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Summary of Significant Accounting Policies | 12 Months Ended
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Feb. 01, 2020
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | 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. 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 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. 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 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:
|  | (in thousands) |
|  | Fiscal Years Ended |
|  | February 1, 2020 |  |  | February 2, 2019 |
Short-term self-insurance reserve(a) |  | $ | 34,817 |  |  | $ | 29,918 |
Long-term self-insurance reserve(b) |  |  | 44,137 |  |  |  | 40,975 |
Total |  | $ | 78,954 |  |  | $ | 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. 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:
|  | (in thousands) |
|  | Fiscal Years Ended |
|  | February 1, 2020 |  |  | February 2, 2019 |  |  | February 3, 2018 |
|  |  |  |  |  |  |  |  |  | (53 Weeks) |
Service fees |  | $ | 16,051 |  |  | $ | 15,836 |  |  | $ | 16,207 |
Subleased rental income and other |  |  | 9,104 |  |  |  | 9,319 |  |  |  | 8,846 |
Rental income from leased departments |  |  | — |  |  |  | 273 |  |  |  | 224 |
Total |  | $ | 25,155 |  |  | $ | 25,428 |  |  | $ | 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. 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. 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) |
Women’s ready-to-wear apparel |  |  | 22 | % |  |  | 23 | % |  |  | 23 | %
Accessories and footwear |  |  | 22 | % |  |  | 22 | % |  |  | 22 | %
Menswear |  |  | 20 | % |  |  | 20 | % |  |  | 20 | %
Youth apparel/baby |  |  | 16 | % |  |  | 16 | % |  |  | 16 | %
Home |  |  | 15 | % |  |  | 15 | % |  |  | 14 | %
Coats |  |  | 5 | % |  |  | 5 | % |  |  | 5 | %
(a) | Percentages may not foot due to rounding.

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