EXHIBIT 99.1
WILD OATS MARKETS, INC. REPORTS THIRD QUARTER 2005 RESULTS
Continued top-line momentum drives substantial profitability
improvement over 2004
BOULDER, Colo., November 4 / PRNewswire / -- 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 October
1, 2005.
HIGHLIGHTS
THIRD QUARTER RESULTS:
o The Company reported an 11.1 percent net sales increase to $278.5 million.
o Comparable store sales increased 6.1 percent.
o Net income was $0.00 per diluted share.
o Adjusted EBITDA was $8.2 million versus $1.0 million last year.
o Store contribution increased $7.7 million, or 70.6 percent over last year.
o Wild Oats opened one new Henry's store in Glendale, Ariz. and completed
the major remodeling of two San Diego area Henry's stores in the quarter.
Financial Results
Net sales in the third quarter of 2005 were $278.5 million, up 11.1
percent compared with $250.7 million in the third quarter of 2004. The sales
gain was driven by continued strong comparable store sales and total square
footage growth of 8.0 percent, as the Company ended the quarter with 2.56
million square feet. Continued strong comparable store sales, as well as the
addition of five new stores, two relocated stores and two major remodels in the
first nine months of 2005 helped drive the increase in net sales. Year-to-date
2005 net sales were $841.2 million, a 9.8 percent increase compared to $766.2
million in the same period last year.
Comparable store sales in the third quarter of 2005 increased 6.1
percent over the same period in 2004. Comparable store sales for the first nine
months of 2005 increased 3.7 percent compared to the first nine months of 2004.
During the second quarter of this year, the Company lapped the final quarter of
difficult comparisons to a year ago when it benefited from the Southern
California strike against the conventional grocery retailers. Excluding the
strike-affected stores, comparable store sales were 8.8 percent and 7.9 percent
during the third quarter and first nine months of 2005, respectively. The
Company expects comparable store sales for the full year, for all stores, to be
at the high end of its previous guidance range of 3.0 percent to 4.0 percent.
"Our sales have continued to gain momentum and accelerated in the third
quarter," said Perry D. Odak, President and Chief Executive Officer of Wild Oats
Markets, Inc. "With the new merchandising programs we introduced, continued
growth in our Wild Oats branded products and improved operational execution, we
expect to finish the year with strong top-line results. Additionally, we
continue to improve our ability to strike a balance between sales, promotion and
gross margin. And, as a result, we are raising our estimates for EPS and EBITDA
for the year."
Net income for the third quarter of 2005 was $82,000, or $0.00 per
diluted share, compared with a net loss of $7.1 million, or $0.25 per diluted
share in the same period last year. The improvements relative to the prior year
were due to stronger sales and a 150-basis-point improvement in gross margin.
The net loss for the first nine months of 2005 was $148,000, or $0.01 per
diluted share, compared with a net loss of $5.3 million, or $0.18 per diluted
share, in the first nine months of 2004. As a result of progress to date in
achieving profitability gains, Wild Oats Markets is increasing its guidance for
its full-year 2005 EPS to be in the $0.04 to $0.07 per share range from previous
guidance of $0.02 to $0.04 per share.
Net income in the third quarter of 2005 was negatively affected by
several items totaling $0.3 million, or $0.01 per share. Included was $0.2
million related to Hurricane Katrina losses and $0.1 million in
restructuring-related charges. Net income in the first nine months of 2005 was
negatively impacted by several items totaling $4.4 million or $0.15 per share.
Included was $3.0 million related to asset write-offs, restructuring charges and
accelerated depreciation for the closure or relocation of facilities. Also
included were $0.6 million related to the March 2005 lease restatement, $0.6
million related to the refinancing of the Company's credit facility, and the
aforementioned Hurricane Katrina losses. Net income in the first nine months of
2004 was adversely affected by $7.0 million, or $0.15 per share, in
restructuring-related charges, as well as costs to correct the Company's 401(k)
retirement plan.
Adjusted EBITDA in the third quarter of 2005 was up significantly to
$8.2 million compared to $1.0 million in the prior year third quarter (please
refer to the attached reconciliation of non-GAAP Financial Information
schedule). For the first nine months of 2005, the Company generated Adjusted
EBITDA of $28.1 million, up 40.6 percent compared with $20.0 million in the same
period last year. The Company is increasing its guidance for its full-year 2005
Adjusted EBITDA to be in the $37.5 million to $38.5 million range from that
previously given of $36 million to $37 million.
Wild Oats reported gross profit of $80.7 million in the third quarter
of 2005, a 17.3 percent increase compared with $68.8 million in the third
quarter of 2004. As a percent of sales, gross profit improved by 150 basis
points to 29.0 percent in the third quarter of 2005 compared with 27.5 percent
in the third quarter last year. The strong improvement in gross margin is
primarily due to the Company's ability to strike a balance between sales and
promotional activity, and its implementation of new merchandising initiatives
focused on improving margins. With these new initiatives, the Company
anticipates gross margins to be close to 30.0 percent on a run-rate basis by the
end of 2005. Wild Oats generated a 10.9 percent increase in gross profit to
$243.6 million, or 29.0 percent of sales, in the first nine months of 2005
compared with $219.7 million, or 28.7 percent of sales, in the comparable period
last year.
Direct store expenses in the third quarter of 2005 were $62.1 million,
or 22.3 percent of sales, compared with $57.9 million, or 23.1 percent of sales,
in the third quarter of 2004. This improvement in direct store expenses as a
percent of sales is primarily due to leveraging payroll and the related taxes
along with the stabilization of health care costs. In the first nine months of
2005, direct store expenses were $183.2 million, or 21.8 percent of sales,
compared with $171.2 million, or 22.3 percent of sales, in the first nine months
of 2004. The year-over-year improvement as a percent of sales is primarily
attributable to leveraging payroll and self-insurance expenses relative to last
year. For the full year, the Company expects direct store expenses as a percent
of sales to be improved relative to 2004.
Higher sales, improved gross margins and better direct store expense
leverage in the third quarter of 2005 resulted in a substantially higher store
contribution of $18.7 million, a 70.6 percent increase, compared with $10.9
million in last year's third quarter. As a percent of sales, store contribution
grew to 6.7 percent in the third quarter of this year, compared with 4.4 percent
in the same period in 2004. Store contribution in the first nine months of 2005
was $60.4 million, or 7.2 percent of sales, a 24.6 percent increase, compared
with $48.5 million, or 6.3 percent of sales, in the same period last year.
Selling, general and administrative (SG&A) expenses in the third
quarter of 2005 were $16.6 million, or 6.0 percent of sales, compared to $15.5
million, or 6.2 percent of sales, in the prior year third quarter. SG&A as a
percent of sales improved through leveraging sales, which offset accrued
corporate and regional level bonus plan expenses. SG&A expenses in the first
nine months of 2005 were $48.9 million, or 5.8 percent of sales, compared with
$45.5 million, or 5.9 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 compared to 2004.
Since the beginning of the year, the sum of cash, cash equivalents and
short-term investments increased by $9.6 million to $51.4 million. Capital
expenditures were $19.2 million in the first nine months of 2005, compared to
$41.5 million in the same period last year. The Company expects full-year
capital expenditures to be in the $28.0 million to $32.0 million range.
BUSINESS DEVELOPMENTS
Wild Oats Markets opened one new Henry's store in Glendale, Ariz. in
the third quarter. Thus far in the fourth quarter, the Company has already
opened its eighth and final store for 2005, a Henry's store in Rancho Cucamonga,
Calif. Previously the Company had estimated it would open nine new stores in
2005; however, one Henry's store in the Phoenix market has been delayed into
2006. Currently Wild Oats has 16 leases or letters of intent signed for new
stores opening in 2006 and 2007. The Company also completed the major remodeling
of two older San Diego Henry's stores in July. Thus far in the fourth quarter,
Wild Oats completed the major remodeling of stores in West Hartford, Conn. and
Evanston, Ill., bringing its total number of major remodels for the year to
four.
Company management will host a conference call and webcast with
financial analysts and investors on Friday, November 4, 2005 at 8:00 a.m.
Mountain time (10:00 a.m. Eastern time) to discuss financial results for the
third quarter and first nine months ended October 1, 2005. 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 earnings conference call" or reference conference ID number 1514202 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 November 11, 2005 by dialing (800) 642-1687, domestically, or (706)
645-9291 from outside the U.S. and referencing the conference ID number listed
above. The conference call will also be archived on the Company's website.
USE OF NON-GAAP FINANCIAL MEASURES
Wild Oats believes 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 third quarters
and first nine months 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 113 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, remodel 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, remodeled 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 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
-------------------------------------------------------------
OCTOBER 1, SEPTEMBER 25,
2005 2004
----------------------------- -----------------------------
Sales $ 278,522 100.0% $ 250,739 100.0%
Cost of goods sold and occupancy costs 197,785 71.0% 181,911 72.5%
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Gross profit 80,737 29.0% 68,828 27.5%
Direct store expenses 62,086 22.3% 57,898 23.1%
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Store contribution 18,651 6.7% 10,930 4.4%
Selling, general, and administrative expenses 16,644 6.0% 15,517 6.2%
Loss on disposal of assets, net 43 0.0% 192 0.1%
Pre-opening expenses 325 0.1% 1,731 0.7%
Restructuring and asset impairment charges, net 51 0.0% 1,944 0.8%
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Income (loss) from operations 1,588 0.6% (8,454) -3.4%
Loss on early extinguishment of debt - 0.0% - 0.0%
Interest income 451 0.2% 370 0.1%
Interest expense (1,784) -0.6% (1,944) -0.8%
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Income (loss) before income taxes 255 0.1% (10,028) -4.0%
Income tax expense (benefit) 173 0.1% (2,976) -1.2%
------------- -------------
Net income (loss) $ 82 0.0% $ (7,052) -2.8%
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Basic net income (loss) per common share $ 0.00 $ (0.25)
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Weighted average number of
common shares outstanding 28,928 28,458
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Diluted net income (loss) per common share $ 0.00 $ (0.25)
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Weighted average number of
common shares outstanding, assuming dilution 29,694 28,458
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NINE MONTHS ENDED
-------------------------------------------------------------
OCTOBER 1, SEPTEMBER 25,
2005 2004
----------------------------- -----------------------------
Sales $ 841,209 100.0% $ 766,231 100.0%
Cost of goods sold and occupancy costs 597,657 71.0% 546,563 71.3%
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Gross profit 243,552 29.0% 219,668 28.7%
Direct store expenses 183,181 21.8% 171,212 22.3%
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Store contribution 60,371 7.2% 48,456 6.3%
Selling, general, and administrative expenses 48,885 5.8% 45,456 5.9%
Loss on disposal of assets, net 87 0.0% 123 0.0%
Pre-opening expenses 3,022 0.4% 4,312 0.6%
Restructuring and asset impairment charges, net 2,511 0.3% 2,079 0.3%
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Income (loss) from operations 5,866 0.7% (3,514) -0.5%
Loss on early extinguishment of debt (559) -0.1% - 0.0%
Interest income 1,136 0.1% 778 0.1%
Interest expense (6,095) -0.7% (4,285) -0.6%
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Income (loss) before income taxes 348 0.0% (7,021) -0.9%
Income tax expense (benefit) 496 0.1% (1,707) -0.2%
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Net income (loss) $ (148) 0.0% $ (5,314) -0.7%
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Basic net income (loss) per common share $ (0.01) $ (0.18)
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Weighted average number of
common shares outstanding 28,717 29,480
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Diluted net income (loss) per common share $ (0.01) $ (0.18)
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Weighted average number of
common shares outstanding, assuming dilution 28,717 29,480
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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)
- --------------------------------------------------------------------------------
OCTOBER 1, JANUARY 1,
2005 2005
------------- -------------
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 51,373 $ 30,671
Short-term investments - 11,144
Inventories (net of reserves of $909 and $815, respectively) 59,819 54,960
Accounts receivable (net of allowance for doubtful accounts
of $192 and $153, respectively) 3,400 3,860
Prepaid expenses and other current assets 5,811 5,741
Current deferred tax asset 258 -
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Total current assets 120,661 106,376
Property and equipment, net 176,655 177,830
Goodwill, net 105,124 106,084
Other intangible assets, net 6,193 6,491
Deposits and other assets 6,137 8,361
Deferred tax asset - 418
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Total assets $ 414,770 $ 405,560
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 56,443 $ 54,428
Book overdraft 21,728 23,325
Accrued liabilities 54,265 53,154
Current portion of debt, capital Leases, and financing obligations 628 405
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Total current liabilities 133,064 131,312
Long-term debt, capital leases and financing obligations 148,296 148,675
Other long-term obligations 27,390 24,472
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Total liabilities 308,750 304,459
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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,
31,008,782 and 30,466,701 shares issued; 29,030,982
and 28,488,901 outstanding, respectively 31 30
Treasury stock, at cost: 1,977,800 shares as of October 1, 2005 and
January 1, 2005 (24,999) (24,999)
Additional paid-in capital 226,274 221,029
Note receivable, related party (11,889) (11,416)
Accumulated deficit (84,657) (84,509)
Accumulated other comprehensive income 1,260 966
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Total stockholders' equity 106,020 101,101
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Total liabilities and stockholders' equity $ 414,770 $ 405,560
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WILD OATS MARKETS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except per-share amounts)
(Unaudited)
- --------------------------------------------------------------------------------
NINE MONTHS ENDED
-----------------------------
OCTOBER 1, SEPTEMBER 25,
2005 2004
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (148) $ (5,314)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 19,635 21,289
Loss on disposal of property and equipment 87 123
Deferred tax expense (benefit) 223 (2,386)
Restructuring and asset impairment charges, net 2,511 2,079
Interest on related party receivable (473) (447)
Stock based compensation 383 539
Income tax benefit from stock based compensation - 519
Accretion on debt issuance costs 96 277
Loss on early extinguishment of debt 559 -
Change in assets and liabilities, net 2,461 6,487
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Net cash provided by operating activities 25,334 23,166
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (19,182) (41,540)
Purchase of short-term investments - (26,299)
Proceeds from the sale of short-term investments 11,122 -
Proceeds from sale of property and equipment 58 988
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Net cash used in investing activities (8,002) (66,851)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments under line-of-credit - (30,179)
Net decrease in book overdraft (1,597) (5,193)
Proceeds from long-term debt - 115,150
Purchase of treasury stock - (24,999)
Payment of debt issuance costs - (3,866)
Repayments on notes payable, long-term debt and capitalized leases (156) (148)
Proceeds from issuance of common stock, net 4,863 3,420
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Net cash provided by financing activities 3,110 54,185
Effect of exchange rate changes on cash 260 168
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Net increase in cash and cash equivalents 20,702 10,668
Cash and cash equivalents at beginning of period 30,671 17,400
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Cash and cash equivalents at end of period $ 51,373 $ 28,068
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SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Equipment acquired through capital lease $ 278 $ 105
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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 NINE MONTHS ENDED
----------------------------- -----------------------------
OCTOBER 1, SEPTEMBER 25, OCTOBER 1, SEPTEMBER 25,
2005 2004 2005 2004
------------- ------------- ------------- -------------
Net income (loss) $ 82 $ (7,052) $ (148) $ (5,314)
Interest expense, net of interest income 1,333 1,574 4,959 3,507
Income tax expense (benefit) 173 (2,976) 496 (1,707)
Depreciation and amortization 6,517 7,274 19,635 21,289
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EBITDA 8,105 (1,180) 24,942 17,775
Loss on early extinguishment of debt - - 559 -
Loss on asset disposals, net 43 192 87 123
Restructuring and asset impairment charges, net 51 1,944 2,511 2,079
------------- ------------- ------------- -------------
Adjusted EBITDA* $ 8,199 $ 956 $ 28,099 $ 19,977
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EBITDA as a percent of sales 2.9% -0.5% 3.0% 2.3%
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Adjusted EBITDA as a percent of sales 2.9% 0.4% 3.3% 2.6%
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*Adjusted EBITDA is defined as Earnings Before Interest, Taxes, Depreciation and
Amortization, Loss on early extinguishment of debt, Loss (gain) on asset
disposals, net, and Restructuring and asset impairment charges (income), net