EDEN PRAIRIE, Minn.--(BUSINESS WIRE)--Bluestem Group Inc. (OTCMKTS: BGRP) today reported unaudited consolidated financial results that include its wholly-owned subsidiary, Bluestem Brands, Inc. and its subsidiaries (“Bluestem”), for the 13-week period ended October 30, 2015 (we refer to the 13-week periods ended October 30, 2015 and October 31, 2014 in this release as respectively the “third quarter” of fiscal 2015 and fiscal 2014). Bluestem is a multi-brand, online retailer of a broad selection of name-brand and private label general merchandise serving low- to middle-income consumers nationwide.
“Bluestem Group delivered another strong quarter. Net retail sales, including sales from the Orchard portfolio which was acquired on July 10th of 2015, were $475.0 million, and adjusted EBITDA was $30.9 million. Although net principal losses for the quarter were 130 bps higher than last year, the year-over-year increase continues to narrow. On the Orchard front, we are making good progress on the integration; we’re already cross-selling merchandise, we’ve consolidated and renegotiated several meaningful contracts, and we’ve centralized the appropriate back-office and operations functions in order to streamline both companies and drive the benefits anticipated in our acquisition model,” said Steve Nave, Bluestem Group’s Chief Executive Officer.
Third Quarter 2015 Bluestem Group Consolidated Highlights – Includes Bluestem Brands beginning November 7, 2014, and Orchard Brands beginning July 10, 2015
- Adjusted EBITDA for the third quarter of fiscal 2015 was $30.9 million compared to $8.3 million in the third quarter of fiscal 2014.
- Net income from continuing operations for the third quarter of fiscal 2015 was $11.2 million compared to net income from continuing operations of $5.4 million for the third quarter of fiscal 2014. Diluted loss per share from continuing operations was $0.02 for the third quarter of fiscal 2015, compared to diluted earnings per share from continuing operations of $0.06 for the third quarter of fiscal 2014. Included in the third quarter net income was a $14.1 million non-cash gain from derivatives in our own equity.
- Net gain on loans held for sale, investments available-for-sale, and equity in income of joint ventures and partnership was $2.3 million in third quarter of fiscal 2015, which included net gains of $0.7 million on proceeds of $5.9 million from dispositions of $5.2 million in net assets. As of the end of the third quarter, the company had $74.9 million in net commercial real estate assets remaining.
- Cash and cash equivalents were $164.9 million as of October 30, 2015.
Third Quarter 2015 Bluestem Brands Stand-alone Highlights – Includes Orchard Brands beginning July 10, 2015
- Net sales for the third quarter of fiscal 2015 were $475.0 million, including $234.3 million of net sales from the Orchard Portfolio, a 123% increase over net sales of $213.3 million for the third quarter of fiscal 2014.
- Bluestem’s adjusted EBITDA was $27.0 million in the third quarter of fiscal 2015 compared to adjusted EBITDA of $11.5 million for the third quarter of fiscal 2014.
- Bluestem Legacy Portfolio net sales for the third quarter of fiscal 2015 were $240.7 million, a 13% increase compared to $213.3 million in the third quarter of fiscal 2014.
- Orchard Portfolio net sales for the third quarter of fiscal 2015 were $234.3 million, a 5% decrease compared to Orchard's net sales of $247.8 million for the 13 weeks ended October 25, 2014.
- Fingerhut and Gettington revolving new customer credit accounts were 169 thousand, an 11% increase over 152 thousand in the third quarter of fiscal 2014.
- FreshStart new customer credit accounts were 55 thousand, an 8% increase over 51 thousand in the third quarter of fiscal 2014.
- Fingerhut and Gettington active accounts increased to 1.69 million as of the end of the third quarter of fiscal 2015, a 10% increase over the end of the third quarter of fiscal 2014.
- 30+ day delinquent balances on the revolving portfolio were 17.6% at the end of the third quarter of fiscal 2015 compared to 17.8% for the same period in 2014.
- Net principal charge-off rate on the revolving portfolio was 18.8% for the third quarter of fiscal 2015 compared to 17.5% for the third quarter of 2014.
- Orchard Portfolio active customers were 8.0 million as of the end of the third quarter of fiscal 2015.
- Orchard’s active customers were 7.9 million as of September 27, 2014.
All financial information included in this release is unaudited. Information for Bluestem Group is presented on a consolidated basis, including Bluestem Brands Inc., beginning November 7, 2014 and the Orchard Portfolio beginning July 10, 2015. Consolidated information for Bluestem Group’s wholly-owned subsidiary, Bluestem Brands Inc., is also presented on a stand-alone basis. The acquisitions of Bluestem Brands and Orchard were accounted for as business combinations.
Adjusted EBITDA is defined in the accompanying financial information of Bluestem Group and Bluestem Brands. Please see “Bluestem Group Inc. and Bluestem Brands, Inc. Financial Information-Overview and Basis of Presentation” below and accompanying disclosures for a more detailed explanation of the foregoing matters, reconciliations to results reported under GAAP and other important information for investors to consider.
Earnings Teleconference Information
Management will discuss the company’s 13-week period ended October 30, 2015 financial results during an in-person meeting and conference call tomorrow, December 16, 2015, from 1:00-3:00PM ET at the offices of Akin Gump, One Bryant Park, Bank of America Tower in New York City. The conference call can be accessed at (888) 504-7963 or (719) 457-2085 (International), conference ID # 4333754. The call will also be broadcast simultaneously at http://www.bluestem.com/investor-relations. Following completion of the call, a recorded replay of the webcast will be available on Bluestem Group’s website. To listen to the telephone replay, call toll-free (877) 870-5176 or (858) 384-5517 (International), replay pin # 4333754. The telephone replay will be available at 8:00 PM ET December 16, 2015. Additional investor information can be accessed at http://www.bluestem.com/investor-relations.
About Bluestem Group
Bluestem Group Inc. is a holding company whose businesses include Bluestem Brands, a multi-brand, online retailer of a broad selection of name-brand and private label general merchandise serving low- to middle-income consumers through 16 retail brands that include: Appleseed’s, Bedford Fair, Blair, Draper’s & Damon’s, Fingerhut, Gettington, Gold Violin, Haband, LinenSource, Norm Thompson, Old Pueblo Traders, PayCheck Direct, Sahalie, Solutions, Tog Shop and Wintersilks. Complementing each brand is a large selection of merchandise with payment options that provide customers with the flexibility of paying over time. Bluestem Group is headquartered in Eden Prairie, MN. For additional information visit the Bluestem Group website at www.bluestem.com.
Forward Looking Statements
This release contains statements that are “forward-looking statements”. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. All statements contained herein that are not clearly historical in nature are forward-looking. In some cases, you can identify these statements by use of forward-looking words such as “may,” “will,” “should,” “anticipate,” “estimate,” “expect,” “plan,” “believe,” “predict,” “potential,” “project,” “intend,” “could” or similar expressions. In particular, statements regarding Bluestem Group’s plans, strategies, prospects and expectations regarding its business are forward-looking statements. You should be aware that these statements and any other forward-looking statements in this document only reflect Bluestem Group’s beliefs, assumptions and expectations and are not guarantees of performance. These statements involve risks, uncertainties and assumptions. Many of these risks, uncertainties and assumptions are beyond Bluestem Group’s control and may cause actual results and performance to differ materially from Bluestem Group’s expectations.
Forward-looking statements are based on Bluestem Group’s beliefs, assumptions and expectations of its future performance and actions, taking into account all information currently available to Bluestem Group. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to Bluestem Group or are within its control. If a change occurs, Bluestem Group’s plans, business, financial condition, and liquidity may vary materially from those expressed in its forward-looking statements. Important factors that could cause the actual results to be materially different from Bluestem Group’s expectations include the risks and uncertainties set forth in “Risk Factors” in Bluestem Group’s Report as of and for the fiscal years ended January 30, 2015 and January 31, 2014, as updated by its subsequent quarterly reports.
Accordingly, you should not place undue reliance on the forward-looking statements contained in this release. These forward-looking statements are made only as of the date of this release. Bluestem Group undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
BLUESTEM GROUP INC.
BLUESTEM BRANDS, INC.
FINANCIAL
INFORMATION
13 and 39 weeks ended October 30, 2015 and
October 31, 2014
Overview and Basis of Presentation
The accompanying financial information for Bluestem Group is presented on a consolidated basis, including Bluestem beginning from November 7, 2014. The accompanying financial information for Bluestem Group’s wholly-owned subsidiary, Bluestem, is also presented on a stand-alone basis. All such information is unaudited.
Bluestem Group Consolidated Financial Information
On November 7, 2014, Bluestem Group Inc. (f/k/a Capmark Financial Group Inc.) acquired Bluestem. As a result, the financial results of Bluestem for the 13- and 39-week periods ended October 30, 2015 were included in Bluestem Group’s consolidated results, and Bluestem’s financial results were not included in the Bluestem Group’s consolidated results for the 13- or 39-week periods ended October 31, 2014. The acquisition of Bluestem was accounted for as a business combination.
In December 2014, Bluestem Group changed its fiscal year from December 31 to the Friday closest to January 31 of the following year to conform to the fiscal year of Bluestem. Bluestem operates on a fiscal calendar widely used by the retail industry that results in fiscal years consisting of 52- or 53-weeks ending on the Friday closest to January 31 of the following year.
On June 18, 2015 Capmark Financial Group Inc. changed its name to Bluestem Group Inc. and began trading on the OTC marketplace under the symbol BGRP on June 19, 2015.
On July 10, 2015, Bluestem acquired Orchard Brands Corporation. Information for the Orchard portfolio is presented in Bluestem’s consolidated financial information beginning July 10, 2015.
To supplement the historical financial data derived from Bluestem Group’s consolidated financial statements, which are prepared in accordance with U.S. generally accepted accounting principles, or GAAP, this release uses adjusted EBITDA, non-GAAP net income (loss) and non-GAAP diluted net income (loss) per share of Bluestem Group as non-GAAP performance measures. This measure is not in accordance with, or an alternative to, measures prepared in accordance with GAAP.
Bluestem Stand-alone Financial Information
As previously discussed, the acquisition of Bluestem was accounted for as a business combination. By the application of “push down” accounting, Bluestem’s assets and liabilities were adjusted to fair value as of November 7, 2014. The accompanying Bluestem financial results are presented as “Predecessor” or “Successor” to indicate the period preceding the acquisition or the period succeeding the acquisition, respectively.
To supplement the historical financial data derived from Bluestem’s consolidated financial statements, which are prepared in accordance with GAAP, this release includes adjusted EBITDA, adjusted pro forma EBITDA, contribution margin, adjusted general and administrative expenses and free cash flow, as non-GAAP performance measures. These measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP. Please see the accompanying report on Bluestem’s results of operations for further important information concerning these measures.
Orchard Brands Corporation Stand-alone Financial Information
The financial information in the accompanying report on Bluestem’s results of operations for the 13 and 39 weeks ended October 30, 2015 includes historical results of Orchard Brands Corporation and its subsidiaries for the 13 weeks ended June 27, 2015, March 28, 2015, December 27, 2014, September 27, 2014, June 28, 2014 and March 29, 2014 (collectively the “Six Quarters of Historical Orchard Results”). The Six Quarters of Historical Orchard Results are presented in accordance with GAAP and based on historical Orchard Brands Corporation's basis of presentation. The Six Quarters of Historical Orchard Results are based on the historical Orchard Brands Corporation fiscal second quarter ended June 27, 2015, first quarter ended March 28, 2015 and fiscal year ended December 27, 2014.
To supplement the historical financial data derived from the historical results of Orchard Brands Corporation the accompanying report uses adjusted EBITDA and free cash flow measures. These measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP. The accompanying report also uses adjusted net sales, adjusted gross profit, adjusted selling and marketing expenses and adjusted general and administrative expenses. These measures are conformed to Bluestem Brands, Inc. basis of presentation for comparison purposes. Bluestem Brands, Inc.'s basis of presentation is in accordance with GAAP. The financial results of the Orchard Portfolio for periods succeeding the acquisition of Orchard Brands Corporation on July 10, 2015 will be presented on Bluestem Brands, Inc.'s basis of presentation. Please see the accompanying report on Orchard Brands Corporation’s results of operations for the Six Quarters of Historical Orchard Results for further important information concerning these measures.
Bluestem Group Inc.
Results for the 13- and 39-weeks
ended October 30, 2015
(includes results of Bluestem Brands, Inc. from November 7, 2014 and results of Orchard Brands Corporation from July 10, 2015)
| BLUESTEM GROUP INC. | |||||||||||||||||||||
| Consolidated Statement of Comprehensive Income | |||||||||||||||||||||
| (unaudited — in thousands, except shares and per share amounts) | |||||||||||||||||||||
| 13 Weeks Ended | 39 Weeks Ended | ||||||||||||||||||||
| October 30, 2015 | October 31, 2014 | October 30, 2015 | October 31, 2014 | ||||||||||||||||||
| Net sales and revenue | |||||||||||||||||||||
| Net retail sales | $ | 474,957 | $ | - | $ | 982,507 | $ | - | |||||||||||||
| Commercial real estate revenue | |||||||||||||||||||||
| Net interest income | 664 | 1,204 | 1,841 | 4,875 | |||||||||||||||||
| Net gains on investments available for sale | 401 | 2,170 | 674 | 15,946 | |||||||||||||||||
| Other noninterest income | 5,983 | 9,336 | 13,569 | 15,209 | |||||||||||||||||
| Total net sales and revenue | 482,005 | 12,710 | 998,591 | 36,030 | |||||||||||||||||
| Costs and expenses | |||||||||||||||||||||
| Retail cost of goods sold | 244,049 | - | 533,844 | - | |||||||||||||||||
| Retail sales and marketing expenses | 137,753 | - | 245,540 | - | |||||||||||||||||
| Retail net credit expense | 15,143 | - | 31,251 | - | |||||||||||||||||
| Commercial real estate operating expenses | 618 | 860 | 1,900 | 4,068 | |||||||||||||||||
| General and administrative expenses | 58,748 | 6,795 | 146,465 | 20,452 | |||||||||||||||||
| Amortization and depreciation not included in | |||||||||||||||||||||
| retail cost of goods sold | 16,462 | - | 43,271 | 54 | |||||||||||||||||
| (Gain) loss from derivatives in our own equity | (14,120 | ) | - | (6,306 | ) | - | |||||||||||||||
| Total costs and expenses | 458,653 | 7,655 | 995,965 | 24,574 | |||||||||||||||||
| Operating income | 23,352 | 5,055 | 2,626 | 11,456 | |||||||||||||||||
| Retail interest expense | 13,945 | - | 30,219 | - | |||||||||||||||||
| Income (loss) from continuing operations before income taxes | 9,407 | 5,055 | (27,593 | ) | 11,456 | ||||||||||||||||
| Income tax (benefit) expense | (1,832 | ) | (300 | ) | (1,515 | ) | 199 | ||||||||||||||
| Income (loss) from continuing operations after income taxes | 11,239 | 5,355 | (26,078 | ) | 11,257 | ||||||||||||||||
| Income from discontinued operations, net of tax | - | 37,790 | - | 33,037 | |||||||||||||||||
| Net income (loss) | 11,239 | 43,145 | (26,078 | ) | 44,294 | ||||||||||||||||
| Net gain attributable to noncontrolling interests | - | 663 | - | 5,930 | |||||||||||||||||
| Net income (loss) attributable to Bluestem Group Inc. | 11,239 | 43,808 | (26,078 | ) | 50,224 | ||||||||||||||||
| Other comprehensive income (loss) | |||||||||||||||||||||
| Net change in unrealized gains and losses | |||||||||||||||||||||
| on investment securities | (142 | ) | (780 | ) | 5 | (1,196 | ) | ||||||||||||||
| Comprehensive income (loss) attributable to Bluestem Group Inc. | $ | 11,097 | $ | 43,028 | $ | (26,073 | ) | $ | 49,028 | ||||||||||||
| Basic and Diluted Income (Loss) Per Share - Common Stockholders | |||||||||||||||||||||
| Basic income (loss) per share from continuing operations | $ | 0.08 | $ | 0.06 | $ | (0.19 | ) | $ | 0.17 | ||||||||||||
| Diluted (loss) income per share from continuing operations | $ | (0.02 | ) | $ | 0.06 | $ | (0.23 | ) | $ | 0.17 | |||||||||||
| Basic income (loss) per share attributable to Bluestem Group Inc. | $ | 0.08 | $ | 0.44 | $ | (0.19 | ) | $ | 0.50 | ||||||||||||
| Diluted (loss) income per share attributable to Bluestem Group Inc. | $ | (0.02 | ) | $ | 0.43 | $ | (0.23 | ) | $ | 0.50 | |||||||||||
| Basic weighted average shares outstanding | 136,160,378 | 99,844,755 | 136,142,101 | 99,817,074 | |||||||||||||||||
| Diluted weighted average shares outstanding | 139,119,658 | 101,328,814 | 138,386,375 | 100,734,797 | |||||||||||||||||
| BLUESTEM GROUP INC. | |||||||||
| Condensed Consolidated Balance Sheets | |||||||||
| (in thousands) | |||||||||
| October 30, 2015 | January 30, 2015 | ||||||||
| (unaudited) | |||||||||
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 164,892 | $ | 254,207 | |||||
| Restricted cash | 18,209 | 13,586 | |||||||
| Customer accounts receivable — net of allowance of $9,601 and $10,457 | 52,785 | 40,928 | |||||||
| Commercial real estate accounts and other receivables | 11,441 | 19,270 | |||||||
| Retail merchandise inventories | 323,079 | 96,431 | |||||||
| Other current assets | 109,751 | 33,670 | |||||||
| Total current assets | 680,157 | 458,092 | |||||||
| Loans held-for-sale | 23,222 | 78,080 | |||||||
| Equity investments | 56,440 | 114,736 | |||||||
| Property and equipment — net | 100,698 | 49,755 | |||||||
| Intangibles — net | 350,337 | 377,892 | |||||||
| Goodwill | 506,649 | 201,642 | |||||||
| Other assets | 16,523 | 21,195 | |||||||
| Total Assets | $ | 1,734,026 | $ | 1,301,392 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||
| Current liabilities: | |||||||||
| Accounts payable | $ | 241,939 | $ | 82,037 | |||||
| Accrued costs and other liabilities | 124,465 | 92,823 | |||||||
| Short-term debt | 107,991 | 17,787 | |||||||
| Total current liabilities | 474,395 | 192,647 | |||||||
| Long-term debt | 520,590 | 354,204 | |||||||
| Deferred income taxes | 95,232 | 79,949 | |||||||
| Other long-term liabilities | 12,134 | 20,037 | |||||||
| Total liabilities | 1,102,351 | 646,837 | |||||||
| Stockholders' Equity: | |||||||||
| Series A participating convertible preferred stock | 4,941 | 4,856 | |||||||
| Common stock | 1,366 | 1,364 | |||||||
| Treasury stock | (131 | ) | - | ||||||
| Additional paid-in capital | 360,019 | 356,697 | |||||||
| Retained earnings | 264,611 | 290,774 | |||||||
| Accumulated other comprehensive income, net of tax | 869 | 864 | |||||||
| Total Bluestem Group Inc. stockholders’ equity | 631,675 | 654,555 | |||||||
| Total Liabilities and Stockholders' Equity | $ | 1,734,026 | $ | 1,301,392 | |||||
BLUESTEM GROUP INC.
Non-GAAP Financial Measures
(unaudited
— in thousands)
To supplement the consolidated financial statements of Bluestem Group Inc. and its subsidiaries which are presented in accordance with U.S. Generally Accepted Accounting Principles, or GAAP, we use the following measures that are not in accordance with, or an alternative to, measures prepared in accordance with GAAP (non-GAAP measures):
Adjusted EBITDA, as presented, represents net income (loss) before interest expense, income tax (benefit) expense, amortization and depreciation expense, stock-based compensation expense, gain from derivatives in our own equity, acquisition transaction costs, integration costs, costs related to the Centerbridge Investment Agreement and income from discontinued operations, net of tax.
Non-GAAP net income (loss), as we present it, represents net income (loss) attributable to Bluestem Group Inc. before amortization of acquired intangible assets, stock-based compensation expense, gain from derivatives in our own equity, acquisition transaction costs, integration costs, costs related to the Centerbridge Investment Agreement and income from discontinued operations, net of tax.
Non-GAAP diluted income (loss) per share, as we present it, represents diluted income (loss) per share before amortization of acquired intangible assets, stock-based compensation expense, gain from derivatives in our own equity, acquisition transaction costs, integration costs, costs related to the Centerbridge Investment Agreement and income from discontinued operations, net of tax.
We provide these measures because we believe they are useful to investors in evaluating our operating performance compared to other companies in our industry. As non-GAAP measures, they have limitations in that they do not reflect all of the amounts associated with Bluestem Group Inc.'s results of operations as determined in accordance with GAAP and are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures should be considered along with the GAAP financial presentation and should not be considered in isolation or as a substitute for results reported in accordance with GAAP. In addition, our calculations of Adjusted EBITDA, non-GAAP net income and non-GAAP diluted earnings per share may not be comparable to the calculations of such measures by other companies.
| 13 Weeks Ended | 39 Weeks Ended | ||||||||||||||||||||
| October 30, 2015 | October 31, 2014 | October 30, 2015 | October 31, 2014 | ||||||||||||||||||
| Adjusted EBITDA reconciliation to GAAP net (loss) income: | |||||||||||||||||||||
| Net income (loss) attributable to Bluestem Group Inc. | $ | 11,239 | $ | 43,808 | $ | (26,078 | ) | $ | 50,224 | ||||||||||||
| Retail interest expense | 13,945 | - | 30,219 | - | |||||||||||||||||
| Income tax (benefit) expense | (1,832 | ) | (300 | ) | (1,515 | ) | 199 | ||||||||||||||
| Amortization and depreciation expense | 17,628 | - | 45,069 | 54 | |||||||||||||||||
| Stock-based compensation expense | 1,095 | 1,063 | 4,042 | 1,963 | |||||||||||||||||
| Gain from derivatives in our own equity | (14,120 | ) | - | (6,306 | ) | - | |||||||||||||||
| Acquisition transaction costs | - | 1,393 | 8,422 | 1,393 | |||||||||||||||||
| Integration costs | 2,972 | - | 3,237 | - | |||||||||||||||||
| Costs related to Centerbridge Investment Agreement | - | 152 | - | 5,596 | |||||||||||||||||
| Income from discontinued operations, net of tax | - | (37,790 | ) | - | (33,037 | ) | |||||||||||||||
| Adjusted EBITDA | $ | 30,927 | $ | 8,326 | $ | 57,090 | $ | 26,392 | |||||||||||||
| GAAP net income (loss) attributable to Bluestem Group Inc. | $ | 11,239 | $ | 43,808 | $ | (26,078 | ) | $ | 50,224 | ||||||||||||
| Adjustments: | |||||||||||||||||||||
| Amortization of acquired intangible assets | 9,720 | - | 27,556 | - | |||||||||||||||||
| Stock-based compensation expense | 1,095 | 1,063 | 4,042 | 1,963 | |||||||||||||||||
| Gain from derivatives in our own equity | (14,120 | ) | - | (6,306 | ) | - | |||||||||||||||
| Acquisition transaction costs | - | 1,393 | 8,422 | 1,393 | |||||||||||||||||
| Integration costs | 2,972 | - | 3,237 | - | |||||||||||||||||
| Costs related to Centerbridge Investment Agreement | - | 152 | - | 5,596 | |||||||||||||||||
| Income from discontinued operations, net of tax | - | (37,790 | ) | - | (33,037 | ) | |||||||||||||||
| Tax effect of adjustments | - | - | - | - | |||||||||||||||||
| Non-GAAP net income (loss) attributable to Bluestem Group Inc. | $ | 10,906 | $ | 8,626 | $ | 10,873 | $ | 26,139 | |||||||||||||
| GAAP diluted income (loss) per share available | |||||||||||||||||||||
| to common stockholders | $ | (0.02 | ) | $ | 0.43 | $ | (0.23 | ) | $ | 0.50 | |||||||||||
| Adjustments: | |||||||||||||||||||||
| Amortization of acquired intangible assets | 0.07 | - | 0.20 | - | |||||||||||||||||
| Stock-based compensation expense | 0.01 | 0.01 | 0.03 | 0.02 | |||||||||||||||||
| Gain from derivatives in our own equity | (0.10 | ) | - | (0.05 | ) | - | |||||||||||||||
| Acquisition transaction costs | - | 0.01 | 0.06 | 0.01 | |||||||||||||||||
| Integration costs | 0.02 | - | 0.02 | - | |||||||||||||||||
| Costs related to Centerbridge Investment Agreement | - | 0.00 | - | 0.06 | |||||||||||||||||
| Income from discontinued operations, net of tax | - | (0.37 | ) | - | (0.33 | ) | |||||||||||||||
| Tax effect of adjustments | - | - | - | - | |||||||||||||||||
| Non-GAAP diluted income (loss) per share available | |||||||||||||||||||||
| to common stockholders | $ | (0.02 | ) | $ | 0.08 | $ | 0.04 | $ | 0.26 | ||||||||||||
| Fully diluted weighted-average shares outstanding | 139,119,658 | 101,328,814 | 138,386,375 | 100,734,797 | |||||||||||||||||
Bluestem Brands, Inc.
Results for the 13- and 39-weeks
ended October 30, 2015
(includes results of Orchard Brands Corporation from July 10, 2015)
| BLUESTEM BRANDS, INC. | ||||||||||||||||||
| Consolidated Statements of Operations and Selected Operating Data | ||||||||||||||||||
| (unaudited — in thousands) | ||||||||||||||||||
| Successor | Predecessor | |||||||||||||||||
| (13 Weeks Ended) | (13 Weeks Ended) | |||||||||||||||||
| October 30, 2015 | October 31, 2014 |
Change (a) |
||||||||||||||||
| Net sales | $ | 474,957 | $ | 213,324 | 122.6 | % | ||||||||||||
| Cost of goods sold | 244,049 | 124,407 | 96.2 | % | ||||||||||||||
|
Gross profit |
230,908 | 88,917 | 159.7 | % | ||||||||||||||
| Sales and marketing expenses | 137,753 | 42,583 | 223.5 | % | ||||||||||||||
| Net credit expense | 15,143 | 8,777 | 72.5 | % | ||||||||||||||
| General and administrative expenses | 56,864 | 37,865 | 50.2 | % | ||||||||||||||
| Amortization and depreciation not included in | ||||||||||||||||||
| cost of goods sold (b) | 16,462 | 3,128 | 426.3 | % | ||||||||||||||
| Interest expense, net (c) | 13,945 | 4,248 | 228.3 | % | ||||||||||||||
| (Loss) income before income taxes | (9,259 | ) | (7,684 | ) | 20.5 | % | ||||||||||||
| Income tax benefit | (14,680 | ) | (3,295 | ) | n/m | |||||||||||||
| Net income (loss) | $ | 5,421 | $ | (4,389 | ) | n/m | ||||||||||||
| Margins and Expenses as a Percentage of Net Sales: | ||||||||||||||||||
| Gross profit rate | 48.6 | % | 41.7 | % | 694 | bp | ||||||||||||
| Sales and marketing expenses | 29.0 | % | 20.0 | % | 904 | bp | ||||||||||||
| Net credit expense | 3.2 | % | 4.1 | % | (93 | ) | bp | |||||||||||
| Contribution margin (d) | $ | 78,012 | $ | 37,557 | 107.7 | % | ||||||||||||
| As a percentage of net sales | 16.4 | % | 17.6 | % | (118 | ) | bp | |||||||||||
| Adjusted general and administrative expenses (d) | $ | 52,287 | $ | 26,659 | 96.1 | % | ||||||||||||
| As a percentage of net sales | 11.0 | % | 12.5 | % | (149 | ) | bp | |||||||||||
| Adjusted EBITDA (d) | $ | 27,020 | $ | 11,518 | 134.6 | % | ||||||||||||
| As a percentage of net sales | 5.7 | % | 5.4 | % | 29 | bp | ||||||||||||
| Selected Financial Data: | ||||||||||||||||||
| Liquidity (e) | $ | 97,372 | $ | 100,119 | (2.7 | %) | ||||||||||||
| Availability on inventory line of credit | $ | 94,704 | $ | 54,623 | 73.4 | % | ||||||||||||
| Free Cash Flow (d) | $ | 22,272 | $ | 9,587 | 132.3 | % | ||||||||||||
| Leverage ratio (f) | 3.8 | n/a | n/m | |||||||||||||||
| Selected Operating Data: | ||||||||||||||||||
| Fingerhut and Gettington revolving new customer credit | ||||||||||||||||||
|
accounts (g) |
169 | 152 | 11.2 | % | ||||||||||||||
| Fingerhut FreshStart new customer credit accounts (g) | 55 | 51 | 7.8 | % | ||||||||||||||
| PayCheck Direct new customer credit accounts (g) | 13 | 9 | 44.4 | % | ||||||||||||||
| Orchard Portfolio new gross customers (h) | 437 | n/a | n/m | |||||||||||||||
| Fingerhut and Gettington revolving active accounts (i) | 1,686 | 1,534 | 9.9 | % | ||||||||||||||
| Orchard Portfolio active customers (j) | 7,996 | n/a | n/m | |||||||||||||||
| PayCheck Direct eligible client employees (k) | 6,216 | 2,449 | 153.9 | % | ||||||||||||||
|
____________________________________ |
||||||||||||||||||
(a) Changes in rates are presented as the basis point (bp) increase (decrease) from the prior period.
(b) Consists of amortization expense of customer relationship finite-lived intangible assets and depreciation expense of software. Depreciation expense related to equipment in Bluestem's fulfillment facilities are included in cost of goods sold.
(c) Interest expense net of interest income.
(d) Please refer to the "Bluestem Brands, Inc. - Non-GAAP Financial Measures" within this release for a reconciliation of non-GAAP financial measures to GAAP and why Bluestem believes these are important measures of its performance.
(e) Defined as unrestricted cash and cash equivalents plus availability on inventory line of credit.
(f) Leverage ratio as defined by our Successor term loan agreement dated November 7, 2014.
(g) Customers that have made their initial order on account during the fiscal period presented. Revolving new customer credit accounts excludes FreshStart graduates initially included in FreshStart new customer credit accounts when their initial order was made.
(h) Customers who have made a first time purchase from a particular brand within the Orchard Portfolio during the period presented.
(i) Revolving credit customers that have made at least one purchase on account within the previous twelve fiscal months and at least one payment on account since origination.
(j) Customers that have made at least one purchase within the previous twelve fiscal months.
(k) PayCheck Direct clients' full-time active employees with a tenure greater than six months, are at least 18 years old, and have met certain minimum annual earnings.
| BLUESTEM BRANDS, INC. | |||||||||||||||||||
| Consolidated Statements of Operations and Selected Operating Data | |||||||||||||||||||
| (unaudited — in thousands) | |||||||||||||||||||
| Successor | Predecessor | ||||||||||||||||||
| (39 Weeks Ended) | (39 Weeks Ended) | ||||||||||||||||||
| October 30, 2015 (a) | October 31, 2014 |
Change (b) |
|||||||||||||||||
| Net sales | $ | 982,507 | $ | 615,049 | 59.7 | % | |||||||||||||
| Cost of goods sold | 533,844 | 356,013 | 50.0 | % | |||||||||||||||
| Gross profit | 448,663 | 259,036 | 73.2 | % | |||||||||||||||
| Sales and marketing expenses | 245,540 | 122,785 | 100.0 | % | |||||||||||||||
| Net credit expense (income) | 31,251 | (3,755 | ) | n/m | |||||||||||||||
| General and administrative expenses | 137,051 | 103,151 | 32.9 | % | |||||||||||||||
| Amortization and depreciation not included in | |||||||||||||||||||
| cost of goods sold (c) | 43,271 | 9,465 | 357.2 | % | |||||||||||||||
| Interest expense, net (d) | 30,219 | 13,248 | 128.1 | % | |||||||||||||||
| (Loss) income before income taxes | (38,669 | ) | 14,142 | n/m | |||||||||||||||
| Income tax (benefit) expense | (20,127 | ) | 4,520 | n/m | |||||||||||||||
| Net (loss) income | $ | (18,542 | ) | $ | 9,622 | n/m | |||||||||||||
| Margins and Expenses as a Percentage of Net Sales: | |||||||||||||||||||
| Gross profit rate | 45.7 | % | 42.1 | % | 355 | bp | |||||||||||||
| Sales and marketing expenses | 25.0 | % | 20.0 | % | 504 | bp | |||||||||||||
| Net credit expense (income) | 3.2 | % | (0.6 | )% | 379 | bp | |||||||||||||
| Contribution margin (e) | $ | 171,872 | $ | 140,006 | 22.8 | % | |||||||||||||
| As a percentage of net sales | 17.5 | % | 22.8 | % | (527 | ) | bp | ||||||||||||
| Adjusted general and administrative expenses (e) | $ | 119,613 | $ | 78,575 | 52.2 | % | |||||||||||||
| As a percentage of net sales | 12.2 | % | 12.8 | % | (60 | ) | bp | ||||||||||||
| Adjusted EBITDA (e) | $ | 54,431 | $ | 63,259 | (14.0 | %) | |||||||||||||
| As a percentage of net sales | 5.5 | % | 10.3 | % | (475 | ) | bp | ||||||||||||
| Free Cash Flow (e) | $ | 42,855 | $ | 58,930 | (27.3 | %) | |||||||||||||
| Selected Operating Data: | |||||||||||||||||||
| Fingerhut and Gettington revolving new customer credit | |||||||||||||||||||
| accounts (f) | 462 | 443 | 4.2 | % | |||||||||||||||
| Fingerhut FreshStart new customer credit accounts (f) | 165 | 147 | 12.2 | % | |||||||||||||||
| PayCheck Direct new customer credit accounts (f) | 26 | 15 | 73.3 | % | |||||||||||||||
| Orchard Portfolio new gross customers (g) | 531 | n/a | n/m | ||||||||||||||||
| Fingerhut and Gettington revolving active accounts (h) | 1,686 | 1,534 | 9.9 | % | |||||||||||||||
| Orchard Portfolio active customers (i) | 7,996 | n/a | n/m | ||||||||||||||||
| PayCheck Direct eligible client employees (j) | 6,216 | 2,449 | 153.9 | % | |||||||||||||||
|
|
|||||||||||||||||||
|
________________________________________________ |
|||||||||||||||||||
(a) Orchard Portfolio results are presented for the period from July 10, 2015 through October 30, 2015.
(b) Changes in rates are presented as the basis point (bp) increase (decrease) from the prior period.
(c) Consists of amortization expense of customer relationship finite-lived intangible assets and depreciation expense of software. Depreciation expense related to equipment in Bluestem's
(d) Interest expense net of interest income. fulfillment facilities are included in cost of goods sold.
(e) Please refer to the "Bluestem Brands, Inc. - Non-GAAP Financial Measures" within this release for a reconciliation of non-GAAP financial measures to GAAP and why Bluestem believes these are important measures of its performance.
(f) Customers that have made their initial order on account during the fiscal period presented. Revolving new customer credit accounts excludes FreshStart graduates initially included in FreshStart new customer credit accounts when their initial order was made.
(g) Customers who have made a first time purchase from a particular brand within the Orchard Portfolio during the period presented.
(h) Revolving credit customers that have made at least one purchase on account within the previous twelve fiscal months and at least one payment on account since origination.
(i) Customers that have made at least one purchase within the previous twelve fiscal months.
(j) PayCheck Direct clients' full-time active employees with a tenure greater than six months, are at least 18 years old, and have met certain minimum annual earnings.
| BLUESTEM BRANDS, INC. | |||||||||
| Condensed Consolidated Balance Sheets | |||||||||
| (in thousands) | |||||||||
| October 30, 2015 | January 30, 2015 | ||||||||
| (unaudited) | |||||||||
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 2,668 | $ | 59,222 | |||||
| Restricted cash | 17,964 | 13,425 | |||||||
| Customer accounts receivable — net of allowance for doubtful | |||||||||
| accounts of $9,601 and $10,457, respectively | 52,785 | 40,928 | |||||||
| Merchandise inventories | 323,079 | 96,431 | |||||||
| Promotional material inventories | 85,881 | 13,976 | |||||||
| Deferred income taxes | 14,574 | 14,914 | |||||||
| Prepaid expenses and other assets | 23,309 | 19,031 | |||||||
| Total current assets | 520,260 | 257,927 | |||||||
| Property and equipment — net | 100,698 | 49,755 | |||||||
| Intangible assets — net | 350,337 | 377,892 | |||||||
| Goodwill | 506,649 | 201,642 | |||||||
| Other assets | 3,279 | 97 | |||||||
| Total Assets | $ | 1,481,223 | $ | 887,313 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
| Current liabilities: | |||||||||
| Accounts payable | $ | 241,939 | $ | 82,037 | |||||
| Current income taxes payable | 2,060 | 18,567 | |||||||
| Accrued costs and other liabilities | 114,350 | 65,109 | |||||||
| Short-term debt | 107,991 | 17,787 | |||||||
| Total current liabilities | 466,340 | 183,500 | |||||||
| Long-term debt | 496,733 | 272,889 | |||||||
| Deferred income taxes | 146,855 | 140,119 | |||||||
| Other long-term liabilities | 4,219 | 5,187 | |||||||
| Stockholders' equity: | |||||||||
| Common stock | - | - | |||||||
| Additional paid-in capital | 369,602 | 269,602 | |||||||
| Retained earnings | (2,526 | ) | 16,016 | ||||||
| Total stockholders' equity | 367,076 | 285,618 | |||||||
| Total Liabilities and Stockholders’ Equity | $ | 1,481,223 | $ | 887,313 | |||||
| BLUESTEM BRANDS, INC. | |||||||||||||||||||||||||
| Condensed Consolidated Statement of Cash Flows | |||||||||||||||||||||||||
| (unaudited — in thousands) | |||||||||||||||||||||||||
| Successor | Predecessor | Successor | Predecessor | ||||||||||||||||||||||
| (13 Weeks Ended) | (13 Weeks Ended) | (39 Weeks Ended) | (39 Weeks Ended) | ||||||||||||||||||||||
| October 30, 2015 | October 31, 2014 | October 30, 2015 | October 31, 2014 | ||||||||||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||||||||||
| Net income (loss) | $ | 5,421 | $ | (4,389 | ) | $ | (18,542 | ) | $ | 9,622 | |||||||||||||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | |||||||||||||||||||||||||
| Amortization and depreciation expense | 17,624 | 3,633 | 45,068 | 10,945 | |||||||||||||||||||||
| Amortization of deferred charges and original issue discount | 1,397 | 258 | 3,311 | 1,455 | |||||||||||||||||||||
| Provision for doubtful accounts | 3,638 | 656 | 10,795 | (7,942 | ) | ||||||||||||||||||||
| Provision for merchandise returns | 29,065 | 4,241 | 47,637 | 15,815 | |||||||||||||||||||||
| Deferred income taxes | (7,800 | ) | (4,377 | ) | (8,620 | ) | (5,157 | ) | |||||||||||||||||
| Stock-based compensation expense | 1,060 | 707 | 3,007 | 2,129 | |||||||||||||||||||||
| Inventory obsolescence and other reserves | 13,254 | 6,523 | 28,838 | 17,469 | |||||||||||||||||||||
| Other, net | (614 | ) | - | 305 | - | ||||||||||||||||||||
| Net change in assets and liabilities which provided (used) cash: | |||||||||||||||||||||||||
| Customer accounts receivable | (61,260 | ) | (12,316 | ) | (102,289 | ) | (25,796 | ) | |||||||||||||||||
| Merchandise inventories | (87,122 | ) | (76,182 | ) | (83,105 | ) | (86,559 | ) | |||||||||||||||||
| Promotional material inventories | (35,869 | ) | (16,905 | ) | (41,321 | ) | (16,739 | ) | |||||||||||||||||
| Prepaid expenses and other assets | (3,582 | ) | (3,708 | ) | 152 | 5,838 | |||||||||||||||||||
| Current income taxes payable | (6,409 | ) | 1,753 | (13,604 | ) | (8,382 | ) | ||||||||||||||||||
| Accounts payable and other liabilities | 80,988 | 57,175 | 86,405 | 62,460 | |||||||||||||||||||||
| Net cash used in operating activities | (50,209 | ) | (42,931 | ) | (41,963 | ) | (24,842 | ) | |||||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||||||||||
| Purchase of customer accounts receivable | (242,268 | ) | (218,485 | ) | (717,299 | ) | (640,829 | ) | |||||||||||||||||
| Proceeds from sale of customer accounts receivable | 242,472 | 218,760 | 717,650 | 642,096 | |||||||||||||||||||||
| Acquisition of Orchard Brands, net | - | - | (392,158 | ) | - | ||||||||||||||||||||
| Net purchase of property and equipment | (9,359 | ) | (7,269 | ) | (24,582 | ) | (18,540 | ) | |||||||||||||||||
| Net increase in restricted cash | (6,619 | ) | (899 | ) | (4,539 | ) | (6,020 | ) | |||||||||||||||||
| Net cash used in investing activities | (15,774 | ) | (7,893 | ) | (420,928 | ) | (23,293 | ) | |||||||||||||||||
| Cash flows from financing activities: | |||||||||||||||||||||||||
| Borrowings on revolving credit facilities | 177,769 | 124,914 | 370,045 | 334,555 | |||||||||||||||||||||
| Repayments on revolving credit facilities | (102,376 | ) | (123,448 | ) | (297,320 | ) | (333,878 | ) | |||||||||||||||||
| Borrowings on Successor Term Loan, net of financing fees | (70 | ) | - | 269,383 | - | ||||||||||||||||||||
| Repayments on Predecessor Term Loan | - | - | (35,771 | ) | - | ||||||||||||||||||||
| Repayments on Successor Term Loan | (15,021 | ) | - | - | (40,000 | ) | |||||||||||||||||||
| Cash equity contributions from parent | - | - | 100,000 | - | |||||||||||||||||||||
| Issuance of Predecessor common stock | - | 74 | - | 566 | |||||||||||||||||||||
| Net cash provided by financing activities | 60,302 | 1,540 | 406,337 | (38,757 | ) | ||||||||||||||||||||
| Net Decrease in Cash and Cash Equivalents | (5,681 | ) | (49,284 | ) | (56,554 | ) | (86,892 | ) | |||||||||||||||||
| Cash and Cash Equivalents, Beginning of Period | 8,349 | 94,780 | 59,222 | 132,388 | |||||||||||||||||||||
| Cash and Cash Equivalents, End of Period | $ | 2,668 | $ | 45,496 | $ | 2,668 | $ | 45,496 | |||||||||||||||||
| BLUESTEM BRANDS, INC. | |||||||||||||||||||||||
| Supplemental Financial Information | |||||||||||||||||||||||
| (unaudited — in thousands, except average order size) | |||||||||||||||||||||||
| Successor | Predecessor | ||||||||||||||||||||||
| (13 Weeks Ended) | (13 Weeks Ended) | ||||||||||||||||||||||
| October 30, 2015 | October 31, 2014 |
Change |
|||||||||||||||||||||
| Total sales by merchandise category: | |||||||||||||||||||||||
| Home | $ | 133,051 | 26.1 | % | $ | 93,529 | 41.8 | % | 42.3 | % | |||||||||||||
| Entertainment | 102,921 | 20.2 | % | 94,497 | 42.3 | % | 8.9 | % | |||||||||||||||
| Fashion | 273,925 | 53.7 | % | 35,549 | 15.9 | % | 670.6 | % | |||||||||||||||
| Total merchandise sales (a) | 509,897 | 100.0 | % | 223,575 | 100.0 | % | 128.1 | % | |||||||||||||||
| Returns and allowances | (53,685 | ) | (14,612 | ) | 267.4 | % | |||||||||||||||||
| Commissions and other revenue | 18,745 | 4,361 | 329.8 | % | |||||||||||||||||||
| Net sales | $ | 474,957 | $ | 213,324 | 122.6 | % | |||||||||||||||||
| Gross profit rate | 48.6 | % | 41.7 | % | 694 | bp | |||||||||||||||||
| Sales and marketing expense | 29.0 | % | 20.0 | % | 904 | bp | |||||||||||||||||
| Contribution margin rate (b) | 16.4 | % | 17.6 | % | (118 | ) | bp | ||||||||||||||||
| Average order size (c) | $ | 110 | $ | 228 | (51.8 | )% | |||||||||||||||||
| Fingerhut sales by merchandise category: | |||||||||||||||||||||||
| Home | $ | 96,091 | 43.7 | % | $ | 82,021 | 41.3 | % | 17.2 | % | |||||||||||||
| Entertainment | 86,442 | 39.2 | % | 83,730 | 42.1 | % | 3.2 | % | |||||||||||||||
| Fashion | 37,731 | 17.1 | % | 32,923 | 16.6 | % | 14.6 | % | |||||||||||||||
| Total merchandise sales (a) | 220,264 | 100.0 | % | 198,674 | 100.0 | % | 10.9 | % | |||||||||||||||
| Returns and allowances | (16,005 | ) | (13,163 | ) | 21.6 | % | |||||||||||||||||
| Commissions | 4,393 | 4,035 | 8.9 | % | |||||||||||||||||||
| Net sales | $ | 208,652 | $ | 189,546 | 10.1 | % | |||||||||||||||||
| Gross profit rate | 43.2 | % | 44.0 | % | (80 | ) | bp | ||||||||||||||||
| Sales and marketing expense | 20.3 | % | 20.3 | % | (2 | ) | bp | ||||||||||||||||
| Contribution margin rate (b) | 17.0 | % | 19.4 | % | (246 | ) | bp | ||||||||||||||||
| Average order size (c) | $ | 231 | $ | 224 | 3.2 | % | |||||||||||||||||
| Orchard sales by merchandise category: | |||||||||||||||||||||||
| Home | $ | 23,790 | 9.3 | % | |||||||||||||||||||
| Fashion | 231,982 | 90.7 | % | ||||||||||||||||||||
| Total merchandise sales (a) | 255,772 | 100.0 | % | ||||||||||||||||||||
| Returns and allowances | (35,324 | ) | |||||||||||||||||||||
| Commissions and other revenue | 13,804 | ||||||||||||||||||||||
| Net sales | $ | 234,252 | |||||||||||||||||||||
| Gross profit rate | 56.5 | % | |||||||||||||||||||||
| Sales and marketing expense | 38.1 | % | |||||||||||||||||||||
| Contribution margin rate (b) | 18.5 | % | |||||||||||||||||||||
| Average order size (c) | $ | 71 | |||||||||||||||||||||
| Other sales by merchandise category: (d) | |||||||||||||||||||||||
| Home | $ | 13,170 | 38.9 | % | $ | 11,508 | 46.3 | % | 14.4 | % | |||||||||||||
| Entertainment | 16,479 | 48.7 | % | 10,767 | 43.2 | % | 53.1 | % | |||||||||||||||
| Fashion | 4,212 | 12.4 | % | 2,626 | 10.5 | % | 60.4 | % | |||||||||||||||
| Total merchandise sales (a) | 33,861 | 100.0 | % | 24,901 | 100.0 | % | 36.0 | % | |||||||||||||||
| Returns and allowances | (2,356 | ) | (1,449 | ) | 62.6 | % | |||||||||||||||||
| Commissions | 548 | 326 | 68.1 | % | |||||||||||||||||||
| Net sales | $ | 32,053 | $ | 23,778 | 34.8 | % | |||||||||||||||||
| Gross profit rate | 26.2 | % | 23.1 | % | 307 | bp | |||||||||||||||||
| Sales and marketing expense | 19.6 | % | 17.2 | % | 238 | bp | |||||||||||||||||
| Contribution margin rate (b) | -1.8 | % | 3.1 | % | (491 | ) | bp | ||||||||||||||||
| Average order size (c) | $ | 282 | $ | 265 | 6.4 | % | |||||||||||||||||
|
__________________________________________ |
|||||||||||||||||||||||
(a) Total merchandise sales includes shipping and handling revenue and is net of sales discounts.
(b) Represents contribution margin as a percentage of net sales. Please refer to the "Bluestem Brands, Inc. - Non-GAAP Financial Measures" within this release for a reconciliation of non-GAAP financial measures to GAAP and why Bluestem believes these are important measures of its performance.
(c) Represents retail merchandise sales including shipping and handling revenue divided by the number of merchandise orders fulfilled during the fiscal period presented.
(d) Other includes Gettington.com and Paycheck Direct.
| BLUESTEM BRANDS, INC. | ||||||||||||||||||||||
| Supplemental Financial Information | ||||||||||||||||||||||
| (unaudited — in thousands, except average order size) | ||||||||||||||||||||||
| Successor | Predecessor | |||||||||||||||||||||
| (39 Weeks Ended) | (39 Weeks Ended) | |||||||||||||||||||||
| October 30, 2015 | October 31, 2014 |
Change |
||||||||||||||||||||
| Total sales by merchandise category: (a) | ||||||||||||||||||||||
| Home | $ | 366,600 | 35.1 | % | $ | 285,330 | 44.3 | % | 28.5 | % | ||||||||||||
| Entertainment | 286,140 | 27.4 | % | 260,085 | 40.5 | % | 10.0 | % | ||||||||||||||
| Fashion | 392,665 | 37.5 | % | 98,044 | 15.2 | % | 300.5 | % | ||||||||||||||
| Total merchandise sales (b) | 1,045,405 | 100.0 | % | 643,459 | 100.0 | % | 62.5 | % | ||||||||||||||
| Returns and allowances | (94,190 | ) | (41,099 | ) | 129.2 | % | ||||||||||||||||
| Commissions and other revenue | 31,292 | 12,689 | 146.6 | % | ||||||||||||||||||
| Net sales | $ | 982,507 | $ | 615,049 | 59.7 | % | ||||||||||||||||
| Gross profit rate | 45.7 | % | 42.1 | % | 355 | bp | ||||||||||||||||
| Sales and marketing expense | 25.0 | % | 20.0 | % | 503 | bp | ||||||||||||||||
| Contribution margin rate (c) | 17.5 | % | 22.8 | % | (527 | ) | bp | |||||||||||||||
| Average order size (d) | $ | 140 | $ | 225 | (37.8 | )% | ||||||||||||||||
| Fingerhut sales by merchandise category: | ||||||||||||||||||||||
| Home | $ | 299,510 | 46.1 | % | $ | 259,441 | 44.8 | % | 15.4 | % | ||||||||||||
| Entertainment | 245,577 | 37.9 | % | 228,012 | 39.4 | % | 7.7 | % | ||||||||||||||
| Fashion | 103,492 | 16.0 | % | 91,590 | 15.8 | % | 13.0 | % | ||||||||||||||
| Total merchandise sales (b) | 648,579 | 100.0 | % | 579,043 | 100.0 | % | 12.0 | % | ||||||||||||||
| Returns and allowances | (45,381 | ) | (37,183 | ) | 22.0 | % | ||||||||||||||||
| Commissions | 12,910 | 11,959 | 8.0 | % | ||||||||||||||||||
| Net sales | $ | 616,108 | $ | 553,819 | 11.2 | % | ||||||||||||||||
| Gross profit rate | 43.5 | % | 44.2 | % | (65 | ) | bp | |||||||||||||||
| Sales and marketing expense | 20.1 | % | 20.4 | % | (27 | ) | bp | |||||||||||||||
| Contribution margin rate (c) | 19.1 | % | 24.6 | % | (551 | ) | bp | |||||||||||||||
| Average order size (d) | $ | 229 | $ | 223 | 2.7 | % | ||||||||||||||||
| Orchard sales by merchandise category: (a) | ||||||||||||||||||||||
| Home | $ | 29,517 | 9.6 | % | ||||||||||||||||||
| Fashion | 279,100 | 90.4 | % | |||||||||||||||||||
| Total merchandise sales (b) | 308,617 | 100.0 | % | |||||||||||||||||||
| Returns and allowances | (43,034 | ) | ||||||||||||||||||||
| Commissions and other revenue | 17,110 | |||||||||||||||||||||
| Net sales | $ | 282,693 | ||||||||||||||||||||
| Gross profit rate | 56.1 | % | ||||||||||||||||||||
| Sales and marketing expense | 37.8 | % | ||||||||||||||||||||
| Contribution margin rate (c) | 18.3 | % | ||||||||||||||||||||
| Average order size (d) | $ | 72 | ||||||||||||||||||||
| Other sales by merchandise category: (e) | ||||||||||||||||||||||
| Home | $ | 37,573 | 42.6 | % | $ | 25,889 | 40.2 | % | 45.1 | % | ||||||||||||
| Entertainment | 40,563 | 46.0 | % | 32,073 | 49.8 | % | 26.5 | % | ||||||||||||||
| Fashion | 10,073 | 11.4 | % | 6,454 | 10.0 | % | 56.1 | % | ||||||||||||||
| Total merchandise sales (b) | 88,209 | 100.0 | % | 64,416 | 100.0 | % | 36.9 | % | ||||||||||||||
| Returns and allowances | (5,775 | ) | (3,916 | ) | 47.5 | % | ||||||||||||||||
| Commissions | 1,272 | 730 | 74.2 | % | ||||||||||||||||||
| Net sales | $ | 83,706 | $ | 61,230 | 36.7 | % | ||||||||||||||||
| Gross profit rate | 26.3 | % | 23.3 | % | 293 | bp | ||||||||||||||||
| Sales and marketing expense | 17.8 | % | 16.2 | % | 158 | bp | ||||||||||||||||
| Contribution margin rate (c) | 3.0 | % | 6.2 | % | (318 | ) | bp | |||||||||||||||
| Average order size (d) | $ | 262 | $ | 251 | 4.3 | % | ||||||||||||||||
|
|
||||||||||||||||||||||
|
__________________________________ |
||||||||||||||||||||||
(a) Orchard Portfolio results are presented for the period from July 10, 2015 through October 30, 2015.
(b) Total merchandise sales includes shipping and handling revenue and is net of sales discounts.
(c) Represents contribution margin as a percentage of net sales. Please refer to the "Bluestem Brands, Inc. - Non-GAAP Financial Measures" within this release for a reconciliation of non-GAAP financial measures to GAAP and why Bluestem believes these are important measures of its performance.
(d) Represents retail merchandise sales including shipping and handling revenue divided by the number of merchandise orders fulfilled during the fiscal period presented.
(e) Other includes Gettington.com and Paycheck Direct.
| BLUESTEM BRANDS, INC. | |||||||||||||||||
| Supplemental Financial Information | |||||||||||||||||
| (unaudited — in thousands, except average balance outstanding) | |||||||||||||||||
| Successor | Predecessor | ||||||||||||||||
| (13 Weeks Ended) | (13 Weeks Ended) | ||||||||||||||||
| October 30, 2015 | October 31, 2014 | Change | |||||||||||||||
| Net credit expense (income): | |||||||||||||||||
| Finance charge and fee income | $ | (466 | ) | $ | 516 | (190.3 | )% | ||||||||||
| Provision for doubtful accounts | 3,637 | 656 | 454.4 | % | |||||||||||||
| Credit management costs | 19,268 | 16,316 | 18.1 | % | |||||||||||||
| Portfolio profit sharing and servicing fee income | (7,296 | ) | (8,711 | ) | (16.2 | )% | |||||||||||
| Net credit expense (income) | $ | 15,143 | $ | 8,777 | 72.5 | % | |||||||||||
| Serviced Portfolio Selected Credit Data: | |||||||||||||||||
| (13 Weeks Ended) | |||||||||||||||||
| October 30, 2015 | |||||||||||||||||
| Revolving (a) | FreshStart (b) | PCD Installment (c) | |||||||||||||||
| Balance active accounts | 1,812 | 120 | 38 | ||||||||||||||
| Average balance outstanding | $ | 677 | $ | 103 | $ | 541 | |||||||||||
| Customer accounts receivable (d) | $ | 1,225,964 | $ | 12,385 | $ | 20,618 | |||||||||||
| Balances 30+ days delinquent (e) | $ | 215,964 | $ | 4,333 | $ | 1,058 | |||||||||||
| Balances 30+ days delinquent as a percentage | |||||||||||||||||
| of total customer accounts receivable (f) | 17.6 | % | 35.0 | % | 5.1 | % | |||||||||||
| Average customer accounts receivable | $ | 1,249,882 | $ | 13,202 | $ | 19,101 | |||||||||||
| Finance charge and fee income (expense) | 85,093 | 67 | n/a | ||||||||||||||
| Finance charge and fee income rate (g) | 27.2 | % | 0.7 | % | n/a | ||||||||||||
| Net principal charge-offs | $ | 58,835 | $ | 3,693 | $ | 812 | |||||||||||
| Net principal charge-off rate (h) | 18.8 | % | 38.4 | % | 17.0 | % | |||||||||||
| (13 Weeks Ended) | |||||||||||||||||
| October 31, 2014 | |||||||||||||||||
| Revolving (a) | FreshStart (b) | PCD Installment (c) | |||||||||||||||
| Balance active accounts | 1,678 | 106 | 16 | ||||||||||||||
| Average balance outstanding | $ | 619 | $ | 105 | $ | 698 | |||||||||||
| Customer accounts receivable (d) | $ | 1,038,208 | $ | 11,106 | $ | 11,225 | |||||||||||
| Balances 30+ days delinquent (e) | $ | 184,780 | $ | 3,654 | $ | 93 | |||||||||||
| Balances 30+ days delinquent as a percentage | |||||||||||||||||
| of total customer accounts receivable (f) | 17.8 | % | 32.9 | % | 0.8 | % | |||||||||||
| Average customer accounts receivable | $ | 1,043,445 | $ | 11,350 | $ | 8,882 | |||||||||||
| Finance charge and fee income | $ | 74,623 | $ | 308 | n/a | ||||||||||||
| Finance charge and fee income rate (g) | 28.6 | % | 4.0 | % | n/a | ||||||||||||
| Net principal charge-offs | $ | 45,722 | $ | 2,990 | $ | 112 | |||||||||||
|
Net principal charge-off rate (h) |
17.5 | % | 38.4 | % | 5.0 | % | |||||||||||
|
_______________________________ |
|||||||||||||||||
(a) Revolving serviced portfolio includes Fingerhut and Gettington.com revolving credit accounts.
(b) FreshStart serviced portfolio is Fingerhut's installment accounts.
(c) PCD installment serviced portfolio is installment receivables issued to consumers who are members and employees of participating organizations and employers in the PayCheck Direct
(d) Customer accounts receivable excludes impact from purchase accounting fair value adjustment. program.
(e) Delinquent balances as of the customers' statement cycle dates prior to or on fiscal period end.
(f) Delinquent balances as of the customers' statement cycle dates prior to or on fiscal period end as a percentage of total customer accounts receivable as of the customers' statement cycle dates prior to or on fiscal period end.
(g) Revolving finance charge and fee income rate represents finance charge and fee income as a percentage of average customer accounts receivable for the 13 weeks ended October 30, 2015 and October 31, 2014 annualized to 52-week periods for comparability. FreshStart finance charge and fee income rate represents finance charge and fee income as a percentage of the 13 weeks of FreshStart related sales five months prior to the 13 weeks ended October 30, 2015 and October 31, 2014.
(h) Revolving and PCD Installment net principal charge-off rate represents net principal charge-offs as a percentage of average customer accounts receivable for the 13 weeks ended October 30, 2015 and October 31, 2014 annualized to 52-week periods for comparability. FreshStart net principal charge-off rate represents net principal charge-offs as a percentage of the 13 weeks of FreshStart related sales five months prior to the 13 weeks ended October 30, 2015 and October 31, 2014.
| BLUESTEM BRANDS, INC. | ||||||||||||||||||
| Supplemental Financial Information | ||||||||||||||||||
| (unaudited — in thousands, except average balance outstanding) | ||||||||||||||||||
| Successor | Predecessor | |||||||||||||||||
| (39 Weeks Ended) | (39 Weeks Ended) | |||||||||||||||||
| October 30, 2015 | October 31, 2014 | Change | ||||||||||||||||
| Net credit expense (income): | ||||||||||||||||||
| Finance charge and fee income | $ | (4,648 | ) | $ | 7,787 | (159.7 | )% | |||||||||||
| Provision (benefit) for doubtful accounts | 10,795 | (7,942 | ) | (235.9 | )% | |||||||||||||
| Credit management costs | 56,469 | 50,361 | 12.1 | % | ||||||||||||||
| Portfolio profit sharing and servicing fee income | (31,365 | ) | (53,961 | ) | (41.9 | )% | ||||||||||||
| Net credit expense (income) | $ | 31,251 | $ | (3,755 | ) | n/m | ||||||||||||
| Serviced Portfolio Selected Credit Data: | ||||||||||||||||||
| (39 Weeks Ended) | ||||||||||||||||||
| October 30, 2015 | ||||||||||||||||||
| Revolving (a) | FreshStart (b) | PCD Installment (c) | ||||||||||||||||
| Balance active accounts | 1,812 | 120 | 38 | |||||||||||||||
| Average balance outstanding | $ | 677 | $ | 103 | $ | 541 | ||||||||||||
| Customer accounts receivable (d) | $ | 1,225,964 | $ | 12,385 | $ | 20,618 | ||||||||||||
| Balances 30+ days delinquent (e) | $ | 215,964 | $ | 4,333 | $ | 1,058 | ||||||||||||
| Balances 30+ days delinquent as a percentage | ||||||||||||||||||
| of total customer accounts receivable (f) | 17.6 | % | 35.0 | % | 5.1 | % | ||||||||||||
| Average customer accounts receivable | $ | 1,248,142 | $ | 17,487 | $ | 17,606 | ||||||||||||
| Finance charge and fee income | 267,350 | 1,749 | n/a | |||||||||||||||
| Finance charge and fee income rate (g) | 28.6 | % | 4.3 | % | n/a | |||||||||||||
| Net principal charge-offs | $ | 172,539 | $ | 13,958 | $ | 1,877 | ||||||||||||
| Net principal charge-off rate (h) | 18.4 | % | 34.0 | % | 14.2 | % | ||||||||||||
| (39 Weeks Ended) | ||||||||||||||||||
| October 31, 2014 | ||||||||||||||||||
| Revolving (a) | FreshStart (b) | PCD Installment (c) | ||||||||||||||||
| Balance active accounts | 1,678 | 106 | 16 | |||||||||||||||
| Average balance outstanding | $ | 619 | $ | 105 | $ | 698 | ||||||||||||
| Customer accounts receivable (d) | $ | 1,038,208 | $ | 11,106 | $ | 11,225 | ||||||||||||
| Balances 30+ days delinquent (e) | $ | 184,780 | $ | 3,654 | $ | 93 | ||||||||||||
| Balances 30+ days delinquent as a percentage | ||||||||||||||||||
| of total customer accounts receivable (f) | 17.8 | % | 32.9 | % | 0.8 | % | ||||||||||||
| Average customer accounts receivable | $ | 1,029,620 | $ | 12,499 | $ | 5,973 | ||||||||||||
| Finance charge and fee income | $ | 226,989 | $ | 1,800 | n/a | |||||||||||||
| Finance charge and fee income rate (g) | 29.4 | % | 6.3 | % | n/a | |||||||||||||
| Net principal charge-offs | $ | 123,394 | $ | 9,549 | $ | 269 | ||||||||||||
| Net principal charge-off rate (h) | 16.0 | % | 33.4 | % | 6.0 | % | ||||||||||||
|
____________________________ |
||||||||||||||||||
(a) Revolving serviced portfolio includes Fingerhut and Gettington.com revolving credit accounts.
(b) FreshStart serviced portfolio is Fingerhut's installment accounts.
(c) PCD installment serviced portfolio is installment receivables issued to consumers who are members and employees of participating organizations and employers in the PayCheck Direct program.
(d) Customer accounts receivable excludes impact from purchase accounting fair value adjustment.
(e) Delinquent balances as of the customers' statement cycle dates prior to or on fiscal period end.
(f) Delinquent balances as of the customers' statement cycle dates prior to or on fiscal period end as a percentage of total customer accounts receivable as of the customers' statement cycle dates prior to or on fiscal period end.
(g) Revolving finance charge and fee income rate represents finance charge and fee income as a percentage of average customer accounts receivable for the 39 weeks ended October 30, 2015 and October 31, 2014 annualized to 52-week periods for comparability. FreshStart finance charge and fee income rate represents finance charge and fee income as a percentage of the 39 weeks of FreshStart related sales five months prior to the 39 weeks ended October 30, 2015 and October 31, 2014.
(h) Revolving and PCD Installment net principal charge-off rate represents net principal charge-offs as a percentage of average customer accounts receivable for the 39 weeks ended October 30, 2015 and October 31, 2014 annualized to 52-week periods for comparability. FreshStart net principal charge-off rate represents net principal charge-offs as a percentage of the 39 weeks of FreshStart related sales five months prior to the 39 weeks ended October 30, 2015 and October 31, 2014.
BLUESTEM BRANDS, INC.
Non-GAAP Financial Measures
(unaudited
— in thousands)
To supplement the consolidated financial information of Bluestem Brands, Inc. and its subsidiaries which are presented in accordance with U.S. Generally Accepted Accounting Principles, or GAAP, Bluestem uses the following measures that are not in accordance with, or an alternative to, measures prepared in accordance with GAAP (non-GAAP measures):
Contribution margin, as presented, is defined as net sales less cost of goods sold, sales and marketing expenses and net credit expense (income). Contribution Margin represents the combined performance of merchandising, marketing and credit management activities.
Adjusted general and administrative expense, as presented, is defined as general and administrative expenses adjusted for dividend equivalent expense, stock-based compensation expense, integration costs, acquisition transaction costs, specified litigation matters, and other. Specified litigation matters are certain litigation contingencies that existed as of the November 7, 2014 acquisition of Bluestem by Bluestem Group that are subject to limited indemnification by Bluestem's former stockholders.
Adjusted EBITDA, as presented, represents net income (loss) before interest expense, income tax (benefit) expense, amortization and depreciation expense, stock-based compensation expense, dividend equivalent expense, acquisition transaction costs, integration costs, specified litigation matters, and other. Specified litigation matters are certain litigation contingencies that existed as of the November 7, 2014 acquisition of Bluestem by Bluestem Group that are subject to limited indemnification by Bluestem's former stockholders.
Free cash flow, as presented, represents adjusted EBITDA, as defined above, less maintenance capital expenditures.
We provide these measures because we believe they are useful to investors in evaluating our operating performance compared to other companies in our industry. As non-GAAP measures, they have limitations in that they do not reflect all of the amounts associated with Bluestem's results of operations as determined in accordance with GAAP and are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures should be considered along with the GAAP financial presentation and should not be considered in isolation or as a substitute for results reported in accordance with GAAP. In addition, our calculations of contribution margin, adjusted general and administrative expense, adjusted EBITDA, and free cash flow may not be comparable to the calculations of such measures by other companies.
The following table reconciles Contribution Margin from the nearest GAAP performance measure, which is net income (loss):
| 13 Weeks Ended | 39 Weeks Ended | ||||||||||||||||||||
| October 30, 2015 | October 31, 2014 | October 30, 2015 (a) | October 31, 2014 | ||||||||||||||||||
| Contribution Margin: | |||||||||||||||||||||
| Net income (loss) | $ | 5,421 | $ | (4,389 | ) | $ | (18,542 | ) | $ | 9,622 | |||||||||||
| Income tax (benefit) expense | (14,680 | ) | (3,295 | ) | (20,127 | ) | 4,520 | ||||||||||||||
| Interest expense, net | 13,945 | 4,248 | 30,219 | 13,248 | |||||||||||||||||
| General and administrative expenses | 56,864 | 37,865 | 137,051 | 103,151 | |||||||||||||||||
| Amortization and depreciation not included in cost of sales | 16,462 | 3,128 | 43,271 | 9,465 | |||||||||||||||||
| Contribution Margin | $ | 78,012 | $ | 37,557 | $ | 171,872 | $ | 140,006 | |||||||||||||
| Contribution margin % of net sales | 16.4 | % | 17.6 | % | 17.5 | % | 22.8 | % | |||||||||||||
The following table reconciles Adjusted General and Administrative expenses from the nearest GAAP performance measure, which is general and administrative expenses:
| 13 Weeks Ended | 39 Weeks Ended | ||||||||||||||||||||
| October 30, 2015 | October 31, 2014 | October 30, 2015 (a) | October 31, 2014 | ||||||||||||||||||
| Adjusted General and Administrative Expenses: | |||||||||||||||||||||
| General and administrative expenses | $ | 56,864 | $ | 37,865 | $ | 137,051 | $ | 103,151 | |||||||||||||
| Less: | |||||||||||||||||||||
| Dividend equivalent expense | - | 2,917 | - | 9,053 | |||||||||||||||||
| Stock-based compensation expense | 1,059 | 706 | 3,007 | 2,131 | |||||||||||||||||
| Integration costs | 2,972 | - | 3,237 | - | |||||||||||||||||
| Acquisition transaction costs | - | 6,772 | 8,342 | 9,656 | |||||||||||||||||
| Specified litigation matters | - | 719 | - | 3,541 | |||||||||||||||||
| Lease termination costs | - | - | 1,122 | - | |||||||||||||||||
| Other | 546 | 92 | 1,730 | 195 | |||||||||||||||||
| Adjusted General and Administrative Expenses | $ | 52,287 | $ | 26,659 | $ | 119,613 | $ | 78,575 | |||||||||||||
| Adjusted general and administrative expenses % of net sales | 11.0 | % | 12.5 | % | 12.2 | % | 12.8 | % | |||||||||||||
|
_____________________________________________ |
|||||||||||||||||||||
|
(a) Orchard Portfolio results are presented for the period from July 10, 2015 through October 30, 2015. |
|||||||||||||||||||||
BLUESTEM BRANDS, INC.
Non-GAAP Financial Measures
(unaudited
— in thousands)
The following table reconciles Adjusted EBITDA from the nearest GAAP performance measure, which is net income (loss):
| 13 Weeks Ended | 39 Weeks Ended | ||||||||||||||||||||
| October 30, 2015 | October 31, 2014 | October 30, 2015 (a) | October 31, 2014 | ||||||||||||||||||
| Adjusted EBITDA: | |||||||||||||||||||||
| Net income (loss) | $ | 5,421 | $ | (4,389 | ) | $ | (18,542 | ) | $ | 9,622 | |||||||||||
| Interest expense | 13,946 | 4,250 | 30,223 | 13,263 | |||||||||||||||||
| Income tax (benefit) expense | (14,680 | ) | (3,295 | ) | (20,127 | ) | 4,520 | ||||||||||||||
| Amortization and depreciation expense | 17,628 | 3,631 | 45,069 | 10,942 | |||||||||||||||||
| EBITDA | 22,315 | 197 | 36,623 | 38,347 | |||||||||||||||||
| Stock-based compensation expense | 1,059 | 706 | 3,007 | 2,131 | |||||||||||||||||
| Dividend equivalent expense | - | 2,917 | - | 9,053 | |||||||||||||||||
| Acquisition transaction costs | - | 6,772 | 8,342 | 9,656 | |||||||||||||||||
| Integration costs | 2,972 | - | 3,237 | - | |||||||||||||||||
| Specified litigation matters | - | 719 | - | 3,541 | |||||||||||||||||
| Lease termination costs | - | - | 1,122 | - | |||||||||||||||||
| Other | 674 | 207 | 2,100 | 531 | |||||||||||||||||
| Adjusted EBITDA | $ | 27,020 | $ | 11,518 | $ | 54,431 | $ | 63,259 | |||||||||||||
| Adjusted EBITDA % of net sales | 5.7 | % | 5.4 | % | 5.5 | % | 10.3 | % | |||||||||||||
The following table reconciles Free Cash Flow from Adjusted EBITDA:
| 13 Weeks Ended | 39 Weeks Ended | ||||||||||||||||||||
| October 30, 2015 | October 31, 2014 | October 30, 2015 (a) | October 31, 2014 | ||||||||||||||||||
| Free Cash Flow: | |||||||||||||||||||||
| Adjusted EBITDA | $ | 27,020 | $ | 11,518 | $ | 54,431 | $ | 63,259 | |||||||||||||
| Less: | |||||||||||||||||||||
| Maintenance capital expenditures | (4,748 | ) | (1,931 | ) | (11,576 | ) | (4,329 | ) | |||||||||||||
| Free Cash Flow | $ | 22,272 | $ | 9,587 | $ | 42,855 | $ | 58,930 | |||||||||||||
| Free Cash Flow % of net sales | 4.7 | % | 4.5 | % | 4.4 | % | 9.6 | % | |||||||||||||
|
________________________________________________ |
|||||||||||||||||||||
| (a) Orchard Portfolio results are presented for the period from July 10, 2015 through October 30, 2015. | |||||||||||||||||||||
Bluestem Brands
Consolidated Statements of Operations
(unaudited
— in thousands)
To supplement the consolidated financial information of Bluestem Brands, Inc. and its subsidiaries, which are presented in accordance with U.S. Generally Accepted Accounting Principles, or GAAP, we are providing certain stand-alone historical results of the Bluestem Legacy Portfolio for the 13 weeks ended July 31, 2015, May 1, 2015, January 30, 2015, October 31, 2014, August 1, 2014 and May 2, 2014. These periods represent the first two quarters of Bluestem Brands, Inc.'s fiscal year 2015 and four quarters of fiscal year 2014. Bluestem Legacy Portfolio results of operations for prior periods are not necessarily indicative of future performance. "Bluestem Legacy Portfolio" refers to the consolidated Fingerhut, Gettington and PayCheck Direct retail brands.
Adjusted EBITDA, as presented, represents net income (loss) before interest expense, income tax expense, amortization and depreciation expense, stock-based compensation expense, acquisition transaction costs, specified litigation matters, dividend equivalent expense, loss on early extinguishment of debt and other. Specified litigation matters are certain litigation contingencies that existed as of the November 7, 2014 acquisition of Bluestem by Bluestem Group, Inc. that are subject to limited indemnification by Bluestem's former stockholders. We provide this measure because we believe it is useful to investors in evaluating operating performance compared to other companies in Bluestem Brands' industry. As a non-GAAP measure, adjusted EBITDA has limitations in that it does not reflect all of the amounts associated with Bluestem Brands' results of operations as determined in accordance with GAAP and is not based on any comprehensive set of accounting rules or principles. Non-GAAP measures should be considered along with the GAAP financial presentation and should not be considered in isolation or as a substitute for results reported in accordance with GAAP.
Adjusted Pro forma EBITDA, as presented, represents Adjusted EBITDA, as defined above, assuming that the SCUSA credit financing arrangement had been in place and all revolving customer accounts receivable were sold to SCUSA prior to the 2013 fiscal year. No pro forma adjustments were necessary for the first and second quarter of fiscal 2015 as the sale of receivables was fully transitioned by the end of fiscal 2014.
| 13 weeks ended | |||||||||||||||||||||||||||||||
| July 31, 2015 | May 1, 2015 | January 30, 2015 | October 31, 2014 | August 1, 2014 | May 2, 2014 | ||||||||||||||||||||||||||
| Net sales | $ | 252,934 | $ | 206,175 | $ | 456,474 | $ | 213,324 | $ | 230,474 | $ | 171,251 | |||||||||||||||||||
| Cost of goods sold | 147,184 | 120,260 | 271,635 | 124,407 | 132,853 | 98,753 | |||||||||||||||||||||||||
| Gross profit | 105,750 | 85,915 | 184,839 | 88,917 | 97,621 | 72,498 | |||||||||||||||||||||||||
| Sales and marketing expenses | 47,463 | 42,717 | 74,010 | 42,583 | 42,991 | 37,211 | |||||||||||||||||||||||||
| Net credit expense (income) | 9,810 | 6,299 | 20,713 | 8,777 | 174 | (12,706 | ) | ||||||||||||||||||||||||
| General and administrative expenses | 40,314 | 33,753 | 63,116 | 37,865 | 31,533 | 33,753 | |||||||||||||||||||||||||
| Amortization and depreciation not included in | |||||||||||||||||||||||||||||||
| cost of goods sold | 14,010 | 12,051 | 21,847 | 3,128 | 3,158 | 3,179 | |||||||||||||||||||||||||
| Loss on early extinguishment of debt | - | - | 9,298 | - | - | ||||||||||||||||||||||||||
| Operating income | (5,847 | ) | (8,905 | ) | (4,145 | ) | (3,436 | ) | 19,765 | 11,061 | |||||||||||||||||||||
| Interest expense, net | 8,755 | 7,520 | 7,419 | 4,248 | 4,364 | 4,636 | |||||||||||||||||||||||||
| Income before provision for income tax | (14,602 | ) | (16,425 | ) | (11,564 | ) | (7,684 | ) | 15,401 | 6,425 | |||||||||||||||||||||
| Income tax (benefit) expense | (288 | ) | (5,159 | ) | (2,960 | ) | (3,295 | ) | 5,510 | 2,305 | |||||||||||||||||||||
| Net income | $ | (14,314 | ) | $ | (11,266 | ) | $ | (8,604 | ) | $ | (4,389 | ) | $ | 9,891 | $ | 4,120 | |||||||||||||||
| Amortization and depreciation expense | $ | 14,295 | $ | 12,336 | $ | 22,149 | $ | 3,631 | $ | 3,648 | $ | 3,663 | |||||||||||||||||||
| Interest expense | 8,755 | 7,520 | 7,421 | 4,250 | 4,370 | 4,643 | |||||||||||||||||||||||||
| Income tax (benefit) expense | (288 | ) | (5,159 | ) | (2,960 | ) | (3,295 | ) | 5,510 | 2,305 | |||||||||||||||||||||
| EBITDA | 8,448 | 3,431 | 18,006 | 197 | 23,419 | 14,731 | |||||||||||||||||||||||||
| Stock-based compensation expense | 939 | 1,009 | 7,553 | 706 | 703 | 722 | |||||||||||||||||||||||||
| Acquisition transaction costs | 6,530 | 1,812 | 1,581 | 6,772 | 1,335 | 1,549 | |||||||||||||||||||||||||
| Dividend equivalent expense | - | - | 19,628 | 2,917 | 2,976 | 3,160 | |||||||||||||||||||||||||
| Loss on early extinguishment of debt | - | - | 9,298 | - | - | - | |||||||||||||||||||||||||
| Specified litigation matters | - | - | 54 | 719 | 805 | 2,017 | |||||||||||||||||||||||||
| Lease termination costs | 1,122 | - | - | - | - | - | |||||||||||||||||||||||||
| Other | 780 | 646 | 517 | 207 | 164 | 160 | |||||||||||||||||||||||||
| Adjusted EBITDA | 17,819 | 6,898 | 56,637 | 11,518 | 29,402 | 22,339 | |||||||||||||||||||||||||
| Net credit expense (income) pro forma adj (a) | - | - | (653 | ) | (1,310 | ) | (2,503 | ) | (15,986 | ) | |||||||||||||||||||||
| Other pro forma adj (a) | - | - | (23 | ) | (243 | ) | (240 | ) | (238 | ) | |||||||||||||||||||||
| Adjusted Pro forma EBITDA | $ | 17,819 | $ | 6,898 | $ | 55,961 | $ | 9,965 | $ | 26,659 | $ | 6,115 | |||||||||||||||||||
| Adjusted Pro forma EBITDA % of net sales | 7.0 | % | 3.3 | % | 12.3 | % | 4.7 | % | 11.6 | % | 3.6 | % | |||||||||||||||||||
|
_________________________________________ |
|||||||||||||||||||||||||||||||
(a) Adjustments assume the SCUSA credit financing arrangement had been in place and all revolving customer accounts receivable were sold to SCUSA prior to the 2013 fiscal year. No pro forma adjustments were necessary for the first and second quarter of fiscal 2015 as the sale of receivables was fully transitioned by the end of fiscal 2014.
| Bluestem Brands | |||||||||||||||||||||||||||||||
| Supplemental Financial Information | |||||||||||||||||||||||||||||||
| (unaudited — in thousands, except average order size and average balance outstanding) | |||||||||||||||||||||||||||||||
| 13 weeks ended | |||||||||||||||||||||||||||||||
| July 31, 2015 | May 1, 2015 | January 30, 2015 | October 31, 2014 | August 1, 2014 | May 2, 2014 | ||||||||||||||||||||||||||
| Margins and Expenses as a Percentage of Net Sales: | |||||||||||||||||||||||||||||||
| Gross profit rate | 41.8 | % | 41.7 | % | 40.5 | % | 41.7 | % | 42.4 | % | 42.3 | % | |||||||||||||||||||
| Sales and marketing expenses | 18.8 | % | 20.7 | % | 16.2 | % | 20.0 | % | 18.7 | % | 21.7 | % | |||||||||||||||||||
| Net credit expense (income) | 3.9 | % | 3.1 | % | 4.5 | % | 4.1 | % | 0.1 | % | (7.4 | )% | |||||||||||||||||||
| Selected Operating Data: | |||||||||||||||||||||||||||||||
| Revolving new customer credit accounts (a) | 150 | 143 | 288 | 152 | 153 | 138 | |||||||||||||||||||||||||
| FreshStart new customer credit accounts (a) | 50 | 60 | 123 | 51 | 47 | 49 | |||||||||||||||||||||||||
| PayCheck Direct new customer credit accounts (a) | 8 | 6 | 11 | 9 | 6 | 1 | |||||||||||||||||||||||||
| Active accounts (b) | 1,682 | 1,686 | 1,593 | 1,534 | 1,519 | 1,473 | |||||||||||||||||||||||||
| Average order size (c) | $ | 238 | $ | 221 | $ | 232 | $ | 228 | $ | 232 | $ | 214 | |||||||||||||||||||
| PayCheck Direct eligible client employees (d) | 4,316 | 2,648 | 2,348 | 2,449 | 2,194 | 1,815 | |||||||||||||||||||||||||
| Revolving Serviced Portfolio Selected Credit Data (e): | |||||||||||||||||||||||||||||||
| Balance active accounts | 1,800 | 1,808 | 1,878 | 1,678 | 1,665 | 1,653 | |||||||||||||||||||||||||
| Average balance outstanding | $ | 688 | $ | 672 | $ | 686 | $ | 619 | $ | 622 | $ | 599 | |||||||||||||||||||
| Customer accounts receivable (f) | $ | 1,237,579 | $ | 1,214,618 | $ | 1,287,526 | $ | 1,038,208 | $ | 1,035,927 | $ | 990,008 | |||||||||||||||||||
| Balances 30+ days delinquent (g) | $ | 201,406 | $ | 186,478 | $ | 189,092 | $ | 184,780 | $ | 173,326 | $ | 158,300 | |||||||||||||||||||
| Balances 30+ days delinquent as a percentage of total | |||||||||||||||||||||||||||||||
| customer accounts receivable (h) | 16.3 | % | 15.4 | % | 14.7 | % | 17.8 | % | 16.7 | % | 16.0 | % | |||||||||||||||||||
| Average customer accounts receivable | $ | 1,252,998 | $ | 1,241,546 | $ | 1,220,616 | $ | 1,043,445 | $ | 1,035,569 | $ | 1,009,848 | |||||||||||||||||||
| Annualized finance charge and fee income as a percentage of | |||||||||||||||||||||||||||||||
| average customer accounts receivable (i) | 28.8 | % | 29.7 | % | 28.7 | % | 28.6 | % | 30.4 | % | 29.2 | % | |||||||||||||||||||
| Net principal charge-offs | $ | 60,863 | $ | 52,841 | $ | 58,729 | $ | 45,722 | $ | 39,852 | $ | 37,820 | |||||||||||||||||||
| Annualized net principal charge-offs as a percentage of | |||||||||||||||||||||||||||||||
| average customer accounts receivable (i) | 19.4 | % | 17.0 | % | 19.2 | % | 17.5 | % | 15.4 | % | 15.0 | % | |||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||
|
__________________________________ |
|||||||||||||||||||||||||||||||
(a) Customers that have made their initial order on account during the fiscal period presented. Revolving new customer credit accounts excludes FreshStart graduates whom were initially included in FreshStart new customer credit accounts when their initial order was made.
(b) Revolving credit customers that have made at least one purchase on account within the previous twelve fiscal months and at least one payment on account since origination.
(c) Retail merchandise sales including shipping and handling revenue divided by the number of merchandise orders fulfilled during the fiscal period presented.
(d) PayCheck Direct clients' full-time active employees with a tenure greater than six months, are at least 18 years old, and have met certain minimum annual earnings.
(e) Revolving serviced portfolio includes Fingerhut and Gettington.com revolving credit accounts.
(f) Customer accounts receivable excludes impact from purchase accounting fair value adjustment.
(g) Delinquent balances as of the customers' statement cycle dates prior to or on fiscal period end.
(h) Delinquent balances as of the customers' statement cycle dates prior to or on fiscal period end as a percentage of total customer accounts receivable as of the customers' statement cycle dates prior to or on fiscal period end.
(i) Finance charge and fee income rate represents finance charge and fee income as a percentage of average customer accounts receivable for the 13 weeks presented above annualized to 52-week periods for comparability.
Bluestem Brands
Supplemental Financial Information
(unaudited
— in thousands)
To supplement the consolidated financial information of Bluestem Brands, Inc. and its subsidiaries, we are providing certain stand-alone historical results of the Bluestem Legacy Portfolio for the 13 weeks ended July 31, 2015, May 1, 2015, January 30, 2015, October 31, 2014, August 1, 2014 and May 2, 2014, Bluestem uses the following measure that are not in accordance with, or an alternative to, measures prepared in accordance with GAAP (non-GAAP measures):
Adjusted general and administrative expenses, as presented, is defined as general and administrative expenses adjusted for dividend equivalent expense, stock-based compensation expense, integration costs, acquisition transaction costs, specified litigation matters, and other. Specified litigation matters are certain litigation contingencies that existed as of the November 7, 2014 acquisition of Bluestem by Bluestem Group that are subject to limited indemnification by Bluestem's former stockholders.
Free cash flow, as presented, represents adjusted pro forma EBITDA, as defined above, less maintenance capital expenditures.
| 13 weeks ended | |||||||||||||||||||||||||||||||
| July 31, 2015 | May 1, 2015 | January 30, 2015 | October 31, 2014 | August 1, 2014 | May 2, 2014 | ||||||||||||||||||||||||||
| Sales by Merchandise Category: | |||||||||||||||||||||||||||||||
| Home | $ | 126,106 | $ | 98,706 | $ | 154,188 | $ | 93,529 | $ | 110,682 | $ | 81,119 | |||||||||||||||||||
| Entertainment | 101,861 | 84,368 | 237,214 | 94,497 | 96,387 | 69,201 | |||||||||||||||||||||||||
| Fashion | 38,627 | 32,996 | 87,303 | 35,549 | 34,891 | 27,604 | |||||||||||||||||||||||||
| Total merchandise sales (a) | 266,594 | 216,070 | 478,705 | 223,575 | 241,960 | 177,924 | |||||||||||||||||||||||||
| Returns and allowances | (18,845 | ) | (13,949 | ) | (28,804 | ) | (14,612 | ) | (15,885 | ) | (10,602 | ) | |||||||||||||||||||
| Commissions and other revenue | 5,185 | 4,054 | 6,573 | 4,361 | 4,399 | 3,929 | |||||||||||||||||||||||||
| Net sales | $ | 252,934 | $ | 206,175 | $ | 456,474 | $ | 213,324 | $ | 230,474 | $ | 171,251 | |||||||||||||||||||
| Adjusted General and Administrative Expenses: | |||||||||||||||||||||||||||||||
| General and administrative expenses | $ | 40,314 | $ | 33,753 | $ | 63,116 | $ | 37,865 | $ | 31,533 | $ | 33,753 | |||||||||||||||||||
| Less: | |||||||||||||||||||||||||||||||
| Stock-based compensation expense | 939 | 1,009 | 7,553 | 706 | 703 | 722 | |||||||||||||||||||||||||
| Acquisition transaction costs | 6,530 | 1,812 | 1,581 | 6,772 | 1,335 | 1,549 | |||||||||||||||||||||||||
| Dividend equivalent expense | - | - | 19,628 | 2,917 | 2,976 | 3,160 | |||||||||||||||||||||||||
| Specified litigation matters | - | - | 54 | 719 | 805 | 2,017 | |||||||||||||||||||||||||
| Lease termination costs | 1,122 | - | - | - | - | - | |||||||||||||||||||||||||
| Other | 653 | 531 | 401 | 92 | 48 | 55 | |||||||||||||||||||||||||
| Adjusted general and administrative expenses | $ | 31,070 | $ | 30,401 | $ | 33,899 | $ | 26,659 | $ | 25,666 | $ | 26,250 | |||||||||||||||||||
| Adjusted general and administrative expenses | |||||||||||||||||||||||||||||||
| % of net sales | 12.3 | % | 14.7 | % | 7.4 | % | 12.5 | % | 11.1 | % | 15.3 | % | |||||||||||||||||||
| Free Cash Flow: | |||||||||||||||||||||||||||||||
| Adjusted Pro forma EBITDA | $ | 17,819 | $ | 6,898 | $ | 55,961 | $ | 9,965 | $ | 26,659 | $ | 6,115 | |||||||||||||||||||
| Less: | |||||||||||||||||||||||||||||||
| Maintenance capital expenditures | 3,562 | 2,698 | 2,549 | 1,931 | 1,889 | 510 | |||||||||||||||||||||||||
| Free Cash Flow | $ | 14,257 | $ | 4,200 | $ | 53,412 | $ | 8,034 | $ | 24,770 | $ | 5,605 | |||||||||||||||||||
|
__________________________________ |
|||||||||||||||||||||||||||||||
| (a) Total merchandise sales includes shipping and handling revenue and is net of sales discounts. | |||||||||||||||||||||||||||||||
Orchard Brands Corporation
Six Quarters of Historical
Orchard Results
ORCHARD BRANDS CORPORATION
Consolidated Statements of
Operations
(unaudited — in thousands)
To supplement the consolidated financial information of Bluestem Brands, Inc. and its subsidiaries, we are providing certain consolidated stand-alone historical results of Orchard Brands Corporation and its subsidiaries for the 13 weeks ended June 27, 2015, March 28, 2015, December 27, 2014, September 27, 2014, June 28, 2014 and March 29, 2014. These periods represent the first two quarters of Orchard Brands Corporation's fiscal year 2015 and four quarters of fiscal year 2014. This information is being presented to provide an understanding of the historic consolidated results of Orchard Brands Corporation prior to ownership by Bluestem Brands, Inc. This information does not include any adjustments or otherwise give effect to any changes to the operations of Orchard Brands Corporation or its subsidiaries that might result from Bluestem Brand’s acquisition of Orchard Brands Corporation. The results for the periods presented are not included in the results of Bluestem Brands, Inc. Orchard Brand Corporation’s consolidated results of operations for prior periods are not necessarily indicative of future performance.
Adjusted EBITDA, as presented, represents net income (loss) before interest expense, income tax expense, amortization and depreciation expense, stock-based compensation expense, special bonus compensation expense, acquisition transaction costs, restructuring costs and other. We provide this measure because we believe it is useful to investors in evaluating operating performance compared to other companies in Orchard Brand’s industry. As a non-GAAP measure, adjusted EBITDA has limitations in that it does not reflect all of the amounts associated with Orchards Brands Corporation's results of operations as determined in accordance with GAAP and is not based on any comprehensive set of accounting rules or principles. Non-GAAP measures should be considered along with the GAAP financial presentation and should not be considered in isolation or as a substitute for results reported in accordance with GAAP.
| 13 weeks ended | |||||||||||||||||||||||||||||
| June 27, 2015 | March 28, 2015 | December 27, 2014 | September 27, 2014 | June 28, 2014 | March 29, 2014 | ||||||||||||||||||||||||
| Net sales | $ | 276,634 | $ | 213,141 | $ | 304,719 | $ | 224,674 | $ | 274,070 | $ | 218,428 | |||||||||||||||||
| Cost of goods sold | 121,704 | 97,465 | 140,669 | 104,336 | 121,091 | 101,290 | |||||||||||||||||||||||
| Gross profit | 154,930 | 115,676 | 164,050 | 120,338 | 152,979 | 117,138 | |||||||||||||||||||||||
| Operating expenses | 137,149 | 111,971 | 149,346 | 110,324 | 138,467 | 112,761 | |||||||||||||||||||||||
| Operating income | 17,781 | 3,705 | 14,704 | 10,014 | 14,512 | 4,377 | |||||||||||||||||||||||
| Interest expense | 4,171 | 4,292 | 4,714 | 4,785 | 5,047 | 5,055 | |||||||||||||||||||||||
| Income before provision for income tax | 13,610 | (587 | ) | 9,990 | 5,229 | 9,465 | (678 | ) | |||||||||||||||||||||
| Income tax expense | 5,240 | (226 | ) | 3,589 | 2,712 | 3,664 | 137 | ||||||||||||||||||||||
| Net income | $ | 8,370 | $ | (361 | ) | $ | 6,401 | $ | 2,517 | $ | 5,801 | $ | (815 | ) | |||||||||||||||
| Amortization and depreciation expense | 3,684 | 3,495 | 3,846 | 4,062 | 3,358 | 3,810 | |||||||||||||||||||||||
| Interest expense | 4,171 | 4,292 | 4,714 | 4,785 | 5,047 | 5,055 | |||||||||||||||||||||||
| Income tax expense | 5,240 | (226 | ) | 3,589 | 2,712 | 3,664 | 137 | ||||||||||||||||||||||
| EBITDA | 21,465 | 7,200 | 18,550 | 14,076 | 17,870 | 8,187 | |||||||||||||||||||||||
| Stock-based compensation expense | 179 | 179 | 4,409 | 735 | 3,712 | - | |||||||||||||||||||||||
| Special bonus compensation expense | - | - | 2,863 | - | - | - | |||||||||||||||||||||||
| Restructuring costs | 334 | - | - | - | - | 122 | |||||||||||||||||||||||
| Acquisition transaction costs | 229 | - | - | - | - | - | |||||||||||||||||||||||
| Other (a) | 33 | 4 | 804 | 64 | 496 | 1,283 | |||||||||||||||||||||||
| Adjusted EBITDA | $ | 22,240 | $ | 7,383 | $ | 26,626 | $ | 14,875 | $ | 22,078 | $ | 9,592 | |||||||||||||||||
| Adjusted EBITDA % of net sales | 8.0 | % | 3.5 | % | 8.7 | % | 6.6 | % | 8.1 | % | 4.4 | % | |||||||||||||||||
|
________________________________________ |
|||||||||||||||||||||||||||||
| (a) Includes one time recruiting costs, board of directors payments, common platform conversion costs, vacant positions and other. | |||||||||||||||||||||||||||||
| ORCHARD BRANDS CORPORATION | |||||||||||||||||||||||||||||
| Supplemental Financial Information | |||||||||||||||||||||||||||||
| (unaudited — in thousands, except average order size) | |||||||||||||||||||||||||||||
| 13 weeks ended | |||||||||||||||||||||||||||||
| June 27, 2015 | March 28, 2015 | December 27, 2014 | September 27, 2014 | June 28, 2014 | March 29, 2014 | ||||||||||||||||||||||||
| Supplemental Financial Data: | |||||||||||||||||||||||||||||
| Sales by merchandise category: | |||||||||||||||||||||||||||||
| Home | $ | 28,681 | $ | 28,095 | $ | 34,397 | $ | 25,962 | $ | 29,039 | $ | 29,470 | |||||||||||||||||
| Fashion | 280,483 | 203,227 | 299,630 | 218,626 | 278,355 | 208,533 | |||||||||||||||||||||||
| Total merchandise sales (a) | 309,164 | 231,322 | 334,027 | 244,588 | 307,394 | 238,003 | |||||||||||||||||||||||
| Returns and allowances | (47,752 | ) | (31,248 | ) | (43,099 | ) | (32,585 | ) | (47,015 | ) | (31,536 | ) | |||||||||||||||||
| Commissions and other revenue | 15,222 | 13,067 | 13,791 | 12,671 | 13,691 | 11,961 | |||||||||||||||||||||||
| Net sales | $ | 276,634 | $ | 213,141 | $ | 304,719 | $ | 224,674 | $ | 274,070 | $ | 218,428 | |||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||
| Selling and marketing expenses | $ | 105,731 | $ | 82,555 | $ | 110,715 | $ | 80,146 | $ | 103,114 | $ | 82,069 | |||||||||||||||||
| General and administrative expenses | 27,734 | 25,921 | 34,785 | 26,116 | 31,995 | 26,882 | |||||||||||||||||||||||
| Amortization and depreciation expenses | 3,684 | 3,495 | 3,846 | 4,062 | 3,358 | 3,810 | |||||||||||||||||||||||
| Operating expenses | $ | 137,149 | $ | 111,971 | $ | 149,346 | $ | 110,324 | $ | 138,467 | $ | 112,761 | |||||||||||||||||
| Other Financial Data: | |||||||||||||||||||||||||||||
| Sourcing overhead expenses (b) | 6,445 | 6,967 | 6,547 | 6,740 | 6,585 | 6,761 | |||||||||||||||||||||||
| Premium expenses (free gift) (c) | 1,904 | 1,544 | 1,918 | 1,842 | 2,115 | 1,624 | |||||||||||||||||||||||
| Fulfillment variable expenses (d) | 7,181 | 6,602 | 7,802 | 6,490 | 7,170 | 6,711 | |||||||||||||||||||||||
| Fulfillment related depreciation expense (e) | 283 | 243 | 258 | 233 | 249 | 307 | |||||||||||||||||||||||
| Other (f) | 298 | 352 | 171 | 352 | 211 | 302 | |||||||||||||||||||||||
| Selected Operating Data: | |||||||||||||||||||||||||||||
| Active customers (g) | 8,020 | 7,966 | 7,928 | 7,854 | 7,928 | 7,889 | |||||||||||||||||||||||
| New gross customers (h) | 516 | 407 | 554 | 336 | 468 | 381 | |||||||||||||||||||||||
| Average order size (i) | $ | 81 | $ | 72 | $ | 78 | $ | 75 | $ | 79 | $ | 73 | |||||||||||||||||
|
_____________________________________ |
|||||||||||||||||||||||||||||
(a) Total merchandise sales includes shipping and handling revenue and is net of sales discounts.
(b) Sourcing overhead expenses are included in cost of goods sold in the stand-alone historical results of Orchard Brands Corporation. Sourcing overhead expenses are included in general and administrative expense in the consolidated Bluestem Brands, Inc. results.
(c) Premium expenses are included in cost of goods sold in the stand-alone historical results of Orchard Brands Corporation. Premium expenses are included in selling and marketing expense in the consolidated Bluestem Brands, Inc. results.
(d) Fulfillment variable expenses are included in operating expenses of the stand-alone historical results of Orchard Brands Corporation. Fulfillment variable expenses are included in cost of goods sold of the consolidated Bluestem Brands, Inc. results.
(e) Fulfillment related depreciation expense is included in operating expenses of the stand-alone historical results of Orchard Brands Corporation. Fulfillment related depreciation expense is included in cost of goods sold of consolidated Bluestem Brands, Inc. results.
(f) Other is included in cost of goods sold of the stand-alone historical results of Orchard Brands Corporation. Other is included in Net Sales of Bluestem Brands, Inc. results.
(g) Customers that have made at least one purchase within the previous twelve fiscal months.
(h) Customers who have made a first time purchase from a particular brand within the Orchard Portfolio during the period presented.
(i) Retail merchandise sales including shipping and handling revenue divided by the number of merchandise orders fulfilled during the fiscal period presented.
ORCHARD BRANDS CORPORATION
Financial Measures Conformed
to Bluestem Brands, Inc.'s Basis of Presentation
(unaudited
— in thousands)
To supplement the consolidated stand-alone historical results of Orchard Brands Corporation and its subsidiaries which are presented in accordance with U.S. Generally Accepted Accounting Principles, or GAAP, and based on historical Orchard Brands Corporation's basis of presentation, the following measures are conformed to Bluestem Brands, Inc.'s basis of presentation for comparison purposes. Bluestem Brands, Inc.'s basis of presentation is in accordance with GAAP. Periods succeeding the acquisition of Orchard Brands Corporation on July 10, 2015 will be presented on Bluestem Brands, Inc.'s basis of presentation. The periods presented are based on the historical Orchard Brands Corporation fiscal second quarter ended June 27, 2015, first quarter ended March 28, 2015 and fiscal year ended December 27, 2014.
Adjusted net sales, as presented, is defined as net sales plus other.
Adjusted gross profit, as presented, is defined as adjusted net sales less cost of goods sold, sourcing overhead expenses, other and premium expenses plus fulfillment variable expenses and fulfillment related depreciation expense divided by adjusted net sales.
Adjusted selling and marketing expenses, as presented, is defined as selling and marketing expenses plus premium expenses.
Adjusted general and administrative expenses, as presented, is defined as general and administrative expenses plus sourcing overhead expenses less fulfillment variable expenses.
Free cash flow, as presented, represents adjusted pro forma EBITDA, as defined above, less maintenance capital expenditures.
| 13 weeks ended | ||||||||||||||||||||||||||||
| June 27, 2015 | March 28, 2015 | December 27, 2014 | September 27, 2014 | June 28, 2014 | March 29, 2014 | |||||||||||||||||||||||
| Adjusted Net Sales: | ||||||||||||||||||||||||||||
| Net sales | $ | 276,634 | $ | 213,141 | $ | 304,719 | $ | 224,674 | $ | 274,070 | $ | 218,428 | ||||||||||||||||
| Plus: Other | 298 | 352 | 171 | 352 | 211 | 302 | ||||||||||||||||||||||
| Adjusted Net Sales | $ | 276,932 | $ | 213,493 | $ | 304,890 | $ | 225,026 | $ | 274,281 | $ | 218,730 | ||||||||||||||||
| Adjusted Gross Profit: | ||||||||||||||||||||||||||||
| Cost of goods sold | $ | 121,704 | $ | 97,465 | $ | 140,669 | $ | 104,336 | $ | 121,091 | $ | 101,290 | ||||||||||||||||
| Plus: Fulfillment variable expenses | 7,181 | 6,602 | 7,802 | 6,490 | 7,170 | 6,711 | ||||||||||||||||||||||
| Fulfillment related depreciation expenses | 283 | 243 | 258 | 233 | 249 | 307 | ||||||||||||||||||||||
| Less: Sourcing overhead expenses | (6,445 | ) | (6,967 | ) | (6,547 | ) | (6,740 | ) | (6,585 | ) | (6,761 | ) | ||||||||||||||||
| Other | 298 | 352 | 171 | 352 | 211 | 302 | ||||||||||||||||||||||
| Premium expenses | (1,904 | ) | (1,544 | ) | (1,918 | ) | (1,842 | ) | (2,115 | ) | (1,624 | ) | ||||||||||||||||
| Adjusted cost of goods sold | 121,117 | 96,151 | 140,435 | 102,828 | 120,021 | 100,226 | ||||||||||||||||||||||
| Adjusted gross profit | $ | 155,815 | $ | 117,342 | $ | 164,455 | $ | 122,198 | $ | 154,260 | $ | 118,504 | ||||||||||||||||
| Adjusted gross profit rate | 56.3 | % | 55.0 | % | 53.9 | % | 54.3 | % | 56.2 | % | 54.2 | % | ||||||||||||||||
| Adjusted Selling and Marketing Expenses: | ||||||||||||||||||||||||||||
| Selling and marketing expenses | $ | 105,731 | $ | 82,555 | $ | 110,715 | $ | 80,146 | $ | 103,114 | $ | 82,069 | ||||||||||||||||
| Plus: Premium expenses | 1,904 | 1,544 | 1,918 | 1,842 | 2,115 | 1,624 | ||||||||||||||||||||||
| Adjusted selling and marketing expenses | $ | 107,635 | $ | 84,099 | $ | 112,633 | $ | 81,988 | $ | 105,229 | $ | 83,693 | ||||||||||||||||
| Adjusted selling and marketing expenses | ||||||||||||||||||||||||||||
| % of Adjusted Net Sales | 38.9 | % | 39.4 | % | 36.9 | % | 36.4 | % | 38.4 | % | 38.3 | % | ||||||||||||||||
| Adjusted General and Administrative Expenses: | ||||||||||||||||||||||||||||
| General and administrative expenses | $ | 27,734 | $ | 25,921 | $ | 34,785 | $ | 26,116 | $ | 31,995 | $ | 26,882 | ||||||||||||||||
| Plus: Sourcing overhead expenses | 6,445 | 6,967 | 6,547 | 6,740 | 6,585 | 6,761 | ||||||||||||||||||||||
| Less: Fulfillment variable expenses | (7,181 | ) | (6,602 | ) | (7,802 | ) | (6,490 | ) | (7,170 | ) | (6,711 | ) | ||||||||||||||||
| $ | 26,998 | $ | 26,286 | $ | 33,530 | $ | 26,366 | $ | 31,410 | $ | 26,931 | |||||||||||||||||
| Stock-based compensation expense | 179 | 179 | 4,409 | 735 | 3,712 | - | ||||||||||||||||||||||
| Special bonus compensation expense | - | - | 2,863 | - | - | - | ||||||||||||||||||||||
| Restructuring costs | 334 | - | - | - | - | 122 | ||||||||||||||||||||||
| Acquisition transaction costs | 229 | - | - | - | - | - | ||||||||||||||||||||||
| Other | 33 | 4 | 804 | 64 | 496 | 1,283 | ||||||||||||||||||||||
| Adjusted general and administrative expenses | $ | 27,773 | $ | 26,469 | $ | 41,606 | $ | 27,165 | $ | 35,618 | $ | 28,336 | ||||||||||||||||
| Adjusted general and administrative expenses | ||||||||||||||||||||||||||||
| % of Adjusted Net Sales | 10.0 | % | 12.4 | % | 13.6 | % | 12.1 | % | 13.0 | % | 13.0 | % | ||||||||||||||||
| Free Cash Flow: | ||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 22,240 | $ | 7,383 | $ | 26,626 | $ | 14,875 | $ | 22,078 | $ | 9,592 | ||||||||||||||||
| Less: | ||||||||||||||||||||||||||||
| Maintenance capital expenditures | 1,196 | 1,018 | 3,475 | 1,962 | 2,092 | 1,301 | ||||||||||||||||||||||
| Free Cash Flow | $ | 21,044 | $ | 6,365 | $ | 23,151 | $ | 12,913 | $ | 19,986 | $ | 8,291 | ||||||||||||||||