BURLINGTON STORES, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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 the Condensed Consolidated Financial
Statements and notes thereto included elsewhere in this report and the
Consolidated Financial Statements and notes thereto in our Annual Report on Form
10-K for the fiscal year ended January 30, 2021 (Fiscal 2020 10-K).

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. Our actual results or other events may differ materially from those
anticipated in these forward-looking statements due to various factors,
including those discussed under the section of this Item 2 entitled "Safe Harbor
Statement."

Executive Summary

Introduction

We are a nationally recognized off-price 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 832 stores as of October 30, 2021 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.

COVID-19

On March 11, 2020, the World Health Organization declared the novel coronavirus
(known as COVID-19) outbreak to be a global pandemic. As a result, we began the
temporary closing of some of our stores, and effective March 22, 2020, we made
the decision to temporarily close all of our stores, distribution centers (other
than processing of received inventory) and corporate offices to combat the rapid
spread of COVID-19. These developments caused significant disruptions to our
business and had a significant adverse impact on our financial condition,
results of operations and cash flows. We began re-opening stores on May 11,
2020, with substantially all stores re-opened by the end of the second quarter
of Fiscal 2020.

In response to the COVID-19 pandemic and the temporary closing of our stores, we
provided two weeks of financial support to associates impacted by these store
closures and by the shutdown of distribution centers. We temporarily furloughed
most store and distribution center associates, as well as some corporate
associates, but continued to provide benefits to furloughed associates in
accordance with our benefit plans. In addition, we paid 100% of their medical
benefit premiums during the period they were furloughed. During the second
quarter of Fiscal 2020, we recalled all furloughed associates at our re-opened
stores, as well as our corporate and distribution facilities.

In order to maintain maximum financial flexibility during the pandemic, we
completed several debt transactions in the first quarter of Fiscal 2020. Refer
to Note 4, “Long Term Debt,” for further discussion regarding these debt
transactions.

Additionally, we took the following steps to further enhance our financial
flexibility:

?
Carefully managed operating expenses, working capital and capital expenditures,
including ceasing substantially all buying activities while stores were closed.
We subsequently resumed our buying activities, while continuing our conservative
approach toward operating expenses and capital expenditures;
?
Negotiated rent deferral agreements with landlords;
?
Temporarily suspended our share repurchase program;



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?
Our CEO voluntarily agreed to not take a salary, our board of directors
voluntarily forfeited their cash compensation, our executive leadership team
voluntarily agreed to decrease their salary by 50% and smaller salary reductions
were temporarily put in place for all employees through a certain level. This
compensation was reinstated once substantially all of our stores re-opened; and
?
The annual incentive bonus payments related to Fiscal 2019 performance were
delayed to the second quarter of Fiscal 2020, and merit pay increases for Fiscal
2020 were delayed to the third quarter of Fiscal 2020.

Due to the aging of inventory related to the temporary store closures discussed
above, as well as the impact of seasonality on our merchandise, we recognized
inventory markdown reserves of $271.9 million during the three month period
ended May 2, 2020. These reserves covered markdowns taken during the second
quarter of Fiscal 2020. These charges were included in "Cost of sales" on our
Condensed Consolidated Statement of Income (Loss).



On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the
CARES Act) was signed into law, which provided emergency economic assistance for
American workers, families and businesses affected by the COVID-19 pandemic. For
the year ended January 30, 2021 we will obtain a one-time tax refund of $245.5
million from the carryback of federal net operating losses (NOLs), which is
included in the line item "Prepaid and other current assets" on our Condensed
Consolidated Balance Sheet.

Fiscal Year

Fiscal 2021 is defined as the 52-week year ending January 29, 2022. Fiscal 2020
is defined as the 52-week year ended January 30, 2021.

Store Openings, Closings, and Relocations

During the nine month period ended October 30, 2021, we opened 93 new stores,
inclusive of 17 relocations, and permanently closed five stores, exclusive of
the aforementioned relocations, bringing our store count as of October 30, 2021
to 832 stores.

Ongoing Initiatives for Fiscal 2021

Since the beginning of the COVID-19 pandemic, protecting the health and safety
of our customers, associates, and the communities that we serve has been our top
priority. Accordingly, we moved quickly to close our stores, distribution
centers, and corporate offices in March of Fiscal 2020. We continue to keep
health and safety as a top priority as we operate our stores and distribution
centers.

We continue to focus on a number of ongoing initiatives aimed at increasing our
overall profitability by improving our comparable store sales trends, increasing
total sales growth and reducing expenses. These initiatives include, but are not
limited to:

?

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 conservatively planning
comparable stores sales growth, holding and controlling liquidity and closely
analyzing the sales trend by business, 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 our growing and 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. We believe that this should drive
faster turns and lower markdowns, while simultaneously improving our customers'
shopping experience.



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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.
?
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 2,000 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. By focusing on opening
stores with attractive unit economics, 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, Downsizes and
Relocations. We continue to invest in store remodels and downsizes on a
store-by-store basis where appropriate, taking into consideration the age, size,
sales and profitability of a store, as well as the potential impact to the
customer shopping experience. In our remodeled stores, we have typically
incorporated new flooring, painting, lighting and graphics, relocated our
fitting rooms and rightsized our selling area to maximize productive selling
space, enhanced certain departments such as home and accessories and made
various other improvements as appropriate by location. We have also increased
our focus on relocations as leases expire to right size our buildings and
improve our competitive positioning.
?
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 to flex 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 and New York buying offices 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 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.



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COVID-19. The extent of the continuing impact of the COVID-19 pandemic on our
business will depend largely on future developments, including the production
and administration of effective medical treatments and vaccines, the timing and
extent of the recovery in traffic and consumer spending at our stores, supply
chain delays due to closed factories or distribution centers, reduced workforces
or labor shortages and scarcity of raw materials, and any future required store
closures because of COVID-19 resurgences. COVID-19 presents material uncertainty
and risk with respect to our business, financial performance and condition,
operating results, liquidity and cash flows.

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 broader, protracted slowdown in the U.S. economy, an extended period of high
unemployment rates, 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, but not limited to, taxes and healthcare.
Ongoing international trade and tariff negotiations could have a direct impact
on our income and an indirect impact on consumer prices. The outbreak or
escalation of war, or 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 continuing COVID-19 pandemic, could lead to a decrease in spending
by consumers. In addition, natural disasters, public health issues, industrial
accidents and acts of war in various parts of the world 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 for an extended period of
time, 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/or if 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.

Seasonality of Sales and Weather Conditions. Our sales, like most other
retailers, are 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.

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, internet 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 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.

Industry-wide supply chain issues have led to increased freight and labor costs
during Fiscal 2021 and may continue to add pressure on margins for the remainder
of the year and potentially into Fiscal 2022. Additionally, the higher our sales
volume is, and the more sales we chase above our initial plans, the more these
increased supply chain costs will impact our margins.



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Key Performance Measures

We consider numerous factors in assessing our performance. Key performance
measures used by management include net income (loss), Adjusted Net Income
(Loss), Adjusted EBITDA, Adjusted EBIT, comparable store sales, gross margin,
inventory, store payroll and liquidity .

Net income (loss). We earned net income of $13.6 million during the three month
period ended October 30, 2021 compared with net income of $8.0 million during
the three month period ended October 31, 2020. This increase was primarily
driven by our strong sales growth during the third quarter of Fiscal 2021,
predominantly offset by an $86.4 million debt extinguishment charge related to
the partial repurchase of our $805.0 million 2.25% Convertible Senior Notes due
2025 (Convertible Notes). We earned net income of $287.2 million during the nine
month period ended October 30, 2021 compared with a net loss of $372.5 million
during the nine month period ended October 31, 2020. This increase was primarily
driven by the temporary closure of all our stores during Fiscal 2020, caused by
the COVID-19 pandemic, as well as our sales growth during Fiscal 2021. Refer to
the section below entitled "Results of Operations" for further explanation.

Adjusted Net Income (Loss), Adjusted EBITDA and Adjusted EBIT: Adjusted Net
Income (Loss), Adjusted EBITDA and Adjusted EBIT are non-GAAP financial measures
of our performance.

We define Adjusted Net Income (Loss) as net income (loss), exclusive of the
following items, if applicable: (i) net favorable lease costs; (ii) costs
related to debt issuances and amendments; (iii) loss on extinguishment of debt;
(iv) impairment charges; (v) amounts related to certain litigation matters; (vi)
non-cash interest expense on the Convertible Notes; (vii) costs related to
closing the e-commerce store; 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 (Loss).

We define Adjusted EBITDA as net income (loss), exclusive of the following
items, if applicable: (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) costs related to debt issuances and
amendments; (viii) amounts related to certain litigation matters; (ix) costs
related to closing the e-commerce store; and (x) other unusual, non-recurring or
extraordinary expenses, losses, charges or gains.

We define Adjusted EBIT as net income (loss), exclusive of the following items,
if applicable: (i) interest expense; (ii) interest income; (iii) loss on
extinguishment of debt; (iv) income tax expense (benefit); (v) impairment
charges; (vi) net favorable lease costs; (vii) costs related to debt issuances
and amendments; (viii) amounts related to certain litigation matters; (ix) costs
related to closing the e-commerce store; and (x) other unusual, non-recurring or
extraordinary expenses, losses, charges or gains.

We present Adjusted Net Income (Loss), 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 what we consider to be our core
operating results are useful supplemental measures that assist in evaluating our
ability to generate earnings and leverage sales, and to more readily compare
core operating results between past and future periods.

We believe that these non-GAAP measures provide investors helpful information
with respect to our operations and financial condition. Other companies in the
retail industry may calculate these non-GAAP measures differently such that our
calculation may not be directly comparable.

Adjusted Net Income (Loss) has limitations as an analytical tool, and should not
be considered either in isolation or as a substitute for net income (loss) or
other data prepared in accordance with GAAP. Among other limitations, Adjusted
Net Income (Loss) does not reflect the following items, net of their tax effect:

•
favorable lease costs;
•
costs related to debt issuances and amendments;
•
losses on extinguishment of debt;
•
amounts charged for certain litigation matters;
•
non-cash interest expense related to original issue discount on the Convertible
Notes;
•
impairment charges on long-lived assets;
•
costs related to closing the e-commerce store; and
•
other unusual, non-recurring or extraordinary expenses, losses, charges or
gains.



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During the three month period ended October 30, 2021, Adjusted Net Income (Loss)
increased $73.4 million to $92.9 million compared to the same period in the
prior year. This increase was primarily driven by sales growth during the third
quarter of Fiscal 2021, as well as weak sales during the third quarter of Fiscal
2020 due to COVID-19 related business disruptions. During the nine months ended
October 30, 2021, Adjusted Net Income (Loss) increased $734.7 million to $402.0
million compared to the same period in the prior year. This increase was
primarily driven by the temporary closure of all our stores during Fiscal 2020,
caused by the COVID-19 pandemic, as well as our sales growth during Fiscal 2021.
Refer to the section below entitled "Results of Operations" for further
explanation.

The following table shows our reconciliation of net income (loss) to Adjusted
Net Income (Loss) for the three and nine months ended October 30, 2021 compared
with the three and nine months ended October 31, 2020:

                                                                          (unaudited)
                                                                         (in thousands)
                                                    Three Months Ended                   Nine Months Ended
                                               October 30,       October 31,       October 30,       October 31,
                                                  2021              2020              2021              2020
Reconciliation of net income (loss) to
Adjusted Net Income (Loss):
Net income (loss)                             $      13,619     $       8,016     $     287,203     $    (372,493 )
Net favorable lease costs (a)                         5,275             5,776            17,188            18,402
Non-cash interest expense on convertible
notes (b)                                                 -             7,542                 -            16,295
Costs related to debt issuances and
amendments (c)                                           89              (719 )           3,419             3,633
Loss on extinguishment of debt (d)                   86,362                 -           117,756               202
Impairment charges                                    1,488             2,575             3,235             5,575
Litigation matters (e)                                    -                 -                 -            20,788
E-commerce closure (f)                                    -               556                 -             1,526
Tax effect (g)                                      (13,891 )          (4,209 )         (26,835 )         (26,634 )
Adjusted Net Income (Loss)                    $      92,942     $      19,537     $     401,966     $    (332,706 )




(a)
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 April 13, 2006 Bain Capital acquisition of Burlington
Coat Factory Warehouse Corporation (the Merger Transaction). These expenses are
recorded in the line item "Selling, general and administrative expenses" in our
Condensed Consolidated Statements of Income (Loss).
(b)
Represents non-cash accretion of original issue discount on the Convertible
Notes. The original issue discount was eliminated as of the beginning of Fiscal
2021, as a result of adopting Accounting Standards Update (ASU) 2020-06,
"Accounting for Convertible Instruments and Contracts in an Entity's Own Equity"
(ASU 2020-06).
(c)
Represents costs incurred in connection with the review and execution of
refinancing opportunities, as well as the issuance of the $300.0 million 6.25%
Senior Secured Notes due 2025 (Secured Notes) and the Convertible Notes.
(d)
Amounts relate to the partial repurchase of the Convertible Notes, the full
redemption of the Secured Notes, as well as the refinancing of the Term Loan
Credit Agreement governing our senior secured credit term loan facility (Term
Loan Facility).
(e)
Represents amounts charged for certain litigation matters.
(f)
Represents costs related to the closure of our e-commerce store.
(g)
Tax effect is calculated based on the effective tax rates (before discrete
items) for the respective periods, adjusted for the tax effect for the impact of
items (a) through (f). The effective tax rate during Fiscal 2020 includes the
benefit of loss carrybacks to prior years with higher statutory tax rates.

Adjusted EBITDA has limitations as an analytical tool, and should not be
considered either in isolation or as a substitute for net income (loss) 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 issuances and amendments;
•
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;
•
amounts charged for certain litigation matters;



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impairment charges on long-lived assets;
•
costs related to closing the e-commerce store;
•
income tax expense; and
•
other unusual, non-recurring or extraordinary expenses, losses, charges or
gains.

During the three month period ended October 30, 2021, Adjusted EBITDA increased
$91.5 million to $205.0 million compared to the same period in the prior year.
This increase was primarily driven by sales growth during the third quarter of
Fiscal 2021, as well as weak sales during the third quarter of Fiscal 2020 due
to COVID-19 related business disruptions. During the nine months ended October
30, 2021, Adjusted EBITDA increased $1,087.0 million to $744.2 million compared
to the same period in the prior year. This increase was primarily driven by the
temporary closure of all our stores during Fiscal 2020, caused by the COVID-19
pandemic, as well as our sales growth during Fiscal 2021. Refer to the section
below entitled "Results of Operations" for further explanation.

The following table shows our reconciliation of net income (loss) to Adjusted
EBITDA for the three and nine months ended October 30, 2021 compared with the
three and nine months ended October 31, 2020:

                                                                           (unaudited)
                                                                          (in thousands)
                                                     Three Months Ended                   Nine Months Ended
                                                October 30,       October 31,       October 30,       October 31,
                                                   2021              2020              2021              2020
Reconciliation of net income (loss) to
Adjusted EBITDA:
Net income (loss)                              $      13,619     $       8,016     $     287,203     $    (372,493 )
Interest expense                                      15,609            27,456            52,710            70,508
Interest income                                          (38 )            (163 )            (156 )          (1,178 )
Loss on extinguishment of debt (a)                    86,362                 -           117,756               202
Costs related to debt issuances and
amendments (b)                                            89              (719 )           3,419             3,633
Litigation matters (c)                                     -                 -                 -            20,788
E-commerce closure (d)                                     -               556                 -             1,526
Depreciation and amortization (e)                     69,938            60,712           200,275           181,934
Impairment charges                                     1,488             2,575             3,235             5,575
Income tax expense (benefit)                          17,922            15,088            79,769          (253,327 )
Adjusted EBITDA                                $     204,989     $     113,521     $     744,211     $    (342,832 )




(a)
Amounts relate to the partial repurchase of the Convertible Notes, the full
redemption of the Secured Notes, as well as the refinancing of the Term Loan
Facility.
(b)
Represents costs incurred in connection with the review and execution of
refinancing opportunities, as well as the issuance of the Secured Notes and the
Convertible Notes.
(c)
Represents amounts charged for certain litigation matters.
(d)
Represents costs related to the closure of our e-commerce store.
(e)
Includes $5.3 million and $17.2 million of favorable lease cost included in the
line item "Selling, general and administrative expenses" in our Condensed
Consolidated Statements of Income (Loss) for the three and nine months ended
October 30, 2021, and $5.7 million and $18.3 million for the three and nine
months ended October 31, 2020, respectively. 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.

Adjusted EBIT has limitations as an analytical tool, and should not be
considered either in isolation or as a substitute for net income (loss) 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 issuances and amendments;
•
favorable lease cost;
•
amounts charged for certain litigation matters;
•
impairment charges on long-lived assets;



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costs related to closing the e-commerce store;
•
income tax expense; and
•
other unusual, non-recurring or extraordinary expenses, losses, charges or
gains.

During the three month period ended October 30, 2021, Adjusted EBIT increased
$81.7 million to $140.3 million compared to the same period in the prior year.
This increase was primarily driven by sales growth during the third quarter of
Fiscal 2021, as well as weak sales during the third quarter of Fiscal 2020 due
to COVID-19 related business disruptions. During the nine months ended October
30, 2021, Adjusted EBIT increased $1,067.5 million to $561.1 million compared to
the same period in the prior year. This increase was primarily driven by the
temporary closure of all our stores during Fiscal 2020, caused by the COVID-19
pandemic, as well as our sales growth during Fiscal 2021. Refer to the section
below entitled "Results of Operations" for further explanation.

The following table shows our reconciliation of net income (loss) to Adjusted
EBIT for the three and nine months ended October 30, 2021 compared with the
three and nine months ended October 31, 2020:

                                                                           (unaudited)
                                                                          (in thousands)
                                                     Three Months Ended                   Nine Months Ended
                                                October 30,       October 31,       October 30,       October 31,
                                                   2021              2020              2021              2020
Reconciliation of net income (loss) to
Adjusted EBIT:
Net income (loss)                              $      13,619     $       8,016     $     287,203     $    (372,493 )
Interest expense                                      15,609            27,456            52,710            70,508
Interest income                                          (38 )            (163 )            (156 )          (1,178 )
Loss on extinguishment of debt (a)                    86,362                 -           117,756               202
Costs related to debt issuances and
amendments (b)                                            89              (719 )           3,419             3,633
Net favorable lease costs (c)                          5,275             5,776            17,188            18,402
Impairment charges                                     1,488             2,575             3,235             5,575
Litigation matters (d)                                     -                 -                 -            20,788
E-commerce closure (e)                                     -               556                 -             1,526
Income tax expense (benefit)                          17,922            15,088            79,769          (253,327 )
Adjusted EBIT                                  $     140,326     $      58,585     $     561,124     $    (506,364 )




(a)
Amounts relate to the partial repurchase of the Convertible Notes, the full
redemption of the Secured Notes, as well as the refinancing of the Term Loan
Facility.
(b)
Represents costs incurred in connection with the review and execution of
refinancing opportunities, as well as the issuance of the Secured Notes and the
Convertible Notes.
(c)
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. These expenses are recorded in the line item "Selling, general and
administrative expenses" in our Condensed Consolidated Statements of Income
(Loss).
(d)
Represents amounts charged for certain litigation matters.
(e)
Represents costs related to the closure of our e-commerce store.

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 a prior year. Due to the impact of the COVID-19
pandemic, including the temporary closing of all stores during Fiscal 2020, we
are using Fiscal 2019 as the comparable previous year period when calculating
comparable store sales for Fiscal 2021. 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.

For Fiscal 2021, we define comparable store sales as merchandise sales of those
stores, commencing on the first day of the fiscal month two years 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 month(s) of their grand
re-opening activities. Comparable store sales increased 16% for the three month
period ended October 30, 2021, compared to the three month period ended November
2, 2019, and 18% for the nine month period ended October 30, 2021 compared to
the nine month period ended November 2, 2019.



                                       30

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Various factors affect comparable store sales, including, but not limited to,
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 may include all of the costs related to
their buying and distribution functions, certain store-related costs 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 Condensed Consolidated Statements of Income (Loss). 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 decreased to 41.4% during the three
month period ended October 30, 2021, compared with 45.0% during the three month
period ended October 31, 2020. Industry-wide supply chain issues have led to
increased freight and labor costs during Fiscal 2021, which we expect to
continue for the remainder of the year and potentially into Fiscal 2022. Product
sourcing costs, which are included in selling, general and administrative
expenses, were $173.5 million during the three month period ended October 30,
2021, compared with $143.5 million during the three month period ended October
31, 2020, driven by an increase in sales and increased processing costs.

Gross margin as a percentage of net sales increased to 42.3% during the nine
month period ended October 30, 2021, compared with 35.3% during the nine month
period ended October 31, 2020, driven primarily by a $271.9 million charge
against aged inventory during the first quarter of Fiscal 2020 due to the
extended store closures. This improvement is partially offset by industry-wide
supply chain issues that have led to increased freight and labor costs during
Fiscal 2021, which we expect to continue for the remainder of the year and
potentially into Fiscal 2022. Product sourcing costs were $459.9 million during
the nine month period ended October 30, 2021, compared with $290.3 million
during the nine month period ended October 31, 2020, driven by an increase in
sales and increased processing costs.

Inventory. Inventory at October 30, 2021 increased to $1,059.7 million compared
with $867.0 million at October 31, 2020. The increase was attributable primarily
to 63 net new stores opened since the end of the third quarter of Fiscal 2020.

Comparable store inventory at October 30, 2021 decreased 24% compared to
November 2, 2019, driven by our strategy of operating with leaner in-store
inventory. Reserve inventory was 30% of total inventory as of October 30, 2021,
compared with 21% as of November 2, 2019. Reserve inventory includes all
inventory that is being stored for release either later in the season, or in a
subsequent season. We intend to continue to build up our reserve merchandise in
order to more effectively chase sales trends. Inventory at January 30, 2021 was
$740.8 million.

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.

Store Payroll. The method of calculating store payroll varies across the retail
industry. As a result, our store payroll 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.

As a result of the COVID-19 outbreak, we temporarily furloughed most store
associates in March 2020, while providing two weeks of financial support to
impacted associates. We also continued to provide benefits to furloughed
associates, including paying 100% of their current medical benefit premiums. As
a result of the furloughs in Fiscal 2020, as well as our new stores opened since
the end of the third quarter of Fiscal 2020, store payroll costs increased to
$192.8 million and $543.7 million during the three and nine month periods ended
October 30, 2021, respectively, compared with $163.0 million and $378.6 million
during the three and nine month periods ended October 31, 2020.

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, decreased $194.9 million during
the nine months ended October 30, 2021, compared with an increase of $945.6
million during the nine months ended October 31, 2020. Refer to the section
below entitled "Liquidity and Capital Resources" for further explanation.

During Fiscal 2020, we took several steps to effectively manage our liquidity
during the COVID-19 pandemic, including careful management of operating
expenses, working capital and capital expenditures, as well as temporarily
suspending our share repurchase program. Additionally, we borrowed $400.0
million
on our existing $600.0 million senior secured asset-based revolving
credit facility



                                       31

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(ABL Line of Credit), issued $805.0 million of our Convertible Notes, and
through BCFWC, issued $300.0 million of our Secured Notes. We repaid $150.0
million on the ABL Line of Credit during the second quarter of Fiscal 2020, and
the remaining $250.0 million during the fourth quarter of Fiscal 2020. On June
11, 2021, BCFWC redeemed the full $300.0 million aggregate principal amount of
the Secured Notes. During Fiscal 2021, we redeemed $160.4 million related to the
partial repurchase of the Convertible Notes. At October 30, 2021, we had $541.0
million available under the ABL Line of Credit.

Results of Operations

The following table sets forth certain items in the Condensed Consolidated
Statements of Income (Loss) as a percentage of net sales for the three and nine
months ended October 30, 2021 and the three and nine months ended October 31,
2020.



                                                                 Percentage of Net Sales
                                                  Three Months Ended                   Nine Months Ended
                                            October 30,        October 31,       October 30,       October 31,
                                               2021               2020              2021              2020
Net sales                                          100.0 %            100.0 %           100.0 %           100.0 %
Other revenue                                        0.2                0.2               0.2               0.2
Total revenue                                      100.2              100.2             100.2             100.2
Cost of sales                                       58.6               55.0              57.7              64.7
Selling, general and administrative
expenses                                            33.0               38.8              31.7              46.7
Costs related to debt issuances and
amendments                                           0.0               (0.0 )             0.1               0.1
Depreciation and amortization                        2.8                3.3               2.7               4.7
Impairment charges - long-lived assets               0.1                0.2               0.0               0.2
Other income - net                                  (0.1 )             (0.1 )            (0.2 )            (0.1 )
Loss on extinguishment of debt                       3.8                  -               1.8               0.0
Interest expense                                     0.7                1.6               0.8               2.0
Total costs and expenses                            98.9               98.8              94.6             118.3
Income (loss) before income tax expense
(benefit)                                            1.3                1.4               5.6             (18.1 )
Income tax expense (benefit)                         0.8                0.9               1.2              (7.3 )
Net income (loss)                                    0.5 %              0.5 %             4.4 %           (10.8 )%

Three Month Period Ended October 30, 2021 Compared With the Three Month Period
Ended October 31, 2020

Net sales

Net sales improved approximately $634.9 million, or 38.1%, to $2,299.6 million
during the third quarter of Fiscal 2021, primarily driven by strong sales growth
in our existing stores compared with weak sales during the third quarter of
Fiscal 2020 due to COVID-19 related business disruptions, as well as our 63 net
new stores opened since the end of the third quarter of Fiscal 2020.

Cost of sales

Cost of sales as a percentage of net sales increased to 58.6% during the third
quarter of Fiscal 2021, compared to 55.0% during the third quarter of Fiscal
2020. This increase is related to industry-wide supply chain issues that have
led to increased freight and labor costs during Fiscal 2021, which we expect to
continue for the remainder of the year and potentially into Fiscal 2022. On a
dollar basis, cost of sales increased $431.7 million, or 47.1%, primarily driven
by our overall increase in sales as well as the industry-wide supply chain
issues. Product sourcing costs, which are included in selling, general and
administrative expenses, were $173.5 million during the third quarter of Fiscal
2021, compared with $143.5 million during the third quarter of Fiscal 2020.



                                       32

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Selling, general and administrative expenses

The following table details selling, general and administrative expenses for the
three month period ended October 30, 2021 compared with the three month period
ended October 31, 2020.

                                                                        (in millions)

                                                                     Three Months Ended
                                                 Percentage                        Percentage
                                October 30,          of           October 31,          of
                                   2021           Net Sales          2020           Net Sales       $ Variance       % Change
Store related costs            $       453.5            19.7 %   $       398.7            23.9 %   $       54.8           13.8 %
Product sourcing costs                 173.5             7.5             143.5             8.6             30.0           20.9
Corporate costs                         85.7             3.7              62.0             3.7             23.7           38.2
Marketing and strategy costs            17.9             0.8              17.7             1.1              0.2            1.1
Other selling, general and
administrative expenses                 29.2             1.3              23.4             1.5              5.8           24.7
Selling, general and
administrative expenses        $       759.8            33.0 %   $       645.3            38.8 %   $      114.5           17.7 %




The decrease in selling, general and administrative expenses as a percentage of
net sales was primarily driven by the overall increase in sales. On a dollar
basis, the increase in selling, general and administrative expenses was
primarily due to our higher product sourcing costs. Additionally, store payroll
costs, occupancy, and incentive compensation drove higher expense during Fiscal
2021.

Depreciation and amortization

Depreciation and amortization expense amounted to $64.7 million during the third
quarter of Fiscal 2021 compared with $55.0 million during the third quarter of
Fiscal 2020. The increase in depreciation and amortization expense was primarily
driven by capital expenditures related to our new and non-comparable stores.

Impairment charges – long-lived assets

Impairment charges on long-lived assets were $1.5 million during the third
quarter of Fiscal 2021, related to store-level assets at four stores. Impairment
charges on long-lived assets were $2.6 million during the third quarter of
Fiscal 2020, related to store-level assets at 10 stores.

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. Refer to Note 6, "Fair Value
Measurements," for further discussion regarding impairment charges.

Loss on Extinguishment of Debt

During the third quarter of Fiscal 2021, we entered into separate, privately
negotiated exchange agreements (Exchange Agreements) with certain holders of the
Convertible Notes. Under the terms of the Exchange Agreements, the holders
exchanged $160.4 million in aggregate principal amount of Convertible Notes held
by them for a combination of an aggregate of $90.8 million in cash and 513,991
shares of our common stock. This exchange resulted in a pre-tax debt
extinguishment charge of $86.4 million in the three month period ended October
30, 2021.

Interest expense

Interest expense improved $11.8 million during the third quarter of Fiscal 2021
to $15.6 million, compared to the same period in the prior year. The decrease
was primarily driven by the adoption of Accounting Standards Update 2020-06,
"Accounting for Convertible Instruments and Contracts in an Entity's Own Equity"
(ASU 2020-06), which eliminated the amortization of debt discount previously
associated with the Convertible Notes. The decrease was also driven by the
redemption in full of the $300.0 million Secured Notes, repurchase of $160.4
million of Convertible Notes, as well as paydown of our ABL Line of Credit
during Fiscal 2020.



                                       33
--------------------------------------------------------------------------------


The average interest rates and average balances related to our variable rate
debt for the third quarter of Fiscal 2021 compared with the third quarter of
Fiscal 2020, are summarized in the table below:

                                                        Three Months Ended
                                                  October 30,        October 31,
                                                      2021               2020
Average balance - ABL Line of Credit (in
millions)                                      $       ??         $     

250.0

Average interest rate - ABL Line of Credit             ??                

1.6%

Average balance - Term Loan Facility (in
millions) (a)                                  $     960.6        $     

961.4

Average interest rate - Term Loan Facility            2.1%               1.9%



(a) Excludes original issue discount.

Income tax expense

Income tax expense was $17.9 million during the third quarter of Fiscal 2021
compared with income tax benefit of $15.1 million during the third quarter of
Fiscal 2020. The effective tax rate for the third quarter of Fiscal 2021 was
56.8% compared with 65.3% during the third quarter of Fiscal 2020. The increase
in income tax expense in the current year was a result of higher pre-tax income,
partially offset by a decreased tax rate. The higher income tax rate in the
prior year is primarily due to the reversal of income tax benefit recorded in
the first two quarters of Fiscal 2020 related to the net operating loss
carry-back as permitted under the CARES Act. The decrease in income tax rate
this year was partially offset by the disallowance of certain debt
extinguishment costs related to partial settlement of the Convertible Notes
during the third quarter of Fiscal 2021.

At the end of each interim period we are required to determine the best estimate
of our annual effective tax rate and then apply that rate in providing for
income taxes on a current year-to-date (interim period) basis. Use of this
methodology during the third quarter of Fiscal 2021 resulted in an annual
effective income tax rate of approximately 30% (before discrete items) as our
best estimate. This is a decrease compared to the annual effective tax rate for
the third quarter of Fiscal 2020 of approximately 35% (before discrete items),
due to prior year losses facilitating a refund receivable upon amending
previously filed returns at a 35% tax rate.

Net income

We earned net income of $13.6 million for the third quarter of Fiscal 2021
compared with $8.0 million for the third quarter of Fiscal 2020. This
improvement was primarily driven by our strong sales growth during the third
quarter of Fiscal 2021, predominately offset by an $86.4 million debt
extinguishment charge related to the partial repurchase of our Convertible
Notes.

Nine Month Period Ended October 30, 2021 Compared With the Nine Month Period
Ended October 31, 2020

Net sales

Net sales improved $3,230.5 million, or 93.0%, to $6,703.1 million during the
nine month period ended October 30, 2021, primarily due to the temporary closure
of all our stores during Fiscal 2020. This improvement was also driven by net
sales from our 63 net new stores opened since the end of the third quarter of
Fiscal 2020.

Cost of sales

Cost of sales as a percentage of net sales decreased to 57.7% during the nine
month period ended October 30, 2021, compared to 64.7% during the nine month
period ended October 31, 2020, driven primarily by a $271.9 million charge
against aged inventory in the first quarter of Fiscal 2020 due to the extended
store closures, partially offset by increased industry-wide supply chain costs.
On a dollar basis, cost of sales increased $1,623.9 million, or 72.3%, primarily
driven by our overall increase in sales as well as increased industry-wide
supply chain costs. Product sourcing costs, which are included in selling,
general and administrative expenses, were $459.9 million during the nine month
period ended October 30, 2021, compared with $290.3 million during the nine
month period ended October 31, 2020, primarily driven by the impact of COVID-19
on our warehouse operations.



                                       34
--------------------------------------------------------------------------------

Selling, general and administrative expenses

The following table details selling, general and administrative expenses for the
nine month period ended October 30, 2021 compared with the nine month period
ended October 31, 2020.

                                                                  (in millions)

                                                                Nine Months Ended
                                           Percentage                     Percentage
                             October           of           October           of
                             30, 2021       Net Sales       31, 2020       Net Sales       $ Variance       % Change
Store related costs         $  1,297.9            19.4 %   $  1,053.2            30.3 %   $      244.7           23.2 %
Product sourcing costs           459.9             6.9          290.3             8.4            169.6           58.4
Corporate costs                  246.4             3.7          198.3             5.7             48.1           24.3
Marketing and strategy
costs                             42.9             0.6           28.7             0.8             14.2           49.5
Other selling, general
and administrative
expenses                          79.8             1.1           51.5             1.5             28.3           55.0
Selling, general and
administrative expenses     $  2,126.9            31.7 %   $  1,622.0            46.7 %   $      504.9           31.1 %




The decrease in selling, general and administrative expenses as a percentage of
net sales was primarily driven by the overall increase in sales. On a dollar
basis, the increase in selling, general and administrative expenses was
primarily due to our higher product sourcing costs, as well as the significant
steps taken to reduce selling, general and administrative expenses during the
period stores were closed during Fiscal 2020. Additionally, store payroll costs,
occupancy, and incentive compensation drove higher expense during Fiscal 2021.

Costs related to debt issuances and amendments

During Fiscal 2021, we incurred $3.3 million of legal and placement fees related
to the refinancing of our Term Loan Facility. During the Fiscal 2020, we
incurred legal fees related to the issuance of our Secured Notes of $2.5
million
, as well as legal and placement fees of $1.1 million related to the
refinancing our Term Loan Facility. Refer to Note 4, “Long Term Debt,” for
further discussion regarding our debt transactions.

Depreciation and amortization

Depreciation and amortization expense amounted to $183.1 million during the nine
month period ended October 30, 2021 compared with $163.7 million during the nine
month period ended October 31, 2020. The increase in depreciation and
amortization expense was primarily driven by capital expenditures related to our
new and non-comparable stores.

Impairment charges – long-lived assets

Impairment charges on long-lived assets were $3.2 million during the nine month
period ended October 30, 2021, related to the impairment of one store down to
its expected sale price, as well as declines in revenues and operating results
for five stores. Impairment charges on long-lived assets were $5.6 million
during the nine month period ended October 31, 2020, related to store-level
assets at 14 stores.

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. Refer to Note 6, "Fair Value
Measurements," for further discussion regarding impairment charges.

Other income – net

Other income improved $6.0 million to $10.3 million during the nine months ended
October 30, 2021, primarily driven by the sale of state tax credits during
Fiscal 2021.



                                       35

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Loss on Extinguishment of Debt

During Fiscal 2021, we incurred a debt extinguishment charge of $86.4 million
related to the partial repurchase of the Convertible Notes, $30.2 million
related to the premium paid on redemption of the Secured Notes, as well as $1.2
million related to the refinancing of our Term Loan Facility. Refer to Note 4,
"Long Term Debt," for further discussion regarding our debt transactions.

Interest expense

Interest expense improved $17.8 million during the nine month period ended
October 30, 2021 to $52.7 million, compared to the same period in the prior
year. The decrease was primarily driven by the adoption of ASU 2020-06, which
eliminated the amortization of debt discount previously associated with the
Convertible Notes. The decrease was also driven by the partial repurchase of
$160.4 million of Convertible Notes, redemption in full of the $300.0 million
Secured Notes, as well as paydown of our ABL Line of Credit during Fiscal 2020.

The average interest rates and average balances related to our variable rate
debt for the nine month period ended October 30, 2021 compared with the prior
year, are summarized in the table below:



                                                         Nine Months Ended
                                                  October 30,        October 31,
                                                      2021               2020
Average balance - ABL Line of Credit (in
millions)                                      $       ??         $     

276.2

Average interest rate - ABL Line of Credit             ??                

2.0%

Average balance - Term Loan Facility (in
millions) (a)                                  $     961.2        $     

961.4

Average interest rate - Term Loan Facility            2.0%               2.3%




(a)

Excludes original issue discount.

Income tax expense (benefit)

Income tax expense was $79.8 million during the nine month period ended October
30, 2021 compared with income tax benefit of $253.3 million during the nine
month period ended October 31, 2020. The effective tax rate for the nine month
period ended October 30, 2021 was 21.7% compared with 40.5% during the nine
month period ended October 31, 2020. The income tax benefit in the prior year
was a result of the pre-tax loss and the carry-back of net operating losses
arising in 2020 to the five prior tax years, as permitted under the CARES Act.
The higher income tax rate in the prior year is a function of prior year losses
facilitating a refund receivable upon amending previously filed returns at a 35%
tax rate.

Net income (loss)

We earned net income of $287.2 million during the nine month period ended
October 30, 2021 compared with a net loss of $372.5 million for the nine month
period ended October 31, 2020. This improvement was primarily driven by the
temporary closure of all our stores during Fiscal 2020, caused by the COVID-19
pandemic, as well as our sales growth during Fiscal 2021.

Liquidity and Capital Resources

Our ability to satisfy interest payment and future principal 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 and future principal 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.

As a result of the uncertainty regarding the COVID-19 pandemic, the Company took
a number of measures to manage its cash flow. These measures included carefully
managing operating expenses, working capital and capital expenditures, as well
as temporarily suspending the Company's share repurchase program. We resumed the
share repurchase program during the third quarter of Fiscal 2021.

We completed several debt transactions in order to facilitate increased
financial flexibility in response to the COVID-19 pandemic. During March 2020,
we borrowed $400.0 million on our existing ABL Line of Credit. We repaid $150.0
million on the ABL Line of Credit during the second quarter of Fiscal 2020, and
the remaining $250.0 million during the fourth quarter of Fiscal 2020. On April
16, 2020, we issued $805.0 million of our Convertible Notes, and through BCFWC,
issued $300.0 million of Secured



                                       36

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Notes. The proceeds of the Convertible Notes are being used for general
corporate purposes. On June 11, 2021, BCFWC redeemed the full $300.0 million
aggregate principal amount of the Secured Notes. The redemption price of the
Secured Notes was $323.7 million, plus accrued and unpaid interest to, but not
including, the date of redemption. Additionally, during the third quarter of
Fiscal 2021, we repurchased $160.4 million of principal on the Convertible
Notes.

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.

As market conditions warrant, we may, from time to time, repurchase our
outstanding debt securities in the open market, in privately negotiated
transactions, by tender offer, by exchange transaction or otherwise. Such
repurchases, if any, will depend on prevailing market conditions, our liquidity
and other factors and may be commenced or suspended at any time. The amounts
involved and total consideration paid may be material.

Cash Flow for the Nine Month Period Ended October 30, 2021 Compared With the
Nine Month Period Ended October 31, 2020

We used $194.9 million of cash during the nine month period ended October 30,
2021 compared with a generation of $945.6 million during the nine month period
ended October 31, 2020.

Net cash provided by operating activities amounted to $608.4 million during the
nine month period ended October 30, 2021, compared with a use of $116.9 million
during the nine month period ended October 31, 2020. The increase in our
operating cash flows was primarily driven by the temporary closure of all our
stores during Fiscal 2020, caused by the COVID-19 pandemic, as well as our
strong sales performance during Fiscal 2021.

Net cash used in investing activities was $233.3 million during the nine month
period ended October 30, 2021 compared with $215.3 million during the nine month
period ended October 31, 2020. This change was primarily the result of an
increase in capital expenditures related to our stores (new stores, remodels and
other store expenditures).

Net cash used in financing activities was $570.0 million during the nine month
period ended October 30, 2021 compared with net cash provided of $1,277.9
million during the nine month period ended October 31, 2020. This change was
primarily driven by our cash flow management efforts during Fiscal 2020 in
response to the COVID-19 pandemic, which included drawing $400.0 million on our
ABL Line of Credit, issuing $805.0 million of our Convertible Notes, and through
BCFWC, issuing $300.0 million of Secured Notes, and temporarily suspending our
share repurchase program. We repaid $150.0 million on the ABL Line of Credit
during the second quarter of Fiscal 2020. On June 11, 2021, BCFWC redeemed the
full $300.0 million aggregate principal amount of the Secured Notes. The
redemption price of the Secured Notes was $323.7 million, plus accrued and
unpaid interest to, but not including, the date of redemption. During the third
quarter of Fiscal 2021, we repurchased $160.4 million of the Convertible Notes
for a combination of $92.3 million in cash, inclusive of third party fees, and
513,991 shares of common stock. Additionally, during the third quarter of Fiscal
2021, we repurchased shares of common stock for $150.0 million under our share
repurchase program.

Changes in working capital also impact our cash flows. Working capital equals
current assets (exclusive of restricted cash) minus current liabilities. We had
working capital at October 30, 2021 of $686.0 million compared with $887.6
million at October 31, 2020. The decrease in working capital was primarily due
to an increase in accounts payable and a decrease in cash and cash equivalents,
partially offset by an increase in merchandise inventories. We had working
capital at January 30, 2021 of $820.0 million.

Capital Expenditures

For the nine month period ended October 30, 2021, cash spend for capital
expenditures, net of $24.6 million of landlord allowances, amounted to $213.9
million. We estimate that we will spend approximately $425 million, net of
approximately $30 million of landlord allowances, in capital expenditures during
Fiscal 2021, 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 $120 million to support our supply chain initiatives, with the
remaining capital used to support our information technology and other business
initiatives.



                                       37
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Share Repurchase Programs

On August 14, 2019, our Board of Directors authorized the repurchase of up to
$400.0 million of common stock, which expired in August 2021. On August 18,
2021, our board of directors authorized the repurchase of up to $400.0 million
of common stock, which is authorized to be executed through August 2023. This
repurchase program is funded using our available cash and borrowings under the
ABL Line of Credit.

During Fiscal 2021, we repurchased 512,363 shares of common stock for $150.0
million under this repurchase program. As of October 30, 2021, we had $250.0
million remaining under our share repurchase authorization.

We are authorized to repurchase, from time to time, shares of our outstanding
common stock on the open market or in privately negotiated transactions under
our repurchase program. 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 program.

Dividends

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. Therefore, at this time, we do not anticipate paying cash dividends
in the near term. Our ability to pay dividends on our common stock will be
limited by restrictions on the ability of our subsidiaries to pay dividends or
make distributions under the terms of current and any future agreements
governing our indebtedness. Any future determination to pay dividends will be at
the discretion of our Board of Directors, subject to compliance with covenants
in our current and future agreements governing our indebtedness, and will depend
upon our results of operations, financial condition, capital requirements and
other factors that our Board of Directors deems relevant.

In addition, since we are a holding company, substantially all of the assets
shown on our Condensed 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.

Operational Growth

During the nine month period ended October 30, 2021, we opened 93 new stores,
inclusive of 17 relocations, and closed five stores, exclusive of the
aforementioned relocations, bringing our store count as of October 30, 2021 to
832 stores. During Fiscal 2021, we plan to open 77 net new stores, which
includes approximately 101 gross new stores, along with approximately 24 store
relocations and closings.

We have identified numerous market opportunities that we believe will allow us
to operate 2,000 stores over the long-term. 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, but not limited to, the availability of desirable locations
with suitable structures and the negotiation of acceptable lease terms. There
can be no assurance, however, that we will be able to find suitable locations
for new stores or that we will be able to open the number of new stores
presently planned, even if such locations are found and acceptable lease terms
are obtained. Assuming that appropriate locations are identified, we believe
that we will be able to execute our growth strategy without significantly
impacting our current stores.

Debt and Hedging

As of October 30, 2021, our obligations, inclusive of original issue discount,
include $952.8 million under our Term Loan Facility, $644.6 million of
Convertible Notes and no outstanding borrowings on our ABL Line of Credit. Our
debt obligations also include $45.0 million of finance lease obligations as of
October 30, 2021.

Term Loan Facility

On June 24, 2021, BCFWC entered into Amendment No. 9 (the Ninth Amendment) to
the Term Loan Credit Agreement governing the Term Loan Facility. The Ninth
Amendment, among other things, extended the maturity date from November 17, 2024
to June 24, 2028, and changed the interest rate margins applicable to the Term
Loan Facility from 0.75% to 1.00%, in the case of prime rate loans, and from
1.75% to 2.00%, in the case of LIBOR loans, with a 0.00% LIBOR floor. Refer to
Note 4, "Long Term Debt," for further discussion regarding our debt
transactions.

At October 30, 2021, our borrowing rate related to the Term Loan Facility was
2.1%.



                                       38

--------------------------------------------------------------------------------

ABL Line of Credit

At October 30, 2021, we had $541.0 million available under the ABL Line of
Credit. There were no borrowings on the ABL Line of Credit during the nine month
period ended October 30, 2021.

Convertible Notes

On April 16, 2020, we issued $805.0 million of Convertible Notes. The
Convertible Notes have an initial conversion rate of 4.5418 shares per $1,000
principal amount of Convertible Notes (equivalent to an initial conversion price
of approximately $220.18 per share of the Company's common stock), subject to
adjustment if certain events occur.

The Convertible Notes are general unsecured obligations of the Company. The
Convertible Notes bear interest at a rate of 2.25% per year, payable
semi-annually in cash, in arrears on April 15 and October 15 of each year,
beginning on October 15, 2020. The Convertible Notes will mature on April 15,
2025
, unless earlier converted, redeemed or repurchased.

During the third quarter of Fiscal 2021, we entered into separate, privately
negotiated the Exchange Agreements with certain holders of the Convertible
Notes. Under the terms of the Exchange Agreements, the holders exchanged $160.4
million in aggregate principal amount of Convertible Notes held by them for a
combination of an aggregate of $90.8 million in cash and 513,991 shares of our
common stock. This exchange resulted in a pre-tax debt extinguishment charge of
$86.4 million in the three month period ended October 30, 2021. See Note 4,
"Long Term Debt," for additional information.

Secured Notes

On April 16, 2020, BCFWC, issued $300.0 million of Senior Secured Notes. The
Secured Notes are senior, secured obligations of BCFWC, and interest was payable
semiannually in cash at a rate of 6.25% per annum on April 15 and October 15 of
each year, beginning on October 15, 2020. The Secured Notes were guaranteed on a
senior secured basis by Burlington Coat Factory Holdings, LLC, Burlington Coat
Factory Investments Holdings, Inc. and BCFWC's subsidiaries that guarantee the
loans under the Term Loan Facility and ABL Line of Credit.

On June 11, 2021, BCFWC redeemed the full $300.0 million aggregate principal
amount of the Secured Notes. The redemption price of the Secured Notes was
$323.7 million, plus accrued and unpaid interest to, but not including, the date
of redemption. Refer to Note 4, "Long Term Debt," for further discussion
regarding our debt transactions.

Hedging

On June 24, 2021, the Company terminated its previous interest rate swap and
entered into a new interest rate swap. The new interest rate swap, which hedges
$450 million of variable rate exposure under our Term Loan Facility, is
designated as a cash flow hedge and expires on June 24, 2028. Refer to Note 5,
"Derivative Instruments and Hedging Activities," for further discussion
regarding our derivative transactions.

Certain Information Concerning Contractual Obligations

We had $1,766.0 million of purchase commitments related to goods that were not
received as of October 30, 2021, and had $3,558.4 million of future minimum
lease payments under operating leases as of October 30, 2021. Additionally, we
redeemed the full $300.0 million aggregate principal amount of the Secured
Notes, and we extended and repriced the Term Loan Facility during the second
quarter of Fiscal 2021. During the third quarter of Fiscal 2021, we also
repurchased $160.4 million in aggregate principal amount of the Convertible
Notes. See Note 4, "Long Term Debt," for additional information related to our
debt transactions. There were no other significant changes regarding our
obligations to make future payments under current contracts from those included
in our Fiscal 2020 10-K.



                                       39
--------------------------------------------------------------------------------

Critical Accounting Policies and Estimates

Our Condensed 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 Condensed
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 Condensed
Consolidated Financial Statements; and (iii) the reported amounts of revenues
and expenses during the reporting period. On an ongoing basis, management
evaluates its estimates and judgments, including those related to revenue
recognition, inventories, long-lived assets, intangible assets, goodwill,
insurance reserves and income taxes. 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. As of the
end of the third quarter of Fiscal 2021, the impact of the COVID-19 pandemic
continues to unfold. As a result, many of our estimates and judgments carry a
higher degree of variability and volatility. As events continue to evolve and
additional information becomes available, our estimates may change materially in
future periods. 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.

Our critical accounting policies and estimates are consistent with those
disclosed in Note 1, “Summary of Significant Accounting Policies,” to the
audited Consolidated Financial Statements, included in Part II, Item 8 of the
Fiscal 2020 10-K.

Safe Harbor Statement

This 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 and other statements regarding matters that are not historical
facts. 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, and Section 21E of the Securities
Exchange Act of 1934, as amended (Exchange Act). Our forward-looking statements
are subject to risks and uncertainties. Such statements may include, but are not
limited to, future impacts of the COVID-19 pandemic, proposed store openings and
closings, proposed capital expenditures, projected financing requirements,
proposed developmental projects, projected sales and earnings, our ability to
maintain selling margins, and the effect of the adoption of recent accounting
pronouncements on our consolidated financial position, results of operations and
cash flows. Actual events or results may differ materially from the results
anticipated in these forward-looking statements as a result of a variety of
factors. While it is impossible to identify all such factors, factors that could
cause actual events or results to differ materially from those we expected
include: general economic conditions; pandemics, including the duration of the
COVID-19 pandemic and actions taken to slow its spread and the related impact on
consumer confidence and spending; increased freight and labor costs associated
with industry-wide supply chain issues; our ability to successfully implement
one or more of our strategic initiatives and growth plans; the availability of
desirable store locations on suitable terms; changing consumer preferences and
demand; industry trends, including changes in buying, inventory and other
business practices; competitive factors, including pricing and promotional
activities of major competitors and an increase in competition within the
markets in which we compete; the availability, selection and purchasing of
attractive merchandise on favorable terms; import risks, including tax and trade
policies, tariffs and government regulations; weather patterns, including, among
other things, changes in year-over-year temperatures; our future profitability;
our ability to control costs and expenses; unforeseen cyber-related problems or
attacks; any unforeseen material loss or casualty; the effect of inflation;
regulatory and tax changes; our relationships with employees; the impact of
current and future laws and the interpretation of such laws; terrorist attacks,
particularly attacks on or within markets in which we operate; natural and
man-made disasters, including fire, snow and ice storms, flood, hail, hurricanes
and earthquakes; 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; domestic events affecting the delivery of merchandise to our
stores; existence of adverse litigation; and other risks discussed from time to
time in our filings with the Securities and Exchange Commission (SEC).

Many of these factors, including the ultimate impact of the COVID-19 pandemic,
are beyond our ability to predict or control. 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. In light of these risks and
uncertainties, the forward-looking events and circumstances discussed in this
report might not occur. Furthermore, we cannot guarantee future results, events,
levels of activity, performance or achievements.



                                       40

--------------------------------------------------------------------------------

Recent Accounting Pronouncements

Refer to Note 1, "Summary of Significant Accounting Policies," to our Condensed
Consolidated Financial Statements in Part I, Item 1 for a discussion of recent
accounting pronouncements and their impact on our Condensed Consolidated
Financial Statements.

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