EXHIBIT 99.1
99 CENTS ONLY STORES(R) REPORTS EARNINGS PER SHARE OF $0.17 FOR THE THIRD
QUARTER ENDED SEPTEMBER 30, 2003.
CITY OF COMMERCE, CA -- October 21, 2003 - 99 Cents Only Stores(R)
(NYSE:NDN) reported net income of $12.1 million for the third quarter ended
September 30, 2003 compared to $13.3 million in the third quarter of 2002.
Earnings per share were $0.17 in the third quarter of 2003, compared to
earnings per share of $0.19 in the third quarter of 2002.
Eric Schiffer, President said "While overall sales growth and
same-store-sales were benefited from increased traffic resulting from growth in
the food category, earnings per share were impacted by the lower food gross
margin as well as back-weighted store openings and higher than planned costs
associated with our entry into the Texas market.
Overall, the initial sales results from the Texas stores indicate these
stores are running behind the sales of the average new non-Texas 99 Cents Only
Stores. We are excited that the initial sales results show that our Houston
customers have a higher average ticket than our non-Texas customers.
Since the Company's stores are still relatively unknown in Houston and
there are a high number of chains and independent stores in Houston with
confusingly similar names, the main sales challenge is to get more consumers
into the store for the first time. This October we initiated a print media ad
campaign in Houston, stepped up efforts to improve the merchandising and the
breadth of product selection in Houston and promoted an experienced discount
retail grocery executive to be general manager of our Texas operation."
Total sales in the third quarter 2003 increased 22.8% to $211.5 million,
compared to $172.3 million in the third quarter of 2002. Retail sales for the
third quarter were $200.6 million, up 25.0% from sales of $160.4 million in
2002. Ten stores opened during the quarter, including six in Texas.
Same-store-sales increased 4.95% in the third quarter of 2003, benefited
primarily from increased transaction count. Same-store-sales for the first nine
months of 2003 increased 6.4%.
Total gross margin for the third quarter of 2003 was 39.2% versus 39.9% in
the third quarter of 2002. Retail gross margin for the quarter was 40.2% versus
41.3% in 2002. The difference is primarily due to accelerated sales growth in
the lower margin food category and cost factors affecting close-out margins.
Year to date retail gross margin was 41.0%, verses 41.5% last year.
Operating expenses were 30.6% of sales in the quarter versus 28.0% last
year. The higher expenses over third quarter last year were due to several
factors. There was an approximately 110 basis point impact associated with the
opening and running of the Texas territory. This includes both retail start-up
costs and costs for operating the new distribution center in Houston, including
property taxes, insurance, utilities, maintenance and labor.
Other cost increases over last year include a 30 basis point increase in
depreciation due to investment in stores, systems infrastructure and Texas
warehouse. Distribution costs increased about 60 basis points resulting from
further expansion into Northern California, Arizona and Nevada as well as
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freight and distribution costs to replenish the Texas distribution center from
Los Angeles. Employee related benefits including workers compensation added
about 20 basis points.
Eric Schiffer, President said "The biggest factor causing the higher SG&A
expense is we are running a large automated distribution center in Texas that is
currently supporting only a handful of stores. In order to achieve operating
returns in Texas similar to our non-Texas stores, given the higher than planned
Texas start-up expenses including absorption of the distribution costs, the
Company estimates it needs about 30 Texas stores. This is planned to occur by
July 2004."
GUIDANCE FOR THE FOURTH QUARTER ENDING DECEMBER 31, 2003
--------------------------------------------------------
Total sales for the fourth quarter, including wholesale sales, are
projected in the range of $243 to $248 million. Comparable store sales are
projected at 1% to 3%. The company plans to open 15 stores in the 4th quarter
with 2 in October, 3 in November and 10 in December. This includes 7 stores in
Houston.
Total gross margin is projected in the range of 40.4% to 41.1%. Total SG&A
expenses including depreciation are projected at 28.6% to 29.4%. The tax rate is
projected at 38.7% of pre-tax income. Fully diluted share count is projected at
73.1 million and EPS for the quarter is projected in the range of $0.24 to
$0.27.
GUIDANCE FOR 2004
-----------------
Total sales for the full year 2004, including wholesale sales, are
projected in the range of $980 million to $1,035 million. Comparable store sales
for the year are projected at 1% to 3%. The company plans to grow its square
footage 25% by opening approximately 48 stores with at least 20 in Texas. The
tax rate for 2004 is estimated at 39.5%. Fully diluted share count is projected
at 74.2 million. EPS for 2004 is projected to be in the range of $1.00 to $1.05.
Total sales, including wholesale, for the first quarter of 2004 are
projected to be in the range of $240 million to $245 million. Same store sales
for the first quarter are projected to range from 1% to 3%. The company plans to
open 12 to 14 stores in the first quarter with at least 7 stores in Texas. The
Company plans to open its first stores in Dallas, Texas and Tucson, Arizona in
the first quarter of 2004.
Total gross margin for the first quarter is projected in the range of 39.7%
to 40.2%. Total SG&A expenses including depreciation are projected at 28.8% to
29.2%. Fully diluted share count is projected at 73.3 million shares. EPS for
the first quarter is projected in the range of $0.22 to $0.24.
A conference call to discuss this earnings release is scheduled for
Tuesday, October 21, 2003, at 8:00 A.M. Pacific Time. If you would like to
participate in this conference call, please phone the Link conference call
operator at 1-206-315-1857 about nine minutes before the call is scheduled to
begin. Please inform the Operator that you are calling in for 99 Cents Only
Stores' 3rd Quarter Earnings conference call. A recorded version of the call
will be made available four hours after completion of the call and will remain
on-line until October 28, 2003, 5:00 P.M. Pacific Time. To access the recorded
version, dial 1-913-383-5767 PASSCODE: 4071.
99 Cents Only Stores(R), the nation's oldest existing one-price retailer,
operates 176 retail stores in California, Nevada, Arizona and Texas and a
wholesale division called Bargain Wholesale. The Company will open its 26th and
27th stores for the year and its twelfth and thirteenth stores in Houston, Texas
on Thursday, November 6, 2003. 99 Cents Only Stores(R) emphasizes name-brand
quality consumables, priced at an excellent value, in attractively merchandised
stores.
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This press release contains forward-looking statements, as referenced in
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
are inherently unreliable and actual results may differ. Factors which could
cause actual results to differ materially from these forward-looking statements
include, changes in the competitive market place, general economic conditions,
factors affecting the retail industry in general, the timing of new store
openings, the ability of the Company to identify and obtain leases for new
stores, the ability of the Company to acquire inventory at favorable costs and
other factors, including those discussed in the Company's most recent quarterly
and annual filings with the Securities and Exchange Commission. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
99 CENTS ONLY STORES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in thousands except per share amounts)
Three months ended September 30 Nine Months ended September 30
2003 2002 2003 2002
---------------------- ----------------- --------------------- -----------------
Net sales:
99 Cents Only Stores $ 200,567 94.8% $160,424 93.1% $ 580,331 94.4% $465,507 92.5%
Bargain Wholesale 10,969 5.2% 11,839 6.9% 34,660 5.6% 37,722 7.5%
---------- ---------- -------- ------- --------- ---------- -------- -------
211,536 100.0% 172,263 100.0% 614,991 100.0% 503,229 100.0%
Cost of sales 128,659 60.8% 103,509 60.1% 369,913 60.1% 302,668 60.2%
---------- ---------- -------- ------- --------- ---------- -------- -------
Gross Profit 82,877 39.2% 68,754 39.9% 245,078 39.9% 200,561 39.8%
Selling, general and
administrative expenses 58,437 27.6% 43,577 25.3% 164,038 26.7% 126,840 25.2%
Depreciation & amortization 6,317 3.0% 4,570 2.7% 16,934 2.8% 12,769 2.5%
---------- ---------- -------- ------- --------- ---------- -------- -------
Total operating expenses 64,754 30.6% 48,147 28.0% 180,972 29.5% 139,609 27.7%
---------- ---------- -------- ------- --------- ---------- -------- -------
Operating Income 18,123 8.6% 20,607 11.9% 64,106 10.4% 60,952 12.1%
Interest and other income
(expense), net 1,609 0.7% 1,135 0.7% 3,635 0.6% 3,430 0.7%
---------- ---------- -------- ------- --------- ---------- -------- -------
Income before income taxes 19,732 9.3% 21,742 12.6% 67,741 11.0% 64,382 12.8%
Provision for income taxes 7,630 3.6% 8,487 4.9% 26,195 4.2% 25,139 5.0%
---------- ---------- -------- ------- --------- ---------- -------- -------
Net income $ 12,102 5.7% $ 13,255 7.7% $ 41,546 6.8% $ 39,243 7.8%
========== ========== ======== ======= ========= ========== ======== =======
Basic earnings per share
Net income $ 0.17 $ 0.19 $ 0.58 $ 0.56
========== ======== ========= ========
Diluted earnings per share
Net income $ 0.17 $ 0.19 $ 0.57 $ 0.55
========== ======== ========= ========
Shares used in computation of net
income per share
Basic 71,929 70,043 71,513 69,830
Diluted 73,033 71,217 72,306 71,139
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99 CENTS ONLY STORES
BALANCE SHEETS
(Unaudited)
(Amounts in thousands)
September 30, December 31, September 30,
2003 2002 2002
-------------- ------------- --------------
ASSETS:
Cash $ 2,054 $ 7,985 $ 3,292
Short-term investments 127,276 146,857 112,162
Receivables, net 3,324 2,753 3,590
Due from shareholder 2,179 1,232 -
Income tax receivable 11,744 - 5,342
Inventories 106,248 83,176 83,823
Other current assets 3,150 2,869 3,212
-------------- ------------- --------------
Total current assets 255,975 244,872 211,421
Property and Equipment, net 177,126 127,560 118,169
Long-term investments in marketable securities 50,341 37,223 42,959
Deferred taxes 19,078 19,078 15,689
Other assets 13,050 11,177 11,329
-------------- ------------- --------------
32,128 30,255 27,018
-------------- ------------- --------------
Total assets $ 515,570 $ 439,910 $ 399,567
============== ============= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current portion of capitalized lease $ 40 $ 40 $ 41
Accounts payable 16,811 16,946 9,850
Accrued expenses 11,384 10,157 7,862
Workers Compensation 8,412 7,725 6,019
Income tax payable - 518 -
-------------- ------------- --------------
Total current liabilities 36,647 38,386 23,772
Deferred rent 2,400 2,210 2,150
Deferred compensation liability 1,780 1,102 950
Capitalized lease obligation 1,564 1,597 1,627
-------------- ------------- --------------
5,744 4,909 4,727
Shareholders' equity 473,179 396,615 371,068
-------------- ------------- --------------
Total liabilities and shareholders' equity $ 515,570 $ 439,910 $ 399,567
============== ============= ==============
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99 CENTS ONLY STORES
STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
NINE MONTHS ENDED
September 30,
2003 2002
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,546 $ 39,243
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . 16,814 12,769
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (17)
Tax benefit from exercise of non-qualified employee stock options. . . . . . . 10,609 3,500
Changes in assets and liabilities associated with operating activities:
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (572) (67)
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23,071) (17,295)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,517) (527)
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (89) -
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (135) (5,393)
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,228 1,518
Worker's compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 687 486
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,262) (3,958)
Deferred rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190 90
Due (from) shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . (947) (1,655)
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . 29,481 28,694
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment. . . . . . . . . . . . . . . . . . . . . . . (66,381) (27,281)
Purchase (sale) of marketable securities . . . . . . . . . . . . . . . . . . . . 6,464 (7,023)
Investments in partnerships. . . . . . . . . . . . . . . . . . . . . . . . . . . 129 -
Net cash used in investing activities. . . . . . . . . . . . . . . . . . . . (59,788) (34,304)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital lease obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . (32) (10)
Proceeds from exercise of stock options. . . . . . . . . . . . . . . . . . . . . 24,408 8,680
Net cash provided by financing activities. . . . . . . . . . . . . . . . . . 24,376 8,670
NET INCREASE (DECREASE) IN CASH . . . . . . . . . . . . . . . . . . . . . . . . . (5,931) 3,060
CASH, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,985 232
CASH, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,054 $ 3,292
NOTE TO EDITORS: 99 CENTS ONLY STORES(R) NEWS RELEASES AND INFORMATION AVAILABLE
ON THE WORLD WIDE WEB AT HTPP://WWW.99ONLY.COM
CONTACT: 99 CENTS ONLY STORES(R), CITY OF COMMERCE, CALIFORNIA, ANDY FARINA,
CFO, 323/881-9933 -99 CENTS--
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