NATURAL GROCERS BY VITAMIN COTTAGE, INC. LAKEWOOD, Colo., Jan. 29, 2015 /PRNewswire/ -- Natural Grocers by Vitamin Cottage, Inc. (NYSE: NGVC) today announced results for its first quarter of fiscal year 2015 ended December 31, 2014 and confirmed its outlook for fiscal 2015.
In addition to presenting the financial results of Natural Grocers by Vitamin Cottage, Inc. and its subsidiaries (collectively, the Company) for the first quarter of fiscal year 2015 and 2014 in conformity with U.S. generally accepted accounting principles (GAAP), the Company is presenting EBITDA, which is a non-GAAP financial measure. The reconciliation from GAAP to this non-GAAP financial measure is provided at the end of this earnings release.
Highlights for First Quarter Fiscal 2015 Compared to First Quarter Fiscal 2014
-- Net sales increased 21.0% to $145.9 million
-- Daily average comparable store sales increased 6.2%
-- Net income increased 22.0% to $3.6 million with diluted earnings per
share of $0.16
-- EBITDA increased 21.9% to $11.4 million
"We are pleased with this positive start to fiscal 2015 as we prepare to celebrate our 60th anniversary of empowering health. We believe our pioneering and unrelenting commitment to healthy, organic, natural and minimally processed foods and dietary supplements positions us at the forefront of an accelerating consumer movement that is creating demand for products with higher standards," said Kemper Isely, Co-President. "As expected, we saw encouraging improvements in our sales trends during the first quarter of fiscal 2015. We continue to remain focused on our directed sales initiatives, outstanding customer service and operational excellence."
Operating Results -- First Quarter Fiscal 2015 Compared to First Quarter Fiscal 2014
During the first quarter of fiscal 2015, net sales increased $25.3 million, or 21.0% over the same period in fiscal 2014 to $145.9 million due to a $17.9 million increase in sales from new stores and a $7.4 million, or 6.2%, increase in comparable store sales. The 6.2% increase in comparable store sales in the first quarter of fiscal 2015 followed a 10.6% increase in the first quarter of fiscal 2014 and was driven by a 3.4% increase in daily average transaction count and a 2.7% increase in average transaction size. Daily average mature store sales increased 2.8% in the first quarter of fiscal 2015. For fiscal 2015, mature stores include all stores open during or before 2010.
Gross profit during the first quarter of fiscal 2015 increased 19.5% over the same period in fiscal 2014 to $42.3 million, primarily driven by positive comparable store sales and an increase in the number of stores. Gross profit reflects earnings after both product and occupancy costs. Gross margin was 29.0% during the first quarter of fiscal 2015, compared to 29.3% in the first quarter of fiscal 2014. Gross margin decreased due to increases in occupancy costs, partially offset by increases in product margin, both as a percentage of sales. Occupancy costs as a percentage of sales increased during the first quarter of fiscal 2015 compared to the first quarter in fiscal 2014, primarily driven by increased average lease expenses at newer stores ((1)).
Store expenses as a percentage of sales increased 40 basis points during the first quarter of fiscal 2015 compared to the comparable period in fiscal 2014, driven by increases in depreciation and other store expenses to support store growth, partially offset by decreases in salary-related expenses all as a percentage of sales.
Administrative expenses as a percentage of sales decreased 30 basis points during the first quarter of fiscal 2015 compared to the comparable period in fiscal 2014 as a result of the Company's ability to support additional store investments and sales without proportionate increases in the cost of overhead.
Pre-opening and relocation expenses decreased $0.3 million during the first quarter of fiscal 2015 compared to the comparable period in fiscal 2014, primarily due to the timing, nature and location of new store openings. During the first quarter of both fiscal 2015 and 2014, the Company opened four new stores.
Interest expense increased less than $0.1 million in the first quarter of fiscal 2015 compared to the comparable period in fiscal 2014, primarily due to an increase in interest expense related to capital and financing lease obligations.
Net income increased 22.0% to $3.6 million compared to the comparable period in fiscal 2014 with diluted earnings per share of $0.16 in the first quarter of fiscal 2015.
EBITDA increased $2.1 million, or 21.9%, to $11.4 million, or 7.8% of sales, for the first quarter of fiscal 2015 compared to the comparable period in fiscal 2014.
(1) The Company had 11 and nine stores
accounted for as capital and
financing lease obligations for
the first quarter of fiscal 2015
and 2014, respectively. For
leases accounted for as capital
and financing lease obligations,
the Company does not record
straight-line rent expense in
cost of goods sold and occupancy
costs, but rather rental payments
are recognized as a reduction of
the capital and financing lease
obligations and as interest
expense. The stores that were
accounted for as capital and
financing lease obligations
rather than being reflected as
operating leases increased gross
margin as a percentage of sales
by approximately 60 basis points
in each of the first quarters of
fiscal 2015 and 2014.
Additionally, accounting for
these stores as capital and
financing lease obligations
rather than operating leases
increased EBITDA as a percentage
of sales by approximately 60
basis points in each of the first
quarters of fiscal 2015 and 2014,
due to the impact on gross
profit, as well as occupancy
costs that would have been
included in pre-opening
expenses.
Balance Sheet and Cash Flow
As of December 31, 2014, the Company had $1.9 million in cash and cash equivalents, $3.1 million outstanding on its credit facility, $0.7 million in outstanding letters of credit and $11.2 million available under the credit facility.
During the first quarter of fiscal 2015, the Company generated $6.9 million in cash from operations and invested $7.6 million in capital expenditures, primarily for new stores. Additionally, during the first quarter of fiscal 2015 the Company paid $5.6 million for the store acquisition in Independence, Missouri.
Growth and Development
During the first quarter of fiscal 2015, the Company opened four new stores, bringing the total store count as of December 31, 2014 to 91 stores located in 15 states.
Since the first quarter of fiscal 2015, the Company has opened one store in Tucson, Arizona. As of the date of this release, the Company has a total of eight signed leases for new stores planned to open in fiscal 2015 in Arizona, Arkansas, Colorado, Kansas, Minnesota, Oklahoma and Texas.
Fiscal 2015 Outlook
For fiscal 2015 the Company expects:
Prior Fiscal Current Fiscal Q1 FY'15
2015 Outlook 2015 Outlook Actual
------------ ------------ ------
Number of new
stores 18 * 4
Number of
relocations 3 2 -
Number of
remodels 2 * -
Daily average
comparable
store sales
growth 5% to 8% * 6.2%
EBITDA as a
percent of
sales 7.3% to 7.5% * 7.8%
Net income as a
percent of
sales 2.1% to 2.3% *
2.4%
Diluted earnings
per share $0.63 to $0.66 *
$0.16
Capital
expenditures
(in millions) $45 to $47 *
$7.6
*No Change from
prior outlook.
Earnings Conference Call
The Company will host a conference call today at 2:30 p.m. Mountain Time (4:30 p.m. Eastern Time) to discuss this earnings release. The dial-in number is 1-888-347-6606 (US); 1-855-669-9657 (Canada); or 1-412-902-4289 (International). The conference ID is "Natural Grocers by Vitamin Cottage." A simultaneous audio webcast will be available at http://Investors.NaturalGrocers.com and archived for a minimum of 30 days.
About Natural Grocers by Vitamin Cottage
Natural Grocers by Vitamin Cottage, Inc. (NYSE: NGVC) is a rapidly expanding specialty retailer of natural and organic groceries and dietary supplements whose products must meet strict quality guidelines. The grocery products sold by Natural Grocers may not contain artificial colors, flavors, preservatives, sweeteners, or partially hydrogenated or hydrogenated oils. Natural Grocer's flexible small-store format allows it to offer affordable prices in a shopper-friendly retail environment. The Company provides extensive free science-based nutrition education programs to help customers make informed health and nutrition choices. The Company, founded in 1955, has 92 stores in 15 states as of the date of this earnings release.
Visit www.NaturalGrocers.com for more information and store locations.
Forward-Looking Statements
The following constitutes a "safe harbor" statement under the Private Securities Litigation Reform Act of 1995. Except for the historical information contained herein, statements in this release are "forward-looking statements" and are based on current expectations and assumptions that are subject to risks and uncertainties. All statements that are not statements of historical facts are forward-looking statements. Actual results could differ materially from those described in the forward-looking statements because of factors such as changes in the Company's industry, business strategy, goals and expectations concerning the Company's market position, the economy, future operations, margins, profitability, capital expenditures, liquidity and capital resources, other financial and operating information and other risks detailed in the Company's Form 10-K for the fiscal year ended September 30, 2014 and the Company's subsequent quarterly reports on Form 10-Q. The information contained herein speaks only as of the date of this release and the Company undertakes no obligation to update forward-looking statements.
For further information regarding risks and uncertainties associated with the Company's business, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of the Company's filings with the Securities and Exchange Commission, including, but not limited to, our Form 10-K for the fiscal ended September 30, 2014 and the Company's subsequent quarterly reports on Form 10-Q, copies of which may be obtained by contacting Investor Relations at 303-986-4600 or by visiting the Company's website at http://Investors.NaturalGrocers.com.
NATURAL GROCERS BY VITAMIN COTTAGE, INC.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except per share data)
Three months ended
December 31,
------------
2014 2013
---- ----
Net sales $145,887 120,580
Cost of goods sold and
occupancy costs 103,593 85,199
------- ------
Gross profit 42,294 35,381
Store expenses 31,049 25,173
Administrative expenses 4,227 3,889
Pre-opening and relocation
expenses 577 889
--- ---
Operating income 6,441 5,430
----- -----
Other (expense) income:
Dividends and interest income - 1
Interest expense (735) (707)
---- ----
Total other expense, net (735) (706)
---- ----
Income before income taxes 5,706 4,724
Provision for income taxes (2,142) (1,802)
------ ------
Net income $3,564 2,922
====== =====
Net income per common share:
Basic $0.16 0.13
===== ====
Diluted $0.16 0.13
===== ====
Weighted average common shares
outstanding:
Basic 22,487,118 22,442,191
========== ==========
Diluted 22,494,373 22,470,979
========== ==========
NATURAL GROCERS BY VITAMIN COTTAGE, INC.
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands, except per share data)
December 31, September 30, 2014
2014
----
Assets
Current assets:
Cash and cash equivalents $1,855 5,113
Accounts receivable, net 1,650 2,146
Merchandise inventory 61,807 58,381
Prepaid expenses and other current
assets 967 641
Deferred income tax assets 729 832
--- ---
Total current assets 67,008 67,113
------ ------
Property and equipment, net 126,934 120,224
------- -------
Other assets:
Deposits and other assets 716 712
Goodwill and other intangible assets,
net 5,789 900
Deferred financing costs, net 32 36
Total other assets 6,537 1,648
----- -----
Total assets $200,479 188,985
======== =======
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $36,185 33,835
Accrued expenses 14,535 15,822
Revolving credit facility 3,082 -
Contingent consideration for
acquisition 536 -
Capital and financing lease
obligations, current portion 279 229
Total current liabilities 54,617 49,886
------ ------
Long-term liabilities:
Capital and financing lease
obligations, net of current portion 25,011 21,748
Deferred income tax liabilities 4,742 5,409
Deferred rent 5,968 5,842
Leasehold incentives 7,564 7,246
Total long-term liabilities 43,285 40,245
------ ------
Total liabilities 97,902 90,131
------ ------
Commitments
Stockholders' equity:
Common stock, $0.001 par value.
Authorized 50,000,000 shares,
22,487,600 and 22,485,488 issued and
outstanding, respectively 22 22
Additional paid in capital 54,711 54,552
Retained earnings 47,844 44,280
------ ------
Total stockholders' equity 102,577 98,854
------- ------
Total liabilities and stockholders'
equity $200,479 188,985
======== =======
NATURAL GROCERS BY VITAMIN COTTAGE, INC.
Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
Three months ended
December 31,
------------
2014 2013
---- ----
Operating activities:
Net income $3,564 2,922
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,981 3,938
Gain on disposal of property and equipment (4) -
Share-based compensation 181 130
Excess tax benefit from share-based compensation - (7)
Deferred income tax (benefit) expense (564) 215
Non-cash interest expense 4 7
Interest accrued on investments and amortization of
premium - (1)
Changes in operating assets and liabilities
Decrease (increase) in:
Accounts receivable, net 496 703
Income tax receivable - 575
Merchandise inventory (2,702) (3,100)
Prepaid expenses and other assets (328) (334)
Increase (decrease) in:
Accounts payable 2,141 (961)
Accrued expenses (1,308) 734
Deferred rent and leasehold incentives 445 489
--- ---
Net cash provided by operating activities 6,906 5,310
----- -----
Investing activities:
Acquisition of property and equipment (7,572) (7,684)
Proceeds from sale of property and equipment 4 -
Payment for acquisition (5,601) -
Decrease in restricted cash - 500
Net cash used in investing activities (13,169) (7,184)
------- ------
Financing activities:
Borrowings under credit facility 24,590 -
Repayments under credit facility (21,508) -
Capital and financing lease obligations payments (55) (43)
Excess tax benefit from share-based compensation - 7
Payments on withholding tax for restricted stock
unit vesting (22) -
--- ---
Net cash provided by (used in) financing activities 3,005 (36)
----- ---
Net decrease in cash and cash equivalents (3,258) (1,910)
Cash and cash equivalents, beginning of period 5,113 8,132
----- -----
Cash and cash equivalents, end of period $1,855 6,222
====== =====
Supplemental disclosures of cash flow information:
Cash paid for interest $8 -
Cash paid for interest on capital and financing
lease obligations 762 693
Income taxes paid 4,270 22
Supplemental disclosures of non-cash investing and
financing activities:
Acquisition of property and equipment not yet paid $3,468 3,646
Property acquired through capital and financing
lease obligations 3,355 14
NATURAL GROCERS BY VITAMIN COTTAGE,
INC.
Non-GAAP Financial Measure
(Unaudited)
In addition to reporting financial
results in accordance with U.S.
generally accepted accounting
principles (GAAP), the Company
provides information regarding
EBITDA which is not in accordance
with, or an alternative to, GAAP
(i.e. a non-GAAP measure). The
Company defines EBITDA as net
income before interest expense,
provision for income tax and
depreciation and amortization.
The Company believes EBITDA provides
additional information about (i)
operating performance, because it
assists in comparing the operating
performance of stores on a
consistent basis, as it removes the
impact of non-cash depreciation
and amortization expense as well as
items not directly resulting from
core operations such as interest
expense and income taxes and (ii)
the performance and the
effectiveness of operational
strategies. Additionally, EBITDA
performance is a measure in the
Company's incentive compensation
payments.
Furthermore, some investors use
EBITDA as a supplemental measure to
evaluate the overall operating
performance of companies in the
industry. Management believes that
some investors' understanding of
performance is enhanced by
including this non-GAAP financial
measure as a reasonable basis for
comparing ongoing results of
operations. By providing this non-
GAAP financial measure, together
with a reconciliation from net
income, the Company believes it is
enhancing investors' understanding
of the business and results of
operations, as well as assisting
investors in evaluating how well
the Company is executing strategic
initiatives.
The Company's competitors may define
EBITDA differently, and as a
result, the Company's measure of
EBITDA may not be directly
comparable to EBITDA of other
companies. Items excluded from
EBITDA are significant components
in understanding and assessing
financial performance.
EBITDA is a supplemental measure of
operating performance that does not
represent and should not be
considered in isolation or as an
alternative to, or substitute for,
net income or other financial
statement data presented in the
consolidated financial statements
as indicators of financial
performance. EBITDA has limitations
as an analytical tool, and should
not be considered in isolation, or
as a substitute for analysis of the
Company's results as reported under
GAAP. EBITDA should not be
considered as a measure of
discretionary cash available to the
Company to invest in the growth of
the business.
The following table reconciles net
income to EBITDA (dollars in
thousands):
Three months ended
December 31,
------------
2014 2013
---- ----
Net income $3,564 2,922
Interest expense 735 707
Provision for income taxes 2,142 1,802
Depreciation and amortization 4,981 3,938
----- -----
EBITDA $11,422 9,369
======= =====
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SOURCE Natural Grocers by Vitamin Cottage, Inc.
