Zumiez Inc. Announces Fiscal 2012 Second Quarter Results

LYNNWOOD, WA--(Marketwire -08/30/12)- Zumiez Inc. (ZUMZ) a leading specialty retailer of action sports related apparel, footwear, equipment and accessories, today reported results for the second quarter ended July 28, 2012.

Total net sales for the second quarter ended July 28, 2012 (13 weeks) increased 20.4% to $135.1 million from $112.2 million in the quarter ended July 30, 2011 (13 weeks). The second quarter results include our acquisition of Blue Tomato which closed on July 4, 2012. Comparable store sales for the second quarter of fiscal 2012 increased 9.5% on top of a comparable store sales increase of 7.5% in the second quarter of fiscal 2011. Net income in the second quarter of fiscal 2012 was $2.1 million, or $0.07 per diluted share, compared to net income of $2.6 million, or $0.08 per diluted share, in the second quarter of the prior fiscal year. The results for fiscal 2012 include approximately $2.5 million, or $0.07 per diluted share, of Blue Tomato acquisition related costs and operations, and approximately $1.3 million, or $0.03 per diluted share, of costs associated with the relocation the Company's ecommerce fulfillment center to Edwardsville, Kansas and its corporate offices to Lynnwood, Washington from Everett, Washington.

Total net sales for the six months (26 weeks) ended July 28, 2012 increased 21.5% to $265.0 million from $218.1 million reported for the six months (26 weeks) ended July 30, 2011. Comparable store sales increased 11.1% in the first six months of fiscal 2012 on top of 9.9% for the first six months of 2011.

The Company reported net income of $6.6 million or $0.21 per diluted share in the first six months of fiscal 2012 compared to net income for the first six months of the prior fiscal year of $4.5 million or $0.14 per diluted share. Results for the first six months of fiscal 2012 include approximately $2.8 million, or $0.08 per diluted share, of Blue Tomato acquisition related costs and operations, approximately $1.6 million, or $0.03 per diluted share, of costs associated with the relocation the Company's ecommerce fulfillment center to Edwardsville, Kansas and corporate offices to Lynnwood, Washington from Everett, Washington.

At July 28, 2012, the Company had cash and current marketable securities of $96.8 million, compared to cash and current marketable securities of $131.9 million at July 30, 2011. The decrease in cash and current marketable securities is a result of the acquisition of Blue Tomato and was funded by the Company's cash balance, offset by cash generated through operations.

Rick Brooks, Chief Executive Officer of Zumiez Inc., stated, "The second quarter was a productive and transformational period for our Company. We continued to expand our North American footprint while at the same time driving a high single digit comparable sales gain. Our teams continue to execute at a very high level to ensure that our merchandise assortments are relevant and that the shopping experience is unique and differentiated regardless of what channel consumers chose to engage with us. We also took a significant step in our long-term plan to create a global action sports business with the acquisition of Blue Tomato. With established leadership in North America and Europe, we are focused on leveraging our combined expertise to take full advantage of the many expansion opportunities that exist in each of our markets."

August 2012 Sales
Total net sales for the four-week period ended August 25, 2012 increased 14.1% to $75.2 million, compared to $65.9 million for the four-week period ended August 27, 2011. The Company's comparable store sales increased 3.7% for the four-week period on top of a comparable store sales increase of 4.3% in the year ago period.

Fiscal 2012 Third Quarter Outlook
The Company is introducing guidance for the three months ending October 27, 2012. Net sales are projected to be in the range of $181 to $185 million resulting in net income per diluted share of approximately $0.42 to $0.45. This guidance is based on an anticipated comparable store sales increase in the 3% to 5% range for the third quarter of fiscal 2012 and reflects a full quarter of operations for Blue Tomato, including approximately $2.5 million, or $0.06 per diluted share, in estimated future incentive payments and the amortization of intangible assets, as well as costs of approximately $1.4 million, or $0.03 per diluted share, associated with the step-up in inventory to estimated fair value in conjunction with our acquisition of Blue Tomato. The Company currently intends to open approximately 50 new stores in fiscal 2012, including up to 10 stores in Canada, with an opening cadence similar to fiscal 2011. The Company does not anticipate opening a material number of stores in Europe in the current fiscal year.

A conference call will be held today to discuss second quarter fiscal 2012 results and will be webcast at 5:00 p.m. ET on http://ir.zumiez.com. Participants may also dial (617)-614-3523 followed by the conference identification code of 54110183.

About Zumiez Inc.

Zumiez is a leading multi-channel specialty retailer of action sports related apparel, footwear, equipment and accessories, focusing on skateboarding, snowboarding, surfing, motocross and BMX for young men and women. As of August 25, 2012 we operated 486 stores, 463 in the United States, 18 in Canada, and 5 in Europe. In the United States and Canada we operate under the name Zumiez and in Europe we operate under the name Blue Tomato. Additionally, we operate ecommerce web sites under www.zumiez.com and www.blue-tomato.com.

Safe Harbor Statement

Certain statements in this press release and oral statements relating thereto made from time to time by representatives of the Company may constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. These statements include, without limitation, predictions and guidance relating to the Company's future financial performance, brand and product category diversity, ability to adjust product mix, integration of acquired businesses, growing customer demand for our products and new store openings. In some cases, you can identify forward-looking statements by terminology such as, "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," or the negative of these terms or other comparable terminology. These forward-looking statements are based on management's current expectations but they involve a number of risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in the forward-looking statements as a result of risks and uncertainties, which include, without limitation, those described in the Company's quarterly report on Form 10-Q for the quarter ended April 28, 2012 as filed with the Securities and Exchange Commission and available at www.sec.gov. You are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements speak only as of the date on which they are made and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

  ZUMIEZ INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) Three Months Ended ------------------------------------------ July 28, % of July 30, % of 2012 Sales 2011 Sales ---------- --------- ---------- --------- Net sales $ 135,066 100.0% $ 112,213 100.0% Cost of goods sold 88,641 65.6% 75,151 67.0% ---------- --------- ---------- --------- Gross profit 46,425 34.4% 37,062 33.0% Selling, general and administrative expenses 42,647 31.6% 33,512 29.8% ---------- --------- ---------- --------- Operating profit 3,778 2.8% 3,550 3.2% Interest income, net 427 0.3% 434 0.4% Other income, net 611 0.5% 3 0.0% ---------- --------- ---------- --------- Earnings before income taxes 4,816 3.6% 3,987 3.6% Provision for income taxes 2,730 2.1% 1,396 1.3% ---------- --------- ---------- --------- Net income $ 2,086 1.5% $ 2,591 2.3% ========== ========= ========== ========= Basic earnings per share $ 0.07 $ 0.08 ========== ========== Diluted earnings per share $ 0.07 $ 0.08 ========== ========== Weighted average shares used in computation of earnings per share: Basic 30,922 30,521 Diluted 31,460 31,081 ZUMIEZ INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) Six Months Ended ------------------------------------------ July 28, % of July 30, % of 2012 Sales 2011 Sales ---------- --------- ---------- --------- Net sales $ 264,965 100.0% $ 218,064 100.0% Cost of goods sold 176,439 66.6% 147,812 67.8% ---------- --------- ---------- --------- Gross profit 88,526 33.4% 70,252 32.2% Selling, general and administrative expenses 77,486 29.2% 64,150 29.4% ---------- --------- ---------- --------- Operating profit 11,040 4.2% 6,102 2.8% Interest income, net 917 0.3% 947 0.5% Other income, net 628 0.2% 58 0.0% ---------- --------- ---------- --------- Earnings before income taxes 12,585 4.7% 7,107 3.3% Provision for income taxes 5,972 2.2% 2,630 1.2% ---------- --------- ---------- --------- Net income $ 6,613 2.5% $ 4,477 2.1% ========== ========= ========== ========= Basic earnings per share $ 0.21 $ 0.15 ========== ========== Diluted earnings per share $ 0.21 $ 0.14 ========== ========== Weighted average shares used in computation of earnings per share: Basic 30,847 30,432 Diluted 31,439 31,072 ZUMIEZ INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) July 28, January 28, July 30, 2012 2012 2011 ----------- ------------ ------------ Assets (Unaudited) (Unaudited) Current assets Cash and cash equivalents $ 12,610 $ 14,779 $ 14,157 Marketable securities 84,212 158,019 117,744 Receivables 11,255 6,284 10,690 Income taxes receivable 747 - 1,894 Inventories 99,699 65,037 84,394 Prepaid expenses and other 9,909 7,907 7,669 Deferred tax assets 4,019 1,477 2,328 ----------- ------------ ------------ Total current assets 222,451 253,503 238,876 Fixed assets, net 111,411 89,478 83,713 Goodwill 59,547 13,154 13,154 Intangible assets, net 19,383 - - Long-term other assets 5,353 6,022 7,624 ----------- ------------ ------------ Total long-term assets 195,694 108,654 104,491 Total assets $ 418,145 $ 362,157 $ 343,367 =========== ============ ============ Liabilities and Shareholders' Equity Current liabilities Trade accounts payable $ 57,630 $ 21,743 $ 50,657 Accrued payroll and payroll taxes 7,637 9,062 6,074 Income taxes payable 1,257 5,835 - Deferred rent and tenant allowances 4,579 4,230 4,138 Other liabilities 18,566 14,706 12,611 ----------- ------------ ------------ Total current liabilities 89,669 55,576 73,480 Long-term deferred rent and tenant allowances 36,329 32,321 31,501 Long-term deferred tax liabilities 5,256 - - Long-term debt and other liabilities 4,454 1,983 1,899 ----------- ------------ ------------ Total long-term liabilities 46,039 34,304 33,400 ----------- ------------ ------------ Total liabilities 135,708 89,880 106,880 ----------- ------------ ------------ Commitments and contingencies Shareholders' equity Preferred stock, no par value, 20,000 shares authorized; none issued and outstanding - - - Common stock, no par value, 50,000 shares authorized; 31,353 shares issued and outstanding at July 28, 2012, 31,170 shares issued and outstanding at January 28, 2012 and 31,094 shares issued and outstanding at July 30, 2011 104,862 99,412 96,468 Accumulated other comprehensive (loss) income (1,768) 135 163 Retained earnings 179,343 172,730 139,856 ----------- ------------ ------------ Total shareholders' equity 282,437 272,277 236,487 ----------- ------------ ------------ Total liabilities and shareholders' equity $ 418,145 $ 362,157 $ 343,367 =========== ============ ============ ZUMIEZ INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six Months Ended -------------------------- July 28, July 30, 2012 2011 ------------ ------------ Cash flows from operating activities: Net income $ 6,613 $ 4,477 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and accretion 10,658 9,574 Deferred taxes (1,177) 1,511 Stock-based compensation expense 3,037 2,772 Excess tax benefit from stock-based compensation (2,065) (1,658) Lease termination costs 920 - Other (183) (78) Changes in operating assets and liabilities: Receivables (4,452) (4,410) Inventories (26,896) (28,073) Prepaid expenses and other (1,904) (413) Trade accounts payable 33,583 33,394 Accrued payroll and payroll taxes (2,156) (1,506) Income taxes payable (4,503) (4,674) Deferred rent and tenant allowances 4,158 4,341 Other liabilities (1,120) (3,995) ------------ ------------ Net cash provided by operating activities 14,513 11,262 ------------ ------------ Cash flows from investing activities: Additions to fixed assets (21,904) (9,959) Acquisitions, net of cash acquired (69,685) - Purchases of marketable securities and other investments (65,655) (72,572) Sales and maturities of marketable securities and other investments 138,555 71,358 ------------ ------------ Net cash used in investing activities (18,689) (11,173) ------------ ------------ Cash flows from financing activities: Payments on long-term debt (109) - Proceeds from exercise of stock-based compensation, net of withholding tax payments 347 996 Excess tax benefit from stock-based compensation 2,065 1,658 ------------ ------------ Net cash provided by financing activities 2,303 2,654 ------------ ------------ Effect of exchange rate changes on cash and cash equivalents (296) 57 Net (decrease) increase in cash and cash equivalents (2,169) 2,800 Cash and cash equivalents, beginning of period 14,779 11,357 ------------ ------------ Cash and cash equivalents, end of period $ 12,610 $ 14,157 ============ ============ Supplemental disclosure on cash flow information: Cash paid during the period for income taxes 11,624 5,789 Accrual for purchases of fixed assets 7,355 4,217