Exhibit 99.1
[LETTERHEAD OF UNITED NATURAL FOODS, INC.]
IMMEDIATE RELEASE
November 30, 2004
UNITED NATURAL FOODS ANNOUNCES 25% INCREASE IN NET SALES
AND $0.24 IN DILUTED EARNINGS PER SHARE, A 42% INCREASE
FOR THE FIRST QUARTER OF FISCAL 2005
Reports Record Sales of $478 Million in the First Quarter of Fiscal 2005
Raises Fiscal 2005 Earnings Guidance
Dayville, Connecticut - November 30, 2004 -- United Natural Foods, Inc. (Nasdaq:
UNFI) today reported net income of $9.9 million for the first quarter of fiscal
2005, ended October 31, 2004, or $0.24 per share on a diluted basis. Net sales
for the first quarter of fiscal 2005 were $477.5 million, an increase of $96.2
million, or 25.2%, from the $381.4 million recorded in the first quarter of
fiscal 2004. Strong growth in all sales channels of United Distribution
contributed to the record sales.
Net income for the first quarter of fiscal 2005, increased 50.0% to $9.9
million, or $0.24 per diluted share, compared to $6.6 million, or $0.16 per
diluted share, excluding special items, for the quarter ended October 31, 2003.
In the first quarter of fiscal 2004, special items consisted of a non-cash
income item related to the change in fair value of certain interest rate swaps
and the related option agreements. There were no special items for the quarter
ended October 31, 2004. Net income for the first quarter of fiscal 2005,
increased 45.8% to $9.9 million, or $0.24 per diluted share, compared to $6.8
million, or $0.17 per diluted share, including the effect of special items, for
the quarter ended October 31, 2003.
Historically, expenses related to the change in fair value of interest rate
swaps, distribution facility expansions and asset impairment charges (including
goodwill) have been classified as special items. However, at this time the
Company does not know the extent or significance of these items or whether the
Company will in fact incur any of these or other special items in fiscal 2005.
The Company's guidance is based on a number of assumptions, which are subject to
change and many of which are outside the control of the Company. If any of these
assumptions vary, the Company's guidance may change. There can be no assurance
that the Company will achieve these results. A description of the Company's use
of non-GAAP information is provided under "Non-GAAP Results" below.
The following table details the amounts and effects of the special items for the
first quarter of fiscal 2004:
-------------------------------------------------------------------------------------------------
Quarter Ended October 31, 2003 Pretax Per diluted
(in thousands, except per share data) Income Net of Tax share
------ ---------- -----
Income, excluding special items: $10,806 $6,591 $0.16
Special items - Income
Interest rate swap and related agreements (included
in change in fair value of financial instruments) 304 186 0.01
-------------------------------------------------------------------------------------------------
Income, including special items: $11,110 $6,777 $0.17
=================================================================================================
All non-GAAP numbers have been adjusted to exclude special charges. A
reconciliation of specific adjustments to GAAP results for the quarters ended
October 31, 2003 is included in the financial table shown above. A description
of the Company's use of non-GAAP information is provided under "Non-GAAP
Results" below.
On December 29, 2003, the Company assigned and transferred all of its
obligations of its two "ineffective" interest rate swaps to a third party at a
cost of $5.4 million plus accrued interest. As a result of this novation, these
"ineffective" swaps will no longer be included as a special item for future
fiscal periods. These "ineffective" swaps were included as a special item
through the second quarter of fiscal 2004.
The Company entered into interest rate swap agreements in October 1998, August
2001 and May 2003. The October 1998 and August 2001 agreements were
"ineffective" hedges as a result of the options held by the counter parties that
may extend the original term of the interest rate swap agreements. Applicable
accounting treatment requires that the Company record the changes in fair value
of the October 1998 and August 2001 agreements in its consolidated statement of
income, rather than within "accumulated other comprehensive income" in its
statement of stockholders' equity. The changes in fair value are dependent upon
the forward looking yield curves for each swap. The May 2003 agreement is an
"effective" hedge and therefore does not require this treatment. The Company
believes that its October 1998 and August 2001 agreements are special items that
are excludable as non-recurring items. First, the Company only intends to enter
into "effective" hedges going forward. This stated intention began with the May
2003 agreement. Second, the Company believes that the October 1998 and August
2001 agreements may distort and confuse investors if the change in fair value
cannot be treated as a special item because their inclusion directly impacts its
reported earnings per share. A change in fair value, whether positive or
negative, can significantly increase or decrease its reported earnings per
share. For example, the Company recorded a positive change in fair value for the
second quarter of fiscal 2004 that increased its diluted earnings per share by
$0.01, and in the first quarter of fiscal 2003, the company recorded a negative
change in fair value that decreased its diluted earnings per share by $0.03. If
the Company were prohibited from excluding this item as a special item, it would
artificially inflate its reported earnings per share and thereby mislead
investors as to its results of operations and our financial condition.
Comments from Management
"Continuing our momentum from fiscal 2004, we are pleased to start off fiscal
2005 with another strong quarter of financial results." said Steven Townsend,
Chairman and Chief Executive Officer. "Reflecting the efforts of a well-focused
team and the successful execution of our sales and operating strategies which
have been designed to meet the growing demand for natural and organic products,
we realized solid gains in sales, net income, and earnings per share which are
indicators that our plans are on target. These gains came despite the negative
impact of the hurricanes that we experienced in Florida, rising fuel prices and
the impact of our decision to close our Mounds View, MN facility due to its
small size." Mr. Townsend added, "We remain focused on serving a broad customer
base and are extremely pleased to report sales growth of 25% and comparable
distribution sales growth of 12% excluding Wild Oats. In addition, we are
pleased with our continued progress to improve operating margins. Our first
quarter operating margin was 3.7%, up 26 basis points from the same period last
year in spite of the impact of the hurricane, Mounds View closure and the rising
fuel costs."
Raises Fiscal 2005 Earnings Guidance
The Company is raising its guidance for fiscal 2005, ending July 31, 2005, with
projected revenues remaining in the $1.9 to $2.0 billion range, and projected
earnings per share, excluding potential special items, increasing to a range of
$0.95 - $1.00 per diluted share. Previously, the Company had announced earnings
per share guidance, excluding potential special items, from $0.93 - $0.97 per
diluted share.
Conference Call
Management will conduct a conference call and audio webcast at 11:00 a.m. ET on
November 30, 2004 to review the Company's quarterly results, market trends and
future outlook. The conference call dial-in number is 303-262-2130. The audio
webcast will be available, on a listen only basis, via the Internet at
www.fulldisclosure.com or at the Investor Relations section of the Company's
website, www.unfi.com. Please allow extra time to the webcast to visit the site
and download any software required to listen to the Internet broadcast. The
online archive of the webcast will be available for 30 days.
About United Natural Foods
United Natural Foods, Inc. carries and distributes over 35,000 products to more
than 18,000 customers 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. For more information
on United Natural Foods, Inc., visit the Company's website at www.unfi.com.
Financial Tables Follow
For more information on United Natural Foods, Inc., visit the Company's website
at www.unfi.com.
AT THE COMPANY: FINANCIAL RELATIONS BOARD
- --------------------------------------------------------------------------------
Rick Puckett Joseph Calabrese
Chief Financial Officer General Information
(860) 779-2800 (212) 827-3772
"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. For a discussion of such risks and uncertainties, which could
cause actual results to differ from those contained in the forward-looking
statements, including but not limited to general business conditions, the impact
of competition and our dependence on principal customers, see "Risk Factors" in
the Company's annual report on Form 10-K filed with the Commission on October
14, 2004, and its other filings under the Securities Exchange Act of 1934, as
amended. 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 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 Results: To supplement its financial statements presented on a GAAP
basis, the Company uses non-GAAP additional measures of operating results, net
earnings and earnings per share adjusted to exclude special charges. The Company
believes that the use of these additional measures is appropriate to enhance an
overall understanding of its past financial performance and also its prospects
for the future as these special charges are not expected to be part of the
Company's ongoing business. The adjustments to the Company's GAAP results are
made with the intent of providing both management and investors with a more
complete understanding of the underlying operational results and trends and its
marketplace performance. For example, these adjusted non-GAAP results are among
the primary indicators management uses as a basis for its planning and
forecasting of future periods. The presentation of this additional information
is not meant to be considered in isolation or as a substitute for net earnings
or diluted earnings per share prepared in accordance with generally accepted
accounting principles in the United States of America. A comparison and
reconciliation from non-GAAP to GAAP results is included in the table within
this release.
UNITED NATURAL FOODS, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)
Three months ended
October 31,
--------------------
2004 2003
-------- --------
Net sales $477,542 $381,382
Cost of sales 385,099 305,209
-------- --------
Gross profit 92,443 76,173
-------- --------
Operating expenses 74,597 62,932
Restructuring charge 170 --
Amortization of intangibles 141 232
-------- --------
Total operating expenses 74,908 63,164
-------- --------
Operating income 17,535 13,009
-------- --------
Other expense (income):
Interest expense 1,433 2,320
Change in fair value of financial instruments -- (304)
Other, net (101) (117)
-------- --------
Total other expense 1,332 1,899
-------- --------
Income before income taxes 16,203 11,110
Income taxes 6,319 4,333
-------- --------
Net income $ 9,884 $ 6,777
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Per share data (basic):
Net income $ 0.25 $ 0.17
======== ========
Weighted average basic shares of common stock 40,123 39,051
======== ========
Per share data (diluted):
Net income $ 0.24 $ 0.17
======== ========
Weighted average diluted shares of common stock 41,580 40,364
======== ========
UNITED NATURAL FOODS, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands)
October 31, July 31,
2004 2004
----------- --------
ASSETS
Current assets:
Cash $ 5,753 $ 13,633
Accounts receivable, net 132,939 106,178
Notes receivable, trade, net 761 772
Inventories 214,255 196,171
Prepaid expenses 8,507 7,007
Deferred income taxes 8,061 7,610
-------- --------
Total current assets 370,276 331,371
Property & equipment, net 114,745 114,140
Other assets:
Goodwill 57,399 57,242
Notes receivable, trade, net 1,996 1,601
Intangible assets, net 140 154
Other 4,000 4,259
-------- --------
Total assets $548,556 $508,767
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $115,541 $ 80,875
Notes payable - line of credit 99,138 107,004
Accrued expenses and other current liabilities 28,677 29,501
Current portion of long-term debt 8,134 4,766
Income taxes payable 5,021 --
-------- --------
Total current liabilities 256,511 222,146
Long-term debt, excluding current portion 39,318 43,978
Deferred income taxes 7,978 7,730
Other long-term liabilities 89 137
-------- --------
Total liabilities 303,896 273,991
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value, authorized 5,000 shares
at October 31, 2004 and July 31, 2004, respectively; none
issued and outstanding -- --
Common stock, $0.01 par value, authorized 50,000 shares;
issued and outstanding 40,130 and 40,118 at October 31,
2004 and July 31, 2004, respectively 401 401
Additional paid-in capital 101,397 101,118
Unallocated shares of ESOP (1,727) (1,768)
Accumulated other comprehensive (loss) income (80) 240
Retained earnings 144,669 134,785
-------- --------
Total stockholders' equity 244,660 234,776
-------- --------
Total liabilities and stockholders' equity $548,556 $508,767
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UNITED NATURAL FOODS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Three months ended
October 31,
--------------------
2004 2003
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 9,884 $ 6,777
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,092 2,744
Change in fair value of financial instruments -- (304)
Loss on disposals of property & equipment 9 2
Provision for doubtful accounts 466 570
Changes in assets and liabilities, net of acquired companies:
Accounts receivable (27,227) (4,350)
Inventory (18,084) (17,499)
Prepaid expenses and other assets (1,876) 951
Notes receivable, trade (384) (357)
Accounts payable 34,666 22,574
Accrued expenses and other current liabilities (841) (4,140)
Income taxes payable 5,021 3,230
Tax effect of stock options 74 97
-------- --------
Net cash provided by operating activities 4,800 10,295
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,590) (2,329)
Proceeds from disposals of property and equipment 25 57
-------- --------
Net cash used in investing activities (3,565) (2,272)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments under note payable (7,866) (583)
Repayments on long-term debt (1,292) (1,014)
Principal payments of capital lease obligations (162) (288)
Proceeds from exercise of stock options 205 366
-------- --------
Net cash used in financing activities (9,115) (1,519)
-------- --------
NET (DECREASE) INCREASE IN CASH (7,880) 6,504
Cash at beginning of period 13,633 3,645
-------- --------
Cash at end of period $ 5,753 $ 10,149
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Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1,377 $ 2,220
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Income taxes, net of refunds $ 1,166 $ 388
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