99 CENTS ONLY STORES 
By CITY OF COMMERCE, Calif., Nov. 9, 2011 /PRNewswire/ -- 99 Cents Only Stores® (NYSE: NDN) (the "Company") announced its financial results for the second quarter ended October 1, 2011.
(Logo: http://photos.prnewswire.com/prnh/20110214/LA47195LOGO-a)
Highlights for the second quarter of fiscal 2012 compared to the second quarter of fiscal 2011:
-- Retail sales for the Company's consolidated operations increased by 9.0%
to $352.2 million and same-store sales increased 6.7%
-- Consolidated gross margin decreased by 60 basis points to 40.2% of sales
-- Product cost increased by 70 basis points to 57.4%
-- Shrinkage was lower by 20 basis points at 2.2%
-- Other items in cost of sales increased by 10 basis points to 0.3%
-- Consolidated operating expenses decreased by 100 basis points to 31.5%
of sales
-- Retail operating costs decreased 140 basis points to 22.4%
-- Distribution and transportation costs decreased 20 basis points to
4.8%
-- Corporate G&A costs increased 30 basis points to 3.6%
-- Other operating expenses increased 30 basis points to 0.7% which
included a negative impact of $1.1 million or 30 basis points of
professional fees related to the going private transaction
-- Consolidated Income Before Taxes increased to $24.4 million, or 6.7% of
revenues, from $20.8 million, or 6.2% of revenues, in the prior year
-- Consolidated net income increased by $2.2 million to $15.1 million or
$0.21 per diluted share, versus $12.9 million in the prior year, or
$0.18 per diluted share
Eric Schiffer, CEO of 99 Cents Only Stores®, stated, "We are pleased with our financial results for the second quarter of fiscal 2012. Our long-term operational improvement initiatives have continued to meet our expectations, resulting in earnings per share of $0.21 for the second quarter of fiscal 2012. We look forward to further discussing our results on today's earnings release conference call."
The details for participating in today's conference call can be found following the financial discussion.
CONSOLIDATED RESULTS
Net consolidated sales for the second quarter of fiscal 2012 were $363.0 million, an 8.8% increase compared to net sales of $333.6 million for the second quarter of fiscal 2011. Retail sales for the Company's consolidated operations increased by 9.0% to $352.2 million. Same-store sales calculated on a comparable 13-week period increased 6.7%.
Consolidated gross profit for the second quarter of fiscal 2012 was $145.8 million, compared to $136.1 million for the second quarter of the prior fiscal year. The Company's consolidated gross profit margin was 40.2% for the second quarter of fiscal 2012 versus 40.8% for the second quarter of the prior fiscal year. The decrease in gross profit margin was primarily due to an increase in cost of products sold to 57.4% of net sales in the second quarter of fiscal 2012 from 56.7% of net sales in the second quarter of fiscal 2011 that was primarily attributable to merchandise price increases and a shift in product mix. Freight costs also increased 20 basis points in the second quarter of fiscal 2012. These unfavorable variances were offset by decreases in shrinkage to 2.2% of net sales in the second quarter of fiscal 2012 from 2.4% of net sales in the second quarter of fiscal 2011, and other less significant items included in cost of sales.
Operating expenses were $114.4 million, or 31.5% of consolidated sales, for the fiscal 2012 second quarter versus $108.3 million, or 32.5% of sales, for the second quarter of the prior fiscal year. The Company's improved operating expense ratio is primarily due to lower payroll-related expenses as a result of improvement in store labor productivity, which was partially offset by an increase in legal accruals of approximately $1.8 million for estimated future payments for settlement of litigation and professional fees of approximately $1.1 million pertaining to the going private transaction and the related process.
Consolidated operating income for the second quarter of fiscal 2012 was $24.4 million, compared to $20.7 million for the second quarter of fiscal 2011. Operating income as a percentage of net sales was 6.7% in fiscal 2012 compared to 6.2% in fiscal 2011.
Net income for the second quarter of fiscal 2012 increased to $15.1 million, or $0.21 per diluted share, compared to net income of $12.9 million, or $0.18 per diluted share, for the second quarter of fiscal 2011.
Certain additional categories of expense and other information are summarized in Management's Analysis of Second Quarter Consolidated Income Statement provided in Table 1 following the financial statements for the quarter. This information and other material information will be provided in the Company's Form 10-Q for the period ended October 1, 2011 and investors are encouraged to review the complete Form 10-Q in conjunction with this release.
OUTLOOK
The Company believes that revenue growth in the remainder of fiscal 2012 will primarily result from increases in same-store sales, the full-year effect of stores opened since last year, and new store openings. For fiscal 2012, as previously announced, the Company has raised its same-store-sales percentage increase expectations for the full year to mid-single digits and plans to open 12 stores in the second half of the year. Of these 12 new stores, the Company has already opened one store in the third quarter and plans to open two more stores in the third quarter and approximately nine stores in the fourth quarter of fiscal 2012. The majority of these new store openings in fiscal 2012 will be in California. The Company plans to accelerate its store growth rate to approximately 10% in fiscal 2013, with the majority of new stores expected to be in California.
CASH AND LIQUIDITY
As of the end of the second quarter of fiscal 2012, the Company held $222.7 million in cash and short and long-term marketable securities, and had no debt. The Company's inventories at the end of the second quarter of fiscal 2012 were $233.2 million versus $197.0 million at the end of second quarter of fiscal 2011. The increase in inventories was primarily due to early receipts of seasonal items, opportunistic buys and to drive higher seasonal sales.
CONFERENCE CALL DETAILS
The Company's conference call to discuss its fiscal 2012 second quarter and the other matters described in this release is scheduled for today, Wednesday, November 9, 2011 at 1:30 p.m. Pacific Time. You can participate in the live call by dialing (888) 771-4371 from the U.S.A. and (847) 585-4405 from international locations and entering confirmation code 30971818. Please phone in approximately 9 minutes before the call is scheduled to begin and hold for a Conference Plus operator to assist you. Please inform the operator that you are calling in for 99 Cents Only Stores' second quarter fiscal 2012 earnings release conference call, and be prepared to provide the operator with your name, company name, and position if requested. A telephone replay will be available approximately two hours after the call concludes and will be available through Wednesday, November 23, 2011, by dialing (888) 843-7419 from the United States, or (630) 652-3042 from international locations, and entering confirmation code 30971818.
A copy of this earnings release and any other financial and statistical information about the period to be presented in the conference call will be available prior to the call at the section of the Company's website entitled "Investor Relations" at www.99only.com.
99 CENTS ONLY STORES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
October 1,
2011 April 2,
----------- 2011
---
(Unaudited)
ASSETS
Current Assets:
Cash $24,684 $16,723
Short-term investments 189,644 184,929
Accounts receivable, net of allowance
for doubtful accounts of $252 and
$258 at October 1, 2011 and April 2,
2011, respectively 2,491 1,655
Income taxes receivable 3,406 15,901
Deferred income taxes 30,049 30,049
Inventories, net 233,173 191,535
Other 10,966 11,213
------ ------
Total current assets 494,413 452,005
Property and equipment, net 322,792 313,852
Long-term deferred income taxes 23,932 24,608
Long-term investments in marketable
securities 8,350 11,232
Assets held for sale 7,356 7,356
Deposits and other assets 15,649 15,162
------ ------
Total assets $872,492 $824,215
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $52,824 $45,163
Payroll and payroll-related 15,231 15,598
Sales tax 7,490 6,544
Other accrued expenses 24,379 18,881
Workers' compensation 40,261 42,430
Current portion of capital lease
obligation 74 75
--- ---
Total current liabilities 140,259 128,691
Deferred rent 9,792 8,678
Deferred compensation liability 4,244 4,924
Capital lease obligation, net of
current portion 393 373
--- ---
Total liabilities 154,688 142,666
------- -------
Commitments and contingencies
Shareholders' Equity:
Preferred stock, no par value -
authorized, 1,000,000 shares; no
shares issued or outstanding - -
Common stock, no par value -
authorized, 200,000,000 shares;
issued and outstanding, 70,584,970
shares at October 1, 2011 and
70,327,068 shares at April 2, 2011 256,653 253,039
Retained earnings 461,633 428,836
Other comprehensive loss (482) (326)
---- ----
Total shareholders' equity 717,804 681,549
------- -------
Total liabilities and shareholders'
equity $872,492 $824,215
======== ========
99 CENTS ONLY STORES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
For the Second Quarter For the First Half
Ended Ended
----------------------- -------------------
October 1, September October 1, September
2011 25, 2010 2011 25, 2010
----------- ---------- ----------- ----------
Net Sales:
99 Cents Only Stores $352,220 $323,248 $709,764 $659,802
Bargain Wholesale 10,818 10,311 21,614 20,232
------ ------ ------ ------
Total sales 363,038 333,559 731,378 680,034
Cost of sales (excluding
depreciation and amortization
expense shown separately
below) 217,264 197,488 436,784 403,701
------- ------- ------- -------
Gross profit 145,774 136,071 294,594 276,333
Selling, general and administrative
expenses:
Operating expenses 114,367 108,254 227,933 215,304
Depreciation and amortization 6,990 7,109 13,703 13,501
----- ----- ------ ------
Total selling, general and
administrative expenses 121,357 115,363 241,636 228,805
------- ------- ------- -------
Operating income 24,417 20,708 52,958 47,528
------ ------ ------ ------
Other (income) expense:
Interest income (60) (207) (202) (441)
Interest expense 34 10 335 11
Other-than-temporary
investment impairment due to
credit losses 31 112 31 112
Other (19) (5) (62) (14)
--- --- --- ---
Total other (income) expense,
net (14) (90) 102 (332)
--- --- --- ----
Income before provision for
income taxes 24,431 20,798 52,856 47,860
Provision for income taxes 9,317 7,862 20,059 18,110
----- ----- ------ ------
Net income $15,114 $12,936 $32,797 $29,750
======= ======= ======= =======
Earnings per common share:
Basic $0.21 $0.19 $0.46 $0.43
===== ===== ===== =====
Diluted $0.21 $0.18 $0.46 $0.42
===== ===== ===== =====
Weighted average number of common shares
outstanding:
Basic 70,570 69,882 70,517 69,768
====== ====== ====== ======
Diluted 71,334 70,972 71,333 70,574
====== ====== ====== ======
99 CENTS ONLY STORES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
First Half Ended
----------------
October 1, September
2011 25,
----------- ----------
2010
----
Cash flows from operating activities:
Net income $32,797 $29,750
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 13,703 13,501
Loss on disposal of fixed assets 80 131
Investments impairment 31 112
Excess tax benefit from share-based
payment arrangements (584) (696)
Deferred income taxes (105) 32
Stock-based compensation expense 1,313 1,502
Changes in assets and liabilities associated with
operating activities:
Accounts receivable (836) 290
Inventories (42,641) (25,882)
Deposits and other assets 165 (182)
Accounts payable 8,498 5,287
Accrued expenses 7,600 407
Accrued workers' compensation (2,169) (2,135)
Income taxes 12,495 (6,737)
Deferred rent 1,114 (8)
Other long-term liabilities - (108)
--- ----
Net cash provided by operating
activities 31,461 15,264
------ ------
Cash flows from investing activities:
Purchases of property and equipment (23,553) (15,547)
Proceeds from sale of fixed assets 2 57
Purchases of investments (50,389) (40,222)
Sales of investments 48,174 32,038
------ ------
Net cash used in investing activities (25,766) (23,674)
------- -------
Cash flows from financing activities:
Repurchases of common stock related to
issuance of performance stock units (753) (735)
Payments of capital lease obligation (35) (34)
Proceeds from exercise of stock options 2,470 2,498
Excess tax benefit from share-based
payment arrangements 584 696
--- ---
Net cash provided by financing
activities 2,266 2,425
----- -----
Net increase (decrease) in cash 7,961 (5,985)
Cash and cash equivalents -beginning
of period 16,723 19,877
------ ------
Cash and cash equivalents -end of
period $24,684 $13,892
======= =======
99 CENTS ONLY STORES
Management Analysis of Second Quarter Fiscal 2012 and 2011 Consolidated
Income Statement
TABLE 1
Description Consolidated Consolidated
----------- ------------ ------------
Q2 Q2
($ millions)(3) FY2012 % Sales FY2011 % Sales
------ ------- ------ -------
Revenues (unaudited) (unaudited)
Retail $352.2 97.0% $323.2 96.9%
Bargain Wholesale $10.8 3.0% $10.3 3.1%
Total $363.0 100.0% $333.6 100.0%
Cost of Goods Sold
Purchase Cost $208.3 57.4% $189.0 56.7%
Shrinkage (1) $7.9 2.2% $7.9 2.4%
Other $1.1 0.3% $0.7 0.2%
---- ----
Total Cost of Goods Sold $217.3 59.8% $197.5 59.2%
Gross Margin $145.8 40.2% $136.1 40.8%
Selling, General and
Administrative Expenses
Retail Operating $81.5 22.4% $79.3 23.8%
Distribution and Transportation $17.5 4.8% $16.7 5.0%
Corporate G&A $13.0 3.6% $11.0 3.3%
Other (incl. Stock-comp and
professional fees related to
going private) (2) $2.4 0.7% $1.2 0.4%
---- ----
Operating Expenses $114.4 31.5% $108.3 32.5%
Depreciation & Amortization $7.0 1.9% $7.1 2.1%
---- ----
Total Operating Expenses $121.4 33.4% $115.4 34.6%
Operating income $24.4 6.7% $20.7 6.2%
Other (Income) Expense ($0.0) 0.0% ($0.1) 0.0%
----- -----
Income before provision for income
taxes $24.4 6.7% $20.8 6.2%
Provision for Income Taxes $9.3 2.6% $7.9 2.4%
---- ----
Net income $15.1 4.2% $12.9 3.9%
EPS
Basic $0.21 $0.19
Diluted $0.21 $0.18
Shares Outstanding
Basic 70,570 69,882
Diluted 71,334 70,972
------- ------ ------
(1) Shrinkage includes scrap, shrink and excess and obsolete inventory.
Other SG&A includes stock-based compensation and SG&A for the Bargain Wholesale
(2) division for second quarter of fiscal 2012 and 2011.
In addition, second quarter of fiscal 2012 included $1.1 million of
professional fees related to the going private transaction and the related
process.
Dollar amounts and percentages may not
(3) add up due to rounding.
Founded in 1982, 99 Cents Only Stores® operates 289 extreme value retail stores with 214 in California, 35 in Texas, 27 in Arizona and 13 in Nevada. The Company's next store grand opening is Thursday November 10th in Sugar Land, Texas. 99 Cents Only Stores® emphasizes quality name-brand consumables, priced at an excellent value, in convenient, attractively merchandised stores. Over half of the Company's sales come from food and beverages, including produce, dairy, deli and frozen foods, along with organic and gourmet foods. The Company's New York Stock Exchange symbol is NDN.
Safe Harbor Statement
We have included statements in this release that constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act and Section 27A of the Securities Act. The words "expect," "estimate," "anticipate," "plan," "predict," "believe" and similar expressions and variations thereof are intended to identify forward-looking statements. Such statements appear in this release and include statements regarding the intent, belief or current expectations of the Company, its directors or officers with respect to, among other things, the results of operations for fiscal 2012, the business and growth strategies of the Company, planned new store openings, our future store opening growth rate and trends affecting the financial condition or results of operations of the Company. The shareholders of the Company and other readers are cautioned not to put undue reliance on such forward-looking statements. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those projected in this release for the reasons, among others, discussed in the reports and other documents the Company files from time to time with the Securities and Exchange Commission, including the risk factors contained in the Section - "Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Company's Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.
Contact Angela Thurstan, 323-881-1272.
SOURCE 99 Cents Only Stores
