Reports Record Sales of $504.7 Million in the Second Quarter of Fiscal 2005DAYVILLE, Conn., March 1, 2005 /PRNewswire-FirstCall via COMTEX/ -- United Natural Foods,
Inc. (Nasdaq: UNFI) today reported net income of $9.4 million for the second
quarter of fiscal 2005, ended January 31, 2005, or $0.23 per share on a
diluted basis, excluding special items. Net income for the second quarter of
fiscal 2005, including special items was $9.2 million, or $0.22 per share on a
diluted basis. The recent acquisition of Select Nutrition Distributors (SND)
had a negative impact on diluted earnings per share in the current quarter of
$0.004. We expected dilution from SND as stated in our press release dated
December 21, 2004. In addition higher fuel costs negatively impacted diluted
earnings per share during the quarter by $0.01 relative to expected cost
levels, and $0.02 compared to actual costs in the second quarter of fiscal
2004.
Net sales for the second quarter of fiscal 2005 were $504.7 million, an
increase of $111.5 million, or 28.3%, from the $393.2 million recorded in the
second quarter of fiscal 2004. On a comparable growth analysis, subtracting
SND and Wild Oats Markets, Inc., wholesale revenue growth was 14.5% for the
current quarter compared to last year.
Net income for the second quarter of fiscal 2005, excluding the effect of
special items, increased 32.3% to $9.4 million, or $0.23 per diluted share,
compared to $7.1 million, or $0.18 per diluted share, excluding special items,
for the quarter ended January 31, 2004. The special items for the second
quarter of fiscal 2005 included certain labor costs associated with the
closing of the Mounds View, MN facility. This closing was completed in the
second quarter of fiscal 2005. Net income for the second quarter of fiscal
2005, including the effect of special items, increased 31.0% to $9.2 million,
or $0.22 per diluted share, compared to $7.0 million, or $0.17 per diluted
share, for the quarter ended January 31, 2004.
The following table details the amounts and effects of this special item:
Quarter Ended January 31, 2005 Pretax Per diluted
(in thousands, except per share data) Income Net of Tax share
Income, excluding special items: $15,474 $9,439 $0.23
Special items - Income/(Expense)
Related to the closing of the
Mounds View, Minnesota facility
(included in operating expenses) (353) (215) (0.01)
Income, including special items: $15,121 $9,224 $0.22
The special items for the second quarter of fiscal 2004 consisted of a
non-cash income item related to the change in fair value of interest rate
swaps and the related option agreements. As previously reported, these
interest rate swaps, which are "ineffective" swaps, have been assigned and
will no longer be included as a special item. In addition, certain equipment
rental and labor costs were recorded in the second quarter of fiscal 2004 for
start-up and transition costs associated with implementing the Company's
primary distribution relationship with Wild Oats Market, Inc.
The following table details the amounts and effects of the special items
for quarter ending January 31, 2004:
Quarter Ended January 31, 2004 Pretax Per diluted
(in thousands, except per share data) Income Net of Tax share
Income, excluding special items: $11,695 $7,134 $0.18
Special items - Income/(Expense)
Related to the transition to the
primary distributorship for Wild Oats
Market, Inc. (included in operating
expenses) (551) (336) (0.01)
Interest rate swap and related
agreements (change in fair value of
financial instruments) 400 244 0.01
Income, including special items: $11,544 $7,042 $0.17*
* Totals reflect rounding
All non-GAAP numbers have been adjusted to exclude special charges. A
reconciliation of specific adjustments to GAAP results for the quarters ended
January 31, 2005, and January 31, 2004, is included in the financial tables
shown above. A description of the Company's use of non-GAAP information is
provided under "Non-GAAP Results" below.
The non-cash item from the change in fair value on interest rate swap
agreements was caused by favorable changes in interest rate yield curves
during the quarter ended January 31, 2004. As previously reported, 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 assignment, 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 for
the second quarter of fiscal 2004.
The Company entered into interest rate swap agreements in October 1998,
August 2001 and April 2003. The October 1998 and August 2001 agreements are
"ineffective" hedges. 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 "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 April 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 April 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 charge because their inclusion directly impacts the Company's
reported earnings per share. A change in fair value, whether positive or
negative, can significantly increase or decrease the Company's 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 earnings
per share by $0.01. If the Company was prohibited from excluding this item as
a special charge, it would artificially inflate its reported earnings per
share and thereby mislead investors as to its financial condition.
Comments from Management
Steven Townsend, Chief Executive Officer, said, "We are pleased with our
current continued strong performance highlighted by our success in meeting the
growing consumer demand for natural and organic foods. During the quarter we
realized solid increases in net sales, net income and earnings per share, all
indications that our sales, marketing and operational strategies are on
target. We remain focused on serving a broad customer base and are pleased to
achieve strong year over year sales growth rates to independents, conventional
mass market and supernaturals. Looking ahead, we remain committed to meeting
the needs of all our customers while consistently providing high service
levels across our entire distribution network."
Conference Call
Management will conduct a conference call and audio webcast at 11:00 a.m.
EST on March 1, 2005 to review the Company's quarterly results, market trends
and future outlook. The conference call dial-in number is (303) 262-2125.
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 43,000 products to
more than 21,000 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 quarterly report on Form 10-Q
filed with the Commission on December 10, 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 tables within this release.
UNITED NATURAL FOODS, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)
Three months ended Six months ended
January 31, January 31,
2005 2004 2005 2004
Net sales $504,710 $393,248 $982,252 $774,631
Cost of sales 409,385 314,463 794,484 619,673
Gross profit 95,325 78,785 187,768 154,958
Operating expenses 78,577 65,386 153,173 128,318
Restructuring charge - - 170 -
Amortization of intangibles 172 234 314 466
Total operating expenses 78,749 65,620 153,657 128,784
Operating income 16,576 13,165 34,111 26,174
Other expense (income):
Interest expense 1,577 2,133 3,010 4,454
Change in fair value of
financial instruments - (400) - (704)
Other, net (122) (112) (223) (230)
Total other expense 1,455 1,621 2,787 3,520
Income before income taxes 15,121 11,544 31,324 22,654
Income taxes 5,897 4,502 12,216 8,835
Net income $9,244 $7,042 $19,108 $13,819
Per share data (basic):
Net income $0.23 $0.18 $0.47 $0.35
Weighted average basic shares
of common stock 40,400 39,196 40,261 39,124
Per share data (diluted):
Net income $0.22 $0.17 $0.46 $0.34
Weighted average diluted shares
of common stock 41,495 40,750 41,369 40,563
UNITED NATURAL FOODS, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands)
January 31, July 31,
2005 2004
ASSETS
Current assets:
Cash $4,198 $13,633
Accounts receivable, net 139,990 106,178
Notes receivable, trade, net 766 772
Inventories 214,738 196,171
Prepaid expenses 9,524 7,007
Deferred income taxes 8,061 7,610
Total current assets 377,277 331,371
Property & equipment, net 117,747 114,140
Other assets:
Goodwill 67,240 57,242
Notes receivable, trade, net 1,960 1,601
Intangible assets, net 373 154
Other 5,665 4,259
Total assets $570,262 $508,767
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $91,500 $80,875
Notes payable - line of credit 129,826 107,004
Accrued expenses and other current liabilities 30,791 29,501
Current portion of long-term debt 6,078 4,766
Total current liabilities 258,195 222,146
Long-term debt, excluding current portion 38,317 43,978
Deferred income taxes 8,127 7,730
Other long-term liabilities 490 137
Total liabilities 305,129 273,991
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value,
authorized 5,000 shares at January 31,
2005 and July 31, 2004, respectively;
none issued and outstanding - -
Common stock, $0.01 par value,
authorized 50,000 shares; issued and outstanding
40,792 and 40,118 at January 31, 2005
and July 31, 2004, respectively 408 401
Additional paid-in capital 112,365 101,118
Unallocated shares of ESOP (1,686) (1,768)
Accumulated other comprehensive income 153 240
Retained earnings 153,893 134,785
Total stockholders' equity 265,133 234,776
Total liabilities and stockholders' equity $570,262 $508,767
UNITED NATURAL FOODS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Six months ended
January 31,
2005 2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $19,108 $13,819
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 6,438 5,531
Change in fair value of financial instruments - (704)
Gains on disposals of property & equipment (12) (22)
Provision for doubtful accounts 998 1,320
Changes in assets and liabilities,
net of acquired companies:
Accounts receivable (31,408) (10,861)
Inventory (14,359) (17,185)
Prepaid expenses and other assets (4,010) (1,743)
Notes receivable, trade (353) (1,722)
Accounts payable 5,756 11,943
Accrued expenses and other current liabilities (181) (1,838)
Financial instruments - (5,400)
Tax effect of stock options 5,193 921
Net cash used in operating activities (12,830) (5,941)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (9,039) (9,335)
Purchases of acquired businesses,
net of cash acquired (6,168) (6)
Proceeds from disposals of property and equipment 114 141
Net cash used in investing activities (15,093) (9,200)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under note payable 17,101 10,328
Proceeds from exercise of stock options 6,061 2,759
Repayments on long-term debt (4,349) (2,098)
Principal payments of capital lease obligations (325) (537)
Proceeds from issuance of long-term debt - 9,904
Net cash provided by financing activities 18,488 20,356
NET (DECREASE) INCREASE IN CASH (9,435) 5,215
Cash at beginning of period 13,633 3,645
Cash at end of period $4,198 $8,860
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $3,067 $4,354
Income taxes, net of refunds $6,062 $9,079
SOURCE United Natural Foods, Inc.
Rick Puckett, Chief Financial Officer of United Natural Foods, Inc., +1-860-779-2800
General Information: Joseph Calabrese of Financial Relations Board, +1-212-445-8434,
for United Natural Foods, Inc.
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