EXHIBIT 99.1
------------
P R E S S R E L E A S E
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For: Xxxxx Xxxxx Inc.
Approved By: Xxxx Xxxxx
(000) 000-0000
SVP - Chief Financial
Officer
Contact: Xxxx X'Xxxxx/Xxxxxx Xxxxxx
Press: Xxxxxxx Xxxxxxx
(000) 000-0000
Financial Dynamics
FOR IMMEDIATE RELEASE
XXXXX XXXXX HOLDINGS, INC. REPORTS THIRD QUARTER
AND NINE MONTH FINANCIAL RESULTS
--------------------------------------------------------------------------------
New York, New York, November 1, 2005 -- Xxxxx Xxxxx Holdings, Inc. today
reported financial results for the third quarter and nine months ended September
24, 2005.
CHANGE IN OWNERSHIP
-------------------
On July 30, 2004, the Company completed its acquisition by Oak Hill
Capital Partners, L.P. and this change in ownership resulted in a new basis of
accounting. This change has resulted in the application of purchase accounting
which requires that various balance sheet account carrying values be adjusted to
fair value as of the transaction date.
In this press release, the Company's financial results for the current
year's third quarter and nine months ended September 24, 2005 reflect this new
basis of accounting. The portions of the prior year's third quarter and nine
months subsequent to the acquisition are shown separately on page 5 of this
release and are identified as the Successor. The portions of the previous year's
financial results for the third quarter and nine months prior to the acquisition
are also shown separately on page 5, reflect the historical basis of accounting
prior to the acquisition and are identified as the Predecessor.
THIRD QUARTER RESULTS
---------------------
Net sales were $378.6 million compared to $380.4 million in the previous
year. Net sales before inclusion of resale activity were $359.2 million, up 2.7%
over the previous year. Total same-store sales increased 2.1%, with a pharmacy
same-store sales increase of 0.3% and a front-end same-store sales increase of
3.7%.
The percentage of more profitable but lower-priced generic prescriptions
to total prescriptions increased 4.2% over the previous year resulting in a
negative impact on pharmacy same-store sales of 2.5%. Pharmacy same-store sales
were also adversely impacted by 1.8% due to the negative publicity and reduced
consumer demand for arthritis medications and certain other high volume drugs
and approximately 1.9% due to increased mail order penetration resulting from
conversion of certain third party plans to mandatory mail order requirements.
The front-end same-store sales increase reflects the favorable impact of a
stronger New York City economy as well as added sales from the improved Dollar
Rewards customer loyalty card program. In addition, the comparison benefits
because of the prior year sales disruptions associated with the Republican
convention.
Net loss was $15.7 million, compared to a net loss of $39.0 million in
the previous year. The current year's results reflect (i) increased non-cash
depreciation and amortization expenses of $6.9 million, resulting from the
application of purchase accounting related to the July 30, 2004 acquisition of
the Company, (ii) increased interest expense of $5.1 million primarily
associated with the debt incurred by the Company as part of the acquisition, and
(iii) higher selling, general and administrative expenses of $6.8 million,
primarily attributable to increased consulting and litigation related legal
expenses and increased pharmacy labor costs. The tax benefit for the current
year's third quarter was $12.9 million, compared to $34.2 million last year.
The prior year's loss reflected pre-tax charges of (i) $37.5 million
associated with expenses related to Oak Hill's acquisition of the Company on
July 30, 2004 and (ii) $25.3 million primarily related to the Company's
termination of its obligations under the Chairman's supplemental executive
retirement plan.
Adjusted FIFO EBITDA, as defined on the attached schedule of operating
data, was $8.2 million, or 2.2% of sales, versus $12.5 million, or 3.3% of
sales, in the prior year period. The decline was primarily attributable to
consulting costs and expenses associated with several initiatives to improve the
Company's operations, litigation related professional fees, higher labor costs
for pharmacists and minimum wage increases as well as self insured retention
costs associated with a fire that occurred in one of the Company's stores.
Increased consulting and related expenses of approximately $1.0 million were
attributable to the development of several new management initiatives to improve
our operations and customers' shopping experience. Professional fees primarily
related to litigation related legal expenses increased by $1.9 million over the
previous year.
Cash outflow from investing activities for the quarter amounted to $0.4
million. Total debt at quarter's end amounted to $556.9 million, with
approximately $80.0 million of availability under the Company's revolving credit
facility.
Commenting on the Company's third quarter results, Xxxxxxx X. Xxxx,
Chairman of the Board and Chief Executive Officer, stated, "The third quarter
front-end sales performance reflects the continued improvement in the New York
City economy as well as an improved marketing and promotional program that has
resulted in increased customer visits. The quarterly decline in Adjusted FIFO
EBITDA reflects investments being made to improve our operations and costs
associated with ongoing litigation activity that should decline during 2006. In
addition, our initiative to improve inventory management is on track as
evidenced by a $19.8 million reduction achieved during the third quarter. We
continue to be confident that these efforts will yield improved financial
results as we move into the new fiscal year."
NINE MONTH RESULTS
------------------
Net sales for the first nine months increased to $1.173 billion from
$1.166 billion in the previous year. Net sales before inclusion of resale
activity were $1.100 billion, reflecting an increase of 3.4% over the prior
year. Total same-store sales increased 1.4%, with pharmacy and front-end
same-store increases of 0.7% and 2.0%, respectively. The aforementioned factors
which impacted third quarter store sales also affected the Company's results
during the first nine months of the fiscal year.
Net loss for the nine month period was $38.8 million, compared to a net
loss of $34.7 million in the previous year. The current year's results reflect
(i) an increase in non-cash depreciation and amortization expenses of $24.1
million, resulting from the application of acquisition-related purchase
accounting, (ii) an interest expense increase of $21.1 million, primarily
attributable to debt related financing associated with the acquisition, (iii)
increased consulting and litigation related legal costs of $6.8 million, (iv) a
decline in gross profit of $2.6 million, reflecting higher non-cash store
occupancy expenses of $3.3 million associated with acquisition-related lease
accounting as well as lower vendor rebates and allowances and increased
inventory shrink losses and (v) higher labor costs for the reasons mentioned
above.
The previous year's results included pre-tax charges of (i) $40.1 million
related to expenses associated with the Oak Hill acquisition transaction and
(ii) $25.3 million primarily related to the above mentioned termination of the
Chairman's supplemental executive retirement program.
Adjusted FIFO EBITDA was $37.9 million, or 3.2% of sales, compared to
$53.9 million, or 4.6% of sales, in the previous year.
During the first nine months of the year, the Company opened five new
stores and closed 11 stores, compared with 16 new stores opened and two stores
closed in the prior year period. Pre-opening expenses were $0.3 million,
compared to $0.8 million in the previous year.
ACCOUNTING RESTATEMENTS
-----------------------
The Company filed a Form 10-K/A on May 16, 2005 summarizing the impact of
certain restatements resulting from changes in accounting practices. All such
changes are reflected in the attached financial data.
CONFERENCE CALL INFORMATION
---------------------------
The Company will hold a conference call on Tuesday, November 1, 2005 at
10:00 AM Eastern Time to discuss financial results for the third quarter and the
first nine months ended September 24, 2005. A live webcast of the call will be
accessible from the Investor Information section of the Xxxxx Xxxxx website
(XXXX://XXX.XXXXXXXXXX.XXX) and the call will be archived on the website until
November 15, 2005. Additionally, a replay of the conference call will be
available from 12:00PM Eastern Time on November 1, 2005 until 12:00PM Eastern
Time on November 3, 2005. The replay can be accessed by dialing (000) 000-0000,
access code "6652602."
ABOUT XXXXX XXXXX
-----------------
Founded in 1960, Xxxxx Xxxxx is the largest drug store chain in the
metropolitan New York City area, offering a wide variety of prescription and
over-the-counter drugs, health and beauty care items, cosmetics, greeting cards,
photo supplies and photofinishing. As of September 24, 2005, the Company
operated 249 stores.
EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN, THE STATEMENTS IN
THIS RELEASE AND THE ACCOMPANYING DISCUSSION ON THE EARNINGS CONFERENCE CALL ARE
FORWARD-LOOKING AND MADE PURSUANT TO THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. IN ADDITION, THIS DOCUMENT MAY CONTAIN
STATEMENTS, ESTIMATES OR PROJECTIONS THAT CONSTITUTE "FORWARD-LOOKING"
STATEMENTS AS DEFINED UNDER U.S. FEDERAL SECURITIES LAWS. FORWARD-LOOKING
STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES, WHICH MAY CAUSE
THE COMPANY'S ACTUAL RESULTS IN FUTURE PERIODS TO DIFFER MATERIALLY FROM
FORECASTED OR EXPECTED RESULTS. THOSE RISKS INCLUDE, AMONG OTHER THINGS, THE
COMPETITIVE ENVIRONMENT IN THE DRUG STORE INDUSTRY IN GENERAL AND IN THE NEW
YORK METROPOLITAN AREA, THE ABILITY TO OPEN AND OPERATE NEW STORES, THE
CONTINUED EFFORTS BY PAYERS AND GOVERNMENT AGENCIES TO REDUCE PRESCRIPTION
REIMBURSEMENT RATES AND PRESCRIPTION DRUG BENEFITS, THE STRENGTH OF THE ECONOMY
IN GENERAL, THE ECONOMIC CONDITIONS IN THE NEW YORK GREATER METROPOLITAN AREA,
CHANGES IN FEDERAL AND STATE LAWS AND REGULATIONS, INCLUDING THE POTENTIAL
IMPACT OF CHANGES IN REGULATIONS SURROUNDING THE IMPORTATION OF PHARMACEUTICALS
FROM FOREIGN COUNTRIES AND CHANGES IN LAWS GOVERNING MINIMUM WAGE REQUIREMENTS,
CHANGES IN THE COMPANY'S OPERATING STRATEGY, CAPITAL EXPENDITURE PLANS OR
DEVELOPMENT PLANS, THE COMPANY'S ABILITY TO ATTRACT, HIRE AND RETAIN QUALIFIED
PHARMACY AND OTHER PERSONNEL, THE COMPANY'S SIGNIFICANT INDEBTEDNESS, LABOR
DISTURBANCES, THE CONTINUED IMPACT OF, OR NEW OCCURRENCES OF, TERRORIST ATTACKS
IN THE NEW YORK GREATER METROPOLITAN AREA AND ANY ACTIONS THAT MAY BE TAKEN IN
RESPONSE, DEMOGRAPHIC CHANGES, THE COMPANY'S ABILITY TO LIMIT FRAUD AND SHRINK,
AND RECALLS OF PHARMACEUTICAL PRODUCTS DUE TO HEALTH CONCERNS OR OTHER REASONS.
THOSE AND OTHER RISKS ARE MORE FULLY DESCRIBED IN XXXXX XXXXX'X REPORTS FILED
WITH THE SEC FROM TIME TO TIME, INCLUDING ITS ANNUAL REPORTS ON FORM 10-K,
QUARTERLY REPORTS ON FORM 10-Q AND CURRENT REPORTS ON FORM 8-K. YOU SHOULD NOT
PLACE UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE
DATE THEY ARE MADE. EXCEPT TO THE EXTENT OTHERWISE REQUIRED BY FEDERAL
SECURITIES LAWS, WE DO NOT UNDERTAKE TO PUBLICLY UPDATE OR REVISE ANY
FORWARD-LOOKING STATEMENTS.
Tables to follow
XXXXX XXXXX HOLDINGS, INC.
Consolidated Statements of Operations (Unaudited)
(In thousands)
FOR THE 13 WEEKS ENDED FOR THE 39 WEEKS ENDED
------------------------------- -------------------------------
Sept. 24, Sept. 25, Sept. 24, Sept. 25,
2005 2004 (1) 2005 2004 (2)
----------- ----------- ----------- -----------
Net sales $ 378,557 $ 380,429 $ 1,172,824 $ 1,165,851
Cost of sales 305,866 309,673 948,729 939,206
----------- ----------- ----------- -----------
Gross profit 72,691 70,756 224,095 226,645
----------- ----------- ----------- -----------
Selling, general & administrative expenses 67,950 61,144 196,990 179,711
Labor contingency expense 1,100 1,100 3,300 3,300
Transaction expense 236 37,504 817 40,123
Depreciation and amortization 17,816 10,876 53,313 29,182
Store pre-opening expenses 114 471 264 836
Other 1,454 25,291 4,636 25,291
----------- ----------- ----------- -----------
88,670 136,386 259,320 278,443
----------- ----------- ----------- -----------
Operating loss (15,979) (65,630) (35,225) (51,798)
Interest expense, net 12,654 7,566 35,318 14,260
----------- ----------- ----------- -----------
Loss before income taxes (28,633) (73,196) (70,543) (66,058)
Income tax benefit (12,885) (34,187) (31,704) (31,337)
----------- ----------- ----------- -----------
Net loss $ (15,748) $ (39,009) $ (38,839) $ (34,721)
=========== =========== =========== ===========
(1) The figures shown reflect the combined results for the third quarter 2004
predecessor, Xxxxx Xxxxx Inc., (June 27, 2004 through July 30, 2004) and
successor, Xxxxx Xxxxx Holdings, Inc. (July 31, 2004 through September 25, 2004)
periods. The actual results for each individual period referenced are detailed
on the following page.
(2) The figures shown reflect the combined results for the nine month 2004
predecessor (December 28, 2003 through July 30, 2004) and successor (July 31,
2004 through September 25, 2004) periods. The actual results for each individual
period referenced are detailed on the following page.
XXXXX XXXXX HOLDINGS, INC. (SUCCESSOR)
XXXXX XXXXX INC. (PREDECESSOR)
Consolidated Statements of Operations (Unaudited)
(In thousands)
SUCCESSOR PREDECESSOR SUCCESSOR PREDECESSOR
----------- ----------- ----------- -----------
Period from Period from Period from Period from Total
July 31, 2004 June 27, 2004 Total July 31, 2004 Dec. 28, 2003 Third
through through Third through through Quarter
Sept. 25 July 30 Quarter Sept. 25, July 30 2004
2004 2004 2004 2004 2004 Year-to-Date
----------- ----------- ----------- ----------- ----------- -----------
Net sales $ 238,050 $ 142,379 $ 380,429 $ 238,050 $ 927,801 $ 1,165,851
Cost of sales 194,116 115,557 309,673 194,116 745,090 939,206
----------- ----------- ----------- ----------- ----------- -----------
Gross profit 43,934 26,822 70,756 43,934 182,711 226,645
----------- ----------- ----------- ----------- ----------- -----------
Selling, general & administrative expenses 37,418 23,726 61,144 37,418 142,293 179,711
Labor contingency expense 689 411 1,100 689 2,611 3,300
Transaction expense 37,118 386 37,504 37,118 3,005 40,123
Depreciation and amortization 7,280 3,596 10,876 7,280 21,902 29,182
Store pre-opening expenses 366 105 471 366 470 836
Other 25,291 -- 25,291 25,291 -- 25,291
----------- ----------- ----------- ----------- ----------- -----------
108,162 28,224 136,386 108,162 170,281 278,443
----------- ----------- ----------- ----------- ----------- -----------
Operating (loss) income (64,228) (1,402) (65,630) (64,228) 12,430 (51,798)
Interest expense, net 6,283 1,283 7,566 6,283 7,977 14,260
----------- ----------- ----------- ----------- ----------- -----------
(Loss) income before income taxes (70,511) (2,685) (73,196) (70,511) 4,453 (66,058)
Income tax (benefit) provision (32,473) (1,714) (34,187) (32,473) 1,136 (31,337)
----------- ----------- ----------- ----------- ----------- -----------
Net (loss) income $ (38,038) $ (971) $ (39,009) $ (38,038) $ 3,317 $ (34,721)
=========== =========== =========== =========== =========== ===========
XXXXX XXXXX HOLDINGS, INC.
Consolidated Balance Sheets
(In thousands)
September 24, December 25,
2005 2004
------------- ------------
(Unaudited)
Current Assets
Cash $ 1,321 $ 1,329
Receivables, net (1) 54,158 58,056
Inventories (2) 258,316 262,323
Current Portion of Deferred Taxes 13,445 9,027
Prepaid Expenses and Other Current Assets 22,819 35,716
-------- --------
Total Current Assets 350,059 366,451
Property and Equipment, net 230,102 224,460
Goodwill 52,216 52,216
Other Assets (3) 274,728 297,032
-------- --------
Total Assets $907,105 $940,159
======== ========
Current Liabilities
Accounts Payable $ 73,140 $ 80,154
Accrued Expenses (4) 42,938 64,944
Current Portion of Senior Debt and Capital Leases (5) (6) 142,849 154,650
-------- --------
Total Current Liabilities 258,927 299,748
Long Term Debt and Capital Leases (5) 414,038 357,040
Deferred Income Taxes 20,644 47,971
Other Liabilities (7) 68,212 51,351
-------- --------
Total Liabilities 761,821 756,110
-------- --------
Total Stockholders' Equity 145,284 184,049
-------- --------
Total Liabilities and Stockholders' Equity $907,105 $940,159
======== ========
(1) Includes third party pharmacy receivables of $34,365 and $37,498 at
September 24, 2005 and December 25, 2004, respectively. The decrease in
the third party pharmacy receivable is partly due to the timing of
receipts in relation to the December 2004 year end date.
(2) Decrease in inventory from December 25, 2004 reflects inventory
management initiatives and the impact of the closure of six net stores in
2005.
(3) Decrease in other assets from December 25, 2004 is primarily due to the
increased amortization of intangible assets resulting from the valuation
step-up in connection with the Oak Hill acquisition.
(4) Decrease in accrued expenses from December 25, 2004 is primarily due to
scheduled payments totaling $23 million made in connection with the
termination of obligations related to the Chairman's SERP. Approximately
$14.3 million of this was offset by funds from the cash surrender value
of a split dollar life insurance policy that was included in other
current assets.
(5) Increase in debt and capital leases from December 25, 2004 of $45.2
million reflects the addition of a $13.5 million capital lease that
replaced an operating lease for photo processing equipment at our stores,
net borrowings of approximately $8.7 million for the payments associated
with the termination of obligations related to the Chairman's SERP,
litigation and consulting expenses that were approximately $6.8 million
higher than the previous year, and general working capital borrowings
over the first nine months of the current year.
(6) The outstanding revolver loan balance of $139.8 million has been
classified as a current liability at September 24, 2005 because cash
receipts controlled by the lenders are used to reduce outstanding debt,
and the Company does not meet the criteria under FAS 6 - "Classification
of Short-Term Obligations Expected to be Refinanced," to reclassify the
debt as long-term. It should be noted that this reclassification is not a
result of a change in status or compliance with the terms of this
indebtedness. We have also revised the classification of the outstanding
revolver balance of $153.9 million at December 25, 2004 to conform with
this presentation. The Company expects to continue to borrow under this
facility until its maturity in 2008.
(7) Increase in other liabilities from December 25, 2004 is primarily due to
deferred marketing income and the additional labor contingency and
deferred rent accruals recorded during the period.
XXXXX XXXXX HOLDINGS, INC.
Operating Data
(Unaudited)
(Dollars in thousands)
FOR THE 13 WEEKS ENDED FOR THE 39 WEEKS ENDED
------------------------- --------------------------
Sept. 24, Sept. 25, Sept. 24, Sept. 25,
2005 2004 (1) 2005 2004 (2)
-------- ------- --------- -------
LIFO EBITDA (3) $ 3,173 $ 8,350 $ 22,205 $45,307
LIFO (Income) Expense (4) 300 277 384 951
-------- ------- --------- -------
FIFO EBITDA (3) $ 3,473 $ 8,627 $ 22,589 $46,258
======== ======= ========= =======
FIFO EBITDA as a percentage of net sales 0.9% 2.3% 1.9% 4.0%
Adjusted FIFO EBITDA (5) $ 8,158 $12,462 $ 37,891 $53,920
Adjusted FIFO EBITDA as a percentage of sales 2.2% 3.3% 3.2% 4.6%
Capital expenditures $ 4,076 $ 5,941 $ 18,386 $22,123
Lease acquisitions and other investing activities $ 1,140 $11,041 $ 6,904 $22,558
Same-store sales growth 2.1% 0.5% 1.4% 0.8%
Pharmacy same-store sales growth 0.3% 5.1% 0.7% 5.4%
Front-end same-store sales growth 3.7% -3.2% 2.0% -2.8%
Pharmacy sales as a % of net sales 48.1% 50.3% 48.8% 50.2%
Third Party sales as a % of
prescription sales 92.6% 92.3% 92.7% 92.2%
Average weekly prescriptions
filled per store (6) 780 790 816 824
Number of stores at end of period 249 255
Retail square footage at end of period 1,732,174 1,784,832
Average store size (sq.ft.) at end of period 6,957 6,999
(1) The figures shown reflect the combined results for the third quarter 2004
predecessor (June 27, 2004 through July 30, 2004) and successor (July 31, 2004
through September 25, 2004) periods.
(2) The figures shown reflect the combined results for the nine month 2004
predecessor (December 28, 2003 through July 30, 2004) and successor (July 31,
2004 through September 25, 2004) periods.
(3) As used in this report, FIFO EBITDA means earnings before interest, income
taxes, depreciation, amortization, debt extinguishment, expenses related to the
acquisition transaction, labor contingency expense, non-cash charges and credits
related to the LIFO inventory valuation method, extraordinary charges and other
non-recurring charges. We believe that FIFO EBITDA, as presented, represents a
useful measure of assessing the performance of our ongoing operating activities,
as it reflects our earnings trends without the impact of certain non-cash
charges and other non-recurring items. Targets and positive trends in FIFO
EBITDA are used as performance measures for determining certain compensation of
management. FIFO EBITDA is also used as a performance measure in our various
debt agreements. LIFO EBITDA reflects FIFO EBITDA adjusted to include the effect
of non-cash charges and credits related to the LIFO inventory valuation method.
We understand that, although security analysts frequently use FIFO EBITDA in the
evaluation of companies, it is not necessarily comparable to other similarly
titled captions of other companies due to potential inconsistencies in the
method of calculation. FIFO EBITDA is not intended as an alternative to net
income as an indicator of our operating performance, or as an alternative to any
other measure of performance in conformity with generally accepted accounting
principles, nor as an alternative to cash flow from operating activities as a
measure of liquidity.
Reconciliations of net (loss) income to FIFO EBITDA and operating cash flow for
each period included above and highlighted elsewhere in this document are
provided on the following pages of this press release.
(4) LIFO expense for the 39 weeks ended September 24, 2005 includes the
remaining portion of the purchase accounting valuation step-up of $0.5 million,
offset by the anticipated impact of inflation of $0.9 million.
(5) As used in this report, Adjusted FIFO EBITDA means FIFO EBITDA as defined
above, adjusted to exclude non-cash rent expense and certain charges related to
the acquisition transaction, inventory valuation step-up adjustment and certain
CEO payments that are not included in the definition of EBITDA used for our
various debt agreements.
(6) Comparative stores only, does not include new stores.
XXXXX XXXXX HOLDINGS, INC.
Reconciliation of Net Sales to Net Sales Before Inclusion of Resale Activity
(in thousands)
FOR THE 13 WEEKS ENDED FOR THE 39 WEEKS ENDED
--------------------------- ----------------------------
Sept. 24, Sept. 25, Sept. 24, Sept. 25,
2005 2004 (1) 2005 2004 (2)
--------- --------- ---------- ----------
Net sales $ 378,557 $ 380,429 $1,172,824 $1,165,851
Resale activity 19,337 30,788 72,343 101,452
--------- --------- ---------- ----------
Net sales before inclusion of resale activity $ 359,220 $ 349,641 $1,100,481 $1,064,399
--------- --------- ---------- ----------
Reconciliation of EBITDA to Net Loss and
Net Cash Used in Operating Activities (Unaudited)
(in thousands)
FOR THE 13 WEEKS ENDED FOR THE 39 WEEKS ENDED
-------------------------- --------------------------
Sept. 24, Sept. 25, Sept. 24, Sept. 25,
2005 2004 (1) 2005 2004 (2)
-------- -------- -------- --------
FIFO EBITDA $ 3,473 $ 8,627 $ 22,589 $ 46,258
LIFO (Income) Expense 300 277 384 951
-------- -------- -------- --------
LIFO EBITDA 3,173 8,350 22,205 45,307
Depreciation and amortization (17,816) (10,876) (53,313) (29,182)
Labor contingency expense (1,100) (1,100) (3,300) (3,300)
Transaction expense (236) (37,504) (817) (40,123)
CEO SERP settlement -- (24,500) -- (24,500)
Interest expense (12,654) (7,566) (35,318) (14,260)
Income taxes 12,885 34,187 31,704 31,337
-------- -------- -------- --------
Net loss $(15,748) $(39,009) $(38,839) $(34,721)
-------- -------- -------- --------
Net loss (15,748) (39,009) (38,839) (34,721)
Adjustments to reconcile net loss
to cash used in operating activities:
Depreciation and amortization of property 8,163 6,400 24,441 18,877
Amortization of intangibles and
deferred financing costs 10,681 5,354 31,641 12,137
Deferred tax provision (12,886) (29,347) (31,744) (26,573)
Non-cash rent expense 3,231 3,044 10,132 6,871
(Gain) loss on sale of property (2,104) -- (2,104) --
Changes in operating assets and liabilities
(net of effect of acquisitions):
Receivables (1,702) (1,468) 3,898 (2,031)
Inventories 19,653 (2,803) 4,466 (3,136)
Accounts payable (14,877) 3,282 (6,589) (5,205)
Prepaid and accrued expenses 3,803 25,229 (12,088) 28,287
Other assets/liabilities, net (57) 8,835 6,274 5,050
-------- -------- -------- --------
Cash used in operating activities $ (1,843) $(20,483) $(10,512) $ (444)
-------- -------- -------- --------
Calculation of Adjusted FIFO EBITDA
FIFO EBITDA as above $ 3,473 $ 8,627 $ 22,589 $ 46,258
Purchase accounting inventory
valuation adjustment (3) -- -- 534 --
Non-cash rent expense 3,231 3,044 10,132 6,871
CEO long term cash award 225 156 675 156
Oak Hill management fee 313 216 938 216
CEO life insurance policy conversion cost 732 419 1,975 419
CEO 280g tax indemnity expense 184 -- 1,048 --
-------- -------- -------- --------
Adjusted FIFO EBITDA $ 8,158 $ 12,462 $ 37,891 $ 53,920
======== ======== ======== ========
(1) The figures shown reflect the combined results for the third quarter 2004
predecessor (June 27, 2004 through July 30, 2004) and successor (July 31, 2004
through September 25, 2004) periods. The actual results for each individual
period referenced are detailed on the following page.
(2) The figures shown reflect the combined results for the nine month 2004
predecessor (December 28, 2003 through July 30, 2004) and successor (July 31,
2004 through September 25, 2004) periods. The actual results for each individual
period referenced are detailed on the following page.
(3) The application of purchase accounting under SFAS 141 resulted in an
increase in the inventory valuation by $8.5 million over FIFO cost as of July
30, 2004. During the quarter ended December 25, 2004, approximately $7.9 million
of this non-cash purchase accounting adjustment was charged to cost of sales on
a FIFO EBITDA basis. The balance of the purchase accounting adjustment was
charged to cost of sales during the first quarter of 2005.
XXXXX XXXXX HOLDINGS, INC. (SUCCESSOR)
XXXXX XXXXX INC. (PREDECESSOR)
Reconciliation of Net Sales to Net Sales Before Inclusion of Resale Activity
(in thousands)
SUCCESSOR PREDECESSOR SUCCESSOR PREDECESSOR
-------------- ------------- -------------- -------------
Period from Period from Total Period from Period from Total
July 31, 2004 June 27, 2004 Third July 31, 2004 Dec. 28, 2003 Third
through through Quarter through through Quarter 2004
Sept. 25, 2004 July 30, 2004 2004 Sept. 25, 2004 July 30, 2004 Year-to-Date
-------------- ------------- ---------- -------------- ------------- ------------
Net sales $ 238,050 $ 142,379 $ 380,429 $ 238,050 $ 927,801 $1,165,851
Resale activity 20,494 10,294 30,788 20,494 80,958 101,452
---------- ---------- ---------- ---------- ---------- ----------
Net sales before inclusion of
resale activity $ 217,556 $ 132,085 $ 349,641 $ 217,556 $ 846,843 $1,064,399
========== ========== ========== ========== ========== ==========
Reconciliation of EBITDA to Net (Loss) Income and
Net Cash (Used In) Provided by Operating Activities (Unaudited)
(in thousands)
SUCCESSOR PREDECESSOR SUCCESSOR PREDECESSOR
------------- ------------- -------------- -------------
Period from Period from Total Period from Period from Total
July 31, 2004 June 27, 2004 Third July 31, 2004 Dec. 28, 2003 Third
through through Quarter through through Quarter 2004
Sept. 25, 2004 July 30, 2004 2004 Sept. 25, 2004 July 30, 2004 Year-to-Date
-------------- ------------- ---------- -------------- ------------- ------------
FIFO EBITDA $ 5,519 $ 3,108 $ 8,627 $ 5,519 $ 40,739 $ 46,258
LIFO Expense 160 117 277 160 791 951
----------- ----------- ----------- ----------- ----------- -----------
LIFO EBITDA 5,359 2,991 8,350 5,359 39,948 45,307
Depreciation and amortization (7,280) (3,596) (10,876) (7,280) (21,902) (29,182)
Labor contingency expense (689) (411) (1,100) (689) (2,611) (3,300)
Transaction expense (37,118) (386) (37,504) (37,118) (3,005) (40,123)
CEO SERP settlement (24,500) -- (24,500) (24,500) -- (24,500)
Interest expense (6,283) (1,283) (7,566) (6,283) (7,977) (14,260)
Income taxes 32,473 1,714 34,187 32,473 (1,136) 31,337
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Net (loss) income $ (38,038) $ (971) $ (39,009) $ (38,038) $ 3,317 $ (34,721)
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Net (loss) income (38,038) (971) (39,009) (38,038) 3,317 (34,721)
Adjustments to reconcile net (loss)
income to cash (used in) provided
by operating activities:
Depreciation and amortization of property 4,009 2,391 6,400 4,009 14,868 18,877
Amortization of goodwill, intangibles and
deferred financing costs 4,002 1,352 5,354 4,002 8,135 12,137
Deferred tax provision (32,473) 3,126 (29,347) (32,473) 5,900 (26,573)
Non-cash rent expense 2,488 556 3,044 2,488 4,383 6,871
Changes in operating assets and liabilities
(net of effect of acquisitions):
Receivables 1,026 (2,494) (1,468) 1,026 (3,057) (2,031)
Inventories (7,521) 4,718 (2,803) (7,521) 4,385 (3,136)
Accounts payable 14,842 (11,560) 3,282 14,842 (20,047) (5,205)
Prepaid and accrued expenses 27,540 (2,311) 25,229 27,540 747 28,287
Other assets/liabilities, net 2,129 6,706 8,835 2,129 2,921 5,050
----------- ----------- ----------- ----------- ----------- -----------
Cash (used in) provided by
operating activities $ (21,996) $ 1,513 $ (20,483) $ (21,996) $ 21,552 $ (444)
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Calculation of Adjusted FIFO EBITDA
FIFO EBITDA as above $ 5,519 $ 3,108 $ 8,627 $ 5,519 $ 40,739 $ 46,258
Non-cash rent expense 2,488 556 3,044 2,488 4,383 6,871
CEO long term cash award 156 -- 156 156 -- 156
Oak Hill management fee 216 -- 216 216 -- 216
CEO life insurance policy
conversion cost 419 -- 419 419 -- 419
----------- ----------- ----------- ----------- ----------- -----------
Adjusted FIFO EBITDA $ 8,798 $ 3,664 $ 12,462 $ 8,798 $ 45,122 $ 53,920
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