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United Natural Foods, Inc. Announces First Quarter Fiscal 2011 Results
Q1 2011 NET SALES INCREASED BY 19.0% OVER Q1 2010 TO $1.053 BILLION

PROVIDENCE, R.I., Dec. 8, 2010 /PRNewswire via COMTEX/ --

Highlights

  • Diluted EPS of $0.39 for the first quarter of fiscal 2011, a 7.4% increase over diluted EPS for the first quarter of fiscal 2010
  • Net income of $17.4 million for the first quarter of fiscal 2011, a 12.0% increase in net income from the comparable fiscal 2010 period
  • Fiscal 2011 EPS guidance reaffirmed at $1.62 - $1.71 per diluted share

United Natural Foods, Inc. (Nasdaq: UNFI) today reported that net income for the first quarter of fiscal 2011 ended October 30, 2010 increased by $1.9 million, or 12.0%, to $17.4 million, or $0.39 per diluted share, from $15.5 million, or $0.36 per diluted share, for the first quarter of fiscal 2010. Net sales for the first quarter of fiscal 2011 totaled $1.053 billion, an increase of 19.0%, or $168.2 million, over net sales recorded in the first quarter of fiscal 2010 of $884.8 million. Excluding the impact of sales related to the Company's June 2010 Canadian acquisition and its October 2010 acquisition of certain inventory and distribution assets of Whole Foods Market, Inc. ("Whole Foods Market"), which generated combined net sales of approximately $59.4 million, first quarter fiscal 2011 net sales increased by 12.3%, or $108.8 million, to $993.6 million. This is the first time the Company has achieved over $1 billion in net sales during a quarter.

"The operating results for our fiscal 2011 first quarter reflect the sales strength we continue to achieve across our distribution channels. In addition, we closed on our previously announced transaction with Whole Foods Market in October and began to serve Whole Foods Market as their primary grocery distributor in both their Rocky Mountain and Southwest regions," said Steven Spinner, President and Chief Executive Officer.

Gross margin was 18.3% for the first quarter of fiscal 2011, which represents a 33 basis point decline from the gross margin of 18.6% for the first quarter of fiscal 2010. The lower gross margin compared to the prior year was largely due to start-up costs as well as unanticipated expenses associated with inventory issues and incremental freight and service costs incurred as the Company experienced operating challenges during the initial period of operations of its new distribution facility in Lancaster, Texas. The gross margin was also negatively affected by the continued shift in the mix of sales by channel.

Operating expenses as a percentage of net sales decreased to 15.4% for the first quarter of fiscal 2011, a decrease of approximately 0.1% compared to the fiscal 2010 first quarter ended October 31, 2009. Operating expenses increased by $25.3 million, or 18.4%, to $162.7 million, compared to the first quarter of fiscal 2010, which had operating expenses of $137.4 million. Operating income as a percentage of net sales decreased to 2.8% for the first quarter of fiscal 2011 from 3.1% for the first quarter of fiscal 2010. The estimated non-recurring costs related to the initial period of operations of our Lancaster, Texas facility, including both planned start-up expenses as well as additional unanticipated costs, aggregated approximately $3.8 million.

"During the quarter, we successfully on-boarded all of our previously announced new specialty and organic business. In addition, UNFI Canada is progressing positively against our anticipated results, and sales trends across all channels continue to improve. We also remain committed to the continued implementation of UNFI's supply chain technology, which began during the quarter in Lancaster, Texas," added Mr. Spinner.

Confirmation of Fiscal 2011 Guidance

Based on the Company's performance through the first three months of fiscal 2011 and the current outlook for the remainder of the year, the Company is confirming its net sales guidance for fiscal year 2011, ending July 30, 2011, in the range of $4.35 billion to $4.45 billion, which represents a 15.8% to 18.4% increase in total net sales over fiscal 2010.

In addition, the Company is confirming its earnings per share guidance for fiscal 2011 in the range of $1.62 to $1.71 per diluted share.

The Company is also confirming its capital expenditure guidance for fiscal 2011 in the range of $42 million to $45 million.

Conference Call & Webcast

The Company's first quarter 2011 conference call and audio webcast will be held at 10:00 a.m. EST on December 8, 2010. The audio webcast of the conference call will be available to the public, on a listen-only basis, via the Internet at www.fulldisclosure.com or 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 60,000 products to more than 23,000 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 Forbes in 2005 as one of the "Best Managed Companies in America," ranked by Fortune in 2006 - 2010 as one of its "Most Admired Companies," winner of the Supermarket News 2008 Sustainability Excellence Award, and recognized by the Nutrition Business Journal for its 2009 Environment and Sustainability Award.

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 on September 27, 2010 and other filings the Company makes with the SEC, and include, but are not limited to, the Company's ability to successfully deploy its operational initiatives in the Canadian market; 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 timely and successfully deploy its new warehouse management system throughout its distribution facilities, including its Lancaster, Texas distribution facility; increased fuel costs; the Company's sensitivity to inflationary pressures; the relatively low margins and economic sensitivity of the Company's business; the ability to identify and successfully complete acquisitions of other natural, organic and specialty food and related product distributors; and management's allocation of capital and the timing of capital expenditures. 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.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)


Three months ended


October 30,
2010


October 31,
2009





Net sales

$1,052,967


$884,768

Cost of sales

860,635


720,167





Gross profit

192,332


164,601





Operating expenses

162,676


137,409





Total operating expenses

162,676


137,409





Operating income

29,656


27,192





Other expense (income):




Interest expense

1,386


1,381

Interest income

(208)


(69)

Other, net

(53)


(8)

Total other expense

1,125


1,304





Income before income taxes

28,531


25,888





Provision for income taxes

11,127


10,355





Net income

$ 17,404


$ 15,533





Basic per share data:




Net income

$ 0.39


$ 0.36





Weighted average basic shares

of common stock

44,771


42,982





Diluted per share data:




Net income

$ 0.39


$ 0.36





Weighted average diluted shares

of common stock

45,101


43,211


UNITED NATURAL FOODS, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except per share data)


October 30,
2010


July 31,
2010

ASSETS




Current assets:




Cash and cash equivalents

$ 10,706


$ 13,802

Accounts receivable, net

253,305


217,097

Notes receivable, trade, net

3,451


3,111

Inventories

536,671


439,702

Prepaid expenses and other current assets

18,398


21,793

Deferred income taxes

20,560


20,560

Total current assets

843,091


716,065





Property and equipment, net

280,926


279,255





Other assets:




Goodwill

188,810


186,925

Intangible assets, net

61,264


50,201

Notes receivable, trade, net

1,196


235

Other

18,375


18,118

Total assets

$1,393,662


$1,250,799





LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$261,276


$192,331

Notes payable

146,145


242,570

Accrued expenses and other current liabilities

93,989


81,941

Current portion of long-term debt

5,036


5,033

Total current liabilities

506,446


521,875





Long-term debt, excluding current portion

47,173


48,433

Deferred income taxes

20,891


20,598

Other long-term liabilities

29,357


29,446

Total liabilities

603,867


620,352





Stockholders' equity:




Preferred stock, $0.01 par value, authorized 5,000 shares; none issued and outstanding

-


-

Common stock, $0.01 par value, authorized 100,000 shares;
48,202 issued and 48,175 outstanding shares at October 30,
2010; 43,558 issued and 43,531 outstanding shares at July 31,
2010

482


435

Additional paid-in capital

329,887


188,727

Treasury stock

(708)


(708)

Unallocated shares of Employee Stock Ownership Plan

(673)


(713)

Accumulated other comprehensive loss

(458)


(1,155)

Retained earnings

461,265


443,861

Total stockholders' equity

789,795


630,447





Total liabilities and stockholders' equity

$1,393,662


$1,250,799


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


Three months ended


October 30,
2010

October 31,
2009

CASH FLOWS FROM OPERATING ACTIVITIES:



Net income

$17,404

$15,533

Adjustments to reconcile net income to net cash provided by



(used in) operating activities:



Depreciation and amortization

8,355

6,650

Share-based compensation

2,657

2,120

Excess tax benefits from share-based payment arrangements

(301)

(3)

Provision for doubtful accounts

216

496

Gain on disposals of property and equipment

(20)

(13)

Changes in assets and liabilities, net of acquisitions:




Accounts receivable

(36,802)

(19,066)


Inventories

(90,060)

(45,989)


Prepaid expenses and other assets

3,240

5,144


Notes receivable, trade

(1,131)

(301)


Accounts payable

50,598

36,962


Accrued expenses and other current liabilities

12,940

15,950

Net cash (used in) provided by operating activities

(32,904)

17,483




CASH FLOWS FROM INVESTING ACTIVITIES:



Capital expenditures

(7,549)

(9,700)

Proceeds from disposals of property and equipment

20

21

Purchases of acquired businesses, net of cash acquired

(21,842)

-

Net cash used in investing activities

(29,371)

(9,679)




CASH FLOWS FROM FINANCING ACTIVITIES:



Net proceeds from issuance of common stock

138,305

-

Net repayments under note payable

(96,425)

(15,000)

Increase in bank overdraft

18,326

13,583

Payment of employee restricted stock tax withholdings

(1,966)

(558)

Proceeds from exercise of stock options

1,910

14

Repayments of long-term debt

(1,257)

(1,254)

Tax benefits from equity awards

301

3

Capitalized debt issuance costs

-

(7)

Net cash provided by (used in) financing activities

59,194

(3,219)




EFFECT OF EXCHANGE RATE CHANGES ON CASH

(15)

-

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

(3,096)

4,585

Cash and cash equivalents at beginning of period

13,802

10,269

Cash and cash equivalents at end of period

$10,706

$14,854




Supplemental disclosures of cash flow information:



Cash paid during the period for:



Interest, net of amounts capitalized

$1,259

$1,200

Federal and state income taxes, net of refunds

$2,516

$1,525


SOURCE United Natural Foods