Business Context and Reporting Period
This Form 8-K was filed by Burlington Stores, Inc. on April 13, 2020. The report addresses the material impact of the COVID-19 pandemic on the Company's operations, liquidity, and financial position. As of March 22, 2020, the Company temporarily closed all store locations, buying and corporate offices, and distribution centers (except for sporadic inventory processing) in response to government mandates and health guidelines.
Key Financial Metrics and Liquidity Actions
- Debt Financing: On March 17, 2020, the Company borrowed $400 million under its Asset-Based Lending (ABL) credit facility.
- Capital Markets Activity: On April 13, 2020, the Company commenced a private offering of $700 million in convertible senior notes due 2025, with an option for purchasers to buy an additional $105 million. Simultaneously, a subsidiary commenced a private offering of $300 million in senior secured notes due 2025.
- Liquidity Preservation: The Company has temporarily suspended its stock repurchase program.
- Cost Reductions: The CEO has agreed to forego salary, and other senior executives have reduced salaries by 50%. Most store and distribution center associates have been furloughed, though health benefits remain covered by the Company.
- Working Capital: The Company is delaying payables, cutting capital expenditures, and negotiating rent payment timing with landlords.
Material Changes and Operational Impact
The filing details a significant disruption to normal business operations. The Company expects a material adverse impact on its business, consolidated results of operations, financial position, and cash flows for Fiscal 2020. Specific changes include:
- Store Closures: All stores are closed with limited visibility on reopening dates; extended closures are anticipated.
- Compensation Delays: Finalization of Fiscal 2019 annual incentive bonuses and Fiscal 2020 merit pay increases have been delayed until there is greater clarity on the pandemic's impact.
- Expansion Halts: Planned new store openings may be delayed or cancelled entirely depending on the duration of the crisis.
Outlook, Risks, and Management Commentary
Management believes the Company currently has adequate liquidity to meet medium-term needs. Upon receiving proceeds from the new note offerings, management projects the Company could continue to operate without revenue beyond Fiscal 2020 if necessary. However, the Company explicitly states it cannot forecast the full impact of the pandemic due to unprecedented uncertainty regarding duration, severity, and consumer demand.
Key Risks Identified:
- Ability to reopen stores and attract customers post-closure.
- Supply chain disruptions, factory closures, and inventory write-downs.
- Difficulty accessing debt and equity capital on attractive terms.
- Heightened risk regarding the Company's high level of indebtedness and ability to service debt.
Investor Verification Checklist
- Verify the final closing status and terms of the $700 million Convertible Notes and $300 million Secured Notes offerings.
- Monitor the duration of store closures and the timeline for reopening as government restrictions evolve.
- Assess the Company's ability to negotiate rent deferrals with landlords and manage vendor payment delays.
- Review future filings for updates on inventory valuation and potential write-downs due to the inability to sell merchandise.
- Track the Company's cash burn rate and liquidity position as the pandemic extends beyond Fiscal 2020.