AP NEWS

Centric Brands Inc. Reports Third Quarter 2018 Results

November 14, 2018

NEW YORK--(BUSINESS WIRE)--Nov 14, 2018--Centric Brands Inc. (the “Company”) (NASDAQ:CTRC), a leading lifestyle brands collective, formerly Differential Brands Group Inc., today announced its financial results for the three months ended September 30, 2018.

The results included below reflect the Company’s financial position and operations before it completed the acquisition (the “Transaction”) of a significant portion of Global Brands Group Holding Limited’s (Hong Kong listed: SEHK Stock Code: 787) (“GBG”) North American licensing business on October 29, 2018.

Third Quarter Financial Review

Total Company net sales for the third quarter of fiscal 2018 decreased 6.0% from the same quarter last year to $39.8 million. Somewhat offsetting a Wholesale segment net sales decline of 12.3% in the quarter compared to last year was strong 13.6% net sales growth in the Consumer Direct segment. Within the Wholesale segment, Robert Graham and Hudson net sales declined 10.9% and 18.1%, respectively, while SWIMS registered solid net sales growth of 10.1%. The Consumer Direct net sales growth in the quarter was broad-based including Ecommerce net sales growth of 20.6% and a retail stores net sales jump of 9.4%, which was led by outlet store net sales growth of 13.8% and full price store net sales growth of 5.9%.

Segment net sales and adjusted EBITDA results were as follows:

Initial gross profit margins increased 1.2% during the third quarter 2018 to 52.1% from 50.9% in the same quarter last year. The margin improvement was driven from a higher penetration of full price business. Gross profit declined approximately $900 thousand as a result of overall sales volume declines.

Selling, general and administrative expenses for the third quarter 2018 increased $138 thousand to $15.5 million compared to the same quarter of the prior year after excluding acquisition related expenses incurred in the third quarter of 2018 of $9.6 million. Excluding acquisition related expenses, selling, general and administrative expense rates increased to 38.8% from 36.2% in the third quarter 2017. Operating expense increases, excluding acquisition related costs, primarily relate to higher direct store labor expenses this year versus the prior year period.

Adjusted EBITDA for the third quarter of 2018 was $2.3 million as compared to $3.2 million for the same quarter last year.

For the third quarter of 2018 and 2017, net loss and loss per share were $10.6 million and $0.89 per share compared to $0.2 million and $0.12 per share, respectively.

Subsequent to September 30, 2018

On October 29, 2018, the Company successfully completed the acquisition of a significant portion of GBG’s (Hong Kong listed: SEHK Stock Code: 787) North American licensing business. Concurrent with the closing of the Transaction, the Company entered into a (i) first lien credit agreement with Ares Capital Corporation, as administrative agent and certain other lenders party thereto and a (ii) second lien credit agreement with U.S. Bank National Association, as administrative agent and collateral agent and certain other lenders party thereto.

i) The First Lien Credit Agreement provides for a senior secured asset based revolving credit facility with commitments in an aggregate principal amount of $150 million, which matures four and a half years from the closing date and a senior secured term loan credit facility in an aggregate principal amount of $645 million, which matures five years from the closing date. ii) The Second Lien Credit Agreement provides for a second lien term loan facility in an aggregate principal amount of $668 million, which matures six years from the closing date.

Concurrent with the closing of the Transaction, the Company changed its name to Centric Brands Inc., reflecting its position as a leading lifestyle brands collective platform. Effective November 2, 2018, Centric Brands is listed publicly on the NASDAQ under the ticker symbol CTRC. Concurrent with the closing of the Transaction, Jason Rabin, former President of GBG North America, was named Chief Executive Officer of Centric Brands Inc.

About Centric Brands Inc.

Centric Brands (NASDAQ:CTRC) is a leading lifestyle brands collective, bringing together creative minds from the worlds of fashion and commerce, sourcing, technology, marketing and digital. We design, produce, manage and build kid’s wear and women’s and men’s accessories and apparel and distribute our products across all retail and digital channels in North America and in international markets. We also license over 100 brands across our core product categories including kid’s, women’s and men’s accessories and apparel. Our company-owned brands are Hudson®, a designer and marketer of women’s and men’s premium, branded denim and apparel, Robert Graham®, a sophisticated, eclectic apparel and accessories brand seeking to inspire a global movement, and SWIMS®, a Scandinavian lifestyle brand best known for its range of fashion-forward, water-friendly footwear, apparel and accessories. We employ approximately 4,000 employees in offices in New York City, Greensboro, NC, Los Angeles, CA, and Montreal, Canada, and in stores throughout North America. For more information, please visit Centric Brands’ website:  www.centricbrands.com

Forward-Looking Statements and Important Disclosure Notice

This release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The matters discussed in this release involve estimates, projections, goals, forecasts, assumptions, risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. All statements in this release that are not purely historical facts are forward-looking statements, including statements containing the words “may,” “will,” “expect,” “anticipate,” “intend,” “estimate,” “continue,” “believe,” “plan,” “project,” “will be,” “will continue,” “will likely result” or similar expressions. Any forward-looking statement inherently involves risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to:; the anticipated benefits of the Transaction on the Company’s financial results, business performance and product offerings, the Company’s ability to successfully integrate GBG’s business and realize cost savings and any other synergies; the risk that the credit ratings of the combined company or its subsidiaries may be different from what the Company expects; the risk of intense competition in the denim and premium lifestyle apparel industries; the risk that the Company’s substantial indebtedness could adversely affect the Company’s financial performance and impact the Company’s ability to service its indebtedness; the risks associated with the Company’s foreign sourcing of its products and the implementation of foreign production for its products, including in light of potential changes in international trade relations proposed to be implemented by the U.S. government; risks associated with the Company’s third-party distribution system; continued acceptance of our product, product demand, competition, capital adequacy, general economic conditions and the potential inability to raise additional capital if required; the risk that the Company will be unsuccessful in gauging fashion trends and changing customer preferences; the risk that changes in general economic conditions, consumer confidence or consumer spending patterns, including consumer demand for denim and premium lifestyle apparel, will have a negative impact on the Company’s financial performance or strategies and the Company’s ability to generate cash flows from its operations to service its indebtedness; the highly competitive nature of the Company’s business in the United States and internationally and its dependence on consumer spending patterns, which are influenced by numerous other factors; the Company’s ability to respond to the business environment and fashion trends; risks related to continued acceptance of the Company’s brands in the marketplace; risks related to the Company’s reliance on a small number of large customers; risks related to the Company’s ability to implement successfully any growth or strategic plans; risks related to the Company’s ability to manage the Company’s inventory effectively; the risk of cyber-attacks and other system risks; risks related to the Company’s ability to continue to have access on favorable terms to sufficient sources of liquidity necessary to fund ongoing cash requirements of the Company’s operations or new acquisitions; risks related to the Company’s ability to continue to have access on favorable terms to sufficient sources of liquidity necessary to fund ongoing cash requirements of its operations or new acquisitions; risks related to the Company’s pledge of all its tangible and intangible assets as collateral under its financing agreements; risks related to the Company’s ability to generate positive cash flow from operations; risks related to a possible oversupply of denim in the marketplace; and other risks. The Company discusses certain of these factors more fully in its additional filings with the SEC, including its annual report on Form 10-K for the fiscal year ended December 31, 2017 and subsequent reports filed with the SEC, and this release should be read in conjunction with those reports through the date of this release. The Company urges you to consider all of these risks, uncertainties and other factors carefully in evaluating the forward-looking statements contained in this release.

The press release above contains summaries of certain financial and statistical information about the Company. The information contained in this press release is summary information that is intended to be considered in the context of the Company’s SEC filings and other public announcements that the Company may make, by press release or otherwise, from time to time. In addition, information related to past performance, while helpful as an evaluative tool, is not necessarily indicative of future results, the achievement of which cannot be assured. Investors should not view the past performance of the Company as indicative of the Company’s future results.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Since the Company operates in a rapidly changing environment, new risk factors can arise and it is not possible for the Company’s management to predict all such risk factors, nor can the Company’s management assess the impact of all such risk factors on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. The Company’s future results, performance or achievements could differ materially from those expressed or implied in these forward-looking statements. The Company does not undertake any obligation to publicly revise these forward-looking statements to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events, except as may be required by law.

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