Q1 Fiscal 2018 Net Sales Increase 7.9% Year-over-Year to Record $2.46
Billion
Reports Q1 Fiscal 2018 Diluted EPS of $0.60
Raises Fiscal 2018 Net Sales and Earnings Guidance
PROVIDENCE, R.I.--(BUSINESS WIRE)--Dec. 7, 2017--
United Natural Foods, Inc. (Nasdaq: UNFI) (the "Company" or "UNFI")
today reported financial results for the first quarter of fiscal 2018
ended October 28, 2017.
First Quarter Fiscal 2018 Highlights
-
Net sales increased 7.9% to $2.46 billion compared to $2.28
billion for the same period last fiscal year
-
Earnings per diluted common share was $0.60 compared to $0.58 for the
same period last year
“We are pleased with our strong start to the fiscal year which reflects
broad-based growth across all of our significant sales channels for the
fiscal first quarter,” said Steven L. Spinner, Chairman and Chief
Executive Officer. “Our dedicated team of associates worked tirelessly
to service our customers and support our increasing sales growth.
Looking ahead, consumer demand for the products we sell remains robust
and we believe UNFI is well positioned for future growth with the
strength of our sourcing capabilities and demonstrated leadership within
better-for-you distribution.”
First Quarter Fiscal 2018 Summary
Net sales for the first quarter of fiscal 2018 increased 7.9%, or $179.2
million, to $2.46 billion from $2.28 billion in the first quarter of
fiscal 2017.
Gross margin for the quarter was 14.94%, a 38 basis point decrease over
last year's first quarter. The decrease was primarily due to a shift in
customer mix where sales growth with lower margin customers outpaced
growth with other customers.
Total operating expenses increased $16.4 million to $312.1 million for
the first quarter of fiscal 2018 compared to $295.7 million in the first
quarter of fiscal 2017. Total operating expenses were 12.70% of net
sales for the first quarter of fiscal 2018, a decrease of 28 basis
points compared to the same period last fiscal year. The year-over-year
decrease in operating expenses as a percentage of net sales was
primarily driven by leveraging of fixed costs on increased net sales.
This was partially offset by increased costs incurred to fulfill the
increased demand for the Company's products, including overtime labor,
outside storage and transportation costs, and increased healthcare costs.
Operating income increased $1.8 million, or 3.3%, to $55.1 million for
the first quarter of fiscal 2018 compared to $53.3 million for the first
quarter of fiscal 2017.
Net income for the first quarter of fiscal 2018 increased $1.3 million,
or 4.4%, to $30.5 million, or $0.60 per diluted share, from $29.2
million, or $0.58 per diluted share, for the first quarter of fiscal
2017. During the first quarter of fiscal 2018 the Company adopted
Accounting Standard Update (ASU) 2016-09, Improvements to Employee
Share-Based Payment Accounting. This new accounting standard will affect
the Company's effective tax rate and increase its variability. As a
result, the Company recorded $0.9 million of income tax expense, which
negatively impacted diluted earnings per share by $0.02, during the
first quarter of fiscal 2018.
EBITDA for the first quarter of fiscal 2018 was $77.5 million, an
increase of 4.0% from $74.6 million in the same period last year.
Fiscal 2018 Guidance
Based on UNFI's performance to date and the outlook for the remainder of
fiscal 2018, the Company is revising its guidance previously provided on
September 13, 2017. For fiscal 2018, ending July 28, 2018, the Company
now estimates net sales in the range of approximately $9.84
billion to $10.00 billion, an increase of 6.2% to 7.8% over fiscal 2017
net sales, compared to the previous estimate of $9.63 billion to $9.81
billion. The Company now estimates earnings per diluted share for fiscal
2018 in the range of approximately $2.72 to $2.80, an increase of
approximately 6.3% to 9.4% over fiscal 2017 earnings per diluted share
of $2.56, compared to the previous estimate of $2.67 to $2.77. The
Company now expects its fiscal 2018 tax rate to be in the range of 40.0%
to 40.3%, compared to previous guidance of 40.3% to 40.7%. The Company’s
estimates related to fiscal 2018 capital expenditures as a percentage of
net sales and free cash flow are unchanged from the Company’s previous
guidance. 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.
EBITDA is a non-GAAP financial measure. Please refer to the table in
this press release for a reconciliation of this non-GAAP financial
measure with the most directly comparable financial measure calculated
in accordance with GAAP.
Conference Call & Webcast
The Company's first quarter fiscal 2018 conference call and audio
webcast will be held today, Thursday, December 7, 2017at
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. carries and distributes more than 110,000
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 26, 2017 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 supermarket
chains 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 and online distributors; 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 or material changes to the Company's relationships
with these customers; volatility in fuel costs; volatility in foreign
exchange rates; 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
and challenges the Company may experience in obtaining sufficient
amounts of products to meet the Company's customers' demands; 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; the
Company's ability to realize the anticipated benefits from its
restructuring program in conjunction with various cost saving and
efficiency initiatives, including acquisition integration, severance and
transition related costs, as well as the anticipated opening of the
Company's shared services center, all within the cost estimates and
timing currently contemplated; the possibility that the tax reforms,
including the reduction in the corporate tax rates, currently being
debated in the United States Congress are not signed into law or the
implementation of those tax reforms is delayed;and the potential
for business disruptions in connection with the opening of the Company's
shared services center. 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 a non-GAAP financial
measure for EBITDA. EBITDA excludes depreciation, amortization, other
expense and income, net and income taxes. The reconciliation of this
non-GAAP financial measure to the comparable GAAP financial measure is
presented in the table appearing below. The presentation of 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 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 2018 fiscal year
to the comparable periods in the 2017 fiscal year and to internally
prepared projections.
|
|
|
|
| UNITED NATURAL FOODS, INC. |
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) |
| (In thousands, except for per share data) |
|
|
|
|
|
|
|
13-Week Period Ended |
|
|
|
October 28,
2017 |
|
October 29,
2016 |
|
Net sales
|
|
|
$
|
2,457,545
|
|
|
$
|
2,278,364
|
|
|
Cost of sales
|
|
|
2,090,329
|
|
|
1,929,348
|
|
|
Gross profit
|
|
|
367,216
|
|
|
349,016
|
|
|
Operating expenses
|
|
|
312,109
|
|
|
295,677
|
|
|
Operating income
|
|
|
55,107
|
|
|
53,339
|
|
|
Other expense (income):
|
|
|
|
|
|
|
Interest expense
|
|
|
3,667
|
|
|
4,522
|
|
|
Interest income
|
|
|
(91
|
)
|
|
(99
|
)
|
|
Other, net
|
|
|
(863
|
)
|
|
383
|
|
|
Total other expense, net
|
|
|
2,713
|
|
|
4,806
|
|
|
Income before income taxes
|
|
|
52,394
|
|
|
48,533
|
|
|
Provision for income taxes
|
|
|
21,889
|
|
|
19,316
|
|
|
Net income
|
|
|
$
|
30,505
|
|
|
$
|
29,217
|
|
|
Basic per share data:
|
|
|
|
|
|
|
Net income
|
|
|
$
|
0.60
|
|
|
$
|
0.58
|
|
|
Weighted average basic shares of common stock outstanding
|
|
|
50,817
|
|
|
50,475
|
|
|
Diluted per share data:
|
|
|
|
|
|
|
Net income
|
|
|
$
|
0.60
|
|
|
$
|
0.58
|
|
|
Weighted average diluted shares of common stock outstanding
|
|
|
50,957
|
|
|
50,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| UNITED NATURAL FOODS, INC. |
| CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) |
| (In thousands, except for per share data) |
|
|
|
|
|
|
|
October 28,
2017 |
|
July 29,
2017 |
|
ASSETS
|
|
|
|
|
| Current assets: |
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
21,155
|
|
|
$
|
15,414
|
|
|
Accounts receivable, net
|
|
598,718
|
|
|
525,636
|
|
|
Inventories
|
|
1,167,529
|
|
|
1,031,690
|
|
|
Deferred income taxes
|
|
—
|
|
|
40,635
|
|
|
Prepaid expenses and other current assets
|
|
51,540
|
|
|
49,295
|
|
|
Total current assets
|
|
1,838,942
|
|
|
1,662,670
|
|
|
Property & equipment, net
|
|
588,638
|
|
|
602,090
|
|
|
Goodwill
|
|
370,811
|
|
|
371,259
|
|
|
Intangible assets, net
|
|
204,421
|
|
|
208,289
|
|
|
Other assets
|
|
43,500
|
|
|
42,255
|
|
|
Total assets
|
|
$
|
3,046,312
|
|
|
$
|
2,886,563
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
Accounts payable
|
|
$
|
638,538
|
|
|
$
|
534,616
|
|
|
Accrued expenses and other current liabilities
|
|
164,815
|
|
|
157,243
|
|
|
Current portion of long-term debt
|
|
12,224
|
|
|
12,128
|
|
|
Total current liabilities
|
|
815,577
|
|
|
703,987
|
|
|
Notes payable
|
|
287,806
|
|
|
223,612
|
|
|
Deferred income taxes
|
|
58,998
|
|
|
98,833
|
|
|
Other long-term liabilities
|
|
28,883
|
|
|
28,347
|
|
|
Long-term debt, excluding current portion
|
|
146,960
|
|
|
149,863
|
|
|
Total liabilities
|
|
1,338,224
|
|
|
1,204,642
|
|
| 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;
50,963 shares issued and 50,801 shares outstanding at October 28,
2017, 50,622 shares issued and outstanding at July 29, 2017
|
|
509
|
|
|
506
|
|
|
Additional paid-in capital
|
|
464,466
|
|
|
460,011
|
|
|
Treasury stock at cost
|
|
(6,449
|
)
|
|
—
|
|
|
Accumulated other comprehensive loss
|
|
(15,505
|
)
|
|
(13,963
|
)
|
|
Retained earnings
|
|
1,265,067
|
|
|
1,235,367
|
|
|
Total stockholders’ equity
|
|
1,708,088
|
|
|
1,681,921
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
3,046,312
|
|
|
$
|
2,886,563
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| UNITED NATURAL FOODS, INC. |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) |
| (In thousands) |
|
|
|
|
|
13-Week Period Ended |
|
|
October 28,
2017 |
|
October 29,
2016 |
| CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
Net income
|
|
$
|
30,505
|
|
|
$
|
29,217
|
|
|
Adjustments to reconcile net income to net cash used in operating
activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
22,442
|
|
|
21,215
|
|
|
Share-based compensation
|
|
7,275
|
|
|
6,653
|
|
|
Loss on disposals of property and equipment
|
|
103
|
|
|
265
|
|
|
Gain associated with disposal of investments
|
|
(699
|
)
|
|
—
|
|
|
Excess tax deficit from share-based payment arrangements
|
|
—
|
|
|
1,421
|
|
|
Deferred income taxes
|
|
891
|
|
|
—
|
|
|
Provision for doubtful accounts
|
|
1,656
|
|
|
626
|
|
|
Non-cash interest expense (income)
|
|
344
|
|
|
(96
|
)
|
|
Changes in assets and liabilities, net of acquired businesses:
|
|
|
|
|
|
Accounts receivable
|
|
(75,416
|
)
|
|
(43,272
|
)
|
|
Inventories
|
|
(136,641
|
)
|
|
(55,127
|
)
|
|
Prepaid expenses and other assets
|
|
(3,174
|
)
|
|
1,581
|
|
|
Accounts payable
|
|
72,400
|
|
|
33,913
|
|
|
Accrued expenses and other liabilities
|
|
8,284
|
|
|
(3,651
|
)
|
|
Net cash used in operating activities
|
|
(72,030
|
)
|
|
(7,255
|
)
|
| CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
Capital expenditures
|
|
(5,257
|
)
|
|
(9,198
|
)
|
|
Purchases of acquired businesses, net of cash acquired
|
|
(11
|
)
|
|
(10,074
|
)
|
|
Proceeds from disposals of property and equipment
|
|
34
|
|
|
—
|
|
|
Proceeds from disposal of investments
|
|
756
|
|
|
—
|
|
|
Net cash used in investing activities
|
|
(4,478
|
)
|
|
(19,272
|
)
|
| CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
Proceeds from borrowings from long-term debt
|
|
—
|
|
|
—
|
|
|
Repayments of long-term debt
|
|
(2,985
|
)
|
|
(367
|
)
|
|
Repurchase of common stock
|
|
(6,449
|
)
|
|
—
|
|
|
Proceeds from borrowings under revolving credit line
|
|
173,581
|
|
|
94,356
|
|
|
Repayments of borrowings under revolving credit line
|
|
(109,229
|
)
|
|
(99,408
|
)
|
|
Increase in bank overdraft
|
|
31,873
|
|
|
29,787
|
|
|
Proceeds from exercise of stock options
|
|
151
|
|
|
—
|
|
|
Payment of employee restricted stock tax withholdings
|
|
(4,389
|
)
|
|
(1,160
|
)
|
|
Excess tax deficit from share-based payment arrangements
|
|
—
|
|
|
(1,421
|
)
|
|
Capitalized debt issuance costs
|
|
—
|
|
|
(180
|
)
|
|
Net cash provided by financing activities
|
|
82,553
|
|
|
21,607
|
|
| EFFECT OF EXCHANGE RATE CHANGES ON CASH |
|
(304
|
)
|
|
(117
|
)
|
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
5,741
|
|
|
(5,037
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
15,414
|
|
|
18,593
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
21,155
|
|
|
$
|
13,556
|
|
|
|
|
|
|
| Supplemental disclosures of cash flow information: |
|
|
|
|
|
Cash paid for interest
|
|
$
|
3,667
|
|
|
$
|
4,522
|
|
|
Cash paid for federal and state income taxes, net of refunds
|
|
$
|
2,559
|
|
|
$
|
2,873
|
|
|
|
|
|
|
|
|
|
|
| Reconciliation of Net Income to EBITDA (unaudited) |
| (in thousands, except percentages) |
|
|
|
13-Week Period Ended |
|
|
|
October 28,
2017 |
|
October 29,
2016 |
|
Change |
|
Net income
|
$
|
30,505
|
|
|
$
|
29,217
|
|
|
4.4%
|
|
Depreciation and amortization
|
22,442
|
|
|
21,215
|
|
|
|
|
Total other expense, net
|
2,713
|
|
|
4,806
|
|
|
|
|
Provision for income taxes
|
21,889
|
|
|
19,316
|
|
|
|
|
EBITDA
|
$
|
77,549
|
|
|
$
|
74,554
|
|
|
4.0%
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20171207006202/en/
Source: United Natural Foods, Inc.
INVESTOR CONTACT:
United Natural Foods, Inc.
Mike
Zechmeister
Chief Financial Officer
401-528-8634