Fred’s, Inc. (NASDAQ: FRED) reported financial results for the
fourth quarter and fiscal year ended February 2, 2019. Except as
otherwise noted, the results contained herein have been adjusted
for discontinued operations related to the sale of Fred’s specialty
pharmacy business to an affiliate of CVS Health Corporation and
certain assets of Fred’s retail pharmacy business to Walgreen Co.
The amounts and percentages presented below, for all periods,
reflect the results of operations and financial conditions from
Fred’s continuing operations.
Joe Anto, Fred’s CEO, stated “This is clearly a
challenging time for the Company and we are disappointed with our
operating results for the quarter and fiscal year. We are
working to optimize our store footprint, cost structure and
operating model, while also addressing concerns regarding our
liquidity profile. As of April 30, 2019, our ABL balance
stood at $78.3 million versus $58.6 million at the end of Q4.
Additionally, we are working on various sale processes for non-core
assets, including certain real estate and our remaining pharmacy
script portfolio.”
Fourth Quarter Fiscal 2018 vs. Fourth
Quarter Fiscal 2017
- Net sales were down 17.2% to $307.1 million in Q4 2018 versus
$370.9 million in Q4 2017.
- Comparable store sales decreased 9.7% in Q4 2018 compared to a
decline of 4.8% in the same period of 2017.
- Gross profit decreased 22.1% to $71.7 million in Q4 2018 versus
$92.1 million in Q4 2017.
- Gross margin as a percentage of sales decreased approximately
147 basis points to 23.4% in Q4 2018 versus 24.8% in Q4 2017.
- Total selling, general, and administrative expenses were $136.7
million in Q4 2018, or 44.5 % of sales, compared to $113.2 million
in Q4 2017, or 30.5% of sales.
- Selling, general, and administrative expenses, adjusted for
non-recurring items, were $102.6 million in Q4 2018, or 33.4% of
sales, compared to $108.4 million in Q4 2017, or 29.2% of
sales.
- Impairment expense of $31.7 million was recorded during Q4 2018
of certain assets related to the decline in the results of
operations compared to the $2.5 million recorded in Q4
2017.
- Net loss from continuing operations was $67.2 million, or
$(1.86) per share, in Q4 2018, compared to a loss of $25.4 million,
or $(0.68) per share, in Q4 2017.
- Adjusted EBITDA, a non-GAAP financial measure, was $(17.7)
million in Q4 2018 compared to $31.4 million in Q4 2017.
Fiscal Year 2018 vs. Fiscal Year
2017
- Net sales were down 8.9% to $1,271.7 million in fiscal 2018
versus $1,395.8 million in fiscal 2017.
- Comparable store sales decreased 1.7% in fiscal 2018 compared
to a decline of 2.5% in fiscal 2017.
- Gross profit decreased 11.2% to $323.0 million in fiscal 2018
versus $363.8 million in fiscal 2017.
- Gross margin as a percentage of sales decreased approximately
70 basis points to 25.4% in fiscal 2018 versus 26.1% in fiscal
2017.
- Total selling, general, and administrative expenses were $452.5
million in fiscal 2018, or 35.6% of sales, compared to $500.8
million, or 35.9% of sales, in fiscal 2017.
- Selling, general, and administrative expenses, adjusted for
non-recurring items, were $409.3 million, or 32.2% of sales, in
fiscal 2018 compared to $439.2 million, or 31.5% of sales, in
fiscal 2017.
- Impairment expense of $33.2 million was recorded in fiscal 2018
compared to $2.5 million recorded in fiscal 2017.
- Net loss from continuing operations was $137.2 million, or
$(3.76) per share, in fiscal 2018, compared to a loss of $144.5
million, or $(3.87) per share, in fiscal 2017.
- Adjusted EBITDA, a non-GAAP financial measure, was $(48.1)
million in fiscal 2018 compared to $20.3 million in fiscal
2017.
Fourth Quarter 2018 ResultsFred’s
net sales for the fourth quarter of fiscal 2018 decreased 17.2% to
$307.1 million from $370.9 million in the fourth quarter last year.
Comparable store sales for the quarter decreased 9.7% compared to a
4.8% decrease in the fourth quarter of last year.
Fred’s gross profit for the fourth quarter of 2018
decreased 22.1% to $71.7 million from $92.1 million in the prior
year period. Gross margin percentage for the quarter decreased 147
basis points to 23.4% from 24.8% in the same quarter last year.
Total selling, general and administrative expenses
for the fourth quarter increased $23.6 million to $136.7 million
compared to last year’s fourth quarter of $113.2 million. As
a percentage of sales, total selling, general and administrative
expenses, increased 1,400 basis points to 44.5% of sales from 30.5%
of sales in the fourth quarter last year.
Adjusted selling, general and administrative
expenses, a non-GAAP financial measure that excludes non-recurring
items, decreased to $102.6 million, or 33.4% of sales, in Q4 of
2018 compared to $108.4 million, or 29.2% of sales, in Q4 of
2017.
Due primarily to the reduction in the estimated
fair value of fixed assets and intangibles related to
underperforming stores, Fred’s recorded an impairment expense of
$31.7 million in the fourth quarter of 2018. Comparatively,
in the fourth quarter of 2017, Fred’s recorded impairment expense
of $2.5 million.
For the fourth quarter of 2018, Fred’s recorded a
net loss from continuing operations of approximately $67.2 million,
or $(1.86) per share, compared to a net loss of $25.4 million, or
$(0.68) per share, during the same period in 2017.
Adjusted EBITDA, a non-GAAP financial measure that
further excludes depreciation and amortization and non-recurring
items from EBIT, was $(17.7) million compared to $31.4 million in
the fourth quarter of 2017.
Fiscal Year End 2018 Results
Net sales for 2018 decreased to $1.272 billion
from $1.396 billion in 2017 for a year-over-year decrease of $124.1
million or 8.9%. Comparable store sales for 2018 decreased
1.6% from the same period last year. Front store
(non-pharmacy) sales decreased 11.8% over 2017 front store
sales. The decrease year over year was primarily due to the
clearance of merchandise that management identified as
under-productive combined with our out of stock position of many
key front store items.
Fred’s gross profit for the year decreased to
$323.0 million in 2018 from $363.8 million in 2017, a
year-over-year decrease of $40.8 million, or 11.2%. Gross
margin rate, measured as a percentage of net sales, decreased to
25.4% in 2018 from 26.1% in 2017, an approximately 70-basis point
decline. Factors contributing to the decline in gross margin were
related to continued pressures Fred’s experienced in its retail
pharmacy business, specifically related to prescription rebates in
2017 that did not recur in 2018 and an increase in DIR fees paid to
PBMs. In the front store, gross margin was impacted by promotional
markdowns as well as a shift in sales mix from general merchandise
to food and consumables.
Total selling, general and administrative
expenses decreased to $452.5 million, or 35.6% of sales, in 2018
from $500.8 million, or 35.9% of sales, in 2017. This
decrease was primarily due to the impact of bank fees, financing
termination fees and professional fees incurred in 2017 related to
the attempted Rite Aid acquisition and the closing of 39
underperforming stores in the prior year that were not repeated in
2018. Additionally, costs decreased as a result of the cost
containment measures experienced during fiscal 2018.
Adjusted selling, general and administrative
expenses, a non-GAAP financial measure that excludes non-recurring
items, decreased to $409.3 million, or 32.2% of sales, for the
fiscal year 2018 compared to $439.2 million, or 31.5% of sales, for
the same period in 2017.
Impairment expense of $33.2 million was recorded in
fiscal 2018 related to long lived assets, including intangibles
related to the decline in the results of operations compared to the
$2.5 million recorded in fiscal 2017.
Net loss from continuing operations decreased $7.3
million to $137.2 million, or $(3.76) per share, in 2018 from a
loss of $144.5 million, or $(3.87) per share, in 2017.
Adjusted EBITDA, a non-GAAP financial measure that
further excludes depreciation and amortization and non-recurring
items from EBIT, was $(48.1) million for fiscal year 2018 compared
to $20.3 million in 2017.
Going Concern; Other Matters
As further detailed in Fred’s Annual Report on
Form 10-K for the fiscal year ended February 2, 2019, filed with
the Securities and Exchange Commission on May 3, 2019, the report
of Fred’s independent registered public accounting firm includes an
explanatory paragraph indicating that there is substantial doubt
about Fred’s ability to continue as a going concern. The receipt of
this explanatory paragraph with respect to Fred’s financial
statements for the year ended February 2, 2019 will result in
a breach of a covenant under Fred’s Revolving Credit Agreement,
which will constitute an event of default under such
agreement. In addition, Fred’s lenders under the Revolving
Credit Agreement have indicated to Fred’s their belief that certain
other events of default have occurred under the Revolving Credit
Agreement in connection with Fred’s previously-announced closure of
159 stores, the inventory sales at certain stores and the timing of
delivery, and content, of a borrowing base certificate due under
the Revolving Credit Agreement. An event of default, which is
not cured or waived, may permit acceleration of Fred’s indebtedness
under the Revolving Credit Agreement, among other remedies.
Fred’s is currently seeking an agreement with its lenders
pursuant to which such lenders would forbear for a period of time
from seeking remedies on account of, or waive, the foregoing events
or potential events of default, but there is no assurance that
Fred’s will receive such forbearance or waivers.
Conference Call
Fred’s will hold a conference call today at 8:00
a.m. Eastern Time to discuss these results.
Date: Monday, May 6, 2019 Time: 8:00 a.m.
Eastern Time Toll-free dial-in number:
1-877-407-4018 International dial-in number:
1-201-689-8471
Please call the conference telephone number 5-10
minutes prior to the start time. An operator will register your
name and organization. If you have any difficulty connecting with
the conference call, please press *0 for operator assistance, or
click “help” on the webcast.
The conference call will be broadcast live and
available for replay at
http://public.viavid.com/player/index.php?id=134348 and via the
investor relations section of the Company’s website at
investors.fredsinc.com .
A replay of the conference call will also be
available by telephone after 11:00 a.m. Eastern time on May 6, 2019
through May 20, 2019.
Toll-free replay number:
1-844-512-2921 International replay number:
1-412-312-6671 Replay ID:13690755
Non-GAAP Financial Measures
The Company’s management believes that the
disclosure of Adjusted selling, general and administrative
expenses, Adjusted EBITDA and Free Cash Flow provides useful
information to investors because the measures present an
alternative and more relevant method for measuring the Company’s
results of operations and financial condition, and, when viewed
together with the Company’s GAAP results and the accompanying
reconciliations, provide a more complete understanding of the
factors and trends affecting the Company than the GAAP results
alone.
Adjusted EBITDA is calculated as loss before
interest and other income and expense, income tax benefit,
depreciation and amortization, and non-recurring items.
Non-recurring items include discontinued operations, impairment,
closed stores, professional fees, stock compensation, LIFO
adjustments, and other. Adjusted selling, general and
administrative expenses, including depreciation and amortization,
is calculated as selling, general and administrative expenses,
including depreciation and amortization and excludes certain
non-recurring items, such as closed stores, non-recurring
professional fees, severance, and other non-recurring items. The
exclusion of certain expenses in calculating Adjusted EBITDA and
Adjusted selling, general and administrative expenses, including
depreciation and amortization, facilitate operating performance
comparisons on a period-to-period basis and excludes items that
Fred’s does not consider to be indicative of our core operating
performance. Accordingly, Fred’s believes that Adjusted EBITDA and
Adjusted selling, general and administrative expenses, including
depreciation and amortization, provide useful information to
investors and others in understanding and evaluating our operating
results in the same manner as Fred’s management and board of
directors. Additionally, Adjusted EBITDA is a common alternative
measure of financial performance used by investors, financial
analysts, and rating agencies. These groups use Adjusted EBITDA,
along with other measures, to estimate the value of a company and
to compare the operating performance of a company to others in its
industry. A reconciliation of these non-GAAP financial measures to
their most directly comparable GAAP measure appears in the
financial tables attached to this news release.
The Company defines Free Cash Flow, which is a
non-GAAP financial measure, as net cash provided by operating
activities less expenditures for property, plant, and equipment,
and any proceeds from asset dispositions, both of which are
reported in our Condensed Consolidated Statement of Cash Flows. The
Company believes that Free Cash Flow is one of several benchmarks
used by analysts and investors for comparisons of liquidity with
other companies within the industry, although the Company’s measure
of Free Cash Flow may not be directly comparable to similar
measures reported by other companies.
About Fred’s, Inc.
Since 1947, Fred’s, Inc. has been an integral part
of the communities it serves throughout the Southeastern United
States. Today, Fred’s operates approximately 557 discount value
stores and its mission is to make it easy AND exciting to save
money. Its unique format offers customers a full range of
value-priced everyday items, along with terrific deals on closeout
merchandise throughout the store. For more information about the
Company, visit Fred’s website at www.fredsinc.com.
Cautionary Statement Regarding
Forward-looking Information
Comments in this press release that are not
historical facts are forward-looking statements within the meaning
of the safe harbor provisions of the U.S. Private Securities
Litigation Reform Act of 1995 that involve risks and uncertainties
that could cause actual results to differ materially from those
projected in the forward-looking statements. A reader can identify
forward-looking statements because they are not limited to
historical facts or they use such words as “outlook,” “guidance,”
“may,” “should,” “could,” “believe,” “anticipate,” “project,”
“plan,” “expect,” “estimate,” “objective,” “forecast,” “goal,”
“intend,” “committed,” “continue,” or “will likely result” and
similar expressions that concern the Company’s strategy, plans,
intentions or beliefs about future occurrences or results.
Forward-looking statements involve estimates, expectations,
projections, goals, forecasts, assumptions, risks and
uncertainties. Forward-looking statements include, but are not
limited to, statements about future financial and operating
results, the Company’s plans, objectives, business outlook,
priorities, expectations and intentions, expectations for sales
growth, comparable sales, earnings and performance, shareholder
value, capital expenditures, cash flows, demand for products, share
repurchases, strategic initiatives, including those relating to
store closures and acquisitions and dispositions by the Company and
the expected impact of such transactions on our strategic and
operational plans and financial results, and any statement of an
assumption underlying any of the foregoing and other statements
that are not historical facts. Although we believe that the
expectations, opinions, projections and comments reflected in these
forward-looking statements are reasonable, such statements involve
risks and uncertainties and we can give no assurance that such
statements will prove to be correct. A wide variety of potential
risks, uncertainties and other factors could materially affect our
ability to achieve the results either expressed or implied by these
forward-looking statements including, but not limited to risks and
uncertainties associated with: (i) the competitive nature of the
industries in which we operate; (ii) our turnaround plan and the
implementation of our strategic initiatives, and their impact on
our sales, costs and operations; (iii) our store closures and the
related sales of inventory and real estate issues; (iv) our
divestitures; (v) utilizing our existing and new stores and the
extent of our pharmacy department presence in new and existing
stores; (vi) conditions affecting the retail sector as a whole;
(vii) our reliance on a single supplier of pharmaceutical products;
(viii) our pharmaceutical drug pricing; (ix) reimbursement rates
and the terms of our agreements with pharmacy benefit management
companies; (x) consolidation in the healthcare industry; (xi)
our private brands; (xii) the seasonality of our business and the
impact of adverse weather conditions; (xiii) operational, supply
chain and distribution difficulties; (xiv) merchandise supply and
pricing; (xv) consumer demand and product mix; (xvi) delayed
openings and operating new stores and distribution facilities;
(xvii) our employees; (xviii) risks relating to payment processing;
(xix) our computer systems, and the processes supported by our
information technology infrastructure; (xx) our ability to protect
the personal information of our customers and employees; (xxi)
cyber-attacks; (xxii) changes in governmental regulations; (xxiii)
the outcome of legal proceedings, including claims of product
liability; (xxiv) insurance costs; (xxv) tax assessments and
unclaimed property audits; (xxvi) current economic
conditions; (xxvii) our indebtedness and our ability to
satisfy our debt obligations and obtain forbearance or waivers for
any defaults; (xxviii) the terms of our existing and future
indebtedness, including the covenants set forth in the documents
governing such indebtedness; (xxix) any acquisitions we may pursue
and the ability to effectively integrate businesses that we
acquire; (xxx) our ability to remediate the material weaknesses in
our internal controls over financial reporting and otherwise
maintain effective internal controls over financial reporting;
(xxxi) our largest stockholder holding a significant percentage of
our outstanding equity; (xxxii) our ability to pay dividends and/or
repurchase shares of our Class A voting common stock; (xxxiii) our
ability to attract and retain talented executives; (xxxiv) any
strategic alternatives that we decide to pursue, if any; (xxxv) our
ability to continue as a going concern; and (xxxvi) the factors
listed under Item 1A: “Risk Factors” in our most recent Annual
Report on Form 10-K and in any subsequent quarterly filings
on Form 10-Q filed with the Securities and Exchange Commission.
Forward-looking statements speak only as of the date made. The
Company undertakes no obligation to release revisions to these
forward-looking statements to reflect events or circumstances after
the date hereof or to reflect the occurrence of unforeseen events,
except as required to be reported under the rules and regulations
of the Securities and Exchange Commission.
Contact
Jen Ehlers, Fred’s,
Inc. 1-817-369-5772 Jen.ehlers@fredsinc.com
FRED’S,
INC.Reconciliation of Unaudited Net Loss to
Adjusted EBITDAA Non-GAAP Financial
Measure(In thousands)
|
|
For the Period Ended |
|
|
For the Year Ended |
|
| |
|
|
|
|
|
|
|
13 Weeks |
|
|
14 Weeks |
|
|
52 Weeks |
|
|
53 Weeks |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2,2019 |
|
|
February 3,2018 |
|
|
February 2,2019 |
|
|
February 3,2018 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Net Income (Loss) |
$ |
68,728 |
|
|
$ |
(32,392 |
) |
|
$ |
(12,967 |
) |
|
$ |
(150,185 |
) |
| Interest expense |
|
1,800 |
|
|
|
1,926 |
|
|
|
7,581 |
|
|
|
6,297 |
|
| Income tax expense (benefit) |
|
406 |
|
|
|
2,361 |
|
|
|
52 |
|
|
|
1,241 |
|
| Operating income (loss) /
EBIT |
|
70,934 |
|
|
|
(28,105 |
) |
|
|
(5,334 |
) |
|
|
(142,647 |
) |
| Depreciation and amortization |
|
7,254 |
|
|
|
8,968 |
|
|
|
31,273 |
|
|
|
35,301 |
|
| EBITDA |
|
78,188 |
|
|
|
(19,137 |
) |
|
|
25,939 |
|
|
|
(107,346 |
) |
| Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock compensation |
|
594 |
|
|
|
13 |
|
|
|
3,279 |
|
|
|
4,619 |
|
| LIFO adjustment |
|
1,531 |
|
|
|
1,497 |
|
|
|
— |
|
|
|
1,446 |
|
| Closing stores |
|
— |
|
|
|
338 |
|
|
|
— |
|
|
|
16,676 |
|
| Inventory impairment |
|
— |
|
|
|
750 |
|
|
|
— |
|
|
|
17,830 |
|
| Professional fees related to
attempted Rite Aid acquisition |
|
— |
|
|
|
9,405 |
|
|
|
(909 |
) |
|
|
41,330 |
|
| Professional fees for specialty and
retail pharmacy discontinued operations |
|
1,065 |
|
|
|
— |
|
|
|
3,541 |
|
|
|
— |
|
| Professional fees related to
turnaround strategy |
|
1,356 |
|
|
|
7,709 |
|
|
|
2,363 |
|
|
|
12,244 |
|
| Walgreens reimbursement
(Rite-Aid) |
|
— |
|
|
|
(25,000 |
) |
|
|
— |
|
|
|
(25,000 |
) |
| Loss on sale of airplane |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,599 |
|
| Impairment of assets, including
intangibles |
|
31,737 |
|
|
|
2,489 |
|
|
|
33,243 |
|
|
|
2,489 |
|
| Valuation allowance |
|
3,747 |
|
|
|
37,116 |
|
|
|
3,747 |
|
|
|
37,116 |
|
| Executive and other severance |
|
— |
|
|
|
— |
|
|
|
4,938 |
|
|
|
852 |
|
| Activism expenses |
|
— |
|
|
|
6,050 |
|
|
|
— |
|
|
|
6,650 |
|
| Discontinued operations |
|
(135,960 |
) |
|
|
7,022 |
|
|
|
(124,216 |
) |
|
|
5,646 |
|
| Other |
|
— |
|
|
|
3,188 |
|
|
|
— |
|
|
|
3,188 |
|
| Adjusted EBITDA |
$ |
(17,742 |
) |
|
$ |
31,440 |
|
|
$ |
(48,075 |
) |
|
$ |
20,339 |
|
FRED’S, INC.
Reconciliation of Unaudited Selling,
General, and Administrative Expenses, Including Depreciation and
Amortization to Adjusted Selling, General, and Administrative
Expenses, Including Depreciation and AmortizationA
Non-GAAP Financial Measure(In thousands)
|
|
For the Period Ended |
|
|
For the Year Ended |
|
| |
|
|
|
|
|
|
|
13 Weeks |
|
|
14 Weeks |
|
|
52 Weeks |
|
|
53 Weeks |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2, 2019 |
|
|
February 3, 2018 |
|
|
February 2, 2019 |
|
|
February 3, 2018 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total selling, general and
administrative expenses |
$ |
136,740 |
|
|
$ |
113,176 |
|
|
$ |
452,519 |
|
|
$ |
500,788 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Closing Stores |
|
— |
|
|
|
338 |
|
|
|
— |
|
|
|
18,173 |
|
| Professional fees related to
attempted Rite Aid acquisition |
|
— |
|
|
|
(15,595 |
) |
|
|
(909 |
) |
|
|
18,555 |
|
| Professional fees related to
turnaround strategy |
|
1,356 |
|
|
|
11,543 |
|
|
|
2,363 |
|
|
|
12,244 |
|
| Professional fees for specialty and
retail pharmacy discontinued operations |
|
1,065 |
|
|
|
— |
|
|
|
3,541 |
|
|
|
— |
|
| Loss on sale of airplane |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,599 |
|
| Activism Expenses |
|
— |
|
|
|
6,050 |
|
|
|
— |
|
|
|
6,650 |
|
| Impairment of assets |
|
31,737 |
|
|
|
2,489 |
|
|
|
33,243 |
|
|
|
2,489 |
|
| Executive and other Severance |
|
— |
|
|
|
— |
|
|
|
4,938 |
|
|
|
852 |
|
| Adjusted selling, general, and
administrative expenses |
$ |
102,582 |
|
|
$ |
108,351 |
|
|
$ |
409,343 |
|
|
$ |
439,226 |
|
FRED’S, INC.Free Cash
FlowA Non-GAAP Financial Measure(In
thousands)
| |
52 Weeks |
|
|
53 Weeks |
|
| |
February 2, 2019 |
|
|
February 3, 2018 |
|
| Net cash used in
operating activities |
$ |
(91,523 |
) |
|
$ |
(44,703 |
) |
| Less
capital expenditures |
|
(9,005 |
) |
|
|
(15,753 |
) |
| Less
asset acquisitions, net, primarily intangibles |
|
— |
|
|
|
(1,718 |
) |
| Add
proceeds from asset dispositions |
|
2,203 |
|
|
|
2,206 |
|
| Add net
proceeds from discontinued operations |
|
215,469 |
|
|
|
— |
|
| Free cash
flow |
$ |
117,144 |
|
|
$ |
(59,968 |
) |
FRED’S, INC.Unaudited
Financial Highlights(In thousands, except per share
amounts)
| |
13 Weeks |
|
|
14 Weeks |
|
|
|
|
|
52 WeeksEnded |
|
|
53 WeeksEnded |
|
|
|
|
| |
February 2,2019 |
|
|
February 3,2018 |
|
% Change |
|
February 2,2019 |
|
|
February 3,2018 |
|
% Change |
| Net sales |
$ |
307,092 |
|
|
$ |
370,865 |
|
|
-17.2 |
% |
|
$ |
1,271,746 |
|
|
$ |
1,395,845 |
|
|
-8.9 |
% |
| Operating loss from continuing
operations |
|
(65,026 |
) |
|
|
(21,100 |
) |
|
-208.2 |
% |
|
|
(129,550 |
) |
|
|
(137,001 |
) |
|
5.4 |
% |
| Net loss from continuing
operations |
|
(67,232 |
) |
|
|
(23,026 |
) |
|
-192.0 |
% |
|
|
(137,183 |
) |
|
|
(144,539 |
) |
|
5.1 |
% |
| Net income (loss) from
discontinued operations |
|
135,960 |
|
|
|
(7,022 |
) |
|
2036.2 |
% |
|
|
124,216 |
|
|
|
(5,646 |
) |
|
2300.1 |
% |
| Net loss per share from continuing
operations, basic and diluted |
|
(1.86 |
) |
|
|
(0.68 |
) |
|
|
|
|
|
(3.76 |
) |
|
|
(3.87 |
) |
|
|
|
| Net income (loss) per share from
discontinued operations, basic and diluted |
|
3.77 |
|
|
|
(0.19 |
) |
|
|
|
|
|
3.40 |
|
|
|
(0.15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
36,073 |
|
|
|
37,461 |
|
|
|
|
|
|
36,510 |
|
|
|
37,392 |
|
|
|
|
| Diluted |
|
36,073 |
|
|
|
37,461 |
|
|
|
|
|
|
36,510 |
|
|
|
37,392 |
|
|
|
|
FRED’S, INC.Unaudited
Fiscal 2018 Fourth Quarter Results(In thousands, except
per share amounts)
|
|
For the Period Ended |
|
|
|
|
| |
13 Weeks |
|
|
|
|
14 Weeks |
|
|
|
|
| |
February 3, 2019 |
|
% of Net Sales |
|
February 2, 2018 |
|
% of Net Sales |
|
| Net sales |
$ |
307,092 |
|
|
100.0 |
% |
$ |
370,865 |
|
|
100.0 |
% |
| Cost of goods sold |
|
235,378 |
|
|
76.6 |
% |
|
278,789 |
|
|
75.2 |
% |
| Gross profit |
|
71,714 |
|
|
23.4 |
% |
|
92,076 |
|
|
24.8 |
% |
| Depreciation &
amortization |
|
7,254 |
|
|
2.4 |
% |
|
8,968 |
|
|
2.4 |
% |
| Impairment expense |
|
31,737 |
|
|
10.3 |
% |
|
2,489 |
|
|
0.7 |
% |
| Selling, general and administrative
expenses |
|
97,749 |
|
|
31.8 |
% |
|
101,719 |
|
|
27.4 |
% |
| Operating loss from continuing
operations |
|
(65,026 |
) |
|
-21.3 |
% |
|
(21,100 |
) |
|
-5.6 |
% |
| Interest expense, net |
|
1,800 |
|
|
0.6 |
% |
|
1,926 |
|
|
0.5 |
% |
| Loss from continuing operations
before income taxes |
|
(66,826 |
) |
|
-21.9 |
% |
|
(23,026 |
) |
|
-6.1 |
% |
| Income tax benefit |
|
406 |
|
|
0.1 |
% |
|
2,344 |
|
|
0.6 |
% |
| Net loss from continuing
operations |
|
(67,232 |
) |
|
-22.1 |
% |
|
(25,370 |
) |
|
-6.8 |
% |
| Net income (loss) from discontinued
operations |
|
135,960 |
|
|
44.1 |
% |
|
(7,022 |
) |
|
-1.9 |
% |
| Net income (loss) |
$ |
68,728 |
|
|
|
|
$ |
(32,392 |
) |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss per share from
continuing, basic and diluted |
|
(1.86 |
) |
|
|
|
|
(0.68 |
) |
|
|
|
| Net income (loss) per share from
discontinued, basic and diluted |
|
3.77 |
|
|
|
|
|
(0.19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
36,073 |
|
|
|
|
|
37,461 |
|
|
|
|
| Diluted |
|
36,073 |
|
|
|
|
|
37,461 |
|
|
|
|
FRED’S, INC.Fiscal Year
Ended 2018 (In thousands, except per share amounts)
|
|
Fiscal Year Ended |
|
|
|
|
| |
52 Weeks |
|
|
|
|
53 Weeks |
|
|
|
|
| |
February 3, 2019 |
|
% of Net
Sales |
|
February 2, 2018 |
|
% of Net
Sales |
|
| Net sales |
$ |
1,271,746 |
|
|
100.0 |
% |
$ |
1,395,845 |
|
|
100.0 |
% |
| Cost of goods sold |
|
948,777 |
|
|
74.6 |
% |
|
1,032,058 |
|
|
73.9 |
% |
| Gross profit |
|
322,969 |
|
|
25.4 |
% |
|
363,787 |
|
|
26.1 |
% |
| Depreciation &
amortization |
|
31,273 |
|
|
2.5 |
% |
|
35,301 |
|
|
2.5 |
% |
| Impairment expense |
|
33,243 |
|
|
2.6 |
% |
|
2,489 |
|
|
0.2 |
% |
| Selling, general and administrative
expenses |
|
388,003 |
|
|
30.5 |
% |
|
462,998 |
|
|
33.2 |
% |
| Operating loss from continuing
operations |
|
(129,550 |
) |
|
-10.2 |
% |
|
(137,001 |
) |
|
-9.7 |
% |
| Interest expense, net |
|
7,581 |
|
|
0.6 |
% |
|
6,297 |
|
|
0.5 |
% |
| Loss from continuing operations
before income taxes |
|
(137,131 |
) |
|
-10.9 |
% |
|
(143,298 |
) |
|
-10.2 |
% |
| Income tax (benefit) expense |
|
52 |
|
|
0.0 |
% |
|
1,241 |
|
|
0.1 |
% |
| Net loss from continuing
operations |
|
(137,183 |
) |
|
-11.0 |
% |
|
(144,539 |
) |
|
-10.4 |
% |
| Net income (loss) from discontinued
operations |
|
124,216 |
|
|
9.6 |
% |
|
(5,646 |
) |
|
-0.4 |
% |
| Net loss |
$ |
(12,967 |
) |
|
|
|
$ |
(150,185 |
) |
|
|
|
| Net loss per share from
continuing, basic and diluted |
|
(3.76 |
) |
|
|
|
|
(3.87 |
) |
|
|
|
| Net income (loss) per share from
discontinued, basic and diluted |
|
3.40 |
|
|
|
|
|
(0.15 |
) |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
36,510 |
|
|
|
|
|
37,392 |
|
|
|
|
| Diluted |
|
36,510 |
|
|
|
|
|
37,392 |
|
|
|
|
FRED’S, INC.Unaudited
Balance Sheet(In thousands)
| |
|
|
|
|
|
|
|
|
|
February 2, |
|
|
February 3, |
|
|
|
2019 |
|
|
2018 |
|
|
ASSETS |
|
|
|
|
|
|
|
| Current
assets: |
|
|
|
|
|
|
|
| Cash and
cash equivalents |
$ |
5,353 |
|
|
$ |
6,573 |
|
|
Inventories |
|
246,517 |
|
|
|
263,831 |
|
| Receivables,
less allowance for doubtful accounts |
|
22,970 |
|
|
|
37,720 |
|
| Other
non-trade receivables |
|
30,412 |
|
|
|
31,500 |
|
| Current
assets held for sale |
|
— |
|
|
|
35,247 |
|
| Prepaid
expenses and other current assets |
|
10,074 |
|
|
|
10,055 |
|
| Total
current assets |
|
315,327 |
|
|
|
384,926 |
|
| Property
and equipment, less accumulated depreciation and amortization |
|
66,346 |
|
|
|
110,539 |
|
|
Goodwill |
|
— |
|
|
|
— |
|
| Noncurrent
assets held for sale |
|
4,839 |
|
|
|
67,185 |
|
| Intangible
assets, net |
|
21,463 |
|
|
|
34,347 |
|
| Other
noncurrent assets, net |
|
1,050 |
|
|
|
568 |
|
| Total
assets |
$ |
409,025 |
|
|
$ |
597,565 |
|
| |
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’
EQUITY |
|
|
|
|
|
|
|
| Current
liabilities: |
|
|
|
|
|
|
|
| Accounts
payable |
$ |
97,107 |
|
|
$ |
129,213 |
|
| Current
portion of indebtedness |
|
58,641 |
|
|
|
65 |
|
| Accrued
expenses and other |
|
58,352 |
|
|
|
67,977 |
|
| Current
liabilities held for sale |
|
— |
|
|
|
26,572 |
|
| Total
current liabilities |
|
214,100 |
|
|
|
223,827 |
|
| Long-term
portion of indebtedness |
|
14,446 |
|
|
|
167,100 |
|
| Noncurrent
liabilities held for sale |
|
— |
|
|
|
48 |
|
| Other
noncurrent liabilities |
|
15,015 |
|
|
|
25,542 |
|
| Total
liabilities |
|
243,560 |
|
|
|
416,517 |
|
| Total
shareholders’ equity |
|
165,465 |
|
|
|
181,048 |
|
| Total
liabilities and shareholders’ equity |
$ |
409,025 |
|
|
$ |
597,565 |
|
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