Q3 Fiscal 2014 Net Sales Increased 13.8% Year over Year to $1.78
Billion
Q3 Fiscal 2014 Net Income Increased 15.1% Year over Year to $36.4
Million
PROVIDENCE, R.I.--(BUSINESS WIRE)--Jun. 10, 2014--
United Natural Foods, Inc. (Nasdaq: UNFI) (the "Company") today reported
financial results for the third quarter of fiscal 2014 ended May 3, 2014.
Third Quarter Fiscal 2014 Highlights
-
Net sales increased 13.8%, or $215.5 million, to $1.78 billion for the
third quarter of fiscal 2014 compared to $1.57 billion for the same
period last fiscal year
-
Diluted EPS was $0.73 for the third quarter of fiscal 2014, an
increase of 14.1% from $0.64 for the same period last fiscal year
-
Operating income increased 16.3% to $62.6 million for the third
quarter of fiscal 2014 compared to $53.9 million for the same period
last fiscal year
“Each of our sales channels continued to benefit from consumers
increasingly choosing better-for-you natural, organic and specialty
foods as illustrated by our second consecutive quarter of net sales
growth in excess of $200 million,” said Steven Spinner, President and
Chief Executive Officer. "To support these positive growth dynamics and
enhance service levels to our customers, in the fourth quarter, we
opened our distribution center in Racine, Wisconsin and we are scheduled
to open our Hudson Valley, New York facility in the first quarter of
fiscal 2015."
Net sales for the third quarter of fiscal 2014 increased 13.8% to $1.78
billion from $1.57 billion in the third quarter of fiscal 2013. The
third quarter of fiscal 2014 included incremental net sales of
approximately $18.0 million, or 1.2%, resulting from the Company's
acquisition of Trudeau Foods in the first quarter of fiscal 2014. Gross
margin was 16.7% for the third quarter of fiscal 2014 compared to 16.8%
for the third quarter of fiscal 2013. Gross margin for the third quarter
of fiscal 2014 was negatively impacted primarily by foreign exchange
from the declining value of the Canadian dollar on the Company's
Canadian business.
Total operating expenses were 13.2% as a percentage of net sales for the
third quarter of fiscal 2014, a decrease of 13 basis points compared
with the same period last fiscal year. The prior year quarter was
negatively impacted by labor action costs of $1.5 million related to the
Company's Auburn, Washington facility. Operating expenses for the third
quarter of fiscal 2014 included non-recurring costs of approximately
$0.9 million related to the start up of the Company's Wisconsin facility
in addition to $0.6 million of acquisition costs related to the recently
announced agreement to purchase of Tony's Fine Foods.
Operating income increased 16.3%, or $8.8 million, to $62.6 million for
the third quarter of fiscal 2014 compared to $53.9 million for the third
quarter of fiscal 2013. Operating income as a percentage of net sales
for the third quarter of fiscal 2014 increased 7 basis points to 3.5%
compared to the same period last fiscal year.
Net income for the third quarter of fiscal 2014 increased $4.8 million,
or 15.1%, to $36.4 million, or $0.73 per diluted share, from $31.6
million, or $0.64 per diluted share, for the third quarter of fiscal
2013.
Fiscal 2014 Year to Date Summary
Net sales for the nine months ended May 3, 2014 totaled $5.03 billion, a
13.7% increase over the comparable prior fiscal year period. Gross
margin decreased 10 basis points to 16.7%, compared to the nine months
ended April 27, 2013. Gross margin in the first nine months of fiscal
2014 was negatively impacted by severe weather and foreign exchange for
the Company's Canadian business and the continued shift in sales growth
towards supernatural, national supermarket and multi-unit independent
customers. These challenges were partially offset by improved execution
by the Company’s supply chain group, specifically with respect to
inbound logistics and procurement.
At 13.5% of net sales, total operating expenses for the nine months
ended May 3, 2014 were 34 basis points lower than the comparable prior
fiscal year period. Total operating expenses increased $66.8 million, or
10.9%, to $678.0 million from $611.2 million for the nine months ended
April 27, 2013. Total operating expenses for the nine months ended April
27, 2013 included approximately $6.1 million of expenses related to the
labor action at the Company's Auburn, Washington facility. Excluding
these incremental expenses, operating expenses were $605.1 million or
13.7% of net sales.
Operating income for the nine months ended May 3, 2014 increased 23.2%,
or $30.1 million, to $159.5 million from $129.4 million for the nine
months ended April 27, 2013. Operating income as percentage of net sales
increased 24 basis points to 3.2% compared to the same period last
fiscal year.
The following table details the amounts and effect of the labor action
costs related to our Auburn, Washington facility described above and the
reconciliation of total operating expenses including the labor action
costs (GAAP basis), to total operating expenses excluding the labor
action costs (non-GAAP basis) for the nine months ended April 27, 2013:
|
|
|
Nine months ended
|
|
|
|
April 27, 2013
|
|
|
|
|
|
|
% of
|
|
(in millions)
|
|
Pretax
|
|
Net Sales
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$
|
611.2
|
|
|
13.8
|
%
|
|
Labor action costs
|
|
(6.1
|
)
|
|
(0.1
|
)%
|
|
Total operating expenses, excluding labor action costs
|
|
$
|
605.1
|
|
|
13.7
|
%
|
|
|
|
|
|
|
|
|
|
Net income for the nine months ended May 3, 2014 increased $16.3
million, or 21.6%, to $92.1 million, or $1.85 per diluted share, from
$75.8 million, or $1.53 per diluted share for the nine months ended
April 27, 2013.
“Our additional distribution capacity in New York and Wisconsin and our
pending acquisition of Tony's Fine Foods will enable us to build our
platform of organic, natural protein and specialty products for new and
existing customers throughout North America,” concluded Mr. Spinner.
Updated Fiscal 2014 Guidance
Based on UNFI's performance to date and the current outlook for the
remainder of fiscal 2014, UNFI is narrowing and updating its previous
guidance for fiscal 2014 provided on March 10, 2014. For fiscal 2014,
ending August 2, 2014, which is a 52-week fiscal year compared with the
53-week fiscal 2013, the Company expects net sales in the range of
approximately $6.73 to $6.77 billion, an increase of approximately 11.0%
to 11.6% over fiscal 2013. Adjusting for $118.7 million of net sales for
the 53rd week in fiscal 2013, net sales growth for fiscal 2014 is
expected to be in the range of approximately 13.2% to 13.8%. The Company
estimates GAAP earnings per diluted share for fiscal 2014 in the range
of approximately $2.47 to $2.50 per share, an increase of approximately
13.3% to 14.7% over fiscal 2013 GAAP earnings per diluted share of
$2.18. The Company’s updated guidance does not reflect any anticipated
sales or earnings from the recently announced agreement to acquire
Tony’s Fine Foods, which is expected to close late in the fourth quarter
of fiscal 2014. The Company’s updated guidance does reflect
approximately $1.3 to $1.6 million in anticipated acquisition costs
associated with the transaction.
Conference Call & Webcast
The Company's third quarter 2014 conference call and audio webcast will
be held today, Tuesday, June 10, 2014 at 4:30 p.m. EDT. The
audio webcast of the conference call will be available to the public, on
a listen-only basis, via the Internet at the Investors section of the
Company's website at www.unfi.com.
The online archive of the webcast will be available on the Company's
website for 30 days.
About United Natural Foods
United Natural Foods, Inc. (http://www.unfi.com)
carries and distributes more than 65,000 products to more than 31,000
customer locations throughout the United States and Canada. 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 Fortune in 2006 - 2010 as one of its "Most Admired Companies"
and in 2012 as one of its "Most Admired American Companies", winner of
the Supermarket News 2008 Sustainability Excellence Award, recognized by
the Nutrition Business Journal for its 2009 Environment and
Sustainability Award and chosen by Food Logistics Magazine as one of its
2012 Top 20 Green Providers.
For more information on United Natural Foods, Inc., visit the
Company’s website at 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 and are based on
current expectations and management estimates; actual results may differ
materially. The risks and uncertainties which could impact these
statements are described in the Company's filings under the Securities
Exchange Act of 1934, as amended, including its annual report on Form
10-K filed with the Securities and Exchange Commission ("SEC") on
October 1, 2013, its quarterly reports on Form 10-Q filed with the SEC
on December 11, 2013 and March 12, 2014, and other filings the Company
makes with the SEC, and include, but are not limited to, the Company's
dependence on principal customers; the Company's sensitivity to general
economic conditions, including the current economic environment, changes
in disposable income levels and consumer spending trends; the Company's
ability to reduce its expenses in amounts sufficient to offset its
increased focus on sales to conventional supermarkets and the resulting
lower gross margins on the sales; the Company's reliance on the
continued growth in sales of natural and organic foods and non-food
products in comparison to conventional products; the Company's ability
to timely and successfully deploy its warehouse management system
throughout its distribution centers; increased fuel costs; the Company's
sensitivity to inflationary and deflationary pressures; the relatively
low margins and economic sensitivity of the Company's business; the
potential for disruptions in the Company's supply chain by circumstances
beyond its control; the risk of interruption of supplies due to lack of
long-term contracts, severe weather, work stoppages or otherwise; the
ability to identify and successfully complete acquisitions of other
natural, organic and specialty food and non-food products distributors;
management's allocation of capital and the timing of capital
expenditures; the occurrence of any event, change or other circumstance
that could give rise to the termination of the acquisition agreement
entered into by the parties in connection with the Company’s proposed
acquisition of all of the stock of Tony’s Fine Foods; the ability of the
Company to consummate the proposed acquisition of Tony’s Fine Foods; and
the Company's ability to successfully deploy its operational initiatives
to achieve synergies from the acquisition of Tony’s Fine Foods. 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 are based on a number of assumptions, many of which are
outside the Company's control and 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 Financial Measures: To supplement its financial
statements presented on a generally accepted accounting principles
(“GAAP”) basis, the Company has included in this press release non-GAAP
financial measures, including operating expenses excluding expenses
related to the labor action at the Company’s Auburn, Washington facility
and estimated net sales growth adjusting for the 53rd week in fiscal
2013. The reconciliations of these non-GAAP financial measures to
the comparable GAAP financial measures are presented within the tables
or text of this press release. The presentation of these non-GAAP
financial measures is not intended to be considered in isolation or as a
substitute for any measure prepared in accordance with GAAP. The Company
believes that presenting its operating expenses for the applicable
periods excluding these expenses facilitates making period-to-period
comparisons and is a meaningful indication of its operating performance.
The Company’s management utilizes this non-GAAP financial information to
compare the Company’s operating performance during the 2013 fiscal year
versus the comparable periods in the 2014 fiscal year and to internally
prepared projections.
|
UNITED NATURAL FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(In thousands, except per share data amounts)
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
|
May 3,
2014
|
|
April 27,
2013
|
|
May 3,
2014
|
|
April 27,
2013
|
|
Net sales
|
|
$
|
1,781,729
|
|
|
$
|
1,566,217
|
|
|
$
|
5,029,781
|
|
|
$
|
4,421,957
|
|
|
Cost of sales
|
|
1,483,600
|
|
|
1,303,220
|
|
|
4,192,309
|
|
|
3,681,334
|
|
|
Gross profit
|
|
298,129
|
|
|
262,997
|
|
|
837,472
|
|
|
740,623
|
|
|
Operating expenses
|
|
235,514
|
|
|
209,140
|
|
|
677,986
|
|
|
609,591
|
|
|
Restructuring and asset impairment expenses
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,629
|
|
|
Total operating expenses
|
|
235,514
|
|
|
209,140
|
|
|
677,986
|
|
|
611,220
|
|
|
Operating income
|
|
62,615
|
|
|
53,857
|
|
|
159,486
|
|
|
129,403
|
|
|
Other expense (income):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
2,308
|
|
|
1,591
|
|
|
5,944
|
|
|
3,942
|
|
|
Interest income
|
|
(129
|
)
|
|
(133
|
)
|
|
(374
|
)
|
|
(474
|
)
|
|
Other, net
|
|
(217
|
)
|
|
121
|
|
|
404
|
|
|
5,103
|
|
|
Total other expense, net
|
|
1,962
|
|
|
1,579
|
|
|
5,974
|
|
|
8,571
|
|
|
Income before income taxes
|
|
60,653
|
|
|
52,278
|
|
|
153,512
|
|
|
120,832
|
|
|
Provision for income taxes
|
|
24,261
|
|
|
20,657
|
|
|
61,405
|
|
|
45,055
|
|
|
Net income
|
|
$
|
36,392
|
|
|
$
|
31,621
|
|
|
$
|
92,107
|
|
|
$
|
75,777
|
|
|
Basic per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.73
|
|
|
$
|
0.64
|
|
|
$
|
1.86
|
|
|
$
|
1.54
|
|
|
Weighted average basic shares of common stock outstanding
|
|
49,635
|
|
|
49,303
|
|
|
49,577
|
|
|
49,200
|
|
|
Diluted per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.73
|
|
|
$
|
0.64
|
|
|
$
|
1.85
|
|
|
$
|
1.53
|
|
|
Weighted average diluted shares of common stock outstanding
|
|
49,931
|
|
|
49,567
|
|
|
49,860
|
|
|
49,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNITED NATURAL FOODS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
May 3,
2014
|
|
August 3,
2013
|
|
ASSETS
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
16,577
|
|
|
$
|
11,111
|
|
|
Accounts receivable, net
|
|
420,943
|
|
|
339,590
|
|
|
Inventories
|
|
831,516
|
|
|
702,161
|
|
|
Prepaid expenses and other current assets
|
|
47,300
|
|
|
38,534
|
|
|
Deferred income taxes
|
|
23,822
|
|
|
23,822
|
|
|
Total current assets
|
|
1,340,158
|
|
|
1,115,218
|
|
|
Property & equipment, net
|
|
409,170
|
|
|
338,594
|
|
|
Goodwill
|
|
209,761
|
|
|
201,874
|
|
|
Intangible assets, net
|
|
55,026
|
|
|
49,540
|
|
|
Other assets
|
|
23,785
|
|
|
24,682
|
|
|
Total assets
|
|
$
|
2,037,900
|
|
|
$
|
1,729,908
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
348,367
|
|
|
$
|
283,851
|
|
|
Accrued expenses and other current liabilities
|
|
113,522
|
|
|
113,397
|
|
|
Current portion of long-term debt
|
|
1,125
|
|
|
1,019
|
|
|
Total current liabilities
|
|
463,014
|
|
|
398,267
|
|
|
Notes payable
|
|
268,200
|
|
|
130,594
|
|
|
Long-term debt, excluding current portion
|
|
32,894
|
|
|
33,091
|
|
|
Deferred income taxes
|
|
44,583
|
|
|
41,474
|
|
|
Other long-term liabilities
|
|
28,417
|
|
|
27,336
|
|
|
Total liabilities
|
|
837,108
|
|
|
630,762
|
|
|
Commitments and contingencies
|
|
—
|
|
|
—
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value, authorized 5,000 shares;
none
issued or outstanding
|
|
—
|
|
|
—
|
|
|
Common stock, $0.01 par value, authorized 100,000 shares;
49,650
issued and outstanding shares at May 3, 2014;
49,330 issued
and outstanding shares at August 3, 2013
|
|
497
|
|
|
493
|
|
|
Additional paid-in capital
|
|
394,117
|
|
|
380,109
|
|
|
Unallocated shares of Employee Stock Ownership Plan
|
|
(23
|
)
|
|
(39
|
)
|
|
Accumulated other comprehensive loss
|
|
(5,581
|
)
|
|
(1,092
|
)
|
|
Retained earnings
|
|
811,782
|
|
|
719,675
|
|
|
Total stockholders’ equity
|
|
1,200,792
|
|
|
1,099,146
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
2,037,900
|
|
|
$
|
1,729,908
|
|
|
|
|
|
|
|
|
|
|
|
|
UNITED NATURAL FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)
|
|
|
|
|
|
|
|
Nine months ended
|
|
|
|
May 3,
2014
|
|
April 27,
2013
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net income
|
|
$
|
92,107
|
|
|
$
|
75,777
|
|
|
Adjustments to reconcile net income to net cash used in operating
activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
35,427
|
|
|
31,242
|
|
|
Share-based compensation
|
|
13,137
|
|
|
11,027
|
|
|
Gain on disposals of property and equipment
|
|
(59
|
)
|
|
(663
|
)
|
|
Excess tax benefits from share-based payment arrangements
|
|
(2,459
|
)
|
|
(88
|
)
|
|
Impairment of intangible asset
|
|
—
|
|
|
1,629
|
|
|
Deferred income taxes
|
|
3,165
|
|
|
1,767
|
|
|
Provision for doubtful accounts
|
|
2,771
|
|
|
2,385
|
|
|
Non-cash interest expense
|
|
1,767
|
|
|
—
|
|
|
Changes in assets and liabilities, net of acquired businesses:
|
|
|
|
|
|
|
|
Accounts receivable
|
|
(81,467
|
)
|
|
(58,497
|
)
|
|
Inventories
|
|
(126,613
|
)
|
|
(143,563
|
)
|
|
Prepaid expenses and other assets
|
|
(6,251
|
)
|
|
(14,829
|
)
|
|
Accounts payable
|
|
48,107
|
|
|
51,588
|
|
|
Accrued expenses and other liabilities
|
|
(279
|
)
|
|
6,201
|
|
|
Net cash used in operating activities
|
|
(20,647
|
)
|
|
(36,024
|
)
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
Capital expenditures
|
|
(107,945
|
)
|
|
(34,753
|
)
|
|
Purchases of acquired businesses, net of cash acquired
|
|
(23,032
|
)
|
|
(9,445
|
)
|
|
Proceeds from disposals of property and equipment
|
|
6,061
|
|
|
2,345
|
|
|
Net cash used in investing activities
|
|
(124,916
|
)
|
|
(41,853
|
)
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Repayments of long-term debt
|
|
(707
|
)
|
|
(479
|
)
|
|
Proceeds from borrowings under revolving credit line
|
|
535,218
|
|
|
478,698
|
|
|
Repayments of borrowings under revolving credit line
|
|
(397,093
|
)
|
|
(418,621
|
)
|
|
Increase in bank overdraft
|
|
12,711
|
|
|
17,398
|
|
|
Proceeds from exercise of stock options
|
|
2,125
|
|
|
1,681
|
|
|
Payment of employee restricted stock tax withholdings
|
|
(3,709
|
)
|
|
(3,381
|
)
|
|
Excess tax benefits from share-based payment arrangements
|
|
2,459
|
|
|
88
|
|
|
Net cash provided by financing activities
|
|
151,004
|
|
|
75,384
|
|
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
|
25
|
|
|
247
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
5,466
|
|
|
(2,246
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
11,111
|
|
|
16,122
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
16,577
|
|
|
$
|
13,876
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
4,812
|
|
|
$
|
3,657
|
|
|
Cash paid for federal and state income taxes, net of refunds
|
|
$
|
52,880
|
|
|
$
|
47,083
|
|
Source: United Natural Foods, Inc.
United Natural Foods, Inc.
Mark Shamber
Chief Financial Officer
(401)
528-8634
or
ICR
Katie Turner
General Information
(646)
277-1228