UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): September 9, 2014
Burlington Stores, Inc.
(Exact Name of Registrant As Specified In Charter)
| Delaware | 001-36107 | 80-0895227 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
1830 Route 130 North
Burlington, New Jersey 08016
(Address of Principal Executive Offices, including Zip Code)
(609) 387-7800
(Registrant’s telephone number, including area code)
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
On September 9, 2014, Burlington Stores, Inc. issued a press release announcing its operating results for the fiscal quarter ended August 2, 2014. A copy of the press release is furnished as Exhibit 99.1 to this Current Report.
The information contained in this report, and the exhibit attached hereto, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of, or otherwise regarded as filed under, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or in the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit No. |
Description | |
| 99.1 | Press Release dated September 9, 2014. | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| BURLINGTON STORES, INC. | ||||||
| /s/ Robert L. LaPenta, Jr. | ||||||
| Robert L. LaPenta, Jr. | ||||||
| Vice President and Treasurer | ||||||
Date: September 9, 2014
EXHIBIT INDEX
| Exhibit No. |
Description | |
| 99.1 | Press Release dated September 9, 2014. | |
Exhibit 99.1
FINAL FOR IMMEDIATE
RELEASE
Burlington Stores, Inc. Announces
Second Quarter and First Half Fiscal 2014 Results
| • | For the Fiscal 2014 Second Quarter: |
| • | Comparable store sales increased 4.7% and Net sales rose 8.3% |
| • | Adjusted EBITDA increased 24%, or $11.2 million |
| • | Comparable stores - inventory decreased 18%, and turnover improved 22% |
| • | Adjusted loss per share was $(0.01) vs. a loss of $(0.19) last year |
| • | First half Fiscal 2014 adjusted diluted EPS of $0.23 increased significantly from an adjusted loss per share of $(0.10) in the first half of Fiscal 2013 |
| • | Company Increases Fiscal Year 2014 Outlook |
BURLINGTON, New Jersey; September 9, 2014—Burlington Stores, Inc. (NYSE: BURL), a nationally recognized off-price retailer of high-quality, branded apparel at everyday low prices, today announced its results for the second quarter and first six months ended August 2, 2014.
Tom Kingsbury, President and Chief Executive Officer stated, “We are extremely pleased with our second quarter performance highlighted by a 4.7% increase in comparable store sales on top of last year’s very strong 7.8% increase. Our 70 basis point increase in Adjusted EBITDA rate was driven by both operating expense leveraging and gross margin expansion versus last year. We continue to believe that these results are indicative of the continued improvement in the execution of our off-price model. We believe we are well positioned for the fall season based on the level and currency of our inventory and remain focused on delivering great value, brands,store experience and fresh product to our customers every day. I would like to thank our store and corporate teams for contributing to these results.”
Note regarding Non-GAAP financial measures
The following discussion includes references to Adjusted EBITDA, Adjusted Net Income (Loss), and Adjusted EPS. The Company believes these measures are useful in evaluating the operating performance of the business and for comparing its results to that of other retailers. These non-GAAP financial measures are defined and reconciled to the most comparable GAAP measure later in this document.
Second Quarter Fiscal 2014 Operating Results (for the 13 week period ended August 2, 2014 compared with the 13 week period ended August 3, 2013):
| • | Comparable store sales increased 4.7%, which follows a comparable store sales increase of 7.8% in the 2013 second quarter driven by improved execution of the Company’s off-price business model. |
| • | Net sales increased 8.3%, or $79.9 million, to $1,043.6 million. This increase includes the 4.7% increase in comparable store sales, as well as an increase of $36.3 million from new and non-comparable stores. |
| • | Gross margin expanded by 50 basis points to 38.2% from 37.7% in the second quarter of Fiscal 2013. This more than offset an approximate 40 basis point increase in product sourcing costs that are included in selling, general and administrative expenses (SG&A). |
| • | SG&A, less product sourcing costs and advisory fees, as a percentage of net sales was 29.0% vs. 29.7% in the second quarter of Fiscal 2013 driven by improved leverage in store payroll, store expenses and other SG&A. |
| • | Adjusted EBITDA increased 23.8%, or $11.2 million, to $58.1 million. Sales growth, SG&A leverage and gross margin expansion led to a 70 basis point expansion in Adjusted EBITDA as a percentage of net sales, as compared to the second quarter of Fiscal 2013. |
| • | Depreciation and amortization expense, exclusive of net favorable lease amortization, decreased $0.4 million to $34.0 million. |
| • | Interest Expense decreased $7.8 million to $25.5 million from last year, driven by interest savings related to principal payments made over the last twelve months on the Company’s Holdco Notes and Term Loan. |
| • | Adjusted tax benefit was $(0.6) million compared to $(7.2) million last year. The adjusted effective tax rate was 39.9% vs. 34.5% last year. The increase in the tax rate is the result of certain tax credits not legislatively approved and available in the current year and other one-time discrete items recorded in the prior year. |
| • | Adjusted Net Loss was $(0.9) million vs. $(13.6) million last year, or $(0.01) per share vs. $(0.19) last year. Shares outstanding were 74.0 million vs. 72.9 million pro forma shares last year. |
2
First Half Fiscal 2014 Operating Results (for the 26 week period ended August 2, 2014 compared with the 26 week period ended August 3, 2013):
| • | Comparable store sales increased 3.6% following a 5.5% increase in the first half of Fiscal 2013. This increase was driven by the improved execution of the Company’s off-price model. |
| • | Net sales increased 7.1%, or $143.1 million, to $2,171.9 million. This increase includes the 3.6% increase in comparable store sales, as well as an increase of $76.6 million from new and non-comparable stores. |
| • | Gross margin expanded by 60 basis points to 38.1% from 37.5% last year. This more than offset an approximate 30 basis point increase in product sourcing costs that are included in SG&A. |
| • | SG&A, less product sourcing costs and advisory fees, as a percentage of net sales was 27.9% vs. 28.3% last year. The 40 basis point improvement was driven by increased leverage in store payroll, other store expenses, and other SG&A. |
| • | Adjusted EBITDA increased 18.9%, or $23.9 million, to $150.4 million. The 70 basis point expansion in Adjusted EBITDA as a percent of net sales was driven by sales growth coupled with expense leverage and gross margin expansion. |
| • | Depreciation and amortization expense, exclusive of net favorable lease amortization, decreased $0.9 million to $68.7 million. |
| • | Interest Expense decreased $15.5 million to $52.1 million from last year, driven by interest savings related to principal payments over the last twelve months on the Company’s Holdco Notes and Term Loan. In addition, the Company realized savings as a result of the 2013 Term Loan refinancing. |
| • | Adjusted tax expense was $12.0 million compared to a tax benefit of $(3.1) million last year. The adjusted effective tax rate was 40.3% vs. 29.6% last year. The increase in the tax rate is the result of certain tax credits not legislatively approved and available in the current year and other one-time discrete items recorded in the prior year. |
| • | Adjusted Net Income was $17.7 million versus an Adjusted Net Loss of $(7.4) million last year, or $0.23 per diluted share vs. $(0.10) last year. Diluted shares outstanding were 75.6 million vs. pro forma basic shares outstanding of 72.6 million last year. |
Inventory:
| • | Merchandise Inventories were $711.5 million vs. $748.3 million at August 3, 2013. The decrease was primarily driven by a comparable store inventory decrease of 18% as a part of the ongoing initiative to reduce inventory levels, increase inventory turnover and ultimately drive incremental sales through continually improved product offerings. This decrease was partially offset by a $41 million increase in pack and hold purchases and inventory related to the opening of 20 net new stores since August 3, 2012. |
3
Fiscal Year Q3 and Full Year 2014 Outlook
The Company is introducing its third quarter guidance and raising its full year fiscal year 2014 outlook based on its better than expected sales and net income performance during the first half of the year and its expectations for the balance of the year, including a reduction of interest expense associated with the debt refinancing completed on August 13, 2014.
For the third quarter of Fiscal 2014 (the 13 weeks ending November 1, 2014), the Company expects:
| • | Net sales to increase in the range of 6.4% to 7.4%; |
| • | Comparable store sales to increase in the range of 3.0% to 4.0%; |
| • | Interest expense to approximate $17 million reflecting the debt refinancing completed on August 13, 2014; |
| • | Adjusted Net Income per diluted share in the range of $0.09 to $0.12 on 75.8 million diluted shares outstanding. This compares to an adjusted loss per pro forma share of $(0.05) in the third quarter of Fiscal 2013; and |
| • | To open 17 new stores and close one existing store resulting in a total store count of 539 at the end of the third quarter. |
For the full Fiscal Year 2014, (the 52-weeks ending January 31, 2015), the Company currently expects:
| • | Total sales to increase in the range of 6.5% to 7.2% versus its previous expectation of an increase in the range of 5.8% to 6.8% and comparable store sales for the full year to be approximately 3%, at the high end of its previous guidance. These estimates include a comparable store sales increase of 2% to 3% in the fourth quarter, consistent with the Company’s previous guidance; |
| • | Adjusted EBITDA margin expansion in the range of 20 to 30 basis points, as compared to previous guidance of 10 to 20 basis points; |
| • | Interest expense of approximately $85 million; |
| • | A tax rate of approximately 40%; |
| • | Fully Diluted Adjusted Net Income in the range of $1.52 to $1.58 per share, utilizing a fully diluted share count of 75.7 million shares. This compares to the Company’s previous expectation for fully diluted adjusted net income in the range of $1.25 to $1.35; and |
| • | To have opened 24 new stores and closed two existing stores resulting in a total store count of 543 at the end of the year. |
4
Second Quarter 2014 Conference Call
The Company will hold a conference call on Tuesday, September 9, 2014 at 8:30 a.m. Eastern Time to discuss the Company’s second quarter Fiscal 2014 results. The U.S. toll free dial-in for the conference call is 1-877-407-0789 and the international dial-in number is 1-201-689-8562. The conference ID is 13589432.
A live webcast of the conference call will also be available on the investor relations page of the Company’s website at www.burlingtoninvestors.com. For those unable to participate in the conference call, a replay will be available beginning at 11:30 a.m. ET, September 9, 2014 until 11:59 p.m. ET on September 16, 2014. The U.S. toll-free replay dial-in number is 1-877-870-5176 and the international replay dial-in number is 1-858-384-5517. The replay pin number is 13589432. Additionally, a replay of the call will be available on the investor relations page of the company’s website at www.burlingtoninvestors.com.
About Burlington Stores, Inc.
The Company, through its wholly-owned subsidiaries, operates a national chain of off-price retail stores offering ladies’, men’s and children’s apparel and accessories, home goods, baby products and coats, principally under the name Burlington Stores.
For more information about Burlington Stores, Inc., visit the Company’s website at www.burlingtonstores.com.
Investor Relations Contacts:
Robert L. LaPenta, Jr.
855-973-8445
Info@BurlingtonInvestors.com
Allison Malkin/Alison MacQuarrie
ICR, Inc.
203-682-8225
Safe Harbor for Forward-Looking and Cautionary Statements
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in this release are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. We do not undertake to publicly update or revise our forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied in such statements will not be realized. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements. All forward-
5
looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those we expected, including competition in the retail industry, seasonality of our business, adverse weather conditions, changes in consumer preferences and consumer spending patterns, import risks, inflation, general economic conditions, our ability to implement our strategy, our substantial level of indebtedness and related debt-service obligations, restrictions imposed by covenants in our debt agreements, availability of adequate financing, our dependence on vendors for our merchandise, events affecting the delivery of merchandise to our stores, existence of adverse litigation and risks, availability of desirable locations on suitable terms and other factors that may be described from time to time in our filings with the Securities and Exchange Commission (SEC). For each of these factors, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, as amended.
BURLINGTON STORES, INC.
CONSOLIDATED BALANCE SHEET
(unaudited)
(All amounts in thousands)
| August 2, 2014 |
February 1, 2014 |
August 3, 2013 |
||||||||||
| ASSETS |
||||||||||||
| Current Assets: |
||||||||||||
| Cash and Cash Equivalents |
$ | 29,291 | $ | 132,984 | $ | 33,407 | ||||||
| Restricted Cash and Cash Equivalents |
32,100 | 32,100 | 34,800 | |||||||||
| Accounts Receivable - Net of Allowance for Doubtful Accounts |
43,678 | 35,678 | 41,640 | |||||||||
| Merchandise Inventories |
711,510 | 720,052 | 748,308 | |||||||||
| Deferred Tax Assets |
14,172 | 13,475 | 12,411 | |||||||||
| Prepaid and Other Current Assets |
76,131 | 77,708 | 74,360 | |||||||||
| Prepaid Income Taxes |
31,691 | 4,523 | 14,668 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Current Assets |
938,573 | 1,016,520 | 959,594 | |||||||||
| Property and Equipment - Net of Accumulated Depreciation and Amortization |
932,566 | 902,657 | 882,190 | |||||||||
| Tradenames |
238,000 | 238,000 | 238,000 | |||||||||
| Favorable Leases - Net of Accumulated Amortization |
279,349 | 292,553 | 306,315 | |||||||||
| Goodwill |
47,064 | 47,064 | 47,064 | |||||||||
| Other Assets |
119,750 | 124,298 | 132,737 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Assets |
$ | 2,555,302 | $ | 2,621,092 | $ | 2,565,900 | ||||||
|
|
|
|
|
|
|
|||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||||||
| Current Liabilities: |
||||||||||||
| Accounts Payable |
$ | 564,531 | $ | 542,987 | $ | 555,593 | ||||||
| Other Current Liabilities |
270,475 | 301,803 | 270,786 | |||||||||
| Current Maturity of Long Term Debt |
1,250 | 59,026 | 9,663 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Current Liabilities |
836,256 | 903,816 | 836,042 | |||||||||
| Long Term Debt |
1,371,819 | 1,369,159 | 1,684,675 | |||||||||
| Other Liabilities |
258,241 | 255,877 | 237,031 | |||||||||
| Deferred Tax Liability |
229,132 | 242,708 | 247,065 | |||||||||
| Commitments and Contingencies |
||||||||||||
| Common Stock, Class L |
— | — | 1,076,244 | |||||||||
| Stockholders’ Deficit: |
||||||||||||
| Preferred Stock, $0.0001 Par Value: Authorized: 50,000,000 shares; no shares issued and outstanding at August 2, 2014 |
||||||||||||
| Common Stock, $0.0001 Par Value: Authorized: 500,000,000 shares at August 2, 2014 and February 1, 2014 and 582,771,244 shares at August 3, 2013 |
||||||||||||
| Issued: 74,809,682 shares at August 2, 2014, 74,218,275 shares at February 1, 2014 and 528,314,688 shares at August 3, 2013 |
||||||||||||
| Outstanding: 74,158,072 shares at August 2, 2014, 73,686,524 shares at February 1, 2014 and 523,502,100 shares at August 3, 2013 |
7 | 7 | 47 | |||||||||
| Additional Paid-In-Capital |
1,354,363 | 1,346,259 | — | |||||||||
| Accumulated Deficit |
(1,487,105 | ) | (1,492,409 | ) | (1,515,200 | ) | ||||||
| Treasury Stock at Cost: |
(7,411 | ) | (4,325 | ) | (4 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Total Stockholders’ Deficit |
(140,146 | ) | (150,468 | ) | (1,515,157 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Total Liabilities and Stockholders’ Deficit |
$ | 2,555,302 | $ | 2,621,092 | $ | 2,565,900 | ||||||
|
|
|
|
|
|
|
|||||||
6
BURLINGTON STORES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(unaudited)
(All amounts in thousands)
| Six Months Ended | Three Months Ended | |||||||||||||||
| August 2 2014 |
August 3, 2013 |
August 2, 2014 |
August 3, 2013 |
|||||||||||||
| REVENUES: |
||||||||||||||||
| Net Sales |
$ | 2,171,850 | $ | 2,028,724 | $ | 1,043,581 | $ | 963,711 | ||||||||
| Other Revenue |
15,134 | 15,745 | 7,545 | 7,769 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Revenue |
2,186,984 | 2,044,469 | 1,051,126 | 971,480 | ||||||||||||
| COSTS AND EXPENSES: |
||||||||||||||||
| Cost of Sales |
1,343,488 | 1,267,973 | 645,027 | 600,320 | ||||||||||||
| Selling, General and Administrative Expenses |
697,047 | 654,461 | 350,026 | 326,757 | ||||||||||||
| Costs Related to Debt Amendments, Secondary Offering and Other |
1,341 | 11,457 | 917 | 2,603 | ||||||||||||
| Stock Option Modification Expense |
1,791 | 7,263 | 963 | 7,263 | ||||||||||||
| Restructuring and Separation Costs |
— | 2,179 | — | 554 | ||||||||||||
| Depreciation and Amortization |
81,757 | 85,239 | 40,549 | 41,247 | ||||||||||||
| Impairment Charges-Long-Lived Assets |
848 | 139 | 829 | 88 | ||||||||||||
| Other Income, Net |
(3,864 | ) | (4,605 | ) | (1,968 | ) | (2,059 | ) | ||||||||
| Loss on Extinguishment of Debt |
3,681 | 617 | — | 617 | ||||||||||||
| Interest Expense (Inclusive of Gain (Loss) on Interest Rate Cap Agreements) |
52,098 | 67,630 | 25,546 | 33,327 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Cost and Expenses |
2,178,187 | 2,092,353 | 1,061,889 | 1,010,717 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income (Loss) Before Income Tax Expense (Benefit) |
8,797 | (47,884 | ) | (10,763 | ) | (39,237 | ) | |||||||||
| Income Tax Expense (Benefit) |
3,493 | (17,307 | ) | (4,293 | ) | (14,223 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net Income (Loss) |
$ | 5,304 | $ | (30,577 | ) | $ | (6,470 | ) | $ | (25,014 | ) | |||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Comprehensive Income (Loss) |
$ | 5,304 | $ | (30,577 | ) | $ | (6,470 | ) | $ | (25,014 | ) | |||||
|
|
|
|
|
|
|
|
|
|||||||||
7
BURLINGTON STORES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(All amounts in thousands)
| Six Months Ended | ||||||||
| August 2, 2014 |
August 3, 2013 |
|||||||
| OPERATING ACTIVITIES |
||||||||
| Net Income (Loss) |
$ | 5,304 | $ | (30,577 | ) | |||
| Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities: |
||||||||
| Depreciation and Amortization |
81,757 | 85,239 | ||||||
| Amortization of Deferred Financing Costs |
4,384 | 4,585 | ||||||
| Impairment Charges – Long-Lived Assets |
848 | 139 | ||||||
| Accretion of Senior Notes |
1,100 | 1,566 | ||||||
| Interest Rate Cap Contracts —Adjustment to Market |
1 | 55 | ||||||
| Provision for Losses on Accounts Receivable |
75 | 103 | ||||||
| Deferred Income Tax (Benefit) |
(14,273 | ) | (12,551 | ) | ||||
| Loss (Gain) on Disposition of Fixed Assets and Leasehold Improvements |
270 | (57 | ) | |||||
| Non-Cash Loss on Extinguishment of Debt – Write-off of Deferred Financing Costs and Original Issue Discount |
2,521 | 466 | ||||||
| Non-Cash Stock Compensation Expense |
3,152 | 5,685 | ||||||
| Non-Cash Rent Expense |
(10,122 | ) | (6,330 | ) | ||||
| Deferred Rent Incentives |
13,807 | 18,079 | ||||||
| Excess Tax Benefit from Stock Based Compensation |
(4,023 | ) | — | |||||
| Insurance Recoveries |
— | 2,391 | ||||||
| Changes in Assets and Liabilities: |
||||||||
| Accounts Receivable |
(8,266 | ) | (5,634 | ) | ||||
| Merchandise Inventories |
8,541 | (68,118 | ) | |||||
| Prepaid and Other Current Assets |
(24,811 | ) | (15,758 | ) | ||||
| Accounts Payable |
21,544 | 55,187 | ||||||
| Other Current Liabilities |
(32,076 | ) | 22,829 | |||||
| Other Long Term Assets and Long Term Liabilities |
1,846 | 563 | ||||||
|
|
|
|
|
|||||
| Net Cash Provided by Operating Activities |
$ | 51,579 | $ | 57,862 | ||||
|
|
|
|
|
|||||
| INVESTING ACTIVITIES |
||||||||
| Cash Paid for Property and Equipment |
(94,569 | ) | (67,999 | ) | ||||
| Proceeds from Sale of Property and Equipment and Assets Held for Sale |
136 | 393 | ||||||
|
|
|
|
|
|||||
| Net Cash Used in Investing Activities |
$ | (94,433 | ) | $ | (67,606 | ) | ||
|
|
|
|
|
|||||
| FINANCING ACTIVITIES |
||||||||
| Proceeds from Long Term Debt—ABL Line of Credit |
275,000 | 339,000 | ||||||
| Principal Payments on Long Term Debt—ABL Line of Credit |
(275,000 | ) | (324,000 | ) | ||||
| Principal Payments on Long Term Debt—Term Loan |
(3,955 | ) | (2,178 | ) | ||||
| Proceeds from Long Term Debt—Holdco Notes |
— | 343,000 | ||||||
| Principal Payments on Long Term Debt – Holdco Notes |
(58,000 | ) | — | |||||
| Repayment of Capital Lease Obligations |
(486 | ) | (453 | ) | ||||
| Payment of Dividends |
— | (335,676 | ) | |||||
| Purchase of Treasury Shares |
(3,086 | ) | — | |||||
| Proceeds from Stock Option Exercises and Related Tax Benefits |
929 | 2,248 | ||||||
| Excess Tax Benefit from Stock Based Compensation |
4,023 | — | ||||||
| Deferred Financing Costs |
(264 | ) | (22,126 | ) | ||||
|
|
|
|
|
|||||
| Net Cash Used in Financing Activities |
$ | (60,839 | ) | $ | (185 | ) | ||
|
|
|
|
|
|||||
| Decrease in Cash and Cash Equivalents |
(103,693 | ) | (9,929 | ) | ||||
| Cash and Cash Equivalents at Beginning of Period |
132,984 | 43,336 | ||||||
|
|
|
|
|
|||||
| Cash and Cash Equivalents at End of Period |
$ | 29,291 | $ | 33,407 | ||||
|
|
|
|
|
|||||
| Supplemental Disclosure of Cash Flow Information |
||||||||
| Interest Paid |
$ | 49,528 | $ | 48,053 | ||||
|
|
|
|
|
|||||
| Income Tax Payments - Net |
$ | 73,177 | $ | 1,632 | ||||
|
|
|
|
|
|||||
| Accretion of Class L Preferred Return |
$ | — | $ | 78,366 | ||||
|
|
|
|
|
|||||
| Non-Cash Investing Activities: |
||||||||
| Accrued Purchases of Property and Equipment |
$ | 25,082 | $ | 21,861 | ||||
|
|
|
|
|
|||||
| Acquisition of Capital Lease |
$ | 5,302 | $ | 887 | ||||
|
|
|
|
|
|||||
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Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Share and Adjusted EBITDA
The following tables calculate the Company’s Adjusted Net Income (Loss), Adjusted Net Income (Loss) Per Share and Adjusted EBITDA (earnings before net interest expense and loss on extinguishment of debt, taxes, depreciation, amortization and impairment, stock option modification expense, advisory fees and costs related to debt amendments, secondary offering and other), all of which are considered Non-GAAP financial measures. Generally, a Non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP.
Adjusted Net Income (Loss) is defined as consolidated net income (loss) for the period plus (i) net favorable lease amortization, (ii) costs related to debt amendments, secondary offering and other, (iii) loss on the extinguishment of debt, (iv) impairment charges, (v) advisory fees and (vi) stock option modification expense, all of which are tax effected to arrive at Adjusted Net Income (Loss).
Adjusted Net Income (Loss) per Share is defined as Adjusted Net Income (Loss) divided by the weighted average shares outstanding, as defined in the table below.
The Company presents Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Share and Adjusted EBITDA because it believes they are useful supplemental measures in evaluating the performance of the business and provide greater transparency into the results of operations. In particular, the Company believes that excluding certain items that may vary substantially in frequency and magnitude from operating income are useful supplemental measures that assist in evaluating the Company’s ability to generate earnings and leverage sales, and to more readily compare these metrics between past and future periods.
The Company believes that Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Share and Adjusted EBITDA provide investors helpful information with respect to the Company’s operations and financial condition. Other companies in the retail industry may calculate these non-GAAP measures differently such that the Company’s calculation may not be directly comparable. The adjustments to these metrics are not in accordance with regulations adopted by the SEC that apply to periodic reports presented under the Exchange Act. Accordingly, Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Share and Adjusted EBITDA may be presented differently in filings made with the SEC than as presented in this report or not presented at all.
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The following table shows the Company’s reconciliation of Net Income (Loss) to Adjusted Net Income (Loss) for the six and three months ended August 2, 2014 compared with the six and three months ended August 3, 2013:
| (unaudited) | ||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||
| Six Months Ended | Three Months Ended | |||||||||||||||
| August 2, 2014 |
August 3, 2013 |
August 2, 2014 |
August 3, 2013 |
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| Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss): |
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| Net Income (Loss) |
$ | 5,304 | $ | (30,577 | ) | $ | (6,470 | ) | $ | (25,014 | ) | |||||
| Net Favorable Lease Amortization (a) |
13,106 | 15,665 | 6,535 | 6,835 | ||||||||||||
| Costs Related to Debt Amendments, Secondary Offering and Other (b) |
1,341 | 11,457 | 917 | 2,603 | ||||||||||||
| Stock Option Modification Expense (c) |
1,791 | 7,263 | 963 | 7,263 | ||||||||||||
| Loss on Extinguishment of Debt (d) |
3,681 | 617 | — | 617 | ||||||||||||
| Impairment Charges (e) |
848 | 139 | 829 | 88 | ||||||||||||
| Advisory Fees (f) |
126 | 2,175 | 60 | 1,103 | ||||||||||||
| Tax Effect (g) |
(8,462 | ) | (14,180 | ) | (3,711 | ) | (7,071 | ) | ||||||||
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| Adjusted Net Income (Loss) |
$ | 17,735 | $ | (7,441 | ) | $ | (877 | ) | $ | (13,576 | ) | |||||
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| Weighted Average Shares Outstanding (h) |
75,585 | 72,599 | 73,966 | 72,896 | ||||||||||||
| Adjusted Net Income (Loss) Per Share |
$ | 0.23 | $ | (0.10 | ) | $ | (0.01 | ) | $ | (0.19 | ) | |||||
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| (a) | Net favorable lease amortization represents the non-cash amortization expense associated with favorable and unfavorable leases that were recorded as a result of purchase accounting related to the acquisition of BCFWC on April 13, 2006 by affiliates of Bain Capital Partners, LLC (along with its associated investment funds, or any successor to its investment management business, Bain Capital) in a take private transaction, and are recorded in the line item “Depreciation and Amortization” in our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). |
| (b) | Costs are primarily related to the Secondary Offering in Fiscal 2014 and advisory and professional fees associated with Amendments No. 2 and No. 3 to our Senior Secured Term Loan Credit Agreement in February and May 2013, respectively. |
| (c) | Represents expenses incurred as a result of our May 2013 stock option modification. |
| (d) | For Fiscal 2014, amounts represent losses incurred in accordance with ASC Topic No. 405-20, “Extinguishments of Liabilities,” related to the April 2014 partial redemption of our Holdco Notes and the excess cash flow payment of our Term Loan Facility. For Fiscal 2013, amounts relate to Amendment No. 3 to the Term Loan Credit Agreement. |
| (e) | Represents impairment charges on long lived assets. |
| (f) | For Fiscal 2014, amounts represent reimbursement for out-of-pocket fees and expenses that are payable to Bain Capital. For Fiscal 2013, amounts primarily represent the annual advisory fee of Bain Capital expensed during the fiscal periods in connection with our advisory agreement with Bain Capital which was terminated on October 2, 2013 in connection with our initial public offering. All amounts are recorded in the line item “Selling and Administrative Expenses” in our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). |
| (g) | Tax effect is calculated based on the effective tax rates (before discrete items) for the respective periods, adjusted for the tax effect for the impact of items (a) through (f). |
| (h) | Pro Forma Weighted Average Shares Outstanding give effect to (i) the cancellation of all existing Class A common stock, (ii) the conversion of the Company’s Class L common stock into Class A common stock, (iii) the 11-for-1 split of the Company’s Class A common stock, (iv) the reclassification of the Company’s Class A common stock and (v) the issuance of 15,333,333 common shares associated with the Company’s initial public offering as if it occurred on February 3, 2013. |
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The following table shows the Company’s reconciliation of Net Income (Loss) to Adjusted EBITDA for the six and three months ended August 2, 2014 compared with the six and three months ended August 3, 2013:
| (unaudited) | ||||||||||||||||
| (in thousands) | ||||||||||||||||
| Six Months Ended | Three Month Ended | |||||||||||||||
| August 2, 2014 |
August 3, 2013 |
August 2, 2014 |
August 3, 2013 |
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| Reconciliation of Net Income (Loss) to Adjusted EBITDA: |
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| Net Income (Loss) |
$ | 5,304 | $ | (30,577 | ) | $ | (6,470 | ) | $ | (25,014 | ) | |||||
| Interest Expense |
52,098 | 67,630 | 25,546 | 33,327 | ||||||||||||
| Interest Income |
(24 | ) | (165 | ) | (12 | ) | (90 | ) | ||||||||
| Loss on Extinguishment of Debt (d) |
3,681 | 617 | — | 617 | ||||||||||||
| Costs Related to Debt Amendments, Secondary Offering and Other (b) |
1,341 | 11,457 | 917 | 2,603 | ||||||||||||
| Stock Option Modification Expense (c) |
1,791 | 7,263 | 963 | 7,263 | ||||||||||||
| Advisory Fees (f) |
126 | 2,175 | 60 | 1,103 | ||||||||||||
| Depreciation and Amortization |
81,757 | 85,239 | 40,549 | 41,247 | ||||||||||||
| Impairment Charges |
848 | 139 | 829 | 88 | ||||||||||||
| Tax Expense (Benefit) |
3,493 | (17,307 | ) | (4,293 | ) | (14,223 | ) | |||||||||
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| Adjusted EBITDA |
$ | 150,415 | $ | 126,471 | $ | 58,089 | $ | 46,921 | ||||||||
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