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

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

   Q3 Fiscal 2014 Net Sales Increased 13.8% Year over Year to $1.78 Billion

  Q3 Fiscal 2014 Net Income Increased 15.1% Year over Year to $36.4 Million

Business Wire

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

United Natural Foods, Inc. (Nasdaq: UNFI) (the "Company") today reported
financial results for the third quarter of fiscal 2014 ended May3, 2014.

Third Quarter Fiscal 2014 Highlights

  *Net sales increased 13.8%, or $215.5 million, to $1.78 billion for the
    third quarter of fiscal 2014 compared to $1.57 billion for the same period
    last fiscal year
  *Diluted EPS was $0.73 for the third quarter of fiscal 2014, an increase of
    14.1% from $0.64 for the same period last fiscal year
  *Operating income increased 16.3% to $62.6 million for the third quarter of
    fiscal 2014 compared to $53.9 million for the same period last fiscal year

“Each of our sales channels continued to benefit from consumers increasingly
choosing better-for-you natural, organic and specialty foods as illustrated by
our second consecutive quarter of net sales growth in excess of $200 million,”
said Steven Spinner, President and Chief Executive Officer. "To support these
positive growth dynamics and enhance service levels to our customers, in the
fourth quarter, we opened our distribution center in Racine, Wisconsin and we
are scheduled to open our Hudson Valley, New York facility in the first
quarter of fiscal 2015."

Net sales for the third quarter of fiscal 2014 increased 13.8% to $1.78
billion from $1.57 billion in the third quarter of fiscal 2013. The third
quarter of fiscal 2014 included incremental net sales of approximately $18.0
million, or 1.2%, resulting from the Company's acquisition of Trudeau Foods in
the first quarter of fiscal 2014. Gross margin was 16.7% for the third quarter
of fiscal 2014 compared to 16.8% for the third quarter of fiscal 2013. Gross
margin for the third quarter of fiscal 2014 was negatively impacted primarily
by foreign exchange from the declining value of the Canadian dollar on the
Company's Canadian business.

Total operating expenses were 13.2% as a percentage of net sales for the third
quarter of fiscal 2014, a decrease of 13 basis points compared with the same
period last fiscal year. The prior year quarter was negatively impacted by
labor action costs of $1.5 million related to the Company's Auburn, Washington
facility. Operating expenses for the third quarter of fiscal 2014 included
non-recurring costs of approximately $0.9 million related to the start up of
the Company's Wisconsin facility in addition to $0.6 million of acquisition
costs related to the recently announced agreement to purchase of Tony's Fine
Foods.

Operating income increased 16.3%, or $8.8 million, to $62.6 million for the
third quarter of fiscal 2014 compared to $53.9 million for the third quarter
of fiscal 2013. Operating income as a percentage of net sales for the third
quarter of fiscal 2014 increased 7 basis points to 3.5% compared to the same
period last fiscal year.

Net income for the third quarter of fiscal 2014 increased $4.8 million, or
15.1%, to $36.4 million, or $0.73 per diluted share, from $31.6 million, or
$0.64 per diluted share, for the third quarter of fiscal 2013.

Fiscal 2014 Year to Date Summary

Net sales for the nine months ended May 3, 2014 totaled $5.03 billion, a 13.7%
increase over the comparable prior fiscal year period. Gross margin decreased
10 basis points to 16.7%, compared to the nine months ended April 27, 2013.
Gross margin in the first nine months 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 13.5% of net sales, total operating expenses for the nine months ended May
3, 2014 were 34 basis points lower than the comparable prior fiscal year
period. Total operating expenses increased $66.8 million, or 10.9%, to $678.0
million from $611.2 million for the nine months ended April 27, 2013. Total
operating expenses for the nine months ended April 27, 2013 included
approximately $6.1 million of expenses related to the labor action at the
Company's Auburn, Washington facility. Excluding these incremental expenses,
operating expenses were $605.1 million or 13.7% of net sales.

Operating income for the nine months ended May 3, 2014 increased 23.2%, or
$30.1 million, to $159.5 million from $129.4 million for the nine months ended
April 27, 2013. Operating income as percentage of net sales increased 24 basis
points to 3.2% compared to the same period last fiscal year.

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 nine months ended April 27, 2013:

                                                        Nine months ended
                                                         April 27, 2013
                                                                    % of
(in millions)                                            Pretax      Net Sales
                                                                           
Total operating expenses                                 $ 611.2     13.8  %
Labor action costs                                       (6.1    )   (0.1  )%
Total operating expenses, excluding labor action costs   $ 605.1    13.7  %
                                                                           

Net income for the nine months ended May 3, 2014 increased $16.3 million, or
21.6%, to $92.1 million, or $1.85 per diluted share, from $75.8 million, or
$1.53 per diluted share for the nine months ended April 27, 2013.

“Our additional distribution capacity in New York and Wisconsin and our
pending acquisition of Tony's Fine Foods will enable us to build our platform
of organic, natural protein and specialty products for new and existing
customers throughout North America,” 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 provided on March 10, 2014. 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 $6.73 to $6.77
billion, an increase of approximately 11.0% to 11.6% 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 13.2% to 13.8%. The Company estimates GAAP earnings per diluted
share for fiscal 2014 in the range of approximately $2.47 to $2.50 per share,
an increase of approximately 13.3% to 14.7% over fiscal 2013 GAAP earnings per
diluted share of $2.18. The Company’s updated guidance does not reflect any
anticipated sales or earnings from the recently announced agreement to acquire
Tony’s Fine Foods, which is expected to close late in the fourth quarter of
fiscal 2014. The Company’s updated guidance does reflect approximately $1.3 to
$1.6 million in anticipated acquisition costs associated with the transaction.

Conference Call & Webcast

The Company's third quarter 2014 conference call and audio webcast will be
held today, Tuesday, June10, 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 reports on Form 10-Q filed with the SEC on
December 11, 2013 and March 12, 2014, 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; management's allocation
of capital and the timing of capital expenditures; the occurrence of any
event, change or other circumstance that could give rise to the termination of
the acquisition agreement entered into by the parties in connection with the
Company’s proposed acquisition of all of the stock of Tony’s Fine Foods; the
ability of the Company to consummate the proposed acquisition of Tony’s Fine
Foods; and the Company's ability to successfully deploy its operational
initiatives to achieve synergies from the acquisition of Tony’s Fine Foods.
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              Nine months ended
                 May 3,         April 27,       May 3,         April 27,
                 2014            2013            2014            2013
Net sales        $ 1,781,729     $ 1,566,217     $ 5,029,781     $ 4,421,957
Cost of sales    1,483,600      1,303,220      4,192,309      3,681,334   
Gross profit     298,129        262,997        837,472        740,623     
Operating        235,514         209,140         677,986         609,591
expenses
Restructuring
and asset        —              —              —              1,629       
impairment
expenses
Total
operating        235,514        209,140        677,986        611,220     
expenses
Operating        62,615         53,857         159,486        129,403     
income
Other expense
(income):
Interest         2,308           1,591           5,944           3,942
expense
Interest         (129        )   (133        )   (374        )   (474        )
income
Other, net       (217        )   121            404            5,103       
Total other      1,962          1,579          5,974          8,571       
expense, net
Income before    60,653          52,278          153,512         120,832
income taxes
Provision for    24,261         20,657         61,405         45,055      
income taxes
Net income       $ 36,392       $ 31,621       $ 92,107       $ 75,777    
Basic per
share data:
Net income       $ 0.73         $ 0.64         $ 1.86         $ 1.54      
Weighted
average basic
shares of        49,635         49,303         49,577         49,200      
common stock
outstanding
Diluted per
share data:
Net income       $ 0.73         $ 0.64         $ 1.85         $ 1.53      
Weighted
average
diluted shares   49,931         49,567         49,860         49,483      
of common
stock
outstanding
                                                                             

UNITED NATURAL FOODS,INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(In thousands, except per share amounts)
                                                              
                                                 May 3,          August 3,
                                                 2014            2013
ASSETS
Current assets:
Cash and cash equivalents                        $ 16,577        $ 11,111
Accounts receivable, net                         420,943         339,590
Inventories                                      831,516         702,161
Prepaid expenses and other current assets        47,300          38,534
Deferred income taxes                            23,822         23,822      
Total current assets                             1,340,158       1,115,218
Property & equipment, net                        409,170         338,594
Goodwill                                         209,761         201,874
Intangible assets, net                           55,026          49,540
Other assets                                     23,785         24,682      
Total assets                                     $ 2,037,900    $ 1,729,908 
                                                                             
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable                                 $ 348,367       $ 283,851
Accrued expenses and other current liabilities   113,522         113,397
Current portion of long-term debt                1,125          1,019       
Total current liabilities                        463,014         398,267
Notes payable                                    268,200         130,594
Long-term debt, excluding current portion        32,894          33,091
Deferred income taxes                            44,583          41,474
Other long-term liabilities                      28,417         27,336      
Total liabilities                                837,108        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;
49,650 issued and outstanding shares at May 3,   497             493
2014;
49,330 issued and outstanding shares at August
3, 2013
Additional paid-in capital                       394,117         380,109
Unallocated shares of Employee Stock Ownership   (23         )   (39         )
Plan
Accumulated other comprehensive loss             (5,581      )   (1,092      )
Retained earnings                                811,782        719,675     
Total stockholders’ equity                       1,200,792      1,099,146   
Total liabilities and stockholders’ equity       $ 2,037,900    $ 1,729,908 
                                                                             

UNITED NATURAL FOODS,INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(In thousands)
                                                     
                                                       Nine months ended
                                                       May 3,      April 27,
                                                       2014         2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                             $ 92,107     $ 75,777
Adjustments to reconcile net income to net cash used
in operating activities:
Depreciation and amortization                          35,427       31,242
Share-based compensation                               13,137       11,027
Gain on disposals of property and equipment            (59      )   (663     )
Excess tax benefits from share-based payment           (2,459   )   (88      )
arrangements
Impairment of intangible asset                         —            1,629
Deferred income taxes                                  3,165        1,767
Provision for doubtful accounts                        2,771        2,385
Non-cash interest expense                              1,767        —
Changes in assets and liabilities, net of acquired
businesses:
Accounts receivable                                    (81,467  )   (58,497  )
Inventories                                            (126,613 )   (143,563 )
Prepaid expenses and other assets                      (6,251   )   (14,829  )
Accounts payable                                       48,107       51,588
Accrued expenses and other liabilities                 (279     )   6,201    
Net cash used in operating activities                  (20,647  )   (36,024  )
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures                                   (107,945 )   (34,753  )
Purchases of acquired businesses, net of cash          (23,032  )   (9,445   )
acquired
Proceeds from disposals of property and equipment      6,061       2,345    
Net cash used in investing activities                  (124,916 )   (41,853  )
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt                           (707     )   (479     )
Proceeds from borrowings under revolving credit line   535,218      478,698
Repayments of borrowings under revolving credit line   (397,093 )   (418,621 )
Increase in bank overdraft                             12,711       17,398
Proceeds from exercise of stock options                2,125        1,681
Payment of employee restricted stock tax               (3,709   )   (3,381   )
withholdings
Excess tax benefits from share-based payment           2,459       88       
arrangements
Net cash provided by financing activities              151,004     75,384   
EFFECT OF EXCHANGE RATE CHANGES ON CASH                25           247
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   5,466        (2,246   )
Cash and cash equivalents at beginning of period       11,111      16,122   
Cash and cash equivalents at end of period             $ 16,577    $ 13,876 
                                                                             
Supplemental disclosures of cash flow information:
Cash paid for interest                                 $ 4,812     $ 3,657  
Cash paid for federal and state income taxes, net of   $ 52,880    $ 47,083 
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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