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, | ||
(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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