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99 Cents Only Stores® Reports Third Quarter And The First Three Quarters Of Fiscal 2013 Results

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CITY OF COMMERCE, Calif., Feb. 6, 2013 /PRNewswire/ -- 99 Cents Only Stores® (the "Company") announced its financial results for the third quarter and the first three quarters of fiscal 2013 ended December 29, 2012.

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

The Company's net sales increased $35.6 million, or 8.8%, to $439.5 million for the third quarter of fiscal 2013 compared to $403.9 million for the third quarter of fiscal 2012.  Same-store sales, calculated on a comparable 13-week period, increased 4.3%.  The Company's pro forma Adjusted EBITDA1 was $51.0 million in the third quarter of fiscal 2013, an increase of $3.1 million, or 6.5%, compared to $47.9 million in the third quarter of fiscal 2012, and the Company's pro forma Adjusted EBITDA margin was 11.6% compared to 11.9% over the same period.

The Company's net sales increased $98.5 million, or 8.7%, to $1.23 billion for the first three quarters of fiscal 2013 compared to $1.14 billion for the first three quarters of fiscal 2012.  Same-store sales, calculated on a comparable 39-week period, increased 4.3%.  The Company's pro forma Adjusted EBITDA was $122.0 million for the first three quarters of fiscal 2013, an increase of $6.6 million, or 5.8%, compared to $115.4 million for the first three quarters of fiscal 2012, and the Company's pro forma Adjusted EBITDA margin was 9.9% compared to 10.2% over the same period.

As of the end of the third quarter of fiscal 2013, the Company's cash and short-term investments were $36.2 million and total debt was $759.3 million, consisting of net borrowings of $509.3 million under the Company's first lien term loan facility and $250 million of the Company's 11% senior unsecured notes. There were no outstanding borrowings under the Company's senior revolving credit facility. 

During the third quarter of fiscal 2013, the Company opened seven stores, four in California, one in Nevada, two in Texas, and closed one store in California upon the expiration of a lease.  As of the end of the third quarter of fiscal 2013, the Company operated 309 stores, an increase of 5.8% in store count over last year. The gross and saleable retail square footage at the end of the third quarter were 6.50 million and 5.11 million, respectively.  This represents an increase of 5.0% and 4.9% gross and saleable square footage, respectively, over last year.

The Company believes that revenue growth in the remainder of fiscal 2013 will primarily result from increases in same-store sales and new store openings. The Company currently plans to open approximately six additional stores during the fourth quarter of fiscal 2013 with the majority of new stores expected to be opened in California.

RESTATEMENT OF FIRST AND SECOND QUARTER INTERIM UNAUDITED FINANCIAL STATEMENTS

As reported on a Form 8-K filed today, the Company determined that it should have recognized a $16.3 million loss on debt extinguishment related to the repricing of its first lien term loan facility in the first quarter of fiscal 2013. Although the error had no impact on revenues, cost of sales, operating income, Adjusted EBITDA or pro forma Adjusted EBITDA, the Company has determined that it will restate its interim unaudited financial statements for the quarters ended June 30, 2012 and September 29, 2012 on an amendment to its report on Form 10-Q for the second quarter of fiscal 2013.  The $16.3 million will be recorded as a loss on extinguishment and adjustment to interest expense as part of non-operating expenses, including the related income tax effect. This restatement is reflected in the financial results for the first three quarters of fiscal 2013 ended December 29, 2012 set forth in this press release.

MERGER

On January 13, 2012, 99 Cents 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." As a result of the Merger, the accompanying financial information is presented for the "Predecessor" and "Successor" periods relating to the periods preceding and succeeding the Merger, respectively. The comparability of the financial statements of the Predecessor and Successor periods has been impacted by the application of acquisition accounting and changes in the Company's capital structure resulting from the Merger.

CONFERENCE CALL DETAILS

The Company's conference call to discuss its third quarter and the first three quarters of fiscal 2013 ended December 29, 2012 and the other matters described in this release is scheduled for Thursday, February 7, 2013 at 10:00 a.m. Pacific time (1:00 p.m. Eastern time). 

The live Third Quarter Fiscal 2013 Earnings call can be accessed by dialing (888) 771-4371 from the U.S.A., or (847) 585-4405 from international locations, and entering confirmation code 34152057.  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' Third Quarter Fiscal 2013 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 Sunday, February 24, 2013, by dialing (888) 843-7419 from the U.S.A., or (630) 652-3042 from international locations, and entering confirmation code 34152057#.

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: out-of-period adjustments, stock-based compensation, fees and expenses related to the Merger, legal settlements, non-ordinary course store closures, and other non-cash items. In calculating pro forma Adjusted EBITDA, the Company reflects the impact of the Merger on the Company's historical financial performance for the periods presented.  Adjusted EBITDA and pro forma Adjusted EBITDA, as presented herein, are supplemental measures of our performance that are 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, Adjusted EBITDA and pro forma 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, Adjusted EBITDA and pro forma 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.

1 "EBITDA," "Adjusted EBITDA" and "pro forma 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.

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


For the Third Quarter Ended


December 29,

2012

December 31,

2011


(In thousands)


(Unaudited)




Net income

$            12,692

$           22,175

Interest expense (income), net

14,718

(39)

Provision for income taxes

6,853

15,103

Depreciation and amortization

14,732

7,068




EBITDA

$            48,995

$           44,307

Out-of-period adjustments (a)

244

(2,004)

Stock-based compensation (b)

835

464

Merger expenses (c)

12

4,104

Legal settlements (d)

1,041

Texas lease termination costs (e)

73

105

Purchase accounting effect on leases (f)

373

Other (g)

505

188




Adjusted EBITDA

$            51,037

$           48,205




Additional adjustments related to the Merger:



          Executive compensation (h)

(185)

          Market value adjustments to leases (i)

(54)

          Credit facility administration fees (j)

(50)




Pro forma adjusted EBITDA

$            51,037

$           47,916




(a)   

Represents out-of-period, non-cash adjustments to reserve balances related to merchandise accruals.

(b)   

Represents stock-based compensation expense incurred in connection with various stock-based compensation plans in which certain Company employees have participated.

(c)  

Represents professional fees incurred in connection with the Merger.

(d)   

Represents the net expense associated with one-time litigation settlements involving wages.

(e)  

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

(f)   

Represents purchase accounting effect on rent revenue and rent expense.

(g)   

Represents the following non-cash charges and income (a) for all periods, amortization of gain related to sale leaseback arrangements; (b) for all periods, net gain/loss on the sale of non-core assets; (c) for third quarter of fiscal 2013, charges related to an interest rate hedging loss; (d) for third quarter of fiscal 2012, charges related to other-than-temporary investment impairments due to credit loss; (e) for third quarter of fiscal 2013, realized losses on disposition of investments.

(h)  

Represent salary adjustments implemented in connection with the Merger for our former Chief Executive Officer, former President and Chief Operating Officer, and former Executive Vice President of Special Projects.

(i)  

Represent adjustments to market value in connection with the Merger to rent payable to our affiliates under leases.

(j)   

Represents administrative fees associated with the first lien term loan facility and senior revolving credit facility.






For the First Three Quarters Ended


December 29,

2012

December 31,

2011


(In thousands)


(Unaudited)




Net income

$              8,011

$           54,972

Interest expense, net

45,573

94

Provision for income taxes

4,279

35,162

Depreciation and amortization

43,298

20,771




EBITDA

$          101,161

$         110,999

Out-of-period adjustments (a)

(806)

(6,072)

Stock-based compensation (b)

2,428

1,777

Merger expenses (c)

521

6,609

Legal settlements (d)

2,791

Texas lease termination costs (e)

283

321

Purchase accounting effect on leases (f)

1,154

Loss on extinguishment of debt (g)

16,346

Other (h)

934

189




Adjusted EBITDA

$          122,021

$         116,614




Additional adjustments related to the Merger:



          Executive compensation (i)

(555)

          Market value adjustments to leases (j)

(535)

          Credit facility administration fees (k)

(150)




Pro forma adjusted EBITDA

$           122,021

$          115,374




(a)  

Represents out-of-period, non-cash adjustments to reserve balances related to merchandise accruals.

(b)   

Represents stock-based compensation expense incurred in connection with various stock-based compensation plans in which certain Company employees have participated.

(c)  

Represents professional fees incurred in connection with the Merger.

(d)   

Represents the net expense associated with one-time litigation settlements involving wages.

(e) 

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

(f)   

Represents purchase accounting effect on rent revenue and rent expense.

(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 charges and income (a) for all periods, amortization of gain related 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 2012, charges related to other-than-temporary investment impairments due to credit loss; (e) for fiscal 2013, realized losses on disposition of investments.

(i)   

Represent salary adjustments implemented in connection with the Merger for our former Chief Executive Officer, former President and Chief Operating Officer, and former Executive Vice President of Special Projects.

(j)    

Represent adjustments to market value in connection with the Merger to rent payable to our affiliates under leases.

(k)  

Represents administrative fees associated with the first lien term loan facility and senior revolving credit facility.

 

99 CENTS ONLY STORES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)





December 29,

2012

March 31,

 2012


(Unaudited)


ASSETS



Current Assets:



Cash

$           35,677

$      27,766

Short-term investments

476

3,631

Accounts receivable, net of allowance for doubtful accounts of $343 and $280 at December 29, 2012 and March 31, 2012, respectively

1,306

2,999

Income taxes receivable

17,680

6,868

Deferred income taxes

24,091

25,843

Inventories, net

239,243

214,318

Assets held for sale

2,621

6,849

Other

13,002

11,297




Total current assets

334,096

299,571

Property and equipment, net

475,992

476,525

Deferred financing costs, net

21,730

30,400

Intangible assets, net

472,878

477,434

Goodwill

471,750

471,513

Deposits and other assets

14,380

12,598




Total assets

$      1,790,826

$   1,768,041







LIABILITIES AND SHAREHOLDERS' EQUITY



Current Liabilities:



Accounts payable

$           57,752

$      41,407

Payroll and payroll-related

19,268

15,580

Sales tax

7,929

6,128

Other accrued expenses

22,699

30,569

Workers' compensation

37,533

39,024

Current portion of long-term debt

5,237

5,250

Current portion of capital lease obligation

81

77




Total current liabilities

150,499

138,035

Long-term debt, net of current portion

754,020

758,351

Unfavorable lease commitments, net

15,865

18,959

Deferred rent

4,253

798

Deferred compensation liability

5,212

5,136

Capital lease obligation, net of current portion

292

354

Long-term deferred income taxes

216,828

214,874

Other liabilities

3,780

767




Total liabilities

1,150,749

1,137,274




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 December 29, 2012 and March 31, 2012, respectively

Additional paid-in capital

638,465

636,037

Retained earnings (deficit)

2,718

(5,293)

Other comprehensive (loss) income

(1,106)

23




Total shareholders' equity

640,077

630,767




Total liabilities and shareholders' equity

$      1,790,826

$ 1,768,041




 

99 CENTS ONLY STORES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands)

(Unaudited)





For the Third Quarter Ended

For the Three Quarters Ended


December 29, 2012


December 31, 2011

December 29, 2012


December 31, 2011


(Successor)


(Predecessor)

(Successor)


(Predecessor)

Net Sales:







99 Cents Only Stores

$           427,102


$         393,263

$       1,198,131


$      1,103,027

Bargain Wholesale

12,388


10,657

35,672


32,271








Total sales

439,490


403,920

1,233,803


1,135,298

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

264,231


238,705

750,832


675,489








Gross profit

175,259


165,215

482,971


459,809

Selling, general and administrative expenses:







Operating expenses

126,012


120,605

365,145


348,538

Depreciation

14,290


7,064

41,973


20,758

Amortization of intangible assets

442


4

1,325


13








Total selling, general and administrative expenses

140,744


127,673

408,443


369,309








Operating income

34,515


37,542

74,528


90,500








Other (income) expense:







Interest income

(29)


(79)

(288)


(281)

Interest expense

14,747


40

45,861


375

Other-than-temporary investment impairment due to credit losses


314


345

Loss on extinguishment of debt


16,346


Other

252


(11)

319


(73)








Total other expense, net

14,970


264

62,238


366








Income before provision for income taxes

19,545


37,278

12,290


90,134

Provision for income taxes

6,853


15,103

4,279


35,162








Net income

$            12,692


$          22,175

$              8,011


$            54,972








 

99 CENTS ONLY STORES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)




For the Three Quarters Ended


December 29,

2012


December 31,

2011


(Successor)


(Predecessor)

Cash flows from operating activities:




Net income

$               8,011


$             54,972

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




Depreciation

41,973


20,758

Amortization of deferred financing costs and accretion of OID

3,138


Amortization of intangible assets

1,325


13

Amortization of favorable/unfavorable leases, net

137


Loss on extinguishment of debt

16,346


Loss on disposal of fixed assets

681


8

Loss on interest rate hedge

719


Investments impairment


345

Excess tax benefit from share-based payment arrangements


(1,383)

Deferred income taxes

781


(7,838)

Stock-based compensation expense

2,428


1,777





Changes in assets and liabilities associated with operating activities:




Accounts receivable

1,700


(1,128)

Inventories

(24,940)


(46,785)

Deposits and other assets

(3,167)


(6)

Accounts payable

11,439


2,037

Accrued expenses

(2,395)


9,105

Accrued workers' compensation

(1,491)


(2,884)

Income taxes

(7,372)


13,888

Deferred rent

3,455


1,179

Other long-term liabilities

(104)






 Net cash provided by operating activities

52,664


44,058









Cash flows from investing activities:




Purchases of property and equipment

(44,428)


(33,248)

Proceeds from sale of property and fixed assets

12,044


95

Purchases of investments

(1,525)


(50,927)

Proceeds from sale of investments

4,372


49,969





Net cash used in investing activities

(29,537)


(34,111)









Cash flows from financing activities:




Payment of debt

(3,928)


Payment of debt issuance costs

(11,230)


Payments of capital lease obligation

(58)


(54)

Repurchases of common stock related to issuance of Performance Stock Units


(1,744)

Proceeds from exercise of stock options


3,338

Excess tax benefit from share-based payment arrangements


1,383





Net cash (used in) provided by financing activities

(15,216)


2,923





Net increase in cash

7,911


12,870

Cash – beginning of period

27,766


16,723





Cash – end of period

$            35,677


$           29,593





Founded in 1982, 99 Cents Only Stores® operates 312 extreme value retail stores with 228 in California, 39 in Texas, 29 in Arizona and 16 in Nevada as of February 6, 2013. 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. 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 Registration Statement on Form S-4 (File No. 333-182582), declared effective on October 9, 2012.  The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.  This release also contains non-GAAP financial measures. A GAAP reconciliation and a discussion of the Company's use of these measures are included in this release.

 

SOURCE 99 Cents Only Stores



RELATED LINKS
http://www.99only.com

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