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Orchard Supply Hardware Stores Corporation Announces Fourth Quarter And Full-Year Fiscal 2011 Financial Results; Reiterates Store Opening Plans And Positive Comparable Store Sales Outlook For Fiscal 2012

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

This press release (including information incorporated or deemed incorporated by reference herein) contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those involving future events and future results that are based on current expectations, estimates, forecasts, and projections as well as the current beliefs and assumptions of the Company's management. Words such as “guidance”, "outlook", "believes", "expects", "appears", "may", "will", "should", “intend”, “target”, “projects”, “estimates”, “plans”, “forecast”, “is likely to”, "anticipates", or the negative thereof or comparable terminology, are intended to identify such forward looking statements. Any statement that is not a historical fact, and other estimates, projections, future trends and the outcome of events that have not yet occurred referenced in this press release, is a forward-looking statement. Forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, factors discussed under the section entitled "Risk Factors" in the Company's reports filed with the Securities and Exchange Commission. Many of such factors relate to events and circumstances that are beyond the Company's control. You should not place undue reliance on forward-looking statements. The Company does not assume any obligation to update the information contained in this press release.

Footnote

(1) Comparable store sales are calculated using sales of stores open at least twelve months and exclude E-commerce. Additionally, and because of an agreement the Company entered into with Sears Holdings Corporation on October 26, 2011 whereby the Company now sells appliances on a consignment basis and receives commission income for sales of such appliances and related protection agreements, comparable store sales also exclude approximately $3.5 million of net sales of Sears branded appliances in the fourth quarter of fiscal 2010 and approximately $0.3 million of commission income in the fourth quarter of fiscal 2011. The first three quarters of fiscal 2011 included approximately $14.5 million of net sales of Sears branded appliances.

ORCHARD SUPPLY HARDWARE STORES CORPORATION AND SUBSIDIARIES

     

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share amounts)

 
  13 Weeks Ended Fiscal Year Ended
January 28, January 29, January 28, January 29,
  2012     2011     2012     2011
NET SALES $ 141,579 $ 141,530 $ 660,472 $ 660,701
COST OF SALES AND EXPENSES:
Cost of sales (excluding depreciation and amortization) 94,620 93,864 441,031 431,839
Gross margin 46,959 47,666 219,441 228,862
Selling and administrative 46,092 40,598 177,184 165,993
Depreciation and amortization 7,000 8,069 29,390 31,187
Loss on sale of real property   470       14,780    
Total cost of sales and expenses   148,182     142,531     662,385     629,019
OPERATING (LOSS) INCOME (6,603 ) (1,001 ) (1,913 ) 31,682
INTEREST EXPENSE, NET   6,568     4,618     23,362     17,392
(LOSS) INCOME BEFORE INCOME TAXES (13,171 ) (5,619 ) (25,275 ) 14,290
INCOME TAX (BENEFIT) EXPENSE   (5,928 )   (2,191 )   (10,825 )   5,573
NET (LOSS) INCOME $ (7,243 ) $ (3,428 ) $ (14,450 ) $ 8,717
 
Basic and diluted (loss) income per share $ (1.21 ) $ (0.57 ) $ (2.40 ) $ 1.45
Basic and diluted weighted average common shares outstanding 6,009 6,012 6,010 6,013

ORCHARD SUPPLY HARDWARE STORES CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

AS OF JANUARY 28, 2012 AND JANUARY 29, 2011

(Unaudited, in thousands)

 
   

2011

   

2010

ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 8,148 $ 15,604
Restricted cash 556 556
Merchandise inventories 157,671 172,050
Deferred income taxes 14,129 16,444
Prepaid expenses and other current assets   13,228   11,253
Total current assets 193,732 215,907
PROPERTY AND EQUIPMENT, NET 210,362 262,968
INTANGIBLE ASSETS 133,916 145,451
DEFERRED FINANCING COSTS AND OTHER LONG-TERM ASSETS   8,493   5,666
TOTAL $ 546,503 $ 629,992
 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Merchandise payables $ 54,410 $ 55,325
Accrued expenses and other liabilities 41,633 40,116
Current portion of long-term debt and capital lease obligations 8,269 19,292
Payable to Sears 2,875 12,458
Deposits from sale of real property   21,471  
Total current liabilities 128,658 127,191
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 254,152 318,928
OTHER LONG-TERM LIABILITIES 29,286 16,338
DEFERRED INCOME TAXES 48,108 69,503
COMMITMENTS AND CONTINGENCIES    
Total liabilities   460,204   531,960
Total stockholders' equity   86,299   98,032
TOTAL $ 546,503 $ 629,992

Non-GAAP Financial Measure

In addition to our net loss determined in accordance with GAAP, for purposes of evaluating operating performance, the Company uses an Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA"), which is adjusted to exclude certain significant items as set forth below. Our management uses Adjusted EBITDA to evaluate the operating performance of our business for comparable periods. Adjusted EBITDA should not be used by investors or other third parties as the sole basis for formulating investment decisions as it excludes a number of important cash and non-cash recurring items. The Adjusted EBITDA should not be considered as a substitute for GAAP measurements. While Adjusted EBITDA is a non-GAAP measurement, management believes that it is an important indicator of operating performance because:

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