99 Cents Only Stores® Reports First Quarter Fiscal 2012 Diluted EPS of $0.25, Up From $0.24 for the First Quarter of Fiscal 2011 - Consolidated Diluted Earnings Per Share Increased 4.2% to $0.25

- Consolidated Net Income Increased 5.2% to $17.7 Million

CITY OF COMMERCE, Calif., Aug. 8, 2011 /PRNewswire/ -- 99 Cents Only Stores® (NYSE: NDN) (the "Company") announced its financial results for the first quarter ended July 2, 2011.

(Logo:  http://photos.prnewswire.com/prnh/20110214/LA47195LOGO-a)

Highlights for the first quarter of fiscal 2012 compared to the first quarter of fiscal 2011:

  • Retail sales for the Company's consolidated operations increased by 6.2% to $357.5 million and same-store sales increased 5.9%
  • Consolidated gross margin decreased by 10 basis points to 40.4% of sales
    • Product cost increased by 30 basis points to 56.9%
    • Shrinkage was lower by 20 basis points at 2.5%
  • Consolidated operating expenses decreased by 10 basis points to 30.8% of sales
    • Retail operating costs decreased 50 basis points to 22.0%
    • Distribution and transportation costs were flat at 4.6%
    • Corporate G&A costs increased 10 basis points to 3.4%
    • Other operating expenses increased 30 basis points to 0.7% which included a negative impact of $1.4 million or 38 basis points of professional fees related to the going private proposal
  • Consolidated Income Before Taxes increased to $28.4 million, or 7.7% of revenues, from $27.1 million, or 7.8% of revenues, in the prior year
  • Consolidated net income increased by $0.9 million to $17.7 million or $0.25 per diluted share, versus $16.8 million in the prior year, or $0.24 per diluted share

Eric Schiffer, CEO of 99 Cents Only Stores®, stated, "We are pleased with our financial results for the first quarter of fiscal 2012. Our long-term operational improvement initiatives have continued to meet our expectations, resulting in earnings per share of $0.25 for the first quarter of fiscal 2012.  We look forward to further discussing our results on today's earnings release conference call."

The details for participating in today's conference call can be found following the financial discussion.

CONSOLIDATED RESULTS

Net consolidated sales for the first quarter of fiscal 2012 were $368.3 million, a 6.3% increase compared to net sales of $346.5 million for the first quarter of fiscal 2011.  Retail sales for the Company's consolidated operations increased by 6.2% to $357.5 million. Same-store sales calculated on a comparable 13-week period, increased 5.9%. A favorable Easter selling season timing shift positively affected same-store sales in the first quarter of this year.

Consolidated gross profit for the first quarter of fiscal 2012 was $148.8 million, compared to $140.3 million for the first quarter of the prior fiscal year.  The Company's consolidated gross profit margin was 40.4% for the fiscal 2012 first quarter versus 40.5% for the first quarter of the prior fiscal year. The decrease in gross profit margin was primarily due to an increase in cost of products sold to 56.9% of net sales in the first quarter of fiscal 2012 from 56.6% of net sales in the first quarter of fiscal 2011 that was primarily attributable to merchandise price increases and a shift in product mix. The remaining change was mainly due to an increase in freight costs of 10 basis points in the first quarter of fiscal 2012, which was partially offset by decreases in shrinkage to 2.5% of net sales in the first quarter of fiscal 2012 from 2.7% of net sales in the first quarter of fiscal 2011, and other less significant items included in cost of sales.

Operating expenses were $113.6 million, or 30.8% of consolidated sales, for the fiscal 2012 first quarter versus $107.1 million, or 30.9% of sales, for the first quarter of the prior fiscal year.  The Company's improved operating expense ratio is primarily due to lower payroll-related expenses as a result of improvement in store labor productivity, which was partially offset by professional fees of approximately $1.4 million pertaining to the going private proposal and the related process.

Consolidated operating income for the first quarter of fiscal 2012 was $28.5 million, compared to $26.8 million for the first quarter of fiscal 2011.  Operating income as a percentage of net sales remained flat at 7.7% for both the first quarter of fiscal 2012 and the first quarter of fiscal 2011.

Net income for the first quarter of fiscal 2012 increased to $17.7 million, or $0.25 per diluted share, compared to net income of $16.8 million, or $0.24 per diluted share, for the first quarter of fiscal 2011.  

Certain additional categories of expense and other information are summarized in Management's Analysis of First Quarter Consolidated Income Statement provided in Table 1 following the financial statements for the quarter.  This information and other material information will be provided in the Company's Form 10-Q for the period ended July 2, 2011 and investors are encouraged to review the complete Form 10-Q in conjunction with this release.  Please note that Table 1 does not contain the non-GAAP measures for Texas and non-Texas operations that the Company has included in prior quarterly releases, because the Company has decided to remain in Texas for the long term and our Texas results in recent periods have not had a more significant effect on consolidated operations than other geographic regional results.  Texas is not a different business segment, as it operates with primarily the same merchandise and retail concept as the rest of the Company.

OUTLOOK

The Company believes that revenue growth in fiscal 2012 will primarily result from new store openings and increases in same-store sales. For fiscal 2012, the Company expects positive same-store sales in the low single digits and plans to open 16 stores.  Of these 16 stores, two stores will be opened in the first half of fiscal 2012 and the remaining fourteen stores in the second half of fiscal 2012. The majority of these new store openings in fiscal 2012 will be in California. The Company currently plans to accelerate its store growth rate to approximately 10% in fiscal 2013, with the majority of new stores expected to be in California.

CASH AND LIQUIDITY

As of the end of the first quarter of fiscal 2012, the Company held $221.8 million in cash and short and long-term marketable securities, and had no debt.  The Company's inventories at the end of the first quarter of fiscal 2012 were $208.2 million versus $175.1 million at the end of first quarter of fiscal 2011. The increase in inventories was primarily due to early purchases of seasonal items and opportunistic buys.

CONFERENCE CALL DETAILS

The Company's conference call to discuss its fiscal 2012 first quarter and the other matters described in this release is scheduled for today, Monday, August 8, 2011 at 1:30 p.m. Pacific Time.  You can participate in the live call by dialing (888) 771-4371 from the U.S.A. and (847) 585-4405 from international locations and entering confirmation code 30203128.  Please phone in approximately 9 minutes before the call is scheduled to begin and hold for a ConferencePlus operator to assist you.  Please inform the operator that you are calling in for 99 Cents Only Stores' first quarter fiscal 2012 earnings release conference call, and be prepared to provide the operator with your name, company name, and position if requested.  A telephone replay will be available approximately two hours after the call concludes and will be available through Monday, August 22, 2011, by dialing (888) 843-7419 from the United States, or (630) 652-3042 from international locations, and entering confirmation code 30203128.

A copy of this earnings release and any other financial and statistical information about the period to be presented in the conference call will be available prior to the call at the section of the Company's website entitled "Investor Relations" at www.99only.com.  

99 Cents ONLY STORES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)



July 2,

2011

April 2,

2011 


(Unaudited)


ASSETS



Current Assets:



Cash

$          21,779

$      16,723

Short-term investments

190,040

184,929

Accounts receivable, net of allowance for doubtful accounts of $258 and $258 at July 2, 2011 and April 2, 2011, respectively

1,626

1,655

Income taxes receivable

6,367

15,901

Deferred income taxes

30,049

30,049

Inventories, net

208,197

191,535

Other

11,266

11,213




Total current assets

469,324

452,005

Property and equipment, net

318,277

313,852

Long-term deferred income taxes

24,079

24,608

Long-term investments in marketable securities

9,988

11,232

Assets held for sale

7,356

7,356

Deposits and other assets

15,092

15,162




Total assets

$        844,116

$  824,215







LIABILITIES AND SHAREHOLDERS' EQUITY



Current Liabilities:



Accounts payable

$  49,541

$  45,163

Payroll and payroll-related

10,394

15,598

Sales tax

6,138

6,544

Other accrued expenses

20,982

18,881

Workers' compensation

41,139

42,430

Current portion of capital lease obligation

73

75




Total current liabilities

128,267

128,691

Deferred rent

8,603

8,678

Deferred compensation liability

4,959

4,924

Capital lease obligation, net of current portion

411

373




Total liabilities

142,240

142,666




Commitments and contingencies



Shareholders' Equity:



Preferred stock, no par value – authorized, 1,000,000 shares; no shares issued or outstanding

Common stock, no par value – authorized, 200,000,000 shares; issued and outstanding, 70,516,458 shares at July 2, 2011 and 70,327,068 shares at April 2, 2011

255,704

253,039

Retained earnings

446,519

428,836

Other comprehensive loss

(347)

(326)




Total shareholders' equity

701,876

681,549




Total liabilities and shareholders' equity

$  844,116

$  824,215







99 Cents ONLY STORES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)



First Quarter Ended 


July 2,

2011  

June 26,

2010  

Net Sales:



99 Cents Only Stores

$           357,544

$      336,554

Bargain Wholesale

10,796

9,921




Total sales

368,340

346,475




Cost of sales (excluding depreciation and amortization expense shown separately below)

219,520

206,213




Gross profit

148,820

140,262

Selling, general and administrative expenses:



Operating expenses

113,566

107,050

Depreciation and amortization

6,713

6,392




Total selling, general and administrative expenses

120,279

113,442




Operating income

28,541

26,820




Other (income) expense:



Interest income

(142)

(234)

Interest expense

301

1

Other

(43)

(9)




Total other (income) expense, net

116

(242)




Income before provision for income taxes

28,425

27,062

Provision for income taxes

10,742

10,248




Net income

$           17,683

$        16,814




Earnings per common share:



Basic

$               0.25

$            0.24




Diluted

$               0.25

$            0.24




Weighted average number of common shares outstanding:



Basic

70,465

69,680




Diluted

71,332

70,921







99 Cents ONLY STORES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)



First Quarter Ended



July 2,

2011


June 26,

2010


Cash flows from operating activities:



Net income

$           17,683

$          16,814

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



Depreciation and amortization

6,713

6,392

Loss on disposal of fixed assets

66

28

Excess tax benefit from share-based payment arrangements

(319)

(242)

Deferred income taxes

(16)

(54)

Stock-based compensation expense

682

874

Changes in assets and liabilities associated with operating activities:



Accounts receivable

29

874

Inventories

(16,437)

(4,116)

Deposits and other assets

(117)

(407)

Accounts payable

5,767

3,589

Accrued expenses

(2,575)

(4,393)

Accrued workers' compensation

(1,291)

(291)

Income taxes

9,534

3,497

Deferred rent

(75)

117

Other long-term liabilities

(54)




Net cash provided by operating activities

19,644

22,628




Cash flows from investing activities:



Purchases of property and equipment

(12,591)

(9,432)

Proceeds from sale of fixed assets

2

54

Purchases of investments

(49,896)

(15,193)

Sales of investments

45,932

24,865




Net cash (used in) provided by investing activities

(16,553)

294




Cash flows from financing activities:



Repurchases of common stock related to issuance of performance stock units

(398)

(350)

Payments of capital lease obligation

(18)

(18)

Proceeds from exercise of stock options

2,062

1,110

Excess tax benefit from share-based payment arrangements

319

242




Net cash provided by financing activities

1,965

984




Net increase in cash

5,056

23,906

Cash and cash equivalents - beginning of period

16,723

19,877




Cash and cash equivalents - end of period

$            21,779

$         43,783








99 Cents ONLY STORES

Management Analysis of First Quarter Fiscal 2012 and 2011 Consolidated Income Statement

TABLE 1

Description


Consolidated


Consolidated




Q1



Q1


($ millions)(3)


FY2012

% Sales


FY2011

% Sales

Revenues


(unaudited)



(unaudited)



Retail


$357.5

97.1%


$336.6

97.1%


Bargain Wholesale


$10.8

2.9%


$9.9

2.9%


Total


$368.3

100.0%


$346.5

100.0%









Cost of Goods Sold








Purchase Cost


$209.7

56.9%


$196.2

56.6%


Shrinkage (1)


$9.3

2.5%


$9.3

2.7%


Other


$0.5

0.1%


$0.7

0.2%


Total Cost of Goods Sold


$219.5

59.6%


$206.2

59.5%









Gross Margin


$148.8

40.4%


$140.3

40.5%









Selling, General and Administrative Expenses








Retail Operating


$81.2

22.0%


$78.1

22.5%


Distribution and Transportation


$17.1

4.6%


$16.1

4.6%


Corporate G&A


$12.7

3.4%


$11.3

3.3%


Other (incl. Stock-comp and Long-lived asset impairment) (2)


$2.6

0.7%


$1.5

0.4%


Operating Expenses


$113.6

30.8%


$107.1

30.9%


Depreciation & Amortization


$6.7

1.8%


$6.4

1.8%


Total Operating Expenses


$120.3

32.7%


$113.4

32.7%









Operating income (loss)


$28.5

7.7%


$26.8

7.7%









Other (Income) Expense


$0.1

0.0%


($0.2)

(0.1%)









Income before provision for income taxes


$28.4

7.7%


$27.1

7.8%









Provision for Income Taxes


$10.7

2.9%


$10.2

3.0%









Net income


$17.7

4.8%


$16.8

4.9%









EPS









Basic


$0.25



$0.24



Diluted


$0.25



$0.24


Shares Outstanding








Basic


70,465



69,680



Diluted


71,332



70,921












(1)

Shrinkage includes scrap, shrink and excess and obsolete inventory.

(2)

Other SG&A includes Stock-based compensation and SG&A for the Bargain Wholesale division for first quarter of Fiscal 2012 and 2011.  


In addition, first quarter of Fiscal 2012 included $1.4 million of professional fees related to the going private proposal and the related process.

(3)

Dollar amounts and percentages may not add up due to rounding.




Founded over 25 years ago, 99 Cents Only Stores® operates 286 extreme value retail stores with 211 in California, 35 in Texas, 27in Arizona and 13 in Nevada. 99 Cents Only Stores® emphasizes quality name-brand consumables, priced at an excellent value, in convenient, attractively merchandised stores. Over half of the Company's sales come from food and beverages, including produce, dairy, deli and frozen foods, along with organic and gourmet foods. The Company's New York Stock Exchange symbol is NDN.

Safe Harbor Statement

We have included statements in this release that constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act and Section 27A of the Securities Act. The words "expect," "estimate," "anticipate," "predict," "believe" and similar expressions and variations thereof are intended to identify forward-looking statements. Such statements appear in this release and include statements regarding the intent, belief or current expectations of the Company, its directors or officers with respect to, among other things, the results of operations for fiscal 2012, the business and growth strategies of the Company, planned new store openings, our future store opening growth rate and trends affecting the financial condition or results of operations of the Company. The shareholders of the Company and other readers are cautioned not to put undue reliance on such forward-looking statements. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those projected in this release for the reasons, among others, discussed in the reports and other documents the Company files from time to time with the Securities and Exchange Commission, including the risk factors contained in the Section – "Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Company's Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.

Contact Angela Thurstan, 323-881-1272.

SOURCE 99 Cents Only Stores



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