United Natural Foods Announces Third Quarter Fiscal 2010 Diluted EPS of $0.45, A 15% Increase Over The Prior Year Period

Jun 02, 2010, 07:30 ET from United Natural Foods, Inc.

PROVIDENCE, R.I., June 2 /PRNewswire-FirstCall/ --

Third Quarter Highlights

  • Net sales increased 10.8% to $985.7 million compared with the third quarter of fiscal 2009
  • Fiscal 2010 sales guidance raised to a range of 6.5% - 7.5% year over year growth, or $3.68 billion to $3.72 billion

United Natural Foods, Inc. (Nasdaq: UNFI) today reported net sales of $985.7 million for the third quarter of fiscal 2010, ended May 1, 2010, an increase of approximately $96.2 million, or 10.8%, from net sales of $889.5 million recorded in the third quarter of fiscal 2009.

"Our fiscal 2010 third quarter reflected the continuing rebound of the natural and organic industry as our growth accelerated during most of the quarter, resulting in both record revenues and net income," said Steven Spinner, President and Chief Executive Officer.  "In addition, now that we have entered our fourth fiscal quarter, we have begun servicing all of our previously announced new customers."

Net income was $19.5 million, or $0.45 per diluted share, for the third quarter of fiscal 2010 compared with net income for the third quarter of fiscal 2009 of $16.8 million, or $0.39 per diluted share.

Gross margin was 18.5% for the third quarter of fiscal 2010, which represents a 46 basis point decline from gross margin of 19.0% for the third quarter of fiscal 2009, primarily due to the continued shift in growth in the Company's customer mix, and moderated inflation.  

Operating expenses as a percentage of net sales decreased by 0.5% to 15.1% of net sales, or $148.6 million in the third quarter of fiscal 2010, compared to 15.6% or $138.3 million in the third quarter of fiscal 2009.  Operating expenses were positively impacted by the growth in the supernatural and supermarket channels which in general have lower operating expenses, and the continued roll-out of process improvement programs across all UNFI divisions.  The Company recorded $0.4 million in expenses during the quarter related to severance for a previously announced separation agreement, and $0.5 million in start-up costs associated with on-boarding of new customers.

In the third quarter of fiscal 2010, the supernatural channel experienced growth of 17.7%, the supermarket channel had growth of 12.2%, and the independent channel showed continued improvement with growth of 6.9%.

Fiscal 2010 Year to Date Summary

Sales for the first nine months of fiscal 2010 were $2.77 billion, a 6.4% increase over the prior fiscal year comparable period.  Diluted EPS was $1.17 per share, a 14.7% increase over the first nine months of fiscal 2009.  

At 15.3% of net sales, operating expenses were 0.7% lower than the prior fiscal year comparable period.  Gross margin was 0.6% less than the first nine months of fiscal 2009, at 18.6% of net sales for the first nine months of fiscal 2010.

"In May, we announced the definitive agreement to acquire the Canadian food distribution assets of the SunOpta Distribution Group business, and we expect the transaction to close later this month," said Mr. Spinner. "This morning, in a separate press release, we announced the extension of our long-term partnership with Whole Foods Market for an additional seven years, resulting in an amended agreement to serve them for the next decade.  We are well situated to continue our strategy to increase market share with both new and existing customers, drive operational excellence, operate as one company and further our sustainability and philanthropic causes which will serve as the primary vehicles for our long-term success."

Updates to Fiscal 2010 Guidance

Based on the Company's performance through the first nine months of 2010 and the current outlook for the remainder of the year including the proposed acquisition of certain assets of the SDG business, the Company is raising its net sales guidance for fiscal year 2010, ending July 31, 2010, to a range of $3.68 billion to $3.72 billion, which represents a 6.5% to 7.5% increase in total net sales over fiscal 2009.  The Company had previously provided, on December 10, 2009, a net sales guidance target of $3.54 billion to $3.63 billion.

In addition, the Company is narrowing its earnings per share guidance for fiscal 2010 to a range of $1.55 to $1.58 per diluted share.  The Company had previously announced earnings per share guidance of $1.48 to $1.58 per diluted share.  The Company's revised guidance reflects the impact of improved operating efficiencies and cost controls.

Conference Call & Webcast

The Company's third quarter fiscal 2010 conference call and audio webcast will be held at 10:00 a.m. ET on June 2, 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 17,000 customer locations nationwide. 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.

Financial Tables Follow

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 30, 2009 and its quarterly reports on Form 10-Q filed thereafter, and include, but are not limited to, the ability of the Company to consummate the proposed acquisition of the SDG business, the Company's ability to successfully deploy its operational initiatives in the Canadian market, the occurrence of any event, change, or other circumstance that could give rise to the termination of the acquisition agreement entered into by the Company and SunOpta in connection with the Company's proposed acquisition of the SDG business; 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; 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

Nine months ended

May 1,

2010

May 2,

2009

May 1,

2010

May 2,

2009

Net sales

$985,694

$889,538

$2,768,679

$2,601,409

Cost of sales

803,287

720,787

2,255,065

2,103,004

        Gross profit

182,407

168,751

513,614

498,405

Operating expenses

148,565

138,327

424,976

417,082

        Total operating expenses

148,565

138,327

424,976

417,082

        Operating income

33,842

30,424

88,638

81,323

Other expense (income):

     Interest expense

1,491

1,723

4,429

8,333

     Interest income

(89)

11

(199)

(331)

     Other, net

(40)

134

(60)

281

        Total other expense

1,362

1,868

4,170

8,283

        Income before income taxes

32,480

28,556

84,468

73,040

Provision for income taxes

12,992

11,777

33,787

29,393

        Net income

$    19,488

$    16,779

$     50,681

$     43,647

Basic per share data:

  Net income

$     0.45

$     0.39

$        1.18

$        1.02

  Weighted average basic shares of common stock

43,245

42,871

43,085

42,827

Diluted per share data:

  Net income

$     0.45

$     0.39

$        1.17

$        1.02

Weighted average diluted shares of common stock

43,536

42,943

43,328

42,939

UNITED NATURAL FOODS, INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands, except per share data)

May 1,

2010

August 1,

2009

ASSETS

Current assets:

   Cash and cash equivalents

$      9,683

$     10,269

   Accounts receivable, net

210,957

179,455

   Notes receivable, trade, net

3,064

1,799

   Inventories

438,752

366,611

   Deferred income taxes

18,074

18,074

   Prepaid expenses and other current assets

12,102

16,423

      Total current assets

692,632

592,631

Property and equipment, net

254,603

242,051

Other assets:

   Goodwill

163,346

164,333

   Notes receivable, trade, net

1,154

2,176

   Intangible assets, net

37,484

38,358

   Other

18,311

19,001

Total assets

$1,167,530

$1,058,550

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

   Notes payable

$   187,000

$   200,000

   Accounts payable

198,623

155,211

   Accrued expenses and other current liabilities

85,094

63,347

   Current portion of long-term debt

5,029

5,020

      Total current liabilities

475,746

423,578

Long-term debt, excluding current portion

49,692

53,858

Deferred income taxes

13,075

12,297

Other long-term liabilities

24,191

24,345

      Total liabilities

562,704

514,078

Stockholders' equity:

Preferred stock, $0.01 par value, authorized 5,000 shares at May 1, 2010 and August 1, 2009; none issued and outstanding

-

-

Common stock, $0.01 par value, authorized 100,000 shares; 43,496 issued and 43,268 outstanding shares at May 1, 2010; 43,237 issued and 43,008 outstanding shares at August 1, 2009                                          

435

432

 Additional paid-in capital

184,574

175,182

 Unallocated shares of Employee Stock Ownership Plan

(754)

(877)

 Treasury stock

(6,092)

(6,092)

 Accumulated other comprehensive loss

(1,468)

(1,623)

 Retained earnings

428,131

377,450

    Total stockholders' equity

604,826

544,472

Total liabilities and stockholders' equity

$1,167,530

$1,058,550

UNITED NATURAL FOODS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

Nine months ended

May 1,

2010

May 2,

2009

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$50,681

$43,647

Adjustments to reconcile net income to net cash provided by

 operating activities:

   Depreciation and amortization

20,219

20,329

   Share-based compensation

6,517

4,607

   Provision for doubtful accounts

781

3,526

   Excess tax benefits from share-based payment arrangements

(399)

(133)

   (Gain) loss on disposals of property and equipment

(3)

290

Changes in assets and liabilities, net of acquisitions:

 Accounts receivable

(32,564)

(20,760)

 Inventories

(72,141)

(21,314)

 Prepaid expenses and other assets

4,458

(1,002)

 Notes receivable, trade

38

369

 Accounts payable

31,715

(1,195)

 Accrued expenses and other current liabilities

23,913

12,327

           Net cash provided by operating activities

33,215

40,691

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures

(30,912)

(25,421)

Purchases of acquired businesses, net of cash acquired

(320)

(4,468)

Proceeds from disposals of property and equipment

20

-

     Net cash used in investing activities

(31,212)

(29,889)

CASH FLOWS FROM FINANCING ACTIVITIES:

Net repayments under note payable

(13,000)

(39,477)

Increase in bank overdraft

11,697

17,152

Repayments of long-term debt

(4,157)

(3,726)

Payments on life insurance policy loans

-

(3,072)

Capitalized debt issuance costs

(7)

(647)

Proceeds from exercise of stock options

3,751

613

Payment of employee restricted stock tax withholdings

(1,272)

(425)

Excess tax benefits from share based payment arrangements

399

133

     Net cash used in financing activities

(2,589)

(29,449)

NET DECREASE IN CASH AND CASH EQUIVALENTS

(586)

(18,647)

Cash and cash equivalents at beginning of period

10,269

25,333

Cash and cash equivalents at end of period

$  9,683

$  6,686

Supplemental disclosures of cash flow information:

Cash paid during the period for:

    Interest, net of amounts capitalized

$  3,559

$  7,713

    Federal and state income taxes, net of refunds

$23,025

$29,734

SOURCE United Natural Foods, Inc.



RELATED LINKS

http://www.unfi.com