Exhibit 99.1
WILD OATS MARKETS, INC. REPORTS SECOND QUARTER AND FIRST HALF 2005 RESULTS
STRONG SECOND QUARTER SALES DRIVE EARNINGS PER SHARE OF $0.03
BOULDER, Colo., Aug. 4 /PRNewswire-FirstCall/ -- Wild Oats Markets, Inc.
(Nasdaq: OATS), a leading national natural and organic foods retailer, today
announced financial results for the second quarter and first half ended July 2,
2005.
Highlights
Second Quarter Results:
* The Company reported a 13.1 percent net sales increase to
$284.6 million.
* Comparable store sales were positive 5.4 percent.
* Net income was $0.03 per diluted share.
* Adjusted EBITDA was $10.2 million versus $7.4 million last year,
an increase of 37.8 percent.
* Wild Oats opened one new store and relocated one store in the
quarter.
* The Company further strengthened its management team with the
addition of Dan Bolstad as Senior Vice President of Operations.
Financial Results
Net sales in the second quarter of 2005 were $284.6 million, up 13.1
percent compared with $251.7 million in the second quarter of 2004. The sales
gain was driven by strong performance in the Wild Oats chain and total square
footage growth of 8.6 percent, as the Company ended the quarter with 2.53
million square feet. Weighted average square footage in the second quarter was
2.52 million square feet, an increase of 12.5 percent compared to weighted
average square footage of 2.24 million in last year's second quarter. The
addition of four new stores and two relocated stores in the first half of 2005
helped to drive the increase in net sales, as well as continued strong sales
momentum in the Company's Wild Oats Natural Marketplace chain. First half 2005
net sales were $562.7 million, a 9.2 percent increase compared to $515.5 million
in the same period last year.
Comparable store sales in the second quarter of 2005 were better than
expected at positive 5.4 percent compared with positive 1.5 percent in the
second quarter of 2004. Excluding the Company's Southern California stores,
which continued to lap difficult strike-related comparisons through the end of
the second quarter, comparable store sales were positive 7.9 percent compared to
0.1 percent in last year's second quarter. Comparable store customer traffic in
the second quarter increased 0.3 percent and comparable store average
transaction size per customer increased 5.0 percent. Second quarter comparable
store sales were bolstered by the Company's Wild Oats Natural Marketplace
stores, which continued their accelerating sales momentum started in the fourth
quarter of 2004. As a result of year-to-date sales performance, the Company
expects comparable store sales for the full year to be at the high end of its
previously stated 3.0 percent to 4.0 percent range.
"We are very pleased with the continued strengthening of our sales
momentum throughout the first half of the year," said Perry D. Odak, President
and Chief Executive Officer of Wild Oats Markets, Inc. "Now that we're into the
third quarter and the lapping of the Southern California grocery strike is
behind us, we expect our comparable store sales to be solid throughout the
remainder of the year. Additionally, our Wild Oats branded products rollout
continues to exceed our expectations and is producing very strong sales, which
is also contributing to our gross margin improvement."
As a result of strong sales, a sequential increase in gross margins and
a higher store contribution, net income was $0.9 million, or $0.03 per diluted
share, compared with a net loss of $0.3 million, or $0.01 per diluted share in
the same period last year. The net loss for the first half of 2005 was
$0.2 million, or $0.01 per diluted share, compared with net income of $1.7
million, or $0.06 per diluted share, in the first six months of 2004. Due to the
improvement in the second quarter, the Company has increased guidance for its
full-year 2005 EPS to be in the $0.02 to $0.04 per share range, which is up from
the range of break-even to $0.03 given previously.
Net income in the second quarter of 2005 was adversely affected by
approximately $1.0 million pre-tax, or $0.03 per share, in restructuring charges
and accelerated depreciation for the closure of facilities. In the second
quarter of 2004, net income was adversely affected by $0.7 million, or $0.01 per
share, in accelerated depreciation for the closure of facilities, which offset a
restructuring credit in the quarter. Net income for the first half of 2005 was
negatively impacted by several items totaling $4.1 million, or $0.14 per share.
Included was $2.9 million related to asset write-offs, restructuring charges and
accelerated depreciation for the closure or relocation of facilities. Also
included were $0.6 million in incremental accounting and legal fees related to
the March 2005 lease restatement, and $0.6 million related to the write off of
loan amortization fees, as a result of the termination of the Company's former
credit facility. Net income in the first half of 2004 was adversely affected by
$2.8 million, or $0.06 per share, related to restructuring charges and
accelerated depreciation for the closure of facilities.
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization,
Loss on early extinguishments of debt, Loss (gain) on asset disposals, net, and
Restructuring and asset impairment charges (income), net (Adjusted EBITDA) in
the second quarter of 2005 were up 37.8 percent to $10.2 million compared to
$7.4 million in the prior year second quarter (please refer to the attached
reconciliation of non-GAAP Financial Information schedule). For the first six
months of 2005, the Company generated Adjusted EBITDA of $19.9 million, up
slightly compared with $19.0 million in last year's first half. The increase in
Adjusted EBITDA in the second quarter was greater than the increase in the first
six months because first quarter 2004 Adjusted EBITDA was bolstered by the
benefit of additional sales during the Southern California grocery strike.
"Our ability to better leverage our sales growth into profitability is
further evidence that we are beginning to strike the right balance between gross
margin, sales and earnings," said Mr. Odak. "Our return to profitability in the
second quarter is encouraging, and we will stay focused on growing our margins
to deliver continued profitable growth and strong shareholder value."
Wild Oats reported gross profit of $82.6 million in the second quarter
of 2005 compared with $73.4 million in the second quarter of 2004. As a percent
of sales, gross profit improved sequentially over the first quarter of this year
by 10 basis points, as the Company continues to rebuild its margins. However, in
the year-over-year comparison, gross margin declined 20 basis points to 29.0
percent in the second quarter of 2005 compared with 29.2 percent in the second
quarter last year. The decline in gross margin year-over-year is largely due to
the impact of having a greater number of new stores in the portfolio than in the
previous year, which adversely affected gross margin in the second quarter of
2005 by 40 basis points relative to the prior year quarter. Wild Oats generated
gross profit of $162.8 million, or 28.9 percent of sales, in the first half of
2005 compared with $150.8 million, or 29.3 percent of sales, in the comparable
period last year.
Direct store expenses in the second quarter of 2005 were $60.7 million
compared with $56.3 million in the second quarter of 2004. Direct store expenses
as a percent of sales were 21.3 percent in the second quarter of 2005, compared
with 22.4 percent in last year's second quarter. This improvement is due to
leveraging payroll and the related taxes, along with improved loss history in
the Company's self-insurance employee benefits, which offset a 10-basis-point
increase in store-level expenses this year due to the addition of new stores,
relative to the prior-year quarter. In the first six months of 2005, direct
store expenses were $121.1 million, or 21.5 percent of sales, compared with
$113.3 million, or 22.0 percent of sales, in the first half of 2004.
Higher sales, relatively flat gross margin and better direct store
expense leverage in the second quarter of 2005 resulted in a higher store
contribution of $21.8 million, a 26.7 percent increase, compared with $17.2
million in last year's second quarter. As a percent of sales, store contribution
grew to 7.7 percent in the second quarter of this year, compared with 6.8
percent in the same period in 2004. Store contribution in the first half of 2005
was $41.7 million, or 7.4 percent of sales, compared with $37.5 million, or 7.3
percent of sales, in the same period last year.
Selling, general and administrative (SG&A) expenses in the second
quarter of 2005 were $17.2 million, or 6.0 percent of sales, compared to $14.4
million, or 5.7 percent of sales, in the prior year second quarter. SG&A in the
quarter increased relative to the second quarter of 2004 primarily because of an
increased level of marketing and advertising spend to maintain the sales
momentum, and accrued corporate and regional staff bonuses. SG&A expenses in the
first six months of 2005 were $32.2 million, or 5.7 percent of sales, compared
with $29.9 million, or 5.8 percent of sales in the same period last year. For
the full year, the Company expects SG&A as a percent of sales to be slightly
improved relative to 2004.
Since the beginning of the year, the sum of cash, cash equivalents and
short-term investments increased by $1.6 million to $43.4 million. Capital
expenditures were $12.0 million in the first half of 2005, compared to $27.4
million in the same period last year. The Company expects full-year capital
expenditures to be in the $35.0 million to $40.0 million range.
Business Developments
Wild Oats Markets opened one new Henry's store in Temecula, Calif. and
relocated a Wild Oats store in the Portland, Ore. market in the second quarter
of 2005. To date, these two new store openings have produced the strongest grand
opening results for the Company in both the Henry's and Wild Oats chains. Wild
Oats Markets plans to open an additional three new Henry's stores throughout the
remainder of the year, bringing the total number of new stores opened in 2005 to
nine. Currently Wild Oats has 17 leases or letters of intent signed for new
stores opening in the remainder of this year, in 2006 and 2007. The Company also
completed the major remodeling of two San Diego Henry's stores in July and
expects it will complete major remodels of five additional stores by the end of
the year.
As previously announced, Wild Oats Markets is pursuing additional retail
opportunities whereby it is offering its Wild Oats branded products in other
retail environments. To this end, in the second quarter, Wild Oats opened the
first of its five-store test of a Holistic Health boutique in the Plymouth,
Mass. Stop & Shop store. The second Wild Oats Stop & Shop department will open
in the third quarter in Fairfield, Conn.
The Company recently announced that it has further strengthened its
management team with the addition of Dan Bolstad as Senior Vice President of
Operations. Mr. Bolstad brings more than 25 years of operations and management
experience in the food retail industry. Most recently he was Senior Vice
President of Operations for ShopKo Stores in Green Bay, Wis., a 140-store chain
of multi-department retail stores. Mr. Bolstad spent most of his career at Fred
Meyer Stores, a leading grocery and general merchandise retailer in the Pacific
Northwest, where he served as Senior Vice President of Operations from 2001 to
2003. Prior to that, he held various management roles in store operations and
merchandising during his 27-year tenure at Fred Meyer.
Company management will host a conference call and webcast with
financial analysts and investors on Thursday, August 4, 2005 at 1:00 p.m.
Mountain time (3:00 p.m. Eastern time) to discuss financial results for the
second quarter and first half ended July 2, 2005. Participants calling from the
U.S. may call in by dialing (888) 324-0789. International callers should dial
(210) 234-0002. Participants should ask for the "Wild Oats second quarter
earnings conference call" to be placed into the conference. A simultaneous
webcast will be available through a link on the Investor Relations page of the
Wild Oats website at www.wildoats.com. A replay of the conference call will be
available until midnight on August 11, 2005 by dialing (866) 457-5509,
domestically, or (203) 369-1283 from outside the U.S. The conference call will
also be archived on the Company's website.
Use of Non-GAAP Financial Measures
Wild Oats believes that the attached supplemental presentation of EBITDA
and Adjusted EBITDA calculations provide meaningful non-GAAP financial measures
to help management and investors understand and compare business trends among
different reporting periods on a consistent basis, independently of regularly
reported non-cash charges and infrequent or unusual events as determined by
management. Readers are cautioned not to view EBITDA or Adjusted EBITDA as an
alternative to GAAP results or as being comparable to results reported or
forecasted by other companies, and should refer to the reconciliation of GAAP
net income (loss) results to EBITDA and Adjusted EBITDA for the second quarters
and first halves of 2005 and 2004, respectively, contained below.
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 billion in annual sales,
the Company currently operates 111 natural foods stores in 24 states and British
Columbia, Canada. The Company's markets include: Wild Oats Natural Marketplace,
Henry's Farmers Markets, 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 and relocate in the future, and the anticipated
performance of such new stores; the impact of changes in the Company's
merchandising and marketing programs; expected future comparable store sales,
revenues and earnings per share, and future financial measures and 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: the number of stores opened, closed
or relocated; the Company's ability to execute, and the results of merchandising
and marketing programs; the impact of competition and other factors as are set
forth in the Company's SEC filings, including the Annual Report on Form 10-K, as
amended, for the fiscal year ended January 1, 2005. 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)
THREE MONTHS ENDED
---------------------------------------------------------
July 2, June 26,
2005 2004
--------------------------- ---------------------------
Sales $ 284,608 100.0% $ 251,697 100.0%
Cost of goods sold and occupancy costs 202,049 71.0% 178,263 70.8%
------------ ------------
Gross Profit 82,559 29.0% 73,434 29.2%
Direct store expenses 60,724 21.3% 56,271 22.4%
------------ ------------
Store Contribution 21,835 7.7% 17,163 6.8%
Selling, general, and
administrative expenses 17,201 6.0% 14,418 5.7%
Loss (gain) on disposal of assets,
net 53 0.0% 48 0.0%
Pre-opening expenses 780 0.3% 1,982 0.8%
Restructuring and asset impairment
charges (income), net 909 0.3% (134) -0.1%
------------ ------------
Income from operations 2,892 1.0% 849 0.3%
Gain (loss) on early extinguishment of
debt -- 0.0% -- 0.0%
Interest income 361 0.1% 222 0.1%
Interest expense (2,144) -0.8% (1,306) -0.5%
------------ ------------
Income (loss) before income
taxes 1,109 0.4% (235) -0.1%
Income tax expense 187 0.1% 96 0.0%
------------ ------------
Net income (loss) $ 922 0.3% $ (331) -0.1%
============ ============
Basic net income (loss) per common
share $ 0.03 $ (0.01)
============ ============
Weighted average number of
common shares outstanding 28,667 29,788
Diluted net income (loss) per common
share $ 0.03 $ (0.01)
Weighted average number of
common shares outstanding, assuming
dilution 29,185 29,788
SIX MONTHS ENDED
---------------------------------------------------------
July 2, June 26,
2005 2004
--------------------------- ---------------------------
Sales $ 562,687 100.0% $ 515,492 100.0%
Cost of goods sold and occupancy costs 399,872 71.1% 364,652 70.7%
------------ ------------
Gross Profit 162,815 28.9% 150,840 29.3%
Direct store expenses 121,095 21.5% 113,314 22.0%
------------ ------------
Store Contribution 41,720 7.4% 37,526 7.3%
Selling, general, and
administrative expenses 32,241 5.7% 29,939 5.8%
Loss (gain) on disposal of assets,
net 44 0.0% (69) 0.0%
Pre-opening expenses 2,697 0.5% 2,581 0.5%
Restructuring and asset impairment
charges (income), net 2,460 0.4% 135 0.0%
------------ ------------
Income from operations 4,278 0.8% 4,940 1.0%
Gain (loss) on early extinguishment of
debt (559) -0.1% -- 0.0%
Interest income 685 0.1% 408 0.1%
Interest expense (4,311) -0.8% (2,341) -0.5%
------------ ------------
Income (loss) before income
taxes 93 0.0% 3,007 0.6%
Income tax expense 322 0.1% 1,269 0.2%
------------ ------------
Net income (loss) $ (229) 0.0% $ 1,738 0.3%
============ ============
Basic net income (loss) per common
share $ (0.01) $ 0.06
Weighted average number of
common shares outstanding 28,622 29,982
Diluted net income (loss) per common
share $ (0.01) $ 0.06
Weighted average number of
common shares outstanding, assuming
dilution 28,622 30,860
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)
July 2, January 1,
2005 2005
------------ ------------
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 43,418 $ 30,671
Short-term investments -- 11,144
Inventories (net of reserves of
$889 and $815, respectively) 58,475 54,960
Accounts Receivable (net of
allowance for doubtful accounts
of $116 and $153, respectively) 3,211 3,860
Prepaid expenses and other current
assets 5,454 5,741
------------ ------------
Total current assets 110,558 106,376
Property and equipment, net 176,068 177,830
Goodwill, net 105,124 106,084
Other intangible assets, net 6,271 6,491
Deposits and other assets 8,109 8,361
Deferred tax asset 674 418
------------ ------------
Total assets $ 406,804 $ 405,560
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 57,816 $ 54,428
Book overdraft 20,974 23,325
Accrued Liabilities 52,161 53,154
Current portion of debt, capital
Leases, and financing obligations 706 405
Deferred tax liabilities 345 --
------------ ------------
Total current liabilities 132,002 131,312
Long-term debt, capital leases and
financing obligations 148,453 148,675
Other long-term obligations 24,282 24,472
------------ ------------
Total liabilities 304,737 304,459
------------ ------------
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,
30,645,967 and 30,466,701 shares
issued; 28,688,167 and
28,488,901 outstanding, respectively 31 30
Treasury stock, at cost: 1,977,800
shares as of July 2, 2005 and
January 1, 2005 (24,999) (24,999)
Additional paid-in capital 222,820 221,029
Note receivable, related party (11,730) (11,416)
Accumulated deficit (84,738) (84,509)
Accumulated other comprehensive
income 683 966
------------ ------------
Total stockholders' equity 102,067 101,101
------------ ------------
Total liabilities and
stockholders' equity $ 406,804 $ 405,560
============ ============
WILD OATS MARKETS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except per-share amounts)
(Unaudited)
SIX MONTHS ENDED
---------------------------
July 2, June 26,
2005 2004
------------ ------------
Cash Flows From Operating Activities:
Net (loss) income $ (229) $ 1,738
Adjustments to reconcile net (loss)
income to net cash
from operating activities:
Depreciation and amortization 13,117 14,015
Loss (gain) on disposal of
property and equipment 44 (69)
Deferred tax expense 134 671
Restructuring and asset
impairment charges, net 2,460 135
Interest on related party
receivable (314) (297)
Stock compensation 244 1,031
Accretion on debt issuance costs 259 197
Loss on early extinguishment of
debt 559 --
Change in assets and liabilities,
net (1,537) 4,113
------------ ------------
Net cash provided by operating
activities 14,737 21,534
Cash Flows From Investing Activities:
Capital expenditures (11,978) (27,374)
Proceeds from the sale of short-term
investments 11,116 --
Proceeds from sale of property and
equipment 26 964
------------ ------------
Net cash used in investing
activities (836) (26,410)
Cash Flows From Financing Activities:
Net repayments under line of credit -- (30,179)
Net decrease in book overdraft (2,351) (5,492)
Proceeds from long-term debt -- 115,150
Repayments on notes payable, long-term
debt and capitalized leases (183) (64)
Payment of debt issuance costs -- (3,636)
Proceeds from issuance of common
stock, net 1,548 2,552
Repurchase of common stock -- (24,999)
------------ ------------
Net cash (used in) provided by
financing activities (986) 53,332
Effect of exchange rate changes on
cash (168) (85)
------------ ------------
Net increase in cash and cash
equivalents 12,747 48,371
Cash and cash equivalents at
beginning of period 30,671 17,400
------------ ------------
Cash and cash equivalents at end of
period $ 43,418 $ 65,771
============ ============
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Equipment acquired through
capital lease $ 262 $ 105
Certain prior period information has been reclassified to conform to the current
presentation.
WILD OATS MARKETS, INC.
RECONCILIATION OF NON GAAP FINANCIAL INFORMATION
(in thousands)
(unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------- ---------------------------
July 2, June 26, July 2, June 26,
2005 2004 2005 2004
------------ ------------ ------------ ------------
Net income (loss) $ 922 $ (331) $ (229) $ 1,738
Interest expense, net of interest
income 1,783 1,084 3,626 1,933
Income tax expense 187 96 322 1,269
Depreciation and amortization 6,382 6,609 13,117 14,014
------------ ------------ ------------ ------------
EBITDA 9,274 7,458 16,836 18,954
Loss on early extinguishment of debt -- -- 559 --
Loss (gain) on asset disposals, net 53 48 44 (69)
Restructuring and asset impairment
charges (income), net 909 (134) 2,460 135
------------ ------------ ------------ ------------
Adjusted EBITDA $ 10,236 $ 7,372 $ 19,899 $ 19,020
============ ============ ============ ============
Percent of Sales 3.6% 2.9% 3.5% 3.7%
SOURCE Wild Oats Markets, Inc.
-0- 08/04/2005
/CONTACT: Sonja Tuitele, Corporate Communications of Wild Oats Markets,
Inc., +1-720-562-4984/
/Web site: http://www.wildoats.com/
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