Exhibit 99.1
[LETTERHEAD OF UNITED NATURAL FOODS, INC.]
IMMEDIATE RELEASE
February 28, 2006
UNITED NATURAL FOODS REPORTS $0.26 DILUTED EPS, EXCLUDING SPECIAL
ITEMS, AND $0.25 DILUTED EPS, INCLUDING SPECIAL ITEMS, ON RECORD
REVENUES OF $601 MILLION FOR THE SECOND QUARTER OF FISCAL 2006
Increases Guidance for Fiscal 2006 Revenues and Earnings
Dayville, Connecticut - February 28, 2006 -- United Natural Foods, Inc. (Nasdaq:
UNFI) (the "Company") today reported net income of $10.8 million, or $0.26 per
diluted share, excluding special items, for the second quarter of fiscal 2006,
ended January 28, 2006. Net income for the second quarter of fiscal 2006,
including the effect of special items, was $10.6 million, or $0.25 per diluted
share.
The Company reported revenues for the second quarter of fiscal 2006 of $601.1
million, an increase of $96.4 million, or 19%, from the $504.7 million recorded
in the second quarter of fiscal 2005. Strong growth across all major sales
channels of the wholesale segment contributed to the record sales.
In December 2004, the Financial Accounting Standards Board finalized FAS 123R,
which requires all companies to expense share-based payments, including stock
options, at fair value as of the beginning of the first annual reporting period
that begins after June 15, 2005. As such, the Company began expensing stock
options on August 1, 2005. The Company has adopted the modified prospective
method allowed under FAS 123R. The charge to earnings during fiscal 2006
includes the impact of the vesting of stock options granted in prior years,
because the expense is recognized over the vesting period of the options, which
is typically four years. For the second quarter of fiscal 2006, share-based
compensation negatively impacted earnings before taxes by $0.9 million or 16
basis points.
For the second quarter of fiscal 2006, net income, excluding the effect of
special items, increased 14.3% to $10.8 million, or $0.26 per diluted share,
compared to $9.4 million, or $0.23 per diluted share, excluding special items,
for the second quarter of fiscal 2005. Special items in the second quarter of
fiscal 2006 consisted of incremental and redundant costs incurred during the
transition from our former warehouses and outside storage facility in Auburn,
California into our new larger facility in Rocklin, California. Net income for
the second quarter of fiscal 2006, including the effect of special items,
increased 15.3% to $10.6 million, or $0.25 per diluted share, compared to $9.2
million, or $0.22 per diluted share, for the second quarter of fiscal 2005.
The following table details the non-GAAP measures for the second quarter of
fiscal 2006:
- ---------------------------------------------------------------------------------------------------
Quarter Ended January 28, 2006 Pretax Per diluted
(in thousands, except per share data) Income Net of Tax share
------ ---------- -----
Income, excluding special items: $17,398 $10,787 $0.26
Special items - (Expense)
Rocklin, CA facility relocation costs (included in
operating expenses) (251) (156) (0.00)
- ---------------------------------------------------------------------------------------------------
Income, including special items: $17,147 $10,631 $0.25*
===================================================================================================
* Total reflects rounding
Certain labor costs associated with the closing of the Mounds View, Minnesota
facility, which was completed in the second quarter of fiscal 2005, represented
the special items for the second quarter of fiscal 2005.
The following table details the non-GAAP measures for the second quarter of
fiscal 2005:
- ---------------------------------------------------------------------------------------------------
Quarter Ended January 31, 2005 Pretax Per diluted
(in thousands, except per share data) Income Net of Tax share
------ ---------- -----
Income, excluding special items: $15,474 $9,439 $0.23
Special items - (Expense)
Related to the closing of the Mounds View,
Minnesota facility (included in operating expenses) (353) (215) (0.01)
- ---------------------------------------------------------------------------------------------------
Income, including special items: $15,121 $9,224 $0.22
===================================================================================================
All non-GAAP numbers have been adjusted to exclude special items. A
reconciliation of specific adjustments to GAAP results for the quarters ended
January 28, 2006 and January 31, 2005 is included in the financial tables shown
above. A description of the Company's use of non-GAAP information is provided
under "Non-GAAP Results" below.
Comments from Management
"We continued fiscal 2006 with record revenues for the quarter, and are pleased
to report second quarter sales growth of 20.4% and comparable distribution sales
growth of 18.7% based on comparable shipping days, excluding the two
acquisitions made during fiscal 2005," said Michael Funk, Chief Executive
Officer.
Mr. Funk added, "This quarter's strong performance demonstrates the
effectiveness of our sales and operating strategies and our ability to
capitalize on the continued strong consumer demand for natural and organic
products. We remain focused on providing superior service to our entire customer
base, and by supporting our customers and helping them grow their businesses, we
continue to drive growth across all of our served channels of business. Looking
ahead, our business metrics remain strong and our team of associates remains
focused on achieving our long-term growth objectives. We also continue to focus
on achieving increased efficiencies in our Greenwood, Indiana and Rocklin,
California facilities that opened earlier this fiscal year, while maintaining
the high service levels our customers have come to expect."
Raises Fiscal 2006 Earnings Guidance
The Company is raising its guidance for fiscal 2006, ending July 29, 2006, with
projected revenues increasing to $2.38 to $2.42 billion, and projected earnings
per share, excluding special items, increasing to a range of $1.05 - $1.10 per
diluted share. Previously, the Company had announced revenue guidance from $2.25
to $2.35 billion and earnings per share guidance, excluding potential special
items, from $1.03 - $1.08 per diluted share for the fiscal year. At this time,
the Company is also narrowing the anticipated impact of share-based compensation
expense to approximately $5.5 million to $6.8 million on a pre-tax basis, or
$0.08 to $0.10 per diluted share after taxes. Previously, the Company had
expected to incur approximately $6.0 million to $8.2 million of share-based
compensation expense on a pre-tax basis, or $0.08 to $0.11 per diluted share
after taxes, excluding potential special items.
Actual share-based compensation expenses recorded during the remainder of fiscal
2006 may fluctuate beyond the guidance provided based on various factors, such
as additional equity awards granted to employees, changes in the Company's stock
price, and actual results in comparison to the underlying assumptions used in
estimating the fair value of share-based payments.
Historically, the Company has classified expenses related to distribution
facility expansions and distribution facility relocations 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 additional special
items in fiscal 2006. 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.
Conference Call
Management will conduct a conference call and audio webcast at 11:00 a.m. EST on
February 28, 2006 to review the Company's quarterly results, market trends and
future outlook. The conference call dial-in number is (303) 262-2075. An audio
webcast of the conference call will be available to the public, on a listen-only
basis, via the Internet at http://www.earnings.com or at the Investor Relations
section of the Company's website at http://www.unfi.com. Please allow extra time
prior to the call to visit the site and download the necessary software 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 more than 40,000 products to
more than 20,000 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
http://www.unfi.com.
Financial Tables Follow
AT THE COMPANY: FINANCIAL RELATIONS BOARD
- --------------------------------------------------------------------------------
Mark Shamber Joseph Calabrese
Acting 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 quarterly report on Form 10-Q filed with the Commission on
December 7, 2005, 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 U.S.
generally accepted accounting principles ("GAAP") basis, the Company uses
non-GAAP additional measures of operating results, net income 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 GAAP. A comparison and reconciliation from non-GAAP
to GAAP results is included in the tables within this release.
UNITED NATURAL FOODS, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)
Three months ended Six months ended
----------------------------- -----------------------------
January 28, January 31, January 28, January 31,
2006 2005 2006 2005
------------ ------------ ------------ ------------
Net sales $ 601,082 $ 504,710 $ 1,176,722 $ 982,252
Cost of sales 484,677 409,385 950,051 794,484
------------ ------------ ------------ ------------
Gross profit 116,405 95,325 226,671 187,768
------------ ------------ ------------ ------------
Operating expenses 96,057 78,577 191,570 153,173
Restructuring charge -- -- -- 170
Amortization of intangibles 142 172 286 314
------------ ------------ ------------ ------------
Total operating expenses 96,199 78,749 191,856 153,657
------------ ------------ ------------ ------------
Operating income 20,206 16,576 34,815 34,111
------------ ------------ ------------ ------------
Other expense (income):
Interest expense 3,195 1,577 5,562 3,010
Other, net (136) (122) (264) (223)
------------ ------------ ------------ ------------
Total other expense 3,059 1,455 5,298 2,787
------------ ------------ ------------ ------------
Income before income taxes 17,147 15,121 29,517 31,324
Income taxes 6,516 5,897 11,216 12,216
------------ ------------ ------------ ------------
Net income $ 10,631 $ 9,224 $ 18,301 $ 19,108
============ ============ ============ ============
Per share data (basic):
Net income $ 0.26 $ 0.23 $ 0.44 $ 0.47
============ ============ ============ ============
Weighted average basic shares of common stock 41,406 40,400 41,395 40,261
============ ============ ============ ============
Per share data (diluted):
Net income $ 0.25 $ 0.22 $ 0.43 $ 0.46
============ ============ ============ ============
Weighted average diluted shares of common stock 41,952 41,495 42,076 41,369
============ ============ ============ ============
UNITED NATURAL FOODS, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands)
January 28, July 31,
2006 2005
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 26,608 $ 12,615
Accounts receivable, net 163,080 136,472
Notes receivable, trade, net 972 877
Inventories 264,296 235,700
Deferred income taxes 7,419 7,419
Prepaid expenses and other current assets 14,259 9,811
------------ ------------
Total current assets 476,634 402,894
Property & equipment, net 164,566 167,909
Other assets:
Goodwill 74,610 73,808
Notes receivable, trade, net 2,296 1,802
Intangible assets, net 246 307
Other 6,249 4,538
------------ ------------
Total assets $ 724,601 $ 651,258
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 161,002 $ 123,574
Accounts payable 125,736 119,177
Accrued expenses and other current liabilities 39,858 34,915
Current portion of long-term debt 5,592 5,843
------------ ------------
Total current liabilities 332,188 283,509
Long-term debt, excluding current portion 62,487 64,852
Deferred income taxes 7,118 6,904
Other long-term liabilities 1,829 474
------------ ------------
Total liabilities 403,622 355,739
------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value, authorized 5,000 shares
at January 28, 2006 and July 31, 2005, respectively;
none issued and outstanding -- --
Common stock, $0.01 par value, authorized 50,000 shares;
41,890 issued and 41,661 outstanding shares at January 28,
2006; 41,287 issued and outstanding shares at July 31, 2005 419 413
Additional paid-in capital 133,167 120,354
Unallocated shares of ESOP (1,523) (1,605)
Accumulated other comprehensive income 350 --
Retained earnings 194,658 176,357
Treasury stock, at cost, 229 and 0 shares at January 28, 2006
and July 31, 2005, respectively (6,092) --
------------ ------------
Total stockholders' equity 320,979 295,519
------------ ------------
Total liabilities and stockholders' equity $ 724,601 $ 651,258
============ ============
UNITED NATURAL FOODS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Six months ended
---------------------------
January 28, January 31,
2006 2005
---------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 18,301 $ 19,108
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 7,988 6,438
Gains on disposals of property & equipment (30) (12)
Provision for doubtful accounts 1,600 998
Share-based compensation 3,480 --
Changes in assets and liabilities, net of acquired companies:
Accounts receivable (28,333) (31,408)
Inventory (28,596) (14,359)
Prepaid expenses and other assets 1,970 (4,010)
Notes receivable, trade (589) (353)
Accounts payable 6,518 5,756
Accrued expenses and other current liabilities 6,510 (181)
Tax effect of stock options -- 5,193
-------------------------
Net cash used in operating activities (11,181) (12,830)
-------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (11,774) (9,039)
Purchases of acquired businesses, net of cash acquired (575) (6,168)
Proceeds from disposals of property and equipment 43 114
-------------------------
Net cash used in investing activities (12,306) (15,093)
-------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under note payable 37,428 17,101
Proceeds from exercise of stock options 7,713 6,061
Purchases of treasury stock (6,092) --
Repayments on long-term debt (2,922) (4,349)
Tax effect of stock options 1,626 --
Principal payments of capital lease obligations (273) (325)
-------------------------
Net cash provided by financing activities 37,480 18,488
-------------------------
NET INCREASE (DECREASE) IN CASH 13,993 (9,435)
Cash at beginning of period 12,615 13,633
-------------------------
Cash at end of period $ 26,608 $ 4,198
=========================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized $ 5,167 $ 3,067
=========================
Income taxes, net of refunds $ 8,749 $ 6,062
=========================