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-weeks ended May 3, 2019 and May 4, 2018. We refer to the 13-week periods in this release as the "first quarter." Bluestem is a multi-brand, direct-to-consumer 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.
First Quarter Fiscal 2019 Bluestem Brands Highlights
- The previously announced strategic exit from six of our eleven Orchard brands is on track, with inventory liquidation well under way.
- Net sales were $349.0 million, a 8.4% decrease compared to the first quarter of fiscal 2018. Net sales decreased 7% when adjusted for exited brand sales in 2019 and 2018.
- Gross margin was 46.7% compared to 48.7% in the first quarter of fiscal 2018. Excluding the impact of inventory liquidation of the exited brands in first quarter fiscal 2019, gross margin was 47.6%.
- Selling and marketing expenses as a percent of net sales was 28.3% compared to 33.3% in the first quarter of fiscal 2018. Excluding net sales and marketing expenses related to the inventory liquidation of exited brands, selling and marketing expenses as a percent of sales was 28.2% in the first quarter of fiscal 2019.
- Net credit expense excluding servicing rights valuation was $21.1 million, an improvement of $6.4 million compared to Q1 2018 from a lower merchant discount rate charged on sales to SCUSA due to an improving credit portfolio.
- Adjusted EBITDA was $0.2 million compared to $(12.6) million in the first quarter of fiscal 2018, an increase of 340 basis points as a percent of net sales.
- Compliant with lender covenants as of the end of the first quarter, net liquidity was $59.7 million compared to a covenant requirement of $40.0 million and lender leverage ratio was 3.02x compared to a covenant requirement of 4.50x.
Bruce Cazenave, CEO, stated, “Our first quarter reflects continued stabilization in the credit portfolio, higher contribution margin rate at Northstar, and continued progress with the Orchard portfolio. In my short time here I have observed that our company can execute well, as shown by the roll out of the initiatives on the credit portfolio, disposing of inventory on the exited brands, and securing marketing efficiency gains. Strong execution will continue to be a key part of our success as we begin deploying our strategic plan later this year. Our action plan will focus on both improving core business processes and capitalizing on growth opportunities. I am confident that our long term growth potential can be realized given the platforms we have to deliver compelling and differentiated value propositions to our customers.”
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First Quarter Fiscal 2019 Bluestem Group Consolidated Information |
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| unaudited in millions (except loss per share) | Q1 2019 | Q1 2018 | |||||||||
| Bluestem Group net loss | $ | (23.8 | ) | $ | (40.1 | ) | |||||
| Bluestem Group basic and diluted loss per share | $ | (0.18 | ) | $ | (0.30 | ) | |||||
| Bluestem Group Adjusted EBITDA | $ | (0.8 | ) | $ | (14.2 | ) | |||||
| Bluestem Group cash and cash equivalents | $ | 122.4 | $ | 126.3 | |||||||
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First Quarter Fiscal 2019 Bluestem Brands Stand-Alone Information |
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| unaudited in millions | Q1 2019 | Q1 2018 | |||||||||
| Bluestem Brands net sales | $ | 349.0 | $ | 381.1 | |||||||
| Bluestem Brands net loss | $ | (18.0 | ) | $ | (30.7 | ) | |||||
| Bluestem Brands Adjusted EBITDA | $ | 0.2 | $ | (12.6 | ) | ||||||
| Northstar Portfolio net sales | $ | 169.9 | $ | 183.0 | |||||||
| Orchard Portfolio net sales | $ | 179.2 | $ | 208.1 | |||||||
| Northstar portfolio active customers | 1.5 | 1.5 | |||||||||
| Orchard Portfolio gross active customers | 5.4 | 6.0 | |||||||||
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Northstar Portfolio revolving credit portfolio: |
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| 30+ day delinquency rate | 16.7 | % | 16.3 | % | |||||||
| Net principal charge-off rate | 22.1 | % | 20.5 | % | |||||||
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 9:00 AM ET on Wednesday, June 19, 2019. The conference call can be accessed at (888) 394-8218 or (323) 701-0225 (International), conference ID # 1934839 and 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 # 1934839. The telephone replay will be available at 11:00 AM ET June 19, 2019. Additional investor information can be accessed at http://www.bluestem.com/investor-relations.
About Bluestem Group
Bluestem Group Inc., a holding company headquartered in Eden Prairie, MN, operates multiple direct to consumer retail brands through its subsidiary Bluestem Brands. The Northstar Portfolio includes Fingerhut and Gettington, both of which are national multi-channel retail brands offering a broad selection of name brand and private label merchandise serving low- to middle-income consumers by offering multiple payment plans through revolving credit lines or installment loans offered by WebBank. The Orchard Portfolio consists of multichannel brands that offer apparel, accessories, and home products for the boomer and senior demographic, generally considered age 50 and over and provide customers with the ability to obtain credit through a third-party private label credit card. Continuing brands include Appleseed’s, Blair, Draper’s & Damon’s, Haband, and Old Pueblo Traders. At the end of fiscal 2018, the Company has announced that it would be exiting from six legacy brands in fiscal 2019: Bedford Fair, Gold Violin, Norm Thompson, Sahalie, Tog Shop and WinterSilks. 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 1, 2019 and February 2, 2018.
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.
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BLUESTEM GROUP INC. Table of Contents |
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| Page | ||
| Overview and Basis of Presentation | 5 | |
| Bluestem Group Inc. | 6 | |
| Consolidated Statements of Comprehensive Income (Loss) (Unaudited) | 7 | |
| Consolidated Balance Sheets (Unaudited) | 8 | |
| Consolidated Statements of Cash Flows (Unaudited) | 9 | |
| Non-GAAP Financial Measure (Unaudited) | 10 | |
| Bluestem Brands, Inc. | 11 | |
| Consolidated Statements of Comprehensive Income (Loss) and Selected Operating Data (Unaudited) | 12 | |
| Consolidated Balance Sheets (Unaudited) | 13 | |
| Consolidated Statements of Cash Flows (Unaudited) | 14 | |
| Supplemental Financial Information (Unaudited) | ||
| Segment Net Sales | 15 | |
| Credit Portfolio | 16 | |
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Non-GAAP Financial Measures (Unaudited) |
16 | |
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BLUESTEM GROUP INC. |
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BLUESTEM BRANDS, INC. |
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FINANCIAL INFORMATION |
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13-Weeks and Fiscal Years Ended May 3, 2019 and May 4, 2018 |
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 and the Orchard Portfolio
- "Northstar Portfolio” refers to the consolidated Fingerhut and Gettington retail brands
- “Orchard Portfolio” refers to the consolidated Appleseed’s, Blair, Draper’s & Damon’s , Haband, and Old Pueblo Traders go-forward retail brands along with Norm Thompson, Gold Violin, Bedford Fair, Sahalie, Tog Shop, and WinterSilks that are being exited and all inventory of the exited brands is being liquidated in 2019.
The accompanying financial information for Bluestem Group Inc. is presented on a consolidated basis, including its wholly owned subsidiary Bluestem Brands, Inc. and its consolidated subsidiaries. The accompanying financial information for Bluestem Brands, Inc. is also presented on a stand-alone basis. All financial information included in this release is unaudited.
At the end of the fourth quarter of fiscal 2018, the Company announced that it had made the strategic decision to exit six of its thirteen retail brands: Bedford Fair, Gold Violin, Norm Thompson, Sahalie, The Tog Shop and Winter Silks ("the 2018 Restructuring Plan"). This decision was made to streamline the business, enabling Company management to focus resources on the core Orchard portfolio brands, consisting of Appleseed’s, Blair, Drapers & Damon’s, Haband and Old Pueblo Traders. All of Sahalie's inventory assortment is now and will continue to be offered through our Gettington retail brand. The inventory of the remaining exited retail brands is in the process of being liquidated.
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.
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 include contribution margin, adjusted general and administrative expenses, adjusted free cash flow, program agreement adjusted EBITDA, lender adjusted EBITDA, leverage ratio net 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.
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Bluestem Group Inc. |
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Results for the 13-Weeks Ended May 3, 2019 and May 4, 2018 |
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BLUESTEM GROUP INC. Consolidated Statements of Comprehensive Income (Loss) (unaudited - in thousands, except shares and per share amounts) |
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| 13-Weeks Ended | ||||||||||
| May 3, 2019 | May 4, 2018 | |||||||||
| Net sales | $ | 349,933 | $ | 381,455 | ||||||
| Costs and expenses | ||||||||||
| Cost of goods sold | 185,457 | 195,167 | ||||||||
| Sales and marketing expenses | 98,722 | 127,019 | ||||||||
| Net credit expense | 18,380 | 25,148 | ||||||||
| General and administrative expenses | 47,213 | 49,016 | ||||||||
| Amortization and depreciation not included in cost of goods sold | 10,587 | 12,304 | ||||||||
| Total costs and expenses | 360,359 | 408,654 | ||||||||
| Operating loss | (10,426 | ) | (27,199 | ) | ||||||
| Interest expense, net | 12,666 | 12,602 | ||||||||
| Loss before income taxes | (23,092 | ) | (39,801 | ) | ||||||
| Income tax expense | 739 | 311 | ||||||||
| Net loss | $ | (23,831 | ) | $ | (40,112 | ) | ||||
| Loss per share - common stockholders | ||||||||||
| Basic and diluted loss per share | $ | (0.18 | ) | $ | (0.30 | ) | ||||
| Basic and diluted weighted average shares outstanding | 133,177,999 | 132,326,876 | ||||||||
| Other comprehensive income (loss) | ||||||||||
| Unrealized (loss) gain on interest rate swap, net of tax | (499 | ) | 402 | |||||||
| Comprehensive loss | $ | (24,330 | ) | $ | (39,710 | ) | ||||
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BLUESTEM GROUP INC. Condensed Consolidated Balance Sheets (unaudited - in thousands) |
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| May 3, 2019 | February 1, 2019 | May 4, 2018 | ||||||||||||
| ASSETS | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 122,402 | $ | 119,507 | $ | 126,269 | ||||||||
| Restricted cash | 14,751 | 13,508 | 15,328 | |||||||||||
| Customer accounts receivable, net of allowance of $7,220, $7,801 and $7,415 | 5,700 | 8,154 | 5,792 | |||||||||||
| Merchandise inventories | 200,968 | 210,658 | 197,914 | |||||||||||
| Promotional material inventories | 11,293 | 13,810 | 17,723 | |||||||||||
| Other current assets | 29,713 | 29,742 | 35,576 | |||||||||||
| Total current assets | 384,827 | 395,379 | 398,602 | |||||||||||
| Property and equipment, net | 86,062 | 90,376 | 101,080 | |||||||||||
| Operating lease right of use assets | 28,114 | — | — | |||||||||||
| Intangibles, net | 117,417 | 120,921 | 159,733 | |||||||||||
| Goodwill | 36,717 | 36,717 | 36,717 | |||||||||||
| Other assets | 5,614 | 5,966 | 9,851 | |||||||||||
| Total Assets | $ | 658,751 | $ | 649,359 | $ | 705,983 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 131,118 | $ | 140,992 | $ | 155,519 | ||||||||
| Accrued costs and other liabilities | 65,523 | 73,349 | 89,669 | |||||||||||
| Short-term debt | 81,260 | 49,903 | 54,060 | |||||||||||
| Short-term operating lease liabilities | 8,570 | — | — | |||||||||||
| Total current liabilities | 286,471 | 264,244 | 299,248 | |||||||||||
| Long-term debt | 389,833 | 395,819 | 413,986 | |||||||||||
| Long-term operating lease liabilities | 24,298 | — | — | |||||||||||
| Deferred income taxes | — | — | 4,360 | |||||||||||
| Other long-term liabilities | 23,175 | 30,925 | 36,151 | |||||||||||
| Total liabilities | 723,777 | 690,988 | 753,745 | |||||||||||
| Stockholders' Equity: | ||||||||||||||
| Series A participating convertible preferred stock | 5,000 | 5,000 | 5,000 | |||||||||||
| Common stock | 1,340 | 1,340 | 1,332 | |||||||||||
| Treasury stock | (131 | ) | (131 | ) | (131 | ) | ||||||||
| Additional paid-in capital | 297,979 | 297,310 | 294,581 | |||||||||||
| Accumulated deficit | (370,209 | ) | (346,642 | ) | (351,277 | ) | ||||||||
| Accumulated other comprehensive income, net of tax | 995 | 1,494 | 2,733 | |||||||||||
| Total stockholders’ equity | (65,026 | ) | (41,629 | ) | (47,762 | ) | ||||||||
| Total Liabilities and Stockholders' Equity | $ | 658,751 | $ | 649,359 | $ | 705,983 | ||||||||
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BLUESTEM GROUP INC. Condensed Consolidated Statements of Cash Flows (unaudited - in thousands) |
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| 13-Weeks Ended | |||||||||
| May 3, 2019 | May 4, 2018 | ||||||||
| Operating Activities | |||||||||
| Net loss | $ | (23,831 | ) | $ | (40,112 | ) | |||
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||
| Amortization and depreciation expense | 11,714 | 13,466 | |||||||
| Provision for doubtful accounts | 13,533 | 19,953 | |||||||
| Provision for deferred income taxes | (530 | ) | 212 | ||||||
| Gain on servicing right | (2,670 | ) | (2,824 | ) | |||||
| Net losses on loans held for sale, investment securities and other | 40 | 118 | |||||||
| Stock-based compensation expense | 941 | 1,078 | |||||||
| Other, net | 2,430 | 1,043 | |||||||
| Net change in assets and liabilities: | |||||||||
| Customer account receivables | 466 | 622 | |||||||
| Merchandise inventories | 9,690 | (3,221 | ) | ||||||
| Promotional material inventories | 2,517 | 3,096 | |||||||
| Other assets | 123 | (7,555 | ) | ||||||
| Accounts payable and other liabilities | (18,581 | ) | 17,116 | ||||||
| Net cash (used in) provided by operating activities | (4,158 | ) | 2,992 | ||||||
| Investing Activities | |||||||||
| Purchases of customer accounts receivable | (178,333 | ) | (187,767 | ) | |||||
| Proceeds from sale of customer accounts receivable | 166,788 | 170,408 | |||||||
| Net purchases of property and equipment | (4,276 | ) | (4,958 | ) | |||||
| Distributions from equity investments | 59 | 1,717 | |||||||
| Net cash used in investing activities | (15,762 | ) | (20,600 | ) | |||||
| Financing Activities | |||||||||
| Repayments of debt | (8,127 | ) | (7,200 | ) | |||||
| Borrowings on asset backed line of credit | 98,142 | 110,602 | |||||||
| Repayments on asset backed line of credit | (65,918 | ) | (83,301 | ) | |||||
| Net cash used in financing activities | 24,097 | 20,101 | |||||||
| Effect of Foreign Exchange Rates on Cash | (39 | ) | (53 | ) | |||||
| Net Increase in Cash, Cash Equivalents and Restricted Cash | 4,138 | 2,440 | |||||||
| Cash, Cash Equivalents and Restricted Cash, Beginning of Period | 133,015 | 139,157 | |||||||
| Cash, Cash Equivalents and Restricted Cash, End of Period | $ | 137,153 | $ | 141,597 | |||||
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BLUESTEM GROUP INC. |
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Non-GAAP Financial Measure |
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(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, interest expense, amortization and depreciation expense, loss on impairment, gain or loss on servicing right, stock-based compensation expense, restructuring costs, impact of inventory liquidation related to exited retail brands 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 | ||||||||||
| May 3, 2019 | May 4, 2018 | |||||||||
| Adjusted EBITDA: | ||||||||||
| Net loss | $ | (23,831 | ) | $ | (40,112 | ) | ||||
| Income tax expense | 739 | 311 | ||||||||
| Interest expense | 12,671 | 12,605 | ||||||||
| Amortization and depreciation expense | 11,701 | 13,465 | ||||||||
| Gain on servicing right | (2,670 | ) | (2,824 | ) | ||||||
| Stock-based compensation expense | 941 | 1,078 | ||||||||
| Restructuring costs | 1,181 | 89 | ||||||||
| Impact of inventory liquidation of exited brands | (1,593 | ) | — | |||||||
| Other | 35 | 1,195 | ||||||||
| Adjusted EBITDA | $ | (826 | ) | $ | (14,193 | ) | ||||
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Bluestem Brands, Inc. |
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Results for the 13-Weeks Ended May 3, 2019 and May 4, 2018 |
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BLUESTEM BRANDS, INC. Consolidated Statements of Comprehensive Income (Loss) and Selected Operating Data (unaudited) (in thousands) |
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| 13-Weeks Ended | ||||||||||||||
| May 3, 2019 | May 4, 2018 | Change(a) | ||||||||||||
| Net sales | $ | 349,011 | $ | 381,060 | (8.4 | )% | ||||||||
| Cost of goods sold | 185,908 | 195,644 | (5.0 | )% | ||||||||||
| Gross profit | 163,103 | 185,416 | (12.0 | )% | ||||||||||
| Sales and marketing expenses | 98,722 | 127,019 | (22.3 | )% | ||||||||||
| Net credit expense | 18,380 | 24,660 | (25.5 | )% | ||||||||||
| General and administrative expenses | 44,319 | 46,430 | (4.5 | )% | ||||||||||
| Amortization and depreciation not included in cost of goods sold(b) | 10,587 | 12,304 | (14.0 | )% | ||||||||||
| Interest expense, net(c) | 12,666 | 12,602 | 0.5 | % | ||||||||||
| Loss before income taxes | (21,571 | ) | (37,599 | ) | 42.6 | % | ||||||||
| Income tax benefit | (3,555 | ) | (6,855 | ) | 48.1 | % | ||||||||
| Net loss | $ | (18,016 | ) | $ | (30,744 | ) | 41.4 | % | ||||||
| Margins and Expenses as a Percentage of Net Sales: | ||||||||||||||
| Gross profit | 46.7 | % | 48.7 | % | (200 | ) | bps | |||||||
| Sales and marketing expenses | 28.3 | % | 33.3 | % | (500 | ) | bps | |||||||
| Net credit expense | 5.3 | % | 6.5 | % | (120 | ) | bps | |||||||
| Contribution margin (d) | $ | 46,001 | $ | 33,737 | 36.4 | % | ||||||||
| As a percentage of net sales(d) | 13.2 | % | 8.9 | % | 430 | bps | ||||||||
| Adjusted general and administrative expenses(d) | $ | 42,434 | $ | 44,457 | (4.6 | )% | ||||||||
| As a percentage of net sales(d) | 12.2 | % | 11.7 | % | 50 | bps | ||||||||
| Adjusted EBITDA (d) | $ | 170 | $ | (12,608 | ) | (101.3 | )% | |||||||
| As a percentage of net sales | — | % | (3.3 | )% | 330 | bps | ||||||||
| Selected Operating Data: | ||||||||||||||
| Northstar Portfolio revolving new customer credit accounts(e) | 105 | 111 | (5.4 | )% | ||||||||||
| Fingerhut FreshStart new customer credit accounts(e) | 45 | 43 | 4.7 | % | ||||||||||
| Orchard Portfolio unique new customers - go-forward brands(f) | 140 | 177 | (20.9 | )% | ||||||||||
| Northstar Portfolio active customers(g) | 1,529 | 1,464 | 4.4 | % | ||||||||||
| Orchard Portfolio unique active customers - go-forward brands(h) | 3,688 | 3,939 | (6.4 | )% | ||||||||||
| (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, right of use 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, counted once without regard for purchases from multiple brands and excluding exited brands in all periods, who have made a first-time purchase during the period presented. Go-forward gross new customers, counted only once for each brand from which a purchase has been made, who have made a first-time purchase from the Orchard Portfolio, during the 13-weeks ended May 3, 2019 and May 4, 2018, were 355 and 477, respectively. Gross new customers including exited brands in all periods, during the 13-weeks ended May 3, 2019 and May 4, 2018, were 409 and 563, 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, counted only once without regard for purchases from multiple brands and excluding exited brands in all periods, who have made at least one purchase from the Orchard Portfolio during the period presented. Go-forward gross active customers, counted once for each brand from which a purchase has been made, that have made at least one purchase from a particular brand within the Orchard Portfolio excluding exited brands in all periods during the 13-weeks ended May 3, 2019 and May 4, 2018, were 5.4 million and 6.0 million, respectively. Gross active customers including exited brands in all periods, during the 13-weeks ended May 3, 2019 and May 4, 2018, were 6.4 million and 7.4 million, respectively. | |
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BLUESTEM BRANDS, INC. Condensed Consolidated Balance Sheets (unaudited - in thousands) |
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| May 3, 2019 | February 1, 2019 | May 4, 2018 | |||||||||||||
| ASSETS | |||||||||||||||
| Current assets: | |||||||||||||||
| Cash and cash equivalents | $ | 12,225 | $ | 7,102 | $ | 12,299 | |||||||||
| Restricted cash | 14,751 | 13,508 | 15,328 | ||||||||||||
| Customer accounts receivable, net of allowance of $7,220, $7,800 and $6,976 | 5,700 | 8,154 | 5,708 | ||||||||||||
| Merchandise inventories | 200,968 | 210,658 | 197,914 | ||||||||||||
| Promotional material inventories | 11,293 | 13,810 | 17,723 | ||||||||||||
| Prepaid expenses and other assets | 28,402 | 27,887 | 32,450 | ||||||||||||
| Total current assets | 273,339 | 281,119 | 281,422 | ||||||||||||
| Property and equipment, net | 67,749 | 71,810 | 83,785 | ||||||||||||
| Operating lease right of use assets | 54,741 | — | — | ||||||||||||
| Intangible assets, net | 117,417 | 120,921 | 159,733 | ||||||||||||
| Goodwill | 36,717 | 36,717 | 36,717 | ||||||||||||
| Other assets | 1,089 | 1,674 | 4,282 | ||||||||||||
| Total Assets | $ | 551,052 | $ | 512,241 | $ | 565,939 | |||||||||
| LIABILITIES AND STOCKHOLDER'S EQUITY | |||||||||||||||
| Current liabilities: | |||||||||||||||
| Accounts payable | $ | 131,118 | $ | 140,992 | $ | 155,519 | |||||||||
| Current income taxes payable | 36,691 | 36,678 | 36,697 | ||||||||||||
| Accrued costs and other liabilities | 81,190 | 89,628 | 104,098 | ||||||||||||
| Short-term debt | 81,260 | 49,903 | 54,060 | ||||||||||||
| Short-term operating lease liabilities | 10,881 | — | — | ||||||||||||
| Total current liabilities | 341,140 | 317,201 | 350,374 | ||||||||||||
| Long-term debt | 389,616 | 395,602 | 413,769 | ||||||||||||
| Long-term operating lease liabilities | 49,421 | — | — | ||||||||||||
| Deferred income taxes | — | 3,828 | 5,889 | ||||||||||||
| Other long-term liabilities | 21,827 | 35,291 | 36,170 | ||||||||||||
| Total liabilities | 802,004 | 751,922 | 806,202 | ||||||||||||
| Stockholder's equity: | |||||||||||||||
| Common stock | — | — | — | ||||||||||||
| Additional paid-in capital | 369,602 | 369,602 | 369,602 | ||||||||||||
| Accumulated deficit | (621,000 | ) | (610,228 | ) | (611,938 | ) | |||||||||
| Accumulated other comprehensive income, net of tax | 446 | 945 | 2,073 | ||||||||||||
| Total stockholder's equity | (250,952 | ) | (239,681 | ) | (240,263 | ) | |||||||||
| Total Liabilities and Stockholder's Equity | $ | 551,052 | $ | 512,241 | $ | 565,939 | |||||||||
|
BLUESTEM BRANDS, INC. Condensed Consolidated Statements of Cash Flows (unaudited - in thousands) |
|||||||||
| 13-Weeks Ended | |||||||||
| May 3, 2019 | May 4, 2018 | ||||||||
| Operating Activities | |||||||||
| Net loss | $ | (18,016 | ) | $ | (30,744 | ) | |||
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||
| Amortization and depreciation expense | 11,461 | 13,238 | |||||||
| Provision for doubtful accounts | 13,533 | 19,937 | |||||||
| Provision for deferred income taxes | (3,727 | ) | (10,436 | ) | |||||
| Gain on servicing right | (2,670 | ) | (2,824 | ) | |||||
| Stock-based compensation expense | 669 | 689 | |||||||
| Other, net | 2,992 | 1,257 | |||||||
| Net change in assets and liabilities: | |||||||||
| Customer accounts receivable | 466 | (1,011 | ) | ||||||
| Merchandise inventories | 9,690 | (3,221 | ) | ||||||
| Promotional material inventories | 2,517 | 6,440 | |||||||
| Prepaid expenses and other assets | (421 | ) | (7,482 | ) | |||||
| Current income taxes payable | 13 | 327 | |||||||
| Accounts payable and other liabilities | (18,417 | ) | 18,079 | ||||||
| Net cash (used in) provided by operating activities | (1,910 | ) | 4,249 | ||||||
| Investing Activities | |||||||||
| Purchase of customer accounts receivable | (178,333 | ) | (187,767 | ) | |||||
| Proceeds from sale of customer accounts receivable | 166,788 | 170,408 | |||||||
| Net purchase of property and equipment | (4,276 | ) | (4,296 | ) | |||||
| Net cash used in investing activities | (15,821 | ) | (21,655 | ) | |||||
| Financing Activities | |||||||||
| Repayments of debt | (8,127 | ) | (7,200 | ) | |||||
| Borrowings on asset backed line of credit | 98,142 | 110,602 | |||||||
| Repayments on asset backed line of credit | (65,918 | ) | (83,301 | ) | |||||
| Net cash provided by financing activities | 24,097 | 20,101 | |||||||
| Net Increase in Cash, Cash Equivalents and Restricted Cash | 6,366 | 2,695 | |||||||
| Cash, Cash Equivalents and Restricted Cash, Beginning of Period | 20,610 | 24,932 | |||||||
| Cash, Cash Equivalents and Restricted Cash, End of Period | $ | 26,976 | $ | 27,627 | |||||
|
BLUESTEM BRANDS, INC. Supplemental Financial Information - Segment Net Sales (unaudited - in thousands, except average order size) |
||||||||||||||||||
| 13-Weeks Ended | ||||||||||||||||||
| May 3, 2019 | May 4, 2018 | Change | ||||||||||||||||
| $ | % of Sales | $ | % of Sales | % | ||||||||||||||
| Total sales by merchandise category: | ||||||||||||||||||
| Home | $ | 79,938 | 21.7 | % | $ | 94,932 | 22.6 | % | (15.8 | )% | ||||||||
| Entertainment | 60,689 | 16.5 | % | 67,864 | 16.2 | % | (10.6 | )% | ||||||||||
| Fashion | 227,493 | 61.8 | % | 256,600 | 61.2 | % | (11.3 | )% | ||||||||||
| Total merchandise sales(a) | 368,120 | 100.0 | % | 419,396 | 100.0 | % | (12.2 | )% | ||||||||||
| Corporate and other(b) | (79 | ) | (10,012 | ) | (99.2 | )% | ||||||||||||
| Returns and allowances | (31,322 | ) | (44,073 | ) | (28.9 | )% | ||||||||||||
| Commissions and other revenues | 12,292 | 15,749 | (22.0 | )% | ||||||||||||||
| Net sales | $ | 349,011 | $ | 381,060 | (8.4 | )% | ||||||||||||
| Gross profit rate | 46.7 | % | 48.7 | % | (190 | ) | bps | |||||||||||
| Sales and marketing expense rate | 28.3 | % | 33.3 | % | (500 | ) | bps | |||||||||||
| Contribution margin rate(c) | 13.2 | % | 8.9 | % | 430 | bps | ||||||||||||
| Average order size(d) | $ | 104 | $ | 100 | ||||||||||||||
| Northstar Portfolio sales by merchandise category: | ||||||||||||||||||
| Home | $ | 72,977 | 42.0 | % | $ | 85,203 | 45.0 | % | (14.3 | )% | ||||||||
| Entertainment | 60,689 | 34.9 | % | 67,864 | 35.9 | % | (10.6 | )% | ||||||||||
| Fashion | 40,240 | 23.1 | % | 36,147 | 19.1 | % | 11.3 | % | ||||||||||
| Total merchandise sales(a) | 173,906 | 100.0 | % | 189,214 | 100.0 | % | (8.1 | )% | ||||||||||
| Returns and allowances | (7,398 | ) | (10,209 | ) | (27.5 | )% | ||||||||||||
| Commissions and other revenues | 3,364 | 4,001 | (15.9 | )% | ||||||||||||||
| Net sales | $ | 169,872 | $ | 183,006 | (7.2 | )% | ||||||||||||
| Gross profit rate(d) | 44.3 | % | 43.9 | % | 30 | bps | ||||||||||||
| Sales and marketing expense rate | 17.9 | % | 15.1 | % | 280 | bps | ||||||||||||
| Contribution margin rate | 15.5 | % | 15.2 | % | 30 | bps | ||||||||||||
| Average order size(d) | $ | 210 | $ | 221 | ||||||||||||||
| Orchard Portfolio sales by merchandise category: | ||||||||||||||||||
| Home | $ | 6,961 | 3.6 | % | $ | 9,729 | 4.2 | % | (28.5 | )% | ||||||||
| Fashion | 187,253 | 96.4 | % | 220,453 | 95.8 | % | (15.1 | )% | ||||||||||
| Total merchandise sales(a) | 194,214 | 100.0 | % | 230,182 | 100.0 | % | (15.6 | )% | ||||||||||
| Returns and allowances | (23,924 | ) | (33,864 | ) | (29.4 | )% | ||||||||||||
| Commissions and other revenues | 8,928 | 11,748 | (24.0 | )% | ||||||||||||||
| Net sales | $ | 179,218 | $ | 208,066 | (13.9 | )% | ||||||||||||
| Gross profit rate | 48.7 | % | 52.6 | % | (390 | ) | bps | |||||||||||
| Sales and marketing expense rate(c) | 38.1 | % | 47.8 | % | (970 | ) | bps | |||||||||||
| Contribution margin rate | 10.6 | % | 4.7 | % | 590 | bps | ||||||||||||
| Average order size(d) | $ | 71 | $ | 69 | ||||||||||||||
| (a) | Total merchandise sales include shipping and handling revenue and is net of sales discounts. | |
| (b) | Corporate and other consist of adjustments to Bluestem's net sales related to 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 | ||||||||||||||||
| May 3, 2019 | May 4, 2018 | Change % | ||||||||||||||
| Net credit expense: | ||||||||||||||||
| Provision for doubtful accounts: | ||||||||||||||||
| Loss on sale of customer accounts receivable | $ | 11,526 | $ | 17,552 | (34.3 | )% | ||||||||||
| Company-owned customer accounts receivable | 2,007 | 2,385 | (15.8 | )% | ||||||||||||
| Total provision for doubtful accounts | 13,533 | 19,937 | (32.1 | )% | ||||||||||||
| Credit management costs | 15,698 | 15,944 | (1.5 | )% | ||||||||||||
| Finance charge and fee income, net | (1,172 | ) | (950 | ) | 23.4 | % | ||||||||||
| Servicing fee income and portfolio profit sharing | (7,009 | ) | (7,447 | ) | (5.9 | )% | ||||||||||
| Loss on servicing right | (2,670 | ) | (2,824 | ) | (5.5 | )% | ||||||||||
| Net credit expense | $ | 18,380 | $ | 24,660 | (25.5 | )% | ||||||||||
| 13-Weeks Ended | ||||||||||||||||
| May 3, 2019 | May 4, 2018 | |||||||||||||||
| Serviced Portfolio Selected Credit Data: | Revolving(a) | FreshStart(b) | Revolving(a) | FreshStart(b) | ||||||||||||
| Finance charge and fee income | $ | 106,678 | $ | 1,201 | $ | 94,572 | $ | 944 | ||||||||
| Finance charge and fee income rate(c) | 29.9 | % | 11.5 | % | 26.7 | % | 10.2 | % | ||||||||
| Net principal charge-offs | $ | 78,820 | $ | 2,631 | $ | 72,778 | $ | 2,577 | ||||||||
| Net principal charge-off rate(d) | 22.1 | % | 25.2 | % | 20.5 | % | 27.8 | % | ||||||||
| Average customer accounts receivable | $ | 1,425,760 | $ | 14,005 | $ | 1,417,769 | $ | 12,899 | ||||||||
| (a) | Revolving serviced portfolio includes Northstar Portfolio revolving credit accounts. | |
| (b) | FreshStart serviced portfolio is Fingerhut's installment accounts. | |
| (c) | 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 May 3, 2019 and May 4, 2018, 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-weeks ended May 3, 2019 and May 4, 2018, respectively. | |
| (d) | Revolving net principal charge-off rate represents net principal charge-offs as a percentage of average customer accounts receivable for the 13-weeks ended May 3, 2019 and May 4, 2018, 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-weeks ended May 3, 2019 and May 4, 2018, respectively. | |
|
BLUESTEM BRANDS, INC. |
|
Non-GAAP Financial Measures |
|
(unaudited - in thousands) |
To supplement the consolidated financial information of Bluestem Brands, Inc. and its subsidiaries for the 13-weeks ended May 3, 2019 and May 4, 2018 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, restructuring costs and other.
Adjusted EBITDA, as presented, represents net loss before income tax benefit, interest expense, amortization and depreciation expense, gain or loss on servicing right, stock-based compensation expense, restructuring costs, the impact of inventory liquidation of exited brands 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 non-cash charges, certain one-time charges, accelerated advertising costs associated with the adoption of Topic 606 for the 13-weeks ended May 4, 2018 and expected cost savings reflecting the projected impact of savings in credit account repricing, print and paper, headcount reduction and other operational improvements . 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 net 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 net debt, as defined above, divided by program agreement adjusted EBITDA, as defined above.
Lender leverage ratio, as presented, represents Leverage ratio net 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 net 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 | |||||||||
| May 3, 2019 | May 4, 2018 | ||||||||
| Contribution margin: | |||||||||
| Net loss | $ | (18,016 | ) | $ | (30,744 | ) | |||
| Income tax benefit | (3,555 | ) | (6,855 | ) | |||||
| Interest expense, net | 12,666 | 12,602 | |||||||
| Amortization and depreciation not included in cost of sales | 10,587 | 12,304 | |||||||
| General and administrative expenses | 44,319 | 46,430 | |||||||
| Contribution margin | $ | 46,001 | $ | 33,737 | |||||
| Contribution margin % of net sales | 13.2 | % | 8.9 | % | |||||
|
BLUESTEM BRANDS, INC. |
|
Non-GAAP Financial Measures |
|
(unaudited - in thousands) |
The following table reconciles adjusted general and administrative expenses from the nearest GAAP performance measure, which is general and administrative expenses:
| 13-Weeks Ended | |||||||||
| May 3, 2019 | May 4, 2018 | ||||||||
| Adjusted general and administrative expenses: | |||||||||
| General and administrative expenses | $ | 44,319 | $ | 46,430 | |||||
| Less: | |||||||||
| Stock-based compensation expense | (669 | ) | (689 | ) | |||||
| Restructuring costs | (1,181 | ) | (89 | ) | |||||
| Other | (35 | ) | (1,195 | ) | |||||
| Adjusted general and administrative expenses | $ | 42,434 | $ | 44,457 | |||||
| Adjusted general and administrative expenses % of net sales | 12.2 | % | 11.7 | % | |||||
The following table reconciles adjusted EBITDA from the nearest GAAP performance measure, which is net loss:
| 13-Weeks Ended | |||||||||
| May 3, 2019 | May 4, 2018 | ||||||||
| Adjusted EBITDA: | |||||||||
| Net loss | $ | (18,016 | ) | $ | (30,744 | ) | |||
| Income tax benefit | (3,555 | ) | (6,855 | ) | |||||
| Interest expense | 12,671 | 12,605 | |||||||
| Amortization and depreciation expense | 11,448 | 13,237 | |||||||
| Gain on servicing right | (2,670 | ) | (2,824 | ) | |||||
| Stock-based compensation expense | 669 | 689 | |||||||
| Restructuring costs | 1,181 | 89 | |||||||
| Impact of inventory liquidation of exited brands | (1,593 | ) | — | ||||||
| Other | 35 | 1,195 | |||||||
| Adjusted EBITDA | $ | 170 | $ | (12,608 | ) | ||||
| Adjusted EBITDA % of net sales | 0.0 | % | (3.3 | )% | |||||
The following table reconciles adjusted free cash flow from net cash provided by operating activities:
| 13-Weeks Ended | |||||||||
| May 3, 2019 | May 4, 2018 | ||||||||
| Adjusted free cash flow: | |||||||||
| Net cash (used in) provided by operating activities | $ | (1,910 | ) | $ | 4,249 | ||||
| Plus: Proceeds from sale of customer accounts receivable | 166,788 | 170,408 | |||||||
| Less: Purchase of customer accounts receivable | (178,333 | ) | (187,767 | ) | |||||
| Less: Maintenance capital expenditures | (1,424 | ) | (1,286 | ) | |||||
| Adjusted free cash flow | $ | (14,879 | ) | $ | (14,396 | ) | |||
| Adjusted free cash flow % of net sales | (4.3 | )% | (3.8 | )% | |||||
|
BLUESTEM BRANDS, INC. |
|
Non-GAAP Financial Measures |
|
(unaudited - in thousands) |
The following tables present trailing twelve months lender adjusted EBITDA and leverage ratios:
| Trailing Twelve Fiscal Months | ||||||||
| May 3, 2019 | May 4, 2018 | |||||||
| Adjusted EBITDA | $ | 115,430 | $ | 73,903 | ||||
| Expected cost savings (a) | 13,567 | 15,984 | ||||||
| Non-cash charges | (103 | ) | (103 | ) | ||||
| Acceleration of advertising expense due to adoption of Topic 606 (b) | — | 13,262 | ||||||
| Other (c) | 27,232 | 7,463 | ||||||
| Program agreement adjusted EBITDA | 156,126 | 110,509 | ||||||
| Unrestricted subsidiary (d) | (10 | ) | 1,857 | |||||
| Incremental expected cost savings (a, e) | — | 371 | ||||||
| Lender adjusted EBITDA | $ | 156,116 | $ | 112,737 | ||||
| Balances As Of | ||||||||
| May 3, 2019 | May 4, 2018 | |||||||
| Leverage ratio net debt: | ||||||||
| Short-term debt | ||||||||
| Current portion of term loan, net of discount | $ | 24,490 | $ | 24,434 | ||||
| Asset backed line of credit | 56,560 | 28,248 | ||||||
| Capital lease obligation and other | 210 | 1,379 | ||||||
| Total short-term debt | 81,260 | 54,061 | ||||||
| Term loan, net of discount | 389,616 | 413,559 | ||||||
| Capital lease obligation | 298 | 210 | ||||||
| Total long-term debt | 389,914 | 413,769 | ||||||
| Total debt | 471,174 | 467,830 | ||||||
| Plus: Deferred charges | 3,785 | 6,272 | ||||||
| Less: Cash and cash equivalents (f) | (4,220 | ) | (5,043 | ) | ||||
| Leverage ratio net debt | $ | 470,739 | $ | 469,059 | ||||
| Program agreement leverage ratio | 3.02 | 4.24 | ||||||
| Program agreement leverage ratio requirement |
< 5.00 |
< 5.00 | ||||||
| Lender leverage ratio | 3.02 | 4.16 | ||||||
| Lender leverage ratio requirement | < 4.50 | < 4.50 | ||||||
| (a) | Expected cost savings reflects the projected savings in credit account repricing, print and paper, headcount reduction and other operational improvements. | |
| (b) | The Company adopted Topic 606, which pertains to revenue recognition, on February 3, 2018. Under Topic 606, the Company now recognizes the expense associated with its catalogs on the estimated date of first delivery to recipients. | |
| (c) | Other includes charges such as, but not limited to or necessarily inclusive of, strategic investment charges, system implementation charges and executive recruiting. | |
| (d) | 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. | |
| (e) | Due to the unrestricted subsidiary designation, incremental expected cost savings above program agreement threshold limitations are able to be included in lender adjusted EBITDA. | |
| (f) | Excludes third party credit card receivables. | |
|
BLUESTEM BRANDS, INC. |
|
Non-GAAP Financial Measures |
|
(unaudited - in thousands) |
The following table presents adjusted working capital and net liquidity:
| May 3, 2019 | May 4, 2018 | ||||||||
| Adjusted working capital: | |||||||||
| Total current assets | $ | 273,339 | $ | 281,422 | |||||
| Total current liabilities | 341,140 | 350,374 | |||||||
| Working capital | $ | (67,801 | ) | $ | (68,952 | ) | |||
| Plus: Inter-company portion of current income taxes payable | 30,631 | 30,583 | |||||||
| Plus: Inter-company payable due to stock compensation | 17,219 | 14,739 | |||||||
| Adjusted working capital | $ | (19,951 | ) | $ | (23,630 | ) | |||
| Program agreement and lender net liquidity: | |||||||||
| Cash and cash equivalents | $ | 12,225 | $ | 12,299 | |||||
| Less: Third party credit card receivables | (8,005 | ) | (7,256 | ) | |||||
| Lender cash and cash equivalents | 4,220 | 5,043 | |||||||
| Plus: Asset backed line availability | 55,452 | 76,530 | |||||||
| Program agreement net liquidity | $ | 59,672 | $ | 81,573 | |||||
| Less: Unrestricted subsidiary cash | (6 | ) | (204 | ) | |||||
| Lender net liquidity | $ | 59,666 | $ | 81,369 | |||||
| Program agreement and lender net liquidity requirement | > $40,000 | > $40,000 | |||||||