LAKEWOOD, Colo., May 7, 2020 /PRNewswire/ -- Natural Grocers by
Vitamin Cottage, Inc. (NYSE: NGVC) today announced results for its
second quarter of fiscal 2020 ended March
31, 2020 and revised its outlook for fiscal 2020.
Highlights for Second Quarter Fiscal 2020 Compared to Second
Quarter Fiscal 2019
- Net sales increased 20.4% to $277.5
million;
- Daily average comparable store sales increased 17.0%;
- Operating income increased 116.6% to $13.3 million;
- Net income increased 151.8% to $9.7
million with diluted earnings per share of $0.43;
- EBITDA increased 57.7% to $21.1
million;
- Opened two new stores, resulting in a 3.3% new store growth
rate for the twelve-month period ended March
31, 2020; and
- The Board of Directors has extended the Company's share
repurchase program and declared a quarterly dividend of
$0.07 per common share.
"Our exceptional results for the second quarter were driven by
unprecedented sales activity resulting from the COVID-19 outbreak,"
said Kemper Isely, Co-President. "We
are deeply grateful to our amazing good4uSM Crew
members, who worked tirelessly during the quarter to quickly adapt
to new circumstances on an almost daily basis. Due to their
efforts, our company was able to continue delivering to customers
in all our markets the highest quality natural and organic produce,
groceries and household essentials during a period of unparalleled
challenges. We wish to thank each and every one of our Crew
members, who are heroes in masks and aprons, for their courageous
work and selfless contribution; they are the personification of the
same principles and integrity that have distinguished the Natural
Grocers name for the past 65 years."
Mr. Isely continued: "During the second quarter, we saw net
sales increase 20.4%, with average daily comparable store sales
growth of 17.0%. We experienced above-average sales increases in
household products, supplements, grocery and bulk. We are one of
the few retailers where consumers can still buy bulk products, as
we prepackage all bulk at our own bulk processing facility. Our
private label brands also performed well. We experienced increased
net sales, driven by a significantly increased average basket size,
beginning in late February and continuing through the end of the
quarter, driven by our customers' response to the COVID-19
pandemic. We remain focused on ensuring our supply chain is able to
keep up with demand, supporting our Crew members and providing our
customers with the products they need, as we work as a community to
get through these uncertain times,"
Mr. Isely added: "The safety of our heroes in masks and aprons
and customers has been the driving factor behind every decision we
have made over the past several months, and will continue to be
throughout this global pandemic. We are proud of the numerous steps
we took proactively to protect the safety of our Crew members and
customers. Those steps include establishing social distancing
measures throughout our stores; sourcing and repacking bulk hand
sanitizer for our Crew members when supplies were limited; relying
on family, Crew and community to produce more than 6,000 face masks
for all our Crew members and requiring those masks to be worn;
establishing customer capacity limits in our stores; adjusting
store hours to allow for cleaning and restocking; installing
plexiglass protective shields at our checkouts; creating store
hours reserved for seniors and other at-risk members of the
community; expanding medical leave; and instituting our Hero
Pay program, which includes raising wages and paying bonuses to our
Crew members in recognition of their extraordinary efforts and to
ease the financial burdens on their families."
In addition to presenting the financial results of Natural
Grocers by Vitamin Cottage, Inc. and its subsidiaries
(collectively, the Company) for the second quarter of fiscal 2020
and 2019 in conformity with U.S. generally accepted accounting
principles (GAAP), the Company is also presenting EBITDA, which is
a non-GAAP financial measure. The reconciliation from GAAP to this
non-GAAP financial measure is provided at the end of this earnings
release.
Operating Results — Second Quarter Fiscal 2020 Compared to
Second Quarter Fiscal 2019
During the second quarter of fiscal 2020, net sales increased
$47.1 million, or 20.4%, to
$277.5 million compared to the same
period in fiscal 2019, driven by a $42.3
million increase in comparable store sales and a
$4.8 million increase in new store
sales. Daily average comparable store sales increased 17.0% in the
second quarter of fiscal 2020 compared to a 2.9% increase in the
second quarter of fiscal 2019. The daily average comparable
store sales increase during the second quarter of fiscal 2020
reflected a 13.1% increase in daily average transaction size and a
3.5% increase in daily average transaction count. Daily average
mature store sales increased 15.4% in the second quarter of fiscal
2020 compared to a 1.8% increase in the second quarter of fiscal
2019. The increase in comparable store sales during the three
months ended March 31, 2020 was
primarily driven by significantly increased net sales starting in
late February 2020 as a result of the
COVID-19 outbreak. From the start of the second quarter of fiscal
2020 through late February 2020, the
Company's comparable store sales were generally consistent with the
prior fiscal quarter. During March
2020, comparable store sales increased by approximately 40%
compared to March 2019, driven by
customer response to the COVID-19 outbreak. Also contributing to
the increase in comparable store sales during the quarter ending
March 31, 2020 were marketing
initiatives, promotional pricing campaigns and increased membership
in and usage of the {N}power® customer loyalty program.
For fiscal 2020, mature stores include all stores open during or
before fiscal 2015.
Gross profit increased $15.6
million, or 25.1%, to $77.8
million for the three months ended March 31, 2020 compared to $62.2 million for the three months ended
March 31, 2019. Gross profit reflects
earnings after both product and occupancy costs. Gross margin
increased to 28.0% for the three months ended March 31, 2020 compared to 27.0% for the three
months ended March 31, 2019. The
increase in gross margin for the three months ended March 31, 2020 was primarily driven by a decrease
in store occupancy and shrink expenses, both as a percentage of
sales, and a shift in sales mix to higher margin products.
Store expenses during the second quarter of fiscal 2020
increased 13.4% compared to the same period in fiscal 2019 to
$56.9 million. The increase in store
expenses during the three months ended March
31, 2020 was primarily driven by the hiring of approximately
650 temporary Crew members to support operational demands, and wage
increases and bonuses for the Company's store Crew members, all
related to the COVID-19 pandemic. Store expenses as a percentage of
sales decreased to 20.5% during the second quarter of fiscal 2020
compared to 21.8% in the second quarter of fiscal 2019. The
decrease in store expenses as a percentage of sales was primarily
driven by leverage on store expenses due to the increased sales
volume resulting from the COVID-19 pandemic.
Administrative expenses increased 22.2% to $7.0 million during the second quarter of fiscal
2020 compared to $5.8 million for the
same period in fiscal 2019. Administrative expenses as a percentage
of sales were 2.5% during the second quarter of fiscal 2020,
consistent with the second quarter of fiscal 2019.
Pre-opening and relocation expenses increased $0.5 million to $0.7
million during the second quarter of fiscal 2020 compared to
the comparable period in fiscal 2019. This increase was due
to the impact of the number and timing of new store openings and
relocations. The Company opened two new stores in the second
quarter of fiscal 2020 compared to opening one new store and
relocating one store in the second quarter of fiscal 2019.
Operating income increased 116.6% to $13.3 million during the second quarter of fiscal
2020 compared to the comparable period in fiscal 2019. Operating
margin during the second quarter of fiscal 2020 increased to 4.8%
compared to 2.7% in the same period in fiscal 2019. The increase in
operating margin was primarily a result of strong sales growth,
increased gross margin and leverage in store expenses, partially
offset by higher pre-opening expense and the impact of the new
lease accounting standard.
Interest expense during the second quarter of fiscal 2020 was
$0.5 million compared to $1.3 million in the prior year period. The lower
interest expense reflects a decrease in the number of finance
leases (formerly classified as capital and financing leases) as
well as a decrease in the average outstanding balance of the
Company's credit facility.
The Company's effective income tax rate for the second quarter
of fiscal 2020 was 23.7% compared to 20.3% for the second quarter
of 2019.
Net income for the second quarter of fiscal 2020 was
$9.7 million, or $0.43 of diluted earnings per share, compared to
net income of $3.9 million, or
$0.17 of diluted earnings per share
in the second quarter of fiscal 2019.
EBITDA increased 57.7% to $21.1
million in the second quarter of fiscal 2020 compared to
$13.4 million in the second quarter
of fiscal 2019. The increase was primarily driven by the
significant growth in net sales and margin improvement as a result
of the impact of the COVID-19 outbreak.
Operating Results — First Half Fiscal 2020 Compared to First
Half Fiscal 2019
During the first half of fiscal 2020, net sales increased
$55.6 million, or 12.3%, to
$507.6 million compared to the same
period in fiscal 2019, primarily driven by a $46.4 million increase in comparable store sales
and a $9.4 million increase in new
store sales, partially offset by a $0.2
million decrease in sales from one store that closed during
the first quarter of fiscal 2019. Daily average comparable store
sales increased 9.7% in the first half of fiscal 2020 compared to a
4.2% increase in the first half of fiscal 2019. The daily average
comparable store sales increase during the first half of fiscal
2020 reflected an 8.1% increase in average transaction size and a
1.5% increase in daily average transaction count. Daily average
mature store sales increased 8.2% in the first half of fiscal 2020
compared to a 2.7% increase in the first half of fiscal 2019. The
increase in comparable store sales during the six months ended
March 31, 2020 was primarily driven
by significantly increased net sales starting in late February 2020 as a result of the COVID-19
outbreak. Also contributing to the increase in comparable store
sales during the six months ending March 31,
2020 were marketing initiatives, promotional pricing
campaigns and increased membership in and usage of the {N}power
customer loyalty program.
Gross profit during the first half of fiscal 2020 increased
14.0% over the same period in fiscal 2019 to $138.3 million. Gross profit reflects earnings
after both product and occupancy costs. Gross margin was 27.3% of
sales for the first half of fiscal 2020 compared to 26.9% of sales
for the first half of fiscal 2019. The increase in gross margin was
primarily driven by a decrease in store occupancy and shrink
expenses, both as a percentage of sales, and a shift in sales mix
to higher margin products.
Store expenses during the first half of fiscal 2020 increased
$9.0 million, or 9.1%, to
$108.3 million. The increase in store
expenses during the six months ended March
31, 2020 was primarily driven by the hiring of approximately
650 temporary Crew members to support operational demands, and wage
increases and bonuses for the Company's store Crew members, all
related to the COVID-19 pandemic. Store expenses as a percentage of
sales decreased to 21.3% during the first half of fiscal 2020
compared to 22.0% in the first half of fiscal 2019. The decrease in
store expenses as a percentage of sales was primarily driven by
leverage on store expenses due to the increased sales volume
resulting from the COVID-19 pandemic.
Administrative expenses during the first half of fiscal 2020
increased 16.1% to $12.9 million
compared to the same period in 2019. Administrative expenses as a
percentage of sales were 2.5% during the first half of fiscal 2020,
consistent with the same period in fiscal 2019.
Pre-opening and relocation expenses increased $0.3 million to $1.1
million during the first half of fiscal 2020 compared to the
comparable period in fiscal 2019. This increase was due to the
impact of the number and timing of new store openings and
relocations. During the first half of fiscal 2020, the Company
opened four new stores compared to opening five new stores and
relocating two stores in the first half of fiscal 2019.
Operating income increased 58.6% to $16.1
million during the first half of fiscal 2020 compared to
$10.2 million for the comparable
period in fiscal 2019. Operating margin increased 90 basis points
to 3.2% compared to 2.2% in the same period in fiscal 2019.
Interest expense during the first half of fiscal 2020 decreased
$1.5 million compared to the
comparable period in fiscal 2019, primarily due to a decrease in
the number of finance leases (formerly classified as capital and
financing leases) as well as a decrease in the average outstanding
balance of the Company's credit facility.
Income tax expense increased $1.9
million during the first half of fiscal 2020 to $3.5 million compared to $1.6 million in the first half of fiscal 2019.
The Company's effective income tax rate for the first half of
fiscal 2020 was approximately 23.0% compared to 20.5% for the six
months ended March 31, 2019.
Net income for the first half of fiscal 2020 was $11.6 million, or $0.51 of diluted earnings per share, compared to
$6.1 million, or $0.27 of diluted earnings per share, for the
first half of fiscal 2019.
EBITDA increased 28.2% to $31.7
million in the first half of fiscal 2020 compared to
$24.7 million in the first half of
fiscal 2019.
Balance Sheet and Cash Flow
As of March 31, 2020, the Company
had $29.4 million in cash and cash
equivalents and $49.0 million
available for borrowing under its $50
million revolving credit facility, with $1.0 million of letters of credit
outstanding.
During the first six months of fiscal 2020, the Company
generated $53.4 million in cash from
operations and invested $20.1 million
in net capital expenditures, primarily for new stores.
Dividend & Share Repurchase Announcement
Today, the Company announced the declaration of a cash dividend
of $0.07 per common share. The
dividend will be paid on June 16,
2020 to all stockholders of record at the close of business
on June 1, 2020.
The Company also announced that its Board of Directors has
extended the Company's $10.0 million
share repurchase program to May 31,
2022. The dollar amount of shares of the Company's common
stock that may yet be repurchased under the share repurchase
program is $8.3 million.
Growth and Development
During the second quarter of fiscal 2020, the Company opened two
new stores, ending the quarter with a total store count of 157
stores in 20 states. The Company's two new store openings during
the second quarter of fiscal 2020 compared to opening one new store
and relocating one store in the second quarter of fiscal 2019,
resulting in 3.3% and 4.8% unit growth rates for the twelve month
periods ended March 31, 2020 and
March 31, 2019, respectively.
The Company has signed leases for three new stores and has
acquired the property for one additional new store; such new stores
will be located in Colorado,
New Mexico, Oregon, and Utah. These new stores are planned to open
during fiscal 2020 and beyond.
Fiscal 2020 Outlook
The Company has updated its fiscal 2020 outlook, reflecting year
to date results and current trends in light of the rapidly evolving
COVID-19 environment. The Company cannot predict the duration or
severity of the current COVID-19 environment and how that could
impact financial results. The fiscal 2020 outlook does not
contemplate significant additional changes to the current operating
environment as a result of further COVID-19 developments and
assumes a moderation of COVID-19 related elevated sales as the year
progresses. Additionally, the Company intends to delay signing new
lease commitments in the near-term as it monitors the evolving
macroeconomic situation. The Company expects:
|
Fiscal
2020 Outlook
|
Number of new
stores
|
6-7
|
Number of
relocations
|
1
|
Daily average
comparable store sales growth
|
5.0% to
9.0%
|
Net income as a
percentage of sales
|
1.1% to
1.5%
|
Diluted earnings per
share1
|
$0.54 to
$0.62
|
|
|
Capital expenditures
(in millions)
|
$28 to $33
|
1 The adoption of the new lease accounting standard
effective October 1, 2019 is expected
to result in incremental occupancy expense, which is expected to
negatively impact diluted earnings per share by $0.01 to $0.02 for
fiscal 2020.
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 1-888-347-6606 (US); 1-855-669-9657
(Canada); or 1-412-902-4289
(International). 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 an
expanding specialty retailer of natural and organic groceries, body
care products and dietary supplements. The products sold by Natural
Grocers must meet strict quality guidelines and may not contain
artificial colors, flavors, preservatives or sweeteners, or
partially hydrogenated or hydrogenated oils. The Company sells only
USDA certified organic produce and exclusively pasture-raised,
non-confinement dairy products, and free-range eggs. Natural
Grocers' flexible smaller-store format allows it to offer
affordable prices in a shopper-friendly retail environment. The
Company also provides extensive free science-based nutrition
education programs to help customers make informed health and
nutrition choices. The Company, founded in 1955, has 157 stores in
20 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. All statements that are not statements of historical
fact are forward-looking statements. Actual results could differ
materially from those described in the forward-looking statements
because of factors such as risks and challenges related to the
COVID-19 pandemic, the economy, changes in the Company's industry,
business strategy, goals and expectations concerning the Company's
market position, future operations, margins, profitability, capital
expenditures, liquidity and capital resources, future growth, other
financial and operating information and other risks detailed in the
Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 2019 (the Form 10-K)
and the Company's 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, except as may be required by the
securities laws.
For further information regarding risks and uncertainties
associated with the Company's business, please refer to the
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Risk Factors" sections of the Company's
filings with the Securities and Exchange Commission, including, but
not limited to, the Form 10-K and the Company's subsequent
quarterly reports on Form 10-Q, copies of which may be obtained by
contacting Investor Relations at 303-986-4600 or by visiting the
Company's website at http://Investors.NaturalGrocers.com.
Investor Contact:
Scott Van Winkle, ICR, Managing
Director, 617-956-6736, scott.vanwinkle@icrinc.com
NATURAL GROCERS BY
VITAMIN COTTAGE, INC
Consolidated
Statements of Income
(Unaudited)
(Dollars in
thousands, except per share data)
|
|
|
|
Three months
ended
March 31,
|
|
Six months
ended
March 31,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net sales
|
|
$
|
277,524
|
|
230,447
|
|
507,554
|
|
451,962
|
Cost of goods sold
and occupancy costs
|
|
199,701
|
|
168,233
|
|
369,207
|
|
330,602
|
Gross
profit
|
|
77,823
|
|
62,214
|
|
138,347
|
|
121,360
|
Store
expenses
|
|
56,878
|
|
50,175
|
|
108,305
|
|
99,298
|
Administrative
expenses
|
|
7,038
|
|
5,761
|
|
12,857
|
|
11,076
|
Pre-opening and
relocation expenses
|
|
650
|
|
157
|
|
1,080
|
|
829
|
Operating
income
|
|
13,257
|
|
6,121
|
|
16,105
|
|
10,157
|
Interest expense,
net
|
|
(516)
|
|
(1,280)
|
|
(1,052)
|
|
(2,535)
|
Income before income
taxes
|
|
12,741
|
|
4,841
|
|
15,053
|
|
7,622
|
Provision for income
taxes
|
|
(3,023)
|
|
(981)
|
|
(3,467)
|
|
(1,565)
|
Net income
|
|
$
|
9,718
|
|
3,860
|
|
11,586
|
|
6,057
|
|
|
|
|
|
|
|
|
|
Net income per common
share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.43
|
|
0.17
|
|
0.52
|
|
0.27
|
Diluted
|
|
$
|
0.43
|
|
0.17
|
|
0.51
|
|
0.27
|
Weighted average
number of shares of common stock
outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
22,493,341
|
|
22,413,055
|
|
22,482,285
|
|
22,399,665
|
Diluted
|
|
22,543,429
|
|
22,561,825
|
|
22,542,319
|
|
22,579,733
|
NATURAL GROCERS BY
VITAMIN COTTAGE, INC
Consolidated
Balance Sheets
(Dollars in
thousands, except per share data)
|
|
|
|
March
31,
2020
|
|
September 30,
2019
|
Assets
|
|
(unaudited)
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
29,374
|
|
6,214
|
Accounts receivable,
net
|
|
5,594
|
|
5,059
|
Merchandise
inventory
|
|
88,411
|
|
96,179
|
Prepaid expenses and
other current assets
|
|
3,253
|
|
7,728
|
Total current
assets
|
|
126,632
|
|
115,180
|
Property and
equipment, net
|
|
154,739
|
|
201,635
|
Operating lease
assets
|
|
349,437
|
|
—
|
Finance lease
assets
|
|
35,429
|
|
—
|
Deposits and other
assets
|
|
657
|
|
1,638
|
Goodwill and other
intangible assets, net
|
|
9,661
|
|
8,644
|
Deferred financing
costs, net
|
|
37
|
|
17
|
Total
assets
|
|
$
|
676,592
|
|
327,114
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
|
70,767
|
|
63,162
|
Accrued
expenses
|
|
22,663
|
|
19,061
|
Capital and financing
lease obligations, current portion
|
|
—
|
|
1,045
|
Operating lease
obligations, current portion
|
|
31,765
|
|
—
|
Finance lease
obligations, current portion
|
|
2,550
|
|
—
|
Total current
liabilities
|
|
127,745
|
|
83,268
|
Long-term
liabilities:
|
|
|
|
|
Capital and financing
lease obligations, net of current portion
|
|
—
|
|
51,475
|
Operating lease
obligations, net of current portion
|
|
336,003
|
|
—
|
Finance lease
obligations, net of current portion
|
|
34,248
|
|
—
|
Revolving credit
facility
|
|
—
|
|
5,692
|
Deferred income tax
liabilities, net
|
|
11,161
|
|
10,420
|
Deferred
rent
|
|
—
|
|
11,393
|
Leasehold
incentives
|
|
—
|
|
7,960
|
Total long-term
liabilities
|
|
381,412
|
|
86,940
|
Total
liabilities
|
|
509,157
|
|
170,208
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
Common stock, $0.001
par value, 50,000,000 shares authorized, 22,510,279 shares issued
at
March 31, 2020 and September 30, 2019 and
22,503,810 and 22,463,057 outstanding at
March 31, 2020 and September 30, 2019,
respectively
|
|
23
|
|
23
|
Additional paid-in
capital
|
|
56,439
|
|
56,319
|
Retained
earnings
|
|
111,022
|
|
100,923
|
Common stock in
treasury at cost, 6,469 and 47,222 shares, at March 31, 2020
and
September 30, 2019, respectively
|
|
(49)
|
|
(359)
|
Total stockholders'
equity
|
|
167,435
|
|
156,906
|
Total liabilities and
stockholders' equity
|
|
$
676,592
|
|
327,114
|
NATURAL GROCERS BY
VITAMIN COTTAGE, INC.
Consolidated
Statements of Cash Flows
(Unaudited)
(Dollars in
thousands)
|
|
|
|
Six months ended
March 31,
|
|
|
2020
|
|
2019
|
Operating
activities:
|
|
|
|
|
Net income
|
|
$
|
11,586
|
|
6,057
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
|
15,595
|
|
14,576
|
Gain on disposal of
property and equipment
|
|
—
|
|
(165)
|
Share-based
compensation
|
|
552
|
|
663
|
Deferred income tax
expense (benefit)
|
|
475
|
|
(546)
|
Non-cash interest
expense
|
|
6
|
|
6
|
Changes in operating
assets and liabilities
|
|
|
|
|
(Increase) decrease
in:
|
|
|
|
|
Accounts receivable,
net
|
|
(535)
|
|
254
|
Merchandise
inventory
|
|
7,768
|
|
(1,107)
|
Prepaid expenses and
other assets
|
|
(483)
|
|
97
|
Income tax
receivable
|
|
4,960
|
|
(65)
|
Operating lease
asset
|
|
14,973
|
|
—
|
(Decrease) increase
in:
|
|
|
|
|
Operating lease
liability
|
|
(15,285)
|
|
—
|
Accounts
payable
|
|
10,146
|
|
4,469
|
Accrued
expenses
|
|
3,602
|
|
(517)
|
Deferred
compensation
|
|
—
|
|
(688)
|
Deferred rent and
leasehold incentives
|
|
—
|
|
(441)
|
Net cash provided by
operating activities
|
|
53,360
|
|
22,593
|
Investing
activities:
|
|
|
|
|
Acquisition of
property and equipment
|
|
(18,759)
|
|
(17,644)
|
Acquisition of other
intangibles
|
|
(1,399)
|
|
(251)
|
Proceeds from sale of
property and equipment
|
|
—
|
|
792
|
Proceeds from property
insurance settlements
|
|
27
|
|
22
|
Net cash used in
investing activities
|
|
(20,131)
|
|
(17,081)
|
Financing
activities:
|
|
|
|
|
Borrowings under
credit facility
|
|
226,000
|
|
185,200
|
Repayments under
credit facility
|
|
(231,692)
|
|
(188,200)
|
Capital and financing
lease obligation payments
|
|
—
|
|
(362)
|
Finance lease
obligation payments
|
|
(1,082)
|
|
—
|
Dividend to
shareholders
|
|
(3,148)
|
|
—
|
Loan fees
paid
|
|
(25)
|
|
—
|
Payments on
withholding tax for restricted stock unit vesting
|
|
(122)
|
|
(265)
|
Net cash used in
financing activities
|
|
(10,069)
|
|
(3,627)
|
Net increase in cash
and cash equivalents
|
|
23,160
|
|
1,885
|
Cash and cash
equivalents, beginning of period
|
|
6,214
|
|
9,398
|
Cash and cash
equivalents, end of period
|
|
$
|
29,374
|
|
11,283
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
Cash paid for
interest
|
|
$
|
328
|
|
439
|
Cash paid for interest
on finance or capital and financing lease obligations, net of
capitalized interest of $68 and $59,
respectively
|
|
781
|
|
2,087
|
Income taxes
paid
|
|
10
|
|
2,962
|
Deferred compensation
paid
|
|
—
|
|
700
|
Supplemental
disclosures of non-cash investing and financing
activities:
|
|
|
|
|
Acquisition of
property and equipment not yet paid
|
|
$
|
3,748
|
|
1,228
|
Property acquired
through capital and financing lease obligations
|
|
|
—
|
|
4,842
|
Property acquired
through operating lease obligations
|
|
|
8,170
|
|
—
|
Property acquired
through finance lease obligations
|
|
|
5,232
|
|
—
|
Non-GAAP financial measures
EBITDA
EBITDA is not a measure of financial performance under GAAP. We
define EBITDA as net income before interest expense, provision for
income taxes and depreciation and amortization. The following
table reconciles net income to EBITDA for the periods presented,
dollars in thousands:
|
|
Three months
ended
March 31,
|
|
Six months
ended
March 31,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net income
|
|
$
|
9,718
|
|
3,860
|
|
11,586
|
|
6,057
|
Interest expense,
net
|
|
516
|
|
1,280
|
|
1,052
|
|
2,535
|
Provision for income
taxes
|
|
3,023
|
|
981
|
|
3,467
|
|
1,565
|
Depreciation and
amortization
|
|
7,888
|
|
7,290
|
|
15,595
|
|
14,576
|
EBITDA
|
|
$
|
21,145
|
|
13,411
|
|
31,700
|
|
24,733
|
EBITDA increased 57.7% to $21.1
million in the three months ended March 31, 2020 compared to $13.4 million for the three months ended
March 31, 2019. EBITDA increased
28.2% to $31.7 million in the six
months ended March 31, 2020 compared
to $24.7 million for the six months
ended March 31, 2019. The
increase in EBITDA was primarily driven by the significant growth
in net income resulting from the increase in net sales starting in
late February 2020 as a result of the
COVID-19 outbreak. EBITDA as a percentage of sales was 7.6% and
5.8% in the three months ended March 31,
2020 and 2019, respectively. EBITDA as a percentage of
sales was 6.2% and 5.5% in the six months ended March 31, 2020 and 2019, respectively. The number
of stores with finance leases (previously classified as capital and
financing lease obligations) decreased from 21 as of March 31, 2019 to 17 as of March 31, 2020 as a result of our adoption of ASC
842 effective October 1, 2019.
Finance leases have a positive impact on EBITDA because, as
discussed above, they result in lower cost of goods sold and
occupancy costs. Conversely, the greater number of stores with
operating leases during the six months ended March 31, 2020, led to higher cost of goods sold
and occupancy costs, which negatively impacted both EBITDA and
EBITDA as a percentage of sales.
Management believes some investors' understanding of our
performance is enhanced by including EBITDA, a non-GAAP financial
measure. We believe EBITDA provides additional information
about: (i) our operating performance, because it assists us in
comparing the operating performance of our 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
our core operations such as interest expense and income taxes and
(ii) our performance and the effectiveness of our operational
strategies. Additionally, EBITDA is a component of a measure
in our financial covenants under our Credit Facility.
Furthermore, management believes some investors use EBITDA as a
supplemental measure to evaluate the overall operating performance
of companies in our industry. Management believes some investors'
understanding of our performance is enhanced by including this
non-GAAP financial measure as a reasonable basis for comparing our
ongoing results of operations. By providing this non-GAAP financial
measure, together with a reconciliation from net income, we believe
we are enhancing analysts' and investors' understanding of our
business and our results of operations, as well as assisting
analysts and investors in evaluating how well we are executing our
strategic initiatives.
Our competitors may define EBITDA differently, and as a result,
our measure of EBITDA may not be directly comparable to those 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
as indicators of financial performance. EBITDA has limitations as
an analytical tool, and should not be considered in isolation, or
as an alternative to, or as a substitute for, analysis of our
results as reported under GAAP. Some of the limitations are:
- EBITDA does not reflect our cash expenditures, or future
requirements for capital expenditures or contractual
commitments;
- EBITDA does not reflect changes in, or cash requirements for,
our working capital needs;
- EBITDA does not reflect any impact for straight-line rent
expense for leases classified as capital and financing lease
obligations;
- EBITDA does not reflect the interest expense, or the cash
requirements necessary to service interest or principal payments on
our debt;
- EBITDA does not reflect our tax expense or the cash
requirements to pay our taxes; and
- although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized will often have to be
replaced in the future and EBITDA does not reflect any cash
requirements for such replacements.
Due to these limitations, EBITDA should not be considered as a
measure of discretionary cash available to us to invest in the
growth of our business. We compensate for these limitations by
relying primarily on our GAAP results and using EBITDA as
supplemental information.
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SOURCE Natural Grocers by Vitamin Cottage, Inc.