Dayville, Conn.-based United Natural Foods has announced that earnings for the Q2 of fiscal 2002, ending 31 January 2002, were in line with the guidance previously provided by the company.


Net sales for the Q2 totalled US$285.5m, a 16.8% increase over the US$244.4m reported in the Q2 of fiscal 2001, above the company’s guidance of 10-14% sales growth.


This increase was primarily due to increased sales throughout all the company’s divisions and included double digit growth in the super natural, independent and mass market distribution channels.


Sales in the Q2 included a full quarter of sales for Boulder Fruit Express, an organic produce and perishables distributor acquired by the company in November 2001, and a full quarter of sales for a Florida retail store opened by the company in October 2001. Sales growth excluding acquisition and new store sales would have been 15.3%.


Net sales for the six months ended 31 January 2001 were US$565.8m, a 15.8% increase over the comparable prior year period.

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Net income for the Q2, excluding the effect of special items, was US$5.2m, or US$0.27 per diluted share, compared to net income of US$2.6m, or US$0.14 per diluted share for last year.


There were no special items recorded during the Q2 of fiscal 2001. The special items consisted of non-cash income of US$1.4m (US$0.8m, net of tax), or US$0.04 per diluted share, related to the change in fair value of interest rate swaps and related option agreements, and restructuring, asset impairment and other costs of US$(1.3)m (US$(0.8)m, net of tax), or US$(0.04) per diluted share, related to the relocation of our Atlanta facility. Net income including these items totaled US$5.2m, or US$0.27 per diluted share.


The FAS 133 income of approximately US$1.4 million (US$0.8m, net of tax), or US$0.04 per diluted share, on interest rate swap agreements resulted from favorable changes in yield curves during the quarter. The Atlanta relocation costs of US$(1.3)m (US$(0.8)m, net of tax), or US$(0.04) per diluted share, consisted of incremental and redundant costs incurred during the transition from the company’s former warehouse and outside storage facility into its new larger facility.


A portion of these costs are reflected in “Restructuring and asset impairment” on the consolidated statements of income, with the remainder reflected as part of “Operating expenses”. The company adopted Statement of Financial Accounting Standards No. 142 (FAS No. 142), “Goodwill and Other Intangible Assets” on 1 August 2001. The result of adopting FAS No. 142 was a reduction in amortization of intangibles of approximately US$0.2m.


Comments from Management


Commenting on the Q2 results, Michael Funk, CEO, said: “We are extremely pleased by the strength of our 2002 Q2 operating results which we believe reflect the effectiveness of our business plan.


“During the quarter we achieved higher than expected sales as we achieved double-digit growth in both our eastern and western regions. Additionally, sales growth exceeded 25% in our supernatural distribution channel and approached 20% in our mass market distribution channel.


“Further, operating metrics continue to track at efficient levels with customer service rates continuing to perform at near optimum levels.


“Looking forward, we believe our sales growth for fiscal 2002 will continue in the 12% – 14% range. We are raising our net income expectations for fiscal 2002 to approximately US$1.08-US$1.12 per diluted share and net income for the fiscal 2002 Q3 to be approximately US$0.27-US$0.29 per diluted share.


“Our guidance for both fiscal 2002 and the Q3 excludes special income or charges for FAS 133 income or expense and relocation expenses related to the new distribution facilities in Atlanta and southern California.”