Dave Busters Entertainment Inc

Note 1: Description of the Business and Summary of Significant Accounting Policies

Description of the business— Dave & Buster’s Entertainment, Inc. (“D&B Entertainment” or the “Company”) is a Delaware corporation formed in June 2010. References to the “Company”, “we”, “us”, and “our” refers to D&B Entertainment, any predecessor companies, and its wholly-owned subsidiaries, Dave & Buster’s Holdings, Inc. (“D&B Holdings”), a holding company which owns 100% of the outstanding common stock of Dave & Buster’s, Inc. (“D&B Inc”), the operating company. The Company, headquartered in Coppell, Texas, is a leading operator of high-volume entertainment and dining venues (“stores”) in North America for adults and families.

The Company operates its business astwo operating segments based on its major brands, Dave & Buster's and Main Event. The Company hasone reportable segment as both brands provide similar products and services to a similar customer base, are managed together by a single management team and share similar economic characteristics.

On June 29, 2022, the Company completed its acquisition of 100% of the equity interests in Main Event, in connect with an Agreement and Plan of Merger dated April 6, 2022. Refer to Note 2, Business Combinations, for further discussion of the Main Event Acquisition.

During fiscal 2023, we opened sixteen additional stores. During fiscal 2022, we acquired stores as a result of the Main Event Acquisition and opened eight new stores. As of February 4, 2024, we owned and operated 220 stores located in 43 states, Puerto Rico andone Canadian province.

Principles of consolidation— The accompanying consolidated financial statements include the accounts of D&B Entertainment and its wholly owned subsidiaries and have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The results of acquired subsidiaries are included in the consolidated financial statements from their dates of acquisition. All intercompany accounts and transactions have been eliminated in consolidation.

Fiscal year— The Company’s fiscal year consists of 52 or 53 weeks ending on the Sunday after the Saturday closest to January 31. Fiscal year 2023, which ended on February 4, 2024, contained 53 weeks. Fiscal years 2022 and 2021, which ended on January 29, 2023 and January 30, 2022, respectively, each contained 52 weeks. Each quarterly period has 13 weeks, except in a 53-week year, when the fourth quarter has 14 weeks.

Use of estimates — The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities at the date of the consolidated financial statements and for the period then ended. Actual results could differ from those estimates.

Cash and cash equivalents — We consider transaction settlements in process from credit card companies and all highly-liquid investments with original maturities of three months or less to be cash equivalents. Our cash management system provides for the daily funding of all major bank disbursement accounts as checks are presented for payment. Under this system, outstanding checks in excess of the cash balances at certain banks create book overdrafts, which are presented in Accounts Payable on the consolidated balance sheet. There wereno such overdrafts as of February 4, 2024 or January 29, 2023. Changes in the book overdraft position are presented within “Net cash provided by operating activities” within the Consolidated Statements of Cash Flows. At the end of fiscal 2023 and fiscal 2022, the Company hadno restricted cash.

Cash and cash equivalents are maintained with multiple financial institutions. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions with reputable credit and therefore bear minimal credit risk. The Company maintains cash and cash equivalent balances that exceed federally insured limits with a number of financial institutions.

Inventories— Inventories consist of food, beverages, amusement merchandise and other supplies and are stated at the lower of cost (first-in, first-out method) or net realizable value. We record inventory reserves for obsolete and slow-moving inventory. See Note 3 for a summary of inventory balances.

Cloud-based computing arrangements— The Company defers application development stage costs for cloud-based computing arrangements and amortizes those costs over the related license subscription term.

Long-lived assets — Property and equipment are carried at cost less accumulated depreciation. Depreciation is computed on the straight-line method. Estimated depreciable lives for the categories of property and equipment follows:

(1)Buildings and building improvements and leasehold improvements related to leased properties are depreciated over the lesser of the lease term, inclusive of reasonably certain renewal periods, or the useful life of the asset.

Expenditures that extend the life, increase capacity of or improve the safety or the efficiency of the property and equipment are capitalized, whereas costs incurred to maintain the appearance and functionality of such assets are charged to repair and maintenance expense. Application development stage costs for internally developed software projects are capitalized and amortized as part of furniture, fixtures, and equipment. Interest cost on funds used during the acquisition period of significant capital assets are capitalized as part of the asset and depreciated. Gains and losses related to store property and equipment disposals are recorded in “Other store operating expenses” in the Consolidated Statements of Comprehensive Income.

We assess the potential impairment of our long-lived assets related to each store to be held and used in business, including property and equipment and right-of-use (“ROU”) assets, on an annual basis or whenever events or changes in circumstances indicate that the carrying values of these assets may not be recoverable. In determining the recoverability of the asset value, an analysis is performed at the individual store level, since this is the lowest level of identifiable cash flows and primarily includes an assessment of historical cash flows and other relevant factors and circumstances, including the maturity of the store, changes in the economic environment, unfavorable changes in legal factors or business climate and future operating plans. The more significant inputs used in determining our estimate of the projected undiscounted cash flows included future revenue growth and projected margins as well as the estimate of the remaining useful life of the assets. If the carrying amount is not recoverable, we record an impairment charge equal to the excess of the carrying amount over the fair value, which is estimated based on discounted projected future operating cash flows of the store over the remaining service life using a risk adjusted discount rate that is commensurate with the inherent risk.

Goodwill and tradenames— Goodwill and tradenames have indefinite useful lives, are not subject to amortization, and are evaluated for impairment annually or more frequently if an event occurs or circumstances change that would indicate that impairment may exist. We consider our Dave & Buster's and Main Event brands to be both our operating segments and reporting units. Goodwill and tradenames are evaluated at the level of thesetwo operating segments.

The carrying value of goodwill as of February 4, 2024 was $742.5, of which $272.6 related to the Dave & Buster's operating segment and $469.9 related to the goodwill added as a result of the Main Event Acquisition. Additionally, the carrying value of tradenames as of February 4, 2024 was $178.2, of which $79.0 related to the Dave & Buster's operating segment and $99.2 related to the tradename acquired as a result of the Main Event Acquisition.

When evaluating goodwill and tradenames for impairment, the Company first performs a qualitative assessment to determine whether it is more likely than not that its reporting unit or tradenames are impaired. For fiscal years 2023, 2022 and 2021, there wasno impairment to our goodwill or tradenames.

Fair value of financial instruments — Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. In determining fair value, the accounting standards establish a three-level hierarchy for inputs used in measuring fair value as follows: Level One inputs are quoted prices available for identical assets or liabilities in active markets; Level Two inputs are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; and Level Three inputs are unobservable and reflect management’s own assumptions.

The carrying amounts of cash and cash equivalents, accounts and notes receivable, accounts payable and other current liabilities approximate fair value because of their short-term nature.

The fair value of the Company’s debt is determined based on traded price data as of the measurement date, which we classify as a Level Two input within the fair value hierarchy. The fair value of the Company's debt was as follows as of the periods indicated:

Revenues— Our entertainment revenues primarily consist of attractions including redemption and simulation games, bowling, laser tag, billiards and gravity ropes. Our food and beverage revenues consist of full meals, appetizers and both alcoholic and non-alcoholic beverages. The following table presents revenues included in these categories for the periods presented:

(1)Primarily consists of revenue earned from party rentals and gift card breakage (see Revenue recognition below).

Revenue recognition— Entertainment revenues are primarily recognized upon utilization of game play credits on gaming cards purchased and used by customers to activate video and redemption games. Redemption games allow customers to earn tickets, which may be redeemed for prizes. We have deferred a portion of entertainment revenues for the estimated unfulfilled performance obligations based on an estimated rate of future use by customers of unused game play credits and the material right provided to customers to redeem tickets in the future for prizes. We estimate the amount of deferred revenue based upon credits and tickets remaining on gaming cards, historic game play credit and ticket utilization patterns and estimates of the standalone selling prices of game play credits and the customer material right. The standalone selling price of the customer material right is estimated using an equivalent chip cost plus margin approach. For purposes of recognizing revenue, the total amount collected from each customer is then allocated between the two performance obligations based on the relative standalone selling price of each obligation.

Total deferred entertainment revenue is included in “Accrued liabilities” in our Consolidated Balance Sheets. During fiscal 2023, we recognized revenue of approximately $69.8 related to the amount in deferred entertainment revenue as of the end of fiscal 2022. During fiscal 2022, we recognized revenue of approximately $42.8 related to the amount in deferred entertainment revenue as of the end of fiscal 2021.

We sell gift cards, which do not have expiration dates, and we do not deduct non-usage fees from outstanding gift card balances. The Company recognizes revenue from gift cards upon redemption by the customer. For unredeemed gift cards that the Company expects to be entitled to breakage and for which there is not a legal obligation to remit the unredeemed gift card balances to the relevant jurisdictions, the Company recognizes expected breakage as revenue in proportion to the pattern of redemption by the customers. The determination of the gift card breakage is based on the Company’s specific historical redemption patterns. Recognized gift card breakage revenue is included in “Entertainment revenues” in the Consolidated Statements of Comprehensive Income. The contract liability related to our gift cards is included in “Accrued liabilities” in our Consolidated Balance Sheets. During fiscal 2023, we recognized revenue of approximately $10.2 related to the amount in deferred gift card revenue as of the end of fiscal 2022. During fiscal 2022, we recognized revenue of approximately $6.3 related to the amount in deferred gift card revenue as of the end of fiscal 2021.

Food and beverage revenues are recognized when payment is tendered at the point of sale as the performance obligation has been satisfied. Beginning in fiscal 2021, we began to offer our customers delivery services, which are fulfilled by third-party service providers. We recognize revenues at the gross amount, and delivery fees are included in “Other store operating expenses” in the Consolidated Statements of Comprehensive Income.

Revenues are reported net of sales-related taxes collected from customers to be remitted to governmental taxing authorities. Sales tax collected is included in “Accrued liabilities” until the taxes are remitted to the appropriate taxing authorities. Historically, certain of our promotional programs include multiple performance obligations that are discounted from the standalone selling prices. We allocate the entire discount to the remaining performance obligation.

During fiscal 2021, the Company launched an enhanced loyalty program, wherein eligible customers who enroll in the program generally earn rewards based on the level of chips played. Earned rewards generally expireone to two months after they are issued. We defer revenue associated with the estimated selling prices of rewards earned, net of rewards we do not expect to be redeemed.

Advertising costs — Advertising production costs are expensed in the period when the advertising first takes place. Other advertising costs are expensed as incurred. Advertising costs expensed were $67.8, $57.6, and $32.2, in fiscal 2023, 2022 and 2021, respectively. Advertising costs are included in “Other store operating expenses” in the Consolidated Statements of Comprehensive Income.

Leases — Our operating leases consist of facility leases at our stores and our store support center and certain equipment leases that have a term in excess of one year. At contract inception, we determine whether a contract is, or contains, a lease by determining whether it conveys the right to control the use of the identified asset for a period of time. We recognize a lease liability representing the present value of lease payments not yet paid and a corresponding ROU asset as of the lease commencement date. Operating lease ROU assets are initially and subsequently measured throughout the lease term at the carrying amount of the lease liability adjusted for lease incentives, initial direct costs, prepayments or accrued lease payments and impairment of ROU assets, if any. We assess lease classification at commencement and reassess lease classification subsequent to commencement upon a change to the expected lease term or modification of the contract. Generally, the Company’s lease contracts do not provide a readily determinable implicit rate, and therefore, the Company uses an estimated incremental borrowing rate as of the commencement date in determining the present value of lease payments. The Company uses judgment in determining its incremental borrowing rate, which includes selecting a yield curve based on a hypothetical credit rating.

Our leases typically have initial terms ranging fromten totwenty years and most include options to extend the leases for one or more 5-year periods. Generally, the lease term includes the non-cancelable period of the lease inclusive of reasonably certain renewal periods up to a term oftwenty years. The Company’s lease agreements generally contain rent holidays and/or escalating rent clauses. Lease cost is recognized on a straight-line basis over the lease term. The Company is generally obligated for the cost of property taxes, insurance, and maintenance of the leased assets, which are often variable lease payments. Our leases typically provide for a fixed base rent plus contingent rent to be determined as a percentage of sales greater than certain specified target amounts. Contingent rental payments, when considered probable, are recognized as variable lease expenses. The Company accounts for the lease components and non-lease components, primarily fixed maintenance, for all leases, as a single lease component for new and modified leases. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Tenant incentives used to fund leasehold improvements are recognized when earned and reduce our ROU asset related to the lease. Tenant incentives are amortized through the ROU asset as reductions of expense over the lease term. The balance of leasehold improvement incentive receivables is reflected as a reduction of the current portion of operating lease liabilities. We consider the concentration of credit risk for tenant improvement allowance receivables from landlords to be minimal due to the payment histories and general financial condition of our landlords.

Operating leases are included within the “Operating lease right of use assets”, “Accrued liabilities” and “Operating lease liabilities” in the Consolidated Balance Sheets. Operating lease payments are classified as cash flows from operating activities with ROU asset amortization and the change in the lease liability combined within “Other liabilities” in the reconciliation of net income to cash flows provided by operating activities in the Consolidated Statements of Cash Flows.

Self-insurance programs — The Company utilizes a self-insurance plan for health, general liability and workers’ compensation coverage. To limit our exposure to losses, we maintain stop-loss coverage on our health coverage and excess liability policies on our general liability and workers' compensation coverage through third-party insurers. Losses are accrued based on the Company’s historical claims experience and case losses, assisted by independent third-party actuaries. The estimated cost to settle reported claims and incurred but unreported claims is included in “Accrued liabilities” and “Other liabilities” in the Consolidated Balance Sheets.

Pre-opening costs — Pre-opening costs include costs associated with the opening and organizing of new stores, including the cost of pre-opening rent, training, relocation, recruiting and travel costs for team members engaged in such pre-opening activities. All pre-opening costs are expensed as incurred.

Income taxes — Deferred tax assets and liabilities are recognized based upon anticipated future tax consequences attributable to differences between the financial statement carrying value of assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using current enacted tax rates expected to apply to taxable income in the years in which we expect the temporary differences to reverse. The effect of a change in tax rates on deferred taxes is recognized in income in the period that includes the enactment date. We routinely evaluate the likelihood of realizing the benefit of our deferred tax assets and may record a valuation allowance if, based on all available evidence, we determine that it is more likely than not that some portion of the tax benefit will not be realized.

The calculation of tax liabilities involves judgment and evaluation of uncertainties in the interpretation of federal and state tax regulations. We evaluate our exposures associated with our various tax filing positions and recognize a tax benefit from an uncertain tax position only if it is more likely than not that the position will be sustained on examination by the taxing authorities based on the technical merits of the position. For uncertain tax positions that do not meet this threshold, we have established accruals for taxes that may become payable in future years as a result of audits by tax authorities. Tax accruals are adjusted as events occur that affect the potential liability for taxes such as the expiration of statutes of limitations, conclusion of tax audits, identification of additional exposure based on current calculations, identification of new issues, or the issuance of statutory or administrative guidance or rendering of a court decision affecting a certain issue.

Foreign currency — Foreign currency translation adjustments represent the unrealized impact of translating the financial statements of our Canadian stores from their respective functional currency (Canadian dollars) to U.S. dollars and are reported as a component of comprehensive income and recorded in “Accumulated other comprehensive loss” on our Consolidated Balance Sheets. Gains and losses from foreign currency transactions are recognized in “Other store operating expenses” in the Consolidated Statements of Comprehensive Income.

Earnings per share — Basic net income per share is computed by dividing net income available to common shareholders by the basic weighted average number of common shares outstanding for the reporting period. Diluted net income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the calculation of diluted net income per share, the basic weighted average shares outstanding is increased by the dilutive effect of stock options and restricted share awards. Stock options and restricted share awards with an anti-dilutive effect are not included in the diluted net income per share calculation.

Basic weighted average shares outstanding are reconciled to diluted weighted average shares outstanding as follows:

Acquisitions —The Company accounts for acquisitions under the acquisition method of accounting, which requires the acquired assets and liabilities, including contingencies, be recorded at fair value determined on the acquisition date and changes thereafter reflected in income. For significant acquisitions, the Company obtains independent third-party valuation studies for certain of the assets acquired and liabilities assumed to assist the Company in determining fair value. The estimation of the fair values of the assets acquired and liabilities assumed involves a number of estimates and assumptions that could differ materially from the actual amounts realized. The Company provides assumptions, including both quantitative and qualitative information, about the specified asset or liability to the third-party valuation firms so they can assist in determining the fair value of assets and liabilities acquired. The Company then records acquired assets and liabilities at their estimated fair value based on the information provided. The third-party valuation firms are supervised by Company personnel who are knowledgeable about valuations and fair value. The Company evaluates the appropriateness of the assumptions and valuation methodologies utilized by the third-party valuation firms.

Recent accounting pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures, which requires public entities, including those with a single reportable segment, to provide all the disclosures required by this standard and all existing segment disclosures required by Segment Reporting (Topic 280) on an interim and annual basis, including new requirements to disclose significant segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within the reported measure(s) of a segment's profit or loss, the amount and composition of any other segment items, the title and position of the CODM, and how the CODM uses the reported measure(s) of a segment's profit or loss to assess performance and decide how to allocate resources. The guidance is effective for annual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024, applied retrospectively. Early adoption is permitted. The Company expects ASU 2023-07 to require additional disclosures in the notes to our consolidated financial statements and does not plan early adoption.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures, which requires, among other things, the following for public business entities: (i) enhanced disclosures of specific categories of reconciling items included in the rate reconciliation, as well as additional information for any of these items meeting certain qualitative and quantitative thresholds; (ii) disclosure of the nature, effect and underlying causes of each individual reconciling item disclosed in the rate reconciliation and the judgment used in categorizing them if not otherwise evident; and (iii) enhanced disclosures for income taxes paid, which includes federal, state, and foreign taxes, as well as for individual jurisdictions over a certain quantitative threshold. The amendments in ASU 2023-09 eliminate the requirement to disclose the nature and estimate of the range of the reasonably possible change in unrecognized tax benefits for the 12 months after the balance sheet date. The provisions of ASU 2023-09 are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company expects ASU 2023-09 to require additional disclosures in the notes to our consolidated financial statements and does not plan early adoption.

Note 2: Business Combination— Acquisition of Main Event

On June 29, 2022, the Company acquired Main Event for net cash and contingent consideration. Main Event is also focused on entertainment, food and drinks, largely for the demographic target of families with young children. The acquisition puts the Company in a strategic position for accelerated, profitable growth in both brands as well as creates cost synergies with our Dave & Buster’s brand. We finalized our accounting for the Main Event Acquisition in the second quarter of fiscal 2023.

The components of the purchase price and net assets acquired in the Main Event Acquisition are as follows:

(1) The Company has an obligation to pay, in cash, an aggregate amount equal to any “Transaction Tax Benefits,” with respect to any taxable year of the Company after the Closing Date ending on or before December 31, 2028, including the current taxable year. This amount was based on the present value of the maximum amount provided in the Merger Agreement. As of February 4, 2024, the remaining unpaid balance of the contingent consideration of $0.6 was included in accrued liabilities on the consolidated balance sheet.

Unaudited Pro Forma Information –To reflect the Acquisition as if it had occurred on January 31, 2022, the unaudited pro forma results include adjustments to reflect, among other things, the interest expense from debt financings obtained to partially fund the cash consideration transferred. Pro forma adjustments were tax effected at the Company’s historical statutory rates in effect for the respective periods. The unaudited pro forma amounts are not necessarily indicative of the combined results of operations that would have been realized had the acquisitions and related financings occurred on the aforementioned dates, nor are they meant to be indicative of any anticipated combined results of operations that the Company will experience after the transaction. In addition, the amounts do not include any adjustments for actions that may be taken following the completion of the transaction, such as expected cost savings, operating synergies, or revenue enhancements that may be realized subsequent to the transaction.

The following unaudited pro forma information provides the effect of the Main Event Acquisition as if the acquisition had occurred at the beginning of fiscal 2022:

The historical consolidated financial information of the Company and Main Event has been adjusted in the pro forma information to give effect to pro forma events that are directly attributable to the acquisition and related financing arrangements and are factually supportable.

Note 3: Inventories

Inventories consisted of the following for the years presented:

Entertainment inventory includes electronics, plush toys and small novelty and other items used as redemption prizes for certain games, as well as supplies needed for entertainment operations.

Note 4: Property and Equipment

Property and equipment consist of the following:

Depreciation expense totaled $207.7, $168.9, and $138.3 for fiscal 2023, fiscal 2022, and fiscal 2021, respectively.

Note 5: Goodwill and Tradename Assets

The changes in the carrying amount of goodwill and tradename assets during fiscal 2023 and fiscal 2021 are as follows:

(1) See Note 2 for discussion of the Main Event Acquisition.

(2) Adjustments to preliminary purchase price. The Company finalized its purchase accounting related to the Main Event Acquisition in the second quarter of 2023.

Note 6: Accrued Liabilities

Accrued liabilities consist of the following as of the fiscal years ended:

(1)Leasehold incentive receivables from landlords of $13.0 and $5.9 as of February 4, 2024 and January 29, 2023, respectively, are reflected as a reduction of the current portion of operating lease liabilities.

Note 7: Debt

Long-term debt consists of the following:

Senior Secured Credit Agreement

In connection with the closing of the Main Event Acquisition on June 29, 2022, the Company entered into a senior secured credit agreement, which refinanced the $500.0 existing revolving facility, extended the maturity date to June 29, 2027, and added a new term loan facility in the aggregate principal amount of $850.0, with a maturity date of June 29, 2029 (“Credit Facility”). The proceeds of the term loan, net of an original issue discount of $42.5, were used to pay the consideration for the Main Event Acquisition. The revolving credit facility can expire before the stated maturity date if the aggregate outstanding principal amount of the Notes, as defined below, exceeds $100.0 ninety-one days prior to November 1, 2025. A portion of the revolving facility not to exceed $35.0 is available for the issuance of letters of credit. The Credit Facility is unconditionally guaranteed by D&B Holdings, and certain of D&B Inc’s existing and future wholly owned material domestic subsidiaries serve as guarantors and/or co-borrowers.

As of February 4, 2024, we had letters of credit outstanding of $9.7 and an unused commitment balance of $490.3 under the revolving facility. The Credit Facility may be increased through incremental facilities, by an amount equal to the greater of (i) $400.0 and (ii)0.75 times trailing twelve-month Adjusted EBITDA, as defined, plus additional amounts subject to compliance with applicable leverage ratio and/or interest coverage ratio requirements.

The original interest rates per annum applicable to SOFR term loans are based on a defined SOFR rate (with a floor of 0.50%) plus an additional credit spread adjustment of 0.10%, plus a margin of 5.00%. The original interest rates per annum applicable to SOFR revolving loans (the “Revolving Loans”) are based on the term loan SOFR rate, plus an additional credit spread adjustment of 0.10%, plus an initial margin of 4.75%. Unused commitments under the revolving facility incur initial commitment fees of 0.50%. After the Company’s third quarter of fiscal 2022, the margin for Revolving Loans became subject to a pricing grid based on net total leverage, ranging from 4.25% to 4.75%, and commitment fees became subject to a pricing grid based on net total leverage, ranging from 0.30% to 0.50%.

First Amendment to the Credit Facility (the “First Amendment”)

On June 30, 2023, D&B Inc entered into the First Amendment with its banking syndicate, which amended the Credit Facility. The Amendment provided for a new tranche of term loans in an aggregate principal amount of $900.0 (the “2023 Term B Loans”) which consisted of $843.6 of 2023 refinancing Term B Loans which refinanced in full the term loans outstanding immediately prior to the First Amendment effective date and $56.4 of 2023 additional Term B Loans, which were used for general corporate and working capital purposes. The 2023 Term B Loans, which were issued with an original issue discount of 1%, reduced the interest rate margin applicable to term loans and Revolving Loans outstanding under the Credit Facility by 1.25% and otherwise have terms substantially the same as the terms of the existing Term B Loans under the June 29, 2022 Credit Facility. The 2023 Term B Loans could be prepaid at any time, without premium or penalty, but were subject to a prepayment premium of 1.00% (subject to certain exceptions) if certain refinancing of, or amendment to, reduce the all-in-yield of the 2023 Term B Loans was made at any time during the first six months after the Amendment effective date.

Under the First Amendment, the 2023 Term B Loans bore interest at Term SOFR (plus an additional credit spread adjustment of 0.10%) or ABR (each, as defined in the amended Credit Facility) plus (i) in the case of Term SOFR loans,3.75% per annum and (ii) in the case of ABR loans,2.75% per annum. The Revolving Loans bore interest subject to a pricing grid based on net total leverage, at Term SOFR (plus an additional credit spread adjustment of 0.10%) plus a spread ranging from 3.00% to 3.50% per annum or ABR plus a spread ranging from 2.00% to 2.50% per annum. Unused commitments under the revolving facility incur initial commitment fees of 0.30% to 0.50%.

Second Amendment to the Credit Facility (the “Second Amendment”)

On January 19, 2024, D&B Inc entered into the Second Amendment with its banking syndicate, which amended the Credit Facility. The Second Amendment provides for a new tranche of term loans in an aggregate principal amount of $897.8 (the “2024 Term B Loans”) which consist of $897.8 of 2024 refinancing Term B Loans which refinanced in full the 2023 Term B Loans outstanding immediately prior to the Second Amendment effective date. The 2024 Term B Loans reduced the interest rate margin applicable to term loans and Revolving Loans outstanding under the Credit Facility by 0.50%, removed the previously existing 0.10% credit spread adjustment, provided for an additional 0.25% step-down if a rating of B1/B+ or higher from Moody’s and S&P is achieved (which will step back up if such rating is subsequently not maintained), and otherwise have terms substantially the same as the terms of the existing 2023 Term B Loans under the First Amendment. The 2024 Term B Loans could be prepaid at any time, without premium or penalty, but were subject to a prepayment premium of 1.00% (subject to certain exceptions) if certain refinancing of, or amendment to, reduce the all-in-yield of the 2024 Term B Loans is made at any time during the first six months after the Second Amendment effective date.

The 2024 Term B Loans bear interest at Term SOFR or ABR (each, as defined in the amended Credit Facility) plus (i) in the case of Term SOFR loans,3.25% per annum and (ii) in the case of ABR loans,2.25% per annum. The Revolving Loans bear interest subject to a pricing grid based on net total leverage, at Term SOFR plus a spread ranging from 2.50% to 3.00% per annum or ABR plus a spread ranging from 1.50% to 2.00% per annum. Unused commitments under the revolving facility incur initial commitment fees of 0.30% to 0.50%.

7.625% Senior Secured Notes

During fiscal 2020, the Company issued $550.0 aggregate principal amount of 7.625% senior secured notes (the “Notes”). Interest on the Notes is payable in arrears on November 1 and May 1 of each year. The Notes mature on November 1, 2025, unless earlier redeemed, and are subject to the terms and conditions set forth in the related indenture. The Notes were issued by D&B Inc and are unconditionally guaranteed by D&B Holdings and certain of D&B Inc’s existing and future wholly owned material domestic subsidiaries. During fiscal 2021, the Company redeemed a total of

$110.0 outstanding principal amount of the Notes. The Company may elect to further redeem the Notes, in whole or in part, at certain specified redemption prices, plus accrued and unpaid interest, at the redemption date.

Loss on debt refinancing

Immediately prior to the First Amendment, the Company had $46.9 of unamortized issuance discounts and costs. As certain lenders exited the syndicate and were replaced by new syndicate members and the term loan facility was increased in size as a result of the First Amendment and Second Amendment described above, a portion of the term loan facility was deemed extinguished and a portion was determined to be modified. As a result, $10.9 of unamortized costs were written off and $5.2 of new fees were expensed on the modified portion resulting in a total charge of $16.1 included in loss on debt refinancing on the consolidated statements of comprehensive income for fiscal 2023. The remaining unamortized issuance discounts and new issuance discount and costs immediately subsequent to the refinancings were deferred and are amortized into interest expense, net over the remaining term of the Credit Facility.

Future debt obligations

Below is our future debt principal payment obligations as of February 4, 2024 by fiscal year:

Interest expense and weighted average effective interest

The following table sets forth our recorded interest expense, net for the periods presented:

(1)See discussion of sale-leaseback transaction at Note 9 to the consolidated financial statements.

For fiscal 2023 and fiscal 2022, the Company’s weighted average effective interest rate on our total debt facilities (before capitalized interest amounts and excluding sale-leaseback interest) was 10.2% and 9.6%, respectively.

Note 8: Income Taxes

The effective tax rate for fiscal 2023 was 22.2%, compared to 21.0% for fiscal 2022. The previous year tax provision includes higher excess tax benefits associated with share-based compensation.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law. Intended to provide economic relief to those impacted by the COVID-19 pandemic, the CARES Act includes provisions, among others, allowing for the carry-back of net operating losses generated in fiscal 2018, 2019 and 2020. The Company has $0.8 of federal tax refunds remaining from the fiscal 2020 carryback claim filed during fiscal 2021.

The following table sets forth our income tax provision:

The following table reconciles the effective tax rate to the federal income tax rate:

Components of the deferred income tax liability, net consist of the following as of the periods indicated:

As of February 4, 2024, we had $84.1 of state net operating loss carryforwards, which will begin to expire in fiscal 2024, and foreign tax credit carryovers of $1.6, which will begin to expire in 2028.

During fiscal 2023, the decrease in the valuation allowance of $(2.3) primarily relates to the use of available net operating loss carryforwards and the release of previously established allowance for certain net operating loss carryforwards due to improved operating performance.

A reconciliation of the beginning and ending amount of unrecognized tax benefits follows:

The February 4, 2024 balance of unrecognized tax benefits includes $2.4, that if recognized, would affect our effective tax rate. At February 4, 2024, and January 29, 2023, we had accrued interest and penalties of $0.6 and $0.5, respectively. The Company recorded accrued interest related to the unrecognized tax benefits and penalties as a component of the provision for income taxes recognized in the Consolidated Statements of Comprehensive Income.

In the next twelve months, it is reasonably possible that our unrecognized tax benefits could change due to the resolution of certain tax matters, including payments on those tax matters or due to lapse of the statute of limitations. These resolutions and payments could reduce our unrecognized tax benefits by up to $0.6.

We file consolidated income tax returns with all our domestic subsidiaries, which are periodically audited by various federal, state and foreign jurisdictions. We are generally no longer subject to federal, state, or foreign income tax examinations for years prior to 2014.

The Company recorded excess tax expense (benefits) of $(0.8), $(3.1), and $(6.9), in fiscal 2023, fiscal 2022 and fiscal 2021, respectively, to the provision for income taxes in the Consolidated Statements of Comprehensive Income.

Note 9: Leases

The components of lease expense, including variable lease costs primarily consisting of common area maintenance charges and property taxes, are as follows:

(1)We have elected the short-term lease recognition exemption for all applicable classes of underlying assets. We have not recorded ROU assets and liabilities for leases with an initial term of 12 months or less that do not include a purchase option that we are reasonably certain to exercise.

Operating lease cost, variable lease cost and short-term lease cost related primarily to our facilities is included in “Other store operating expenses” for our operating stores, “Pre-opening costs” for our stores not yet operating, or “General and administrative expenses” for our store support center, in the Consolidated Statements of Comprehensive Income.

Supplemental disclosures of cash flow information related to leases were as follows:

(1)Includes the leases acquired in the business combination discussed at Note 2.

Minimum future maturities of operating lease liabilities as of February 4, 2024 were as follows:

Operating lease payments in the table above includes minimum lease payments forfive future sites for which the leases have commenced. Operating lease payments exclude approximately $216.3 of minimum lease payments related totwelve facility leases that have been executed but have not yet commenced.

Sale-Leaseback Transaction

In October 2023, the Company entered into a sale and master lease agreement (a "sale-leaseback") with an unrelated third-party. Under these agreements, the Company sold four of its store properties, including land, buildings and certain improvements, at a sale price of $85.8 and then leased the assets back through the sale-leaseback transaction.

Based on certain criteria and in accordance with U.S. GAAP, the transaction was accounted for as a failed sale-leaseback. As a result, the store property assets remain on the consolidated balance sheet at their historical net book value and are depreciated over the remaining term of the master lease. A financing obligation liability was recognized in the amount of the net proceeds received in the amount of $84.2. The Company will not recognize rent expense related to the leased assets. Instead, monthly rent payments under the master lease agreement (initially, $6.4 per year) will be recorded as interest expense and a reduction of the outstanding liability.

As of February 4, 2024 the long-term outstanding liability of $83.7 was recorded in Other long-term liabilities and the current outstanding liability of $0.3 was recorded in Accrued liabilities on the consolidated balance sheet related to the financing liability.

Note 10: Stockholders’ Equity

Share issuances and repurchases

On March 27, 2023, our Board approved a share repurchase program with an authorization limit of $100.0. On April 19, 2023, our Board approved an increase to the authorization limit of $200.0 for a total of $300.0 authorized under the program. On September 4, 2023 our Board approved an increase to the authorization limit of $100.0 for a total of $400.0 authorized under the program. During fiscal 2023, the Company repurchased 8.49 shares at an average of $35.35 per share. The remaining dollar value of shares that may be repurchased under the program is $100.0 as of February 4, 2024. Future decisions to repurchase shares continue to be at the discretion of the Board and will be dependent on our operating performance, financial condition, capital expenditure requirements and other factors that the Board considers relevant.

On December 6, 2021, our Board approved a share repurchase program, under which the Company could repurchase shares on the private market, through privately negotiated transactions and through trading plans. During fiscal 2022, the Company purchased 0.76 shares of stock for $25.0 under its share repurchase program. The share repurchase authorization limit of $100.0 expired at the end offiscal 2022.

The Company treats shares withheld for tax purposes on behalf of our employees in connection with the vesting of restricted stock units as common stock repurchases because they reduce the number of shares that would have been issued upon vesting. These withheld shares of common stock were not considered common stock repurchases under the share repurchase plan. During the fiscal years ended 2023, 2022 and 2021, we withheld 0.09,0.17, and 0.23 shares of common stock to satisfy $3.1, $8.5, and $9.5 of employees’ tax obligations, respectively.

Cash dividends

The Company did not declare or pay any dividends during fiscal years ended 2023, 2022 or 2021.

Share-based compensation

The Company maintains an equity incentive plan under which it may grant awards denominated in the Company’s common stock or units of the Company’s common stock, as well as cash variable compensation awards. The Company’s long-term incentive compensation provides awards to executive and management personnel as well as directors. We issue share-based awards under our 2014 Stock Incentive Plan. We may grant stock options or restricted stock units to executive and management personnel as well as members of our Board. Options granted to employees generally become exercisable ratably over athree-year period from the grant date. Performance-based restricted stock units and market stock units (“MSUs”) awarded to employees generally either vest ratably over three years or fully vest after three years, subject to the achievement of specified performance or market conditions, as applicable. Time-based restricted stock units have various service periods not exceeding five years.

Options granted terminate on theten-year anniversary of the grants. Stock option awards generally provide continued vesting, in the event of termination, for employees that either a) reach age 60 or greater and have at leastten years of service or b) reach age 65. Unvested stock options and restricted stock units are generally forfeited by employees who terminate prior to vesting and are prorated for retired employees.

Each share granted subject to a stock option award or time-based restricted stock unit award reduces the number of shares available under our stock incentive plans by one share. Each share granted subject to a performance restricted stock unit or market stock unit award reduces the number of shares available under our stock incentive plans by a range ofone share if the target performance or market condition is achieved, up to a maximum oftwo shares for performance or market condition achieved above target and a minimum ofno shares if performance or market condition achieved is below a minimum threshold target. The number of unissued common shares reserved for future grants under the 2014 Stock Incentive Plan is approximately 3.37 as of February 4, 2024. The Company satisfies stock option exercises and vesting of restricted stock units with newly issued shares.

The grant date fair value of our stock option awards has been determined using the Black-Scholes option valuation model. The Black-Scholes option valuation model uses assumptions of expected volatility, the expected dividend yield of our stock, the expected term of the awards and the risk-free interest rate, as well as an estimated fair value of our common stock. Fair value valuation analyses were prepared by an independent third-party valuation firm, utilizing the market-determined share price.

A summary of the options, as well as the significant assumptions used in determining the underlying fair value of those options, granted in fiscal 2023 were as follows:

(1)Annual grant to certain executives.

(2)Grants to newly hired executive employees.

The following is a summary of stock option award activity during fiscal 2023:

The total intrinsic value of options exercised during fiscal 2023, fiscal 2022, and fiscal 2021 was $1.7, $5.1, and $10.4, respectively. The unrecognized expense related to our stock option plan totaled approximately $3.9 as of February 4, 2024 and will be expensed over a weighted average of 3.3 years. For options outstanding as of February 4, 2024, the weighted average remaining contractual life was 6.1 years and the aggregate intrinsic value was $10.5. For options exercisable as of February 4, 2024, the weighted average remaining contractual life was 4.3 years and the aggregate intrinsic value was $4.0.

The following is a summary of restricted stock unit awards activity during fiscal 2023:

The weighted average grant-date fair values of restricted stock units granted during fiscal 2023, 2022 and 2021 were $35.94, $33.09, and $47.42, respectively. The total fair value of restricted stock units vested during fiscal 2023, 2022, and 2021 was $7.4, $20.6, and $29.3, respectively. The unrecognized expense related to our restricted stock units was $26.0 as of February 4, 2024, which will be expensed over a weighted average of 2.9 years.

Compensation expense related to stock options with only service conditions (time-based) is recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award or to the date on which retirement eligibility is achieved, if shorter. Compensation expense for time-based restricted stock units is based on the market price of the shares underlying the awards on the grant date. Compensation expense for performance-based restricted stock units reflects the estimated probability that performance conditions at target or above will be met. Restricted stock units are expensed ratably over the service period. The effect of market conditions is considered in determining the grant date fair value of MSU awards, which is not subsequently revised based on actual performance.

Compensation expense related to stock option plans and time-based restricted stock units, which is included in general and administrative expenses on the consolidated statements of comprehensive income, was as follows for the fiscal years presented:

Note 11: Commitments and Contingencies

We are subject to certain legal proceedings and claims that arise in the ordinary course of our business, including claims alleging violations of federal and state law regarding workplace and employment matters, discrimination, slip-and-fall and other customer-related incidents and similar matters. In the opinion of management, based upon consultation with legal counsel, the amount of ultimate liability with respect to such legal proceedings and claims will not materially affect the consolidated results of our operations or our financial condition. Legal costs related to such claims are expensed as incurred.

We are subject to the terms of a settlement agreement with the Federal Trade Commission that requires us, on an ongoing basis, to establish, implement, and maintain a comprehensive information security program that is reasonably designed to protect the security, confidentiality, and integrity of personal information collected from or about consumers. The agreement does not require us to pay any fines or other monetary assessments and we do not believe that the terms of the agreement will have a material adverse effect on our business, operations, or financial performance.

Note 12: Subsequent Event

On April 2, 2024, our Board approved an increase of $100.0 to our previously existing share repurchase program, under which the Company may repurchase shares on the open market, through privately negotiated transactions and through trading plans. See further discussion of the existing share repurchase program at Note 10. The total authorized under the program is now $500.0. The remaining dollar value of shares that may be repurchased under the program is now $200.0. The share repurchase program may be modified, suspended, or discontinued at any time. Future decisions to repurchase shares continue to be at the discretion of the Board and will be dependent on our operating performance, financial condition, capital expenditure requirements and other factors that the Board considers relevant.