Brookstone Reports Net Sales increased 4.6% to $519.6 million for Fiscal Year 2012 - Comp sales increased 4.5%

- Cash position improves by $1.6 million

- Adjusted EBITDA of $18.4 million decreased 25.7% from Fiscal Year 2011

MERRIMACK, N.H., March 28, 2013 /PRNewswire/ -- Innovative product development company and multi-channel lifestyle retailer Brookstone, Inc. announced today that, for the fiscal year ended December 29, 2012, net sales increased 4.6% to $519.6 million and comp sales increased 4.5% while Adjusted EBITDA decreased 25.7% to $18.4 million as compared to the fiscal year ended December 31, 2011.  For the fourth quarter ended December 29, 2012, net sales decreased 8.0% to $232.8 million, comp sales decreased 3.5% and Adjusted EBITDA decreased 25.9% to $35.4 million as compared to the fourth quarter of 2011. 

For the fiscal year ended December 29, 2012, net sales in the Alternative Distribution channel, which includes our wholesale business, increased $14.1 million, or 51.4%, to $41.6 million as compared to the fiscal year ended December 31, 2011. For the fourth quarter ended December 29, 2012, net sales in the Alternative Distribution channel decreased $3.4 million, or 24.3%, to $10.7 million as compared to the fourth quarter of 2011. The increase for the full fiscal year was primarily the result of an increase in sales to our wholesale partners (i.e. other retailers) that purchased our products for sale in their retail stores and channels, while the fourth quarter decrease was due to the timing of shipments to our wholesale partners as compared to the fourth quarter of 2011. We continue to focus on expanding our revenue streams through alternative channels.  

Net sales in our e-Commerce channel increased $9.0 million, or 9.3%, to $105.4 million for the fiscal year ended December 29, 2012, as compared to the fiscal year ended December 31, 2011. For the fourth quarter ended December 29, 2012, net sales in the e-Commerce channel decreased $1.3 million, or 2.1%, to $60.1 million as compared to the fourth quarter of 2011.  The increases for the full fiscal year were driven by new and expanded online marketing initiatives and partnerships through our website, www.brookstone.com. Our results were offset in the fourth quarter by reduced year over year catalog circulation and a reduction in shipping and handling revenues as we responded to consumer demand with discounted shipping programs.

In our Retail channel, for the fiscal year ended December 29, 2012, net sales decreased $0.3 million, or 0.1%, to $372.6 million and same-store sales increased 1.7% as compared to the fiscal year ended December 31, 2011. For the fourth quarter ended December 29, 2012, net sales in the Retail channel decreased $15.4 million, or 8.7%, to $162.0 million and same-store sales decreased 6.3% as compared to the fourth quarter of 2011.  The net sales results in our Retail channel were impacted by the soft holiday selling season broadly experienced by retailers, driven by consumers' uncertainty about the economy, the potential fiscal cliff, and the U.S. Presidential election, as well as a net decrease in the number of stores from 294 to 278 as compared to fiscal year 2011.

Our inventories at the end of the year increased approximately $18.3 million or 20.6% from the same period last year.  While higher than in fiscal year 2011, we believe that our stock levels remain satisfactory and that the quality of our inventory on the whole is good.  Our cash levels increased $1.6 million as we ended fiscal year 2012 with approximately $31.6 million in cash as compared to $30.1 million in cash at the end of fiscal year 2011, no cash borrowings and approximately $64.8 million in borrowings available under our revolving credit facility.

Stephen Bebis, Brookstone's President and CEO, said:  "While we are disappointed in the fourth quarter results, we are encouraged by improvements in key growth segments of our business such as our e-Commerce and Alternative Distribution channels. Nevertheless, in response to our fourth quarter Retail channel results, as well as a recognition of the evolution of retail and our overall business, we enacted a plan in January 2013 to significantly reduce certain administrative and labor costs of the Company.  These measures are designed to increase the profitability of the Company, while at the same time provide for growth of our strategic initiatives.  We anticipate that the associated savings will be approximately $12.0 million during fiscal year 2013. These initiatives, along with our continued top line growth, 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:

 

Brookstone, Inc. 


Reconciliation of Net Income (Loss) to Adjusted Earnings Before Interest,

Taxes, and Depreciation and Amortization (Adjusted EBITDA)

(In thousands)


(Unaudited)

 




For the fourth quarter ended


For the fiscal year ended



December 29, 2012


December 31, 2011


December 29, 2012


December 31, 2011

Net income (loss) attributable

  to Brookstone


$    27,802


$     39,255


$    (13,715)


$    (7,281)

Interest expense


4,359


6,302


17,317


19,723

Income tax provision (benefit)


(91)


(384)


109


136

Depreciation and Amortization


2,390


2,518


9,376


10,745

EBITDA


34,460


47,691


13,087


23,323

Share-based compensation


---


(15)


4,139


1,342

Long-lived asset impairment


878


---


878


---

Straight-line rent adjustment


83


94


328


154

Adjusted EBITDA


$    35,421


$    47,770


$       18,432


$     24,819











Brookstone, Inc. is an innovative product development and specialty lifestyle retail company that currently operates approximately 270 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 for share data)


(Unaudited)













December 29, 2012


December 31, 2011


Assets:





 

Current assets:






Cash and cash equivalents

$                31,614


$                30,051



Receivables, less allowances for doubtful accounts of $314 at

December 29, 2012 and $507 at December 31, 2011

14,895


13,298



Merchandise inventories

107,215


88,936



Prepaid expenses

2,881


8,603



   Total current assets

156,605


140,888









Property, plant and equipment, net

42,735


45,441



Intangible assets

105,000


105,000



Goodwill

99,734


99,734



Other assets

2,037


2,661



   Total assets

$             406,111


$             393,724








Liabilities and Shareholder's Equity





 

Current liabilities:






Accounts payable

$               55,103


$               32,073



Other current liabilities

49,187


48,681



Current portion of long-term debt

2,104


10,828



Deferred income taxes

47


469



   Total current liabilities

106,441


92,051









Long-term debt:






   Senior Notes, at face value net of discount

125,410


125,275



   Concession on 2010 Note Exchange, net

6,973


10,401



   Other long-term debt

14,499


2,503



       Total long-term debt

146,882


138,179









Other long term liabilities

17,858


19,217



Deferred income taxes

38,488


38,066



   Total liabilities

309,669


287,513









Commitments and contingencies

---


---








Equity:






Brookstone Shareholder's equity:






Common stock – $0.01 par value 1,000 shares authorized, one share
issued and outstanding

---


---



Additional paid-in capital

270,966


266,827



Accumulated other comprehensive loss

(3,120)


(2,717)



Retained deficit

(172,995)


(159,280)



   Total Brookstone Shareholder's equity

94,851


104,830



Noncontrolling interests

1,591


1,381



   Total equity

96,442


106,211



   Total liabilities and equity

$            406,111


$            393,724


 

 

BROOKSTONE, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands)

(Unaudited)







Thirteen weeks ended


Thirteen weeks ended


December 29, 2012


December 31, 2011





Net sales

$ 232,814


$ 252,965





Cost of sales

145,743


151,165





Gross profit

87,071


101,800





Selling, general and administrative expenses

53,798


56,337





Long-lived asset impairment

878


---





Income from operations

32,395


45,463





Interest expense, net

4,359


6,302





Income before taxes

28,036


39,161





Income tax benefit

(91)


(383)





Consolidated net income

28,127


39,544





Less: Net income attributable to noncontrolling interests

325


289





Net income attributable to Brookstone, Inc.

$ 27,802


$ 39,255





 

BROOKSTONE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

(Unaudited)








Fifty-two weeks ended


Fifty-two weeks ended


December 29, 2012


December 31, 2011









Net sales

$ 519,613


$ 496,766





Cost of sales

363,045


339,631





Gross profit

156,588


157,135





Selling, general and administrative expenses

150,061


143,374





Long-lived asset impairment

878


-





Income from operations

5,129


13,761





Interest expense, net

17,317


19,722





Loss before taxes

(12,188)


(5,961)





Income tax provision

109


136





Consolidated net loss

(12,297)


(6,097)





Less: Net income attributable to noncontrolling interests

1,418


1,184





Net loss attributable to Brookstone, Inc.

$ (13,715)


$ (7,281)





 

Contact:

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

SOURCE Brookstone, Inc.



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http://www.brookstone.com

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