Gross margin was 18.7% for the fourth quarter of fiscal 2007, which
represents a 54 basis point decline from the gross margin of 19.2% for the
fourth quarter of fiscal 2006. Gross margin in the fourth quarter of 2007
increased 94 basis points when compared with the 17.7% gross margin reported
in the third quarter of fiscal 2007, ended April 28, 2007.
For the fourth quarter ended July 28, 2007, operating expenses were 15.3%
of net sales, or $108.2 million, an increase of $11.5 million, or 11.9%, over
operating expenses of $96.7 million, or 15.6% of net sales, for the fourth
quarter of fiscal 2006. In the fourth quarter of fiscal 2007, several items
negatively impacted the Company's operating expenses and net income.
Operating expenses in the fourth quarter of fiscal 2007 were negatively
impacted by $0.9 million in labor and other start-up expenses related to the
Company's new distribution facilities in Sarasota, Florida and Ridgefield,
Washington, which are expected to open in September and December 2007,
respectively. Higher health insurance expenses of $0.6 million and an increase
in fuel costs of $0.9 million also contributed to the increase in operating
expenses as a percentage of net sales compared to the third quarter of fiscal
2007.
In the fourth quarter of fiscal 2007, the Company recorded share-based
compensation expense of $1.0 million, in accordance with Statement of
Financial Accounting Standard ("SFAS") No. 123R, Share-Based Payment, compared
to $0.8 million of share-based compensation expense for the fourth quarter of
fiscal 2006.
Record Full Year Results
Net sales for fiscal 2007 were $2.75 billion, an increase of 13.2%, or
$320.7 million, over the $2.43 billion of net sales recorded in fiscal 2006.
Gross margin was 18.5% for fiscal 2007, which represents a 64 basis point
decline from the gross margin of 19.1% for fiscal 2006.
Net income for fiscal 2007 increased $6.9 million, or 15.9%, to $50.2
million, or $1.17 per diluted share, from $43.3 million, or $1.02 per diluted
share, for fiscal 2006.
Fiscal year 2007 operating expenses were 15.1% of net sales, or $416.1
million, an increase of $30.1 million, or 7.8%, over operating expenses of
$386.0 million, or 15.9% of net sales, for fiscal 2006.
Operating expenses during fiscal 2007 were negatively impacted by
approximately $2.2 million of losses related to the Company's two Auburn,
California facilities, $0.7 million in fees and abandoned leasehold
improvements and $0.9 million in labor and other start-up expenses related to
the Company's new distribution facilities in Sarasota, Florida and Ridgefield,
Washington.
Operating expenses in fiscal 2006 were negatively impacted by $3.5 million
in expenses related to an employment transition agreement entered into with a
former executive and $0.9 million in costs incurred during the transition from
our former warehouses and outside storage facility in Auburn, California into
our facility in Rocklin, California.
For the fiscal year ended July 28, 2007, share-based compensation expense
was $4.0 million, compared with $5.5 million for the fiscal year ended July
29, 2006.
Comments from Management
"Our sales growth in the 2007 fourth quarter remained strong and
consistent with our forecast of 13% to 15% growth." said Michael Funk,
President and Chief Executive Officer.
Mr. Funk added, "We're pleased to report that our gross margins rebounded
nicely during the quarter, as we had discussed on the third quarter earnings
conference call. I'm very impressed with the Company's ability to focus on the
margin enhancing initiatives during the fourth quarter. However, during the
fourth quarter, we incurred start-up operating costs associated with our new
facilities in Florida and the Portland, Oregon area, which will continue into
the first quarter of fiscal 2008. Nonetheless, the transportation savings and
operational efficiencies generated from these investments should benefit us
during the second half of fiscal 2008 and into the future."
"We look forward to executing on our fiscal 2008 plan which will deliver
shareholders a 19 to 24% increase in earnings and top line growth between 11%
and 14%," Mr. Funk concluded.
Announces Fiscal 2008 Guidance
The Company also has provided its financial outlook for fiscal 2008,
ending August 2, 2008.
For fiscal 2008, the Company expects revenues to increase by approximately
11% to 14% from fiscal 2007 to a range of $3.05 billion to $3.13 billion.
Fiscal 2008 U.S. GAAP earnings per diluted share are expected to be in the
range of $1.40 to $1.45 per share, an increase of 19% to 24% over fiscal 2007.
After excluding the impact of $2.2 million of losses related to the Company's
two Auburn, California facilities and $0.7 million in fees related to the
early termination of unused lease space and the write-off of abandoned
leasehold improvements at a facility in Minnesota, both reported in the second
quarter of fiscal 2007, fiscal 2008 earnings per diluted share are expected to
increase 16% to 20% over fiscal 2007 earnings per diluted share.
The Company's guidance is based on a number of assumptions, which are
subject to change and many of which are outside the Company's control. If any
of these assumptions vary, the Company's guidance may change. There can be no
assurance that the Company will achieve these results.
Capital expenditures are expected to be in the range of $50 million to $55
million during fiscal 2008. Included in the Company's 2008 capital
expenditures guidance are certain costs associated with the Sarasota, Florida
and Ridgefield, Washington facilities. The Company expects to begin operating
out of the Sarasota, Florida facility in the middle of the first quarter of
fiscal 2008, and the Ridgefield, Washington facility should commence
operations in the second fiscal quarter.
Conference Call
Management will conduct a conference call and audio webcast at 11:00 a.m.
EDT on August 31, 2007 to review the Company's quarterly results, market
trends and future outlook. The conference call dial-in number is (303) 275-
2170. An audio webcast of the conference call will be available to the public,
on a listen-only basis, via the Internet at www.earnings.com or at the
Investor Relations section of the Company's website at 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 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. United Natural Foods, Inc. was ranked by Forbes in 2005 as one of the
"Best Managed Companies in America," ranked by Fortune in 2006 and 2007 as one
of its "Most Admired Companies," and ranked by Business Ethics as one of its
"100 Best Corporate Citizens for 2006."
"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 June 7, 2007, 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.
UNITED NATURAL FOODS, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)
Quarters ended Years ended
July 28, July 29, July 28, July 29,
2007 2006 2007 2006
Net sales $706,786 $619,804 $2,754,280 $2,433,594
Cost of sales 574,791 500,729 2,244,702 1,967,684
Gross profit 131,995 119,075 509,578 465,910
Operating expenses 108,210 96,667 415,337 385,982
Impairment on assets
held for sale - - 756 -
Total operating
expenses 108,210 96,667 416,093 385,982
Operating income 23,785 22,408 93,485 79,928
Other expense (income):
Interest expense 2,807 2,900 12,089 11,210
Interest income (357) (78) (975) (297)
Other, net (176) (173) 156 (381)
Total other expense 2,274 2,649 11,270 10,532
Income before
income taxes 21,511 19,759 82,215 69,396
Provision for
income taxes 8,387 7,084 32,062 26,119
Net income $13,124 $12,675 $50,153 $43,277
Basic per share data:
Net income $0.31 $0.30 $1.18 $1.04
Weighted average
basic shares of
common stock 42,602 42,103 42,445 41,682
Diluted per share data:
Net income $0.31 $0.30 $1.17 $1.02
Weighted average
diluted shares of
common stock 42,847 42,572 42,786 42,304
UNITED NATURAL FOODS, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except per share data)
July 28, July 29,
2007 2006
ASSETS
Current assets:
Cash and cash equivalents $17,010 $20,054
Accounts receivable, net 160,329 151,642
Notes receivable, trade, net 1,236 1,254
Inventories 312,377 257,259
Prepaid expenses and other current assets 8,199 5,728
Assets held for sale 5,935 6,868
Deferred income taxes 9,801 10,911
Total current assets 514,887 453,716
Property and equipment, net 185,083 163,247
Other assets:
Goodwill 79,903 78,016
Notes receivable, trade, net 3,247 2,760
Intangible assets, net 8,552 251
Other 9,553 6,561
Total assets $801,225 $704,551
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $134,576 $102,146
Notes payable 120,000 125,005
Accrued expenses and other
current liabilities 37,132 38,201
Current portion of long-term debt 6,934 5,433
Total current liabilities 298,642 270,785
Long-term debt, excluding current portion 65,067 59,716
Deferred income taxes 9,882 9,693
Other long-term liabilities 839 883
Total liabilities 374,430 341,077
Stockholders' equity:
Preferred stock, $0.01 par value, authorized
5,000 shares at July 28, 2007 and
July 29, 2006; none issued and outstanding - -
Common stock, $0.01 par value, authorized
100,000 shares; 43,051 issued and 42,822
outstanding shares at July 28, 2007; 42,477
issued and 42,248 outstanding shares
at July 29, 2006 431 425
Additional paid-in capital 163,473 149,840
Unallocated shares of Employee
Stock Ownership Plan (1,203) (1,380)
Treasury stock (6,092) (6,092)
Accumulated other comprehensive income 399 1,047
Retained earnings 269,787 219,634
Total stockholders' equity 426,795 363,474
Total liabilities and stockholders' equity $801,225 $704,551
UNITED NATURAL FOODS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Years ended
July 28, July 29,
2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $50,153 $43,277
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 18,376 17,099
Loss (gain) on disposals of property
and equipment 1,997 (140)
Impairment on assets held for sale 756 -
Deferred income taxes 1,707 (1,355)
Provision for doubtful accounts 1,528 2,829
Share-based compensation 3,994 5,507
Changes in assets and liabilities, net
of acquisitions:
Accounts receivable (10,216) (17,934)
Inventories (52,975) (21,242)
Prepaid expenses and other assets (5,772) 4,348
Notes receivable, trade (469) (1,335)
Accounts payable 27,739 (8,936)
Accrued expenses and other current liabilities (1,308) 3,070
Net cash provided by operating activities 35,510 25,188
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (46,804) (19,290)
Purchases of acquired businesses, net of
cash acquired (9,303) (3,286)
Proceeds from disposals of property and equipment 5,452 224
Other investing activities (1,010) -
Net cash used in investing activities (51,665) (22,352)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 10,000 -
Proceeds from exercise of stock options 7,127 18,679
Repayments on long-term debt (6,216) (5,854)
Net (repayments) borrowings under note payable (5,005) 1,431
Increase (decrease) in bank overdraft 4,691 (8,300)
Tax benefit from exercises of stock options 2,518 5,312
Principal payments of capital lease obligations (4) (573)
Purchases of treasury stock - (6,092)
Net cash provided by financing activities 13,111 4,603
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (3,044) 7,439
Cash and cash equivalents at beginning of period 20,054 12,615
Cash and cash equivalents at end of period $17,010 $20,054
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest paid, net of amounts capitalized $11,877 $10,352
Federal and state income taxes paid,
net of refunds $28,607 $21,485
SOURCE United Natural Foods, Inc.