LAKEWOOD, Colo., Feb. 1, 2018 /PRNewswire/ -- Natural Grocers by
Vitamin Cottage, Inc. (NYSE: NGVC) today announced results for its
first quarter of fiscal 2018 ended December
31, 2017 and adjusted its outlook for fiscal 2018 to reflect
the favorable impact of the non-cash remeasurement of the Company's
deferred income tax assets and liabilities as a result of the
recent federal tax reform.
Highlights for First Quarter Fiscal 2018 Compared to First
Quarter Fiscal 2017
- Net sales increased 10.3% to $202.5
million;
- Daily average comparable store sales increased 4.7%;
- Net income was $5.2 million with
diluted earnings per share of $0.23,
which included the favorable impact of a $4.3 million, or $0.19 per diluted share, non-cash remeasurement
of the Company's deferred income tax assets and liabilities;
- EBITDA was $9.6 million; and
- Opened two new stores in the first quarter of fiscal 2018,
resulting in a unit growth rate of 8.4% for the twelve month period
ended December 31, 2017.
"We are pleased with the continued acceleration of sales trends
during the first quarter, with daily average comparable store sales
increasing 4.7%," said Kemper Isely,
Co-President. "We made additional promotional investments
during the quarter and have seen a significant positive response to
our direct mail promotions, which, along with continued new
{N}Power® enrollments and our marketing initiatives, led
to 4.8% growth in daily average transaction count. The promotions
had a negative effect on product margins, which impacted pre-tax
earnings during the quarter. With sales momentum in place, we will
look to balance our promotional efforts to drive improved
earnings."
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 2018
and 2017 in conformity with U.S. generally accepted accounting
principles (GAAP), the Company is also 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.
Operating Results — First Quarter Fiscal 2018 Compared to
First Quarter Fiscal 2017
During the first quarter of fiscal 2018, net sales increased
$18.9 million, or 10.3%, to
$202.5 million compared to the same
period in fiscal 2017, primarily driven by a $10.3 million increase in sales from new stores
and an $8.6 million increase in
comparable store sales growth. Daily average comparable store sales
increased 4.7% in the first quarter of fiscal 2018 compared to a
0.6% decrease in the first quarter of fiscal 2017. The daily
average comparable store sales increase during the first quarter of
fiscal 2018 was driven by a 4.8% increase in daily average
transaction count, partially offset by a 0.1% decrease in average
transaction size. Daily average mature store sales increased 1.6%
in the first quarter of fiscal 2018 compared to a 2.3% decrease in
the first quarter of fiscal 2017. For fiscal 2018, mature stores
include all stores open during or before fiscal 2013.
Gross profit during the first quarter of fiscal 2018 increased
1.9% over the same period in fiscal 2017 to $53.2 million, primarily driven by an
increase in the number of comparable stores. Gross profit reflects
earnings after both product and occupancy costs. Gross margin was
26.3% of sales for the first quarter of fiscal 2018 compared to
28.4% of sales for the first quarter of fiscal 2017. The decline in
gross margin was primarily driven by lower product margin,
reflecting promotional activity to drive comparable store sales
growth, a shift in sales mix to lower margin products and, to a
lesser extent, higher occupancy costs, all as a percentage of
sales.
Store expenses during the first quarter of fiscal 2018 increased
$3.3 million, or 7.9%, to
$45.2 million. Store expenses as a
percentage of sales decreased to 22.3% during the first quarter of
fiscal 2018 compared to 22.8% in the first quarter of fiscal 2017.
This decrease was primarily due to decreases in labor-related
expenses, marketing costs and depreciation, partially offset by an
increase in utilities, all as a percentage of sales.
Administrative expenses increased 7.6% to $5.3 million during the first quarter of fiscal
2018 compared to $4.9 million for the
comparable period in fiscal 2017. Administrative expenses as a
percentage of sales decreased to 2.6% during the first quarter of
fiscal 2018 compared to 2.7% in the comparable period in fiscal
2017.
Pre-opening and relocation expenses decreased $0.7 million during the first quarter of fiscal
2018 compared to the comparable period in fiscal 2017. This
decrease was due to the impact of the number and timing of new
store openings and relocations. During the first quarter of fiscal
2018, the Company opened two new stores and relocated one store,
compared to opening five new stores during the first quarter of
fiscal 2017.
Interest expense during the first quarter of fiscal 2018
increased $0.1 million compared to
the comparable period in fiscal 2017 due to an increase in average
borrowings under the Company's revolving credit facility and an
increase in the number of the Company's capital leases.
The Company reported a net tax benefit of $4.1 million for the three months ended
December 31, 2017, primarily the
result of the favorable impact of a $4.3
million non-cash remeasurement of the Company's deferred
income tax assets and liabilities as a result of the recent federal
tax reform. Exclusive of the adjustment to deferred income tax
assets and liabilities, the Company's effective income tax rate for
the three months ended December 31,
2017 was approximately 23.5% as compared to 35.2% for the
three months ended December 31, 2016.
The decrease in the effective income tax rate for the three months
ended December 31, 2017 is a result
of the recent federal tax reform.
Net income for the three months ended December 31, 2017 was $5.2
million with diluted earnings per share of $0.23. EBITDA in the first quarter of fiscal 2018
was $9.6 million.
Balance Sheet and Cash Flow
As of December 31, 2017, the
Company had $8.1 million in cash and
cash equivalents and $24.4 million
available for borrowing under its $50
million revolving credit facility. Credit facility usage was
comprised of $24.6 million of direct
borrowings and $1.0 million of
letters of credit as of December 31,
2017.
During the first quarter of fiscal 2018, the Company generated
$11.0 million in cash from operations
and invested $4.9 million in capital
expenditures, primarily for new stores and relocations.
Growth and Development
During the first quarter of fiscal 2018, the Company opened two
new stores, bringing the total store count as of December 31, 2017 to 142 stores in 19 states. The
Company's two new store openings during the first quarter of fiscal
2018 compared to opening five new stores in the first quarter of
fiscal 2017, resulting in 8.4% and 22.4% unit growth rates for the
twelve month periods ended December 31,
2017 and December 31, 2016,
respectively. During the first quarter of fiscal 2018, the Company
relocated one store.
Since January 1, 2018, the company
has opened one store in Texas and
plans to open an additional store in Texas on February 7,
2018. The Company has 9 signed leases for additional
stores that are planned to open in fiscal 2018 and beyond in
Colorado, Iowa, Oregon,
and Texas.
Fiscal 2018 Outlook
The Company is adjusting its outlook for fiscal 2018, which was
initially provided when the Company reported fourth quarter and
full-year fiscal 2017 results on November
16, 2017, to reflect the favorable impact of a $4.3 million non-cash remeasurement of the
Company's deferred income tax assets and liabilities during the
first quarter of fiscal 2018:
|
|
Fiscal
2018 Outlook
|
|
Q1
FY'18
Actual
|
|
Number of new
stores
|
|
8 to 10
|
|
2
|
|
Number of
relocations
|
|
3 to 4
|
|
1
|
|
Daily average
comparable store sales growth
|
|
1.0% to
3.0%
|
|
4.7%
|
|
Net income as a
percentage of sales
|
|
1.0% to
1.3%
|
|
2.6%
|
|
Diluted earnings per
share
|
|
$0.40 to
$0.50
|
|
$0.23
|
|
|
|
|
|
|
|
Capital expenditures
(in millions)
|
|
$25 to $30
|
|
$4.9
|
|
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 an
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 or sweeteners, or
partially hydrogenated or hydrogenated oils. The Company sells only
USDA certified organic produce and exclusively pasture-raised,
non-confinement dairy products. Natural Grocers' flexible
smaller-store format allows it to offer affordable prices in a
shopper-friendly retail environment. The Company also provides
extensive free science-based nutrition education programs to help
customers make informed health and nutrition choices. The Company,
founded in 1955, has 143 stores in 19 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
fact 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, future growth other financial and operating information
and other risks detailed in the Company's Annual Report on Form
10-K for the fiscal year ended September 30,
2017 (Form 10-K) 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, except as may be
required by the securities laws.
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, the Form 10-K 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,
|
|
|
|
2017
|
|
2016
|
|
|
|
|
|
|
Net sales
|
|
$
|
202,480
|
|
183,577
|
|
Cost of goods sold
and occupancy costs
|
|
149,321
|
|
131,424
|
|
Gross
profit
|
|
53,159
|
|
52,153
|
|
Store
expenses
|
|
45,166
|
|
41,843
|
|
Administrative
expenses
|
|
5,257
|
|
4,883
|
|
Pre-opening and
relocation expenses
|
|
543
|
|
1,261
|
|
Operating
income
|
|
2,193
|
|
4,166
|
|
Interest
expense
|
|
(1,089)
|
|
(983)
|
|
Income before income
taxes
|
|
1,104
|
|
3,183
|
|
Benefit from
(provision for) income taxes
|
|
4,077
|
|
(1,122)
|
|
Net income
|
|
$
|
5,181
|
|
2,061
|
|
|
|
|
|
|
|
Net income per common
share:
|
|
|
|
|
|
Basic
|
|
$
|
0.23
|
|
0.09
|
|
Diluted
|
|
$
|
0.23
|
|
0.09
|
|
Weighted average
number of shares of common stock outstanding:
|
|
|
|
|
|
Basic
|
|
22,359,828
|
|
22,453,459
|
|
Diluted
|
|
22,366,749
|
|
22,461,094
|
|
NATURAL GROCERS BY
VITAMIN COTTAGE, INC.
|
|
|
|
Consolidated
Balance Sheets
|
|
(Dollars in
thousands, except per share data)
|
|
|
|
|
|
December
31,
2017
|
|
September
30,
2017
|
|
|
|
(unaudited)
|
|
|
|
Assets
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
8,089
|
|
6,521
|
|
Accounts receivable,
net
|
|
4,477
|
|
4,860
|
|
Merchandise
inventory
|
|
91,422
|
|
93,612
|
|
Prepaid expenses and
other current assets
|
|
2,761
|
|
3,222
|
|
Total current
assets
|
|
106,749
|
|
108,215
|
|
Property and
equipment, net
|
|
185,189
|
|
184,417
|
|
Other
assets:
|
|
|
|
|
|
Deposits and other
assets
|
|
1,688
|
|
1,642
|
|
Goodwill and other
intangible assets, net of accumulated amortization of $402 and
$394, respectively
|
|
5,673
|
|
5,655
|
|
Deferred financing
costs, net
|
|
40
|
|
62
|
|
Total other
assets
|
|
7,401
|
|
7,359
|
|
Total
assets
|
|
$
|
299,339
|
|
299,991
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable
|
|
$
|
52,163
|
|
56,849
|
|
Accrued
expenses
|
|
17,177
|
|
14,164
|
|
Capital and financing
lease obligations, current portion
|
|
604
|
|
548
|
|
Total current
liabilities
|
|
69,944
|
|
71,561
|
|
Long-term
liabilities:
|
|
|
|
|
|
Capital and financing
lease obligations, net of current portion
|
|
37,120
|
|
32,880
|
|
Revolving credit
facility
|
|
24,592
|
|
28,392
|
|
Deferred income tax
liabilities
|
|
7,973
|
|
12,419
|
|
Deferred
compensation
|
|
1,355
|
|
1,231
|
|
Deferred
rent
|
|
10,593
|
|
10,465
|
|
Leasehold
incentives
|
|
9,122
|
|
9,160
|
|
Total long-term
liabilities
|
|
90,755
|
|
94,547
|
|
Total
liabilities
|
|
160,699
|
|
166,108
|
|
Stockholders'
equity:
|
|
|
|
|
|
Common stock, $0.001
par value, 50,000,000 shares authorized, 22,510,279 shares issued
at December 31, 2017 and September 30, 2017, respectively, and
22,347,709 and 22,448,056 outstanding at December 31, 2017 and
September 30, 2017, respectively
|
|
23
|
|
23
|
|
Additional paid-in
capital
|
|
55,826
|
|
55,678
|
|
Retained
earnings
|
|
84,026
|
|
78,846
|
|
Common stock in
treasury at cost, 162,570 and 62,223 shares at December 31, 2017
and September 30, 2017, respectively
|
|
(1,235)
|
|
(664)
|
|
Total stockholders'
equity
|
|
138,640
|
|
133,883
|
|
Total liabilities and
stockholders' equity
|
|
$
|
299,339
|
|
299,991
|
|
NATURAL GROCERS BY
VITAMIN COTTAGE, INC.
|
|
|
|
Consolidated
Statements of Cash Flows
|
|
(Unaudited)
|
|
(Dollars in
thousands)
|
|
|
|
|
|
Three months
ended
December
31,
|
|
|
|
2017
|
|
2016
|
|
|
|
|
|
|
Operating
activities:
|
|
|
|
|
|
|
Net income
|
|
$
|
5,181
|
|
2,061
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
|
7,415
|
|
7,121
|
|
Loss on disposal of
property and equipment
|
|
48
|
|
—
|
|
Share-based
compensation
|
|
160
|
|
217
|
|
Deferred income tax
benefit
|
|
(4,446)
|
|
(170)
|
|
Non-cash interest
expense
|
|
3
|
|
2
|
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
Decrease (increase)
in:
|
|
|
|
|
|
Accounts receivable,
net
|
|
383
|
|
1,128
|
|
Merchandise
inventory
|
|
2,190
|
|
(1,657)
|
|
Prepaid expenses and
other assets
|
|
22
|
|
1,395
|
|
Income tax
receivable
|
|
351
|
|
—
|
|
(Decrease) increase
in:
|
|
|
|
|
|
Accounts
payable
|
|
(3,564)
|
|
(286)
|
|
Accrued
expenses
|
|
3,013
|
|
3,927
|
|
Deferred
compensation
|
|
124
|
|
116
|
|
Deferred rent and
leasehold incentives
|
|
89
|
|
240
|
|
Net cash provided by
operating activities
|
|
10,969
|
|
14,094
|
|
Investing
activities:
|
|
|
|
|
|
Acquisition of
property and equipment
|
|
(4,925)
|
|
(13,057)
|
|
Proceeds from sale of
property and equipment
|
|
41
|
|
2,564
|
|
Net cash used in
investing activities
|
|
(4,884)
|
|
(10,493)
|
|
Financing
activities:
|
|
|
|
|
|
Borrowings under
credit facility
|
|
87,500
|
|
67,350
|
|
Repayments under
credit facility
|
|
(91,300)
|
|
(67,701)
|
|
Capital and financing
lease obligations payments
|
|
(132)
|
|
(113)
|
|
Repurchases of common
stock
|
|
(581)
|
|
—
|
|
Payments on
withholding tax for restricted stock unit vesting
|
|
(4)
|
|
(12)
|
|
Net cash used in
financing activities
|
|
(4,517)
|
|
(476)
|
|
Net increase in cash
and cash equivalents
|
|
1,568
|
|
3,125
|
|
Cash and cash
equivalents, beginning of period
|
|
6,521
|
|
4,017
|
|
Cash and cash
equivalents, end of period
|
|
$
|
8,089
|
|
7,142
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
Cash paid for
interest
|
|
$
|
217
|
|
121
|
|
Cash paid for interest
on capital and financing lease obligations, net of capitalized
interest of $25 and $63, respectively
|
|
848
|
|
784
|
|
Income taxes
paid
|
|
19
|
|
11
|
|
Supplemental
disclosures of non-cash investing and financing
activities:
|
|
|
|
|
|
Acquisition of
property and equipment not yet paid
|
|
$
|
1,722
|
|
7,243
|
|
Property acquired
through capital and financing lease obligations
|
|
|
4,428
|
|
—
|
|
|
|
|
|
|
|
NATURAL GROCERS BY VITAMIN COTTAGE,
INC.
Non-GAAP financial measure
(Unaudited)
EBITDA is not a measure of financial performance under GAAP. We
define EBITDA as net income before interest expense, provision for
income taxes and depreciation and amortization. The following
table reconciles net income to EBITDA for the periods presented,
dollars in thousands:
|
|
Three months
ended
December 31,
|
|
|
|
|
2017
|
|
2016
|
|
|
Net income
|
|
$
|
5,181
|
|
2,061
|
|
|
Interest
expense
|
|
1,089
|
|
983
|
|
|
Benefit from
(provision for) income taxes
|
|
(4,077)
|
|
1,122
|
|
|
Depreciation and
amortization
|
|
7,415
|
|
7,121
|
|
|
EBITDA
|
|
$
|
9,608
|
|
11,287
|
|
|
EBITDA decreased 14.9% to $9.6
million in the three months ended December 31, 2017 compared to $11.3 million for the three months ended
December 31, 2016. EBITDA as a
percentage of sales was 4.7% and 6.1% in the three months ended
December 31, 2017 and 2016,
respectively. Stores with leases that are classified as
capital and financing lease obligations, rather than being
reflected as operating leases, increased EBITDA as a percentage of
sales by approximately 55 basis points for each of the three months
ended December 31, 2017 and 2016, due
to the impact on cost of goods sold and occupancy costs as
discussed above, as well as occupancy costs that would have been
included in pre-opening expenses prior to the stores' opening dates
if these leases had been accounted for as operating
leases.
Management believes that some investors' understanding of our
performance is enhanced by including EBITDA, a non-GAAP financial
measure. We believe EBITDA provides additional information
about: (i) our operating performance, because it assists us in
comparing the operating performance of our 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
our core operations such as interest expense and income taxes and
(ii) our performance and the effectiveness of our operational
strategies. Additionally, EBITDA is a component of a measure
in our financial covenants under our Credit Facility. Further, our
incentive compensation plan bases incentive compensation payments
on EBITDA, among other measures.
Furthermore, management believes some investors use EBITDA as a
supplemental measure to evaluate the overall operating performance
of companies in our industry. Management believes that some
investors' understanding of our performance is enhanced by
including this non-GAAP financial measure as a reasonable basis for
comparing our ongoing results of operations. By providing this
non-GAAP financial measure, together with a reconciliation from net
income, we believe we are enhancing analysts' and investors'
understanding of our business and our results of operations, as
well as assisting analysts and investors in evaluating how well we
are executing our strategic initiatives.
Our competitors may define EBITDA differently, and as a result,
our measure of EBITDA may not be directly comparable to those 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 an alternative to, or as a substitute for, analysis of our
results as reported under GAAP. Some of the limitations
are:
- EBITDA does not reflect our cash expenditures, or future
requirements for capital expenditures or contractual
commitments;
- EBITDA does not reflect changes in, or cash requirements for,
our working capital needs;
- EBITDA does not reflect any impact for straight-line rent
expense for leases classified as capital and financing lease
obligations;
- EBITDA does not reflect the interest expense, or the cash
requirements necessary to service interest or principal payments on
our debt;
- EBITDA does not reflect our tax expense or the cash
requirements to pay our taxes; and
- although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized will often have to be
replaced in the future and EBITDA does not reflect any cash
requirements for such replacements.
Due to these limitations, EBITDA should not be considered as a
measure of discretionary cash available to us to invest in the
growth of our business. We compensate for these limitations by
relying primarily on our GAAP results and using EBITDA as
supplemental information.
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SOURCE Natural Grocers by Vitamin Cottage, Inc.