crystal service web conference crystal service web conference december 19, 2008 presented by: dennis...
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Crystal Service Web ConferenceCrystal Service Web Conference
December 19, 2008December 19, 2008
Presented by: Dennis Cantalupo
3q & YTD Results:
13 Weeks Ended % Change/ 39 Weeks Ended % Change/ Trailing 1211/1/2008 11/3/2007 Difference 11/1/2008 11/3/2007 Difference Months
(Dollars in Millions) (Dollars in Millions)Operating Performance:
Sales 269.9$ 259.5$ 4.0% 730.5$ 651.8$ 12.1% 1,048.1$ Store Count 0 108 -100.0% 0 108 -100.0% N.A. Comp Store Sales (% Change) -6.5% -8.4% -8.3% -1.9% N.A. Gross Margins 25.8% 27.0% -1.2% 24.5% 23.9% 0.6% 25.2% SG&A Margin 21.2% 24.1% -2.9% 23.2% 24.0% -0.8% 22.0% EBITDA 12.6$ 7.5$ 67.8% 9.8$ (1.2)$ 896.1% 33.8$ EBITDA Margin 4.7% 2.9% 1.8% 1.3% -0.2% 1.5% 3.2% Op. Income (Loss) 4.8$ 0.4$ >1,000% (13.6)$ (21.0)$ 35.1% 2.5$ Int. Exp. (Income) 5.0$ 5.5$ -10.7% 14.3$ 14.0$ 1.8% 20.0$ Net Income (Loss) 0.8$ (5.1)$ 114.9% (28.5)$ (37.6)$ 24.2% (22.7)$ Interest Coverage 2.54 1.35 87.8% 0.69 (0.09) 882.1% 1.69 Capital Expenditures 3.9$ 23.1$ -83.1% 16.2$ 40.5$ -60.1% 22.2$ Capex Margin 1.4% 8.9% -7.5% 2.2% 6.2% -4.0% 2.1% Return on equity for period 0.4% Neg. N.M. Neg. Neg. --
Working Capital & Liquidity Indicators:
Cash and Equivalents 1.7$ 1.7$ -2.0% 1.7$ 1.7$ -2.0% Accounts Receivable 21.4$ 22.4$ -4.6% 21.4$ 22.4$ -4.6% Inventory 441.9$ 475.0$ -7.0% 441.9$ 475.0$ -7.0% % Inventory financed by vendors 20.0% 23.5% -3.5% 20.0% 23.5% -3.5% Inventory turnover (annualized) 1.86 1.79 3.7% 1.86 1.79 3.7% Accounts Payable 88.3$ 111.5$ -20.8% 88.3$ 111.5$ -20.8% Days Payable Outstanding 39.72 52.96 -25.0% Working capital 14.9$ 38.5$ -61.3% 14.9$ 38.5$ -61.3% Current ratio 1.03 1.08 -4.6% 1.03 1.08 -4.6%
Debt & Leverage Ratios:
Total Debt 387.1$ 338.9$ 14.2% 387.1$ 338.9$ 14.2% Stockholders' Equity 166.5$ 163.5$ 1.8% 166.5$ 163.5$ 1.8% Tangible Net Worth 92.8$ 163.5$ -43.2% 92.8$ 163.5$ -43.2% Total debt to equity ratio 2.33 2.07 12.2% 2.33 2.07 12.2% Total liabilities to equity ratio 3.36 3.23 4.0% 3.36 3.23 4.0% Total debt to TTM EBITDA 11.46 9.79 17.1% 11.46 9.79 17.1%
Top line Remains the Achilles' Heel:
Sales & Store Growth($ in mill ions)
$-$200$400$600$800
$1,000$1,200
2001 2002 2003 2004 2005 2006 2007 TTM 3Q08
0
50
100
150
Sales Store Count
Comparable Store Sales
-2.50%
-6.0%
-1.1%
-8.3%
-5.4%
-9.00%-8.00%-7.00%-6.00%-5.00%-4.00%-3.00%-2.00%-1.00%0.00%
2004 2005 2006 2007 YTD 08
Thin Profitability:
(in basis points)
Quarter over Quarter EBITDA Margin Change
190 220
360460
-60
150
-90-190
-340
170230
180
-400-300-200-100
0100200300400500
4Q051Q06
2Q063Q06
4Q061Q07
2Q073Q07
4Q071Q08
2Q083Q 08
Basi
s Po
ints
Annual EBITDA Margin
4.0% 3.2%1.7%2.8%2.8%
1.1%-0.1% 2.3%
-2.0%0.0%2.0%4.0%6.0%8.0%
10.0%
2001 2002 2003 2004 2005 2006 2007 TTM 3Q 08
Direct Business Analysis:
During the final two months of 2007, Overton’s contributed $5.5 million in sales and $1.5 million in net loss. Based on these figures, it appears that Overton’s has lost approximately 8% of its sales base and with the added expenses of opening the Gander Mtn direct business, the new Direct business has been a negative contributor to earnings.
$ in 000'sCombined
Overton's 39 Wks EndedFiscal 2006 11/1/08
Sales 90,000$ 73,811$ Depreciation & Amortization 1,115$ Income (loss) From Operations 16$ EBITDA 8,000$ 1,131$ EBITDA Margin 8.9% 1.5%Net Income (loss) (2,594)$
Total Assets 93,776$ Inventories 21,080$ Goodwill & Intangibles 66,670$ Long Term Debt 35,000$
Direct Business (Overton's & Gander Mtn Direct)
Below 3x is a warning sign
Above 3.5x is a warning sign
Credit Measures:
Debt/TTM EBITDA
11.84
8.156.36
14.70 13.99
11.46
5.065.12
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
2002 2003 2004 2005 2006 2006 2007 TTM 3Q08
Trailing Twelve Month Interest Coverage
(0.05)
0.52
2.89
3.50
1.90
1.15
1.691.27
(0.50)
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
2001 2002 2003 2004 2005 2006 2007 TTM 3Q08
Credit Availability ($ in millions)
$54.0 $59.0
15.7% 17.1%
$-
$50
$100
$150
$200
11/3/2007 12/7/2007 2/2/2008 5/3/2008 8/2/2008 11/1/2008 12/5/2008
0%10%20%30%40%50%60%70%80%90%100%
Credit Availability % Available Under Revolver
Credit Facility:Original Facility Date December 19, 2001Maturity Date June 2012Amendment Date December 6, 2007Agent Bank Bank of America (fka Fleet Retail Finance)
Foothill Capital Corporation syndication agent, CIT Group collateral agent, GECC syndication agent
Maximum Borrowings $345.0 million increased from $275 million (plus a $20 million term loan)Accordian Feature Facility can be increased to $400 million, however, not until after the $40 million Term Loan B has been repaid.Letter of Credit Sublimit $50.0 millionBorrowing Base 68.25% - 75.5% of eligible inventory, plus 85% of eligible credit card receivablesAvailability (as of 12/5/08) $41.5 million ( after 5% availability block)Interest Rate Prime + 0.0% to 0.50% or LIBOR + 1.25% to 2.25%, depending on EBITDASecurity Secured by substantially all assets of the Company except real estate.Financial Covenants Minimum Availability reserve of 5.0% of the borrowing base through July 2009 and
7.5% thereafter.Limitations on capital expenditures
It should be noted that the $10 million loan received earlier in the year was used to repay borrowings. This represents approximately 3% of borrowing base.
3Q 2Q 1Q FYE 3Q 2Q 1Q FYE11/1/08 8/2/08 5/3/08 2/2/08 11/3/07 8/4/07 5/5/07 2/3/07
Cash From Operations (49.5)$ (9.3)$ (18.5)$ (30.4)$ (104.8)$ (67.8)$ (47.1)$ 0.6$ Cash From Investing (16.3) (12.4) (6.6) (122.3) (47.6) (17.5) (8.9) (28.3) Cash From Financing 64.9 20.8 26.5 154.0 152.8 85.4 56.0 27.4
Net Change in Cash (1.0) (1.0) 1.4 1.3 0.3 0.1 0.0 (0.2)
Cash From Operations (49.5) (9.3) (18.5) (30.4) (104.8) (67.8) (47.1) 0.6
+ Interest Expense (Income) 14.3 9.4 4.8 19.7 14.0 8.5 4.0 19.2
Capital Expenditures (16.2) (12.3) (6.5) (46.5) (40.5) (17.5) (8.9) (36.5)
Free Cash Flow Before Interest Expense (51.4) (12.3) (20.1) (57.2) (131.3) (76.7) (52.0) (16.7)
Free Cash Flow / Interest Expense (3.60) (1.31) (4.15) (2.90) (9.35) (9.02) (13.08) (0.87)
Free Cash Flow After Interest Expense (65.7) (21.6) (25.0) (76.9) (145.3) (85.3) (56.0) (35.9)
Debt Service
Total Debt 387.1$ 342.0$ 346.4$ 318.4$ 338.9$ 270.5$ 242.4$ 186.6$ Revolver Available (1) 18.1 16.6 13.5 8.3 48.8 32.8 28.0 45.0 (1) Availability is after 5% min. requirement.
(dollars in millions)
Free Cash Flow:
4Q Projections
Scenario 1 Scenario 2 Scenario 3Net Sales ∆ 0% 4% 8%
$ in millions EBITDA Margin ∆ 0.50% 1.80% 2.50%
4Q Ended2/2/2008
Total Company Sales 317.60$ 317.60$ 330.30$ 343.01$ Total Company EBITDA 24.00$ 25.59$ 30.91$ 36.21$ Total Company EBITDA Margin 7.56% 8.1% 9.4% 10.6%
Estimated Interest Expense(income) 5.70$ 5.00$ 5.00$ 5.00$ Less Capital Expenditures 6.00$ 2.00$ 2.00$ 2.00$ Principal Payment on Term Loan B 2.50$ 2.50$ 2.50$
As of 11/1/08Total Inventory 417.20$ 370.00$ 370.00$ 370.00$ Change in borrowing needs based on lower Inventory 37.60$ 37.60$ 37.60$
Cash Flow 53.69$ 59.01$ 64.31$
As of 11/1/08Cash Plus Short Term Investments 1.70$ 1.70$ 1.70$ 1.70$ Total Needed Debt 387.10$ 333.41$ 328.09$ 322.79$ Net Debt 385.40$ 331.71$ 326.39$ 321.09$
Revolver Borrowings 286.26$ 232.57$ 227.25$ 221.95$ Estimated Borrowing Base 345.00$ 252.71$ 252.71$ 252.71$ Outstanding LOC's 23.00$ 7.00$ 7.00$ 7.00$ Availability 35.74$ 13.14$ 18.46$ 23.76$ 5% Minimum Availability Block 17.25$ 12.64$ 12.64$ 12.64$
Availability after 5% Minimum Requirement 18.49$ 0.50$ 5.82$ 11.12$
Fiscal Year Ended 2/2/2009 Estimates
Summary:
• CEO Resigns on 9/8/08
• David C. Pratt New Interim CEO
• Founded United Industries in 1969, which he sold for $620 million in 1999
• President of Rex Realty
• Minority owner of St. Louis Cardinals
• Owns over 30% of Gander Mtn’s voting stock
• Invested over $70 million into GMTN since December 2006
• Expiration of New $10 million Loan extended to March from December)
• Without this financing received in June 2008, liquidity would have been tight during the second quarter of 2008.
• Overton’s Acquisition has not generated the anticipated EBITDA.
• David Pratt has done a commendable job thus far, however, the economy is not making matters easier for Gander.
• How is David Pratt going to get his money out?
• Sell the Company?
• Turn the operations around?
• Credit availability will remain tight
• Credit Rating: E2
HAPPY HOLIDAYS!
!
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Presented by:Dennis CantalupoVice PresidentPhone: 800 – 789 – 0123 X-110E-mail: [email protected]