Natural Grocers by Vitamin Cottage Reports Fiscal 2012 Fourth
Quarter and Full Year Results and Provides 2013 Outlook
LAKEWOOD, Colo., Nov. 15, 2012 /PRNewswire/ -- Natural Grocers by
Vitamin Cottage, Inc. (NYSE: NGVC) today reported results for the
fourth quarter and fiscal year ended September 30, 2012 and provided 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 results:
- on an adjusted basis in order to reflect the impact of certain
compensation charges related to the July 25,
2012 initial public offering (IPO); and
- 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.
Such adjustments to financial results and EBITDA are non-GAAP
financial measures. The Company describes the use of non-GAAP
financial measures at the end of this press release. In
addition, reconciliations of GAAP measures to adjusted results and
EBITDA are presented in schedules to this press release.
Highlights
- Comparable store sales increased 13.0% for the fourth quarter
and increased 11.6% for fiscal year 2012.
- Net sales increased 28.2% to $89.9
million for the fourth quarter and increased 27.2% to
$336.4 million for fiscal year
2012.
- Net income attributable to NGVC increased 6.0% to $973,000 for the fourth quarter and increased
89.8% to $6.6 million for fiscal year
2012 with diluted earnings per share of $0.30.
- Adjusted pro forma net income attributable to NGVC (which
illustrates net income as if the Company owned 100% of BVC for the
periods presented and excludes stock-based and incentive
compensation expenses associated with the IPO) increased 64.0% to
$1.8 million for the fourth quarter
with diluted earnings per share of $0.08 and increased 92.0% to $8.0 million for fiscal year 2012 with diluted
earnings per share of $0.36.
- EBITDA increased 7.7% to $4.3
million for the fourth quarter and increased 45.0% to
$21.9 million for fiscal year 2012.
Adjusted EBITDA (which excludes $1.4
million of stock-based and incentive compensation expenses
associated with the IPO) increased 42.7% to $5.7 million for the fourth quarter and increased
54.2% to $23.3 million for fiscal
year 2012.
"We are pleased to report these strong results to our
shareholders following our first quarter as a public company,"
stated Kemper Isely,
Co-President. "Our 2012 fiscal performance reflects strength
in both new store openings and comparable store sales increases,
which together demonstrate the strong foundation of people and
systems we have in place to support disciplined sustainable
growth."
Operating Results
Fourth Quarter Fiscal Year 2012 compared to 2011
During the fourth quarter, net sales increased 28.2% to
$89.9 million due to an increase of
$10.8 million in sales from new
stores and a 13.0% increase in comparable store sales. Comparable
store transaction count increased 7.9% quarter over quarter.
Gross profit increased 29.0% to $26.4 million. Gross margin increased to
29.3% from 29.2%, quarter over quarter with product margin staying
relatively flat. The increase in gross margin is due to a decrease
in occupancy costs as a percentage of sales at comparable
stores.
Store expenses as a percentage of sales decreased to 21.3% from
21.9%. 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 increased 62.9% to $4.4 million, in part due to the $1.1 million stock-based compensation expense and
the $286,000 incentive compensation
expense associated with the IPO. Excluding the stock-based and
incentive compensation expenses associated with the IPO,
administrative expenses as a percentage of sales were 3.4% compared
to 3.9% in the prior comparable quarter.
Pre-opening and relocation expenses increased $367,000 to $862,000, due to the timing of new store
openings, the relocation of one store and the relocation of the
bulk food repackaging facility and distribution center.
Interest expense decreased by less than $1,000, as a result of a $40,000 decrease in interest expense due to the
payoff of the term loan and all outstanding amounts under the
revolving credit facility in July
2012, offset by a $39,000
increase in interest expense as a result of two new stores that
were accounted for as capital lease finance obligations.
Other expense increased to $301,000 primarily due to asset disposals in
conjunction with the relocation of one store.
Net income attributable to noncontrolling interest decreased
$359,000 to a net loss of
$74,000 compared to net income of
$285,000 in the prior
comparable quarter as a result of the purchase of the
remaining noncontrolling interest in BVC in July 2012. The fourth quarter includes
approximately one month of operations for 45% of BVC combined with
increased expenses due to BVC's share of IPO costs.
Net income attributable to NGVC increased 6.0% to $973,000 and EBITDA increased 7.7% to
$4.3 million.
Pro forma net income attributable to NGVC decreased 15.5% to
$927,000 or $0.04 diluted earnings per share. Adjusted pro
forma net income attributable to NGVC increased 64.0% to
$1.8 million or $0.08 diluted earnings per share. Adjusted EBITDA
increased 42.7% to $5.7
million.
Fiscal Year 2012 compared to 2011
For fiscal year 2012, net sales increased 27.2% to $336.4 million due to an increase of $41.3 million in sales from new stores and an
11.6% increase in comparable store sales. Comparable store
transaction count increased 7.0% year over year. Mature store sales
increased 7.6%. For fiscal 2012, mature stores are stores open
during or before fiscal 2007.
Gross profit increased 28.0% to $99.1 million. Gross margin increased to
29.4% from 29.3%, with product margin staying relatively flat. The
increase in gross margin is due to a decrease in occupancy costs as
a percentage of sales at comparable stores.
Store expenses as a percentage of sales decreased to 21.4% from
21.8%. The decrease was primarily driven by a decrease in salary
related expenses, and to a lesser extent, a decrease in advertising
expense, partially offset by an increase in depreciation expense,
all as a percentage of sales.
Administrative expenses increased 22.5% to $12.7 million, in part due to the $1.1 million stock-based compensation expense and
the $286,000 incentive compensation
expense associated with the IPO, as well as an increase in general
and administrative positions in fiscal year 2012 to support store
growth. Excluding the stock-based and incentive compensation
expenses associated with the IPO, administrative expenses as a
percentage of sales were 3.4% compared to 3.9% in the prior
year.
Pre-opening and relocation expenses increased $209,000 to $2.2
million due to the relocation of one store and the
relocation of the bulk food repackaging facility and distribution
center.
Interest expense decreased $101,000 or 15.0% due to the repayment of all
outstanding amounts under the term loan and revolving credit
facility in July 2012. The decrease
in interest expense as a result of the repayments was partially
offset by a $39,000 increase in
interest expense as a result of two new stores that were accounted
for as capital lease finance obligations.
Other expense increased $325,000
primarily due to asset disposals in conjunction with the relocation
of one store.
The Company's effective income tax rate for fiscal 2012 was
34.6% compared to 32.0% in the prior year. The increase was
primarily due to changes in nontaxable net income attributable to
noncontrolling interest, and to a lesser extent, different state
income tax rates.
Net income attributable to noncontrolling interest decreased
$278,000 to $828,000 as a result of the purchase of the
remaining noncontrolling interest in BVC in July 2012. Fiscal year 2012 includes
approximately ten months of operations for 45% of BVC combined with
increased expenses due to BVC's share of IPO costs. The prior year
includes twelve months of operations for 45% of BVC.
Net income attributable to NGVC increased 89.8% to $6.6 million and EBITDA increased 45.0% to
$21.9 million.
Pro forma net income attributable to NGVC increased 71.2% to
$7.2 million or $0.32 diluted earnings per share. Adjusted pro
forma net income attributable to NGVC increased 92.0% to
$8.0 million or $0.36 diluted earnings per share. Adjusted EBITDA
increased 54.2% to $23.3 million.
Balance Sheet and Cash Flow
During the fourth quarter, the Company generated $7.2 million in cash from operations and invested
$11.7 million in capital expenditures
primarily for new stores and the relocation and expansion of the
bulk food repackaging facility and distribution center. For fiscal
2012, the Company generated $25.2
million in cash from operations and invested $25.3 million in capital expenditures primarily
for new stores.
In connection with the IPO, the Company received $58.1 million in proceeds, net of underwriting
fees, repaid the outstanding $26.4
million on the term loan and revolving credit facility,
purchased the remaining 45% noncontrolling interest in five of the
Colorado stores for $10.1 million and paid $2.5 million in expenses associated with the
IPO.
The Company ended the fiscal year with $17.3 million in cash and cash equivalents and
$1.8 million in available for sale
securities, as well as $21.0 million
available under the revolving credit facility. On October 31, 2012 the Company amended the
revolving credit facility and reduced the amount available from
$21.0 million to $15.0 million.
The Company entered into four capital leases during fiscal year
2012. Two opened during the fourth quarter of fiscal 2012, and two
are scheduled to open in the first quarter of fiscal 2013.
Growth and Development
In fiscal year 2012, the Company opened ten stores, including
four stores in the fourth quarter.
As of September 30, 2012, the
Company had 59 stores located in 12 states.
The Company plans to open 12 stores in fiscal year 2013 and
expects to remodel three existing stores. On October 30, 2012, the Company opened a store in
Missoula, MT.
The Company has signed leases for six stores scheduled to open
in fiscal year 2013 in Helena, MT;
Denton, TX; Omaha, NE; Lubbock,
TX; Medford, OR; and
Kalispell, MT.
Store Level Economics
Historically, new stores opened since January 1, 2005 required an upfront capital
investment of approximately $1.9 million. The Company anticipates that
fiscal 2013 new stores will require an upfront capital investment
of approximately $2.3 million
consisting of capital expenditures of approximately $1.8 million (net of tenant allowances),
initial inventory of approximately $300,000 (net of payables) and pre-opening
expenses of approximately $180,000.
It is projected that these stores will experience higher than
historical first year sales. The Company continues to
target approximately four years to recoup the initial net cash
investments and approximately 35% cash on cash returns by the end
of the fifth year following the opening.
Outlook Fiscal Year 2013
For fiscal
year 2013 the Company expects:
|
|
|
Fiscal 2013 Outlook
|
|
Number of
new stores
|
12
|
20%
increase
|
Number of
remodels
|
3
|
-
|
Comparable
store sales growth
|
7.5% to
8.5%
|
-
|
Public
company costs (1)
|
Approximately $1.2 million
|
-
|
EBITDA
percent of sales
|
7.0% to
7.2%
|
-
|
Net income
percent of sales
|
2.5% to
2.7%
|
-
|
Diluted
earnings per share
|
$0.46 to
$0.49
|
-
|
Capital
expenditures
|
$25 to $30
million
|
-
|
(1)
|
Public
company costs include additional legal, accounting, insurance,
stock‑based compensation, board of director expenses and other
costs.
|
Earnings Conference Call
The Company will host a conference call today at 3:00 p.m. Mountain Time (5:00 p.m. Eastern Time) to discuss this earnings
release. The dial-in number is (800)-866-2442. 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, now has 60 stores in 12 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 Prospectus dated July 24, 2012. 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 S-1 registration statement,
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 September 30,
|
Year
ended September 30,
|
|
2012
|
2011
|
2012
|
2011
|
|
|
|
|
Statements of Income Data:
|
|
|
|
|
Net
sales
|
$89,932,891
|
70,136,488
|
336,385,372
|
264,544,046
|
Cost of
goods sold and occupancy costs
|
63,558,793
|
49,687,700
|
237,328,764
|
187,162,252
|
Gross profit
|
26,374,098
|
20,448,788
|
99,056,608
|
77,381,794
|
Store
expenses
|
19,189,661
|
15,391,173
|
71,856,455
|
57,609,690
|
Administrative expenses
|
4,447,020
|
2,730,014
|
12,732,100
|
10,396,891
|
Pre-opening and relocation expenses
|
862,014
|
494,649
|
2,173,181
|
1,964,186
|
Operating income
|
1,875,403
|
1,832,952
|
12,294,872
|
7,411,027
|
Other
income (expense):
|
|
|
|
|
Dividends
and interest income
|
658
|
1,740
|
6,096
|
10,077
|
Interest
expense
|
(93,971)
|
(94,847)
|
(568,501)
|
(669,125)
|
Other
(expense) income, net
|
(300,676)
|
6,801
|
(300,676)
|
24,707
|
Income before income taxes
|
1,481,414
|
1,746,646
|
11,431,791
|
6,776,686
|
Provision
for income taxes
|
(582,393)
|
(543,462)
|
(3,955,219)
|
(2,166,800)
|
Net income
|
899,021
|
1,203,184
|
7,476,572
|
4,609,886
|
Net loss
(income) attributable to noncontrolling interest
|
73,595
|
(285,218)
|
(827,772)
|
(1,106,075)
|
Net income
attributable to Natural Grocers by Vitamin
Cottage, Inc
|
$972,616
|
917,966
|
6,648,800
|
3,503,811
|
Per
Share Data:
|
|
|
|
|
Net income
attributable to Natural Grocers by Vitamin Cottage, Inc. per
common share
|
|
|
|
|
Basic
|
$0.04
|
0.04
|
0.30
|
0.16
|
Diluted
|
$0.04
|
0.04
|
0.30
|
0.16
|
Weighted
average common shares outstanding:
|
|
|
|
|
Basic
|
22,372,184
|
22,372,184
|
22,372,184
|
22,372,184
|
Diluted
|
22,463,093
|
22,461,405
|
22,463,093
|
22,461,405
|
NATURAL
GROCERS BY VITAMIN COTTAGE, INC.
|
Consolidated Balance Sheets
(unaudited)
|
|
|
September 30,
|
|
2012
|
2011
|
Assets
|
|
|
Current
assets:
|
|
|
Cash and cash equivalents
|
$
17,290,948
|
377,549
|
Short term investments – available-for-sale
securities
|
777,445
|
—
|
Accounts receivable, net
|
1,755,142
|
1,027,141
|
Accounts receivable – leasehold incentives
|
100,274
|
1,111,475
|
Merchandise inventory
|
37,543,861
|
29,820,321
|
Prepaid expenses
|
596,090
|
455,126
|
Income tax receivable
|
—
|
1,701,917
|
Deferred income tax assets
|
842,963
|
583,668
|
Total current assets
|
58,906,723
|
35,077,197
|
Property
and equipment, net
|
64,602,743
|
41,737,234
|
Other
assets:
|
|
|
Long-term investments – available-for-sale
securities
|
973,729
|
—
|
Deposits and other assets
|
196,365
|
167,558
|
Goodwill
|
511,029
|
511,029
|
Deferred financing costs, net
|
54,643
|
88,631
|
Other intangibles, net
|
416,464
|
490,301
|
Split-dollar life insurance premiums
|
—
|
577,861
|
Notes receivable – related party,
long-term
|
—
|
265,572
|
Total other assets
|
2,152,230
|
2,100,952
|
Total assets
|
$
125,661,696
|
78,915,383
|
Liabilities and Stockholders'
Equity
|
|
|
Current
liabilities:
|
|
|
Accounts payable
|
$
26,031,756
|
16,087,882
|
Accrued expenses
|
7,783,430
|
5,785,499
|
Long-term debt, current portion
|
—
|
500,000
|
Revolving credit facility
|
—
|
11,036,324
|
Notes payable – related party, current
portion
|
260,187
|
562,271
|
Capital lease finance obligation, current
portion
|
11,884
|
—
|
Total current liabilities
|
34,087,257
|
33,971,976
|
Long-term
liabilities:
|
|
|
Capital lease finance obligation, net of current
portion
|
5,513,958
|
—
|
Deferred income tax liabilities
|
4,143,351
|
4,947,870
|
Deferred rent
|
3,618,233
|
2,845,292
|
Leasehold incentives
|
5,327,408
|
4,879,432
|
Long-term debt, net of current portion
|
—
|
15,700,000
|
Notes payable – related party, net of current
portion
|
22,312
|
643,834
|
Total long-term liabilities
|
18,625,262
|
29,016,428
|
Total liabilities
|
52,712,519
|
62,988,404
|
Commitments
|
|
|
Stockholders' equity:
|
|
|
Common stock, $0.001 par value. Authorized 50,000,000
shares, 22,372,184 issued and outstanding at 2012, none issued and
outstanding at 2011
|
22,372
|
—
|
Common stock Vitamin Cottage Natural Food Markets,
Inc., Class A, voting, no par value. Authorized 1,000 shares,
issued and outstanding at 2011
|
—
|
1,679
|
Common stock Vitamin Cottage Natural Food Markets,
Inc., Class B, nonvoting, no par value. Authorized 1,000,000
shares, 625,112 shares issued and outstanding at 2011
|
—
|
792,676
|
Additional paid in capital
|
52,675,925
|
—
|
Accumulated other comprehensive loss
|
(3,696)
|
—
|
Retained earnings
|
20,254,576
|
13,605,776
|
Total Natural Grocers by Vitamin Cottage, Inc.
equity
|
72,949,177
|
14,400,131
|
Noncontrolling interest
|
—
|
1,526,848
|
Total stockholders' equity
|
72,949,177
|
15,926,979
|
Total liabilities and stockholders' equity
|
$
125,661,696
|
78,915,383
|
NATURAL
GROCERS BY VITAMIN COTTAGE, INC.
|
Consolidated Statements of Cash Flows
(unaudited)
|
|
|
Year
ended September 30,
|
|
2012
|
2011
|
Operating
activities:
|
|
|
Net income
|
$7,476,572
|
4,609,886
|
Adjustments to reconcile net income to net cash
provided by operating activities:
|
|
|
Depreciation and amortization
|
9,948,243
|
7,690,778
|
Loss (gain) on disposal of property and
equipment
|
300,676
|
(24,707)
|
Stock-based compensation (excluding cash portion of
restricted stock award
paid of $334,579)
|
779,979
|
—
|
Excess tax benefit from stock-based
compensation
|
(620,138)
|
—
|
Deferred income tax expense
|
2,673,248
|
3,937,798
|
Non-cash interest expense
|
38,036
|
50,196
|
Other amortization
|
67,837
|
67,837
|
Unrealized loss on available-for-sale
securities
|
(3,696)
|
—
|
Changes in operating assets and
liabilities
|
|
|
(Increase) decrease in:
|
|
|
Accounts receivable, net
|
(728,001)
|
(165,987)
|
Accounts receivable – leasehold incentives
|
1,011,201
|
221,963
|
Income tax receivable
|
1,488,931
|
(711,764)
|
Merchandise inventory
|
(7,723,540)
|
(4,256,193)
|
Prepaid expenses and other assets
|
(169,771)
|
75,979
|
Increase in:
|
|
|
Accounts payable
|
6,860,498
|
2,107,957
|
Accrued expenses
|
2,560,927
|
849,259
|
Deferred rent and lease incentives
|
1,241,343
|
2,288,519
|
Net cash provided by operating activities
|
25,202,345
|
16,741,521
|
Investing
activities:
|
|
|
Acquisition of property and equipment
|
(25,258,595)
|
(20,446,122)
|
Proceeds from sale of property and
equipment
|
608,022
|
35,600
|
Purchase of available-for-sale securities
|
(1,751,174)
|
—
|
Payments received on notes receivable, related
party
|
270,301
|
—
|
Payments received for premiums paid on split-dollar
life insurance
|
659,852
|
—
|
Notes receivable, related party – insurance
premiums
|
(4,729)
|
(36,163)
|
Increase in split-dollar life insurance
premiums
|
(81,991)
|
(65,364)
|
Net cash used in investing activities
|
(25,558,314)
|
(20,512,049)
|
Financing
activities:
|
|
|
Borrowings under credit facility
|
—
|
5,847,041
|
Repayments under credit facility
|
(27,236,324)
|
(500,000)
|
Repayments under notes payable
|
—
|
(119,412)
|
Repayments under notes payable, related
party
|
(923,606)
|
(533,150)
|
Capital lease and financing obligation
payments
|
(485)
|
—
|
Distributions to noncontrolling interests
|
(810,000)
|
(990,000)
|
Purchase of remaining 45% noncontrolling interest in
BVC
|
(10,050,880)
|
—
|
Proceeds from common stock issued in IPO, net of
commissions
|
58,134,770
|
—
|
Excess tax benefit from stock-based
compensation
|
620,138
|
—
|
Equity issuance costs
|
(2,460,196)
|
—
|
Loan fees paid
|
(4,049)
|
(1,972)
|
Net cash provided by financing activities
|
17,269,368
|
3,702,507
|
Net increase (decrease) in cash and cash
equivalents
|
16,913,399
|
(68,021)
|
Cash and
cash equivalents, beginning of year
|
377,549
|
445,570
|
Cash and
cash equivalents, end of year
|
$17,290,948
|
377,549
|
Supplemental disclosures of cash flow
information:
|
|
|
Cash paid for interest, net of capitalized interest
of $25,000 and $32,000 respectively
|
$524,391
|
615,425
|
Cash paid for interest on capital
lease and financing obligations
|
39,197
|
—
|
Income taxes paid
|
519,231
|
11,589
|
Supplemental disclosures of non-cash investing and
financing activities:
|
|
|
Acquisition of property and equipment not yet
paid
|
$5,007,169
|
2,055,213
|
Property acquired through capital lease financing
obligations
|
5,526,327
|
—
|
Equity issuance costs not yet paid
|
256,420
|
—
|
Tax benefit associated with
acquisition of noncontrolling interest in BVC
|
3,591,931
|
—
|
NATURAL GROCERS BY VITAMIN
COTTAGE, INC.
Non-GAAP Financial Measures
(unaudited)
In addition to reporting financial results in accordance with
U.S. generally accepted accounting principles, or GAAP, the Company
provides information regarding pro forma net income, Adjusted pro
forma net income, EBITDA, Adjusted EBITDA and additional
information about its operating results. These measures are
not in accordance with, or an alternative to 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 the periods presented. The Company defines
Adjusted pro forma net income as pro forma net income excluding
stock-based and incentive compensation expenses associated with the
IPO. 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
Company defines Adjusted EBITDA as EBITDA excluding stock-based and
incentive compensation expenses associated with the IPO
($1.4 million).
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, Adjusted pro forma net income, EBITDA, and
Adjusted EBITDA.
Pro Forma and Adjusted Pro Forma Statements 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 for all periods presented, as such, the
consolidated statements of income include the revenues and expenses
of BVC for all periods presented 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 statements
of income for the periods 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 all
periods presented. 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.
|
Three
months ended
September 30,
|
Year
ended
September 30,
|
|
2012
|
2011
|
2012
|
2011
|
Net income
attributable to Natural Grocers by Vitamin Cottage, Inc
|
$972,616
|
917,966
|
6,648,800
|
3,503,811
|
Net (loss)
income attributable to noncontrolling interest
|
(73,595)
|
285,218
|
827,772
|
1,106,075
|
Net
income
|
899,021
|
1,203,184
|
7,476,572
|
4,609,886
|
Provision
for income taxes
|
582,393
|
543,462
|
3,955,219
|
2,166,800
|
Income
before income taxes
|
1,481,414
|
1,746,646
|
11,431,791
|
6,776,686
|
Pro forma
provision for income taxes
|
(554,830)
|
(649,526)
|
(4,263,972)
|
(2,589,443)
|
Pro forma
net income
|
926,584
|
1,097,120
|
7,167,819
|
4,187,243
|
Stock-based compensation of $1,106,228, net of income
taxes of $412,623 (1)
|
693,605
|
—
|
693,605
|
—
|
Incentive
compensation of $285,726, net of income taxes of $106,576
(1)
|
179,150
|
—
|
179,150
|
—
|
Adjusted
pro forma net income
|
$1,799,339
|
1,097,120
|
8,040,574
|
4,187,243
|
Per
Share Data:
|
|
|
|
|
Adjusted
pro forma net income per common share
|
|
|
|
|
Basic
|
$0.08
|
0.05
|
0.36
|
0.19
|
Diluted
|
$0.08
|
0.05
|
0.36
|
0.19
|
|
|
|
|
|
(1)
|
Entirely
contingent upon a successful IPO
|
The following table reconciles the effective tax rate to
the pro forma effective tax rate had the Company owned 100% of
BVC for all periods presented:
|
Three
months ended
September 30,
|
Year
ended
September 30,
|
|
2012
|
2011
|
2012
|
2011
|
Effective tax rate
|
39.3%
|
31.1
|
34.6
|
32.0
|
Pro forma adjustment to exclude nontaxable net income
attributable to noncontrolling interest
|
(1.8)
|
6.1
|
2.7
|
6.2
|
Pro forma effective tax rate
|
37.5%
|
37.2
|
37.3
|
38.2
|
Effective October 31, 2012, BVC
merged with and into the Company's wholly owned subsidiary Vitamin
Cottage Natural Foods Market, Inc. and ceased to exist.
EBITDA and Adjusted EBITDA
EBITDA is not a measure of financial performance
under GAAP. The Company believes EBITDA and Adjusted EBITDA
provide additional information about (i) operating
performance, because they assist in comparing the operating
performance of stores on a consistent basis, as they remove 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
these non-GAAP financial measures 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 these non-GAAP financial measures,
together with a reconciliation, 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 and Adjusted EBITDA differently, and
as a result, the Company's measure of EBITDA and Adjusted EBITDA
may not be directly comparable to EBITDA and Adjusted EBITDA of
other companies. Items excluded from EBITDA and Adjusted EBITDA are
significant components in understanding and assessing financial
performance. EBITDA and Adjusted EBITDA are a supplemental measure
of operating performance that do not represent and should not be
considered in isolation or as alternatives to, or substitutes for,
net income or other financial statement data presented in the
consolidated financial statements of the Company as indicators of
financial performance. EBITDA and Adjusted EBITDA have limitations
as analytical tools, and should not be considered in isolation, or
as a substitute for analysis of the Company's results as reported
under GAAP. EBITDA and Adjusted 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. and net income, to
EBITDA and to Adjusted EBITDA:
|
Three
months ended
September 30,
|
Year
ended September 30,
|
|
2012
|
2011
|
2012
|
2011
|
Net income
attributable to Natural Grocers by Vitamin Cottage, Inc
|
$972,616
|
917,966
|
6,648,800
|
3,503,811
|
Net (loss) income attributable to noncontrolling
interest
|
(73,595)
|
285,218
|
827,772
|
1,106,075
|
Net
income
|
899,021
|
1,203,184
|
7,476,572
|
4,609,886
|
Interest expense
|
93,971
|
94,847
|
568,501
|
669,125
|
Provision for income taxes
|
582,393
|
543,462
|
3,955,219
|
2,166,800
|
Depreciation and amortization
|
2,719,498
|
2,145,068
|
9,948,243
|
7,690,778
|
EBITDA
|
4,294,883
|
3,986,561
|
21,948,535
|
15,136,589
|
Stock-based compensation (1)
|
1,106,228
|
—
|
1,106,228
|
—
|
Incentive
compensation (1)
|
285,726
|
—
|
285,726
|
—
|
Adjusted
EBITDA
|
$5,686,837
|
3,986,561
|
23,340,489
|
15,136,589
|
(1)
|
Entirely
contingent upon a successful IPO
|
SOURCE Natural Grocers by Vitamin Cottage, Inc.