Burlington Stores

A N N U A L   R E P O R T201901919199911919191919A N N U A L   R E P O R T

Burlington Stores, Inc., headquartered in New Jersey, is a nationally recognized 
off-price retailer with Fiscal 2019 revenues of $7.3 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 operated 727 stores as of the end 
of the fourth quarter of Fiscal 2019 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 60% off other retailers’ prices
every day, including women’s ready-to-wear apparel, menswear, youth apparel,
baby, beauty, footwear, accessories, home, toys and coats.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the fiscal year ended February 1, 2020
OR

‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from

to

Commission File Number 001-36107

BURLINGTON STORES, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)

2006 Route 130 North
Burlington, New Jersey
(Address of Principal Executive Offices)

80-0895227
(I.R.S. Employer
Identification No.)

08016
(Zip Code)

Title of each class

(609) 387-7800
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

BURL
Securities registered pursuant to Section 12(g) of the Act: None

New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes È No ‘
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No È
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes È No ‘
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes È No ‘
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer È
Non-Accelerated filer ‘

‘
Accelerated filer
Smaller reporting company ‘
Emerging growth company ‘

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No È
The aggregate market value of the common stock held by non-affiliates of the registrant on August 2, 2019, the last business day of the registrant’s most recently
completed second fiscal quarter, was $11,637,817,686. The aggregate market value was computed by reference to the closing price of the common stock on such date.

As of February 28, 2020, there were 65,892,508 shares of common stock of the registrant outstanding.

Documents Incorporated By Reference:
Certain provisions of the registrant’s definitive proxy statement for the 2020 Annual Meeting of Stockholders, to be filed within 120 days of the close of the registrant’s
2019 fiscal year, are incorporated by reference in Part III of this Form 10-K to the extent described herein.

[THIS PAGE INTENTIONALLY LEFT BLANK]

BURLINGTON STORES, INC.
INDEX TO REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED FEBRUARY 1, 2020

PART I.

Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.

PART II.

Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases

of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 6.
Item 7.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Item 8.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9.
Controls and Procedures
Item 9A.
Other Information
Item 9B.

PART III.

Item 10.
Item 11.
Item 12.

Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters

Item 13.
Item 14.

Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services

PART IV.

Item 15.
Item 16.

Exhibits and Financial Statement Schedules
Form 10-K Summary

SIGNATURES

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[THIS PAGE INTENTIONALLY LEFT BLANK]

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report contains forward-looking statements that are based on current expectations, estimates,
forecasts and projections about us, the industry in which we operate and other matters, as well as management’s
beliefs and assumptions. For example, when we use words such as “projects,” “expects,” “anticipates,” “intends,”
“plans,” “believes,” “seeks,” “estimates,” “should,” “would,” “could,” “will,” “opportunity,” “potential” or
“may,” variations of such words or other words that convey uncertainty of future events or outcomes, we are
making “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as
amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange
Act). All statements other than statements of historical fact are forward-looking statements. These forward-
looking statements may relate to such matters as our future actions, including expected store openings, ongoing
strategic initiatives and the intended results of those initiatives, future performance or results of current and
anticipated sales, expenses, interest rates, foreign exchange rates and results and the outcome of contingencies
such as legal proceedings. Our forward-looking statements are subject to risks and uncertainties. Actual events or
results may differ materially from the events or results anticipated in these forward-looking statements as a result
of a variety of factors, including each of the factors discussed in Item 1A, Risk Factors as well as risks and
uncertainties discussed elsewhere in this Annual Report. While we believe that our assumptions are reasonable,
we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate
all factors that could affect our actual future events or results. In light of these risks and uncertainties, the
forward-looking events and circumstances discussed in this Annual Report might not occur. In addition, as a
result of these and other factors, our past financial performance should not be relied on as an indication of future
performance. The cautionary statements referred to in this section also should be considered in connection with
any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our
behalf. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as required by law.

PART I

Item 1. Business

Overview

We are a nationally recognized retailer of high-quality, branded merchandise at everyday low prices. We
opened our first store in Burlington, New Jersey in 1972, selling primarily coats and outerwear. Since then, we
have expanded our store base to 727 stores as of February 1, 2020, inclusive of an internet store, in 45 states and
Puerto Rico. We have diversified our product categories by offering an extensive selection of in-season, fashion-
focused merchandise at up to 60% off other retailers’ prices, including: women’s ready-to-wear apparel,
menswear, youth apparel, baby, beauty, footwear, accessories, home, toys, gifts and coats. We sell a broad
selection of merchandise acquired directly from nationally recognized manufacturers and other suppliers.

As used in this Annual Report, the terms “Company,” “we,” “us,” or “our” refer to Burlington Stores, Inc.
and all of its subsidiaries. We were organized in 2013 under the name Burlington Holdings, Inc. and currently
exist as a Delaware corporation. Our indirect wholly-owned subsidiary, Burlington Coat Factory Warehouse
Corporation (BCFWC), was initially organized in 1972 as a New Jersey corporation, was reincorporated in 1983
in Delaware, and currently exists as a Florida corporation. We completed an initial public offering of our
common stock in October 2013.

Fiscal Year End

We define our fiscal year as the 52- or 53-week period ending on the Saturday closest to January 31. This is

an annual report for the 52-week fiscal year ended February 1, 2020 (Fiscal 2019). The fiscal years ended
February 2, 2019 (Fiscal 2018) and February 3, 2018 (Fiscal 2017) consisted of 52 weeks and 53 weeks,
respectively.

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Our Stores

Over 99% of our net sales are derived from stores we operate as Burlington Stores. We believe that our
customers are attracted to our stores principally by the availability of a large assortment of first-quality, current,
brand-name merchandise at everyday low prices.

Burlington Stores offer customers a complete line of merchandise, including: women’s ready-to-wear
apparel, accessories, footwear, menswear, youth apparel, baby, home, coats, beauty, toys and gifts. Our broad
selection provides a wide range of apparel, accessories and furnishings for all ages. We purchase both pre-season
and in-season merchandise, allowing us to respond timely to changing market conditions and consumer fashion
preferences. Furthermore, we believe Burlington Stores’ substantial selection of staple, destination products
attracts customers from beyond our local trade areas. We believe these products drive incremental store traffic
and differentiate us from our competitors.

We believe the breadth of our selection and our ability to successfully operate in stores of varying square

footage represents a competitive advantage. We believe that, as we continue to reduce our comparable store
inventory, we will be able to reduce the square footage of our stores while continuing to maintain our broad
assortment. As a result, we believe major landlords seek us as a tenant because the appeal of our merchandise
profile attracts a desired customer base.

Our store base is geographically diversified with stores located in 45 states and Puerto Rico as set forth

below:

State

Number of Stores

State

Number of Stores

State

Number of Stores

AK
AL
AR
AZ
CA
CO
CT
DE
FL
GA
IA
ID
IL
IN
KS
KY

2
6
6
13
82
10
12
3
56
23
3
2
37
14
5
6

LA
MA
MD
ME
MI
MN
MO
MS
NC
ND
NE
NH
NJ
NM
NV

7
17
18
2
18
9
9
3
17
1
4
4
37
3
9

NY
OH
OK
OR
PA
PR
RI
SC
SD
TN
TX
UT
VA
WA
WI

47
28
7
4
34
12
5
10
1
9
81
8
20
12
10

Our internet store is excluded from the above table.

Store Expansion and Real Estate Strategy

We continue to explore expansion opportunities both within our current market areas and in other regions.

We believe that our ability to find satisfactory locations for our stores is essential for the continued growth of our
business. The opening of stores generally is contingent upon a number of factors, including the availability of
desirable locations with suitable structures and the negotiation of acceptable lease terms.

We have a proven track record of new store expansion. Our store base has grown from 13 stores in 1980 to
727 stores, inclusive of an internet store, as of February 1, 2020. If we identify appropriate locations, we believe

2

that we will be able to execute our growth strategy without significantly impacting our current stores. We have
identified numerous market opportunities that we believe will allow us to operate at least 1,000 stores over the
long-term. The table below shows our store openings and closings each of the last three fiscal years.

Stores (beginning of period)
Stores opened(a)(b)
Stores closed(a)

Stores (end of period)

Fiscal 2019

Fiscal 2018

Fiscal 2017

675
60
(8)

727

629
56
(10)

675

592
43
(6)

629

(a) Exclusive of relocations.
(b) Stores opened during Fiscal 2019 had an average size of 42,000 square feet.

Distribution and Warehousing

We have four distribution centers that shipped approximately 98% of merchandise units to our stores in
Fiscal 2019. The remaining 2% of merchandise units are drop shipped by our vendors directly to our stores. Our
two east coast distribution centers are located in Edgewater Park, New Jersey and Burlington, New Jersey. Our
two west coast distribution centers are located in San Bernardino, California and Redlands, California. These
four distribution centers occupy an aggregate of 2,884,000 square feet, and each includes processing, shipping
and storage capabilities. In addition, we entered into a lease for an additional distribution center in Riverside,
California occupying approximately 900,000 square feet, which is expected to become operational during Fiscal
2020.

In addition to the distribution centers that we operate, we have arrangements with third parties for the use of

pool point facilities, which we believe streamline and optimize our distribution network

We also operate three warehousing facilities to support our distribution centers. The east coast has two

supporting warehouses in Burlington, New Jersey. The west coast has one supporting warehouse in Redlands,
California. These three warehousing facilities occupy an aggregate of 1,456,000 square feet and primarily serve
as storage facilities.

In addition, as of February 1, 2020, we occupied approximately 180,000 square feet of space at a third-party

logistics center in Plainfield, Indiana to support our e-commerce business.

Customer Service

We are committed to providing our customers with an enjoyable shopping experience in stores that are

clean, neat and easy to shop. In training our employees, our goal is to emphasize knowledgeable, friendly
customer service and a sense of professional pride. We offer our customers special services in most of our stores,
such as layaway, to enhance the convenience of their shopping experience.

We have empowered our store teams to provide an outstanding customer experience for every customer in
every store, every day. We have streamlined processes and will continue to strive to create opportunities for fast
and friendly customer interactions. Our goal for our stores is to reflect clean, organized merchandise
presentations that highlight the brands, value and diversity of selection within our assortments.

Our Off-Price Sourcing and Merchandising Model

Our “open to buy” off-price model enables us to provide our customers with products that are nationally

branded, fashionable, high quality and priced right. We have an experienced team of General Merchandise
Managers, Divisional Merchandise Managers and buyers focused on improving comparable store inventory
turnover, inventory age and freshness of merchandise.

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We continue to improve the quality of our brand portfolio, driven by the growth of our merchandising team,

excellent product availability, and a vendor community increasingly committed to grow with Burlington. We
carry many different brands, none of which accounted for more than 2% of our net purchases during Fiscal 2019,
Fiscal 2018 or Fiscal 2017. We have no long-term purchase commitments or arrangements with any of our
suppliers, and believe that we are not dependent on any one supplier. We continue to have good working
relationships with our suppliers.

We have designed our merchant organization so that buyers focus primarily on buying, planners focus
primarily on planning, and information systems help inform data-driven decisions for both groups. Buyers are in
the market each week and focus on purchasing great products for great value. We seek to purchase a majority of
our merchandise in-season. Buyers spend time interacting face-to-face with new and existing vendors and on
continuously evaluating trends in the market to which we believe our customers would respond positively. Our
buyers use a merchant scorecard that rates products across four key attributes—fashion, quality, brand and
price—to help formalize a framework for buying decisions.

Our merchandising model allows us to provide our customers with a wide breadth of product categories.

Sales percentage by major product category is as follows:

Category

Fiscal 2019(a)

Fiscal 2018(a)

Fiscal 2017(a)

Women’s ready-to-wear apparel
Accessories and footwear
Menswear
Youth apparel/baby
Home
Coats

(a) Percentages may not foot due to rounding.

E-Commerce

22%
22%
20%
16%
15%
5%

23%
22%
20%
16%
15%
5%

23%
22%
20%
16%
14%
5%

We employ an online strategy focused on increasing awareness of the breadth of our merchandise selection,
great brands and values, as well as driving traffic to our stores. We execute our strategy through our website and
through social media platforms such as Facebook and Twitter. We are in the process of winding down the sales
of merchandise (other than gift cards) from our website. The website will transition from an e-commerce
platform to an engaging online site filled with inspirational content, showcasing the great finds found in our
stores at a great value. Merchandise sold directly from our website represented approximately 0.5% of our total
sales in Fiscal 2019.

Customer Demographic

Our core customer is the 25-49 year old woman, with an average annual household income of

$25,000-$100,000. The core customer is educated, resides in mid- to large-sized metropolitan areas and is a
brand conscious fashion enthusiast. This customer shops for herself, her family, and her home. We appeal to
value seeking and fashion conscious customers who are price-driven but enjoy the style and fit of high-quality,
branded merchandise.

Marketing and Advertising

We use a variety of broad-based and targeted marketing strategies to efficiently deliver the right message to
the targeted audience at the right time. These strategies include national television, direct mail, email, digital and
social marketing, local radio and out-of-home communications. Our broad television broadcast communication
and reach is balanced with relevant customer contacts to increase frequency of store visits.

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Private Label Credit Card

During Fiscal 2019, we launched a private label credit card program. The program has been rolled out to all

of our stores. We believe this program has the potential to deepen customer loyalty, inform customer contact
strategies, and drive increases in trip frequency and transaction size.

Management Information Systems and Processes

We utilize a combination of industry-standard third party and internally developed information technology
and system solutions to support our business functions. We continually evaluate and implement business system
technologies and solutions that enhance the consistency of our execution and improve the scalability of business
system functions. We utilize standard methodologies to evaluate new initiatives across our entire organization
and make data-driven decisions that support our growth and cost management initiatives.

Competition

The U.S. retail apparel and home furnishings markets are highly fragmented and competitive. We compete

on the basis of a combination of factors, including, among others, price, breadth, quality and style of merchandise
offered, in-store experience, level of customer service, ability to identify and respond to new and emerging
fashion trends, brand image and scalability. We compete for business with department stores, off-price retailers,
specialty stores, online retailers, discount stores, wholesale clubs, and outlet stores, as well as with certain
traditional, full-price retail chains that have developed off-price concepts. At various times throughout the year,
traditional full-price department store chains and specialty shops offer brand-name merchandise at substantial
markdowns, which can result in prices approximating those offered by us at our stores.

Seasonality

Our business, like that of most retailers, is subject to seasonal influences. In the second half of the year,

which includes the back-to-school and holiday seasons, we generally realize a higher level of sales and net
income. Weather is also a contributing factor to the sale of our clothing. Generally, our sales are higher if the
weather is cold during the Fall and warm during the early Spring. Sales of cold weather clothing are increased by
early cold weather during the Fall, while sales of warm weather clothing are improved by early warm weather
conditions in the Spring. Although we have diversified our product offerings, we believe traffic to our stores is
still driven, in part, by weather patterns.

Trademarks

We are the owner of certain registered and common law trademarks, service marks and tradenames
(collectively referred to as the Marks) that we use in connection with our business. Our Marks include, but are
not limited to, “Burlington Stores,” “BCF,” “Burlington,” “Burlington Coat Factory,” “Cohoes,” “Luxury
Linens,” “MJM Designer Shoes,” “B” and “Baby Depot.” We consider these Marks and the accompanying name
recognition to be valuable to our business. We believe that our rights to these properties are adequately protected.
Our rights in these trademarks endure for as long as they are used.

Employees

As of February 1, 2020, we employed approximately 47,000 people, including part-time and seasonal
employees. Our staffing requirements fluctuate during the year as a result of the seasonality of our business. We
hire additional employees and increase the hours of part-time employees during seasonal peak selling periods. As
of February 1, 2020, employees at one of our stores were subject to a collective bargaining agreement.

Available Information

We are subject to the reporting requirements of the Exchange Act. Therefore, we file reports, proxy
statements and other information with the Securities and Exchange Commission (SEC). The SEC maintains a

5

website (http://www.sec.gov) that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC, including us.

You can access financial and other information about us in the Investor Relations page of our website at
www.burlingtoninvestors.com. We make available through our website, free of charge, copies of our annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those
reports filed with or furnished to the SEC under Section 13(a) or 15(d) of the Exchange Act as soon as
reasonably practicable after electronically filing or furnishing such material to the SEC.

Investors and others should note that we currently announce material information using SEC filings, press
releases, public conference calls and webcasts. In the future, we will continue to use these channels to distribute
material information about the Company, and may also utilize our 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 we post on our website or on
social media channels could be deemed material; therefore, we encourage investors, the media, our customers,
business partners and others interested in the Company to review the information posted on our website, as well
as the following social media channels: Facebook (https://www.facebook.com/BurlingtonStores) and Twitter
(https://twitter.com/burlington). Any updates to the list of social media channels we may use to communicate
material information will be posted on the Investor Relations page of our website at
www.burlingtoninvestors.com.

The information contained on, or accessible through, our website and these social media channels is not part

of this Annual Report and is therefore not incorporated by reference. The references to our website and these
social media channels are intended to be inactive textual references only.

Item 1A. Risk Factors

Set forth below are certain important risks and uncertainties that could adversely affect our results of

operations, financial condition or cash flows and cause our actual results to differ materially from those
expressed in forward-looking statements made by us. Although we believe that we have identified and discussed
below the key risk factors affecting our business, there may be additional risks and uncertainties that are not
presently known or that are not currently believed to be significant that may adversely affect our results of
operations, financial condition or cash flows. Before making an investment decision, you should carefully
consider the risks and uncertainties described below together with all of the other information included or
incorporated by reference in this Annual Report. If we are not successful in managing these risks and
uncertainties, they could have a negative impact on our results of operations, financial condition and cash flows.

Risks Related to Our Business and Our Substantial Indebtedness

A downturn in general economic conditions or consumer spending could adversely affect our business.

Consumer spending habits, including spending for the merchandise that we sell, are affected by, among
other things, prevailing global economic conditions, inflation, levels of employment, salaries and wage rates,
prevailing interest rates, housing costs, energy costs, commodities pricing, income tax rates and policies,
consumer confidence and consumer perception of economic conditions. In addition, consumer purchasing
patterns may be influenced by consumers’ disposable income, credit availability and debt levels. Slowdown in
the U.S. economy, an uncertain global economic outlook or a credit crisis could adversely affect consumer
spending habits, resulting in lower net sales and profits than expected on a quarterly or annual basis. Consumer
confidence is also affected by the domestic and international political situation. Our financial condition and
operations could be impacted by changes in government regulations in areas, including taxes and healthcare. The
outbreak or escalation of war, or the occurrence of terrorist acts or other hostilities in or affecting the U.S. could
lead to a decrease in spending by consumers. In addition, natural disasters, industrial accidents, acts of war, and

6

public health issues such as pandemics or epidemics could have the effect of disrupting supplies and raising
prices globally which, in turn, may have adverse effects on the world and U.S. economies and lead to a downturn
in consumer confidence and spending.

Concerns are rapidly growing about the outbreak of a novel strain of coronavirus (COVID-19) that was first

reported in China in December 2019. Since then, the virus has spread to over 100 countries, including the U.S.
The number of people ill with or dying of a viral pneumonia caused by the virus is rising rapidly, despite
quarantines of millions of people and other measures to try to stop it or slow its spread. As the pandemic
continues to grow, consumer fear about becoming ill with the virus and recommendations and/or mandates from
federal, state and local authorities to avoid large gatherings of people or self-quarantine may continue to increase,
which may adversely affect traffic to our stores. Any significant reduction in customer visits to, and spending at,
our stores caused by COVID-19 would result in a loss of sales and profits and other material adverse effects. The
extent of the impact of COVID-19 on our business and financial results will depend largely on future
developments, including the duration and spread of the outbreak within the U.S. and the related impact on
consumer confidence and spending, all of which are highly uncertain and cannot be predicted.

We face increased competition from other retailers that could adversely affect our business.

The retail sector is highly competitive, and retailers are constantly adjusting their business models,
promotional activities and pricing strategies in response to changing conditions. We compete on the basis of a
combination of factors, including among others, price, breadth, quality and style of merchandise offered, in-store
experience, level of customer service, ability to identify and respond to new and emerging fashion trends, brand
image and scalability. We compete with a wide variety of retailers for customers, vendors, suitable store
locations and personnel. In order to increase traffic and drive consumer spending, competitors, including
department stores, mass merchants and specialty apparel stores, have been offering brand-name merchandise at
substantial markdowns. Continuation of this trend, or the possible effect on consumer buying patterns that
improving economic conditions could have, may cause consumer demand to shift from off-price retailers to other
retail categories, which could have a material adverse effect on our business, financial condition and results of
operations.

Certain traditional, full-price retail chains have developed off-price concepts, which may directly compete

with our business. Our competitors, including such retail chains, may seek to emulate facets of our business
strategy, which could result in a reduction of any competitive advantage or special appeal that we might
possess. In addition, most of our products are sold to us on a non-exclusive basis. As a result, our current and
future competitors may be able to duplicate or improve on some or all of our product offerings that we believe
are important in differentiating our stores. If our competitors were to duplicate or improve on some or all of our
in-store experience or product offerings, obtaining the products we sell may become increasingly difficult,
competition for customers may increase, and our competitive position and our business could suffer.

We may not be able to sustain our growth plans or successfully implement our long-range strategic goals.

Our growth largely depends on our ability to successfully open and operate new stores, as well as to expand

our distribution capabilities in order to support that growth. We intend to open 54 net new stores in 2020, while
refreshing, remodeling or relocating a portion of our existing store base annually. The success of these strategies
is dependent upon, among other things, the current retail environment, the identification of suitable markets and
the availability of real estate that meets our criteria for traffic, square footage, co-tenancies, lease economics,
demographics, and other factors, the negotiation of acceptable lease terms, construction costs, the availability of
financing, the hiring, training and retention of competent sales personnel, and the effective management of
inventory to meet the needs of new and existing stores on a timely basis.

Notably, as we continue to evolve our off-price model, we plan on more effectively chasing the sales trend,

making greater investments in our merchandising capabilities, operating with leaner inventories, improving

7

operational flexibility, and challenging expenses, among other things. Executing these initiatives while also
maintaining the current pace of our expansion may place increased demands on our operational, managerial and
administrative resources. These initiatives may require us to increase the number of merchants and other
associates we employ, modify how we manage our liquidity and inventory, as well as to monitor and upgrade our
management information and other systems and our distribution infrastructure.

We may not be able to successfully execute our growth and other strategies on a timely basis or at all. If we

fail to implement these strategies successfully, if we cannot keep up with the pace required for execution, or if
these strategies do not yield the desired outcomes, our financial condition and results of operations would be
adversely affected.

Our net sales, operating income and inventory levels fluctuate on a seasonal basis, and decreases in sales or
margins during our peak seasons could have a disproportionate effect on our overall financial condition and
results of operations.

Our net sales and operating income fluctuate seasonally, with a higher level of our operating income
typically realized during the second half of the year. Any decrease in sales or margins during this period could
have a disproportionate effect on our financial condition and results of operations. Seasonal fluctuations also
affect our inventory levels. We must carry a significant amount of inventory, especially before the holiday season
selling period. If we are not successful in selling our inventory, we may have to write down our inventory or sell
it at significantly reduced prices or we may not be able to sell such inventory at all, which could have a material
adverse effect on our financial condition and results of operations.

A reduction in traffic to, or the closing of, the other destination retailers in the shopping areas where our
stores are located could significantly reduce our sales and leave us with excess inventory, which could have a
material adverse effect on our business, financial condition, profitability and cash flows.

Many of our stores are strategically located in off-mall shopping areas known as “power centers.” Power
centers typically contain three to five big-box anchor stores along with a variety of smaller specialty tenants. Due
to many of our stores being located in such shopping areas, our sales are derived, in part, from the volume of
traffic generated by the other destination retailers and the anchor stores in power centers where our stores are
located. Customer traffic to these shopping areas may be adversely affected by the closing of such destination
retailers or anchor stores, or by a reduction in traffic to such stores resulting from a regional or global economic
downturn, a general downturn in the local area where our store is located, or a decline in the desirability of the
shopping environment of a particular power center. Such a reduction in customer traffic would reduce our sales
and leave us with excess inventory, which could have a material adverse effect on our business, financial
condition, profitability and cash flows. We may respond by increasing markdowns or transferring product to
other stores to reduce excess inventory, which would further decrease our gross profits and net income.

Failure to execute our opportunistic buying and inventory management process could adversely affect our
business.

We purchase the majority of our inventory opportunistically, with our buyers purchasing close to need.
Establishing the “treasure hunt” nature of the off-price buying experience to drive traffic to our stores requires us
to offer changing assortments of merchandise in our stores. While opportunistic purchasing provides our buyers
the ability to buy at desirable times and prices, in the quantities we need and into market trends, it places
considerable discretion with our buyers, which subjects us to risks related to the pricing, quantity, nature and
timing of inventory flowing to our stores. If we are unable to provide frequent replenishment of fresh, high
quality, attractively priced merchandise in our stores, it could adversely affect traffic to our stores as well as our
sales and margins. We base our purchases of inventory, in part, on our sales forecasts. If our sales forecasts do
not match customer demand, we may experience higher inventory levels and need to markdown excess or slow-
moving inventory, leading to decreased profit margins, or we may have insufficient inventory to meet customer

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demand, leading to lost sales, either of which could adversely affect our financial performance. We need to
purchase inventory sufficiently below conventional retail to maintain our pricing differential to regular
department and specialty store prices, and to attract customers and sustain our margins, which we may not
achieve at various times and which could adversely affect our results.

In order to better serve our customers and maximize sales, we must properly execute our inventory
management strategies by appropriately allocating merchandise among our stores, timely and efficiently
distributing inventory to such locations, maintaining an appropriate mix and level of inventory in such locations,
appropriately changing the allocation of floor space of stores among product categories to respond to customer
demand, and effectively managing pricing and markdowns, and there is no assurance we will be able to do so. In
addition, as we execute inventory localization initiatives, there could be disruptions in inventory flow and
placement. Failure to effectively execute our opportunistic inventory buying and inventory management
strategies could adversely affect our performance and our reputation.

In addition to our own execution, we may need to react to factors affecting inventory flow that are outside
our control, such as adverse weather, natural disasters, epidemics or pandemics (including COVID-19) or other
changes in conditions affecting our vendors and others in our supply chain, such as political instability, labor
issues (including strikes or threats of strikes and scarcity of labor) or increasing cost of regulations. If we are not
able to adjust appropriately to such factors, our inventory management may be affected, which could impact our
performance and our reputation.

Failure to identify customer trends and preferences to meet customer demand could negatively impact our
performance and reputation.

Because our success depends on our ability to meet customer demand, we work to follow customer trends

and preferences on an ongoing basis and to buy inventory in response to those trends and preferences. However,
identifying consumer trends and preferences in the diverse product lines and many markets in which we do
business and successfully meeting customer demand across those lines and for those markets on a timely basis is
challenging. Although our flexible business model allows us to buy close to need and in response to consumer
preferences and trends, and to expand and contract merchandise categories in response to consumers’ changing
tastes, we may not do so successfully, which could adversely affect our sales and the markdowns required to
move the resulting excess inventory will adversely affect our operating margins.

Customers may also have expectations about how they shop in stores, or more generally engage with
businesses across different channels or media (through internet-based and other digital or mobile channels or
particular forms of social media), which may vary across demographics and may evolve rapidly. Customers are
increasingly using technology and mobile devices to rapidly compare products and prices and to purchase
products. Failure to effectively meet these changing expectations and demands, including any failure of the planned
transformation of our e-commerce platform, may adversely impact our reputation and our financial results.

Many stakeholders, including investors, customers, consumers and others, have increasingly focused on
sustainability matters. If we do not (or are perceived not to) act responsibly with respect to any sustainability
matters, our reputation could be harmed, which could negatively impact our business and results of operations.

If we are unable to renew or replace our store leases or enter into leases for new stores on favorable terms, if
our current leases are terminated prior to the expiration of their stated term and we cannot find suitable
alternate locations, or if we cannot optimize our existing stores, our growth strategy and profitability could be
negatively impacted.

We lease substantially all of our store locations. Most of our current leases expire at various dates after
ten-year terms, the majority of which are subject to our option to renew such leases for several additional five-year
periods. While we have the right to terminate some of our leases under specified conditions, including by making

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specified payments, we may not be able to terminate a particular lease if or when we would like to close a particular
store. If we decide to close stores, we are generally required to continue to perform obligations under the applicable
leases, which generally include, among other things, paying rent and operating expenses for the balance of the lease
term, or paying to exercise rights to terminate, and performing any of these obligations may be expensive. When we
assign leases or sublease space to third parties, we may remain liable on the lease obligations, which could lead to
significant expense if the assignee or sublessee does not perform. In addition, when the lease terms for the stores in
our ongoing operations expire, our ability to renew such expiring leases on commercially acceptable terms or, if
such leases cannot be renewed, our ability to lease a suitable alternative location, and our ability to enter into leases
for new stores on favorable terms will each depend on many factors, some of which may not be within our control,
such as conditions in the local real estate market, competition for desirable properties and our relationships with
current and prospective lessors. As we renew and replace our store leases, we also strive to optimize the size of our
existing stores to ensure maximum space utilization, which frequently means adjusting operations to accommodate
smaller space through alternative floor plans and inventory turn optimization.

In addition, to the extent that our new store openings are in existing markets, we may experience reduced

net sales volumes in existing stores in those markets. We expect to fund some of our expansion through cash
flow from operations, lease incentives from our lessors, and, if necessary, by borrowings under our line of
credit. If we experience a decline in performance or lease payment allowances from our lessors become
unavailable, we may slow or discontinue store openings, relocations, refreshes and/or remodels.

If we are unable to effectively manage our existing portfolio of real estate leases, renew existing leases or
lease suitable alternative locations, enter into leases for new stores on favorable terms, or optimize our existing
stores, our growth and profitability may be negatively impacted.

Extreme and/or unseasonable weather conditions, or catastrophic events could have a significant adverse
effect on our business, financial condition and results of operations.

Extreme weather conditions in the areas in which our stores or distribution centers are located – especially
in areas with a high concentration of our stores – could have a material adverse effect on our business, financial
condition and results of operations. For example, heavy snowfall or other extreme weather conditions over a
prolonged period might make it difficult for our customers or employees to travel to our stores. In addition,
natural disasters such as hurricanes, tornados, floods, earthquakes, and other extreme weather or climate
conditions, or a combination of these or other factors, could severely damage or destroy one or more of our stores
or distribution facilities located in the affected areas, or disrupt our computer systems, thereby disrupting our
business operations. Any of these events or circumstances also could disrupt the operations of one or more of our
vendors. Day-to-day operations, particularly our ability to receive products from our vendors or transport
products to our stores, could be adversely affected, or we could be required to close stores. Finally, if the
COVID-19 pandemic continues to grow within the U.S., we may decide or be required to temporarily close a
significant number of our stores in various affected areas, which could have a material adverse effect on our
business and results of operations.

Our business is also susceptible to unseasonable weather conditions. For example, extended periods of
unseasonably warm temperatures during the Fall or Winter seasons or cool weather during the Spring or Summer
seasons could render a portion of our inventory incompatible with those unseasonable conditions, particularly in
light of our historical product mix. These prolonged unseasonable weather conditions could adversely affect our
business, financial condition and results of operations. In addition, because higher net sales historically have
occurred during the second half of the year, unseasonably warm weather during these months could have a
disproportionately large effect on our business and materially adversely affect our financial condition and results
of operations.

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Since we do not have long-term contracts with our vendors, if we are unable to purchase attractive brand
name merchandise in sufficient quantities at competitive prices, we may be unable to offer an appealing
merchandise mix and our sales may be harmed.

Our ability to purchase merchandise opportunistically from third party vendors depends upon the

continuous, sufficient availability of high quality merchandise that we can acquire at prices sufficiently below
those paid by conventional retailers in order to achieve the value proposition we strive to provide to our
customers. Some of our key vendors may limit the number of retail channels they use to sell their merchandise,
which may result in intense competition among retailers to obtain and sell these goods. In addition, most of the
brands of our top vendors are sold by competing retailers and some of our top vendors also have their own
dedicated retail stores. Moreover, we typically buy products from our vendors on a purchase order basis. We
have no long-term purchase contracts with any of our vendors and, therefore, have no contractual assurances of
continued supply, pricing or access to products, and any vendor could change the terms upon which they sell to
us or discontinue selling to us at any time. Finally, if our vendors are better able to manage their inventory levels
and reduce the amount of their excess inventory, the amount of high quality merchandise available to us could be
materially reduced.

If our relationships with our vendors are disrupted, we may not be able to acquire the merchandise we
require in sufficient quantities or on terms acceptable to us. Any inability to acquire high quality merchandise
would have a negative effect on our business and operating results because we would be missing products from
our merchandise mix unless and until alternative supply arrangements were made, resulting in deferred or lost
sales. In addition, events that adversely affect our vendors could impair our ability to obtain desired merchandise
in sufficient quantities. Such events include difficulties or problems associated with our vendors’ businesses,
finances, labor, importation of products, costs, production, insurance and reputation.

The loss of executives or other key personnel or our failure to facilitate senior management smooth transitions
may disrupt our business and adversely affect our financial results.

We depend on the contributions of key personnel in various functions for our continued success. These
executives and other key personnel may be hired by our competitors, some of which have considerably more
financial resources than we do. The loss of key personnel, or the inability to hire, train, motivate and retain
qualified employees, or changes to our organizational structure, operating results, or business model that
adversely affect morale or retention, could adversely affect our business, financial condition and results of
operations. Effective succession planning is also a key factor for our success.

In Fiscal 2019, we experienced significant transitions among the Company’s senior management with the

appointment of a new Chief Executive Officer and a new Chief Financial Officer. Our failure to enable the
effective transfer of knowledge and facilitate smooth transitions with regard to these key personnel and others
could adversely affect our strategic planning and execution and negatively affect our business, financial
condition and results of operations. If we fail to enable the effective transfer of knowledge and facilitate smooth
transitions for key personnel, the operating results and future growth for our business could be adversely
affected, and the morale and productivity of the workforce could be disrupted.

Our failure to attract, train and retain quality employees and temporary personnel in appropriate numbers
could adversely affect our business.

Our performance depends on recruiting, developing, training and retaining quality sales, systems,
distribution center and other employees in large numbers as well as experienced buying and management
personnel, and we invest significant resources in training and motivating them to maintain a high level of job
satisfaction. Many of our store employees are in entry level or part-time positions with historically high rates of
turnover, which can lead to increased training and retention costs, particularly if employment opportunities
increase. Availability and skill of employees may differ across markets in which we do business and in new
markets we enter, and we need to manage our labor needs effectively.

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In addition, because of the distinctive nature of our off-price model, we must provide significant internal

training and development for key employees across the company, including within our buying
organization. Similar to other retailers, we face challenges in securing and retaining sufficient talent in
management and other key areas for many reasons, including competition in the retail industry generally and for
talent in various geographic markets. If we do not continue to attract qualified individuals, train them in our
business model, support their development and retain them, our performance could be adversely affected or our
growth could be limited.

We are also dependent upon temporary personnel to adequately staff our stores and distribution facilities,
with heightened dependence during busy periods such as the holiday season and when multiple new stores are
opening. Although we strive to secure long-term contracts on favorable terms with our service providers and
other vendors, we may not be able to avoid unexpected operating cost increases in the future, such as those
associated with minimum wage increases or enhanced health care requirements. In addition, there can be no
assurance that we will receive adequate assistance from our temporary personnel, or that there will be sufficient
sources of suitable temporary personnel to meet our demand. Any such failure to meet our staffing needs or any
material increases in associate turnover rates could have a material adverse effect on our business or results of
operations. Further, any negative publicity regarding the agencies from which we source temporary personnel,
such as in connection with immigration issues or employment practices, could damage our reputation, disrupt our
ability to obtain needed labor or result in financial harm to our business.

Labor costs, including healthcare costs, and other challenges from our large workforce may adversely affect
our results and profitability.

We have a large workforce, and our ability to meet our labor needs while controlling costs, including costs
of providing health, retirement and other associate benefits, is subject to various factors such as unemployment
levels; prevailing wage rates and minimum wage requirements; participant benefit levels; economic conditions;
interest rate changes; health and other insurance costs; and the regulatory environment, including health care
legislation, and with respect to governmental labor and employment and associate benefits programs and
requirements. When wage rates or benefit levels increase in the market or the unemployment rate is otherwise
low, increasing our wages or benefits to compete for employees may cause our earnings to decrease, while failing
to increase our wages or benefits competitively or reducing our wages or benefits could result in a decline in our
ability to attract or retain employees or in the quality of our workforce, causing our customer service or
performance to suffer, which could negatively impact our results.

Parties with whom we do business may be subject to insolvency risks or may otherwise become unable or
unwilling to perform their obligations to us.

We are party to contracts, transactions and business relationships with various third parties, including

vendors, suppliers, service providers and lenders, pursuant to which such third parties have performance,
payment and other obligations to us. In some cases, we depend upon such third parties to provide essential
leaseholds, products, services or other benefits, including with respect to store and distribution center locations,
merchandise, advertising, software development and support, logistics, other agreements for goods and services
in order to operate our business in the ordinary course, extensions of credit, hedging instruments and other vital
matters. Economic, industry and market conditions could result in increased risks to us associated with the
potential financial distress of such third parties.

If any of the third parties with which we do business become subject to bankruptcy, receivership or similar

insolvency proceedings, our rights and benefits in relation to our contracts, transactions and business
relationships with such third parties could be terminated, modified in a manner adverse to us, or otherwise
impaired. We cannot make any assurances that we would be able to arrange for alternate or replacement
contracts, transactions or business relationships on terms as favorable as our existing contracts, transactions or
business relationships, if at all. Any inability on our part to do so could negatively affect our cash flows, financial
condition and results of operations.

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Many of our vendors produce merchandise overseas, and our business is exposed to the risk of foreign and
domestic operations and international tax policies and trade relations.

We do not own or operate any manufacturing facilities. As a result, we are dependent upon the timely
receipt of quality merchandise from vendors, many of which produce merchandise overseas. Factors which affect
overseas production could affect our vendors and, in turn, our ability to obtain inventory and the price levels at
which they may be obtained. Factors that cause an increase in merchandise costs or a decrease in supply could
lead to generally lower sales and gross margins in the retail industry.

Such factors include:

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political or labor instability in countries where vendors are located or at foreign ports which could result in
lengthy shipment delays, which, if timed ahead of the Fall and Winter peak selling periods, could materially
and adversely affect our ability to stock inventory on a timely basis;

disruptions in the operations of domestic ports through which we import our merchandise, including labor
disputes involving work slowdowns, lockouts or strikes, which could require us and/or our vendors to ship
merchandise to alternative ports in the United States or through the use of more expensive means, and
shipping to alternative ports in the United States could result in increased lead times and transportation
costs; disruptions at ports through which we import our goods could also result in unanticipated inventory
shortages;

political or military conflict, which could cause a delay in the transportation of our products to us and an
increase in transportation costs;

heightened terrorism security concerns, which could subject imported goods to additional, more frequent or
more thorough inspections, leading to delays in deliveries or impoundment of goods for extended periods;

disease epidemics, pandemics (including COVID-19), outbreaks and other health-related concerns, which
could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargoing of
goods produced in infected areas;

natural disasters and industrial accidents, which could have the effect of curtailing production and disrupting
supplies;

increases in labor and production costs in goods-producing countries, which would result in an increase in
our inventory costs;

the migration and development of manufacturers, which can affect where our products are or will be
produced;

fluctuation in our vendors’ local currency against the dollar, which may increase our cost of goods sold; and

changes in import duties, taxes, charges, quotas, loss of “most favored nation” trading status with the United
States for a particular foreign country and trade restrictions (including the United States imposing
antidumping or countervailing duty orders, safeguards, remedies or compensation and retaliation due to
illegal foreign trade practices).

Any of the foregoing factors, or a combination thereof, could have a material adverse effect on our business.

Over the past couple years, uncertainty has increased with respect to tax and trade policies, tariffs and
government regulations affecting trade between the U.S. and other countries. Although we source the majority of
our merchandise from third party vendors located in the U.S., the production of that merchandise occurs
primarily overseas. As a result, we continue to evaluate the impact of the effective and any additional proposed
tariffs on our supply chain, costs, sales and profitability. Given the uncertainty regarding the scope and duration
of the tariffs on Chinese goods, as well as the potential for additional trade actions by the U.S. or other countries,
the impact on our operations and results is uncertain, and we can provide no assurance that any strategies we
implement to mitigate the impact of such tariffs or other trade actions will be successful.

13

In addition, other major developments in tax policy or trade relations, such as the disallowance of tax
deductions for imported merchandise or the imposition of additional unilateral tariffs on imported products could
increase the cost of products purchased from suppliers in such countries or restrict the importation of products
from such countries, which in turn could have a material adverse effect on our business, results of operations and
liquidity.

Any disruption to our distribution network, including the shutdown of one of our primary distribution centers
or complications with any third-party vendors that support our network, or increases in the cost of their
services, could cause disruptions in our business, a loss of sales and profits, increases in our expenses, and
other material adverse effects.

Most of the merchandise we purchase is shipped directly to our distribution centers, where it is prepared for
shipment to the appropriate stores. The success of our stores depends on their timely receipt of merchandise, and
a strong, efficient and flexible distribution network is critical to our ability to grow and to maintain a low-cost
operating structure. A disruption within our distribution network, including the shutdown of or loss of significant
capacity by one of our current primary distribution centers, could adversely affect our ability to deliver inventory
in a timely manner and significantly disrupt our business. In addition, any failure to continue to add capacity to
our existing distribution centers and build out planned additional distribution centers timely and cost effectively
could adversely affect our business.

In addition to the distribution centers that we operate, we have arrangements with third parties for the use of

pool point facilities, which we believe streamline and optimize our distribution network. If complications arise
with a pool point facility or its operator, or if any such facility is severely damaged or destroyed, it may cause
delays in the delivery of our merchandise to our stores. We also may be affected by disruptions in the global
transportation network such as port strikes, weather conditions, work stoppages or other labor unrest, which may
also adversely affect our ability to deliver inventory on a timely basis. We also depend upon third-party carriers
for shipment of merchandise; any interruption in service by these carriers for any reason could cause disruptions
in our business, a loss of sales and profits, and other material adverse effects.

Finally, if the COVID-19 pandemic continues to grow, our import supply chain could experience severe
delays due to closed factories and/or reduction in processing capacity as a result of workers not being able to
return back to work or other labor shortages, which could cause disruptions in our business, a loss of sales and
profits, and other adverse effects.

If we are unable to protect our information systems against service interruption, misappropriation of data,
breaches of security, or other cyber-related attacks, our operations could be disrupted, we may suffer financial
losses and our reputation may be damaged.

We rely extensively on various information systems, including data centers, hardware, software and
applications to manage many aspects of our business, including to process and record transactions in our stores,
to enable effective communication systems, to plan and track inventory flow, to manage logistics and to generate
performance and financial reports. In addition, some aspects of our business, like that of most retailers, involve
the receipt, storage and transmission of customers’ personal information and consumer preferences, as well as
confidential information about our employees, our vendors and our Company, some of which is entrusted to
third-party service providers and vendors. We are dependent on the integrity, security and consistent operations
of these systems and related back-up systems, software, tools (including encryption technology) and monitoring
to provide security and oversight for processing, transmission, storage and the protection of such confidential
information.

Like most major corporations, however, we, our customers and our third-party services providers face an

evolving, increasing threat landscape in which cybercriminals, among others, employ a complex array of
techniques designed to access personal and other information, including, for example, the use of fraudulent or

14

stolen access credentials, malware, ransomware, phishing, denial of service and other types of attacks. Hardware,
software or applications we develop or obtain from third parties may contain defects in design or manufacture or
other problems that are not presently known and could unexpectedly compromise information security. In
addition, our employees, contractors or third parties with which we do business or to which we outsource
business operations may attempt to circumvent our security measures in order to misappropriate such
information, and may purposefully or inadvertently cause a breach involving such information or become subject
to various other cyber-crimes. Further, our computer systems and the third-party systems of our vendors are also
subject to damage or interruption from a number of non-criminal causes, including power outages; computer and
telecommunications failures; computer viruses; and design or usage errors by our employees or contractors.

If we or third parties with which we do business were to fall victim to successful cyber-attacks or experience

other cybersecurity incidents, including the loss of individually identifiable customer or other sensitive data, we
may incur substantial costs and suffer other negative consequences, which may include:

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remediation costs, such as liability for stolen assets or information, repairs of system damage or replacement
of systems, and incentives to customers or business partners in an effort to maintain relationships after an
attack;

increased cybersecurity protection costs, which may include the costs to continuing to make organizational
changes, deploy additional personnel and protection technologies, train employees, and engage third party
consultants;

lost revenues resulting from the unauthorized use of proprietary information or the failure to retain or attract
customers following an attack;

litigation and legal risks, including regulatory actions by state and federal governmental authorities;

increased cybersecurity and other insurance premiums;

reputational damage that adversely affects customer or investor confidence; and

damage to our competitiveness, stock price, and long-term stockholder value.

Despite advances in security hardware, software, and encryption technologies, the methods and tools used to

obtain unauthorized access, disable or degrade service, or sabotage systems are constantly changing and
evolving, and may be difficult to anticipate or detect for long periods of time, and there is no guarantee that the
proactive measures we put in place will be adequate to safeguard against all data security breaches or misuses of
data.

Although we endeavor to protect consumer identity and payment information through the implementation

and modification of security technologies, processes and procedures, including training programs for employees
to raise awareness about phishing, malware and other cyber risks and certification of our major technology
suppliers and any outsourced services through accepted security certification measures, we could experience
increased costs associated with maintaining these protections as threats of cyber-attacks increase in sophistication
and complexity. In addition, there are additional inherent risks associated with modifying or replacing systems,
and with new or changed relationships, including accurately capturing and maintaining data, realizing the
expected benefit of the change and managing the potential disruption of the operation of the systems as the
changes are implemented. Potential issues associated with implementing technology initiatives and the time and
resources required to optimize the benefits of new elements of our systems and infrastructure could reduce the
efficiency of our operations in the short term.

Compliance with increasingly rigorous privacy and data security regulations could be costly, affect or limit
our business opportunities and how we collect and/or use data, and potentially subject us to fines and lawsuits.

As described above, the protection of customer, employee, vendor and Company data is critical to our

business. As the regulatory environment relating to retailers’ and other companies’ obligation to protect such

15

sensitive data becomes increasingly rigorous, with new and evolving requirements applicable to our business,
compliance with those requirements could result in additional costs; could have a significant impact on our
current and planned privacy, data protection and information security-related practices, our collection, use,
sharing, retention and safeguarding of customer and/or employee information, and some of our current or future
business plans; and a material failure on our part to comply could subject us to fines or other regulatory sanctions
and potentially to lawsuits.

In recent years, there has been increasing regulatory enforcement and litigation activity in the area of
privacy, data protection and information security in various states in which we operate. Notably, on January 1,
2020, the California Consumer Privacy Act of 2018 (the “CCPA”) became effective. The CCPA requires certain
companies to satisfy new requirements regarding the handling of personal and sensitive data, including its use,
protection and the ability of California residents whose data is stored to know specifically what data types each
company has collected on them and, if they so choose, the right to demand that such companies delete their data.
While we believe we have sufficient measures in place to comply with our obligations under the CCPA, failure to
comply with its requirements could result in civil penalties, and it additionally provides a private right of action
that allows consumers to seek, either individually or as a class, statutory or actual damages and injunctive and
other relief, if their sensitive personal information is subject to unauthorized access and exfiltration, theft or
disclosure as a result of a business’s failure to implement and maintain required reasonable security procedures.
Compliance with the CCPA and other similar laws will likely increase the costs of doing business, especially if
we face differing regulatory requirements across multiple jurisdictions and/or a lack of adequate regulatory
guidance. New legislation or regulations such as the CCPA, including any potential comprehensive federal
privacy legislation, as well as any associated inquiries or investigations or any other government actions, could
also result in negative publicity, require significant management time and attention, and subject us to remedies
that may harm our business, including fines or demands or orders that we modify or cease existing business
practices.

We are subject to payment-related risks that could increase our operating costs, expose us to fraud or theft,
subject us to potential liability and potentially disrupt our business.

We accept payments using a variety of methods, including cash, checks, credit and debit cards, and gift

cards, and we may offer new payment options over time. Acceptance of these payment methods subjects us to
rules, regulations, contractual obligations and compliance requirements, including payment network rules and
operating guidelines, data security standards and certification requirements, and rules governing electronic funds
transfers. These requirements may change over time or be reinterpreted, making compliance more difficult or
costly.

For certain payment methods, including credit and debit cards, we pay interchange and other fees, which
may increase over time and raise our operating costs. We rely on third parties to provide payment processing
services, including the processing of credit cards, debit cards, and other forms of electronic payment. If these
companies become unable to provide these services to us, or if their systems are compromised, it could
potentially disrupt our business. The payment methods that we offer also subject us to potential fraud and theft
by criminals, who are becoming increasingly more sophisticated, seeking to obtain unauthorized access to or
exploit weaknesses that may exist in the payment systems. If we fail to comply with applicable rules or
requirements for the payment methods we accept, or if payment-related data is compromised due to a breach or
misuse of data, we may be liable for costs incurred by payment card issuing banks and other third parties or
subject to fines and higher transaction fees, or our ability to accept or facilitate certain types of payments may be
impaired. In addition, our customers could lose confidence in certain payment types, which may result in a shift
to other payment types or potential changes to our payment systems that may result in higher costs. As a result,
our business and operating results could be adversely affected.

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Issues with merchandise safety could damage our reputation, sales and financial results.

Various governmental authorities in the jurisdictions where we do business regulate the safety of the
merchandise we sell to consumers. Regulations and standards in this area, including those related to the U.S.
Consumer Product Safety Improvement Act of 2008, state regulations like California’s Proposition 65, and
similar legislation, impose restrictions and requirements on the merchandise we sell in our stores. These
regulations change from time to time as new federal, state or local regulations are enacted. If we or our
merchandise vendors are unable to comply with regulatory requirements on a timely basis or at all, or to
adequately monitor new regulations that may apply to existing or new merchandise categories, significant fines
or penalties could be incurred or we could have to curtail some aspects of our sales or operations, which could
have a material adverse effect on our financial results.

We rely on our vendors to provide quality merchandise that complies with applicable product safety laws
and other applicable laws, but they may not comply with their obligations to do so. Although our arrangements
with our vendors frequently provide for indemnification for product liabilities, the vendors may fail to honor
those obligations to an extent we consider sufficient or at all. Issues with the safety of merchandise, and issues
with the authenticity of merchandise, or customer concerns about such issues, regardless of our fault, could cause
damage to our reputation and could result in lost sales, uninsured product liability claims or losses, merchandise
recalls and increased costs, and regulatory, civil or criminal fines or penalties, any of which could have a material
adverse effect on our financial results.

Difficulty complying with existing laws, rules, regulations and local codes, or changes in existing laws, rules,
regulations and local codes, could negatively affect our business operations and financial performance.

We are subject to federal, state and local laws, rules and regulations in the operation of our business. In
addition to complying with current laws, rules and regulations, we must also comply with new and changing laws
and regulations, new regulatory initiatives, evolving interpretation of existing laws by judicial and regulatory
authorities, and reforms in jurisdictions where we do business. Complying with local zoning codes, real estate
land use restrictions, employment-related laws, and other local laws across numerous jurisdictions is particularly
challenging as we grow the number of our stores in new municipalities and need to stay abreast of changes in
such local laws. The increasing proliferation of local laws, some of which may be conflicting, further
complicates our efforts to comply with all of the various laws, rules and regulations that apply to our business.

All of the above legal, regulatory and administrative requirements collectively affect multiple aspects of our

business, including those involving labor and employment benefits; health, welfare and finance; real estate
management; consumer protection and product safety; climate change, supply chain, energy and waste;
electronic communications, data protection and privacy; and protection of third party intellectual property
rights. Changes to these laws and regulations could increase our costs of compliance or of doing business, and
could adversely affect our operating results. In addition, if we fail to comply with these laws, rules and
regulations, we may be subject to judgments, fines or other costs or penalties, which could materially adversely
affect our business operations and financial performance.

Changes in accounting standards and subjective assumptions, estimates and judgments by management
related to complex accounting matters could significantly affect our financial results or financial condition.

Generally accepted accounting principles and related accounting pronouncements, implementation
guidelines and interpretations with regard to a wide range of matters that are relevant to our business, such as
inventories, leases, and self-insurance reserves, are highly complex and involve many subjective assumptions,
estimates and judgments. Changes in these rules or their interpretation, or changes in underlying assumptions,
estimates or judgments, could significantly change our reported or expected financial performance or financial
condition.

17

Our future growth and profitability could be adversely affected if our advertising and marketing programs are
not effective in generating sufficient levels of customer awareness and traffic.

We rely on advertising to increase consumer awareness of our product offerings and pricing to drive traffic

to our stores. In addition, we rely and will increasingly rely on other forms of media advertising, including
digital, social media and e-marketing. Our future growth and profitability will depend in part upon the
effectiveness and efficiency of our advertising and marketing programs. Our advertising and marketing programs
may not be successful if we do not:

• manage advertising and marketing costs effectively in order to maintain acceptable operating margins and

return on our marketing investment; and

•

convert customer awareness into actual store visits and product purchases.

Our planned advertising and marketing expenditures may not result in increased total or comparable store
sales or generate sufficient levels of product awareness. Further, we may not be able to manage our advertising
and marketing expenditures on a cost-effective basis. Additionally, some of our competitors may have
substantially larger marketing budgets, which may provide them with a competitive advantage over us.

Damage to our corporate reputation or brand could adversely affect our sales and operating results.

Building brand reputation is important to our continuing success. Our reputation is partially based on
perceptions of various subjective qualities and overall integrity. Any incident that erodes the trust or confidence
of our customers or the general public could adversely affect our reputation and business, particularly if the
incident results in significant adverse publicity or governmental inquiry. In addition, information concerning us,
whether or not true, may be instantly and easily posted on social media platforms and similar devices at any time,
which information may be adverse to our reputation or business. The harm may be immediate without affording
us an opportunity for redress or correction. Damage to our reputation in any form could result in declines in
customer loyalty and sales, affect our vendor relationships, development opportunities and associate retention,
and otherwise adversely affect our business.

Use of social media by the Company or third parties at our direction may adversely impact our reputation or
subject us to fines or other penalties.

There has been a substantial increase in the use of social media platforms, including blogs, social media
websites, and other forms of internet-based communications, which allow individuals access to a broad audience
of consumers and other interested persons. We have increasingly utilized social media in our marketing and
employment recruiting efforts in order to reach as many current and potential new customers and potential
employment candidates as efficiently and cost effectively as possible, and have also retained third parties with
expertise and distinction in the social media realm to bolster our social media efforts. As laws and regulations
rapidly evolve to govern the use of these platforms, the failure by us, our employees or third parties acting at our
direction to abide by applicable laws and regulations in the use of these platforms could adversely impact our
reputation or subject us to fines or other penalties.

Legal and regulatory proceedings could have an adverse impact on our results of operations.

We are subject to various legal and regulatory proceedings relating to our business, certain of which may

involve jurisdictions with reputations for aggressive application of laws and procedures against corporate
defendants. We are impacted by trends in litigation, such as representative claims under the California Private
Attorneys’ General Act and class action litigation brought under various consumer protection, employment, and
privacy and information security laws, including wage and hour lawsuits alleging employee misclassification as
discussed in Note 17 to our Consolidated Financial Statements, “Commitments and Contingencies.” Accruals are
established based on our best estimates of our potential liability. However, we cannot accurately predict the

18

ultimate outcome of any such proceedings due to the inherent uncertainties of litigation. Regardless of the
outcome or whether the claims are meritorious, legal and regulatory proceedings may require that we devote
substantial time and expense to defend our Company. Unfavorable rulings could result in a material adverse
impact on our business, financial condition or results of operations.

Our business could be impacted as a result of actions by activist stockholders or others.

From time to time, we may be subject to legal and business challenges in the operation of our Company due

to stockholder proposals, media campaigns, proxy contests, and other such actions instituted by activist
stockholders or others. Responding to such actions could be costly and time-consuming, disrupt our operations,
may not align with our business strategies and could divert the attention of our Board of Directors and senior
management from the pursuit of current business strategies. Perceived uncertainties as to our future direction as a
result of stockholder activism or potential changes to the composition of the Board of Directors may lead to the
perception of a change in the direction of the business or other instability, and may make it more difficult to
attract and retain qualified personnel and business partners.

Circumstances limiting our ability, or the ability of our vendors, to access capital markets could adversely
affect our business or financial condition.

Changes in the credit and capital markets, including market disruptions, limited liquidity and interest rate
fluctuations, may increase the cost of financing or restrict our access to this potential source of future liquidity. A
decrease in the ratings that rating agencies assign to our short- and long-term debt may also negatively impact
our access to the debt financing markets and increase our cost of borrowing. These circumstances may negatively
impact our access to capital markets, which could have a materially adverse impact on our business or financial
condition.

In many cases, our vendors depend upon commercial credit to finance their operations. If they are unable to

secure commercial financing, our vendors could seek to change the terms on which they sell to us, which could
negatively affect our liquidity. In addition, the inability of vendors to access liquidity, or the insolvency of
vendors, could lead to their failure to deliver merchandise to us.

Our substantial indebtedness requires a significant amount of cash. Our ability to generate sufficient cash
depends on numerous factors beyond our control, and we may be unable to generate sufficient cash flow to
service our debt obligations.

As of February 1, 2020, our obligations include $957.5 million, inclusive of original issue discount, under
our $1,200.0 million senior secured term loan facility (Term Loan Facility). We had no outstanding balance on
our $600.0 million asset-based lending facility (ABL Line of Credit) as of February 1, 2020. Our debt obligations
also include $50.1 million of finance lease obligations as of February 1, 2020. Estimated cash required to make
interest payments for these debt obligations amounts to approximately $44.7 million for the fiscal year ending
January 30, 2021.

Our ability to make payments on and to refinance our debt, and to fund planned capital expenditures, will

depend on our ability to generate cash in the future, which is to some extent subject to general economic,
financial, competitive, legislative, regulatory and other factors that are beyond our control. If we are unable to
generate sufficient cash flow to service our debt and meet our other commitments, we will be required to adopt
one or more alternatives, such as refinancing all or a portion of our debt, selling material assets or operations or
raising additional debt or equity capital. We may not be able to successfully carry out any of these actions on a
timely basis, on commercially reasonable terms or at all, or be assured that these actions would be sufficient to
meet our capital requirements. In addition, the terms of our existing or future debt agreements, including the
Term Loan Facility and the ABL Line of Credit, may restrict us from affecting any of these alternatives.

19

Our failure to comply with the agreements relating to our outstanding indebtedness, including as a result of
events beyond our control, could result in an event of default that could materially and adversely affect our
results of operations and our financial condition.

If an event of default under any of the agreements relating to our outstanding indebtedness occurred, the
holders of the defaulted debt could cause all amounts outstanding with respect to that debt to be due and payable
immediately. Our assets or cash flow may not be sufficient to fully repay borrowings under our outstanding debt
instruments if accelerated upon an event of default. Further, if we are unable to repay, refinance or restructure
our secured indebtedness, the holders of such debt could proceed against the collateral securing that indebtedness
through foreclosure proceedings and/or by forcing us into bankruptcy or liquidation. In addition, any event of
default or declaration of acceleration under one debt instrument could also result in an event of default under one
or more of our other debt instruments.

It is unclear how increased regulatory oversight and changes in the method for determining LIBOR may
affect the financial obligations owed by us that are linked to LIBOR, or how such changes could affect our
results of operations or financial condition.

In the recent past, concerns have been publicized that some of the member banks surveyed by British
Bankers’ Association, or (the BBA), in connection with the calculation of LIBOR across a range of maturities
and currencies may have been under-reporting, over-reporting or otherwise manipulating the inter-bank lending
rate applicable to them in order to profit on their derivative positions or to avoid an appearance of capital
insufficiency or adverse reputational or other consequences that may have resulted from reporting inter-bank
lending rates higher than those they actually submitted. A number of BBA member banks entered into
settlements with their regulators and law enforcement agencies with respect to alleged manipulation of LIBOR,
and investigations by regulators and governmental authorities in various jurisdictions are ongoing. Other member
banks may also enter into such settlements with, or have proceedings brought by, their regulators or law
enforcement agencies in the future. If manipulation of LIBOR occurred, it may have resulted in LIBOR having
been artificially lower (or higher) than it would otherwise have been. Any such manipulation could have occurred
over a substantial period of time.

On July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced
that it intends to phase out LIBOR by the end of 2021. It is unclear whether LIBOR will cease to exist or if new
methods of calculating LIBOR will be established such that it continues to exist after 2021. The U.S. Federal
Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of
large U.S. financial institutions, announced an alternative to U.S. dollar LIBOR with a new index calculated by
short term repurchase agreements, backed by Treasury securities, called the Secured Overnight Financing Rate
(SOFR). Whether or not SOFR attains market traction as a LIBOR alternative or replacement for U.S. dollar-
denominated instruments remains in question and future of LIBOR at this time is uncertain. To address a
potential transition away from LIBOR, the Term Loan Facility and ABL Line of Credit agreements each provide
for an agreed upon methodology to amend such agreements to substitute LIBOR with an agreed replacement rate,
subject to our consent and the applicable administrative agent, and in each case subject to a short lender negative
consent period. However, there is no guarantee that any such replacement rate would be agreed by the applicable
agents and lenders or that such consents would be obtained, and in such event we would be required to pay a rate
of interest higher than expected on the amount owed under such agreements where the interest rate is subject to
LIBOR. We have also entered into LIBOR-based interest rate swap agreements to manage our exposure to
interest rate movements resulting from changes in the benchmark interest rate of LIBOR. Any replacement of
LIBOR as the basis on which interest on our floating-rate debt and/or under our interest rate swaps is calculated
may result in interest rates and/or payments that do not correlate over time with the interest rates and/or payments
that would have been made on our obligations if LIBOR was available in its current form.

In addition, any further changes or reforms to the determination or supervision of LIBOR may result in a

sudden or prolonged increase or decrease in reported LIBOR, which could have a material adverse effect on our
business, financial condition and results of operations.

20

We are a holding company and rely on dividends, distributions and other payments, advances and transfers of
funds from our subsidiaries to meet our obligations.

We are a holding company that does not conduct any business operations of our own. As a result, we are
largely dependent upon cash dividends and distributions and other transfers from our subsidiaries to meet our
obligations. The deterioration of income from, or other available assets of, our subsidiaries for any reason could
limit or impair their ability to pay dividends or other distributions to us.

Risks Related to Ownership of Our Common Stock

Our stock price has been and may continue to be volatile.

The market price of our common stock has fluctuated substantially in the past and may continue to fluctuate
significantly. For example, in Fiscal 2019, our stock price fluctuated from a high of $236.02 to a low of $136.30.
Future announcements or disclosures concerning us or any of our competitors, our strategic initiatives, our sales
and profitability, our financial condition, any quarterly variations in actual or anticipated operating results or
comparable sales, any failure to meet analysts’ expectations and sales of large blocks of our common stock,
among other factors, could cause the market price of our common stock to fluctuate substantially. In addition, the
stock market has experienced price and volume fluctuations that have affected the market price of many retail
and other stocks that have often been unrelated or disproportionate to the operating performance of these
companies.

Anti-takeover provisions in our charter documents and Delaware law might discourage or delay acquisition
attempts for us that stockholders might consider favorable.

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions

that may make the acquisition of the Company more difficult without the approval of our Board of Directors.
These provisions:

•

•

•

•

•

•

•

•

authorize the issuance of undesignated preferred stock, the terms of which may be established and the
shares of which may be issued without stockholder approval, and which may include super voting,
special approval, dividend, or other rights or preferences superior to the rights of the holders of
common stock;

prohibit stockholder action by written consent, requiring all stockholder actions be taken at a meeting
of our stockholders;

establish advance notice requirements for nominations for elections to our Board of Directors or for
proposing matters that can be acted upon by stockholders at stockholder meetings;

establish a classified Board of Directors, as a result of which our Board of Directors is divided into
three classes, with each class serving for staggered three-year terms, which prevents stockholders from
electing an entirely new Board of Directors at an annual meeting;

limit the ability of stockholders to remove directors only for cause and only upon the affirmative vote
of at least 75% of the outstanding shares of our common stock;

prohibit stockholders from calling special meetings of stockholders;

provide that the Board of Directors is expressly authorized to alter or repeal our amended and restated
bylaws; and

require the approval of holders of at least 75% of the outstanding shares of our voting common stock to
amend the amended and restated bylaws and certain provisions of the amended and restated certificate
of incorporation.

These anti-takeover provisions and other provisions under Delaware law could discourage, delay or prevent

a transaction involving a change in control of the Company, even if doing so would benefit our stockholders.

21

These provisions could also discourage proxy contests and make it more difficult for stockholders to elect
directors of their choosing and to cause us to take other corporate actions they desire.

Our amended and restated certificate of incorporation designates the Court of Chancery of the State of
Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by
our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes
with us or our directors, officers or employees.

Our amended and restated certificate of incorporation provides that, subject to limited exceptions, the Court

of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or
proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of
our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim against us
arising pursuant to any provision of the Delaware General Corporation Law, or (iv) any other action asserting a
claim against us that is governed by the internal affairs doctrine.

Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be

deemed to have notice of and to have consented to the provisions of our amended and restated certificate of
incorporation described above. This choice of forum provision may limit a stockholder’s ability to bring a claim
in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which
may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were
to find these provisions of our amended and restated certificate of incorporation inapplicable to, or unenforceable
in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs
associated with resolving such matters in other jurisdictions, which could adversely affect our business and
financial condition.

Because we do not intend to pay cash dividends in the near term, stockholders may not receive any return on
investment unless they are able to sell their common stock for a price greater than their purchase price.

The continued operation and expansion of our business will require substantial funding. Accordingly, we do

not anticipate that we will pay any cash dividends on shares of our common stock in the near term. Any
determination to pay dividends in the future will be at the discretion of our Board of Directors and will depend
upon results of operations, financial condition, contractual restrictions, including those under our ABL Line of
Credit and Term Loan Facility, any potential future indebtedness we may incur, restrictions imposed by
applicable law and other factors our Board of Directors deems relevant. Accordingly, if stockholders purchase
shares of our common stock, realization of a gain on investment will depend on the appreciation of the price of
our common stock, which may never occur.

Item 1B. Unresolved Staff Comments

Not Applicable.

22

Item 2.

Properties

We own the land and/or buildings for 36 of our stores and have leases for 690 of our stores. Our new stores

are generally leased for an initial term of ten to fifteen years, the majority of which are subject to our option to
renew such leases for several additional five-year periods. Store leases generally provide for fixed monthly rental
payments, plus the payment, in most cases, of real estate taxes and other charges with escalation clauses. In many
locations, our store leases contain formulas providing for the payment of additional rent based on sales. Most of
our stores are freestanding or located in regional power centers, strip shopping centers or in malls.

Primary Distribution Centers:
Edgewater Park, New Jersey(a)
Burlington, New Jersey (Daniels Way)
San Bernardino, California
Redlands, California (Pioneer Ave)
Riverside, California (Cactus Ave)(b)
Warehousing Facilities:
Burlington, New Jersey (Route 130 North)(a)
Burlington, New Jersey (Richards Run)
Redlands, California (River Bluff Ave)

Calendar
Year
Operational

Size
(sq. feet)

Leased
or
Owned

2004
2014
2006
2014
2020

1987
2017
2017

648,000
678,000
758,000
800,000
900,000

402,000
511,000
543,000

Owned
Leased
Leased
Leased
Leased

Owned
Leased
Leased

Inclusive of corporate offices.

(a)
(b) The lease for this distribution center was signed during Fiscal 2018.

We own approximately 235 acres of land in Burlington and Florence, New Jersey on which we have
constructed our corporate campus, which includes our corporate headquarters and a warehouse facility. We own
approximately 43 acres of land in Edgewater Park, New Jersey on which we have constructed our Edgewater
Park, New Jersey distribution center and an office facility. We lease approximately 35,000 square feet of office
space in New York City (east coast buying office), and we are relocating our 10,000 square feet of office space in
Los Angeles, California (west coast buying office) to a larger space consisting of approximately 25,000 square
feet.

Item 3. Legal Proceedings

Like many retailers, the Company has been named in potential class or collective actions on behalf of
groups alleging violations of federal and state wage and hour and other labor statutes, and alleged violation of
state consumer and/or privacy protection and other statutes. In the normal course of business, we are also party to
representative claims under the California Private Attorneys’ General Act and various other lawsuits and
regulatory proceedings including, among others, commercial, product, product safety, employee, customer,
intellectual property and other claims. Actions against us are in various procedural stages. Many of these
proceedings raise factual and legal issues and are subject to uncertainties. Refer to Note 17 to our Consolidated
Financial Statements, “Commitments and Contingencies,” for further detail.

Item 4. Mine Safety Disclosures

Not applicable.

23

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities

Market Information

Our common stock is listed on the New York Stock Exchange under the symbol “BURL.”

Holders

As of February 28, 2020, we had 277 holders of record of our common stock. This figure does not include

the significantly greater number of beneficial holders of our common stock.

Dividends

During the past two fiscal years, we have not declared, and do not anticipate declaring in the near term,
dividends on shares of our common stock. We currently do, and intend to continue to, retain all available funds
and any future earnings to fund all of the Company’s capital expenditures, business initiatives, and to support any
potential opportunistic capital structure initiatives. Any determination to pay dividends in the future will be at the
discretion of our Board of Directors and will depend upon results of operations, financial condition, contractual
restrictions, including those under our ABL Line of Credit and Term Loan Facility, any potential future
indebtedness we may incur, restrictions imposed by applicable law and other factors our Board of Directors
deems relevant.

In addition, since we are a holding company, substantially all of the assets shown on our consolidated
balance sheets are held by our subsidiaries. Accordingly, our earnings, cash flow and ability to pay dividends are
largely dependent upon the earnings and cash flows of our subsidiaries and the distribution or other payment of
such earnings to us in the form of dividends.

24

Stock Performance Graph

The performance graph below and related information shall not be deemed “soliciting material” or to be
“filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under
that Section, and shall not be deemed to be incorporated by reference into any future filing under the Securities
Act or the Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.

The following graph compares the cumulative total stockholder return on our common stock from the
closing prices as of the end of each fiscal year from January 31, 2015 through February 1, 2020, with the return
on the Standard & Poor’s (S&P) 500 Index and the S&P Retailing Index over the same period. This graph
assumes an initial investment of $100 and assumes the reinvestment of dividends, if any. Such returns are based
on historical results and are not intended to suggest future performance.

Cumulative Stockholder Return Performance
Assumes Initial Investment of $100

$500.00

$400.00

$300.00

$200.00

$100.00

1/31/2015

1/30/2016

1/28/2017

2/3/2018

2/2/2019

2/1/2020

Burlington Stores Inc.

S&P 500

S&P 500 Retailing Index

Company / Index

Burlington Stores, Inc.
S&P 500 Index
S&P Retailing Index

Base Period

January 31,
2015

$100.00
$100.00
$100.00

Indexed Returns for Fiscal Years Ended

January 30,
2016

January 28,
2017

February 3,
2018

February 2,
2019

February 1,
2020

$107.70
$ 97.26
$115.56

$162.18
$115.02
$135.54

$232.01
$138.45
$189.60

$344.50
$135.67
$203.54

$435.90
$161.68
$243.26

25

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table provides information regarding our purchases of common stock during the three fiscal

months ended February 1, 2020:

Month

November 3, 2019 through November 30, 2019
December 1, 2019 through January 4, 2020
January 5, 2020 through February 1, 2020

Total

Total Number
of Shares
Purchased(1)

Average Price
Paid Per
Share

80,462
236,574
77,133

394,169

$202.70
$224.90
$227.43

Approximate
Dollar Value
of Shares
That May Yet
Be Purchased
Under the
Plans or
Programs
(in thousands)

$466,615
$413,505
$398,546

Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs(2)

73,731
236,145
65,653

375,529

(1) The number of shares purchased between November 3, 2019 and November 30, 2019, between December 1,
2019 and January 4, 2020 and between January 5, 2020 and February 1, 2020 include 6,731 shares, 429
shares and 11,480 shares, respectively, which were withheld for tax payments due upon the vesting of
employee restricted stock awards, and do not reduce the dollar value that may yet be purchased under our
publicly announced share repurchase program.

(2) On August 15, 2018, our Board of Directors authorized the repurchase of up to $300 million of common
stock, which was completed during the fourth quarter of Fiscal 2019. On August 14, 2019, our Board of
Directors authorized the repurchase of up to an additional $400 million of common stock, which is
authorized to be executed through August 2021. For a further discussion of our share repurchase programs,
see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Liquidity and Capital Resources—Share Repurchase Program.

26

Item 6. Selected Financial Data

The following table presents selected historical consolidated financial data. The historical consolidated
balance sheet data and consolidated statement of operations data for Fiscal 2019, Fiscal 2018 and Fiscal 2017 and
for the fiscal years ended January 28, 2017 (Fiscal 2016) and January 30, 2016 (Fiscal 2015) have been derived
from our historical audited Consolidated Financial Statements.

The historical consolidated financial data presented below should only be read in conjunction with our
audited Consolidated Financial Statements (and the related notes thereto) and Item 7, Management’s Discussion
and Analysis of Financial Condition and Results of Operations, each of which are included elsewhere in this
Annual Report. Our historical consolidated financial data may not be indicative of our future performance.

Fiscal Year Ended(1)

February 1,
2020

February 2,
2019

February 3,
2018

January 28,
2017

January 30,
2016

(dollar amounts in thousands, except per share data)

Consolidated Statement of Operations Data:
Net sales

$7,261,243 $6,643,051 $6,084,766 $5,566,038 $5,098,932

Net income

$ 465,116 $ 414,745 $ 384,852 $ 215,873 $ 150,482

Net income per common share—basic:

Net income per common share—diluted:

$

$

7.05 $

6.91 $

6.21 $

6.04 $

5.64 $

5.48 $

3.06 $

3.01 $

2.03

1.99

Consolidated Balance Sheet Data (end of the

period):

Inventory
Total assets
Long term debt
Stockholders’ equity (deficit)
Other Financial Data:
Adjusted Net Income(2)
Adjusted EBITDA(3)
Comparable store sales growth(4)
Gross margin rate
Store payroll as a percentage of net sales
Cash flow increase (decrease)
Working capital (deficit)(5)
Number of stores
Gross square footage (in thousands)
Selling square footage (in thousands)

$ 777,248 $ 954,183 $ 752,562 $ 701,891 $ 783,528
$5,593,859 $3,079,172 $2,812,829 $2,574,483 $2,571,813
$1,001,723 $ 983,643 $1,113,808 $1,128,843 $1,295,163
86,774 $ (49,812)$ (99,022)
$ 528,149 $ 322,710 $

$ 498,784 $ 442,540 $ 405,753 $ 232,268 $ 174,555
$ 883,905 $ 792,215 $ 696,066 $ 584,562 $ 484,029

2.7%
41.8%
8.6%

3.2%
41.8%
8.5%
$ 275,500 $ (26,930)$
$ (51,112)$

4.5%
3.4%
40.8%
41.5%
8.5%
8.5%
60,682 $
51,689 $
2,276 $ (46,998)$ (96,310)$
629
45,693
33,305

592
44,736
34,234

675
46,773
32,898

727
47,449
31,997

2.1%
40.0%
8.6%

(4,434)
18,594
567
43,468
33,230

(1) Fiscal 2019, Fiscal 2018, Fiscal 2016 and Fiscal 2015 consisted of 52 weeks. Fiscal 2017 consisted of 53

weeks.

(2) We define Adjusted Net Income as net income, exclusive of the following items: (i) net favorable lease

costs, (ii) costs related to debt amendments and secondary offerings, (iii) stock option modification expense,
(iv) loss on extinguishment of debt, (v) impairment charges, (vi) advisory fees, (vii) amounts related to
certain litigation and (viii) other unusual, non-recurring or extraordinary expenses, losses, charges or gains,
all of which are tax effected to arrive at Adjusted Net Income. For further discussion of Adjusted Net
Income, including a reconciliation of Adjusted Net Income to net income, see Part II, Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Key Performance Measures.

(3) We define Adjusted EBITDA as net income, exclusive of the following items: (i) interest expense,

(ii) interest income, (iii) loss on extinguishment of debt, (iv) income tax expense (benefit), (v) depreciation
and amortization, (vi) impairment charges, (vii) advisory fees, (viii) stock option modification expense,

27

(ix) costs related to debt amendments and secondary offerings, (x) amounts related to certain litigation and
(xi) other unusual, non-recurring or extraordinary expenses, losses, charges or gains. For further discussion
of Adjusted EBITDA, including a reconciliation of Adjusted EBITDA to net income, see Part II, Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key
Performance Measures.

(4) We define comparable store sales as sales of those stores, including online sales, commencing on the first
day of the fiscal month one year after the end of their grand opening activities, which normally conclude
within the first two months of operations. Our comparable store sales are based on a 52-week basis.

(5) We define working capital as current assets (excluding restricted cash) minus current liabilities.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

For purposes of the following “Management’s Discussion and Analysis of Financial Condition and Results
of Operations,” unless the context requires otherwise, references to “the Company,” “we,” “our,” or “us” refer
to Burlington Stores, Inc. and its consolidated subsidiaries.

The following discussion summarizes the significant factors affecting our consolidated operating results,

financial condition, liquidity and cash flows as of and for the periods presented below. The following discussion
and analysis should be read in conjunction with “Item 6, Selected Financial Data” and our Consolidated
Financial Statements, including the notes thereto, appearing elsewhere in this Annual Report.

In addition to historical information, this discussion and analysis contains forward-looking statements

based on current expectations that involve risks, uncertainties and assumptions, such as our plans, objectives,
expectations and intentions set forth under the caption above entitled “Cautionary Statement Regarding
Forward-Looking Statements.” Our actual results and the timing of events may differ materially from those
anticipated in these forward-looking statements as a result of various factors, including those set forth in
Item 1A, Risk Factors and elsewhere in this Annual Report.

General

We are a nationally recognized retailer of high-quality, branded apparel at everyday low prices. We opened

our first store in Burlington, New Jersey in 1972, selling primarily coats and outerwear. Since then, we have
expanded our store base to 727 stores as of February 1, 2020, inclusive of an internet store, in 45 states and
Puerto Rico. We have diversified our product categories by offering an extensive selection of in-season, fashion-
focused merchandise at up to 60% off other retailers’ prices, including: women’s ready-to-wear apparel,
menswear, youth apparel, baby, beauty, footwear, accessories, home, toys, gifts and coats. We sell a broad
selection of desirable, first-quality, current-brand, labeled merchandise acquired directly from nationally-
recognized manufacturers and other suppliers.

Executive Summary

Overview of Fiscal 2019 Operating Results

Highlights from Fiscal 2019 compared with Fiscal 2018 include the following:

• We generated total revenues of $7,286.4 million compared with $6,668.5 million.

• Net sales improved $618.2 million to $7,261.2 million. Comparable store sales increased 2.7%.

• Gross margin as a percentage of net sales remained consistent at 41.8%. Product sourcing costs, which
are included in selling, general and administrative expenses, remained flat as a percentage of net sales.
Product sourcing costs include the costs of processing goods through our supply chain and buying
costs.

28

•

Selling, general and administrative expenses as a percentage of net sales increased to 30.7% compared
with 30.4%.

• We earned net income of $465.1 million compared with $414.7 million, an increase of $50.4 million.

• Adjusted Net Income (as defined in the section below entitled “Key Performance Measures”),

exclusive of management transition costs, improved $56.2 million to $498.8 million.

• Adjusted EBITDA (as defined in the section below entitled “Key Performance Measures”), exclusive

of management transition costs, improved $91.7 million to $883.9 million.

• Adjusted EBIT (as defined in the section below entitled “Key Performance Measures”), exclusive of

management transition costs, improved $73.1 million to $673.6 million.

Store Openings, Closings and Relocations

During Fiscal 2019, we opened 76 new stores, inclusive of 16 relocations, and closed eight stores, exclusive

of the aforementioned relocations, bringing our store count as of February 1, 2020 to 727 stores, inclusive of an
internet store. We will wind down operations of the internet store during Fiscal 2020. We continue to pursue our
growth plans and invest in capital projects that meet our financial requirements. During the fiscal year ending
January 30, 2021 (Fiscal 2020), we plan to open approximately 54 net new stores, which includes approximately
80 gross new stores, along with approximately 26 store relocations and closings.

Ongoing Initiatives for Fiscal 2020

We continue to focus on a number of ongoing initiatives aimed at driving merchandise value and increasing

our overall profitability by improving our comparable store sales trends, increasing total sales growth and
reducing expenses. These initiatives include:

• Driving Comparable Store Sales Growth.

We intend to continue to increase comparable store sales through the following initiatives:

• More Effectively Chasing the Sales Trend. We are planning a more conservative comparable
stores sales growth, holding and controlling liquidity, closely analyzing the sales trend by
business, and being ready to chase that trend. We believe that these actions should not only enable
us to more effectively chase the trend, but they will also allow us to take more advantage of great
opportunistic buys.

• Making a Greater Investment in Merchandising Capabilities. We intend to invest in incremental

headcount, especially in growing or under-developed businesses, training and coaching, improved
tools and reporting, and other forms of merchant support. We believe that these investments
should improve our ability to develop vendor relationships, source great merchandise buys, more
accurately assess value, and better forecast and chase the sales trend.

• Operating with Leaner Inventories. We are planning to carry less inventory going forward, which

we believe should result in the customer finding a higher mix of fresh receipts and great
merchandise values within the racks. We believe that this should drive faster turns and lower
markdowns, while simultaneously improving our customers’ shopping experience.

• Enhancing Existing Categories and Introducing New Categories. We have opportunities to

expand the depth and breadth of certain existing categories, such as ladies’ apparel, children’s
products, bath and cosmetic merchandise, housewares, décor for the home and beauty as we
continue to de-weather our business, and maintain the flexibility to introduce new categories as we
expand our merchandising capabilities.

29

• Expanding and Enhancing Our Retail Store Base.

We intend to expand and enhance our retail store base through the following initiatives:

• Adhering to a Market Focused and Financially Disciplined Real Estate Strategy. We have grown
our store base consistently since our founding in 1972, developing more than 99% of our stores
organically. We believe there is significant opportunity to expand our retail store base in the
United States. We have identified numerous market opportunities that we believe will allow us to
operate at least 1,000 stores over the long term.

• Maintaining Focus on Unit Economics and Returns. We have adopted a market focused approach
to new store openings with a specific focus on maximizing sales while achieving attractive unit
economics and returns. This focus is demonstrated by the fact that more than 98% of our existing
stores had positive Adjusted EBIT for Fiscal 2019. By focusing on opening stores with attractive
unit economics, we believe that we are able to achieve attractive returns on capital and continue to
grow our margins. We believe that as we continue to reduce our comparable store inventory, we
will be able to reduce the square footage of our stores while continuing to maintain our broad
assortment.

• Enhancing the Store Experience Through Store Remodels and Relocations. We continue to invest
in store remodels on a store-by-store basis where appropriate, taking into consideration the age,
sales and profitability of a store, as well as the potential impact to the customer shopping
experience. During Fiscal 2019, we remodeled 28 of our stores and relocated 16 stores. In our
remodeled stores, we have typically incorporated new flooring, painting, lighting and graphics,
relocated our fitting rooms to maximize productive selling space, enhanced certain departments
such as home and accessories and made various other improvements as appropriate by location.

• Enhancing Operating Margins.

We intend to increase our operating margins through the following initiatives:

•

Improving Operational Flexibility. Our store and supply chain teams must continue to respond to
the challenge of becoming more responsive to the sales chase, enhancing their ability at flexing up
and down based on trends. Their ability to appropriately flex based on the ongoing trends allows
us to maximize leverage on sales, regardless of the trend.

• Optimizing Markdowns. We believe that our markdown system allows us to maximize sales and

gross margin dollars based on forward-looking sales forecasts, sell-through targets and exit dates.
Additionally, as we plan to carry less inventory in our stores, we expect to drive faster turns,
which in turn will reduce the amount of markdowns taken.

• Enhancing Purchasing Power. We believe that increasing our store footprint and expanding our

west coast buying office provides us with the opportunity to capture incremental buying
opportunities and realize economies of scale in our merchandising and non-merchandising
purchasing activities.

• Challenging Expenses to Drive Operating Leverage. We believe that we will be able to leverage
our growing sales over the fixed costs of our business. In addition, by more conservatively
planning our comparable store sales growth, we are forcing even tighter expense control. We
believe that this should put us in a strong position to drive operating leverage on any sales ahead
of the plan. Additionally, we plan to continue challenging the processes and operating norms
throughout the organization with the belief that this will lead to incremental efficiency
improvements and savings.

Uncertainties and Challenges

As we strive to increase profitability through achieving positive comparable store sales and leveraging
productivity initiatives focused on improving the in-store experience, more efficient movement of products from

30

the vendors to the selling floors, and modifying our marketing plans to increase our core customer base and
increase our share of our current customers’ spending, there are uncertainties and challenges that we face as an
off-price retailer of apparel and accessories for men, women and children and home furnishings that could have a
material impact on our revenues or income.

Seasonality of Sales and Weather Conditions. Our business, like that of most retailers, is subject to seasonal

influences. In the second half of the year, which includes the back-to-school and holiday seasons, we generally
realize a higher level of sales and net income.

Weather continues to be a contributing factor to the sale of our clothing. Generally, our sales are higher if
the weather is cold during the Fall and warm during the early Spring. Sales of cold weather clothing are increased
by early cold weather during the Fall, while sales of warm weather clothing are improved by early warm weather
conditions in the Spring. Although we have diversified our product offerings, we believe traffic to our stores is
still driven, in part, by weather patterns.

General Economic Conditions. Consumer spending habits, including spending for the merchandise that we
sell, are affected by, among other things, prevailing global economic conditions, inflation, levels of employment,
salaries and wage rates, prevailing interest rates, housing costs, energy costs, commodities pricing, income tax
rates and policies, consumer confidence and consumer perception of economic conditions. In addition, consumer
purchasing patterns may be influenced by consumers’ disposable income, credit availability and debt levels.

A slowdown in the U.S. economy, an uncertain global economic outlook or a credit crisis could adversely
affect consumer spending habits resulting in lower net sales and profits than expected on a quarterly or annual
basis. Consumer confidence is also affected by the domestic and international political situation. Our financial
condition and operations could be impacted by changes in government regulations in areas including taxes and
healthcare. The outbreak or escalation of war, the occurrence of terrorist acts or other hostilities in or affecting
the U.S., or public health issues such as pandemics or epidemics, including the recent outbreak of a novel strain
of coronavirus (COVID-19), could lead to a decrease in spending by consumers. We are continuing to monitor
and assess the effects of the COVID-19 outbreak on our operations. In addition, natural disasters, industrial
accidents, acts of war in various parts of the world and public health issues could have the effect of disrupting
supplies and raising prices globally which, in turn, may have adverse effects on the world and U.S. economies
and lead to a downturn in consumer confidence and spending.

We closely monitor our net sales, gross margin and expenses. We have performed scenario planning such

that, if our net sales decline, we have identified variable costs that could be reduced to partially mitigate the
impact of these declines. If we were to experience adverse economic trends and our efforts to counteract the
impacts of these trends are not sufficiently effective, there could be a negative impact on our financial
performance and position in future fiscal periods.

Competition and Margin Pressure. We believe that in order to remain competitive with retailers, including
off-price retailers and discount stores, we must continue to offer brand-name merchandise at a discount to prices
offered by other retailers as well as an assortment of merchandise that is appealing to our customers.

The U.S. retail apparel and home furnishings markets are highly fragmented and competitive. We compete

for business with department stores, off-price retailers, specialty stores, discount stores, wholesale clubs, and
outlet stores as well as with certain traditional, full-price retail chains that have developed off-price concepts. At
various times throughout the year, traditional full-price department store chains and specialty shops offer brand-
name merchandise at substantial markdowns, which can result in prices approximating those offered by us at our
Burlington Stores. We anticipate that competition will increase in the future. Therefore, we will continue to look
for ways to differentiate our stores from those of our competitors.

The U.S. retail industry continues to face increased pressure on margins as overall challenging retail
conditions have led consumers to be more value conscious. Our “open to buy” paradigm, in which we purchase

31

both pre-season and in-season merchandise, allows us the flexibility to purchase less pre-season with the balance
purchased in-season and opportunistically. It also provides us with the flexibility to shift purchases between
suppliers and categories. This enables us to obtain better terms with our suppliers, which we expect to help offset
any rising costs of goods.

Ongoing international trade and tariff negotiations could have a direct impact on our income and an indirect

impact on consumer prices.

Key Performance Measures

We consider numerous factors in assessing our performance. Key performance measures used by

management include net income, Adjusted Net Income, Adjusted EBITDA, Adjusted EBIT, comparable store
sales, gross margin, inventory, store payroll as a percentage of net sales and liquidity.

Net income. We earned net income of $465.1 million during Fiscal 2019 compared with net income of
$414.7 million during Fiscal 2018. This improvement was primarily driven by our improved gross margin
dollars, partially offset by an increase in our selling, general and administrative expenses. Refer to the section
below entitled “Results of Operations” for further explanation.

Adjusted Net Income, Adjusted EBITDA and Adjusted EBIT: Adjusted Net Income, Adjusted EBITDA and

Adjusted EBIT are non-GAAP financial measures of our performance.

We define Adjusted Net Income as net income, exclusive of the following items, if applicable: (i) net
favorable lease costs; (ii) costs related to debt amendments; (iii) stock option modification expense; (iv) loss on
extinguishment of debt; (v) impairment charges; and (vi) other unusual, non-recurring or extraordinary expenses,
losses, charges or gains, all of which are tax effected to arrive at Adjusted Net Income.

We define Adjusted EBITDA as net income, exclusive of the following items, if applicable: (i) interest
expense; (ii) interest income; (iii) loss on extinguishment of debt; (iv) income tax expense; (v) depreciation and
amortization; (vi) impairment charges; (vii) stock option modification expense; (viii) costs related to debt
amendments; and (ix) other unusual, non-recurring or extraordinary expenses, losses, charges or gains.

We define Adjusted EBIT as net income, exclusive of the following items, if applicable: (i) interest expense;

(ii) interest income (iii) loss on extinguishment of debt; (iv) income tax expense; (v) impairment charges;
(vi) stock option modification expense; (vii) net favorable lease costs; (viii) costs related to debt amendments;
and (ix) other unusual, non-recurring or extraordinary expenses, losses, charges or gains.

We present Adjusted Net Income, Adjusted EBITDA and Adjusted EBIT because we believe they are useful

supplemental measures in evaluating the performance of our business and provide greater transparency into our
results of operations. In particular, we believe that excluding certain items that may vary substantially in
frequency and magnitude from operating income are useful supplemental measures that assist investors and
management in evaluating our ability to generate earnings and leverage sales, and to more readily compare these
metrics between past and future periods. Additionally, Adjusted Net Income per share (subject to further
adjustment by the Compensation Committee of the board of directors) is used for purposes of determining 50%
of the awards made under our corporate annual incentive plan.

Adjusted Net Income has limitations as an analytical tool, and should not be considered either in isolation or

as a substitute for net income or other data prepared in accordance with GAAP. Among other limitations,
Adjusted Net Income does not reflect the following items, net of their tax effect:

•

•

favorable lease costs;

costs related to debt amendments;

32

•

•

•

•

expenses related to our May 2013 stock option modification;

losses on extinguishment of debt;

impairment charges on long-lived assets; and

other unusual, non-recurring or extraordinary expenses, losses, charges or gains.

During Fiscal 2019, Adjusted Net Income, exclusive of management transition costs, improved

$56.2 million to $498.8 million. This improvement was primarily driven by our improved gross margin dollars,
partially offset by an increase in our selling, general and administrative expenses. Refer to the section below
entitled “Results of Operations” for further explanation.

The following table shows our reconciliation of net income to Adjusted Net Income for Fiscal 2019, Fiscal

2018 and Fiscal 2017:

Reconciliation of net income to Adjusted Net

Income:

Net income
Net favorable lease costs(a)
Costs related to debt amendments(b)
Stock option modification expense(c)
Loss on extinguishment of debt(d)
Impairment charges(e)
Tax effect(f)

Adjusted Net Income
Management transition costs, net of tax

effect(g)

Adjusted Net Income, exclusive of
management transition costs

(unaudited)

(in thousands)

Fiscal Year Ended

February 1,
2020

February 2,
2019

February 3,
2018
(53 Weeks)

$465,116
35,761
(375)
—
—
4,315
(10,083)

$414,745
26,081
2,496
—
1,823
6,844
(9,449)

$384,852
23,325
2,262
142
2,881
2,127
(9,836)

494,734

442,540

405,753

4,050

—

—

$498,784

$442,540

$405,753

(a) Net favorable lease costs represents the non-cash 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 (the Merger Transaction). As a result of adoption of
Accounting Standards Update (ASU) 2016-02, “Leases” (ASU 2016-02), these expenses are recorded in the
line item “Selling, general and administrative expenses” in our Consolidated Statement of Income for Fiscal
2019. These expenses are recorded in the line item “Depreciation and amortization” in our Consolidated
Statements of Income for Fiscal 2018 and Fiscal 2017.

(b) Represents costs incurred in connection with review and execution of refinancing opportunities and the

reversal of previously estimated costs related to the repricing of our senior secured term loan facility (the
Term Loan Facility) in Fiscal 2018.

(c) Represents expenses incurred as a result of our May 2013 stock option modification. Refer to Note 12 to our

Consolidated Financial Statements, “Stock-Based Compensation,” for further detail.

(d) For Fiscal 2018, amounts relate to the refinancing of our Term Loan Facility, the $150.0 million prepayment
on the Term Loan Facility and an amendment to our Second Amended and Restated Credit Agreement,
dated September 2, 2011 governing our ABL Line of Credit (the ABL Credit Agreement). For Fiscal 2017,
amounts relate to the repricing and extension of our Term Loan Facility.

33

(e) Represents impairment charges on long-lived assets.
(f) Tax effect is calculated based on the effective tax rates (before discrete items) for the respective periods, for

the tax impact of items (a) through (e).

(g) Represents costs incurred as a result of hiring a new Chief Executive Officer, primarily related to sign-on

and duplicative compensation costs.

Adjusted EBITDA has limitations as an analytical tool, and should not be considered either in isolation or as

a substitute for net income or other data prepared in accordance with GAAP. Among other limitations, Adjusted
EBITDA does not reflect:

•

•

•

•

•

•

•

•

interest expense on our debt;

losses on the extinguishment of debt;

costs related to debt amendments;

expenses related to our May 2013 stock option modification;

cash requirements for replacement of assets. Although depreciation and amortization are non-cash
charges, the assets being depreciated and amortized will likely have to be replaced in the future;

impairment charges on long-lived assets;

income tax expense; and

other unusual, non-recurring or extraordinary expenses, losses, charges or gains.

During Fiscal 2019, Adjusted EBITDA, exclusive of management transition costs, improved $91.7 million
to $883.9 million. This improvement was primarily driven by our improved gross margin dollars, partially offset
by an increase in selling, general and administrative expenses. Refer to the section below entitled “Results of
Operations” for further explanation.

The following table shows our reconciliation of net income to Adjusted EBITDA for Fiscal 2019, Fiscal

2018 and Fiscal 2017:

(unaudited)

(in thousands)

Fiscal Year Ended

February 1,
2020

February 2,
2019

February 3,
2018
(53 Weeks)

$465,116
50,826
(1,720)
—
(375)
—
246,109
4,315
115,409

879,680
4,225

$414,745
55,990
(406)
1,823
2,496
—
217,884
6,844
92,839

792,215
—

$384,852
58,777
(206)
2,881
2,262
142
201,103
2,127
44,128

696,066
—

$883,905

$792,215

$696,066

Reconciliation of net income to Adjusted

EBITDA:

Net income
Interest expense
Interest income
Loss on extinguishment of debt(a)
Costs related to debt amendments(b)
Stock option modification expense(c)
Depreciation and amortization(d)
Impairment charges(e)
Income tax expense

Adjusted EBITDA
Management transition costs(f)

Adjusted EBITDA, exclusive of
management transition costs

34

(a) For Fiscal 2018, amounts relate to the refinancing of our Term Loan Facility, the $150.0 million prepayment
on the Term Loan Facility and the amendment of the ABL Credit Agreement. For Fiscal 2017, amounts
relate to the repricing and extension of our Term Loan Facility.

(b) Represents costs incurred in connection with review and execution of refinancing opportunities and the
reversal of previously estimated costs related to the repricing of our Term Loan Facility in Fiscal 2018.
(c) Represents expenses incurred as a result of our May 2013 stock option modification. Refer to Note 12 to our

(d)

Consolidated Financial Statements, “Stock-Based Compensation,” for further detail.
Includes $35.4 million of favorable lease cost included in the line item “Selling, general and administrative
expenses” in our Consolidated Statement of Income for Fiscal 2019. Net favorable lease cost represents the
non-cash expense associated with favorable and unfavorable leases that were recorded as a result of the
Merger Transaction. As a result of adoption of ASU 2016-02, these expenses are recorded in the line item
“Selling, general and administrative expenses” in our Consolidated Statement of Income for Fiscal 2019.
These expenses are recorded in the line item “Depreciation and amortization” in our Consolidated
Statements of Income for Fiscal 2018 and Fiscal 2017.

(e) Represents impairment charges on long-lived assets.
(f) Represents costs incurred as a result of hiring a new Chief Executive Officer, primarily related to sign-on

and duplicative compensation costs.

Adjusted EBIT has limitations as an analytical tool, and should not be considered either in isolation or as a

substitute for net income or other data prepared in accordance with GAAP. Among other limitations, Adjusted
EBIT does not reflect:

•

•

•

•

•

•

•

•

interest expense on our debt;

losses on the extinguishment of debt;

costs related to debt amendments;

expenses related to our May 2013 stock option modification;

favorable lease cost;

impairment charges on long-lived assets;

income tax expense; and

other unusual, non-recurring or extraordinary expenses, losses, charges or gains.

During Fiscal 2019, Adjusted EBIT, exclusive of management transition costs, improved $73.1 million to

$673.6 million. This improvement was primarily driven by our improved gross margin dollars, partially offset by
an increase in selling, general and administrative expenses. Refer to the section below entitled “Results of
Operations” for further explanation.

35

The following table shows our reconciliation of net income to Adjusted EBIT for Fiscal 2019, Fiscal 2018

and Fiscal 2017:

Reconciliation of net income to Adjusted EBIT:

Net income
Interest expense
Interest income
Loss on extinguishment of debt(a)
Costs related to debt amendments(b)
Stock option modification expense(c)
Net favorable lease costs(d)
Impairment charges(e)
Income tax expense

Adjusted EBIT
Management transition costs(f)

(unaudited)

(in thousands)

Fiscal Year Ended

February 1,
2020

February 2,
2019

$465,116
50,826
(1,720)
—
(375)
—
35,761
4,315
115,409

669,332
4,225

$414,745
55,990
(406)
1,823
2,496
—
26,081
6,844
92,839

600,412
—

February 3,
2018
(53 Weeks)

$384,852
58,777
(206)
2,881
2,262
142
23,325
2,127
44,128

518,288
—

Adjusted EBIT, exclusive of management

transition costs

$673,557

$600,412

$518,288

(a) For Fiscal 2018, amounts relate to the refinancing of our Term Loan Facility, the $150.0 million prepayment
on the Term Loan Facility and the amendment of the ABL Credit Agreement. For Fiscal 2017, amounts
relate to the repricing and extension of our Term Loan Facility.

(b) Represents costs incurred in connection with review and execution of refinancing opportunities and the
reversal of previously estimated costs related to the repricing of our Term Loan Facility in Fiscal 2018.
(c) Represents expenses incurred as a result of our May 2013 stock option modification. Refer to Note 12 to our

Consolidated Financial Statements, “Stock-Based Compensation,” for further detail.

(d) Net favorable lease cost represents the non-cash expense associated with favorable and unfavorable leases that
were recorded as a result of purchase accounting related to the Merger Transaction. As a result of adoption of
ASU 2016-02, these expenses are recorded in the line item “Selling, general and administrative expenses” in
our Consolidated Statement of Income for Fiscal 2019. These expenses are recorded in the line item
“Depreciation and amortization” in our Consolidated Statements of Income for Fiscal 2018 and Fiscal 2017.

(e) Represents impairment charges on long-lived assets.
(f) Represents costs incurred as a result of hiring a new Chief Executive Officer, primarily related to sign-on

and duplicative compensation costs.

Comparable Store Sales. Comparable store sales measure performance of a store during the current

reporting period against the performance of the same store in the corresponding period of the previous year. The
method of calculating comparable store sales varies across the retail industry. As a result, our definition of
comparable store sales may differ from other retailers. This metric is also used for purposes of determining 50%
of the awards made under our corporate annual incentive plan.

We define comparable store sales as sales of those stores, including our online store, commencing on the
first day of the fiscal month one year after the end of their grand opening activities, which normally conclude
within the first two months of operations. If a store is closed for seven or more days during a month, our policy is
to remove that store from our calculation of comparable stores sales for any such month, as well as during the

36

month(s) of their grand re-opening activities. The table below depicts our comparable store sales during Fiscal
2019, Fiscal 2018 and Fiscal 2017, all of which are calculated on a 52-week basis.

Fiscal 2019
Fiscal 2018
Fiscal 2017

Comparable
Store Sales

2.7%
3.2%
3.4%

Various factors affect comparable store sales, including weather conditions, current economic conditions,

the timing of our releases of new merchandise and promotional events, the general retail sales environment,
consumer preferences and buying trends, changes in sales mix among distribution channels, competition and the
success of marketing programs.

Gross Margin. Gross margin is the difference between net sales and the cost of sales. Our cost of sales and
gross margin may not be comparable to those of other entities, since some entities include all of the costs related
to their buying and distribution functions, and other costs, in cost of sales. We include certain of these costs in
the line items “Selling, general and administrative expenses” and “Depreciation and amortization” in our
Consolidated Statements of Income. We include in our “Cost of sales” line item all costs of merchandise (net of
purchase discounts and certain vendor allowances), inbound freight, distribution center outbound freight and
certain merchandise acquisition costs, primarily commissions and import fees. Gross margin as a percentage of
net sales remained consistent at 41.8% during Fiscal 2019. Increased merchandise margin was offset by higher
freight costs.

Inventory. Inventory at February 1, 2020 decreased to $777.2 million from $954.2 million at February 2,

2019. This decrease was primarily related to our pack-and hold inventory levels, which were 26% of total
inventory at the end of Fiscal 2019 compared to 30% at the end of Fiscal 2018, as well as a 15% decrease in
comparable store inventory and a decrease in short stay inventory. These decreases were partially offset by our
52 net new stores opened since February 2, 2019.

In order to better serve our customers and maximize sales, we continue to refine our merchandising mix and

inventory levels within our stores. By appropriately managing our inventories, we believe we will be better able
to deliver a continual flow of fresh merchandise to our customers. We continue to move toward more productive
inventories by increasing the amount of current inventory as a percent of total inventory.

Inventory turnover and comparable store inventory turnover are performance metrics that indicate how

efficiently inventory is bought and sold. They each measure the length of time that we own our inventory.

Inventory turnover is calculated by dividing cost of goods sold by the 13-month average cost value of our

inventory for the period being measured. Our inventory turnover rate improved approximately 6% during Fiscal
2019, compared with Fiscal 2018.

Comparable store inventory turnover is calculated by dividing comparable store sales by the average
comparable store retail value of inventory for the period being measured. The comparable store retail value of
inventories is estimated based on the original sales price of items on hand reduced by retail reductions, which
include sales, markdowns taken, an estimated shortage adjustment and employee discounts, for our comparable
stores. The calculation is based on a rolling 13-month average of inventory (at estimated retail value) and the last
12 months’ comparable store sales. Our comparable store inventory turnover rate improved approximately 13%
during Fiscal 2019 compared with Fiscal 2018.

The difference between inventory turnover and comparable store inventory turnover is primarily the result
of the latter not including distribution center and warehouse inventory or inventory at new and non-comparable

37

stores. Inventory held at our warehouses and distribution centers includes merchandise being readied for
shipment to our stores and pack-and-hold inventory acquired opportunistically for future store release. The
magnitude of pack-and-hold inventory, at any one point in time, is dependent on the buying opportunities
identified in the marketplace.

We present inventory turnover because it demonstrates how effective we are at managing our inventory. We

present comparable store inventory turnover as we believe this is a useful supplemental metric in evaluating the
effectiveness of our merchandising efforts, as a faster comparable store inventory turnover generally leads to
reduced markdowns and more fresh merchandise in our stores.

Store Payroll as a Percentage of Net Sales. Store payroll as a percentage of net sales measures our ability to

manage our payroll in accordance with increases or decreases in net sales. The method of calculating store
payroll varies across the retail industry. As a result, our store payroll as a percentage of net sales may differ from
other retailers. We define store payroll as regular and overtime payroll for all store personnel as well as regional
and territory personnel, exclusive of payroll charges related to corporate and warehouse employees. Store payroll
as a percentage of net sales was 8.6% during Fiscal 2019, compared with 8.5% during Fiscal 2018.

Liquidity. Liquidity measures our ability to generate cash. Management measures liquidity through cash
flow, which is the measure of cash generated from or used in operating, financing, and investing activities. Cash
and cash equivalents, including restricted cash and cash equivalents, increased $275.5 million during Fiscal 2019,
compared with a decrease of $26.9 million during Fiscal 2018. Refer to the section below entitled “Liquidity and
Capital Resources” for further explanation.

Results of Operations

The following table sets forth certain items in the Consolidated Statements of Income as a percentage of net

sales for the periods indicated.

Percentage of Net Sales

Fiscal Year Ended

February 1,
2020

February 2,
2019

100.0%
0.4

100.0%
0.4

February 3,
2018
(53 Weeks)

100.0%
0.4

100.4
58.2
30.7
(0.0)
—
2.9
0.1
(0.2)
—
0.7

92.4

8.0
1.6

100.4
58.2
30.4
0.0
—
3.3
0.1
(0.2)
0.0
0.8

92.6

7.8
1.4

100.4
58.5
30.6
0.0
0.0
3.3
0.0
(0.1)
0.0
1.0

93.3

7.1
0.7

6.4%

6.4%

6.4%

Net sales
Other revenue

Total revenue

Cost of sales
Selling, general and administrative expenses
Costs related to debt amendments
Stock option modification expense
Depreciation and amortization
Impairment charges—long-lived assets
Other income—net
Loss on extinguishment of debt
Interest expense

Total costs and expenses

Income before income tax expense
Income tax expense

Net income

38

Performance for Fiscal Year Ended February 1, 2020 (Fiscal 2019) Compared with Fiscal Year Ended
February 2, 2019 (Fiscal 2018)

Net sales

Net sales improved $618.2 million, or 9.3%, to $7,261.2 million, driven by the following:

•

•

•

an increase of $503.3 million from our new and non-comparable stores; and

an increase in comparable store sales of $172.8 million, to $6,537.9 million; partially offset by

a $57.9 million decrease related to the net impact of permanently closed stores and other sales
adjustments.

Cost of sales

Cost of sales as a percentage of net sales remained consistent at 58.2% during Fiscal 2019. Increased
merchandise margins were offset by higher freight costs. Product sourcing costs, which are included in the line
item “Selling, general and administrative expenses” in our Consolidated Statements of Income, remained flat as a
percentage of net sales. On a dollar basis, cost of sales increased $360.6 million, or 9.3%, primarily driven by our
overall increase in sales.

Selling, general and administrative expenses

Selling, general and administrative expenses as a percentage of net sales increased 30 basis points during
Fiscal 2019. The following table details selling, general and administrative expenses for Fiscal 2019 compared
with Fiscal 2018:

(in millions)

Fiscal Year Ended

February 1,
2020

Percentage
of Net Sales

February 2,
2019

Percentage
of Net Sales

$ Variance % Change

$1,462.5
339.1
214.4
86.1
35.4

20.1% $1,336.3
313.3
4.7
200.9
3.0
89.5
1.2
—
0.5

20.1%
4.7
3.0
1.4
—

$126.2
25.8
13.5
(3.4)
35.4

9.4%
8.2
6.7
(3.8)
N/A

90.7

1.2

78.7

1.2

12.0

15.2

Store related costs
Product sourcing costs
Corporate costs
Marketing and strategy costs
Favorable lease cost
Other selling, general and
administrative expenses

Selling, general and administrative

expenses

$2,228.2

30.7% $2,018.7

30.4%

$209.5

10.4%

The increase in selling, general and administrative expenses as a percentage of sales was primarily driven by

the reclassification of favorable lease cost from depreciation and amortization expense to selling, general and
administrative expense as a result of adopting ASU 2016-02, which resulted in a 50 basis point increase. This
increase was partially offset by a 20 basis point improvement in our national television advertising and direct
marketing efforts. Store related costs remained consistent, due to a 10 basis point improvement in store
occupancy costs, offset by a 10 basis point increase in store payroll.

Costs related to debt amendments

During Fiscal 2018, we recorded total estimated costs related to debt amendments of $2.5 million, primarily

as a result of the repricing of our Term Loan Facility. During Fiscal 2019, we reversed $0.4 million of this
estimated expense based on actual expenses incurred.

39

Depreciation and amortization

Depreciation and amortization expense amounted to $210.7 million during Fiscal 2019, primarily related to

the depreciation of fixed assets, compared with $217.9 million during Fiscal 2018, primarily related to the
depreciation of fixed assets and the amortization of favorable leases. The decrease was primarily driven by the
reclassification of favorable lease cost from depreciation and amortization expense to selling, general and
administrative expense as a result of adopting ASU 2016-02, partially offset by our capital expenditures related
to new and non-comparable stores.

Impairment charges—long-lived assets

Impairment charges related to long-lived assets were $4.3 million and $6.8 million during Fiscal 2019 and
Fiscal 2018, respectively. We recorded impairment charges related to store-level assets for two stores as well as
the online store during Fiscal 2019, and eight stores during Fiscal 2018. Refer to Note 6 to our Consolidated
Financial Statements, “Impairment Charges,” for further discussion.

The recoverability assessment related to these store-level assets requires various judgments and estimates,
including estimates related to future revenues, gross margin rates, store expenses and other assumptions. We base
these estimates upon our past and expected future performance. We believe our estimates are appropriate in light
of current market conditions. However, future impairment charges could be required if we do not achieve our
current revenue or cash flow projections for each store.

Other income, net

Other income, net (consisting of stored value card breakage income, gains and losses on disposition of

assets, gains and losses on insurance proceeds and other miscellaneous items) improved $5.5 million to
$16.5 million during Fiscal 2019. The improvement in other income was primarily driven by gains on insurance
recoveries.

Loss on extinguishment of debt

During Fiscal 2018, we recorded a loss on extinguishment of debt of $1.8 million related to transactions
associated with our Term Loan Facility and ABL Credit Agreement. Refer to Note 7, “Long Term Debt,” to our
Consolidated Financial Statements for further details regarding our debt transactions. There were no debt
extinguishments during Fiscal 2019.

Interest expense

Interest expense improved $5.2 million to $50.8 million. The improvement was primarily driven by the
$150 million paydown and repricing of our Term Loan Facility during Fiscal 2018. Refer to Note 7, “Long Term
Debt,” to our Consolidated Financial Statements for further details on our debt transactions.

Our average interest rates and average balances related to our ABL Line of Credit and our Term Loan

Facility for Fiscal 2019 compared with Fiscal 2018 are summarized in the table below:

Average interest rate—ABL Line of Credit
Average interest rate—Term Loan Facility
Average balance—ABL Line of Credit (in millions)
Average balance—Term Loan Facility (in millions)(a)

(a) Excludes original issue discount

40

Fiscal Year Ended

February 1,
2020

February 2,
2019

3.7%
4.2%

3.4%
4.4%

$ 81.5
$961.4

$
83.9
$1,015.8

Income tax expense

Income tax expense was $115.4 million for Fiscal 2019 compared with $92.8 million for Fiscal 2018. The

effective tax rate was 19.9% related to pretax income of $580.5 million for Fiscal 2019, and 18.3% related to
pretax income of $507.6 million for Fiscal 2018. The lower tax rate in the prior year was primarily related to the
impact of the changes to New Jersey tax law enacted during the second quarter of Fiscal 2018.

Net income

We earned net income of $465.1 million during Fiscal 2019 compared with net income of $414.7 million for
Fiscal 2018. This improvement was primarily driven by our improved gross margin dollars, partially offset by an
increase in our selling, general and administrative expenses.

Performance for Fiscal Year Ended February 2, 2019 (Fiscal 2018) Compared with Fiscal Year Ended
February 3, 2018 (Fiscal 2017)

For a discussion related to Fiscal 2018 performance compared to Fiscal 2017 performance, refer to Part II,
Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in
our Annual Report on Form 10-K for the fiscal year ended February 2, 2019 (Fiscal 2018 10-K).

Liquidity and Capital Resources

Our ability to satisfy interest payment obligations on our outstanding debt will depend largely on our future

performance which, in turn, is subject to prevailing economic conditions and to financial, business and other
factors beyond our control. If we do not have sufficient cash flow to service interest payment obligations on our
outstanding indebtedness, and if we cannot borrow or obtain equity financing to satisfy those obligations, our
business and results of operations will be materially adversely affected. We cannot be assured that any
replacement borrowing or equity financing could be successfully completed on terms similar to our current
financing agreements, or at all.

We believe that cash generated from operations, along with our existing cash and our ABL Line of Credit,
will be sufficient to fund our expected cash flow requirements and planned capital expenditures for at least the
next twelve months as well as the foreseeable future. However, there can be no assurance that we would be able
to offset declines in our comparable store sales with savings initiatives in the event that the economy declines.

Cash Flows

Cash Flows for Fiscal 2019 Compared with Fiscal 2018

We generated $275.5 million of cash flows during Fiscal 2019 compared with a use of $26.9 million during

Fiscal 2018.

Net cash provided by operating activities amounted to $891.7 million and $639.7 million during Fiscal 2019

and Fiscal 2018, respectively. The increase in our operating cash flows was primarily driven by our improved
operating results and changes in working capital.

Net cash used in investing activities was $324.6 million and $298.5 million during Fiscal 2019 and Fiscal
2018, respectively. This change was primarily the result of an increase in capital expenditures related to a new
distribution center and our store expenditures (new stores, remodels and other store expenditures).

Net cash used in financing activities was $291.6 million during Fiscal 2019 compared to $368.1 million
during Fiscal 2018. This change was primarily driven by an increase in the value of share repurchases, partially
offset by a decrease in net payments on our debt and increased proceeds from stock option exercises.

41

Changes in working capital also impact our cash flows. Working capital equals current assets (exclusive of

restricted cash) minus current liabilities. We had a working capital deficit at February 1, 2020 of $51.1 million
compared with working capital of $2.3 million at February 2, 2019. The decrease in working capital was
primarily related to our adoption of ASU 2016-02, which resulted in adding a portion of the new lease liability to
current liabilities, as well as a decrease in merchandise inventories. This was partially offset by an increase in
cash and a decrease in accounts payable.

For a discussion of our cash flows for Fiscal 2018 compared to Fiscal 2017, refer to Part II, Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our
Fiscal 2018 10-K.

Capital Expenditures

For Fiscal 2019, cash spend for capital expenditures, net of $56.3 million of landlord allowances and
$5.1 million of insurance recoveries related to property and equipment, amounted to $268.9 million. These
capital expenditures include approximately $140 million, net of the previously mentioned landlord allowances
and insurance recoveries, for store expenditures (new stores, remodels and other store expenditures). In addition,
we made capital expenditures of approximately $56 million to support our supply chain initiatives including a
new distribution center, with the remaining capital to support information technology and other business
initiatives. We incurred cash spend on capital expenditures of $253.7 million, net of approximately $50.8 million
of landlord allowances and $2.8 million of insurance recoveries related to property and equipment, during Fiscal
2018.

We estimate that we will spend approximately $400 million, net of approximately $30 million of landlord

allowances, in capital expenditures during Fiscal 2020, including approximately $175 million, net of the
previously mentioned landlord allowances, for store expenditures (new stores, remodels and other store
expenditures). In addition, we estimate that we will spend approximately $80 million to support our supply chain
initiatives, with the remaining capital used to support our information technology and other business initiatives.

Share Repurchase Programs

On August 15, 2018, our Board of Directors authorized the repurchase of up to $300 million of common

stock, which was completed during the fourth quarter of Fiscal 2019. On August 14, 2019, our Board of
Directors authorized the repurchase of up to an additional $400 million of common stock, which is authorized to
be executed through August 2021.These repurchase programs are funded using our available cash and
borrowings on our ABL Line of Credit.

During Fiscal 2019, we repurchased 1,740,740 shares of common stock for $299.9 million, inclusive of

commissions, under our share repurchase programs. As of February 1, 2020, we had $398.5 million remaining
under our share repurchase authorizations.

We are authorized to repurchase shares of our outstanding common stock from time to time on the open

market or in privately negotiated transactions under our repurchase programs. The timing and amount of stock
repurchases will depend on a variety of factors, including the market conditions as well as corporate and
regulatory considerations. Our share repurchase program may be suspended, modified or discontinued at any
time, and we have no obligation to repurchase any amount of our common stock under the programs.

Dividends

During the past two fiscal years, we have not declared, and do not anticipate declaring in the near term,
dividends on shares of our common stock. We currently do, and intend to continue to, retain all available funds
and any future earnings to fund all of the Company’s capital expenditures, business initiatives, and to support any

42

potential opportunistic capital structure initiatives. Any determination to pay dividends in the future will be at the
discretion of our Board of Directors and will depend upon results of operations, financial condition, contractual
restrictions, including those under our ABL Line of Credit and Term Loan Facility, any potential future
indebtedness we may incur, restrictions imposed by applicable law and other factors our Board of Directors
deems relevant.

In addition, since we are a holding company, substantially all of the assets shown on our consolidated
balance sheets are held by our subsidiaries. Accordingly, our earnings, cash flow and ability to pay dividends are
largely dependent upon the earnings and cash flows of our subsidiaries and the distribution or other payment of
such earnings to us in the form of dividends.

Debt and Hedging

As of February 1, 2020, our obligations include $957.5 million, inclusive of original issue discount, under
our Term Loan Facility. We had no outstanding balance on our ABL Line of Credit as of February 1, 2020. Our
debt obligations also include $50.1 million of finance lease obligations as of February 1, 2020. Refer to Note 7 to
our Consolidated Financial Statements, “Long Term Debt,” for an overview of the terms and conditions of these
instruments.

Term Loan Facility

At February 1, 2020, our borrowing rate related to the Term Loan Facility was 3.7%.

On February 26, 2020, we completed a repricing of our Term Loan Facility, which among other things,
reduced the interest rate margins applicable to our 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 continuing to be 0.00%.

ABL Line of Credit

At February 1, 2020, we had $501.8 million available under the ABL Line of Credit. The maximum
borrowings under the ABL Line of Credit during Fiscal 2019 amounted to $255.0 million. Average borrowings
during Fiscal 2019 amounted to $81.5 million at an average interest rate of 3.7%.

Hedging

We were hedged on $800 million of our Term Loan Facility through May 2019. On December 17, 2018, the

Company entered into an interest rate swap contract, which was designated as a cash flow hedge. This interest
rate swap, which hedges $450 million of our Term Loan Facility, became effective May 31, 2019 and matures
December 29, 2023.

43

Certain Information Concerning Contractual Obligations

The following table sets forth certain information regarding our obligations to make future payments under

current contracts as of February 1, 2020:

Payments Due By Period

Total

Less Than
1 Year

2-3 Years

4-5 Years

Thereafter

(in thousands)

Debt obligations(1)
Interest on debt obligations(2)
Finance lease obligations(3)
Operating lease obligations(4)
Purchase obligations(5)
Other(6)

$

$ 961,415
210,944
74,068
3,308,058
921,242
848

44,728
6,057
435,535
921,242
848

— $ — $ 961,415
76,761
15,006
725,890

89,455
14,354
821,900

—
—

—
—

$

—
—
38,651
1,324,733

—
—

Total

$5,476,575

$1,408,410

$925,709

$1,779,072

$1,363,384

(1) Represents future principal payments on outstanding borrowings as of February 1, 2020.
(2) Represents interest payments on (i) the outstanding balance of the Term Loan Facility, with an average

interest rate of 4.2% during Fiscal 2019 and (ii) the average borrowings outstanding on our ABL Line of
Credit during Fiscal 2019, with an average interest rate of 3.7% during Fiscal 2019.

(3) Finance lease obligations include future interest payments.
(4) Represents minimum rent payments for operating leases under the current terms.
(5) Represents commitments to purchase goods that have not been received as of February 1, 2020. The table

above excludes estimated commitments for services used in our business of up to $105 million over the next
five years.

(6) Represents severance payments in the normal course of business that are included in the line item “Selling,

general and administrative expenses” in our Consolidated Statements of Income.

Our agreements with three former employees (including our former President and Chief Executive Officer)

to pay their respective beneficiaries $1.0 million upon their deaths for a total of $3.0 million is not reflected in
the table above because the timing of the payments is unpredictable.

The table above excludes ASC Topic No. 740 “Income Taxes” (Topic No. 740) liabilities which represent

uncertain tax positions related to temporary differences. The total Topic No. 740 liability was $20.1 million,
inclusive of $12.0 million of interest and penalties included in our total Topic No. 740 liability neither of which
is presented in the table above as we are not certain if and when these payments would be required.

The table above excludes our irrevocable letters of credit guaranteeing payment and performance under
certain leases, insurance contracts, debt agreements, merchandising agreements and utility agreements in the
amount of $53.1 million as of February 1, 2020.

As of February 1, 2020, insurance reserves amounted to $79.0 million. These amounts are excluded from

the table above as we are not certain if and when these payments would be required.

Critical Accounting Policies and Estimates

Our Consolidated Financial Statements have been prepared in accordance with GAAP. We believe there are

several accounting policies that are critical to understanding our historical and future performance as these
policies affect the reported amounts of revenues and other significant areas that involve management’s judgments
and estimates. The preparation of our Consolidated Financial Statements requires management to make estimates
and assumptions that affect (i) the reported amounts of assets and liabilities; (ii) the disclosure of contingent
assets and liabilities at the date of the Consolidated Financial Statements; and (iii) the reported amounts of

44

revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and
judgments, including those related to revenue recognition, inventories and insurance reserves. Historical
experience and various other factors that are believed to be reasonable under the circumstances form the basis for
making estimates and judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under different assumptions or conditions. A
critical accounting estimate meets two criteria: (1) it requires assumptions about highly uncertain matters and
(2) there would be a material effect on the Consolidated Financial Statements from either using a different,
although reasonable, amount within the range of the estimate in the current period or from reasonably likely
period-to-period changes in the estimate.

While there are a number of accounting policies, methods and estimates affecting our Consolidated

Financial Statements as addressed in Note 1 to our Consolidated Financial Statements, “Summary of Significant
Accounting Policies,” areas that are particularly critical and significant include:

Revenue Recognition. While revenue recognition for the Company does not involve significant judgment, it
represents an important accounting policy. We record revenue at the time control of goods are transferred to the
customer, which we determine to be at point of sale and delivery of merchandise, net of allowances for estimated
future returns, which is estimated based on historical return rates. We present sales, net of sales taxes, in our
Consolidated Statements of Income. We account for layaway sales and leased department revenue in compliance
with ASC Topic No. 606 “Revenue from Contracts with Customers.” Layaway sales are recognized upon
delivery of merchandise to the customer. The amount of cash received upon initiation of the layaway is recorded
as a deposit liability within the line item “Other current liabilities” in our Consolidated Balance Sheets. Stored
value cards (gift cards and store credits issued for merchandise returns) are recorded as a liability at the time of
issuance, and the related sale is recorded upon redemption.

We estimate and recognize stored value card breakage income in proportion to actual stored value card
redemptions and record such income in the line item “Other income, net” in our Consolidated Statements of
Income. We determine an estimated stored value card breakage rate by continuously evaluating historical
redemption data. Breakage income is recognized on a monthly basis in proportion to the historical redemption
patterns for those stored value cards for which the likelihood of redemption is remote.

Inventory. Our inventory is valued at the lower of cost or market using the retail inventory method. Under

the retail inventory method, the valuation of inventory and the resulting gross margin are determined by applying
a calculated cost to retail ratio to the retail value of inventory. The retail inventory method is an averaging
method that results in valuing inventory at the lower of cost or market provided markdowns are taken timely to
reduce the retail value of inventory. Inherent in the retail inventory method calculation are certain significant
management judgments and estimates including merchandise markon, markups, markdowns and shortage, which
significantly impact the ending inventory valuation as well as the resulting gross margin. Management believes
that our retail inventory method provides an inventory valuation which approximates cost using a first-in,
first-out assumption and results in carrying value at the lower of cost or market. We reserve for aged inventory
based on historical trends and specific identification. Our aged inventory reserve contains uncertainties as the
calculations require management to make assumptions and to apply judgment regarding a number of factors,
including market conditions, the selling environment, historical results and current inventory trends. A 1%
change in the dollar amount of retail markdowns would have resulted in an increase in markdown dollars, at cost,
of approximately $3.0 million for Fiscal 2019.

Typically, estimates are used to record inventory shortage at retail stores for the first three quarters of a
fiscal year. Actual physical inventories are typically conducted annually during the second or fourth quarters to
calculate actual shortage. While we make estimates on the basis of the best information available to us at the time
the estimates are made, over accruals or under accruals of shortage may be identified as a result of the physical
inventory counts, requiring adjustments. During the fourth quarter of Fiscal 2019, Fiscal 2018 and Fiscal 2017,
we recorded shortage adjustments of $1.9 million, $1.9 million and $1.8 million, respectively, as a result of
actual shortage being less than what we had estimated throughout the year.

45

Insurance Reserves. We have risk participation agreements with insurance carriers with respect to workers’

compensation, general liability insurance and health insurance. Pursuant to these arrangements, we are
responsible for paying individual claims up to designated dollar limits. The amounts included in our costs related
to these claims are estimated and can vary based on changes in assumptions or claims experience included in the
associated insurance programs. For example, changes in legal trends and interpretations, as well as changes in the
nature and method of how claims are settled, can impact ultimate costs. An increase in workers’ compensation
claims by employees, health insurance claims by employees or general liability claims may result in a
corresponding increase in our costs related to these claims. Insurance reserves amounted to $79.0 million and
$70.9 million at February 1, 2020 and February 2, 2019, respectively.

Recent Accounting Pronouncements

Refer to Note 2 to our Consolidated Financial Statements, “Recent Accounting Pronouncements,” for a
discussion of recent accounting pronouncements and their impact in our Consolidated Financial Statements.

Fluctuations in Operating Results

We expect that our revenues and operating results may fluctuate from fiscal quarter to fiscal quarter or over

the longer term. Certain of the general factors that may cause such fluctuations are discussed in Item 1A, Risk
Factors and elsewhere in this Annual Report.

Seasonality

Our business, like that of most retailers, is subject to seasonal influences. In the second half of the year,

which includes the back-to-school and holiday seasons, we generally realize a higher level of sales and net
income. Weather is also a contributing factor to the sale of our clothing. Generally, our sales are higher if the
weather is cold during the Fall and warm during the early Spring. Sales of cold weather clothing are increased by
early cold weather during the Fall, while sales of warm weather clothing are improved by early warm weather
conditions in the Spring. Although we have diversified our product offerings, we believe traffic to our stores is
still driven, in part, by weather patterns.

Inflation

We do not believe that our operating results have been materially affected by inflation during Fiscal 2019,

Fiscal 2018 or Fiscal 2017. Historically, as the costs of merchandising and related operating expenses have
increased, we have been able to mitigate the effect of such impact on our operations.

The U.S. retail industry continues to face increased pressure on margins as commodity prices increase and

the overall challenging retail conditions have led consumers to be more value conscious. Our “open to buy”
paradigm, in which we purchase both pre-season and in-season merchandise, allows us the flexibility to purchase
less pre-season with the balance purchased in-season and opportunistically. It also provides us the flexibility to
shift purchases between suppliers and categories. This enables us to obtain better terms with our suppliers, which
we expect to help offset the expected rising costs of goods.

Market Risk

We are exposed to market risks relating to fluctuations in interest rates. Our borrowings contain floating rate

obligations and are subject to interest rate fluctuations. The objective of our financial risk management is to
minimize the negative impact of interest rate fluctuations on our earnings and cash flows. We manage interest
rate risk through the use of our interest rate cap contracts.

As more fully described in Note 8 to our Consolidated Financial Statements, “Derivative Instruments and
Hedging Activities,” we enter into interest rate derivative contracts to manage interest rate risks associated with

46

our long term debt obligations. The effective portion of changes in the fair value of derivatives designated and
that qualify as cash flow hedges is recorded in the line item “Accumulated other comprehensive loss” on the
Company’s Consolidated Balance Sheets and is subsequently reclassified into earnings in the period that the
hedged forecasted transaction affects earnings. We continue to have exposure to interest rate risks to the extent
they are not hedged.

Off-Balance Sheet Arrangements

Other than operating leases consummated in the normal course of business (prior to our adoption of ASU

2016-02) and letters of credit, as more fully described above under the caption “Certain Information Concerning
Contractual Obligations,” we are not involved in any off-balance sheet arrangements that have or are reasonably
likely to have a material current or future impact on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. As a result of
adopting ASU 2016-02, our operating leases are included in our Consolidated Balance Sheet for Fiscal 2019.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to certain market risks as part of our ongoing business operations. Primary exposures
include changes in interest rates, as borrowings under our ABL Line of Credit and Term Loan Facility bear
interest at floating rates based on LIBOR or the base rate, in each case plus an applicable borrowing margin. The
interest rate of our Term Loan Facility is also dependent on the prime rate, and the federal funds rate as further
discussed in Note 7 to our Consolidated Financial Statements, “Long Term Debt.”

We manage our interest rate risk through the use of interest rate derivative contracts. For our floating-rate

debt, interest rate changes generally impact our earnings and cash flows, assuming other factors are held
constant.

On April 24, 2015, we entered into two interest rate cap contracts which were designated as cash flow
hedges. These interest rate cap contracts had an aggregate notional principal amount of $800.0 million, cap rates
of 1.0%, and matured on May 31, 2019.

On December 17, 2018, we entered into an interest rate swap contract, which was designated as a cash flow

hedge. This interest rate swap became effective on May 31, 2019. It has a notional principal amount of
$450.0 million, a swap rate of 2.72%, and matures on December 29, 2023.

On November 2, 2018, we completed a repricing of our Term Loan Facility, which among other things,
reduced the interest rate margins applicable to our Term Loan Facility from 1.50% to 1.00%, in the case of prime
rate loans, and from 2.50% to 2.00%, in the case of LIBOR loans, with the LIBOR floor being reduced from
0.75% to 0.00%.

On February 26, 2020, we completed a repricing of our Term Loan Facility, which among other things,
reduced the interest rate margins applicable to our 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 continuing to be 0.00%.

We have unlimited interest rate risk related to borrowings on our variable rate debt in excess of the notional

principal amount of our interest rate swap contract.

At February 1, 2020, we had $961.4 million of floating-rate debt, exclusive of original issue discount. Based
on $961.4 million outstanding as floating-rate debt, a one percentage point increase as of February 1, 2020 (after
considering our interest rate swap contract), would cause an increase to cash interest expense of $5.2 million per
year, resulting in $5.2 million less in our pre-tax earnings. This sensitivity analysis assumes our mix of financial
instruments and all other variables will remain constant in future periods. These assumptions are made in order to
facilitate the analysis and are not necessarily indicative of our future intentions.

47

If a one percentage point increase in interest rates were to occur as of February 1, 2020, such an increase

would result in the following additional interest expenses (assuming current borrowing level remains constant):

Floating Rate Debt

Term Loan Facility(a)
ABL Line of Credit

(in millions)

Principal
Outstanding
at February 1,
2020

Additional
Interest
Expense
Q1 2020

Additional
Interest
Expense
Q2 2020

Additional
Interest
Expense
Q3 2020

Additional
Interest
Expense
Q4 2020

$961.4
—

$961.4

$ 1.3
—

$ 1.3

$ 1.3
—

$ 1.3

$ 1.3
—

$ 1.3

$ 1.3
—

$ 1.3

(a) Principal balance represents carrying value of our Term Loan Facility exclusive of original issue discount.

Our ability to satisfy our interest payment obligations on our outstanding debt will depend largely on our
future performance, which, in turn, is in part subject to prevailing economic conditions and to financial, business
and other factors beyond our control. If we do not have sufficient cash flow to service our interest payment
obligations on our outstanding indebtedness and if we cannot borrow or obtain equity financing to satisfy those
obligations, our business and results of operations will be materially adversely affected. We cannot be assured
that any replacement borrowing or equity financing could be successfully completed.

48

Item 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm
Consolidated Statements of Income for the fiscal years ended February 1, 2020, February 2, 2019 and

February 3, 2018

Consolidated Statements of Comprehensive Income for the fiscal years ended February 1, 2020,

February 2, 2019 and February 3, 2018

Consolidated Balance Sheets as of February 1, 2020 and February 2, 2019
Consolidated Statements of Cash Flows for the fiscal years ended February 1, 2020, February 2, 2019

and February 3, 2018

Consolidated Statements of Stockholders’ Equity (Deficit) for the fiscal years ended February 1,

2020, February 2, 2019 and February 3, 2018

Notes to Consolidated Financial Statements for the fiscal years ended February 1, 2020, February 2,

2019 and February 3, 2018

Page

50

53

54
55

56

57

58

49

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of
Burlington Stores, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Burlington Stores, Inc. and subsidiaries (the
“Company”) as of February 1, 2020, and February 2, 2019, the related consolidated statements of income,
comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended
February 1, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the
financial statements present fairly, in all material respects, the financial position of the Company as of
February 1, 2020, and February 2, 2019, and the results of its operations and its cash flows for each of the three
fiscal years in the period ended February 1, 2020, in conformity with accounting principles generally accepted in
the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company’s internal control over financial reporting as of February 1, 2020, based
on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission and our report dated March 13, 2020, expressed an
unqualified opinion on the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 2 to the financial statements, effective February 3, 2019, the Company adopted Financial
Accounting Standards Board (FASB) Update (ASU) 2016-12, Leases (Topic 842), using the alternative transition
method, which does not require prior periods to be recast. See below for a critical audit matter related to the
change in accounting principle.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on the Company’s financial statements based on our audits. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the US federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our

50

opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters
below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they
relate.

Incremental Borrowing Rate Used in Adoption of Topic No. 842—Refer to Notes 1 and 2 to the financial
statements (also see Change in Accounting Principle explanatory paragraph above)

Critical Audit Matter Description

The Company adopted the provisions of FASB ASU 2016-12 as of February 3, 2019. Accordingly, the Company
recognized an operating lease liability of $2.1 billion based on the present value of its lease payments on the
adoption date. The discount rates used in valuing the Company’s leases are not readily determinable and are
based on the Company’s incremental borrowing rate (IBR) on a fully collateralized basis. The determination of
the IBRs required management to make significant estimates and assumptions as to its use of the retail industry
yield curve, credit profile adjustment, and estimate of the impact of collateral.

Given the determination of the IBRs required management to make significant estimates and assumptions
relating to its use of the retail industry yield curve, credit profile adjustment, and estimate for the impact of
collateral, performing audit procedures to evaluate the reasonableness of such estimates and
assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to
involve our valuation specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the IBRs that were used in the adoption of Topic 842 included the following:

• We tested the effectiveness of controls over management’s review of methodology, inputs, and assumptions

used in the determination of the IBRs.

• With the assistance of our valuation specialists, we evaluated the methods and assumptions used by
management to determine the IBRs, tested the reasonableness of the inputs used, and tested the
mathematical accuracy of the IBR model.

Retail Inventory Method—Impact of Markdowns—Refer to Note 1 to the financial statements

Critical Audit Matter Description

The Company values merchandise inventories at the lower of cost or market using the retail inventory method.
Under this method, the valuation of inventories at cost and the resulting gross margins are determined by
applying a calculated cost-to-retail ratio to the retail value of inventories. The retail inventory method is an
averaging method that results in valuing inventory at the lower of cost or market provided markdowns are taken
timely to reduce the retail value of inventory. Merchandise inventories as of February 1, 2020, were
$777.2 million.

The judgments involved in determining when to record markdowns can significantly impact the ending inventory
valuation and the resulting gross profit. Given the significant judgments necessary to identify and record
markdowns timely, performing audit procedures to evaluate the timeliness of markdowns involved a high degree
of auditor judgment.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the timing of markdowns taken included the following, among others:

• We tested the effectiveness of controls over inventory valuation, specifically those over the determination

and execution of markdowns.

51

• We made selections of markdowns recorded after year-end to determine if the selected markdowns should

have been taken as of the year-end balance sheet date.

• We made selections of markdowns recorded throughout the year to test the accuracy and timeliness of

markdowns taken.

• We developed an expectation for markdowns based on historical amounts recorded as a percentage of sales

and compared our estimate to management’s recorded markdowns.

Parsippany, New Jersey
March 13, 2020

We have served as the Company’s auditor since 1983.

52

BURLINGTON STORES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(All amounts in thousands, except per share data)

REVENUES:
Net sales
Other revenue

Total revenue

COSTS AND EXPENSES:
Cost of sales
Selling, general and administrative expenses
Costs related to debt amendments
Stock option modification expense
Depreciation and amortization
Impairment charges—long-lived assets
Other income—net
Loss on extinguishment of debt
Interest expense

Total costs and expenses

Income before income tax expense
Income tax expense

Net income

Net income per common share:
Common stock—basic

Common stock—diluted

Weighted average number of common shares:

Common stock—basic

Common stock—diluted

Fiscal Year Ended

February 1,
2020

February 2,
2019

February 3,
2018
(53 Weeks)

$7,261,243
25,155

$6,643,051
25,428

$6,084,766
25,277

7,286,398

6,668,479

6,110,043

4,228,740
2,228,178
(375)
—

210,720
4,315
(16,531)
—
50,826

3,868,119
2,018,737
2,496
—

217,884
6,844
(10,998)
1,823
55,990

3,559,158
1,863,501
2,262
142
201,103
2,127
(8,888)
2,881
58,777

6,705,873

6,160,895

5,681,063

580,525
115,409

507,584
92,839

428,980
44,128

$ 465,116

$ 414,745

$ 384,852

$

$

7.05

6.91

$

$

6.21

6.04

$

$

5.64

5.48

65,943

67,293

66,812

68,679

68,286

70,288

See Notes to Consolidated Financial Statements.

53

BURLINGTON STORES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(All amounts in thousands)

Net income
Other comprehensive (loss) income, net of tax:

Interest rate derivative contracts:

Net unrealized (losses) gains arising during the period
Reclassification into earnings during the period

Other comprehensive (loss) income, net of tax

Total comprehensive income

Fiscal Year Ended

February 1,
2020

February 2,
2019

February 3,
2018
(53 Weeks)

$465,116

$414,745

$384,852

(16,606)
1,259

(15,347)

(3,080)
1,354

(1,726)

1,742
3,562

5,304

$449,769

$413,019

$390,156

See Notes to Consolidated Financial Statements.

54

BURLINGTON STORES, INC.
CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except share and per share data)

ASSETS
Current assets:
Cash and cash equivalents
Restricted cash and cash equivalents
Accounts receivable—net of allowance for doubtful accounts of $795 and $78,

respectively

Merchandise inventories
Assets held for disposal
Prepaid and other current assets

Total current assets

Property and equipment—net
Operating lease assets
Tradenames
Favorable leases—net
Goodwill
Deferred tax assets
Other assets

Total assets

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Current operating lease liabilities
Other current liabilities
Current maturities of long term debt

Total current liabilities

Long term debt
Long term operating lease liabilities
Other liabilities
Deferred tax liabilities
Commitments and contingencies (Note 17)
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: 79,882,506 shares and 79,224,669 shares, respectively;
Outstanding: 65,929,972 shares and 67,145,097 shares, respectively

Additional paid-in-capital
Accumulated earnings (deficit)
Accumulated other comprehensive loss
Treasury stock, at cost

Total stockholders’ equity

Total liabilities and stockholders’ equity

See Notes to Consolidated Financial Statements.

55

February 1,
2020

February 2,
2019

$

403,074
6,582

$ 112,274
21,882

91,508
777,248
2,261
136,698

1,417,371
1,403,173
2,397,111
238,000
731
47,064
4,678
85,731

58,752
954,183

—
124,809

1,271,900
1,253,705

—
238,000
164,324
47,064
4,361
99,818

$ 5,593,859

$3,079,172

$

759,107
302,185
397,032
3,577

1,461,901
1,001,723
2,322,000
97,798
182,288

$ 848,561

—

396,257
2,924

1,247,742
983,643
—
346,298
178,779

—

—

7
1,587,146
204,797
(18,960)
(1,244,841)

7
1,508,996
(260,919)
(3,613)
(921,761)

528,149

322,710

$ 5,593,859

$3,079,172

BURLINGTON STORES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)

OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating activities

Depreciation and amortization
Impairment charges—long-lived assets
Amortization of deferred financing costs
Accretion of long term debt instruments
Deferred income taxes
Non-cash loss on extinguishment of debt
Non-cash stock compensation expense
Non-cash lease expense
Non-cash rent
Cash received from landlord allowances

Changes in assets and liabilities:
Accounts receivable
Merchandise inventories
Prepaid and other current assets
Accounts payable
Other current liabilities
Other long term assets and long term liabilities

Other operating activities

Net cash provided by operating activities

INVESTING ACTIVITIES
Cash paid for property and equipment
Lease acquisition costs
Proceeds from insurance recoveries related to property and equipment
Proceeds from sale of property and equipment and assets held for sale
Other investing activities

Net cash (used in) investing activities

FINANCING ACTIVITIES
Proceeds from long term debt—ABL Line of Credit
Principal payments on long term debt—ABL Line of Credit
Proceeds from long term debt—Term B-5 Loans
Principal payments on long term debt—Term B-5 Loans
Principal payments on long term debt—Term B-4 Loans
Purchase of treasury shares
Proceeds from stock option exercises
Deferred financing costs
Other financing activities

Net cash (used in) financing activities

Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period

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

Supplemental disclosure of cash flow information:
Interest paid

Income tax payments—net

Non-cash investing activities:
Accrued purchases of property and equipment

Acquisition of finance leases

Fiscal Year Ended

February 1,
2020

February 2,
2019

February 3,
2018
(53 Weeks)

$

465,116

$

414,745

$

384,852

210,720
4,315
1,247
813
9,070
—
43,928
12,599
—
56,280

(8,816)
176,430
(13,598)
(90,899)
25,202
3,176
(3,858)

891,725

(328,357)
(1,983)
5,131
—
611

(324,598)

1,294,400
(1,294,400)

—
—
—

(323,080)
34,222
—
(2,769)

(291,627)

275,500
134,156

409,656

47,071

110,588

62,814

19,875

$

$

$

$

$

217,884
6,844
1,596
754
2,519
1,823
35,485
—
(25,568)
50,843

3,482
(201,621)
(7,461)
111,023
13,700
8,780
4,825

639,653

(295,772)
(8,543)
2,787
6,020
(3,000)

(298,508)

1,220,200
(1,220,200)

—

(152,793)

—

(228,874)
16,306
(2,439)
(275)

(368,075)

(26,930)
161,086

134,156

52,173

75,650

47,258

13,538

$

$

$

$

$

201,103
2,127
2,463
1,048
(30,727)
2,881
27,034
—
(24,689)
48,834

(19,983)
(50,671)
(42,855)
97,003
2,509
(2,109)
8,430

607,250

(268,194)

—
5,980
(3)
9

(262,208)

1,215,500
(1,215,500)
1,114,207
(2,793)
(1,117,000)
(289,777)
9,173
(1,188)
(5,975)

(293,353)

51,689
109,397

161,086

49,092

109,581

31,279

—

$

$

$

$

See Notes to Consolidated Financial Statements.

56

BURLINGTON STORES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(All dollar amounts in thousands)

Common Stock

Paid-in Accumulated

Additional

Accumulated
Other
Comprehensive

Treasury Stock

Shares

Amount Capital

Deficit

Loss

Shares

Amount

Total

$1,420,581 $(1,060,099)
384,852

Balance at January 28, 2017
Net income
Stock options exercised
Shares used for tax withholding
Shares purchased as part of

publicly announced programs
Issuance of restricted shares, net

of forfeitures of 33,263
restricted shares

Stock based compensation
Unrealized gains on interest rate
cap contracts, net of related
taxes of $1.7 million
Amount reclassified into

earnings, net of related taxes of
$2.4 million

Cumulative-effect adjustment

Balance at February 3, 2018
Net income
Stock options exercised
Shares used for tax withholding
Shares purchased as part of

publicly announced programs
Issuance of restricted shares, net

of forfeitures of 25,504
restricted shares

Stock based compensation
Unrealized gains on interest rate
cap contracts, net of related
taxes of $1.2 million
Amount reclassified into

earnings, net of related taxes of
$0.5 million

Balance at February 2, 2019
Net income
Stock options exercised
Shares used for tax withholding
Shares purchased as part of

publicly announced programs
Forfeiture of restricted shares, net
of issuances of 1,759 restricted
shares

Stock based compensation
Unrealized losses on interest rate

77,653,924
—
568,675
—

—

199,348
—

—

—
—

78,421,947
—
684,011
—

—

118,711
—

—

—

79,224,669
—
710,964
—

—

$

7

—
—
—

—

—
—

—

—
—

7

—
—
—

—

—
—

—

—

7

—
—
—

—

—
9,173
—

—

—
27,034

—

—
417

1,457,205
—
16,306
—

—

—
35,485

—

—

1,508,996
—
34,222
—

—

(53,127) —
—

—

—
43,928

—
—

—

—
—

—

—
(417)

(675,664)
414,745

—
—

—

—
—

—

—

(260,919)
465,116

—
—

—

—
—

—

$ (7,191)

—
—
—

—

—
—

1,742

3,562
—

(1,887)
—
—
—

—

—
—

(3,080)

1,354

(3,613)
—
—
—

—

—
—

(16,606)

(7,473,211) $ (403,110) $ (49,812)
— 384,852
9,173
—
(7,307)
(7,307)

—
—
(70,291)

(3,006,720)

(282,470)

(282,470)

—
—

—

—
—

—
—

—

—
—

—
27,034

1,742

3,562
—

(10,550,222)

—
—
(69,489)

(692,887)

86,774
— 414,745
16,306
—
(10,127)
(10,127)

(1,459,861)

(218,747)

(218,747)

—
—

—

—

—
—

—

—

—
35,485

(3,080)

1,354

(12,079,572)

—
—

(132,222)

(921,761)

322,710
— 465,116
34,222
—
(23,200)
(23,200)

(1,740,740)

(299,880)

(299,880)

—
—

—

—
—

—
—

—
43,928

—

(16,606)

—
—

1,259
600

derivative contracts, net of related
taxes of $6.4 million
Amount reclassified into

earnings, net of related taxes of
$0.5 million

Cumulative-effect adjustment

—

—
—

—

—
—

—

—
—

—
600

1,259
—

Balance at February 1, 2020

79,882,506

$

7

$1,587,146 $

204,797

$(18,960)

(13,952,534) $(1,244,841) $ 528,149

See Notes to Consolidated Financial Statements.

57

BURLINGTON STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Business

As of February 1, 2020, Burlington Stores, Inc., a Delaware corporation (collectively with its subsidiaries,

the Company), has expanded its store base to 727 retail stores, inclusive of an internet store, in 45 states and
Puerto Rico. The Company sells in-season, fashion-focused merchandise at up to 60% off other retailers’ prices,
including: women’s ready-to-wear apparel, menswear, youth apparel, baby, beauty, footwear, accessories, home,
toys, gifts and coats. As of February 1, 2020, the Company operated stores under the names “Burlington Stores”
(714 stores), “Cohoes Fashions” (2 stores), “Super Baby Depot” (2 stores), “MJM Designer Shoes” (8 stores) and
1 online store. Cohoes Fashions offers products similar to those offered by Burlington Stores. MJM Designer
Shoes offers moderately priced designer and fashion shoes. The Super Baby Depot stores offer baby clothing,
accessories, furniture and other merchandise in the middle to higher price range.

Basis of Consolidation and Presentation

The accompanying Consolidated Financial Statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (GAAP). The Consolidated Financial Statements
include the accounts of Burlington Stores, Inc. and its subsidiaries. All inter-company accounts and transactions
have been eliminated in consolidation.

Fiscal Years

The Company defines its fiscal year as the 52 or 53-week period ending on the Saturday closest to
January 31. The fiscal years ended February 1, 2020 (Fiscal 2019) and February 2, 2019 (Fiscal 2018) each
consisted of 52 weeks. The fiscal year ended February 3, 2018 (Fiscal 2017) consisted of 53 weeks.

Use of Estimates

Certain amounts included in the Consolidated Financial Statements are estimated based on historical
experience, currently available information and management’s judgment as to the expected outcome of future
conditions and circumstances. While every effort is made to ensure the integrity of such estimates, actual results
could differ from these estimates, and such differences could have a material impact on the Company’s
Consolidated Financial Statements.

Casualty Losses and Insurance Proceeds

As a result of the effects of certain weather-related incidents, 82 of the Company’s stores were closed for at
least one day during Fiscal 2017. The Company incurred losses during Fiscal 2017 of (i) $5.4 million related to
the net book values of merchandise inventories and (ii) $17.7 million related to the net book values of property
and equipment and other long-lived assets, as well as repair and maintenance costs related to the clean-up of its
stores. These costs were recorded in the line items “Cost of sales” and “Selling general and administrative
expenses” on the Company’s Consolidated Statement of Income for the year ended February 3, 2018. The
Company was insured at the selling price of the inventory and at replacement costs for the property and
equipment and other long-lived assets, less a deductible. During Fiscal 2017, the Company received
approximately $11.7 million of insurance proceeds to offset some of the losses. The Company allocated
$6.0 million of these proceeds to property and equipment, which is included in the line item “Proceeds from
insurance recoveries related to property and equipment,” a component of cash flows from investing activities, on
the Company’s Consolidated Statements of Cash Flows during the year ended February 3, 2018.

58

During Fiscal 2019 and Fiscal 2018, the Company received $12.5 million and $9.3 million, respectively, of

insurance proceeds related to these incidents. These proceeds resulted in a gain on insurance recovery of
$8.1 million and $3.3 million, which is included in “Other income – net” on the Company’s Consolidated
Statements of Income for Fiscal 2019 and Fiscal 2018, respectively. The Company allocated $5.1 million and
$2.8 million of these proceeds to property and equipment, which is included in the line item “Proceeds from
insurance recoveries related to property and equipment,” a component of cash flows from investing activities, on
the Company’s Consolidated Statement of Cash Flows for Fiscal 2019 and Fiscal 2018, respectively.

The Company also incurred losses during Fiscal 2019 of $3.1 million related to several stores that sustained
damages and were temporarily closed during the year. These losses primarily relate to merchandise held at these
stores, and the losses are included in the line item “Cost of sales” in the Company’s Consolidated Statement of
Income for Fiscal 2019.

Cash and Cash Equivalents

Cash and cash equivalents represent cash and short-term, highly liquid investments with maturities of three
months or less at the time of purchase. Book cash overdrafts are included in the line item “Accounts payable” on
the Company’s Consolidated Balance Sheets.

Accounts Receivable

Accounts receivable consist of credit card receivables, lease incentive receivables, insurance receivables and

other receivables. Accounts receivable are recorded at net realizable value, which approximates fair value. The
Company provides an allowance for doubtful accounts for amounts deemed uncollectible.

Inventories

Merchandise inventories are valued at the lower of cost or market, as determined by the retail inventory

method. Under the retail inventory method, the valuation of inventories at cost and the resulting gross margins
are calculated by applying a calculated cost to retail ratio to the retail value of inventories. The Company
regularly records a provision for estimated shortage, thereby reducing the carrying value of merchandise
inventory. Complete physical inventories of all of the Company’s stores and warehouses are performed no less
frequently than annually, with the recorded amount of merchandise inventory being adjusted to coincide with
these physical counts.

The Company records its cost of merchandise (net of purchase discounts and certain vendor allowances),
certain merchandise acquisition costs (primarily commissions and import fees), inbound freight, outbound freight
from distribution centers, and freight on internally transferred merchandise in the line item “Cost of sales” in the
Company’s Consolidated Statements of Income.

Costs associated with the Company’s distribution, buying, and store receiving functions (product sourcing

costs) are included in the line items “Selling, general and administrative expenses” and “Depreciation and
amortization” in the Company’s Consolidated Statements of Income. Product sourcing costs included within the
line item “Selling, general and administrative expenses” amounted to $339.1 million, $313.3 million and
$283.6 million during Fiscal 2019, Fiscal 2018 and Fiscal 2017, respectively. Depreciation and amortization
related to the distribution and purchasing functions for the same periods amounted to $31.9 million,
$30.5 million and $26.6 million, respectively.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over

the estimated useful lives of the assets, which range from 20 to 40 years for buildings, depending upon the

59

expected useful life of the facility, and 3 to 15 years for store fixtures and equipment. Leasehold improvements
are amortized over the lease term, including any reasonably assured renewal options or the expected economic
life of the improvement, whichever is less. Repairs and maintenance expenditures are expensed as incurred.
Renewals and betterments, which significantly extend the useful lives of existing property and equipment, are
capitalized. Assets recorded under capital leases are recorded at the present value of minimum lease payments
and are amortized over the lease term. Amortization of assets recorded as capital leases is included in the line
item “Depreciation and amortization” in the Company’s Consolidated Statements of Income. The carrying value
of all long-lived assets is reviewed for impairment whenever events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable, in accordance with ASC Topic No. 360 “Property, Plant, and
Equipment” (Topic No. 360). The Company recorded impairment charges related to property and equipment of
$3.4 million, $3.9 million and $1.1 million during Fiscal 2019, Fiscal 2018 and Fiscal 2017, respectively. These
charges are recorded in the line item “Impairment charges—long-lived assets” in the Company’s Consolidated
Statements of Income. Refer to Note 6, “Impairment Charges,” for further discussion of the Company’s
measurement of impairment of long-lived assets.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is
measured by a comparison of the carrying amount of an asset to undiscounted pre-tax future net cash flows
expected to be generated by that asset. If the undiscounted future cash flows are not adequate to recover the
carrying value of the asset, an impairment charge is recognized for the amount by which the carrying amount of
the assets exceeds the fair value of such assets. Refer to Note 6, “Impairment Charges,” for further discussion of
the Company’s measurement of impairment of long-lived assets.

Capitalized Computer Software Costs

The Company accounts for capitalized software in accordance with ASC Topic No. 350 “Intangibles—

Goodwill and Other” (Topic No. 350) which requires the capitalization of certain costs incurred in connection
with developing or obtaining software for internal use. The Company capitalized $18.0 million and $15.7 million
relating to these costs during Fiscal 2019 and Fiscal 2018, respectively.

Intangible Assets

The Company accounts for intangible assets in accordance with Topic No. 350. The Company’s intangible

assets primarily represent tradenames and favorable lease positions. The tradename asset “Burlington” is
expected to generate cash flows indefinitely and, therefore, is accounted for as an indefinite-lived asset not
subject to amortization. The values of favorable and unfavorable lease positions are amortized on a straight-line
basis over the expected lease terms. Amortization of net favorable lease positions is included in the line item
“Depreciation and amortization” in the Company’s Consolidated Statements of Income. The Company evaluates
its intangible assets for possible impairment as follows:

Indefinite-lived intangible assets: The Company tests identifiable intangible assets with an indefinite life for

impairment on an annual basis, or when a triggering event occurs, relying on a number of factors that include
operating results, business plans and projected future cash flows. The impairment test consists of a comparison of
the fair value of the indefinite-lived intangible asset with its carrying amount. The Company determines fair
value through the relief of royalty method which is a widely accepted valuation technique. On the first business
day of the second quarter, the Company’s annual assessment date, the Company performed a quantitative
analysis and determined that the fair values of each of the Company’s identifiable intangible assets are greater
than their respective carrying values. There were no impairment charges recorded during Fiscal 2019, Fiscal
2018 or Fiscal 2017 related to indefinite-lived intangible assets.

60

Finite-lived intangible assets: Identifiable intangible assets that are subject to amortization are evaluated for

impairment in accordance with Topic No. 360 using a process similar to that used to evaluate other long-lived
assets as described in Note 6, “Impairment Charges.” An impairment charge is recognized for the amount by
which the carrying value exceeds the fair value of the asset. The Company recorded impairment charges of
$2.9 million and $0.8 million related to finite-lived intangible assets during Fiscal 2018 and Fiscal 2017,
respectively. There were no impairment charges related to finite-lived intangible assets during Fiscal 2019. These
charges are recorded in the line item “Impairment charges–long-lived assets” in the Company’s Consolidated
Statements of Income. Refer to Note 6, “Impairment Charges,” for further discussion of the Company’s
measurement of impairment of long-lived assets.

Goodwill

Goodwill represents the excess of the acquisition cost over the estimated fair value of tangible assets and
other identifiable intangible assets acquired less liabilities assumed. Topic No. 350 requires a comparison, at least
annually, of the carrying value of the assets and liabilities associated with a reporting unit, including goodwill,
with the fair value of the reporting unit. The Company determines fair value through multiple widely accepted
valuation techniques. These techniques use a variety of assumptions including projected market conditions,
discount rates and future cash flows. If the carrying value of the assets and liabilities exceeds the fair value of the
reporting unit, the Company would calculate the implied fair value of its reporting unit goodwill as compared
with the carrying value of its reporting unit goodwill to determine the appropriate impairment charge. On the first
business day of the second fiscal quarter, the Company’s annual assessment date, the Company performed a
quantitative analysis and determined that the fair value of the Company’s reporting unit was greater than its
carrying value. There were no impairment charges related to goodwill during Fiscal 2019, Fiscal 2018 or Fiscal
2017.

Other Assets

Other assets consist primarily of landlord-owned store assets that the Company has paid for as part of its
lease and deferred financing costs associated with the Company’s senior secured asset-based revolving credit
facility (the ABL Line of Credit). Landlord-owned assets represent leasehold improvements at certain stores for
which the Company has paid and derives a benefit, but the landlord has retained title. These assets are amortized
over the lease term inclusive of reasonably assured renewal options. Amortization of landlord-owned assets was
$14.6 million, $16.0 million and $14.5 million, during Fiscal 2019, Fiscal 2018 and Fiscal 2017, respectively,
and was included in the line item “Depreciation and amortization” in the Company’s Consolidated Statements of
Income. Deferred financing costs are amortized over the life of the ABL Line of Credit using the interest method
of amortization. Amortization of deferred financing costs is recorded in the line item “Interest expense” in the
Company’s Consolidated Statements of Income. Other assets also included purchased lease rights as of
February 2, 2019. As a result of adopting Accounting Standards Update (ASU) 2016-02, “Leases” (ASU
2016-02), purchased lease rights are now included in the line item “Operating lease assets” as of February 1,
2020.

Other Current Liabilities

Other current liabilities primarily consist of sales tax payable, customer liabilities, accrued payroll costs,

self-insurance reserves, accrued operating expenses, payroll taxes payable and other miscellaneous items.
Additionally, the current portion of straight line rent liability was included in other current liabilities as of
February 2, 2019. As a result of adopting ASU 2016-02, the current portion of straight line rent liability is
included in the line item “Current operating lease liabilities” as of February 1, 2020. Customer liabilities totaled
$32.1 million and $33.7 million as of February 1, 2020 and February 2, 2019, respectively.

The Company has risk participation agreements with insurance carriers with respect to workers’

compensation, general liability insurance and health insurance. Pursuant to these arrangements, the Company is

61

responsible for paying individual claims up to designated dollar limits. The amounts related to these claims are
estimated and can vary based on changes in assumptions or claims experience included in the associated
insurance programs. An increase in workers’ compensation claims, health insurance claims or general liability
claims may result in a corresponding increase in costs related to these claims. Self-insurance reserves as of
February 1, 2020 and February 2, 2019 were:

Short-term self-insurance reserve(a)
Long-term self-insurance reserve(b)

Total

(in thousands)

Fiscal Years Ended

February 1,
2020

February 2,
2019

$34,817
44,137

$78,954

$29,918
40,975

$70,893

(a) Represents the portions of the self-insurance reserve expected to be paid in the next twelve months, which

were recorded in the line item “Other current liabilities” in the Company’s Consolidated Balance Sheets.
(b) Represents the portions of the self-insurance reserve expected to be paid in excess of twelve months, which

was recorded in the line item “Other liabilities” in the Company’s Consolidated Balance Sheets.

Other Liabilities

As of February 1, 2020, other liabilities primarily consist of the long term portion of self-insurance reserves

and tax liabilities associated with the uncertain tax positions recognized by the Company in accordance with
ASC Topic No. 740 “Income Taxes” (Topic No. 740). As of February 2, 2019, other liabilities primarily consist
of deferred lease incentives, the long term portion of straight line rent liability, the long term portion of self-
insurance reserves and tax liabilities associated with the uncertain tax positions recognized by the Company in
accordance with Topic No. 740.

Deferred lease incentives are funds received or receivable from landlords used primarily to offset the costs

incurred for leasehold improvements and for new and remodeled stores. These deferred lease incentives are
amortized over the expected lease term, including rent holiday periods and option periods where the exercise of
the option can be reasonably assured. Amortization of deferred lease incentives is included in the line item
“Selling, general and administrative expenses” on the Company’s Consolidated Statements of Income. As of
February 2, 2019, deferred lease incentives included in the line item “Other liabilities” were $216.2 million. As a
result of adoption of ASU 2016-02, deferred lease incentives are included in the line item “Operating lease
assets” as of February 1, 2020.

Revenue Recognition

The Company records revenue at the time control of the goods are transferred to the customer, which the
Company determines to be at point of sale and delivery of merchandise, net of allowances for estimated future
returns, which is estimated based on historical return rates. The Company presents sales, net of sales taxes, in its
Consolidated Statements of Income. The Company accounts for layaway sales and leased department revenue in
compliance with ASC Topic No. 606 “Revenue from Contracts with Customers” (Topic No. 606). Layaway sales
are recognized upon delivery of merchandise to the customer. The amount of cash received upon initiation of the
layaway is recorded as a deposit liability in the line item “Other current liabilities” in the Company’s
Consolidated Balance Sheets. Stored value cards (gift cards and store credits issued for merchandise returns) are
recorded as a liability at the time of issuance, and the related sale is recorded upon redemption.

The Company determines an estimated stored value card breakage rate by continuously evaluating historical

redemption data. Breakage income is recognized monthly in proportion to the historical redemption patterns for
those stored value cards for which the likelihood of redemption is remote.

62

Other Revenue

Other revenue consists of service fees (layaway, shipping and handling, alteration, dormancy and other
service charges), subleased rental income and rental income from leased departments as shown in the table
below:

Service fees
Subleased rental income and other
Rental income from leased departments

Total

(in thousands)

Fiscal Years Ended

February 1,
2020

February 2,
2019

$16,051
9,104
—

$25,155

$15,836
9,319
273

$25,428

February 3,
2018
(53 Weeks)

$16,207
8,846
224

$25,277

Rental income from leased departments resulted from arrangements at some of the Company’s stores where

the Company granted unaffiliated third parties the right to use designated store space solely for the purpose of
selling such third parties’ goods, including such items as fragrances and designer handbags. Rental income was
based on an agreed upon percentage of the lease departments’ total revenues. The Company did not own or have
any rights to any tradenames, licenses or other intellectual property in connection with the brands sold by such
unaffiliated third parties. The Company no longer has any such arrangements as of the end of Fiscal 2019.

Private Label Credit Card

The Company has a private label credit card program, in which customers earn reward points for purchases
made using the card. The Company reduces net sales for the dollar value of any points earned at the time of the
initial transaction, and subsequently recognizes net sales at the time the points are redeemed or expired. The
Company receives royalty revenue based on a percentage of all purchases made on the card, which is recognized
at the time of the initial transaction. The Company also receives a fee for each card activated. Revenue from
activation fees are deferred and amortized over the period the Company performs its obligations under the card to
the customer.

Advertising Costs

The Company’s advertising costs consist primarily of national television, direct mail and digital costs.

Advertising costs are expensed the first time the advertising takes place, and are included in the line item
“Selling, general and administrative expenses” on the Company’s Consolidated Statements of Income. During
Fiscal 2019, Fiscal 2018 and Fiscal 2017, advertising costs were $74.6 million, $77.1 million and $82.3 million,
respectively.

Income Taxes

The Company accounts for income taxes in accordance with Topic No. 740. Deferred income taxes reflect

the impact of temporary differences between amounts of assets and liabilities for financial reporting purposes and
such amounts as measured by tax laws. A valuation allowance against the Company’s deferred tax assets is
recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized. In
determining the need for a valuation allowance, management is required to make assumptions and to apply
judgment, including forecasting future earnings, taxable income, and the mix of earnings in the jurisdictions in
which the Company operates. Management periodically assesses the need for a valuation allowance based on the
Company’s current and anticipated results of operations. The need for and the amount of a valuation allowance
can change in the near term if operating results and projections change significantly.

63

Topic No. 740 requires the recognition in the Company’s Consolidated Financial Statements of the impact

of a tax position taken or expected to be taken in a tax return, if that position is “more likely than not” to be
sustained upon examination by the relevant taxing authority, based on the technical merits of the position. The
tax benefits recognized in the Company’s Consolidated Financial Statements from such a position are measured
based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate
resolution. The Company records interest and penalties related to unrecognized tax benefits as part of income
taxes.

Other Income, Net

Other income, net, consists of breakage income, gains and losses on insurance proceeds, interest income, net

gains and losses on disposition of assets, and other miscellaneous items. During Fiscal 2019, Fiscal 2018 and
Fiscal 2017, the Company recognized $3.6 million, $4.2 million and $3.3 million, respectively, of breakage
income. The Company recognized an $8.1 million and $3.3 million gain on insurance recoveries during Fiscal
2019 and Fiscal 2018, respectively. There was no gain on insurance recovery during Fiscal 2017. The Company
also recognized $2.1 million and $2.5 million during Fiscal 2018 and Fiscal 2017, respectively, related to the sale
of certain state tax credits. There were no sales of tax credits during Fiscal 2019.

Comprehensive Income

Comprehensive income is comprised of net income and the effective portion of changes in the fair value of

derivatives designated and that qualify as cash flow hedges, less amounts reclassified into earnings.

Lease Accounting

The Company leases store locations, distribution centers and office space used in its operations. Beginning

in Fiscal 2019, as a result of adopting ASU 2016-02, the Company accounts for these types of leases in
accordance with ASC Topic No. 842, “Leases” (Topic No. 842), which requires that leases be evaluated and
classified as operating or finance leases for financial reporting purposes. The lease liability is calculated as the
present value of the remaining future lease payments over the lease term, including reasonably assured renewal
options. 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. In calculating its incremental
borrowing rate, the Company uses a retail industry yield curve, adjusted for the Company’s credit profile. The
right-of-use asset for operating leases is based on the lease liability adjusted for the reclassification of certain
balance sheet amounts, such as favorable leases, the long term portion of straight line rent liability, purchased
lease rights, unamortized initial direct costs, impairment of the right-of-use asset and unamortized landlord
allowances.

The Company’s operating lease cost, included in the line item “Selling, general and administrative

expenses” on its Consolidated Statement of Income, includes amortization of right-of-use assets, interest on lease
liabilities, as well as any variable and short-term lease cost. The Company commences recording operating lease
cost when the underlying asset is made available for use.

Assets held under finance leases are included in the line item “Property and equipment—net of accumulated

depreciation and amortization” in the Company’s Consolidated Balance Sheets.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC Topic No. 718, “Stock

Compensation” (Topic No. 718), which requires companies to record stock compensation expense for all
non-vested and new awards beginning as of the grant date. Refer to Note 12, “Stock-Based Compensation,” for
further details.

64

Net Income Per Share

Net income per share is calculated using the treasury stock method. Refer to Note 11, “Net Income Per

Share,” for further details.

Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist

principally of cash, cash equivalents and investments. The Company manages the credit risk associated with cash
equivalents and investments by investing with high-quality institutions and, by policy, limiting investments only
to those which meet prescribed investment guidelines. The Company maintains cash accounts that, at times, may
exceed federally insured limits. The Company has not experienced any losses from maintaining cash accounts in
excess of such limits. Management believes that it is not exposed to any significant risks on its cash and cash
equivalent accounts.

Segment Information

The Company reports segment information in accordance with ASC Topic No. 280 “Segment Reporting.”

The Company has one reportable segment. The Company is an off-price retailer that offers customers a complete
line of value-priced apparel, including: women’s ready-to-wear apparel, accessories, footwear, menswear, youth
apparel, baby, home, coats, beauty, toys and gifts. Sales percentage by major product category is as follows:

Category

Fiscal 2019(a)

Fiscal 2018(a)

Fiscal 2017(a)

22%
22%
20%
16%
15%
5%

23%
22%
20%
16%
15%
5%

23%
22%
20%
16%
14%
5%

Women’s ready-to-wear apparel
Accessories and footwear
Menswear
Youth apparel/baby
Home
Coats

(a) Percentages may not foot due to rounding.

2. Recent Accounting Pronouncements

Adopted Accounting Standards

Leases

In February 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-02. The standard’s
core principle is to increase transparency and comparability among organizations by recognizing lease assets and
liabilities on the balance sheet and disclosing key information about leasing arrangements. The Company
adopted this ASU as of the beginning of Fiscal 2019.

The Company applied the changes from the new guidance at the adoption date and recognized a cumulative

effect adjustment to retained earnings in the period of adoption, as allowed under ASU 2018-11, “Leases:
Targeted Improvements.” The Company did not adjust prior periods. The Company made an accounting policy
election not to capitalize leases with an initial term of twelve months or less. The Company elected the transition
package of practical expedients, which allows the Company to carry forward for its existing leases: (i) the
historical lease classification as either operating or capital; (ii) assessment of whether any expired or existing
contracts are or contain leases; and (iii) capitalization of initial direct costs. Additionally, the Company elected
the practical expedients to not separate lease and non-lease components for both its real estate and non-real estate
leases, to not assess whether existing or expired land easements contain a lease, and to employ hindsight when
determining lease terms for existing leases on the date of adoption.

65

At adoption of this standard, the Company recognized approximately $2.1 billion of additional right-of-use

assets and approximately $2.2 billion of additional lease liabilities (current and long-term combined) on its
Consolidated Balance Sheet as of February 3, 2019. The lease liability for operating leases is based on the net
present value of future minimum lease payments. The right-of-use asset for operating leases is based on the lease
liability adjusted for the reclassification of certain balance sheet amounts such as favorable leases, the long term
portion of straight line rent liability, purchased lease rights, unamortized initial direct costs, impairment of the
right-of-use asset and unamortized landlord allowances. In addition, the Company also recorded an approximate
$0.6 million cumulative-effect adjustment to retained earnings, related to a deferred gain on a previous sale-
leaseback transaction that was being recognized into the line item “Other income” over a 13 year period.

Adoption of this standard also resulted in a change in the timing of certain expense recognition, primarily
related to net favorable lease cost, as well as a reclassification of favorable lease cost from “Depreciation and
amortization” to “Selling, general and administrative expenses” on the Company’s Consolidated Statement of
Income for the year ended February 1, 2020. This guidance did not have a material impact on the Company’s
liquidity. Refer to Note 3, “Lease Commitments,” for further detail of the Company’s future minimum lease
payments.

Pending Accounting Standards

Intangible Assets

On January 26, 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other: Simplifying the
Test for Goodwill Impairment,” which aims to simplify the subsequent measurement of goodwill by eliminating
Step 2 from the goodwill impairment test. Under the new guidance, goodwill impairment will be measured as the
amount by which the carrying value exceeds the fair value. The loss recognized should not exceed the total
amount of goodwill allocated to the reporting unit. The new guidance will be effective for annual reporting
periods beginning after December 15, 2019, including interim periods. This ASU will be effective for the
Company as of the beginning of the fiscal year ending January 30, 2021 (Fiscal 2020). Early adoption is
permitted for annual or interim goodwill impairment tests performed on testing dates after January 1, 2017. The
Company does not anticipate that the new guidance will have a significant impact on its consolidated financial
statements.

In August 2018, the FASB issued ASU 2018-15, “Intangibles—Goodwill and Other—Internal-Use

Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is
a Service Contract.” This ASU requires that implementation costs incurred in a hosting arrangement that is a
service contract be assessed in accordance with the existing guidance in Subtopic 350-40, “Internal-Use
Software.” Accordingly, costs incurred during the preliminary project stage must be expensed as incurred, while
costs incurred during the application development stage must be capitalized. Capitalized implementation costs
associated with a hosting arrangement that is a service contract must be expensed over the term of the hosting
arrangement. Additionally, the new guidance requires that the expense of these capitalized costs be presented in
the same line item in the statement of income as the fees associated with the hosting element of the arrangement.
The new guidance will be effective for annual reporting periods beginning after December 15, 2019, including
interim periods. This ASU will be effective for the Company as of the beginning of Fiscal 2020. Early adoption
is permitted for annual or interim periods. The Company does not anticipate that the new guidance will have a
significant impact on its consolidated financial statements.

There were no other new accounting standards that had a material impact on the Company’s Consolidated

Financial Statements during the year ended February 1, 2020, and there were no other new accounting standards
or pronouncements that were issued but not yet effective as of February 1, 2020 that the Company expects to
have a material impact on its financial position or results of operations upon becoming effective.

66

3. Restricted Cash and Cash Equivalents

At February 1, 2020 and February 2, 2019, restricted cash and cash equivalents consisted of $6.6 million
and $21.9 million, respectively, related to collateral for certain insurance contracts. The Company has the ability
to convert the restricted cash to a letter of credit at any time, which would reduce available borrowings on the
ABL Line of Credit by a like amount.

4. Property and Equipment

Property and equipment consist of:

Land
Buildings
Store fixtures and equipment
Software
Leasehold improvements

Construction in progress

Total property and equipment at cost
Less: accumulated depreciation

Total property and equipment, net of
accumulated depreciation and
amortization

Useful Lives

N/A
20 to 40 Years
3 to 15 Years
3 to 10 Years
Shorter of
lease term or
useful life
N/A

(in thousands)

February 1,
2020

February 2,
2019

$

149,426
491,389
1,030,646
273,674

$

156,040
485,265
927,081
256,610

761,561
58,759

694,145
24,767

2,765,455
(1,362,282)

2,543,908
(1,290,203)

$ 1,403,173

$ 1,253,705

As of February 1, 2020 and February 2, 2019, assets, net of accumulated amortization of $4.4 million and

$23.2 million, respectively, held under finance leases amounted to approximately $44.8 million and
$30.3 million, respectively, and are included in the line item “Buildings” in the foregoing table. Amortization
expense related to finance leases is included in the line item “Depreciation and amortization” in the Company’s
Consolidated Statements of Income. The total amount of depreciation expense during Fiscal 2019, Fiscal 2018
and Fiscal 2017 was $195.8 million, $175.8 million and $163.3 million, respectively.

During Fiscal 2019, Fiscal 2018 and Fiscal 2017, the Company recorded impairment charges related to

property and equipment of $3.4 million, $3.9 million and $1.1 million, respectively. Refer to Note 6,
“Impairment Charges,” for further discussion.

Internally developed software is amortized on a straight line basis over three to ten years and is recorded in

the line item “Depreciation and amortization” in the Company’s Consolidated Statements of Income.
Depreciation and amortization of internally developed software amounted to $17.9 million, $19.4 million and
$18.2 million during Fiscal 2019, Fiscal 2018 and Fiscal 2017, respectively.

67

5. Intangible Assets

Intangible assets at February 1, 2020 consist primarily of tradenames. Intangible assets at February 2, 2019
consisted primarily of tradenames and favorable lease positions. As a result of adopting ASU 2016-02, most of
the Company’s favorable lease positions are included in “Operating lease assets” on the Company’s Consolidated
Balance Sheet as of February 1, 2020.

(in thousands)

February 1, 2020

February 2, 2019

Gross
Carrying
Amount

Accumulated
Amortization

Net
Amount

Gross
Carrying
Amount

Accumulated
Amortization

Net
Amount

$238,000

$ —

$238,000

$238,000

$

— $238,000

$

3,506

$(2,775)

$

731

$420,537

$(256,213) $164,324

Tradenames

Favorable leases

Favorable Leases

The total amount of net favorable lease amortization during Fiscal 2018 and Fiscal 2017 was $26.1 million

and $23.3 million, respectively, and was included in “Depreciation and amortization” on the Company’s
Consolidated Statements of Income. As a result of adopting ASU 2016-02, amortization of favorable leases is
part of operating lease cost, included in “Selling, general and administrative expenses” on the Company’s
Consolidated Statement of Income for Fiscal 2019. The Company recorded impairment charges of $2.9 million
and $0.8 million related to its favorable leases during Fiscal 2018 and Fiscal 2017, respectively.

6. Impairment Charges

Impairment charges recorded during Fiscal 2019, Fiscal 2018 and Fiscal 2017 amounted to $4.3 million,
$6.8 million and $2.1 million, respectively, and are primarily related to declines in revenues and operating results
of the respective stores. Additionally, during Fiscal 2018 and Fiscal 2017, a portion of the impairment related to
a decline in the appraised fair value of one of the Company’s owned stores. Impairment charges during these
periods related to the following:

Asset Categories

Land
Operating lease assets
Buildings
Store fixtures and equipment
Leasehold improvements
Favorable leases
Other assets

Total

(in thousands)

Fiscal Years Ended

February 1,
2020

February 2,
2019

February 3,
2018
(53 Weeks)

$1,604
921
921
809
52

—
8

$4,315

$1,551
—
1,262
878
195
2,894
64

$6,844

$ 247
—
227
308
306
836
203

$2,127

The Company recorded impairment charges related to store-level assets for two stores, as well as the online

store, during Fiscal 2019, eight stores during Fiscal 2018 and four stores during Fiscal 2017.

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 Topic No. 820 “Fair Value Measurements” (Topic No. 820). Refer to
Note 16, “Fair Value of Financial Instruments,” for further discussion of the Company’s fair value hierarchy. The

68

fair value of the Company’s long-lived assets is calculated using a discounted cash-flow model that used level 3
inputs. In calculating future cash flows, the Company makes estimates regarding future operating results based
on its experience and knowledge of market factors in which the retail location is located. The table below sets
forth, by level within the fair value hierarchy, the remaining fair value of the two impaired stores as of
February 1, 2020:

(in thousands)

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Un-
Observable
Inputs
(Level 3)

Land
Operating lease assets
Operating lease liabilities
Buildings
Store fixtures and equipment
Leasehold improvements
Other assets

Total

7. Long Term Debt

Long term debt consists of:

$—
—
—
—
—
—
—

$—

$—
—
—
—
—
—
—

$—

$1,200,000 senior secured term loan facility (Term B-5 Loans), LIBOR (with a floor of

0.00%) plus 2.00%, matures on November 17, 2024

$600,000 ABL senior secured revolving facility, LIBOR plus spread based on average

outstanding balance, matures on June 29, 2023

Finance lease obligations
Unamortized deferred financing costs

Total debt
Less: current maturities

Long term debt, net of current maturities

Term Loan Facility

Total

$1,450
132
(125)
833
148
4
7

$1,450
132
(125)
833
148
4
7

$2,449

$2,449

(in thousands)

February 1,
2020

February 2,
2019

$ 957,505

$956,693

—
50,130
(2,335)

—
32,706
(2,832)

1,005,300
(3,577)

986,567
(2,924)

$1,001,723

$983,643

On February 24, 2011, the Company entered into a $1.0 billion senior secured term loan facility (the Term

Loan Facility). The Term Loan Facility was issued pursuant to a credit agreement (Term Loan Credit
Agreement), dated February 24, 2011, among Burlington Coat Factory Warehouse Corporation, an indirect
subsidiary of the Company (BCFWC), the guarantors signatory thereto, and JPMorgan Chase Bank, N.A., as
administrative agent and as collateral agent, the lenders party thereto, J.P. Morgan Securities LLC and Goldman
Sachs Lending Partners LLC, as joint bookrunners, and J.P. Morgan Securities LLC, Goldman Sachs Lending
Partners LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC, as joint
arrangers, governing the terms of the Term Loan Facility.

On November 17, 2017, BCFWC entered into Amendment No. 6 (the Sixth Amendment) to the Term Loan

Credit Agreement governing its Term Loan Facility. The Sixth Amendment, among other things, reduced the
interest rate margins applicable to the Term Loan Facility from 1.75% to 1.50% in the case of prime rate loans,

69

and from 2.75% to 2.50% in the case of LIBOR loans, with the LIBOR floor continuing to be 0.75%. The Sixth
Amendment also extended the maturity date from August 13, 2021 to November 17, 2024. The Sixth
Amendment was accomplished by replacing the outstanding $1,117.0 million principal amount of Term B-4
Loans with a like aggregate principal amount of Term B-5 Loans. In accordance with ASC Topic No. 470-50,
“Debt Modifications and extinguishments” (Topic No. 470), the Company recognized a non-cash loss on the
extinguishment of debt of $2.9 million, representing the write-off of $1.5 million and $1.4 million in deferred
financing costs and unamortized original issue discount, respectively, which was recorded in the line item “Loss
on extinguishment of debt” in the Company’s Consolidated Statements of Income. Also in connection with the
Sixth Amendment, the Company incurred fees of $2.3 million, primarily related to legal and placement fees,
which were recorded in the line item “Costs related to debt amendments” in the Company’s Consolidated
Statements of Income.

In June 2018, the Company prepaid $150.0 million on the Term Loan Facility, which offset the mandatory
quarterly payments through November 17, 2024. In accordance with Topic No. 470, the Company recognized a
non-cash loss on the extinguishment of debt of $1.2 million, representing the write-off of unamortized original
issue discount and deferred financing costs, which was recorded in the line item “Loss on extinguishment of
debt” in the Company’s Consolidated Statement of Income.

On November 2, 2018, BCFWC entered into Amendment No. 7 (the Seventh Amendment) to the Term

Loan Credit Agreement governing its Term Loan Facility. The Seventh Amendment, among other things,
reduced the interest rate margins applicable to the Company’s term loan facility from 1.50% to 1.00%, in the
case of prime rate loans, and from 2.50% to 2.00%, in the case of LIBOR loans, with the LIBOR floor being
reduced from 0.75% to 0.00%. In connection with the execution of the Seventh Amendment, the Company paid
fees and expenses, including a fee to each consenting lender equal to 0.125% of the aggregate principal amount
of such lender’s loans under the Term Loan Credit Agreement. In accordance with Topic No. 470, the Company
recognized a non-cash loss on the extinguishment of debt of $0.5 million, representing the write-off of deferred
financing costs and unamortized original issue discount, which was recorded in the line item “Loss on
extinguishment of debt” in the Company’s Consolidated Statement of Income. Also in connection with the
Seventh Amendment, the Company incurred fees of $2.4 million, primarily related to legal and placement fees,
which were recorded in the line item “Costs related to debt amendments” in the Company’s Consolidated
Statement of Income.

The Term Loan Facility is collateralized by a first lien on our favorable leases, real estate and property &
equipment and a second lien on our inventory and receivables. Interest rates for the Term Loan Facility are based
on: (i) for LIBOR rate loans for any interest period, at a rate per annum equal to the greater of (x) the LIBOR
rate, as determined by the Term Loan Facility Administrative Agent, for such interest period multiplied by the
Statutory Reserve Rate (as defined in the Term Loan Credit Agreement), and (y) 0.00% (the Term Loan Adjusted
LIBOR Rate), plus an applicable margin; and (ii) for prime rate loans, a rate per annum equal to the highest of
(a) the variable annual rate of interest then announced by JPMorgan Chase Bank, N.A. at its head office as its
“prime rate,” (b) the federal reserve bank of New York rate in effect on such date plus 0.50% per annum, and
(c) the Term Loan Adjusted LIBOR Rate for the applicable class of term loans for one-month plus 1.00%, plus,
in each case, an applicable margin. As of February 1, 2020, the Company’s borrowing rate related to the Term
Loan Facility was 3.7%.

Subsequent Event

On February 26, 2020, the Company entered into Amendment No. 8 (the Eighth Amendment) to the Term

Loan Credit Agreement governing its 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.

70

ABL Line of Credit

On June 29, 2018, BCFWC entered into Amendment No. 2 (the Second Amendment) to the Second
Amended and Restated Credit Agreement, dated September 2, 2011 (the ABL Credit Agreement), governing
BCFWC’s existing senior secured asset-based revolving credit facility (the ABL Line of Credit). The Second
Amendment, among other things, extended the maturity date from August 13, 2019 to June 29, 2023 and adjusted
the pricing grid such that the lower interest rate of 1.25% in the case of LIBOR loans and 0.25% in the case of
prime rate loans is applicable so long as the Company maintains at least 40% average daily availability (as
opposed to 50%). In connection with its entry into the Second Amendment, and in accordance with Topic
No. 470, the Company recognized a non-cash loss on the extinguishment of debt of $0.2 million, representing the
write-off of deferred financing costs, which was recorded in the line item “Loss on extinguishment of debt” in
the Company’s Consolidated Statement of Income for the year ended February 2, 2019.

The aggregate amount of commitments under the Second Amended and Restated Credit Agreement (as

amended, supplemented and otherwise modified, the Amended ABL Credit Agreement) is $600.0 million
(subject to a borrowing base limitation) and, subject to the satisfaction of certain conditions, the Company can
increase the aggregate amount of commitments up to $900.0 million. The interest rate margin applicable under
the Amended ABL Credit Agreement in the case of loans drawn at LIBOR is 1.25% - 1.50% (based on total
commitments or borrowing base availability), and the fee on the average daily balance of unused loan
commitments is 0.20%. Prior to the Second Amendment, the ABL Line of Credit was collateralized by a first lien
on the Company’s inventory and receivables and a second lien on the Company’s real estate and property and
equipment. In connection with the Second Amendment, the agent and lenders under the ABL Line of Credit
agreed to release their second liens on the Company’s real estate, but retained their liens on the Company’s
inventory, receivables, and equipment.

The Company believes that the Amended ABL Credit Agreement provides the liquidity and flexibility to

meet its operating and capital requirements over the remaining term of the ABL Line of Credit. Further, the
calculation of the borrowing base under the Amended ABL Credit Agreement has been amended to allow for
increased availability, particularly during the September 1st through December 15th period of each year.

At February 1, 2020, the Company had $501.8 million available under the ABL Line of Credit. The
maximum borrowings under the facility during Fiscal 2019 amounted to $255.0 million. Average borrowings
during Fiscal 2019 amounted to $81.5 million at an average interest rate of 3.7%.

At February 2, 2019, the Company had $543.3 million available under the ABL Line of Credit. The
maximum borrowings under the facility during Fiscal 2018 amounted to $265.0 million. Average borrowings
during Fiscal 2018 amounted to $83.9 million at an average interest rate of 3.4%.

Deferred Financing Costs

The Company had $2.5 million and $3.4 million in deferred financing costs associated with its ABL Line of

Credit, which are recorded in the line item “Other assets” in the Company’s Consolidated Balance Sheets as of
February 1, 2020 and February 2, 2019, respectively. In addition, The Company had $2.3 million and
$2.8 million of deferred financing costs associated with its Term Loan Facility recorded in the line item “Long
term debt” in the Company’s Consolidated Balance Sheets as of February 1, 2020 and February 2, 2019,
respectively.

Amortization of deferred financing costs amounted to $1.2 million, $1.6 million and $2.5 million during
Fiscal 2019, Fiscal 2018 and Fiscal 2017, respectively, which was included in the line item “Interest expense” in
the Company’s Consolidated Statements of Income.

71

Amortization expense related to the deferred financing costs as of February 1, 2020 for each of the next five

fiscal years and thereafter is estimated to be as follows:

Fiscal Years

2020
2021
2022
2023
2024
Thereafter

Total

(in thousands)

$1,216
1,216
1,216
807
384
—

$4,839

Deferred financing costs have a weighted average amortization period of approximately 4.1 years.

Scheduled Maturities

Scheduled maturities of the Company’s long term debt obligations, as they exist as of February 1, 2020, in

each of the next five fiscal years and thereafter are as follows:

Fiscal Years:
2020
2021
2022
2023
2024
Thereafter

Total
Less: unamortized discount
Less: unamortized deferred financing costs
Long term finance lease liabilities

Long term debt

(in thousands)

Long-
Term
Debt

$

—
—
—
—
961,415
—

961,415
(3,910)
(2,335)
46,553

$1,001,723

8. Derivative Instruments and Hedging Activities

The Company accounts for derivatives and hedging activities in accordance with ASC Topic No. 815
“Derivatives and Hedging” (Topic No. 815). Topic No. 815 provides the disclosure requirements for derivatives
and hedging activities with the intent to provide users of financial statements with an enhanced understanding of:
(i) how and why an entity uses derivative instruments, (ii) how the entity accounts for derivative instruments and
related hedged items, and (iii) how derivative instruments and related hedged items affect an entity’s financial
position, financial performance, and cash flows. Further, qualitative disclosures are required that explain the
Company’s objectives and strategies for using derivatives, as well as quantitative disclosures about the fair value
of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in
derivative instruments.

As required by Topic No. 815, the Company records all derivatives on the balance sheet at fair value and

adjusts them to market on a quarterly basis. The accounting for changes in the fair value of derivatives depends
on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging

72

relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary
to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in
expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge
accounting generally provides for the matching of the timing of gain or loss recognition on the hedging
instrument with the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company
may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge
accounting does not apply or the Company elects not to apply hedge accounting.

The Company uses interest rate cap contracts and interest rate swap contracts to manage interest rate risk.

The fair value of these contracts are determined using the market standard methodology of discounted future
variable cash flows. The variable cash flows of the interest rate cap contracts are determined using the market
standard methodology of discounting the future expected cash receipts that would occur if variable interest rates
rise above the strike rate of the caps in conjunction with the cash payments related to financing the premium of
the interest rate caps. The variable cash flows of the interest rate swap contract are determined using the market
standard methodology of discounting the future expected cash receipts that would occur if variable interest rates
rise or fall compared to current levels in conjunction with the fixed cash payments. The variable interest rates
used in the calculation of projected receipts on the cap and swap contracts are based on an expectation of future
interest rates derived from observable market interest rate curves and volatilities. In addition, to comply with the
provisions of Topic No. 820, credit valuation adjustments, which consider the impact of any credit enhancements
to the contracts, are incorporated in the fair values to account for potential nonperformance risk. In adjusting the
fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered any
applicable credit enhancements such as collateral postings, thresholds, mutual puts, and guarantees.

In accordance with Topic No. 820, the Company made an accounting policy election to measure the credit

risk of its derivative financial instruments that are subject to master netting agreements on a net basis by
counterparty portfolio. There is no impact of netting because the Company’s only derivatives are interest rate cap
contracts and interest rate swap contracts that are with separate counterparties and are under separate master
netting agreements.

Although the Company has determined that the majority of the inputs used to value its derivatives fall
within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize
Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company
and its counterparties. However, as of February 1, 2020 and February 2, 2019, the Company has assessed the
significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions
and has determined that the credit valuation adjustment is not significant to the overall valuation of its derivative
portfolios. As a result, the Company classifies its derivative valuations in Level 2 of the fair value hierarchy.

The Company is exposed to certain risks arising from both its business operations and economic conditions.

The Company principally manages its exposures to a wide variety of business and operational risks through
management of its core business activities. The Company manages economic risks, including interest rate,
liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and the use
of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to
manage exposures that arise from business activities that result in the payment of future known and uncertain
cash amounts, the value of which are determined by interest rates. The Company uses derivative financial
instruments to manage differences in the amount, timing, and duration of the Company’s known or expected cash
payments principally related to the Company’s borrowings.

Cash Flow Hedges of Interest Rate Risk

The Company uses interest rate derivatives to add stability to interest expense and to manage its exposure to
interest rate movements. To accomplish this objective, the Company primarily uses interest rate caps and interest
rate swaps as part of its interest rate risk management strategy. Interest rate caps designated as cash flow hedges

73

involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the
contract. 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.

On April 24, 2015, the Company entered into two interest rate cap contracts, which were designated as cash

flow hedges, and expired in May of 2019. On December 17, 2018, the Company entered into an interest rate
swap contract, which was designated as a cash flow hedge, and became effective May 31, 2019.

During Fiscal 2019, the Company’s derivatives were used to hedge the variable cash flows associated with

existing (or anticipated) variable-rate debt. The effective portion of changes in the fair value of derivatives
designated and that qualify as cash flow hedges are recorded in the line item “Accumulated other comprehensive
loss” on the Company’s Consolidated Balance Sheets and are subsequently reclassified into earnings in the
period that the hedged forecasted transaction affects earnings. Amounts reported in accumulated other
comprehensive loss related to the Company’s derivative contracts will be reclassified to interest expense as
interest payments are made on the Company’s variable-rate debt. As of February 1, 2020, the Company estimates
that $5.9 million will be reclassified into interest expense during the next twelve months.

As of February 1, 2020, the Company had the following outstanding interest rate derivatives that were

designated as cash flow hedges of interest rate risk:

Interest Rate Derivative

Interest rate swap contract

Tabular Disclosure

Number of
Instruments

Notional Aggregate
Principal Amount

Interest
Cap/Swap
Rate

Maturity Date

One

$ 450.0 million

2.72% December 29, 2023

The tables below present the fair value of the Company’s derivative financial instruments on a gross basis,

as well as their classification on the Company’s Consolidated Balance Sheets:

Derivatives Designated as Hedging Instruments

Interest rate cap contracts

(in thousands)

Fair Values of Derivative Instruments

February 1, 2020

February 2, 2019

Balance
Sheet
Location

Fair
Value

N/A

N/A

Balance
Sheet
Location

Prepaid and
other current
assets

Fair
Value

$2,213

Interest rate swap contract

Other liabilities

$26,220 Other liabilities

$5,239

The following table presents the unrealized (losses) gains deferred to accumulated other comprehensive loss
resulting from the Company’s derivative instruments designated as cash flow hedging instruments for each of the
reporting periods.

Interest Rate Derivatives:

Unrealized (losses) gains, before taxes
Income tax benefit (expense)

(in thousands)

Fiscal Year Ended

February 1,
2020

February 2,
2019

$(22,959)
6,353

$(4,232)
1,152

February 3,
2018
(53 Weeks)

$ 3,460
(1,718)

Unrealized (losses) gains, net of taxes

$(16,606)

$(3,080)

$ 1,742

74

The following table presents information about the reclassification of losses from accumulated other
comprehensive loss into earnings related to the Company’s derivative instruments designated as cash flow
hedging instruments for each of the reporting periods.

Component of Earnings:

Interest expense
Income tax expense

Net reclassification into earnings

(in thousands)

Fiscal Year Ended

February 1,
2020

February 2,
2019

$1,733
(474)

$1,259

$1,872
(518)

$1,354

February 3,
2018
(53 Weeks)

$ 5,931
(2,369)

$ 3,562

9. Accumulated Other Comprehensive Loss

Amounts included in accumulated other comprehensive loss are recorded net of the related income tax
effects. The table below details the changes in accumulated other comprehensive loss for Fiscal 2019 and Fiscal
2018.

Balance at February 3, 2018
Unrealized losses, net of related tax benefit of

$1.2 million

Amount reclassified into earnings, net of related taxes of

$0.5 million

Balance at February 2, 2019
Unrealized losses, net of related tax benefit of

$6.4 million

Amount reclassified into earnings, net of related taxes of

$0.5 million

Balance at February 1, 2020

(in thousands)

Derivative
Instruments

$ (1,887)

(3,080)

1,354

$ (3,613)

(16,606)

1,259

$(18,960)

10. Capital Stock

Common Stock

As of February 1, 2020, the total amount of the Company’s authorized capital stock consisted of
500,000,000 shares of common stock, par value $0.0001 per share, and 50,000,000 shares of undesignated
preferred stock, par value of $0.0001 per share.

The Company’s common stock is not entitled to preemptive or other similar subscription rights to purchase

any of the Company’s securities. The Company’s common stock is neither convertible nor redeemable. Unless
the Company’s Board of Directors determines otherwise, the Company will issue all of the Company’s capital
stock in uncertificated form.

Preferred Stock

The Company does not have any shares of preferred stock issued or outstanding. The Company’s Board of

Directors has the authority to issue shares of preferred stock from time to time on terms it may determine, to

75

divide shares of preferred stock into one or more series and to fix the designations, preferences, privileges, and
restrictions of preferred stock, including dividend rights, conversion rights, voting rights, terms of redemption,
liquidation preference, sinking fund terms, and the number of shares constituting any series or the designation of
any series to the fullest extent permitted by the General Corporation Law of the State of Delaware. The issuance
of the Company’s preferred stock could have the effect of decreasing the trading price of the Company’s
common stock, restricting dividends on the Company’s capital stock, diluting the voting power of the Company’s
common stock, impairing the liquidation rights of the Company’s capital stock, or delaying or preventing a
change in control of the Company.

Dividend Rights

Each holder of shares of the Company’s capital stock will be entitled to receive such dividends and other
distributions in cash, stock or property as may be declared by the Company’s Board of Directors from time to
time out of the Company’s assets or funds legally available for dividends or other distributions. These rights are
subject to the preferential rights of any other class or series of the Company’s preferred stock.

Treasury Stock

The Company accounts for treasury stock under the cost method.

During Fiscal 2019, the Company acquired 132,222 shares of common stock from employees for
approximately $23.2 million to satisfy their minimum statutory tax withholdings related to the vesting of
restricted stock awards.

Share Repurchase Programs

On August 15, 2018, the Company’s Board of Directors authorized the repurchase of up to an additional
$300 million of common stock, which was completed during the fourth quarter of Fiscal 2019. On August 14,
2019, the Company’s Board of Directors authorized the repurchase of up to an additional $400 million of
common stock, which is authorized to be executed through August 2021. These repurchase programs are funded
using the Company’s available cash and borrowings under the ABL Line of Credit.

During Fiscal 2019, the Company repurchased 1,740,740 shares of common stock for $299.9 million under

its share repurchase programs, which was recorded in the line item, “Treasury stock” on the Company’s
Consolidated Balance Sheets, and the line item “Purchase of treasury shares” on the Company’s Consolidated
Statements of Cash Flows. As of February 1, 2020, the Company had $398.5 million remaining under its share
repurchase authorization.

76

11. Net Income Per Share

Basic net income per share is calculated by dividing net income by the weighted-average number of

common shares outstanding. Dilutive net income per share is calculated by dividing net income by the weighted-
average number of common shares and potentially dilutive securities outstanding during the period using the
treasury stock method.

Basic net income per share
Net income

(in thousands, except per share data)

Fiscal Year Ended

February 1,
2020

February 2,
2019

February 3,
2018
(53 Weeks)

$465,116

$414,745

$384,852

Weighted average number of common

shares—basic

65,943

66,812

68,286

Net income per common share—basic

$

7.05

$

6.21

$

5.64

Diluted net income per share
Net income

Shares for basic and diluted net income per share:
Weighted average number of common

$465,116

$414,745

$384,852

shares—basic

65,943

66,812

68,286

Assumed exercise of stock options and vesting

of restricted stock

1,350

1,867

2,002

Weighted average number of common

shares—diluted

67,293

68,679

70,288

Net income per common share—diluted

$

6.91

$

6.04

$

5.48

Approximately 405,000 shares, 425,000 shares and less than 150,000 shares were excluded from diluted net

income per share for Fiscal 2019, Fiscal 2018 and Fiscal 2017, respectively, since their effect was anti-dilutive.

12. Stock-Based Compensation

On May 1, 2013, the Company’s Board of Directors approved the Company’s assumption and adoption of
the 2006 Management Incentive Plan (the 2006 Plan) that was previously sponsored by Burlington Coat Factory
Holdings, LLC. The 2006 Plan terminated on April 12, 2016. The Company’s 2013 Omnibus Incentive Plan (the
2013 Plan and, together with the 2006 Plan, the Plans), originally adopted effective prior to and in connection
with the Company’s initial public offering, was amended and restated effective May 17, 2017. The 2006 Plan,
prior to its termination, and the 2013 Plan provide for the granting of stock options, restricted stock and other
forms of awards to key employees and directors of the Company or its affiliates.

The Company accounts for awards issued under the Plans in accordance with Topic No. 718. As of
February 1, 2020, there were 3,280,488 shares of common stock available for issuance under the 2013 Plan.

CEO Awards

A portion of the awards granted during Fiscal 2019 were granted to Michael O’Sullivan, the Company’s
Chief Executive Officer (the CEO), upon commencement of his employment in September 2019. To compensate
the CEO for a portion of the equity awards forfeited at his prior employer, he received a make-whole long-term
incentive grant with a target grant date fair value of $25.0 million, comprised of 50% time-based restricted stock

77

units and 50% stock options, vesting in one-third annual increments (subject to the CEO’s continued employment
through the applicable vesting date). The CEO also received a prorated portion of his Fiscal 2019 long-term
incentive award (such award having a target grant date fair value equal to $8.5 million), delivered as 50%
performance-based restricted stock units, 25% stock options and 25% time-based restricted stock units, on the
same terms as the Company’s Fiscal 2019 annual equity grants.

Stock Options

Options granted during Fiscal 2019, Fiscal 2018 and Fiscal 2017, were all service-based awards granted

under the Plans at the following exercise prices:

Fiscal 2019
Fiscal 2018
Fiscal 2017

Exercise Price Ranges

From

To

$145.08
$113.80
$ 80.91

$231.86
$172.40
$110.50

All awards granted during Fiscal 2019, Fiscal 2018 and Fiscal 2017, other than certain awards granted to the
CEO as noted above, vest 25% on each of the first four anniversaries of the grant date. The final exercise date for
any option granted is the tenth anniversary of the grant date. Options granted during Fiscal 2019, Fiscal 2018 and
Fiscal 2017 become exercisable if the grantee’s employment is terminated without cause or, in some instances,
the recipient resigns with good reason, within a certain period of time following a change in control. Unless
determined otherwise by the plan administrator, upon cessation of employment other than for cause, the majority
of options that have not vested will terminate immediately, and unexercised vested options will be exercisable for
a period of 60 to 180 days.

In May 2013, the Company’s Board of Directors approved a modification to all then outstanding options.
The modification, through a combination of either reduced exercise prices or cash payments, did not affect the
existing vesting schedules. The modification resulted in a total of $0.1 million of incremental compensation
expense during Fiscal 2017, of which less than $0.1 million was payable in cash. These costs were recorded in
the line item “Stock option modification expense” in the Company’s Consolidated Statement of Income. There
was no incremental compensation expense as a result of the modification during Fiscal 2019 or Fiscal 2018. As
of February 1, 2020, the Company does not expect to recognize any additional compensation expense related to
the modification.

Non-cash stock compensation expense is as follows:

Type of Non-Cash Stock Compensation

Restricted stock grants(a)
Stock option grants(a)
Stock option modification(b)
Performance stock grants(a)

Total(c)

(in thousands)

Fiscal Year Ended

February 1,
2020

February 2,
2019

$20,454
19,222
—
4,252

$43,928

$18,967
16,518
—
—

$35,485

February 3,
2018
(53 Weeks)

$15,864
11,039
131
—

$27,034

(a)

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

(b) Represents non-cash compensation related to the May 2013 stock option modification as discussed above.

Amounts are included in the line item “Stock option modification expense” in the Company’s Consolidated
Statements of Income.

78

(c) The amounts presented in the table above exclude the effect of income taxes. The tax benefit related to the
Company’s non-cash stock compensation was $9.0 million, $9.7 million and $2.8 million during Fiscal
2019, Fiscal 2018 and Fiscal 2017, respectively.

As of February 1, 2020, the Company had 1,890,955 options outstanding to purchase shares of common
stock, and there was $40.8 million of unearned non-cash stock-based option compensation that the Company
expects to recognize as expense over a weighted average period of 2.5 years. The awards are expensed on a
straight-line basis over the requisite service period.

Stock option transactions during Fiscal 2019 are summarized as follows:

Options outstanding, February 2, 2019

Options granted
Options exercised(a)
Options forfeited

Weighted
Average
Exercise
Price Per
Share

$ 64.48
180.22
48.14
89.20

Number of
Shares

2,337,316
417,286
(710,964)
(152,683)

Options outstanding, February 1, 2020

1,890,955

$ 94.17

(a) Options exercised during Fiscal 2019 had a total intrinsic value of $94.1 million.

The following table summarizes information about the options outstanding and exercisable as of February 1,

2020:

Exercise Prices

$0.79 - $4.55
$26.96+

Options Outstanding

Options Exercisable

Number
Outstanding at
February 1,
2020

399,129
1,491,826

1,890,955

Weighted
Average
Remaining
Contractual
Life (Years)

3.4
7.7

Number
Exercisable at
February 1,
2020

247,329
424,077

671,406

Weighted
Average
Remaining
Contractual
Life (Years)

3.4
6.3

The following table summarizes information about the stock options vested and expected to vest during the

contractual term:

Vested and expected to vest

1,890,955

6.8

$94.17

$233.2

Weighted
Average
Remaining
Contractual
Life (Years)

Weighted
Average
Exercise
Price

Aggregate
Intrinsic
Value
(in millions)

Options

79

The fair value of each stock option granted was estimated on the date of grant using the Monte Carlo
Simulation option pricing model prior to the date of the Company’s initial public offering and the Black Scholes
option pricing model subsequent to the date of the initial public offering. The fair value of each stock option
granted during Fiscal 2019 was estimated using the following assumptions:

Risk-free interest rate
Expected volatility
Expected life (years)
Contractual life (years)
Expected dividend yield
Weighted average grant date fair value of options

issued

Fiscal Year
Ended
February 1, 2020

1.47%—3.00%
32%—36%
5.69—6.25
10.0
0.0%

$67.41

The expected dividend yield was based on the Company’s expectation of not paying dividends in the
foreseeable future. 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 Fiscal 2019, Fiscal 2018 and Fiscal 2017, the expected life of the options was calculated
using the simplified method, which 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 short length of
time our common stock has been publicly traded.

Restricted Stock Awards

Restricted stock awards granted during Fiscal 2019 were all service-based awards. The fair value of each

unit of restricted stock granted during Fiscal 2019 was based upon the closing price of the Company’s common
stock on the grant date. As of February 1, 2020, the Company had 40,000 awards outstanding that cliff vest at the
end of the service periods ranging from three years to five years from the grant date. Awards granted to
non-employee members of the Company’s Board of Directors before Fiscal 2018 have graded vesting provisions
that generally vest in thirds over a three-year period. Awards granted to non-employee members of the
Company’s Board of Directors during Fiscal 2018 and Fiscal 2019 vest 100% on the first anniversary of the grant
date. The remaining awards outstanding as of February 1, 2020, other than certain awards granted to the CEO as
noted above, have graded vesting provisions that generally vest in quarters over a four-year-period. Following a
change of control, all unvested restricted stock awards shall remain unvested, provided, however, that 100% of
such shares shall vest if, following such change of control, the employment of the recipient is terminated without
cause or, in some instances, the recipient resigns with good reason, within a certain period of time following a
change in control.

As of February 1, 2020, there was approximately $43.0 million of unearned non-cash stock-based
compensation related to restricted stock awards that the Company expects to recognize as an expense over the
next 2.5 years. The awards are expensed on a straight-line basis over the requisite service periods.

80

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. Award grant, vesting and forfeiture transactions during Fiscal 2019
are summarized as follows:

Non-vested awards outstanding, February 2, 2019
Awards granted
Awards vested(a)
Awards forfeited

Non-vested awards outstanding, February 1, 2020

Weighted
Average Grant
Date Fair
Value Per
Award

$ 81.93
177.72
67.48
101.32

131.03

Number of
Shares

666,842
192,278
(344,800)
(62,546)

451,774

(a) Restricted stock awards vested during Fiscal 2019 had a total intrinsic value of $60.1 million.

Performance Share Units

Beginning in Fiscal 2019, the Company granted performance share units to its senior executives. Vesting of

these performance share units is based on pre-established EBIT margin expansion and sales compound annual
growth rate (CAGR) goals (each weighted equally) over a three-year performance period. Based on the
Company’s achievement of these goals, each award may range from 50% (at threshold performance) to no more
than 200% of the target award. In the event that actual performance is below threshold, no award will be made. In
addition to the performance conditions, each performance share unit cliff vests at the end of a three-year service
period. Following a change of control, all unvested performance share units shall remain unvested, provided,
however, that 100% of such shares shall vest if, following such change of control, the employment of the
recipient is terminated without cause or, in some instances, the recipient resigns with good reason, within a
certain period of time following a change in control.

As of February 1, 2020, there was approximately $12.6 million of unearned non-cash stock-based

compensation related to performance share units that the Company expects to recognize as an expense over the
next 2.3 years. The awards are expensed on a straight-line basis over the requisite service periods.

Performance share unit transactions during Fiscal 2019 are summarized as follows:

Non-vested units outstanding, February 2, 2019
Units granted
Awards forfeited

Non-vested units outstanding, February 1, 2020

Weighted
Average Grant
Date Fair
Value Per
Award

$ —
173.51
170.08

173.87

Number of
Shares

—
89,448
(8,497)

80,951

13. 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.

81

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

Fiscal Year

2020
2021
2022
2023
2024
Thereafter

Total future minimum lease payments
Amount representing interest

Total lease liabilities

Less: current portion of lease liabilities

(in thousands)

Operating
Leases

435,535
419,251
402,649
381,618
344,272
1,324,733

3,308,058
(683,873)

2,624,185
(302,185)

Finance
Leases

6,057
6,841
7,513
7,589
7,417
38,651

74,068
(23,938)

50,130
(3,577)

Total long term lease liabilities

$2,322,000

$ 46,553

Weighted average discount rate
Weighted average remaining lease term (years)

5.4%
8.6

7.0%
12.1

The above schedule excludes approximately $373.2 million for 51 stores that the Company has committed

to open or relocate but has not yet taken possession of the space.

The following is a schedule of net lease costs for Fiscal 2019:

Finance lease cost:

Amortization of finance lease asset(a)
Interest on lease liabilities(b)

Operating lease cost(c)
Variable lease cost(c)

Total lease cost
Less all rental income(d)

Total net rent expense(e)

(in thousands)

Fiscal Year
Ended
February 1,
2020

$

4,027
2,770
414,174
155,210

576,181
(5,029)

$571,152

(a)

(b)
(c)

Included in the line item “Depreciation and amortization” in the Company’s Consolidated Statements
of Income.
Included in the line item “Interest expense” in the Company’s Consolidated Statements of Income.
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 Consolidated Statements of
Income.
Included in the line item “Other revenue” in the Company’s Consolidated Statements of Income.

(d)
(e) Excludes an immaterial amount of short-term lease cost.

82

Supplemental cash flow disclosures related to leases are as follows:

Cash paid for amounts included in the measurement of

lease liabilities:

Cash payments arising from operating lease

liabilities(a)

Cash payments for the principal portion of finance

lease liabilities(b)

Cash payments for the interest portion of finance

lease liabilities(a)

Supplemental non-cash information:

Operating lease liabilities arising from obtaining

right-of-use assets

(in thousands)

Fiscal Year
Ended
February 1,
2020

$401,575

$

$

2,932

2,770

$690,827

(a)
(b)

Included within operating activities in the Company’s Consolidated Statements of Cash Flows.
Included within financing activities in the Company’s Consolidated Statements of Cash Flows.

The following is a schedule of net rent expense for the periods indicated under Accounting Standards

Codification (ASC) 840, “Leases.” Prior periods have not been adjusted for adoption of ASU 2016-02:

Rent expense:
Minimum rental payments
Contingent rental payments
Straight-line rent expense
Lease incentives amortization
Amortization of purchased lease rights

Total rent expense(a)

Less all rental income(b)

Total net rent expense

(in thousands)

Year Ended

February 2,
2019

February 3,
2018
(53 Weeks)

$364,637
6,047
8,469
(34,827)
844

345,170
(6,164)

$340,979
4,734
7,543
(32,618)
499

321,137
(6,846)

$339,006

$314,291

(a)

(b)

Included in the line item “Selling, general and administrative expenses” in the Company’s Consolidated
Statements of Income.
Included in the line item “Other revenue” in the Company’s Consolidated Statements of Income.

83

As previously disclosed in the Company’s Fiscal 2018 Form 10-K and under the previous lease accounting

standard, future minimum lease payments due under non-cancelable operating leases as of February 2, 2019
would have been as follows:

Fiscal Year

2019
2020
2021
2022
2023
Thereafter

Total minimum lease payments

Amount representing interest

(in thousands)

Operating
Leases

$ 383,877
405,370
387,140
369,068
346,175
1,475,301

3,366,931
—

Capital
Leases

$ 5,414
5,120
5,597
5,725
6,291
15,849

43,996
(11,290)

Total future minimum lease payments

$3,366,931

$ 32,706

The above schedule included $278.9 million related to options to extend lease terms that were reasonably
assured of being exercised and $622.4 million of minimum lease payments for 76 stores that the Company had
committed to open or relocate.

14. Employee Retirement Plans

The Company maintains separate defined contribution 401(k) retirement savings and profit-sharing plans

covering employees in the United States and Puerto Rico who meet specified age and service requirements. The
discretionary profit sharing component (which the Company has not utilized since 2005 and has no current plans
to utilize) is entirely funded by the Company, and the Company also makes additional matching contributions to
the 401(k) component of the plans. Participating employees can voluntarily elect to contribute a percentage of
their earnings to the 401(k) component of the plans (up to certain prescribed limits) through a cash or deferred
(salary deferral) feature qualifying under Section 401(k) of the Internal Revenue Code (401(k) Plan).

The Company recorded $10.0 million, $9.3 million and $8.4 million of 401(k) Plan match expense during
Fiscal 2019, Fiscal 2018 and Fiscal 2017 respectively, which is included in the line item “Selling, general and
administrative expenses” on the Company’s Consolidated Statements of Income.

15. Income Taxes

Income before income taxes was as follows for Fiscal 2019, Fiscal 2018 and Fiscal 2017:

Domestic
Foreign

(in thousands)

Year Ended

February 1,
2020

February 2,
2019

$573,399
7,126

$503,290
4,294

February 3,
2018
(53 Weeks)

$429,939
(959)

Total income before income taxes

$580,525

$507,584

$428,980

84

Income tax expense was as follows for Fiscal 2019, Fiscal 2018 and Fiscal 2017:

Current:

Federal
State
Foreign

Subtotal

Deferred:

Federal
State
Foreign

Subtotal

(in thousands)

Year Ended

February 1,
2020

February 2,
2019

$ 83,521
20,778
2,040

106,339

$69,007
19,642
1,671

90,320

February 3,
2018
(53 Weeks)

$ 65,824
8,824
207

74,855

8,375
1,012
(317)

9,070

8,337
(8,409)
2,591

2,519

(40,839)
9,091
1,021

(30,727)

Total Income Tax Expense

$115,409

$92,839

$ 44,128

The tax rate reconciliations were as follows for Fiscal 2019, Fiscal 2018 and Fiscal 2017:

Tax at statutory rate
State income taxes, net of federal
Excess tax benefit from stock compensation
Tax credits
Impact of federal tax reform
Other

Effective tax rate

Fiscal Year Ended

February 1,
2020

February 2,
2019

February 3,
2018
(53 Weeks)

21.0%
4.0
(5.3)
(1.0)
—
1.2

19.9%

21.0%
4.2
(5.2)
(1.2)
—
(0.5)

18.3%

33.7%
3.0
(4.4)
(1.4)
(21.1)
0.5

10.3%

The increase in the effective tax rate was primarily related to the one-time tax benefit in the prior year from

the deferred tax revaluation due to changes in New Jersey tax law, enacted during the second quarter of Fiscal
2018.

85

The tax effects of temporary differences are included in deferred tax accounts as follows:

(in thousands)

February 1, 2020

February 2, 2019

Tax
Assets

Tax
Liabilities

Tax
Assets

Tax
Liabilities

Non-current deferred tax assets and liabilities:
Property and equipment basis adjustments
Operating lease liability
Operating lease asset
Deferred rent
Intangibles—long-lived
Intangibles—indefinite-lived
Employee benefit compensation
State net operating losses (net of federal benefit)
Landlord allowances
Tax credits
Other
Valuation allowance

$ — $171,949
682,104

—
645,240

—
—
—
—
14,933
9,346
—
8,154
—
(9,842)

—
—
64,842
—
—
—
—
274
—

$ — $149,705

—
—
19,496
—
—
15,186
12,290
35,907
6,140
2,651
(10,268)

—
—
—
40,918
65,197
—
—
—
—
—
—

Total non-current deferred tax assets and liabilities

$704,695

$882,305

$ 81,402

$255,820

Net deferred tax liability

$177,610

$174,418

As of February 1, 2020, the Company has a deferred tax asset related to net operating losses of $9.3 million,

inclusive of $9.0 million of state net operating losses which will expire at various dates between 2020 and 2039
and $0.3 million of deferred tax assets recorded for Puerto Rico net operating loss carry-forwards that will expire
in 2025. As of February 1, 2020, the Company had tax credit carry-forwards of $8.2 million, inclusive of state
tax credit carry-forwards of $6.8 million that will begin to expire in 2020 and $1.4 million of Puerto Rico
alternative minimum tax (AMT) credits that have an indefinite life.

As of February 2, 2019, the Company had a deferred tax asset related to net operating losses of

$12.3 million, inclusive of $10.4 million of state net operating losses, and $1.9 million of deferred tax assets
recorded for Puerto Rico net operating loss carry-forwards. As of February 2, 2019, the Company had tax credit
carry-forwards of $6.1 million, inclusive of state tax credit carry-forwards of $4.5 million, and $1.6 million of
Puerto Rico AMT credits.

We believe that it is more likely than not that the benefit from certain state net operating loss carry forwards

and credits will not be realized. In recognition of this risk, we have provided a valuation allowance of
$5.6 million on state net operating losses and $3.9 million on state tax credit carry forwards. In addition, the
Company believes that it is more likely than not that the benefit from Puerto Rico net operating loss carry-
forwards will not be realized. As a result, we have provided for a full valuation allowance of $0.3 million. If our
assumptions change and we determine we will be able to realize these net operating losses or credits, the tax
benefits relating to any reversal of the valuation allowance on deferred tax assets as of February 1, 2020 will be
recorded to the Company’s Consolidated Statement of Income. As of February 2, 2019, we provided a total
valuation allowance of $10.3 million, inclusive of $5.9 of valuation allowance related to state net operating
losses, $2.5 million related to tax credit carry-forwards and $1.9 million related to Puerto Rico.

86

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (exclusive of

interest and penalties) is as follows:

Balance at January 28, 2017
Additions for tax positions of the current year
Additions for tax positions of prior years
Reduction for tax positions of prior years
Settlements
Lapse of statute of limitations

Balance at February 3, 2018
Additions for tax positions of the current year
Additions for tax positions of prior years
Reduction for tax positions of prior years
Settlements
Lapse of statute of limitations

Balance at February 2, 2019
Additions for tax positions of the current year
Additions for tax positions of prior years
Reduction for tax positions of prior years
Settlements
Lapse of statute of limitations

Balance at February 1, 2020

(in thousands)

Gross
Unrecognized
Tax Benefits,
Exclusive of
Interest and
Penalties

$9,193
72
882
(973)
—
(101)

$9,073
18
698
(782)
—
(80)

$8,927
—
—
(783)
—
(67)

$8,077

As of February 1, 2020, the Company reported total unrecognized benefits of $8.1 million, of which
$6.4 million would affect the Company’s effective tax rate if recognized. As a result of previous positions taken
and current period activity, the Company recorded a net benefit of $0.2 million of interest and penalties during
Fiscal 2019 in the line item “Income tax expense” in the Company’s Consolidated Statements of Income.
Cumulative interest and penalties of $12.0 million are recorded in the line item “Other liabilities” in the
Company’s Consolidated Balance Sheets as of February 1, 2020. The Company recognizes interest and penalties
related to unrecognized tax benefits as part of income taxes. Within the next twelve months, the Company does
not expect any significant changes in its unrecognized tax benefits.

As of February 2, 2019, the Company reported total unrecognized benefits of $8.9 million, of which
$7.1 million would affect the Company’s effective tax rate if recognized. As a result of previous positions taken,
the Company recorded an increase of $0.2 million of interest and penalties during Fiscal 2018 in the line item
“Income tax expense” in the Company’s Consolidated Statements of Income. Cumulative interest and penalties
of $12.3 million are recorded in the line item “Other liabilities” in the Company’s Consolidated Balance Sheets
as of February 2, 2019.

The Company files tax returns in the U.S. federal jurisdiction, Puerto Rico, and various state jurisdictions.

The Company is open to examination by the IRS under the applicable statutes of limitations for Fiscal Years
2016 through 2019. The Company or its subsidiaries’ state and Puerto Rico income tax returns are open to audit
for Fiscal Years 2014 through 2019, with a few exceptions, under the applicable statutes of limitations. There are
ongoing state audits in several jurisdictions, and the Company has accrued for possible exposures as required
under Topic No. 740. The Company does not expect the settlement of these audits to have a material impact to its
financial results.

87

16. Fair Value of Financial Instruments

The Company accounts for fair value measurements in accordance with Topic No. 820 which defines fair
value, establishes a framework for measurement and expands disclosure about fair value measurements. Topic
No. 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date (exit price), and classifies the inputs
used to measure fair value into the following hierarchy:

Level 1: Quoted prices for identical assets or liabilities in active markets.

Level 2: Quoted market prices for similar assets or liabilities in active markets; quoted prices for identical
or similar assets or liabilities in markets that are not active; and model-derived valuations whose
inputs are observable or whose significant value drivers are observable.

Level 3:

Pricing inputs that are unobservable for the assets and liabilities, and include situations where
there is little, if any, market activity for the assets and liabilities.

The inputs into the determination of fair value require significant management judgment or estimation.

The carrying amounts of cash equivalents, accounts receivable and accounts payable approximate fair value

due to the short-term nature of these instruments.

Refer to Note 8, “Derivative Instruments and Hedging Activities,” for further discussion regarding the fair

value of the Company’s interest rate cap contracts.

Financial Assets

The fair values of the Company’s financial assets and the hierarchy of the level of inputs as of February 1,

2020 and February 2, 2019 are summarized below:

(in thousands)

Fair Value Measurements at

February 1,
2020

February 2,
2019

Level 1

Cash equivalents (including restricted cash)

$369,733

$22,416

Financial Liabilities

The fair values of the Company’s financial liabilities are summarized below:

Term B-5 Loans
ABL Line of Credit

Total debt(a)

(in thousands)

February 1, 2020

February 2, 2019

Carrying
Amount

Fair
Value

Carrying
Amount

Fair
Value

$957,505
—

$959,899
—

$956,693
—

$947,126
—

$957,505 $959,899

$956,693

$947,126

(a) Finance lease obligations are excluded from the table above.

The fair values presented herein are based on pertinent information available to management as of the
respective year end dates. The estimated fair values of the Company’s debt are classified as Level 2 in the fair

88

value hierarchy. Although management is not aware of any factors that could significantly affect the estimated
fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial
statements since that date, and current estimates of fair value may differ from amounts presented herein.

17. Commitments and Contingencies

Legal

Like many retailers, the Company has been named in potential class or collective actions on behalf of
groups alleging violations of federal and state wage and hour and other labor statutes, and alleged violation of
state consumer and/or privacy protection and other statutes. The Company is involved in a federal wage and hour
lawsuit alleging that certain exempt employees were misclassified under the Fair Labor Standards Act
(FLSA). In late November 2019, the Court overseeing this lawsuit granted final certification allowing the matter
to proceed as a collective action under the FLSA. In addition, the Company is involved in a putative class action
matter raising similar allegations of misclassification under the wage and hour laws of three states. This matter
was stayed by the Court shortly after it was filed and has remained stayed to date. At this time, the Company is
not able to predict the outcome of these two lawsuits and cannot reasonably estimate any reasonably possible loss
therefrom.

The Company is also party to representative claims under the California Private Attorneys’ General Act and
various other lawsuits and regulatory proceedings including, among others, commercial, product, product safety,
employee, customer, intellectual property and other claims. Actions against us are in various procedural stages.
Many of these proceedings raise factual and legal issues and are subject to uncertainties. While no assurance can
be given as to the ultimate outcome of these matters, the Company believes that the final resolution of these
actions will not have a material adverse effect on the Company’s results of operations, financial position,
liquidity or capital resources.

Letters of Credit

The Company had irrevocable letters of credit in the amounts of $53.1 million and $56.7 million as of

February 1, 2020 and February 2, 2019, respectively.

Letters of credit outstanding as of February 1, 2020 and February 2, 2019 amounted to $46.6 million and

$48.9 million, respectively, guaranteeing performance under various lease agreements, insurance contracts, and
utility agreements. The Company also had outstanding letters of credit arrangements in the aggregate amount of
$6.5 million and $7.8 million at February 1, 2020 and February 2, 2019, respectively, related to certain
merchandising agreements. Based on the terms of the Amended ABL Credit Agreement relating to the ABL Line
of Credit, the Company had available letters of credit of $501.8 million and $543.3 million as of February 1,
2020 and February 2, 2019, respectively.

Inventory Purchase Commitments

The Company had $921.2 million of purchase commitments related to goods that were not received as of

February 1, 2020.

Death Benefits

In November 2005, the Company entered into agreements with three of the Company’s former executives
whereby, upon each of their deaths, the Company will pay $1.0 million to each respective designated beneficiary.

18. Related Party Transactions

The brother-in-law of one of the Company’s Executive Vice Presidents is an independent sales
representative of one of the Company’s suppliers of merchandise inventory. This relationship predated the

89

commencement of the Executive Vice President’s employment with the Company. The Company has determined
that the dollar amount of purchases through such supplier represents an insignificant amount of its inventory
purchases.

19. Quarterly Results (Unaudited)

In the opinion of the Company’s management, the accompanying unaudited interim Consolidated Financial

Statements contain all adjustments which are necessary for the fair presentation of the quarters presented. The
operating results for any quarter are not necessarily indicative of the results of any future quarter.

Year ended February 1, 2020:

Net sales
Gross margin(1)(2)
Net income
Net income per share—basic(3):
Common stockholders
Net income per share—diluted(3):
Common stockholders

Year ended February 2, 2019:

Net sales
Gross margin (1)(2)
Net income
Net income per share—basic(3):
Common stockholders
Net income per share—diluted(3):
Common stockholders

(in thousands, except share data)

Quarter Ended

May 4,
2019

August 3,
2019

November 2,
2019

February 1,
2020

$1,628,547
$ 667,229
77,765
$

$1,656,363
$ 685,942
84,567
$

$1,774,949
$ 752,037
96,459
$

$2,201,384
$ 927,295
$ 206,325

$

$

1.18

1.15

$

$

1.28

1.26

$

$

1.46

1.44

$

$

3.14

3.08

(in thousands, except share data)

Quarter Ended

May 5,
2018

August 4,
2018

November 3,
2018

February 2,
2019

$1,518,446
$ 625,764
82,588
$

$1,498,633
$ 621,159
70,957
$

$1,634,489
$ 692,480
76,849
$

$1,991,483
$ 835,529
$ 184,351

$

$

1.23

1.20

$

$

1.06

1.03

$

$

1.15

1.12

$

$

2.77

2.70

(1) Gross margin is equal to net sales less cost of sales.
(2) During the quarterly periods ended February 1, 2020 and February 2, 2019, the Company recorded shortage
adjustments of $1.9 million and $1.9 million, respectively, as a result of actual shortage being less than what
the Company had estimated throughout the year.

(3) Quarterly net income per share results may not equal full year amounts due to rounding.

20. Subsequent Event

Towards the end of December 2019, an outbreak of a novel strain of coronavirus (COVID-19) emerged

globally. There have been mandates from federal, state and local authorities requiring forced closures of
non-essential retailers, which could negatively impact the Company’s business. Although it is not possible to
reliably estimate the length or severity of this outbreak and hence its financial impact, any significant reduction
in customer visits to, and spending at, the Company’s stores caused by COVID-19 would result in a loss of sales
and profits and other material adverse effects.

90

Schedule I

CONDENSED FINANCIAL INFORMATION
OF REGISTRANT
Parent Company Information
Burlington Stores, Inc.
Balance Sheets

ASSETS:
Current assets

Investment in subsidiaries

Total assets

LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities

Negative investment in subsidiaries
Commitments and contingencies
Total stockholders’ equity

As of

February 1,
2020

February 2,
2019

(in thousands)

$

51

$

38

528,098

322,672

$528,149

$322,710

$ —

$ —

—
—
528,149

—
—
322,710

Total liabilities and stockholders’ equity

$528,149

$322,710

See Notes to Condensed Financial Statements

91

CONDENSED FINANCIAL INFORMATION
OF REGISTRANT
Parent Company Information
Burlington Stores, Inc.

Statements of Income

REVENUES:

Total revenue

COSTS AND EXPENSES:
Income from equity investment

Total costs and expenses

Income before provision for income tax

Provision for income tax

Earnings from equity investment, net of income taxes

Net income

Total comprehensive income

Fiscal Years Ended

February 1,
2020

February 2,
2019

(in thousands)

February 3,
2018
(53 Weeks)

$ — $ — $ —

—

—

—

—

—

—

—

—

—

—

—

—

$465,116

$414,745

$384,852

$465,116

$414,745

$384,852

$465,116

$414,745

$384,852

See Notes to Condensed Financial Statements

92

CONDENSED FINANCIAL INFORMATION
OF REGISTRANT

Parent Company Information
Burlington Stores, Inc.

Statements of Cash Flows

OPERATING ACTIVITIES:
Net cash provided by operations

INVESTING ACTIVITIES:
Receipt of dividends

Net cash used in investing activities

FINANCING ACTIVITIES:
Proceeds from initial public offering
Offering costs
Receipt of dividends
Payment of dividends
Purchase of treasury shares
Intercompany financing transactions
Proceeds from stock option exercises

Fiscal Years Ended

February 1,
2020

February 2,
2019

(in thousands)

February 3,
2018
(53 Weeks)

$

— $

— $

—

—

—
—
—
—

—

—

—
—
—
—

—

—

—

—
—
—
—

(323,080)
288,871
34,222

(228,874)
212,462
16,306

(289,777)
280,701
9,173

Net cash provided by (used in) financing activities

Increase (Decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

$

13

13
38

51

(106)

(106)
144

97

97
47

$

38

$

144

See Notes to Condensed Financial Statements

93

CONDENSED FINANCIAL INFORMATION
OF REGISTRANT

Parent Company Information
Burlington Stores, Inc.

Note 1. Basis of Presentation

Burlington Stores, Inc. (the Parent Company) is a holding company that conducts substantially all of its

business operations through its subsidiaries. The Parent Company’s ability to pay dividends on Parent
Company’s common stock will be limited by restrictions on the ability of Parent Company and its subsidiaries to
pay dividends or make distributions under the terms of current and future agreements governing the indebtedness
of Parent Company’s subsidiaries. In addition to other baskets under the agreements governing its indebtedness,
the Parent Company and its subsidiaries are permitted to make dividends and distributions under the Term Loan
Facility so long as there is no event of default and the pro forma consolidated leverage ratio of the Parent
Company and its subsidiaries does not exceed 3.50 to 1.00, and under the ABL Line of Credit as long as certain
restricted payment conditions are satisfied.

The accompanying Condensed Financial Statements include the accounts of the Parent Company and, on an
equity basis, its consolidated subsidiaries and affiliates. Accordingly, these Condensed Financial Statements have
been presented on a “parent-only” basis. Under a parent-only presentation, the Parent Company’s investments in
its consolidated subsidiaries are presented under the equity method of accounting. These parent-only financial
statements should be read in conjunction with Burlington Stores, Inc.’s audited Consolidated Financial
Statements included elsewhere herein.

Note 2. Dividends

As discussed above, the terms of current and future agreements governing the indebtedness of the Parent

Company and its subsidiaries include, or may include, limitations on the ability of such subsidiaries and the
Parent Company to pay dividends, subject to certain exceptions set forth in such agreements.

Note 3. Stock-Based Compensation

Non-cash stock compensation expense of $43.9 million, $35.5 million and $27.0 million has been pushed

down to Parent Company’s subsidiaries for Fiscal 2019, Fiscal 2018 and Fiscal 2017, respectively.

94

BURLINGTON STORES, INC.
Schedule II—Valuation and Qualifying Accounts and Reserves
(All amounts in thousands)

Description

Year ended February 1, 2020

Allowance for doubtful accounts
Sales reserves(3)
Valuation allowances on deferred tax assets

Year ended February 2, 2019

Allowance for doubtful accounts
Sales reserves(3)
Valuation allowances on deferred tax assets

Year ended February 3, 2018

Allowance for doubtful accounts
Sales reserves(3)
Valuation allowances on deferred tax assets

Notes:

Balance at
Beginning
of Period

Charged
to Costs &
Expenses

Charged
to Other
Accounts(1)

Accounts
Written Off
or
Deductions(2)

Balance at
End of
Period

78
$
$ 9,451
$10,268

99
$
$ 3,768
$ 8,376

262
$
$ 3,419
$ 7,388

$ 992
$ —
$ —

$ 122
$ (19)
$ —

$ 411
$(524)
$ —

$ —
$362,764
(426)
$

275
$
$360,546
$ —

$ —
$359,711
1,892
$

$ —
$335,675
988
$

143
$
$354,009
$ —

574
$
$334,802
$ —

795
$
$11,669
$ 9,842

78
$
$ 9,451
$10,268

99
$
$ 3,768
$ 8,376

(1) Amounts related to sales reserves are charged to net sales and cost of sales, and amounts related to

valuation allowances on deferred taxes are charged to income tax expense.

(2) Actual returns and allowances.
(3) During Fiscal 2018, the Company adopted ASU 2014-09, “Revenue from Contracts with Customers,”

which requires the Company’s sales return reserve to be established at the gross sales value with an
asset established for the value of the expected merchandise returned. The liability and asset related to
the sales return reserve were $11.7 million and $7.0 million, respectively, as of February 1, 2020, and
$9.5 million and $5.7 million, respectively, as of February 2, 2019, and were included in the lines
“Other current liabilities” and “Prepaid and other current assets,” respectively, on the Company’s
Consolidated Balance Sheet. Prior period amounts have not been adjusted. As of February 3, 2018, the
net sales return reserve was $3.8 million and was included in the line “Other current liabilities” on the
Company’s Consolidated Balance Sheet.

95

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management team, under the supervision and with the participation of our principal executive officer

and our principal financial officer, evaluated the effectiveness of the design and operation of our disclosure
controls and procedures as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act, as of
the last day of the fiscal period covered by this Annual Report, February 1, 2020. The term disclosure controls
and procedures means our controls and other procedures that are designed to ensure that information required to
be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to ensure that information required to
be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and
communicated to management, including our principal executive and principal financial officer, or persons
performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on
this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure
controls and procedures were effective as of February 1, 2020.

Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial
reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and Rule 15d-15(f) under the
Exchange Act as a process designed by, or under the supervision of, the issuer’s principal executive and principal
financial officers, or persons performing similar functions, and effected by the issuer’s board of directors,
management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with GAAP and includes those
policies and procedures that:

•

•

•

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the issuer;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with GAAP, and that receipts and expenditures of the issuer are
being made only in accordance with authorizations of management and directors of the issuer; and

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use
or disposition of the issuer’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

In accordance with the internal control reporting requirement of the SEC, management completed an

assessment of the adequacy of our internal control over financial reporting as of February 1, 2020. In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control—Integrated Framework (2013).

Based on this assessment and the criteria in the COSO framework, management has concluded that, as of

February 1, 2020, our internal control over financial reporting was effective.

96

Deloitte & Touche LLP, the independent registered public accounting firm that audited and reported on our

consolidated financial statements contained herein, has audited the effectiveness of our internal control over
financial reporting as of February 1, 2020, and has issued an attestation report on the effectiveness of our internal
control over financial reporting included herein.

Changes in Internal Control Over Financial Reporting

During the fourth quarter of Fiscal 2019, there were no changes in our internal control over financial
reporting that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.

97

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of
Burlington Stores, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Burlington Stores, Inc. and subsidiaries (the
“Company”) as of February 1, 2020, based on criteria established in Internal Control — Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion,
the Company maintained, in all material respects, effective internal control over financial reporting as of February 1,
2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), consolidated statements of income, comprehensive income, stockholders’ equity, and
cash flows, as of and for the year ended February 1, 2020, of the Company and our report dated March 13, 2020,
expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding
the Company’s adoption of Accounting Standards Update (“ASU”) 2016-12, Leases (Topic 842), using the
alternative transition method.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion
on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Parsippany, New Jersey
March 13, 2020

98

Item 9B. Other Information.

None.

Part III

Item 10. Directors, Executive Officers and Corporate Governance

For the information required by this Item 10, see “Election of Directors,” “Information About Our Executive

Officers,” “Corporate Governance,” and “Board Committees,” in the Proxy Statement for our 2020 Annual
Meeting of Stockholders (the “Proxy Statement”), which information is incorporated herein by reference. The
Proxy Statement will be filed within 120 days of the close of our 2019 fiscal year.

Item 11. Executive Compensation

For the information required by this Item 11, see “Executive Compensation” and “Director Compensation”

in the Proxy Statement, which information is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters

For the information required by this Item 12, see “Ownership of Securities” and “Securities Authorized for

Issuance Under Equity Compensation Plans” in the Proxy Statement, which information is incorporated herein by
reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

For the information required by this Item 13, see “Certain Relationships and Related Party Transactions”

and “Corporate Governance” in the Proxy Statement, which information is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

For the information required by this Item 14, see “Principal Accountant Fees and Services” and “Policy on

Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered
Certified Public Accounting Firm” in the Proxy Statement, which information is incorporated herein by
reference.

99

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) Documents Filed as Part of this Report

(1) Financial Statements. The Consolidated Financial Statements filed as part of this Annual Report are listed
on the Index to Consolidated Financial Statements on page 42 of this Annual Report.

(2) Financial Statement Schedules. Schedule I—Condensed Financial Information of Registrant filed as part of
this Annual Report is set forth on pages 78-81. Schedule II—Valuation and Qualifying Accounts filed as part of
this Annual Report is set forth on page 82 of this Annual Report. All other financial statement schedules have
been omitted here because they are not applicable, not required, or the information is shown in the Consolidated
Financial Statements or notes thereto.

(3) Exhibits Required by Item 601 of Regulation S-K.

The following is a list of exhibits required by Item 601 of Regulation S-K and filed as part of this Annual

Report. Exhibits that previously have been filed are incorporated herein by reference.

Exhibit
Number

3.1

3.2

4.1†

10.1

10.1.1

Exhibit Description

Incorporated by Reference

Form

Filing Date

Amended and Restated Certificate of
Incorporation of Burlington Stores, Inc.

Registration Statement on
Form S-1/A

September 10, 2013

Amended and Restated Bylaws of
Burlington Stores, Inc.

Current Report on
Form 8-K

February 27, 2018

Current Report on
Form 8-K

February 24, 2011

Current Report on
Form 8-K

May 17, 2012

Description of the Registrant’s Securities.

Credit Agreement, dated February 24, 2011,
by and among Burlington Coat Factory
Warehouse Corporation, as borrower, the
facility guarantors signatory thereto,
JPMorgan Chase Bank, N.A., as
administrative agent and as collateral agent,
Goldman Sachs Lending Partners LLC, the
lenders party thereto, and J.P. Morgan
Securities LLC, Goldman Sachs Lending
Partners LLC, Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Wells
Fargo Securities, LLC, as joint lead arrangers
and joint bookrunners.

Amendment No. 1, dated May 16, 2012, to
the Credit Agreement, dated February 24,
2011, by and among Burlington Coat Factory
Warehouse Corporation, the lenders party
thereto, JPMorgan Chase Bank, N.A., as
administrative agent and as collateral agent,
and the other parties thereto.

100

Incorporated by Reference

Form

Filing Date

Current Report on
Form 8-K

February 21, 2013

Current Report on
Form 8-K

May 22, 2013

Current Report on
Form 8-K

August 18, 2014

Current Report on
Form 8-K

July 29, 2016

Current Report on
Form 8-K

November 21, 2017

Current Report on
Form 8-K

November 8, 2018

Current Report on
Form 8-K

March 3, 2020

Exhibit
Number

10.1.2

10.1.3

10.1.4

10.1.5

10.1.6

10.1.7

10.1.8

Exhibit Description

Amendment No. 2, dated February 15, 2013,
to the Credit Agreement, dated February 24,
2011, by and among Burlington Coat Factory
Warehouse Corporation, the lender parties
thereto, JPMorgan Chase Bank, N.A., as
administrative agent and as collateral agent,
and the other parties thereto.

Amendment No. 3, dated May 17, 2013, to
the Credit Agreement, dated February 24,
2011, by and among Burlington Coat Factory
Warehouse Corporation, the lenders party
thereto, JPMorgan Chase Bank, N.A., as
administrative agent and as collateral agent.

Amendment No. 4, dated August 13, 2014, to
the Credit Agreement, dated February 24,
2011, by and among Burlington Coat Factory
Warehouse Corporation, the lenders party
thereto, JPMorgan Chase Bank, N.A., as
administrative agent and as collateral agent.

Amendment No. 5, dated July 29, 2016, to
the Credit Agreement, dated February 24,
2011, by and among Burlington Coat Factory
Warehouse Corporation, the lenders party
thereto, JPMorgan Chase Bank, N.A., as
administrative agent and as collateral agent.

Amendment No. 6 to the Credit Agreement,
dated November 17, 2017, to the Credit
Agreement, dated February 24, 2011, by and
among Burlington Coat Factory Warehouse
Corporation, the lenders party thereto,
JPMorgan Chase Bank, N.A., as
administrative agent and as collateral agent.

Amendment No. 7 to the Credit Agreement,
dated November 2, 2018, to the Credit
Agreement, dated February 24, 2011, by and
among Burlington Coat Factor Warehouse
Corporation, the lenders party thereto,
JPMorgan Chase Bank, N.A., as
administrative agent and as collateral agent.

Amendment No. 8 to the Credit Agreement,
dated February 26, 2020, to the Credit
Agreement, dated February 24, 2011, by and
among Burlington Coat Factory Warehouse
Corporation, the lenders party thereto,
JPMorgan Chase Bank, N.A., as
administrative agent and as collateral agent.

101

Exhibit
Number

10.2

10.2.1

10.2.2

10.2.3

10.3

10.4

Exhibit Description

Second Amended and Restated Credit
Agreement, dated September 2, 2011, among
Burlington Coat Factory Warehouse
Corporation, as lead borrower, the borrowers
named therein and the facility guarantors
party thereto, Bank of America, N.A., as
administrative agent and as collateral agent,
Wells Fargo Capital Finance, LLC and
JPMorgan Chase Bank, N.A., as
co-syndication agents, and Suntrust Bank and
U.S. Bank, National Association, as
co-documentation agents, the lenders named
therein, Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Wells Fargo Capital
Finance, LLC, as joint lead arrangers, and
Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Wells Fargo Capital
Finance, LLC, as joint bookrunners.

First Amendment to Second Amended and
Restated Credit Agreement, dated August 13,
2014, by and among Burlington Coat Factory
Warehouse Corporation, as lead borrower,
the other borrowers party thereto, the facility
guarantors thereto, the lenders party thereto
and Bank of America, N.A., as
administrative agent and collateral agent.

Second Amendment to Second Amended and
Restated Credit Agreement, dated June 29,
2018, by and among Burlington Coat Factory
Warehouse Corporation, as lead borrower,
the other borrowers party thereto, the facility
guarantors thereto, the lenders party thereto
and Bank of America, N.A., as
administrative agent and collateral agent.

Consent and Technical Modification
Agreement, dated December 3, 2018, by and
between Burlington Coat Factory Warehouse
Corporation, as lead borrower, and Bank of
America, N.A., as administrative agent

Revolving Credit Note, dated April 13, 2006,
by the borrowers party thereto in favor of
PNC Bank, National Association.

Revolving Credit Note, dated April 13, 2006,
by the borrowers party thereto in favor of
Siemens Financial Services, Inc.

102

Incorporated by Reference

Form

Filing Date

Current Report on
Form 8-K

September 9, 2011

Current Report on
Form 8-K

August 18, 2014

Current Report on
Form 8-K

July 2, 2018

Annual Report on
Form 10-K

March 20, 2019

Registration Statement on
Form S-4

October 10, 2006

Registration Statement on
Form S-4

October 10, 2006

Exhibit Description

Form

Incorporated by Reference

Filing Date

April 30, 2010

Transition Report on
Form 10-K/T

Registration Statement on
Form S-4

October 10, 2006

Registration Statement on
Form S-4

October 10, 2006

Registration Statement on
Form S-4

October 10, 2006

Registration Statement on
Form S-4

October 10, 2006

Transition Report on Form
10-K/T

April 30, 2010

Registration Statement on
Form S-4

Registration Statement on
Form S-4

October 10, 2006

October 10, 2006

Registration Statement on
Form S-4

October 10, 2006

Registration Statement on
Form S-4

October 10, 2006

Exhibit
Number

10.5

10.6

10.7

10.8

10.9

10.10

Amended and Restated Revolving Credit
Note, dated January 15, 2010, by the
borrowers party thereto in favor of Wells
Fargo Retail Finance, LLC.

Revolving Credit Note, dated April 13, 2006,
by the borrowers party thereto in favor of
National City Business Credit, Inc.

Revolving Credit Note, dated April 13, 2006,
by the borrowers party thereto in favor of
Citizens Bank of Pennsylvania.

Revolving Credit Note, dated April 13, 2006,
by the borrowers party thereto in favor of
HSBC Business Credit (USA), Inc.

Revolving Credit Note, dated April 13, 2006,
by the borrowers party thereto in favor of
Sovereign Bank.

Amended and Restated Revolving Credit
Note, dated January 15, 2010, by the
borrowers party thereto in favor of Capital
One Leverage Finance Corp.

10.11

Form of Swingline Note.

10.12

10.13

10.14

Guaranty, dated April 13, 2006, by the
facility guarantors party thereto in favor of
Bank of America, N.A., as administrative
Agent and Bank of America, N.A., as
Collateral Agent.

Security Agreement, dated April 13, 2006,
by and among each of the borrowers party
thereto, each of the facility guarantors party
thereto, and Bank of America, N.A., as
collateral agent.

Intellectual Property Security Agreement,
dated April 13, 2006, by and among each of
the borrowers party thereto, each of the
facility guarantors party thereto, and Bank of
America, N.A., as collateral agent.

103

Exhibit
Number

10.15

10.16+

10.16.1+

10.16.2+

10.17+

10.17.1+

10.17.2+

10.17.3+

Exhibit Description

Pledge Agreement, dated April 13, 2006, by
and between Burlington Coat Factory
Holdings, Inc., Burlington Coat Factory
Investments Holdings, Inc., Burlington Coat
Factory Warehouse Corporation, Burlington
Coat Factory Realty Corp., Burlington Coat
Factory Purchasing, Inc., K&T Acquisition
Corp., Burlington Coat Factory of New York,
LLC, Burlington Coat Factory Warehouse of
Baytown, Inc., Burlington Coat Factory of
Texas, Inc., as the pledgors, and Bank of
America, N.A., as collateral agent.

Employment Agreement, dated October 13,
2009, by and between Burlington Coat
Factory Warehouse Corporation and Joyce
Manning Magrini.

Amendment to Employment Agreement,
dated February 26, 2010, by and between
Burlington Coat Factory Warehouse
Corporation and Joyce Manning Magrini.

Amendment No. 2 to Employment
Agreement, dated October 18, 2012, by and
between Burlington Coat Factory Warehouse
Corporation and Joyce Manning Magrini.

Employment Agreement, dated December 2,
2008, by and among Burlington Coat Factory
Warehouse Corporation, Burlington Coat
Factory Holdings, Inc., and Thomas
Kingsbury.

Amendment No. 1 to Employment
Agreement, dated October 23, 2012, by and
among Burlington Coat Factory Warehouse
Corporation, Burlington Coat Factory
Holdings, Inc., and Thomas Kingsbury.

Amendment No. 2 to Employment
Agreement, dated December 8, 2014, by and
among Burlington Coat Factory Warehouse
Corporation, Burlington Coat Factory
Holdings, LLC, Burlington Stores, Inc. and
Thomas Kingsbury.

Amendment No. 3 to Employment
Agreement, dated May 18, 2015, by and
among Burlington Coat Factory Warehouse
Corporation, Burlington Coat Factory
Holdings, LLC, Burlington Stores, Inc. and
Thomas Kingsbury.

104

Incorporated by Reference

Form

Filing Date

Registration Statement on
Form S-4

October 10, 2006

Transition Report on
Form 10-K/T

April 30, 2010

Transition Report on
Form 10-K/T

April 30, 2010

Quarterly Report on
Form 10-Q

December 11, 2012

Quarterly Report on
Form 10-Q

April 14, 2009

Quarterly Report on
Form 10-Q

December 11, 2012

Current Report on
Form 8-K

December 9, 2014

Quarterly Report on
Form 10-Q

August 31, 2015

Exhibit
Number

10.17.4+

10.17.5+

10.17.6+

10.17.7+

10.18+

10.18.1+

10.19+

10.19.1+

10.20+

10.20.1+

Exhibit Description

Amendment No. 4 to Employment
Agreement, dated May 29, 2015, by and
among Burlington Coat Factory Warehouse
Corporation, Burlington Coat Factory
Holdings, LLC, Burlington Stores, Inc. and
Thomas Kingsbury.

Amendment No. 5 to Employment
Agreement, dated July 7, 2015, by and
among Burlington Coat Factory Warehouse
Corporation, Burlington Coat Factory
Holdings, LLC, Burlington Stores, Inc. and
Thomas Kingsbury.

Amendment No. 6 to Employment
Agreement, dated January 20, 2017, by and
among Burlington Coat Factory Warehouse
Corporation, Burlington Coat Factory
Holdings, LLC, Burlington Stores, Inc. and
Thomas Kingsbury.

Chairman Agreement, dated June 14, 2019,
by and between Burlington Stores, Inc. and
Thomas A. Kingsbury.

Employment Agreement, dated January 28,
2008, by and between Burlington Coat
Factory Warehouse Corporation and Fred
Hand.

Amendment No. 1 to Employment
Agreement, dated October 31, 2012, by and
between Burlington Coat Factory Warehouse
Corporation and Fred Hand.

Employment Agreement, dated June 26,
2008, by and between Burlington Coat
Factory Warehouse Corporation and Marc
Katz.

Amendment No. 1 to Employment
Agreement, dated October 16, 2012, by and
between Burlington Coat Factory Warehouse
Corporation and Marc Katz.

Amended and Restated Employment
Agreement, dated July 28, 2015, by and
among Burlington Coat Factory Warehouse
Corporation and Jennifer Vecchio.

Amendment, dated May 19, 2017, to the
Amended and Restated Employment
Agreement, dated July 28, 2015, by and
among Burlington Coat Factory Warehouse
Corporation and Jennifer Vecchio.

105

Incorporated by Reference

Form

Filing Date

Current Report on
Form 8-K

June 1, 2015

Current Report on
Form 8-K

July 7, 2015

Current Report on
Form 8-K

January 20, 2017

Current Report on
Form 8-K/A

June 17, 2019

Quarterly Report on
Form 10-Q

April 15, 2008

Registration Statement
on Form S-1/A

September 6, 2013

Current Report on
Form 8-K

June 27, 2008

Registration Statement on
Form S-1/A

September 6, 2013

Quarterly Report on
Form 10-Q

August 31, 2015

Current Report on
Form 8-K

May 22, 2017

Exhibit
Number

10.21+

10.22+†

10.23+

10.24+

10.25+

10.26+

10.27+

10.28+

10.29+

Exhibit Description

Employment Agreement, dated as of
April 23, 2019, by and between Burlington
Stores, Inc. and Michael O’Sullivan.

Employment Agreement, dated as of
March 23, 2011, by and between Burlington
Coat Factory Warehouse Corporation and
John Crimmins

Form of Non-Qualified Stock Option
Agreement between Burlington Coat Factory
Holdings, Inc. and Employees with
Employment Agreements (for grants made
after March 2009 and prior to 2014 (other
than 2013 special one-time grants)) pursuant
to 2006 Management Incentive Plan.

Form of Non-Qualified Stock Option
Agreement between Burlington Coat Factory
Holdings, Inc. and Employees without
Employment Agreements (for grants made
after March 2009 and prior to 2014 (other
than 2013 special one-time grants)) pursuant
to 2006 Management Incentive Plan.

Burlington Coat Factory Holdings, Inc. 2006
Management Incentive Plan (Amended and
Restated June 15, 2013).

Incorporated by Reference

Form

Current Report on
Form 8-K

Filing Date

April 23, 2019

Current Report on
Form 8-K

April 30, 2009

Current Report on
Form 8-K

April 30, 2009

Registration Statement on
Form S-1/A

September 6, 2013

Form of Directors and Officers
Indemnification Agreement.

Registration Statement on
Form S-1/A

September 10, 2013

Current Report on
Form 8-K

May 22, 2017

Registration Statement on
Form S-1/A

September 6, 2013

Registration Statement on
Form S-1/A

September 6, 2013

Burlington Stores, Inc. 2013 Omnibus
Incentive Plan, as amended and restated
May 17, 2017.

Form of Non-Qualified Stock Option
Agreement, pursuant to Burlington Holdings,
Inc. 2006 Management Incentive Plan
(Amended and Restated June 15, 2013),
between Burlington Holdings, Inc. and
Employees with Employment Agreements
(for 2013 special one-time grants).

Form of Non-Qualified Stock Option
Agreement, pursuant to Burlington Holdings,
Inc. 2006 Management Incentive Plan
(Amended and Restated June 15, 2013),
between Burlington Holdings, Inc. and
Employees without Employment Agreements
(for 2013 special one-time grants).

106

Incorporated by Reference

Form

Filing Date

Registration Statement on
Form S-1/A

September 6, 2013

Annual Report on
Form 10-K

March 25, 2015

Annual Report on
Form 10-K

March 15, 2016

Annual Report on
Form 10-K

March 15, 2016

Annual Report on
Form 10-K

March 15, 2016

Annual Report on
Form 10-K

March 15, 2016

Exhibit
Number

10.30+

10.31+

10.32+

10.33+

10.34+

10.35+

Exhibit Description

Form of Non-Qualified Stock Option
Agreement, pursuant to Burlington Holdings,
Inc. 2006 Management Incentive Plan
(Amended and Restated June 15, 2013),
dated June 17, 2013, between Burlington
Holdings, Inc. and Thomas A. Kingsbury (for
2013 special one-time grant).

Restricted Stock Grant Agreement between
Burlington Stores, Inc. and Thomas
Kingsbury, dated December 15, 2014 (for
grants made after 2014 and before May
2019).

Form of Non-Qualified Stock Option
Agreement between Burlington Stores, Inc.
and Employees with Employment
Agreements pursuant to Burlington
Holdings, Inc. 2006 Management Incentive
Plan (Amended and Restated June 15, 2013)
(for grants made from and after December
2015 and prior to November 2016).

Form of Non-Qualified Stock Option
Agreement between Burlington Stores, Inc.
and Employees without Employment
Agreements pursuant to Burlington
Holdings, Inc. 2006 Management Incentive
Plan (Amended and Restated June 15, 2013)
(for grants made from and after December
2015 and prior to November 2016).

Form of Restricted Stock Grant Agreement
between Burlington Stores, Inc. and
Employees with Employment Agreements
pursuant to Burlington Holdings, Inc. 2006
Management Incentive Plan (Amended and
Restated June 15, 2013) (for grants made
from and after December 2015 and prior to
November 2016).

Form of Restricted Stock Grant Agreement
between Burlington Stores, Inc. and
Employees without Employment Agreements
pursuant to Burlington Holdings, Inc. 2006
Management Incentive Plan (Amended and
Restated June 15, 2013) (for grants made
from and after December 2015 and prior to
November 2016).

107

Incorporated by Reference

Form

Filing Date

Quarterly Report on
Form 10-Q

November 23, 2016

Quarterly Report on
Form 10-Q

November 23, 2016

Quarterly Report on
Form 10-Q

November 23, 2016

Quarterly Report on
Form 10-Q

November 23, 2016

Current Report on
Form 8-K

Current Report on
Form 8-K

May 22, 2017

May 22, 2017

Exhibit
Number

10.36+

10.37+

10.38+

10.39+

10.40+

10.41+

Exhibit Description

Form of Non-Qualified Stock Option
Agreement between Burlington Stores, Inc.
and Employees with Employment
Agreements pursuant to Burlington Stores,
Inc. 2013 Omnibus Incentive Plan, as
amended and restated May 17, 2017 (for
grants made from and after November 2016
and prior to May 2017).

Form of Non-Qualified Stock Option
Agreement between Burlington Stores, Inc.
and Employees without Employment
Agreements pursuant to Burlington Stores,
Inc. 2013 Omnibus Incentive Plan, as
amended and restated May 17, 2017 (for
grants made from and after November 2016
and prior to May 2017).

Form of Restricted Stock Grant Agreement
between Burlington Stores, Inc. and
Employees with Employment Agreements
pursuant to Burlington Stores, Inc. 2013
Omnibus Incentive Plan, as amended and
restated May 17, 2017 (for grants made from
and after November 2016 and prior to May
2017).

Form of Restricted Stock Grant Agreement
between Burlington Stores, Inc. and
Employees without Employment Agreements
pursuant to Burlington Stores, Inc. 2013
Omnibus Incentive Plan, as amended and
restated May 17, 2017 (for grants made from
and after November 2016 and prior to May
2017).

Burlington Stores, Inc. Executive
Severance Plan

Form of Non-Qualified Stock Option
Agreement between Burlington Stores, Inc.
and Employees with Employment
Agreements or Subject to the Executive
Severance Plan pursuant to Burlington
Stores, Inc. 2013 Omnibus Incentive Plan, as
amended and restated May 17, 2017 (for
grants made from and after May 2017 and
prior to May 2019).

108

Incorporated by Reference

Form

Current Report on
Form 8-K

Filing Date

May 22, 2017

Current Report on
Form 8-K

May 22, 2017

Current Report on
Form 8-K

May 22, 2017

Current Report on
Form 8-K

May 22, 2017

Quarterly Report on
Form 10-Q

June 3, 2019

Quarterly Report on
Form 10-Q

June 3, 2019

Exhibit
Number

10.42+

10.43+

10.44+

10.45+

10.46+

10.47+

Exhibit Description

Form of Non-Qualified Stock Option
Agreement between Burlington Stores, Inc.
and Employees without Employment
Agreements pursuant to Burlington Stores,
Inc. 2013 Omnibus Incentive Plan, as
amended and restated May 17, 2017 (for
grants made from and after May 2017 and
prior to May 2019).

Form of Restricted Stock Grant Agreement
between Burlington Stores, Inc. and
Employees with Employment Agreements or
Subject to the Executive Severance Plan
pursuant to Burlington Stores, Inc. 2013
Omnibus Incentive Plan, as amended and
restated May 17, 2017 (for grants made from
and after May 2017 and prior to May 2019).

Form of Restricted Stock Grant Agreement
between Burlington Stores, Inc. and
Employees without Employment Agreements
pursuant to Burlington Stores, Inc. 2013
Omnibus Incentive Plan, as amended and
restated May 17, 2017 (for grants made from
and after May 2017 and prior to May 2019).

Form of Restricted Stock Grant Agreement
between Burlington Stores, Inc. and
Independent Directors pursuant to Burlington
Stores, Inc. 2013 Omnibus Incentive Plan, as
amended and restated May 17, 2017 (for
grants made from and after May 2017 and
prior to March 2018).

Form of Performance-Based Restricted Stock
Unit Award Notice and Agreement between
Burlington Stores, Inc. and award recipients
pursuant to the Burlington Stores, Inc. 2013
Omnibus Incentive Plan, as amended and
restated May 17, 2017 (for grants made from
and after May 1, 2019).

Form of Restricted Stock Unit Award Notice
and Agreement between Burlington Stores,
Inc. and award recipients pursuant to the
Burlington Stores, Inc. 2013 Omnibus
Incentive Plan, as amended and restated
May 17, 2017 (for grants made from and
after May 2019).

109

Incorporated by Reference

Form

Filing Date

Quarterly Report on
Form 10-Q

June 3, 2019

Quarterly Report on
Form 10-Q

June 3, 2019

Quarterly Report on
Form 10-Q

June 3, 2019

Quarterly Report on
Form 10-Q

June 3, 2019

Quarterly Report on
Form 10-Q

August 29, 2019

Exhibit
Number

10.48+

10.49+

10.50+

10.51+

10.52+

21.1†

23.1†

31.1†

31.2†

Exhibit Description

Form of Stock Option Award Notice and
Agreement between Burlington Stores, Inc.
and award recipients pursuant to the
Burlington Stores, Inc. 2013 Omnibus
Incentive Plan, as amended and restated
May 17, 2017 (for grants made from and
after May 2019).

Form of Performance-Based Restricted Stock
Unit Award Notice and Agreement between
Burlington Stores, Inc. and Thomas A.
Kingsbury pursuant to the Burlington Stores,
Inc. 2013 Omnibus Incentive Plan, as
amended and restated May 17, 2017 (for
grants made from and after May 2019).

Form of Restricted Stock Unit Award Notice
and Agreement between Burlington Stores,
Inc. and Thomas A. Kingsbury pursuant to
the Burlington Stores, Inc. 2013 Omnibus
Incentive Plan, as amended and restated
May 17, 2017 (for grants made from and
after May 2019).

Form of Stock Option Award Notice and
Agreement between Burlington Stores, Inc.
and Thomas A. Kingsbury pursuant to the
Burlington Stores, Inc. 2013 Omnibus
Incentive Plan, as amended and restated
May 17, 2017 (for grants made from and
after May 2019).

Form of Restricted Stock Unit Award Notice
and Agreement between Burlington Stores,
Inc. and Non-Employee Directors pursuant to
the Burlington Stores, Inc. 2013 Omnibus
Incentive Plan, as amended and restated
May 17, 2017 (for grants made from and
after May 2019).

List of Subsidiaries of Burlington Stores, Inc.

Consent of Deloitte & Touche LLP.

Certification of Principal Executive Officer
required by Rule 13a-14(a) or Rule 15d-14(a)
of the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

Certification of Principal Financial Officer
required by Rule 13a-14(a) or Rule 15d-14(a)
of the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

110

Incorporated by Reference

Form

Filing Date

Exhibit
Number

32.1†

32.2†

101.INS†

101.SCH†

101.CAL†

101.DEF†

101.LAB†

101.PRE†

104†

Exhibit Description

Certification of Principal Executive Officer
pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.

Certification of Principal Financial Officer
pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.

Inline XBRL Instance Document – the
instance document does not appear in
Interactive Data File, because its XBRL tags
are embedded within the Inline XBRL
document.

Inline XBRL Taxonomy Extension Schema
Document

Inline Taxonomy Extension Calculation
Linkbase Document

Inline XBRL Taxonomy Extension
Definition Linkbase Document

Inline XBRL Taxonomy Extension Label
Linkbase Document

Inline XBRL Taxonomy Extension
Presentation Linkbase Document

Cover Page Interactive Data File (formatted
as inline XBRL and contained in
Exhibit 101)

+
†

Indicates management contract or compensatory plan or arrangement.
Filed or furnished herewith.

Item 16. Form 10-K Summary

None.

111

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant

has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

BURLINGTON STORES, INC.

By:

/s/ Michael O’Sullivan

Michael O’Sullivan
Chief Executive Officer

Date: March 13, 2020

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by

the following persons on behalf of the registrant and in the capacities indicated on the 13th day of March 2020.

Signature

Title

/s/ Michael O’Sullivan
Michael O’Sullivan

/s/ John Crimmins
John Crimmins

/s/ Ted English
Ted English

/s/ Jordan Hitch
Jordan Hitch

/s/ John Mahoney
John Mahoney

/s/ William McNamara
William McNamara

/s/ Jessica Rodriguez
Jessica Rodriguez

/s/ Laura J. Sen
Laura J. Sen

/s/ Paul Sullivan
Paul Sullivan

/s/ Mary Ann Tocio
Mary Ann Tocio

Chief Executive Officer and Director
(Principal Executive Officer)

Chief Financial Officer
(Principal Financial Officer and Principal Accounting
Officer)

Director

Director

Director

Director

Director

Director

Director

Director

112

BOARD OF DIRECTORS

MANAGEMENT TEAM

JOHN J. MAHONEY
Retired Vice Chairman
Staples, Inc.
Chairman of the Board of Directors

TED ENGLISH *1, 3
Executive Chairman
Bob’s Discount Furniture

MICHAEL O’SULLIVAN
Chief Executive Officer

JENNIFER VECCHIO
President and Chief Merchandising Officer

FRED HAND
Chief Customer Officer/Principal

JORDAN HITCH *1, 2
Former Managing Director
Bain Capital
Chair of the Compensation Committee

GAYLE AERTKER
Executive Vice President,
Store Development

WILLIAM P. MCNAMARA *2
Retired President
Macy’s Reinvent Strategies
Macy’s, Inc.

MICHAEL O’SULLIVAN
Chief Executive Officer
Burlington Stores, Inc.

JESSICA RODRIGUEZ *2
Chief Marketing Officer and President of 
Entertainment of UCI Networks

LAURA J. SEN *3
Former Non-Executive Chairman & Chief 
Executive Officer, BJ’s Wholesale Club, Inc.

PAUL J. SULLIVAN *3
Retired Partner
PricewaterhouseCoopers LLP
Chair of the Audit Committee

MARY ANN TOCIO *1,2
Retired President and
Chief Operating Officer
Bright Horizons Family Solutions, Inc.
Chair of the Nominating and
Corporate Governance Committee

FORREST DAVID CODER
Executive Vice President of Stores

JOHN CRIMMINS
Executive Vice President and Chief 
Financial Officer

SIIRI DOUGHERTY 
Executive Vice President of Merchandising

KEVIN GRIFFIN
Executive Vice President of Merchandising

DENNIS HODGSON
Executive Vice President and Chief 
Information Officer

JOYCE MANNING MAGRINI
Executive Vice President,
Human Resources

MIKE METHENY
Executive Vice President,
Supply Chain, Corporate Services
and Asset Protection

ELIOT M. ROSENFIELD
Executive Vice President of 
Merchandising

RICK SEEGER
Executive Vice President of Planning 
& Allocation and MIO

CORPORATE AND
STOCKHOLDER INFORMATION

ANNUAL MEETING
The company’s 2020 annual meeting of 
stockholders will take place at 8:00 AM 
on May 20, 2020.

STOCK EXCHANGE LISTING
New York Stock Exchange
Trading Symbol — BURL

INDEPENDENT REGISTERED CERTIFIED 
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
Parsippany, New Jersey

INVESTOR RELATIONS
Investors, analysts and others seeking 
information about the company are asked 
to visit our investor relations website at
www.BurlingtonInvestors.com
g
or to contact:

David Glick 
Senior Vice President of Investor 
Relations and Treasurer

(855) 973-8445
Info@BurlingtonInvestors.com

g

A copy of our Annual Report for the fiscal 
year ended February 1, 2020 as filed with
the Securities and Exchange Commission 
on Form 10-K, quarterly reports on Form 10-
Q, and current reports on Form 8-K can be 
accessed on our investor relations website 
under the SEC Filings section or can be 
mailed upon request.

TRANSFER AGENT AND REGISTRAR
(for registered stockholders)
American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, New York 11219
(800) 937-5449

BENEFICIAL STOCKHOLDERS
(Shares held by your broker in the name 
of the brokerage house) should direct 
questions to your broker

*Board Committees
1 Compensation
2 Nominating and Corporate Governance
3 Audit