03.09.03

3.9.2003: Meldung: United Natural Foods: 4th Quarter Results

United Natural Foods, Inc. today reported net income of $5.0 million, or $0.25 per share on a diluted basis, for the fourth quarter of fiscal 2003, which ended July 31, 2003. Net income for the fourth quarter of fiscal 2003 was $6.4 million or $0.32 per share on a diluted basis, excluding special items, in line with the guidance previously provided by the Company.Net sales for the fourth quarter of fiscal 2003 were $366.8 million, an increase of 18.6% from the $309.3 million recorded in the fourth quarter of fiscal 2002. Sales in the fourth quarter included a full quarter of sales for Blooming Prairie and Northeast Cooperatives, acquired by the Company in October 2002 and December 2002, respectively. This increase included growth in the independent and mass market channels of approximately 36.0% and 23.0%, respectively, compared to the same period last year. Sales in the supernatural distribution channel decreased approximately 6.0% compared to the same period last year primarily due to the previously announced transition of the Company"s former second-largest customer to a new primary distributor. The supernatural distribution channel is comprised of small and large chains of natural foods supermarkets.
Net income for the fourth quarter of fiscal 2003 increased 20.4% to $5.0 million, or $0.25 per diluted share, compared to $4.1 million, or $0.21 per diluted share, for the same period last year. Net income for the fourth quarter of fiscal 2003, excluding the effect of special items, increased 15.6% to $6.4 million, or $0.32 per diluted share, compared to $5.6 million, or $0.29 per diluted share, excluding special items, for the same period last year.
The special items for the fourth quarter of fiscal 2003 included a goodwill impairment charge, inventory write down, and restructuring and asset impairment charges at the Company"s subsidiary, Hershey Import. In addition, the Company recorded non-cash income related to the change in fair value of interest rate swaps and related options agreements caused by favorable changes in yield curves. The special items also included moving and other costs related to the completion of the expansion of the Company"s Chesterfield, New Hampshire distribution facility. The special items for the fourth quarter of fiscal 2002 included a non-cash charge related to the change in fair value of interest rate swaps and related options agreements as well as moving and other costs related to the relocation of the Company"s subsidiary, Hershey Import.
The following tables detail the amounts and effect of these special items and the reconciliation of net income, excluding special items (Non-GAAP basis), to net income, including special items (GAAP basis):

Quarter Ended July 31, 2003
(in thousands, except per Pretax Per diluted
share data) Income Net of Tax share
Net income, excluding
special items: $10,549 $6,435 $0.32
Less: special items
expense (income)
Goodwill impairment charge 1,353 825 0.04
Interest rate swap agreements
(change in value of
financial instruments) (1,355) (827) (0.04)
Inventory write down
(cost of goods sold) 1,104 673 0.03
Restructuring and asset
impairment charges 773 472 0.02
Moving and other costs
(included in operating
expenses) 554 339 0.02
Net income, including
special items: $8,120 $4,953 $0.25
Quarter Ended July 31, 2002
(in thousands, except per Pretax Per diluted
share data) Income Net of Tax share
Net income, excluding
special items: $9,277 $5,566 $0.29
Less: special items expense
Interest rate swap
agreements (change in
value of financial
instruments) 2,136 1,281 0.07
Moving and other costs
(included in operating
expenses) 284 171 0.01
Net income, including
special items: $6,857 $4,114 0.21
All non-GAAP numbers have been adjusted to exclude special charges. A reconciliation of specific adjustments to GAAP results for the fourth quarter of fiscal 2003 and the same period last year 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.
Year End Results
Net sales for the twelve months ended July 31, 2003 were $1.4 billion, an increase of 17.4% over the $1.2 billion recorded in the comparable prior year period. Sales for the twelve months ended July 31, 2003 included over 9 months of sales from Blooming Prairie, acquired by the Company on October 11, 2002, and 7 months of sales from Northeast Cooperatives, acquired by the Company on December 31, 2002. Net income for the twelve months ended July 31, 2003 increased $3.0 million, or 17.5%, to $20.2 million, or $1.02 per diluted share, from $17.2 million, or $0.89 per diluted share, for the twelve months ended July 31, 2002. Net income, excluding special items, was $23.4 million, or $1.19 per diluted share, compared to $21.2 million, or $1.10 per diluted share, for the twelve months ended July 31, 2002. The special items for the twelve months ended July 31, 2003 included a goodwill impairment charge, inventory write down and restructuring and asset impairment charges related to the Company"s subsidiary, Hershey Import, and, moving and other costs related to the expansion of the Company"s Chesterfield, New Hampshire distribution facility. In addition, the special items included costs related to the loss of a major customer and a non-cash charge related to the change in fair value of interest rate swaps and related option agreements. The special items for the fiscal year ended July 31, 2002 included a non-cash charge related to the change in fair value of interest rate swaps and related options agreements caused by unfavorable changes in yield curves as well as moving, asset impairment and redundant rent expense related to moving the Company"s Atlanta, Georgia distribution facility, incremental costs such as labor, utilities and rent related to the startup of the Company"s southern California distribution facility, and labor, utilities, rent and severance related to relocating the Company"s subsidiary, Hershey Import.
The following tables detail the amounts and effect of these special items and the reconciliation of net income, excluding special items (Non-GAAP basis), to net income, including special items (GAAP basis):

Year Ended July 31, 2003
(in thousands, except per Pretax Per diluted
share data) Income Net of Tax share
Net income, excluding
special items: $38,655 $23,395 $1.19
Less: special items expense
Goodwill impairment charge 1,353 819 0.04
Inventory write down
(cost of goods sold) 1,104 668 0.03
Moving and other costs
(included in operating
expenses) 1,004 607 0.03
Restructuring and asset
impairment charges 773 467 0.02
Costs related to loss of
major customer (included
in operating expenses) 530 321 0.02
Interest rate swap agreements
(change in value of
financial instruments) 484 293 0.02
Net income, including
special items: $33,407 $20,220 $1.02*
*Total reflects rounding
Year Ended July 31, 2002
(in thousands, except per Pretax Per diluted
share data) Income Net of Tax share
Net income, excluding
special items: $35,409 $21,245 $1.10
Less: special items expense
Interest rate swap
agreements (change in value
of financial instruments) 4,331 2,599 0.13
Moving and other costs
(included in operating
expenses) 1,972 1,183 0.06
Restructuring and asset
impairment charges 424 254 0.01
Net income, including
special items: $28,682 $17,209 $0.89
All non-GAAP numbers have been adjusted to exclude special charges. A reconciliation of specific adjustments to GAAP results for the year ended July 31, 2003 and the same period last year 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
Steven Townsend, President and Chief Executive Officer of the Company, said, "All divisions, except Hershey Import, contributed to our strong growth and record sales of $1.4 billion for fiscal 2003. Our successful integration of two acquisitions and a distribution facility expansion are a tribute to the hard work of all of our associates at United Natural Foods." Mr. Townsend continued, "Our strong growth for the quarter and the year is a direct result of our continued commitment to providing the best customer service and support. In addition, we continue to see ongoing strong demand for natural and organic products in all sales channels and above average growth in the independent and mass market channels."
The Company reaffirms its guidance for fiscal 2004, ending July 31, 2004, with 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. 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.
Conference Call
Management will conduct a conference call and audio webcast at 11:00 a.m. ET on September 2, 2003 to review the Company"s quarterly results, market trends and outlook. The conference call dial-in number is 703-871-3630. 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
The Company carries and distributes over 30,500 products to more than 11,000 customers nationwide. The Company serves a wide variety of retail formats including conventional supermarket chains, natural product superstores and independent retail operators.

Financial Tables Follow
For more information on United Natural Foods, Inc., visit the Company"s web-site at www.unfi.com .
"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 June 14, 2003, 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. A comparison and reconciliation from non-GAAP to GAAP results is included in the tables within this release.

UNITED NATURAL FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, QUARTER ENDED YEAR ENDED
except per share JULY 31, JULY 31,
data) 2003 2002 2003 2002
Net sales $366,843 $309,255 $1,379,893 $1,175,393
Cost of sales 292,482 245,506 1,099,704 934,238
Gross profit 74,361 63,749 280,189 241,155
Operating expenses 63,483 53,191 236,784 200,586
Goodwill impairment
charge 1,353 - 1,353 -
Restructuring and
asset impairment
charges 773 - 773 424
Amortization of
intangibles 229 46 463 180
Total operating
expenses 65,838 53,237 239,373 201,190
Operating income 8,523 10,512 40,816 39,965
Other expense (income):
Interest expense 2,065 1,910 7,795 7,233
Change in value of
financial
instruments (1,355) 2,136 484 4,331
Other, net (307) (392) (870) (281)
Total other
expense 403 3,654 7,409 11,283
Income before
income taxes 8,120 6,858 33,407 28,682
Income taxes 3,167 2,744 13,187 11,473
Net income $4,953 $4,114 $20,220 $17,209
Per share data (basic):
Net income $0.25 $0.22 $1.05 $0.91
Weighted average basic
shares of
common stock 19,475 19,106 19,235 18,933
Per share data
(diluted):
Net income $0.25 $0.21 $1.02 $0.89
Weighted average
diluted shares of
common stock 20,025 19,423 19,727 19,334
UNITED NATURAL FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
JULY 31, JULY 31,
(In thousands) 2003 2002
ASSETS
Current assets:
Cash $3,645 $11,184
Accounts receivable, net 90,111 84,303
Notes receivable, trade, net 585 513
Inventories 158,263 131,932
Prepaid expenses 5,706 4,493
Deferred income taxes 6,455 4,612
Refundable income taxes 704 58
Total current assets 265,469 237,095
Property & equipment, net 101,238 82,702
Other assets:
Goodwill, net 57,400 31,399
Notes receivable, trade, net 1,261 956
Other intangibles, net 1,014 248
Deferred taxes - 800
Other, net 3,717 1,257
Total assets $430,099 $354,457
LIABILITIES AND STOCKHOLDERS" EQUITY
Current liabilities:
Notes payable - line of credit $96,170 $106,109
Current installments of
long-term debt 4,459 1,658
Current installment of obligations
under capital leases 903 1,037
Accounts payable 67,187 52,789
Accrued expenses 26,347 18,185
Financial instruments 6,104 5,620
Total current liabilities 201,170 185,398
Long-term debt, excluding
current installments 38,507 7,677
Deferred income taxes 2,247 -
Obligations under capital leases,
excluding current installments 612 995
Total liabilities 242,536 194,070
Stockholders" equity:
Preferred stock, $.01 par value,
authorized 5,000 shares; none
issued and outstanding Common stock,
$.01 par value, authorized 50,000
shares; issued and outstanding
19,510 at July 31, 2003; issued and
outstanding 19,106 at July 31, 2002 195 191
Additional paid-in capital 86,068 79,711
Unallocated shares of ESOP (1,931) (2,094)
Other comprehensive income 432 -
Retained earnings 102,799 82,579
Total stockholders" equity 187,563 160,387
Total liabilities and
stockholders" equity $430,099 $354,457
UNITED NATURAL FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
TWELVE MONTHS ENDED
JULY 31,
(In thousands) 2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $20,220 $17,209
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 10,330 8,206
Change in fair value of
financial instruments 484 4,331
Goodwill impairment charge 1,353 -
Loss on disposals of
property & equipment 154 307
Deferred income taxes 1,667 (1,099)
Provision for doubtful accounts 2,622 1,806
Changes in assets and liabilities,
net of acquired companies:
Accounts receivable (1,083) (3,867)
Inventory (3,861) (21,091)
Prepaid expenses 869 921
Refundable income taxes (647) 308
Other assets (2,552) (928)
Notes receivable, trade 87 266
Accounts payable (496) (692)
Accrued expenses 1,775 5,346
Tax effect of exercise
of stock options 950 415
Net cash provided by
operating activities 31,872 11,438
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of acquired businesses,
net of cash acquired (43,723) (16)
Proceeds from disposals of
property and equipment 257 33
Capital expenditures (20,025) (27,789)
Net cash used in
investing activities (63,491) (27,772)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings
under note payable (9,939) 38,053
Repayments on long-term debt (2,073) (21,062)
Proceeds from long-term debt 32,110 2,967
Principal payments of capital
lease obligations (1,429) (1,240)
Proceeds from exercise of stock options 5,411 2,407
Net cash provided by
financing activities 24,080 21,125
NET (DECREASE) INCREASE IN CASH (7,539) 4,791
Cash at beginning of period 11,184 6,393
Cash at end of period $3,645 $11,184
Supplemental disclosures of
cash flow information:
Cash paid during the period for:
Interest $7,697 $7,089
Income taxes, net of refunds $7,999 $12,883


For more information on United Natural Foods, Inc., visit the Company"s web site at www.unfi.com .
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