Burlington Stores, Inc. 10-Q

Item 1. Financial Statements BURLINGTON STORES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Unaudited) (All amounts in thousands, except per share data) Three Months Ended Six Months Ended July 31, August 1, July 31, August 1, 2021 2020 2021 2020 REVENUES: Net sales $ 2,212,812 $ 1,009,882 $ 4,403,479 $ 1,807,877 Other revenue 3,099 2,446 5,728 5,974 Total revenue 2,215,911 1,012,328 4,409,207 1,813,851 COSTS AND EXPENSES: Cost of sales 1,279,685 547,550 2,521,873 1,329,734 Selling, general and administrative expenses 702,291 491,598 1,367,119 976,686 Costs related to debt issuances and amendments 3,331 — 3,331 4,352 Depreciation and amortization 62,814 54,404 118,424 108,694 Impairment charges - long-lived assets 970 1,077 1,747 3,001 Other income - net ( 5,841 ) ( 824 ) ( 7,214 ) ( 2,946 ) Loss on extinguishment of debt 31,395 — 31,395 202 Interest expense 17,502 28,359 37,101 43,052 Total costs and expenses 2,092,147 1,122,164 4,073,776 2,462,775 Income (loss) before income tax expense (benefit) 123,764 ( 109,836 ) 335,431 ( 648,924 ) Income tax expense (benefit) 21,210 ( 63,055 ) 61,847 ( 268,415 ) Net income (loss) $ 102,554 $ ( 46,781 ) $ 273,584 $ ( 380,509 ) Net income (loss) per common share: Common stock - basic $ 1.54 $ ( 0.71 ) $ 4.11 $ ( 5.79 ) Common stock - diluted $ 1.50 $ ( 0.71 ) $ 4.01 $ ( 5.79 ) Weighted average number of common shares: Common stock - basic 66,636 65,947 66,516 65,760 Common stock - diluted 68,448 65,947 68,240 65,760 See Notes to Condensed Consolidated Financial Statements. 3 BURLINGTON STORES, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (All amounts in thousands) Three Months Ended Six Months Ended July 31, August 1, July 31, August 1, 2021 2020 2021 2020 Net income (loss) $ 102,554 $ ( 46,781 ) $ 273,584 $ ( 380,509 ) Other comprehensive income (loss), net of tax: Interest rate derivative contracts: Net unrealized losses arising during the period ( 5,083 ) ( 1,982 ) ( 4,258 ) ( 11,591 ) Net reclassification into earnings during the period 2,519 2,049 4,678 3,157 Other comprehensive income (loss), net of tax ( 2,564 ) 67 420 ( 8,434 ) Total comprehensive income (loss) $ 99,990 $ ( 46,714 ) $ 274,004 $ ( 388,943 ) 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) July 31, January 30, August 1, 2021 2021 2020 ASSETS Current assets: Cash and cash equivalents $ 1,344,318 $ 1,380,276 $ 1,077,146 Restricted cash and cash equivalents 6,582 6,582 6,582 Accounts receivable — net 78,761 62,161 50,255 Merchandise inventories 828,152 740,788 607,554 Assets held for disposal 2,500 6,655 — Prepaid and other current assets 403,602 314,154 150,253 Total current assets 2,663,915 2,510,616 1,891,790 Property and equipment—net 1,467,399 1,438,863 1,431,476 Operating lease assets 2,506,985 2,469,366 2,457,553 Tradenames 238,000 238,000 238,000 Goodwill 47,064 47,064 47,064 Deferred tax assets 4,197 4,422 4,678 Other assets 64,941 72,761 299,373 Total assets $ 6,992,501 $ 6,781,092 $ 6,369,934 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 979,973 $ 862,638 $ 492,349 Current operating lease liabilities 326,282 304,629 277,211 Other current liabilities 483,134 512,830 451,877 Current maturities of long term debt 14,095 3,899 3,760 Total current liabilities 1,803,484 1,683,996 1,225,197 Long term debt 1,774,312 1,927,770 2,161,166 Long term operating lease liabilities 2,429,315 2,400,782 2,390,344 Other liabilities 105,737 103,940 113,580 Deferred tax liabilities 203,958 199,850 217,387 Commitments and contingencies (Note 11) Stockholders’ equity: Preferred stock, $ 0.0001 par value: authorized: 50,000,000 shares; no shares issued and outstanding — — — Common stock, $ 0.0001 par value: Authorized: 500,000,000 shares; Issued: 81,041,969 shares, 80,661,453 shares and 80,414,151 shares, respectively; Outstanding: 66,724,476 shares, 66,386,331 shares and 66,163,573 shares, respectively 7 7 7 Additional paid-in-capital 1,742,874 1,809,831 1,770,091 Accumulated earnings (deficit) 279,037 ( 11,702 ) ( 175,712 ) Accumulated other comprehensive loss ( 22,595 ) ( 23,015 ) ( 27,394 ) Treasury stock, at cost ( 1,323,628 ) ( 1,310,367 ) ( 1,304,732 ) Total stockholders' equity 675,695 464,754 262,260 Total liabilities and stockholders' equity $ 6,992,501 $ 6,781,092 $ 6,369,934 See Notes to Condensed Consolidated Financial Statements. 5 BURLINGTON STORES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (All amounts in thousands) Six Months Ended July 31, August 1, 2021 2020 OPERATING ACTIVITIES Net income (loss) $ 273,584 $ ( 380,509 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities Depreciation and amortization 118,424 108,694 Impairment charges — long-lived assets 1,747 3,001 Amortization of deferred financing costs 3,100 1,786 Accretion of long term debt instruments 411 9,146 Deferred income taxes 42,434 ( 5,923 ) Loss on extinguishment of debt 31,395 202 Non-cash stock compensation expense 36,059 30,045 Non-cash lease expense ( 6,968 ) 1,226 Cash received from landlord allowances 19,995 12,825 Changes in assets and liabilities: Accounts receivable ( 15,631 ) 59,304 Merchandise inventories ( 87,364 ) 169,694 Prepaid and other current assets ( 89,449 ) ( 13,553 ) Accounts payable 116,346 ( 269,750 ) Other current liabilities ( 25,875 ) 10,131 Other long term assets and long term liabilities 1,087 ( 216,888 ) Other operating activities 7,575 7,539 Net cash provided by (used in) operating activities 426,870 ( 473,030 ) INVESTING ACTIVITIES Cash paid for property and equipment ( 147,187 ) ( 133,722 ) Lease acquisition costs ( 436 ) — Proceeds from sale of property and equipment and assets held for sale 5,988 — Other investing activities — ( 395 ) Net cash (used in) investing activities ( 141,635 ) ( 134,117 ) FINANCING ACTIVITIES Proceeds from long term debt—ABL Line of Credit — 400,000 Principal payments on long term debt—ABL Line of Credit — ( 150,000 ) Proceeds from long term debt—Term B-6 Loans 956,608 — Principal payments on long term debt—Term B-5 Loans ( 961,415 ) — Proceeds from long term debt—Convertible Note — 805,000 Proceeds from long term debt—Secured Note — 300,000 Principal payments on long term debt—Secured Note ( 323,866 ) — Purchase of treasury shares ( 13,261 ) ( 59,891 ) Proceeds from stock option exercises 28,900 20,984 Deferred financing costs ( 510 ) ( 28,815 ) Other financing activities ( 7,649 ) ( 6,059 ) Net cash (used in) provided by financing activities ( 321,193 ) 1,281,219 (Decrease) increase in cash, cash equivalents, restricted cash and restricted cash equivalents ( 35,958 ) 674,072 Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period 1,386,858 409,656 Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period $ 1,350,900 $ 1,083,728 Supplemental disclosure of cash flow information: Interest paid $ 32,719 $ 17,722 Income tax payments - net $ 100,269 $ 8,754 Non-cash investing activities: Accrued purchases of property and equipment $ 43,207 $ 60,693 See Notes to Condensed Consolidated Financial Statements. 6 BURLINGTON STORES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS July 31, 2021 (Unaudited) 1. Summary of Significant Accounting Policies Basis of Presentation As of July 31, 2021, Burlington Stores, Inc., a Delaware corporation (collectively with its subsidiaries, the Company), through its indirect subsidiary Burlington Coat Factory Warehouse Corporation (BCFWC), operated 792 retail stores. These unaudited Condensed Consolidated Financial Statements include the accounts of Burlington Stores, Inc. and its subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation. The Condensed Consolidated 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 January 30, 2021 (Fiscal 2020 10-K). The balance sheet at January 30, 2021 presented herein has been derived from the audited Consolidated Financial Statements contained in the Fiscal 2020 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 July 31, 2021 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 2020 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 29, 2022 (Fiscal 2021) and the prior fiscal year ended January 30, 2021 (Fiscal 2020) 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 processing of received inventory) and corporate offices to combat the rapid spread of COVID-19. These developments caused significant disruptions to the Company’s business and had a significant adverse impact on its financial condition, results of operations and cash flows. The Company began re-opening stores on May 11, 2020, with substantially all stores re-opened by the end of the second quarter of Fiscal 2020. 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 its furloughed associates in accordance with its benefit plans. In addition, the Company paid 100 % of their medical benefit premiums during the period they were furloughed. During the second quarter of Fiscal 2020, 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), of which $ 150 million was repaid during the second quarter of Fiscal 2020, and the remaining $ 250 million was repaid during the fourth quarter of Fiscal 2020. 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). The Secured Notes were redeemed in full during the second quarter of Fiscal 2021. Refer to Note 4, “Long Term Debt,” for further discussion regarding these debt transactions. 7 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 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. • Temporarily 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 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. Due to the aging of inventory related to the temporary store closures discussed above, as well as the impact of seasonality on the Company’s merchandise, the Company recognized inventory markdown reserves of $ 271.9 million during the three month period ended May 2, 2020. 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 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. For the year ended January 30, 2021, the Company will obtain a one-time tax refund of $ 245.5 million from the carryback of federal net operating losses (NOLs) as a result of the CARES Act, which is included in the line item “Prepaid and other current assets” on the Company’s Condensed Consolidated Balance Sheet. Recently Adopted Accounting Standards Convertible Debt On August 5, 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (ASU 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments. The new guidance removes from GAAP the separation models for convertible debt with a cash conversion feature. The Company elected to early adopt this ASU as of the beginning of Fiscal 2021, using the modified retrospective method of transition. Prior periods have not been restated. As a result of adopting the guidance, the Company is no longer separating the Convertible Notes into debt and equity components, and is instead accounting for it wholly as debt. As of the beginning of Fiscal 2021, this ASU resulted in a reduction in the line item “Additional paid-in capital” of $ 176.0 million, net of deferred financing costs, and an increase in the line item “Long term debt” of $ 153.0 million, which eliminated the debt discount and reallocated deferred financing costs that were previously allocated to the equity component. The changes noted above caused a decrease in the effective interest rate on the Convertible Notes from 8.2 % to 2.8 %, resulting in a cumulative-effect adjustment to retained earnings of $ 23.0 million related to Fiscal 2020 interest expense, as well as a $ 7.7 million and $ 15.3 million reduction in interest expense for the three and six month periods ended July 31, 2021, respectively. As of the beginning of Fiscal 2021, the tax effect of adopting this guidance resulted in a $ 44.1 million increase in the line item “Additional paid-in-capital,” a $ 38.3 million reduction in the line item “Deferred tax liabilities” and a $ 5.9 million reduction to retained earnings. The new guidance also requires use of the if-converted method when calculating the dilutive impact of the Convertible Notes on earnings per share. The Company used the treasury stock method prior to adoption of the ASU. The impact of this ASU on net income and weighted average diluted shares resulted in an increase to diluted net income per share of $ 0.07 and $ 0.12 during the three and six month periods ended July 31, 2021, respectively. 8 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 July 31, 2021, and there were no other new accounting standards or pronouncements that were issued but not yet effective as of July 31, 2021 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 and six month periods ended July 31, 2021 and August 1, 2020 in the Company’s stockholders’ equity are summarized below: (in thousands, except share data) Common Stock Additional Paid-in Accumulated Earnings Accumulated Other Comprehensive Treasury Stock Shares Amount Capital (Deficit) Loss Shares Amount Total Balance at January 30, 2021 80,661,453 $ 7 $ 1,809,831 $ ( 11,702 ) $ ( 23,015 ) ( 14,275,122 ) $ ( 1,310,367 ) $ 464,754 Net income — — — 171,030 — — — 171,030 Stock options exercised 181,683 — 16,089 — — — — 16,089 Shares used for tax withholding — — — — — ( 41,768 ) ( 13,083 ) ( 13,083 ) Vesting of restricted shares, net of forfeitures of 883 restricted shares 53,914 — — — — — — — Stock based compensation — — 12,879 — — — — 12,879 Unrealized losses on interest rate derivative contracts, net of related taxes of $ 0.3 million — — — — 825 — — 825 Amount reclassified into earnings, net of related taxes of $ 0.8 million — — — — 2,159 — — 2,159 Adoption of ASU 2020-06 (Note 1) — — ( 131,916 ) 17,155 — — — ( 114,761 ) Balance at May 1, 2021 80,897,050 7 1,706,883 176,483 ( 20,031 ) ( 14,316,890 ) ( 1,323,450 ) 539,892 Net income — — — 102,554 — — — 102,554 Stock options exercised 139,274 — 12,811 — — — — 12,811 Shares used for tax withholding — — — — — ( 603 ) ( 178 ) ( 178 ) Vesting of restricted shares, net of forfeitures of 1,101 restricted shares 5,645 — — — — — — — Stock based compensation — — 23,180 — — — — 23,180 Unrealized losses on interest rate derivative contracts, net of related taxes of $ 1.9 million — — — — ( 5,083 ) — — ( 5,083 ) Amount reclassified into earnings, net of related taxes of $ 0.9 million — — — — 2,519 — — 2,519 Balance at July 31, 2021 81,041,969 $ 7 $ 1,742,874 $ 279,037 $ ( 22,595 ) ( 14,317,493 ) $ ( 1,323,628 ) $ 675,695 9 (in thousands, except share data) Common Stock Additional Paid-in Accumulated Accumulated Other Comprehensive Treasury Stock Shares Amount Capital Deficit 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 of related taxes of $ 44.1 million — — 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 Net loss — — — ( 46,781 ) — — — ( 46,781 ) Stock options exercised 324,500 — 19,530 — — — — 19,530 Shares used for tax withholding — — — — — ( 13,108 ) ( 2,350 ) ( 2,350 ) Vesting of restricted shares, net of forfeitures of 2,499 restricted shares 5,480 — — — — — — — Stock based compensation — — 12,693 — — — — 12,693 Unrealized losses on interest rate derivative contracts, net of related taxes of $ 0.7 million — — — — ( 1,982 ) — — ( 1,982 ) Amount reclassified into earnings, net of related taxes of $ 0.8 million — — — — 2,049 — — 2,049 Balance at August 1, 2020 80,414,151 7 1,770,091 ( 175,712 ) ( 27,394 ) ( 14,250,578 ) ( 1,304,732 ) 262,260 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 temporary 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. 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 $ 11.6 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. 10 The following is a schedule of the Company’s future lease payments: (in thousands) Fiscal Year Operating Leases Finance Leases 2021 (remainder) $ 226,021 $ 3,693 2022 472,683 7,513 2023 449,112 7,589 2024 414,152 7,417 2025 380,927 5,287 2026 342,129 5,324 Thereafter 1,121,958 28,014 Total future minimum lease payments 3,406,982 64,837 Amount representing interest ( 651,385 ) ( 18,727 ) Total lease liabilities 2,755,597 46,110 Less: current portion of lease liabilities ( 326,282 ) ( 4,481 ) Total long term lease liabilities $ 2,429,315 $ 41,629 Weighted average discount rate 5.2 % 6.8 % Weighted average remaining lease term (years) 8.2 11.4 The above schedule excludes approximately $ 494.0 million for 96 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 Six Months Ended July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020 Finance lease cost: Amortization of finance lease asset (a) $ 1,132 $ 1,211 $ 2,274 $ 2,422 Interest on lease liabilities (b) 790 857 1,598 1,729 Operating lease cost (c) 115,771 109,592 226,930 218,565 Variable lease cost (c) 46,165 45,643 92,912 86,861 Total lease cost 163,858 157,303 323,714 309,577 Less all rental income (d) ( 1,354 ) ( 1,265 ) ( 2,629 ) ( 2,513 ) Total net rent expense (e) $ 162,504 $ 156,038 $ 321,085 $ 307,064 (a) Included in the line item “Depreciation and amortization” in the Company’s Condensed Consolidated Statements of Income (Loss). (b) Included in the line item “Interest expense” in the Company’s Condensed Consolidated Statements of Income (Loss). (c) Includes real estate taxes, common area maintenance, insurance and percentage rent. Included in the line item “Selling, general and administrative expenses” in the Company’s Condensed Consolidated Statements of Income (Loss). (d) Included in the line item “Other revenue” in the Company’s Condensed Consolidated Statements of Income (Loss). (e) Excludes an immaterial amount of short-term lease cost. Supplemental cash flow disclosures related to leases are as follows: (in thousands) Six Months Ended July 31, 2021 August 1, 2020 Cash paid for amounts included in the measurement of lease liabilities: Cash payments arising from operating lease liabilities (a) $ 242,905 $ 169,391 Cash payments for the principal portion of finance lease liabilities (b) $ 1,908 $ 1,743 Cash payments for the interest portion of finance lease liabilities (a) $ 1,598 $ 1,729 Supplemental non-cash information: Operating lease liabilities arising from obtaining right-of-use assets $ 203,396 $ 228,344 (a) Included within operating activities in the Company’s Condensed Consolidated Statements of Cash Flows. 11 (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) July 31, January 30, August 1, 2021 2021 2020 Senior secured term loan facility (Term B-6 Loans), LIBOR (with a floor of 0.00 %) plus 2.00 %, matures on June 24, 2028 $ 955,005 $ — $ — Senior secured term loan facility (Term B-5 Loans), LIBOR (with a floor of 0.00 %) plus 1.75 %, repaid in full on June 24, 2021 — 958,418 958,025 $ 805,000 convertible senior notes, 2.25 %, matures on April 15, 2025 805,000 648,311 633,076 $ 300,000 senior secured notes, 6.25 %, redeemed in full on June 11, 2021 — 300,000 300,000 $ 600,000 ABL senior secured revolving facility, LIBOR plus spread based on average outstanding balance, matures on June 29, 2023 — — 250,000 Finance lease obligations 46,110 47,664 48,848 Unamortized deferred financing costs ( 17,708 ) ( 22,724 ) ( 25,023 ) Total debt 1,788,407 1,931,669 2,164,926 Less: current maturities ( 14,095 ) ( 3,899 ) ( 3,760 ) Long term debt, net of current maturities $ 1,774,312 $ 1,927,770 $ 2,161,166 Term Loan Facility On February 26, 2020, BCFWC 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 issuances and amendments” in the Company’s Condensed Consolidated Statement of Income (Loss). 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 Income (Loss). On June 24, 2021, BCFWC entered into Amendment No. 9 (the Ninth Amendment) to the Term Loan Credit Agreement governing the Term Loan Facility. The Ninth Amendment, among other things, extended the maturity date from November 17, 2024 to June 24, 2028 , and changed the interest rate margins applicable to the Term Loan Facility from 0.75 % to 1.00 %, in the case of prime rate loans, and from 1.75 % to 2.00 %, in the case of LIBOR loans, with a 0.00 % LIBOR floor. This amendment also requires quarterly principal payments of $ 2.4 million. In connection with the execution of the Ninth Amendment, the Company incurred fees of $ 3.3 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 Income (Loss). Additionally, the Company recognized a loss on the extinguishment of debt of $ 1.2 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 Income (Loss). At July 31, 2021 and August 1, 2020, the interest rate related to the Term Loan Facility was 2.1 % and 1.9 %, 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. The Convertible Notes are general unsecured obligations of the Company. The Convertible Notes bear interest at a rate of 2.25 % per year, payable semi-annually in cash, in arrears, on April 15 and October 15 of each year, beginning on October 15, 2020 . The Convertible Notes will mature on April 15, 2025 , unless earlier converted, redeemed or repurchased. 12 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. During the first quarter of Fiscal 2021, the Company made an irrevocable settlement election for any conversions of the Convertible Notes. Upon conversion, the Company will pay cash for the principal amount. For any excess above principal, the Company will deliver shares of its common stock. The Company 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 initially 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 was 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. As a result of adopting ASU 2020-06, the Company is no longer separating the Convertible Notes into debt and equity components, and is instead accounting for it wholly as debt. In connection with the Convertible Notes issuance, the Company incurred deferred financing costs of $ 21.0 million, primarily related to fees paid to the bookrunners of the offering, as well as legal, accounting and rating agency fees. These costs were initially allocated on a pro rata basis, with $ 16.4 million allocated to the debt component and $ 4.6 million allocated to the equity component. As a result of adopting ASU 2020-06, all unamortized deferred financing costs related to the Convertible Notes are now allocated to debt. Prior to adoption of ASU 2020-06, the debt discount and the debt portion of the deferred costs were being amortized to interest expense over the term of the Convertible Notes at an effective interest rate of 8.2 %. The effective interest rate after adoption of ASU 2020-06 is 2.8 %. The Convertible Notes consist of the following components as of the dates indicated: (in thousands) July 31, January 30, August 1, 2021 2021 2020 Liability component: Principal $ 805,000 $ 805,000 $ 805,000 Unamortized debt discount — ( 156,689 ) ( 171,924 ) Unamortized deferred debt costs ( 15,846 ) ( 14,191 ) ( 15,571 ) Net carrying amount $ 789,154 $ 634,120 $ 617,505 Equity component, net $ — $ 131,916 $ 131,916 13 Interest expense related to the Convertible Notes consists of the following as of the periods indicated: (in thousands) Three Months Ended Six Months Ended July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020 Coupon interest $ 4,510 $ 4,513 $ 9,021 $ 5,356 Amortization of debt discount — 7,387 — 8,753 Amortization of deferred debt costs 1,007 672 2,007 793 Convertible Notes interest expense $ 5,517 $ 12,572 $ 11,028 $ 14,902 Secured Notes On April 16, 2020, BCFWC issued $ 300 million of Secured Notes. The Secured Notes were senior, secured obligations of BCFWC, and interest was payable semiannually in cash, in arrears, at a rate of 6.25 % per annum on April 15 and October 15 of each year, beginning on October 15, 2020 . The Secured Notes were 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. In connection with the Secured Notes issuance, the Company incurred deferred financing costs of $ 7.9 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 $ 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). On June 11, 2021, BCFWC redeemed the full $ 300.0 million aggregate principal amount of the Secured Notes. The redemption price of the Secured Notes was $ 323.7 million, plus accrued and unpaid interest to, but not including, the date of redemption. This redemption resulted in a pre-tax debt extinguishment charge of $ 30.2 million in the three month period ended July 31, 2021. 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. The Company repaid $ 150 million of this amount during the second quarter of Fiscal 2020, and the remaining $ 250.0 million during the fourth quarter of Fiscal 2020. At July 31, 2021, the Company had $ 533.6 million available under the ABL Line of Credit. There were no borrowings under the ABL Line of Credit during the three and six month periods ended July 31, 2021. 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. 5. Derivative Instruments and Hedging Activities The Company accounts for derivatives and hedging activities in accordance with ASC 815, “Derivatives and Hedging” (ASC 815). As required by ASC 815, the Company records all derivatives on the balance sheet at fair value and adjusts to market on a quarterly basis. In addition, to comply with the provisions of ASC 820, “Fair Value Measurements” (ASC 820), credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, are incorporated in the fair values to account for potential nonperformance risk. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered any applicable credit enhancements such as collateral postings, thresholds, mutual puts, and guarantees. In accordance with ASC 820, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. There is no impact of netting, because the Company has only one derivative. The Company classifies its derivative valuations in Level 2 of the fair value hierarchy. On December 17, 2018, the Company entered into an interest rate swap, which hedged $ 450 million of the variable rate exposure under the Term Loan Facility at a rate of 2.72 %. On June 24, 2021, the Company terminated this previous interest rate swap, and entered into a new interest rate swap, which hedges $ 450 million of the variable rate exposure on the Term Loan Facility at a blended rate of 2.19 %, and is designated as a cash flow hedge. 14 The amount of loss deferred for the previous interest rate swap was $ 26.9 million. The Company is amortizing this amount from accumulated other comprehensive loss into interest expense over the original life of the previous interest rate swap, which had an original maturity date of December 29, 2023 . The new interest rate swap had a liability fair va lue at inception of $ 26.9 million. The Company will accrete this amount into accumulated other comprehensive loss as a benefit to interest expense over the life of the new interest rate swap, which has a maturity date of June 24, 2028 . Cash Flow Hedges of Interest Rate Risk The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. As of July 31, 2021, 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 Swap Rate Maturity Date Interest rate swap contract One $ 450.0 million 2.19 % June 24, 2028 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 July 31, 2021 January 30, 2021 August 1, 2020 Derivatives Designated as Hedging Instruments Balance Sheet Location Fair Value Balance Sheet Location Fair Value Balance Sheet Location Fair Value Interest rate swap contracts Other liabilities $ 31,764 Other liabilities $ 31,665 Other liabilities $ 37,798 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 Six Months Ended Interest Rate Derivatives: July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020 Unrealized losses, before taxes $ ( 6,972 ) $ ( 2,730 ) $ ( 5,840 ) $ ( 15,894 ) Income tax benefit 1,889 748 1,582 4,303 Unrealized losses, net of taxes $ ( 5,083 ) $ ( 1,982 ) $ ( 4,258 ) $ ( 11,591 ) 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 Six Months Ended Component of Earnings: July 31, 2021 August 1, 2020 July 31, 2021 August 1, 2020 Interest expense $ 3,459 $ 2,820 $ 6,423 $ 4,352 Income tax benefit ( 940 ) ( 771 ) ( 1,745 ) ( 1,195 ) Net reclassification into earnings $ 2,519 $ 2,049 $ 4,678 $ 3,157 The Company estimates that approximately $ 6.7 million will be reclassified from accumulated other comprehensive loss into interest expense during the next twelve months. 6. 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 15 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 July 31, 2021, January 30, 2021 and August 1, 2020 are summarized below: (in thousands) Fair Value Measurements at July 31, January 30, August 1, 2021 2021 2020 Level 1 Cash equivalents (including restricted cash) $ 701,577 $ 1,001,475 $ 1,001,253 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 ASC 820. The fair value of the Company’s long-lived assets is generally calculated using discounted cash flows. During the three and six months ended July 31, 2021, the Company recorded impairment charges of $ 1.0 million and $ 1.7 million, respectively, primarily related to the expected sale of one store, as well as declines in revenues and operating results for one store. These costs were recorded in the line item “Impairment charges – long-lived assets” in the Company’s Condensed Consolidated Statements of Income (Loss). The assets associated with the sale had a remaining fair value as of July 31, 2021 of $ 2.5 million, and would be categorized as Level 2 in the fair value hierarchy described above. Financial Liabilities The fair values of the Company’s financial liabilities are summarized below: (in thousands) July 31, 2021 January 30, 2021 August 1, 2020 Principal Amount Fair Value Principal Amount Fair Value Principal Amount Fair Value Term B-6 Loans $ 961,415 $ 954,204 $ — $ — $ — $ — Term B-5 Loans — — 961,415 955,406 961,415 914,546 Convertible Notes 805,000 1,319,733 805,000 1,080,713 805,000 896,070 Secured Notes — — 300,000 320,625 300,000 319,875 ABL Line of Credit (a) — — — — 250,000 250,000 Total debt (b) $ 1,766,415 $ 2,273,937 $ 2,066,415 $ 2,356,744 $ 2,316,415 $ 2,380,491 (a) To the extent the Company has any outstanding borrowings under the ABL Line of Credit, the fair value would approximate its reported value, because the interest rate is variable and reflects current market rates, due to short term nature. (b) 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. 7. Income Taxes Income tax expense was $ 21.2 million during the second quarter of Fiscal 2021 compared with income tax benefit of $ 63.1 million during the second quarter of Fiscal 2020. The effective tax rate for the second quarter of Fiscal 2021 was 17.1 % compared with 57.4 % during the second quarter of Fiscal 2020. Income tax expense was $ 61.8 million during the six month period ended July 31, 2021, compared with income tax benefit of $ 268.4 million during the six month period ended August 1, 2020. The effective tax rate for the six month period ended July 31, 2021 was 18.4 %, compared with 41.4 % during the six month period ended August 1, 2020. The decrease in the effective tax rate was primarily due to the Company’s pretax loss in the prior year 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. Net deferred taxes are as follows: (in thousands) July 31, January 30, August 1, 2021 2021 2020 Deferred tax asset $ 4,197 $ 4,422 $ 4,678 Deferred tax liability 203,958 199,850 217,387 Net deferred tax liability $ 199,761 $ 195,428 $ 212,709 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. As of July 31, 2021, the Company had a deferred tax asset related to net operating losses of $ 31.3 million, inclusive of $ 31.0 million related to state net operating losses that expire at various dates between 2022 and 2040 , as well as $ 0.3 million related to Puerto Rico net operating losses that will expire in 2025 . As of July 31, 2021, the Company had a deferred tax asset related to tax credit carry-forwards of $ 6.9 million, inclusive of $ 5.9 million of state tax credit carry-forwards, which will begin to expire in 2023 , and $ 1.0 million of deferred tax assets recorded for Puerto Rico alternative minimum tax credits that have an indefinite life . As of July 31, 2021, January 30, 2021 and August 1, 2020, valuation allowances amounted to $ 11.3 million, $ 13.0 million and $ 11.5 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. 8. Capital Stock Treasury Stock The Company accounts for treasury stock under the cost method. During the six month period ended July 31, 2021, the Company acquired 42,371 shares of common stock from employees for approximately $ 13.3 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 s On August 14, 2019, the Company’s Board of Directors authorized the repurchase of up to $ 400 million of common stock, which was authorized to be executed through August 2021 . As part of the Company’s cash management efforts during the COVID-19 pandemic, the Company temporarily suspended its share repurchase programs in March 2020. As of July 31, 2021, the Company had $ 348.4 million remaining under this share repurchase authorization, which expired in August 2021 . On August 18, 2021, 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 2023 . The Company’s repurchase program is funded using the Company’s available cash and borrowings under the ABL Line of Credit. 9. 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 for the Company’s stock option, restricted stock and restricted stock unit awards, and the if-converted method for the Convertible Notes. 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 July 31, August 1, July 31, August 1, 2021 2020 2021 2020 Basic net income (loss) per share Net income (loss) $ 102,554 $ ( 46,781 ) $ 273,584 $ ( 380,509 ) Weighted average number of common shares – basic 66,636 65,947 66,516 65,760 Net income (loss) per common share – basic $ 1.54 $ ( 0.71 ) $ 4.11 $ ( 5.79 ) Diluted net income (loss) per share Net income (loss) $ 102,554 $ ( 46,781 ) $ 273,584 $ ( 380,509 ) Shares for basic and diluted net income (loss) per share: Weighted average number of common shares – basic 66,636 65,947 66,516 65,760 Assumed exercise of stock options and vesting of restricted stock 660 — 711 — Assumed conversion of convertible debt 1,152 — 1,013 — Weighted average number of common shares – diluted 68,448 65,947 68,240 65,760 Net income (loss) per common share – diluted $ 1.50 $ ( 0.71 ) $ 4.01 $ ( 5.79 ) Approximately 185,000 and 95,000 shares of the Company’s stock-based compensation grants were excluded from diluted net income per share for the three and six month periods ended July 31, 2021, respectively, since their effect was anti-dilutive. 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 2,005,000 and 2,015,000 shares related to the Company’s stock option, restricted stock and restricted stock unit awards were excluded from diluted net loss per share for the three and six month periods ended August 1, 2020, respectively, since their effect was anti-dilutive. 10. Stock-Based Compensation As of July 31, 2021, there were 1,994,299 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 Six Months Ended July 31, August 1, July 31, August 1, Type of Non-Cash Stock Compensation 2021 2020 2021 2020 Restricted stock and restricted stock unit grants (a) $ 7,684 $ 5,739 $ 13,940 $ 12,638 Stock option grants (a) 4,682 4,696 9,076 11,028 Performance stock unit grants (a) 10,814 2,258 13,043 6,379 Total (b) $ 23,180 $ 12,693 $ 36,059 $ 30,045 (a) Included in the line item “Selling, general and administrative expenses” in the Company’s Condensed Consolidated Statements of Income (Loss). (b) The amounts presented in the table above exclude taxes. For the three and six month periods ended July 31, 2021, the tax benefit related to the Company’s non-cash stock compensation was approximately $ 3.7 million and $ 6.1 million, respectively. 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. Stock Options Stock option transactions during the six month period ended July 31, 2021 are summarized as follows: Number of Shares Weighted Average Exercise Price Per Share Options outstanding, January 30, 2021 1,346,775 $ 133.86 Options granted 165,775 324.91 Options exercised (a) ( 320,957 ) 90.05 Options forfeited ( 32,324 ) 190.33 Options outstanding, July 31, 2021 1,159,269 $ 171.73 (a) Options exercised during the six month period ended July 31, 2021 had a total intrinsic value of $ 70.1 million. The following table summarizes information about the stock options vested and expected to vest during the contractual term of such options as of July 31, 2021: Options Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Aggregate Intrinsic Value (in millions) Options vested and expected to vest 1,159,269 6.7 $ 171.73 $ 189.0 Options exercisable 529,381 4.9 $ 128.54 $ 109.2 The fair value of each stock option granted during the six month period ended July 31, 2021 was estimated using the Black Scholes option pricing model using the following assumptions: Six Months Ended July 31, 2021 Risk-free interest rate 0.45% - 1.13% Expected volatility 34% - 35% Expected life (years) 6.25 Contractual life (years) 10.0 Expected dividend yield 0.0 % Weighted average grant date fair value of options issued $ 113.59 19 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 issued during the six month period ended July 31, 2021, 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 six month period ended July 31, 2021 are summarized as follows: Number of Shares Weighted Average Grant Date Fair Value Per Award Non-vested awards outstanding, January 30, 2021 396,555 $ 168.87 Awards granted 120,945 324.83 Awards vested (a) ( 127,445 ) 145.26 Awards forfeited ( 14,442 ) 199.55 Non-vested awards outstanding, July 31, 2021 375,613 225.92 (a) Restricted stock awards vested during the six month period ended July 31, 2021 had a total intrinsic value of $ 40.2 million. The fair value of each share of restricted stock granted during Fiscal 2021 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 stock units is based on continued service and the achievement of 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. 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 July 31, 2021 are summarized as follows: Number of Shares Weighted Average Grant Date Fair Value Per Award Non-vested units outstanding, January 30, 2021 148,668 $ 176.70 Units granted 50,044 324.28 Awards forfeited ( 16,011 ) 215.27 Non-vested units outstanding, July 31, 2021 182,701 213.74 11. 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 violations of state consumer and/or privacy protection and other statutes. In the normal course of business, 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, 20 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 letters of credit arrangements with various banks in the aggregate amount of $ 65.3 million, $ 54.9 million and $ 53.9 million as of July 31, 2021, January 30, 2021 and August 1, 2020, respectively. Among these arrangements, as of July 31, 2021, January 30, 2021 and August 1, 2020, the Company had letters of credit outstanding in the amount of $ 46.7 million, $ 46.8 million and $ 47.2 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 $ 18.6 million, $ 8.2 million and $ 6.7 million at July 31, 2021, January 30, 2021 and August 1, 2020, 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 $ 533.6 million, $ 476.8 million and $ 120.4 million as of July 31, 2021, January 30, 2021 and August 1, 2020, respectively. Purchase Commitments The Company had $ 1,959.7 million of purchase commitments related to goods that were not received as of July 31, 2021. 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. 12. Related Parties The brother-in-law of one of the Company’s former 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 former 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. The Executive Vice President retired from the Company during the second quarter of Fiscal 2021. 21 BURLINGTON STORES, INC.