Bombay Announces Third Quarter Operating Results

FORT WORTH, Texas, Nov. 16  /PRNewswire-FirstCall/ -- The Bombay Company, Inc. (NYSE:BBA) reported that revenue for the three months ended October 28, 2006 decreased 15.5% to $108.2 million compared to $128.1 million for the three months ended October 29, 2005. Same store sales for Bombay stores operating for more than one year decreased 15.5% for the quarter. Revenue from retail stores declined to $100.2 million from $121.6 million due to the decrease in same store sales and a lower store count. Bombay's direct- to-customer business, which includes Internet and Mail Order, grew to $7.4 million for the quarter compared to $5.5 million last year, driven primarily by Internet sales. The loss before income taxes for the quarter ended October 28, 2006 was $16.0 million compared to $6.5 million for the quarter ended October 29, 2005. The results for the 2005 quarter include a pre-tax gain of $4.1 million on the sale of non-operating land and a building.  The net loss for the quarter ended October 28, 2006 was $15.6 million, or $0.43 per share, compared to a net loss of $4.4 million, or $0.12 per share, for the corresponding period of the prior year.

For the nine-month period ended October 28, 2006, revenue decreased 7.9% to $348.2 million compared to $378.2 million for the corresponding period of the prior year.  Revenue from retail stores declined to $324.2 million from $354.1 million as a result of a 6.5% decline in same store sales and the reduced store count.  Revenue from Bombay's direct-to-customer business grew to $21.2 million for the nine-month period compared to $15.2 million in the comparable year-ago period, primarily due to higher Internet sales.  Results for the nine-month period ended October 29, 2005 include $6.9 million of revenue from Bailey Street operations, the assets of which were sold during the second quarter of Fiscal 2005. The loss before income taxes for the nine months ended October 28, 2006 was $52.1 million compared to $33.3 million for the nine months ended October 29, 2005 which included $4.7 million of gains on sales of the non-operating land and building and the Bailey Street assets. The net loss for the nine-months ended October 28, 2006 was $51.1 million, or $1.42 per share, compared to a net loss of $21.7 million, or $0.60 per share, for the corresponding period of the prior year.

David B. Stewart, Chief Executive Officer, noted, "We remain focused on implementing our plan to return Bombay to positive cash flow and improved operations. We made important progress with some key initiatives during the third quarter, which included cost-cutting measures, selling unproductive inventory, strengthening our merchandise presentation, and concentrating on our core product. Clearly, we are part of a troubled sector, and our numbers reflect that.  We believe that we added to the problem by executing an overly zealous inventory reduction program that cost us sales.  The good news is, we have made course corrections to improve inventory availability in coming quarters. While we are disappointed with the store results, we continue to be very pleased with the growth of our direct-to-customer business and in particular the Internet.  Our Canadian subsidiary continues to outperform the U.S. market.

"During the third quarter, we began to differentiate the merchandising of our mall and off-mall stores for clearer product focus and a more customer friendly environment with the objective of improving our store results.  We concentrated on increasing unit volume, and our stores have made progress with key product presentations.  We realized the benefit of a number of the cost reductions that were identified during the second quarter and expect to continue to realize the benefit into Fiscal 2007. We trimmed our print advertising and enhanced our store marketing and e-marketing and we believe that this change in media has not adversely affected the business.

"We also began to convert square footage devoted to BombayKIDS into increased square footage for our core product.  During the quarter, a total of 23 stores were converted, which resulted in all or a portion of the BombayKIDS product being replaced by core merchandise.  We will continue to monitor the performance of these stores and manage the BombayKIDS business based upon the results.  Key to the success of this initiative will be the introduction of new core product that is expected to arrive in stores during the spring of 2007," Mr. Stewart concluded.

The Company ended the quarter with $69.1 million in borrowings outstanding under its credit facility compared to $62.2 million last year. During the quarter, the Company entered into a new credit facility that provides significantly more liquidity than its previous arrangement. The new facility will fund working capital requirements and will be used for other corporate needs, including the initiatives to focus on the Company's core business. Inventory levels were $151.7 million compared to $176.3 million due to the decision to reduce overall inventory levels and flow product, including holiday merchandise, closer to the time of need.

In conjunction with this release, you are invited to listen to Bombay's conference call with management that will be conducted on Thursday, November 16, 2006 at 10:00 a.m. Central Time.  Interested parties should dial 212-896-6010 ten minutes prior to the start time.  The call will also be broadcast live over the Internet at http://www.bombaycompany.com/ .  For those who are unable to listen to the live broadcast, a telephone replay will be available for 72 hours beginning at 12:00 p.m. Central Time at 800-633-8284. The access code is 21274579.  The call will also be available for replay for 45 days on the investor relations page of the Bombay website.

The Bombay Company, Inc. designs, sources and markets a unique line of home accessories, wall decor and furniture through 453 retail outlets, specialty catalogs and the Internet in the U.S. and internationally.

Any statements in this press release that may be considered forward- looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Those risks are described in the Company's public announcements, reports to stockholders and SEC filings, including but not limited to Reports on Forms 10-K, 8-K and 10-Q, copies of which are available from the SEC or may be obtained upon request from the Company.  The Company undertakes no obligation to revise the forward-looking statements contained therein to reflect events or circumstances after the date hereof as a result of new information, future events or otherwise.

                  THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
                    Consolidated Statements of Operations
                   (In thousands, except per share amounts)
                                 (Unaudited)

                             Three Months Ended        Nine Months Ended
                          October 28,  October 29,  October 28,  October 29,
                             2006         2005         2006         2005
                                      (as adjusted)            (as adjusted)

  Net revenue              $108,220     $128,062     $348,160     $378,220
  Costs and expenses:
   Cost of sales, buying
    and store occupancy
    costs                    86,683       96,842      282,810      294,463
   Selling, general &
    administrative expenses  36,722       40,895      116,025      119,931

  Operating loss            (15,185)      (9,675)     (50,675)     (36,174)
    Gain on sale of assets      ---        4,130          ---        4,690
    Interest expense, net      (815)        (970)      (1,464)      (1,800)

  Loss before income taxes  (16,000)      (6,515)     (52,139)     (33,284)
  Income tax benefit           (376)      (2,160)      (1,041)     (11,608)
  Net loss                 ($15,624)     ($4,355)    ($51,098)    ($21,676)

  Net loss per basic
   & diluted share           ($0.43)      ($0.12)      ($1.42)      ($0.60)

  Avg. common shares
   outstanding               36,253       36,349       36,098       36,169

  Avg. common shares
   outstanding and dilutive
   potential common shares   36,253       36,349       36,098       36,169

  Other Selected Financial
   and Operating Data
  Capital expenditures (net) $5,000       $5,068       $9,143      $16,347
  Depreciation and
   amortization              $4,675       $5,171      $13,784      $14,274

  Stores opened                   8            8           15           30
  Stores closed                  27            9           60           38

  Store composition:
  Bombay core                   368          388
  Outlet                         48           48
  KIDS                           37           58
  Total                         453          494

  Total Combination
   format stores                 33           54

  Total store square
   footage (in thousands)     1,996        2,019



                  THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
                         Consolidated Balance Sheets
                   (In thousands, except per share amounts)
                                 (Unaudited)

                                          Oct. 28,    Jan. 28,    Oct. 29,
                                            2006        2006        2005
  ASSETS                                                       (as adjusted)
  Current assets:
    Cash and cash equivalents              $3,718      $4,015      $7,688
    Inventories                           151,717     128,719     176,302
    Other current assets                   17,605      14,846      32,521
      Total current assets                173,040     147,580     216,511

  Property and equipment, net              81,778      84,651      89,601

  Deferred taxes                              448         456      11,848
  Goodwill, net                               423         423         423
  Other assets                              4,021       5,631       5,079
      Total assets                       $259,709    $238,741    $323,462

  LIABILITIES AND STOCKHOLDERS' EQUITY
  Current liabilities:
    Bank borrowings                       $69,062        $---     $62,218
    Accounts payable and accrued expenses  29,982      29,176      31,669
    Gift certificates redeemable            8,541       9,224       8,042
    Accrued payroll and bonuses             4,028       6,219       3,134
    Accrued insurance                       5,813       5,178       4,997
    Customer deposits                       6,410       4,526       8,995
    Current portion of accrued rent         4,011       3,871       3,905
    Other current liabilities               5,809       5,834       3,301
        Total current liabilities         133,656      64,028     126,261

  Accrued rent and other long
   term liabilities                        39,838      38,976      37,462

  Stockholders' equity:
    Preferred stock, $1 par value,
      1,000,000 shares authorized             ---         ---         ---
    Common stock, $1 par value,
      50,000,000 shares authorized,
      38,149,646 shares issued             38,150      38,150      38,150
    Additional paid-in capital             80,196      79,817      79,910
    Retained earnings (deficit)           (27,158)     23,669      48,724
    Accumulated other comprehensive income  2,154       2,077       1,683
    Common shares in treasury, at cost,
     1,776,202; 1,715,066 and 1,788,078
     shares, respectively                  (7,127)     (7,038)     (7,338)
    Deferred compensation                     ---        (938)     (1,390)
      Total stockholders' equity           86,215     135,737     159,739

  Total liabilities and
   stockholders' equity                  $259,709    $238,741    $323,462



                  THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
                    Consolidated Statements of Cash Flows
                   (In thousands, except per share amounts)
                                 (Unaudited)

                                                     Nine Months Ended
                                                 October 28,    October 29,
                                                    2006           2005
                                                               (as adjusted)
  Cash flows from operating activities:
    Net loss                                     ($51,098)       ($21,676)
    Adjustments to reconcile net loss to
     net cash used in operating activities:
        Depreciation and amortization              13,784          14,274
        Stock-based compensation expense            1,307           1,178
        Gain on sale of assets                        ---          (4,690)
        Amortization of landlord construction
         allowances and other                      (2,709)         (3,224)
    Change in assets and liabilities:
        Increase in inventories                   (22,668)        (30,706)
        Increase in other assets                   (2,629)         (9,849)
        Increase (decrease) in current liabilities     88          (6,247)
        Increase in noncurrent liabilities            427             703
    Landlord construction allowances                3,197           6,546
    Net cash used in operating activities         (60,301)        (53,691)

  Cash flows from investing activities:
        Purchases of property and equipment        (9,143)        (16,347)
        Proceeds from sale of assets                    3           5,996
    Net cash used in investing activities          (9,140)        (10,351)

  Cash flows from financing activities:
        Net bank borrowings                        69,062          62,218
        Increase in outstanding checks in
         excess of cash balances                       33             ---
        Proceeds from the exercise of employee
         stock options                                  3             671
        Sale of stock to employee benefit
         plans and other                               83             145
    Net cash provided by financing activities      69,181          63,034

  Effect of exchange rate change on cash
   and cash equivalents                               (37)           (472)

  Net decrease in cash and cash equivalents          (297)         (1,480)
  Cash and cash equivalents at beginning of period  4,015           9,168
  Cash and cash equivalents at end of period       $3,718          $7,688

  Supplemental disclosure of cash flow information:
     Interest paid                                 $1,254          $1,639
     Income taxes paid                                 71             327
     Non-cash investing and financing activities:
       Distributions of restricted stock               73           1,368
       Cancellations of restricted stock             (328)           (156)
       Distribution of director fees                   59             132


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DATASOURCE: The Bombay Company, Inc.



CONTACT:  Elaine D. Crowley, Sr. Vice President, Chief Financial Officer

of The Bombay Company, Inc., [phone]



Web site:  http://www.bombaycompany.com/ 

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