05.05.06

5.5.2006: Meldung: Wild Oats Markets, Inc. Reports Q1 2006 Results

Sales in Line With Expectations and Improved Gross Margins Drive $0.10 in EPS

Wild Oats Markets, Inc., a leading national natural and organic foods retailer, today announced financial results for the first quarter ended April 1, 2006. Sales in line with expectations and a 170-basis-point year-over-year improvement in gross margin resulted in earnings per share of $0.10 in the first quarter.

Net sales for the quarter increased 7.3 percent to $298.4 million, from $278.1 million in the first quarter of 2005. The first quarter 2006 sales increase was largely due to same store sales that were in line with Company expectations, and the addition of six new stores and one relocated store since the end of last year"s first quarter, which more than offset the closure of two stores in February 2006. The Company reported a 4.1 percent increase in comparable store sales and ended the quarter with 2.56 million total square feet.

The Company opened one new Henry"s store in the first quarter in Carlsbad, Calif. on March 1, 2006 and, thus far in the second quarter, has opened a new Wild Oats store in Tampa, Fla. on April 5, 2006. Both grand openings set records for the strongest grand opening sales in the Company"s history by their respective format.

Wild Oats Markets achieved a solid increase in sales, and leveraged gross margin and expenses to deliver significantly higher profitability in the first quarter compared to last year. Net income for the first quarter of 2006 was $2.9 million, or $0.10 per share, compared to a net loss of $1.2 million or $0.04 per share in last year"s first quarter. This improvement was primarily due to a 170-basis-point increase in gross margin compared to last year"s first quarter. The Company"s full year earnings guidance remains at between $0.34 and $0.40 per share.

Net income in the first quarter of 2006 was adversely affected by several items totaling $1.7 million pre-tax, or $0.06 per share. Included were restructuring charges for lease-related liabilities, as well as asset impairment charges, severance payments and accelerated depreciation for the closure or relocation of facilities. Net income in the first quarter of 2005 was adversely affected by similar items totaling $3.1 million pre-tax, or $0.11 per share.

Adjusted EBITDA in the first quarter of 2006 increased 38.8 percent to $13.6 million, or 4.6 percent of sales, compared to $9.8 million, or 3.5 percent of sales, in the prior year first quarter (please refer to the attached schedule of Selected Additional Financial Information for a reconciliation of non GAAP financial information). The increase in Adjusted EBITDA was due to the increase in gross margin, as well as the Company"s ability to leverage higher sales against expenses. The Company"s Adjusted EBITDA guidance for 2006 remains unchanged at $49.0 million to $51.0 million.

Wild Oats reported gross profit of $91.4 million in the first quarter of 2006, a 13.9 percent increase compared with $80.3 million in the same period last year. Gross margin in the first quarter of 2006 was 30.6 percent of sales, a 170-basis-point improvement compared with 28.9 percent of sales in the first quarter of 2005. Approximately 80 basis points of the improvement was due to opening one new store during this year"s first quarter compared to four in the first quarter of 2005. New stores" gross margins are initially lower due to higher shrink and more aggressive promotional activity. The remaining gross margin improvement was achieved through the leverage of higher sales volume and the implementation of merchandising initiatives that drove sales increases in higher margin categories. Going forward, the Company expects gross margin to moderate throughout 2006 to be 30 percent for the full year as it continues to focus on increasing sales volumes and will open more new stores later in the year relative to 2005.

"We are pleased with our continued bottom-line growth in the first quarter, as successful marketing programs drove a favorable product mix shift to higher margin categories," said Perry Odak, President and CEO of Wild Oats Markets. "We grew sales in line with our expectations. As we move through 2006, we will continue to focus on striking a balance between driving higher sales and achieving our gross margin goal of 30 percent for the full year."

Direct store expenses in the first quarter of 2006 increased 6.8 percent to $69.8 million, or 23.4 percent of sales, compared to $65.4 million, or 23.5 percent of sales, in the first quarter of 2005. The improvement of 10 basis points as a percent of sales was largely the result of leveraging labor costs.

The Company has reclassified certain regional and marketing related expenses, which historically were reflected in Selling, General and Administrative expenses (SG&A), to the Direct Store Expenses line. This classification reflects a more typical presentation used widely in the food retail industry (please refer to the attached schedule of Selected Additional Financial Information, which shows the amount reclassified by quarter for 2005). This change had no impact on net income or Adjusted EBITDA in the first quarter.

Store contribution in the first quarter of 2006 increased 44.7 percent to $21.5 million, or 7.2 percent of sales, compared with $14.9 million, or 5.4 percent of sales, in the first quarter of 2005.

SG&A expenses in the first quarter of 2006 were $14.0 million, or 4.7 percent of sales, compared to $10.0 million, or 3.6 percent of sales, in the prior year first quarter. The year-over-year increase in SG&A was primarily the result of an increase in accrued bonuses, legal and professional fees, and the impact of expensing stock compensation pursuant to the implementation of SFAS 123R. The Company expects SG&A will be relatively flat at 4.1 percent of sales for the full year 2006, as compared to 4.0 percent of sales last year. The 2006 guidance for SG&A expenses includes a $2.4 million estimate for stock compensation expense.

Net cash provided by operating activities was $13.2 million in the first quarter of 2006 compared with $8.5 million in the first quarter of 2005. Capital expenditures in the first quarter were $5.8 million. The Company expects capital spending to be between $55.0 million and $60.0 million for the full year 2006 as it plans to open a total of 10 new stores throughout the year.

Business Developments

Wild Oats Markets opened one new Henry"s store in Carlsbad, Calif. and closed two smaller, older stores in the first quarter of 2006. Thus far in the second quarter of 2006, the Company opened one new Wild Oats store in April in Tampa, Fla. Currently, the Company has 15 leases and letters of intent signed for new stores scheduled to open in 2006 and 2007.

Company management will host a conference call and webcast with financial analysts and investors on Thursday, May 4, 2006 at 8:00 a.m. Mountain time (10:00 a.m. Eastern time) to discuss financial results for the first quarter ended April 1, 2006. Participants calling from the U.S. may call in by dialing (877) 252-5618. International callers should dial (706) 634-1349. Participants should ask for the "Wild Oats first quarter 2006 earnings conference call" or reference conference ID number 8025062 to be placed into the conference. A simultaneous webcast will be available through a link on the Investor Relations page of the Wild Oats website at www.wildoats.com.

About Wild Oats

Wild Oats Markets, Inc. is a nationwide chain of natural and organic foods markets in the U.S. and Canada. With more than $1.1 billion in annual sales, the Company currently operates 113 natural food stores in 24 states and British Columbia, Canada. The Company"s markets include: Wild Oats Natural Marketplace, Henry"s Farmers Market, Sun Harvest and Capers Community Markets. For more information, please visit the Company"s website at www.wildoats.com.

Risk Factors and Uncertainties

This release contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties. Such forward-looking statements include: the number of stores the Company plans to open, remodel and relocate in the future, and the anticipated performance of such stores; the amount of capital expenditures; expected future comparable store sales, revenues and earnings per share, and future financial measures and prospects for favorable growth and performance.

The statements made by the Company are based on management"s present expectations, and actual results may differ from the results indicated or otherwise implied by such forward-looking statements due to certain risks and uncertainties including, but not limited to: the Company"s ability to execute, the results of merchandising and marketing programs, the impact of competition and other factors as are set forth in the Company"s SEC filings, including the Annual Report on Form 10-K for the fiscal year ended December 31, 2005 and the Company"s quarterly reports on Form 10-Q. These risk factors may not be an all-inclusive enumeration of the business risks faced by Wild Oats. Investors should recognize that the reliability of any projected financial data diminishes the farther in the future the data is projected.

The statements made by management of the Company and summarized above represent their views as of the date of this press release, and it should not be assumed that the statements made herein remain accurate as of any future date. Wild Oats does not intend to update these statements and undertakes no duty to any person to effect any such update under any circumstances.


WILD OATS MARKETS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per-share amounts)
(unaudited)

THREE MONTHS ENDED
April 1, April 2,
2006 2005

Sales $298,357 100.0% $278,079 100.0%
Cost of goods sold and occupancy costs 206,985 69.4% 197,823 71.1%
Gross Profit 91,372 30.6% 80,256 28.9%

Direct store expenses 69,833 23.4% 65,368 23.5%
Store Contribution 21,539 7.2% 14,888 5.4%

Selling, general, and
administrative expenses 13,965 4.7% 10,043 3.6%
Loss (gain) on disposal of assets,
net 90 0.0% (9) 0.0%
Pre-opening expenses 1,459 0.5% 1,917 0.7%
Restructuring and asset impairment
charges, net 1,670 0.6% 1,551 0.6%
Income from operations 4,355 1.5% 1,386 0.5%

Loss on early extinguishment of debt -- 0.0% (559) -0.2%
Interest income 589 0.2% 324 0.1%
Interest expense (1,854) -0.6% (2,167) -0.8%
Income (loss) before income
taxes 3,090 1.0% (1,016) -0.4%
Income tax expense 205 0.0% 135 0.0%
Net income (loss) $2,885 1.0% $(1,151) -0.4%

Basic net income (loss) per common
share $0.10 $(0.04)

Weighted-average number of common
shares outstanding 28,970 28,554

Diluted net income (loss) per common
share $0.10 $(0.04)

Weighted-average number of common
shares outstanding, assuming dilution 29,542 28,554


Percentages may not add due to rounding. Certain prior period information
has been reclassified to conform to the current presentation.



WILD OATS MARKETS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)

April 1, 2006 December 31, 2005
ASSETS (unaudited)
Current Assets:
Cash and cash equivalents $39,110 $35,250
Short-term investments 21,406 14,522
Inventories (net of reserves of $991
and $960, respectively) 65,700 63,056
Accounts Receivable ( net of
allowance for doubtful accounts of
$159 and $190, respectively) 3,291 4,006
Prepaid expenses and other current
assets 6,764 5,962
Total current assets 136,271 122,796

Property and equipment, net 177,919 178,867
Goodwill, net 105,124 105,124
Other intangible assets, net 6,016 6,122
Deposits and other assets 5,640 5,897
Deferred tax asset 64 64
Total assets $431,034 $418,870


LIABILITIES AND STOCKHOLDERS" EQUITY

Current liabilities:
Accounts payable $59,581 $56,078
Book overdraft 22,590 23,351
Accrued Liabilities 54,635 53,354
Current portion of debt, capital
leases, and financing obligations 606 614
Total current liabilities 137,412 133,397

Long-term debt, capital leases and
financing obligations 148,064 148,181
Other long-term obligations 28,262 27,750
Total liabilities 313,738 309,328

Stockholders" equity:
Preferred stock, $.001 par value;
5,000,000 shares authorized; no
shares issued and outstanding -- --
Common stock; $0.001 par value;
60,000,000 shares authorized,
31,506,925 and 31,036,834 shares
issued; 28,881,202 and 29,059,034
outstanding, respectively 31 31
Treasury stock, at cost: 2,656,330 and
1,977,800 shares as of April 1, 2006
and December 31, 2005, respectively (37,138) (24,999)
Additional paid-in capital 231,650 226,645
Note receivable, related party -- (12,051)
Accumulated deficit (78,439) (81,324)
Accumulated other comprehensive income 1,192 1,240
Total stockholders" equity 117,296 109,542
Total liabilities and
stockholders" equity $431,034 $418,870



WILD OATS MARKETS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except per-share amounts)
(Unaudited)

THREE MONTHS ENDED
April 1, 2006 April 2, 2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $2,885 $(1,151)
Adjustments to reconcile net income
(loss) income to net cash provided by
operating activities:
Depreciation and amortization 6,687 6,735
Loss (gain) on disposal of property
and equipment 90 (9)
Deferred tax benefit -- (2)
Restructuring and asset impairment
charges, net 1,670 1,551
Interest on related party receivable (88) (156)
Stock-based compensation 778 104
Accretion of debt issuance costs 156 259
Loss on early extinguishment of debt -- 559
Change in assets and liabilities, net 1,003 645

Net cash provided by operating
activities 13,181 8,535

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,759) (6,171)
Purchase of short-term investments (21,410) --
Proceeds from the sale of short-term
investments 14,522 9,645
Proceeds from sale of property and
equipment 24 17

Net cash (used in) provided by
investing activities (12,623) 3,491

CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in book overdraft (760) (1,991)
Repayments on notes payable, long-term
debt and capital leases (125) (117)
Proceeds from issuance of common
stock, net 4,227 634

Net cash provided by (used in)
financing activities 3,342 (1,474)

Effect of exchange rate changes on cash (40) (60)

Net increase in cash and cash equivalents 3,860 10,492
Cash and cash equivalents at beginning
of period 35,250 30,671

Cash and cash equivalents at end of period $39,110 $41,163

Supplemental Disclosure of Noncash
Investing and Financing Activities:
Equipment acquired through capital lease $-- $262


Certain prior period information has been reclassified to conform to the
current presentation.



WILD OATS MARKETS, INC.
SELECTED ADDITIONAL FINANCIAL INFORMATION
(in thousands)
(unaudited)

RECONCILIATION OF NON GAAP FINANCIAL INFORMATION

THREE MONTHS ENDED
April 1, 2006 April 2, 2005

Net income (loss) $2,885 $(1,151)
Interest expense, net of interest income 1,265 1,843
Income tax expense 205 135
Depreciation and amortization 6,687 6,735
EBITDA 11,042 7,562
Loss on early extinguishment of debt -- 559
Loss (gain) on asset disposals, net 90 (9)
Stock-based compensation expense 778 104
Restructuring and asset impairment
charges, net 1,670 1,551
EBITDA, as adjusted $13,580 $9,767

EBITDA as a percentage of sales 3.7% 2.7%

EBITDA, as adjusted, as a
percentage of sales 4.6% 3.5%



2005 RECLASSIFICATION IN 2006

1Q 2Q
Statement of
Operations As Reclass- As Reclass-
Reported Changes ified Reported Changes ified
Operating expenses:
Direct store
expenses 60,371 4,997 65,368 60,724 5,788 66,512
As a percent
of sales 21.7% 1.8% 23.5% 21.3% 2.0% 23.4%
Selling, general
and administra-
tive expenses 15,040 (4,997) 10,043 17,201 (5,788) 11,413
As a percent
of sales 5.4% -1.8% 3.6% 6.0% -2.0% 4.0%


3Q 4Q

As Reclass- As Reclass-
Reported Changes ified Reported Changes ified
Operating expenses:
Direct store
expenses 62,086 5,409 67,495 59,641 5,058 64,699
As a percent
of sales 22.3% 1.9% 24.2% 21.1% 1.8% 22.9%
Selling, general
and administra-
tive expenses 16,644 (5,409) 11,235 17,674 (5,058) 12,616
As a percent
of sales 6.0% -1.9% 4.0% 6.3% -1.8% 4.5%


YTD 2005

As Reclass-
Reported Changes ified
Operating expenses:
Direct store
expenses 242,822 21,252 264,074
As a percent
of sales 21.6% 7.6% 23.5%
Selling, general
and administra-
tive expenses 66,559 (21,252) 45,307
As a percent
of sales 5.9% -7.6% 4.0%



Source: Wild Oats Markets, Inc.
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