Burlington stores, inc. announces third quarter and first nine months
fiscal 2015 results
Burlington, n.j.--(business wire)--burlington stores, inc. (nyse:burl), a nationally recognized off-price retailer of high-quality, branded apparel at everyday low prices, today announced its results for the third quarter and nine months ended october 31, 2015. tom kingsbury, president and chief executive officer stated, “we are pleased with our third quarter results, which included a 2.8% increase in comparable store sales on top of a 5.2% increase in last year’s third quarter. adjusted net income per share surpassed our expectations due to sales growth, expansion in gross margin, leverage in sg&a and share repurchase activity. i would like to thank our store and corporate teams for contributing to these results.” mr. kingsbury continued: “we continue to have significant open to buy and believe we are well prepared to take full advantage of the abundance of merchandise available in the marketplace.” fiscal 2015 third quarter operating results (for the 13 week period ended october 31, 2015 compared with the 13 week period ended november 1, 2014): comparable store sales increased 2.8%, which follows a comparable store sales increase of 5.2% in the fiscal 2014 third quarter. net sales increased 6.4%, or $73.6 million, to $1,230.9 million. this increase includes the 2.8% increase in comparable store sales, as well as an increase of $44.3 million from new and non-comparable stores. gross margin expanded by 10 basis points to 39.8% during the third quarter of fiscal 2015. during the quarter product sourcing costs, which are included in selling, general and administrative expenses (sg&a), were flat to last year as a percentage of net sales. sg&a, less product sourcing costs and advisory fees, as a percentage of net sales was 28.9%, which represented an approximate 40 basis points of improvement compared with the third quarter of fiscal 2014. this improvement was primarily driven by a reduction in incentive compensation partially offset by an increase in stock based compensation. expense leverage was also achieved in advertising and store occupancy. adjusted ebitda improved 13.8%, or $10.0 million, to $82.5 million. sales growth, sg&a leverage and gross margin expansion contributed to a 40 basis point expansion in adjusted ebitda as a percentage of net sales. depreciation and amortization expense, exclusive of net favorable lease amortization, increased $1.1 million to $37.2 million. interest expense improved $1.8 million to $14.8 million from last year, driven by interest savings realized as a result of the 2014 term loan refinancing. adjusted tax expense was $11.5 million compared to $7.9 million last year. the adjusted effective tax rate was 37.7% vs. 39.9% last year. the decrease in the effective tax rate was primarily the result of state credits available to the company for its new corporate headquarters and the benefit of federal hiring credits from prior years realized during fiscal 2015. adjusted net income increased 59.9% to $19.0 million, or $0.25 per share vs. $0.16 per share last year. fully diluted shares outstanding were 75.4 million at the end of the quarter compared with 76.0 million outstanding last year. fiscal 2015 first nine months operating results (for the 39 week period ended october 31, 2015 compared with the 39 week period ended november 1, 2014): comparable store sales increased 3.0% following a 4.2% increase in the first nine months of fiscal 2014. net sales increased 6.9%, or $229.0 million, to $3,558.2 million. this increase includes the 3.0% increase in comparable store sales, as well as an increase of $140.2 million from new and non-comparable stores. gross margin expanded by 90 basis points to 39.6% from 38.7%. this improvement was due to a reduction in markdown rate, which more than offset an approximate 40 basis point increase in product sourcing costs that are included in sg&a. sg&a, less product sourcing costs and advisory fees, as a percentage of net sales was 28.2% vs. 28.4% last year. the 20 basis point improvement was driven by a reduction of incentive compensation, offset by an increase in stock based compensation. expense leverage was also achieved in advertising and store occupancy. adjusted ebitda improved 16.3%, or $36.4 million, to $259.4 million. the 60 basis point expansion in adjusted ebitda as a percent of net sales was driven by sales growth coupled with expense leverage and gross margin expansion. depreciation and amortization expense, exclusive of net favorable lease amortization, increased $4.3 million to $109.0 million. interest expense improved $24.5 million to $44.2 million from last year, driven by interest savings realized as a result of the 2014 term loan refinancing. adjusted tax expense was $40.9 million compared with $19.9 million last year. the adjusted effective tax rate was 38.5% vs. 40.1% last year. the decrease in the effective tax rate was primarily driven by state credits available to the company for its new corporate headquarters and the benefit of federal hiring credits from prior years realized during fiscal 2015. adjusted net income was $65.3 million versus $29.6 million last year, or $0.86 per diluted share vs. $0.39 last year. fully diluted shares outstanding were 76.1 million vs. 75.7 million shares last year. inventory: merchandise inventories were $934.0 million vs. $899.9 million at the end of the third quarter last year. this includes an increase in pack and hold inventory of approximately $11 million vs. last year. pack and hold inventory represented 14% of inventory at quarter end versus 12% last year. comparable store inventory decreased 7% compared with the third quarter last year. share repurchase activity during the third quarter, the company invested $97.6 million of cash to repurchase 1,892,414 shares of its common stock ending the period with $77.0 million remaining on its share repurchase authorization. on november 24, 2015, the company announced that its board of directors had authorized the repurchase of up to an additional $200.0 million of common stock. this brings total availability under the company’s share repurchase programs to $277.0 million. share repurchases will be funded using the company’s available cash, and the newly-announced program is authorized to be executed over the next 24 months. commenting on the share repurchase announcement, tom kingsbury, chairman, president and chief executive officer stated: “the decision by our board of directors to authorize a new $200 million share repurchase program reflects their confidence in our business and strategy, as well as our strong cash flow generation that enables us to invest in our growth, reduce debt and repurchase our common stock for the benefit of our shareholders.” fiscal 2015 q4 and revised full year 2015 outlook for the fourth quarter of fiscal 2015 (the 13 weeks ending january 30, 2016), the company expects: net sales to increase in the range of 3.7% to 4.7%; comparable store sales to increase in the range of flat to 1.0%; adjusted net income per share in the range of $1.44 to $1.48, utilizing a fully diluted share count of approximately 74.4 million shares. this compares with an adjusted net income per share of $1.43 in the fourth quarter of fiscal 2014, which benefited from a $3.2 million one-time legal settlement, or $0.03 per share; and to open one new store resulting in a total store count of 567 at the end of the fourth quarter. for the full fiscal year 2015 (the 52-weeks ending january 30, 2016), the company currently expects: net sales to increase in the range of 5.8% to 6.3%; comparable store sales to increase between 2.0% to 2.5%; adjusted ebitda margin expansion of 20 to 30 basis points; interest expense of approximately $59 million; tax rate to approximate 37.8%; adjusted net income per share in the range of $2.28 to $2.32, utilizing a fully diluted share count of approximately 75.7 million shares. this compares with an adjusted net income per share of $1.83 in fiscal 2014; to open 25 net new stores. note regarding non-gaap financial measures the foregoing discussion includes references to adjusted ebitda, adjusted tax expense, adjusted net income, and adjusted net income per share. the company believes these measures are useful in evaluating the operating performance of the business and for comparing its results to that of other retailers. these non-gaap financial measures are defined and reconciled to the most comparable gaap measure later in this document. third quarter 2015 conference call the company will hold a conference call on tuesday, november 24, 2015 at 8:30 a.m. eastern time to discuss the company’s third quarter fiscal 2015 results. the u.s. toll free dial-in for the conference call is 1-877-407-0789 and the international dial-in number is 1-201-689-8562. a live webcast of the conference call will also be available on the investor relations page of the company's website at www.burlingtoninvestors.com. for those unable to participate in the conference call, a replay will be available beginning at 11:30 am et, november 24, 2015 until 11:59 pm et on december 1, 2015. the u.s. toll-free replay dial-in number is 1-877-870-5176 and the international replay dial-in number is 1-858-384-5517. the replay passcode is 13624496. additionally, a replay of the call will be available on the investor relations page of the company's website at www.burlingtoninvestors.com. investors and others should note that burlington stores currently announces material information using sec filings, press releases, public conference calls and webcasts. in the future, burlington stores will continue to use these channels to distribute material information about the company, and may also utilize its website and/or various social media sites to communicate important information about the company, key personnel, new brands and services, trends, new marketing campaigns, corporate initiatives and other matters. information that the company posts on its website or on social media channels could be deemed material; therefore, the company encourages investors, the media, our customers, business partners and others interested in burlington stores to review the information posted on its website, as well as the following social media channels: facebook (https://www.facebook.com/burlingtoncoatfactory/) and twitter (https://twitter.com/burlington). any updates to the list of social media channels the company may use to communicate material information will be posted on the investor relations page of the company's website at www.burlingtoninvestors.com. about burlington stores, inc. the company, through its wholly-owned subsidiaries, operates a national chain of off-price retail stores offering ladies’, men’s and children’s apparel and accessories, home goods, baby products and coats, principally under the name burlington stores. for more information about burlington stores, inc., visit the company's website at www.burlingtonstores.com. safe harbor for forward-looking and cautionary statements this release contains forward-looking statements within the meaning of section 27a of the securities act of 1933, as amended, and section 21e of the securities exchange act of 1934, as amended (exchange act). all statements other than statements of historical fact included in this release are forward-looking statements. forward-looking statements discuss our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. you can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. we do not undertake to publicly update or revise our forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied in such statements will not be realized. if we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements. all forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those we expected, including competition in the retail industry, seasonality of our business, adverse weather conditions, changes in consumer preferences and consumer spending patterns, import risks, inflation, general economic conditions, our ability to implement our strategy, our substantial level of indebtedness and related debt-service obligations, restrictions imposed by covenants in our debt agreements, availability of adequate financing, our dependence on vendors for our merchandise, events affecting the delivery of merchandise to our stores, existence of adverse litigation and risks, availability of desirable locations on suitable terms and other factors that may be described from time to time in our filings with the securities and exchange commission (sec). for each of these factors, the company claims the protection of the safe harbor for forward-looking statements contained in the private securities litigation reform act of 1995, as amended. liabilities and stockholders' deficit preferred stock, $0.0001 par value: authorized: 50,000,000 shares; no shares issued and outstanding at october 31, 2015, january 31, 2015 and november 1, 2014 common stock, $0.0001 par value: authorized: 500,000,000 shares at october 31, 2015, january 31, 2015 and november 1, 2014; issued: 76,597,066 shares at october 31, 2015, 75,925,507 shares at january 31, 2015 and 75,241,724 shares at november 1, 2014 outstanding: 73,560,207 shares at october 31, 2015, 75,254,682 shares at january 31, 2015 and 74,590,114 shares at november 1, 2014 ) ) ) ) ) ) ) ) non-cash loss on extinguishment of debt—write-off of deferred financing costs and original issue discount reconciliation of non-gaap financial measures(unaudited)(amounts in thousands except per share data) adjusted net income, adjusted net income per share, adjusted ebitda and adjusted tax expense the following tables calculate the company’s adjusted net income, adjusted net income per share, adjusted ebitda (earnings before net interest expense and loss on extinguishment of debt, taxes, costs related to debt amendments, secondary offerings and other, depreciation, amortization and impairment, stock option modification expense, advisory fees and other unusual, non-recurring or extraordinary expenses, losses or charges) and adjusted tax expense (income tax expense (benefit) less the tax effect of the reconciling items to get to adjusted net income (footnote (g) in the table below)), all of which are considered non-gaap financial measures. generally, a non-gaap financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with gaap. adjusted net income is defined as net income (loss) for the period plus (i) net favorable lease amortization, (ii) costs related to debt amendments, secondary offerings and other, (iii) loss on the extinguishment of debt, (iv) impairment charges, (v) advisory fees, (vi) stock option modification expense and (vii) other unusual, non-recurring or extraordinary expenses, losses or charges, all of which are tax effected to arrive at adjusted net income. adjusted net income per share is defined as adjusted net income divided by the weighted average shares outstanding, as defined in the table below. the company presents adjusted net income, adjusted net income per share, adjusted ebitda and adjusted tax expense because it believes they are useful supplemental measures in evaluating the performance of the company’s business and provide greater transparency into the results of operations. in particular, the company believes that excluding certain items that may vary substantially in frequency and magnitude from operating income are useful supplemental measures that assist in evaluating the company’s ability to generate earnings and leverage sales, and to more readily compare these metrics between past and future periods. the company believes that adjusted net income, adjusted net income per share, adjusted ebitda and adjusted tax expense provide investors helpful information with respect to the company’s operations and financial condition. other companies in the retail industry may calculate these non-gaap measures differently such that the company’s calculation may not be directly comparable. the adjustments to these metrics are not in accordance with regulations adopted by the sec that apply to periodic reports presented under the exchange act. accordingly, adjusted net income, adjusted net income per share, adjusted ebitda and adjusted tax expense may be presented differently in filings made with the sec than as presented in this report or not presented at all. the following table shows the company’s reconciliation of net income (loss) to adjusted net income for the three and nine months ended october 31, 2015 compared with the three and nine months ended november 1, 2014: and other (b) the following table shows the company’s reconciliation of net income (loss) to adjusted ebitda for the three and nine months ended october 31, 2015 compared with the three and nine months ended november 1, 2014: the following table shows the company’s reconciliation of income tax expense (benefit) to adjusted tax expense for the three and nine months ended october 31, 2015 compared with the three and nine months ended november 1, 2014:
