EDEN PRAIRIE, Minn.--(BUSINESS WIRE)--Bluestem Group Inc. ("Bluestem Group" or the "Company")(OTCMKTS: BGRP) today reported unaudited consolidated financial results that include its wholly-owned subsidiary, Bluestem Brands, Inc. and its subsidiaries (“Bluestem Brands”), for the 13- and 39-weeks ended November 3, 2017 and October 28, 2016. We refer to the 13-week periods in this release as the "third quarter". Bluestem is a multi-brand, online retailer of a broad selection of name-brand and private label general merchandise serving the boomer and senior demographic, generally considered age 50 and over, and low- to middle-income consumers across all age demographics.
Third Quarter Fiscal 2017 Highlights
- Bluestem Group cash and cash equivalents as of the end of third quarter 2017 were $119.1 million
- Bluestem Brands net sales for the third quarter of fiscal 2017 were $399.8 million, a 10.2% decrease compared to the third quarter of fiscal 2016
- Bluestem Brands net sales for the third quarter of fiscal 2017, excluding business that have been or are being exited, were $398.2 million, a 5.0% decrease compared to the third quarter of fiscal 2016
- Bluestem Brands adjusted EBITDA for the third quarter of fiscal 2017 was $11.0 million, an increase of $11.9 million compared to the third quarter of fiscal 2016
- Bluestem Brands lender net liquidity was $70.5 million as of the end of the third quarter compared to a covenant requirement of $40.0 million
- Bluestem Brands merchandise inventories as of the end of the third quarter 2017 were $234.9 million, a 20.1% decrease from $294.1 million as of the end of third quarter 2016
Steve Nave, Bluestem Group’s President and Chief Executive Officer stated, “I am pleased that we were able to drive a significant year-over-year increase in EBITDA in the third quarter. We drove a 320 basis points increase in contribution margin through substantial improvements in both our gross margin rate and advertising efficiencies, which were partially offset by higher provision expenses against our owned credit receivables. These improvements are a key aspect of our turnaround strategy and we expect additional benefit from ongoing initiatives in both of these areas. Actions aimed at eliminating operating costs from both portfolios and improve inventory productivity also contributed to the improved performance. While we have continued to see evidence of stabilization in our delinquency levels, credit losses remain above prior year levels. However, I remain confident that we are making the appropriate credit underwriting adjustments”. Mr. Nave continued, “Overall, we are pleased with the execution of our strategic turnaround initiatives, but recognize that we still have a lot of work in front of us before we achieve our goal of stable profitable growth.”
Third Quarter Fiscal 2017 Bluestem Group Consolidated Statistics
| unaudited in millions (except loss per share) | Q3 2017 | Q3 2016 | ||||||||
| Bluestem Group net loss | $ | (16.5 | ) | $ | (32.4 | ) | ||||
| Bluestem Group basic and diluted loss per share | $ | (0.12 | ) | $ | (0.25 | ) | ||||
| Bluestem Group Adjusted EBITDA | $ | 9.7 | $ | (2.2 | ) | |||||
| Bluestem Group cash and cash equivalents* | $ | 119.1 | $ | 162.3 | ||||||
*Q3 2017 includes impact of $80.2 million dividend paid in Q1 2017
Third Quarter Fiscal 2017 Bluestem Brands Stand-Alone Statistics
| unaudited in millions | Q3 2017 | Q3 2016 | ||||||||
| Bluestem Brands net sales | $ | 399.8 | $ | 445.1 | ||||||
| Bluestem Brands net loss | $ | (10.8 | ) | $ | (20.9 | ) | ||||
| Bluestem Brands Adjusted EBITDA | $ | 11.0 | $ | (0.9 | ) | |||||
| Northstar Portfolio net sales | $ | 210.1 | $ | 218.3 | ||||||
| Orchard Portfolio net sales | $ | 201.7 | $ | 218.7 | ||||||
| Northstar portfolio active accounts | 1.5 | 1.6 | ||||||||
| Orchard Portfolio gross active customers | 7.5 | 7.6 | ||||||||
| Northstar Portfolio revolving credit portfolio: | ||||||||||
| 30+ day delinquency rate | 19.8 | % | 19.1 | % | ||||||
| Net principal charge-off rate | 21.2 | % | 20.2 | % | ||||||
All financial information included in this release is unaudited. Information for Bluestem Group is presented on a consolidated basis. Consolidated information for Bluestem Group’s wholly-owned subsidiary, Bluestem Brands, Inc., is also presented on a stand-alone basis.
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
The Company will host a conference call at 9:00AM ET on Thursday, December 21, 2017. The conference call can be accessed at (888) 394-8218 or (323) 794-2149 (International), conference ID # 1334614 and will 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’s website. To listen to the telephone replay, call toll-free (844) 512-2921 or (412) 317-6671 (International), replay pin # 1334614. The telephone replay will be available at 12:00PM ET December 21, 2017. 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 national, multi-brand, online retailer of a broad selection of name-brand and private label general merchandise serving the boomer and senior demographic, generally considered age 50 and over, and low- to middle-income consumers over all age demographics through 13 retail brands that include: Appleseed’s, Bedford Fair, Blair, Draper’s & Damon’s, Fingerhut, Gettington, Gold Violin, Haband, Norm Thompson, Old Pueblo Traders, Sahalie, 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 February 3, 2017 and January 29, 2016.
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 November 3, 2017 and
October 28, 2016
Overview and Basis of Presentation
As used in this release:
- “Bluestem Group,” "BGI," “we,” “us,” “our,” or “the Company” refers to Bluestem Group Inc. with its consolidated subsidiaries
- “BGI Holding Company” refers to the Bluestem Group Inc. legal entity, excluding its subsidiaries
- "Bluestem Brands" or “Bluestem” refers to Bluestem Brands, Inc., an indirect subsidiary of Bluestem Group, which consists of Northstar Portfolio, Orchard Portfolio and PayCheck Direct (which was exited in the first quarter of fiscal 2017 and currently is winding down)
- "Northstar Portfolio” refers to the consolidated Fingerhut and Gettington retail brands
- “Orchard Portfolio” refers to the consolidated Appleseed’s, Bedford Fair, Blair, Draper’s & Damon’s (retail stores were exited during the first quarter of fiscal 2017), Gold Violin, Haband, LinenSource (which was exited in the second quarter of fiscal 2017), Norm Thompson, Old Pueblo Traders, Sahalie, Solutions (which was exited in the fourth quarter of fiscal 2016), Tog Shop, and WinterSilks retail brands
- “Capmark Portfolio” refers to the commercial real estate finance operations of Bluestem Group
The accompanying financial information for Bluestem Group Inc. is presented on a consolidated basis, including Bluestem Brands, Inc. and its consolidated subsidiaries. The accompanying financial information for Bluestem Group’s wholly-owned subsidiary, Bluestem, is also presented on a stand-alone basis. All financial information included in this release is unaudited.
The Company reviews and presents the consolidated business results based on the organizational structure management uses to evaluate performance and make decisions on allocating resources and assessing performance. Beginning in fiscal 2017, the consolidated business results are presented in three categories: Northstar Portfolio, Orchard Portfolio, and Corporate and other.
Financial Information
To supplement the historical financial data derived from Bluestem Group’s and Bluestem’s consolidated financial statements, which are prepared in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"), this release uses adjusted EBITDA as a non-GAAP performance measure. In addition, Bluestem’s stand-alone consolidated financial statements includes contribution margin, adjusted general and administrative expenses, adjusted free cash flow, program agreement adjusted EBITDA, lender adjusted EBITDA, leverage ratio debt, program agreement leverage ratio, lender leverage ratio, working capital, adjusted working capital, program agreement net liquidity and lender net liquidity 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 Group’s and Bluestem’s results for further important information concerning these measures.
Bluestem Group Inc.
Results for the 13- and 39-Weeks
Ended November 3, 2017
|
BLUESTEM GROUP INC. Condensed Consolidated Statements of Comprehensive Loss (unaudited - in thousands, except shares and per share amounts) |
|||||||||||||||||||||
| 13-Weeks Ended | 39-Weeks Ended | ||||||||||||||||||||
|
November 3, |
October 28, |
November 3, |
October 28, |
||||||||||||||||||
| Net sales and revenue | |||||||||||||||||||||
| Net sales | $ | 399,798 | $ | 445,085 | $ | 1,266,314 | $ | 1,341,703 | |||||||||||||
| Commercial real estate revenue, net | 1,115 | 163 | 2,522 | 758 | |||||||||||||||||
| Total net sales and revenue | 400,913 | 445,248 | 1,268,836 | 1,342,461 | |||||||||||||||||
| Costs and expenses | |||||||||||||||||||||
| Cost of goods sold | 208,663 | 245,260 | 661,190 | 702,338 | |||||||||||||||||
| Sales and marketing expenses | 107,192 | 130,095 | 343,636 | 394,302 | |||||||||||||||||
| Net credit expense | 30,398 | 23,898 | 89,821 | 59,719 | |||||||||||||||||
| General and administrative expenses | 46,274 | 51,910 | 168,119 | 172,755 | |||||||||||||||||
| Amortization and depreciation not included in cost of goods sold | 13,471 | 17,347 | 42,797 | 51,838 | |||||||||||||||||
| Loss on impairment | — | — | 230 | 430 | |||||||||||||||||
| Gain on derivatives in our own equity | — | — | — | (548 | ) | ||||||||||||||||
| Gain on debt extinguishment | — | (2,509 | ) | — | (2,509 | ) | |||||||||||||||
| Total costs and expenses | 405,998 | 466,001 | 1,305,793 | 1,378,325 | |||||||||||||||||
| Operating loss | (5,085 | ) |
|
(20,753 | ) |
|
(36,957 | ) |
|
(35,864 | ) | ||||||||||
| Interest expense, net | 12,785 | 13,189 | 38,401 | 40,394 | |||||||||||||||||
| Loss before income taxes | (17,870 | ) |
|
(33,942 | ) |
|
(75,358 |
) |
|
(76,258 | ) | ||||||||||
| Income tax (benefit) expense | (1,390 | ) |
|
(1,509 | ) |
|
(1,514 |
) |
|
1,219 | |||||||||||
| Net loss | $ | (16,480 | ) |
|
$ | (32,433 | ) |
|
$ | (73,844 | ) |
|
$ | (77,477 | ) | ||||||
| Other Comprehensive loss | |||||||||||||||||||||
| Unrealized gain (loss) on interest rate swap, net of tax | 917 |
|
246 |
|
|
124 |
|
|
(510 | ) | |||||||||||
| Net change in unrealized gains/losses on investments securities, net of tax | — | 4 | — | (227 | ) | ||||||||||||||||
| Comprehensive loss | $ | (15,563 | ) |
|
$ | (32,183 | ) |
|
$ | (73,720 | ) |
|
$ | (78,214 | ) | ||||||
| Basic and diluted loss per share - common stockholders | |||||||||||||||||||||
| Basic and diluted loss per share | $ | (0.12 | ) |
|
$ | (0.25 | ) |
|
$ | (0.56 | ) |
|
$ | (0.58 | ) | ||||||
| Basic and diluted weighted average shares outstanding | 132,326,876 | 132,036,278 | 132,181,045 | 133,176,853 | |||||||||||||||||
|
BLUESTEM GROUP INC. Condensed Consolidated Balance Sheets (unaudited - in thousands) |
||||||||||||||
|
November 3, |
February 3, |
October 28, |
||||||||||||
| ASSETS | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 119,123 | $ | 212,942 | $ | 162,293 | ||||||||
| Restricted cash | 27,109 | 15,797 | 17,936 | |||||||||||
| Customer accounts receivable, net of allowance of $8,176, $17,041 and $10,566 | 13,628 | 50,053 | 34,792 | |||||||||||
| Merchandise inventories | 234,856 | 229,970 | 294,111 | |||||||||||
| Promotional material inventories | 64,034 | 49,730 | 83,432 | |||||||||||
| Other current assets | 33,860 | 39,135 | 56,076 | |||||||||||
| Total current assets | 492,610 | 597,627 | 648,640 | |||||||||||
| Property and equipment, net | 110,470 | 130,065 | 134,762 | |||||||||||
| Intangibles, net | 195,565 | 208,563 | 432,679 | |||||||||||
| Goodwill | 202,556 | 202,556 | 367,481 | |||||||||||
| Other assets | 10,471 | 41,926 | 64,740 | |||||||||||
| Total Assets | $ | 1,011,672 | $ | 1,180,737 | $ | 1,648,302 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 209,769 | $ | 221,539 | $ | 266,835 | ||||||||
| Accrued costs and other liabilities | 84,956 | 154,095 | 107,115 | |||||||||||
| Short-term debt | 75,411 | 47,500 | 82,660 | |||||||||||
| Total current liabilities | 370,136 | 423,134 | 456,610 | |||||||||||
| Long-term debt | 426,615 | 468,924 | 476,019 | |||||||||||
| Deferred income taxes | 37,988 | 37,474 | 98,692 | |||||||||||
| Other long-term liabilities | 33,807 | 37,470 | 15,256 | |||||||||||
| Total liabilities | 868,546 | 967,002 | 1,046,577 | |||||||||||
| Stockholders' Equity: | ||||||||||||||
| Series A participating convertible preferred stock | 5,000 | 5,000 | 5,000 | |||||||||||
| Common stock | 1,332 | 1,323 | 1,323 | |||||||||||
| Treasury stock | (131 | ) | (131 | ) | (131 | ) | ||||||||
| Additional paid-in capital | 293,038 | 289,789 | 368,671 | |||||||||||
| Retained earnings | (156,858 | ) | (82,867 | ) | 227,368 | |||||||||
| Accumulated other comprehensive (loss) income, net of tax | 745 | 621 | (506 | ) | ||||||||||
| Total stockholders’ equity | 143,126 | 213,735 | 601,725 | |||||||||||
| Total Liabilities and Stockholders' Equity | $ | 1,011,672 | $ | 1,180,737 | $ | 1,648,302 | ||||||||
|
BLUESTEM GROUP INC. Condensed Consolidated Statements of Cash Flows (unaudited - in thousands) |
||||||||||
| 39-Weeks Ended | ||||||||||
|
November 3, |
October 28, |
|||||||||
| Operating Activities | ||||||||||
| Net loss | $ | (73,844 | ) | $ | (77,477 | ) | ||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||
| Amortization and depreciation expense | 46,485 | 55,141 | ||||||||
| Loss on impairment | 230 | 430 | ||||||||
| Provision for doubtful accounts | 61,420 | 24,792 | ||||||||
| Provision for deferred income taxes | 794 | 418 | ||||||||
| Gain on servicing right | (968 | ) | — | |||||||
| Net gains on loans held for sale, investment securities and other | (1,614 | ) | (122 | ) | ||||||
| Gain on debt extinguishment | — | (2,509 | ) | |||||||
| Stock-based compensation expense | 3,164 | 4,178 | ||||||||
| Other, net | 1,737 | 3,446 | ||||||||
| Net change in assets and liabilities: | ||||||||||
| Customer account receivables | 26,505 | (14,966 | ) | |||||||
| Merchandise inventories | (4,886 | ) | (30,532 | ) | ||||||
| Promotional material inventories | (14,304 | ) | (30,179 | ) | ||||||
| Other assets | 7,742 | 2,313 | ||||||||
| Accounts payable and other liabilities | (233 | ) | 82,485 | |||||||
| Payments from loans held for sale | — | 1,289 | ||||||||
| Net cash provided by operating activities | 52,228 | 18,707 | ||||||||
| Investing Activities | ||||||||||
| Purchases of customer accounts receivable | (652,326 | ) | (666,034 | ) | ||||||
| Proceeds from sale of customer accounts receivable | 600,826 | 666,116 | ||||||||
| Net purchases of property and equipment | (14,604 | ) | (36,456 | ) | ||||||
| Distributions from equity investments | 8,215 | 9,613 | ||||||||
| Net (increase) decrease in restricted cash | (11,311 | ) | 4,633 | |||||||
| Other | (13 | ) | (565 | ) | ||||||
| Net cash used in investing activities | (69,213 | ) | (22,693 | ) | ||||||
| Financing Activities | ||||||||||
| Repayments of debt | (21,601 | ) | (22,353 | ) | ||||||
| Extinguishment of debt | — | (18,150 | ) | |||||||
| Borrowings on asset backed line of credit | 339,603 | 730,413 | ||||||||
| Repayments on asset backed line of credit | (314,694 | ) | (697,049 | ) | ||||||
| Payments for the repurchase of common stock | — | (12,554 | ) | |||||||
| Payment of dividends | (80,201 | ) | — | |||||||
| Net cash used in by financing activities | (76,893 | ) | (19,693 | ) | ||||||
| Effect of Foreign Exchange Rates on Cash | 59 | 28 | ||||||||
| Net Decrease in Cash and Cash Equivalents | (93,819 | ) | (23,651 | ) | ||||||
| Cash and Cash Equivalents, Beginning of Period | 212,942 | 185,944 | ||||||||
| Cash and Cash Equivalents, End of Period | $ | 119,123 | $ | 162,293 | ||||||
BLUESTEM GROUP INC.
Non-GAAP Financial Measure
(unaudited
- in thousands)
To supplement the consolidated financial statements of Bluestem Group Inc. and its subsidiaries, which are presented in accordance with GAAP, we use the following measure that is not in accordance with, or an alternative to, measures prepared in accordance with GAAP ("non-GAAP measure"):
Adjusted EBITDA, as presented, represents net loss attributable to Bluestem Group Inc. before income tax (benefit) expense, interest expense, amortization and depreciation expense, loss on impairment, gain on servicing right, stock-based compensation expense, gain on derivatives in our own equity, gain on debt extinguishment, integration costs, restructuring costs, Orchard Portfolio segmentation and positioning research and other.
We provide this measure because we believe it is useful to investors in evaluating our operating performance compared to other companies in our industry. As a non-GAAP measure, it has limitations in that it does not reflect all of the amounts associated with Bluestem Group Inc.'s results of operations as determined in accordance with GAAP and is not based on any comprehensive set of accounting rules or principles. This non-GAAP measure 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 calculation of Adjusted EBITDA may not be comparable to the calculation of such measure by other companies.
The following table reconciles Adjusted EBITDA from the nearest GAAP performance measure, which is net loss:
| 13-Weeks Ended | 39-Weeks Ended | |||||||||||||||||
|
November 3, |
October 28, |
November 3, |
October 28, |
|||||||||||||||
| Adjusted EBITDA: | ||||||||||||||||||
| Net loss | $ | (16,480 | ) | $ | (32,433 | ) | $ | (73,844 | ) | $ | (77,477 | ) | ||||||
| Income tax (benefit) expense | (1,390 | ) | (1,509 | ) | (1,514 | ) | 1,219 | |||||||||||
| Interest expense | 12,787 | 13,189 | 38,404 | 40,395 | ||||||||||||||
| Amortization and depreciation expense | 14,607 | 18,444 | 46,485 | 55,141 | ||||||||||||||
| Loss on impairment | — | — | 230 | 430 | ||||||||||||||
| Gain on servicing right | (1,558 | ) | — | (968 | ) | — | ||||||||||||
| Stock-based compensation expense | 552 | 1,377 | 3,164 | 3,980 | ||||||||||||||
| Gain on derivatives in our own equity | — | — | — | (548 | ) | |||||||||||||
| Gain on debt extinguishment | — | (2,509 | ) | — | (2,509 | ) | ||||||||||||
| Integration costs | — | 655 | — | 3,921 | ||||||||||||||
| Restructuring costs | (207 | ) | — | 15,685 | — | |||||||||||||
| Orchard Portfolio segmentation and positioning research | 815 | — | 3,679 | — | ||||||||||||||
| Other | 533 | 588 | 3,203 | 588 | ||||||||||||||
| Adjusted EBITDA | $ | 9,659 | $ | (2,198 | ) | $ | 34,524 | $ | 25,140 | |||||||||
Bluestem Brands, Inc.
Results for the 13- and 39-Weeks
Ended November 3, 2017
|
BLUESTEM BRANDS, INC. Condensed Consolidated Statements of Loss and Selected Operating Data (unaudited - in thousands) |
||||||||||||||
| 13-Weeks Ended | ||||||||||||||
|
November 3, |
October 28, |
Change (a) | ||||||||||||
| Net sales | $ | 399,798 | $ | 445,085 | (10.2 | )% | ||||||||
| Cost of goods sold | 209,003 | 245,260 | (14.8 | )% | ||||||||||
| Gross profit | 190,795 | 199,825 | (4.5 | )% | ||||||||||
| Sales and marketing expenses | 107,192 | 130,095 | (17.6 | )% | ||||||||||
| Net credit expense | 29,636 | 23,898 | 24.0 | % | ||||||||||
| General and administrative expenses | 43,832 | 50,539 | (13.3 | )% | ||||||||||
| Amortization and depreciation not included in cost of goods sold (b) | 13,471 | 17,347 | (22.3 | )% | ||||||||||
| Interest expense, net (c) | 12,785 | 13,432 | (4.8 | )% | ||||||||||
| Loss before income taxes | (16,121 | ) | (35,486 | ) | (54.6 | )% | ||||||||
| Income tax benefit | (5,318 | ) | (14,595 | ) | (63.6 | )% | ||||||||
| Net loss | $ | (10,803 | ) | $ | (20,891 | ) | (48.3 | )% | ||||||
| Margins and Expenses as a Percentage of Net Sales: | ||||||||||||||
| Gross profit | 47.7 | % | 44.9 | % | 280 | bps | ||||||||
| Sales and marketing expenses | 26.8 | % | 29.2 | % | (240 | ) | bps | |||||||
| Net credit expense | 7.4 | % | 5.4 | % | 200 | bps | ||||||||
| Contribution margin (d) | $ | 53,967 | $ | 45,832 | 17.7 | % | ||||||||
| As a percentage of net sales | 13.5 | % | 10.3 | % | 320 | bps | ||||||||
| Adjusted general and administrative expenses (d) | $ | 42,420 | $ | 47,976 | (11.6 | )% | ||||||||
| As a percentage of net sales | 10.6 | % | 10.8 | % | (20 | ) | bps | |||||||
| Adjusted EBITDA (d) | $ | 10,979 | $ | (920 | ) | n/m | ||||||||
| As a percentage of net sales | 2.7 | % | (0.2 | )% | 290 | bps | ||||||||
| Selected Financial Data: | ||||||||||||||
| Lender net liquidity (d) | $ | 70,476 | $ | 109,591 | (35.7 | )% | ||||||||
| Availability on inventory line of credit | $ | 65,238 | $ | 106,195 | (38.6 | )% | ||||||||
| Adjusted free cash flow (d) | $ | (19,163 | ) | $ | 9,279 | (306.5 | )% | |||||||
| Lender leverage ratio (d) | 3.84 | 4.18 | ||||||||||||
| Lender leverage ratio requirement | 4.50 | 4.75 | ||||||||||||
| Program agreement leverage ratio (d) | 4.13 | 4.18 | ||||||||||||
| Program agreement leverage ratio requirement | 5.00 | 5.00 | ||||||||||||
| Selected Operating Data: | ||||||||||||||
| Northstar Portfolio revolving new customer credit accounts (e) | 104 | 144 | (27.8 | )% | ||||||||||
| Fingerhut FreshStart new customer credit accounts (e) | 46 | 51 | (9.8 | )% | ||||||||||
| Orchard Portfolio new gross customers (f) | 494 | 594 | (16.8 | )% | ||||||||||
| Northstar Portfolio active accounts (g) | 1,500 | 1,594 | (5.9 | )% | ||||||||||
| Orchard Portfolio gross active customers (h) | 7,533 | 7,624 | (1.2 | )% | ||||||||||
(a) Changes in rates are presented as the basis point ("bps") increase (decrease) from the prior period.
(b) Consists of amortization expense of customer relationship finite-lived intangible assets and depreciation expense related to software and office equipment. Owned fulfillment facilities and equipment depreciation is included in cost of goods sold.
(c) Interest expense is 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) 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.
(f) Individual customers who have made a first time purchase from a particular brand within the Orchard Portfolio during the period presented. Unique new customers, representing unique individuals who have made a first time purchase from the Orchard Portfolio during the 13-weeks ended November 3, 2017 and October 28, 2016, were 167 thousand and 195 thousand, respectively.
(g) 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.
(h) Individual customers that have made at least one purchase from a particular brand within the Orchard Portfolio during the previous twelve fiscal months. Unique active customers, representing unique individuals who have made at least one purchase from the Orchard Portfolio during the twelve fiscal months ended November 3, 2017 and October 28, 2016, were 4.6 million and 4.9 million, respectively.
|
BLUESTEM BRANDS, INC. Condensed Consolidated Statements of Loss and Selected Operating Data (unaudited - in thousands) |
||||||||||||||
| 39-Weeks Ended | ||||||||||||||
|
November 3, |
October 28, |
Change (a) | ||||||||||||
| Net sales | $ | 1,266,314 | $ | 1,341,703 | (5.6 | )% | ||||||||
| Cost of goods sold | 661,530 | 702,338 | (5.8 | )% | ||||||||||
| Gross profit | 604,784 | 639,365 | (5.4 | )% | ||||||||||
| Sales and marketing expenses | 343,636 | 394,302 | (12.8 | )% | ||||||||||
| Net credit expense | 91,737 | 59,719 | 53.6 | % | ||||||||||
| General and administrative expenses | 163,181 | 167,929 | (2.8 | )% | ||||||||||
| Amortization and depreciation not included in cost of goods sold (b) | 42,797 | 51,838 | (17.4 | )% | ||||||||||
| Loss on impairment | 230 | 430 | (46.5 | )% | ||||||||||
| Interest expense, net (c) | 38,401 | 40,637 | (5.5 | )% | ||||||||||
| Loss before income taxes | (75,198 | ) | (75,490 | ) | (0.4 | )% | ||||||||
| Income tax benefit | (27,174 | ) | (27,957 | ) | (2.8 | )% | ||||||||
| Net loss | $ | (48,024 | ) | $ | (47,533 | ) | 1.0 | % | ||||||
| Margins and Expenses as a Percentage of Net Sales: | ||||||||||||||
| Gross profit | 47.8 | % | 47.7 | % | 10 | bps | ||||||||
| Sales and marketing expenses | 27.1 | % | 29.4 | % | (230 | ) | bps | |||||||
| Net credit expense | 7.2 | % | 4.5 | % | 270 | bps | ||||||||
| Contribution margin (d) | $ | 169,411 | $ | 185,344 | (8.6 | )% | ||||||||
| As a percentage of net sales | 13.4 | % | 13.8 | % | (40 | ) | bps | |||||||
| Adjusted general and administrative expenses (d) | $ | 139,977 | $ | 158,597 | (11.7 | )% | ||||||||
| As a percentage of net sales | 11.1 | % | 11.8 | % | (70 | ) | bps | |||||||
| Adjusted EBITDA (d) | $ | 37,830 | $ | 30,432 | 24.3 | % | ||||||||
| As a percentage of net sales | 3.0 | % | 2.3 | % | 70 | bps | ||||||||
| Selected Financial Data: | ||||||||||||||
| Lender net liquidity (d) | $ | 70,476 | $ | 109,591 | (35.7 | )% | ||||||||
| Availability on inventory line of credit | $ | 65,238 | $ | 106,195 | (38.6 | )% | ||||||||
| Adjusted free cash flow (d) | $ | (2,051 | ) | $ | 4,031 | (150.9 | )% | |||||||
| Lender leverage ratio (d) | 3.84 | 4.18 | ||||||||||||
| Lender leverage ratio requirement | 4.50 | 4.75 | ||||||||||||
| Program agreement leverage ratio (d) | 4.13 | 4.18 | ||||||||||||
| Program agreement leverage ratio requirement | 5.00 | 5.00 | ||||||||||||
| Selected Operating Data: | ||||||||||||||
| Northstar Portfolio revolving new customer credit accounts (e) | 302 | 396 | (23.7 | )% | ||||||||||
| Fingerhut FreshStart new customer credit accounts (e) | 142 | 146 | (2.7 | )% | ||||||||||
| Orchard Portfolio new gross customers (f) | 1,603 | 1,844 | (13.1 | )% | ||||||||||
| Northstar Portfolio active accounts (g) | 1,500 | 1,594 | (5.9 | )% | ||||||||||
| Orchard Portfolio gross active customers (h) | 7,533 | 7,624 | (1.2 | )% | ||||||||||
(a) Changes in rates are presented as the basis point ("bps") increase (decrease) from the prior period.
(b) Consists of amortization expense of customer relationship finite-lived intangible assets and depreciation expense related to software and office equipment. Owned fulfillment facilities and equipment depreciation is included in cost of goods sold.
(c) Interest expense is 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) 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.
(f) Individual customers who have made a first time purchase from a particular brand within the Orchard Portfolio during the period presented. Unique new customers, representing unique individuals who have made a first time purchase from the Orchard Portfolio during the 39-weeks ended November 3, 2017 and October 28, 2016, were 530 thousand and 611 thousand, respectively.
(g) 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.
(h) Individual customers that have made at least one purchase from a particular brand within the Orchard Portfolio during the previous twelve fiscal months. Unique active customers, representing unique individuals who have made at least one purchase from the Orchard Portfolio during the twelve fiscal months ended November 3, 2017 and October 28, 2016, were 4.6 million and 4.9 million, respectively.
|
BLUESTEM BRANDS, INC. Condensed Consolidated Balance Sheets (unaudited - in thousands) |
||||||||||||||
|
November 3, |
February 3, |
October 28, |
||||||||||||
| ASSETS | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 13,011 | $ | 7,916 | $ | 11,310 | ||||||||
| Restricted cash | 27,024 | 15,713 | 17,852 | |||||||||||
| Customer accounts receivable, net of allowance of $4,923, $17,041 and $10,566 | 6,619 | 50,053 | 34,792 | |||||||||||
| Merchandise inventories | 234,856 | 229,970 | 294,111 | |||||||||||
| Promotional material inventories | 64,034 | 49,730 | 83,432 | |||||||||||
| Prepaid expenses and other assets | 29,694 | 27,896 | 31,802 | |||||||||||
| Total current assets | 375,238 | 381,278 | 473,299 | |||||||||||
| Property and equipment, net | 93,836 | 130,065 | 134,762 | |||||||||||
| Intangible assets, net | 195,565 | 208,563 | 432,679 | |||||||||||
| Goodwill | 202,556 | 202,556 | 367,481 | |||||||||||
| Other assets | 2,635 | 3,514 | 3,476 | |||||||||||
| Total Assets | $ | 869,830 | $ | 925,976 | $ | 1,411,697 | ||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 209,769 | $ | 221,539 | $ | 266,835 | ||||||||
| Current income taxes payable | 14,090 | 34,059 | 6,639 | |||||||||||
| Accrued costs and other liabilities | 99,362 | 83,055 | 109,316 | |||||||||||
| Short-term debt | 75,411 | 47,500 | 83,791 | |||||||||||
| Total current liabilities | 398,632 | 386,153 | 466,581 | |||||||||||
| Long-term debt | 426,398 | 445,736 | 471,585 | |||||||||||
| Deferred income taxes | 51,025 | 56,758 | 153,956 | |||||||||||
| Other long-term liabilities | 34,643 | 29,870 | 8,308 | |||||||||||
| Total liabilities | 910,698 | 918,517 | 1,100,430 | |||||||||||
| Stockholders' equity: | ||||||||||||||
| Common stock | — | — | — | |||||||||||
| Additional paid-in capital | 369,602 | 369,602 | 369,602 | |||||||||||
| Retained earnings | (410,935 | ) | (362,764 | ) | (57,825 | ) | ||||||||
| Accumulated other comprehensive (loss) income, net of tax | 465 | 621 | (510 | ) | ||||||||||
| Total stockholders' equity | (40,868 | ) | 7,459 | 311,267 | ||||||||||
| Total Liabilities and Stockholders’ Equity | $ | 869,830 | $ | 925,976 | $ | 1,411,697 | ||||||||
|
BLUESTEM BRANDS, INC. Condensed Consolidated Statements of Cash Flows (unaudited - in thousands) |
||||||||||
| 39-Weeks Ended | ||||||||||
|
November 3, |
October 28, |
|||||||||
| Operating Activities | ||||||||||
| Net loss | $ | (48,024 | ) | $ | (47,533 | ) | ||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||
| Amortization and depreciation expense | 46,337 | 55,141 | ||||||||
| Loss on impairment | 230 | 430 | ||||||||
| Provision for doubtful accounts | 65,206 | 24,792 | ||||||||
| Provision for deferred income taxes | (5,733 | ) | (472 | ) | ||||||
| Gain on servicing right | (968 | ) | — | |||||||
| Stock-based compensation expense | 2,670 | 3,628 | ||||||||
| Other, net | 2,537 | 4,248 | ||||||||
| Net change in assets and liabilities: | ||||||||||
| Customer accounts receivable | (117 | ) | (15,220 | ) | ||||||
| Merchandise inventories | (4,886 | ) | (30,532 | ) | ||||||
| Promotional material inventories | (14,304 | ) | (30,179 | ) | ||||||
| Prepaid expenses and other assets | 294 | 366 | ||||||||
| Current income taxes payable | (19,969 | ) | (27,944 | ) | ||||||
| Accounts payable and other liabilities | 1,789 | 83,624 | ||||||||
| Net cash provided by operating activities | 25,062 | 20,349 | ||||||||
| Investing Activities | ||||||||||
| Purchase of customer accounts receivable | (652,326 | ) | (666,034 | ) | ||||||
| Proceeds from sale of customer accounts receivable | 630,671 | 666,116 | ||||||||
| Acquisitions, net of cash on hand | 24,295 | — | ||||||||
| Net purchase of property and equipment | (14,604 | ) | (36,456 | ) | ||||||
| Net (increase) decrease in restricted cash | (11,311 | ) | 4,633 | |||||||
| Net cash used in investing activities | (23,275 | ) | (31,741 | ) | ||||||
| Financing Activities | ||||||||||
| Repayments of debt | (21,601 | ) | (22,532 | ) | ||||||
| Borrowings on asset backed line of credit | 339,603 | 730,413 | ||||||||
| Repayments on asset backed line of credit | (314,694 | ) | (697,049 | ) | ||||||
| Net cash provided by financing activities | 3,308 | 10,832 | ||||||||
| Net Increase (Decrease) in Cash and Cash Equivalents | 5,095 | (560 | ) | |||||||
| Cash and Cash Equivalents, Beginning of Period | 7,916 | 11,870 | ||||||||
| Cash and Cash Equivalents, End of Period | $ | 13,011 | $ | 11,310 | ||||||
|
BLUESTEM BRANDS, INC. Supplemental Financial Information - Segment Net Sales (unaudited - in thousands, except average order size) |
||||||||||||||||||||
| 13-Weeks Ended | ||||||||||||||||||||
| November 3, 2017 | October 28, 2016 | Change | ||||||||||||||||||
| $ | % of Sales | $ | % of Sales | % | ||||||||||||||||
| Total sales by merchandise category: | ||||||||||||||||||||
| Home | $ | 102,661 | 23.5 | % | $ | 119,771 | 25.6 | % | (14.3 | )% | ||||||||||
| Entertainment | 89,453 | 20.5 | % | 90,646 | 19.3 | % | (1.3 | )% | ||||||||||||
| Fashion | 244,202 | 56.0 | % | 257,993 | 55.1 | % | (5.3 | )% | ||||||||||||
| Total merchandise sales(a) | 436,316 | 100.0 | % | 468,410 | 100.0 | % | (6.9 | )% | ||||||||||||
| Corporate and other(b) | (12,020 | ) | 8,056 | |||||||||||||||||
| Returns and allowances | (42,808 | ) | (48,699 | ) | (12.1 | )% | ||||||||||||||
| Commissions and other revenues | 18,310 | 17,318 | 5.7 | % | ||||||||||||||||
| Net sales | $ | 399,798 | $ | 445,085 | (10.2 | )% | ||||||||||||||
| Gross profit rate | 47.7 | % | 44.9 | % | 280 | bps | ||||||||||||||
| Sales and marketing expense rate | 26.8 | % | 29.2 | % | (240 | ) | bps | |||||||||||||
| Contribution margin rate(c) | 13.5 | % | 10.3 | % | 320 | bps | ||||||||||||||
| Average order size(d) | $ | 105 | $ | 107 | ||||||||||||||||
| Northstar Portfolio sales by merchandise category: | ||||||||||||||||||||
| Home | $ | 90,395 | 41.3 | % | $ | 100,028 | 43.6 | % | (9.6 | )% | ||||||||||
| Entertainment | 89,453 | 40.8 | % | 90,646 | 39.6 | % | (1.3 | )% | ||||||||||||
| Fashion | 39,113 | 17.9 | % | 38,591 | 16.8 | % | 1.4 | % | ||||||||||||
| Total merchandise sales(a) | 218,961 | 100.0 | % | 229,265 | 100.0 | % | (4.5 | )% | ||||||||||||
| Returns and allowances | (13,178 | ) | (15,926 | ) | (17.3 | )% | ||||||||||||||
| Commissions and other revenues | 4,332 | 4,994 | (13.3 | )% | ||||||||||||||||
| Net sales | $ | 210,115 | $ | 218,333 | (3.8 | )% | ||||||||||||||
| Gross profit rate | 43.1 | % | 38.4 | % | 470 | bps | ||||||||||||||
| Sales and marketing expense rate | 14.0 | % | 18.0 | % | (400 | ) | bps | |||||||||||||
| Contribution margin rate(c) | 14.8 | % | 10.5 | % | 430 | bps | ||||||||||||||
| Average order size(d) | $ | 232 | $ | 224 | ||||||||||||||||
| Orchard Portfolio sales by merchandise category: | ||||||||||||||||||||
| Home | $ | 12,266 | 5.6 | % | $ | 19,743 | 8.3 | % | (37.9 | )% | ||||||||||
| Fashion | 205,089 | 94.4 | % | 219,402 | 91.7 | % | (6.5 | )% | ||||||||||||
| Total merchandise sales(a) | 217,355 | 100.0 | % | 239,145 | 100.0 | % | (9.1 | )% | ||||||||||||
| Returns and allowances | (29,630 | ) | (32,773 | ) | (9.6 | )% | ||||||||||||||
| Commissions and other revenues | 13,978 | 12,324 | 13.4 | % | ||||||||||||||||
| Net sales | $ | 201,703 | $ | 218,696 | (7.8 | )% | ||||||||||||||
| Gross profit rate | 52.3 | % | 52.3 | % | — | bps | ||||||||||||||
| Sales and marketing expense rate | 40.1 | % | 40.0 | % | 10 | bps | ||||||||||||||
| Contribution margin rate(c) | 12.2 | % | 12.3 | % | (10 | ) | bps | |||||||||||||
| Average order size(d) | $ | 67 | $ | 70 | ||||||||||||||||
(a) Total merchandise sales includes shipping and handling revenue and is net of sales discounts.
(b) Corporate and other consist of adjustments to Bluestem's net sales related to in-transit product sales from shipping point to estimated time of delivery to the customer, net sales of PayCheck Direct and the elimination of inter-segment activities.
(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 merchandise sales including shipping and handling revenue divided by the number of merchandise orders fulfilled during the fiscal period presented.
|
BLUESTEM BRANDS, INC. Supplemental Financial Information - Segment Net Sales (unaudited - in thousands, except average order size) |
||||||||||||||||||||
| 39-Weeks Ended | ||||||||||||||||||||
| November 3, 2017 | October 28, 2016 | Change | ||||||||||||||||||
| $ | % of Sales | $ | % of Sales | % | ||||||||||||||||
| Total sales by merchandise category: | ||||||||||||||||||||
| Home | $ | 333,537 | 24.7 | % | $ | 368,510 | 25.9 | % | (9.5 | )% | ||||||||||
| Entertainment | 251,260 | 18.6 | % | 247,822 | 17.4 | % | 1.4 | % | ||||||||||||
| Fashion | 763,507 | 56.7 | % | 804,732 | 56.7 | % | (5.1 | )% | ||||||||||||
| Total merchandise sales(a) | 1,348,304 | 100.0 | % | 1,421,064 | 100.0 | % | (5.1 | )% | ||||||||||||
| Corporate and other(b) | (4,311 | ) | 23,047 | |||||||||||||||||
| Returns and allowances | (135,189 | ) | (155,451 | ) | (13.0 | )% | ||||||||||||||
| Commissions and other revenues | 57,510 | 53,043 | 8.4 | % | ||||||||||||||||
| Net sales | $ | 1,266,314 | $ | 1,341,703 | (5.6 | )% | ||||||||||||||
| Gross profit rate | 47.8 | % | 47.7 | % | 10 | bps | ||||||||||||||
| Sales and marketing expense rate | 27.1 | % | 29.4 | % | (230 | ) | bps | |||||||||||||
| Contribution margin rate(c) | 13.4 | % | 13.8 | % | (40 | ) | bps | |||||||||||||
| Average order size(d) | $ | 106 | $ | 107 | ||||||||||||||||
| Northstar Portfolio sales by merchandise category: | ||||||||||||||||||||
| Home | $ | 284,831 | 44.4 | % | $ | 303,269 | 46.3 | % | (6.1 | )% | ||||||||||
| Entertainment | 251,260 | 39.2 | % | 247,822 | 37.9 | % | 1.4 | % | ||||||||||||
| Fashion | 105,056 | 16.4 | % | 103,462 | 15.8 | % | 1.5 | % | ||||||||||||
| Total merchandise sales(a) | 641,147 | 100.0 | % | 654,553 | 100.0 | % | (2.0 | )% | ||||||||||||
| Returns and allowances | (36,558 | ) | (44,722 | ) | (18.3 | )% | ||||||||||||||
| Commissions and other revenues | 13,628 | 14,335 | (4.9 | )% | ||||||||||||||||
| Net sales | $ | 618,217 | $ | 624,166 | (1.0 | )% | ||||||||||||||
| Gross profit rate | 42.8 | % | 41.3 | % | 150 | bps | ||||||||||||||
| Sales and marketing expense rate | 15.0 | % | 19.0 | % | (400 | ) | bps | |||||||||||||
| Contribution margin rate(c) | 14.0 | % | 13.7 | % | 30 | bps | ||||||||||||||
| Average order size(d) | $ | 232 | $ | 230 | ||||||||||||||||
| Orchard Portfolio sales by merchandise category: | ||||||||||||||||||||
| Home | $ | 48,706 | 6.9 | % | $ | 65,241 | 8.5 | % | (25.3 | )% | ||||||||||
| Fashion | 658,451 | 93.1 | % | 701,270 | 91.5 | % | (6.1 | )% | ||||||||||||
| Total merchandise sales(a) | 707,157 | 100.0 | % | 766,511 | 100.0 | % | (7.7 | )% | ||||||||||||
| Returns and allowances | (98,631 | ) | (110,729 | ) | (10.9 | )% | ||||||||||||||
| Commissions and other revenues | 43,882 | 38,708 | 13.4 | % | ||||||||||||||||
| Net sales | $ | 652,408 | $ | 694,490 | (6.1 | )% | ||||||||||||||
| Gross profit rate | 52.5 | % | 54.0 | % | (150 | ) | bps | |||||||||||||
| Sales and marketing expense rate | 38.7 | % | 38.4 | % | 30 | bps | ||||||||||||||
| Contribution margin rate(c) | 13.7 | % | 15.7 | % | (200 | ) | bps | |||||||||||||
| Average order size(d) | $ | 71 | $ | 73 | ||||||||||||||||
(a) Total merchandise sales includes shipping and handling revenue and is net of sales discounts.
(b) Corporate and other consist of adjustments to Bluestem's net sales related to in-transit product sales from shipping point to estimated time of delivery to the customer, net sales of PayCheck Direct and the elimination of inter-segment activities.
(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 merchandise sales including shipping and handling revenue divided by the number of merchandise orders fulfilled during the fiscal period presented.
|
BLUESTEM BRANDS, INC. Supplemental Financial Information - Credit Portfolio (unaudited - in thousands, except average balance outstanding) |
||||||||||||||||||
| 13-Weeks Ended | ||||||||||||||||||
|
November 3, |
October 28, |
Change % | ||||||||||||||||
| Net credit expense: | ||||||||||||||||||
| Credit management costs | $ | 16,151 | $ | 18,919 | (14.6 | )% | ||||||||||||
| Provision for doubtful accounts - company-owned customer accounts receivable | 1,839 | 4,073 | (54.8 | )% | ||||||||||||||
| Provision for doubtful accounts - loss on sale of Northstar customer accounts receivable to SCUSA | 20,950 | 7,462 | 180.8 | % | ||||||||||||||
| Provision for doubtful accounts | 22,789 | 11,535 | 97.6 | % | ||||||||||||||
| Finance charge and fee income, net | (361 | ) | 2 | n/m | ||||||||||||||
| Servicing fee income and portfolio profit sharing | (7,385 | ) | (6,558 | ) | 12.6 | % | ||||||||||||
| Gain on servicing right | (1,558 | ) | — | n/m | ||||||||||||||
| Net credit expense | $ | 29,636 | $ | 23,898 | 24.0 | % | ||||||||||||
| 13-Weeks Ended | ||||||||||||||||||
| November 3, 2017 | October 28, 2016 | |||||||||||||||||
| Serviced Portfolio Selected Credit Data: | Revolving(a) | FreshStart(b) | Revolving(a) | FreshStart(b) | ||||||||||||||
| Balance active accounts | 1,695 | 100 | 1,805 | 106 | ||||||||||||||
| Average balance outstanding | $ | 775 | $ | 97 | $ | 726 | $ | 98 | ||||||||||
| Customer accounts receivable | $ | 1,313,206 | $ | 9,684 | $ | 1,311,610 | $ | 10,322 | ||||||||||
| Balances 30+ days delinquent(c) | $ | 260,070 | $ | 3,117 | $ | 251,046 | $ | 3,318 | ||||||||||
| Balances 30+ days delinquent as a percentage of total customer accounts receivable(d) | 19.8 | % | 32.2 | % | 19.1 | % | 32.1 | % | ||||||||||
| Average customer accounts receivable | $ | 1,351,508 | $ | 10,377 | $ | 1,342,888 | $ | 11,034 | ||||||||||
| Finance charge and fee income | $ | 83,475 | $ | 360 | $ | 84,957 | $ | (73 | ) | |||||||||
| Finance charge and fee income rate(e) | 24.7 | % | 4.1 | % | 25.3 | % | (0.9 | )% | ||||||||||
| Net principal charge-offs | $ | 71,758 | $ | 2,975 | $ | 67,964 | $ | 2,872 | ||||||||||
| Net principal charge-off rate(f) | 21.2 | % | 33.8 | % | 20.2 | % | 33.9 | % | ||||||||||
(a) Revolving serviced portfolio includes Northstar Portfolio revolving credit accounts.
(b) FreshStart serviced portfolio is Fingerhut's installment accounts.
(c) Delinquent balances as of the customers' statement cycle dates prior to or on fiscal period end.
(d) 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.
(e) Revolving finance charge and fee income rate represents finance charge and fee income as a percentage of average customer accounts receivable for the 13-week periods ended November 3, 2017 and October 28, 2016, respectively, 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-week periods ended November 3, 2017 and October 28, 2016, respectively.
(f) Revolving net principal charge-off rate represents net principal charge-offs as a percentage of average customer accounts receivable for the 13-week periods ended November 3, 2017 and October 28, 2016, respectively, 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-week periods ended November 3, 2017 and October 28, 2016, respectively.
|
BLUESTEM BRANDS, INC. Supplemental Financial Information - Credit Portfolio (unaudited - in thousands, except average balance outstanding) |
||||||||||||||||||
| 39-Weeks Ended | ||||||||||||||||||
|
November 3, |
October 28, |
Change % | ||||||||||||||||
| Net credit expense: | ||||||||||||||||||
| Credit management costs | $ | 51,721 | $ | 56,520 | (8.5 | )% | ||||||||||||
| Provision for doubtful accounts - company-owned customer accounts receivable(a) | 9,275 | 12,199 | (24.0 | )% | ||||||||||||||
| Provision for doubtful accounts - loss on sale of Northstar customer accounts receivable to SCUSA | 52,145 | 12,593 | 314.1 | % | ||||||||||||||
| Provision for doubtful accounts - loss on sale of PayCheck Direct customer accounts receivable to BGI Holding Company | 3,786 | — | 100.0 | % | ||||||||||||||
| Provision for doubtful accounts | 65,206 | 24,792 | 163.0 | % | ||||||||||||||
| Finance charge and fee income | (1,763 | ) | (1,425 | ) | 23.7 | % | ||||||||||||
| Servicing fee income and portfolio profit sharing | (22,459 | ) | (20,168 | ) | 11.4 | % | ||||||||||||
| Gain on servicing right | (968 | ) | — | n/m | ||||||||||||||
| Net credit expense | $ | 91,737 | $ | 59,719 | 53.6 | % | ||||||||||||
| 39-Weeks Ended | ||||||||||||||||||
| November 3, 2017 | October 28, 2016 | |||||||||||||||||
| Serviced Portfolio Selected Credit Data: | Revolving(b) | FreshStart(c) | Revolving(b) | FreshStart(c) | ||||||||||||||
| Balance active accounts | 1,740 | 112 | 1,805 | 106 | ||||||||||||||
| Average balance outstanding | $ | 755 | $ | 87 | $ | 726 | $ | 98 | ||||||||||
| Customer accounts receivable | $ | 1,313,206 | $ | 9,684 | $ | 1,311,610 | $ | 10,322 | ||||||||||
| Balances 30+ days delinquent(d) | $ | 260,070 | $ | 3,117 | $ | 251,046 | $ | 3,318 | ||||||||||
| Balances 30+ days delinquent as a percentage of total customer accounts receivable(e) | 19.8 | % | 32.2 | % | 19.1 | % | 32.1 | % | ||||||||||
| Average customer accounts receivable | $ | 1,398,761 | $ | 12,764 | $ | 1,376,102 | $ | 13,967 | ||||||||||
| Finance charge and fee income | $ | 267,568 | $ | 1,722 | $ | 275,773 | $ | 1,182 | ||||||||||
| Finance charge and fee income rate(f) | 25.5 | % | 5.1 | % | 26.7 | % | 3.5 | % | ||||||||||
| Net principal charge-offs | $ | 218,580 | $ | 10,356 | $ | 198,168 | $ | 10,823 | ||||||||||
| Net principal charge-off rate(g) | 20.8 | % | 29.5 | % | 19.2 | % | 31.7 | % | ||||||||||
(a) Includes $2.0 million additional provision during the 13-weeks ended May 5, 2017 due to the exit of PayCheck Direct.
(b) Revolving serviced portfolio includes Northstar Portfolio revolving credit accounts.
(c) FreshStart serviced portfolio is Fingerhut's installment accounts.
(d) Delinquent balances as of the customers' statement cycle dates prior to or on fiscal period end.
(e) 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.
(f) 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 November 3, 2017 and October 28, 2016 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 52 weeks of FreshStart related sales five months prior to the 39-weeks ended November 3, 2017 and October 28, 2016.
(g) Revolving net principal charge-off rate represents net principal charge-offs as a percentage of average customer accounts receivable for the 39-weeks ended November 3, 2017 and October 28, 2016, respectively 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 November 3, 2017 and October 28, 2016, respectively.
BLUESTEM BRANDS, INC.
Non-GAAP Financial Measures
(unaudited
- in thousands except % of net sales and ratios)
To supplement the consolidated financial information of Bluestem Brands, Inc. and its subsidiaries for the 13- and 39-weeks ended November 3, 2017, which are presented in accordance with 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. Contribution Margin represents the combined performance of merchandising, marketing and credit management activities.
Adjusted general and administrative expenses, as presented, is defined as general and administrative expenses adjusted for stock-based compensation expense, integration costs, restructuring costs, Orchard Portfolio segmentation and positioning research and other.
Adjusted EBITDA, as presented, represents net loss before income tax benefit, interest expense, amortization and depreciation expense, loss on impairment, gain on servicing right, stock-based compensation expense, integration costs, restructuring costs, Orchard Portfolio segmentation & positioning research and other.
Adjusted free cash flow, as presented, represents net cash provided by operating activities, plus proceeds from the sale of customer accounts receivable, less purchase of customer accounts receivable and less maintenance capital expenditures.
Program agreement adjusted EBITDA, as presented, represents Adjusted EBITDA, as defined above, plus adjustments allowed for under Bluestem's Program Agreement including certain transaction-related expected cost savings, certain non-cash charges, certain one-time charges and expected cost savings reflecting the projected impact of cost synergies such as savings in headcount reduction, print and paper, transportation, credit operations and marketing and other. Other includes charges such as, but not limited to or necessarily inclusive of, strategic investments, system implementations and executive recruiting.
Lender adjusted EBITDA, as presented, represents Program Agreement Adjusted EBITDA, as defined above, less designated unrestricted subsidiaries, which consists of the subsidiary making sales for our PayCheck Direct business, and incremental expected cost savings as allowed for under Bluestem's lender agreements.
Leverage ratio debt, as presented, is defined as short-term debt plus long-term debt plus deferred charges and less cash and cash equivalents.
Program agreement leverage ratio, as presented, represents Leverage Ratio Debt, as defined above, divided by Program agreement adjusted EBITDA, as defined above.
Lender leverage ratio, as presented, represents Leverage ratio debt, as defined above, divided by Lender adjusted EBITDA, as defined above.
Working capital, as presented, is defined as total current assets less total current liabilities.
Adjusted working capital, as presented, represents working capital, as defined above, plus the inter-company portion of current income taxes payable and inter-company payable due to stock compensation.
Program agreement net liquidity, as presented, is defined as cash and cash equivalents less third party credit card receivables ("Lender cash and cash equivalents") as defined by the lender plus availability under the asset backed line of credit.
Lender net liquidity, as presented, is defined as program agreement net liquidity, as defined above, less unrestricted subsidiary cash as defined by the lender.
We provide these measures because we believe they are useful to investors in evaluating our operating performance and financial condition compared to other companies in our industry and to evaluate our financial condition and operating performance compared to term loan and program agreement financial covenants. 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, adjusted free cash flow, program agreement adjusted EBITDA, lender adjusted EBITDA, leverage ratio debt, program agreement leverage ratio, lender leverage ratio, working capital, adjusted working capital, and program agreement and lender net liquidity 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 loss:
| 13-Weeks Ended | 39-Weeks Ended | |||||||||||||||||
|
November 3, |
October 28, |
November 3, |
October 28, |
|||||||||||||||
| Contribution margin: | ||||||||||||||||||
| Net loss | $ | (10,803 | ) | $ | (20,891 | ) | $ | (48,024 | ) | $ | (47,533 | ) | ||||||
| Income tax benefit | (5,318 | ) | (14,595 | ) | (27,174 | ) | (27,957 | ) | ||||||||||
| Interest expense, net | 12,785 | 13,432 | 38,401 | 40,637 | ||||||||||||||
| Loss on impairment | — | — | 230 | 430 | ||||||||||||||
| Amortization and depreciation not included in cost of sales | 13,471 | 17,347 | 42,797 | 51,838 | ||||||||||||||
| General and administrative expenses | 43,832 | 50,539 | 163,181 | 167,929 | ||||||||||||||
| Contribution margin | $ | 53,967 | $ | 45,832 | $ | 169,411 | $ | 185,344 | ||||||||||
| Contribution margin % of net sales | 13.5 | % | 10.3 | % | 13.4 | % | 13.8 | % | ||||||||||
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 | |||||||||||||||||
|
November 3, |
October 28, |
November 3, |
October 28, |
|||||||||||||||
| Adjusted general and administrative expenses: | ||||||||||||||||||
| General and administrative expenses | $ | 43,832 | $ | 50,539 | $ | 163,181 | $ | 167,929 | ||||||||||
| Less: | ||||||||||||||||||
| Stock-based compensation expense | 271 | 1,101 | 2,671 | 3,628 | ||||||||||||||
| Integration costs | — | 655 | — | 3,921 | ||||||||||||||
| Restructuring costs | (207 | ) | — | 13,651 | — | |||||||||||||
| Orchard Portfolio segmentation and positioning research | 815 | — | 3,679 | — | ||||||||||||||
| Other | 533 | 807 | 3,203 | 1,783 | ||||||||||||||
| Adjusted general and administrative expenses | $ | 42,420 | $ | 47,976 | $ | 139,977 | $ | 158,597 | ||||||||||
| Adjusted general and administrative expenses % of net sales | 10.6 | % | 10.8 | % | 11.1 | % | 11.8 | % | ||||||||||
The following table reconciles adjusted EBITDA from the nearest GAAP performance measure, which is net loss:
| 13-Weeks Ended | 39-Weeks Ended | |||||||||||||||||
|
November 3, |
October 28, |
November 3, |
October 28, |
|||||||||||||||
| Adjusted EBITDA: | ||||||||||||||||||
| Net loss | $ | (10,803 | ) | $ | (20,891 | ) | $ | (48,024 | ) | $ | (47,533 | ) | ||||||
| Income tax benefit | (5,318 | ) | (14,595 | ) | (27,174 | ) | (27,957 | ) | ||||||||||
| Interest expense | 12,787 | 13,432 | 38,404 | 40,638 | ||||||||||||||
| Amortization and depreciation expense | 14,459 | 18,444 | 46,337 | 55,141 | ||||||||||||||
| Loss on impairment | — | — | 230 | 430 | ||||||||||||||
| EBITDA | 11,125 | (3,610 | ) | 9,773 | 20,719 | |||||||||||||
| Gain on servicing right | (1,558 | ) | — | (968 | ) | — | ||||||||||||
| Stock-based compensation expense | 271 | 1,101 | 2,671 | 3,628 | ||||||||||||||
| Integration costs | — | 655 | — | 3,921 | ||||||||||||||
| Restructuring costs | (207 | ) | — | 19,472 | — | |||||||||||||
| Orchard Portfolio segmentation and positioning research | 815 | — | 3,679 | — | ||||||||||||||
| Other | 533 | 934 | 3,203 | 2,164 | ||||||||||||||
| Adjusted EBITDA | $ | 10,979 | $ | (920 | ) | $ | 37,830 | $ | 30,432 | |||||||||
| Adjusted EBITDA % of net sales | 2.7 | % | (0.2 | )% | 3.0 | % | 2.3 | % | ||||||||||
The following table reconciles adjusted free cash flow from net cash provided by operating activities:
| 13-Weeks Ended | 39-Weeks Ended | |||||||||||||||||
|
November 3, |
October 28, |
November 3, |
October 28, |
|||||||||||||||
| Adjusted free cash flow: | ||||||||||||||||||
| Net cash provided by operating activities | $ | 3,640 | $ | 14,254 | $ | 25,062 | $ | 20,349 | ||||||||||
| Plus: Proceeds from sale of customer accounts receivable | 199,268 | 233,426 | 630,671 | 666,116 | ||||||||||||||
| Less: Purchase of customer accounts receivable | (219,635 | ) | (233,409 | ) | (652,326 | ) | (666,034 | ) | ||||||||||
| Less: Maintenance capital expenditures | (2,436 | ) | (4,992 | ) | (5,458 | ) | (16,400 | ) | ||||||||||
| Adjusted free cash flow | $ | (19,163 | ) | $ | 9,279 | $ | (2,051 | ) | $ | 4,031 | ||||||||
| Adjusted free cash flow % of net sales | (4.8 | )% | 2.1 | % | (0.2 | )% | 0.3 | % | ||||||||||
The following table presents trailing twelve months lender adjusted EBITDA and leverage ratios:
| Trailing Twelve Fiscal Months | ||||||||||
|
November 3, |
October 28, |
|||||||||
| Adjusted EBITDA | $ | 98,257 | $ | 106,827 | ||||||
| Expected cost savings (a) | 18,281 | 18,971 | ||||||||
| Non-cash charges | (103 | ) | 961 | |||||||
| One-time charges | (1,142 | ) | 2,000 | |||||||
| Other (b) | 6,728 | 5,869 | ||||||||
| Program agreement adjusted EBITDA | 122,021 | 134,628 | ||||||||
| Unrestricted subsidiary (c) | 7,655 | — | ||||||||
| Incremental expected cost savings (a,d) | 1,531 | — | ||||||||
| Lender adjusted EBITDA | $ | 131,207 | $ | 134,628 | ||||||
| Leverage ratio debt: | ||||||||||
| Short-term debt | ||||||||||
| Current portion of term loan, net of discount | $ | 25,404 | $ | 24,877 | ||||||
| Asset backed line of credit | 48,346 | 56,286 | ||||||||
| Capital lease obligation and other | 1,661 | 2,629 | ||||||||
| Total short-term debt | 75,411 | 83,792 | ||||||||
| Term loan, net of discount | 425,531 | 468,829 | ||||||||
| Capital lease obligation | 868 | 2,755 | ||||||||
| Total long-term debt | 426,399 | 471,584 | ||||||||
| Total debt | 501,810 | 555,376 | ||||||||
| Plus: Deferred charges | 7,515 | 10,483 | ||||||||
| Less: Cash and cash equivalents (e) | (5,268 | ) | (3,397 | ) | ||||||
| Leverage ratio debt | $ | 504,057 | $ | 562,462 | ||||||
| Program agreement leverage ratio | 4.13 | 4.18 | ||||||||
| Program agreement leverage ratio requirement | < 5.00 | < 5.00 | ||||||||
| Lender leverage ratio | 3.84 | 4.18 | ||||||||
| Lender leverage ratio requirement | < 4.50 | < 4.75 | ||||||||
(a) Expected cost savings reflects the projected impact of cost synergies such as, but not limited to or necessarily inclusive of the implemented headcount reductions, catalog circulation reductions and anticipated vendor savings.
(b) Other includes charges such as, but not limited to or necessarily inclusive of, strategic investment charges, system implementation charges and executive recruiting.
(c) Bluestem Enterprises, Inc. ("BEI"), a subsidiary of Bluestem, was designated as an unrestricted subsidiary under Bluestem's term loan agreement at the end of fiscal 2016, which requires BEI's results of operations to be excluded from Bluestem's consolidated adjusted EBITDA calculation per the term loan agreement.
(d) Due to the unrestricted subsidiary designation, incremental expected cost savings above Program Agreement threshold limitations are able to be included in lender adjusted EBITDA.
(e) Excludes third party credit card receivables.
The following table presents adjusted working capital and net liquidity:
|
November 3, |
October 28, |
|||||||||
| Adjusted working capital: | ||||||||||
| Total current assets | $ | 375,238 | $ | 473,299 | ||||||
| Total current liabilities | 398,632 | 466,581 | ||||||||
| Working capital | $ | (23,394 | ) | $ | 6,718 | |||||
| Plus: Inter-company portion of current income taxes payable | 7,974 | 8,240 | ||||||||
| Plus: Inter-company payable due to stock compensation | 13,818 | 9,029 | ||||||||
| Adjusted working capital | $ | (1,602 | ) | $ | 23,987 | |||||
| Cash and cash equivalents | $ | 13,011 | $ | 11,310 | ||||||
| Less: Third party credit card receivables | (7,743 | ) | (7,914 | ) | ||||||
| Lender cash and cash equivalents | 5,268 | 3,396 | ||||||||
| Plus: Asset backed line availability | 65,238 | 106,195 | ||||||||
| Program agreement net liquidity | $ | 70,506 | $ | 109,591 | ||||||
| Less: Unrestricted subsidiary cash | (30 | ) | — | |||||||
| Lender net liquidity | $ | 70,476 | $ | 109,591 | ||||||
| Program agreement and lender net liquidity requirement | > $40,000 | > $40,000 | ||||||||