Exhibit 99.1
WILD OATS MARKETS REPORTS STRONG FOURTH QUARTER AND FULL-YEAR 2005 RESULTS
Continued sales growth drives earnings per share of 11 cents in 2005
BOULDER, Colo., February 16 / PRNewswire / -- Wild Oats Markets, Inc.
(NASDAQ: OATS), a leading national natural and organic foods retailer, today
announced financial results for the fourth quarter and year ended December 31,
2005.
HIGHLIGHTS
2005 RESULTS:
o The Company reported a 7.2 percent net sales increase to $1.1 billion,
and excluding the 53rd week in 2004, sales increased 9.1 percent.
o Comparable store sales increased 3.8 percent.
o Net income was $0.11 per diluted share versus a net loss of $1.37 in
2004.
o Adjusted EBITDA increased 89.8 percent to $41.0 million versus $21.6
million last year.
o Store contribution increased 38.0 percent over 2004 to $84.7 million.
o The Company opened eight new Wild Oats and Henry's stores - two of
which were relocations of older, smaller Wild Oats stores - and
completed the major remodeling of four stores in 2005.
"We are very pleased with our results for 2005 and believe it was a year of
solid progress for Wild Oats Markets," said Perry D. Odak, President and Chief
Executive Officer of Wild Oats Markets, Inc. "We achieved - and exceeded - our
sales and profitability targets, and we are realizing the benefits of the
investments we have made to turn this business around."
FINANCIAL RESULTS
Net sales in the fourth quarter of 2005 were $282.7 million, up slightly
compared with $281.9 million in the fourth quarter of 2004. This increase in
sales was achieved even with the comparison to an additional sales week in the
fourth quarter of 2004. Excluding the additional week in the fourth quarter of
2004, the sales gain was 7.2 percent in the fourth quarter of 2005. This was
driven by continued strong comparable store sales and total square footage
growth of 5.5 percent, as the Company ended the quarter with 2.58 million square
feet. The addition of eight new stores - two of which were relocated stores -
and four major remodels in 2005, coupled with continued strong comparable store
sales growth helped to drive the overall increase in net sales. Net sales in
2005 were $1.1 billion, a 7.2 percent increase compared to $1.0 billion in 2004.
Excluding the 53rd week in 2004, total sales in 2005 increased 9.1 percent.
Comparable store sales in the fourth quarter of 2005 increased 4.2 percent
over the same period in 2004. Comparable store sales for the full year 2005
increased 3.8 percent compared to 2004. During the second quarter of 2005, 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 5.4
percent and 7.2 percent during the fourth quarter and full year 2005,
respectively. The Company expects comparable store sales in 2006, for all
stores, to be in the range of 4.0 percent to 5.0 percent.
The Company was able to leverage its continued sales growth into
significant gains in profitability, which exceeded earnings guidance provided at
the end of the third quarter. Net income for the fourth quarter of 2005 was $3.3
million, or $0.11 per diluted share, compared with a net loss of $34.7 million,
or $1.22 per diluted share in the same period last year. The improvement
relative to the prior year fourth quarter was due to stronger sales and a
230-basis-point gain in gross margin. Net income for the full year 2005 was $3.2
million, or $0.11 per diluted share, compared with a net loss of $40.0 million,
or $1.37 per diluted share, in 2004. As a result of continued momentum and
improvement in its business, Wild Oats Markets estimates that full-year 2006 EPS
will be in the $0.34 to $0.40 per share range, which includes an $0.08 per share
impact of expensing stock compensation plans.
Net income in the fourth quarter of 2005 was negatively affected by several
items totaling $1.9 million, or $0.06 per share. Included were $1.5 million in
restructuring charges and accelerated depreciation for the closure or relocation
of facilities and $0.4 million in hurricane-related losses. Net income in the
fourth quarter of 2004 was adversely affected by $0.6 million, or $0.01 per
share, related to restructuring charges and accelerated depreciation for the
closure or relocation of facilities.
Net income in the full year 2005 was negatively impacted by several items
totaling $6.3 million or $0.22 per share. Included was $4.5 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 $0.6 million for hurricane-related losses. Net
income in 2004 was adversely affected by $7.7 million, or $0.16 per share, in
restructuring-related charges, as well as costs to correct the Company's 401(k)
retirement plan.
Adjusted EBITDA in the fourth quarter of 2005 was up significantly to $13.0
million compared to $1.6 million in the prior year fourth quarter (please refer
to the attached reconciliation of non-GAAP Financial Information schedule). For
the full year 2005, the Company generated Adjusted EBITDA of $41.0 million, up
89.8 percent compared with $21.6 million last year. This exceeded the Company's
previous guidance. For 2006 the Company expects full-year Adjusted EBITDA to be
in the $49.0 million to $51.0 million range.
Wild Oats reported gross profit of $84.0 million in the fourth quarter of
2005, an 8.8 percent increase compared with $77.2 million in the fourth quarter
of 2004. As a percent of sales, gross margin improved by 230 basis points to
29.7 percent in the fourth quarter of 2005 compared with 27.4 percent in the
fourth quarter of 2004. The 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. Wild Oats generated a 10.3 percent increase in gross profit to $327.6
million, or 29.1 percent of sales, in 2005 compared with $296.9 million, or 28.3
percent of sales, in 2004. The Company expects gross margin for the full year
2006 to be approximately 30 percent.
Direct store expenses in the fourth quarter of 2005 were $59.6 million, or
21.1 percent of sales, an 170-basis-point reduction compared with $64.2 million,
or 22.8 percent of sales, in the fourth 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 improved workers compensation loss
results and health care costs compared to the prior year. In the full year 2005,
direct store expenses were $242.8 million, or 21.6 percent of sales, a
90-basis-point reduction compared with $235.4 million, or 22.5 percent of sales,
in 2004.
Higher sales, improved gross margins and better direct store expense
leverage in the fourth quarter of 2005 resulted in a substantially higher store
contribution of $24.4 million, an 87.7 percent increase, compared with $13.0
million in the prior year fourth quarter. As a percent of sales, store
contribution grew to 8.6 percent in the fourth quarter of 2005, compared with
4.6 percent in the same period in 2004. Store contribution in the full year 2005
was $84.7 million, or 7.5 percent of sales, a 37.9 percent increase, compared
with $61.4 million, or 5.9 percent of sales, in 2004.
Selling, general and administrative (SG&A) expenses in the fourth quarter
of 2005 were $17.7 million, or 6.3 percent of sales, compared to $17.0 million,
or 6.0 percent of sales, in the prior year fourth quarter. SG&A as a percent of
sales were up due to corporate and regional bonus expense in the fourth quarter
of 2005. SG&A expenses in 2005 were $66.6 million, or 5.9 percent of sales,
compared with $62.5 million, or 6.0 percent of sales in 2004.
Since the beginning of the year, the sum of cash, cash equivalents and
short-term investments increased by $8.0 million to $49.8 million. Capital
expenditures were $28.3 million in 2005, compared to $49.1 million in 2004. The
reduction in capital expenditures in 2005 is primarily due to the number of
stores opened in 2005 relative to 2004 and the timing of these new store
openings. The Company expects full-year 2006 capital expenditures to be in the
$55.0 million to $60.0 million range.
BUSINESS DEVELOPMENTS
Wild Oats Markets opened one new Henry's store in Rancho Cucamonga, Calif.
in the fourth quarter. This brings the total number of new stores opened in 2005
to eight. Currently Wild Oats has 16 leases or letters of intent signed for new
stores opening in 2006 and 2007, and plans to open 10 new stores in 2006. The
Company also completed the major remodeling of four older stores in 2005,
including two San Diego Henry's stores and Wild Oats stores in Evanston, Ill.
and West Hartford, Conn. The Company expects to complete the major remodeling of
up to six older stores in 2006. As part of its ongoing efforts to improve its
overall store base, thus far in the first quarter of 2006, the Company announced
the closure of two smaller, older stores in Portland, Ore. and Ft. Lauderdale,
Fla. The Company has also identified an additional store for closure in the
second quarter of 2006. Restructuring charges related to these closures have
already been incorporated into the Company's EPS guidance for the year.
In January 2006, Wild Oats announced the addition of Sam Martin as Senior
Vice President of Operations. Mr. Martin brings more than 30 years of operations
and management experience in the food and general merchandise retail industry.
In addition to his 24 years at Fred Meyer Stores, a leading grocery and general
merchandise retailer in the Pacific Northwest, he has held positions in
operations, supply chain and logistics at ShopKo Stores and Toys "R" Us, Inc.
"We are optimistic about our prospects for success in 2006," said Mr. Odak.
"We have a solid management team in place, our real estate pipeline is full and
we have many new stores in development. In addition to being the high growth
segment of the food industry, we have built an infrastructure for growth and our
investments in distribution and in upgrading our store base are paying off."
Company management will host a conference call and webcast with financial
analysts and investors on Thursday, February 16, 2006 at 11:00 a.m. Mountain
time (1:00 p.m. Eastern time) to discuss financial results for the full year
ended December 31, 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 2005 earnings conference call" or
reference conference ID number 4128046 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 February 23, 2006 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 fourth quarters
and full years 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 $1.1 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 stores; the amount of capital expenditures; 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
------------------------------------------------------
DECEMBER 31, JANUARY 1,
2005 2005
-------------------------- --------------------------
Sales $ 282,748 100.0% $ 281,933 100.0%
Cost of goods sold and occupancy costs 198,739 70.3% 204,751 72.6%
------------ ------------
Gross profit 84,009 29.7% 77,182 27.4%
Direct store expenses 59,641 21.1% 64,213 22.8%
------------ ------------
Store contribution 24,367 8.6% 12,969 4.6%
Selling, general, and administrative expenses 17,674 6.3% 16,998 6.0%
Loss on disposal of assets, net 100 0.0% 64 0.0%
Pre-opening expenses 397 0.1% 953 0.3%
Restructuring and asset impairment charges, net 1,456 0.5% 382 0.1%
------------ ------------
Income (loss) from operations 4,741 1.7% (5,428) -1.9%
Loss on early extinguishment of debt - 0.0% - 0.0%
Interest income 533 0.2% 292 0.1%
Interest expense (1,868) -0.7% (2,024) -0.7%
------------ ------------
Income (loss) before income taxes 3,406 1.2% (7,160) -2.5%
Income tax expense (benefit) 74 0.0% 27,545 9.8%
------------ ------------
Net income (loss) $ 3,332 1.2% $ (34,705) -12.3%
============ ============
Basic net income (loss) per common share $ 0.11 $ (1.22)
============ ============
Weighted average number of
common shares outstanding 29,089 28,469
============ ============
Diluted net income (loss) per common share $ 0.11 $ (1.22)
============ ============
Weighted average number of
common shares outstanding, assuming dilution 29,661 28,469
============ ============
YEAR ENDED
------------------------------------------------------
DECEMBER 31, JANUARY 1,
2005 2005
-------------------------- --------------------------
Sales $ 1,123,957 100.0% $ 1,048,164 100.0%
Cost of goods sold and occupancy costs 796,396 70.9% 751,314 71.7%
------------ ------------
Gross profit 327,561 29.1% 296,850 28.3%
Direct store expenses 242,822 21.6% 235,425 22.5%
------------ ------------
Store contribution 84,739 7.5% 61,425 5.9%
Selling, general, and administrative expenses 66,559 5.9% 62,454 6.0%
Loss on disposal of assets, net 187 0.0% 187 0.0%
Pre-opening expenses 3,419 0.3% 5,265 0.5%
Restructuring and asset impairment charges, net 3,967 0.4% 2,461 0.2%
------------ ------------
Income (loss) from operations 10,607 0.9% (8,942) -0.9%
Loss on early extinguishment of debt (559) 0.0% - 0.0%
Interest income 1,669 0.1% 1,070 0.1%
Interest expense (7,963) -0.7% (6,309) -0.6%
------------ ------------
Income (loss) before income taxes 3,754 0.3% (14,181) -1.4%
Income tax expense (benefit) 569 0.0% 25,838 2.5%
------------ ------------
Net income (loss) $ 3,185 0.3% $ (40,019) -3.8%
============ ============
Basic net income (loss) per common share $ 0.11 $ (1.37)
============ ============
Weighted average number of
common shares outstanding 28,812 29,219
============ ============
Diluted net income (loss) per common share $ 0.11 $ (1.37)
============ ============
Weighted average number of
common shares outstanding, assuming dilution 29,249 29,219
============ ============
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)
- --------------------------------------------------------------------------------
DECEMBER 31, JANUARY 1,
2005 2005
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 35,250 $ 30,671
Short-term investments 14,522 11,144
Inventories (net of reserves of $960 and $815, respectively) 63,056 54,960
Accounts receivable (net of allowance for doubtful accounts
of $190 and $153, respectively) 4,006 3,860
Prepaid expenses and other current assets 5,962 5,741
Current deferred tax asset - -
------------ ------------
Total current assets 122,796 106,376
Property and equipment, net 178,867 177,830
Goodwill, net 105,124 106,084
Other intangible assets, net 6,122 6,491
Deposits and other assets 5,897 8,361
Deferred tax asset 64 418
------------ ------------
Total assets $ 418,870 $ 405,560
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 56,078 $ 54,428
Book overdraft 23,351 23,325
Accrued liabilities 53,354 53,154
Current portion of debt, capital Leases, and financing obligations 614 405
------------ ------------
Total current liabilities 133,397 131,312
Long-term debt, capital leases and financing obligations 148,181 148,675
Other long-term obligations 27,750 24,472
------------ ------------
Total liabilities 309,328 304,459
------------ ------------
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, 31,036,834
and 30,466,701 shares issued; 29,059,034 and 28,488,901
outstanding, respectively 31 30
Treasury stock, at cost: 1,977,800 shares as of December 31, 2005 and
January 1, 2005 (24,999) (24,999)
Additional paid-in capital 226,645 221,029
Note receivable, related party (12,051) (11,416)
Accumulated deficit (81,324) (84,509)
Accumulated other comprehensive income 1,240 966
------------ ------------
Total stockholders' equity 109,542 101,101
------------ ------------
Total liabilities and stockholders' equity $ 418,870 $ 405,560
============ ============
WILD OATS MARKETS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except per-share amounts)
(Unaudited)
- --------------------------------------------------------------------------------
YEAR ENDED
----------------------------
DECEMBER 31, JANUARY 1,
2005 2005
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,185 $ (40,019)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 26,288 27,917
Loss on disposal of property and equipment 187 187
Deferred tax expense 402 26,851
Non-cash restructuring and asset impairment charges, net 3,967 2,461
Interest on related party receivable (635) (601)
Stock based compensation 507 710
Income tax benefit from stock based compensation - -
Accretion on debt issuance costs 709 -
Loss on early extinguishment of debt 559 -
Change in assets and liabilities, net (3,727) (909)
------------ ------------
Net cash provided by operating activities 31,442 16,597
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (28,345) (49,105)
Purchase of short-term investments (3,398) (26,797)
Proceeds from the sale of short-term investments 15,653
Proceeds from sale of property and equipment 96 1,012
------------ ------------
Net cash used in investing activities (31,647) (59,237)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments under line-of-credit - (30,179)
Net decrease in book overdraft 26 (3,402)
Proceeds from long-term debt - 115,150
Purchase of treasury stock - (24,999)
Payment of debt issuance costs (331) (3,717)
Repayments on notes payable, long-term debt and capitalized leases (285) (226)
Proceeds from issuance of common stock, net 5,110 2,858
------------ ------------
Net cash provided by financing activities 4,520 55,485
Effect of exchange rate changes on cash 264 426
------------ ------------
Net increase in cash and cash equivalents 4,579 13,271
Cash and cash equivalents at beginning of period 30,671 17,400
------------ ------------
Cash and cash equivalents at end of period $ 35,250 $ 30,671
============ ============
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 YEAR ENDED
---------------------------- ----------------------------
DECEMBER 31, JANUARY 1, DECEMBER 31, JANUARY 1,
2005 2005 2005 2005
------------ ------------ ------------ ------------
Net income (loss) $ 3,332 $ (34,705) $ 3,185 $ (40,019)
Interest expense, net of interest 1,335 1,732 6,294 5,239
income
Income tax expense (benefit) 74 27,545 569 25,838
Depreciation and amortization 6,654 6,629 26,288 27,917
------------ ------------ ------------ ------------
EBITDA 11,395 1,201 36,336 18,975
Loss on early extinguishment of debt - - 559 -
Loss on asset disposals, net 100 64 187 187
Restructuring and asset impairment
charges, net 1,456 382 3,967 2,461
------------ ------------ ------------ ------------
EBITDA, as adjusted $ 12,951 $ 1,647 $ 41,049 $ 21,623
============ ============ ============ ============
EBITDA as a percentage of sales 4.0% 0.4% 3.2% 1.8%
------------ ------------ ------------ ------------
EBITDA, as adjusted, as a percentage
of sales 4.6% 0.6% 3.7% 2.1%
------------ ------------ ------------ ------------