Burlington Stores, Inc. Announces Second Quarter and First Half Fiscal 2016 Results, Exceeding Prior Guidance; Raises Fiscal Year 2016 Outlook

For the Fiscal 2016 Second Quarter vs the Fiscal 2015 Second
Quarter:

  • On a GAAP basis, net sales rose 9.7%, net income increased 87%
    and diluted net income per share rose 100%
  • On a Non-GAAP basis,
  • Comparable store sales increased 5.4%
  • Adjusted Net Income per Share rose 105% to $0.39
  • Adjusted EBITDA increased 31% to $99.1 million
  • Comparable store inventory decreased 7% and turnover improved 15%

BURLINGTON, N.J.–(BUSINESS WIRE)–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 six months ended July
30, 2016.

Tom Kingsbury, Chief Executive Officer stated, “We are very pleased to
report second quarter results that included a 9.7% increase in net
sales, a 5.4% increase in comparable store sales and a 130 basis point
expansion in Adjusted EBITDA margin. These results were driven by the
continued improvement in the execution of our off-price operating model.
Our consistently strong performance has also enabled us to take
advantage of favorable interest rates resulting in the re-pricing of our
term loan on July 29, 2016. We believe we are well positioned for the
fall season and remain focused on delivering great value, relevant
brands, fresh product and an improved store experience for our customers
every day. I would like to thank our store and corporate teams for these
results.”

Fiscal 2016 Second Quarter Operating Results
(for the 13 week period ended July 30, 2016 compared with the 13 week
period ended August 1, 2015):

  • Net sales increased 9.7%, or $110.8 million, to $1,255.1 million. This
    increase includes a 5.4% increase in comparable store sales, as well
    as an increase of $51.8 million from new and non-comparable stores.
    Our 5.4% comparable store sales increase is on top of a 5.6% increase
    in the second quarter of Fiscal 2015.
  • Gross margin improved 40 basis points to 39.6% during the Fiscal 2016
    second quarter. This more than offset a 15 basis point increase in
    product sourcing costs, which are included in selling, general and
    administrative expenses (SG&A).
  • SG&A, less product sourcing costs, as a percentage of net sales was
    27.3%, representing approximately 110 basis points of improvement
    compared with last year. This improvement was driven by greater
    leverage in store payroll, occupancy, utilities and includes a
    reversal of previously recorded benefits related expenses.
  • The effective tax rate was 37.6% compared with 41.4% last year,
    primarily related to a decrease in our state tax rate and an increase
    in federal hiring credits.
  • Net income increased 87.1% to $20.4 million, or $0.28 per diluted
    share.
  • Adjusted Net Income increased 90.1% to $28.2 million, or $0.39 per
    share vs. $0.19 per share last year.
  • Fully diluted shares outstanding were 72.0 million compared with 76.5
    million last year, primarily driven by the repurchase of 4.8 million
    shares since the end of the 2015 second quarter.
  • Adjusted EBITDA increased 31.4%, or $23.7 million, to $99.1 million.
    Sales growth, SG&A leverage and gross margin expansion led to a 130
    basis point expansion in Adjusted EBITDA as a percentage of net sales.

Fiscal 2016 First Half Operating Results (for
the 26 week period ended July 30, 2016 compared with the 26 week period
ended August 1, 2015):

  • Net sales increased 9.0%, or $210.4 million, to $2,537.7 million. This
    increase includes a 4.9% increase in comparable store sales, as well
    as an increase of $104.4 million from new and non-comparable stores.
    Our 4.9% comparable store sales increase is on top of a 3.1% increase
    in the first half of Fiscal 2015.
  • Gross margin expanded by 40 basis points to 39.9% from 39.5%. This
    more than offset a 15 basis point increase in product sourcing costs
    which are included in SG&A.
  • SG&A, less product sourcing costs, as a percentage of net sales was
    27.0% vs. 27.8% last year. The 80 basis point improvement was driven
    by increased leverage in store occupancy, marketing and store payroll.
  • The effective tax rate was 37.6% compared with 39.0% last year,
    primarily related to a decrease in our state tax rate and an increase
    in federal hiring credits.
  • Net income increased 58.2% to $57.9 million, or $0.80 per diluted
    share.
  • Adjusted Net Income was $69.9 million vs. $46.1 million, or $0.97 per
    diluted share vs. $0.60 last year.
  • Fully diluted shares outstanding were 72.2 million compared with 76.5
    million shares last year, primarily driven by repurchase of 4.8
    million shares since the end of the 2015 second quarter.
  • Adjusted EBITDA increased 24.4%, or $43.2 million, to $220.1 million.
    The 110 basis point expansion in Adjusted EBITDA as a percent of net
    sales was driven by sales growth coupled with SG&A leverage and gross
    margin expansion.

Inventory

  • Merchandise inventories were $745.0 million vs. $802.3 million last
    year, primarily driven by a comparable store inventory decrease of 7%.
    Pack and hold inventory represented 27% of inventory at quarter end
    vs. 28% last year.

Share Repurchase Activity

  • During the second quarter, we invested $25 million of cash to
    repurchase 390,814 shares of our common stock ending the period with
    approximately $125 million remaining on its share repurchase
    authorization.

Debt Repricing

  • On July 29, 2016, the Company completed the repricing of its senior
    secured term loan facility (the Term Loan Facility), which, among
    other things, reduced the applicable interest rate margins from 2.25%
    to 1.75%, in the case of prime rate loans, and from 3.25% to 2.75% in
    the case of LIBOR loans, with the LIBOR floor being reduced from 1.00%
    to 0.75%. As a result of this transaction, the Company recognized a
    non-cash loss on the extinguishment of debt of $3.8 million and
    incurred fees of $1.3 million, which were recorded in the line items
    “Loss on extinguishment of debt” and “Costs related to debt amendments
    and secondary offering,” respectively, in the Condensed Consolidated
    Statements of Operations.

Full Year Fiscal 2016 and Third Quarter 2016
Outlook

The Company is raising its full year Fiscal 2016 outlook based on its
strong first half performance and positive outlook for the remainder of
the year, including a reduction of interest expense associated with the
re-pricing of the Term Loan Facility. The Company notes that given
changes in share count, simple addition of its quarterly adjusted net
income per share will not round to the full fiscal year.

For the full Fiscal Year 2016 (the 52 weeks ending January 28, 2017),
the Company expects:

  • Net sales to increase in the range of 7.8% to 8.3%;
  • Comparable store sales to increase between 3.6% to 4.1%;
  • Interest expense of approximately $59 million reflecting the Term Loan
    Facility repricing;
  • Adjusted Net Income per Share in the range of $2.92 to $2.96, which
    reflects an increase in incentive compensation expense of $0.02 per
    share driven by operating performance above the Company’s expectations
    in the first half of the year, compared to the Company’s prior
    guidance of $2.68 to $2.78, utilizing a fully diluted share count of
    approximately 72.1 million shares, as compared with $2.31 in Fiscal
    2015;
  • Adjusted EBITDA margin expansion to increase 50 to 60 basis points; and
  • To open 25 net new stores.

For the third quarter of Fiscal 2016 (the 13 weeks ending October 29,
2016), the Company expects:

  • Net sales to increase in the range of 7.1% to 8.1%;
  • Comparable store sales to increase in the range of 2.5% to 3.5%; and
  • Adjusted Net Income per Share in the range of $0.30 to $0.32, which
    reflects an increase in incentive compensation expense of $0.01 per
    share driven by operating performance above the Company’s expectations
    in the first half of the year, utilizing a fully diluted share count
    of approximately 72.0 million shares, as compared to $0.25 last year.

The Company has provided non-GAAP guidance as set out above. This does
not reflect the impact of potential future non-GAAP adjustments on GAAP
net income or GAAP diluted net income per share because the need for
some of these adjustments, and their impact, cannot be predicted with
reasonable certainty. The adjustments that cannot be predicted with
reasonable certainty include, but are not limited to, costs related to
debt amendments, secondary offerings, loss on extinguishment of debt,
and impairment charges as well as the tax effect of such items.

Note regarding Non-GAAP financial measures

The foregoing discussion includes references to Adjusted EBITDA,
Adjusted Net Income, and Adjusted Net Income per Share. 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 2016 Conference Call

The Company will hold a conference call on Thursday, August 25, 2016 at
8:30 a.m. Eastern Time to discuss the Company’s second quarter 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.

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 after the conclusion of the earnings call on August 25, 2016
through September 7, 2016. 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 passcode is 13643375. Additionally, a replay
of the call will be available on the investor relations page of the
Company’s website at www.burlingtoninvestors.com.

Investors and others should note that Burlington Stores currently
announces material information using SEC filings, press releases, public
conference calls and webcasts. In the future, Burlington Stores will
continue to use these channels to distribute material information about
the Company, and may also utilize its website and/or various social
media sites to communicate important information about the Company, key
personnel, new brands and services, trends, new marketing campaigns,
corporate initiatives and other matters. Information that the Company
posts on its website or on social media channels could be deemed
material; therefore, the Company encourages investors, the media, our
customers, business partners and others interested in Burlington Stores
to review the information posted on its website, as well as the
following social media channels:

Facebook (https://www.facebook.com/BurlingtonCoatFactory/)
and Twitter (https://twitter.com/burlington).

Any updates to the list of social media channels the Company may use to
communicate material information will be posted on the investor
relations page of the Company’s website at www.burlingtoninvestors.com.

Participation in Goldman Sachs Annual Global Retailing Conference

The Company is scheduled to participate in the 23rd Annual Goldman Sachs
Global Retailing Conference, to be held at the Plaza Hotel in New York
City, on Thursday, September 8, 2016. Tom Kingsbury, Chairman, President
and Chief Executive Officer, Marc Katz, Executive Vice President and
Chief Financial Officer and Robert LaPenta, Jr., Treasurer will host a
fireside chat presentation at 1:40 p.m. Eastern Time. The fireside chat
presentation will be webcast live at the Company’s investor relations
web site, www.burlingtoninvestors.com.
An archived webcast will be available after the conclusion of the
presentation.

About Burlington Stores, Inc.

Burlington Stores, Inc., headquartered in New Jersey, is a nationally
recognized off-price retailer with fiscal 2015 revenue of $5.1 billion.
The Company is a Fortune 500 company and its common stock is traded on
the New York Stock Exchange under the ticker symbol “BURL.” The Company
operates 570 stores, inclusive of an internet store, in 45 states and
Puerto Rico, principally under the name Burlington Stores. The Company’s
stores offer an extensive selection of in-season, fashion-focused
merchandise at up to 65% off other retailers’ prices, including women’s
ready-to-wear apparel, menswear, youth apparel, baby, beauty, footwear,
accessories, home and coats.

For more information about the Company, visit www.burlingtonstores.com.

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 (Exchange Act). 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-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.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(All amounts in thousands)

   
Three Months Ended Six Months Ended
July 30,   August 1, July 30,   August 1,
2016 2015 2016 2015
REVENUES:
Net sales $ 1,255,053 $ 1,144,218 $ 2,537,723 $ 2,327,276
Other revenue   5,663   7,355   11,877   15,215
Total revenue 1,260,716 1,151,573 2,549,600 2,342,491
COSTS AND EXPENSES:
Cost of sales 757,622 695,915 1,526,303 1,408,845
Selling, general and administrative expenses 407,102 381,606 810,487 759,285
Costs related to debt amendments and secondary offering 1,346 (12 ) 1,346 247
Stock option modification expense 178 335 414 795
Depreciation and amortization 44,613 41,746 90,158 83,901
Impairment charges-long-lived assets 188 109 1,903
Other income—net (1,717 ) (1,389 ) (5,886 ) (2,462 )
Loss on extinguishment of debt 3,805 3,805 649
Interest expense   15,084   14,598   30,036   29,401
Total cost and expenses   1,228,033   1,132,987   2,456,772   2,282,564
Income before income tax expense 32,683 18,586 92,828 59,927
Income tax expense   12,289   7,686   34,920   23,332
Net income $ 20,394 $ 10,900 $ 57,908 $ 36,595
 

BURLINGTON STORES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(All amounts in thousands)

     
July 30, January 30, August 1,
2016 2016 2015
ASSETS
Current assets:
Cash and cash equivalents $ 30,469 $ 20,915 $ 27,231
Restricted cash and cash equivalents 27,800 27,800 27,800
Accounts receivable—net 41,902 38,571 38,979
Merchandise inventories 744,965 783,528 802,341
Prepaid and other current assets   86,895   62,168   140,672
Total current assets 932,031 932,982 1,037,023
Property and equipment—net 1,024,919 1,018,570 986,395
Goodwill and intangible assets—net 511,645 523,817 539,314
Other assets   97,659   96,444   101,799
Total assets $ 2,566,254 $ 2,571,813 $ 2,664,531
 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable $ 546,035 $ 598,199 $ 590,498
Other current liabilities 291,353 286,986 278,593
Current maturities of long term debt   1,512   1,403   1,340
Total current liabilities 838,900 886,588 870,431
Long term debt 1,351,830 1,295,163 1,340,857
Other liabilities 284,083 287,389 270,575
Deferred tax liabilities 195,175 201,695 223,305
Commitments and contingencies
Stockholders’ deficit   (103,734 )   (99,022 )   (40,637 )
Total liabilities and stockholders’ deficit $ 2,566,254 $ 2,571,813 $ 2,664,531
 

BURLINGTON STORES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(All amounts in thousands)

 
Six Months Ended
July 30,   August 1,
2016 2015
OPERATING ACTIVITIES
Net income $ 57,908 $ 36,595
Adjustments to reconcile net income to net cash provided by (used
in) operating activities
Depreciation and amortization 90,158 83,901
Deferred income tax (benefit) (4,603 ) (7,740 )
Non-cash loss on extinguishment of debt 3,805 649
Non-cash stock compensation expense 7,376 5,258
Non-cash rent expense (15,712 ) (12,182 )
Deferred rent incentives 9,681 16,936
Changes in assets and liabilities:
Accounts receivable (5,034 ) 1,902
Merchandise inventories 38,263 (13,633 )
Accounts payable (53,238 ) (31,184 )
Other current assets and liabilities (24,244 ) (78,110 )
Long term assets and liabilities 2,440 512
Other operating activities   (3,681 )   (3,610 )
Net cash provided by (used in) operating activities   103,119   (706 )
INVESTING ACTIVITIES
Cash paid for property and equipment (75,949 ) (81,935 )
Other investing activities   203   136
Net cash used in investing activities   (75,746 )   (81,799 )
FINANCING ACTIVITIES
Proceeds from long term debt—ABL Line of Credit 887,400 797,800
Principal payments on long term debt—ABL Line of Credit (831,500 ) (647,400 )
Proceeds from long term debt—Term B-4 Loans 1,114,208
Principal payments on long term debt—Term B-3 Loans (1,117,000 ) (50,000 )
Purchase of treasury shares (76,155 ) (25,782 )
Other financing activities   5,228   9,769
Net cash (used in) provided by financing activities   (17,819 )   84,387
Increase in cash and cash equivalents 9,554 1,882
Cash and cash equivalents at beginning of period   20,915   25,349
Cash and cash equivalents at end of period $ 30,469 $ 27,231
 
 

Reconciliation of Non-GAAP Financial Measures

(Unaudited)

(Amounts in thousands except per share data)

 

Adjusted Net Income, Adjusted Net Income per Share, Adjusted
EBITDA and Adjusted Tax Expense

 
The following tables calculate the Company’s Adjusted Net Income,
Adjusted Net Income per Share, Adjusted EBITDA (earnings before (i)
net interest expense, (ii) loss on extinguishment of debt, (iii)
costs related to debt amendments and secondary offering, (iv) stock
option modification expense, (v) advisory fees, (vi) depreciation
and amortization, (vii) impairment charges, (viii) amounts related
to certain ongoing litigation and (ix) taxes) and Adjusted Tax
Expense (income tax expense less the tax effect of the reconciling
items to get to Adjusted Net Income (footnote (h) in the table
below)), 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 is defined as net income for the period plus (i)
net favorable lease amortization, (ii) costs related to debt
amendments and secondary offering, (iii) stock option modification
expense, (iv) loss on the extinguishment of debt, (v) impairment
charges, (vi) amounts related to certain ongoing litigation and
(vii) advisory fees, all of which are tax effected to arrive at
Adjusted Net Income.
 
Adjusted Net Income per Share is defined as Adjusted Net Income
divided by the weighted average shares outstanding, as defined in
the table below.
 
The Company presents Adjusted Net Income, Adjusted Net Income per
Share, Adjusted EBITDA and Adjusted Tax Expense because it believes
they are useful supplemental measures in evaluating the performance
of the Company’s 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, Adjusted Net Income
per Share, Adjusted EBITDA and Adjusted Tax Expense 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, Adjusted Net
Income per Share, Adjusted EBITDA and Adjusted Tax Expense may be
presented differently in filings made with the SEC than as presented
in this report or not presented at all.
 
The following table shows the Company’s reconciliation of net income
to Adjusted Net Income for the three and six months ended July 30,
2016 compared with the three and six months ended August 1, 2015:
  (unaudited)
(in thousands, except per share data)
Three Months Ended   Six Months Ended
July 30,   August 1, July 30,   August 1,
2016 2015 2016 2015
Reconciliation of net income to Adjusted Net Income:
Net income $ 20,394 $

10,900

$ 57,908 $ 36,595
Net favorable lease amortization (a) 5,852 5,992 12,074 12,049
Costs related to debt amendments and secondary offering (b) 1,346 (12 ) 1,346 247
Stock option modification expense (c) 178 335 414 795
Loss on extinguishment of debt (d) 3,805 3,805 649
Impairment charges (e) 188 109 1,903
Advisory fees (f) 72
Litigation accrual(g) 1,400 1,400
Tax effect (h)   (4,731 )   (2,546 )   (7,200 )   (6,161 )
Adjusted Net Income $ 28,244 $ 14,857 $ 69,856 $ 46,149
Fully diluted weighted average shares outstanding (i) 71,987 76,511 72,205 76,506
Adjusted Net Income per Share $ 0.39 $ 0.19 $ 0.97 $ 0.60
(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 April 13, 2006 Bain Capital acquisition of Burlington Coat
Factory Warehouse Corporation, and are recorded in the line item
“Depreciation and amortization” in our Condensed Consolidated
Statements of Operations.
(b) Costs are related to the repricing of our Term Loan Facility during
the second quarter of Fiscal 2016 and our secondary offering of
common stock during Fiscal 2015.
(c) Represents expenses incurred as a result of our May 2013 stock
option modification.
(d) Amounts relate to the repricing or our Term Loan Facility during the
second quarter of Fiscal 2016 and the prepayment on our Term Loan
Facility during the first quarter of Fiscal 2015.
(e) Represents impairment charges on long-lived assets.
(f) Amounts represent reimbursement for out-of-pocket expenses that are
payable to Bain Capital, and are recorded in the line item “Selling,
general and administrative expenses” in our Condensed Consolidated
Statements of Operations.
(g) Represents amounts charged for certain ongoing litigation.
(h) Tax effect is calculated based on the effective tax rates (before
discrete items) for the respective periods, adjusted for the tax
effect for the tax impact of items (a) through (g).
(i) Fully diluted weighted average shares outstanding starts with basic
shares outstanding and adds back any potentially dilutive securities
outstanding during the period. Fully diluted weighted average shares
outstanding is equal to basic shares outstanding if the Company is
in an Adjusted Net Loss position.

Contacts

Investor Relations:
Burlington Stores, Inc.
Robert L.
LaPenta, Jr.
855-973-8445
Info@BurlingtonInvestors.com
or
ICR,
Inc.
Allison Malkin
Melissa Calandruccio
203-682-8225

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