LAKEWOOD, Colo., May 3, 2018 /PRNewswire/ -- Natural Grocers by
Vitamin Cottage, Inc. (NYSE: NGVC) today announced results for its
second quarter of fiscal 2018 ended March
31, 2018, increased its outlook for daily average comparable
store sales growth for fiscal 2018 and narrowed its earnings
per share outlook for fiscal 2018.
Highlights for Second Quarter Fiscal 2018 Compared to Second
Quarter Fiscal 2017
- Net sales increased 12.3% to $215.9
million;
- Daily average comparable store sales increased 7.1%;
- Net income increased 13.6% to $3.4
million with diluted earnings per share of $0.15;
- EBITDA increased 1.7% to $13.1
million;
- Opened three new stores, resulting in 7.4% store growth for the
twelve month period ended March 31,
2018;
- The Company is raising its fiscal 2018 outlook for daily
average comparable stores sales growth to 3.5% to 4.5% and
narrowing its fiscal 2018 diluted earnings per share outlook to
$0.43 to $0.50; and
- The Company's Board of Directors has authorized a two-year
extension of the Company's $10
million share repurchase program.
"Sales momentum continued to accelerate during the second
quarter, which, combined with more focused pricing and promotional
activities, generated year-over-year growth in both EBITDA and
diluted earnings per share," said Kemper
Isely, Co-President. "We are pleased with the 7.1%
growth in daily average comparable store sales during the second
quarter, which reflected a continued positive customer response to
our enhanced sales initiatives. We fine-tuned our pricing and
promotional investments during the second quarter, resulting in an
improved gross margin relative to the first quarter while
delivering enhanced value to our customers. Our strong sales growth
and prudent new store expansion strategy enabled us to leverage
expenses to support improved earnings."
In addition to presenting the financial results of Natural
Grocers by Vitamin Cottage, Inc. and its subsidiaries
(collectively, the Company) for the second quarter of fiscal 2018
and 2017 in conformity with U.S. generally accepted accounting
principles (GAAP), the Company is also presenting EBITDA, which is
a non-GAAP financial measure. The reconciliation from GAAP to this
non-GAAP financial measure is provided at the end of this earnings
release.
Operating Results — Second Quarter Fiscal 2018 Compared to
Second Quarter Fiscal 2017
During the second quarter of fiscal 2018, net sales increased
$23.7 million, or 12.3%, to
$215.9 million compared to the same
period in fiscal 2017, primarily driven by a $13.5 million increase in comparable store sales
and a $10.2 million increase in new
store sales. Daily average comparable store sales increased 7.1% in
the second quarter of fiscal 2018 compared to a 1.7% decrease in
the second quarter of fiscal 2017. The daily average
comparable store sales increase during the second quarter of fiscal
2018 was driven by a 5.0% increase in daily average transaction
count and a 2.0% increase in average transaction size. Daily
average mature store sales increased 4.3% in the second quarter of
fiscal 2018 compared to a 3.1% decrease in the second quarter of
fiscal 2017. For fiscal 2018, mature stores include all stores open
during or before fiscal 2013.
Gross profit during the second quarter of fiscal 2018 increased
7.6% over the same period in fiscal 2017 to $58.3 million, primarily driven by an
increase in the number of comparable stores. Gross profit reflects
earnings after both product and occupancy costs. Gross margin was
27.0% of sales for the second quarter of fiscal 2018 compared to
28.2% of sales for the second quarter of fiscal 2017. The decline
in gross margin was primarily driven by lower product margin,
reflecting recent promotional pricing campaigns, a shift in sales
mix to lower margin products and, to a lesser extent, higher
occupancy costs, all as a percentage of sales.
Store expenses during the second quarter of fiscal 2018
increased $4.1 million, or 9.6%, to
$46.5 million. Store expenses as a
percentage of sales decreased to 21.5% during the second quarter of
fiscal 2018 compared to 22.1% in the second quarter of fiscal 2017.
This decrease was primarily due to expense leverage from increased
sales and decreases in labor expenses and depreciation expenses,
both as a percentage of sales.
Administrative expenses increased 10.1% to $5.5 million during the second quarter of fiscal
2018 compared to $5.0 million for the
comparable period in fiscal 2017. This increase was due primarily
to an increase in compensation expenses. Administrative expenses as
a percentage of sales decreased to 2.5% during the second quarter
of fiscal 2018 compared to 2.6% in the comparable period in fiscal
2017.
Pre-opening and relocation expenses decreased $0.6 million during the second quarter of fiscal
2018 compared to the comparable period in fiscal 2017. This
decrease was due to the impact of the number and timing of new
store openings and relocations. During the second quarter of fiscal
2018, the Company opened three new stores compared to opening four
new stores and relocating one store during the second quarter of
fiscal 2017.
Interest expense during the second quarter of fiscal 2018
increased $0.2 million compared to
the comparable period in fiscal 2017 due to an increase in the
number of the Company's capital leases and higher interest rates
under the Company's revolving credit facility.
The Company's effective income tax rate for the second quarter
of fiscal 2018 was approximately 24.8% compared to 35.4% for the
second quarter of fiscal 2017. The decrease in the effective income
tax rate for the three months ended March
31, 2018 is a result of the recent federal income tax
reform.
Net income for the second quarter of fiscal 2018 increased 13.6%
over the same period in fiscal 2017 to $3.4
million with diluted earnings per share of $0.15.
EBITDA in the second quarter of fiscal 2018 increased 1.7% to
$13.1 million compared to the second
quarter of fiscal 2017.
Operating Results — First Half Fiscal 2018 Compared to First
Half Fiscal 2017
During the first half of fiscal 2018, net sales increased
$42.6 million, or 11.3%, over the
same period in fiscal 2017 to $418.4
million due to a $22.1
million, or 5.9%, increase in comparable store sales and a
$20.5 million increase in sales from
new stores. The 5.9% increase in daily average comparable store
sales during the first half of fiscal 2018 compared to a 1.2%
decrease in the first half of fiscal 2017. The 5.9% increase in the
first half of fiscal 2018 was driven by a 4.9% increase in daily
average transaction count and a 0.9% increase in average
transaction size. Daily average mature store sales increased 3.0%
in the first half of fiscal 2018 compared to a 2.7% decrease in the
first half of fiscal 2017.
Gross profit during the first half of fiscal 2018 increased 4.8%
over the same period in fiscal 2017 to $111.4 million, primarily driven by an increase
in the number of comparable stores. Gross profit reflects earnings
after both product and occupancy costs. Gross margin was 26.6% of
sales during the first half of fiscal 2018 compared to 28.3% of
sales in the first half of fiscal 2017. The decline in gross margin
was primarily driven by lower product margin, reflecting recent
promotional pricing campaigns and a shift in sales mix to lower
margin products, both as a percentage of sales.
Store expenses as a percentage of sales decreased 50 basis
points during the first half of fiscal 2018 to 21.9% of sales
compared to the comparable period in fiscal 2017, primarily driven
by leverage from increased sales, including decreased labor
expenses and depreciation, both as a percentage of sales.
Administrative expenses increased 8.9% to $10.7 million during the first half of fiscal
2018 compared to $9.8 million for the
comparable period in fiscal 2017. This increase was due to an
increase in compensation expenses. Administrative expenses as a
percentage of sales were 2.6% during the first half of fiscal 2018,
consistent with the comparable period in fiscal 2017.
Pre-opening and relocation expenses decreased $1.3 million during the first half of fiscal 2018
compared to the comparable period in fiscal 2017 primarily due to
the number and timing of new store openings and relocations. During
the first half of fiscal 2018, the Company opened five new stores
and relocated one store compared to opening nine new stores and
relocating one store during the first half of fiscal 2017.
Interest expense increased $0.3
million in the first half of fiscal 2018 compared to the
comparable period in fiscal 2017, primarily due to higher interest
rates under the Company's revolving credit facility, an increase in
the number of the Company's capital leases and a decrease in
capitalized interest expense.
The Company reported a net tax benefit of $3.0 million in the first half of fiscal 2018,
primarily due to the favorable impact of a $4.3 million non-cash remeasurement of the
Company's deferred income tax assets and liabilities as a result of
the recent federal income tax reform. That remeasurement was
recorded in the first quarter of fiscal 2018. Exclusive of the
adjustment to deferred income tax assets and liabilities, the
Company's effective income tax rate for the first half of fiscal
2018 was approximately 24.5% as compared to 35.3% for the first
half of fiscal 2017. The decrease in the effective income tax rate
for the six months ended March 31,
2018 is a result of the recent federal tax reform.
Net income was $8.6 million with
diluted earnings per share of $0.38
in the first half of fiscal 2018. Excluding the favorable impact of
the remeasurement of our deferred tax assets and liabilities as a
result of the recent federal income tax reform, net income was
$4.3 million, or $0.19 diluted earnings per share, for the six
months ended March 31, 2018.
EBITDA during the first half of fiscal 2018 was $22.7 million.
Balance Sheet and Cash Flow
As of March 31, 2018, the Company
had $8.1 million in cash and cash
equivalents and $29.4 million
available for borrowing under its $50
million revolving credit facility. Credit facility usage was
comprised of $19.6 million of direct
borrowings and $1.0 million of
letters of credit as of March 31,
2018.
During the second quarter of fiscal 2018, the Company generated
$21.7 million in cash from operations
and invested $10.5 million in capital
expenditures, primarily for new stores and relocations.
Growth and Development
During the second quarter of fiscal 2018, the Company opened
three new stores, bringing the total store count as of March 31, 2018 to 145 stores in 19 states. The
Company opened five new stores and relocated one store in the first
half of fiscal 2018 compared to opening nine new stores and
relocating one store in the first half of 2017, resulting in 7.4%
and 20.5% unit growth rates for the twelve month periods ended
March 31, 2018 and March 31, 2017, respectively.
Since April 1, 2018, the Company
has opened one store in Oregon.
The Company has eight signed leases for stores that are planned to
open in fiscal 2018 and beyond in Colorado, Iowa, Oregon
and Texas.
Fiscal 2018 Outlook
The Company is raising its fiscal 2018 outlook for daily average
comparable store sales growth and narrowing its outlook for diluted
earnings per share. The initial outlook had been provided when the
Company reported fourth quarter and full-year fiscal 2017 results
on November 16, 2017.
|
|
Fiscal
2018 Outlook
|
|
|
|
First Half
FY'18 Actual
|
|
Number of new
stores
|
|
8 to 10
|
|
|
|
5
|
|
Number of
relocations
|
|
3 to 4
|
|
|
|
1
|
|
Daily average
comparable store sales growth
|
|
3.5% to
4.5%
|
|
|
|
5.9%
|
|
Net income as a
percentage of sales
|
|
1.0% to
1.3%
|
|
|
|
2.1%
|
|
Diluted earnings per
share
|
|
$0.43 to
$0.50
|
|
|
|
$0.38
|
|
|
|
|
|
|
|
|
|
Capital expenditures
(in millions)
|
|
$25 to $30
|
|
|
|
$10.5
|
|
Extension of Share Repurchase Program
On May 2, 2018, the Company's
Board of Directors authorized a two-year extension of the Company's
$10 million share repurchase
program. As a result of such extension, the share repurchase
program will terminate on May 4,
2020. The dollar value of the shares of the Company's common
stock that may yet be purchased under the share repurchase program
is approximately $8.3
million.
Earnings Conference Call
The Company will host a conference call today at 2:30 p.m. Mountain Time (4:30 p.m. Eastern Time) to discuss this earnings
release. The dial-in number is 1-888-347-6606 (US); 1-855-669-9657
(Canada); or 1-412-902-4289
(International). The conference ID is "Natural Grocers by Vitamin
Cottage." A simultaneous audio webcast will be available at
http://Investors.NaturalGrocers.com and archived for a
minimum of 30 days.
About Natural Grocers by Vitamin Cottage
Natural Grocers by Vitamin Cottage, Inc. (NYSE: NGVC) is an
expanding specialty retailer of natural and organic groceries and
dietary supplements whose products must meet strict quality
guidelines. The grocery products sold by Natural Grocers may not
contain artificial colors, flavors, preservatives or sweeteners, or
partially hydrogenated or hydrogenated oils. The Company sells only
USDA certified organic produce and exclusively pasture-raised,
non-confinement dairy products. Natural Grocers' flexible
smaller-store format allows it to offer affordable prices in a
shopper-friendly retail environment. The Company also provides
extensive free science-based nutrition education programs to help
customers make informed health and nutrition choices. The Company,
founded in 1955, has 146 stores in 19 states.
Visit www.NaturalGrocers.com for more information and store
locations.
Forward-Looking Statements
The following constitutes a "safe harbor" statement under the
Private Securities Litigation Reform Act of 1995. Except for the
historical information contained herein, statements in this release
are "forward-looking statements" and are based on current
expectations and assumptions that are subject to risks and
uncertainties. All statements that are not statements of historical
fact are forward-looking statements. Actual results could differ
materially from those described in the forward-looking statements
because of factors such as changes in the Company's industry,
business strategy, goals and expectations concerning the Company's
market position, the economy, future operations, margins,
profitability, capital expenditures, liquidity and capital
resources, future growth other financial and operating information
and other risks detailed in the Company's Annual Report on Form
10-K for the fiscal year ended September 30,
2017 (Form 10-K) and the Company's subsequent quarterly
reports on Form 10-Q. The information contained herein speaks only
as of the date of this release and the Company undertakes no
obligation to update forward-looking statements, except as may be
required by the securities laws.
For further information regarding risks and uncertainties
associated with the Company's business, please refer to the
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Risk Factors" sections of the Company's
filings with the Securities and Exchange Commission, including, but
not limited to, the Form 10-K and the Company's subsequent
quarterly reports on Form 10-Q, copies of which may be obtained by
contacting Investor Relations at 303-986-4600 or by visiting the
Company's website at http://Investors.NaturalGrocers.com.
NATURAL GROCERS BY
VITAMIN COTTAGE, INC.
|
|
Consolidated
Statements of Income
|
(Unaudited)
|
(Dollars in
thousands, except per share data)
|
|
|
|
|
Three months
ended
March 31,
|
|
Six months
ended
March 31,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Net sales
|
|
$
|
215,911
|
|
192,203
|
|
418,391
|
|
375,780
|
|
Cost of goods sold
and occupancy costs
|
|
157,630
|
|
138,045
|
|
306,951
|
|
269,469
|
|
Gross
profit
|
|
58,281
|
|
54,158
|
|
111,440
|
|
106,311
|
|
Store
expenses
|
|
46,480
|
|
42,400
|
|
91,646
|
|
84,243
|
|
Administrative
expenses
|
|
5,458
|
|
4,959
|
|
10,715
|
|
9,842
|
|
Pre-opening and
relocation expenses
|
|
697
|
|
1,284
|
|
1,240
|
|
2,545
|
|
Operating
income
|
|
5,646
|
|
5,515
|
|
7,839
|
|
9,681
|
|
Interest expense,
net
|
|
(1,122)
|
|
(879)
|
|
(2,211)
|
|
(1,862)
|
|
Income before income
taxes
|
|
4,524
|
|
4,636
|
|
5,628
|
|
7,819
|
|
(Provision for)
benefit from income taxes
|
|
(1,120)
|
|
(1,640)
|
|
2,957
|
|
(2,762)
|
|
Net income
|
|
$
|
3,404
|
|
2,996
|
|
8,585
|
|
5,057
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common
share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.15
|
|
0.13
|
|
0.38
|
|
0.23
|
|
Diluted
|
|
$
|
0.15
|
|
0.13
|
|
0.38
|
|
0.23
|
|
Weighted average
number of shares of common stock outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
22,353,993
|
|
22,458,524
|
|
22,356,943
|
|
22,455,964
|
|
Diluted
|
|
22,444,808
|
|
22,469,349
|
|
22,419,056
|
|
22,464,979
|
|
NATURAL GROCERS BY
VITAMIN COTTAGE, INC.
|
|
Consolidated
Balance Sheets
|
(Dollars in
thousands, except per share data)
|
|
|
|
March
31,
2018
|
|
September 30,
2017
|
|
Assets
|
|
(unaudited)
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
8,071
|
|
6,521
|
|
Accounts receivable,
net
|
|
5,692
|
|
4,860
|
|
Merchandise
inventory
|
|
96,873
|
|
93,612
|
|
Prepaid expenses and
other current assets
|
|
2,789
|
|
3,222
|
|
Total current
assets
|
|
113,425
|
|
108,215
|
|
Property and
equipment, net
|
|
184,053
|
|
184,417
|
|
Other
assets:
|
|
|
|
|
|
Deposits and other
assets
|
|
1,691
|
|
1,642
|
|
Goodwill and other
intangible assets, net of accumulated amortization of $411 and
$394, respectively
|
|
5,667
|
|
5,655
|
|
Deferred financing
costs, net
|
|
37
|
|
62
|
|
Total other
assets
|
|
7,395
|
|
7,359
|
|
Total
assets
|
|
$
|
304,873
|
|
299,991
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable
|
|
$
|
60,564
|
|
56,849
|
|
Accrued
expenses
|
|
15,440
|
|
14,164
|
|
Capital and financing
lease obligations, current portion
|
|
633
|
|
548
|
|
Total current
liabilities
|
|
76,637
|
|
71,561
|
|
Long-term
liabilities:
|
|
|
|
|
|
Capital and financing
lease obligations, net of current portion
|
|
36,953
|
|
32,880
|
|
Revolving credit
facility
|
|
19,592
|
|
28,392
|
|
Deferred income tax
liabilities
|
|
8,248
|
|
12,419
|
|
Deferred
compensation
|
|
665
|
|
1,231
|
|
Deferred
rent
|
|
10,796
|
|
10,465
|
|
Leasehold
incentives
|
|
9,743
|
|
9,160
|
|
Total long-term
liabilities
|
|
85,997
|
|
94,547
|
|
Total
liabilities
|
|
162,634
|
|
166,108
|
|
Stockholders'
equity:
|
|
|
|
|
|
Common stock, $0.001
par value, 50,000,000 shares authorized, 22,510,279 shares issued
at March 31, 2018 and September 30, 2017 and 22,364,280 and
22,448,056 outstanding at March 31, 2018 and September 30, 2017,
respectively
|
|
23
|
|
23
|
|
Additional paid-in
capital
|
|
55,894
|
|
55,678
|
|
Retained
earnings
|
|
87,431
|
|
78,846
|
|
Common stock in
treasury at cost, 145,999 and 62,223 shares, at March 31, 2018 and
September 30, 2017, respectively
|
|
(1,109)
|
|
(664)
|
|
Total stockholders'
equity
|
|
142,239
|
|
133,883
|
|
Total liabilities and
stockholders' equity
|
|
$
|
304,873
|
|
299,991
|
|
NATURAL GROCERS BY
VITAMIN COTTAGE, INC.
|
|
Consolidated
Statements of Cash Flows
|
(Unaudited)
|
(Dollars in
thousands)
|
|
|
|
Six months
ended
March
31,
|
|
|
|
2018
|
|
2017
|
|
Operating
activities:
|
|
|
|
|
|
Net income
|
|
$
|
8,585
|
|
5,057
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
|
14,825
|
|
14,440
|
|
Gain on disposal of
property and equipment
|
|
(28)
|
|
—
|
|
Share-based
compensation
|
|
362
|
|
414
|
|
Deferred income tax
benefit
|
|
(4,171)
|
|
(573)
|
|
Non-cash interest
expense
|
|
6
|
|
6
|
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
(Increase) decrease
in:
|
|
|
|
|
|
Accounts receivable,
net
|
|
(832)
|
|
558
|
|
Merchandise
inventory
|
|
(3,261)
|
|
(6,184)
|
|
Prepaid expenses and
other assets
|
|
447
|
|
1,414
|
|
Increase (decrease)
in:
|
|
|
|
|
|
Accounts
payable
|
|
4,181
|
|
4,580
|
|
Accrued
expenses
|
|
1,276
|
|
1,183
|
|
Deferred
compensation
|
|
(566)
|
|
233
|
|
Deferred rent and
leasehold incentives
|
|
914
|
|
1,316
|
|
Net cash provided by
operating activities
|
|
21,738
|
|
22,444
|
|
Investing
activities:
|
|
|
|
|
|
Acquisition of
property and equipment
|
|
(10,559)
|
|
(23,598)
|
|
Proceeds from sale of
property and equipment, net of commissions of $7 and $80,
respectively
|
|
34
|
|
2,564
|
|
Net cash used in
investing activities
|
|
(10,525)
|
|
(21,034)
|
|
Financing
activities:
|
|
|
|
|
|
Borrowings under
credit facility
|
|
176,000
|
|
142,350
|
|
Repayments under
credit facility
|
|
(184,800)
|
|
(143,300)
|
|
Capital and financing
lease obligations payments
|
|
(271)
|
|
(231)
|
|
Repurchase of common
stock
|
|
(581)
|
|
—
|
|
Payments on
withholding tax for vested restricted stock units
|
|
(11)
|
|
(12)
|
|
Net cash used in
financing activities
|
|
(9,663)
|
|
(1,193)
|
|
Net increase in cash
and cash equivalents
|
|
1,550
|
|
217
|
|
Cash and cash
equivalents, beginning of period
|
|
6,521
|
|
4,017
|
|
Cash and cash
equivalents, end of period
|
|
$
|
8,071
|
|
4,234
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
Cash paid for
interest
|
|
$
|
431
|
|
330
|
|
Cash paid for interest
on capital and financing lease obligations, net of capitalized
interest of $49 and $237, respectively
|
|
1,748
|
|
1,483
|
|
Income taxes
paid
|
|
90
|
|
1,382
|
|
Deferred compensation
paid
|
|
700
|
|
—
|
|
Supplemental
disclosures of non-cash investing and financing
activities:
|
|
|
|
|
|
Acquisition of
property and equipment not yet paid
|
|
$
|
2,377
|
|
9,528
|
|
Property acquired
through capital and financing lease obligations
|
|
4,428
|
|
—
|
|
NATURAL GROCERS BY VITAMIN COTTAGE,
INC.
Non-GAAP financial measures
EBITDA is not a measure of financial performance under GAAP. We
define EBITDA as net income before interest expense, provision for
income taxes and depreciation and amortization. The following
table reconciles net income to EBITDA for the periods presented,
dollars in thousands:
|
|
Three months
ended
March 31,
|
|
Six months
ended
March 31,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Net income
|
|
$
|
3,404
|
|
2,996
|
|
8,585
|
|
5,057
|
|
Interest expense,
net
|
|
1,122
|
|
879
|
|
2,211
|
|
1,862
|
|
Provision for (benefit
from) income taxes
|
|
1,120
|
|
1,640
|
|
(2,957)
|
|
2,762
|
|
Depreciation and
amortization
|
|
7,410
|
|
7,319
|
|
14,825
|
|
14,440
|
|
EBITDA
|
|
$
|
13,056
|
|
12,834
|
|
22,664
|
|
24,121
|
|
EBITDA increased 1.7% to $13.1
million in the three months ended March 31, 2018 compared to $12.8 million for the three months ended
March 31, 2017. EBITDA
decreased 6.0% to $22.7 million in
the six months ended March 31, 2018
compared to $24.1 million for the six
months ended March 31, 2017.
EBITDA as a percent of sales was 6.0% and 6.7% in the three months
ended March 31, 2018 and 2017,
respectively. EBITDA as a percent of sales was 5.4% and 6.4%
in the six months ended March 31,
2018 and 2017, respectively.
Management believes some investors' understanding of our
performance is enhanced by including EBITDA, a non-GAAP financial
measure. We believe EBITDA provides additional information
about: (i) our operating performance, because it assists us in
comparing the operating performance of our stores on a consistent
basis, as it removes the impact of non-cash depreciation and
amortization expense as well as items not directly resulting from
our core operations such as interest expense and income taxes and
(ii) our performance and the effectiveness of our operational
strategies. Additionally, EBITDA is a component of a measure
in our financial covenants under our Credit Facility. Further, our
incentive compensation plan bases incentive compensation payments
on EBITDA, among other measures.
Furthermore, management believes some investors use EBITDA as a
supplemental measure to evaluate the overall operating performance
of companies in our industry. Management believes some investors'
understanding of our performance is enhanced by including this
non-GAAP financial measure as a reasonable basis for comparing our
ongoing results of operations. By providing this non-GAAP financial
measure, together with a reconciliation from net income, we believe
we are enhancing analysts' and investors' understanding of our
business and our results of operations, as well as assisting
analysts and investors in evaluating how well we are executing our
strategic initiatives.
Our competitors may define EBITDA differently, and as a result,
our measure of EBITDA may not be directly comparable to those of
other companies. Items excluded from EBITDA are significant
components in understanding and assessing financial performance.
EBITDA is a supplemental measure of operating performance that does
not represent, and should not be considered in isolation or as an
alternative to, or substitute for, net income or other financial
statement data presented in the consolidated financial statements
as indicators of financial performance. EBITDA has limitations as
an analytical tool, and should not be considered in isolation, or
as an alternative to, or as a substitute for, analysis of our
results as reported under GAAP. Some of the limitations are:
- EBITDA does not reflect our cash expenditures, or future
requirements for capital expenditures or contractual
commitments;
- EBITDA does not reflect changes in, or cash requirements for,
our working capital needs;
- EBITDA does not reflect any impact for straight-line rent
expense for leases classified as capital and financing lease
obligations;
- EBITDA does not reflect the interest expense, or the cash
requirements necessary to service interest or principal payments on
our debt;
- EBITDA does not reflect our tax expense or the cash
requirements to pay our taxes; and
- although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized will often have to be
replaced in the future and EBITDA does not reflect any cash
requirements for such replacements.
Due to these limitations, EBITDA should not be considered as a
measure of discretionary cash available to us to invest in the
growth of our business. We compensate for these limitations by
relying primarily on our GAAP results and using EBITDA as
supplemental information.
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SOURCE Natural Grocers by Vitamin Cottage, Inc.