Increases Guidance for Fiscal 2006 Revenues and Earnings
DAYVILLE, Conn., Feb. 28 /PRNewswire-FirstCall/ -- United Natural Foods,
Inc. (Nasdaq: UNFI) (the "Company") today reported net income of $10.8
million, or $0.26 per diluted share, excluding special items, for the second
quarter of fiscal 2006, ended January 28, 2006. Net income for the second
quarter of fiscal 2006, including the effect of special items, was $10.6
million, or $0.25 per diluted share.
The Company reported revenues for the second quarter of fiscal 2006 of
$601.1 million, an increase of $96.4 million, or 19%, from the $504.7 million
recorded in the second quarter of fiscal 2005. Strong growth across all major
sales channels of the wholesale segment contributed to the record sales.
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, the Company began expensing
stock options on August 1, 2005. The Company has adopted the modified
prospective method allowed under FAS 123R. The charge to earnings during
fiscal 2006 includes the impact of the vesting of stock options granted in
prior years, because the expense is recognized over the vesting period of the
options, which is typically four years. For the second quarter of fiscal 2006,
share-based compensation negatively impacted earnings before taxes by $0.9
million or 16 basis points.
For the second quarter of fiscal 2006, net income, excluding the effect of
special items, increased 14.3% to $10.8 million, or $0.26 per diluted share,
compared to $9.4 million, or $0.23 per diluted share, excluding special items,
for the second quarter of fiscal 2005. Special items in the second quarter of
fiscal 2006 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. Net income for
the second quarter of fiscal 2006, including the effect of special items,
increased 15.3% to $10.6 million, or $0.25 per diluted share, compared to $9.2
million, or $0.22 per diluted share, for the second quarter of fiscal 2005.
The following table details the non-GAAP measures for the second quarter
of fiscal 2006:
Quarter Ended January 28, 2006 Pretax Per diluted
(in thousands, except per share data) Income Net of Tax share
Income, excluding special items: $17,398 $10,787 $0.26
Special items - (Expense)
Rocklin, CA facility relocation costs
(included in operating expenses) (251) (156) (0.00)
Income, including special items: $17,147 $10,631 $0.25*
* Total reflects rounding
Certain labor costs associated with the closing of the Mounds View,
Minnesota facility, which was completed in the second quarter of fiscal 2005,
represented the special items for the second quarter of fiscal 2005.
The following table details the non-GAAP measures for the second quarter
of fiscal 2005:
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 - (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
All non-GAAP numbers have been adjusted to exclude special items. A
reconciliation of specific adjustments to GAAP results for the quarters ended
January 28, 2006 and January 31, 2005 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.
Comments from Management
"We continued fiscal 2006 with record revenues for the quarter, and are
pleased to report second quarter sales growth of 20.4% and comparable
distribution sales growth of 18.7% based on comparable shipping days,
excluding the two acquisitions made during fiscal 2005," said Michael Funk,
Chief Executive Officer.
Mr. Funk added, "This quarter's strong performance demonstrates the
effectiveness of our sales and operating strategies and our ability to
capitalize on the continued strong consumer demand for natural and organic
products. We remain focused on providing superior service to our entire
customer base, and by supporting our customers and helping them grow their
businesses, we continue to drive growth across all of our served channels of
business. Looking ahead, our business metrics remain strong and our team of
associates remains focused on achieving our long-term growth objectives. We
also continue to focus on achieving increased efficiencies in our Greenwood,
Indiana and Rocklin, California facilities that opened earlier this fiscal
year, while maintaining the high service levels our customers have come to
expect."
Raises Fiscal 2006 Earnings Guidance
The Company is raising its guidance for fiscal 2006, ending July 29, 2006,
with projected revenues increasing to $2.38 to $2.42 billion, and projected
earnings per share, excluding special items, increasing to a range of $1.05 -
$1.10 per diluted share. Previously, the Company had announced revenue
guidance from $2.25 to $2.35 billion and earnings per share guidance,
excluding potential special items, from $1.03 - $1.08 per diluted share for
the fiscal year. At this time, the Company is also narrowing the anticipated
impact of share-based compensation expense to approximately $5.5 million to
$6.8 million on a pre-tax basis, or $0.08 to $0.10 per diluted share after
taxes. Previously, the Company had expected to incur approximately $6.0
million to $8.2 million of share-based compensation expense on a pre-tax
basis, or $0.08 to $0.11 per diluted share after taxes, excluding potential
special items.
Actual share-based compensation expenses recorded during the remainder of
fiscal 2006 may fluctuate beyond the guidance provided based on various
factors, such as additional equity awards granted to employees, changes in the
Company's stock price, and actual results in comparison to the underlying
assumptions used in estimating the fair value of share-based payments.
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 February 28, 2006 to review the Company's quarterly results, market
trends and future outlook. The conference call dial-in number is (303) 262-
2075. An audio webcast of the conference call will be available to the public,
on a listen-only basis, via the Internet at http://www.earnings.com or at the
Investor Relations section of the Company's website at http://www.unfi.com.
Please allow extra time prior to the call to visit the site and download the
necessary software 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.
"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 7, 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 U.S.
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. 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 GAAP. 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 28, January 31, January 28, January 31,
2006 2005 2006 2005
Net sales $601,082 $504,710 $1,176,722 $982,252
Cost of sales 484,677 409,385 950,051 794,484
Gross profit 116,405 95,325 226,671 187,768
Operating expenses 96,057 78,577 191,570 153,173
Restructuring charge - - - 170
Amortization of intangibles 142 172 286 314
Total operating
expenses 96,199 78,749 191,856 153,657
Operating income 20,206 16,576 34,815 34,111
Other expense (income):
Interest expense 3,195 1,577 5,562 3,010
Other, net (136) (122) (264) (223)
Total other expense 3,059 1,455 5,298 2,787
Income before
income taxes 17,147 15,121 29,517 31,324
Income taxes 6,516 5,897 11,216 12,216
Net income $10,631 $9,224 $18,301 $19,108
Per share data (basic):
Net income $0.26 $0.23 $0.44 $0.47
Weighted average basic
shares of common stock 41,406 40,400 41,395 40,261
Per share data (diluted):
Net income $0.25 $0.22 $0.43 $0.46
Weighted average diluted
shares of common stock 41,952 41,495 42,076 41,369
UNITED NATURAL FOODS, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands)
January 28, July 31,
2006 2005
ASSETS
Current assets:
Cash and cash equivalents $26,608 $12,615
Accounts receivable, net 163,080 136,472
Notes receivable, trade, net 972 877
Inventories 264,296 235,700
Deferred income taxes 7,419 7,419
Prepaid expenses and other current assets 14,259 9,811
Total current assets 476,634 402,894
Property & equipment, net 164,566 167,909
Other assets:
Goodwill 74,610 73,808
Notes receivable, trade, net 2,296 1,802
Intangible assets, net 246 307
Other 6,249 4,538
Total assets $724,601 $651,258
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $161,002 $123,574
Accounts payable 125,736 119,177
Accrued expenses and other current liabilities 39,858 34,915
Current portion of long-term debt 5,592 5,843
Total current liabilities 332,188 283,509
Long-term debt, excluding current portion 62,487 64,852
Deferred income taxes 7,118 6,904
Other long-term liabilities 1,829 474
Total liabilities 403,622 355,739
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value, authorized
5,000 shares at January 28, 2006 and July 31,
2005, respectively; none issued and outstanding - -
Common stock, $0.01 par value, authorized 50,000
shares; 41,890 issued and 41,661 outstanding
shares at January 28, 2006; 41,287 issued and
outstanding shares at July 31, 2005 419 413
Additional paid-in capital 133,167 120,354
Unallocated shares of ESOP (1,523) (1,605)
Accumulated other comprehensive income 350 -
Retained earnings 194,658 176,357
Treasury stock, at cost, 229 and 0 shares at
January 28, 2006 and July 31, 2005,
respectively (6,092) -
Total stockholders' equity 320,979 295,519
Total liabilities and stockholders' equity $724,601 $651,258
UNITED NATURAL FOODS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Six months ended
January 28, January 31,
2006 2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $18,301 $19,108
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 7,988 6,438
Gains on disposals of property & equipment (30) (12)
Provision for doubtful accounts 1,600 998
Share-based compensation 3,480 -
Changes in assets and liabilities,
net of acquired companies:
Accounts receivable (28,333) (31,408)
Inventory (28,596) (14,359)
Prepaid expenses and other assets 1,970 (4,010)
Notes receivable, trade (589) (353)
Accounts payable 6,518 5,756
Accrued expenses and other current liabilities 6,510 (181)
Tax effect of stock options - 5,193
Net cash used in operating activities (11,181) (12,830)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (11,774) (9,039)
Purchases of acquired businesses, net of
cash acquired (575) (6,168)
Proceeds from disposals of property and equipment 43 114
Net cash used in investing activities (12,306) (15,093)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under note payable 37,428 17,101
Proceeds from exercise of stock options 7,713 6,061
Purchases of treasury stock (6,092) -
Repayments on long-term debt (2,922) (4,349)
Tax effect of stock options 1,626 -
Principal payments of capital lease obligations (273) (325)
Net cash provided by financing activities 37,480 18,488
NET INCREASE (DECREASE) IN CASH 13,993 (9,435)
Cash at beginning of period 12,615 13,633
Cash at end of period $26,608 $4,198
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized $5,167 $3,067
Income taxes, net of refunds $8,749 $6,062
SOURCE United Natural Foods, Inc.
CONTACT: Mark Shamber, Acting Chief Financial Officer of United Natural
Foods, Inc., 1-860-779-2800; or Joseph Calabrese of Financial Relations
Board, General Information, 1-212-827-3772, for United Natural Foods, Inc.
Web site: http://www.unfi.com
http://www.earnings.com
(UNFI)