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Brookstone Announces $1.2 million EBITDA Improvement for First Quarter 2013 Financial Results

- Comp sales increased 2.1%

MERRIMACK, N.H., May 14, 2013 /PRNewswire/ -- Innovative product development company and multi-channel lifestyle retailer Brookstone, Inc. announced today that, for the first quarter ended March 30, 2013, net sales increased 0.6% to $89.6 million and comp sales increased 2.1% while Adjusted EBITDA improved 13.1% to $(7.8) million as compared to the first quarter ended March 31, 2012.   The revenue increase of 0.6% was on top of an 11.2% increase during the same period last year.

For the first quarter of 2013, net sales in our e-Commerce channel increased $2.0 million, or 12.8%, to $17.5 million, as compared to the same period last year. This was primarily due to increases in revenue resulting from improved catalog productivity, continued growth of our online product portfolio, and the expansion of successful Internet marketing programs.

Net sales in the Alternative Distribution channel, which includes our wholesale business, increased $1.4 million, or 24.0%, to $7.4 million as compared to last year. The significant increase in the net sales of our Alternative Distribution segment was primarily the result of an increase in sales to our wholesale partners that purchased our products for sale in their retail stores and channels.  We continue to focus on expanding our revenue streams through alternative channels.  

In our Retail channel for the first quarter of 2013, net sales decreased $2.9 million, or 4.2%, to $64.7 million and same-store sales decreased 1.2% as compared to the first quarter of last year. The net sales results in our Retail channel were impacted by delays in new product introductions and a decrease in the number of stores from 284 to 267 as compared to the first quarter of 2012.  The same-store sales decline of 1.2% for the first quarter compares to a 7.9% increase during the same period last year.

Our cash level at the end of the first quarter was approximately $1.4 million as compared to $1.3 million for the first quarter of 2012.  In addition, we had cash borrowings of approximately $28.9 million and approximately $29.2 million in borrowings available under our revolving credit facility. Although inventories at the end of the first quarter increased approximately $13.9 million or 16.6% from the first quarter of 2012, we believe that our stock levels remain satisfactory, inventory quality is strong, and total inventory levels are in line with historical norms and expectations.

Jim Speltz, Brookstone's President and CEO, said:  "We are pleased with the top and bottom line growth of our e-Commerce and wholesale channels.  Specifically, e-Commerce has seen growth in website traffic, catalog productivity, and customer file growth.  At the same time, we are disappointed in our first quarter Retail channel results.  As previously noted, we have refocused our product strategy in 2013 to develop a deeper range of relevant and timely gifts that are oriented around seasonal events including Mothers Day, Fathers Day, and the winter holiday season.  These initiatives complement our core category offerings and provide us with optimism for 2013 as we continue to promote the Brookstone brand to drive our long-term success in each of our business segments." 

Non-GAAP Financial Information
EBITDA and Adjusted EBITDA are measures used by management to evaluate the Company's ongoing operations and as a general indicator of the Company's operating cash flow. The Company defines EBITDA as net income, plus interest expense, provision for income taxes, and depreciation and amortization. The Company's definition of Adjusted EBITDA is consistent with the definition of "Consolidated EBITDA" as noted in our Credit Agreement for purposes of certain financial covenant calculations, which is EBITDA minus extraordinary or one-time gains and plus extraordinary or one-time non-cash losses; plus non-cash items that reduce consolidated net income during the period; and purchase accounting adjustments.  Management believes EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in the comparative evaluation of companies. Because not all companies use identical calculations, the Company's presentation of EBITDA may not be comparable to similarly titled measures of other companies. EBITDA is not a recognized term under GAAP and does not purport to be an alternative to either net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Additionally, EBITDA is not intended to be a measure of free cash flow for management's discretionary use as it does not reflect certain cash requirements such as interest payments, tax payments and debt service requirements.  The Company excludes certain non-cash items from Adjusted EBITDA as noted above, as the Company believes this provides an enhanced indicator of operating cash flow.  We have provided a reconciliation of Adjusted EBITDA to GAAP net income below (in thousands):

 



For the thirteen weeks ended



March 30, 2013


March 31, 2012







Net loss attributable to Brookstone

$       (14,711)


$        (16,704)


Interest expense

4,247


4,408


Income tax provision

187


188


Depreciation and Amortization

2,341


2,409


EBITDA

(7,936)


(9,699)


Share-based compensation

38


589


Straight-line rent adjustment

55


82


Adjusted EBITDA

$         (7,843)


$          (9,028)







 

Brookstone, Inc. is an innovative product development and specialty lifestyle retail company that currently operates approximately 265 Brookstone branded stores nationwide and in Puerto Rico. Typically located in high-traffic regional shopping malls and airports, the stores feature unique and innovative consumer products. The Company also operates an e-Commerce channel that includes the Brookstone catalog and the Brookstone website at http://www.brookstone.com as well as an alternative distribution channel that includes sales to select resellers and corporate partners. 

Brookstone is principally owned by three sponsors, Osim International, J.W. Childs, and Temasek Holdings.  In accordance with the terms governing its publicly-held debt, the Company issues quarterly and annual reports under SEC guidelines.

Statements in this release which are not historical facts, including statements about the Company's confidence or expectations, earnings, anticipated operations of its e-commerce sites and those of third-party service providers, and other statements about the Company's operational outlook are forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 ("Reform Act") and are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in such forward-looking statements. Such risks and uncertainties include, without limitation, risks of changing market conditions in the overall economy and the retail industry, consumer demand, the effectiveness of e-commerce technology and marketing efforts, availability of products, availability of adequate transportation of such products, and other factors detailed from time to time in the Company's annual and other reports posted to the Company's website. Words such as "estimate", "project", "plan", "believe", "feel", "anticipate", "assume", "may", "will", "should" and similar words and phrases may identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date thereof. The Company undertakes no obligations to publicly release any revisions to these forward-looking statements or reflect events or circumstances after the date hereof.

 

BROOKSTONE, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)



March 30, 2013


December 29, 2012


March 31, 2012







Assets












Current assets:






    Cash and cash equivalents

$               1,365


$               31,614


$               1,280

    Receivables, net

9,596


14,895


8,411

    Merchandise inventories

97,196


107,215


83,336

    Prepaid expenses

7,249


2,881


8,458







        Total current assets

115,406


156,605


101,485







Property, plant and equipment, net

41,333


42,735


43,661

Intangible assets, net

105,000


105,000


105,000

Goodwill

99,734


99,734


99,734

Other assets

1,835


2,037


2,639







        Total assets

$           363,308


$            406,111


$           352,519







Liabilities and Shareholder's Equity












Current liabilities:






    Accounts payable

$             22,960


$             55,103


$             14,879

    Other current liabilities

26,221


49,187


26,439

    Short-term borrowings

28,899


---


10,860

    Current portion of long term debt

2,104


2,104


2,104

    Deferred income taxes

47


47


469







Total current liabilities

80,231


106,441


54,751







Long-term debt:






    Senior Notes, at face value net of discount

125,438


125,410


125,328

    Concession on 2010 Note Exchange, net

6,058


6,973


9,567

    Other long-term debt

13,971


14,499


16,077

        Total long-term debt

145,467


146,882


150,972







Other long-term liabilities

17,648


17,858


18,551

Deferred income taxes

38,488


38,488


38,066

Total liabilities

281,834


309,669


262,340







Commitments and contingencies

---


---


---







Equity:






Brookstone Shareholder's equity:






Additional paid-in capital

271,004


270,966


267,416

Accumulated other comprehensive loss

(3,072)


(3,120)


(2,710)

Retained deficit

(187,706)


(172,995)


(175,984)

         Total Brookstone Shareholder's equity

80,226


94,851


88,722

Noncontrolling interests

1,248


1,591


1,457

Total equity

81,474


96,442


90,179







Total liabilities and equity

$           363,308


$           406,111


$           352,519

 

BROOKSTONE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

(Unaudited)



Thirteen weeks ended


March 30, 2013


March 31, 2012





Net sales

$              89,614


$              89,052





Cost of sales

71,246


68,854





Gross profit

18,368


20,198





Selling, general and administrative expenses

28,537


32,014





Loss from operations

(10,169)


(11,816)





Interest expense, net

4,247


4,408





Loss before income taxes

(14,416)


(16,224)





Income tax provision

187


188





Consolidated net loss

(14,603)


(16,412)





Less: Net income attributable to noncontrolling interests

108


292





Net loss attributable to Brookstone

$           (14,711)


$           (16,704)

 

Contact:

Thomas F. Moynihan
Vice President, Chief Financial Officer
(603) 880-9500

SOURCE Brookstone, Inc.

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