BJ
$23.64
Bj's Wholesale Club Holdings
$.17
.72%
Earnings Details
3rd Quarter October 2019
Thursday, November 21, 2019 6:45:00 AM
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Summary

Bj's Wholesale Club Holdings Misses

Bj's Wholesale Club Holdings (BJ) reported 3rd Quarter October 2019 earnings of $0.41 per share on revenue of $3.2 billion. The consensus earnings estimate was $0.40 per share on revenue of $3.3 billion. The Earnings Whisper number was $0.43 per share. Revenue grew 0.2% on a year-over-year basis.

The company said it expects fiscal year earnings of $1.44 to $1.48 per share on revenue of approximately $12.90 billion. The company's previous guidance was earnings of $1.42 to $1.50 per share on revenue of $12.90 billion to $13.20 billion and the current consensus earnings estimate is $1.48 per share on revenue of $13.28 billion for the year ending January 31, 2020.

Results
Reported Earnings
$0.41
Earnings Whisper
$0.43
Consensus Estimate
$0.40
Reported Revenue
$3.23 Bil
Revenue Estimate
$3.33 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

BJ’s Wholesale Club Holdings, Inc. Announces Third Quarter Fiscal 2019 Results

Board Authorizes Stock Repurchase Program of up to $250 Million

  • Net sales for the third quarter of fiscal 2019 increased 0.1% to $3.2 billion, compared to the third quarter of fiscal 2018.
  • Comparable club sales excluding gasoline sales increased 1.1% for the third quarter of fiscal 2019, compared to the third quarter of fiscal 2018.
  • Income from continuing operations of $55.2 million for the third quarter of fiscal 2019, compared to income from continuing operations of $54.6 million in the third quarter of fiscal 2018.
  • Adjusted EBITDA for the third quarter of fiscal 2019 increased 3.8% to $154.1 million, compared to the third quarter of fiscal 2018.
  • Net income was $55.1 million, or $0.40 per diluted share, and adjusted net income was $56.6 million, or $0.41 per diluted share, for the third quarter of fiscal 2019.
  • Net cash provided by operating activities was $221.5 million for the first nine months of fiscal 2019. Free cash flow was $77.1 million for the first nine months of fiscal 2019.
  • Company updates outlook for fiscal 2019.

WESTBOROUGH, Mass.--(BUSINESS WIRE)--BJ’s Wholesale Club Holdings, Inc. (NYSE: BJ) (the "Company") today announced its financial results for the thirteen and thirty-nine weeks ended November 2, 2019.

“We delivered solid margin improvement and continued earnings growth in the third quarter ” said Christopher J. Baldwin, Chairman and Chief Executive Officer, BJ’s Wholesale Club. "We remain focused on executing against our strategic plan and transforming our business to be well positioned for the long-term. The board's decision to authorize a stock repurchase program reflects the strength of our cash flow and confidence in our growth strategy and long-term outlook."

Key Measures for the Thirteen Weeks Ended November 2, 2019 (Third Quarter of Fiscal 2019) and for the Thirty-Nine Weeks Ended November 2, 2019 (First Nine Months of Fiscal 2019):

BJ'S WHOLESALE CLUB HOLDINGS, INC.
(Amounts in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13 Weeks Ended

 

13 Weeks Ended

 

 

 

39 Weeks Ended

 

39 Weeks Ended

 

 

 

 

November 2, 2019

 

November 3, 2018

 

% Growth

 

November 2, 2019

 

November 3, 2018

 

% Growth

Net sales

 

$

3,152,887

 

 

$

3,150,234

 

 

0.1

%

 

$

9,493,795

 

 

$

9,380,640

 

 

1.2

%

Membership fee income

 

76,517

 

 

71,429

 

 

7.1

%

 

224,587

 

 

209,825

 

 

7.0

%

Total revenues

 

3,229,404

 

 

3,221,663

 

 

0.2

%

 

9,718,382

 

 

9,590,465

 

 

1.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

100,932

 

 

90,327

 

 

11.7

%

 

270,355

 

 

193,571

 

 

39.7

%

Income from continuing operations

 

55,196

 

 

54,568

 

 

1.2

%

 

145,574

 

 

63,379

 

 

129.7

%

Adjusted EBITDA (a)

 

154,144

 

 

148,464

 

 

3.8

%

 

431,407

 

 

413,057

 

 

4.4

%

Net income

 

55,092

 

 

54,431

 

 

1.2

%

 

145,413

 

 

62,954

 

 

131.0

%

EPS (b)

 

0.40

 

 

0.39

 

 

2.6

%

 

1.04

 

 

0.55

 

 

89.1

%

Adjusted net income(a)

 

56,575

 

 

53,822

 

 

5.1

%

 

148,304

 

 

125,029

 

 

18.6

%

Adjusted EPS (a)

 

0.41

 

 

0.39

 

 

5.1

%

 

1.06

 

 

0.90

 

 

17.8

%

Basic weighted average shares outstanding

 

135,521

 

 

135,018

 

 

0.4

%

 

136,301

 

 

110,162

 

 

23.7

%

Diluted weighted average shares outstanding

 

138,192

 

 

139,368

 

 

(0.8

)%

 

139,390

 

 

114,944

 

 

21.3

%

a)

See “Note Regarding Non-GAAP Financial Information”

b)

EPS represents earnings per diluted share

Additional Highlights:

  • Comparable club sales for the third quarter of fiscal 2019 decreased 0.4%, compared to the third quarter of fiscal 2018. Comparable club sales, excluding the impact of gasoline sales increased 1.1%. Comparable club sales for the first nine months of fiscal 2019 increased 0.7%, compared to the first nine months of fiscal 2018. Excluding the impact of gasoline sales, comparable club sales increased 1.5%.
  • Gross profit increased to $617.6 million in the third quarter of fiscal 2019 from $592.1 million in the third quarter of fiscal 2018. Gross profit increased to $1,804.6 million in the first nine months of fiscal 2019 from $1,732.0 million in the first nine months of fiscal 2018. Excluding the impact of gasoline sales and membership fee income, merchandise gross margin rate increased by approximately 50 basis points over the third quarter of fiscal 2018 and by approximately 40 basis points over the first nine months of fiscal 2018. The improvement was primarily driven by continued progress in our category profitability improvement program.
  • Selling, general and administrative expenses ("SG&A") increased to $510.4 million in the third quarter of fiscal 2019, compared to $499.6 million in the third quarter of fiscal 2018. In the first nine months of fiscal 2019, SG&A decreased to $1,523.5 million, compared to $1,534.3 million in the first nine months of fiscal 2018. Excluding charges associated with stock-based compensation related to the Company’s initial public offering (“IPO”), costs related to our IPO and the registered offerings by selling stockholders (such offering costs, collectively, "offering costs"), club asset impairment and management fees(1), SG&A was $510.4 million in the third quarter of fiscal 2019 compared to $496.2 million in the prior year period and $1,521.6 million in the first nine months of fiscal 2019 compared to $1,474.9 million in the prior year period. The increase in SG&A reflects continued investments to drive the Company’s strategic priorities.
  • Operating income increased to $100.9 million, or 3.1% of total revenues in the third quarter of fiscal 2019, compared to $90.3 million, or 2.8% of total revenues in the third quarter of fiscal 2018. Operating income increased to $270.4 million, or 2.8% of total revenues, in the first nine months of fiscal 2019, compared to $193.6 million, or 2.0% of total revenues in the first nine months of fiscal 2018. Excluding charges associated with stock-based compensation related to the IPO, offering costs, club asset impairment and management fees(1), operating income was $100.9 million, or 3.1% of total revenues in the third quarter of fiscal 2019, compared to $93.7 million, or 2.9% of total revenues in the prior year period and $272.3 million, or 2.8% of total revenues, in the first nine months of fiscal 2019, compared to $252.9 million, or 2.6% of total revenues in the prior year period.
  • Interest expense, net, decreased to $27.7 million in the third quarter of fiscal 2019, compared to $33.0 million in the third quarter of fiscal 2018. Excluding $2.0 million of write-off of deferred fees and the original issue discount associated with the 2019 partial payoff of our first lien term loan facility (the "First Lien Term Loan"), interest expense would have been $25.7 million in the third quarter of fiscal 2019. During the third quarter of fiscal 2018, the Company repriced its First Lien Term Loan and senior secured asset based revolving credit and term facility (the "ABL Facility"). Excluding $6.2 million in fees and write-off of deferred financing fees associated with the repricing, interest expense would have been $26.8 million for the third quarter of fiscal 2018. In the first nine months of fiscal 2019, interest expense, net, decreased to $82.3 million, compared to $137.8 million in the first nine months of fiscal 2018. Excluding $24.3 million in interest expense, $6.2 million in a prepayment penalty and $13.0 million in a write-off of deferred financing costs related to the Second Lien Term Loan that occurred during the second quarter of fiscal 2018 and excluding $6.2 million of expenses associated with the repricing of the First Lien Term Loan and ABL Facility in third quarter of fiscal 2018, interest expense for the first nine months of fiscal 2018 would have been $88.0 million.
  • Income tax expense was $18.0 million in the third quarter of fiscal 2019, compared to income tax expense of $2.7 million in the third quarter of fiscal 2018. The third quarter of fiscal 2019 included a benefit of $1.8 million from windfall tax benefits related to stock compensation awards compared to $7.6 million in the third quarter of fiscal 2018. Income tax expense was $42.5 million in the first nine months of fiscal 2019, compared to an income tax benefit of $7.6 million in the first nine months of fiscal 2018. The first nine months of fiscal 2019 included a benefit of $8.4 million from windfall tax benefits related to stock compensation awards, compared to $17.4 million in the first nine months of fiscal 2018.

(1) See reconciliation to Adjusted Net Income table

Stock Repurchase Program

  • On November 20, 2019, the Company's Board of Directors approved a stock repurchase program, effective immediately. The authorization allows the Company to repurchase up to $250.0 million of its outstanding common stock. The stock repurchase program expires in January 2022 and gives management the flexibility to determine the terms and conditions under which shares may be purchased. The amount and timing of any repurchases made under the stock repurchase program will depend on a variety of factors, including available liquidity, cash flow and market conditions. The stock repurchase program does not obligate the Company to repurchase any dollar amount or number of shares of common stock, and the program may be suspended or discontinued at any time.

Fiscal Year (FY) 2019 Outlook

Outlook

 

Prior Outlook

 

Current Outlook

FY Ending February 1, 2020(a)

 

FY 2019

 

FY 2019

 

 

 

 

 

Net sales

 

$12.9 - $13.2

 

Approx. $12.9

Merchandise Comparable Store Sales (b)

 

1.5% - 2.5%

 

1.3% - 1.5%

Income from Continuing Operations

 

$200 - $212

 

$200 - $204

Adjusted EBITDA

 

$590 - $600

 

$585 - $592

Interest expense

 

$105- $110

 

$106- $108

Tax Rate(c)

 

Approx. 25%

 

Approx. 24%

Net income

 

$200 - $212

 

$200 - $205

EPS (d)

 

$1.42 - $1.50

 

$1.44 - $1.48

Capital Expenditures

 

Approx. $200

 

Approx. $200

a)

Amounts in millions, except for per share amounts. Net sales is in billions. Outlook reflects the immaterial impact of adopting the new lease accounting standard.

b)

Merchandise comparable store sales are defined as comparable club sales, excluding the impact of gasoline sales.

c)

Tax rate reflects statutory rate of 27.9%, offset by future windfall stock benefits.

d)

Based on estimated diluted weighted average shares outstanding of approximately 139 million.

Conference Call Details

A conference call to discuss the third quarter of fiscal 2019 financial results is scheduled for today, November 21, 2019, at 8:30 a.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial 877-274-0290 (international callers please dial 647-689-5405) approximately 10 minutes prior to the start of the call. A live audio webcast of the conference call will be available online at https://investors.bjs.com.

A recorded replay of the conference call will be available within two hours of the conclusion of the call and can be accessed both online at https://investors.bjs.com and by dialing 416-621-4642 and entering the access code 9697299. The recorded replay will be available until November 28, 2019 and an online archive of the webcast will be available for one year.

About BJ’s Wholesale Club Holdings, Inc.

Headquartered in Westborough, Massachusetts, BJ's Wholesale Club Holdings, Inc. is a leading operator of membership warehouse clubs in the Eastern United States. The company currently operates 219 clubs and 144 BJ's Gas® locations in 17 states.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including, without limitation, statements regarding our strategic priorities; our anticipated fiscal 2019 outlook and longer-term position and outlook; and our future progress, as well as statements that include the words "will", "could", "predict", "continue", "would", “expect,” “intend,” “plan,” “believe,” “project,” “forecast,” “estimate,” “may,” “should,” “anticipate” or the negative of these terms or other similar expressions. These forward-looking statements are based on management’s current expectations. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to: uncertainties in the financial markets, consumer and small business spending patterns and debt levels; our dependence on having a large and loyal membership; domestic and international economic conditions, including exchange rates; our ability to procure the merchandise we sell at the best possible prices; the effects of competition and regulation; our dependence on vendors to supply us with quality merchandise at the right time and at the right price; breaches of security or privacy of member or business information; conditions affecting the acquisition and development; our ability to attract and retain a qualified management team and other team members; costs associated with employees (generally including health care costs), energy and certain commodities, geopolitical conditions (including tariffs); disruptions in merchandise distribution; our ability to identify and respond effectively to consumer trends; the effects of payment related risks, including risks to the security of payment card information; changes in laws related to, or the governments administration of the Supplemental Nutrition Assistance Program or its electronic benefit transfer systems; union attempts to organize our team members; failure or disruption of our primary and back-up systems; our ability to attract and retain a qualified management team and other team members; fluctuation of our comparable club sales and quarterly operating results; changes in our product mix or in our revenues from gasoline sales; the effects of product recalls; our failure to successfully maintain a relevant omnichannel experience for our members; risks related to our growth strategy to open new clubs; risks related to our e-commerce business; and other important factors discussed under the captions “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended February 2, 2019 filed with the United States Securities and Exchange Commission (“SEC”) on March 25, 2019, as such factors may be updated from time to time in our other filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. These and other important factors could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. Any such forward-looking statements represent management’s estimates as of the date of this press release. While we may elect to update such forward-looking statements at some point in the future, unless required by law, we disclaim any obligation to do so, even if subsequent events cause our views to change. Thus, one should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.

Non-GAAP Financial Measures

We refer to certain financial measures that are not recognized under United States generally accepted accounting principles (“GAAP”). Please see “Note Regarding Non-GAAP Financial Information" and “Reconciliation of GAAP to Non-GAAP Financial Information” below for additional information and a reconciliation of the non-GAAP financial measures to the most comparable GAAP financial measures.

BJ'S WHOLESALE CLUB HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

13 Weeks Ended

 

13 Weeks Ended

 

39 Weeks Ended

 

39 Weeks Ended

 

 

November 2, 2019

 

November 3, 2018

 

November 2, 2019

 

November 3, 2018

Net sales

 

$

3,152,887

 

 

$

3,150,234

 

 

$

9,493,795

 

 

$

9,380,640

 

Membership fee income

 

76,517

 

 

71,429

 

 

224,587

 

 

209,825

 

Total revenues

 

3,229,404

 

 

3,221,663

 

 

9,718,382

 

 

9,590,465

 

Cost of sales

 

2,611,758

 

 

2,629,575

 

 

7,913,820

 

 

7,858,515

 

Selling, general and administrative expenses

 

510,410

 

 

499,554

 

 

1,523,480

 

 

1,534,314

 

Preopening expense

 

6,304

 

 

2,207

 

 

10,727

 

 

4,065

 

Operating income

 

100,932

 

 

90,327

 

 

270,355

 

 

193,571

 

Interest expense, net

 

27,702

 

 

33,029

 

 

82,274

 

 

137,787

 

Income from continuing operations before income taxes

 

73,230

 

 

57,298

 

 

188,081

 

 

55,784

 

Provision (benefit) for income taxes

 

18,034

 

 

2,730

 

 

42,507

 

 

(7,595

)

Income from continuing operations

 

55,196

 

 

54,568

 

 

145,574

 

 

63,379

 

Loss from discontinued operations, net of income taxes

 

(104

)

 

(137

)

 

(161

)

 

(425

)

Net income

 

$

55,092

 

 

$

54,431

 

 

$

145,413

 

 

$

62,954

 

Income per share attributable to common stockholders - basic:

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.41

 

 

$

0.40

 

 

$

1.07

 

 

$

0.58

 

Loss from discontinued operations

 

 

 

 

 

 

 

 

Net income

 

$

0.41

 

 

$

0.40

 

 

$

1.07

 

 

$

0.58

 

Income per share attributable to common stockholders - diluted:

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.40

 

 

$

0.39

 

 

$

1.04

 

 

$

0.55

 

Loss from discontinued operations

 

 

 

 

 

 

 

 

Net income

 

$

0.40

 

 

$

0.39

 

 

$

1.04

 

 

$

0.55

 

Weighted average number of shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

135,521

 

 

135,018

 

 

136,301

 

 

110,162

 

Diluted

 

138,192

 

 

139,368

 

 

139,390

 

 

114,944

 

BJ'S WHOLESALE CLUB HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

November 2, 2019

 

November 3, 2018

ASSETS

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

29,968

 

 

$

31,502

 

 

Accounts receivable, net

 

185,983

 

 

179,091

 

 

Merchandise inventories

 

1,271,172

 

 

1,245,110

 

 

Prepaid expense and other current assets

 

55,285

 

 

104,258

 

 

 

Total current assets

 

1,542,408

 

 

1,559,961

 

 

 

 

 

 

 

 

Operating lease right-of-use assets, net

 

2,067,626

 

 

 

Property and equipment, net

 

775,659

 

 

745,889

 

Goodwill

 

924,134

 

 

924,134

 

Intangibles, net

 

150,357

 

 

206,706

 

Other assets

 

17,897

 

 

28,265

 

 

 

Total assets

 

$

5,478,081

 

 

$

3,464,955

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

Current liabilities:

 

 

 

 

 

Current portion of long-term debt

 

$

449,377

 

 

$

389,377

 

 

Current portion of operating lease liabilities

 

121,961

 

 

 

 

Accounts payable

 

973,328

 

 

976,518

 

 

Accrued expenses and other current liabilities

 

507,141

 

 

487,912

 

 

 

Total current liabilities

 

2,051,807

 

 

1,853,807

 

 

 

 

 

 

 

 

Long-term lease liabilities

 

1,980,447

 

 

 

Long-term debt

 

1,339,700

 

 

1,549,406

 

Deferred income taxes

 

50,486

 

 

51,810

 

Other noncurrent liabilities

 

160,127

 

 

266,550

 

 

 

 

 

 

 

 

STOCKHOLDERS' DEFICIT

 

(104,486

)

 

(256,618

)

 

 

Total liabilities and stockholders' deficit

 

$

5,478,081

 

 

$

3,464,955

 

BJ'S WHOLESALE CLUB HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)

 

 

 

39 Weeks Ended
November 2, 2019

 

39 Weeks Ended
November 3, 2018

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

Net income

 

$

145,413

 

 

$

62,954

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

116,920

 

 

122,434

 

Amortization of debt issuance costs and accretion of original issue discount

 

3,969

 

 

5,233

 

Debt extinguishment and refinancing charges

 

2,032

 

 

23,602

 

Impairment charges

 

 

 

3,962

 

Other non-cash items, net

 

2,539

 

 

1,826

 

Stock-based compensation expense

 

13,984

 

 

54,746

 

Deferred income tax provision (benefit)

 

14,846

 

 

(2,802

)

Increase (decrease) in cash due to changes in:

 

 

 

 

Accounts receivable

 

8,317

 

 

11,233

 

Merchandise inventories

 

(218,866

)

 

(225,972

)

Accounts payable

 

160,291

 

 

202,630

 

Accrued expenses

 

(38,847

)

 

(14,687

)

Other operating assets and liabilities, net

 

10,924

 

 

5,734

 

Net cash provided by operating activities

 

221,522

 

 

250,893

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

Additions to property and equipment, net of disposals

 

(144,428

)

 

(103,340

)

Net cash used in investing activities

 

(144,428

)

 

(103,340

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Payments on long term debt

 

(11,533

)

 

(32,323

)

Paydown of First Lien Term Loan and extinguishment of Second Lien Term Loan

 

(200,000

)

 

(975,633

)

Net borrowings on ABL Facility

 

195,000

 

 

207,000

 

Debt issuance costs paid

 

 

 

(982

)

Net cash received (paid) from stock option exercises

 

9,293

 

 

(15,277

)

Net cash received from Employee Stock Purchase Program (ESPP)

 

726

 

 

 

Acquisition of treasury stock

 

(67,305

)

 

(19,109

)

Net proceeds from stock issuance

 

 

 

685,889

 

Other financing activities

 

(453

)

 

(570

)

Net cash used in financing activities

 

(74,272

)

 

(151,005

)

Net increase (decrease) in cash and cash equivalents

 

2,822

 

 

(3,452

)

Cash and cash equivalents at beginning of period

 

27,146

 

 

34,954

 

Cash and cash equivalents at end of period

 

$

29,968

 

 

$

31,502

 

Note Regarding Non-GAAP Financial Information

This press release includes financial measures that are not calculated in accordance with GAAP, including adjusted net income, adjusted net income per diluted share, adjusted EBITDA, free cash flow and net debt and net debt to LTM adjusted EBITDA.

We define adjusted net income as net income attributable to common stockholders adjusted for: stock-based compensation related to the IPO; offering costs; management fees; club asset impairment; charges related to debt restructurings and retirements; the windfall tax benefit from stock exercises; and the tax impact of the foregoing adjustments on net income.

We define adjusted net income per diluted share as adjusted net income divided by the weighted average diluted shares outstanding for the thirteen weeks and thirty-nine weeks ended on the last day of the latest periods presented.

We define adjusted EBITDA as income from continuing operations before interest expense, net, provision (benefit) for income taxes and depreciation and amortization, adjusted for the impact of certain other items, including: stock-based compensation expense; pre-opening expenses; management fees; non-cash rent; strategic consulting; offering costs; and other adjustments.

We define free cash flow as net cash provided by operating activities net of capital expenditures.

We define net debt as total debt outstanding less cash and cash equivalents.

We define net debt to LTM adjusted EBITDA as net debt at the balance sheet date divided by adjusted EBITDA for the trailing twelve-month period.

We present adjusted net income, adjusted net income per diluted share and adjusted EBITDA, which are not recognized financial measures under GAAP, because we believe it assists investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, adjusted EBITDA excludes preopening expenses, because we do not believe these expenses are indicative of the underlying operating performance of our stores. The amount and timing of preopening expenses are dependent on, among other things, the size of new stores opened and the number of new stores opened during any given period.

Management believes that adjusted net income, adjusted net income per diluted share and adjusted EBITDA are helpful in highlighting trends in our core operating performance compared to other measures, which can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. We use adjusted net income, adjusted net income per diluted share and adjusted EBITDA to supplement GAAP measures of performance in the evaluation of the effectiveness of our business strategies; to make budgeting decisions; and to compare our performance against that of other peer companies using similar measures. We also use adjusted EBITDA in connection with establishing discretionary annual incentive compensation.

We present free cash flow, which is not a recognized financial measure under GAAP, because we use it to report to our board of directors and we believe it assists investors and analysts in evaluating our liquidity. Free cash flow should not be considered as an alternative to cash flows from operations as a liquidity measure. We present net debt and net debt to LTM adjusted EBITDA, which are not recognized as financial measures under GAAP, because we use them to report to our board of directors and we believe they assist investors and analysts in evaluating our borrowing capacity. Net debt to LTM adjusted EBITDA is a key financial measure that is used by management to assess the borrowing capacity of the Company.

You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating adjusted net income, adjusted net income per diluted share, adjusted EBITDA and net debt to LTM adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or like some of the adjustments in our presentation of these metrics. Our presentation of adjusted net income, adjusted net income per diluted share, adjusted EBITDA, free cash flow, net debt and net debt to LTM adjusted EBITDA should not be considered as alternatives to any other measure derived in accordance with GAAP and they should not be construed as an inference that the Company’s future results will be unaffected by unusual or non-recurring items. There can be no assurance that we will not modify the presentation of adjusted net income, adjusted net income per diluted share, adjusted EBITDA or net debt to LTM adjusted EBITDA in the future, and any such modification may be material. In addition, adjusted net income, adjusted net income per diluted share, adjusted EBITDA, free cash flow, net debt and net debt to LTM adjusted EBITDA may not be comparable to similarly titled measures used by other companies in our industry or across different industries. Additionally, adjusted net income, adjusted net income per diluted share, adjusted EBITDA, free cash flow, net debt and net debt to LTM adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP.

Reconciliation of GAAP to Non-GAAP Financial Information

BJ'S WHOLESALE CLUB HOLDINGS, INC.
Reconciliation of net income to adjusted net income and adjusted net income per diluted share
(Amounts in thousands, except per share amounts)
(Unaudited)

 

 

13 Weeks Ended

 

13 Weeks Ended

 

39 Weeks Ended

 

39 Weeks Ended

 

November 2,
2019

 

November 3,
2018

 

November 2,
2019

 

November 3,
2018

Net income as reported

$

55,092

 

 

$

54,431

 

 

$

145,413

 

 

$

62,954

 

Adjustments:

 

 

 

 

 

 

 

Stock-based compensation related to IPO (a)

 

 

 

 

 

 

48,927

 

Offering costs (b)

 

 

2,382

 

 

1,928

 

 

3,143

 

Management fees (c)

 

 

 

 

 

 

3,333

 

Club asset impairment (d)

 

 

962

 

 

 

 

3,962

 

Charges related to extinguishing Second Lien Term Loan (e)

 

 

 

 

 

 

19,159

 

Interest and amortization on Second Lien Term Loan (f)

 

 

 

 

 

 

24,341

 

Charges and write-offs related to 2018 debt refinancing and 2019 debt paydown (g)

2,032

 

 

6,240

 

 

2,032

 

 

6,240

 

Windfall tax benefit from stock exercises (h)

 

 

(7,586

)

 

 

 

(17,353

)

Tax impact of adjustments to net income (i)

(549

)

 

(2,607

)

 

(1,069

)

 

(29,677

)

Adjusted net income

$

56,575

 

 

$

53,822

 

 

$

148,304

 

 

$

125,029

 

 

 

 

 

 

 

 

 

Weighted average diluted shares outstanding

138,192

 

 

139,368

 

 

139,390

 

 

114,944

 

Weighted average diluted shares outstanding for the thirteen and thirty-nine weeks ended November 2, 2019

138,192

 

 

138,192

 

 

139,390

 

 

139,390

 

Adjusted net income per diluted share (j)

$

0.41

 

 

$

0.39

 

 

$

1.06

 

 

$

0.90

 

(a)

Represents stock-based compensation expense for certain restricted stock and stock option awards issued in connection with our IPO.

(b)

Represents costs related to our IPO, and the registered offerings by selling stockholders.

(c)

Represents management fees paid to our sponsors (or advisory affiliates thereof) in accordance with our management services agreement, which terminated upon closing of the IPO.

(d)

Represents the impairment charges related to a club relocated in 2018.

(e)

Represents the write-off of certain deferred financing charges and a prepayment penalty associated with the payoff of our Second Lien Term Loan.

(f)

Represents the historical interest expense associated with the Second Lien Term Loan that was paid in full with proceeds from our IPO.

(g)

Represents the write-off of deferred fees associated with the 2019 partial payoff of our First Lien Term Loan and the 2018 repricing of the Company’s First Lien Term Loan and ABL Facility.

(h)

Represents the windfall tax benefit to the Company due to the exercise of stock options by former employees of the Company.

(i)

Represents the tax effect of the above adjustments at an effective tax rate of approximately 27% for both periods ended November 2, 2019 and November 3, 2018.

(j)

Adjusted net income per diluted share is measured using the weighted average diluted shares outstanding of 138.2 million shares for the third quarter of fiscal 2019 and third quarter of fiscal 2018, and 139.4 million shares for the first nine months of fiscal 2019 and first nine months of fiscal 2018.

BJ'S WHOLESALE CLUB HOLDINGS, INC.
Reconciliation to Adjusted EBITDA
(Amounts in thousands)
(Unaudited)

 

 

 

13 Weeks Ended

 

13 Weeks Ended

 

39 Weeks Ended

 

39 Weeks Ended

 

 

November 2,
2019

 

November 3,
2018

 

November 2,
2019

 

November 3,
2018

Income from continuing operations

 

$

55,196

 

 

$

54,568

 

 

$

145,574

 

 

$

63,379

 

Interest expense, net

 

27,702

 

 

33,029

 

 

82,274

 

 

137,787

 

Provision (benefit) for income taxes

 

18,034

 

 

2,730

 

 

42,507

 

 

(7,595

)

Depreciation and amortization

 

39,249

 

 

39,936

 

 

116,920

 

 

122,434

 

Stock-based compensation expense (a)

 

5,188

 

 

2,620

 

 

13,984

 

 

55,985

 

Preopening expenses (b)

 

6,304

 

 

2,207

 

 

10,727

 

 

4,065

 

Management fees (c)

 

 

 

 

 

 

 

3,333

 

Non-cash rent (d)

 

2,558

 

 

1,150

 

 

6,331

 

 

3,591

 

Strategic consulting (e)

 

 

 

9,321

 

 

11,349

 

 

22,569

 

Offering costs(f)

 

 

 

2,382

 

 

1,928

 

 

3,143

 

Other adjustments (g)

 

(87

)

 

521

 

 

(187

)

 

4,366

 

Adjusted EBITDA

 

$

154,144

 

 

$

148,464

 

 

$

431,407

 

 

$

413,057

 

(a)

Represents total stock-based compensation expense and includes expense related to certain restricted stock and stock option awards issued in connection with our IPO.

(b)

Represents direct incremental costs of opening or relocating a facility that are charged to operations as incurred.

(c)

Represents management fees paid to our sponsors (or advisory affiliates thereof) in accordance with our management services agreement, which terminated upon closing of the IPO.

(d)

Consists of an adjustment to remove the non-cash portion of rent expense.

(e)

Represents fees paid to external consultants for strategic initiatives of limited duration.

(f)

Represents costs related to our IPO and the registered offerings by selling stockholders.

(g)

Other non-cash items, including non-cash accretion on asset retirement obligations, termination costs to former executives and obligations associated with our post-retirement medical plan. Fiscal year 2018 also includes amortization of a deferred gain from sale leaseback transactions in 2013, and impairment charges related to a club that was relocated in 2018.

BJ'S WHOLESALE CLUB HOLDINGS, INC.
Reconciliation to Free Cash Flow
(Amounts in thousands)
(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

13 Weeks Ended

 

13 Weeks Ended

 

39 Weeks Ended

 

39 Weeks Ended

 

 

November 2,
2019

 

November 3,
2018

 

November 2,
2019

 

November 3,
2018

Net Cash provided by operating activities

 

$

6,398

 

 

$

47,674

 

 

$

221,522

 

 

$

250,893

 

Less: Capital Expenditures

 

56,130

 

 

27,674

 

 

144,428

 

 

103,340

 

Free cash flow (a)

 

$

(49,732

)

 

$

20,000

 

 

$

77,094

 

 

$

147,553

 

(a)

Free cash flow for the 13 Weeks Ended November 2, 2019 was primarily impacted by the timing of capital expenditures associated with land purchases and build out of the Company's new clubs in Michigan.

BJ'S WHOLESALE CLUB HOLDINGS, INC.
Reconciliation of Net Debt and Net Debt to LTM adjusted EBITDA
(Amounts in thousands)
(Unaudited)

 

 

 

 

 

November 2, 2019

Total debt

 

$

1,789,077

 

Less: Cash and cash equivalents

 

29,968

 

Net Debt

 

$

1,759,109

 

 

 

 

Income from continuing operations

 

209,287

 

Interest expense, net

 

109,022

 

Provision for income taxes

 

61,928

 

Depreciation and amortization

 

156,709

 

Stock-based compensation expense (a)

 

16,916

 

Preopening expenses (b)

 

12,780

 

Non-cash rent (c)

 

7,604

 

Strategic consulting (d)

 

22,266

 

Offering costs (e)

 

2,588

 

Other adjustments (f)

 

(2,324

)

Adjusted EBITDA

 

$

596,776

 

 

 

 

Net debt to LTM adjusted EBITDA

 

2.9x

(a)

Represents total stock-based compensation expense and includes expense related to certain restricted stock and stock option awards issued in connection with our IPO.

(b)

Represents direct incremental costs of opening or relocating a facility that are charged to operations as incurred.

(c)

Consists of an adjustment to remove the non-cash portion of rent expense.

(d)

Represents fees paid to external consultants for strategic initiatives of limited duration.

(e)

Represents costs related to our IPO and the registered offerings by selling stockholders.

(f)

Other non-cash items, including non-cash accretion on asset retirement obligations, termination costs to former executives and obligations associated with our post-retirement medical plan, amortization of a deferred gain from sale leaseback transactions in 2013, impairment charges related to a club that was relocated in 2018 and a gain from a third party settlement.

BJ'S WHOLESALE CLUB HOLDINGS, INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
Fiscal Year 2019 Outlook for Adjusted EBITDA
(Amounts in millions)
(Unaudited)

 

 

 

Fiscal Year 2019 Outlook

 

 

Low End

 

High End

Income from continuing operations

 

$

200

 

 

$

205

 

Interest expense, net

 

108

 

 

106

 

Provision for income taxes

 

65

 

 

65

 

Depreciation and amortization

 

156

 

 

159

 

Stock-based compensation

 

20

 

 

20

 

Preopening expenses (a)

 

14

 

 

15

 

Non-cash rent (b)

 

10

 

 

10

 

Strategic consulting (c)

 

12

 

 

12

 

Adjusted EBITDA

 

$

585

 

 

$

592

 

(a)

Represents direct incremental costs of opening or relocating a facility that are charged to operations as incurred.

(b)

Consists of an adjustment to remove the non-cash portion of rent expense.

(c)

Represents fees paid to external consultants for strategic initiatives of limited duration.

 

Investor Contact:
Faten Freiha, BJ's Wholesale Club
(774) 512-6320
ffreiha@bjs.com

Media Contact:
Kirk Saville, BJ’s Wholesale Club
(774) 512-7425
ksaville@bjs.com

Source: BJ’s Wholesale Club Holdings, Inc.