NATURAL GROCERS BY VITAMIN COTTAGE, INC. 
By LAKEWOOD, Colo., Jan. 30, 2014 /PRNewswire/ -- Natural Grocers by Vitamin Cottage, Inc. (NYSE: NGVC) today announced results for its first quarter of fiscal year 2014 ended December 31, 2013 and confirmed its outlook for fiscal year 2014.
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 2014 and 2013 in conformity with U.S. generally accepted accounting principles (GAAP), the Company has presented a non-GAAP financial measure. Reconciliations from GAAP to a non-GAAP financial measure is provided at the end of this earnings release.
Highlights for First Quarter Fiscal Year 2014 Compared to First Quarter Fiscal Year 2013
-- Net sales increased 25.8% to $120.6 million
-- Daily average comparable store sales increased 10.6%
-- Net income increased 31.6% to $2.9 million with diluted earnings per
share of $0.13
-- EBITDA increased 38.1% to $9.4 million
"We are pleased to report another quarter of solid financial results and we continue to meet our outlook expectations. We look forward to carrying this positive momentum into the remainder of fiscal 2014," said Kemper Isely, Co-President.
Operating Results -- First Quarter Fiscal Year 2014 Compared to First Quarter Fiscal Year 2013
During the first quarter of fiscal year 2014, net sales increased $24.8 million, or 25.8% over the same period in fiscal year 2013 to $120.6 million due to a $14.6 million increase in sales from new stores and a $10.2 million, or 10.6%, increase in comparable store sales. Daily average comparable store sales increased 10.6% in the first quarter of fiscal year 2014 compared to a 12.9% increase in the first quarter of fiscal year 2013. The 10.6% increase in the first quarter of fiscal year 2014 was driven by a 5.1% increase in daily average transaction count and a 5.3% increase in average transaction size. Daily average mature store sales increased 6.9% in the first quarter of fiscal year 2014.
Gross profit during the first quarter of fiscal year 2014 increased 27.1% over the same period in fiscal year 2013 to $35.4 million driven by positive comparable store sales and new store growth. Gross profit reflects earnings after both product and occupancy costs. Gross margin was 29.3% during the first quarter of fiscal year 2014 compared to 29.0% in the first quarter of fiscal year 2013. Gross margin increased due to increases in product margin across all departments, partially offset by a shift in sales mix towards products with lower margin. Additionally, gross margin benefited from productivity improvements at the bulk food repackaging and distribution center. Occupancy costs as a percentage of sales increased during the first quarter of fiscal year 2014 compared to the first quarter last year due to increased average lease expenses at new stores((1)).
Store expenses as a percentage of sales decreased 20 basis points during the first quarter compared to the comparable period of fiscal year 2013 driven by a decrease in salary-related expenses as a percentage of sales at comparable stores. The decrease in salary-related expenses was slightly offset by an increase in depreciation expense at new stores and to a lesser extent an increase in advertising expense, all as a percentage of sales.
Administrative expenses as a percentage of sales decreased 30 basis points during the first quarter compared to the comparable period as a result of the Company's ability to support additional store investments and sales without proportionate investments in overhead.
Pre-opening and relocation expenses as a percentage of sales increased 20 basis points during the first quarter compared to the comparable period primarily due to the increased number of new store openings. During the first quarter of fiscal year 2014 four new stores opened compared to two new stores opened during the first quarter of fiscal year 2013.
Interest expense increased $0.5 million in the first quarter compared to the comparable period, primarily due to interest expense related to capital and financing lease obligations.
Net income increased 31.6% to $2.9 million compared to the same period in fiscal year 2013 with diluted earnings per share of $0.13 in the first quarter of fiscal year 2014.
EBITDA increased $2.6 million, or 38.1%, to $9.4 million, or 7.8% of sales, for the first quarter of fiscal year 2014 compared to the same period in fiscal year 2013.
(1) The Company had nine and
four stores accounted for
as capital and financing
lease obligations for the
first quarter of fiscal
year 2014 and 2013,
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
liabilities 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 and 25
basis points in the first
quarter of fiscal year 2014
and 2013, respectively.
Additionally, these stores
increased EBITDA as a
percentage of sales by
approximately 60 and 40
basis points in the first
quarter of fiscal year 2014
and 2013, respectively, 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, 2013, the Company had $6.2 million in cash and cash equivalents and $1.2 million in available-for-sale securities, as well as no amounts outstanding on the revolving credit facility. During the quarter, the Company amended and restated the $15.0 million facility to improve terms and extend the maturity date by three years to January 31, 2017.
During the first quarter of fiscal year 2014, the Company generated $5.3 million in cash from operations and invested $7.7 million in capital expenditures primarily for new stores.
Growth and Development
During the first quarter of fiscal year 2014, the Company opened four new stores, bringing the total store count to 76 stores located in 13 states.
The Company plans to open a total 15 stores in fiscal year 2014 and expects to remodel two existing stores.
As of this release, the Company has signed leases for ten of the remaining 11 stores it plans to open in fiscal year 2014 for locations in Colorado, Idaho, Kansas, New Mexico, Oklahoma, Oregon, Utah and Washington.
Fiscal Year 2014 Outlook
The following table provides information on the Company's fiscal year 2014 outlook:
Prior Fiscal Current Fiscal Q1 FY'14
2014 Outlook 2014 Outlook Actual
------------ ------------ ------
Number of new
stores 15 * 4
Number of
remodels 2 * -
Daily average
comparable
store sales
growth 8.5% to 9.5% * 10.6%
EBITDA as a
percent of
sales 7.8% to 8.0% (1) * 7.8%
Net income as a
percent of
sales 2.4% to 2.6% * 2.4%
Diluted earnings
per share $0.58 to $0.63 * $0.13
Capital
expenditures
(in millions) $35 to $37 * $7.7
*No Change from prior outlook.
(1) Includes approximately 55
basis points of EBITDA
improvement from the nine
capital and financing lease
obligations.
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 US: 1-877-870-4263; Canada: 1-855-669-9657 or International: 1-412-317-0790. 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. Grocery products may not contain artificial colors, flavors, preservatives, sweeteners, or partially hydrogenated or hydrogenated oils. Natural Grocers' 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 76 stores in 13 states.
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 our industry, business strategy, goals and expectations concerning our 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, 2013 and our 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 our business, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of our SEC filings, including, but not limited to, our Form 10-K for the fiscal year ended September 30, 2013 and our subsequent quarterly reports on Form 10-Q, copies of which may be obtained by contacting investor relations at 303-986-4600 or by visiting our website at http://Investors.NaturalGrocers.com.
NATURAL GROCERS BY VITAMIN COTTAGE, INC.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except share and per share
data)
Three months ended
December 31,
------------
2013 2012
---- ----
Net
sales $120,580 95,831
Cost
of
goods
sold
and
occupancy
costs 85,199 67,994
------ ------
Gross
profit 35,381 27,837
Store
expenses 25,173 20,203
Administrative
expenses 3,889 3,326
Pre-
opening
and
relocation
expenses 889 519
--- ---
Operating
income 5,430 3,789
Other
(expense)
income:
Interest
expense (707) (255)
Other
income,
net 1 2
--- ---
Total
other
expense (706) (253)
---- ----
Income
before
income
taxes 4,724 3,536
Provision
for
income
taxes (1,802) (1,315)
------ ------
Net
income $2,922 2,221
====== =====
Net
income
per
common
share:
Basic $0.13 0.10
===== ====
Diluted $0.13 0.10
===== ====
Weighted
average
common
shares
outstanding:
Basic 22,442,191 22,372,184
========== ==========
Diluted 22,470,979 22,464,229
========== ==========
NATURAL GROCERS BY VITAMIN COTTAGE, INC.
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands, except share and per share data)
December
31, 2013 September 30, 2013
--------- ------------------
Assets
Current assets:
Cash and cash
equivalents $6,222 8,132
Restricted cash - 500
Short term
investments -
available-for-
sale securities 1,150 1,149
Accounts receivable,
net 1,698 2,401
Merchandise
inventory 48,572 45,472
Prepaid expenses and
other current
assets 870 1,097
Deferred income tax
assets 1,196 1,114
----- -----
Total current assets 59,708 59,865
Property and
equipment, net 102,772 98,910
Other assets:
Deposits and other
assets 189 203
Goodwill and other
intangible assets,
net of accumulated
amortization of
$654 and $654,
respectively 900 900
Deferred financing
costs, net 39 25
Total other assets 1,128 1,128
----- -----
Total assets $163,608 159,903
======== =======
Liabilities and
Stockholders'
Equity
Current liabilities:
Accounts payable $28,080 28,918
Accrued expenses 10,024 9,306
Capital and
financing lease
obligations,
current portion 189 174
Total current
liabilities 38,293 38,398
------ ------
Long-term
liabilities:
Capital and
financing lease
obligations, net of
current portion 19,611 19,648
Deferred income tax
liabilities 7,174 6,877
Deferred rent 5,033 4,731
Leasehold incentives 5,904 5,716
Total long-term
liabilities 37,722 36,972
------ ------
Total liabilities 76,015 75,370
------ ------
Commitments
Stockholders'
equity:
Common stock, $0.001
par value.
Authorized
50,000,000 shares,
22,442,389 and
22,441,253 issued
and outstanding,
respectively 22 22
Additional paid in
capital 53,842 53,704
Retained earnings 33,729 30,807
------ ------
Total stockholders'
equity 87,593 84,533
------ ------
Total liabilities
and stockholders'
equity $163,608 159,903
======== =======
NATURAL GROCERS BY VITAMIN COTTAGE, INC.
Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
Three months
ended
December 31,
------------
2013 2012
---- ----
Operating activities:
Net income $2,922 2,221
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization 3,938 2,992
Gain on disposal of property
and equipment - (1)
Share-based compensation 130 17
Excess tax benefit from
share-based compensation (7) -
Deferred income tax expense
(benefit) 215 (636)
Non-cash interest expense 7 22
Interest accrued on
investments and
amortization of premium (1) 1
Other amortization - 17
Changes in operating assets
and liabilities
Decrease (increase) in:
Accounts receivable, net 703 (245)
Income tax receivable 575 -
Merchandise inventory (3,100) (856)
Prepaid expenses and other
assets (334) (34)
(Decrease) increase in:
Accounts payable (961) (3,008)
Accrued expenses 734 1,676
Deferred rent and leasehold
incentives 489 174
--- ---
Net cash provided by
operating activities 5,310 2,340
----- -----
Investing activities:
Acquisition of property and
equipment (7,684) (8,825)
Proceeds from sale of
property and equipment - 1
Purchase of available-for-
sale securities - (181)
Decrease in restricted cash 500 -
Net cash used in investing
activities (7,184) (9,005)
------ ------
Financing activities:
Repayments under notes
payable, related party - (64)
Capital and financing lease
obligations payments (43) (6)
Excess tax benefit from
share-based compensation 7 -
Equity issuance costs - (268)
Loan fees paid - (18)
--- ---
Net cash used in financing
activities (36) (356)
--- ----
Net decrease in cash and
cash equivalents (1,910) (7,021)
Cash and cash equivalents,
beginning of period 8,132 17,291
----- ------
Cash and cash equivalents,
end of period $6,222 10,270
====== ======
Supplemental disclosures of
cash flow information:
Cash paid for interest $ - 3
Cash paid for interest on
capital and financing lease
obligations 693 229
Income taxes paid 22 101
Supplemental disclosures of
non-cash investing and
financing activities:
Acquisition of property and
equipment not yet paid $3,646 2,176
Property acquired through
capital and financing lease
obligations 14 10,319
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. 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,
-------------------
2013 2012
---- ----
Net income $2,922 2,221
Interest expense 707 255
Provision for income
taxes 1,802 1,315
Depreciation and
amortization 3,938 2,992
----- -----
EBITDA $9,369 6,783
====== =====
SOURCE Natural Grocers by Vitamin Cottage, Inc.
