- Quarterly net sales of $830.7 million increased 24.2% from the second
quarter of fiscal 2007.
- Reports quarterly net income of $9.1 million, or $0.21 per diluted
share, including approximately $3.3 million in dilution from Millbrook.
DAYVILLE, Conn., Feb. 21 /PRNewswire-FirstCall/ -- United Natural Foods,
Inc. (Nasdaq: UNFI) (the "Company") today reported net sales of $830.7 million
for the second quarter of fiscal 2008, ended January 26, 2008, an increase of
approximately $162.1 million, or 24.2%, from the $668.5 million of net sales
recorded in the second quarter of fiscal 2007. Excluding the effect of the
Company's November 2007 acquisition of Millbrook Distribution Services, Inc.
("Millbrook"), net sales increased by $89.8 million, or 13.4%, to
$758.3 million.
The Company reported net income of $9.1 million, or $0.21 per diluted
share, for the second quarter of fiscal 2008. The Company estimates that
Millbrook, which the Company acquired in the second quarter of fiscal 2008,
negatively impacted net income by approximately $3.3 million, or $0.08 per
diluted share, for the second quarter of fiscal 2008. The Company previously
announced that the Millbrook acquisition was expected to be dilutive to
earnings by approximately $0.04 in the second quarter of fiscal 2008. The
larger than expected dilution from the Millbrook acquisition was due to a
combination of lower than projected improvements in gross margin from purchase
discounts and forward buying opportunities, and delays in the original
timeline to generate identified savings from synergies between Millbrook and
the Company's operations. Excluding Millbrook, net income for the quarter
ended January 26, 2008 would have been $12.4 million, or $0.29 per diluted
share, compared to $10.9 million, or $0.25 per diluted share for the quarter
ended January 27, 2007.
Operating expenses were $135.1 million, or 16.3% of net sales for the
quarter ended January 26, 2008, compared to $102.6 million, or 15.4% of
net sales, for the second quarter of fiscal 2007. For the quarter ended
January 26, 2008, operating expenses were negatively impacted by $0.7 million
in expenses related to start-up activities at the Company's Portland, Oregon
area distribution facility, which commenced shipments in December 2007. In
addition, the Company continues to experience start-up inefficiencies at its
Sarasota, Florida and Portland, Oregon area facilities, which negatively
impacted operating margins in the quarter. The Company typically achieves
optimum efficiencies from new facilities within six to nine months following
their opening.
During the second quarter of 2008, the Company reversed its January 2007
decision to sell the Company's second Auburn, California facility, which is
discussed below. Following the decision, the building was reclassified on the
Company's balance sheet from assets held for sale to property and equipment,
and the Company recorded incremental depreciation of $0.2 million on this
facility during the quarter. Operating expenses during the second quarter of
fiscal 2007 were negatively impacted by approximately $2.2 million of losses
related to the Company's two Auburn, California facilities. In January 2007,
the Company incurred a loss of $1.5 million associated with the sale of one of
the facilities. In addition, the Company recorded an impairment loss in
accordance with Statement of Financial Accounting Standard ("SFAS") No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, of $0.8
million on its previously mentioned second Auburn, California facility, as a
result of the Company's decision to sell the property. During the second
quarter of fiscal 2007, the Company also incurred $0.4 million in fees related
to the early termination of unused leased space at a facility in Minnesota and
recorded a related write-off of $0.3 million in abandoned leasehold
improvements.
The Company recorded share-based compensation expense of $1.4 million, in
the second quarter of fiscal 2008, in accordance with SFAS No. 123R, Share-
Based Payment, compared to $1.0 million of share-based compensation expense
recorded for the second quarter of fiscal 2007.
"In an increasingly tough economy, we are pleased to report strong sales
growth in all of our channels," said Michael Funk, President and Chief
Executive Officer. "Our sales to independents continued to strengthen during
the quarter, resulting in comparable growth of approximately 11%, while our
sales to supermarkets increased by 81% as a result of Millbrook's customer
mix. As we look forward to the rest of fiscal 2008, we remain focused on
expanding our presence in specialty foods, and driving synergies from our
recent acquisition. We believe that there are significant opportunities to
expand and improve our specialty foods operations as we work to further
integrate Millbrook into the Company."
Updates Fiscal 2008 Earnings Guidance
The Company is reaffirming its projected net sales guidance for fiscal
year 2008, ending August 2, 2008, of $3.27 billion to $3.35 billion, which
represents a 19% to 22% increase in net sales over fiscal 2007. In addition,
the Company is revising its guidance on earnings per share for fiscal 2008
downward to a range of $1.12 to $1.14 per diluted share. The Company's updated
guidance reflects the expectation that the Millbrook acquisition will be
dilutive to earnings by $0.10 to $0.12 per diluted share in the second half of
fiscal 2008. This increased dilution is expected to be due to a combination of
slower than projected improvements in gross margin from purchase discounts and
forward buying opportunities, and delays in the original timeline to generate
identified savings from synergies between Millbrook and the Company's
operations. The Company expects that Millbrook will be neutral to earnings by
the first quarter of fiscal 2009. The Company previously announced earnings
per share guidance of $1.40 to $1.45 per diluted share for fiscal 2008.
Finally, the Company is reaffirming its anticipated fiscal 2008 capital
expenditures guidance of approximately $50 to $55 million, which includes
certain costs associated with the previously announced Moreno Valley,
California facility, which is expected to begin operations in the first
quarter of fiscal 2009.
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.
Conference Call
Management will conduct a conference call and audio webcast at
5:00 p.m. ET on February 21, 2008 to review the Company's quarterly results,
market trends and future outlook. The conference call dial-in number is
(303) 262-2175. 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 on the
Company's website for 60 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." For more information on United
Natural Foods, Inc., visit the Company's website at http://www.unfi.com.
Financial Tables Follow
"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 Securities and Exchange Commission on December 6, 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)
Three months ended Six months ended
January 26, January 27, January 26, January 27,
2008 2007 2008 2007
Net sales $830,656 $668,545 $1,567,045 $1,314,978
Cost of sales 675,984 544,477 1,276,902 1,067,339
Gross profit 154,672 124,068 290,143 247,639
Operating expenses 135,100 101,877 246,366 202,307
Impairment on assets
held for sale - 756 - 756
Total operating
expenses 135,100 102,633 246,366 203,063
Operating income 19,572 21,435 43,777 44,576
Other expense (income):
Interest expense 5,059 3,350 7,950 6,261
Interest income (153) (180) (332) (294)
Other, net 6 399 75 371
Total other
expense 4,912 3,569 7,693 6,338
Income before
income taxes 14,660 17,866 36,084 38,238
Provision for income taxes 5,561 6,968 13,423 14,913
Net income $9,099 $10,898 $22,661 $23,325
Basic per share data:
Net income $0.21 $0.26 $0.53 $0.55
Weighted average
basic shares
of common stock 42,676 42,438 42,645 42,299
Diluted per share data:
Net income $0.21 $0.25 $0.53 $0.55
Weighted average
diluted shares
of common stock 42,884 42,848 42,860 42,733
UNITED NATURAL FOODS, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands)
January 26, July 28,
2008 2007
ASSETS
Current assets:
Cash and cash equivalents $25,183 $17,010
Accounts receivable, net 184,409 160,329
Notes receivable, trade, net 1,338 1,836
Inventories 393,745 312,377
Prepaid expenses and other current assets 16,757 8,199
Assets held for sale - 5,935
Deferred income taxes 9,474 9,474
Total current assets 630,906 515,160
Property & equipment, net 210,925 185,083
Other assets:
Goodwill 179,969 79,903
Notes receivable, trade, net 3,410 2,647
Intangible assets, net 28,962 8,552
Other 10,457 9,553
Total assets $1,064,629 $800,898
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $297,009 $120,000
Accounts payable 171,914 134,576
Accrued expenses and other current liabilities 66,690 37,132
Current portion of long-term debt 5,068 6,934
Total current liabilities 540,681 298,642
Long-term debt, excluding current portion 61,454 65,067
Deferred income taxes 1,027 9,555
Other long-term liabilities 10,306 839
Total liabilities 613,468 374,103
Stockholders' equity:
Preferred stock, $0.01 par value,
authorized 5,000 shares at January 26, 2008
and July 28, 2007; none issued and outstanding - -
Common stock, $0.01 par value,
authorized 100,000 shares;
43,099 issued and 42,871 outstanding
shares at January 26, 2008;
43,051 issued and 42,822 outstanding
shares at July 28, 2007 431 431
Additional paid-in capital 166,830 163,473
Unallocated shares of
Employee Stock Ownership Plan (1,121) (1,203)
Treasury stock (6,092) (6,092)
Accumulated other comprehensive (loss) income (1,335) 399
Retained earnings 292,448 269,787
Total stockholders' equity 451,161 426,795
Total liabilities and stockholders' equity $1,064,629 $800,898
UNITED NATURAL FOODS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Six months ended
January 26, January 27,
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $22,661 $23,325
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization 10,157 9,378
Share-based compensation 2,387 1,997
Provision for doubtful accounts 1,286 815
Gain on forgiveness of loan (157) -
Loss (gain) on disposals of property & equipment 8 1,968
Impairment on assets held for sale - 756
Changes in assets and liabilities,
net of acquired companies:
Accounts receivable (13,565) (16,083)
Inventory (57,392) (31,730)
Prepaid expenses and other assets (5,724) (10,675)
Notes receivable, trade (265) 104
Accounts payable (2,729) 11,843
Accrued expenses and other current liabilities 4,371 (1,213)
Net cash used in operating activities (38,962) (9,515)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of acquired business,
net of cash acquired (107,235) -
Capital expenditures (21,466) (14,542)
Proceeds from disposals of property and equipment 165 5,441
Other investing activities - (1,028)
Net cash used in investing activities (128,536) (10,129)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under note payable 177,009 (2,005)
Increase in bank overdraft 4,102 2,283
Proceeds from exercise of stock options 810 6,663
Repayments on long-term debt (6,411) (2,999)
Tax effect of stock options 161 2,718
Principal payments of capital lease obligations - (4)
Proceeds from borrowings of long-term debt - 10,000
Net cash provided by financing activities 175,671 16,656
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 8,173 (2,988)
Cash and cash equivalents at beginning of period 17,010 20,054
Cash and cash equivalents at end of period $25,183 $17,066
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized $7,146 $6,280
Federal and state income taxes, net of refunds $15,862 $17,313
SOURCE United Natural Foods, Inc.
CONTACT: Mark Shamber, Chief Financial Officer of United Natural Foods,
Inc., 1-860-779-2800; or General Information - Joseph Calabrese of Financial
Relations Board, 1-212-827-3772
Web site: http://www.unfi.com
(UNFI)