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