United Natural Foods, Inc. Announces Second Quarter Fiscal 2014 Results

  United Natural Foods, Inc. Announces Second Quarter Fiscal 2014 Results

  Q2 Fiscal 2014 Net Income Increased 23.6% Year Over Year to $28.0 Million

Business Wire

PROVIDENCE, R.I. -- March 10, 2014

United Natural Foods, Inc. (Nasdaq: UNFI) (the "Company") today reported
financial results for the second quarter of fiscal 2014 ended February1,
2014.

Second Quarter Fiscal 2014 Highlights

  *Net sales increased 13.9%, or $200.3 million, to $1.65 billion for the
    second quarter of fiscal 2014 compared to $1.45 billion for the same
    period last fiscal year
  *Diluted EPS was $0.56 for the second quarter of fiscal 2014, an increase
    of 21.7% from $0.46 for the same period last fiscal year
  *Operating margin was 3.0% of net sales for the second quarter of fiscal
    2014, an increase of 27 basis points from the same period last fiscal year
  *Independent channel net sales growth accelerated to 11.6%

“Our independent channel grew over 11% during the quarter driven by continued
innovation in products and services supported by UNFI's extensive product
offering,” commented Steven Spinner, President and Chief Executive Officer.
“Continued demand for our products further demonstrates that the trend towards
natural and organic consumption continues to gain momentum.”

Net sales for the second quarter of fiscal 2014 increased 13.9% to $1.65
billion from $1.45 billion in the second quarter of fiscal 2013. Gross margin
was 16.3% for the second quarter of fiscal 2014 compared to 16.7% for the
second quarter of fiscal 2013. Gross margin for the second quarter of fiscal
2014 was negatively impacted by severe weather, the foreign exchange impact
from the declining value of the Canadian dollar on the Company's Canadian
business and the ongoing shift in the Company’s sales mix.

Total operating expenses were 13.3% as a percentage of net sales for the
second quarter of fiscal 2014, a decrease of 70 basis points compared with the
same period last fiscal year. This improvement in expenses was driven by the
continued shift in the sales mix to supernatural, supermarket and multi-unit
independent customers, positive trends in the Company’s self-insurance
accruals compared to the prior year and lapping of the prior year labor action
costs. Total operating expenses for the second quarter of fiscal 2013 included
$3.6 million of expenses related to the labor action at the Company's Auburn,
Washington facility. Excluding the Auburn, Washington labor action costs in
the second quarter of fiscal 2013, operating expenses were 13.8% of net sales.

Operating income increased 25.3%, or $9.9 million, to $48.8 million for the
second quarter of fiscal 2014 compared to $39.0 million for the second quarter
of fiscal 2013. Operating income as a percentage of net sales for the second
quarter of fiscal 2014 increased 27 basis points to 3.0% compared to the same
period last fiscal year. Net income for the second quarter of fiscal 2014
increased $5.3 million, or 23.6%, to $28.0 million, or $0.56 per diluted
share, from $22.6 million, or $0.46 per diluted share, for the second quarter
of fiscal 2013. The second quarter of fiscal 2013 included the negative impact
of approximately $0.04 per diluted share related to the Auburn, Washington
labor action.

The following table details the amounts and effect of the labor action costs
related to our Auburn, Washington facility described above and the
reconciliation of total operating expenses including the labor action costs
(GAAP basis), to total operating expenses excluding the labor action costs
(non-GAAP basis) for the three months ended January 26, 2013:

                                                       Three months ended
                                                        January 26, 2013
(in millions)                                           Pretax     % of Sales
                                                                    
Total operating expenses                                $ 202.7     14.0   %
Labor action costs                                      3.6        0.2    %
Total operating expenses, excluding labor action        $ 199.1    13.8   %
costs

First Half Fiscal 2014 Summary

Net sales for the first half of fiscal 2014 totaled $3.25 billion, a 13.7%
increase over the comparable prior fiscal year period. Gross margin was 12
basis points lower than the comparable prior fiscal year period, at 16.6% of
net sales for the six months ended February 1, 2014. Gross margin in the first
half of fiscal 2014 was negatively impacted by severe weather and foreign
exchange for the Company's Canadian business and the continued shift in sales
growth towards supernatural, national supermarket and multi-unit independent
customers. These challenges were partially offset by improved execution by the
Company’s supply chain group, specifically with respect to inbound logistics
and procurement.

At 13.6% of net sales, total operating expenses for the six months ended
February 1, 2014 were 46 basis points lower than the comparable prior fiscal
year period. Total operating expenses increased $40.4 million, or 10.0%, to
$442.5 million from $402.1 million for the six months ended January 26, 2013.
Total operating expenses in the first half of fiscal 2013 included
approximately $4.6 million of expenses related to the labor action at the
Company's Auburn, Washington facility. Excluding these incremental expenses,
operating expenses were $397.5 million or 13.9% of net sales.

The following table details the amounts and effect of the labor action costs
related to our Auburn, Washington facility described above and the
reconciliation of total operating expenses including the labor action costs
(GAAP basis), to total operating expenses excluding the labor action costs
(non-GAAP basis) for the six months ended January 26, 2013:

                                                       Six months ended
                                                        January 26, 2013
(in millions)                                           Pretax     % of Sales
                                                                    
Total operating expenses                                $ 402.1     14.1   %
Labor action costs                                      4.6        0.2    %
Total operating expenses, excluding labor action        $ 397.5    13.9   %
costs

Net income for the first half of fiscal 2014 increased $11.6 million, or
26.2%, to $55.7 million, or $1.12 per diluted share, from $44.2 million, or
$0.89 per diluted share for the first half of fiscal 2013.

“Later this quarter we will finish construction of our Sturtevant, Wisconsin
facility which will serve as our exciting new hub serving the greater Chicago
market,” concluded Mr. Spinner.

Updated Fiscal 2014 Guidance

Based on UNFI's performance to date and the current outlook for the remainder
of fiscal 2014, UNFI is narrowing and updating its previous guidance for
fiscal 2014, which was affirmed on December 3, 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 $6.70
to $6.78 billion, an increase of approximately 10.5% to 11.8% over fiscal
2013. Adjusting for $118.7 million of net sales for the 53rd week in fiscal
2013, net sales growth for fiscal 2014 is expected to be in the range of
approximately 12.7% to 14.0%. The Company estimates GAAP earnings per diluted
share for fiscal 2014 in the range of approximately $2.45 to $2.51 per share,
an increase of approximately 12.4% to 15.1% over fiscal 2013 GAAP earnings per
diluted share of $2.18.

Conference Call & Webcast

The Company's second quarter 2014 conference call and audio webcast will be
held today, Monday, March10, 2014 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 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, its quarterly report on Form 10-Q filed with the SEC on
December 11, 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 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 excluding expenses related to the labor action at the
Company’s Auburn, Washington facility and estimated net sales growth adjusting
for the 53rd week in fiscal 2013. The reconciliations of these non-GAAP
financial measures to the comparable GAAP financial measures are presented
within the tables or text of this press release. 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 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              Six months ended
                 February 1,    January 26,     February 1,    January 26,
                 2014            2013            2014            2013
Net sales        $ 1,646,041     $ 1,445,703     $ 3,248,052     $ 2,855,740
Cost of sales    1,377,874      1,204,030      2,708,709      2,378,114   
Gross profit     268,167        241,673        539,343        477,626     
Operating        219,322         202,693         442,472         400,451
expenses
Restructuring
and asset        —              —              —              1,629       
impairment
expenses
Total
operating        219,322        202,693        442,472        402,080     
expenses
Operating        48,845         38,980         96,871         75,546      
income
Other expense
(income):
Interest         1,782           1,373           3,636           2,351
expense
Interest         (125        )   (168        )   (245        )   (341        )
income
Other, net       602            201            621            4,982       
Total other      2,259          1,406          4,012          6,992       
expense, net
Income before    46,586          37,574          92,859          68,554
income taxes
Provision for    18,635         14,954         37,144         24,398      
income taxes
Net income       $ 27,951       $ 22,620       $ 55,715       $ 44,156    
Basic per
share data:
Net income       $ 0.56         $ 0.46         $ 1.13         $ 0.90      
Weighted
average basic
shares of        49,615         49,289         49,490         49,174      
common stock
outstanding
Diluted per
share data:
Net income       $ 0.56         $ 0.46         $ 1.12         $ 0.89      
Weighted
average
diluted shares   49,873         49,528         49,766         49,475      
of common
stock
outstanding
                                                                             

UNITED NATURAL FOODS,INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(In thousands, except per share amounts)
                                                              
                                                 February 1,     August 3,
                                                 2014            2013
ASSETS
Current assets:
Cash and cash equivalents                        $ 14,575        $ 11,111
Accounts receivable, net                         406,943         339,590
Inventories                                      764,694         702,161
Prepaid expenses and other current assets        56,851          38,534
Deferred income taxes                            23,822         23,822      
Total current assets                             1,266,885       1,115,218
Property & equipment, net                        394,147         338,594
Goodwill & intangible assets, net                265,588         251,414
Other assets                                     24,361         24,682      
Total assets                                     $ 1,950,981    $ 1,729,908 
                                                                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable                                 $ 334,867       $ 283,851
Accrued expenses and other current liabilities   113,058         113,397
Current portion of long-term debt                1,202          1,019       
Total current liabilities                        449,127         398,267
Notes payable                                    240,180         130,594
Long-term debt, excluding current portion        33,128          33,091
Deferred income taxes                            41,474          41,474
Other long-term liabilities                      27,878         27,336      
Total liabilities                                791,787        630,762     
Commitments and contingencies                    —               —
                                                                 
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; 49,623 issued and outstanding    496             493
shares at February 1, 2014; 49,330 issued and
outstanding shares at August 3, 2013
Additional paid-in capital                       390,056         380,109
Unallocated shares of Employee Stock Ownership   (39         )   (39         )
Plan
Accumulated other comprehensive loss             (6,709      )   (1,092      )
Retained earnings                                775,390        719,675     
Total stockholders’ equity                       1,159,194      1,099,146   
Total liabilities and stockholders’ equity       $ 1,950,981    $ 1,729,908 
                                                                             

UNITED NATURAL FOODS,INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(In thousands)
                                                   
                                                     Six months ended
                                                     February 1,  January 26,
                                                     2014          2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                           $  55,715     $  44,156
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization                        22,998        20,944
Share-based compensation                             9,507         7,889
Loss (gain) on disposals of property and equipment   46            (20       )
Excess tax benefits from share-based payment         (2,321    )   (30       )
arrangements
Impairment of intangible asset                       —             1,629
Provision for doubtful accounts                      1,601         1,497
Non-cash interest expense                            1,050         —
Changes in assets and liabilities, net of acquired
businesses:
Accounts receivable                                  (66,988   )   (51,057   )
Inventories                                          (60,139   )   (94,621   )
Prepaid expenses and other assets                    (15,953   )   (11,762   )
Accounts payable                                     19,022        32,140
Accrued expenses and other liabilities               (363      )   651       
Net cash used in operating activities                (35,825   )   (48,584   )
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures                                 (76,320   )   (20,026   )
Purchases of acquired businesses, net of cash        (23,005   )   (9,266    )
acquired
Proceeds from disposals of property and equipment    102          2,342     
Net cash used in investing activities                (99,223   )   (26,950   )
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt                         (396      )   (400      )
Proceeds from borrowings under revolving credit      347,474       361,906
line
Repayments of borrowings under revolving credit      (237,284  )   (302,808  )
line
Increase in bank overdraft                           28,378        10,504
Proceeds from exercise of stock options              1,692         1,455
Payment of employee restricted stock tax             (3,570    )   (3,335    )
withholdings
Excess tax benefits from share-based payment         2,321         30
arrangements
Capitalized debt issuance costs                      —            (12       )
Net cash provided by financing activities            138,615      67,340    
EFFECT OF EXCHANGE RATE CHANGES ON CASH              (103      )   157
NET INCREASE (DECREASE) IN CASH AND CASH             3,464         (8,037    )
EQUIVALENTS
Cash and cash equivalents at beginning of period     11,111       16,122    
Cash and cash equivalents at end of period           $  14,575    $  8,085  
                                                                   
Supplemental disclosures of cash flow information:
Cash paid for interest                               $  2,925     $  2,195  
Cash paid for federal and state income taxes, net    $  42,072    $  32,315 
of refunds

Contact:

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