Q1 Fiscal 2017 Net Sales Increased 9.7% Compared to Q1 Fiscal 2016
PROVIDENCE, R.I.--(BUSINESS WIRE)--Dec. 7, 2016--
United Natural Foods, Inc. (Nasdaq: UNFI) (the “Company” or “UNFI”)
today reported financial results for the first quarter of fiscal 2017
ended October 29, 2016.
First Quarter Fiscal 2017 Highlights
-
Net sales increased 9.7% to $2.28 billion compared to $2.08
billion for the same period last fiscal year; adjusted net sales
increased 12.9%, excluding the year-over-year impact of the previously
disclosed termination of a customer distribution contract
-
Gross margin increased 20 basis points to 15.32% compared to the same
period last fiscal year
“We are pleased with the progress we have made on our strategic
initiatives, including the ongoing integration of our recent
acquisitions and the sales reorganization, which was completed at the
start of our first quarter,” said Steven L. Spinner, UNFI’s President
and Chief Executive Officer. “We believe these initiatives will enable
us to continue to execute our strategy of building a national fresh
distribution platform and capitalize on growth opportunities with new
and existing customers in an operating environment that remains
challenging due to deflationary pressures and competition.”
Net sales for the first quarter of fiscal 2017 increased 9.7%, or $201.7
million, to $2.28 billion from $2.08 billion in the first quarter of
fiscal 2016. Adjusted net sales for the quarter increased 12.9% compared
to the same period last fiscal year, excluding the year-over-year impact
of the previously disclosed termination of a customer distribution
contract. Net sales were positively impacted by the acquisitions of
Haddon House Food Products, Inc., Global Organic/Specialty Source, Inc.,
Nor-Cal Produce, Inc. and Gourmet Guru, Inc. Due to varying levels of
assimilation of these acquisitions, the total financial impact is no
longer fully separable.
Gross margin increased 20 basis points to 15.32% for the first quarter
of fiscal 2017 compared to 15.12% for the same period last fiscal year.
The increase in gross margin was due to the favorable impact of
acquisitions completed in the past twelve months. Despite the
year-over-year improvement, first quarter fiscal 2017 gross margin
continued to face headwinds from moderated supplier promotional
activity, competitive pricing pressures and reduced fuel surcharges.
Total operating expenses increased $35.6 million to $295.7 million for
the first quarter of fiscal 2017 compared to $260.0 million in the first
quarter of fiscal 2016. Total operating expenses were 12.98% of net
sales for the first quarter of fiscal 2017, an increase of 46 basis
points compared to the same period last fiscal year. The increase was
attributable to the acquired businesses, which have higher costs to
serve. Total operating expenses for the first quarter of
fiscal 2016 included $2.8 million of severance and other transition
costs due to the restructuring plan disclosed in the fourth quarter of
fiscal 2015 as a result of the termination of the Company’s distribution
agreement with a customer and $1.8 million of bad debt expense related
to outstanding receivables for a customer who declared bankruptcy in the
first quarter of fiscal 2016.
Net income for the first quarter of fiscal 2017 decreased $0.9 million,
or 3.0%, to $29.2 million, or $0.58 per diluted share, from $30.1
million, or $0.60 per diluted share, for the first quarter of fiscal
2016. Operating income as a percentage of net sales was 2.34% for the
first quarter of fiscal 2017, a decrease of 26 basis points compared to
the same period last year. Operating income decreased $0.6 million to
$53.3 million for the first quarter of fiscal 2017 compared to $53.9
million for the first quarter of fiscal 2016. EBITDA for the first
quarter of fiscal 2017 was $74.6 million, an increase of 5.6% from $70.6
million in the same period last year.
Fiscal 2017 Guidance
Guidance for fiscal 2017 remains unchanged from the previous guidance
the Company provided on September 12, 2016. For fiscal 2017, ending July
29, 2017, the Company estimates net sales in the range of
approximately $9.43 billion to $9.60 billion, an increase of
approximately 11.3% to 13.3% over fiscal 2016. The Company estimates
GAAP earnings per diluted share for fiscal 2017 in the range of
approximately $2.53 to $2.63 compared to fiscal 2016 GAAP earnings per
diluted share of $2.50. The Company’s guidance is based on current plans
and expectations and is subject to a number of known and unknown
uncertainties and risks, including those set forth under the Company’s
safe harbor statement of the Private Securities Litigation Reform Act of
1995 below.
Conference Call & Webcast
The Company’s first quarter fiscal 2017 conference call and audio
webcast will be held today, Wednesday, December 7, 2016 at
5:00 p.m. EST. The 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. is celebrating its 40-year anniversary of
delivering healthier food options to more people. The Company carries
and distributes more than 100,000 products to more than 43,000 customer
locations throughout the United States and Canada. United Natural Foods
serves a wide variety of sales channels including conventional
supermarket chains, natural product superstores, independent retailers,
eCommerce and food service.
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 (the “SEC”) on
September 28, 2016 and other filings the Company makes with the SEC, and
include, but are not limited to, the ability of the Company to retain
customers of Haddon House Food Products, Inc. (“Haddon”), Nor-Cal
Produce, Inc. (“Nor-Cal”), Global Organic/Specialty Source, Inc.
(“Global Organic”) and Gourmet Guru, Inc. (“Gourmet Guru”) and their
affiliated entities that we purchased on terms similar to those in place
prior to the Company’s acquisition of these businesses; 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 shift in
the Company’s product mix as a result of its acquisition of Tony’s Fine
Foods and the resulting lower gross margins on those 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; increased competition in the Company’s industry as a result of
increased distribution of natural, organic and specialty products by
conventional grocery distributors and direct distribution of those
products by large retailers; the Company’s ability to timely and
successfully deploy its warehouse management system throughout its
distribution centers and its transportation management system across the
Company; the addition or loss of significant customers; volatility in
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; consumer demand for natural and
organic products outpacing suppliers’ ability to produce those products;
moderated supplier promotional activity, including decreased forward
buying opportunities; union-organizing activities that could cause labor
relations difficulties and increased costs; 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; and the
Company’s ability to successfully deploy its operational initiatives to
achieve synergies from the acquisitions of Tony’s Fine Foods, Global
Organic, Nor-Cal, Haddon House, and Gourmet Guru. 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 estimates 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 estimates are subject to change and could differ
materially from final reported results. The Company may from time to
time update these publicly announced estimates, but it is not obligated
to do so.
Non-GAAP Financial Measures: To supplement the financial information
presented on a generally accepted accounting principles (“GAAP”) basis,
the Company has included in this press release non-GAAP financial
measures for adjusted net sales and EBITDA. The non-GAAP measure for
adjusted net sales excludes the impact of net sales related to the
termination of our distribution agreement with a customer that the
Company announced in July 2015. EBITDA excludes depreciation,
amortization, other expense and income, net (including interest expense)
and taxes. The reconciliations of non-GAAP financial measures to the
comparable GAAP financial measures are presented in the tables appearing
below. 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 these non-GAAP financial measures aids in making
period-to-period comparisons and is a meaningful indication of its
actual and estimated operating performance. The Company’s management
utilizes and plans to utilize this non-GAAP financial information to
compare the Company’s operating performance during the 2017 fiscal year
to the comparable periods in the 2016 fiscal year and to internally
prepared projections.
|
|
|
UNITED NATURAL FOODS, INC.
|
|
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
|
|
(In thousands, except per share data amounts)
|
|
|
|
|
|
|
|
13-Week Period Ended
|
|
|
|
|
|
October 29,
|
|
|
|
October 31,
|
|
|
|
|
|
2016
|
|
|
|
2015
|
|
Net sales
|
|
|
|
$
|
2,278,364
|
|
|
|
|
$
|
2,076,649
|
|
|
Cost of sales
|
|
|
|
|
1,929,348
|
|
|
|
|
|
1,762,712
|
|
|
Gross profit
|
|
|
|
|
349,016
|
|
|
|
|
|
313,937
|
|
|
Operating expenses
|
|
|
|
|
295,677
|
|
|
|
|
|
257,224
|
|
|
Restructuring and asset impairment expenses
|
|
|
|
|
—
|
|
|
|
|
|
2,809
|
|
|
Total operating expenses
|
|
|
|
|
295,677
|
|
|
|
|
|
260,033
|
|
|
Operating income
|
|
|
|
|
53,339
|
|
|
|
|
|
53,904
|
|
|
Other expense (income):
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
4,522
|
|
|
|
|
|
3,748
|
|
|
Interest income
|
|
|
|
|
(99
|
)
|
|
|
|
|
(152
|
)
|
|
Other, net
|
|
|
|
|
383
|
|
|
|
|
|
173
|
|
|
Total other expense, net
|
|
|
|
|
4,806
|
|
|
|
|
|
3,769
|
|
|
Income before income taxes
|
|
|
|
|
48,533
|
|
|
|
|
|
50,135
|
|
|
Provision for income taxes
|
|
|
|
|
19,316
|
|
|
|
|
|
20,004
|
|
|
Net income
|
|
|
|
$
|
29,217
|
|
|
|
|
$
|
30,131
|
|
|
Basic per share data:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
$
|
0.58
|
|
|
|
|
$
|
0.60
|
|
|
Weighted average basic shares of common stock outstanding
|
|
|
|
|
50,475
|
|
|
|
|
|
50,194
|
|
|
Diluted per share data:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
$
|
0.58
|
|
|
|
|
$
|
0.60
|
|
|
Weighted average diluted shares of common stock outstanding
|
|
|
|
|
50,599
|
|
|
|
|
|
50,313
|
|
|
|
|
|
|
UNITED NATURAL FOODS, INC.
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
|
|
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
October 29,
|
|
|
|
July 30,
|
|
|
|
|
|
2016
|
|
|
|
2016
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
13,556
|
|
|
|
|
$
|
18,593
|
|
|
Accounts receivable, net
|
|
|
|
|
534,322
|
|
|
|
|
|
489,708
|
|
|
Inventories
|
|
|
|
|
1,077,931
|
|
|
|
|
|
1,021,663
|
|
|
Deferred income taxes
|
|
|
|
|
35,219
|
|
|
|
|
|
35,228
|
|
|
Prepaid expenses and other current assets
|
|
|
|
|
43,530
|
|
|
|
|
|
45,998
|
|
|
Total current assets
|
|
|
|
|
1,704,558
|
|
|
|
|
|
1,611,190
|
|
|
Property & equipment, net
|
|
|
|
|
608,296
|
|
|
|
|
|
616,605
|
|
|
Goodwill
|
|
|
|
|
375,226
|
|
|
|
|
|
366,168
|
|
|
Intangible assets, net
|
|
|
|
|
219,467
|
|
|
|
|
|
222,314
|
|
|
Other assets
|
|
|
|
|
35,494
|
|
|
|
|
|
35,878
|
|
|
Total assets
|
|
|
|
$
|
2,943,041
|
|
|
|
|
$
|
2,852,155
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
$
|
514,362
|
|
|
|
|
$
|
445,430
|
|
|
Accrued expenses and other current liabilities
|
|
|
|
|
156,741
|
|
|
|
|
|
162,438
|
|
|
Current portion of long-term debt
|
|
|
|
|
11,919
|
|
|
|
|
|
11,854
|
|
|
Total current liabilities
|
|
|
|
|
683,022
|
|
|
|
|
|
619,722
|
|
|
Notes payable
|
|
|
|
|
421,241
|
|
|
|
|
|
426,519
|
|
|
Deferred income taxes
|
|
|
|
|
96,227
|
|
|
|
|
|
95,220
|
|
|
Other long-term liabilities
|
|
|
|
|
28,926
|
|
|
|
|
|
29,451
|
|
|
Long-term debt, excluding current portion
|
|
|
|
|
161,138
|
|
|
|
|
|
161,739
|
|
|
Total liabilities
|
|
|
|
|
1,390,554
|
|
|
|
|
|
1,332,651
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value, authorized 5,000 shares; none
issued or outstanding
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Common stock, par value $0.01 per share, authorized 100,000 shares;
issued and outstanding 50,581 and 50,383
|
|
|
|
|
506
|
|
|
|
|
|
504
|
|
|
Additional paid-in capital
|
|
|
|
|
440,237
|
|
|
|
|
|
436,167
|
|
|
Accumulated other comprehensive loss
|
|
|
|
|
(22,685
|
)
|
|
|
|
|
(22,379
|
)
|
|
Retained earnings
|
|
|
|
|
1,134,429
|
|
|
|
|
|
1,105,212
|
|
|
Total stockholders’ equity
|
|
|
|
|
1,552,487
|
|
|
|
|
|
1,519,504
|
|
|
Total liabilities and stockholders’ equity
|
|
|
|
$
|
2,943,041
|
|
|
|
|
$
|
2,852,155
|
|
|
|
|
|
|
UNITED NATURAL FOODS, INC.
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
|
|
|
|
|
|
|
|
13-Week Period Ended
|
|
|
|
|
|
October 29,
|
|
|
|
October 31,
|
|
(In thousands)
|
|
|
|
2016
|
|
|
|
2015
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
$
|
29,217
|
|
|
|
|
$
|
30,131
|
|
|
Adjustments to reconcile net income to net cash (used in) provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
21,215
|
|
|
|
|
|
16,704
|
|
|
Share-based compensation
|
|
|
|
|
6,653
|
|
|
|
|
|
5,973
|
|
|
Loss on disposals of property and equipment
|
|
|
|
|
265
|
|
|
|
|
|
194
|
|
|
Excess tax deficit (benefit) from share-based payment arrangements
|
|
|
|
|
1,421
|
|
|
|
|
|
(414
|
)
|
|
Provision for doubtful accounts
|
|
|
|
|
626
|
|
|
|
|
|
3,207
|
|
|
Non-cash interest income
|
|
|
|
|
(96
|
)
|
|
|
|
|
(102
|
)
|
|
Changes in assets and liabilities, net of acquired businesses:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
|
|
(43,272
|
)
|
|
|
|
|
(19,866
|
)
|
|
Inventories
|
|
|
|
|
(55,127
|
)
|
|
|
|
|
(100,387
|
)
|
|
Prepaid expenses and other assets
|
|
|
|
|
1,581
|
|
|
|
|
|
4,455
|
|
|
Accounts payable
|
|
|
|
|
33,913
|
|
|
|
|
|
58,395
|
|
|
Accrued expenses and other liabilities
|
|
|
|
|
(3,651
|
)
|
|
|
|
|
7,202
|
|
|
Net cash (used in) provided by operating activities
|
|
|
|
|
(7,255
|
)
|
|
|
|
|
5,492
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
|
(9,198
|
)
|
|
|
|
|
(7,588
|
)
|
|
Purchases of acquired businesses, net of cash acquired
|
|
|
|
|
(10,074
|
)
|
|
|
|
|
(17
|
)
|
|
Net cash used in investing activities
|
|
|
|
|
(19,272
|
)
|
|
|
|
|
(7,605
|
)
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Repayments of long-term debt
|
|
|
|
|
(367
|
)
|
|
|
|
|
(2,890
|
)
|
|
Proceeds from borrowings under revolving credit line
|
|
|
|
|
94,356
|
|
|
|
|
|
122,650
|
|
|
Repayments of borrowings under revolving credit line
|
|
|
|
|
(99,408
|
)
|
|
|
|
|
(169,591
|
)
|
|
Increase in bank overdraft
|
|
|
|
|
29,787
|
|
|
|
|
|
47,084
|
|
|
Proceeds from exercise of stock options
|
|
|
|
|
—
|
|
|
|
|
|
921
|
|
|
Payment of employee restricted stock tax withholdings
|
|
|
|
|
(1,160
|
)
|
|
|
|
|
(1,576
|
)
|
|
Excess tax (deficit) benefit from share-based payment arrangements
|
|
|
|
|
(1,421
|
)
|
|
|
|
|
414
|
|
|
Capitalized debt issuance costs
|
|
|
|
|
(180
|
)
|
|
|
|
|
—
|
|
|
Net cash provided by (used in) financing activities
|
|
|
|
|
21,607
|
|
|
|
|
|
(2,988
|
)
|
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
|
|
|
|
(117
|
)
|
|
|
|
|
14
|
|
|
NET DECREASE IN CASH AND CASH EQUIVALENTS
|
|
|
|
|
(5,037
|
)
|
|
|
|
|
(5,087
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
|
|
|
18,593
|
|
|
|
|
|
17,380
|
|
|
Cash and cash equivalents at end of period
|
|
|
|
$
|
13,556
|
|
|
|
|
$
|
12,293
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
|
|
$
|
4,522
|
|
|
|
|
$
|
4,354
|
|
|
Cash paid for federal and state income taxes, net of refunds
|
|
|
|
$
|
2,873
|
|
|
|
|
$
|
1,768
|
|
|
|
|
|
|
UNITED NATURAL FOODS, INC.
|
|
|
|
Reconciliation of GAAP Net Sales Growth to Non-GAAP Adjusted Net
Sales Growth (unaudited)
|
|
(in thousands)
|
|
|
|
|
|
|
|
13-Week Period Ended
|
|
|
|
|
|
|
|
|
|
October 29,
|
|
|
|
October 31,
|
|
|
|
Percentage
|
|
|
|
|
|
2016
|
|
|
|
2015
|
|
|
|
Growth
|
|
Net sales
|
|
|
|
$
|
2,278,364
|
|
|
|
$
|
2,076,649
|
|
|
|
|
9.7
|
%
|
|
Adjustment (1) |
|
|
|
|
—
|
|
|
|
|
(58,439
|
)
|
|
|
|
|
|
Adjusted net sales
|
|
|
|
$
|
2,278,364
|
|
|
|
$
|
2,018,210
|
|
|
|
|
12.9
|
%
|
|
|
(1) Adjusted to exclude net sales in each period related to a customer
distribution contract that was terminated in the first quarter of fiscal
2016.
|
|
|
Reconciliation of Net Income to EBITDA (unaudited)
|
|
(in thousands)
|
|
|
|
|
|
|
|
13-Week Period Ended
|
|
|
|
|
|
|
|
|
|
October 29,
|
|
|
|
October 31,
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
|
2015
|
|
|
|
Change
|
|
Net income
|
|
|
|
$
|
29,217
|
|
|
|
$
|
30,131
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
21,215
|
|
|
|
|
16,704
|
|
|
|
|
|
Total other expense, net
|
|
|
|
|
4,806
|
|
|
|
|
3,769
|
|
|
|
|
|
Provision for income taxes
|
|
|
|
|
19,316
|
|
|
|
|
20,004
|
|
|
|
|
|
EBITDA
|
|
|
|
$
|
74,554
|
|
|
|
$
|
70,608
|
|
|
|
5.6
|
%
|
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20161207006227/en/
Source: United Natural Foods, Inc.
United Natural Foods, Inc.
Halie O'Shea, 401-528-8634
Director
Investor Relations & Corporate Strategy