Exhibit 99.1
Wild Oats Markets, Inc. Reports First Quarter 2007 Results
BOULDER, Colo.--(BUSINESS WIRE)--May 3, 2007--Wild Oats Markets,
Inc. (NASDAQ:OATS), a leading national natural and organic foods
retailer, today announced financial results for the first quarter
ended March 31, 2007. Net of $3.5 million, or $0.12 per share, in
transaction expenses related to the pending merger with Whole Foods
Market, Inc. the Company generated a significant improvement in
profitability. Excluding transaction expenses, earnings per share in
the first quarter of 2007 were $0.17 compared to $0.10 in the first
quarter of 2006, and adjusted earnings before interest, taxes,
depreciation and amortization (Adjusted EBITDA) increased 13.2 percent
to $15.4 million from $13.6 million in last year's first quarter.
Reported net income on a GAAP basis for the first quarter of 2007,
which includes the transaction costs, was $1.6 million, or $0.05 per
share, and reported Adjusted EBITDA was $11.9 million in the first
quarter of 2007.
Financial Results
Net sales in the first quarter increased 3.9 percent to $309.9
million, from $298.4 million in the first quarter of 2006. The
contribution of seven new stores opened since the end of last year's
first quarter drove the overall increase in net sales and more than
offset the sales impact of nine store closures in 2006. The Company
reported a 0.3 percent increase in comparable store sales in the first
quarter, compared with same-store sales of 4.1 percent in the first
quarter of 2006. Wild Oats ended the first quarter of 2007 with 2.53
million total square feet under management, which represents a slight
decline relative to last year due to the store closures in 2006.
"We are very pleased with our growth in profitability in the first
quarter, and with the top-line momentum we are establishing in 2007,"
said Gregory Mays, Chairman and interim CEO of Wild Oats Markets. "The
merchandising and marketing programs we put in place in the first
quarter are gaining traction and are driving improvement in comparable
store sales in the second quarter. We will continue to implement
innovative merchandising and marketing programs, and focus on improved
store-level operations to drive further sales gains and an improved
customer experience."
Wild Oats Markets achieved significantly higher profitability in
the first quarter compared to last year's first quarter, excluding
transaction and other non-operating charges. Excluding incurred
charges of approximately $3.5 million related to the pending merger
with Whole Foods Market, the Company's net income was $5.1 million,
resulting in earnings per share of $0.17 and Adjusted EBITDA of $15.4
million. Reported net income for the first quarter of 2007, which
includes the transaction costs, was $1.6 million, or $0.05 per share,
compared to net income of $2.9 million or $0.10 per share in last
year's first quarter.
In addition to the transaction-related expenses in 2007, several
non-operating charges adversely affected reported earnings in the
first quarters of 2006 and 2007. These non-operating charges in the
first quarter of 2007 totaled approximately $1.5 million in
restructuring for lease-related liabilities, as well as asset
impairment charges and accelerated depreciation for closed facilities.
Net income in the first quarter of 2006 was adversely affected by
non-operating charges totaling $1.7 million on a pre-tax basis, which
included restructuring charges, asset impairment charges, severance
payments and accelerated depreciation for the closure or relocation of
facilities.
Adjusted EBITDA, net of transaction-related costs, in the first
quarter of 2007 was a record $15.4 million, or 5.0 percent of sales,
compared to $13.6 million, or 4.6 percent of sales, in first quarter
of 2006 (please refer to the attached schedule of Selected Additional
Financial Information for a reconciliation of non-GAAP financial
information).
Wild Oats reported gross profit of $99.2 million in the first
quarter of 2007, a 2.2 percent increase compared with $97.1 million in
the same period last year. Gross margin in the first quarter of 2007
was 32.0 percent of sales, compared with 32.5 percent of sales in the
first quarter of 2006. The slight decline in gross margin in the first
quarter was due to increased occupancy costs, a sales mix shift to
lower-margin product categories and a more aggressive promotional
schedule in 2007 relative to last year, which has helped to drive
improved sales results. The Company has reclassified depreciation
expenses for stores, warehouse and commissary facilities to be
presented separately. Therefore, these expenses are no longer included
in the gross profit calculation. This classification reflects a more
typical presentation used widely in the food retail industry (please
refer to the attached schedule of Selected Additional Financial
Information, which shows historical gross profit reclassified by
quarter).
Direct store expenses in the first quarter of 2007 were up
slightly, but remained relatively constant as a percent of sales at
$73.1 million, or 23.6 percent of sales, compared to $69.8 million, or
23.4 percent of sales, in the first quarter of 2006. The increase in
direct store expenses in the first quarter of 2007 was due to higher
inventory services costs, IT upgrades and increased regional
management to better support stores. Store contribution in the first
quarter of 2007 declined 4.2 percent to $26.1 million, or 8.4 percent
of sales, compared with $27.2 million, or 9.1 percent of sales, in the
first quarter of 2006.
Selling, General and Administrative (SG&A) expenses in the first
quarter of 2007 were $14.0 million, or 4.5 percent of sales, compared
to $13.0 million, or 4.3 percent of sales, in the prior year first
quarter. The year-over-year increase in SG&A was primarily the result
of transaction costs related to the pending merger, without which,
SG&A was $10.5 million in the first quarter, an 18.9 percent decline
relative to last year's first quarter. The reduction in SG&A in the
first quarter can be attributed to improved operating efficiency and
expense management.
Net cash provided by operating activities was $5.8 million in the
first quarter of 2007 compared with $13.2 million in the first quarter
of 2006. Capital expenditures in the first quarter of 2007 were $12.0
million compared with $5.8 million in the first quarter of 2006. The
increase in capital expenditures reflects the opening of one store in
January, the continued construction of the Boulder flagship store and
the completion of major remodeling of two stores.
Business Developments
On Feb. 21, 2007, Wild Oats Markets and Whole Foods Market
announced they have signed a definitive merger agreement under which
Whole Foods Market has offered to acquire Wild Oats Markets'
outstanding common stock in a cash tender offer at $18.50 per share,
or approximately $565 million based on fully diluted shares, plus
assumed debt. Consummation of these transactions is subject to
customary closing conditions, including regulatory filings. On April
25, 2007, the tender offer was further extended to May 22, 2007 due to
a second request for information by the Federal Trade Commission (FTC)
in connection with the Company's Hart-Scott-Rodino filing. As a result
of the pending merger, Company management will not host a conference
call with the investment community to discuss first quarter 2007
financial results.
The Company continues to sell its premium natural and organic Wild
Oats branded products in retail channels outside its stores. As
previously announced, this includes Price Chopper and Pathmark stores
in the Northeast, and online food retailer, Peapod in Chicago and
Washington D.C. As a result of the introduction of the Wild Oats
branded products in these retail outlets, sales of Wild Oats corporate
branded products increased by $2.0 million in the first quarter over
the first quarter of 2006.
About Wild Oats
Wild Oats Markets, Inc. is a nationwide chain of natural and
organic foods markets in the U.S. and Canada. With more than $1.2
billion in annual sales, the Company currently operates 110 natural
food stores in 24 states and British Columbia, Canada. The Company's
markets include: Wild Oats Marketplace, Henry's Farmers Market, Sun
Harvest and Capers Community Markets. For more information, please
visit the Company's website at www.wildoats.com.
Risk Factors and Uncertainties
This release contains forward-looking statements, as defined in
the Private Securities Litigation Reform Act of 1995, which involve
risks and uncertainties. Such forward-looking statements include: the
number of stores the Company plans to open, remodel and relocate in
the future, and the anticipated performance of such stores; the amount
of capital expenditures required to open or remodel stores; expected
future comparable store sales, revenues and earnings per share, future
financial measures and prospects for favorable growth and performance,
the likelihood of receipt of regulatory consents to, and the timing of
the consummation of the proposed tender offer and merger, and the
Company's ability, within a reasonable time period, to identify and
hire a chief executive officer with the vision and ability to continue
the Company's growth.
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: the
Company's ability to execute, the results of merchandising and
marketing programs, the impact of competition, the pending merger and
other factors as are set forth in the Company's SEC filings, including
the Annual Report on Form 10-K for the fiscal year ended December 30,
2006 and the Company's 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 is 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 STATEMENTS OF OPERATIONS
(In thousands, except per-share amounts)
(unaudited)
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THREE MONTHS ENDED
---------------------------------
March 31, April 1,
2007 2006
---------------- ----------------
Sales $309,942 100.0% $298,357 100.0%
Cost of goods sold and occupancy
costs 210,776 68.0% 201,297 67.5%
--------- ---------
Gross profit 99,166 32.0% 97,060 32.5%
Direct store expenses 73,078 23.6% 69,821 23.4%
--------- ---------
Store contribution 26,088 8.4% 27,239 9.1%
Depreciation and amortization 6,716 2.2% 6,687 2.2%
Selling, general, and
administrative expenses 14,022 4.5% 12,978 4.3%
Loss on disposal of assets, net 19 0.0% 90 0.0%
Pre-opening expenses 697 0.2% 1,459 0.5%
Restructuring and asset
impairment charges, net 1,457 0.5% 1,670 0.6%
--------- ---------
Income from operations 3,177 1.0% 4,355 1.5%
Interest income 551 0.2% 589 0.2%
Interest expense (1,840) -0.6% (1,854) -0.6%
--------- ---------
Income before income
taxes 1,888 0.6% 3,090 1.0%
Income tax expense 264 0.1% 205 0.0%
--------- ---------
Net income $ 1,624 0.5% $ 2,885 1.0%
========= =========
--------- ---------
Basic net income per common share $ 0.05 $ 0.10
========= =========
--------- ---------
========= =========
Weighted-average number of common
shares outstanding 30,005 28,970
========= =========
--------- ---------
Diluted net income per common share $ 0.05 $ 0.10
========= =========
--------- ---------
Weighted-average number of common
shares outstanding, assuming
dilution 30,342 29,542
========= =========
Percentages may not add due to rounding. Certain prior period
information has been reclassified to conform to the current
presentation.
WILD OATS MARKETS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
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March 31, December 30,
2007 2006
ASSETS (unaudited)
----------- ------------
Current Assets:
Cash and cash equivalents $ 34,567 $ 40,420
Short-term investments 8,250 13,675
Inventories (net of reserves of $1,062 and
$1,032, respectively) 69,717 67,753
Accounts receivable (net of allowance for
doubtful accounts of $179 and $288,
respectively) 4,740 7,581
Prepaid expenses and other current assets 9,883 10,204
----------- ------------
Total current assets 127,157 139,633
Property and equipment, net 199,274 192,061
Goodwill, net 105,124 105,124
Other intangible assets, net 4,776 4,810
Deposits and other assets 4,980 4,831
Deferred tax asset 181 179
----------- ------------
Total assets $ 441,492 $ 446,638
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 57,622 $ 57,147
Book overdraft 24,133 29,888
Accrued liabilities 60,930 64,470
Current portion of debt, capital leases,
and financing obligations 500 573
----------- ------------
Total current liabilities 143,185 152,078
Long-term debt, capital leases and financing
obligations 147,596 147,662
Other long-term obligations 39,147 38,302
----------- ------------
Total liabilities 329,928 338,042
----------- ------------
Stockholders' equity:
Preferred stock, $.001 par value; 5,000,000
shares authorized; no shares issued and
outstanding - -
Common stock; $0.001 par value; 60,000,000
shares authorized, 32,540,392 and
32,454,554 shares issued; 29,881,129 and
29,795,291 outstanding, respectively 32 32
Treasury stock, at cost: 2,659,263 shares,
respectively (37,181) (37,181)
Additional paid-in capital 243,568 242,322
Accumulated deficit (96,288) (97,912)
Accumulated other comprehensive income 1,433 1,335
----------- ------------
Total stockholders' equity 111,564 108,596
----------- ------------
Total liabilities and
stockholders' equity $ 441,492 $ 446,638
=========== ============
WILD OATS MARKETS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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THREE MONTHS ENDED
-------------------
March 31, April 1,
2007 2006
--------- ---------
Cash Flows From Operating Activities:
Net income $ 1,624 $ 2,885
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,716 6,687
Loss on disposal of property and equipment 19 90
Restructuring and asset impairment charges,
net 1,457 1,670
Interest on related party receivable - (88)
Stock-based compensation 564 778
Accretion of debt issuance costs 156 156
Change in assets and liabilities, net (4,693) 1,003
--------- ---------
Net cash provided by operating activities 5,843 13,181
Cash Flows From Investing Activities:
Capital expenditures (11,967) (5,759)
Purchase of short-term investments (37,925) (21,410)
Proceeds from the sale of short-term investments 43,350 14,522
Proceeds from the sale of property and equipment 2 24
--------- ---------
Net cash used in investing activities (6,540) (12,623)
Cash Flows From Financing Activities:
Net decrease in book overdraft (5,755) (760)
Repayments on notes payable, long-term debt and
capitalized leases (139) (125)
Proceeds from issuance of common stock, net 682 4,227
--------- ---------
Net cash (used in) provided by financing
activities (5,212) 3,342
Effect of exchange rate changes on cash 56 (40)
--------- ---------
Net (decrease) increase in cash and cash
equivalents (5,853) 3,860
Cash and cash equivalents at beginning of period 40,420 35,250
--------- ---------
Cash and cash equivalents at end of period $ 34,567 $ 39,110
========= =========
WILD OATS MARKETS, INC.
RECONCILIATION OF NON GAAP FINANCIAL INFORMATION
(in thousands)
(unaudited)
- ----------------------------------------------------------------------
THREE MONTHS ENDED
------------------
March 31, April 1,
2007 2006
--------- --------
Net income $ 1,624 $ 2,885
Interest expense, net of interest income 1,289 1,265
Income tax expense 264 205
Depreciation and amortization 6,716 6,687
--------- --------
EBITDA 9,893 11,042
Loss on asset disposals, net 19 90
Stock-based compensation expense 564 778
Restructuring and asset impairment charges, net 1,457 1,670
--------- --------
EBITDA, as adjusted 11,933 13,580
Transaction costs 3,500 -
--------- --------
EBITDA, as adjusted, after transaction costs $ 15,433 $13,580
========= ========
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EBITDA as a percentage of sales 3.2% 3.7%
--------- --------
--------- --------
EBITDA, as adjusted, as a percentage of sales 3.9% 4.6%
--------- --------
--------- --------
EBITDA, as adjusted, after transaction costs,
as a percentage of sales 5.0% 4.6%
--------- --------
WILD OATS MARKETS, INC.
SELECTED ADDITIONAL FINANCIAL INFORMATION
(in thousands)
(unaudited)
2006 RECLASSIFICATION IN 2007
- ----------------------------------------------------------------------
1Q
-----------------------------------
Statement of Operations
As Reported Changes Reclassified
------------ -------- ------------
Operating expenses:
Cost of goods sold and occupancy
costs 206,985 (5,688) 201,297
As a percent of sales 69.4% -1.9% 67.5%
Direct store expenses 69,833 (12) 69,821
As a percent of sales 23.4% 0.0% 23.4%
Depreciation and amortization - 6,687 6,687
As a percent of sales 0.0% 2.2% 2.2%
Selling, general and
administrative expenses 13,965 (987) 12,978
As a percent of sales 4.7% -0.3% 4.3%
2Q
-----------------------------------
Statement of Operations
As Reported Changes Reclassified
-------------- ------- ------------
Operating expenses:
Cost of goods sold and occupancy
costs 206,876 (5,398) 201,478
As a percent of sales 69.8% -1.8% 67.9%
Direct store expenses 69,939 (11) 69,928
As a percent of sales 23.6% 0.0% 23.6%
Depreciation and amortization - 6,370 6,370
As a percent of sales 0.0% 2.1% 2.1%
Selling, general and
administrative expenses 12,328 (961) 11,367
As a percent of sales 4.2% -0.3% 3.8%
3Q
-----------------------------------
As Reported Changes Reclassified
------------ -------- ------------
Operating expenses:
Cost of goods sold and occupancy
costs 206,131 (5,561) 200,570
As a percent of sales 70.6% -1.9% 68.7%
Direct store expenses 68,709 (11) 68,698
As a percent of sales 23.5% 0.0% 23.5%
Depreciation and amortization - 6,468 6,468
As a percent of sales 0.0% 2.2% 2.2%
Selling, general and
administrative expenses 10,870 (896) 9,974
As a percent of sales 3.7% -0.3% 3.4%
4Q
-----------------------------------
As Reported Changes Reclassified
-------------- ------- ------------
Operating expenses:
Cost of goods sold and occupancy
costs 207,835 (5,640) 202,195
As a percent of sales 70.1% -1.9% 68.2%
Direct store expenses 68,562 (9) 68,553
As a percent of sales 23.1% 0.0% 23.1%
Depreciation and amortization - 6,532 6,532
As a percent of sales 0.0% 2.2% 2.2%
Selling, general and
administrative expenses 17,685 (883) 16,802
As a percent of sales 6.0% -0.3% 5.7%
YTD 2006
----------------------------------
As Reported Changes Reclassified
------------ -------- ------------
Operating expenses:
Cost of goods sold and
occupancy costs 827,827 (22,287) 805,540
As a percent of sales 70.0% -1.9% 68.1%
Direct store expenses 277,043 (43) 277,000
As a percent of sales 23.4% 0.0% 23.4%
Depreciation and
amortization - 26,057 26,057
As a percent of sales 0.0% 2.2% 2.2%
Selling, general and
administrative expenses 54,848 (3,727) 51,121
As a percent of sales 4.6% -0.3% 4.3%
WILD OATS MARKETS, INC.
SELECTED ADDITIONAL FINANCIAL INFORMATION
(in thousands)
(unaudited)
2005 RECLASSIFICATION IN 2007
- ----------------------------------------------------------------------
YTD 2005
-------------------------------
Statement of Operations
As Changes Reclassified
Reported
--------- -------- ------------
Operating expenses:
Cost of goods sold and occupancy
costs 796,396 (22,086) 774,310
As a percent of sales 70.9% -2.0% 68.9%
Direct store expenses 264,074 (164) 263,910
As a percent of sales 23.5% 0.0% 23.5%
Depreciation and amortization - 26,288 26,288
As a percent of sales 0.0% 2.3% 2.3%
Selling, general and administrative
expenses 45,307 (4,038) 41,269
As a percent of sales 4.0% -0.4% 3.7%
CONTACT: Wild Oats Markets, Inc.
Sonja Tuitele, 303-396-6984
Corporate Communications