LAKEWOOD, Colo., Aug. 3, 2023
/PRNewswire/ -- Natural Grocers by Vitamin Cottage, Inc.
(NYSE: NGVC) today announced results for its third quarter of
fiscal 2023 ended June 30, 2023 and
raised its outlook for fiscal 2023.
Highlights for Third Quarter Fiscal 2023 Compared to Third
Quarter Fiscal 2022
- Net sales increased 5.8% to $281.8
million;
- Daily average comparable store sales increased 4.4%, and
increased 6.9% on a two-year basis;
- Operating income increased 60.8% to $9.1
million;
- Net income increased 79.8% to $7.1
million;
- Diluted earnings per share was $0.31, up 82.4% from $0.17 in the third quarter of fiscal 2022;
and
- Adjusted EBITDA was $16.7
million.
"We delivered strong results in the third quarter reflecting
continued top-line momentum as comparable store sales accelerated
to 4.4% including a 1.9% increase in daily average transaction
count. Moreover, strength was broad-based across categories," said
Kemper Isely, Co-President. "Growth
continues to be driven by a loyal and resilient customer base that
prioritizes our offering of high-quality natural and organic
products at Always AffordableSM prices. We believe the
enduring strength of our business model is further reflected in the
19.1% increase in daily average comparable store sales compared to
the third quarter of 2019. Our crew members' commitment to
operational excellence and exceptional customer service was
instrumental in driving our strong sales results, as well as our
130 basis point improvement in gross margin and 82.4% growth in
diluted earnings per share to $0.31."
Mr. Isely continued, "We are confident in our execution and the
trajectory of our business. We are increasing our outlook for
comparable store sales and diluted earnings per share for fiscal
year 2023 to reflect the strong results in the third quarter."
In addition to presenting the financial results of Natural
Grocers by Vitamin Cottage, Inc. and its subsidiaries
(collectively, the Company) in conformity with U.S. generally
accepted accounting principles (GAAP), the Company is also
presenting EBITDA and Adjusted EBITDA, which are non-GAAP financial
measures. The reconciliation from GAAP to these non-GAAP financial
measures is provided at the end of this earnings release.
Operating Results — Third Quarter Fiscal 2023 Compared to
Third Quarter Fiscal 2022
During the third quarter of fiscal 2023, net sales increased
$15.5 million, or 5.8%, to
$281.8 million, compared to the third
quarter of fiscal 2022, due to an $11.7
million increase in comparable store sales and a
$3.8 million increase in new store
sales. Daily average comparable store sales increased 4.4% in the
third quarter of fiscal 2023, comprised of a 2.4% increase in daily
average transaction size and a 1.9% increase in daily average
transaction count. The increase in net sales was driven by
transaction count, retail price increases, new store sales, and
marketing initiatives including market-specific campaigns and
{N}power® loyalty program offers that drove customer
engagement.
Gross profit during the third quarter of fiscal 2023 increased
$7.8 million, or 10.6%, to
$81.4 million, compared to
$73.6 million in the third quarter of
fiscal 2022. Gross profit reflects earnings after product and store
occupancy costs. Gross margin increased 130 basis points to 28.9%
during the third quarter of fiscal 2023, compared to 27.6% in the
third quarter of fiscal 2022. The increase in gross margin was
driven by higher product margin attributed to effective pricing and
promotions.
Store expenses during the third quarter of fiscal 2023 increased
$2.5 million, or 4.2%, to
$62.6 million. Store expenses as a
percentage of net sales were 22.2% during the third quarter of
fiscal 2023, down from 22.6% in the third quarter of fiscal 2022.
The decrease in store expenses as a percentage of net sales was
primarily driven by expense leverage on sales, partially offset by
higher labor expense as a result of increased wage rates.
Administrative expenses during the third quarter of fiscal 2023
increased $1.8 million, or 24.8%, to
$9.3 million, primarily driven by
higher compensation expense, software expense and technology
amortization. Administrative expenses as a percentage of net sales
were 3.3% and 2.8% for the third quarters of fiscal 2023 and 2022,
respectively.
Operating income for the third quarter of fiscal 2023 was
$9.1 million, compared to
$5.7 million in the third quarter of
fiscal 2022. Operating margin during the third quarter of fiscal
2023 was 3.2%, compared to 2.1% in the third quarter of fiscal
2022.
The effective income tax rate was 14.1% and 22.1% for the third
quarter of fiscal 2023 and 2022, respectively. The decrease in the
effective income tax rate was primarily attributable to increased
food donation deductions recorded during the third quarter of
fiscal 2023.
Net income for the third quarter of fiscal 2023 was $7.1 million, or $0.31 diluted earnings per share, compared to net
income of $3.9 million, or
$0.17 diluted earnings per share, for
the third quarter of fiscal 2022.
Adjusted EBITDA for the third quarter of fiscal 2023 increased
28.2% to $16.7 million, compared to
$13.0 million in the third quarter of
fiscal 2022.
Operating Results — First Nine Months Fiscal 2023 Compared to
First Nine Months Fiscal 2022
During the first nine months of fiscal 2023, net sales increased
$30.1 million, or 3.7%, to
$845.5 million, compared to the first
nine months of fiscal 2022, due to a $20.4
million increase in comparable store sales and an
$11.5 million increase in new store
sales, partially offset by a $1.8
million decrease in net sales related to store closures.
Daily average comparable store sales increased 2.5% in the first
nine months of fiscal 2023, and was comprised of a 1.4% increase in
daily average transaction size and a 1.1% increase in daily average
transaction count. The increase in net sales was primarily driven
by transaction count, retail price increases, new store sales and
marketing initiatives, partially offset by a moderation of the
pandemic trends experienced in the first six months of fiscal
2022.
Gross profit during the first nine months of fiscal 2023
increased $13.5 million, or 5.9%, to
$242.6 million. Gross profit reflects
earnings after product and occupancy expenses. Gross margin
increased to 28.7% during the first nine months of fiscal 2023,
compared to 28.1% in the first nine months of fiscal 2022. The
increase in gross margin was driven by higher product margin
partially offset by higher shrink expense.
Store expenses during the first nine months of fiscal 2023
increased $12.4 million, or 6.9%, to
$191.4 million. Store expenses as a
percentage of net sales were 22.6% during the first nine months of
fiscal 2023, up from 22.0% in the first nine months of fiscal 2022.
The increase in store expenses as a percentage of net sales
reflects higher labor expense as a result of increased wage rates
and an impairment charge related to a store closure.
Administrative expenses during the first nine months of fiscal
2023 increased $3.2 million, or
14.1%, to $26.2 million. The increase
in administrative expenses was primarily driven by higher
compensation expense, technology amortization and software expense.
Administrative expenses as a percentage of net sales were 3.1%
during the first nine months of fiscal 2023, up from 2.8% in the
first nine months of fiscal 2022.
Operating income for the first nine months of fiscal 2023 was
$23.9 million, compared to
$26.5 million in the first nine
months of fiscal 2022. Operating margin during the first nine
months of fiscal 2023 was 2.8%, compared to 3.3% in the first nine
months of fiscal 2022.
The effective income tax rate was 19.1% and 22.7% for the nine
months of fiscal 2023 and 2022, respectively. The decrease in the
effective income tax rate was primarily attributable to increased
food donation deductions recorded during the third quarter of
fiscal 2023.
Net income for the first nine months of fiscal 2023 was
$17.4 million, or $0.76 diluted earnings per share, compared to net
income of $19.2 million, or
$0.84 diluted earnings per share for
the first nine months of fiscal 2022.
Adjusted EBITDA for the first nine months of fiscal 2023 was
$47.3 million, compared to
$48.6 million in the first nine
months of fiscal 2022.
Balance Sheet and Cash Flow
As of June 30, 2023, the Company
had $8.6 million in cash and cash
equivalents, no outstanding borrowings on its $50.0 million revolving credit facility, and
$9.7 million outstanding on its term
loan facility.
During the first nine months of fiscal 2023, the Company
generated $36.2 million in cash from
operations and invested $24.3 million
in net capital expenditures, primarily for new and relocated
stores.
Dividend Announcement
Today, the Company announced the declaration of a quarterly cash
dividend of $0.10 per common share.
The dividend will be paid on September 13,
2023 to stockholders of record at the close of business on
August 28, 2023.
Growth and Development
The Company ended the third quarter of fiscal 2023 with 164
stores in 21 states. As of August 3,
2023, the Company has signed leases for an additional five
new stores planned to open in fiscal years 2023 and beyond.
Fiscal 2023 Outlook
The Company is raising its fiscal 2023 outlook for comparable
store sales and diluted earnings per share based upon year-to-date
performance and current trends. The Company is also refining its
outlook for the number of new stores and relocations/remodels. The
outlook reflects recent results, current operating trends, consumer
trends, and the uncertainty of the economic environment, including
inflationary factors. The Company now expects:
|
Fiscal
2023 Outlook
|
Number of new
stores
|
4
|
Number of
relocations/remodels
|
3
|
Daily average
comparable store sales growth
|
2.0% to 3.0%
|
Diluted earnings per
share
|
$0.86 to
$0.94
|
|
|
Capital expenditures
(in millions)
|
$28 to $35
|
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) or
1-412-902-4289 (International). The conference ID is "Natural
Grocers Q3 FY 2023 Earnings Call." A simultaneous audio webcast
will be available at http://Investors.NaturalGrocers.com and
archived for a minimum of 20 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, body
care products and dietary supplements. The products sold by Natural
Grocers must meet strict quality guidelines and 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, and free-range eggs. Natural
Grocers' flexible smaller-store format allows it to offer
affordable prices in a shopper-friendly, clean and convenient
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 164 stores in 21 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 management's
current expectations and are subject to uncertainty and changes in
circumstances. All statements that are not statements of historical
fact are forward-looking statements. Actual results could differ
materially from these expectations due to changes in global,
national, regional or local political, economic, inflationary,
deflationary, recessionary, business, interest rates, labor market,
competitive, market, regulatory and other factors, and other risks
detailed in the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 2022 (the 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 publicly 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.
Investor Contact:
Reed Anderson, ICR, 646-277-1260,
reed.anderson@icrinc.com
NATURAL GROCERS BY
VITAMIN COTTAGE, INC.
Consolidated
Statements of Income
(Unaudited)
(Dollars in
thousands, except per share data)
|
|
|
|
|
|
Three months
ended
June 30,
|
|
Nine months
ended
June 30,
|
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
Net sales
|
|
$
|
281,791
|
|
266,309
|
|
845,493
|
|
815,419
|
|
Cost of goods sold and
occupancy costs
|
|
200,401
|
|
192,750
|
|
602,907
|
|
586,341
|
|
Gross
profit
|
|
81,390
|
|
73,559
|
|
242,586
|
|
229,078
|
|
Store
expenses
|
|
62,631
|
|
60,124
|
|
191,419
|
|
179,065
|
|
Administrative
expenses
|
|
9,308
|
|
7,459
|
|
26,166
|
|
22,924
|
|
Pre-opening
expenses
|
|
367
|
|
325
|
|
1,069
|
|
550
|
|
Operating
income
|
|
9,084
|
|
5,651
|
|
23,932
|
|
26,539
|
|
Interest expense,
net
|
|
(848)
|
|
(603)
|
|
(2,478)
|
|
(1,692)
|
|
Income before income
taxes
|
|
8,236
|
|
5,048
|
|
21,454
|
|
24,847
|
|
Provision for income
taxes
|
|
(1,164)
|
|
(1,115)
|
|
(4,091)
|
|
(5,642)
|
|
Net income
|
|
$
|
7,072
|
|
3,933
|
|
17,363
|
|
19,205
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share of
common stock:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.31
|
|
0.17
|
|
0.76
|
|
0.85
|
|
Diluted
|
|
$
|
0.31
|
|
0.17
|
|
0.76
|
|
0.84
|
|
Weighted average number
of shares of common stock outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
22,734,375
|
|
22,676,882
|
|
22,722,712
|
|
22,659,042
|
|
Diluted
|
|
22,887,923
|
|
22,854,754
|
|
22,825,343
|
|
22,812,692
|
|
NATURAL GROCERS BY
VITAMIN COTTAGE, INC.
Consolidated Balance
Sheets
(Unaudited)
(Dollars in
thousands, except per share data)
|
|
|
|
|
|
June
30,
2023
|
|
September 30,
2022
|
|
Assets
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
8,576
|
|
12,039
|
|
Accounts receivable,
net
|
|
8,873
|
|
10,496
|
|
Merchandise
inventory
|
|
116,709
|
|
113,756
|
|
Prepaid expenses and
other current assets
|
|
6,071
|
|
4,369
|
|
Total current
assets
|
|
140,229
|
|
140,660
|
|
Property and equipment,
net
|
|
162,312
|
|
157,179
|
|
Other
assets:
|
|
|
|
|
|
Operating lease
assets, net
|
|
292,779
|
|
307,132
|
|
Finance lease assets,
net
|
|
46,236
|
|
43,554
|
|
Deposits and other
assets
|
|
406
|
|
452
|
|
Goodwill and other
intangible assets, net
|
|
14,134
|
|
14,131
|
|
Total other
assets
|
|
353,555
|
|
365,269
|
|
Total
assets
|
|
$
|
656,096
|
|
663,108
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable
|
|
$
|
72,755
|
|
71,283
|
|
Accrued
expenses
|
|
22,938
|
|
26,737
|
|
Term loan facility,
current portion
|
|
1,750
|
|
1,750
|
|
Operating lease
obligations, current portion
|
|
34,839
|
|
34,735
|
|
Finance lease
obligations, current portion
|
|
3,552
|
|
3,223
|
|
Total current
liabilities
|
|
135,834
|
|
137,728
|
|
Long-term
liabilities:
|
|
|
|
|
|
Term loan facility,
net of current portion
|
|
7,938
|
|
13,938
|
|
Operating lease
obligations, net of current portion
|
|
281,189
|
|
295,064
|
|
Finance lease
obligations, net of current portion
|
|
48,066
|
|
44,664
|
|
Deferred income tax
liabilities, net
|
|
16,133
|
|
15,902
|
|
Total long-term
liabilities
|
|
353,326
|
|
369,568
|
|
Total
liabilities
|
|
489,160
|
|
507,296
|
|
Stockholders'
equity:
|
|
|
|
|
|
Common stock, $0.001
par value, 50,000,000 shares authorized, 22,743,895 and
22,690,188 shares issued at June 30, 2023 and September 30, 2022,
respectively, and
22,736,344 and 22,690,188 shares outstanding at June 30, 2023 and
September 30, 2022,
respectively
|
|
23
|
|
23
|
|
Additional paid-in
capital
|
|
58,725
|
|
58,072
|
|
Retained
earnings
|
|
108,264
|
|
97,717
|
|
Common stock in
treasury at cost, 7,551 shares at June 30, 2023
|
|
(76)
|
|
—
|
|
Total stockholders'
equity
|
|
166,936
|
|
155,812
|
|
Total liabilities and
stockholders' equity
|
|
$
|
656,096
|
|
663,108
|
|
NATURAL GROCERS BY
VITAMIN COTTAGE, INC.
Consolidated
Statements of Cash Flows
(Unaudited)
(Dollars in
thousands)
|
|
|
|
|
|
Nine months ended
June 30,
|
|
|
|
2023
|
|
2022
|
|
Operating
activities:
|
|
|
|
|
|
Net income
|
|
$
|
17,363
|
|
19,205
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
|
21,426
|
|
21,088
|
|
Impairment of
long-lived assets
|
|
930
|
|
95
|
|
Loss on disposal of
property and equipment
|
|
104
|
|
57
|
|
Share-based
compensation
|
|
1,046
|
|
887
|
|
Deferred income tax
expense
|
|
231
|
|
274
|
|
Non-cash interest
expense
|
|
14
|
|
17
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
Decrease (increase)
in:
|
|
|
|
|
|
Accounts receivable,
net
|
|
2,188
|
|
(298)
|
|
Merchandise
inventory
|
|
(2,953)
|
|
(10,783)
|
|
Prepaid expenses and
other assets
|
|
(569)
|
|
(1,088)
|
|
Income tax
receivable
|
|
(1,111)
|
|
(328)
|
|
Operating lease
assets
|
|
24,730
|
|
23,795
|
|
(Decrease) increase
in:
|
|
|
|
|
|
Operating lease
liabilities
|
|
(25,643)
|
|
(20,974)
|
|
Accounts
payable
|
|
2,202
|
|
1,696
|
|
Accrued
expenses
|
|
(3,799)
|
|
(4,138)
|
|
Net cash provided by
operating activities
|
|
36,159
|
|
29,505
|
|
Investing
activities:
|
|
|
|
|
|
Acquisition of
property and equipment
|
|
(23,241)
|
|
(15,925)
|
|
Acquisition of other
intangibles
|
|
(1,133)
|
|
(2,293)
|
|
Proceeds from sale of
property and equipment
|
|
76
|
|
16
|
|
Proceeds from property
insurance settlements
|
|
—
|
|
184
|
|
Net cash used in
investing activities
|
|
(24,298)
|
|
(18,018)
|
|
Financing
activities:
|
|
|
|
|
|
Borrowings under
revolving facility
|
|
379,700
|
|
6,100
|
|
Repayments under
revolving facility
|
|
(379,700)
|
|
(6,100)
|
|
Repayments under term
loan facility
|
|
(6,000)
|
|
(6,000)
|
|
Finance lease
obligation payments
|
|
(2,039)
|
|
(2,059)
|
|
Dividends to
shareholders
|
|
(6,816)
|
|
(6,797)
|
|
Repurchase of common
stock
|
|
(181)
|
|
—
|
|
Payments on
withholding tax for restricted stock unit vesting
|
|
(288)
|
|
(393)
|
|
Net cash used in
financing activities
|
|
(15,324)
|
|
(15,249)
|
|
Net decrease in cash
and cash equivalents
|
|
(3,463)
|
|
(3,762)
|
|
Cash and cash
equivalents, beginning of period
|
|
12,039
|
|
23,678
|
|
Cash and cash
equivalents, end of period
|
|
$
|
8,576
|
|
19,916
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
Cash paid for
interest
|
|
$
|
933
|
|
418
|
|
Cash paid for interest
on finance lease obligations, net of capitalized interest
of
$183 and
$222, respectively
|
|
1,542
|
|
1,340
|
|
Income taxes
paid
|
|
5,006
|
|
5,315
|
|
Supplemental
disclosures of non-cash investing and financing
activities:
|
|
|
|
|
|
Acquisition of
property and equipment not yet paid
|
|
$
|
6,246
|
|
3,642
|
|
Acquisition of other
intangibles not yet paid
|
|
|
—
|
|
231
|
|
Property acquired
through operating lease obligations
|
|
|
11,307
|
|
19,645
|
|
Property acquired
through finance lease obligations
|
|
|
5,771
|
|
9,726
|
|
NATURAL GROCERS BY
VITAMIN COTTAGE, INC.
|
Non-GAAP Financial
Measures
|
(Unaudited)
|
EBITDA and Adjusted EBITDA
EBITDA and Adjusted EBITDA are not measures of financial
performance under GAAP. We define EBITDA as net income before
interest expense, provision for income taxes, depreciation and
amortization. We define Adjusted EBITDA as EBITDA as adjusted to
exclude the effects of certain income and expense items that
management believes make it more difficult to assess the Company's
actual operating performance, including certain items such as
impairment charges, store closing costs, share-based compensation
and non-recurring items.
The following table reconciles net income to EBITDA and Adjusted
EBITDA, dollars in thousands:
|
|
Three months
ended
June 30,
|
|
Nine months
ended
June 30,
|
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
Net income
|
|
$
|
7,072
|
|
3,933
|
|
17,363
|
|
19,205
|
|
Interest expense,
net
|
|
848
|
|
603
|
|
2,478
|
|
1,692
|
|
Provision for income
taxes
|
|
1,164
|
|
1,115
|
|
4,091
|
|
5,642
|
|
Depreciation and
amortization
|
|
7,210
|
|
7,068
|
|
21,426
|
|
21,088
|
|
EBITDA
|
|
|
16,294
|
|
12,719
|
|
45,358
|
|
47,627
|
|
Impairment of
long-lived assets
|
|
|
59
|
|
—
|
|
930
|
|
95
|
|
Share-based
compensation
|
|
333
|
|
297
|
|
1,046
|
|
887
|
|
Adjusted
EBITDA
|
|
$
|
16,686
|
|
13,016
|
|
47,334
|
|
48,609
|
|
EBITDA increased 28.1% to $16.3
million for the three months ended June 30, 2023 compared to $12.7 million for the three months ended
June 30, 2022. EBITDA decreased 4.8%
to $45.4 million for the nine months
ended June 30, 2023 compared to
$47.6 million for the nine months
ended June 30, 2022. EBITDA as a
percentage of net sales was 5.8% and 4.8% for the three months
ended June 30, 2023 and 2022,
respectively. EBITDA as a percentage of net sales was 5.4% and 5.8%
for the nine months ended June 30,
2023 and 2022, respectively.
Adjusted EBITDA increased 28.2% to $16.7
million for the three months ended June 30, 2023 compared to $13.0 million for the three months ended
June 30, 2022. Adjusted EBITDA
decreased 2.6% to $47.3 million for
the nine months ended June 30, 2023
compared to $48.6 million for the
nine months ended June 30, 2022.
Adjusted EBITDA as a percentage of net sales was 5.9% and 4.9% for
the three months ended June 30, 2023
and 2022, respectively. Adjusted EBITDA as a percentage of net
sales was 5.6% and 6.0% for the nine months ended June 30, 2023 and 2022, respectively.
Management believes some investors' understanding of our
performance is enhanced by including EBITDA and Adjusted EBITDA,
which are non-GAAP financial measures. We believe EBITDA and
Adjusted EBITDA provide additional information about: (i) our
operating performance, because they assist us in comparing the
operating performance of our stores on a consistent basis, as they
remove 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.
Furthermore, management believes some investors use EBITDA and
Adjusted EBITDA as supplemental measures to evaluate the overall
operating performance of companies in our industry. Management
believes that some investors' understanding of our performance is
enhanced by including these non-GAAP financial measures as a
reasonable basis for comparing our ongoing results of operations.
By providing these non-GAAP financial measures, together with a
reconciliation from net income, we believe we are enhancing
investors' understanding of our business and our results of
operations, as well as assisting investors in evaluating how well
we are executing our strategic initiatives.
Our competitors may define EBITDA and Adjusted EBITDA
differently, and as a result, our measures of EBITDA and Adjusted
EBITDA may not be directly comparable to EBITDA and Adjusted EBITDA
of other companies. Items excluded from EBITDA and Adjusted EBITDA
are significant components in understanding and assessing financial
performance. EBITDA and Adjusted EBITDA are supplemental measures
of operating performance that do 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 and Adjusted EBITDA have limitations as
analytical tools, and should not be considered in isolation, or as
a substitute for analysis of our results as reported under GAAP.
Some of the limitations are:
- EBITDA and Adjusted EBITDA do not reflect our cash
expenditures, or future requirements for capital expenditures or
contractual commitments;
- EBITDA and Adjusted EBITDA do not reflect changes in, or cash
requirements for, our working capital needs;
- EBITDA and Adjusted EBITDA do not reflect any depreciation or
interest expense for leases classified as finance leases;
- EBITDA and Adjusted EBITDA do not reflect the interest expense,
or the cash requirements necessary to service interest or principal
payments on our debt;
- Adjusted EBITDA does not reflect share-based compensation,
impairment charges, and store closing costs;
- EBITDA and Adjusted EBITDA do 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 and Adjusted EBITDA do not
reflect any cash requirements for such replacements.
Due to these limitations, EBITDA and Adjusted EBITDA should not
be considered as measures 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 and Adjusted EBITDA as supplemental information.
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SOURCE Natural Grocers by Vitamin Cottage, Inc.