What changed in this filing

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Item 1. Financial Statements

2020-11-24 compared with 2020-08-27 · 164 added, 146 removed, 508 unchanged (38% of the section changed)

1 unchanged sentence

BURLINGTON STORES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(All amounts in thousands, except per share data)

Three Months Ended

Six Months Ended

Nine Months Ended

Other revenue

10 unchanged sentences

Total costs and expenses

(Loss) income before income tax (benefit) expense

Income tax (benefit) expense

Net (loss) income

Net (loss) income per common share:

Income (loss) before income tax expense (benefit)

Income tax expense (benefit)

Net income (loss)

Net income (loss) per common share:

Common stock - basic

5 unchanged sentences

BURLINGTON STORES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(All amounts in thousands)

Three Months Ended

Six Months Ended

Net (loss) income

Nine Months Ended

Net income (loss)

Other comprehensive income (loss), net of tax:

Interest rate derivative contracts:

Net unrealized losses arising during the period

Net unrealized gains (losses) arising during the period

Reclassification into earnings during the period

Other comprehensive income (loss), net of tax

Total comprehensive (loss) income

Total comprehensive income (loss)

See Notes to Condensed Consolidated Financial Statements.

43 unchanged sentences

(All amounts in thousands)

Six Months Ended

Nine Months Ended

OPERATING ACTIVITIES

22 unchanged sentences

Lease acquisition costs

Proceeds from insurance recoveries related to property and equipment

Other investing activities

10 unchanged sentences

Net cash provided by (used in) financing activities

Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents

Increase in cash, cash equivalents, restricted cash and restricted cash equivalents

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

8 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

August 1, 2020

October 31, 2020

Summary of Significant Accounting Policies

Basis of Presentation

As of August 1, 2020, Burlington Stores, Inc., a Delaware corporation (collectively with its subsidiaries, the Company), through its indirect subsidiary Burlington Coat Factory Warehouse Corporation (BCFWC), operated 739 retail stores.

As of October 31, 2020, Burlington Stores, Inc., a Delaware corporation (collectively with its subsidiaries, the Company), through its indirect subsidiary Burlington Coat Factory Warehouse Corporation (BCFWC), operated 769 retail stores.

These unaudited Condensed Consolidated Financial Statements include the accounts of Burlington Stores, Inc.

5 unchanged sentences

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 and six month periods ended August 1, 2020 are not necessarily indicative of results for the fiscal year.

Because of the COVID-19 pandemic discussed below, and because the Company’s business is seasonal in nature, the operating results for the three and nine month periods ended October 31, 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.

2 unchanged sentences

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.

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 processing of received inventory) and corporate offices to combat the rapid spread of COVID-19.

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 continuing extent of which will be primarily based on a variety of factors, including the timing and extent of any recovery in traffic and consumer spending at the Company’s stores, as well as any future required store closures because of COVID-19 resurgences.

The Company began reopening stores on May 11, 2020, with the majority of stores, as well as all distribution centers, re-opened by mid-June 2020, and substantially all stores re-opened by the end of the second quarter.

The Company began re-opening stores on May 11, 2020, with the majority of stores, as well as all distribution centers, re-opened by mid-June 2020, and substantially all stores re-opened by the end of the second quarter.

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, including additional temporary store closures.

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 continued to provide benefits to furloughed associates, including paying 100 % of their current medical benefit premiums.

As of August 1, 2020, the Company has recalled all furloughed associates at its re-opened stores, as well as its corporate and distribution facilities.

The Company temporarily furloughed most store and distribution center associates, as well as some corporate associates, but continued to provide benefits to its furloughed associates in accordance with its benefit plans.

In addition, we paid 100 % of their medical benefit premiums during the period they were furloughed.

During the second quarter, the Company recalled all furloughed associates at its re-opened stores, as well as its corporate and distribution facilities.

In order to maintain maximum financial flexibility during these uncertain times, the Company completed several debt transactions in the first quarter of Fiscal 2020.

In March 2020, the Company borrowed $ 400 million on its existing $ 600 million senior

secured asset-based revolving credit facility (the ABL Line of Credit) , $ 150 million of which was repaid during the second quarter .

In April 2020, the Company issued $ 805 million of 2.25 % Converti ble Senior Notes due 2025 (the Convertible Notes ), and BCFWC issued $ 300 million of 6.25 % Seni or Secured Notes due 2025 (the Secured Notes ).

In March 2020, the Company borrowed $ 400 million on its existing $ 600 million senior secured asset-based revolving credit facility (the ABL Line of Credit), $ 150 million of which was repaid during the second quarter.

In April 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 while stores were closed.

The Company has subsequently resumed its buying activities, while continuing its conservative approach toward operating expenses and capital expenditures.

Carefully managed operating expenses, working capital and capital expenditures, including ceasing substantially all buying activities while stores were closed.

The Company subsequently resumed its buying activities, while continuing its conservative approach toward operating expenses and capital expenditures.

Negotiated rent deferral agreements with landlords.

2 unchanged sentences

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 were temporarily put in place for all employees through a certain level.

This compensation has been reinstated now that substantially all of the Company’s stores have reopened.

the Company’s executive leadership team voluntarily agreed to decrease their salary by 50 %;

and smaller salary reductions were temporarily put in place for all employees through a certain level.

This compensation was reinstated once substantially all of the Company’s stores re-opened.

The annual incentive bonus payments related to Fiscal 2019 performance were delayed to the second quarter of Fiscal 2020, and merit pay increases for Fiscal 2020 were delayed to the third quarter of Fiscal 2020.

1 unchanged sentence

These reserves covered markdowns taken during the second quarter of Fiscal 2020.

These charges were 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.

These charges were included in “Cost of sales” on the Company’s Condensed Consolidated Statement of Income (Loss).

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the 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 evaluation of the CARES Act, the Company believes that it qualifies for certain employer refundable payroll credits, deferral of applicable payroll taxes, net operating loss (NOL) carrybacks and immediate expensing for eligible qualified improvement property.

The Company recorded a tax benefit of $ 24.8 million and $ 87.3 million in its effective income tax rate for the three and six month periods ended August 1, 2020, respectively, for the increased benefit from NOL carrybacks to earlier years when the tax rate was higher than the current year.

The Company estimates that it will obtain a tax refund of $ 221.2 million from the carryback of federal NOLs, which is included in the line item “Other assets” on the Company’s Condensed Consolidated Balance Sheet.

The Company recorded a tax expense of $ 7.2 million and a tax benefit of $ 80.1 million in its effective income tax rate for the three and nine month periods ended October 31, 2020, respectively, for the increased benefit from NOL carrybacks to earlier years when the tax rate was higher than the current year.

The Company estimates that it will obtain a tax refund of $ 202.1 million from the carryback of federal NOLs, which is included in the line item “Prepaid and other current assets” on the Company’s Condensed Consolidated Balance Sheet.

Refer to Note 8, “Income Taxes” for further discussion.

33 unchanged sentences

Additionally, this guidance may cause a change to our diluted share count in certain periods.

There were no other new accounting standards that had a material impact on the Company’s Condensed Consolidated Financial Statements and notes thereto during the three and six month periods ended August 1, 2020, and there were no other new accounting standards or pronouncements that were issued but not yet effective as of August 1, 2020 that the Company expects to have a material impact on its financial position or results of operations upon becoming effective.

There were no other new accounting standards that had a material impact on the Company’s Condensed Consolidated Financial Statements and notes thereto during the three and nine month periods ended October 31, 2020, and there were no other new accounting standards or pronouncements that were issued but not yet effective as of October 31, 2020 that the Company expects to have a material impact on its financial position or results of operations upon becoming effective.

Stockholders’ Equity

Activity for the three and six month periods ended August 1, 2020 and August 3, 2019 in the Company’s stockholders’ equity are summarized below:

Activity for the three and nine month periods ended October 31, 2020 and November 2, 2019 in the Company’s stockholders’ equity are summarized below:

(in thousands, except share data)

9 unchanged sentences

Equity component of convertible notes issuance, net

Unrealized losses on interest rate derivative contracts, net of related tax benefit of $ 3.6 million

Unrealized losses on interest rate derivative contracts, net of related taxes of $ 3.6 million

Amount reclassified into earnings, net of related taxes of $ 0.4 million

4 unchanged sentences

Stock based compensation

Unrealized losses on interest rate derivative contracts, net of related tax benefit of $ 0.7 million

Unrealized losses on interest rate derivative contracts, net of related taxes of $ 0.7 million

Amount reclassified into earnings, net of related taxes of $ 0.8 million

Balance at August 1, 2020

Stock options exercised

Shares used for tax withholding

Vesting of restricted shares, net of forfeitures of 508 restricted shares

Stock based compensation

Unrealized gains on interest rate derivative contracts, net of related taxes of $ 0.2 million

Amount reclassified into earnings, net of related taxes of $ 0.8 million

Balance at October 31, 2020

(in thousands, except share data)

19 unchanged sentences

Balance at August 3, 2019

Stock options exercised

Shares used for tax withholding

Shares purchased as part of publicly announced programs

Forfeiture of restricted shares

Stock based compensation

Unrealized losses on interest rate derivative contracts, net of related tax benefit of $ 0.4 million

Amount reclassified into earnings, net of related taxes of $ 0.2 million

Balance at November 2, 2019

Lease Commitments

4 unchanged sentences

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 as enforceable rights under the original contract.

As a result of the COVID-19 pandemic and the associated temporary store closures discussed above , the Company worked with landlords to modify paymen t terms for certain leas e s .

The FASB has pr ovided relief under ASC 842, “Leases,” related to the COVID-19 pandemic.

Under thi s relief, c ompanies 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 m ade as 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 of $ 45.6 million are included in the line item “Other current liabilities” on the Company’s Condensed Consolidated Balance Sheet.

Due dates for these payments vary by lease, with all payments due before the end of Fiscal 2021.

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

13 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Three Months Ended

Six Months Ended

August 1, 2020

August 3, 2019

Nine Months Ended

October 31, 2020

November 2, 2019

Finance lease cost:

6 unchanged sentences

Total net rent expense (e)

Included in the line item “Depreciation and amortization” in the Company’s Condensed Consolidated Statements of (Loss) Income.

Included in the line item “Interest expense” in the Company’s Condensed Consolidated Statements of (Loss) Income.

Included in the line item “Depreciation and amortization” in the Company’s Condensed Consolidated Statements of Income (Loss).

Included in the line item “Interest expense” in the Company’s Condensed Consolidated Statements of Income (Loss).

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.

Included in the line item “Other revenue” in the Company’s Condensed Consolidated Statements of (Loss) Income.

Included in the line item “Selling, general and administrative expenses” in the Company’s Condensed Consolidated Statements of Income (Loss).

Included in the line item “Other revenue” in the Company’s Condensed Consolidated Statements of Income (Loss).

Excludes an immaterial amount of short-term lease cost.

1 unchanged sentence

(in thousands)

Six Months Ended

August 1, 2020

August 3, 2019

Nine Months Ended

October 31, 2020

November 2, 2019

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

21 unchanged sentences

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 issuances and amendments” in the Company’s Condensed Consolidated Statement of (Loss) 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 August 1, 2020 and August 3, 2019, the Company’s interest rate related to the Term Loan Facility was 1.9 % and 4.3 %, respectively.

At October 31, 2020 and November 2, 2019, the Company’s interest rate related to the Term Loan Facility was 1.9 % and 3.9 %, respectively.

Convertible Notes

10 unchanged sentences

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.

6 unchanged sentences

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:

The Convertible Notes consist of the following components as of the dates indicated:

(in thousands)

7 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Three Months Ended

Six Months Ended

August 1, 2020

August 3, 2019

Nine Months Ended

October 31, 2020

November 2, 2019

Coupon interest

10 unchanged sentences

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 issuances and amendments” in the Company’s Condensed Consolidated Statement of (Loss) Income.

The Company incurred additional costs of $ 2.5 million, primarily related to legal fees, which are recorded in the line item, “Costs related to debt issuances and amendments” in the Company’s Condensed Consolidated Statement of Income (Loss).

ABL Line of Credit

1 unchanged sentence

The Company repaid $ 150 million of this amount during the second quarter of Fiscal 2020.

At August 1, 2020, the Company had $ 120.4 million available under the ABL Line of Credit.

The maximum borrowings under the ABL Line of Credit during the three and six month periods ended August 1, 2020 amounted to $ 400.0 million.

Average borrowings during the three and six month periods ended August 1, 2020 amounted to $ 372.0 million and $ 289.3 million, respectively, at an average interest rate of 2.1 % in both periods.

At August 3, 2019, the Company had $ 428.6 million available under the ABL Line of Credit.

The maximum borrowings under the ABL Line of Credit during the three and six month periods ended August 3, 2019 amounted to $ 245.0 million and $ 255.0 million, respectively.

Average borrowings during the three and six month periods ended August 3, 2019 amounted to $ 146.0 million and $ 146.7 million, respectively, at an average interest rate of 3.7 % in both periods.

At October 31, 2020, the Company had $ 292.4 million available under the ABL Line of Credit.

The maximum borrowings under the ABL Line of Credit during the three and nine month periods ended October 31, 2020 amounted to $ 250.0 million and $ 400.0 million, respectively.

Average borrowings during the three and nine month periods ended October 31, 2020 amounted to $ 250.0 million and $ 276.2 million, respectively, at an average interest rate of 1.6 % and 2.0 %, respectively.

At November 2, 2019, the Company had $ 540.8 million available under the ABL Line of Credit.

The maximum borrowings under the ABL Line of Credit during the three and nine month periods ended November 2, 2019 amounted to $ 120.0 million and $ 255.0 million, respectively.

Average borrowings during the three and nine month periods ended November 2, 2019 amounted to $ 32.6 million and $ 108.7 million, respectively, at an average interest rate of 3.5 % and 3.7 %, respectively.

Derivative Instruments and Hedging Activities

15 unchanged sentences

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.

As of August 1, 2020, the Company had the following outstanding interest rate derivative that was designated as a cash flow hedge of interest rate risk:

As of October 31, 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

10 unchanged sentences

Fair Values of Derivative Instruments

August 1, 2020

October 31, 2020

February 1, 2020

August 3, 2019

November 2, 2019

Derivatives Designated as Hedging Instruments

6 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Interest Rate Derivatives:

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

Unrealized losses, before taxes

Income tax benefit

Unrealized losses, net of taxes

October 31, 2020

November 2, 2019

October 31, 2020

November 2, 2019

Unrealized gains (losses), before taxes

Income tax expense (benefit)

Unrealized gains (losses), net of taxes

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.

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

Component of Earnings:

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

October 31, 2020

November 2, 2019

October 31, 2020

November 2, 2019

Interest expense

Income tax (benefit) expense

Income tax expense (benefit)

Net reclassification into earnings

7 unchanged sentences

Amount reclassified into earnings, net of related taxes of $ 2.0 million

Balance at August 1, 2020

Balance at October 31, 2020

Fair Value Measurements

11 unchanged sentences

Financial Assets

The fair values of the Company’s financial assets and the hierarchy of the level of inputs as of August 1, 2020, February 1, 2020 and August 3, 2019 are summarized below:

The fair values of the Company’s financial assets and the hierarchy of the level of inputs as of October 31, 2020, February 1, 2020 and November 2, 2019 are summarized below:

(in thousands)

4 unchanged sentences

The fair value of the Company’s long-lived assets is generally calculated using discounted cash flows.

During the three and six months ended August 1, 2020, the Company recorded impairment charges of $ 1.1 million and $ 3.0 million, respectively, primarily related to declines in revenues and operating results for five stores and ten stores, respectively.

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 ten stores were fully impaired and therefore had zero fair value as of August 1, 2020, and would be categorized as Level 3 in the fair value hierarchy described above.

Two of these stores also had partially impaired lease assets, with an aggregate fair value of $ 0.7 million as of August 1, 2020, and are categorized as Level 3 in the fair value hierarchy described above.

During the three and nine months ended October 31, 2020, the Company recorded impairment charges of $ 2.6 million and $ 5.6 million, respectively, primarily related to declines in revenues and operating results for 10 stores and 14 stores, respectively.

These costs were recorded in the line item “Impairment charges – long-lived assets” in the Company’s Condensed Consolidated Statements of Income (Loss).

All of the fixed assets for these stores were fully impaired and therefore had zero fair value as of October 31, 2020, and would be categorized as Level 3 in the fair value hierarchy described above.

One of these stores also had a partially impaired lease asset, with a fair value of $ 2.9 million as of October 31, 2020, and is categorized as Level 3 in the fair value hierarchy described above.

Financial Liabilities

1 unchanged sentence

(in thousands)

August 1, 2020

October 31, 2020

February 1, 2020

August 3, 2019

November 2, 2019

Term B-5 Loans

7 unchanged sentences

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 correct certain revisions made to qualified improvement property regulations enacted 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 $ 268.4 million during the six month period ended August 1, 2020, compared with income tax expense of $ 27.3 million during the six month period ended August 3, 2019.

The effective tax rate for the six month period ended August 1, 2020 was 41.4 %, compared with 14.4 % during the six month period ended August 3, 2019.

The effective tax rate for the six month period ended August 1, 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 13.5 %.

Income tax benefit was $ 253.3 million during the nine month period ended October 31, 2020, compared with income tax expense of $ 50.3 million during the nine month period ended November 2, 2019.

The effective tax rate for the nine month period ended October 31, 2020 was 40.5 %, compared with 16.3 % during the nine month period ended November 2, 2019.

The effective tax rate for the nine month period ended October 31, 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 12.8 %.

Additionally, there was a 4.1 % tax rate impact related to permanent benefits related to stock compensation.

7 unchanged sentences

The increase in deferred tax liability is primarily attributable to the tax treatment of certain debt transactions entered into during the first quarter of Fiscal 2020.

As of August 1, 2020, the Company had a deferred tax asset related to net operating losses of $ 20.7 million, inclusive of $ 20.4 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 August 1, 2020, the Company had a deferred tax asset related to tax credit carry-forwards of $ 11.1 million, inclusive of $ 1.4 million of federal tax credits, which will expire in 2040 , and $ 8.3 million of state tax credit carry-forwards, which will begin to expire in 2021 , and $ 1.4 million of deferred tax assets recorded for Puerto Rico alternative minimum tax credits that have an indefinite life .

As of August 1, 2020, February 1, 2020 and August 3, 2019, valuation allowances amounted to $ 11.5 million, $ 9.8 million and $ 9.2 million, respectively, related to state and Puerto Rico net operating losses and state tax credit carry-forwards.

As of October 31, 2020, the Company had a deferred tax asset related to net operating losses of $ 22.2 million, inclusive of $ 21.9 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 October 31, 2020, the Company had a deferred tax asset related to tax credit carry-forwards of $ 12.9 million, inclusive of $ 2.5 million of federal tax credits, which will expire in 2040 , and $ 9.1 million of state tax credit carry-forwards, which will begin to expire in 2021 , and $ 1.3 million of deferred tax assets recorded for Puerto Rico alternative minimum tax credits that have an indefinite life .

As of October 31, 2020, February 1, 2020 and November 2, 2019, valuation allowances amounted to $ 12.4 million, $ 9.8 million and $ 8.7 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.

2 unchanged sentences

The Company accounts for treasury stock under the cost method.

During the six month period ended August 1, 2020, the Company acquired 54,471 shares of common stock from employees for approximately $ 9.7 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.

During the nine month period ended October 31, 2020, the Company acquired 68,180 shares of common stock from employees for approximately $ 12.6 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.

Share Repurchase Program

3 unchanged sentences

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 August 1, 2020, the Company had $ 348.4 million remaining under its share repurchase authorization.

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:

As of October 31, 2020, the Company had $ 348.4 million remaining under its share repurchase authorization.

Net Income (Loss) Per Share

Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding.

Diluted net income (loss) per share is calculated by dividing net income (loss) 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 (loss) per share:

(in thousands, except per share data)

Three Months Ended

Six Months Ended

Basic net (loss) income per share

Net (loss) income

Nine Months Ended

Basic net income (loss) per share

Net income (loss)

Weighted average number of common shares – basic

Net (loss) income per common share – basic

Diluted net (loss) income per share

Net (loss) income

Shares for basic and diluted net (loss) income per share:

Net income (loss) per common share – basic

Diluted net income (loss) per share

Net income (loss)

Shares for basic and diluted net income (loss) per share:

Weighted average number of common shares – basic

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Weighted average number of common shares – diluted

Net (loss) income per common share – diluted

Approximately 2,005,000 and 2,015,000 shares were excluded from diluted net loss per share for the three and six month periods ended August 1, 2020, respectively, 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 600,000 and 500,000 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 and six month periods ended August 3, 2019, respectively, since their effect was anti-dilutive.

During the three and six months ended August 1, 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.

Net income (loss) per common share – diluted

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 585,000 and 2,010,000 shares were excluded from diluted net income (loss) per share for the three and nine month periods ended October 31, 2020, respectively, since their effect was anti-dilutive.

Approximately 350,000 and 450,000 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 and nine month periods ended November 2, 2019, respectively, since their effect was anti-dilutive.

During the three and nine months ended October 31, 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.

Stock-Based Compensation

As of August 1, 2020, there were 2,432,377 shares of common stock available for issuance under the Company’s 2013 Omnibus Incentive Plan.

As of October 31, 2020, there were 2,424,032 shares of common stock available for issuance under the Company’s 2013 Omnibus Incentive Plan.

Non-cash stock compensation expense is as follows:

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Three Months Ended

Six Months Ended

Nine Months Ended

Type of Non-Cash Stock Compensation

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Performance stock unit grants (a)

Included in the line item “Selling, general and administrative expenses” in the Company’s Condensed Consolidated Statements of (Loss) Income.

Included in the line item “Selling, general and administrative expenses” in the Company’s Condensed Consolidated Statements of Income (Loss).

The amounts presented in the table above exclude taxes.

For the three and six month periods ended August 1, 2020, the tax benefit related to the Company’s non-cash stock compensation was approximately $ 2.2 million and $ 6.0 million, respectively.

For the three and six month periods ended August 3, 2019, the tax benefit related to the Company’s non-cash stock compensation was approximately $ 2.9 million and $ 5.2 million, respectively.

For the three and nine month periods ended October 31, 2020, the tax benefit related to the Company’s non-cash stock compensation was approximately $ 2.3 million and $ 8.3 million, respectively.

For the three and nine month periods ended November 2, 2019, the tax benefit related to the Company’s non-cash stock compensation was approximately $ 1.7 million and $ 6.4 million, respectively.

Stock Options

Stock option transactions during the six month period ended August 1, 2020 are summarized as follows:

Stock option transactions during the nine month period ended October 31, 2020 are summarized as follows:

Options outstanding, February 1, 2020

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Options forfeited

Options outstanding, August 1, 2020

Options exercised during the six month period ended August 1, 2020 had a total intrinsic value of $ 77.5 million.

The following table summarizes information about the stock options vested and expected to vest during the contractual term of such options as of August 1, 2020:

Options outstanding, October 31, 2020

Options exercised during the nine month period ended October 31, 2020 had a total intrinsic value of $ 88.2 million.

The following table summarizes information about the stock options vested and expected to vest during the contractual term of such options as of October 31, 2020:

(in millions)

Vested and expected to vest

The fair value of each stock option granted during the six month period ended August 1, 2020 was estimated using the Black Scholes option pricing model using the following assumptions:

Six Months Ended

The fair value of each stock option granted during the nine month period ended October 31, 2020 was estimated using the Black Scholes option pricing model using the following assumptions:

Nine Months Ended

Risk-free interest rate

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Treasury zero-coupon bonds with maturities similar to those of the expected term of the awards being valued.

For grants issued during the six month period ended August 1, 2020 , the expected life of the options was calculated using the simplified method.

For grants issued during the nine month period ended October 31, 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.

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Grants made on and after May 1, 2019 are in the form of restricted stock units.

Restricted stock transactions during the six month period ended August 1, 2020 are summarized as follows:

Restricted stock transactions during the nine month period ended October 31, 2020 are summarized as follows:

Average Grant

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Awards forfeited

Non-vested awards outstanding, August 1, 2020

Restricted stock awards vested during the six month period ended August 1, 2020 had a total intrinsic value of $ 29.8 million.

Non-vested awards outstanding, October 31, 2020

Restricted stock awards vested during the nine month period ended October 31, 2020 had a total intrinsic value of $ 36.3 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 .

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Compensation costs recognized on the performance stock units are adjusted, as applicable, for performance above or below the target specified in the award.

Performance stock unit transactions during the six month period ended August 1, 2020 are summarized as follows:

Performance stock unit transactions during the nine month period ended October 31, 2020 are summarized as follows:

Average Grant

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Awards forfeited

Non-vested units outstanding, August 1, 2020

Non-vested units outstanding, October 31, 2020

Commitments and Contingencies

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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 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.

In June 2020, the Company agreed to

settle both matters for approximately $ 19.6 million (plus applicable employer-side payroll taxes).

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.

In June 2020, the Company agreed to settle both matters for approximately $ 19.6 million (plus applicable employer-side payroll taxes).

The parties are currently working to obtain final Court approval of the settlement.

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Letters of Credit

The Company had letters of credit arrangements with various banks in the aggregate amount of $ 53.9 million, $ 53.1 million and $ 74.5 million as of August 1, 2020, February 1, 2020 and August 3, 2019, respectively.

Among these arrangements, as of August 1, 2020, February 1, 2020 and August 3, 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 $ 6.7 million, $ 6.5 million and $ 23.6 million at August 1, 2020, February 1, 2020 and August 3, 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 $ 120.4 million, $ 501.8 million and $ 428.6 million as of August 1, 2020, February 1, 2020 and August 3, 2019, respectively.

The Company had letters of credit arrangements with various banks in the aggregate amount of $ 57.6 million, $ 53.1 million and $ 59.2 million as of October 31, 2020, February 1, 2020 and November 2, 2019, respectively.

Among these arrangements, as of October 31, 2020, February 1, 2020 and November 2, 2019, the Company had letters of credit outstanding in the amount of $ 47.2 million, $ 46.6 million and $ 50.8 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 $ 10.4 million, $ 6.5 million and $ 8.4 million at October 31, 2020, February 1, 2020 and November 2, 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 $ 292.4 million, $ 501.8 million and $ 540.8 million as of October 31, 2020, February 1, 2020 and November 2, 2019, respectively.

Purchase Commitments

The Company had $ 955.6 million of purchase commitments related to goods that were not received as of August 1, 2020.

The Company had $ 1,090.7 million of purchase commitments related to goods that were not received as of October 31, 2020.

Death Benefits

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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-Q

Item 1. Financial Statements