Exhibit 99.1
Wild Oats Markets, Inc. Reports Third Quarter 2003 Results
BOULDER, Colo., Nov. 4 /PRNewswire-FirstCall/ -- Wild Oats Markets, Inc.
(Nasdaq: OATS), a leading national natural and organic foods retailer, today
announced financial results for the third quarter and nine months ended
September 27, 2003.
Net sales in the third quarter of 2003 increased 3.9 percent to $237.0
million, compared to $228.1 million in the third quarter of 2002. This
increase was primarily driven by the inclusion of five new stores, one of
which was a relocation, in the Company's portfolio compared to the third
quarter of 2002. Wild Oats opened one store in Lexington, Ky. and relocated
one store in Nashville, Tenn. in the third quarter of 2003. Net sales for the
first nine months of 2003 were $715.3 million, which is a 2.6 percent
increase, compared to net sales of $697.3 million in the first nine months of
2002.
Comparable store sales increased 0.8 percent in the third quarter of 2003,
compared with 5.6 percent in last year's third quarter. As previously
announced, supply chain inconsistencies caused higher out-of-stock levels,
which contributed to declining customer traffic in the quarter. As a result,
comparable store customer traffic in the third quarter of 2003 was negative
2.4 percent and comparable store average transaction size per customer was
positive 3.3 percent.
Wild Oats reported a net loss of ($861,000), or ($0.03) per share in the
third quarter of 2003, compared with net income of $2.2 million, or $0.08 per
diluted share in the same period last year. Included in third quarter 2003
results are approximately $1.5 million, or $0.03 per share, in pre-tax charges
related to asset write-offs, restructuring charges and accelerated
depreciation for the planned closure or relocation of distribution centers and
warehouses. The loss in the third quarter caused net income for the first
nine months of 2003 to decline to $2.8 million, or $0.09 per share, from net
income of $4.3 million, or $0.17 per share, in the first nine months of 2002.
The inability of Wild Oats and Tree of Life, Inc. to achieve anticipated
supply chain improvements was a primary contributor to the Company's net loss
in the third quarter. The decline in net income was largely attributed to the
Company's efforts to overcome disruption in the stores related to supply chain
inconsistencies, including increased purchases from secondary and tertiary
distributors at a higher cost, higher operating expenses related to managing
supply chain issues, and increased promotional activity to drive customer
traffic in anticipation of improved supply chain efficiencies.
As previously announced, Wild Oats Markets and Tree of Life have mutually
agreed to terminate their current primary distribution relationship. The
parties have begun to work on a transition plan under which Wild Oats will
exercise a conversion option with its secondary distributor, United Natural
Foods, Inc. (UNFI), to transition its primary distribution business to UNFI at
competitive terms. This conversion will be complete within the first quarter
of 2004 and Tree of Life has committed to continue to support Wild Oats'
stores during the transition to UNFI.
"While we are disappointed by our results in the third quarter, we believe
that our business fundamentals are strong, and we continue to make strides to
achieve our growth objectives," said Perry D. Odak, President and Chief
Executive Officer. "Early indications show that our results in the fourth
quarter will be back on track, which is partially due to the benefit of labor
strikes at unionized grocery stores in certain regions. Once we realize
anticipated supply chain improvements, we expect that our financial results
will reflect the overall growth in the natural products industry."
Wild Oats reported gross profit of $68.9 million, or 29.1 percent of
sales, in the third quarter of 2003, a 2.7 percent increase compared with
$67.1 million, or 29.4 percent of sales, in the third quarter of 2002. The
decline in gross margin in the third quarter was the result of the
aforementioned accelerated depreciation for the planned closure or relocation
of distribution centers and warehouses; supply chain inconsistencies and
planned mark-downs to reduce inventory in Natural Living product categories to
eliminate slow-moving products and make room for new products. Wild Oats
generated gross profit of $211.0 million, or 29.5 percent of sales in the
first nine months of 2003, compared with $206.1 million, or 29.6 percent of
sales in the same period last year.
Direct store expenses increased 9.2 percent to $53.1 million in the third
quarter of 2003, compared with $48.6 million in the third quarter of 2002.
This increase in direct store expenses was largely the result of increased
store payroll expenses required to accommodate supply chain inconsistencies.
As a result, direct store expenses as a percent of sales was up more than one
full percentage point to 22.4 percent, compared with 21.3 percent in last
year's third quarter. Direct store expenses in the year-to-date period were
$154.3 million, or 21.6 percent of sales, compared with $150.6 million, or
21.6 percent of sales, in the same period in 2002. The Company continues its
focus on expense management at store level and, by the end of the fourth
quarter of 2003, expects its direct store expenses as a percent of sales to
return to levels achieved in the first half of the year.
Store contribution was $15.8 million, or 6.6 percent of sales, in the
third quarter of 2003, a 14.6 percent decline compared to $18.5 million, or
8.1 percent of sales, in the third quarter of 2002. This was due to the
above-mentioned decline in gross margins and increase in direct store
expenses. Store contribution for the first nine months of 2003 was $56.7
million, or 7.9 percent, a 2.0 percent increase compared with $55.5 million,
or 8.0 percent of sales in the same period last year.
Selling, General & Administrative expenses (SG&A) in the third quarter of
2003 increased 21.8 percent to $15.5 million, or 6.5 percent of sales,
compared with $12.7 million, or 5.6 percent of sales, in the prior year third
quarter. Higher SG&A expenses in the third quarter of 2003 were primarily due
to increased administrative costs related to the Company's new store rollout
program, and continued investments to improve the Company's IT systems.
Additionally, third quarter 2002 SG&A expenses benefited from a favorable
legal judgment. While the Company invested in advertising and promotional
programs early in the third quarter of 2003 in anticipation of supply chain
improvements, which did not produce desired results, this was largely a
reallocation of resources and did not have an adverse impact on SG&A in the
quarter compared to prior-year levels. SG&A expenses in the first nine months
of 2003 were $48.3 million, or 6.7 percent of sales, compared with $41.6
million, or 6.0 percent of sales, in the same period last year.
Wild Oats Markets continues to generate improved cash flow despite a
significant increase in capital expenditures related to investments in new and
existing stores. During the first nine months of 2003, net cash provided by
operating activities was $26.2 million, compared to $25.1 million in the same
period in 2002. Capital expenditures were $8.6 million for the third quarter
and $22.1 million year-to-date in 2003, compared to $2.3 million in the third
quarter and $6.9 million year-to-date in 2002. In the third quarter of 2003,
Wild Oats paid down a net $2.6 million on its credit facility and, as of the
end of the quarter, had approximately $37.3 million outstanding on its $75.0
million credit facility.
2003 Outlook
To date in 2003, Wild Oats Markets completed remodeling and/or resetting
20 stores as part of its previously announced store remodeling and resetting
initiatives. Wild Oats Markets will open three additional stores in the
fourth quarter of 2003, bringing the total new stores opened in 2003 to eight.
The three additional stores include two Wild Oats Natural Marketplaces in
Southwest Denver, Colo. and Park City, Utah; and one Henry's Marketplace in
Chino Hills, Calif. As previously communicated, the Company had planned to
open nine new stores this year, and as a result of construction delays, the
Company will open this ninth store, a Wild Oats Natural Marketplace in
Colorado Springs, Colo., in January 2004.
Wild Oats currently has 15 leases and 18 letters of intent signed for new
stores slated to open in 2004 and 2005. The Company expects it will meet its
growth plans of adding up to 15 new stores in 2004 and up to 20 in 2005.
"We continue to focus both on improving our existing stores and building
successful new stores," said Mr. Odak. "Our new store development program is
netting positive results and, as we continue to improve efficiencies in
opening new stores, we are able to focus greater attention on our existing
store base. Our ability to continue to generate cash and pay down debt, while
at the same time devoting a higher level of capital expenditures on store
remodeling and new store development, gives us even greater confidence in the
underlying financial strength we have built for this Company."
As previously announced, several factors, including the duration of the
current labor strikes at unionized grocery stores in Southern Calif. and
potential strikes in other states, as well as the transition to a new primary
distributor, may have an impact on earnings results in the fourth quarter.
Therefore, the Company has withdrawn its previous EPS guidance for 2003 and is
unable to provide revised full-year EPS guidance at this time.
Company management will host a conference call and webcast with financial
analysts and investors on Tuesday, November 4, 2003 at 11:00 a.m. Mountain
time (1:00 p.m. Eastern time) to discuss financial results for the third
quarter and nine months ended September 27, 2003. Participants calling from
the U.S. may call in by dialing (877) 252-5618. International callers should
dial (706) 634-1349. Participants should ask for the "Wild Oats third quarter
2003 earnings conference call" or reference conference ID number 3339461. A
simultaneous webcast will be available through a link on the Investor
Relations page of the Wild Oats website at www.wildoats.com .
About Wild Oats
Wild Oats Markets, Inc. is a nationwide chain of natural and organic foods
markets in the U.S. and Canada. With annual sales of nearly $920 million, the
Company currently operates 101 natural foods stores in 25 states and British
Columbia, Canada. The Company's natural food stores include Wild Oats Natural
Marketplace, Henry's Marketplace, Sun Harvest and Capers Community Markets.
For more information, please visit the Company's website at
www.wildoatsinc.com .
Risk Factors and Uncertainties
Except for the historical information contained herein, this news release
contains forward-looking statements that involve risks and uncertainties.
Such forward-looking statements include the ability to resolve distributor
issues without significant disruption, the number, timing and location of
stores that the Company plans to open, relocate, sell or close in the future,
the amount and timing of expected restructuring and asset impairment charges,
expected future comparable store sales, revenues and earnings per share, the
success of the Company's marketing and merchandising programs, and the future
financial measures and the prospects for favorable growth and performance.
The statements made by the Company are based on management's present
expectations, and actual results may differ from the results indicated or
otherwise implied by such forward-looking statements due to certain risks and
uncertainties including, but not limited to, general economic conditions, the
impact of competition and labor disputes in certain regions, the ability to
obtain necessary inventory, the timing of completion of the transition to a
new primary distributor, the Company's ability to execute on marketing and
merchandising initiatives to drive customer traffic, as well as other risks
detailed from time to time in the Company's SEC filings, including the Annual
Report on Form 10-K for the fiscal year ended December 28, 2002, as well as
quarterly reports on Form 10-Q. These risk factors may not be an all-
inclusive enumeration of the business risks faced by Wild Oats. Investors
should recognize that the reliability of any projected financial data
diminishes the farther in the future the data are projected.
The statements made by management of the Company and summarized above
represent their views as of the date of this press release, and it should not
be assumed that the statements made herein remain accurate as of any future
date. Wild Oats does not intend to update these statements and undertakes no
duty to any person to effect any such update under any circumstances.
Wild Oats Markets, Inc.
Consolidated Statement of Operations
(In thousands, except per-share amounts)
(Unaudited)
Thirteen Weeks Ended
Sept 27, Sept 28,
2003 2002
Sales $237,028 100.0% $228,102 100.0%
Cost of goods sold
and occupancy costs 168,158 70.9% 161,026 70.6%
-------- --------
Gross profit 68,870 29.1% 67,076 29.4%
Direct store expenses 53,114 22.4% 48,629 21.3%
-------- --------
Store contribution 15,756 6.6% 18,447 8.1%
Selling, general and
administrative expenses 15,472 6.5% 12,705 5.6%
Pre-opening expenses 616 0.3% 237 0.1%
(Gain) loss on disposal
of assets 661 0.3% 13 0.0%
Restructuring and asset
impairment charges (income) 134 0.1% (174) -0.1%
-------- --------
Income (loss) from
operations (1,127) -0.5% 5,666 2.5%
Interest expense, net 285 0.1% 2,134 0.9%
-------- --------
Income (loss) before
income taxes (1,412) -0.6% 3,532 1.5%
Income tax expense
(benefit)(1) (551) -0.2% 1,360 0.6%
-------- --------
Net income (loss) $(861) -0.4% $2,172 1.0%
======== ========
Basic net income
per common share $(0.03) $0.08
======== ========
Weighted average number
of common shares
outstanding 29,898 26,440
======== ========
Diluted net income
per common share $(0.03) $0.08
======== ========
Weighted average number
of common shares
outstanding, assuming
dilution 29,898 27,185
======== ========
Wild Oats Markets, Inc.
Consolidated Statement of Operations
(In thousands, except per-share amounts)
(Unaudited)
Thirty-Nine Weeks Ended
Sept 27, Sept 28,
2003 2002
Sales $715,263 100.0% $697,302 100.0%
Cost of goods sold
and occupancy costs 504,312 70.5% 491,155 70.4%
-------- --------
Gross profit 210,951 29.5% 206,147 29.6%
Direct store expenses 154,305 21.6% 150,605 21.6%
-------- --------
Store contribution 56,646 7.9% 55,542 8.0%
Selling, general and
administrative expenses 48,246 6.7% 41,625 6.0%
Pre-opening expenses 1,639 0.2% 1,251 0.2%
(Gain) loss on disposal
of assets 2,029 0.3% (27) 0.0%
Restructuring and asset
impairment charges (income) (1,747) -0.2% (826) -0.1%
-------- --------
Income (loss) from
operations 6,479 0.9% 13,519 1.9%
Interest expense, net 1,951 0.3% 6,543 0.9%
-------- --------
Income (loss) before
income taxes 4,528 0.6% 6,976 1.0%
Income tax expense
(benefit) (1) 1,766 0.2% 2,638 0.4%
-------- --------
Net income (loss) $2,762 0.4% $4,338 0.6%
======== ========
Basic net income per
common share $0.09 $0.17
======== ========
Weighted average number
of common shares outstanding 29,792 25,425
======== ========
Diluted net income per
common share $0.09 $0.17
======== ========
Weighted average number
of common shares
outstanding, assuming
dilution 30,169 26,071
======== ========
(1) Interest expense for the nine months ended September 27, 2003
includes a $186,000 loss on early extinguishment of debt.
Wild Oats Markets, Inc.
Condensed Consolidated Balance Sheet
(In Thousands)
Sept 27, 2003 June 28, 2003 Dec 28, 2002
(unaudited) (unaudited)
Assets
Current assets:
Cash and cash equivalents $11,211 $15,275 $11,367
Inventories, net 45,836 47,785 47,175
Accounts receivable, net 4,708 3,087 2,524
Prepaid expenses and
other current assets 3,217 7,490 7,069
-------- -------- --------
Total current assets 64,972 73,637 68,135
Property and equipment, net 126,134 123,963 122,359
Intangible assets, net 113,524 113,648 113,819
Other long term assets 18,963 16,976 19,272
-------- -------- --------
Total assets $323,593 $328,224 $323,585
======== ======== ========
Liabilities and
Stockholders' Equity
Current liabilities:
Accounts payable $62,878 $65,105 $57,596
Accrued liabilities 36,080 35,955 37,943
Current portion of debt
and capital leases 19 16 146
-------- -------- --------
Total current
liabilities 98,977 101,076 95,685
Long-term debt and
capital leases 37,279 39,886 43,075
Other long-term
liabilities 13,964 14,330 17,923
------- ------- -------
Total liabilities 150,220 155,292 156,683
-------- -------- --------
Stockholders' equity:
Preferred stock, $0.001
par value; 5,000,000
shares authorized; no
shares issued and
outstanding
Common stock, $0.001 par
value; 60,000,000 shares
authorized; 29,965,041
and 29,658,660 shares
issued and outstanding 30 30 30
Additional paid-in
capital 205,830 204,693 203,282
Accumulated deficit (32,606) (31,745) (35,368)
Accumulated other
comprehensive
income (loss) 119 (46) (1,042)
-------- -------- --------
Total stockholders'
equity 173,373 172,932 166,902
-------- -------- --------
Total liabilities and
stockholders' equity $323,593 $328,224 $323,585
======== ======== ========
Wild Oats Markets, Inc.
Consolidated Statement of Cash Flows
(In Thousands)
(Unaudited)
Thirteen Weeks Ended Thirty-nine Weeks Ended
Sept 27, Sept 28, Sept 27, Sept 28,
2003 2002 2003 2002
Cash Flows From
Operating Activities:
Net income $(861) $2,172 $2,762 $4,338
Adjustments to reconcile
net income to net cash
from operating
activities:
Depreciation and
amortization 5,898 5,234 16,764 15,762
Deferred tax expense (587) 2,337 1,396 3,157
Loss (gain) on disposal
of property and equipment 661 12 2,029 (27)
Restructuring and asset
impairment charges 134 (174) (1,747) (826)
Loss on early
extinguishment of
long-term debt 186
Other 26 (151) 132 (211)
Change in assets and
liabilities:
Inventories 1,955 2,396 1,500 8,992
Receivables and other
assets 814 1,558 533 4,304
Accounts payable (2,012) (5,378) 5,698 (7,494)
Accrued liabilities (167) (4,816) (3,051) (2,916)
------- ------- ------- -------
Net cash provided by
operating activities 5,861 3,190 26,202 25,079
------- ------- ------- -------
Cash Flows From Investing
Activities:
Capital expenditures (8,554) (2,262) (22,070) (6,906)
Proceeds from sale of
property and equipment 322 213 326 218
------- ------- ------- -------
Net cash used in
investing activities (8,232) (2,049) (21,744) (6,688)
------- ------- ------- -------
Cash Flows From
Financing Activities:
Net repayments on
line of credit (2,600) (3,000) (6,700) (24,000)
Net increase (decrease)
in book overdraft (195) (2,373) (489) (493)
Repayments on notes
payable, long-term
debt and capitalized
leases (4) (2,564) (37,102) (8,294)
Proceeds from long-term
debt 37,879
Payment of debt
issuance costs (721)
Proceeds from issuance
of common stock 1,112 51,491 2,455 52,925
------- ------- ------- -------
Net cash provided by
(used in) financing
activities (1,687) 43,554 (4,678) 20,138
------- ------- ------- -------
Effect of exchange rate
changes on cash (6) (40) 64 14
------- ------- ------- -------
Net increase (decrease)
in cash and cash
equivalents (4,064) 44,655 (156) 38,543
Cash and cash equivalents
at beginning of period 15,275 12,728 11,367 18,840
------- ------- ------- -------
Cash and cash equivalents
at end of period $11,211 $57,383 $11,211 $57,383
======= ======= ======= =======
Non-Cash Investing and
Financing Activities;
Stock Issued in payment
of note payable $1,210
=======
Settlement of note
payable against
accounts receivable $200
=======
SOURCE Wild Oats Markets, Inc.
-0- 11/04/2003
/CONTACT: Sonja Tuitele, Corporate Communications of Wild Oats Markets,
Inc., +1-720-562-4984/
/Web site: http://www.wildoats.com
http://www.wildoatsinc.com /
(OATS)
CO: Wild Oats Markets, Inc.
ST: Colorado
IN: REA SUP FOD
SU: ERN ERP CCA