3.12.2003: Meldung: United Natural Foods announces financial results for first quarter 2004
Net income for the first quarter of fiscal 2004, excluding the effect of special items, increased 23.2% to $6.6 million, or $0.33 per diluted share, compared to $5.4 million, or $0.28 per diluted share, excluding special items, for the quarter ended October 31, 2002. The special items for the first quarter of fiscal 2004 consisted of a non-cash income item related to the change in fair value of interest rate swaps and the related option agreements. A special non-cash charge was recorded in the first quarter of fiscal 2003 related to the non cash change in fair value of interest rate swaps and the related option agreements and certain costs relating to the transition of Wild Oats to a new primary distributor. Net income for the first quarter of fiscal 2004, including the effect of special items, increased 70.1% to $6.8 million, or $0.34 per diluted share, for the first quarter of fiscal 2004 compared to $4.0 million, or $0.21 per diluted share, for the quarter ended October 31, 2002.
The non-cash items from the change in fair value on interest rate swap agreements were caused by favorable and unfavorable changes in interest rate yield curves during the quarters ended October 31, 2003 and 2002, respectively. The costs related to the transition of Wild Oats to a new primary distributor consisted primarily of severance and expenses related to the transfer of their private label inventory.
The Company entered into interest rate swap agreements in October 1998, August 2001 and April 2003. The October 1998 and August 2001 agreements are "ineffective" hedges. 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 "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 April 2003 agreement is an "effective" hedge and therefore does not require this treatment. The Company"s 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 April 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 charge because their inclusion directly impacts the Company"s reported earnings per share. A change in fair value, whether positive or negative, can significantly increase or decrease the Company"s reported earnings per share. For example, the Company recorded a positive change in fair value for the first quarter of fiscal 2004 that increased its earnings per share by $0.01. If the Company were prohibited from excluding this item as a special charge, it would artificially inflate its reported earnings per share and thereby mislead investors as to its financial condition.
Commenting on the first quarter results, Steven Townsend, Chief Executive Officer, said, "This is an excellent start to our new fiscal year as we continue executing on our business plan and growth objectives. During the quarter, we achieved a 22.6% year over year growth in sales and a 23.2% increase in net income, excluding special items. This strong growth continues across all sales channels where our growth rates to independents, conventional mass market and supernaturals were 30%, 19% and 9% respectively. With our focus on Natural and Organic Products, we intend to be the leading source for these products over the long term." Mr. Townsend added, "Operationally, we continue to work at building efficiencies that, over time, will serve to lower operating expenses and improve our operating margins. Concurrently, we are focused on maintaining and improving our service levels to all of our customers across all of our distribution centers."
The Company had previously announced guidance for fiscal 2004, ending July 31, 2004, with net revenues in the $1.55 to $1.57 billion range and net income, excluding potential special items, in the range of $1.42 - $1.46 per diluted share. Subsequent to this guidance, as previously announced by Wild Oats, Wild Oats and its primary distributor have mutually agreed to terminate their primary distribution relationship and Wild Oats plans to transition its primary distribution business to the Company. If this transition occurs, the Company would anticipate incurring start up costs in the second quarter of fiscal 2004 related to the Wild Oats transition and, achieving revenue consistent with a primary distribution relationship during the fourth quarter of fiscal 2004. The Company will provide revised guidance for fiscal 2004 after the primary distribution agreement with Wild Oats has been executed. Historically, interest rate swaps, distribution facility expansions and asset impairment charges (including goodwill) have been classified as special items. However, at this time we do not know the extent or significance of these items or whether the Company will in fact incur any of these items in fiscal 2004. 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.
Management will conduct a conference call and audio webcast at 11:00 a.m. ET on December 2, 2003 to review the Company"s quarterly results, market trends and future outlook. The conference call dial-in number is (877) 423-3894. The audio webcast will be available, on a listen only basis, via the Internet at www.viavid.net 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 32,000 products to more than 14,000 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 .
United Natural Foods
PO Box 999
260 Lake Road
Dayville, CT 06241