99 Cents Only Stores® Reports Second Quarter Fiscal 2012 Diluted EPS of $0.21, Up From $0.18 for the Second Quarter of Fiscal 2011 -- Consolidated Diluted Earnings Per Share Increased 16.7% to $0.21

-- Consolidated Net Income Increased 17.1% to $15.1 Million

CITY OF COMMERCE, Calif., Nov. 9, 2011 /PRNewswire/ -- 99 Cents Only Stores® (NYSE: NDN) (the "Company") announced its financial results for the second quarter ended October 1, 2011.

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

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

  • Retail sales for the Company's consolidated operations increased by 9.0% to $352.2 million and same-store sales increased 6.7%
  • Consolidated gross margin decreased by 60 basis points to 40.2% of sales
    • Product cost increased by 70 basis points to 57.4%
    • Shrinkage was lower by 20 basis points at 2.2%
    • Other items in cost of sales increased by 10 basis points to 0.3%
  • Consolidated operating expenses decreased by 100 basis points to 31.5% of sales
    • Retail operating costs decreased 140 basis points to 22.4%
    • Distribution and transportation costs decreased 20 basis points to 4.8%
    • Corporate G&A costs increased 30 basis points to 3.6%
    • Other operating expenses increased 30 basis points to 0.7% which included a negative impact of $1.1 million or 30 basis points of professional fees related to the going private transaction
  • Consolidated Income Before Taxes increased to $24.4 million, or 6.7% of revenues, from $20.8 million, or 6.2% of revenues, in the prior year
  • Consolidated net income increased by $2.2 million to $15.1 million or $0.21 per diluted share, versus $12.9 million in the prior year, or $0.18 per diluted share

Eric Schiffer, CEO of 99 Cents Only Stores®, stated, "We are pleased with our financial results for the second quarter of fiscal 2012. Our long-term operational improvement initiatives have continued to meet our expectations, resulting in earnings per share of $0.21 for the second 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 second quarter of fiscal 2012 were $363.0 million, an 8.8% increase compared to net sales of $333.6 million for the second quarter of fiscal 2011.  Retail sales for the Company's consolidated operations increased by 9.0% to $352.2 million. Same-store sales calculated on a comparable 13-week period increased 6.7%.

Consolidated gross profit for the second quarter of fiscal 2012 was $145.8 million, compared to $136.1 million for the second quarter of the prior fiscal year.  The Company's consolidated gross profit margin was 40.2% for the second quarter of fiscal 2012 versus 40.8% for the second quarter of the prior fiscal year. The decrease in gross profit margin was primarily due to an increase in cost of products sold to 57.4% of net sales in the second quarter of fiscal 2012 from 56.7% of net sales in the second quarter of fiscal 2011 that was primarily attributable to merchandise price increases and a shift in product mix. Freight costs also increased 20 basis points in the second quarter of fiscal 2012. These unfavorable variances were offset by decreases in shrinkage to 2.2% of net sales in the second quarter of fiscal 2012 from 2.4% of net sales in the second quarter of fiscal 2011, and other less significant items included in cost of sales.

Operating expenses were $114.4 million, or 31.5% of consolidated sales, for the fiscal 2012 second quarter versus $108.3 million, or 32.5% of sales, for the second 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 an increase in legal accruals of approximately $1.8 million for estimated future payments for settlement of litigation and professional fees of approximately $1.1 million pertaining to the going private transaction and the related process.

Consolidated operating income for the second quarter of fiscal 2012 was $24.4 million, compared to $20.7 million for the second quarter of fiscal 2011.  Operating income as a percentage of net sales was 6.7% in fiscal 2012 compared to 6.2% in fiscal 2011.

Net income for the second quarter of fiscal 2012 increased to $15.1 million, or $0.21 per diluted share, compared to net income of $12.9 million, or $0.18 per diluted share, for the second quarter of fiscal 2011.  

Certain additional categories of expense and other information are summarized in Management's Analysis of Second 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 October 1, 2011 and investors are encouraged to review the complete Form 10-Q in conjunction with this release.  

OUTLOOK

The Company believes that revenue growth in the remainder of fiscal 2012 will primarily result from increases in same-store sales, the full-year effect of stores opened since last year, and new store openings. For fiscal 2012, as previously announced, the Company has raised its same-store-sales percentage increase expectations for the full year to mid-single digits and plans to open 12 stores in the second half of the year.  Of these 12 new stores, the Company has already opened one store in the third quarter and plans to open two more stores in the third quarter and approximately nine stores in the fourth quarter of fiscal 2012.  The majority of these new store openings in fiscal 2012 will be in California. The Company 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 second quarter of fiscal 2012, the Company held $222.7 million in cash and short and long-term marketable securities, and had no debt.  The Company's inventories at the end of the second quarter of fiscal 2012 were $233.2 million versus $197.0 million at the end of second quarter of fiscal 2011. The increase in inventories was primarily due to early receipts of seasonal items, opportunistic buys and to drive higher seasonal sales.

CONFERENCE CALL DETAILS

The Company's conference call to discuss its fiscal 2012 second quarter and the other matters described in this release is scheduled for today, Wednesday, November 9, 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 30971818.  Please phone in approximately 9 minutes before the call is scheduled to begin and hold for a Conference Plus operator to assist you.  Please inform the operator that you are calling in for 99 Cents Only Stores' second 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 Wednesday, November 23, 2011, by dialing (888) 843-7419 from the United States, or (630) 652-3042 from international locations, and entering confirmation code 30971818.

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)



October 1, 2011

April 2,
2011 


(Unaudited)


ASSETS



Current Assets:



Cash

$          24,684

$      16,723

Short-term investments

189,644

184,929

Accounts receivable, net of allowance for doubtful accounts of $252 and $258 at October 1, 2011 and April 2, 2011, respectively

2,491

1,655

Income taxes receivable

3,406

15,901

Deferred income taxes

30,049

30,049

Inventories, net

233,173

191,535

Other

10,966

11,213




Total current assets

494,413

452,005

Property and equipment, net

322,792

313,852

Long-term deferred income taxes

23,932

24,608

Long-term investments in marketable securities

8,350

11,232

Assets held for sale

7,356

7,356

Deposits and other assets

15,649

15,162




Total assets

$        872,492

$  824,215







LIABILITIES AND SHAREHOLDERS' EQUITY



Current Liabilities:



Accounts payable

$  52,824

$  45,163

Payroll and payroll-related

15,231

15,598

Sales tax

7,490

6,544

Other accrued expenses

24,379

18,881

Workers' compensation

40,261

42,430

Current portion of capital lease obligation

74

75




Total current liabilities

140,259

128,691

Deferred rent

9,792

8,678

Deferred compensation liability

4,244

4,924

Capital lease obligation, net of current portion

393

373




Total liabilities

154,688

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, 70,584,970 shares at October 1, 2011 and 70,327,068 shares at April 2, 2011

256,653

253,039

Retained earnings

461,633

428,836

Other comprehensive loss

(482)

(326)




Total shareholders' equity

717,804

681,549




Total liabilities and shareholders' equity

$  872,492

$  824,215







99 CENTS ONLY STORES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)



For the Second Quarter Ended 

For the First Half Ended 


October 1, 2011  

September 25, 2010  

October 1, 2011

September 25, 2010  

Net Sales:





         99 Cents Only Stores

$        352,220

$      323,248

$     709,764

$     659,802

         Bargain Wholesale

10,818

10,311

21,614

20,232






         Total sales

363,038

333,559

731,378

680,034











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

217,264

197,488

436,784

403,701

Gross profit

145,774

136,071

294,594

276,333

Selling, general and administrative expenses:





Operating expenses

114,367

108,254

227,933

215,304

Depreciation and amortization

6,990

7,109

13,703

13,501






Total selling, general and administrative expenses

121,357

115,363

241,636

228,805






         Operating income

24,417

20,708

52,958

47,528






Other (income) expense:





Interest income

(60)

(207)

(202)

(441)

Interest expense

34

10

335

11

Other-than-temporary investment impairment due to credit losses   

31

112

31

112

Other

(19)

(5)

(62)

(14)






                    Total other (income) expense, net

(14)

(90)

102

(332)






         Income before provision for income taxes

24,431

20,798

52,856

47,860

Provision for income taxes

9,317

7,862

20,059

18,110






Net income

$          15,114

$        12,936

$       32,797

$       29,750






Earnings per common share:





Basic

$               0.21

$            0.19

$          0.46

$           0.43






Diluted

$               0.21

$            0.18

$          0.46

$           0.42






Weighted average number of common shares outstanding:





Basic

70,570

69,882

70,517

69,768






Diluted

71,334

70,972

71,333

70,574









99 CENTS ONLY STORES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)



First Half Ended


October 1, 2011 

September 25,

2010 

Cash flows from operating activities:



Net income                                                                       

$           32,797

$          29,750

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



Depreciation and amortization

13,703

13,501

Loss on disposal of fixed assets

80

131

Investments impairment

31

112

Excess tax benefit from share-based payment arrangements

(584)

(696)

Deferred income taxes

(105)

32

Stock-based compensation expense

1,313

1,502

Changes in assets and liabilities associated with operating activities:



Accounts receivable

(836)

290

Inventories

(42,641)

(25,882)

Deposits and other assets

165

(182)

Accounts payable

8,498

5,287

Accrued expenses

7,600

407

Accrued workers' compensation

(2,169)

(2,135)

Income taxes

12,495

(6,737)

Deferred rent

1,114

(8)

Other long-term liabilities

(108)




Net cash provided by operating activities

31,461

15,264




Cash flows from investing activities:



Purchases of property and equipment

(23,553)

(15,547)

Proceeds from sale of fixed assets

2

57

Purchases of investments

(50,389)

(40,222)

Sales of investments

48,174

32,038




Net cash used in investing activities

(25,766)

(23,674)




Cash flows from financing activities:



Repurchases of common stock related to issuance of performance stock units

(753)

(735)

Payments of capital lease obligation

(35)

(34)

Proceeds from exercise of stock options

2,470

2,498

Excess tax benefit from share-based payment arrangements

584

696




Net cash provided by financing activities

2,266

2,425




Net increase (decrease) in cash

7,961

(5,985)

Cash and cash equivalents - beginning of period

16,723

19,877




Cash and cash equivalents - end of period

$            24,684

$         13,892








99 CENTS ONLY STORES

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

TABLE 1

Description


Consolidated


Consolidated




Q2



Q2


($ millions)(3)


FY2012

% Sales


FY2011

% Sales

Revenues


(unaudited)



(unaudited)



Retail


$352.2

97.0%


$323.2

96.9%


Bargain Wholesale


$10.8

3.0%


$10.3

3.1%


Total


$363.0

100.0%


$333.6

100.0%









Cost of Goods Sold








Purchase Cost


$208.3

57.4%


$189.0

56.7%


Shrinkage (1)


$7.9

2.2%


$7.9

2.4%


Other


$1.1

0.3%


$0.7

0.2%


Total Cost of Goods Sold


$217.3

59.8%


$197.5

59.2%









Gross Margin


$145.8

40.2%


$136.1

40.8%









Selling, General and Administrative Expenses








Retail Operating


$81.5

22.4%


$79.3

23.8%


Distribution and Transportation


$17.5

4.8%


$16.7

5.0%


Corporate G&A


$13.0

3.6%


$11.0

3.3%


Other (incl. Stock-comp and professional fees related to going private) (2)


$2.4

0.7%


$1.2

0.4%


Operating Expenses


$114.4

31.5%


$108.3

32.5%


Depreciation & Amortization


$7.0

1.9%


$7.1

2.1%


Total Operating Expenses


$121.4

33.4%


$115.4

34.6%









Operating income


$24.4

6.7%


$20.7

6.2%









Other (Income) Expense


($0.0)

0.0%


($0.1)

0.0%









Income before provision for income taxes


$24.4

6.7%


$20.8

6.2%









Provision for Income Taxes


$9.3

2.6%


$7.9

2.4%









Net income


$15.1

4.2%


$12.9

3.9%









EPS









Basic


$0.21



$0.19



Diluted


$0.21



$0.18


Shares Outstanding








Basic


70,570



69,882



Diluted


71,334



70,972










(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 second quarter of fiscal 2012 and 2011.  


In addition, second quarter of fiscal 2012 included $1.1 million of professional fees related to the going private transaction and the related process.


(3)

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

























Founded in 1982, 99 Cents Only Stores® operates 289 extreme value retail stores with 214 in California, 35 in Texas, 27 in Arizona and 13 in Nevada. The Company's next store grand opening is Thursday November 10th in Sugar Land, Texas. 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," "plan," "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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