2014

99 Cents Only Stores® Reports First Quarter Fiscal 2014 Results

CITY OF COMMERCE, Calif., Aug. 8, 2013 /PRNewswire/ -- 99¢ Only Stores® (the "Company") announced its financial results for the first quarter ended June 29, 2013.

(Logo: http://photos.prnewswire.com/prnh/20130612/LA31400LOGO)

The Company's net sales increased $32.9 million, or 8.2%, to $433.9 million for the first quarter of fiscal 2014 compared to $401.0 million for the first quarter of fiscal 2013.  Same-store sales, calculated on a comparable 13-week period, increased 3.1%.  The Company's Adjusted EBITDA(1) was $35.5 million in the first quarter of fiscal 2014, compared to $39.2 million in the first quarter of fiscal 2013, and the Company's Adjusted EBITDA margin was 8.2% compared to 9.8% over the same period. Easter, a holiday that drives the Company's busiest selling week, occurred in calendar year 2012 on April 8 and in calendar year 2013 on March 31. As a result, the Company did not benefit from the Easter selling season in the first quarter of 2014, which the Company estimates negatively impacted same-store sales by approximately 180 basis points.

During the first quarter of fiscal 2013, the Company opened six stores, three in California, one in Nevada and two in Texas.  As of June 29, 2013, the Company operated 322 stores, an increase of 7.3% in store count over last year. The gross and saleable retail square footage at the end of the first quarter were 6.74 million and 5.30 million, respectively.  This represents an increase of 6.5% and 6.4% for gross and saleable square footage, respectively, over last year.

In fiscal 2014, the Company expects to increase its store count by approximately 10%, exclusively in existing markets.

Merger

On January 13, 2012, 99¢ Only Stores was acquired by affiliates of Ares Management LLC and Canada Pension Plan Investment Board and the Gold/Schiffer family.  The acquisition is referred to as the "Merger."

CONFERENCE CALL DETAILS

The Company's conference call to discuss its first quarter fiscal 2014 ended June 29, 2013 and the other matters described in this release is scheduled for Friday, August 9, 2013 at 10:00 a.m. Pacific time (1:00 p.m. Eastern time). 

The live First Quarter Fiscal 2014 Earnings call can be accessed by dialing (888) 895-5479 from the U.S.A., or (847) 619-6250 from international locations, and entering confirmation code 35393897.  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¢ Only Stores' First Quarter Fiscal 2014 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 Friday, August 16, 2013, by dialing (888) 843-7419 from the U.S.A., or (630) 652-3042 from international locations, and entering confirmation code 35393897#.

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

Non-GAAP Financial Measures

The Company defines EBITDA as net income before interest expense (income) and other financial costs, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA for the relevant period as adjusted by the following amounts: non-cash  adjustments to reserve balances, stock-based compensation, fees and expenses related to the Merger, legal settlements, non-ordinary course store closures, and other non-cash or one-time items.  Adjusted EBITDA as presented herein, is a supplemental measure of our performance that is not required by, or presented in accordance with, generally accepted accounting principles in the United States of America ("GAAP"). The Company's management uses EBITDA and Adjusted EBITDA to assess its performance and that of its competitors. In addition, Adjusted EBITDA is used to determine the Company's compliance and ability to take certain actions under the covenants contained in the Company's debt instruments. EBITDA and Adjusted EBITDA are not measures of our financial performance under GAAP and should not be considered in isolation or as alternatives to net income, operating income or any other performance measures derived in accordance with GAAP, as measures of operating performance or operating cash flows or as measures of liquidity.

The following tables reconcile EBITDA and Adjusted EBITDA to net income for the periods indicated:



For the First Quarter Ended


June 29,

2013

June 30,

2012


(In thousands)


(Unaudited)




Net income (loss)

$               3,164

$           (4,891)

Interest expense, net

14,673

15,353

Provision (benefit) for income taxes

1,750

(2,788)

Depreciation and amortization

15,768

14,193




EBITDA

$            35,355

$           21,867

Accrual adjustments (a)

18

(695)

Stock-based compensation (b)

(1,571)

792

Merger expenses (c)

154

Texas lease termination costs (d)

(564)

105

Purchase accounting effect on leases (e)

359

410

Executive related expenses (f)

30

Loss on extinguishment of debt (g)

16,346

Other (h)

1,831

262




Adjusted EBITDA

$            35,458

$          39,241




(a)

Represents non-cash adjustments to reserve balances related to merchandise accruals.

(b)

Represents stock-based compensation expense (credit) incurred in connection with various stock-based compensation plans in which certain Company employees have participated, and former executive put rights adjustment.

(c)

Represents professional fees incurred in connection with the Merger.

(d)

Represents expenses (credits) related to the non-ordinary course termination of leases for stores previously closed in Texas.

(e)

Represents purchase accounting effect on rent revenue and rent expense.

(f)

Represents executive relocation and other expenses.

(g)

Represents loss on extinguishment of debt from the repricing of the first lien term loan facility in the first quarter of fiscal 2013.

(h)

Represents the following non-cash or one-time charges and income: (a) for all periods, amortization of gains relates to sale-leaseback arrangements; (b) for all periods, net loss on the sale of non-core assets; (c) for fiscal 2013, charges related to an interest rate hedging loss; (d) for fiscal 2014, inventory project related expenses and real estate study fees.

 





99¢ ONLY STORES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)





June 29,

2013

March 30,

 2013


(Unaudited)


ASSETS



Current Assets:



Cash

$           71,326

$      45,476

Accounts receivable, net of allowance for doubtful accounts of $200 and $84 at June 29, 2013 and March 30, 2013, respectively

1,883

1,851

Income taxes receivable

2,438

3,969

Deferred income taxes

33,139

33,139

Inventories, net

210,716

201,601

Assets held for sale

2,106

2,106

Other

15,094

16,370




       Total current assets

336,702

304,512

Property and equipment, net

478,387

476,051

Deferred financing costs, net

20,296

21,016

Intangible assets, net

469,841

471,359

Goodwill

479,745

479,745

Deposits and other assets

4,808

4,554




        Total assets

$      1,789,779

$   1,757,237







LIABILITIES AND SHAREHOLDERS' EQUITY



Current Liabilities:



Accounts payable

$           85,011

$      50,011

Payroll and payroll-related

23,448

17,096

Sales tax

4,443

7,200

Other accrued expenses

24,402

29,695

Workers' compensation

38,365

39,498

Current portion of long-term debt

8,567

8,567

Current portion of capital lease obligation

84

83




        Total current liabilities

184,320

152,150

Long-term debt, net of current portion

748,830

749,758

Unfavorable lease commitments, net

13,898

14,833

Deferred rent

6,670

4,823

Deferred compensation liability

1,146

1,153

Capital lease obligation, net of current portion

249

271

Long-term deferred income taxes

187,163

186,851

Other liabilities

6,471

8,428




        Total liabilities

1,148,747

1,118,267




Commitments and contingencies 



Shareholders' Equity:



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

Common stock $0.01 par value – Class A authorized, 1,000 shares; issued and outstanding, 100 shares and Class B authorized, 1,000 shares; issued and outstanding, 100 shares at June 29, 2013 and March 30, 2013, respectively

Additional paid-in capital

652,853

654,424

Accumulated deficit

(11,038)

(14,202)

Other comprehensive loss

(783)

(1,252)




Total shareholders' equity

641,032

638,970




Total liabilities and shareholders' equity

$      1,789,779

$ 1,757,237




 




99¢ ONLY STORES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

(Unaudited)




For the First Quarter Ended


June 29,

 2013

June 30,

2012




Net Sales:



99¢ Only Stores

$           420,936

$         388,956

Bargain Wholesale

12,930

11,994




Total sales

433,866

400,950

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

266,679

243,902




Gross profit

167,187

157,048

Selling, general and administrative expenses:



Operating expenses

131,832

118,771

Depreciation

15,326

13,752

Amortization of intangible assets

442

441




        Total selling, general and administrative expenses

147,600

132,964




Operating income

19,587

24,084




Other (income) expense:



Interest income

(15)

(224)

Interest expense

14,688

15,577

Loss on extinguishment of debt

16,346

Other

64




Total other expense, net

14,673

31,763




Income (loss) before provision for income taxes

4,914

(7,679)

Provision (benefit) for income taxes

1,750

(2,788)




Net income (loss)

$               3,164

$           (4,891)




 



99¢ ONLY STORES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)




For the First Quarter Ended


June 29,

2013


June 30,

2012





Cash flows from operating activities:




Net income (loss)

$              3,164


$          ( 4,891)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:




Depreciation

15,326


13,752

Amortization of deferred financing costs and accretion of OID

1,102


1,001

Amortization of intangible assets

442


441

Amortization of favorable/unfavorable leases, net

141


47

Loss on extinguishment of debt


16,346

Loss on disposal of fixed assets

52


259

(Gain) loss on interest rate hedge

(322)


296

Stock-based compensation

(1,571)


792





Changes in assets and liabilities associated with operating activities:




    Accounts receivable

(32)


1,348

    Inventories

(9,115)


4,139

    Deposits and other assets

1,015


(2,517)

    Accounts payable

33,860


6,946

    Accrued expenses

(1,698)


(6,753)

    Accrued workers' compensation

(1,133)


(679)

    Income taxes

1,531


(3,086)

    Deferred rent

1,847


1,927

    Other long-term liabilities

(845)


(50)





         Net cash provided by operating activities

43,764


29,318









Cash flows from investing activities:




Purchases of property and equipment

(16,594)


(9,025)

Proceeds from sale of property and fixed assets

11


11,505

Purchases of investments


(384)

Proceeds from sale of investments


1,416





            Net cash (used in) provided by investing activities

(16,583)


3,512









Cash flows from financing activities:




Payment of debt

(1,310)


(1,309)

Payments of capital lease obligation

(21)


(21)

Payment of debt issuance costs


(11,230)





            Net cash used in financing activities

(1,331)


(12,560)





Net increase in cash

25,850


20,270

Cash - beginning of period

45,476


27,766





Cash - end of period

$               71,326


$            48,036





Founded in 1982, 99¢ Only Stores® operates 326 extreme value retail stores with 237 in California, 42 in Texas, 30 in Arizona and 17 in Nevada as of August 8, 2013. 99¢ 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. For more information, visit www.99only.com.

Safe Harbor Statement

The Company has included statements in this release that constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act, as amended, and Section 27A of the Securities Act of 1933, as amended. As a general matter, forward-looking statements are those focused on future or anticipated events or trends, expectations and beliefs including, among other things, (a) trends affecting the financial condition or results of operations of the Company and (b) the business and growth strategies of the Company (including the Company's store opening growth rate) that are not historical in nature. Such statements are intended to be identified by using words such as "believe," "expect," "intend," "estimate," "anticipate," "will," "project," "plan" and similar expressions in connection with any discussion of future operating or financial performance. Any forward-looking statements are and will be based upon the Company's then-current expectations, estimates and assumptions regarding future events and are applicable only as of the dates of such statements. 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, the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections contained in the Company's Annual Report on Form 10-K for the fiscal year ended March 30, 2013.  The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 






(1)

"EBITDA" and "Adjusted EBITDA" are financial measures that are considered "non-GAAP financial measures" under the Securities and Exchange Commission regulations.  The definitions of, an explanation of how and why the Company uses, and a reconciliation to the closest GAAP measure of these non-GAAP measures are included in this press release.

 

 

SOURCE 99 Cents Only Stores



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