News Releases

Natural Grocers by Vitamin Cottage Announces Second Quarter and First Half Fiscal 2016 Results

LAKEWOOD, Colo., May 5, 2016 /PRNewswire/ -- Natural Grocers by Vitamin Cottage, Inc. (NYSE: NGVC) today announced results for its second quarter and first half of fiscal 2016 ended March 31, 2016 and reaffirmed its recently-updated outlook for fiscal 2016.

Natural Grocers by Vitamin Cottage

In addition to presenting the financial results of Natural Grocers by Vitamin Cottage, Inc. and its subsidiaries (collectively, the Company) for the second quarter and first half of fiscal 2016 and 2015 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 Second Quarter and First Half Fiscal 2016 Compared to Second Quarter and First Half Fiscal 2015

  • Net sales increased 12.5% to $177.4 million in the second quarter and increased 13.7% to $345.2 million in the first half of fiscal 2016
  • Daily average comparable store sales increased 1.0% in the second quarter and increased 2.3% in the first half of fiscal 2016
  • Net income was $3.6 million with diluted earnings per share of $0.16 in the second quarter and was $7.3 million with diluted earnings per share of $0.33 in the first half of fiscal 2016
  • EBITDA was $12.6 million in the second quarter and was $25.4 million in the first half of fiscal 2016
  • Opened nine new stores in the first half of fiscal 2016, compared to eight new stores in the first half of fiscal 2015, resulting in growth rates of 17.9% and 17.3% for the twelve month periods ended March 31, 2016 and 2015, respectively

"As we noted in the announcement of our preliminary second quarter results, several factors impacted our comparable store sales growth during the period," said Kemper Isely, Co-President. "We remain focused on our initiatives to drive sales while controlling expenses to deliver improved profit performance."

Operating Results — Second Quarter Fiscal 2016 Compared to Second Quarter Fiscal 2015

During the second quarter of fiscal 2016, net sales increased $19.7 million, or 12.5%, over the same period in fiscal 2015 to $177.4 million, primarily due to an $18.0 million increase in new store revenue and a $1.7 million, or 1.0%, increase in daily average comparable store sales.  The 1.0% increase in daily average comparable store sales in the second quarter of fiscal 2016 followed a 5.6% increase in the second quarter of fiscal 2015 and was driven by a 1.0% increase in average transaction size and a consistent daily average transaction count when compared to the prior year. Daily average mature store sales decreased 1.3% in the second quarter of fiscal 2016. For fiscal 2016, mature stores include all stores open during or before fiscal 2011.

Gross profit during the second quarter of fiscal 2016 increased 10.1% over the same period in fiscal 2015 to $51.6 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 29.1% for the second quarter of fiscal 2016 compared to 29.7% for the second quarter of fiscal 2015. Gross margin was negatively impacted by an increase in occupancy costs, partially offset by an increase in product margin, both as a percentage of sales. Gross margin was positively impacted by increases in product margin across most departments.

Store expenses during the second quarter of fiscal 2016 increased $6.3 million, or 19.4%, to $38.8 million. Store expenses as a percentage of sales increased 130 basis points to 21.9% during the second quarter of fiscal 2016 compared to 20.6% in the second quarter fiscal 2015. This increase was primarily due to increases in salary related expenses, depreciation expense and other store expenses, partially offset by decreased incentive compensation and worker's compensation expense, all as a percentage of sales.

Administrative expenses as a percentage of sales increased 20 basis points to 2.8% during the second quarter of fiscal 2016 compared to the comparable period in fiscal 2015 due to the addition of senior management positions to support the Company's growth.

Pre-opening and relocation expenses increased $0.6 million during the second quarter of fiscal 2016 compared to the comparable period in fiscal 2015, primarily due to the number and timing of new store openings and relocations. During the second quarter of fiscal 2016, five new stores opened compared to four new stores during the second quarter of fiscal 2015.

Interest expense increased less than $0.1 million in the second quarter of fiscal 2016 compared to the comparable period in fiscal 2015, primarily due to an increase in interest expense associated with the Company's revolving credit facility.

Net income decreased 33.8% to $3.6 million compared to the comparable period in fiscal 2015 with diluted earnings per share of $0.16 in the second quarter of fiscal 2016.

EBITDA decreased $1.9 million, or 13.0%, to $12.6 million, or 7.1% of sales, for the second quarter of fiscal 2016 compared to the comparable period in fiscal 2015.

Operating Results — First Half Fiscal 2016 Compared to First Half Fiscal 2015

During the first half of fiscal 2016, net sales increased $41.6 million, or 13.7%, over the same period in fiscal 2015 to $345.2 million due to a $34.7 million increase in sales from new stores and a $6.9 million, or 2.3%, increase in comparable store sales. The 2.3% increase in daily average comparable store sales during the first half of fiscal 2016 followed a 5.9% increase in the first half of fiscal 2015. The 2.3% increase in the first half of fiscal 2016 was driven by a 1.4% increase in average transaction size and a 0.9% increase in daily average transaction count. Daily average mature store sales decreased 0.5% in the first half of fiscal 2016.

Gross profit during the first half of fiscal 2016 increased 12.0% over the same period in fiscal 2015 to $99.9 million, primarily driven by positive comparable store sales and an increase in the number of comparable stores. Gross profit reflects earnings after both product and occupancy costs. Gross margin was 28.9% during the first half of fiscal 2016, compared to 29.4% in the first half of fiscal 2015. Gross margin was negatively impacted by an increase in occupancy costs, partially offset by an increase in product margin, both as a percentage of sales. Gross margin was positively impacted by increases in product margin across most departments.

Store expenses as a percentage of sales increased 70 basis points during the first half of fiscal 2016 compared to the comparable period in fiscal 2015, driven by increases in salary related expenses and depreciation expense, partially offset by decreases in incentive compensation and workers compensation expense.

Administrative expenses as a percentage of sales remained flat during the first half of fiscal 2016 compared to the comparable period in fiscal 2015.

Pre-opening and relocation expenses increased $0.9 million during the first half of fiscal 2016 compared to the comparable period primarily due to the number and timing of new store openings and relocations. During the first half of fiscal 2016, nine new stores opened and two stores relocated compared to eight new stores opened during the first half of fiscal 2015.

Interest expense decreased less than $0.1 million in the first half of fiscal 2016 compared to the comparable period in fiscal 2015, primarily due to an increase in capitalized interest.

Net income decreased 18.3% to $7.3 million compared to the same period in fiscal 2015 with diluted earnings per share of $0.33 in the first half of fiscal 2016.

EBITDA decreased $0.6 million, or 2.2%, to $25.4 million, or 7.4% of sales, for the first half of fiscal 2016 compared to the same period in fiscal 2015.

Balance Sheet and Cash Flow

As of March 31, 2016, the Company had $5.6 million in cash and cash equivalents, and $20.4 million available under the new $30.0 million revolving credit facility entered into on January 28, 2016. Credit facility usage was comprised of $8.6 million of direct borrowings and $1.0 million of letters of credit.

During the first half of fiscal 2016, the Company generated $18.0 million in cash from operations and invested $23.7 million in capital expenditures, primarily for new stores.

Growth and Development

During the second quarter of fiscal 2016, the Company opened five new stores, bringing the total store count as of March 31, 2016 to 112 stores located in 19 states. The Company opened nine new stores in the first half of fiscal 2016 compared to eight new stores in the first half of fiscal 2015, resulting in a 17.9% and 17.3% unit growth rate for the twelve month periods ended March 31, 2016 and 2015, respectively. The Company plans to open a total of 23 new stores in fiscal 2016, which would result in an annual unit growth rate of 22.3%.

As of the date of this release, the Company has opened an additional store in Spokane, Washington, and has 24 signed leases for stores planned to open in fiscal 2016 and 2017 in Arizona, Colorado, Idaho, Iowa, Missouri, Nevada, North Dakota, Oregon, Texas, Utah and Washington.

Fiscal 2016 Outlook

The Company is reiterating its recently-revised outlook for fiscal 2016, which was updated when the Company reported preliminary second quarter results on April 20, 2016:

 



Current Fiscal
2016 Outlook



First Half FY'16
Actual

Number of new stores


23



9

Number of relocations


4



2

Number of remodels


1



Daily average comparable store sales growth


0% to 1.5%



2.3%

EBITDA as a percent of sales


6.7% to 7.0%



7.4%

Net income as a percent of sales


  1.6% to 1.8%



2.1%

Diluted earnings per share


  $0.50 to $0.56



$0.33

Capital expenditures (in millions)


     $52 to $54



$23.7







 

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 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 113 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 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 Annual Report on Form 10-K for the fiscal year ended September 30, 2015 (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.

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
March 31,


Six months ended
March 31,




2016


2015


2016


2015


Net sales


$

177,395


157,744


345,181


303,631


Cost of goods sold and occupancy costs


125,792


110,874


245,283


214,467


Gross profit


51,603


46,870


99,898


89,164


Store expenses


38,774


32,461


74,673


63,510


Administrative expenses


4,936


4,156


9,690


8,383


Pre-opening and relocation expenses


1,444


870


2,392


1,447


Operating income


6,449


9,383


13,143


15,824


Interest expense


(733)


(714)


(1,386)


(1,449)


Income before income taxes


5,716


8,669


11,757


14,375


Provision for income taxes


(2,139)


(3,266)


(4,432)


(5,408)


Net income


$

3,577


5,403


7,325


8,967












Net income per common share:










Basic


$

0.16


0.24


0.33


0.40


Diluted


$

0.16


0.24


0.33


0.40


Weighted average common shares outstanding:










Basic


22,499,378


22,488,667


22,498,327


22,487,884


Diluted


22,510,409


22,499,322


22,505,079


22,496,919


 

NATURAL GROCERS BY VITAMIN COTTAGE, INC.


Consolidated Balance Sheets

(Unaudited)

(Dollars in thousands, except per share data)




March 31,
2016


September 30,
2015


Assets






Current assets:






Cash and cash equivalents


$

5,600


2,915


Accounts receivable, net


2,270


2,576


Merchandise inventory


82,519


74,818


Prepaid expenses and other current assets


2,722


1,108


Deferred income tax assets



866


Total current assets


93,111


82,283


Property and equipment, net


158,813


145,219


Other assets:






Deposits and other assets


902


778


Goodwill and other intangible assets, net of accumulated amortization of $362 and $683, respectively


5,607


5,623


Deferred financing costs, net


55


21


Total other assets


6,564


6,422


Total assets


$

258,488


233,924








Liabilities and Stockholders' Equity






Current liabilities:






Accounts payable


$

55,188


49,896


Accrued expenses


14,671


19,649


Capital and financing lease obligations, current portion


418


333


Total current liabilities


70,277


69,878


Long-term liabilities:






Capital and financing lease obligations, net of current portion


29,803


27,274


Deferred income tax liabilities


9,987


6,073


Revolving credit facility


8,577



Deferred compensation


532


314


Deferred rent


7,760


6,922


Leasehold incentives


8,313


7,975


Total long-term liabilities


64,972


48,558


Total liabilities


135,249


118,436


Commitments






Stockholders' equity:






Common stock, $0.001 par value, 50,000,000 shares authorized, 22,503,644 and 22,496,628 shares issued and outstanding, respectively


23


22


Additional paid-in capital


55,407


54,982


Retained earnings


67,809


60,484


Total stockholders' equity


123,239


115,488


Total liabilities and stockholders' equity


$

258,488


233,924


 

NATURAL GROCERS BY VITAMIN COTTAGE, INC.


Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)




Six months ended
March 31,




2016


2015


Operating activities:






Net income


$

7,325


8,967


Adjustments to reconcile net income to net cash provided by operating activities:






Depreciation and amortization


12,237


10,130


Loss (gain) on disposal of property and equipment


2


(4)


Share-based compensation


452


297


Deferred income tax expense (benefit)


4,780


(1,467)


Non-cash interest expense


7


8


Changes in operating assets and liabilities






Decrease (increase) in:






Accounts receivable, net


306


(27)


Merchandise inventory


(7,701)


(5,620)


Prepaid expenses and other assets


(1,738)


(568)


Increase (decrease) in:






Accounts payable


5,690


8,134


Accrued expenses


(4,981)


3,889


Deferred compensation


218


103


Deferred rent and leasehold incentives


1,414


487


Net cash provided by operating activities


18,011


24,329


Investing activities:






Acquisition of property and equipment


(23,664)


(15,957)


Proceeds from sale of property and equipment


12


4


Payment for acquisition



(5,601)


Net cash used in investing activities


(23,652)


(21,554)


Financing activities:






Borrowings under credit facility


147,662


66,790


Repayments under credit facility


(139,085)


(66,790)


Capital and financing lease obligations payments


(199)


(116)


Contingent consideration payments for acquisition



(514)


Loan fees paid


(42)



Payments on withholding tax for restricted stock unit vesting


(10)


(22)


Net cash provided by (used in) financing activities


8,326


(652)


Net increase in cash and cash equivalents


2,685


2,123


Cash and cash equivalents, beginning of period


2,915


5,113


Cash and cash equivalents, end of period


$

5,600


7,236


Supplemental disclosures of cash flow information:






Cash paid for interest


$

83


27


Cash paid for interest on capital and financing lease obligations, net of capitalized interest of $316 and $137, respectively


1,247


1,401


Income taxes paid


6,012


5,099


Supplemental disclosures of non-cash investing and financing activities:






Acquisition of property and equipment not yet paid


$

6,031


2,358


Property acquired through capital and financing lease obligations


2,665


3,355


 

NATURAL GROCERS BY VITAMIN COTTAGE, INC.

Non-GAAP Financial Measure
(Unaudited)

In addition to reporting financial results in accordance with GAAP, the Company provides information regarding EBITDA which is not in accordance with, or an alternative to, GAAP (i.e. a non-GAAP financial measure). The Company defines EBITDA as net income before interest expense, provision for income taxes 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 is a measure of the Company's financial covenants under its credit facility and is one of the factors upon which incentive compensation payments under the Company's incentive compensation plan is based.   

Furthermore, management believes that some investors use EBITDA as a supplemental measure to evaluate the overall operating performance of companies in the industry and their understanding of the Company's 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 as an alternative to, or substitute for, net income or other financial statement data presented in the consolidated financial statements as indicators of the Company's financial performance. EBITDA has limitations as an analytical tool, and should not be considered in isolation or as an alternative to, or 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 for the periods presented, dollars in thousands:

 



Three months ended
March 31,


Six months ended
March 31,




2016


2015


2016


2015


Net income


$

3,577


5,403


7,325


8,967


Interest expense


733


714


1,386


1,449


Provision for income taxes


2,139


3,266


4,432


5,408


Depreciation and amortization


6,192


5,149


12,237


10,130


EBITDA


$

12,641


14,532


25,380


25,954


 

The Company does not provide financial guidance for forecasted net income, and, therefore, is unable to provide a reconciliation of its EBITDA guidance to net income, the most comparable financial measure calculated in accordance with GAAP.

Logo - http://photos.prnewswire.com/prnh/20141209/163083LOGO

 

SOURCE Natural Grocers by Vitamin Cottage, Inc.

For further information: Investor Contacts, Ashley MacLeod, Director of Finance and Investor Relations, 303-986-4600, amacleod@naturalgrocers.com OR Scott Van Winkle, ICR, Managing Director, 617-956-6736, scott.vanwinkle@icrinc.com

Join our Community on Facebook
print email rss