United Natural Foods, Inc. (Nasdaq: UNFI) (the "Company" or "UNFI") today reported financial results for the first quarter of fiscal 2015 ended November 1, 2014.

First Quarter Fiscal 2015 Highlights

  • Net sales increased 24.4% to $1.99 billion compared to $1.60 billion for the same period last fiscal year
  • Operating income increased 21.6% to $58.4 million for the first quarter of fiscal 2015 compared to $48.0 million for the same period last fiscal year
  • Diluted EPS increased 17.9% to $0.66 for the first quarter of fiscal 2015, compared to $0.56 for the same period last fiscal year

“UNFI achieved record sales of almost $2 billion during our first quarter of fiscal 2015 and comparable sales growth recovered nicely after experiencing a modest slowdown during the first few weeks of the quarter,” said Steven Spinner, President and Chief Executive Officer.

Net sales for the first quarter of fiscal 2015 increased 24.4%, or $390.5 million, to $1.99 billion from $1.60 billion in the first quarter of fiscal 2014. The first quarter of fiscal 2015 included incremental net sales of approximately $227.7 million, resulting from the Company's acquisitions of Trudeau Foods in the first quarter of fiscal 2014 and Tony's Fine Foods ("Tony's") in the fourth quarter of fiscal 2014.

Gross margin decreased 92 basis points to 16.0% for the first quarter of fiscal 2015 compared to 16.9% for the same period last year. Gross margin for the first quarter of fiscal 2015 was negatively impacted primarily by the dilution from Tony's sales in the quarter, while shifting customer mix, inbound freight costs and foreign exchange from the declining value of the Canadian dollar on the Company's Canadian business also contributed to the year-over-year decline.

Total operating expenses were 13.1% as a percentage of net sales for the first quarter of fiscal 2015, a decrease of 85 basis points compared with the same period last fiscal year. Total operating expenses increased $37.5 million, or 16.8%, to $260.6 million for the first quarter of fiscal 2015 as compared to $223.2 million in the first quarter of fiscal 2014, primarily due to higher sales volume. Total operating expenses for the first quarter of fiscal 2015 included non-recurring costs of approximately $1.0 million related to the startup of the Company's Hudson Valley, New York facility, $0.6 million associated with the write-off of an intangible asset related to the Company's Canadian division, which was acquired in June 2010, and approximately $0.3 million in remaining costs related to the Company's acquisition of Tony's.

Operating income increased 21.6%, or $10.4 million, to $58.4 million for the first quarter of fiscal 2015 compared to $48.0 million for the first quarter of fiscal 2014. As a percentage of net sales, operating income for the first quarter of fiscal 2015 decreased 7 basis points to 2.9% compared to the same period last fiscal year.

Net income for the first quarter of fiscal 2015 increased $5.3 million, or 19.0%, to $33.0 million, or $0.66 per diluted share, from $27.8 million, or $0.56 per diluted share, for the first quarter of fiscal 2014.

“Tony’s Fine Foods performed extremely well during their first quarter as part of UNFI, and we look forward to rolling this perishable platform out across the US as we look to both existing and new customers,” added Mr. Spinner. “As we discussed at our analyst day in October, our newest distribution facilities, located in Racine, Wisconsin and Hudson Valley, New York, were designed to handle the unique storage requirements of these exciting products.”

Fiscal 2015 Guidance

Based on UNFI's performance to date and the current outlook for the remainder of fiscal 2015, UNFI is reaffirming its previous guidance for fiscal 2015 provided on September 17, 2014. For fiscal 2015, ending August 1, 2015, the Company expects net sales in the range of approximately $8.13 to $8.38 billion, an increase of approximately 19.7% to 23.7% over fiscal 2014. The Company estimates GAAP earnings per diluted share for fiscal 2015 in the range of approximately $2.88 to $3.01 per share, an increase of approximately 14.3% to 19.4% over fiscal 2014 GAAP earnings per diluted share of $2.52.

Conference Call & Webcast

The Company's first quarter 2015 conference call and audio webcast will be held today, Thursday, December 4, 2014 at 8:30 a.m. EST. 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 80,000 products to more than 40,000 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 2012 as one of its "Most Admired American Companies," 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, 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 shift in the Company's product mix as a result of its acquisition of Tony's 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; 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; 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; 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 acquisition of Tony’s. 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.

   

UNITED NATURAL FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(In thousands, except per share data amounts)

 
Three months ended

November 1,
2014

    

November 2,
2013

Net sales $ 1,992,476 $ 1,602,011
Cost of sales 1,673,480   1,330,835  
Gross profit 318,996   271,176  
Operating expenses 260,048 223,150
Restructuring and asset impairment expenses 555   —  
Total operating expenses 260,603   223,150  
Operating income 58,393   48,026  
Other expense (income):
Interest expense 3,255 1,854
Interest income (93 ) (120 )
Other, net 616   19  
Total other expense, net 3,778   1,753  
Income before income taxes 54,615 46,273
Provision for income taxes 21,573   18,509  
Net income $ 33,042   $ 27,764  
Basic per share data:
Net income $ 0.66   $ 0.56  
Weighted average basic shares of common stock outstanding 49,889   49,439  
Diluted per share data:
Net income $ 0.66   $ 0.56  
Weighted average diluted shares of common stock outstanding 50,113   49,735  
 
       

UNITED NATURAL FOODS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(In thousands, except per share amounts)

 

November 1,
2014

August 2,
2014

ASSETS

Current assets:
Cash and cash equivalents $ 17,564 $ 16,116
Accounts receivable, net 489,758 449,870
Inventories 984,411 834,722
Prepaid expenses and other current assets 41,979 45,064
Deferred income taxes 38,570   32,518  
Total current assets 1,572,282 1,378,290
Property & equipment, net 501,176 483,960
Goodwill 273,916 274,548
Intangible assets, net 132,737 134,989
Other assets 29,955   25,446  
Total assets $ 2,510,066   $ 2,297,233  
 

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable $ 469,375 $ 385,890
Accrued expenses and other current liabilities 131,073 136,959
Current portion of long-term debt 10,967   990  
Total current liabilities 611,415 523,839
Notes payable 366,752 415,660
Long-term debt, excluding current portion 169,766 32,510
Deferred income taxes 50,995 50,995
Other long-term liabilities 31,237   30,865  
Total liabilities 1,230,165   1,053,869  
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; 49,998 issued and outstanding shares at November 1, 2014; 49,771 issued and outstanding shares at August 2, 2014 500 498
Additional paid-in capital 408,928 402,875
Unallocated shares of Employee Stock Ownership Plan (12 ) (14 )
Accumulated other comprehensive loss (7,714 ) (5,152 )
Retained earnings 878,199   845,157  
Total stockholders’ equity 1,279,901   1,243,364  
Total liabilities and stockholders’ equity $ 2,510,066   $ 2,297,233  
 
   

UNITED NATURAL FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)

 
Three months ended

November 1,
2014

    

November 2,
2013

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 33,042 $ 27,764
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 14,158 11,238
Share-based compensation 5,962 5,478
Loss (gain) on disposals of property and equipment 32 (67 )
Excess tax benefits from share-based payment arrangements (1,659 ) (2,332 )
Impairment of intangible asset 555 —
Deferred income taxes (6,052 ) —
Provision for doubtful accounts 1,196 933
Non-cash interest expense 134 616
Changes in assets and liabilities, net of acquired businesses:
Accounts receivable (42,079 ) (55,678 )
Inventories (150,761 ) (131,765 )
Prepaid expenses and other assets 4,586 2,367
Accounts payable 50,878 100,198
Accrued expenses and other liabilities (8,735 ) (8,416 )
Net cash used in operating activities (98,743 ) (49,664 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (27,372 ) (33,247 )
Purchases of acquired businesses, net of cash acquired (7,734 ) (22,973 )
Proceeds from disposals of property and equipment — 99
Long-term investment (3,000 ) —  
Net cash used in investing activities (38,106 ) (56,121 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (2,902 ) (86 )
Proceeds from borrowings from long-term debt 150,000 —
Proceeds from borrowings under revolving credit line 127,962 192,715
Repayments of borrowings under revolving credit line (176,614 ) (95,210 )
Increase in bank overdraft 40,674 6,347
Proceeds from exercise of stock options 523 1,551
Payment of employee restricted stock tax withholdings (2,089 ) (3,422 )
Excess tax benefits from share-based payment arrangements 1,659 2,332
Capitalized debt issuance costs (954 ) —  
Net cash provided by financing activities 138,259   104,227  
EFFECT OF EXCHANGE RATE CHANGES ON CASH 38 (196 )
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,448 (1,754 )
Cash and cash equivalents at beginning of period 16,116   11,111  
Cash and cash equivalents at end of period $ 17,564   $ 9,357  
 
Supplemental disclosures of cash flow information:
Cash paid for interest $ 3,190   $ 1,074  
Cash paid for federal and state income taxes, net of refunds $ 11,032   $ 5,989