EX-99.1 2 dex991.htm EARNINGS RELEASE EARNINGS RELEASE

Exhibit 99.1

 

  FOR: BROOKSTONE, INC.
  CONTACT: Philip Roizin
       EVP of Finance and Administration
       (603) 880-9500

FOR IMMEDIATE RELEASE

Brookstone Announces Second Quarter and Year to Date 2006 Financial Results

MERRIMACK, N.H., July 26, 2006 — Innovative product development company and specialty lifestyle retailer Brookstone, Inc. today announced financial results for the second quarter and year to date ended July 1, 2006. Results in this release relating to the Company’s Gardeners Eden brand are reflected as discontinued operations.

For the 13-week period ended July 1, 2006, Brookstone reported total net sales of $91.3 million, which is a 4.3 percent increase compared to the 13-week period ending July 30, 2005. Same-store sales for the 13-week period ended July 1, 2006 increased 1.0 percent from the comparable 13-week period ending July 2, 2005.

For the 26-week period ended July 1, 2006, Brookstone reported total net sales of $168.0 million, which is a 2.3 percent increase compared to the 26-week period ending July 30, 2005. Same-store sales for the 26-week period ended July 1, 2006 decreased 6.4 percent from the comparable 26-week period ending July 2, 2005.

Lou Mancini, Chief Executive Officer of Brookstone, said: “We’re encouraged by our performance in the second quarter of 2006, particularly our improving trend in same-store sales. We believe that the initiatives we’ve put in place, including a more appealing product mix and sales incentive programs, are beginning to positively impact sales. We have several important product launches planned for the third and fourth quarters, including certain exclusive OSIM healthy lifestyle products, and we believe these new introductions will contribute positively to the Company’s overall operations and financial performance.”

Brookstone ended the second quarter with approximately $24 million in cash and no cash borrowings under the Company’s asset-backed lending agreement.

In November of 2005, the Company changed its fiscal year end from the Saturday closest to the end of January to the Saturday closest to the end of December. As a result of this change, our presentations through the fourth quarter of 2006 will compare the new quarter end results with the historical results from the old quarter ends. We believe these period-to-period comparisons will be informative given the fact that while the seasonality of the business is skewed towards the Holiday selling season, both the old and new fiscal fourth-quarter periods will encompass the Holiday selling season.

On October 4, 2005, Brookstone, Inc. was acquired through a merger transaction with Brookstone Acquisition Corp., a Delaware corporation formed by OSIM International Ltd and affiliates of J.W. Childs Equity Partners III, L.P. and Temasek (Private) Capital Limited. As a result of the acquisition, Brookstone, Inc. became a privately held, wholly owned subsidiary of OSIM Brookstone Holdings, L.P., the general partner of which is OSIM Brookstone Holdings, Inc. and the majority shareholder of which is OSIM International Ltd.


On June 29, 2005, the Company announced its plans to sell its Gardeners Eden business, which currently consists of one Gardeners Eden store. As a result, commencing with the second quarter of Fiscal 2005, the Company began reflecting the results of operations from the Gardeners Eden business as a discontinued operation.

Brookstone, Inc. is an innovative product development and specialty lifestyle retail Company that operates 307 Brookstone Brand stores nationwide and in Puerto Rico. Typically located in high-traffic regional shopping malls and airports, the stores feature unique and innovative consumer products. The Company also operates one store under the Gardeners Eden Brand, and a Direct Marketing business that includes the Brookstone and Hard-to-Find Tools catalogs and an e-commerce website at http://www.brookstone.com.

# # #

Statements in this release which are not historical facts, including statements about the Company’s confidence or expectations, earnings, anticipated operations of its e-commerce sites and those of third-party service providers, and other statements about the Company’s operational outlook are forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (“Reform Act”) and are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in such forward-looking statements. Such risks and uncertainties include, without limitation, risks of changing market conditions in the overall economy and the retail industry, consumer demand, the effectiveness of e-commerce technology and marketing efforts, availability of products, availability of adequate transportation of such products. Words such as “estimate”, “project”, “plan”, “believe”, “feel”, “anticipate”, “assume”, “may”, “will”, “should” and similar words and phrases may identify forward-looking statements. Statements about a possible sale or divestiture of its Gardeners Eden business constitute forward-looking statements. The Company may not be able to complete a divestiture on acceptable terms because of a number of factors, including failure to reach agreement with a purchaser. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date thereof. The Company undertakes no obligations to publicly release any revisions to these forward-looking statements or reflect events or circumstances after the date hereof.


Brookstone, Inc.

Consolidated Statement of Operations

($ in thousands)

(Unaudited)

 

     Thirteen-weeks ended     Twenty-six weeks ended  
     Successor     Predecessor     Successor     Predecessor  
     July 1, 2006     July 30, 2005     July 1, 2006     July 30, 2005  

Net sales

   $ 91,322     $ 87,521     $ 168,031     $ 164,308  

Cost of sales

     66,410       63,027       127,351       120,653  
                                

Gross profit

     24,912       24,494       40,680       43,655  

Selling, general and administrative expenses

     31,120       28,468       61,478       57,480  
                                

Loss from continuing operations

     (6,208 )     (3,974 )     (20,798 )     (13,825 )

Interest (income) expense, net

     6,178       (87 )     11,977       (103 )
                                

Loss before taxes, other party interests in consolidated entities and discontinued operations

     (12,386 )     (3,887 )     (32,775 )     (13,722 )

Other party interests in consolidated entities

     359       247       646       506  
                                

Loss before taxes and discontinued operations

     (12,745 )     (4,134 )     (33,421 )     (14,228 )

Income tax benefit

     (1,859 )     (1,575 )     (11,513 )     (5,470 )
                                

Loss from continuing operations

     (10,886 )     (2,559 )     (21,908 )     (8,758 )

Discontinued operations, net of tax

     (76 )     (3,190 )     (318 )     (3,770 )
                                

Net loss

   $ (10,962 )   $ (5,749 )   $ (22,226 )   $ (12,528 )
                                


Brookstone, Inc.

Condensed Consolidated Balance Sheet

($ in thousands)

(Unaudited)

 

     Successor    Predecessor
     July 1,
2006
   December 31,
2005
   July 30,
2005

Current Assets:

        

Cash and cash equivalents

   $ 23,604    $ 76,326    $ 46,613

Receivables, net

     9,663      10,906      7,923

Merchandise inventories

     73,776      75,716      75,879

Deferred income taxes, net

     16,704      4,947      12,271

Prepaid expenses

     9,003      9,117      7,315
                    

Total current assets

     132,750      177,012      150,001

Deferred income taxes, net

     —        —        5,228

Property, plant and equipment, net

     74,631      76,328      74,362

Intangible assets, net

     131,813      132,271      —  

Goodwill

     192,453      192,453      —  

Other assets

     17,300      19,363      3,213
                    

Total assets

   $ 548,947    $ 597,427    $ 232,804
                    

Liabilities and Shareholders’ Equity

        

Current Liabilities:

        

Accounts payable

   $ 12,562    $ 22,012    $ 12,076

Other current liabilities

     41,098      54,714      29,224
                    

Total current liabilities

     53,660      76,726      41,300

Other long term liabilities

     19,700      18,962      22,668

Long term debt

     190,551      190,849      8,308

Deferred income taxes

     43,430      43,392      —  

Commitments and Contingencies

        

Other party interests in consolidated entities

     1,296      1,176      1,004

Total shareholders’ equity

     240,310      266,322      159,524
                    

Total liabilities and shareholders’ equity

   $ 548,947    $ 597,427    $ 232,804
                    

# # #


EBITDA

EBITDA is a financial measure used by management of the Company and which management believes provide useful information to investors regarding the Company’s results of operations because such measure assists in analyzing the operating performance of the Company and its ability to service debt. We define EBITDA as net income (loss) plus interest expense, depreciation, amortization and income taxes. Other companies may define EBITDA differently, and as a result, our measure of EBITDA may not be directly comparable to EBITDA of other companies. EBITDA should not be considered alternatives to net income, operating income or any other measure of performance or liquidity presented in accordance with GAAP. For the thirteen-week and twenty-six week periods ended July 1, 2006 and July 30, 2005, EBITDA, reconciled to our reported net income for such periods, are as follows:

 

     Successor     Predecessor  
        Thirteen weeks   
ended July 1,
2006
       Thirteen weeks   
ended July 30,
2005
 

Net loss – as reported

   $ (10,962 )   $ (5,749 )

Add: Income tax benefit

     (1,896 )     (3,614 )

Add: Interest expense

     6,526       391  

Add: Depreciation and amortization

     3,356       3,450  
                

EBITDA

   $ (2,976 )   $ (5,522 )
                
     Successor     Predecessor  
     Twenty-six weeks
ended July 1,
2006
    Twenty-six weeks
ended July 30,
2005
 

Net loss – as reported

   $ (22,226 )   $ (12,528 )

Add: Income tax benefit

     (11,686 )     (7,912 )

Add: Interest expense

     12,971       836  

Add: Depreciation and amortization

     6,626       6,908  
                

EBITDA

   $ (14,315 )   $ (12,696 )