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United Natural Foods, Inc.$7.47$.557.95%

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 United Natural Foods, Inc. Reports Third Quarter Fiscal 2019 Results
   Wednesday, June 05, 2019 4:10:00 PM ET

PROVIDENCE, R.I., June 5, 2019 /PRNewswire/ -- United Natural Foods, Inc. (NYSE: UNFI) (the "Company" or "UNFI") today reported financial results for the third quarter of fiscal 2019 ended April 27, 2019.

Third Quarter Fiscal 2019 Highlights

  • Net Sales Increased to $5.96 Billion, Including $3.24 Billion from SUPERVALU
  • Earnings Per Diluted Share (EPS) of $1.12; Adjusted EPS of $0.61
  • Integration of SUPERVALU Progressing; UNFI Now Operating As One Company with A National Leadership Team and Structure

















"Our transformational journey continues, and I'm proud of what our team has accomplished this quarter," said Steven L. Spinner, Chairman and Chief Executive Officer. "I am excited about our next chapter and the acceleration of value creation we expect to realize from the scale, services, and assortment that only UNFI can deliver."

Third Quarter Fiscal 2019 Summary

Net sales from continuing operations by customer channel for the third quarter of fiscal 2019 compared to the third quarter of fiscal 2018 were as follows ($ in millions):
































 

Gross margin for the third quarter of fiscal 2019 was 13.22% of net sales compared to 15.41% of net sales for the third quarter of fiscal 2018.  The largest driver of the decline in the gross margin rate was the addition of SUPERVALU at a lower gross profit rate.  In addition, last year's gross margin rate included the positive impact of a change in estimate of $20.9 million, which resulted from the Company having revised its calculation for its accrual for inventory purchases.

Operating expenses in the third quarter of fiscal 2019 were $737.7 million, or 12.37% of net sales, compared to $325.8 million, or 12.30% of net sales for the third quarter of fiscal 2018.  The increase in operating expenses, as a percent of net sales, was driven by higher depreciation and amortization expense resulting from the SUPERVALU acquisition partially offset by the benefit of cost synergies.

Goodwill and asset impairment benefit was $38.3 million in the third quarter of fiscal 2019, resulting from adjustments to the purchase price allocation undertaken in the third quarter related to the net assets acquired in the SUPERVALU acquisition.  The fiscal 2019 year-to-date goodwill impairment charge of $332.6 million, reflects the preliminary goodwill impairment charge of $370.9 million and the favorable adjustment to the charge of $38.3 million described above. The goodwill impairment charge and related purchase price allocations for the SUPERVALU acquisition are subject to change during the measurement period (up to one year from the acquisition date).

Restructuring, acquisition, and integration related expenses in the third quarter of fiscal 2019 were $19.4 million including employee-related costs and charges due to severance, settlement of outstanding equity awards and benefits costs and certain charges related to the divestiture of retail banners.

Operating income was $69.7 million in the third quarter of fiscal 2019 reflecting a benefit from the goodwill impairment charge adjustment of $38.3 million and restructuring, acquisition, and integration related expenses of $19.4 million.  When excluding these items, operating income was $50.9 million, or 0.85% of net sales, in the third quarter of fiscal 2019.  Operating income in the third quarter of fiscal 2018 was $82.2 million, or 3.10% of net sales, and included restructuring charges of $0.2 million.  When excluding these charges, operating income for the third quarter of fiscal 2018 was $82.3 million, or 3.11% of net sales.  The decrease in adjusted operating income, as a percent of net sales, was driven by lower gross margins, as a percent of net sales, and higher operating expenses, including depreciation and amortization expense resulting from the SUPERVALU acquisition, as a percent of net sales.

Adjusted EBITDA for the third quarter of fiscal 2019 was $168.2 million compared to $111.9 million for the third quarter of fiscal 2018.  The increase was predominantly driven by the addition of SUPERVALU.

Interest expense, net for the third quarter of fiscal 2019 was $54.9 million and included expense of $0.4 million for unamortized debt issuance costs and original issue discount related to term loan prepayments made in the quarter with asset sale proceeds. When excluding these amounts, interest expense, net was $54.5 million compared to $4.3 million for the third quarter of fiscal 2018.  The increase in interest expense, net was driven by the SUPERVALU acquisition financing.

Effective tax rate for continuing operations for the third quarter of fiscal 2019 was (32.4)% compared to 33.3% for the third quarter of fiscal 2018.  The third quarter of fiscal 2019 effective tax rate reflects a tax benefit based on consolidated pre-tax income from continuing operations, while the third quarter of fiscal 2018 effective tax rate reflects tax expense on consolidated pre-tax income from continuing operations. The change in the effective tax rate for the quarter was primarily driven by purchase accounting adjustments that impacted the goodwill impairment charge recorded in the quarter.

Net income for the third quarter of fiscal 2019 was $57.1 million, including $24.4 million of income related to discontinued operations, compared to $51.9 million for the third quarter of fiscal 2018.  The increase in net income was primarily the result of the benefit from the goodwill impairment charge adjustment and the contribution from SUPERVALU, partially offset by increased interest expense, and restructuring, acquisition, and integration related expenses.

Earnings Per Diluted Share (EPS) was $1.12 for the third quarter of fiscal 2019 compared to $1.02 for the third quarter of fiscal 2018. Adjusted EPS was $0.61 for the third quarter of fiscal 2019 compared to adjusted EPS of $1.04 in the third quarter of fiscal 2018, reflecting higher interest expense and lower operating income, offset in part by net income from discontinued operations.

Debt reduction during the third quarter (compared to the second quarter) was $21 million and was the result of the application of cash from operations and the proceeds from asset sales net of capital expenditures.

Fiscal 2019 Guidance
UNFI is updating fiscal 2019 Earnings Per Share guidance to a range of $(5.85) to $(5.65).  This reflects the $38.3 million benefit from the goodwill impairment charge adjustment; $10 million in expected higher restructuring, acquisition, and integration related expenses; and adjusted EBITDA tracking closer to the low end of the range provided on March 5, 2019.

Conference Call and Webcast
The Company's third quarter fiscal 2019 conference call and audio webcast will be held today, Wednesday, June 5, 2019 at 5:00 p.m. ET.  A webcast of the conference call (and supplemental materials) will be available to the public, on a listen only basis, via the internet at the Investors section of the Company's website www.unfi.com .  An online archive of the webcast (and supplemental materials) will be available for 120 days.

About United Natural Foods

(NOTE: On October 22, 2018, UNFI completed the acquisition of SUPERVALU INC. For more information on the acquisition, please visit www.bettertogether.unfi.com .)

UNFI is North America's premier food wholesaler delivering the widest variety of products to customer locations throughout North America including natural product superstores, independent retailers, conventional supermarket chains, ecommerce retailers, and food service customers.  By providing this deeper 'full-store' selection and compelling brands for every aisle, UNFI is uniquely positioned to deliver great food, more choices, and fresh thinking to customers everywhere. Combined with SUPERVALU, UNFI is the largest publicly-traded grocery distributor in America with expected annual sales of over $21 billion. To learn more about how UNFI is Moving Food Forward, visit www.unfi.com .

INVESTOR CONTACT:
Steve Bloomquist
Vice President, Investor Relations
952-828-4144

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 and are based on current expectations and management estimates; actual results may differ materially. The risks and uncertainties which could impact these statements are described in the Company's filings under the Securities Exchange Act of 1934, as amended, including its quarterly report on Form 10-Q for the period ended October 27, 2018 filed with the Securities and Exchange Commission (the "SEC") on December 6, 2018 and other filings the Company makes with the SEC, and include, but are not limited to, the Company's dependence on principal customers; the Company's sensitivity to general economic conditions including changes in disposable income levels and consumer spending trends; the Company's ability to realize anticipated benefits of its acquisitions and dispositions, in particular, its acquisition of SUPERVALU; the possibility that restructuring, asset impairment, and other charges and costs we may incur in connection with the sale or closure of SUPERVALU's retail operations will exceed current estimates; the potential for additional goodwill impairment charges as a result of purchase accounting adjustments or otherwise; the Company's reliance on the continued growth in sales of higher margin natural and organic foods and non-food products in comparison to lower margin conventional grocery products; increased competition in the Company's industry as a result of increased distribution of natural, organic and specialty products by conventional grocery distributors and direct distribution of those products by large retailers and online distributors; increased competition as a result of continuing consolidation of retailers in the natural product industry and the growth of supernatural chains; the Company's ability to timely and successfully deploy its warehouse management system throughout its distribution centers and its transportation management system across the Company and to achieve efficiencies and cost savings from these efforts; the addition or loss of significant customers or material changes to the Company's relationships with these customers; volatility in fuel costs; volatility in foreign exchange rates; the Company's sensitivity to inflationary and deflationary pressures; the relatively low margins and economic sensitivity of the Company's business; the potential for disruptions in the Company's supply chain by circumstances beyond its control; the risk of interruption of supplies due to lack of long-term contracts, severe weather, work stoppages or otherwise; moderated supplier promotional activity, including decreased forward buying opportunities; union-organizing activities that could cause labor relations difficulties and increased costs; and the ability to identify and successfully complete acquisitions of other natural, organic and specialty food and non-food products distributors.   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 estimates of future results of operations are based on a number of assumptions, many of which are outside the Company's control and should not be construed in any manner as a guarantee that such results will in fact occur. These estimates are subject to change and could differ materially from final reported results. The Company may from time to time update these publicly announced estimates, but it is not obligated to do so.

Non-GAAP Financial Measures: To supplement the financial information presented on a U.S. generally accepted accounting principles ("GAAP") basis, the Company has included in this press release non-GAAP financial measures for adjusted EBITDA and adjusted earnings per diluted common share. The measure adjusted earnings per diluted common share excludes goodwill and asset impairment charges, restructuring, acquisition, and integration related expenses, loss on debt extinguishment and interest on SUPERVALU's senior notes during their mandatory redemption period, inventory fair value adjustment expense related to the acquisition of SUPERVALU, tax benefit related to U.S. tax reform enacted in December 2017, a legal reserve adjustment, discontinued operations store closures and other charges, net and the tax impact of adjustments.  The non-GAAP measure adjusted EBITDA excludes total other expense, net, (benefit) provision for income taxes, depreciation and amortization, share-based compensation, goodwill and asset impairment charges, restructuring, acquisition and integration related expenses, inventory fair value adjustment related to the acquisition of SUPERVALU, discontinued operations store closures and other charges, net and a legal reserve adjustment.

The reconciliation of these non-GAAP financial measures to their comparable GAAP financial measures are presented in the tables appearing below. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for any measure prepared in accordance with GAAP. The Company believes that presenting non-GAAP financial measures aids in making period-to-period comparisons, assessing the underlying operating performance of the Company and understanding core business trends, and is a meaningful indication of its actual and estimated operating performance. The Company currently expects to continue to exclude the items listed above from non-GAAP financial measures and may also exclude other items that may arise.  Management utilizes and plans to utilize these non-GAAP financial measures to compare the Company's operating performance during the 2019 fiscal year to the comparable periods in the 2018 fiscal year and to internally prepared projections.

 
























































































































































 

























































































 

 





























































































































 

 









































 

 






















































































































 

Cision View original content:http://www.prnewswire.com/news-releases/united-natural-foods-inc-reports-third-quarter-fiscal-2019-results-300862795.html

SOURCE United Natural Foods, Inc.



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