03.06.04

3.6.2004: Meldung: United Natural Foods, Inc.: Increase in Net Revenue for the Third Quarter of Fiscal 2004

United Natural Foods Announces 23% Increase in Net Revenue and $0.22 in Earnings Per Share, Excluding Special Items, a 42% Increase for the Third Quarter of Fiscal 2004

Tuesday June 1, 7:59 am ET
Reports Record Sales of $449 Million in the Third Quarter of Fiscal 2004

DAYVILLE, Conn., June 1 / United Natural Foods, Inc. (Nasdaq: UNFI - News) today reported net income of $9.2 million for the third quarter of fiscal 2004, ended April 30, 2004, or $0.22 per share on a diluted basis, excluding special items. Net income for the third quarter of fiscal 2004, including special items, was $8.6 million, or $0.21 per share on a diluted basis.

Net sales for the third quarter of fiscal 2004 were $448.9 million, an increase of $85.3 million, or 23.5%, from the $363.6 million recorded in the third quarter of fiscal 2003. This increase included growth in the supernatural, conventional mass market and independent channels of 44%, 20% and 9%, respectively.

Net income for the third quarter of fiscal 2004, excluding the effect of special items, increased 48.7% to $9.2 million, or $0.22 per diluted share, compared to $6.2 million, or $0.16 per diluted share, excluding special items, for the quarter ended April 30, 2003. The special items for the third quarter of fiscal 2004 consisted of certain equipment rental and labor costs recorded in the third quarter of fiscal 2004 for start-up and transition costs associated with implementing the Company"s primary distribution relationship with Wild Oats Market, Inc. In the third quarter of 2003, a special non-cash expense item was recorded related to the change in fair value of certain interest rate swaps and the related option agreements, and certain costs relating to the expansion of the Chesterfield facility. Net income for the third quarter of fiscal 2004, including the effect of special items, increased 49.0% to $8.6 million, or $0.21 per diluted share, compared to $5.8 million, or $0.15 per diluted share, for the quarter ended April 30, 2003.

The following table details the amounts and effects of these special items:

Quarter Ended April 30, 2004 Pretax Per diluted
(in thousands, except per share data) Income Net of Tax share

Income, excluding special items: $15,115 $9,220 $0.22

Special items - Income/(Expense)
Related to the transition to the
primary distributorship for
Wild Oats Market, Inc.
(included in operating expenses) (1,010) (616) (0.01)

Income, including special items: $14,105 $8,604 $0.21


Quarter Ended April 30, 2003 Pretax Per diluted
(in thousands, except per share data) Income Net of Tax share

Income, excluding special items: $10,162 $6,199 $0.16

Special items - Income/(Expense)
Interest rate swap and related
agreements (included in change in
fair value of financial instruments) (360) (220) (0.01)
Costs related to the Chesterfield
expansion
(included in operating expenses) (336) (205) (0.01)

Income, including special items: $9,466 $5,774 $0.15*

* Total reflects rounding


The non-cash item from the change in fair value on interest rate swap agreements was caused by unfavorable changes in interest rate yield curves during the quarter ended April 30, 2003. The costs related to the expansion of the Chesterfield facility were primarily labor related.

On March 17, 2004, the Company"s Board of Directors approved a two-for-one split of the Company"s common stock that was payable in the form of a stock dividend. Stockholders received one additional share of the Company"s common stock for each share of common stock held on the record date of March 29, 2004. The split became effective on April 20, 2004. The applicable share and per-share data for all periods included herein have been restated to give effect to this stock split.

As previously reported, the Company entered into an amended and restated four-year $250 million revolving credit facility with a bank group that was led by Bank of America Business Capital (formerly Fleet Capital Corporation) as the administrative agent, effective April 30, 2004. The amended and restated credit facility provides for improved terms and conditions that provide the Company with more financial flexibility and reduced costs, as well as increased liquidity. The new credit facility replaces an existing $150 million revolving credit facility. The Company"s outstanding commitments under the amended and restated credit facility as of April 30, 2004 were approximately $123 million.

Comments from Management

Commenting on the third quarter results, Steven Townsend, Chief Executive Officer, said, "We achieved another strong quarter of financial results reflecting the efforts of a well-focused team and the successful execution of our sales strategies designed to meet the growing demand for natural and organic products. Our results are highlighted by solid gains in net sales, net income and earnings per share, all indicators that our sales, marketing and operational plans are on target. We remain focused on serving a broad customer base and are pleased to realize sales growth of 23.5% and comparable sales growth of 15.1%, excluding sales to Wild Oats Markets. We remain committed to meeting the needs of all of our customers while consistently providing superior service levels across our entire distribution network."

Mr. Townsend added, "We are also very pleased with our continued progress to improve our operating margins. Excluding special items, our fiscal 2004 third quarter operating margin was 3.7%, up 40 basis points from the same period last year."

Raises Fiscal 2004 Guidance

The Company is raising its guidance for revenue for fiscal year ended July 31, 2004 to $1.62 to $1.64 billion from $1.60 to $1.62 billion, and raising the guidance on earnings per share, excluding special items, to $0.74 to $0.77 from $0.73 to $0.76 per diluted share.

Conference Call

Management will conduct a conference call and audio webcast at 11:00 a.m. ET on June 1, 2004 to review the Company"s quarterly results, market trends and future outlook. The conference call dial-in number is 303-262-2211 or 800-218-0204. The audio webcast will be available, on a listen only basis, via the Internet at http://www.fulldisclosure.com or at the Investor Relations section of the Company"s website, http://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 http://www.unfi.com .

For more information on United Natural Foods, Inc., visit the Company"s website at http://www.unfi.com .


UNITED NATURAL FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

QUARTERS ENDED NINE MONTHS ENDED
APRIL 30, APRIL 30,
(In thousands, except per 2004 2003 2004 2003
share data)

Net sales $448,900 $363,611 $1,223,530 $1,013,050

Cost of sales 361,323 290,056 980,995 812,574

Gross profit 87,577 73,555 242,535 200,476

Operating expenses 71,388 61,930 199,706 167,949

Amortization of intangibles 676 130 1,142 234

Total operating expenses 72,064 62,060 200,848 168,183

Operating income 15,513 11,495 41,687 32,293

Other expense (income):
Interest expense 1,536 1,811 5,990 5,729
Change in fair value of
financial instruments - 360 (704) 1,839
Other, net (128) (142) (358) (562)

Total other expense 1,408 2,029 4,928 7,006

Income before income taxes 14,105 9,466 36,759 25,287

Income taxes 5,501 3,692 14,336 10,020

Net income $8,604 $5,774 $22,423 $15,267

Per share data (basic):

Net income $0.22 $0.15 $0.57 $0.40

Weighted average basic shares
of common stock 39,648 38,483 39,296 38,310

Per share data (diluted):

Net income $0.21 $0.15 $0.55 $0.39

Weighted average diluted shares
of common stock 41,344 39,500 40,813 39,271


UNITED NATURAL FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(In thousands) APRIL 30, JULY 31,
2004 2003
(UNAUDITED) (UNAUDITED)
ASSETS
Current assets:
Cash $8,802 $3,645
Accounts receivable, net 110,094 90,111
Notes receivable, trade, net 690 585
Inventories 203,715 158,263
Prepaid expenses 5,672 5,706
Deferred income taxes 6,004 6,455
Refundable income taxes - 704
Total current assets 334,977 265,469

Property & equipment, net 112,125 101,238

Other assets:
Goodwill 57,242 57,400
Notes receivable, trade, net 2,264 1,261
Intangible assets, net 168 1,014
Other, net 3,532 3,717

Total assets $510,308 $430,099

LIABILITIES AND STOCKHOLDERS" EQUITY
Current liabilities:
Notes payable - line of credit $114,514 $96,170
Accounts payable 96,531 67,187
Accrued expenses and other current liabilities 24,877 26,347
Current portion of long-term debt 4,597 4,459
Current portion of obligations under capital
leases 512 903
Financial instruments - 6,104
Income taxes payable 61 -
Total current liabilities 241,092 201,170

Long-term debt, excluding current portion 45,367 38,507
Deferred income taxes 2,247 2,247
Obligations under capital leases, excluding
current portion 244 612
Total liabilities 288,950 242,536

Commitments and contingencies

Stockholders" equity:
Preferred stock, $0.01 par value, authorized
5,000 shares at January 31, 2004 and July 31,
2003, respectively; none issued and outstanding
Common stock, $0.01 par value, authorized
50,000 shares; issued and outstanding 39,877 and
19,510 at April 30, 2004 and July 31, 2003,
respectively 399 195
Additional paid-in capital 97,211 86,068
Unallocated shares of ESOP (1,809) (1,931)
Accumulated other comprehensive income 335 432
Retained earnings 125,222 102,799
Total stockholders" equity 221,358 187,563

Total liabilities and stockholders" equity $510,308 $430,099


UNITED NATURAL FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

NINE MONTHS ENDED
APRIL 30,
(In thousands) 2004 2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $22,423 $15,267

Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 8,807 7,663
Change in fair value of financial instruments (704) 1,839
Gains on disposals of property & equipment (61) (18)
Provision for doubtful accounts 2,521 1,952
Changes in assets and liabilities, net of
acquired companies:
Accounts receivable (22,504) (2,279)
Inventory (45,345) (6,575)
Prepaid expenses and other assets 1,050 (2,155)
Notes receivable, trade (1,108) 31
Accounts payable 29,344 9,606
Accrued expenses (968) 806
Income taxes payable 61 2,651
Financial instruments (5,400) -
Tax effect of stock options 3,870 846
Net cash (used in) provided by operating
activities (8,014) 29,635

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of acquired businesses, net of
cash acquired (6) (43,964)
Proceeds from disposals of property and equipment 202 60
Capital expenditures (18,989) (14,975)
Net cash used in investing activities (18,793) (58,879)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under note payable 18,344 (9,267)
Proceeds from issuance of long-term debt 10,204 30,954
Repayments on long-term debt (3,302) (1,282)
Principal payments of capital lease obligations (759) (1,002)
Proceeds from exercise of stock options 7,477 3,613
Net cash provided by financing activities 31,964 23,016

NET INCREASE (DECREASE) IN CASH 5,157 (6,228)
Cash at beginning of period 3,645 11,184
Cash at end of period $8,802 $4,956

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $5,788 $5,591

Income taxes, net of refunds $9,686 $4,598


Source: United Natural Foods, Inc.
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