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| 8-K - FREDERICK'S OF HOLLYWOOD GROUP INC /NY/ | v205465_8k.htm |
EXHIBIT
99.1
FOR
IMMEDIATE RELEASE:
Frederick’s
of Hollywood Group Inc. Reports Improved Financial Results
From
Continuing Operations in First Quarter of Fiscal 2011
-
- -
Operating
income from continuing operations increased by $2.4 million to $0.1
million
New York, New York – December 14,
2010 —Frederick’s of Hollywood Group Inc. (NYSE Amex: FOH) (“Company”)
today announced financial results for its fiscal 2011 first quarter ended
October 30, 2010.
Thomas
Lynch, the Company’s Chairman and Chief Executive Officer, stated, “Our
financial results from continuing operations for the first quarter of fiscal
2011 reflect the significant progress we have made in improving the performance
of our continuing retail business. This includes our improved gross margins as
well as operating income of $127,000 as compared to an operating loss of $2.3
million for the first quarter of fiscal 2010. Shareholders’ equity
also dramatically increased to $10.3 million at October 30, 2010 from $2.0
million at October 24, 2009. While we are still facing many
challenges associated with the macroeconomic environment, we believe the actions
we have taken to transform the Frederick’s of Hollywood brand into a sexy
lifestyle brand have placed us on a path towards profitability.
Fiscal 2011 First Quarter
Compared to Fiscal 2010 First Quarter:
|
·
|
Net
loss from continuing operations decreased to $297,000 from $2.6
million.
|
|
·
|
Adjusted
EBITDA from continuing operations was $1.0 million compared to a loss of
$1.0 million. A reconciliation of GAAP results to Adjusted
EBITDA from continuing operations, a non-GAAP measurement, is provided in
the accompanying table.
|
|
·
|
Net
sales decreased 8.0% to $28.6 million from $31.1
million.
|
|
o
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Total
store sales decreased 9.6% while comparable store sales decreased
7.0%.
|
|
o
|
Direct
sales (catalog and website operations) decreased
5.0%.
|
|
·
|
Gross
margin, as a percentage of net sales, increased to 40.0% from
35.2%.
|
|
·
|
Selling,
general and administrative expenses decreased by 14.1% to $11.3 million,
or 39.6% of sales, from $13.2 million or 42.5% of
sales.
|
|
·
|
Net
loss applicable to common shareholders was $1.2 million or $(0.03) per
diluted share, compared to a net loss of $4.5 million or $(0.17) per
diluted share.
|
|
o
|
Net
loss from discontinued operations, net of tax, decreased to $0.9 million
from $1.7 million, which was primarily due to a gain on the sale of the
wholesale division of approximately $1.1 million for the three months
ended October 30, 2010.
|
Mr. Lynch
continued, “The first quarter of 2011 reflects an increase in gross margin,
which is attributable to a decrease in promotional activity, additional vendor
allowances and reduced buying costs. Selling, general and
administrative expenses were positively impacted by planned strategic reductions
in headcount and changes in catalog distribution. Specifically, we
are utilizing more effective and less expensive alternatives to full-sized
catalogs, including targeted emails, postcards and smaller-sized, more
personalized books.”
“Looking
ahead, our licensing business is making progress, with initial licensed products
currently available on our website and in select stores, and a more extensive
roll out to additional stores during Summer 2011. During the first
quarter of fiscal 2011, we entered into an exclusive multi-year license
agreement with Lady Sandra Home Fashions Inc. to develop, manufacture and
distribute Frederick’s of Hollywood branded beach towels, bedding and bath items
throughout the U.S. and Canada. We believe this new license agreement
complements our other licensed product offerings, which include swimwear, sexy
Halloween costumes, jewelry and accessories. We are continuing to
seek both domestic and international licensing partners capable of providing
high quality products and a strong distribution network,” concluded Mr.
Lynch.
Non-GAAP Financial
Measures
For
purposes of evaluating our continuing operating performance, the Company uses an
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
(“Adjusted EBITDA”) measurement, which is computed as the net loss from
continuing operations appearing on the statement of operations plus depreciation
and amortization, interest, income tax expense and non-cash stock compensation
expense. Adjusted EBITDA from continuing operations is used by
management to evaluate the operating performance of the Company’s business for
comparable periods. Adjusted EBITDA from continuing operations 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.
While
Adjusted EBITDA from continuing operations is a non-GAAP measurement, management
believes that it is an important indicator of operating performance
because:
|
·
|
Adjusted
EBITDA from continuing operations excludes the effects of financing and
investing activities by eliminating the effects of interest and
depreciation costs; and
|
|
·
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other
significant items, while periodically affecting the Company’s results, may
vary significantly from period to period and have a disproportionate
effect in a given period, which affects the comparability of
results.
|
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Three
Months Ended
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||||||||
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October
30, 2010
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October
24, 2009
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|||||||
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Net
loss from continuing operations
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$ | (297 | ) | $ | (2,629 | ) | ||
|
Depreciation
and amortization
|
842 | 1,084 | ||||||
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Interest
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399 | 361 | ||||||
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Income
tax expense
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25 | 16 | ||||||
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Stock
compensation expense
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77 | 191 | ||||||
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Adjusted EBITDA from
continuing operations
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$ | 1,046 | $ | (977 | ) | |||
Forward Looking
Statement
Certain
of the matters set forth in this press release are forward-looking and involve a
number of risks and uncertainties. These statements are based on
management’s current expectations or beliefs. Actual results may vary
materially from those expressed or implied by the statements
herein. Among the factors that could cause actual results to differ
materially are the following: competition; business conditions and industry
growth; rapidly changing consumer preferences and trends; general economic
conditions; working capital needs; continued compliance with government
regulations; loss of key personnel; labor practices; product development;
management of growth, increases in costs of operations or inability to meet
efficiency or cost reduction objectives; timing of orders and deliveries of
products; foreign government regulations and risks of doing business abroad; and
the other risks that are described from time to time in Frederick’s of Hollywood
Group Inc.’s SEC reports. Frederick’s of Hollywood Group Inc. is
under no obligation to, and expressly disclaims any obligation to, update or
alter its forward-looking statements, whether as a result of new information,
future events, changes in assumptions or otherwise.
2
About Frederick’s of
Hollywood Group Inc.
Frederick’s
of Hollywood Group Inc., through its subsidiaries, sells women’s intimate
apparel, swimwear and related products under its proprietary Frederick’s of
Hollywood® brand
through 126 specialty retail stores, a world-famous catalog and an online shop
at http://www.fredericks.com/. With its exclusive product offerings
including Seduction by Frederick’s of Hollywood, the Hollywood Exxtreme
Cleavage® bra and
Hollywood Sizzle Pool Party Swim™,
Frederick’s of Hollywood is the Original Sex Symbol®.
Our press
releases and financial reports can be accessed on our corporate website at
http://www.fohgroup.com.
This
release is available on the KCSA Strategic Communications Web site at
http://www.kcsa.com.
CONTACT:
Frederick’s
of Hollywood Group Inc.
Thomas
Rende, CFO
(212)
798-4700
Investor
Contacts:
Todd
Fromer / Garth Russell
KCSA
Strategic Communications
212-896-1215
/ 212-896-1250
tfromer@kcsa.com
/ grussell@kcsa.com
3
FREDERICK’S
OF HOLLYWOOD GROUP INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In
Thousands)
|
October
30,
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July
31,
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|||||||
|
2010
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2010
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|||||||
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(Unaudited)
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(Audited)
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|||||||
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ASSETS
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||||||||
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CURRENT
ASSETS:
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||||||||
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Cash
and cash equivalents
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$ | 491 | $ | 536 | ||||
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Restricted
cash
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2,302 | 4,660 | ||||||
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Accounts
receivable
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1,862 | 1,254 | ||||||
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Merchandise
inventories
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11,195 | 10,951 | ||||||
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Prepaid
expenses and other current assets
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3,435 | 2,298 | ||||||
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Deferred
income tax assets
|
681 | 875 | ||||||
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Current
assets of discontinued operations
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2,844 | 4,185 | ||||||
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Total
current assets
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22,810 | 24,759 | ||||||
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PROPERTY
AND EQUIPMENT, Net
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12,751 | 13,861 | ||||||
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INTANGIBLE
AND OTHER ASSETS
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19,353 | 19,392 | ||||||
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LONG-TERM
ASSETS OF DISCONTINUED OPERATIONS
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- | 960 | ||||||
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TOTAL
ASSETS
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$ | 54,914 | $ | 58,972 | ||||
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LIABILITIES
AND SHAREHOLDERS’ EQUITY
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||||||||
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CURRENT
LIABILITIES:
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||||||||
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Revolving
credit facility
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$ | 3,000 | $ | 3,269 | ||||
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Accounts
payable and other accrued expenses
|
17,540 | 20,198 | ||||||
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Deferred
revenue from gift cards
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1,778 | 1,781 | ||||||
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Current
liabilities of discontinued operations
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2,327 | 2,041 | ||||||
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Total
current liabilities
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24,645 | 27,289 | ||||||
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DEFERRED
RENT AND TENANT ALLOWANCES
|
4,926 | 4,926 | ||||||
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TERM
LOAN
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7,112 | 7,002 | ||||||
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OTHER
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57 | 70 | ||||||
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DEFERRED
INCOME TAX LIABILITIES
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7,917 | 8,377 | ||||||
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TOTAL
LIABILITIES
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44,657 | 47,664 | ||||||
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SHAREHOLDERS’
EQUITY
|
10,257 | 11,308 | ||||||
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TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$ | 54,914 | $ | 58,972 | ||||
4
FREDERICK’S
OF HOLLYWOOD GROUP INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
(In
Thousands, Except Per Share Amounts)
|
Three
Months Ended
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||||||||
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October
30,
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October
24,
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|||||||
|
2010
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2009
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Net
sales
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$ | 28,617 | $ | 31,114 | ||||
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Cost
of goods sold, buying and occupancy
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17,148 | 20,156 | ||||||
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Gross profit
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11,469 | 10,958 | ||||||
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Selling,
general and administrative expenses
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11,342 | 13,210 | ||||||
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Operating
income (loss)
|
127 | (2,252 | ) | |||||
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Interest
expense, net
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399 | 361 | ||||||
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Loss from continuing
operations before income tax provision
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(272 | ) | (2,613 | ) | ||||
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Income
tax provision
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25 | 16 | ||||||
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Net
loss from continuing operations
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(297 | ) | (2,629 | ) | ||||
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Net
loss from discontinued operations
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(933 | ) | (1,707 | ) | ||||
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Net
loss
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(1,230 | ) | (4,336 | ) | ||||
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Less:
Preferred stock dividends
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- | 119 | ||||||
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Net
loss applicable to common shareholders
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$ | (1,230 | ) | $ | (4,455 | ) | ||
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Basic
and diluted net loss per share from continuing operations
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$ | (.01 | ) | $ | (.10 | ) | ||
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Basic
and diluted net loss per share from discontinued
operations
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(.02 | ) | (.07 | ) | ||||
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Total
basic and diluted net loss per share applicable to common
shareholders
|
$ | (.03 | ) | $ | (.17 | ) | ||
|
Weighted
average shares outstanding – basic and diluted
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38,349 | 26,407 | ||||||
5