United Natural Foods, Inc. Announces Fourth Quarter and Full Year Fiscal 2013 Results

  United Natural Foods, Inc. Announces Fourth Quarter and Full Year Fiscal
  2013 Results

 Fiscal 2013 Net Sales Increased 15.8% Year-Over-Year to $6.06 Billion Fiscal
             2013 Operating Income Increased 19.6% Year-Over-Year

Business Wire

PROVIDENCE, R.I. -- September 12, 2013

United Natural Foods, Inc. (Nasdaq: UNFI) (the “Company”) today reported
financial results for the fiscal quarter and fiscal year ended August3, 2013.

Fourth Quarter Fiscal 2013 Highlights

  *Net sales increased 22.2%, or $298.7 million, to $1.64 billion compared to
    $1.34 billion in the same period last fiscal year. Adjusted for the
    additional week in the fourth quarter of fiscal 2013, net sales increased
    13.4% over the fourth quarter of fiscal 2012.
  *Gross margin increased 53 basis points from third quarter of fiscal 2013
  *Operating income increased 30.6% to $56.1 million compared to $43.0
    million in the same period last fiscal year
  *Net income increased 27.6% to $32.1 million compared to $25.1 million in
    the same period last fiscal year
  *Earnings per diluted share increased 27.5% to $0.65 compared to $0.51 in
    the same period last fiscal year

Fiscal Year 2013 Highlights

  *Net sales increased 15.8%, or $828.3 million, year-over-year to $6.06
    billion compared to $5.24 billion in fiscal 2012. Adjusted for the
    additional week in fiscal 2013, net sales increased 13.6% over fiscal
    2012.
  *Operating income increased 19.6% to $185.5 million compared to $155.2
    million in fiscal 2012
  *Net income increased 18.1% to $107.9 million compared to $91.3 million in
    fiscal 2012
  *Earnings per diluted share increased 17.2% to $2.18 compared to $1.86 in
    fiscal 2012

“UNFI crossed the $6 billion annual net sales mark, and most importantly
demonstrated real progress across all of our core strategies resulting in over
18% net income growth compared to the prior year,” said Steven Spinner,
President and Chief Executive Officer.

Net sales for the fourth quarter of fiscal 2013 increased 22.2% to $1.64
billion from $1.34 billion in fiscal 2012. Adjusted for net sales in the 53^rd
week of fiscal 2013 of $118.7 million, net sales increased 13.4% over fiscal
2012.

Gross margin was 17.3% for the fourth quarter of fiscal 2013, a 53 basis point
increase from the third quarter of fiscal 2013 and an 11 basis point increase
from gross margin of 17.2% for the fourth quarter of fiscal 2012. Gross margin
for the fourth quarter of fiscal 2013 increased due to improvements in
purchasing and logistics efficiencies, partially offset by a continued shift
in the Company’s customer mix to lower margin conventional supermarkets.

Total operating expenses were 13.9% as a percentage of net sales for the
fourth quarter of fiscal 2013, an 11 basis point decrease compared with the
fourth quarter of fiscal 2012. This improvement was driven by the Company’s
ongoing initiatives to enhance productivity and reduce operating expenses
throughout the organization. Total operating expenses increased $40.1 million
or 21.3%, to $228.4 million in the fourth quarter of fiscal 2013 as compared
to $188.3 million in the fourth quarter of fiscal 2012, primarily due to
higher sales volume.

Operating income as a percentage of net sales for the fourth quarter of fiscal
2013 increased 22 basis points to 3.4% compared to 3.2% for the fourth quarter
of fiscal 2012. Net income for the fourth quarter of fiscal 2013 increased
$6.9 million, or 27.6%, to $32.1 million, or $0.65 per diluted share, from
$25.1 million, or $0.51 per diluted share, for the fourth quarter of fiscal
2012.

Fiscal Year 2013 Summary

Net sales for fiscal 2013 totaled $6.06 billion, a 15.8% increase compared to
fiscal 2012. The additional week in fiscal 2013 contributed approximately
$118.7 million, or 2.2%, to the Company’s overall fiscal 2013 net sales
growth. Excluding the 53^rd week, net sales increased 13.6% over fiscal 2012.

Gross margin for the period was 16.9%, a 59 basis point decrease versus the
prior fiscal year. The decline in gross margin was attributed to increased
inbound freight costs throughout fiscal 2013 as well as the Company’s focus on
maintaining higher service levels despite greater supplier out of stocks. The
continued shift in customer mix towards the supernatural and conventional
supermarket channels, and to customers within the conventional supermarket
channel who are migrating to limited service programs, also negatively
impacted gross margin in fiscal 2013 compared to fiscal 2012. This decrease
was partially offset by technology initiatives in the second half of fiscal
2013 which provided tools for the Company to maximize purchase incentives
while also more effectively managing inventory levels to keep pace with
demand.

Total operating expenses for fiscal 2013 were 13.8% of net sales, which was 69
basis points lower than in fiscal 2012. Total operating expenses increased
$78.7 million, or 10.3%, to $839.6 million, compared to $760.8 million for
fiscal 2012. Total operating expenses for fiscal 2013 included approximately
$6.3 million in expenses related to the labor action at the Company’s Auburn,
Washington facility and $1.6 million related to the termination of a licensing
agreement and the write-off of the associated intangible asset. Total
operating expenses for fiscal 2012 included $5.1 million in expenses related
to the restructuring and divestiture of the Company’s conventional non-foods
and general merchandise lines of business and $1.6 million in expenses related
to the onboarding of a national customer. Excluding the $1.6 million of
expenses related to the write-off of an intangible asset in fiscal 2013 and
the $6.7 million of expenses related to the restructuring of the Company’s
conventional non-foods and general merchandise lines of business and the
onboarding of a new national customer in fiscal 2012, operating expenses as a
percentage of net sales were 13.8% for fiscal 2013, a decrease of 58 basis
points compared to fiscal 2012. Operating income as a percentage of net sales
was 3.1% for fiscal 2013, an increase of 10 basis points over fiscal 2012.

Net income for fiscal 2013 increased $16.5 million, or 18.1%, to $107.9
million, or $2.18 per diluted share, from $91.3 million, or $1.86 per diluted
share, for fiscal 2012. Excluding $6.5 million of expenses related to the
write-off of an intangible asset and the settlement of a multi-state unclaimed
property audit in fiscal 2013 and $6.7 million of expenses related to the
restructuring of the Company’s conventional non-foods and general merchandise
lines of business and the onboarding of a new national customer in fiscal
2012, earnings per diluted share increased 13.4% to $2.20 for fiscal 2013,
from $1.94 for fiscal 2012.

“Continued expansion of our distribution network, technology improvements and
coming together as one company will be important strategies for continuing to
deliver long term growth. We also remain extremely committed to our culture of
giving and reducing our carbon footprint,” concluded Mr. Spinner.

Introduction of Fiscal 2014 Guidance

UNFI provided its financial outlook for fiscal 2014, ending August 2, 2014,
which is a 52-week fiscal year compared with the 53-week fiscal 2013. For
fiscal 2014, the Company expects net sales in the range of approximately $6.65
to $6.78 billion, an increase of approximately 9.7% to 11.8% over fiscal 2013.
Adjusting for the 53^rd week in fiscal 2013, sales growth for fiscal 2014 is
in the range of approximately 11.8% to 14.0%. The Company estimates GAAP
earnings per diluted share for fiscal 2014 in the range of approximately $2.40
to $2.50 per share, an increase of approximately 10.1% to 14.7% over fiscal
2013 GAAP earnings per diluted share of $2.18.

Conference Call & Webcast

The Company’s fourth quarter and full year fiscal 2013 conference call and
audio webcast will be held today, Thursday, September12, 2013 at 4:30 p.m.
EDT. The audio webcast of the conference call will be available to the public,
on a listen-only basis, via the Internet at the Investors section of the
Company’s website at www.unfi.com. The online archive of the webcast will be
available on the Company’s website for 30 days.

About United Natural Foods

United Natural Foods, Inc. (http://www.unfi.com) carries and distributes more
than 65,000 products to more than 27,000 customer locations throughout the
United States and Canada. The Company serves a wide variety of retail formats
including conventional supermarket chains, natural product superstores,
independent retail operators and the food service channel. United Natural
Foods, Inc. was ranked by Fortune in 2006 - 2010 and 2012 as one of its “Most
Admired Companies,” winner of the Supermarket News 2008 Sustainability
Excellence Award, recognized by the Nutrition Business Journal for its 2009
Environment and Sustainability Award and chosen by Food Logistics Magazine as
one of its 2012 Top 20 Green Providers.

For more information on United Natural Foods, Inc., visit the Company’s
website at www.unfi.com.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of
1995: Statements in this press release regarding the Company’s business that
are not historical facts are “forward-looking statements” that involve risks
and uncertainties and are based on current expectations and management
estimates; actual results may differ materially. The risks and uncertainties
which could impact these statements are described in the Company’s filings
under the Securities Exchange Act of 1934, as amended, including its annual
report on Form 10-K filed with the Securities and Exchange Commission (“SEC”)
on September 26, 2012, its quarterly reports on Form 10-Q filed with the SEC
on December 6, 2012, March 6, 2013 and June 6, 3013, and other filings the
Company makes with the SEC, and include, but are not limited to, the Company’s
dependence on principal customers; the Company’s sensitivity to general
economic conditions, including the current economic environment, changes in
disposable income levels and consumer spending trends; the Company’s ability
to reduce its expenses in amounts sufficient to offset its increased focus on
sales to conventional supermarkets and the resulting lower gross margins on
the sales; the Company’s reliance on the continued growth in sales of natural
and organic foods and non-food products in comparison to conventional
products; the Company’s ability to timely and successfully deploy its new
warehouse management system throughout its distribution centers; increased
fuel costs; the Company’s sensitivity to inflationary and deflationary
pressures; the relatively low margins and economic sensitivity of the
Company’s business; the potential for disruptions in the Company’s supply
chain by circumstances beyond its control; the risk of interruption of
supplies due to lack of long-term contracts, severe weather, work stoppages or
otherwise; the ability to identify and successfully complete acquisitions of
other natural, organic and specialty food and non-food products distributors;
and management’s allocation of capital and the timing of capital expenditures.
Any forward-looking statements are made pursuant to the Private Securities
Litigation Reform Act of 1995 and, as such, speak only as of the date made.
The Company is not undertaking to update any information in the foregoing
reports until the effective date of its future reports required by applicable
laws. Any projections of future results of operations are based on a number of
assumptions, many of which are outside the Company’s control and should not be
construed in any manner as a guarantee that such results will in fact occur.
These projections are subject to change and could differ materially from final
reported results. The Company may from time to time update these publicly
announced projections, but it is not obligated to do so.

Non-GAAP Financial Measures: To supplement its financial statements presented
on a generally accepted accounting principles in the United States (“GAAP”)
basis, the Company has included in this press release non-GAAP financial
measures (including net sales, operating expenses, operating income, net
income and earnings per diluted share) in the case of net sales excluding the
impact of a fifty-third week in fiscal 2013 and in each other case excluding
certain unusual items as described in more detail within this press release.
The reconciliations of these non-GAAP financial measures to the comparable
GAAP financial measures are presented in the tables appearing below labeled
“Consolidated Statements of Income with Adjustments” for the fiscal year ended
August3, 2013 and July28, 2012. The presentation of these non-GAAP financial
measures is not intended to be considered in isolation or as a substitute for
any measure prepared in accordance with GAAP. The Company believes that
presenting its net sales, operating expenses, operating income, net income and
earnings per diluted share for the fiscal year ended August3, 2013 and
July28, 2012 excluding these items facilitates making period-to-period
comparisons and is a meaningful indication of its operating performance. The
Company’s management utilizes this non-GAAP financial information to compare
the Company’s operating performance during the 2013 fiscal year versus the
comparable periods in the 2012 fiscal year and to internally prepared
projections.


UNITED NATURAL FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)

                Three months ended             Fiscal year ended
                 August 3,      July 28,        August 3,      July 28,
                 2013            2012            2013            2012
                                                                 
Net sales        $ 1,642,398     $ 1,343,660     $ 6,064,355     $ 5,236,021
Cost of sales     1,357,945     1,112,448     5,039,279     4,320,018 
Gross profit       284,453         231,212         1,025,076       916,003
Operating          228,362         188,414         837,953         755,744
expenses
Restructuring
and asset
impairment        —             (154      )    1,629         5,101     
expenses
(recoveries)
Total
operating         228,362       188,260       839,582       760,845   
expenses
Operating         56,091        42,952        185,494       155,158   
income
Other expense
(income):
Interest           1,955           1,168           5,897           4,734
expense
Interest           (158      )     (150      )     (632      )     (715      )
income
Other, net        1,010         393           6,113         356       
Total other       2,807         1,411         11,378        4,375     
expense, net
Income before      53,284          41,541          174,116         150,783
income taxes
Provision for     21,207        16,399        66,262        59,441    
income taxes
Net income       $ 32,077       $ 25,142       $ 107,854      $ 91,342    
                                                                 
Basic per
share data:
Net income       $ 0.65         $ 0.51         $ 2.19         $ 1.87      
Weighted
average basic     49,320        48,951        49,217        48,766    
shares of
common stock
Diluted per
share data:
Net income       $ 0.65         $ 0.51         $ 2.18         $ 1.86      
Weighted
average
diluted shares    49,646        49,368        49,509        49,100    
of common
stock



UNITED NATURAL FOODS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except per share data)

                                                August 3,      July 28,
                                                 2013            2012
ASSETS
Current assets:
Cash and cash equivalents                        $ 11,111        $ 16,122
Accounts receivable, net                           339,590         305,177
Inventories                                        702,161         578,555
Deferred income taxes                              25,400          25,353
Prepaid expenses and other current assets         37,052        21,654    
Total current assets                               1,115,314       946,861
Property and equipment, net                        338,594         278,455
Other assets:
Goodwill                                           201,874         193,741
Intangible assets, net                             49,540          52,496
Other                                             24,682        22,393    
Total assets                                     $ 1,730,004    $ 1,493,946 
                                                                 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable                                 $ 283,851       $ 242,179
Accrued expenses and other current liabilities     111,510         91,632
Current portion of long-term debt                 1,019         350       
Total current liabilities                          396,380         334,161
Notes payable                                      130,594         115,000
Long-term debt, excluding current portion          33,495          635
Deferred income taxes                              43,052          36,260
Other long-term liabilities                       27,337        29,174    
Total liabilities                                 630,858       515,230   
Stockholders' equity:
Preferred stock, $0.01 par value, authorized       —               —
5,000 shares; none issued or outstanding
Common stock, $0.01 par value, authorized
100,000 shares; 49,330 issued and outstanding      493             490
shares at August 3, 2013; 49,011 issued and
outstanding shares at July 28, 2012
Additional paid-in capital                         380,109         364,598
Unallocated shares of Employee Stock Ownership     (39       )     (89       )
Plan
Accumulated other comprehensive (loss) income      (1,092    )     1,896
Retained earnings                                 719,675       611,821   
Total stockholders' equity                        1,099,146     978,716   
Total liabilities and stockholders' equity       $ 1,730,004    $ 1,493,946 



UNITED NATURAL FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

                                                Fiscal year ended
                                                 August 3,     July 28,
(In thousands)                                   2013           2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                       $ 107,854      $ 91,342
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization                      42,398         39,560
Deferred income tax expense (benefit)              6,780          (6,115     )
Share-based compensation                           15,104         11,372
Excess tax benefit from share-based payment        (1,952   )     (2,804     )
arrangements
Gain on disposals of property and equipment        (513     )     (313       )
Impairment of indefinite lived intangibles         1,629          —
Unrealized loss on foreign exchange                (698     )     (468       )
Provision for doubtful accounts                    4,227          3,532
Non-cash interest expense                          651            —
Changes in assets and liabilities, net of
acquired companies:
Accounts receivable                                (37,295  )     (51,193    )
Inventories                                        (123,904 )     (62,822    )
Prepaid expenses and other assets                  (17,702  )     15,050
Accounts payable                                   34,974         16,095
Accrued expenses                                  12,778       13,008     
Net cash provided by operating activities         44,331       66,244     
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures                               (66,554  )     (31,492    )
Purchases of acquired businesses, net of cash      (8,135   )     (3,297     )
acquired
Proceeds from disposals of property and           2,368        332        
equipment
Net cash used in investing activities             (72,321  )    (34,457    )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings under revolving           610,046        1,021,517
credit line
Repayments of borrowings under revolving           (594,107 )     (1,021,517 )
credit line
Repayments of long-term debt                       (353     )     (47,447    )
Increase in bank overdraft                         6,347          8,673
Proceeds from exercise of stock options            1,942          7,571
Payment of employee restricted stock tax           (3,484   )     (1,526     )
withholdings
Excess tax benefit from share-based payment        1,952          2,804
arrangements
Capitalized debt issuance costs                   —            (2,905     )
Net cash provided by (used in) financing          22,343       (32,830    )
activities
Effect of exchange rate changes on cash and       636          298        
cash equivalents
NET DECREASE IN CASH AND CASH EQUIVALENTS          (5,011   )     (745       )
Cash and cash equivalents at beginning of         16,122       16,867     
period
Cash and cash equivalents at end of period       $ 11,111      $ 16,122     
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest, net of amounts capitalized             $ 5,494       $ 4,734      
Federal and state income taxes, net of refunds   $ 64,367      $ 52,666     



UNITED NATURAL FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME WITH ADJUSTMENTS
Reconciliation of GAAP Results to Non-GAAP Presentation (Unaudited)
(In thousands, except per share data)

               Fiscal year ended August 3, 2013
                GAAP                         Adjustments      Adjusted
                              
Net sales       $ 6,064,355     100.00 %      $  —              $ 6,064,355     100.00 %
Cost of sales    5,039,279    83.10  %        —              5,039,279    83.10  %
Gross profit     1,025,076    16.90  %        —              1,025,076    16.90  %
Operating         837,953       13.82  %         —                837,953       13.82  %
expenses
Restructuring
and asset
impairment       1,629        0.03   %        (1,629 ) (a)    —            —      %
expenses
(recoveries)
Total
operating        839,582      13.84  %  *     (1,629 )        837,953      13.82  %
expenses
Operating        185,494      3.06   %        1,629          187,123      3.09   %  *
income
Other expense
(income):
Interest          5,897         0.10   %         —                5,897         0.10   %
expense
Interest          (632      )   (0.01  )%        —                (632      )   (0.01  )%
income
Other, net       6,113        0.10   %        (4,900 ) (b)    1,213        0.02   %
Total other      11,378       0.19   %        (4,900 )        6,478        0.11   %
expense, net
Income before     174,116       2.87   %         6,529            180,645       2.98   %
income taxes
Provision for    66,262       1.09   %        5,274   (c)    71,536       1.18   %
income taxes
Net income      $ 107,854      1.78   %      $  1,255         $ 109,109      1.80   %
                                                                                          
Basic per
share data:
Net income      $ 2.19                       $  0.03          $ 2.22      
Weighted
average basic
shares of        49,217                       —              49,217    
common stock
outstanding
                                                                                          
Diluted per
share data:
Net income      $ 2.18                       $  0.03          $ 2.20       * 
Weighted
average
diluted          49,509                       —              49,509    
shares of
common stock
outstanding

* Total reflects rounding
(a) Represents expense incurred as a result of the termination of a long-term licensing
agreement and the write-off of the associated intangible asset.
(b) Represents expense incurred in connection with agreement to settle multi-state
unclaimed property audit.
(c) Represents the additional tax expense related to adjustments for the expenses above, as
well as a discrete tax benefit of $2.7 million primarily related to the reversal of
reserves for uncertain tax positions.


UNITED NATURAL FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME WITH ADJUSTMENTS
Reconciliation of GAAP Results to Non-GAAP Presentation (Unaudited)
(In thousands, except per share data)

               Fiscal year ended July 28, 2012
                GAAP                         Adjustments      Adjusted
                              
Net sales       $ 5,236,021     100.00 %      $  —              $ 5,236,021     100.00 %
Cost of sales    4,320,018    82.51  %        —              4,320,018    82.51  %
Gross profit     916,003      17.49  %        —              916,003      17.49  %
Operating         755,744       14.43  %         (1,558 ) (a)     754,186       14.40  %
expenses
Restructuring
and asset
impairment       5,101        0.10   %        (5,101 ) (b)    —            —      %
expenses
(recoveries)
Total
operating        760,845      14.53  %        (6,659 )        754,186      14.40  %
expenses
Operating        155,158      2.96   %        6,659          161,817      3.09   %
income
Other expense
(income):
Interest          4,734         0.09   %         —                4,734         0.09   %
expense
Interest          (715      )   (0.01  )%        —                (715      )   (0.01  )%
income
Other, net       356          0.01   %        —              356          0.01   %
Total other      4,375        0.08   %  *     —              4,375        0.08   %  *
expense, net
Income before     150,783       2.88   %         6,659            157,442       3.01   %
income taxes
Provision for    59,441       1.14   %        2,624   (c)    62,065       1.19   %
income taxes
Net income      $ 91,342       1.74   %      $  4,035         $ 95,377       1.82   %
                                                                                          
Basic per
share data:
Net income      $ 1.87                       $  0.08          $ 1.96       * 
Weighted
average basic
shares of        48,766                       —              48,766    
common stock
outstanding
                                                                                          
Diluted per
share data:
Net income      $ 1.86                       $  0.08          $ 1.94      
Weighted
average
diluted          49,100                       —              49,100    
shares of
common stock
outstanding

* Total reflects rounding
(a) Represents expense incurred in connection with the onboarding of a national customer.
(b) Represents expense incurred in connection with the restructuring and divestiture of the
Company's conventional non-foods and general merchandise lines of business.
(c) Represents the additional tax expense related to adjustments for the expenses above.

Contact:

United Natural Foods, Inc.
Mark Shamber, (401) 528-8634
Chief Financial Officer
or
ICR
Katie Turner, (646) 277-1228
General Information
 
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