US: United Natural Foods cuts FY outlook, profits up

By Michelle Russell | 26 February 2013

  • Net profit up 18.8%
  • Operating profit grows 18.7$
  • Net sales climb 14%

US distributor United Natural Foods has cut its full-year profit outlook, despite booking an increase in first-half profit.

The company today (26 February) booked an 18.8% increase in profit in the six months ended 26 January, to US$44.2m. Operating profit was up 18.7% to $75.5m.

Net sales totalled $2.9bn, a 14% increase over the comparable period last year.

Despite the increase, United Natural Foods cut its EPS outlook for the fiscal year ending in July to between $2.12 and $2.18 from a prior forecast of $2.14 to $2.24.

Show the press release

 

United Natural Foods, Inc. Announces Second Quarter Fiscal 2013 Results

Q2 FISCAL 2013 NET SALES INCREASED 12.3% YEAR OVER YEAR TO $1.45 BILLION

PROVIDENCE, R.I.Feb. 26, 2013 /PRNewswire/ -- 

Highlights

  • Net income in the second quarter of fiscal 2013 increased 2.8% over the prior year comparable quarter to $22.6 million
  • Diluted EPS was $0.46 for the second quarter of fiscal 2013, an increase of 2.2% compared with diluted EPS of $0.45 for the second quarter of fiscal 2012
  • Impact of the Auburn, Washington labor action during the second quarter of fiscal 2013 was additional pre-tax operating expenses of $3.6 million, or $0.04 per diluted share
  • Operating margin was 2.7% of net sales for the second quarter of fiscal 2013. Adjusted for the effect of the Auburn, Washingtonlabor action, operating margin was 2.9% of net sales, an increase of 4 basis points compared with the second quarter of fiscal 2012

United Natural Foods, Inc. (Nasdaq: UNFI) (the "Company") today reported net sales for the second quarter of fiscal 2013 ended January 26, 2013 of $1.45 billion, an increase of 12.3%, or $158.8 million, over $1.29 billion in net sales recorded in the second quarter of fiscal 2012. 

"We were extremely focused on bringing resolution to our labor dispute in Auburn, Washington during the second quarter.  By working together, we were able to reach a fair and equitable agreement.  Our associates are back to work and the facility is back at full capacity," said Steven Spinner, UNFI's President and Chief Executive Officer. "We continue to move forward together as a Company and our results demonstrate our sustained sales growth, expense control and execution." 

Gross margin was 16.7% for the second quarter of fiscal 2013, unchanged from the first quarter of fiscal 2013 and representing a 62 basis point decline from gross margin of 17.3% for the second quarter of fiscal 2012.  Gross margin for the second quarter of fiscal 2013 was impacted by the continued shift in customer mix to the conventional supermarket and supernatural channels.

Total operating expenses were 14.0% as a percentage of net sales for the second quarter of fiscal 2013, a decrease of 40 basis points compared with the second quarter of fiscal 2012.  This improvement was driven by the Company's ongoing initiatives to enhance productivity and reduce operating expenses throughout the organization, which were partially offset by $3.6 million in operating expenses related to the labor action at the Company's Auburn, Washington facility.  Excluding the Auburn, Washington labor action costs, operating expenses for the second quarter of fiscal 2013 were 13.8% of net sales, a decrease of 65 basis points compared with the second quarter of fiscal 2012, which were 14.4% of net sales.

Operating income for the second quarter of fiscal 2013 as a percentage of net sales decreased 21 basis points to 2.7% compared to the second quarter of fiscal 2012.  Adjusting for the additional costs related to the labor action in Auburn, Washington, operating income for the second quarter of fiscal 2013 was 2.9% of net sales, an increase of 4 basis points compared to the second quarter of fiscal 2012.  Net income for the second quarter of fiscal 2013 increased by $0.6 million, or 2.8%, to $22.6 million, or $0.46 per diluted share including the negative impact of $0.04 per diluted share related to the Auburn, Washington labor action, from $22.0 million, or$0.45 per diluted share, for the second quarter of fiscal 2012. 

The following table details the amounts and effect of the labor action costs related to our Auburn, Washington facility described above and the reconciliation of total operating expenses and operating income, in each case including the labor action costs (GAAP basis), to total operating expenses and operating income, excluding the labor action costs (non-GAAP basis) for the three months January 26, 2013 compared to the prior year quarter:



Three months ended





January 26, 2013



January 28, 2012



(in millions)


Pretax


% of Sales


Pretax


% of Sales












Gross profit


$

241.7


16.72%


$

223.1


17.34%












Total operating expenses


202.7


14.02%


185.6


14.42%


Labor action costs


3.6


0.25%




Total operating expenses, excluding labor

action costs


199.1


13.77%


185.6


14.42%












Operating income, excluding labor action costs


$

42.6


2.95%


$

37.5


2.91%

*

Total reflects rounding
















First Half Fiscal 2013 Summary 
Net sales for the first half of fiscal 2013 totaled $2.9 billion, a 14.0% increase over the comparable prior fiscal year period.  Gross margin was 85 basis points lower than the comparable prior year period, at 16.7% of net sales for the six months ended January 26, 2013.  The decline in gross margin was attributed to increased inbound freight costs throughout the first half of fiscal 2013 as well as the Company's focus in the first quarter of fiscal 2013 on maintaining higher service levels despite greater supplier out of stocks.  The continued shift in customer mix towards the supernatural and conventional supermarket channels, and to customers within the conventional supermarket channel who are migrating to limited service programs also continued to negatively impact gross margin compared to the comparable prior year period.

At 14.1% of net sales, total operating expenses for the six months ended January 26, 2013 were 96 basis points lower than the comparable prior fiscal year period.  Total operating expenses increased by $25.4 million, or 6.7%, to $402.1 million, compared with the six months ended January 28, 2012, which had operating expenses of $376.7 million.  Total operating expenses for the first half of fiscal 2013 also included approximately $4.6 million in expenses related to the labor action at the Company's Auburn, Washingtonfacility.  Excluding these incremental expenses, operating expenses were $397.5 million, which was 112 basis points as a percentage of net sales below the prior year's comparable period. Total operating expenses for the first half of fiscal 2013 also included expenses of approximately $1.6 million related to the termination of a licensing agreement and the write-off of the associated intangible asset.  Total operating expenses for the first half of fiscal 2012 included $5.2 million in expenses related to the restructuring and divestiture of the Company's conventional non-foods and general merchandise lines of business and $1.6 million in expenses related to the onboarding of a new national customer.

The following table details the amounts and effect of the labor action costs related to our Auburn, Washington facility described above and the reconciliation of total operating expenses including the labor action costs (GAAP basis), to total operating expenses excluding the labor action costs (non-GAAP basis) for the six months January 26, 2013:



Six months ended



January 26, 2013

(in millions)


Pretax


% of Sales






Total operating expenses


$

402.1


14.08%

Labor action costs


4.6


0.16%

Total operating expenses, excluding labor action costs


$

397.5


13.92%

Operating income as a percentage of net sales was 2.6% for the first half of fiscal 2013 compared with 2.5% for the same period in fiscal 2012.  Excluding $1.6 million related to the termination of a licensing agreement and the write-off of the associated intangible asset in the first half of fiscal 2013 and $6.8 million related to restructuring the Company's lines of business and the onboarding of a new national customer in the first half of fiscal 2012, operating expenses as a percentage of net sales were 14.0% for the first half of fiscal 2013, a decrease of 75 basis points compared to 14.8% for the first half of fiscal 2012. 

Net income for the first half of fiscal 2013 increased by $7.0 million, or 18.8%, to $44.2 million, or $0.89 per diluted share, from $37.2 million, or $0.76 per diluted share, for the first half of fiscal 2012.

"UNFI continued its drive towards increasing operational excellence during the second quarter of fiscal 2013, realizing higher sales while managing our cost structure despite the quarter's labor related expenses," added Mr. Spinner.  "Our sustained top-line growth reflects strong consumer demand being fueled by more people maintaining healthier lifestyles.  We expect this trend to continue for the foreseeable future and will continue with our mission to supply natural and organic products that meet their growing needs."

Updated Fiscal 2013 Guidance 
Based on UNFI's fiscal 2013 performance to date and the current outlook for the remainder of the fiscal year, the Company is narrowing and lowering its GAAP earnings per diluted share guidance for fiscal 2013 to range from approximately $2.12 to $2.18, an increase of approximately 14.0% to 17.2% over fiscal 2012 GAAP diluted earnings per share of $1.86.  UNFI previously provided, on September 11, 2012, GAAP earnings guidance of approximately $2.14 to $2.24 per diluted share.  The Company expects to incur approximately$0.6 million to $1.0 million in additional expenses related to the Auburn, Washington labor issue in the third quarter of fiscal 2013. Excluding the impact of the $1.6 million write-off of the intangible asset, the $4.9 million unclaimed property settlement and the discrete tax benefit of $2.7 million primarily related to the reversal of reserves for uncertain tax positions (collectively, the "special items"), UNFI expects diluted earnings per share for fiscal 2013 in the range of approximately $2.15 to $2.21 per share, which represents an increase of approximately 10.8% to 13.9% over fiscal 2012 diluted earnings per share of $1.94 excluding the expenses associated with the restructuring and divestiture of the Company's conventional non-foods and general merchandise lines of business and the expenses related to the onboarding of a national customer.

The following table details the amounts and effect of the special items and the reconciliation of net income and diluted earnings per share guidance, excluding the special items (non-GAAP basis), to net income guidance, including the special items (GAAP basis) for the fiscal year ending August 3, 2013:

Year Ended August 3, 2013

Low Range

High range

(in thousands, except per share data)

 

Pretax

Income

Net of Tax

Per

diluted

share

 

Pretax

Income

Net of Tax

Per

dilutedshare








Income, including special items:

$

169,752


$

104,891


$

2.12


$

175,002


$

108,051


$

2.18








Special items:














Expenses incurred as a result of the termination of a long-term licensing agreement and the write-off of the associated intangible asset

(included in total operating expenses)

1,629


981


0.02


1,629


981


0.02













Expense incurred in connection with

agreement to settle multi-state unclaimed

property audit

(included in other, net expenses)

4,900


2,950


0.06


4,900


2,950


0.06













Discrete tax benefit primarily related to the reversal of reserves for uncertain tax positions


(2,675)


(0.05)



(2,675)


(0.05)








Income, excluding special items:

$

176,281


$

106,147


$

2.15


$

181,531


$

109,307


$

2.21

Conference Call & Webcast 
The Company's second quarter fiscal 2013 conference call and audio webcast will be held at 10:00 a.m. EST on February 26, 2013.  The audio webcast of the conference call will be available to the public, on a listen-only basis, via the Internet at www.earnings.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 65,000 products to more than 27,000 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 2006 - 2010 and 2012 as one of its "Most Admired Companies," winner of the Supermarket News 2008 Sustainability Excellence Award, recognized by the Nutrition Business Journal for its 2009 Environment and Sustainability Award 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 September 26, 2012, its quarterly report on Form 10-Q filed with the SEC on December 6, 2012, 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 resulting lower gross margins on the 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 new warehouse management system throughout its distribution centers; 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 ability to identify and successfully complete acquisitions of other natural, organic and specialty food and non-food products 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.

Non-GAAP Financial Measures:  To supplement its financial statements presented on a generally accepted accounting principles ("GAAP") basis, the Company has included in this press release non-GAAP financial measures (including operating expenses,  operating income, net income and earnings per diluted share) in each case excluding certain unusual expenses as described in more detail within this press release.  The reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are presented in the tables appearing below labeled "Consolidated Statements of Income with Adjustments" for the three and six months ended January 26, 2013 and January 28, 2012.  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 its operating expenses, operating income, net income and earnings per diluted share for the three and six months ended January 26, 2013 and January 28, 2012 excluding these expenses facilitates making period-to-period comparisons and is a meaningful indication of its operating performance. The Company's management utilizes this non-GAAP financial information to compare the Company's operating performance during the 2013 fiscal year versus the comparable periods in the 2012 fiscal year and to internally prepared projections.

 

 

UNITED NATURAL FOODS, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(In thousands, except per share data)







Three months ended


Six months ended


January 26,

2013


January 28,

2012


January 26,

2013


January 28,

2012









Net sales

$

1,445,703



$

1,286,910



$

2,855,740



$

2,504,338


Cost of sales

1,204,030



1,063,763



2,378,114



2,064,078


Gross profit

241,673



223,147



477,626



440,260










Operating expenses

202,693



185,760



400,451



371,473


Restructuring and asset impairment expenses

(recoveries)



(126)



1,629



5,219


Total operating expenses

202,693



185,634



402,080



376,692










Operating income

38,980



37,513



75,546



63,568










Other expense (income):








Interest expense

1,373



1,382



2,351



2,455


Interest income

(168)



(219)



(341)



(389)


Other, net

201



27



4,982



168


Total other expense, net

1,406



1,190



6,992



2,234










Income before income taxes

37,574



36,323



68,554



61,334










Provision for income taxes

14,954



14,312



24,398



24,166










Net income

$

22,620



$

22,011



$

44,156



$

37,168










Basic per share data:








Net income

$

0.46



$

0.45



$

0.90



$

0.76










Weighted average basic shares of common

stock

49,289



48,774



49,174



48,665










Diluted per share data:








Net income

$

0.46



$

0.45



$

0.89



$

0.76










Weighted average diluted shares of common

stock

49,528



49,019



49,475



48,933


 

 

UNITED NATURAL FOODS, INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands, except per share data)








January 26, 2013


July 28, 2012

ASSETS





Current assets:





Cash and cash equivalents


$

8,085


$

16,122

Accounts receivable, net


358,173


305,177

Inventories


674,046


578,555

Prepaid expenses and other current assets


30,726


21,654

Deferred income taxes


25,353


25,353

Total current assets


1,096,383


946,861






Property and equipment, net


302,368


278,455






Other assets:





Goodwill


203,906


193,741

Intangible assets, net


51,981


52,496

Other


25,468


22,393

Total assets


$

1,680,106


$

1,493,946






LIABILITIES AND STOCKHOLDERS' EQUITY





Current liabilities:





Accounts payable


$

285,943


$

242,179

Accrued expenses and other current liabilities


125,027


91,632

Current portion of long-term debt


357


350

Total current liabilities


411,327


334,161






Notes payable


173,947


115,000

Long-term debt, excluding current portion


849


635

Deferred income taxes


36,260


36,260

Other long-term liabilities


29,068


29,174

Total liabilities


651,451


515,230






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;

49,295 issued and outstanding shares at January 26, 2013;

49,011 issued and outstanding shares at July 28, 2012


493


490

Additional paid-in capital


370,634


364,598

Unallocated shares of Employee Stock Ownership Plan


(71)


(89)

Accumulated other comprehensive income


1,622


1,896

Retained earnings


655,977


611,821

Total stockholders' equity


1,028,655


978,716

Total liabilities and stockholders' equity


$

1,680,106


$

1,493,946

 

 

UNITED NATURAL FOODS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)






Six months ended



January 26, 2013


January 28, 2012

CASH FLOWS FROM OPERATING ACTIVITIES:





Net income


$

44,156



$

37,168


Adjustments to reconcile net income to net cash used in

operating activities:





     Depreciation and amortization


20,944



19,190


     Share-based compensation


7,889



6,433


     Gain on disposals of property and equipment


(20)



(306)


     Excess tax benefits from share-based payment arrangements


(30)



(441)


     Impairment of intangible asset


1,629




     Unrealized loss on foreign exchange


(63)




     Provision for doubtful accounts


1,497



1,832


Changes in assets and liabilities, net of acquisitions:





     Accounts receivable


(51,057)



(67,522)


     Inventories


(94,621)



(79,545)


     Prepaid expenses and other assets


(11,762)



3,278


     Accounts payable


32,140



14,203


     Accrued expenses and other current liabilities


714



7,905


Net cash used in operating activities


(48,584)



(57,805)







CASH FLOWS FROM INVESTING ACTIVITIES:





Capital expenditures


(20,026)



(12,922)


Purchases of acquired businesses, net of cash acquired


(9,266)



(2,450)


Proceeds from disposals of property and equipment


2,342



325


Net cash used in investing activities


(26,950)



(15,047)







CASH FLOWS FROM FINANCING ACTIVITIES:





Repayments of long-term debt


(400)



(2,522)


Net borrowings under notes payable


59,098



75,000


Increase in bank overdraft


10,504



8,851


Proceeds from exercise of stock options


1,455



2,508


Payment of employee restricted stock tax withholdings


(3,335)



(1,392)


Excess tax benefits from share-based payment arrangements


30



441


Capitalized debt issuance costs


(12)




Net cash provided by financing activities


67,340



82,886







EFFECT OF EXCHANGE RATE CHANGES ON CASH


157



(165)


NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS


(8,037)



9,869


Cash and cash equivalents at beginning of period


16,122



16,867


Cash and cash equivalents at end of period


$

8,085



$

26,736







Supplemental disclosures of cash flow information:





Cash paid during the period for:





     Interest, net of amounts capitalized


$

2,195



$

2,423


Income taxes, net of refunds


$

32,315



$

18,023


 

 

Original source: United Natural Foods

Sectors: Financials

Companies: United Natural Foods

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