Reports Record Sales of $478 Million in the First Quarter of Fiscal 2005 Raises Fiscal 2005 Earnings GuidanceDAYVILLE, Conn., Nov 30, 2004 /PRNewswire-FirstCall via COMTEX/ -- United Natural Foods,
Inc. (Nasdaq: UNFI) today reported net income of $9.9 million for the first
quarter of fiscal 2005, ended October 31, 2004, or $0.24 per share on a
diluted basis. Net sales for the first quarter of fiscal 2005 were $477.5
million, an increase of $96.2 million, or 25.2%, from the $381.4 million
recorded in the first quarter of fiscal 2004. Strong growth in all sales
channels of United Distribution contributed to the record sales.
Net income for the first quarter of fiscal 2005, increased 50.0% to $9.9
million, or $0.24 per diluted share, compared to $6.6 million, or $0.16 per
diluted share, excluding special items, for the quarter ended October 31,
2003. In the first quarter of fiscal 2004, special items consisted of a non-
cash income item related to the change in fair value of certain interest rate
swaps and the related option agreements. There were no special items for the
quarter ended October 31, 2004. Net income for the first quarter of fiscal
2005, increased 45.8% to $9.9 million, or $0.24 per diluted share, compared to
$6.8 million, or $0.17 per diluted share, including the effect of special
items, for the quarter ended October 31, 2003.
Historically, expenses related to the change in fair value of interest
rate swaps, distribution facility expansions and asset impairment charges
(including goodwill) have been classified as special items. However, at this
time the Company does not know the extent or significance of these items or
whether the Company will in fact incur any of these or other special items in
fiscal 2005. The Company's guidance is based on a number of assumptions,
which are subject to change and many of which are outside the control of the
Company. If any of these assumptions vary, the Company's guidance may change.
There can be no assurance that the Company will achieve these results. A
description of the Company's use of non-GAAP information is provided under
"Non-GAAP Results" below.
The following table details the amounts and effects of the special items
for the first quarter of fiscal 2004:
Quarter Ended October 31, 2003
(in thousands, except per share data) Pretax Per diluted
Income Net of Tax share
Income, excluding special items: $10,806 $6,591 $0.16
Special items - Income
Interest rate swap and related
agreements (included in change
in fair value of financial
instruments) 304 186 0.01
Income, including special items: $11,110 $6,777 $0.17
All non-GAAP numbers have been adjusted to exclude special charges. A
reconciliation of specific adjustments to GAAP results for the quarters ended
October 31, 2003 is included in the financial table shown above. A
description of the Company's use of non-GAAP information is provided under
"Non-GAAP Results" below.
On December 29, 2003, the Company assigned and transferred all of its
obligations of its two "ineffective" interest rate swaps to a third party at a
cost of $5.4 million plus accrued interest. As a result of this novation,
these "ineffective" swaps will no longer be included as a special item for
future fiscal periods. These "ineffective" swaps were included as a special
item through the second quarter of fiscal 2004.
The Company entered into interest rate swap agreements in October 1998,
August 2001 and May 2003. The October 1998 and August 2001 agreements were
"ineffective" hedges as a result of the options held by the counter parties
that may extend the original term of the interest rate swap agreements.
Applicable accounting treatment requires that the Company record the changes
in fair value of the October 1998 and August 2001 agreements in its
consolidated statement of income, rather than within "accumulated other
comprehensive income" in its statement of stockholders' equity. The changes
in fair value are dependent upon the forward-looking yield curves for each
swap. The May 2003 agreement is an "effective" hedge and therefore does not
require this treatment. The Company believes that its October 1998 and August
2001 agreements are special items that are excludable as non-recurring items.
First, the Company only intends to enter into "effective" hedges going
forward. This stated intention began with the May 2003 agreement. Second, the
Company believes that the October 1998 and August 2001 agreements may distort
and confuse investors if the change in fair value cannot be treated as a
special item because their inclusion directly impacts its reported earnings
per share. A change in fair value, whether positive or negative, can
significantly increase or decrease its reported earnings per share. For
example, the Company recorded a positive change in fair value for the second
quarter of fiscal 2004 that increased its diluted earnings per share by $0.01,
and in the first quarter of fiscal 2003, the company recorded a negative
change in fair value that decreased its diluted earnings per share by $0.03.
If the Company were prohibited from excluding this item as a special item, it
would artificially inflate its reported earnings per share and thereby mislead
investors as to its results of operations and our financial condition.
Comments from Management
"Continuing our momentum from fiscal 2004, we are pleased to start off
fiscal 2005 with another strong quarter of financial results," said Steven
Townsend, Chairman and Chief Executive Officer. "Reflecting the efforts of a
well-focused team and the successful execution of our sales and operating
strategies which have been designed to meet the growing demand for natural and
organic products, we realized solid gains in sales, net income, and earnings
per share which are indicators that our plans are on target. These gains came
despite the negative impact of the hurricanes that we experienced in Florida,
rising fuel prices and the impact of our decision to close our Mounds View, MN
facility due to its small size."
Mr. Townsend added, "We remain focused on serving a broad customer base
and are extremely pleased to report sales growth of 25% and comparable
distribution sales growth of 12% excluding Wild Oats. In addition, we are
pleased with our continued progress to improve operating margins. Our first
quarter operating margin was 3.7%, up 26 basis points from the same period
last year in spite of the impact of the hurricane, Mounds View closure and the
rising fuel costs."
Raises Fiscal 2005 Earnings Guidance
The Company is raising its guidance for fiscal 2005, ending July 31, 2005,
with projected revenues remaining in the $1.9 to $2.0 billion range, and
projected earnings per share, excluding potential special items, increasing to
a range of $0.95 - $1.00 per diluted share. Previously, the Company had
announced earnings per share guidance, excluding potential special items, from
$0.93 - $0.97 per diluted share.
Conference Call
Management will conduct a conference call and audio webcast at 11:00 a.m.
ET on November 30, 2004 to review the Company's quarterly results, market
trends and future outlook. The conference call dial-in number is 303-262-
2130. The audio webcast will be available, on a listen only basis, via the
Internet at http://www.fulldisclosure.com or at the Investor Relations section
of the Company's website, http://www.unfi.com. Please allow extra time to the
webcast to visit the site and download any software required to listen to the
Internet broadcast. The online archive of the webcast will be available for
30 days.
About United Natural Foods
United Natural Foods, Inc. carries and distributes over 35,000 products to
more than 18,000 customers nationwide. The Company serves a wide variety of
retail formats including conventional supermarket chains, natural product
superstores, independent retail operators and the food service channel. For
more information on United Natural Foods, Inc., visit the Company's website at
http://www.unfi.com.
Financial Tables Follow
For more information on United Natural Foods, Inc., visit the Company's
website at http://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. For a discussion of such risks and uncertainties,
which could cause actual results to differ from those contained in the
forward-looking statements, including but not limited to general business
conditions, the impact of competition and our dependence on principal
customers, see "Risk Factors" in the Company's annual report on Form 10-K
filed with the Commission on October 14, 2004, and its other filings under the
Securities Exchange Act of 1934, as amended. 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 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 Results: To supplement its financial statements presented on a
GAAP basis, the Company uses non-GAAP additional measures of operating
results, net earnings and earnings per share adjusted to exclude special
charges. The Company believes that the use of these additional measures is
appropriate to enhance an overall understanding of its past financial
performance and also its prospects for the future as these special charges are
not expected to be part of the Company's ongoing business. The adjustments to
the Company's GAAP results are made with the intent of providing both
management and investors with a more complete understanding of the underlying
operational results and trends and its marketplace performance. For example,
these adjusted non-GAAP results are among the primary indicators management
uses as a basis for its planning and forecasting of future periods. The
presentation of this additional information is not meant to be considered in
isolation or as a substitute for net earnings or diluted earnings per share
prepared in accordance with generally accepted accounting principles in the
United States of America. A comparison and reconciliation from non-GAAP to
GAAP results is included in the table within this release.
UNITED NATURAL FOODS, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)
Three months ended
October 31,
2004 2003
Net sales $477,542 $381,382
Cost of sales 385,099 305,209
Gross profit 92,443 76,173
Operating expenses 74,597 62,932
Restructuring charge 170 -
Amortization of intangibles 141 232
Total operating expenses 74,908 63,164
Operating income 17,535 13,009
Other expense (income):
Interest expense 1,433 2,320
Change in fair value of financial instruments - (304)
Other, net (101) (117)
Total other expense 1,332 1,899
Income before income taxes 16,203 11,110
Income taxes 6,319 4,333
Net income $9,884 $6,777
Per share data (basic):
Net income $0.25 $0.17
Weighted average basic shares of common stock 40,123 39,051
Per share data (diluted):
Net income $0.24 $0.17
Weighted average diluted shares of common stock 41,580 40,364
UNITED NATURAL FOODS, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands)
October 31, July 31,
2004 2004
ASSETS
Current assets:
Cash $5,753 $13,633
Accounts receivable, net 132,939 106,178
Notes receivable, trade, net 761 772
Inventories 214,255 196,171
Prepaid expenses 8,507 7,007
Deferred income taxes 8,061 7,610
Total current assets 370,276 331,371
Property & equipment, net 114,745 114,140
Other assets:
Goodwill 57,399 57,242
Notes receivable, trade, net 1,996 1,601
Intangible assets, net 140 154
Other 4,000 4,259
Total assets $548,556 $508,767
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $115,541 $80,875
Notes payable - line of credit 99,138 107,004
Accrued expenses and other current liabilities 28,677 29,501
Current portion of long-term debt 8,134 4,766
Income taxes payable 5,021 -
Total current liabilities 256,511 222,146
Long-term debt, excluding current portion 39,318 43,978
Deferred income taxes 7,978 7,730
Other long-term liabilities 89 137
Total liabilities 303,896 273,991
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value, authorized
5,000 shares at October 31, 2004 and July 31,
2004, respectively; none issued and outstanding - -
Common stock, $0.01 par value, authorized
50,000 shares; issued and outstanding 40,130
and 40,118 at October 31, 2004 and July 31,
2004, respectively 401 401
Additional paid-in capital 101,397 101,118
Unallocated shares of ESOP (1,727) (1,768)
Accumulated other comprehensive (loss) income (80) 240
Retained earnings 144,669 134,785
Total stockholders' equity 244,660 234,776
Total liabilities and stockholders' equity $548,556 $508,767
UNITED NATURAL FOODS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Three months ended
October 31,
2004 2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $9,884 $6,777
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,092 2,744
Change in fair value of financial instruments - (304)
Loss on disposals of property & equipment 9 2
Provision for doubtful accounts 466 570
Changes in assets and liabilities,
net of acquired companies:
Accounts receivable (27,227) (4,350)
Inventory (18,084) (17,499)
Prepaid expenses and other assets (1,876) 951
Notes receivable, trade (384) (357)
Accounts payable 34,666 22,574
Accrued expenses and other current liabilities (841) (4,140)
Income taxes payable 5,021 3,230
Tax effect of stock options 74 97
Net cash provided by operating activities 4,800 10,295
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,590) (2,329)
Proceeds from disposals of property
and equipment 25 57
Net cash used in investing activities (3,565) (2,272)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments under note payable (7,866) (583)
Repayments on long-term debt (1,292) (1,014)
Principal payments of capital lease obligations (162) (288)
Proceeds from exercise of stock options 205 366
Net cash used in financing activities (9,115) (1,519)
NET (DECREASE) INCREASE IN CASH (7,880) 6,504
Cash at beginning of period 13,633 3,645
Cash at end of period $5,753 $10,149
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $1,377 $2,220
Income taxes, net of refunds $1,166 $388
SOURCE United Natural Foods, Inc.
At The Company: Rick Puckett, Chief Financial Officer,
+1-860-779-2800; or Financial Relations Board: Joseph Calabrese, General
Information, +1-212-827-3772
http://www.unfi.com