Catalog productivity up at outerwear retailer Eddie Bauer

16 May '09

6 min read

Operating loss was $28.2 million compared to $25.4 million in the year-ago period. The increased operating loss was primarily driven by lower net merchandise sales and gross margins, offset by a $14.7 million decrease in SG&A expenses as compared to the prior year quarter.

Net Loss
Net loss for the first quarter increased by $25.2 million to $44.5 million, or $1.44 per share. The increased net loss was primarily attributable to two non-cash items: a non-cash $10.3 million accounting loss on the senior term loan interest rate hedge; and a lower non-cash income tax benefit of $11.0 million.

Other Financial Highlights
Inventories: Decreased to $139.0 million at 2009 first quarter end from $148.2 million a year earlier, a decrease of $9.2 million or 6.2% or 8.9% on a per store basis.

Senior Term Loan: Principal amounts owed under the senior term loan decreased to $187.8 million at 2009 first quarter end from $194.5 million a year earlier, a reduction of $6.7 million. Reductions to the outstanding balance included $16.3 million of mandatory and excess cash flow payments, offset by a principal balance increase of $9.6 million in non-cash payment-in-kind fees resulting from the first quarter 2009 amendment.

The senior term loan is recorded at $166.5 million on the Company's balance sheet, which is net of a $21.3 million discount to reflect the fair value of the amended loan and common stock warrants to be issued to the lenders. A deferred cash amendment fee of $3.8 million is due on November 30, 2009.

Short Term Borrowings: Our $150 million revolving line of credit increased to $31.9 million at the end of the first quarter of 2009 from $9.3 million at first quarter end 2008, an increase of $22.6 million primarily due to a $14.7 million mandatory excess cash flow payment to the term loan and the timing of funds clearing for future period expenses during the quarter as compared to the prior year.

Convertible Notes: Principal amounts owed under the convertible notes remained unchanged at $75 million. The Company was required to adopt a new accounting policy in the first quarter which required that the notes be split between the fair value of the debt without conversion features, with the residual carrying amount recorded within equity.

Therefore, the notes are recorded at $21.4 million, net of a discount of $53.6 million as of the end of the quarter. Additionally, because the notes are no longer required to be settled in cash as of the beginning of fiscal 2009, the Company is no longer required to record the derivative liability associated with the conversion features at market value.

Net Capital Expenditures: Decreased by $1.6 million to $1.5 million for the first three months of 2009 from $3.1 million for the comparable period in 2008, as a result of fewer store openings and decreased remodeling costs in 2009.

Cash Taxes: Decreased by $4.1 million to $0.5 million for the first quarter of 2009 from $4.6 million for the prior year comparable period, primarily due to lower Canadian tax payments.

Details of the Company's financial performance for the first quarter of 2009 are available in the Quarterly Report on Form 10-Q for the period ended April 4, 2009.

Eddie Bauer Holdings Inc

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