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Orchard Supply Hardware Stores Corporation Reports First Quarter Fiscal 2012 Financial Results; Reiterates Store Opening Plans And Positive Comparable Store Sales Outlook For Fiscal 2012

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 $4.1 million of net sales of Sears branded appliances in the first quarter of fiscal 2011 and approximately $0.5 million of commission income in the first quarter of fiscal 2012.

ORCHARD SUPPLY HARDWARE STORES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share amounts)

 
13 Weeks Ended
April 28, 2012   April 30, 2011
 
Net sales $ 155,004   $ 163,768  
Cost of sales and expenses:
Cost of sales (excluding depreciation and amortization) 102,925 108,641
Gross Margin 52,079 55,127
Selling and administrative 45,860 43,999
Depreciation and amortization 7,839 7,163
Gain on sale of real property   (630 )   -  
Total cost of sales and expenses   155,994     159,803  
Operating (loss) income (990 ) 3,965
Interest expense, net   6,565     5,553  
Loss before income taxes (7,555 ) (1,588 )
Income tax benefit   3,046     598  
Net loss $ (4,509 ) $ (990 )
Loss per common share attributable to stockholders:
Basic and diluted loss per share $ (0.75 ) $ (0.16 )
Basic and diluted weighted average common shares outstanding 6,011 6,013
 

ORCHARD SUPPLY HARDWARE STORES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands)

     
April 28, 2012 January 28, 2012 April 30, 2011
 
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 22,354 $ 8,148 $ 11,532
Restricted cash 556 556 556
Merchandise inventories 173,446 157,671 178,637
Deferred income taxes 14,757 14,129 16,924
Prepaid expenses and other current assets   15,641   13,228   11,377
Total current assets 226,754 193,732 219,026
PROPERTY AND EQUIPMENT, NET 202,245 210,362 263,362
INTANGIBLE ASSETS 132,418 133,916 143,597
DEFERRED FINANCING COSTS AND OTHER LONG-TERM ASSETS   7,708   8,493   5,391
TOTAL $ 569,125 $ 546,503 $ 631,376
 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Merchandise payables $ 73,338 $ 54,410 $ 65,768
Accrued expenses and other liabilities 51,959 44,508 45,315
Current portion of long-term debt and capital lease obligations 9,526 8,269 8,492
Deposits from sale of real property   21,555   21,471   -
Total current liabilities 156,378 128,658 119,575
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 256,487 254,152 329,605
OTHER LONG-TERM LIABILITIES 28,475 29,286 16,519
DEFERRED INCOME TAXES   45,792   48,108   68,489
Total liabilities   487,132   460,204   534,188
Total stockholders' equity   81,993   86,299   97,188
TOTAL $ 569,125 $ 546,503 $ 631,376
 

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:

  • Adjusted EBITDA excludes the effects of financing and investing activities by eliminating the effects of interest, depreciation and amortization costs;
  • Management considers gain/loss on the sale of assets to result from investing decisions. Asset impairments and equity compensation expenses are excluded as they are non-cash charges; and
  • Other significant items, while periodically affecting our results, may vary significantly from period to period and have a disproportionate effect in a given period.

Reconciliation of Net Loss to Non-GAAP Adjusted EBITDA

(Unaudited, in thousands)

 
13 Weeks Ended
April 28, 2012 April 30, 2011
Net loss $ (4,509 ) $ (990 )
Interest expense, net 6,565 5,553
Income tax benefit (3,046 ) (598 )
Depreciation and amortization 7,839 7,163
Net loss on sale of real property and impairment of assets 197 85
Stock-based compensation 203 146
Other significant items   293     (193 )
Adjusted EBITDA $ 7,542   $ 11,166  




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