United Natural Foods, Inc. Announces First Quarter Fiscal 2014 Results Q1 Fiscal 2014 Diluted EPS Increased 30.2% to $0.56 from $0.43 for Q1 Fiscal 2013 Q1 Fiscal 2014 Diluted EPS Increased 21.7% over Q1 Fiscal 2013 Adjusted Diluted EPS of $0.46 Business Wire PROVIDENCE, R.I. -- December 3, 2013 United Natural Foods, Inc. (Nasdaq: UNFI) (the "Company") today reported financial results for the first quarter of fiscal 2014 ended November2, 2013. First Quarter Fiscal 2014 Highlights *Net sales increased 13.6%, or $192.0 million, to $1.6 billion compared to $1.4 billion in the same period last fiscal year *Diluted EPS was $0.56 for the first quarter of fiscal 2014, an increase of 30.2% from $0.43 for the same period last fiscal year. When adjusting the prior year diluted EPS for certain items as detailed below, diluted EPS increased 21.7% from $0.46 for the same period last fiscal year. "Continued demand and UNFI's focus on its core strategies delivered strong results during the first quarter of fiscal 2014," said Steven Spinner, President and Chief Executive Officer. Net sales for the first quarter of fiscal 2014 increased 13.6% to $1.6 billion from $1.4 billion in the first quarter of fiscal 2013. Gross margin was 16.9% for the first quarter of fiscal 2014, a 20 basis point increase from gross margin of 16.7% for the first quarter of fiscal 2013. Compared to the fourth quarter of fiscal 2013, gross margin decreased 39 basis points primarily due to the continued shift in customer mix to the conventional supermarket and supernatural channels. Total operating expenses were 13.9% as a percentage of net sales for the first quarter of fiscal 2014, a decrease of 21 basis points compared with the first quarter of fiscal 2013. Total operating expenses increased $23.8 million, or 11.9%, to $223.2 million in the first quarter of fiscal 2014 as compared to $199.4 million in the first quarter of fiscal 2013, primarily due to higher sales volume. Total operating expenses for the first quarter of fiscal 2013 included $1.6 million of expenses related to the termination of a licensing agreement and the write-off of the associated intangible asset. Excluding these expenses from the first quarter of fiscal 2013, total operating expenses for the first quarter of fiscal 2014 increased 12.8%, or $25.4 million, compared to the first quarter of fiscal 2013. Total operating expenses in the first quarter of fiscal 2013 also included $1.0 million of expenses related to the labor action at the Company's Auburn, Washington facility. On a GAAP basis, operating income increased 31.3%, or $11.5 million, to $48.0 million for the first quarter of fiscal 2014 compared to $36.6 million for the first quarter of fiscal 2013. Operating income as a percentage of net sales for the first quarter of fiscal 2014 increased 41 basis points to 3.0% compared to the first quarter of fiscal 2013. Adjusting operating income for the first quarter of fiscal 2013 to exclude expenses associated with the write-off of the intangible asset, operating income for the first quarter of fiscal 2014 increased 25.7%, or $9.8 million, from $38.2 million for the first quarter of fiscal 2013. Operating income as a percentage of net sales increased 29 basis points from adjusted operating income as a percentage of net sales of 2.7% for the first quarter of fiscal 2013. GAAP net income for the first quarter of fiscal 2014 increased $6.2 million, or 28.9%, to $27.8 million, or $0.56 per diluted share, from $21.5 million, or $0.43 per diluted share, for the first quarter of fiscal 2013. Other expense, net for the first quarter of fiscal 2013 included $4.9 million in expense associated with an agreement to settle a multi-state unclaimed property audit. When adjusting net income for the first quarter of fiscal 2013 for this expense and the expenses associated with the write-off of the intangible asset, partially offset by a net discrete tax benefit of $2.7 million primarily related to the reversal of reserves for uncertain tax positions, net income for the first quarter of fiscal 2014 increased $5.0 million, or 21.8%, from $22.8 million, or $0.46 per diluted share, for the first quarter of fiscal 2013. "As we grow into new facilities, channels and geographies, UNFI is well positioned to continue its growth," concluded Mr. Spinner. Affirmed Fiscal 2014 Guidance Based on UNFI's performance to date and the current outlook for the remainder of fiscal 2014, UNFI is affirming its previous guidance for fiscal 2014 provided on September 12, 2013. For fiscal 2014, ending August 2, 2014, which is a 52-week fiscal year compared with the 53-week fiscal 2013, 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 expected 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 first quarter 2014 conference call and audio webcast will be held today, Tuesday December3, 2013 at 5:00 p.m. EST. 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 31,000 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 as one of its "Most Admired Companies" and in 2012 as one of its "Most Admired American 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 October 1, 2013 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 (“GAAP”) basis, the Company has included in this press release non-GAAP financial measures (including operating expenses, operating income, net income and earnings per diluted share) in each case excluding certain unusual expenses 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 “Condensed Consolidated Statements of Income with Adjustments” for the three months ended October 27, 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 operating expenses, operating income, net income and earnings per diluted share for the applicable periods excluding these expenses 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 2014 fiscal year and to internally prepared projections. UNITED NATURAL FOODS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) (In thousands, except per share data amounts) Three months ended November 2, October 27, 2013 2012 Net sales $ 1,602,011 $ 1,410,037 Cost of sales 1,330,835 1,174,084 Gross profit 271,176 235,953 Operating expenses 223,150 197,758 Restructuring and asset impairment — 1,629 expenses Total operating expenses 223,150 199,387 Operating income 48,026 36,566 Other expense (income): Interest expense 1,854 978 Interest income (120 ) (173 ) Other, net 19 4,781 Total other expense, net 1,753 5,586 Income before income taxes 46,273 30,980 Provision for income taxes 18,509 9,444 Net income $ 27,764 $ 21,536 Basic per share data: Net income $ 0.56 $ 0.44 Weighted average basic shares of common 49,439 49,142 stock outstanding Diluted per share data: Net income $ 0.56 $ 0.43 Weighted average diluted shares of common 49,735 49,585 stock outstanding UNITED NATURAL FOODS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (In thousands, except per share amounts) November 2, August 3, 2013 2013 ASSETS Current assets: Cash and cash equivalents $ 9,357 $ 11,111 Accounts receivable, net 398,210 339,590 Inventories 838,391 702,161 Prepaid expenses and other current assets 36,192 38,534 Deferred income taxes 23,822 23,822 Total current assets 1,305,972 1,115,218 Property & equipment, net 362,298 338,594 Goodwill & intangible assets, net 269,020 251,414 Other assets 24,625 24,682 Total assets $ 1,961,915 $ 1,729,908 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 394,668 $ 283,851 Accrued expenses and other current 102,537 113,397 liabilities Current portion of long-term debt 1,226 1,019 Total current liabilities 498,431 398,267 Notes payable 228,099 130,594 Long-term debt, excluding current portion 33,414 33,091 Deferred income taxes 41,474 41,474 Other long-term liabilities 27,943 27,336 Total liabilities 829,361 630,762 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; 49,609 issued and outstanding shares at November 2, 2013; 496 493 49,330 issued and outstanding shares at August 3, 2013 Additional paid-in capital 386,045 380,109 Unallocated shares of Employee Stock (43 ) (39 ) Ownership Plan Accumulated other comprehensive loss (1,383 ) (1,092 ) Retained earnings 747,439 719,675 Total stockholders’ equity 1,132,554 1,099,146 Total liabilities and stockholders’ equity $ 1,961,915 $ 1,729,908 UNITED NATURAL FOODS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (In thousands) Three months ended November 2, October 27, 2013 2012 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 27,764 $ 21,536 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 11,238 10,119 Share-based compensation 5,478 4,714 Gain on disposals of property and equipment (67 ) (19 ) Excess tax benefits from share-based payment (2,332 ) (30 ) arrangements Impairment of intangible asset — 1,629 Unrealized loss on foreign exchange 209 122 Provision for doubtful accounts 933 691 Non-cash interest expense 616 — Changes in assets and liabilities, net of acquired businesses: Accounts receivable (55,678 ) (30,216 ) Inventories (131,765 ) (140,067 ) Prepaid expenses and other assets 2,367 (1,463 ) Accounts payable 100,198 76,165 Accrued expenses and other liabilities (8,625 ) 1,360 Net cash used in operating activities (49,664 ) (55,459 ) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (33,247 ) (4,573 ) Purchases of acquired businesses, net of cash (22,973 ) (9,235 ) acquired Proceeds from disposals of property and equipment 99 20 Net cash used in investing activities (56,121 ) (13,788 ) CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of long-term debt (86 ) (100 ) Proceeds from borrowings under revolving credit 192,715 217,477 line Repayments of borrowings under revolving credit (95,210 ) (183,441 ) line Increase in bank overdraft 6,347 30,352 Proceeds from exercise of stock options 1,551 1,165 Payment of employee restricted stock tax (3,422 ) (3,217 ) withholdings Excess tax benefits from share-based payment 2,332 30 arrangements Capitalized debt issuance costs — (7 ) Net cash provided by financing activities 104,227 62,259 EFFECT OF EXCHANGE RATE CHANGES ON CASH (196 ) (195 ) NET DECREASE IN CASH AND CASH EQUIVALENTS (1,754 ) (7,183 ) Cash and cash equivalents at beginning of period 11,111 16,122 Cash and cash equivalents at end of period $ 9,357 $ 8,939 Supplemental disclosures of cash flow information: Cash paid for interest $ 1,074 $ 932 Cash paid for federal and state income taxes, net $ 5,989 $ 4,113 of refunds 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) Three months ended October 27, 2012 GAAP Adjustments Adjusted Net sales $ 1,410,037 100.00 % $ — $ 1,410,037 100.00 % Cost of sales 1,174,084 83.27 % — 1,174,084 83.27 % Gross profit 235,953 16.73 % — 235,953 16.73 % Operating 197,758 14.03 % — 197,758 14.03 % expenses Restructuring and asset 1,629 0.12 % (1,629 ) (a) — — % impairment expenses Total operating 199,387 14.14 % * (1,629 ) 197,758 14.03 % expenses Operating 36,566 2.59 % 1,629 38,195 2.71 % * income Other expense (income): Interest 978 0.07 % — 978 0.07 % expense Interest (173 ) (0.01 )% — (173 ) (0.01 )% income Other, net 4,781 0.34 % (4,900 ) (b) (119 ) (0.01 )% Total other 5,586 0.40 % (4,900 ) 686 0.05 % expense, net Income before 30,980 2.20 % * 6,529 37,509 2.66 % income taxes Provision for 9,444 0.67 % 5,274 (c) 14,718 1.04 % income taxes Net income $ 21,536 1.53 % $ 1,255 $ 22,791 1.62 % Basic per share data: Net income $ 0.44 $ 0.03 $ 0.46 * Weighted average basic shares of 49,142 — 49,142 common stock outstanding Diluted per share data: Net income $ 0.43 $ 0.03 $ 0.46 Weighted average diluted 49,585 — 49,585 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. Contact: AT THE COMPANY: United Natural Foods, Inc. Mark Shamber Chief Financial Officer (401) 528-8634 or ICR Katie Turner General Information (646) 277-1228
United Natural Foods, Inc. Announces First Quarter Fiscal 2014 Results
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