shares of common stock at cost based on the settlement date of the transaction.

These shares are classified as treasury stock, which is a reduction to shareholders’ equity.

These shares are classified as treasury stock, which is a reduction to stockholders’ equity.

Treasury stock is included in authorized and issued shares but excluded from outstanding shares.

Recently Issued Accounting Pronouncements

Business Combinations (ASU 2021-08)

In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2021-08, "Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers".

ASU 2021-08 improves the accounting for acquired revenue contracts with customers in a business combination by addressing the diversity in practice and inconsistency related to the recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer.

The amendments in this ASU require acquirers to recognize and measure contract assets and contract liabilities acquired in the business combination in accordance with Topic 606 as if it had originated the contracts.

The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 25, 2023, with early adoption permitted.

The Company does not expect adoption of this standard to have a significant impact on the consolidated financial statements.

No accounting pronouncements have been issued recently that are expected to impact the Company's consolidated financial statements.

Recently Adopted Accounting Pronouncements

Income Taxes (ASU 2019-12)

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740).

This standard simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

The standard also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

The Company adopted this standard prospectively as of January 31, 2021.

The adoption of this standard did not have a material impact on the Company ’ s consolidated financial statements.

The Company has not adopted any new accounting pronouncements that had a material impact on the Company’s consolidated financial statements.

Related Party Transactions

One of the Company’s suppliers, Advantage Solutions Inc., was determined to be a related party of the Company.

One of the Company’s suppliers, Advantage Solutions Inc., was determined to be a related party of the Company through June 17, 2022 in fiscal year 2022 as well as in fiscal years 2021 and 2020.

Advantage Solutions Inc.

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The demonstration and sampling service fees are fully funded by merchandise vendors who participate in the program.

The Company adopted ASC 842 as of February 3, 2019, using the modified retrospective method and applying transitional relief allowing entities to initially apply the requirements at the adoption date by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

The Company only reassesses lease classification subsequent to commencement upon a change to the expected lease term or the contract being modified.

The Company has operating and finance leases for the Company’s clubs, and operating leases for the Company’s distribution centers, home office, and stand-alone gas stations.

Operating leases, net of accumulated amortization, are included in operating lease ROU assets, and current and non-current operating lease liabilities, on the Consolidated Balance Sheets.

Finance leases are included in property and equipment, accrued expenses and other current liabilities, and other non-current liabilities on the Consolidated Balance Sheets.

Lease liabilities are calculated using the effective interest method, regardless of classification, while the amortization of the ROU assets varies depending upon classification.

Lease expense for finance and operating leases are included in SG&A on the Consolidated Statement of Operations and Comprehensive Income.

Leases with an initial term of twelve months or less are not recorded on the Consolidated Balance Sheets.

The Company is generally obligated for the cost of property taxes, insurance, and maintenance relating to its leases, which are often variable lease payments.

Such costs are presented as occupancy costs for finance and operating leases included in SG&A on the Consolidated Statement of Operations and Comprehensive Income.

Certain of the Company’s lease agreements provide for lease payments based on future sales volumes at the leased location, or include rental payments adjusted periodically for inflation or based on an index, which are not measurable at the inception of the lease.

The Company expenses such variable amounts in the period incurred, which is the period in which it becomes probable that the specified target that triggers the variable lease payments will be achieved.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the reasonably certain lease term.

The operating lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Where the Company’s leases do not provide an implicit rate, the Company uses a collateralized incremental borrowing rate ("IBR") to determine the present value of lease payments.

The collateralized IBR is based on a synthetic credit rating that is externally prepared on an annual basis at the measurement date, and that the Company adjusts quarterly with a yield curve that approximates the Company’s market risk profile.

In calculating the present value of the lease payments, the Company has elected to utilize its estimated IBR based on the original lease term and not the remaining lease term.

The Company has operating and finance leases for certain of the Company's clubs and transportation vehicles, and operating leases for certain distribution centers, stand-alone gas stations, and the Club Support Center.

The initial primary term of the Company’s operating leases ranges from 1 to 44 years, with most of these leases having an initial term of 20 years.

The initial primary term of the Company’s three finance leases are 20 years.

The following table summarizes the Company’s finance and operating lease liabilities and ROU assets as of January 29, 2022 and January 30, 2021 (in thousands):

January 29, 2022 January 30, 2021

Finance Leases:

ROU assets recorded $ 19,283 $ 19,283

Accumulated amortization 11,706 10,578

Lease liability 16,082 15,230

Operating Leases:

ROU assets recorded 2,599,460 2,363,437

Accumulated amortization 467,473 304,674

There were no impairments of ROU assets in fiscal year 2021 or fiscal year 2020.

In fiscal year 2019, the Company recorded an ROU asset impairment charge of $ 9.6 million.

The following table is a summary of the components of net lease costs for the years ended January 29, 2022, January 30, 2021 and February 1, 2020 (in thousands):

January 29, 2022 January 30, 2021 February 1, 2020

Operating lease cost $ 336,094 $ 327,325 $ 322,346

The initial primary term of the Company’s four finance leases ranges from 5 years to 20 years, with most of these leases having an initial term of 20 years.

The following table summarizes the Company’s finance and operating lease liabilities and lease assets as of January 28, 2023 and January 29, 2022 (in thousands):

January 28, 2023 January 29, 2022 Consolidated Balance Sheet Classification

Operating lease assets $ 2,142,925 $ 2,131,986 Operating lease right-of-use assets, net

Finance lease assets 33,679 19,283 Land and buildings

finance lease amortization ( 13,555 ) ( 11,706 ) Accumulated depreciation and amortization

Total lease assets $ 2,163,049 $ 2,139,563

Operating lease liabilities $ 177,233 $ 141,453 Current portion of operating lease liabilities

Finance lease liabilities 1,629 1,266 Accrued expenses and other current liabilities

Operating lease liabilities 2,058,797 2,059,760 Long-term operating lease liabilities

Finance lease liabilities 18,832 14,816 Other non-current liabilities

Total lease liabilities $ 2,256,491 $ 2,217,295

There were no impairments of lease assets in fiscal years 2021 or 2020.

The following table is a summary of the components of net lease costs for fiscal years 2022, 2021, and 2020 (in thousands):

Fiscal Year Ended

January 28, 2023 January 29, 2022 January 30, 2021

Finance lease cost:

Amortization of right-of-use assets 1,128 564 1,128

Interest on lease liabilities 4,022 3,965 2,503

Amortization of lease assets (a)

$ 1,849 $ 1,128 $ 564

Interest on lease liabilities (b)

2,745 4,022 3,965

Total finance lease costs 4,594 5,150 4,529

Sublease income ( 980 ) ( 251 ) —

Variable lease costs 85 230 98

Operating lease cost (a)

357,284 336,094 327,325

Variable lease cost (a)

10,129 85 230

Sublease income (a)

( 3,973 ) ( 980 ) ( 251 )

Net lease costs $ 368,034 $ 340,349 $ 331,833

The weighted-average remaining lease term and weighted-average discount rate for operating and finance leases as of January 29, 2022 were as follows:

Operating Leases Finance Leases

Weighted-average remaining lease term (in years) 8.9 11.2

Weighted-average discount rate 7.8 % 7.7 %

(a) Amortization of finance lease assets, operating lease cost, variable lease cost, and sublease income are primarily included in selling, general, and administrative expenses in the consolidated statements of operations and comprehensive income.

Variable lease cost for fiscal year 2022 includes $ 4.8 million of costs incurred to purchase assets deemed to be owned by the lessor of the Company’s Club Support Center and increases in rental payments based on an index.

(b) Interest recognized on finance lease liabilities is included in interest expense, net in the consolidated statements of operations and comprehensive income.

The weighted-average remaining lease term and weighted-average discount rate for operating and finance leases as of January 28, 2023 and January 29, 2022 were as follows:

January 28, 2023 January 29, 2022

Weighted-average remaining lease term (in years) - operating leases 10.4 8.9

Weighted-average remaining lease term (in years) - finance leases 10.8 11.2

Weighted-average discount rate - operating leases 7.8 % 7.8 %

Weighted-average discount rate - finance leases 7.9 % 7.7 %

Cash paid for amounts included in the measurement of lease liabilities were as follows (in thousands):

January 29, 2022 January 30, 2021 February 1, 2020

Fiscal Year Ended

January 28, 2023 January 29, 2022 January 30, 2021

Operating cash flows paid for operating leases $ 350,234 $ 325,941 $ 317,997

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Financing cash flows paid for principal portion of finance leases 1,343 1,112 984

Supplemental cash flow information related to lease assets and lease liabilities were as follows (in thousands):

Fiscal Year Ended

January 28, 2023 January 29, 2022 January 30, 2021

Operating lease liabilities arising from obtaining right-of-use assets $ 220,547 $ 261,228 $ 154,714

Financing lease liabilities arising from obtaining right-of-use assets 7,443 — —

Financing obligations arising from failed sale-leasebacks 3,487 666 —

Future lease commitments to be paid by the Company as of January 28, 2023 were as follows (in thousands):

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Present value of lease liabilities $ 2,236,030 $ 20,461

As of January 29, 2022, the Company had certain executed real estate and gas station leases that have not yet commenced and therefore are not reflected in the tables above.

These leases are expected to commence in fiscal year 2022 with lease terms ranging from 6 years to 20 years.

As of January 28, 2023, the Company had certain executed real estate, gas station, and transportation vehicle leases that have not yet commenced and therefore are not reflected in the tables above.

These leases are expected to commence primarily in fiscal year 2023 with lease terms ranging from 4 years to 25 years.

We estimate future lease commitments for these leases to be approximately $ 267.8 million.

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January 28, 2023 January 29, 2022

ABL Revolving Facility $ 405,000 $ —

ABL Facility — 50,000

First Lien Term Loan 450,000 701,920

Unamortized debt discount and debt issuance costs ( 3,352 ) ( 5,745 )

Current portion — ( 260,000 )

Unamortized original issue discount and debt issuance costs ( 2,120 ) ( 3,352 )

Short-term debt ( 405,000 ) —

Long-term debt $ 447,880 $ 748,568

The ABL Facility is comprised of a $ 950.0 million revolving credit facility and a $ 50.0 million term loan.

The ABL Facility is secured on a senior basis by certain "liquid assets" of the Company and secured on a junior basis by certain "fixed assets" of the Company.

The $ 50.0 million term loan payment terms are restricted in that the term loan cannot be repaid unless all loans outstanding under the ABL Facility are repaid, and once repaid, cannot be re-borrowed.

The availability under the $ 950.0 million revolving credit facility is restricted based on eligible monthly merchandise inventories and receivables as defined in the facility agreement.

As amended, interest on the revolving credit facility is calculated either at LIBOR plus a range of 125 to 175 basis points or a base rate plus a range of 25 to 75 basis points;

and interest on the term loan is calculated at LIBOR plus a range of 200 to 300 basis points or a base rate plus a range of 100 to 150 basis points, in all cases based on excess availability.

The applicable spread of LIBOR and base rate loans at all levels of excess availability steps down by 12.5 basis points upon achieving total net leverage of 3.00 to 1.00.

The ABL Facility also provides a sub-facility for issuance of letters of credit subject to certain fees defined in the ABL Facility agreement.

The ABL Facility is subject to various commitment fees during the term of the facility based on utilization of the revolving credit facility, which is scheduled to mature on August 17, 2023.

At January 29, 2022, there was $ 50.0 million outstanding in borrowings under the ABL Facility and $ 12.7 million in outstanding letters of credit.

The interest rate on the revolving credit facility was 1.23 %, the interest rate of the term loan was 2.10 % and unused capacity was $ 886.9 million.

At January 30, 2021, there was $ 310.0 million outstanding in borrowings under the ABL Facility and $ 15.0 million in outstanding letters of credit.

The interest rate on the revolving credit facility was 1.25 %, the interest rate on the term loan was 2.14 % and unused capacity was $ 641.1 million.

ABL Revolving Facility

On July 28, 2022, the Company entered into the ABL Revolving Facility with an ABL Revolving Commitment of $ 1.2 billion pursuant to that certain credit agreement (the "Credit Agreement") with Bank of America, N.A., as administrative agent and collateral agent, and the other lenders party thereto.

The maturity date of the ABL Revolving Facility is July 28, 2027.

In connection with this transaction, the Company extinguished the ABL Facility.

Revolving loans under the ABL Revolving Facility are available in an aggregate amount equal to the lesser of the aggregate ABL Revolving Commitment or a borrowing base based on the value of certain inventory, accounts and credit card receivables, subject to specified advance rebates and reserves as set forth in the Credit Agreement.

Indebtedness under the ABL Revolving Facility is secured by substantially all of the assets (other than real estate) of the Company and its subsidiaries, subject to customary exceptions.

As amended, interest on the ABL Revolving Facility is calculated either at the Secured Overnight Financing Rate ("SOFR") plus a range of 100 to 125 basis points or a base rate plus 0 to 25 basis points, based on excess availability.

The Company will also pay an unused commitment fee of 20 basis points per annum on the unused ABL Revolving Commitment.

Each borrowing is for a period of one , three , or six months , as selected by the Company, or for such other period that is twelve months or less requested by the Company and consented to by the lenders and administrative agent.

The ABL Revolving Facility places certain restrictions (i.e., covenants) upon the Borrower’s, and its subsidiaries’, ability to, among other things, incur additional indebtedness, pay dividends and make certain loans, investments and divestitures.

The ABL Revolving Facility contains customary events of default (including payment defaults, cross-defaults to certain of our other indebtedness, breach of representations and covenants and change of control).

The occurrence of an event of default under the ABL Revolving Facility would permit the lenders to accelerate the indebtedness and terminate the ABL Revolving Facility.

As of January 28, 2023, there was $ 405.0 million outstanding in loans under the ABL Revolving Facility and $ 11.5 million in outstanding letters of credit.

The interest rate on the revolving credit facility was 5.63 %, and unused capacity was $ 535.2 million.

ABL Facility - Former Credit Agreement

The ABL Revolving Facility replaced the ABL Facility, which was comprised of a $ 950.0 million revolving credit facility and a $ 50.0 million term loan.

The ABL Facility was secured on a senior basis by certain "liquid assets" of the Company and secured on a junior basis by certain "fixed assets" of the Company.

The $ 50.0 million term loan payment terms were restricted in that the term loan could not be repaid unless all loans outstanding under the ABL Facility are repaid, and once repaid, cannot be re-borrowed.

The availability under the $ 950.0 million revolving credit facility was restricted based on eligible monthly merchandise inventories and receivables as defined in the facility agreement.

Interest on the revolving credit facility was calculated either at the London Interbank Offered Rate ("LIBOR") plus a range of 125 to 175 basis points or a base rate plus a range of 25 to 75 basis points;

and interest on the term loan was calculated at LIBOR plus a range of 200 to 250 basis points or a base rate plus a range of 100 to 150 basis points, in all cases based on excess availability.

The applicable spread of LIBOR and base rate loans at all levels of excess availability stepped down by 12.5 basis points upon achieving total net leverage of 3.00 to 1.00.

The ABL Facility also provided a sub-facility for issuance of letters of credit subject to certain fees defined in the ABL Facility agreement.

The ABL Facility was subject to various commitment fees during the term of the facility based on utilization of the revolving credit facility and was scheduled to mature on August 17, 2023.

As of January 29, 2022, there was $ 50.0 million outstanding in borrowings under the ABL Facility and $ 12.7 million in outstanding letters of credit.

Also on that date, the interest rate on the revolving credit facility was 1.23 %, the interest rate on the term loan was 2.10 % and unused capacity was $ 886.9 million.

First Lien Term Loan

The First Lien Term Loan matures on February 3, 2024.

On January 5, 2023, the Company entered into an amendment (the “Third Amendment”) to the First Lien Term Loan Credit Agreement, with Nomura Corporate Funding Americas, LLC, as administrative agent and collateral agent and the lenders party thereto.

BofA Securities, Inc., Deutsche Bank Securities Inc., and Wells Fargo Securities LLC acted as joint lead arrangers and joint bookrunners of the Third Amendment.

The Third Amendment, among other things, extends the maturity date with respect to the term loans outstanding under the First Lien Term Loan Credit Agreement from February 3, 2024 to February 3, 2027.

In addition, the Third Amendment transitions the interest rate, effective immediately, from LIBOR to SOFR and changes the applicable margin from LIBOR plus 200 – 225 basis points per annum to SOFR plus 275 basis points per annum.

Voluntary prepayments are permitted.

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It is secured on a senior basis by certain "fixed assets" of the Company and on a junior basis by certain "liquid" assets of the Company.

On November 1, 2019, the Company borrowed $ 200.0 million from the ABL Facility.

The proceeds from the Company’s borrowing were used to pay a portion of the principal amount due on the First Lien Term Loan.

In connection with the payment, the Company expensed $ 2.0 million of previously capitalized deferred debt issuance costs and original issue discount.

On January 29, 2020, the Company amended its First Lien Term Loan to reduce the applicable interest rates.

As amended, the First Lien Term Loan has an initial principal amount of $ 1,315.2 million and interest is calculated either at LIBOR plus 225 basis points basis or a base rate plus 125 basis points and provided for a 25 basis point step down in the interest rate upon the achievement of certain debt ratings upgrades.

Total fees associated with the refinancing were approximately $ 3.2 million.

The Company wrote off $ 0.1 million of previously capitalized debt issuance costs and original issue discount and expensed $ 1.7 million of new third-party fees.

The Company expensed $ 0.6 million of previously capitalized debt issuance costs and original issue discount and expensed $ 2.0 million of new third-party fees.

The Company deferred $ 1.2 million of new debt issuance costs and original issue discount.

On July 13, 2020, the Company paid $ 150.0 million of the principal amount due on the First Lien Term Loan.

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In connection with the payment, the Company expensed $ 0.7 million of previously capitalized debt issuance costs and original issue discount.

There were $ 701.9 million and $ 801.9 million outstanding on the First Lien Term Loan at January 29, 2022 and January 30, 2021, respectively.

Interest rates for the First Lien Term Loan were 2.11 % and 2.13 % at January 29, 2022 and January 30, 2021, respectively.

As of January 29, 2022, there was $ 701.9 million outstanding on the First Lien Term Loan and the interest rate was 2.11 %.

As of January 28, 2023, there was $ 450.0 million outstanding under the First Lien Term Loan, which reflects the Company’s previous repayment of approximately $ 151.9 million of the principal amount outstanding under the First Lien Term Loan Credit Agreement during the fourth quarter of fiscal year 2022 in connection with the Third Amendment.

The interest rate was 7.11 % as of fiscal year end.

Future minimum payments

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Principal Payments

2023 $ 405,000

Total $ 855,000

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Fiscal Year Ended

January 29, 2022 Fiscal Year Ended

January 30, 2021 Fiscal Year Ended

February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021

Interest on debt $ 37,533 $ 45,124 $ 65,064

Interest on financing obligations 4,269 4,022 3,965

Debt issuance costs amortization 2,193 2,496 2,745

Original issue discount amortization 1,195 1,865 2,427

Loss on debt extinguishment 657 4,077 3,820

Loss on cash flow hedge 6,340 6,927 —

Amortization of debt issuance costs 1,719 2,193 2,496

Accretion of original issue discount 1,046 1,195 1,865

Debt extinguishment and refinancing charges 3,256 657 4,077

(Gain) loss on cash flow hedge ( 165 ) 6,340 6,927

Capitalized interest ( 196 ) ( 87 ) ( 9 )

Interest expense, net $ 47,462 $ 59,444 $ 84,385

Intangible Assets and Liabilities

Intangible assets and liabilities consist of the following (in thousands):

Goodwill and Intangible Assets

The carrying value of goodwill and the change in the balance for the fiscal years ended January 28, 2023 and January 29, 2022 is as follows (in thousands):

Fiscal Year Ended

January 28, 2023 January 29, 2022

Beginning balance $ 924,134 $ 924,134

Acquisition ( Note 19 )

Ending balance $ 1,008,816 $ 924,134

Intangible assets consist of the following (in thousands):

January 28, 2023

Gross Carrying Amount Accumulated Amortization Net Amount

Goodwill $ 924,134 $ — $ 924,134

Intangible Assets Not Subject to Amortization:

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Gross Carrying Amount Accumulated Amortization Net Amount

Goodwill $ 924,134 $ — $ 924,134

Intangible Assets Not Subject to Amortization:

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Total intangible assets $ 344,000 $ ( 219,360 ) $ 124,640

The Company records amortization expenses of intangible assets as a component of SG&A.

The Company records amortization expense of intangible assets as a component of SG&A.

Member relationships are amortized over 15.3 years and private label brands are amortized over 12 years.

Member relationships will be amortized through fiscal year 2026 and private label brands will be amortized through fiscal year 2023.

The Company recorded amortization expenses of $ 10.5 million, $ 11.9 million and $ 13.5 million as a component of SG&A for the fiscal years ended January 29, 2022, January 30, 2021 and February 1, 2020, respectively.

The Company estimates that amortization expenses related to intangible assets will be as follows in each of the next five fiscal years (in thousands):

Intangible Assets

Commitment and Contingencies

Member relationships will primarily be amortized through fiscal year 2026 and private label brands will be amortized through fiscal year 2023.

The Company recorded amortization expense of $ 9.2 million, $ 10.5 million and $ 11.9 million as a component of SG&A for the fiscal years 2022, 2021, and 2020, respectively.

The Company estimates that amortization expense related to intangible assets will be as follows in each of the next five fiscal years (in thousands):

Fiscal Year Amortization Expense

Thereafter 62

Total $ 25,005

Commitments and Contingencies

The Company is involved in various legal proceedings that are typical of a retail business.

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Stock Incentive Plans

On June 13, 2018, the Company’s board of directors adopted, and its shareholders approved, the BJ’s Wholesale Club Holdings, Inc.

On June 13, 2018, the Company’s board of directors adopted, and its stockholders approved, the BJ’s Wholesale Club Holdings, Inc.

2018 Incentive Award Plan (the "2018 Plan").

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(i) full vesting of all time-based awards, including restricted stock awards and stock options, (ii) pro-rata vesting of all performance-based awards, including performance share units, based on actual performance as of the end of the applicable performance period, pro-rated based on the period of employment during the applicable performance period, and (iii) the extension of the post-termination exercise window for vested stock options.

The Company recognized $ 17.5 million of stock-based compensation expense due to the accelerated vesting of equity awards, related to the passing of a former executive.

The Company recognized $ 53.8 million ($ 38.8 million post-tax), $ 32.2 million ($ 23.2 million post-tax) and $ 18.8 million ($ 13.5 million post-tax) of total stock-based compensation for fiscal years 2021, 2020 and 2019, respectively.

As of January 29, 2022, there was approximately $ 49.5 million of unrecognized compensation cost, which is expected to be recognized over the next three years .

In fiscal 2021, the Company recognized $ 17.5 million of stock-based compensation expense due to the accelerated vesting of equity awards, related to the passing of a former executive.

There was no accelerated vesting of awards in fiscal year 2022.

The Company recognized $ 42.6 million, $ 53.8 million, and $ 32.2 million of total stock-based compensation for fiscal years 2022, 2021 and 2020, respectively.

As of January 28, 2023, there was approximately $ 53.9 million o f unrecognized compensation cost, most of which is expected to be recognized over the next three years .

Stock option awards are generally granted with vesting periods of three years .

All options have a contractual term of ten years .

No options were granted during fiscal year 2021.

The fair value of the options granted in fiscal year 2020 and fiscal year

2019 was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions (no dividends were expected).

Fiscal Year Ended

January 30, 2021 Fiscal Year Ended

February 1, 2020

No options were granted during fiscal year 2022 or 2021.

The fair value of the options granted in fiscal year 2020 was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions (no dividends were expected).

Risk-free interest rate 0.44 %

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Outstanding, end of period 750 $ 50.10 24 $ 58.61 854 $ 45.70

As it relates to performance stock, the table above reflects a 100 % payout, but the ultimate payout could be up to 200 %.

As it relates to performance stock, the table above reflects a 100 % payout, however, the actual payout for the fiscal year 2020 grants which vest in the first quarter of fiscal year 2023 is expected to be 200 % and actual payout for performance stock grants in fiscal years 2021 and 2022 could be up to 200 %.

The fair value as of the vesting date was $ 40.5 million for restricted stock and $ 1.5 million for restricted stock units.

2018 Employee Stock Purchase Plan

On June 14, 2018, the Company’s board of directors adopted and and its shareholders approved the BJ's Wholesale Club Holdings, Inc.

On June 14, 2018, the Company’s board of directors adopted and and its stockholders approved the BJ's Wholesale Club Holdings, Inc.

2018 Employee Stock Purchase Plan (the "ESPP"), which became effective the day prior to the first day of public trading of the Company's equity securities.

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The offering under the ESPP commenced on January 1, 2019.

The amount of expense recognized in the fiscal years ended January 29, 2022, January 30, 2021 and February 1, 2020 was $ 0.8 million, $ 0.6 million and $ 0.4 million, respectively.

The amount of expense recognized in the fiscal years 2022, 2021, and 2020, was $ 1.1 million, $ 0.8 million and $ 0.6 million, respectively.

Treasury Shares and Share Repurchase Programs

Treasury Shares Acquired on Restricted Stock Awards

On June 27, 2019, the Company completed an offering of 9,977,024 shares of the Company’s common stock and, in connection with the offering, the Company repurchased 2,500,000 shares of common stock at a price of $ 25.41 per share.

These repurchased shares are being held in treasury.

In addition, 376,758 shares and 212,173 shares were reacquired to satisfy tax withholding obligations upon the vesting of restricted stock awards in fiscal year 2021 and fiscal year 2020, respectively.

These reacquired shares were recorded as $ 16.8 million and $ 6.5 million of treasury stock in fiscal years 2021 and 2020, respectively.

Shares reacquired to satisfy tax withholding obligations upon the vesting of restricted stock awards in fiscal year 2022, 2021, and 2020 were 264,167 shares, 376,758 shares and 212,173 shares, respectively.

These reacquired shares were recorded as $ 18.0 million, $ 16.8 million, and $ 6.5 million of treasury stock in fiscal years 2022, 2021, and 2020, respectively.

Share Repurchase Programs

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The 2021 Repurchase Program expires in January 2025.

The Company initiated the 2019 Repurchase Program and the 2021 Repurchase Program to mitigate potentially dilutive effects of stock options and shares of restricted stock granted by the Company, in addition to enhancing shareholder value.

As of January 28, 2023, $ 318.7 million remained available to purchase under the 2021 Repurchase Program.

In fiscal year 2021, the Company repurchased 3,331,956 shares of common stock totaling $ 179.2 million, including 2,880,614 shares of common stock totaling $ 150.4 million under the 2019 Repurchase Program.

In fiscal year 2022, the Company repurchased 2,234,708 shares of common stock totaling $ 152.5 million.

The provision for income taxes from continuing operations includes the following (in thousands):

Fiscal Year Ended

January 29, 2022 Fiscal Year Ended

January 30, 2021 Fiscal Year Ended

February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021

Current $ 115,270 $ 88,507 $ 94,947

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Fiscal Year Ended

January 29, 2022 Fiscal Year Ended

January 30, 2021 Fiscal Year Ended

February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021

Statutory federal income tax rates 21.0 % 21.0 % 21.0 %

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Prior year adjustments — — ( 0.2 )

Excess tax benefit related to share-based payments ( 2.4 ) ( 1.5 ) ( 2.7 )

Excess tax benefit related to stock-based compensation ( 1.3 ) ( 2.4 ) ( 1.5 )

Other 0.2 0.2 ( 0.1 )

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Fiscal Year Ended

January 29, 2022 Fiscal Year Ended

January 30, 2021

January 28, 2023 January 29, 2022

Balance, beginning of period $ 2,263 $ 2,201

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The Company’s tax years from 2018 forward remain open and are subject to examination by the Internal Revenue Service or various state taxing jurisdictions.

The Company classifies interest expense and any penalties related to income tax uncertainties as a component of income tax expense, which is consistent with the recognition of these items in prior reporting periods.

For the periods ended January 29, 2022 and January 30, 2021, the Company recognized no interest income or expense.

For the period ended February 1, 2020, the Company recognized $ 0.3 million of interest income.

As of both January 29, 2022 and January 30, 2021, the Company had $ 0.2 million of accrued interest related to income tax uncertainties.

The Company classifies interest expense and any penalties related to income tax uncertainties as a component of income tax expense.

For fiscal years 2022, 2021, and 2020, the Company recognized no interest income or expense.

As of January 28, 2023 and January 29, 2022, the Company had $ 0.1 million and $ 0.2 million, respectively, of accrued interest related to income tax uncertainties.

Retirement Plans

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Participants become fully vested in their contribution accounts at the end of the fiscal year in which they complete four full fiscal years of service.

Pretax expense under this plan was $ 1.8 million, $ 2.8 million and $ 2.6 million in fiscal years 2021, 2020 and 2019, respectively.

Expense under this plan was $ 3.7 million, $ 1.8 million and $ 2.8 million in fiscal years 2022, 2021 and 2020, respectively.

Asset Retirement Obligations

The following is a summary of activity relating to the liability for asset retirement obligations, which the Company will incur primarily in connection with the expected future removal of solar panels, gasoline tanks and the related infrastructure.

The following is a summary of activity relating to the liability for asset retirement obligations, which the Company will incur primarily in connection with the expected future removal of gasoline tanks, solar panels and the related infrastructure.

The following is included in other non-current liabilities on the consolidated balance sheets (in thousands):

Fiscal Year Ended

January 29, 2022 Fiscal Year Ended

January 30, 2021 Fiscal Year Ended

February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021

Balance, beginning of period $ 21,378 $ 19,329 $ 17,153

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Insurance reserves 53,183 48,379

Sales, property, use and other taxes 47,161 43,803

BJ’s Perks rewards 51,114 40,804

Sales, property, use and other taxes 50,004 47,161

Fixed asset accruals 37,629 29,640

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Utilities, advertising and accrued interest 23,138 21,699

Membership fee income sales reserves and legal reserves 14,870 12,360

Legal, sales, and membership fee reserves 17,518 14,870

Gift cards 14,092 11,799

Accrued federal and state income taxes 10,875 788

Repairs and maintenance 10,174 11,347

Repairs and common area maintenance 11,374 10,174

Professional services 11,311 8,251

Accrued federal and state income taxes 10,950 10,875

Other 39,100 26,131

Total $ 748,245 $ 651,625

Total accrued expenses and other current liabilities $ 767,411 $ 748,245

The following table summarizes membership fee income activity for each of the last two fiscal years (in thousands):

Fiscal Year Ended

January 29, 2022 Fiscal Year Ended

January 30, 2021

January 28, 2023 January 29, 2022

Deferred membership fee income, beginning of period $ 174,916 $ 155,580

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January 28, 2023 January 29, 2022

Workers’ compensation and general liability $ 98,851 $ 88,982

Insurance reserves $ 110,777 $ 98,851

Co-brand deferred revenue and other 32,549 22,082

Interest rate swap liability — 25,279

Asset retirement obligations 23,336 21,378

Financing obligations 27,415 14,816

Deferred wage taxes — 20,593

Total other non-current liabilities $ 194,077 $ 157,127

2 unchanged sentences

On November 13, 2018, the Company entered into three forward starting interest rate swaps (the "Interest Rate Swaps"), which were effective starting on February 13, 2019 and fixed the LIBOR component of $ 1.2 billion of its floating rate debt at a rate of approximately 3.0 % from February 13, 2019 until February 13, 2022.

The Company elected hedge accounting for the

interest rate swap agreements, and, as such, the effective portion of the gains or losses were recorded as a component of other comprehensive income and the ineffective portion of gains or losses were recorded as interest expense.

The Company elected hedge accounting for the interest rate swap agreements, and, as such, the effective portion of the gains or losses were recorded as a component of other comprehensive income and the ineffective portion of gains or losses were recorded as interest expense.

On October 30, 2020, the Company borrowed $ 260.0 million from the ABL Facility.

The proceeds from the Company’s borrowing, as well as $ 100.0 million of the Company’s cash and cash equivalents, were used to pay $ 360.0 million of the principal amount due on the First Lien Term Loan.

Due to the payment of debt principal on the First Lien Term Loan, the Company determined that certain interest payments are no longer probable and that a portion of one of the interest rate swap agreements would be ineffective as a result of the payment of debt principal, and as such reclassified $ 5.1 million of losses recorded in other comprehensive income to interest expense.

On November 10, 2020, the Company terminated one of the Interest Rate Swaps, which fixed $ 360.0 million of its floating rate debt at a rate of approximately 3.0 %.

An additional interest rate swap, which fixed $ 240.0 million of its floating rate debt at 3.0 % was determined to be ineffective.

Gains and losses on the ineffective interest rate swap agreement will be recorded as interest expense.

Gains and losses on the ineffective interest rate swap agreement w recorded as interest expense.

On April 30, 2021, the Company used $ 150.0 million of its cash and cash equivalents to pay $ 100.0 million of the principal amount outstanding on the First Lien Term Loan and $ 50.0 million of the outstanding amounts on the ABL Facility.

The Company accelerated the release of unrealized losses into earnings on the ineffective interest rate swap agreements and reclassified $ 4.7 million recorded in other comprehensive income to interest expense, net of tax.

The Company accelerated the reclassification of unrealized losses into earnings on the ineffective interest rate swap agreements and reclassified $ 4.7 million recorded in accumulated other comprehensive income to interest expense, net of tax.

On July 30, 2021, the Company used $ 210.0 million of its cash and cash equivalents to pay $ 210.0 million of the principal amount outstanding on the ABL Facility.

The Company accelerated the release of unrealized losses into earnings on the ineffective interest rate swap agreements and reclassified $ 3.5 million recorded in other comprehensive income to interest expense, net of tax.

The Interest Rate Swaps are recorded as a liability of $ 2.2 million and $ 26.4 million in fiscal year 2021 and fiscal year 2020, respectively.

The net of tax amount for the effective and ineffective Interest Rate Swaps recorded in other comprehensive income and interest expense, respectively.

There were $ 24.2 million and $ 1.7 million of unrealized gains recorded in fiscal years 2021 and 2020, respectively.

The Company accelerated the reclassification of unrealized losses into earnings on the ineffective interest rate swap agreements and reclassified $ 3.5 million recorded in accumulated other comprehensive income to interest expense, net of tax.

The interest rate swaps expired in February 2022.

There was no liability recorded as of January 28, 2023 and $ 2.2 million recorded as of January 29, 2022.

The net of tax amount for the effective and ineffective Interest Rate Swaps was recorded in other comprehensive income and interest expense, respectively.

The fair value of derivative instruments included on the consolidated balance sheets are as follows (in thousands):

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

The fair values of the Company’s derivative instruments are based on quotes received from third-party banks and represent the estimated amount the Company would pay to terminate the agreements taking into consideration current interest rates as well as the creditworthiness of the counterparties.

These inputs are considered to be Level 2.

The fair values of the Company’s derivative instruments were based on quotes received from third-party banks and represent the estimated amount the Company would pay to terminate the agreements taking into consideration current interest rates as well as the creditworthiness of the counterparties.

These inputs were considered to be Level 2.

All derivative instruments expired in the first quarter of fiscal year 2022.

Financial Assets and Liabilities

The fair value of the Company's long-term debt is estimated based on current market rates for our specific debt instrument.

Judgment is required to develop these estimates.

As such, the estimated fair value of long-term debt is classified within Level 2, as defined under U.S.

The gross carrying amount and fair value of the Company’s debt at January 28, 2023 are as follows (in thousands):

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First Lien Term Loan $ 450,000 $ 450,482

ABL Facility 50,000 50,000

ABL Revolving Facility 405,000 405,000

Total Debt $ 855,000 $ 855,482

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See Note 2 for further information.

The Company believes that the carrying amounts of its other financial instruments, including cash, accounts receivable, and accounts payable approximates their carrying value due to the short-term maturities of these instruments.

The Company believes that the carrying amounts of its other financial instruments, including cash, accounts receivable, and accounts payable approximate their carrying value due to the short-term maturities of these instruments.

Earnings Per Share

The table below reconciles basic weighted-average common shares outstanding to diluted weighted-average common shares outstanding for fiscal years 2021, 2020 and 2019:

The table below reconciles basic weighted-average common shares outstanding to diluted weighted-average common shares outstanding for fiscal years 2022, 2021 and 2020 (in thousands):

Fiscal Year Ended

January 29, 2022 Fiscal Year Ended

January 30, 2021 Fiscal Year Ended

February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021

Weighted-average shares of common stock outstanding, used for basic computation 134,017 135,386 136,111

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Weighted-average shares of common stock and dilutive potential shares of common stock outstanding 136,473 138,045 138,876

The table below summarizes restricted shares and stock options that were excluded from the computation of diluted earnings for fiscal years 2021, 2020 and 2019, as their inclusion would have been anti-dilutive:

The table below summarizes restricted shares and stock options that were excluded from the computation of diluted earnings for fiscal years 2022, 2021, and 2020 as their inclusion would have been anti-dilutive (in thousands):

Fiscal Year Ended

January 29, 2022 Fiscal Year Ended

January 30, 2021 Fiscal Year Ended

February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021

Restricted shares 75 32 207

Stock options — — 276

On May 2, 2022, the Company completed the Acquisition to bring substantially all of its end-to-end perishable supply chain in-house.

The total consideration paid by the Company in connection with the Acquisition was approximately $ 375.6 million, excluding transaction costs.

For the fiscal year ended January 28, 2023, the Company recorded transaction and integration costs related to the Acquisition of $ 12.3 million.

These costs are included in selling, general and administrative expenses in the consolidated statements of operations and comprehensive income.

The following table summarizes the consideration paid and the fair values of the assets acquired and liabilities assumed (in thousands) in connection with the Acquisition:

As of May 2, 2022

Initial fair value (a)

Adjustments Updated fair value

Property and equipment, net $ 203,400 $ — $ 203,400

Merchandise inventories 88,072 — 88,072

Goodwill 84,682 — 84,682

Operating lease right-of-use assets, net 15,994 575 16,569

Prepaid expenses and other current assets 433 — 433

Intangibles, net 100 — 100

Total Assets 392,681 575 393,256

Long-term operating lease liabilities ( 15,994 ) ( 575 ) ( 16,569 )

Accrued expenses and other current liabilities ( 1,106 ) — ( 1,106 )

Total liabilities ( 17,100 ) ( 575 ) ( 17,675 )

Total consideration paid, including working capital adjustments $ 375,581 $ — $ 375,581

(a) Initial fair value disclosed in our Quarterly Report on Form 10-Q for the period ended July 30, 2022, filed with the SEC on August 26, 2022

Goodwill represents the excess of the purchase price over the net identifiable assets acquired and liabilities assumed.

Goodwill is primarily attributable to the assembled workforce and bringing the Company's perishable supply chain in-house.

Goodwill deductible for tax purposes is $ 84.7 million.

The Acquisition was accounted for as a business combination using the acquisition method with the Company as the accounting acquirer in accordance with ASC 805.

Under this method of accounting, the purchase price is allocated to the assets acquired and liabilities assumed of the acquiree based upon their estimated fair values at the acquisition date.

For the fiscal year ended January 28, 2023, the Acquisition generated an incremental $ 66.8 million in revenue.

It is impracticable to provide historical supplemental pro forma financial information along with earnings during the period subsequent to the Acquisition due to a variety of factors, including access to historical information and the operations of acquirees being integrated within the Company shortly after closing and not operating as discrete entities within the Company’s organizational structure.

Condensed Financial Information of Registrant (Parent Company Only)

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(Amounts in thousands)

Fiscal Year Ended

January 29, 2022 Fiscal Year Ended

January 30, 2021

January 28, 2023 January 29, 2022

Investment in subsidiaries $ 1,046,837 $ 648,108

SHAREHOLDERS’ EQUITY

STOCKHOLDERS’ EQUITY

Preferred stock;

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Additional paid-in capital 960,105 904,009

Retained earnings (accumulated deficit) 131,313 ( 295,339 )

Retained earnings 644,490 131,313

Treasury stock, at cost, 12,444 shares at January 28, 2023 and 9,945 shares at January 29, 2022

( 559,221 ) ( 388,668 )

Total shareholders’ equity $ 648,108 $ 319,327

Total stockholders’ equity $ 1,046,837 $ 648,108

BJ’S WHOLESALE CLUB HOLDINGS, INC.

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Fiscal Year Ended

January 29, 2022 Fiscal Year Ended

January 30, 2021 Fiscal Year Ended

February 1, 2020

January 28, 2023 January 29, 2022 January 30, 2021

Equity in net income of subsidiaries $ 513,177 $ 426,652 $ 421,030

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Diluted 3.76 3.09 3.03

Weighted-average number of common shares outstanding:

Weighted-average number of shares outstanding:

Basic 134,017 135,386 136,111

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A statement of cash flows has not been presented as BJ’s Wholesale Club Holdings, Inc.

did not have any cash as of, or for, the years ended January 29, 2022, January 30, 2021 or February 1, 2020.

did not have any cash as of, or for, the years ended January 28, 2023, January 29, 2022, or January 30, 2021.

Basis of Presentation

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(as defined in Rule 4-08(e)(3) of Regulation S-X) exceed 25% of the consolidated net assets of the Company.

The ability of BJ’s Wholesale Club Holdings, Inc.’s operating subsidiaries to pay dividends may be restricted due to terms of the subsidiaries’ First Lien Term Loan and ABL Facility, as defined in Note 5.

For example, the covenants of the ABL Facility restrict the payment of dividends to, among other exceptions, (i) a $ 25.0 million general basket, (ii) a basket for unlimited dividends and distributions if there is no event of default, availability under the ABL Facility is greater than 12.5 % of the lesser of the commitments under the ABL Facility and the borrowing base under the ABL Facility for 6 months following such dividend or distribution and, if availability is less than 20 % of the lesser of the commitments under the ABL Facility and the borrowing base under the ABL Facility, a 1.00 to 1.00 (or higher) fixed charge coverage ratio for 12 months after giving effect to such dividend or distribution, and (iii) a basket for up to 6.0 % per annum of the net proceeds received by or contributed to the borrower’s common stock from certain of such public offerings.

The covenants of the First Lien Term Loan restrict the payment of dividends and distributions to, among

other exceptions, (i) a $ 25.0 million general basket, (ii) a basket for unlimited dividends and distributions if no event of default exists and the pro-forma total net leverage ratio is less than or equal to 4.25 to 1.00, (iii) a "growing" basket based on, among other things, retained excess cash flow subject to no event of default and compliance with a pro-forma interest coverage ratio of greater than or equal to 2.00 to 1.00, and (iv) a basket for 6.0 % per annum of the net cash proceeds received from such qualified IPO that are contributed to the borrower in cash.

The ability of BJ’s Wholesale Club Holdings, Inc.’s operating subsidiaries to pay dividends may be restricted due to terms of the subsidiaries’ First Lien Term Loan and ABL Revolving Facility, as defined in Note 5 .

For example, the covenants of the ABL Revolving Facility restrict the payment of dividends to, among other exceptions, (i) a greater of $ 135.0 million or 15.0 % of trailing 12 months EBITDA general basket, (ii) a basket for unlimited dividends and distributions if there is no specified event of default and either (x) (A) availability under the ABL Revolving Facility is not less than 17.5 % of the lesser of the commitments under the ABL Revolving Facility and the borrowing base under the ABL Revolving Facility for the 30 consecutive day period ending immediately prior to such dividend or distribution and (B) availability under the ABL Revolving Facility is not less than 17.5 % of the lesser of the commitments under the ABL Revolving Facility and the borrowing base under the ABL Revolving Facility on the date of such dividend or distribution or (y) (A) availability under the ABL Revolving Facility is not less than 12.5 % of the lesser of the commitments under the ABL Revolving Facility and the borrowing base under the ABL Revolving Facility for the 30 consecutive day period ending immediately prior to such dividend or distribution, (B) availability under the ABL Revolving Facility is not less than 12.5 % of the lesser of the commitments under the ABL Revolving Facility and the borrowing base under the ABL Revolving Facility on the date of such dividend or distribution and (C) the fixed charge coverage ratio as of the end of the most recently ended fiscal quarter for which financial statements are available is not less than 1.00 to 1.00, and (iii) ) a basket for up to 7.0 % per annum of the market capitalization of BJ’s Wholesale Club Holdings, Inc if there is no event of default.

The covenants of the First Lien Term Loan restrict the payment of dividends and distributions to, among other exceptions, (i) a $ 25.0 million general basket, (ii) a basket for unlimited dividends and distributions if no event of default exists and the pro-forma total net leverage ratio is less than or equal to 4.25 to 1.00, (iii) a "growing" basket based on, among other things, retained excess cash flow subject to no event of default and compliance with a pro-forma interest coverage ratio of greater than or equal to 2.00 to 1.00, and (iv) a basket for 6.0 % per annum of the net cash proceeds received from such qualified IPO that are contributed to the borrower in cash.

As of January 28, 2023, the amount of net income free of such restrictions and available for payment by BJ’s Wholesale Club Holdings, Inc.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data