Natural Grocers by Vitamin Cottage Announces Second Quarter and First Half Fiscal Year 2013 Results

LAKEWOOD, Colo., May 9, 2013 /PRNewswire/ -- Natural Grocers by Vitamin Cottage, Inc. (NYSE: NGVC) today announced results for the second quarter and first half of fiscal year 2013, and updated its outlook for fiscal year 2013.

(Logo: http://photos.prnewswire.com/prnh/20121115/LA13448LOGO)

An Introduction

In addition to presenting the financial results of Natural Grocers by Vitamin Cottage, Inc. (NGVC) and its subsidiaries (collectively, the Company) in conformity with U.S. generally accepted accounting principles (GAAP), the Company has presented selected second quarter and first half of fiscal year 2012 results on a pro forma basis to reflect the purchase of the 45% noncontrolling interest in Boulder Vitamin Cottage Group, LLC (BVC), which owned five stores in Colorado.

Pro forma adjusted financial results and EBITDA are non-GAAP financial measures.  The Company describes the use of these non-GAAP financial measures at the end of this earnings release.  In addition, reconciliations of pro forma adjusted results and EBITDA to the comparable GAAP measures are presented in schedules to this earnings release.

Highlights for Second Quarter and First Half Fiscal Year 2013 Compared to Second Quarter and First Half Fiscal Year 2012

  • Net sales increased 25.4% to $106.5 million in the second quarter and increased 26.6% to $202.3 million in the first half of fiscal 2013.
  • Daily average comparable store sales increased 10.6% in the second quarter and increased 11.6% in the first half of fiscal 2013. Daily average comparable store sales removes the effect of the loss of two selling days in the second quarter of fiscal 2013 due to leap year in 2012 and the occurrence of Easter in March 2013 rather than April 2012.
  • Net income attributable to NGVC increased 29.5% to $3.2 million with diluted earnings per share of $0.14 in the second quarter and increased 56.5% to $5.4 million with diluted earnings per share of $0.24 in the first half of fiscal 2013.
  • Net income attributable to NGVC compared to pro forma net income attributable to NGVC (which illustrates net income as if the Company owned 100% of BVC for the comparable period in fiscal year 2012) increased 20.6% to $3.2 million for the second quarter and increased 42.1% to $5.4 million in the first half of fiscal 2013.
  • EBITDA increased 28.3% to $8.8 million in the second quarter and increased 39.6% to $15.5 million in the first half of fiscal 2013.

"We are pleased to announce our results this quarter with continued strength in both sales and earnings growth while remaining focused on our five founding principles," stated Kemper Isely, Co-President.

Operating Results — Second Quarter Fiscal Year 2013 Compared to Second Quarter Fiscal Year 2012

During the second quarter of fiscal 2013, net sales increased 25.4% over the same period in fiscal 2012 to $106.5 million, due to a $14.7 million increase in sales from new stores and a $6.9 million, or 8.1% increase in comparable store sales. Daily average comparable store sales increased 10.6% in the second quarter of fiscal 2013 compared to a 10.4% increase in the second quarter of fiscal 2012. The Company uses this metric to remove the effect of differences in the number of selling days in the comparable periods. The 10.6% increase in the second quarter of fiscal 2013 was driven equally by increases in daily average transaction count and average transaction size. Daily average mature store sales increased 5.8% in the second quarter of fiscal 2013. For fiscal 2013, mature stores include all stores open during or before 2008.

Gross profit during the second quarter of fiscal 2013 increased 23.9% over the same period in fiscal 2012 to $31.8 million. Gross profit reflects earnings after both product and occupancy costs. Gross margin decreased to 29.9%, during the second quarter of fiscal 2013 from 30.2% in the second quarter of fiscal 2012, due to a shift in product mix toward products with slightly lower margins, partially offset by purchasing improvements. In addition, occupancy costs as a percentage of sales increased due to more expensive leases.

In the second quarter of fiscal 2012, all of the Company's leases were accounted for as operating leases with rent expense included in occupancy costs. During the second quarter of fiscal 2013, seven of the Company's stores were accounted for as capital leases. For leases accounted for as capital leases, the Company does not record straight-line rent expense in cost of goods sold and occupancy costs, but rather rental payments are recognized as a reduction of the capital lease liabilities and as interest expense. If these leases had qualified as operating leases the straight-line rent expense would have been included in occupancy costs, and the Company's gross profit would have been approximately 40 basis points lower and interest expense would have been approximately 35 basis points lower as a percentage of sales.

Store expenses as a percentage of sales for the second quarter of fiscal 2013 decreased to 20.8% from 21.2% of sales during the same period in fiscal 2012. The decrease was primarily driven by a decrease in salary related expenses at comparable stores, partially offset by an increase in salary related expenses at new stores, all as a percentage of related sales.

Administrative expenses as a percentage of sales decreased 20 basis points, quarter over quarter, as a result of the Company's ability to support additional store investments and sales without proportionate investments in overhead.

Pre-opening and relocation expenses as a percentage of sales increased 20 basis points, quarter over quarter, primarily due to the increased number, and the timing of new store openings in fiscal 2013.

Interest expense as a percent of sales increased 20 basis points, quarter over quarter, due to capital leases partially offset by the payoff of the term loan and all outstanding amounts under the revolving credit facility in July 2012.

As a result of the purchase of the remaining noncontrolling interest in BVC in July 2012, income from the five BVC stores is included in net income and there was no net income attributable to noncontrolling interest in the second quarter of fiscal 2013. The prior comparable quarter included $293,000 of net income attributable to noncontrolling interest.

Net income attributable to NGVC increased to $3.2 million for the second quarter of fiscal 2013, a 29.5% increase compared to the same period in fiscal 2012. Net income attributable to NGVC increased 20.6% compared to pro forma net income attributable to NGVC in the second quarter of fiscal 2012.

EBITDA increased $1.9 million or 28.3%, to $8.8 million or 8.2% of sales for the second quarter of fiscal 2013 compared to $6.8 million or 8.0% of sales in the same period in fiscal 2012. The new stores that were accounted for as capital leases rather than being reflected as operating leases increased EBITDA as a percentage of sales by approximately 55 basis points, due to the impact on gross profit as discussed above as well as occupancy costs that would have been included in pre-opening expenses.

Operating Results — First Half Fiscal Year 2013 Compared to First Half Fiscal Year 2012

During the first half of fiscal 2013, net sales increased 26.6% over the same period in fiscal 2012 to $202.3 million, due to a $26.0 million increase in sales from new stores and a $16.5 million, or 10.4% increase in comparable store sales. Daily average comparable store sales increased 11.6% in the first half of fiscal 2013 compared to a 9.6% increase in the first half of fiscal 2012. The Company uses this metric to remove the effect of differences in the number of selling days in the comparable periods. The 11.6% increase in the first half of fiscal 2013 compared to the first half of fiscal 2012 is due to a 6.6% increase in daily average transaction count and a 4.7% increase in average transaction size. Daily average mature store sales increased 6.9%, in the first half of fiscal 2013. For fiscal 2013, mature stores include all stores open during or before 2008.

Gross profit during the first half of fiscal 2013 increased 26.2% over the same period in fiscal 2012 to $59.7 million. Gross profit reflects earnings after both product and occupancy costs. Gross margin decreased to 29.5% during the first half of fiscal 2013 from 29.6% in the first half of fiscal 2012 for two reasons. The first reason was a shift in product mix toward products with slightly lower margins, offset by purchasing improvements. The second reason was a decrease in product margin for bulk products due to increased production costs as a result of the relocation to a larger bulk food repackaging and distribution center in September 2012. In addition, occupancy costs as a percentage of sales increased due to more expensive leases.

In the first half of fiscal 2012, all of the Company's leases were accounted for as operating leases with rent expense included in occupancy costs. During the first half of fiscal 2013, seven of the Company's stores were accounted for as capital leases. For leases accounted for as capital leases, the Company does not record straight-line rent expense in cost of goods sold and occupancy costs, but rather rental payments are recognized as a reduction of the capital lease liabilities and as interest expense. If these leases had qualified as operating leases the straight-line rent expense would have been included in occupancy costs, and the Company's gross profit would have been approximately 35 basis points lower and interest expense would have been approximately 30 basis points lower as a percentage of sales.

Store expenses as a percentage of sales for the first half of fiscal 2013 decreased to 20.9% from 21.6% of sales during the same period in fiscal 2012. The decrease was primarily driven by a decrease in salary related expenses as a percent of sales at comparable stores.

Administrative expenses as a percentage of sales decreased 20 basis points, first half over first half, as a result of the Company's ability to support additional store investments and sales without proportionate investments in overhead.

Pre-opening and relocation expenses as a percentage of sales increased 20 basis points, first half over first half, primarily due to the increased number, and the timing of new store openings in fiscal 2013.

Interest expense as a percentage of sales increased ten basis points, first half over first half, due to capital leases partially offset by the payoff of the term loan and all outstanding amounts under the revolving credit facility in July 2012.

As a result of the purchase of the remaining noncontrolling interest in BVC in July 2012, income from the five BVC stores is included in net income and there was no net income attributable to noncontrolling interest in the first half of fiscal 2013. The prior comparable period included $562,000 of net income attributable to noncontrolling interest.

Net income attributable to NGVC increased to $5.4 million for the first half of fiscal 2013, a 56.5% increase compared to the same period in fiscal 2012. Net income attributable to NGVC increased 42.1% compared to pro forma net income attributable to NGVC in the first half of fiscal 2012.

EBITDA increased $4.4 million or 39.6%, to $15.5 million or 7.7% of sales in the first half of fiscal 2013 compared to $11.1 million or 7.0% of sales in the same period in fiscal 2012. The new stores that were accounted for as capital leases rather than being reflected as operating leases increased EBITDA as a percentage of sales by approximately 45 basis points, due to the impact on gross profit as discussed above as well as occupancy costs that would have been included in pre-opening expenses.

Balance Sheet and Cash Flow

During the first half of fiscal 2013 the Company generated $10.7 million in cash from operating activities and invested $17.7 million in capital expenditures, primarily for new stores.

The Company ended the second quarter of fiscal 2013 with $9.5 million in cash and cash equivalents, $500,000 in restricted cash and $1.8 million in available for sale securities, as well as $15.0 million available under the revolving credit facility.

The Company was deemed to be the owner during the construction period for five build-to-suit store locations. Two opened during the fourth quarter of fiscal 2012, two opened during the first quarter of fiscal 2013 and one opened during the second quarter of fiscal 2013. In addition, the Company has two stores which are accounted for as capital leases. Both opened during the second quarter of fiscal 2013.

Growth and Development

During the second quarter of fiscal 2013, the Company opened four new stores, bringing the total store count to 65 stores located in 13 states.

The Company plans to open 13 stores in fiscal year 2013 and expects to relocate one and remodel two existing stores. On April 23, 2013 the Company opened its first store of the third quarter in Kalispell, MT.

The Company has signed leases for the remaining six stores planned to open in fiscal year 2013 and four stores planned to open in fiscal year 2014. Leases have been signed for locations in Idaho Falls, ID; Shawnee and Topeka, KS; Omaha, NE; Tulsa, OK; Beaverton, Bend, Gresham and Salem, OR; and Wichita Falls, TX.

Outlook Fiscal Year 2013

The following table provides information on the Company's updated fiscal year 2013 outlook.



Prior Fiscal

2013 Outlook


Current Fiscal

2013 Outlook


First Half FY'13

Actual


Number of new stores


12


13


6


Number of remodels/relocations


3


*



Daily average comparable store sales growth


8.0% to 9.0%


8.5% to 9.5%


11.6%


EBITDA percent of sales


7.2% to 7.4%


7.3% to 7.5%


7.7%


Net income percent of sales


2.5% to 2.7%


*


2.7%


Diluted earnings per share


$0.46 to $0.49


*


$0.24


Capital expenditures


$25 to $30 mil


$28 to $33 mil

(1)

$17.7mil

(2)

*

No change from prior outlook.



(1)

Reflects opening 13 stores in fiscal 2013 compared to prior outlook of 12 stores and increased capital expenditures on the three remodels/relocations planned for the second half of fiscal 2013.

(2)

Includes $5.0 million of capital expenditures for assets acquired as of September 30, 2012 but paid during the first half of fiscal 2013, primarily for new stores.

Earnings Conference Call

The Company will host a conference call today at 2:30 p.m. Mountain Time (4:30 p.m. Eastern Time) to discuss this earnings release. The dial-in number is US: 1-800-860-2442; Canada: 1-866-605-3852 or international: 1-412-858-4600. The conference ID is "Natural Grocers by Vitamin Cottage." A simultaneous audio webcast will be available at http://Investors.NaturalGrocers.com and archived for a minimum of 30 days.

About Natural Grocers by Vitamin Cottage

Natural Grocers by Vitamin Cottage, Inc. (NYSE: NGVC) is a rapidly expanding specialty retailer of natural and organic groceries and dietary supplements whose products must meet strict quality guidelines. Grocery products may not contain artificial colors, flavors, preservatives, sweeteners, or partially hydrogenated or hydrogenated oils. Natural Grocers' flexible small-store format allows it to offer affordable prices in a shopper-friendly retail environment. The Company provides extensive free science-based nutrition education programs to help customers make informed health and nutrition choices. The Company, founded in 1955, has over 65 stores in 13 states.

Visit www.NaturalGrocers.com for more information and store locations.

Forward Looking Statements

The following constitutes a "safe harbor" statement under the Private Securities Litigation Reform Act of 1995. Except for the historical information contained herein, statements in this release are "forward-looking statements" and are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially from those described in the forward-looking statements because of factors such as our industry, business strategy, goals and expectations concerning our market position, the economy, future operations, margins, profitability, capital expenditures, liquidity and capital resources, other financial and operating information and other risks detailed in the Company's Form 10-K for the year-ended September 30, 2012, as amended by Form 10-K/A (Form 10-K) and our subsequent quarterly reports on Form 10-Q. The information contained herein speaks only as of the date of this release and the Company undertakes no obligation to update forward-looking statements.

For further information regarding risks and uncertainties associated with our business, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of our SEC filings, including, but not limited to, our Form 10-K and our subsequent quarterly reports on Form 10-Q, copies of which may be obtained by contacting investor relations at 303-986-4600 or by visiting our website at http://Investors.NaturalGrocers.com.

 

NATURAL GROCERS BY VITAMIN COTTAGE, INC.

Consolidated Statements of Income

(Unaudited)









Three months ended

March 31,


Six months ended

March 31,




2013


2012


2013


2012


Net sales


$

106,484,819


84,907,259


202,316,167


159,745,878


Cost of goods sold and occupancy costs


74,668,098


59,223,589


142,662,598


112,462,998


Gross profit


31,816,721


25,683,670


59,653,569


47,282,880


Store expenses


22,162,828


18,028,062


42,365,511


34,467,921


Administrative expenses


3,341,579


2,812,256


6,667,607


5,524,926


Pre-opening and relocation expenses


796,304


426,728


1,315,290


853,631




26,300,711


21,267,046


50,348,408


40,846,478


Operating income


5,516,010


4,416,624


9,305,161


6,436,402


Other income (expense):










Dividends and interest income


2,450


2,329


4,639


4,011


Interest expense


(401,361)


(154,928)


(656,463)


(330,127)


Total other expense


(398,911)


(152,599)


(651,824)


(326,116)


Income before income taxes


5,117,099


4,264,025


8,653,337


6,110,286


Provision for income taxes


(1,899,901)


(1,486,443)


(3,214,739)


(2,072,705)


Net income


3,217,198


2,777,582


5,438,598


4,037,581


Net income attributable to noncontrolling interest



(292,503)



(562,189)


Net income attributable to Natural Grocers by Vitamin Cottage, Inc.


$

3,217,198


2,485,079


5,438,598


3,475,392


Net income attributable to Natural Grocers by Vitamin Cottage, Inc. per common share:










Basic


$

0.14


0.11


0.24


0.16


Diluted


$

0.14


0.11


0.24


0.16


Weighted average common shares outstanding:










Basic


22,393,993


22,372,184


22,382,969


22,372,184


Diluted


22,441,445


22,372,184


22,437,183


22,372,184


 

 

NATURAL GROCERS BY VITAMIN COTTAGE, INC.

Consolidated Balance Sheets

(Unaudited)




March 31,

2013


September 30,

2012


Assets






Current assets:






Cash and cash equivalents


$

9,497,330


17,290,948


Restricted cash


500,000



Short term investments — available-for-sale securities


1,828,715


777,445


Accounts receivable, net


1,483,034


1,755,142


Merchandise inventory


42,536,486


37,543,861


Prepaid expenses and other assets


885,025


696,364


Deferred income tax assets


1,007,314


842,963


Total current assets


57,737,904


58,906,723


Property and equipment, net


85,649,939


64,602,743


Other assets:






Long-term investments — available-for-sale securities



973,729


Deposits and other assets


201,268


196,365


Goodwill


511,029


511,029


Deferred financing costs, net


42,207


54,643


Other intangibles, net of accumulated amortization of $654,187 and $626,609, respectively


388,886


416,464


Total other assets


1,143,390


2,152,230


Total assets


$

144,531,233


125,661,696


Liabilities and Stockholders' Equity






Current liabilities:






Accounts payable


$

26,319,211


26,031,756


Accrued expenses


9,519,631


7,783,430


Note payable — related party, current portion


154,135


260,187


Capital lease finance obligation, current portion


48,859


11,884


Capital lease obligation, current portion


150,009



Total current liabilities


36,191,845


34,087,257


Long-term liabilities:






Capital lease finance obligation, net of current portion


11,121,679


4,168,700


Capital lease finance obligation for assets under construction



1,345,258


Capital lease obligation, net of current portion


4,696,557



Deferred income tax liabilities


4,959,413


4,143,351


Deferred rent


3,939,604


3,618,233


Leasehold incentives


4,988,422


5,327,408


Note payable — related party, net of current portion



22,312


Total long-term liabilities


29,705,675


18,625,262


Total liabilities


65,897,520


52,712,519


Commitments






Stockholders' equity:






Common stock, $0.001 par value. Authorized 50,000,000 shares, 22,401,924 and 22,372,184 issued and outstanding at March 31, 2013 and September 30, 2012, respectively


22,402


22,372


Additional paid in capital


52,918,503


52,675,925


Accumulated other comprehensive loss


(366)


(3,696)


Retained earnings


25,693,174


20,254,576


Total stockholders' equity


78,633,713


72,949,177


Total liabilities and stockholders' equity


$

144,531,233


125,661,696


 

NATURAL GROCERS BY VITAMIN COTTAGE, INC.

Consolidated Statements of Cash Flows

(Unaudited)




Six months ended March 31,




2013


2012


Operating activities:






Net income


$

5,438,598


4,037,581


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






Depreciation and amortization


6,225,368


4,688,997


Gain on disposal of property and equipment


(2,474)



Stock-based compensation


43,445



Deferred income tax expense


651,711


499,622


Excess tax benefit from stock-based compensation


(210,935)



Amortization of deferred financing costs


30,618


22,424


Interest accrued on investments and amortization of premium


12,156



Other amortization


25,578


33,918


Changes in operating assets and liabilities






Decrease (increase) in:






Accounts receivable, net


272,108


43,936


Income tax receivable



1,660,655


Merchandise inventory


(4,992,625)


(3,792,414)


Prepaid expenses and other assets


(193,564)


(213,413)


Increase (decrease) in:






Accounts payable


1,338,858


3,559,122


Accrued expenses


2,072,136


2,266,112


Deferred rent and lease incentives


(17,615)


1,124,154


Net cash provided by operating activities


10,693,363


13,930,694


Investing activities:






Acquisition of property and equipment


(17,667,475)


(8,203,767)


Proceeds from sale of property and equipment


2,474



Purchase of available-for-sale securities


(426,367)



Proceeds from maturity of available-for-sale securities


340,000



Increase in restricted cash


(500,000)




Notes receivable, related party—insurance premiums



(3,346)


Increase in split-dollar life insurance premiums



(81,991)


Net cash used in investing activities


(18,251,368)


(8,289,104)


Financing activities:






Repayments under credit facility



(1,833,338)


Repayments under note payable, related party


(128,364)


(277,397)


Distributions to noncontrolling interests



(450,000)


Capital lease finance obligation payments


(31,810)



Excess tax benefit from stock-based compensation


210,935



Equity issuance costs


(268,192)



Loan fees paid


(18,182)


(4,049)


Net cash used in financing activities


(235,613)


(2,564,784)


Net (decrease) increase in cash and cash equivalents


(7,793,618)


3,076,806


Cash and cash equivalents, beginning of the period


17,290,948


377,549


Cash and cash equivalents, end of the period


$

9,497,330


3,454,355


Supplemental disclosures of cash flow information:






Cash paid for interest, net of capitalized interest of none and $9,200, respectively


$

6,111


336,668


Cash paid for interest on capital lease finance obligations


619,392



Income taxes paid


1,948,050


519,231


Supplemental disclosures of non-cash investing and financing activities:






Acquisition of property and equipment not yet paid


$

4,087,186


1,392,439


Property acquired through capital lease finance obligations


5,657,626



Property acquired through capital lease obligations


4,865,446



NATURAL GROCERS BY VITAMIN COTTAGE, INC.
Non-GAAP Financial Measures
(Unaudited)

In addition to reporting financial results in accordance with GAAP, the Company provides information regarding pro forma net income, EBITDA and additional information about its operating results.  These measures are not in accordance with, or an alternative to GAAP (non-GAAP). The Company's management believes that these presentations provide useful information to management, analysts and investors regarding certain additional financial and business trends relating to its results of operations and financial condition. In addition management uses these measures for reviewing the financial results of the Company as well as a component of incentive compensation. The Company defines pro forma net income as what net income would have been had it owned 100% of BVC for all periods presented. The Company defines EBITDA as net income attributable to Natural Grocers by Vitamin Cottage, Inc. before interest expense, provision for income tax, net income attributable to the noncontrolling interest and depreciation and amortization.

The following is a tabular presentation of the non-GAAP financial measures, including reconciliation from net income attributable to Natural Grocers by Vitamin Cottage, Inc. to pro forma net income and EBITDA.

Pro Forma Statement of Income Data

In connection with the IPO in July 2012, the Company purchased the 45% noncontrolling interest in BVC, not previously owned by the Company. Prior to the purchase of the noncontrolling interest, the Company held a controlling 55% interest in BVC. As such, the consolidated statement of income includes the revenues and expenses of BVC for the three and six months ended March 31, 2012 as required by GAAP. 45% of BVC's net income has previously been reported as net income attributable to noncontrolling interest in the Company's consolidated statement of income for the three and six months ended March 31, 2012 in which it did not own 100% of BVC. The pro forma financial data presented below illustrates what net income would have been had the Company owned 100% of BVC for the three and six months ended March 31, 2012. The Company's effective tax rate increased as a result of the BVC acquisition, as the income attributable to the noncontrolling interest was nontaxable income prior to the BVC acquisition but is included in taxable income after the acquisition.

The following table reconciles net income attributable to Natural Grocers by Vitamin Cottage, Inc. to pro forma net income for the three and six months ended March 31, 2012:



Three months ended

March 31, 2012


Six months ended

March 31, 2012


Net income attributable to Natural Grocers by Vitamin Cottage, Inc.


$

2,485,079


3,475,392


Net income attributable to noncontrolling interest


292,503


562,189


Net income


2,777,582


4,037,581


Provision for income taxes


1,486,443


2,072,705


Income before income taxes


4,264,025


6,110,286


Pro forma provision for income taxes


(1,595,920)


(2,282,732)


Pro forma net income


$

2,668,105


3,827,554


Per Share Data:






Pro forma net income per common share






Basic


$

0.12


0.17


Diluted


$

0.12


0.17


EBITDA

EBITDA is not a measure of financial performance under GAAP. The Company believes EBITDA provides additional information about (i) operating performance, because it assists in comparing the operating performance of stores on a consistent basis, as it removes the impact of non-cash depreciation and amortization expense as well as items not directly resulting from core operations such as interest expense and income taxes and (ii) the performance and the effectiveness of operational strategies. Additionally, EBITDA is a measure in the Company's debt covenants under the credit facility, and incentive compensation plans base incentive compensation payments on EBITDA performance. Furthermore, investors use EBITDA as a supplemental measure to evaluate the overall operating performance of companies in the industry. Management believes that investors' understanding of performance is enhanced by including this non-GAAP financial measure as a reasonable base for comparing ongoing results of operations. Many investors are interested in understanding the performance of the business by comparing the Company's results from ongoing operations period over period and would ordinarily add back non-cash expenses such as depreciation and amortization as well as items that are not part of normal day-to-day operations of business such as interest expense and income taxes. By providing this non-GAAP financial measure, together with a reconciliation from net income attributable to Natural Grocers by Vitamin Cottage, Inc., the Company believes it is enhancing investors' understanding of the business and results of operations, as well as assisting investors in evaluating how well the Company is executing strategic initiatives. The Company's competitors may define EBITDA differently, and as a result, the Company's measure of EBITDA may not be directly comparable to EBITDA of other companies. Items excluded from EBITDA are significant components in understanding and assessing financial performance. EBITDA is a supplemental measure of operating performance that does not represent and should not be considered in isolation or as an alternative to, or substitute for, net income or other financial statement data presented in the consolidated financial statements of the Company as indicators of financial performance. EBITDA has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of the Company's results as reported under GAAP. EBITDA should not be considered as a measure of discretionary cash available to the Company to invest in the growth of the business.

The following table reconciles net income attributable to Natural Grocers by Vitamin Cottage, Inc. to EBITDA:



Three months ended

March 31,


Six months ended

March 31,




2013


2012


2013


2012


Net income attributable to Natural Grocers by Vitamin Cottage, Inc.


$

3,217,198


2,485,079


5,438,598


3,475,392


Net income attributable to noncontrolling interest



292,503



562,189


Net income


3,217,198


2,777,582


5,438,598


4,037,581


Interest expense


401,361


154,928


656,463


330,127


Provision for income taxes


1,899,901


1,486,443


3,214,739


2,072,705


Depreciation and amortization


3,233,681


2,403,976


6,225,368


4,688,997


EBITDA


$

8,752,141


6,822,929


15,535,168


11,129,410


SOURCE Natural Grocers by Vitamin Cottage, Inc.



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