Burlington Stores, Inc. 10-Q

Item 1. Financial Statements BURLINGTON STORES, INC. CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME (Unaudited) (All amounts in thousands, except per share data) Three Months Ended May 2, May 4, 2020 2019 REVENUES: Net sales $ 797,996 $ 1,628,547 Other revenue 3,527 5,647 Total revenue 801,523 1,634,194 COSTS AND EXPENSES: Cost of sales 782,184 961,318 Selling, general and administrative expenses 485,088 517,378 Costs related to debt amendments 4,352 ( 382 ) Depreciation and amortization 54,291 50,641 Impairment charges - long-lived assets 1,924 — Other income - net ( 2,124 ) ( 2,092 ) Loss on extinguishment of debt 202 — Interest expense 14,693 13,371 Total costs and expenses 1,340,610 1,540,234 (Loss) income before income tax (benefit) expense ( 539,087 ) 93,960 Income tax (benefit) expense ( 205,359 ) 16,195 Net (loss) income $ ( 333,728 ) $ 77,765 Net (loss) income per common share: Common stock - basic $ ( 5.09 ) $ 1.18 Common stock - diluted $ ( 5.09 ) $ 1.15 Weighted average number of common shares: Common stock - basic 65,572 66,104 Common stock - diluted 65,572 67,730 See Notes to Condensed Consolidated Financial Statements. 3 BURLINGTON STORES, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited) (All amounts in thousands) Three Months Ended May 2, May 4, 2020 2019 Net (loss) income $ ( 333,728 ) $ 77,765 Other comprehensive loss, net of tax: Interest rate derivative contracts: Net unrealized losses arising during the period ( 9,609 ) ( 3,272 ) Reclassification into earnings during the period 1,108 ( 185 ) Other comprehensive loss, net of tax ( 8,501 ) ( 3,457 ) Total comprehensive (loss) income $ ( 342,229 ) $ 74,308 See Notes to Condensed Consolidated Financial Statements. 4 BURLINGTON STORES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (All amounts in thousands, except share and per share data) May 2, February 1, May 4, 2020 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 1,488,470 $ 403,074 $ 105,031 Restricted cash and cash equivalents 6,582 6,582 21,882 Accounts receivable — net 12,375 91,508 99,461 Merchandise inventories 625,908 777,248 895,813 Assets held for disposal 2,261 2,261 — Prepaid and other current assets 94,284 136,698 129,614 Total current assets 2,229,880 1,417,371 1,251,801 Property and equipment—net 1,407,082 1,403,173 1,288,180 Operating lease assets 2,436,761 2,397,111 2,144,757 Tradenames 238,000 238,000 238,000 Favorable leases—net 683 731 941 Goodwill 47,064 47,064 47,064 Deferred tax assets 4,661 4,678 4,191 Other assets 276,546 85,731 90,305 Total assets $ 6,640,677 $ 5,593,859 $ 5,065,239 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 701,922 $ 759,107 $ 707,672 Current operating lease liabilities 269,016 302,185 273,348 Other current liabilities 380,789 397,032 359,818 Current maturities of long term debt 3,679 3,577 3,052 Total current liabilities 1,355,406 1,461,901 1,343,890 Long term debt 2,304,094 1,001,723 1,133,385 Long term operating lease liabilities 2,370,861 2,322,000 2,045,743 Other liabilities 112,092 97,798 83,393 Deferred tax liabilities 219,123 182,288 180,280 Commitments and contingencies (Note 12) Stockholders’ equity: Preferred stock, $ 0.0001 par value: authorized: 50,000,000 shares; no shares issued and outstanding — — — Common stock, $ 0.0001 par value: Authorized: 500,000,000 shares; Issued: 80,084,171 shares, 79,882,506 shares and 79,332,577 shares, respectively; Outstanding: 65,846,701 shares, 65,929,972 shares and 66,366,098 shares, respectively 7 7 7 Additional paid-in-capital 1,737,868 1,587,146 1,520,244 Accumulated (deficit) earnings ( 128,931 ) 204,797 ( 182,554 ) Accumulated other comprehensive loss ( 27,461 ) ( 18,960 ) ( 7,070 ) Treasury stock, at cost ( 1,302,382 ) ( 1,244,841 ) ( 1,052,079 ) Total stockholders' equity 279,101 528,149 278,548 Total liabilities and stockholders' equity $ 6,640,677 $ 5,593,859 $ 5,065,239 See Notes to Condensed Consolidated Financial Statements. 5 BURLINGTON STORES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (All amounts in thousands) Three Months Ended May 2, May 4, 2020 2019 OPERATING ACTIVITIES Net (loss) income $ ( 333,728 ) $ 77,765 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities Depreciation and amortization 54,291 50,641 Impairment charges — long-lived assets 1,924 — Amortization of deferred financing costs 479 330 Accretion of long term debt instruments 1,562 203 Deferred income taxes ( 4,146 ) 2,993 Non-cash loss on extinguishment of debt 202 — Non-cash stock compensation expense 17,352 9,427 Non-cash lease expense 1,174 4,057 Cash received from landlord allowances 5,807 12,213 Changes in assets and liabilities: Accounts receivable 89,367 ( 20,170 ) Merchandise inventories 151,340 57,864 Prepaid and other current assets 42,415 ( 6,028 ) Accounts payable ( 70,377 ) ( 140,767 ) Other current liabilities ( 40,553 ) 2,515 Other long term assets and long term liabilities ( 192,735 ) 3,080 Other operating activities 3,891 68 Net cash (used in) provided by operating activities ( 271,735 ) 54,191 INVESTING ACTIVITIES Cash paid for property and equipment ( 62,463 ) ( 83,781 ) Other investing activities ( 146 ) ( 72 ) Net cash (used in) investing activities ( 62,609 ) ( 83,853 ) FINANCING ACTIVITIES Proceeds from long term debt—ABL Line of Credit 400,000 588,300 Principal payments on long term debt—ABL Line of Credit — ( 438,300 ) Proceeds from long term debt—Convertible Note 805,000 — Proceeds from long term debt—Secured Note 300,000 — Purchase of treasury shares ( 57,542 ) ( 130,319 ) Proceeds from stock option exercises 1,454 1,821 Deferred financing costs ( 26,846 ) — Other financing activities ( 2,326 ) 917 Net cash provided by financing activities 1,419,740 22,419 Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents 1,085,396 ( 7,243 ) Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period 409,656 134,156 Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period $ 1,495,052 $ 126,913 Supplemental disclosure of cash flow information: Interest paid $ 8,566 $ 12,543 Income tax payments - net $ 104 $ 1,179 Non-cash investing activities: Accrued purchases of property and equipment $ 57,219 $ 46,702 See Notes to Condensed Consolidated Financial Statements. 6 BURLINGTON STORES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS May 2, 2020 (Unaudited) 1. Summary of Significant Accounting Policies Basis of Presentation As of May 2, 2020, Burlington Stores, Inc., a Delaware corporation (collectively with its subsidiaries, the Company), through its indirect subsidiary Burlington Coat Factory Warehouse Corporation (BCFWC), has expanded its store base to 736 retail stores, which includes temporarily closed stores. These unaudited Condensed Consolidated Financial Statements include the accounts of Burlington Stores, Inc. and its subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation. The Condensed Consolidated Financial Statements are unaudited, but in the opinion of management reflect all adjustments (which are of a normal and recurring nature) necessary for the fair presentation of the results of operations for the interim periods presented. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted. These Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 2020 (Fiscal 2019 10-K). The balance sheet at February 1, 2020 presented herein has been derived from the audited Consolidated Financial Statements contained in the Fiscal 2019 10-K. Because of the COVID-19 pandemic discussed below, and because the Company’s business is seasonal in nature, the operating results for the three month period ended May 2, 2020 are not necessarily indicative of results for the fiscal year. Accounting policies followed by the Company are described in Note 1, “Summary of Significant Accounting Policies,” included in Part II, Item 8 of the Fiscal 2019 10-K. Fiscal Year The Company defines its fiscal year as the 52- or 53-week period ending on the Saturday closest to January 31. The current fiscal year ending January 30, 2021 (Fiscal 2020) and the prior fiscal year ended February 1, 2020 (Fiscal 2019) both consist of 52 weeks. COVID-19 On March 11, 2020, the World Health Organization declared the novel coronavirus (known as COVID-19) outbreak to be a global pandemic. As a result, the Company began the temporary closing of some of its stores, and effective March 22, 2020, it made the decision to temporarily close all of its stores, distribution centers (other than sporadic processing of received inventory) and corporate offices to combat the rapid spread of COVID-19. All stores, distribution centers and corporate offices remained temporarily closed as of May 2, 2020. These developments have caused significant disruptions to the Company’s business and have had a significant adverse impact on its financial condition, results of operations and cash flows, the extent of which will be primarily based on the duration of the store closures, as well as the timing and extent of any recovery in traffic and consumer spending at the Company’s stores. As of May 29, 2020, approximately 400 of the Company’s stores, as well as its distribution centers, have been reopened, and the Company expects the majority of its stores to reopen by mid-June 2020. However, the Company is currently unable to determine whether, when or how the conditions surrounding the COVID-19 pandemic will change, including the impact that social distancing protocols will have on the Company’s operations, the degree to which the Company’s customers will patronize its stores and any impact from potential subsequent additional outbreaks. In response to the COVID-19 pandemic and the temporary closing of stores, the Company provided two weeks of financial support to associates impacted by these store closures and by the shutdown of distribution centers. The Company temporarily furloughed most store and distribution center associates, as well as some corporate associates, but continues to provide benefits to furloughed associates, including paying 100 % of their current medical benefit premiums. As the Company reopens its stores, it has begun to recall furloughed associates. 7 In order to maintain maximum financial flexibility during these uncertain times, the Company initiated several debt transactions. During March 2020, the Company borrowed $ 400 million on its existing $ 600 million senior secured asset-based revolving credit facility (the ABL Line of Credit). On April 16, 2020, the Company issued $ 805 million of 2.25 % Convertible Senior Notes due 2025 (the Convertible Notes), and BCFWC issued $ 300 million of 6.25 % Senior Secured Notes due 2025 (the Secured Notes). Refer to Note 4, “Long Term Debt,” for further discussion regarding these debt transactions. Additionally, the Company took the following steps to further enhance its financial flexibility: • Carefully managed operating expenses, working capital and capital expenditures, including ceasing substantially all buying activity. • Negotiated rent deferral agreements with landlords. • Suspended the Company’s share repurchase program. • The Company’s CEO voluntarily agreed to not take a salary; the Company’s board of directors voluntarily forfeited their cash compensation; the Company’s executive leadership team voluntarily agreed to decrease their salary by 50 %, and smaller salary reductions have been temporarily put in place for all employees through a certain level. It is anticipated that this compensation will be reinstated when a significant number of the Company’s stores reopen. • The annual incentive bonus payments related to Fiscal 2019 performance, as well as merit pay increases for Fiscal 2020, have been delayed to later in the fiscal year after the Company has more clarity regarding the impact of COVID-19. Although the Company has ceased most of its merchandise purchasing activity during this period, a significant amount of inventory remained at stores and in distribution centers prior to the temporary closures discussed above. Due to the aging of this inventory, as well as the impact of seasonality on the Company’s merchandise, the Company recognized inventory markdowns of $ 271.9 million during the three month period ended May 2, 2020. These charges are included in “Cost of sales” on the Company’s Condensed Consolidated Statement of (Loss) Income. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law, which provides emergency economic assistance for American workers, families and businesses affected by the COVID-19 pandemic. The economic relief package includes government loan enhancement programs and various tax provisions to help improve liquidity for American businesses. Based on the Company’s preliminary evaluation of the CARES Act, the Company currently believes that it qualifies for certain employer refundable payroll credits, deferral of applicable payroll taxes, net operating loss carryback and immediate expensing for eligible qualified improvement property. The Company recorded a tax benefit of $ 62.5 million in its effective income tax rate for the three month period ended May 2, 2020, for the increased benefit from net operating loss carryback to earlier years when the tax rate was higher than the current year. The Company intends to continue to review and consider any available potential benefits under the CARES Act for which it qualifies, including those described above. The Company could experience other potential adverse impacts as a result of the COVID-19 pandemic, including, but not limited to, charges from adjustments to the carrying amount of goodwill and other intangible assets or long-lived asset impairment charges. In addition, the negative impacts of the COVID-19 pandemic may result in further changes in the amount of valuation allowance required. Actual results may differ materially from the Company’s current estimates as the scope of the COVID-19 pandemic evolves, depending largely, though not exclusively, on the duration and extent of the disruption to its business. Recently Adopted Accounting Standards Reference Rate Reform On March 12, 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which aims to address accounting consequences that could result from the global markets’ anticipated transition away from the use of the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The amendments in this update provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The optional amendments are effective for all entities as of March 12, 2020, through December 31, 2022. The Company intends to elect to apply certain of the optional expedients when evaluating the impact of reference rate reform on its debt and derivative instruments that reference LIBOR. 8 Intangible Assets On January 26, 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment,” which aims to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under the new guidance, goodwill impairment will be measured as the amount by which the carrying value exceeds the fair value. The loss recognized should not exceed the total amount of goodwill allocated to the reporting unit. The new guidance became effective for the Company as of the beginning of Fiscal 2020. Adoption of this guidance did not have a significant impact on the Company’s consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” This ASU requires that implementation costs incurred in a hosting arrangement that is a service contract be assessed in accordance with the existing guidance in Subtopic 350-40, “Internal-Use Software.” Accordingly, costs incurred during the preliminary project stage must be expensed as incurred, while costs incurred during the application development stage must be capitalized. Capitalized implementation costs associated with a hosting arrangement that is a service contract must be expensed over the term of the hosting arrangement. Additionally, the new guidance requires that the expense of these capitalized costs be presented in the same line item in the statements of income as the fees associated with the hosting element of the arrangement. The new guidance became effective for the Company as of the beginning of Fiscal 2020. Adoption of this guidance did not have a significant impact on the Company’s consolidated financial statements. There were no other new accounting standards that had a material impact on the Company’s Condensed Consolidated Financial Statements during the three month period ended May 2, 2020, and there were no new accounting standards or pronouncements that were issued but not yet effective as of May 2, 2020 that the Company expects to have a material impact on its financial position or results of operations upon becoming effective. 2. Stockholders’ Equity Activity for the three month periods ended May 2, 2020 and May 4, 2019 in the Company’s stockholders’ equity are summarized below: (in thousands, except share data) Common Stock Additional Paid-in Accumulated Accumulated Other Comprehensive Treasury Stock Shares Amount Capital Deficit (Earnings) Loss Shares Amount Total Balance at February 1, 2020 79,882,506 $ 7 $ 1,587,146 $ 204,797 $ ( 18,960 ) ( 13,952,534 ) $ ( 1,244,841 ) $ 528,149 Net loss — — — ( 333,728 ) — — — ( 333,728 ) Stock options exercised 180,950 — 1,454 — — — — 1,454 Shares used for tax withholding — — — — — ( 41,363 ) ( 7,383 ) ( 7,383 ) Shares purchased as part of publicly announced programs — — — — — ( 243,573 ) ( 50,158 ) ( 50,158 ) Vesting of restricted shares, net of forfeitures of 4,166 restricted shares 20,715 — — — — — — — Stock based compensation — — 17,352 — — — — 17,352 Equity component of convertible notes issuance, net — — 131,916 — — — — 131,916 Unrealized losses on interest rate derivative contracts, net of related tax benefit of $ 3.6 million — — — — ( 9,609 ) — — ( 9,609 ) Amount reclassified into earnings, net of related taxes of $ 0.4 million — — — — 1,108 — — 1,108 Balance at May 2, 2020 80,084,171 $ 7 $ 1,737,868 $ ( 128,931 ) $ ( 27,461 ) ( 14,237,470 ) $ ( 1,302,382 ) $ 279,101 9 (in thousands, except share data) Common Stock Additional Paid-in Accumulated Accumulated Other Comprehensive Treasury Stock Shares Amount Capital Deficit (Loss) Income Shares Amount Total Balance at February 2, 2019 79,224,669 $ 7 $ 1,508,996 $ ( 260,919 ) $ ( 3,613 ) ( 12,079,572 ) $ ( 921,761 ) $ 322,710 Net income — — — 77,765 — — — 77,765 Stock options exercised 110,493 — 1,821 — — — — 1,821 Shares used for tax withholding — — — — — ( 45,447 ) ( 7,538 ) ( 7,538 ) Shares purchased as part of publicly announced programs — — — — — ( 841,460 ) ( 122,780 ) ( 122,780 ) Issuance of restricted shares, net of forfeitures of 4,344 restricted shares ( 2,585 ) — — — — — — — Stock based compensation — — 9,427 — — — — 9,427 Unrealized losses on interest rate derivative contracts, net of related taxes of $ 1.3 million — — — — ( 3,272 ) — — ( 3,272 ) Amount reclassified into earnings, net of related taxes of $ 0.1 million — — — — ( 185 ) — — ( 185 ) Cumulative-effect adjustment — — — 600 — — — 600 Balance at May 4, 2019 79,332,577 $ 7 $ 1,520,244 $ ( 182,554 ) $ ( 7,070 ) ( 12,966,479 ) $ ( 1,052,079 ) $ 278,548 3. Lease Commitments The Company’s leases primarily consist of stores, distribution facilities and office space under operating and finance leases that will expire principally during the next 30 years. The leases typically include renewal options at five year intervals and escalation clauses. Lease renewals are only included in the lease liability to the extent that they are reasonably assured of being exercised. The Company’s leases typically provide for contingent rentals based on a percentage of gross sales. Contingent rentals are not included in the lease liability, and they are recognized as variable lease cost when incurred. As a result of the COVID-19 pandemic and the associated store closures discussed above, the Company worked with landlords to modify payment terms for certain leases. The FASB has provided relief under ASC 842, “Leases,” related to the COVID-19 pandemic. Under this relief, companies can make a policy election on how to treat lease concessions resulting directly from COVID-19, provided that the modified contracts result in total cash flows that are substantially the same or less than the cash flows in the original contract. The Company has made the policy election to account for lease concessions that result from the COVID-19 pandemic as if they were made under enforceable rights under the original contract. Additionally, the Company has elected to account for these concessions outside of the lease modification framework described under ASC 842. As a result, deferred payments related to these leases are included in the line item “Other current liabilities” on the Company’s Condensed Consolidated Balance Sheet. 10 The following is a schedule of the Company’s future lease payments: (in thousands) Fiscal Year Operating Leases Finance Leases 2020 (remainder) $ 297,615 $ 4,598 2021 432,881 6,841 2022 416,766 7,513 2023 395,076 7,589 2024 361,574 7,417 2025 327,606 5,298 Thereafter 1,102,645 33,353 Total future minimum lease payments 3,334,163 72,609 Amount representing interest ( 694,286 ) ( 23,101 ) Total lease liabilities 2,639,877 49,508 Less: current portion of lease liabilities ( 269,016 ) ( 3,679 ) Total long term lease liabilities $ 2,370,861 $ 45,829 Weighted average discount rate 5.4 % 7.0 % Weighted average remaining lease term (years) 8.6 12.0 The above schedule excludes approximately $ 326.6 million for 51 stores that the Company has committed to open or relocate but has not yet taken possession of the space. The discount rates used in valuing the Company’s leases are not readily determinable, and are based on the Company’s incremental borrowing rate on a fully collateralized basis. The following is a schedule of net lease costs for the periods indicated: (in thousands) Three Months Ended Three Months Ended May 2, 2020 May 4, 2019 Finance lease cost: Amortization of finance lease asset (a) $ 1,211 $ 973 Interest on lease liabilities (b) 872 655 Operating lease cost (c) 108,973 100,924 Variable lease cost (c) 41,218 38,819 Total lease cost 152,274 141,371 Less all rental income(d) ( 1,248 ) ( 1,240 ) Total net rent expense (e) $ 151,026 $ 140,131 (a) Included in the line item “Depreciation and amortization” in the Company’s Condensed Consolidated Statements of (Loss) Income. (b) Included in the line item “Interest expense” in the Company’s Condensed Consolidated Statements of (Loss) Income. (c) Includes real estate taxes, common area maintenance, insurance and percentage rent. Included in the line item “Selling, general and administrative expenses” in the Company’s Condensed Consolidated Statements of (Loss) Income. (d) Included in the line item “Other revenue” in the Company’s Condensed Consolidated Statements of (Loss) Income. (e) Excludes an immaterial amount of short-term lease cost. 11 Supplemental cash flow disclosures related to leases are as follows: (in thousands) Three Months Ended Three Months Ended May 2, 2020 May 4, 2019 Cash paid for amounts included in the measurement of lease liabilities: Cash payments arising from operating lease liabilities (a) $ 87,209 $ 96,458 Cash payments for the principal portion of finance lease liabilities (b) $ 853 $ 696 Cash payments for the interest portion of finance lease liabilities (a) $ 872 $ 655 Supplemental non-cash information: Operating lease liabilities arising from obtaining right-of-use assets $ 125,335 $ 177,687 (a) Included within operating activities in the Company’s Condensed Consolidated Statements of Cash Flows. (b) Included within financing activities in the Company’s Condensed Consolidated Statements of Cash Flows. 4. Long Term Debt Long term debt consists of: (in thousands) May 2, February 1, May 4, 2020 2020 2019 $ 1,200,000 senior secured term loan facility (Term B-5 Loans), LIBOR (with a floor of 0.00 %) plus 1.75 % , matures on November 17, 2024 $ 957,829 $ 957,505 $ 956,896 $ 805,000 convertible senior notes, 2.25 %, matures on April 15, 2025 625,688 — — $ 300,000 senior secured notes, 6.25 %, matures on April 15, 2025 300,000 — — $ 600,000 ABL senior secured revolving facility, LIBOR plus spread based on average outstanding balance, matures on June 29, 2023 400,000 — 150,000 Finance lease obligations 49,508 50,130 32,251 Unamortized deferred financing costs ( 25,252 ) ( 2,335 ) ( 2,710 ) Total debt 2,307,773 1,005,300 1,136,437 Less: current maturities ( 3,679 ) ( 3,577 ) ( 3,052 ) Long term debt, net of current maturities $ 2,304,094 $ 1,001,723 $ 1,133,385 Term Loan Facility On February 26, 2020, the Company entered into Amendment No. 8 (the Eighth Amendment) to the Term Loan Credit Agreement governing its senior secured credit term loan facility (the Term Loan Facility). The Eighth Amendment, among other things, reduced the interest rate margins applicable to the Term Loan Facility from 1.00 % to 0.75 %, in the case of prime rate loans, and from 2.00 % to 1.75 %, in the case of LIBOR loans, with the LIBOR floor remaining at 0.00 %. In connection with the execution of the Eighth Amendment, the Company incurred fees of $ 1.1 million, primarily related to legal and placement fees, which were recorded in the line item “Costs related to debt amendments” in the Company’s Condensed Consolidated Statement of Income. Additionally, the Company recognized a non-cash loss on the extinguishment of debt of $ 0.2 million, representing the write-off of unamortized deferred financing costs and original issue discount, which was recorded in the line item “Loss on extinguishment of debt” in the Company’s Condensed Consolidated Statement of (Loss) Income. At May 2, 2020 and May 4, 2019, the Company’s interest rate related to the Term Loan Facility was 2.6 % and 4.5 %, respectively. Convertible Notes On April 16, 2020, the Company issued $ 805 million of Convertible Notes. An aggregate of up to 3,656,149 shares of common stock may be issued upon conversion of the Convertible Notes, which number is subject to adjustment up to an aggregate of 4,844,410 shares following certain corporate events that occur prior to the maturity date or if the Company issues a notice of redemption, and which is also subject to certain anti-dilution adjustments. 12 The Convertible Notes are general unsecured obligations of the Company. The Convertible Notes will bear interest at a rate of 2.25 % per year, payable semi-annually in cash, in arrears, on April 15 and October 15 of each year, beginning on October 15, 2020 . The Convertible Notes will mature on April 15, 2025 , unless earlier converted, redeemed or repurchased. Prior to the close of business on the business day immediately preceding January 15, 2025, the Convertible Notes will be convertible at the option of the holders only upon the occurrence of certain events and during certain periods. Thereafter, the Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. The Convertible Notes have an initial conversion rate of 4.5418 shares per $ 1,000 principal amount of Convertible Notes (equivalent to an initial conversion price of approximately $ 220.18 per share of the Company’s common stock), subject to adjustment if certain events occur. The initial conversion price represents a conversion premium of approximately 32.50 % over $ 166.17 per share, the last reported sale price of the Company’s common stock on April 13, 2020 (the pricing date of the offering) on the New York Stock Exchange. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of its common stock or a combination of cash and shares of its common stock, at its election. The Company may not redeem the Convertible Notes prior to April 15, 2023. On or after April 15, 2023, the Company will be able to redeem for cash all or any portion of the Convertible Notes, at its option, if the last reported sale price of the Company’s common stock is equal to or greater than 130 % of the conversion price for a specified period of time, at a redemption price equal to 100 % of the principal aggregate amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. Holders of the Convertible Notes may require the Company to repurchase their Convertible Notes upon the occurrence of certain events that constitute a fundamental change under the indenture governing the Convertible Notes at a purchase price equal to 100 % of the principal amount thereof, plus accrued and unpaid interest to, but excluding, the date of repurchase. In connection with certain corporate events or if the Company issues a notice of redemption, it will, under certain circumstances, increase the conversion rate for holders who elect to convert their Convertible Notes in connection with such corporate event or during the relevant redemption period for such Convertible Notes. The Convertible Notes contain a cash conversion feature, and as a result, the Company has separated it into liability and equity components. The Company valued the liability component based on its borrowing rate for a similar debt instrument that does not contain a conversion feature. The equity component, which is recognized as a debt discount, was valued as the difference between the face value of the Convertible Notes and the fair value of the liability component. In connection with the Convertible Notes issuance, the Company incurred deferred financing costs of $ 20.6 million, primarily related to fees paid to the bookrunners of the offering, as well as legal, accounting and rating agency fees. These costs were allocated on a pro rata basis, with $ 16.0 million allocated to the debt component and $ 4.6 million allocated to the equity component. The debt discount and the debt portion of the deferred costs are being amortized to interest expense over the term of the Convertible Notes at an effective interest rate of 8.2 %. The Convertible Notes consist of the following components as of the periods indicated: (in thousands) May 2, February 1, May 4, 2020 2020 2019 Liability component: Principal $ 805,000 $ — $ — Unamortized debt discount ( 179,312 ) — — Unamortized deferred debt costs ( 15,881 ) — — Net carrying amount $ 609,807 $ — $ — Equity component, net $ 131,916 $ — $ — 13 Interest expense related to the Convertible Notes consists of the following as of the periods indicated: (in thousands) Three Months Ended Three Months Ended May 2, 2020 May 4, 2019 Coupon interest $ 843 $ — Amortization of debt discount 1,366 — Amortization of deferred debt costs 121 — Convertible Notes interest expense $ 2,330 $ — Secured Notes On April 16, 2020, BCFWC issued $ 300 million of Secured Notes. The Secured Notes are senior, secured obligations of BCFWC, and interest is payable semiannually in cash, in arrears, at a rate of 6.25 % per annum on each of April 15 and October 15, beginning on October 15, 2020 . The Secured Notes are guaranteed on a senior secured basis by Burlington Coat Factory Holdings, LLC, Burlington Coat Factory Investments Holdings, Inc. and BCFWC’s subsidiaries that guarantee the loans under the Term Loan Facility. The Secured Notes mature on April 15, 2025 , unless earlier redeemed or repurchased. In connection with the Secured Notes issuance, the Company incurred deferred financing costs of $ 7.3 million, primarily related to fees paid to the bookrunners of the offering, as well as legal fees. These costs are being amortized to interest expense over the term of the Secured Notes. The Company incurred additional costs of $ 3.2 million, primarily related to legal fees, which are recorded in the line item, “Costs related to debt amendments” in the Company’s Condensed Consolidated Statement of (Loss) Income. ABL Line of Credit On March 17, 2020, the Company borrowed $ 400 million under the ABL Line of Credit as a precautionary measure in order to increase the Company’s cash position and facilitate financial flexibility in light of the uncertainty resulting from COVID-19. At May 2, 2020, the Company had $ 150.9 million available under the ABL Line of Credit. The maximum borrowings under the ABL Line of Credit during the three month period ended May 2, 2020 amounted to $ 400.0 million. Average borrowings during the three month period ended May 2, 2020 amounted to $ 206.6 million, at an average interest rate of 2.2 %. At May 4, 2019, the Company had $ 393.9 million available under the ABL Line of Credit. The maximum borrowings under the ABL Line of Credit during the three month period ended May 4, 2019 amounted to $ 255.0 million. Average borrowings during the three month period ended May 4, 2019 amounted to $ 147.4 million, at an average interest rate of 3.8 %. 5. Derivative Instruments and Hedging Activities The Company accounts for derivatives and hedging activities in accordance with ASC Topic No. 815, “Derivatives and Hedging” (Topic No. 815). As required by Topic No. 815, the Company records all derivatives on the balance sheet at fair value and adjusts to market on a quarterly basis. In addition, to comply with the provisions of ASC Topic No. 820, “Fair Value Measurements” (Topic No. 820), credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, are incorporated in the fair values to account for potential nonperformance risk. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered any applicable credit enhancements such as collateral postings, thresholds, mutual puts, and guarantees. In accordance with Topic No. 820, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. There is no impact of netting, because the Company has only one derivative. The Company classifies its derivative valuations in Level 2 of the fair value hierarchy. Cash Flow Hedges of Interest Rate Risk The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. 14 As of May 2, 2020, the Company had the following outstanding interest rate derivative that was designated as a cash flow hedge of interest rate risk: Interest Rate Derivative Number of Instruments Notional Aggregate Principal Amount Interest Cap/Swap Rate Maturity Date Interest rate swap contract One $ 450.0 million 2.72 % December 29, 2023 Tabular Disclosure The table below presents the fair value of the Company’s derivative financial instruments on a gross basis as well as their classification on the Company’s Condensed Consolidated Balance Sheets: (in thousands) Fair Values of Derivative Instruments May 2, 2020 February 1, 2020 May 4, 2019 Derivatives Designated as Hedging Instruments Balance Sheet Location Fair Value Balance Sheet Location Fair Value Balance Sheet Location Fair Value Interest rate cap contracts N/A N/A N/A N/A Prepaid and other current assets $ 483 Interest rate swap contract Other liabilities $ 37,913 Other liabilities $ 26,220 Other liabilities $ 9,708 The following table presents the unrealized gains and losses deferred to accumulated other comprehensive loss resulting from the Company’s derivative financial instruments for each of the reporting periods. (in thousands) Three Months Ended Interest Rate Derivatives: May 2, 2020 May 4, 2019 Unrealized losses, before taxes $ ( 13,164 ) $ ( 4,523 ) Income tax benefit 3,555 1,251 Unrealized losses, net of taxes $ ( 9,609 ) $ ( 3,272 ) The following table presents information about the reclassification of gains and losses from accumulated other comprehensive loss into earnings related to the Company’s derivative instruments for each of the reporting periods. (in thousands) Three Months Ended Component of Earnings: May 2, 2020 May 4, 2019 Interest expense $ 1,532 $ ( 256 ) Income tax (benefit) expense ( 424 ) 71 Net reclassification into earnings $ 1,108 $ ( 185 ) The Company estimates that approximately $ 11.2 million will be reclassified from accumulated other comprehensive loss into interest expense during the next twelve months. 6. Accumulated Other Comprehensive Loss Amounts included in accumulated other comprehensive loss are recorded net of the related income tax effects. The following table details the changes in accumulated other comprehensive loss: (in thousands) Derivative Instruments Balance at February 1, 2020 $ ( 18,960 ) Unrealized losses, net of related tax benefit of $ 3.6 million ( 9,609 ) Amount reclassified into earnings, net of related taxes of $ 0.4 million 1,108 Balance at May 2, 2020 $ ( 27,461 ) 15 7. Fair Value Measurements The Company accounts for fair value measurements in accordance with Topic No. 820, which defines fair value, establishes a framework for measurement and expands disclosure about fair value measurements. Topic No. 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price), and classifies the inputs used to measure fair value into the following hierarchy: Level 1: Quoted prices for identical assets or liabilities in active markets. Level 2: Quoted market prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. Level 3: Pricing inputs that are unobservable for the assets and liabilities and include situations where there is little, if any, market activity for the assets and liabilities. The inputs into the determination of fair value require significant management judgment or estimation. The carrying amounts of cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term nature of these instruments. Refer to Note 5, “Derivative Instruments and Hedging Activities,” for further discussion regarding the fair value of the Company’s interest rate swap contract. Financial Assets The fair values of the Company’s financial assets and the hierarchy of the level of inputs as of May 2, 2020, February 1, 2020 and May 4, 2019 are summarized below: (in thousands) Fair Value Measurements at May 2, February 1, May 4, 2020 2020 2019 Level 1 Cash equivalents (including restricted cash) $ 1,001,033 $ 369,733 $ 22,471 Long-Lived Assets Long-lived assets are measured at fair value on a non-recurring basis for purposes of calculating impairment using the fair value hierarchy of Topic No. 820. The fair value of the Company’s long-lived assets is generally calculated using discounted cash flows. During the three months ended May 2, 2020, the Company recorded impairment charges of $ 1.9 million, primarily related to declines in revenues and operating results for seven stores. These costs were recorded in the line item “Impairment charges – long-lived assets” in the Company’s Condensed Consolidated Statements of (Loss) Income. All of the fixed assets for these seven stores were fully impaired and therefore had zero fair value as of May 2, 2020, and would be categorized as Level 3 in the fair value hierarchy described above. Financial Liabilities The fair values of the Company’s financial liabilities are summarized below: (in thousands) May 2, 2020 February 1, 2020 May 4, 2019 Principal Amount Fair Value Principal Amount Fair Value Principal Amount Fair Value Term B-5 Loans $ 961,415 $ 896,169 $ 961,415 $ 959,899 $ 961,415 $ 954,504 Convertible Notes 805,000 847,746 — — — — Secured Notes 300,000 304,583 — — — — ABL Line of Credit 400,000 400,000 — — 150,000 150,000 Total debt (a) $ 2,466,415 $ 2,448,498 $ 961,415 $ 959,899 $ 1,111,415 $ 1,104,504 (a) The table above excludes finance lease obligations, debt discount and deferred debt costs. 16 The fair values presented herein are based on pertinent information available to management as of the respective period end dates. The estimated fair values of the Company’s debt are classified as Level 2 in the fair value hierarchy , and are based on current market quotes received from inactive markets . 8. Income Taxes On March 27, 2020, the CARES Act was enacted into law. The CARES Act includes several significant business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (“NOLs”) and allow businesses to carry back NOLs arising in 2018, 2019, and 2020 to the five prior tax years, loosen the business interest limitation under section 163(j), and fix the qualified improvement property regulations in the 2017 Tax Cuts and Jobs Act. As a result of the CARES Act, to the extent that there are taxable losses at the end of 2020, the Company estimates that it will be able to obtain a tax refund from the carryback of federal NOLs. Income tax benefit was $ 205.4 million during the three-month period ended May 2, 2020, compared with income tax expense of $ 16.2 million during the three month period ended May 4, 2019. The effective tax rate for the three month period ended May 2, 2020 was 38.1 %, compared with 17.2 % during the three month period ended May 4, 2019. The effective tax rate for the first quarter of fiscal 2020 differs from the federal statutory rate of 21 % and is an increase over the prior year primarily due to the Company’s pretax loss and applying various provisions of the CARES Act, namely the benefit related to the carryback of federal NOLs in Fiscal 2020 to earlier tax years with higher tax rates than the current year, which represents a rate impact of 11.6 %. Additionally, there was a 2.2 % rate impact related to permanent benefits related to stock compensation and a 3.5 % rate impact related to state tax benefits on the Company’s taxable loss. Net deferred taxes are as follows: (in thousands) May 2, February 1, May 4, 2020 2020 2019 Deferred tax asset $ 4,661 $ 4,678 $ 4,191 Deferred tax liability 219,123 182,288 180,280 Net deferred tax liability $ 214,462 $ 177,610 $ 176,089 Net deferred tax assets relate to Puerto Rico deferred balances that have a future net benefit for tax purposes. Net deferred tax liabilities primarily relate to intangible assets and depreciation expense where the Company has a future obligation for tax purposes. The increase in deferred tax liability is primarily attributable to the tax treatment of certain debt transactions entered into during the first quarter. As of May 2, 2020, the Company had a deferred tax asset related to net operating losses of $ 16.8 million, inclusive of $ 16.5 million related to state net operating losses that expire at various dates between 2021 and 2040 , as well as $ 0.3 million related to Puerto Rico net operating losses that will expire in 2025 . As of May 2, 2020, the Company had a deferred tax asset related to tax credit carry-forwards of $ 9.5 million, inclusive of $ 0.6 million of federal tax credits, which will expire in 2040 , and $ 7.5 million of state tax credit carry-forwards, which will begin to expire in 2021 , as well as $ 1.4 million of deferred tax assets recorded for Puerto Rico alternative minimum tax credits that have an indefinite life . As of May 2, 2020, February 1, 2020 and May 4, 2019, valuation allowances amounted to $ 10.7 million, $ 9.8 million and $ 9.2 million, respectively, related to state and Puerto Rico net operating losses and state tax credit carry-forwards. The Company believes that it is more likely than not that this portion of state and Puerto Rico net operating losses and state tax credit carry-forwards will not be realized. 9. Capital Stock Treasury Stock The Company accounts for treasury stock under the cost method. During the three month period ended May 2, 2020, the Company acquired 41,363 shares of common stock from employees for approximately $ 7.4 million to satisfy their minimum statutory tax withholdings related to the vesting of restricted stock and restricted stock unit awards, which was recorded in the line item “Treasury stock” on the Company’s Condensed Consolidated Balance Sheets, and the line item “Purchase of treasury shares” on the Company’s Condensed Consolidated Statements of Cash Flows. 17 Share Repurchase Program On August 14, 2019, the Company’s Board of Directors authorized the repurchase of up to $ 400 million of common stock, which is authorized to be executed through August 2021 . This repurchase program is funded using the Company’s available cash and borrowings under the ABL Line of Credit. During the three month period ended May 2, 2020, the Company repurchased 243,573 shares of its common stock for $ 50.2 million under its share repurchase program, which was recorded in the line item “Treasury stock” on the Company’s Condensed Consolidated Balance Sheets, and the line item “Purchase of treasury shares” on the Company’s Condensed Consolidated Statements of Cash Flows. As part of the Company’s cash management efforts during the COVID-19 pandemic, the Company suspended its share repurchase program in March 2020. As of May 2, 2020, the Company had $ 348.4 million remaining under its share repurchase authorization. 10. Net (Loss) Income Per Share Basic net income per share is calculated by dividing net income by the weighted-average number of common shares outstanding. Diluted net income per share is calculated by dividing net income by the weighted-average number of common shares and potentially dilutive securities outstanding during the period using the treasury stock method. The following table presents the computation of basic and diluted net income per share: (in thousands, except per share data) Three Months Ended May 2, May 4, 2020 2019 Basic net (loss) income per share Net (loss) income $ ( 333,728 ) $ 77,765 Weighted average number of common shares – basic 65,572 66,104 Net (loss) income per common share – basic $ ( 5.09 ) $ 1.18 Diluted net (loss) income per share Net (loss) income $ ( 333,728 ) $ 77,765 Shares for basic and diluted net income per share: Weighted average number of common shares – basic 65,572 66,104 Assumed exercise of stock options and vesting of restricted stock — 1,626 Assumed conversion of convertible debt — — Weighted average number of common shares – diluted 65,572 67,730 Net (loss) income per common share – diluted $ ( 5.09 ) $ 1.15 Approximately 2,025,000 shares were excluded from diluted net loss per share for the three month period ended May 2, 2020, since all of the Company’s stock option, restricted stock and restricted stock unit awards have an anti-dilutive effect while in a net loss position. Approximately 440,000 shares related to the Company’s stock option, restricted stock and restricted stock unit awards were excluded from diluted net income per share for the three month period ended May 4, 2019, since their effect was anti-dilutive. The Company intends to repay the principal portion of the Convertible Notes in cash and any excess in either cash, shares or a combination of cash and shares. As a result, the Company will use the treasury stock method to calculate the dilutive impact of the Convertible Notes, assuming that the principal will be repaid in cash, and that the excess will be paid by issuing shares of common stock. During the three months ended May 2, 2020, shares of common stock issuable upon conversion of the Convertible Notes have been excluded from the computation of diluted earnings per share as the effect would be anti-dilutive, since the conversion price of $ 220.18 exceeded the average market price of the Company’s common stock during the period. 11. Stock-Based Compensation As of May 2, 2020, there were 2,547,386 shares of common stock available for issuance under the Company’s 2013 Omnibus Incentive Plan. 18 Non-cash stock compensation expense is as follows: (in thousands) Three Months Ended May 2, May 4, Type of Non-Cash Stock Compensation 2020 2019 Restricted stock and restricted stock unit grants (a) $ 6,899 $ 4,952 Stock option grants (a) 6,332 4,417 Performance-based restricted stock unit grants (a) 4,121 58 Total (b) $ 17,352 $ 9,427 (a) Included in the line item “Selling, general and administrative expenses” in the Company’s Condensed Consolidated Statements of (Loss) Income. (b) The amounts presented in the table above exclude taxes. For the three month period ended May 2, 2020, the tax benefit related to the Company’s non-cash stock compensation was approximately $ 3.8 million. For the three month period ended May 4, 2019, the tax benefit related to the Company’s non-cash stock compensation was approximately $ 2.4 million. Stock Options Stock option transactions during the three month period ended May 2, 2020 are summarized as follows: Number of Shares Weighted Average Exercise Price Per Share Options outstanding, February 1, 2020 1,890,955 $ 94.17 Options granted 235,571 180.05 Options exercised (a) ( 180,950 ) 8.03 Options forfeited ( 16,661 ) 115.73 Options outstanding, May 2, 2020 1,928,915 $ 112.56 (a) Options exercised during the three month period ended May 2, 2020 had a total intrinsic value of $ 32.7 million. The following table summarizes information about the stock options vested and expected to vest during the contractual term of such options as of May 2, 2020: Options Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Aggregate Intrinsic Value (in millions) Vested and expected to vest 1,928,915 6.2 $ 112.56 $ 131.7 The fair value of each stock option granted during the three month period ended May 2, 2020 was estimated using the Black Scholes option pricing model using the following assumptions: Three Months Ended May 2, 2020 Risk-free interest rate 0.45% - 1.48% Expected volatility 35% - 36% Expected life (years) 6.25 Contractual life (years) 10.0 Expected dividend yield 0.0 % Weighted average grant date fair value of options issued $ 63.37 The expected dividend yield was based on the Company’s expectation of not paying dividends in the near term. Since the Company completed its initial public offering in October 2013, it does not have sufficient history as a publicly traded company to evaluate its volatility factor. As such, the expected stock price volatility is based upon the historical volatility of the stock price over the expected life of the options of peer companies that are publicly traded. The risk free interest rate was based on the U.S. Treasury rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the awards being valued. For grants 19 issued during the three month period ended May 2, 2020 , the expected life of the options was calculated using the simplified method. The simplified method defines the life as the average of the contractual term of the options and the weighted average vesting period for all option tranches. This methodology was utilized due to the relatively short length of time the Company’s common stock has been publicly traded. Restricted Stock Prior to May 1, 2019, the Company granted shares of restricted stock. Grants made on and after May 1, 2019 are in the form of restricted stock units. Restricted stock transactions during the three month period ended May 2, 2020 are summarized as follows: Number of Shares Weighted Average Grant Date Fair Value Per Award Non-vested awards outstanding, February 1, 2020 451,774 $ 131.03 Awards granted 113,819 179.92 Awards vested (a) ( 123,195 ) 107.54 Awards forfeited ( 6,650 ) 136.41 Non-vested awards outstanding, May 2, 2020 435,748 150.36 (a) Restricted stock awards vested during the three month period ended May 2, 2020 had a total intrinsic value of $ 22.0 million. The fair value of each share of restricted stock granted during Fiscal 2020 was based upon the closing price of the Company’s common stock on the grant date . Performance Stock Units The Company grants performance-based restricted stock units to its senior executives. Vesting of these performance share units is based on pre-established EBIT margin expansion and sales compounded annual growth rate (CAGR) goals (each weighted equally) over a three-year performance period. Based on the Company’s achievement of these goals, each award may range from 50 % (at threshold performance) to no more than 200 % of the target award. In the event that actual performance is below threshold, no award will be made. In addition to the performance conditions, each performance stock unit cliff vests at the end of a three-year service period. Compensation costs recognized on the performance-based restricted stock units are adjusted, as applicable, for performance above or below the target specified in the award. Performance stock unit transactions during the three month period ended May 2, 2020 are summarized as follows: Number of Shares Weighted Average Grant Date Fair Value Per Award Non-vested units outstanding, February 1, 2020 80,951 $ 173.87 Units granted 74,783 179.46 Awards forfeited ( 979 ) 170.08 Non-vested units outstanding, May 2, 2020 154,755 176.59 12. Commitments and Contingencies Legal Like many retailers, the Company has been named in potential class or collective actions on behalf of groups alleging violations of federal and state wage and hour and other labor statutes, and alleged violation of state consumer and/or privacy protection and other statutes. The Company is involved in a federal wage and hour lawsuit alleging that certain exempt employees were misclassified under the Fair Labor Standards Act (FLSA). In late November 2019, the Court overseeing this lawsuit granted final certification allowing the matter to proceed as a collective action under the FLSA. In addition, the Company is involved in a putative class action matter raising similar allegations of misclassification under the wage and hour laws of three states. This matter was stayed by the Court shortly after it was filed and has remained stayed to date. The Company is beginning mediation discussions in early June 20 with respect to these lawsuits and is not able to predict the outcome at this time and cannot reasonably estimate any reasonably possible loss in excess of the amount accrued. The Company is also party to representative claims under the California Private Attorneys’ General Act and various other lawsuits and regulatory proceedings including, among others, commercial, product, product safety, employee, customer, intellectual property and other claims. Actions against us are in various procedural stages. Many of these proceedings raise factual and legal issues and are subject to uncertainties. While no assurance can be given as to the ultimate outcome of these matters, the Company believes that the final resolution of these actions will not have a material adverse effect on the Company’s results of operations, financial position, liquidity or capital resources. Letters of Credit The Company had letter of credit arrangements with various banks in the aggregate amount of $ 49.1 million, $ 53.1 million and $ 56.0 million as of May 2, 2020, February 1, 2020 and May 4, 2019, respectively. Among these arrangements, as of May 2, 2020, February 1, 2020 and May 4, 2019, the Company had letters of credit outstanding in the amount of $ 47.2 million, $ 46.6 million and $ 50.9 million, respectively, guaranteeing performance under various insurance contracts and utility agreements. In addition, the Company had outstanding letters of credit arrangements in the amounts of $ 1.9 million, $ 6.5 million and $ 5.1 million at May 2, 2020, February 1, 2020 and May 4, 2019, respectively, related to certain merchandising agreements. Based on the terms of the agreement governing the ABL Line of Credit, the Company had the ability to enter into letters of credit up to $ 150.9 million, $ 501.8 million and $ 393.9 million as of May 2, 2020, February 1, 2020 and May 4, 2019, respectively. Purchase Commitments The Company had $ 455.2 million of purchase commitments related to goods that were not received as of May 2, 2020. Death Benefits In November 2005, the Company entered into agreements with three of the Company’s former executives whereby upon each of their deaths the Company will pay $ 1.0 million to each respective designated beneficiary. 13. Related Parties The brother-in-law of one of the Company’s Executive Vice Presidents is an independent sales representative of one of the Company’s suppliers of merchandise inventory. This relationship predated the commencement of the Executive Vice President’s employment with the Company. The Company has determined that the dollar amount of purchases through such supplier represents an insignificant amount of its inventory purchases. 21 BURLINGTON STORES, INC.