-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BZ0749lURX+VT6erCcdcwYmpBC3Dsr1FO25O+mj5ItvOBLBflY/uleylBDG5DUQ7 8T38REpDDkQTENzU6cgfPA== 0000891092-04-002240.txt : 20040505 0000891092-04-002240.hdr.sgml : 20040505 20040505115140 ACCESSION NUMBER: 0000891092-04-002240 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040505 ITEM INFORMATION: FILED AS OF DATE: 20040505 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WILD OATS MARKETS INC CENTRAL INDEX KEY: 0000909990 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CONVENIENCE STORES [5412] IRS NUMBER: 841100630 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-21577 FILM NUMBER: 04780326 BUSINESS ADDRESS: STREET 1: 3375 MITCHELL LANE CITY: BOULDER STATE: CO ZIP: 80301 BUSINESS PHONE: 3034405220 MAIL ADDRESS: STREET 1: 1645 BROADWAY CITY: BOULDER STATE: CO ZIP: 80302 8-K 1 e17784_8k.txt FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of The Securities Act of 1934 Date of Report (Date of earliest event reported): May 5, 2004 WILD OATS MARKETS, INC. (Exact name of registrant as specified in its charter) Delaware 0-21577 84-1100630 (State or other jurisdiction of Commission File Number (I.R.S. Employer incorporation or organization) Identification Number) 3375 Mitchell Lane Boulder, Colorado 80301 (Address of principal executive offices, including zip code) (303) 440-5220 (Registrant's telephone number, including area code) TABLE OF CONTENTS Item 12 Results of Operations and Financial Condition Page ------ SIGNATURES The Registrant issued the press release regarding the results of operations and financial condition for the fiscal quarter-ended March 27, 2004, attached as Exhibit 99.1 to this Current Report on Form 8-K, on May 5, 2004. Exhibits - ------------ Exhibit 99.1 Press Release of the Registrant Dated May 5, 2004. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. Wild Oats Markets, Inc. By /s/ Freya R. Brier ------------------------ Date: May 5, 2004 Executive Officer Exhibit 99.1. Press release dated May 5, 2004, regarding the results of operations and financial condition for the fiscal quarter-ended March 27, 2004. EX-99.1 2 e17784ex99_1.txt PRESS RELEASE Exhibit 99.1 Wild Oats Markets, Inc. Reports First Quarter 2004 Results - Net Sales Up 11.8% and Net Income Increased 63.7% BOULDER, Colo., May 5 /PRNewswire-FirstCall/ -- Wild Oats Markets, Inc. (Nasdaq: OATS), a leading national natural and organic foods retailer, today announced financial results for the first quarter ended March 27, 2004. The Company generated net income of $2.4 million, or $0.08 per diluted share, on first quarter sales of $263.8 million. Financial Results Net sales for the quarter were $263.8 million, up 11.8 percent compared with $236.0 million in the first quarter of 2003. This sales increase was bolstered by the positive impact from the California United Food and Commercial Workers strike against conventional grocery retailers, which continued to benefit the Company's five Wild Oats and 17 Henry's stores in southern California through February 2004. Additionally, six new stores added to the Company's portfolio since the first quarter of 2003 contributed to the year-over-year sales increase. The positive contribution of new stores more than offset the sale and/or closure of seven stores year-over-year, one of which was a relocation in Nashville, Tenn. One new Wild Oats store was opened in the first quarter, on Jan. 14, 2004, in Colorado Springs, Colo. The Company ended the first quarter with total square footage of 2.2 million, which is a 2.0 percent increase compared to the first quarter of 2003. Comparable store sales in the first quarter of 2004 were up 8.5 percent compared to a decline in same-store sales of 0.9 percent in the first quarter of 2003. The increase in sales in the first quarter can largely be attributed to the benefit from the southern California conventional grocery strike, without which estimated same-store sales in this year's first quarter would have been up 3.6 percent. The Company experienced improvements in comparable store sales in all regions in the U.S. and Canada during the first quarter even while undergoing the transition to United Natural Foods, Inc. (UNFI) as its primary distributor, as well as consolidating two warehouses into a new perishables distribution center in Riverside, Calif. Comparable stores' customer traffic increased 2.7 percent and the average transaction per customer increased 5.8 percent in the first quarter of 2004. "We are pleased with our sales results in the first quarter, particularly because the growth was broad-based and not isolated to a specific region of the country," said Perry D. Odak, President and Chief Executive Officer. "Although it is still early, we are encouraged by the fact that post-strike customer retention and sales in our 22 southern California stores have exceeded our expectations and have exceeded historical levels for stores impacted by labor strikes. We believe this can be attributed to our strong emphasis on customer service and marketing programs that continue to attract customers to our stores in that region." Net income in the first quarter of 2004 increased 63.7 percent to $2.4 million from $1.4 million in the first quarter of 2003. Net income was $0.08 per diluted share in the first quarter of 2004, a 60.0 percent increase compared with $0.05 per diluted share in the first quarter of 2003. The diluted weighted average number of common shares outstanding in this year's first quarter was 31.0 million compared with 29.9 million in the first quarter of 2003. The increase in net income was due to higher net sales and continued store-level expense management, as direct store expenses remained constant as a percent of sales in the first quarter of 2004. However, net income in the first quarter of 2004 was adversely affected by approximately $1.9 million in pre-tax charges related to asset write-offs, restructuring charges and accelerated depreciation for the planned closure or relocation of distribution centers, warehouses and stores, which had a $0.04 negative impact on earnings per share. Additionally, short-term gross margin erosion related to supply chain transitions had an adverse impact on net income in the first quarter of 2004. "We have generated growth on both the top and bottom line during a time of transition," said Mr. Odak. "Now that we have largely completed the transition to UNFI as our primary distribution partner, and have opened our new perishables distribution center in Riverside, we believe we are better positioned to leverage our sales growth into margin improvement and to further grow overall profitability as we move through 2004." Wild Oats reported gross profit of $77.1 million in the first quarter of 2004, an 8.8 percent increase compared with $70.9 million in the same period last year. Gross margins in the first quarter of 2004 were 29.2 percent compared with 30.0 percent in the first quarter of 2003. Accelerated depreciation of $1.7 million in the first quarter of 2004 related to the planned closure of facilities accounted for 63 basis points of the reduction in gross margins. The balance of the reduction in gross margins in the quarter was due to the Company's supply chain transitions that took place in the first quarter of 2004. The transition to UNFI was largely completed in the first quarter of 2004 with minimal disruption to the stores. However, the Company did experience disruption in private label supply related to the transition, which had an adverse impact on margins in the quarter. Additionally, the start up and transition to the Company's new perishables distribution center in Riverside, Calif. created disruption in produce supply in 36 stores in Arizona, California, Nevada, New Mexico and Utah in the first quarter, which caused produce margins to decline in the period. Wild Oats Markets expects gross margins to gradually increase throughout the year and to return to 30 percent by the end of the fourth quarter inclusive of pressure on gross margins related to the ramp up of new stores. Direct store expenses in the first quarter of 2004 were $57.0 million, compared to $50.9 million in the first quarter of 2003. This 12.0 percent increase was largely due to the increased labor required for new stores and to accommodate increased customer traffic in the 22 stores affected by the southern California grocery strike. Direct store expenses remained constant as a percent of sales at 21.6 percent in the first quarter of 2004, as the Company continues to focus on store-level expense management. The implementation of the Company's new labor scheduling system, which began in the first quarter of 2004, is expected to have a positive impact on direct store expenses beginning in the fourth quarter of this year. Store contribution in the first quarter of 2004 was $20.1 million, relatively flat compared with $20.0 million in the first quarter of 2003. The store contribution margin in the first quarter of 2004 was 7.6 percent of sales versus 8.4 percent in the same period last year. The reduction in store contribution as a percent of sales was the result of the decline in gross profit. Selling, general and administrative (SG&A) expenses in the first quarter of 2004 declined 2.9 percent to $15.5 million from $16.0 million in the prior year first quarter. SG&A as a percent of sales was 5.9 percent in the first quarter of 2004 compared with 6.8 percent in the first quarter of 2003. The reduction in SG&A as a percent of sales is the result of the Company's ability to leverage administrative and infrastructure expenses against higher sales. SG&A expenses in the first quarter of 2004 included approximately $500,000 in costs required to ensure the Company's timely compliance with the Sarbanes-Oxley Act and costs associated with an ongoing administrative practices audit of one of the Company's benefit plans. The Company expects the audit to be complete by the end of the second quarter of 2004 and the costs associated with compliance with the Sarbanes-Oxley Act to be ongoing. Wild Oats Markets continues to generate improved cash flow despite a significant increase in capital expenditures as the Company invests in new and existing stores. During the first quarter of 2004, net cash provided by operating activities was $16.4 million compared to $9.2 million in the same period last year. Capital expenditures were $13.7 million in the first quarter of 2004 compared with $6.1 million in the first quarter of 2003. The increase in capital expenditures is primarily related to investments to achieve its new store growth plans. In the first quarter, Wild Oats paid down a net $6.0 million on its credit facility and, as of the end of the quarter, had approximately $24.2 million in outstanding borrowings on its $95.0 million credit facility. Business Developments Wild Oats Markets opened one new store in the first quarter of 2004 under the Wild Oats Natural Marketplace banner in Colorado Springs, Colo. The Company will open five new stores in the second quarter, the first of which opens today, May 5, 2004, and is a Henry's Marketplace in Mission Viejo, Calif. The four remaining stores to open in the second quarter include Wild Oats stores in Superior, Colo., Omaha, Neb. and Salt Lake City, Utah; as well as the first Henry's store to open outside of California, in Phoenix, Ariz. Beyond the stores currently opened, the Company is on schedule to open 13 additional stores over the next nine months. The new stores in development include five Henry's stores in the greater Los Angeles area and in metropolitan Phoenix, and five Wild Oats stores in Cincinnati, Ohio, Vancouver, Wash., Indianapolis, Ind., Salt Lake City, Utah and Scottsdale, Ariz. Wild Oats Markets currently has leases or letters of intent signed for 31 new sites opening in 2004 and 2005, and expects it will achieve its new store development plans of adding 20 new stores in 2005. Wild Oats continues to strengthen its overall store portfolio so that it has a stronger base from which to grow. In the first quarter, the Company sold one store that did not fit its store format in New York, N.Y. and chose to close one store in West Palm Beach, Fla., due to a lease expiration and the fact that the store was too small to offer the Company's full line of products. Additionally, Wild Oats temporarily closed one store in Phoenix to convert it to a Henry's Marketplace, which will re-open in June of this year. After completing a thorough analysis of the store's location and surrounding demographic profile, Company management determined this location would be better suited for a farmers market format store, further demonstrating the benefit of having two distinct retail formats in terms of real estate flexibility. Company management will host a conference call and webcast with financial analysts and investors on Wednesday, May 5, 2004 at 11:00 a.m. Mountain time (1:00 p.m. Eastern time) to discuss financial results for the first quarter ended March 27, 2004. 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 first quarter 2004 earnings conference call" or reference conference ID number 6809911 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.wildoatsinc.com. About Wild Oats Wild Oats Markets, Inc. is a nationwide chain of natural and organic foods markets in the U.S. and Canada. With nearly $970 million in annual sales, the Company currently operates 102 natural food stores in 24 states and British Columbia, Canada. The Company's markets include: Wild Oats Natural Marketplace, Henry's Marketplace, Sun Harvest and Capers Community Markets. For more information, please visit the Company's website at www.wildoatsinc.com. Risk Factors and Uncertainties Except for the historical information contained herein, this news release contains forward-looking statements that involve risks and uncertainties. Such forward-looking statements include the number, timing and location of stores that the Company plans to open, relocate, sell or close in the future; the cost of future store development; expected future comparable store sales, revenues and earnings per share; the success of the Company's marketing and merchandising programs; and the future financial measures and the 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, general economic conditions, the impact of competition in certain regions, the ability to obtain necessary inventory, the Company's ability to execute on operational, marketing and merchandising initiatives being implemented, as well as other risks detailed from time to time in the Company's SEC filings, including the Annual Report on Form 10-K for the fiscal year ended December 27, 2003, as well as 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 Income (In thousands, except per-share amounts) (Unaudited) Thirteen Weeks Ended March 27, March 29, 2004 2003 Sales $263,795 100.0% $235,987 100.0% Cost of goods sold and occupancy costs 186,681 70.8% 165,128 70.0% -------- -------- Gross profit 77,114 29.2% 70,859 30.0% Direct store expenses 57,043 21.6% 50,864 21.6% -------- -------- Store contribution 20,071 7.6% 19,995 8.5% Selling, general and administrative expenses 15,521 5.9% 15,977 6.8% Loss (gain) on disposal of assets (70) 0.0% 1,468 0.6% Pre-opening expenses 475 0.2% 922 0.3% Restructuring expense (income), net 264 0.1% (1,736) -0.7% -------- -------- Income from operations 3,881 1.5% 3,364 1.4% Loss on early extinguishment of debt (186) -0.1% Interest income 186 0.1% 176 0.1% Interest expense (267) -0.1% (993) -0.4% -------- -------- Income before income taxes 3,800 1.4% 2,361 1.0% Income tax expense 1,443 0.5% 921 0.4% -------- -------- Net income $2,357 0.9% $1,440 0.6% ======== ======== Basic net income per common share $0.08 $0.05 ======== ======== Weighted average number of common shares outstanding 30,194 29,704 ======== ======== Diluted net income per common share $0.08 $0.05 ======== ======== Weighted average number of common shares outstanding 31,034 29,916 ======== ======== Percentages may not add up due to rounding. Certain prior period information has been reclassified to conform to the current presentation. Wild Oats Markets, Inc. Condensed Consolidated Balance Sheets (In Thousands) (Unaudited) March 27, Dec. 27, 2004 2003 Assets Current assets: Cash and cash equivalents $12,901 $17,400 Inventories, net 45,837 46,621 Accounts receivable, net 4,175 4,038 Prepaid expenses and other current assets 8,865 8,793 -------- -------- Total current assets 71,778 76,852 Property and equipment, net 136,350 130,989 Intangible assets, net 112,996 113,380 Other long term assets 13,755 15,370 -------- -------- Total assets $334,879 $336,591 ======== ======== Liabilities and Stockholders' Equity Current liabilities: Accounts payable $74,786 $74,256 Accrued liabilities 41,930 42,998 Current portion of debt and capital leases 64 14 -------- -------- Total current liabilities 116,780 117,268 Long-term debt and capital leases 24,221 30,179 Other long-term liabilities 14,271 14,058 -------- -------- Total liabilities 155,272 161,505 -------- -------- Stockholders' equity: Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding Common stock, $0.001 par value; 60,000,000 shares authorized; 30,266,778 and 30,063,421 shares issued and outstanding 30 30 Additional paid-in capital 208,841 206,585 Accumulated deficit (29,420) (31,777) Accumulated other comprehensive income (loss) 156 248 -------- -------- Total stockholders' equity 179,607 175,086 -------- -------- Total liabilities and stockholders' equity $334,879 $336,591 ======== ======== Wild Oats Markets, Inc. Consolidated Statements of Cash Flows (In Thousands) (Unaudited) Thirteen Weeks Ended March 27, March 29, 2004 2003 Cash Flows From Operating Activities: Net income $2,357 $1,440 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 6,749 5,570 Deferred tax expense 1,341 885 Loss (gain) on disposal of property and equipment (70) 1,468 Noncash restructuring expense (income), net 227 (1,736) Other 199 263 Change in assets and liabilities, net 5,622 1,340 ------- ------- Net cash provided by operating activities 16,425 9,230 ------- ------- Cash Flows From Investing Activities: Capital expenditures (13,649) (6,129) Proceeds from sale of property and equipment 964 ------- ------- Net cash used in investing activities (12,685) (6,129) ------- ------- Cash Flows From Financing Activities: Net repayments on line of credit (6,000) (5,100) Net increase (decrease) in book overdraft (3,980) 763 Repayments on long-term debt and capitalized leases (13) (37,094) Proceeds from long-term debt 37,879 Payment of debt issuance costs (721) Proceeds from issuance of common stock, net 1,780 485 ------- ------- Net cash used in financing activities (8,213) (3,788) ------- ------- Effect of exchange rate changes on cash (26) (28) ------- ------- Net decrease in cash and cash equivalents (4,499) (715) Cash and cash equivalents at beginning of period 17,400 11,367 ------- ------- Cash and cash equivalents at end of period $12,901 $10,652 ======= ======= SOURCE Wild Oats Markets, Inc. -0- 05/05/2004 /CONTACT: Sonja Tuitele, Corporate Communications of Wild Oats Markets, Inc., +1-720-562-4984/ /Web site: http://www.wildoatsinc.com / (OATS) CO: Wild Oats Markets, Inc. ST: Colorado IN: SUP FOD REA HOU SU: ERN CCA MAV -----END PRIVACY-ENHANCED MESSAGE-----