Press Release Details

United Natural Foods Announces 21% Increase In Net Sales for the First Quarter of Fiscal 2006

November 29, 2005
Reports Record Revenue of $576 million and $0.27 diluted EPS, Excluding Special Items and the Impact of Share-based Compensation

DAYVILLE, Conn., Nov 29, 2005 /PRNewswire-FirstCall via COMTEX News Network/ -- United Natural Foods, Inc. (Nasdaq: UNFI) today reported net sales for the first quarter of fiscal 2006, ended October 29, 2005, of $575.6 million, an increase of $98.1 million, or 21%, from the $477.5 million recorded in the first quarter of fiscal 2005. Strong growth in all sales channels of the wholesale segment contributed to the record sales.

The Company reported net income of $10.3 million, or $0.24 per diluted share, excluding special items but including the impact of share-based compensation, for the first quarter of fiscal 2006. Net income for the first quarter of fiscal 2006, excluding the impact of the adoption of Statement of Financial Accounting Standard No. 123R, Share-Based Payment ("FAS 123R"), and special items, was $11.3 million, or $0.27 per diluted share. Net income for the first quarter of fiscal 2006, including the effect of special items and the adoption of FAS 123R, was $7.7 million, or $0.18 per diluted share. This compares with net income of $9.9 million, or $0.24 per diluted share, for the first quarter of fiscal 2005 ended October 31, 2004. There were no special items for the first quarter of fiscal 2005.

In December 2004, the Financial Accounting Standards Board finalized FAS 123R which requires all companies to expense share-based payments, including stock options, at fair value as of the beginning of the first annual reporting period that begins after June 15, 2005. As such, we began expensing stock options on August 1, 2005. Although we have adopted the modified prospective method allowed under FAS 123R, the charge to earnings during fiscal 2006 includes the impact of stock options granted in prior years, because the expense is recognized over the vesting period of the options, which has typically been four years. For the first quarter of fiscal 2006, share-based compensation, excluding special items of $1.0 million, negatively impacted earnings by $1.5 million before taxes, or $0.02 in earnings per diluted share.

For the first quarter of fiscal 2006 ended October 29, 2005, special items consisted of incremental and redundant costs incurred during the transition from our former warehouses and outside storage facility in Auburn, California into our new larger facility in Rocklin, California, certain incremental costs associated with the opening of our new Greenwood, Indiana facility and non- recurring cash and non-cash expenses incurred in accordance with the employment transition agreement we entered into during the quarter with Steven H. Townsend, our former President and Chief Executive Officer.

The following table details the non-GAAP measures for the first quarter of fiscal 2006:

Quarter Ended October 29, 2005           Pretax                Per diluted
    (in thousands, except per share data)    Income   Net of Tax      share

    Income, excluding special items and
     share-based compensation:               $18,160    $11,259        $0.27

    Share-based compensation expense
     (included in operating expenses)         (1,514)      (939)       (0.02)

    Income, excluding special items:         $16,646    $10,320        $0.24*

    Special items - (Expense)
    Employment transition agreement costs
     (included in operating expenses)         (3,512)    (2,177)       (0.05)
    Rocklin, CA facility relocation costs
     (included in operating expenses)           (672)      (416)       (0.01)
    Greenwood, IN facility openings costs
     (included in operating expenses)            (92)       (57)       (0.00)

    Income, including special items:         $12,371*    $7,670        $0.18

     * Total reflects rounding.

All non-GAAP numbers have been adjusted to exclude special items. A reconciliation of specific adjustments to GAAP results for the quarter ended October 29, 2005 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.

Comments from Management

"We are extremely pleased to start off fiscal 2006 with another strong quarter of financial results," said Michael Funk, 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 across all of our served channels of business for natural and organic products, we realized record sales, and strong earnings per share."

Mr. Funk added, "We remain focused on providing superior service to our entire customer base and are pleased to report sales growth of 21% and comparable distribution sales growth of 18% excluding the acquisitions made during fiscal 2005. Fuel costs remained high in the quarter, negatively impacting our operating margins by 10 bps. Our service levels remain high and our business metrics are strong. We also successfully opened our new Rocklin, CA facility and closed two owned facilities in Northern California as well as a third off site storage facility."

Confirms Fiscal 2006 Earnings Guidance

The Company is confirming its guidance for fiscal 2006, ending July 29, 2006, with projected revenues remaining in the $2.25 to $2.35 billion range, and projected earnings per share, excluding special items but including the impact of share-based compensation, expected to be in a range of $1.03 - $1.08 per diluted share. In July 2005 the Company had announced earnings per share guidance, excluding special items and share-based compensation, from $1.14 - $1.19 per diluted share.

Historically, the Company has classified expenses related to distribution facility expansions and distribution facility relocations 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 additional special items in fiscal 2006. 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.

Conference Call

Management will conduct a conference call and audio webcast at 11:00 a.m. EST on November 29, 2005 to review the Company's quarterly and annual results, market trends and future outlook. The conference call dial-in number is (303) 262-2141. The audio webcast will be available, on a listen only basis, via the Internet at http://www.earnings.com or at the Investor Relations section of the Company's website, http://www.unfi.com. Please allow extra time prior 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 more than 40,000 products to more than 20,000 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.

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 13, 2005, 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 generally accepted accounting principles ("GAAP") basis, the Company uses non- GAAP additional measures of operating results, net income and earnings per share adjusted to exclude special charges and/or share-based compensation. 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, while the measures excluding share- based compensation provide comparability to the prior fiscal year. 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 tables within this release.

UNITED NATURAL FOODS, INC.
                CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
                    (In thousands, except per share data)

                                                     Three months ended
                                                  October 29,     October 31,
                                                      2005            2004

    Net sales                                       $575,641        $477,542

    Cost of sales                                    465,374         385,099

                     Gross profit                    110,267          92,443

    Operating expenses (includes $2,535 and $0
     of share-based compensation expense in 2005
     and 2004, respectively)                          95,513          74,597

    Restructuring charge                                  --             170

    Amortization of intangibles                          145             141

                    Total operating expenses          95,658          74,908

                    Operating income                  14,609          17,535

    Other expense (income):
             Interest expense                          2,367           1,433
             Other, net                                 (129)           (101)

                     Total other expense               2,238           1,332

                     Income before income taxes       12,371          16,203

    Income taxes                                       4,701           6,319

                    Net income                        $7,670          $9,884

    Per share data (basic):

                    Net income                         $0.19           $0.25

    Weighted average basic shares of common stock     41,334          40,123

    Per share data (diluted):

                    Net income                         $0.18           $0.24

    Weighted average diluted shares of common stock   42,150          41,580


                          UNITED NATURAL FOODS, INC.
                   CONSOLIDATED BALANCE SHEETS (Unaudited)
                                (In thousands)

                                                      October 29,     July 31,
                                                         2005           2005

    ASSETS
    Current assets:
        Cash and cash equivalents                       $9,906       $12,615
        Accounts receivable, net                       153,488       136,472
        Notes receivable, trade, net                       832           877
        Inventories                                    270,449       235,700
        Prepaid expenses and other current assets       10,023         9,811
        Deferred income taxes                            7,419         7,419
           Total current assets                        452,117       402,894

    Property & equipment, net                          171,971       167,909

    Other assets:
        Goodwill                                        74,552        73,808
        Notes receivable, trade, net                     2,093         1,802
        Intangible assets, net                             276           307
        Other                                            5,277         4,538

           Total assets                               $706,286      $651,258

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
        Accounts payable                              $144,191      $119,177
        Notes payable                                  138,975       123,574
        Accrued expenses and other current liabilities  35,805        34,915
        Current portion of long-term debt                5,657         5,843
           Total current liabilities                   324,628       283,509

      Long-term debt, excluding current portion         63,907        64,852
      Deferred income taxes                              7,032         6,904
      Other long-term liabilities                        1,747           474
           Total liabilities                           397,314       355,739

    Commitments and contingencies

    Stockholders' equity:
        Preferred stock, $0.01 par value,
         authorized 5,000 shares
         at October 29, 2005 and July 31, 2005,
         respectively; none issued and outstanding           -             -
        Common stock, $0.01 par value, authorized
         50,000 shares; issued and outstanding 41,436
         and 41,287 at October 29, 2005 and
         July 31, 2005, respectively                       414           413
        Additional paid-in capital                     125,885       120,354
        Unallocated shares of ESOP                      (1,564)       (1,605)
        Accumulated other comprehensive income             210             -
        Retained earnings                              184,027       176,357
           Total stockholders' equity                  308,972       295,519

    Total liabilities and stockholders' equity        $706,286      $651,258


                          UNITED NATURAL FOODS, INC.
              CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
                                (In thousands)

                                                         Three months ended
                                                      October 29,  October 31,
                                                          2005         2004
    CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income                                            $7,670      $9,884
    Adjustments to reconcile net income to net cash
     (used in) provided by operating activities:
        Depreciation and amortization                      3,754       3,092
        (Gain) loss on disposals of property & equipment      (9)          9
        Provision for doubtful accounts                      369         466
        Share-based compensation                           2,535           -
     Changes in assets and liabilities, net of acquisitions:
        Accounts receivable                              (17,510)    (27,227)
        Inventories                                      (34,749)    (18,084)
        Prepaid expenses and other assets                   (625)     (1,876)
        Notes receivable, trade                             (246)       (384)
        Accounts payable                                  24,973      34,666
        Accrued expenses and other current liabilities     2,189        (841)
        Income taxes payable                                   -       5,021
        Tax effect of stock options                            -          74
    Net cash (used in) provided by operating activities  (11,649)      4,800

    CASH FLOWS FROM INVESTING ACTIVITIES:
        Capital expenditures                              (7,683)     (3,590)
        Payments for acquisitions, net of cash acquired     (517)          -
        Proceeds from disposals of property and equipment     21          25
    Net cash used in investing activities                 (8,179)     (3,565)

    CASH FLOWS FROM FINANCING ACTIVITIES:
        Net borrowings (repayments) under note payable    15,401      (7,866)
        Proceeds from exercise of stock options            1,713         205
        Tax effect of stock options                        1,284           -
        Repayments on long-term debt                      (1,131)     (1,292)
        Principal payments of capital lease obligations     (148)       (162)
    Net cash provided by (used in) financing activities   17,119      (9,115)

    NET DECREASE IN CASH AND CASH EQUIVALENTS             (2,709)     (7,880)
    Cash and cash equivalents at beginning of period      12,615      13,633
    Cash and cash equivalents at end of period            $9,906      $5,753

    Supplemental disclosures of cash flow information:
      Cash paid during the period for:
        Interest                                          $2,561      $1,377
        Income taxes, net of refunds                      $4,470      $1,166

SOURCE United Natural Foods, Inc.

Rick Puckett, Chief Financial Officer of United Natural Foods, Inc., +1-860-779-2800;
or Joseph Calabrese, of Financial Relations Board, +1-212-827-3772, for United
Natural Foods, Inc.

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