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United Natural Foods, Inc. Reports Third Quarter Fiscal 2021 Results

United Natural Foods, Inc. Reports Third Quarter Fiscal 2021 Results

United Natural Foods, Inc. (NYSE: UNFI) (the “Company” or “UNFI”) today reported financial results for the third quarter of fiscal 2021 (13 weeks) ended May 1, 2021.

Third Quarter Fiscal 2021 Highlights (comparisons to third quarter fiscal 2020)

  • Net sales of $6.62 billion, a decrease of 5.9% (+6.7% on a two-year stack basis)
  • Net income of $49 million, a decrease of approximately $40 million
  • Adjusted EBITDA of $179 million, a decrease of 19.2%
  • Earnings per diluted share (EPS) of $0.80, a decrease of 50.0%
  • Adjusted EPS of $0.94, a decrease of 29.3%
  • Net debt reduction of $62 million bringing fiscal year-to-date total to $175 million
  • Full-year outlook for fiscal 2021 reflects record year for net sales and adjusted EBITDA

“Our results reflect our unrelenting focus on efficiency and the profitability of our business, as we cycled the highest spikes of sales revenue from pantry loading in the prior-year quarter,” said Steven L. Spinner, Chairman and Chief Executive Officer. “We continue to focus on helping our customers operate their businesses and meet the needs of their shoppers through our differentiated business model. As the industry and economic backdrop continue to evolve, UNFI remains well positioned for future growth.” Spinner concluded by saying, “Fiscal 2020 was a record year for UNFI and fiscal 2021 is on-track to set another record. Looking ahead, we fully expect fiscal 2022 to be even better than this year.”

 

13-Week Period Ended

 

 

 

 

($ in millions, except per share data)(1)

May 1,
2021

 

May 2,
2020

 

Percent Change

 

Two-Year

Stack (4)

Net Sales

$

6,620

 

 

$

7,032

 

 

(5.9)

%

 

6.7

%

Chains(2)

$

2,949

 

 

$

3,125

 

 

(5.6)

%

 

5.4

%

Independent retailers

$

1,599

 

 

$

1,805

 

 

(11.4)

%

 

3.8

%

Supernatural

$

1,287

 

 

$

1,279

 

 

0.6

%

 

16.6

%

Retail

$

578

 

 

$

637

 

 

(9.3)

%

 

14.9

%

Other(2)

$

580

 

 

$

599

 

 

(3.2)

%

 

(0.6)

%

Eliminations(2)

$

(373)

 

 

$

(414)

 

 

(9.9)

%

 

13.7

%

Net Income

$

49

 

 

$

88

 

 

(44.9)

%

 

 

Adjusted EBITDA(3)

$

179

 

 

$

222

 

 

(19.2)

%

 

 

EPS

$

0.80

 

 

$

1.60

 

 

(50.0)

%

 

 

Adjusted EPS(3)

$

0.94

 

 

$

1.33

 

 

(29.3)

%

 

 

(1)

As a result of displaying amounts in millions, totals may not sum due to rounding.

(2)

In the first quarter of fiscal 2021, the presentation of net sales by customer channel was recast to present the Chains and Other channel exclusive of the intercompany eliminations and present total eliminations separately. There was no impact to the Condensed Consolidated Statements of Operations. The Company believes this modified basis better reflects its channel presentation, as it further aligns with segment presentation and how sales channel information would appear following the potential disposition of Retail, assuming all banners retain a supply agreement. In addition, during the fourth quarter of fiscal 2020, the presentation of net sales by customer channel was recast to be presented on a basis consistent with customer size. International customers other than Canada, and alternative format sales continue to be classified within Other. The main effect of the change was to re-categorize the former Supermarkets and Independents channels, previously classified by the majority of product carried by those customers between conventional and natural products, respectively, to classify those stores by the number of customer locations we supply. There was no impact to the Condensed Consolidated Statements of Operations as a result of the reclassification of customer types. The Company believes this modified basis better reflects the nature and economic risks of cash flows from customers.

(3)

Please refer to the tables in this press release for a reconciliation of these non-GAAP financial measures to the most directly comparable financial measure calculated in accordance with U.S. GAAP.

(4)

The two-year stack is calculated by adding the percent change in sales in the current year period to the percent change in sales in the prior-year period. The Company believes this information is helpful to understanding trends in periods impacted by variations in prior-year growth rates.

Third Quarter Fiscal 2021 Summary

Net sales from continuing operations were lower than those in the third quarter of fiscal 2020 which benefited from strong customer demand driven by the initial responses to COVID-19.

Gross margin rate in the third quarter of fiscal 2021 was 14.60% of net sales compared to 14.94% of net sales for the third quarter of fiscal 2020. The decline was driven by lower levels of supplier-related income in the Wholesale segment. Retail gross margin rate was approximately flat to last year.

Operating expenses in the third quarter of fiscal 2021 were $866.5 million, or 13.09% of net sales, compared to $911.0 million, or 12.96% of net sales, in the third quarter of fiscal 2020. The increase in operating expenses as a percent of net sales resulted from the deleveraging effect of lower sales, partially offset by lower pandemic-related costs.

Restructuring, acquisition and integration related expenses in the third quarter of fiscal 2021 were $9.9 million, primarily reflecting costs associated with advisory and transformational activities as we position our business for further value creation post SUPERVALU acquisition compared to $14.6 million in the third quarter of fiscal 2020, which primarily reflected closed property charges and costs.

Operating income in the third quarter of fiscal 2021 was $90.5 million and included $9.9 million of restructuring, acquisition and integration related expenses. When excluding this item, operating income in the third quarter of fiscal 2021 was $100.4 million, or 1.52% of net sales. Operating income in the third quarter of fiscal 2020 was $124.3 million and included $14.6 million of restructuring, acquisition, and integration related expenses. When excluding the restructuring, acquisition and integration expenses, operating income in the third quarter of fiscal 2020 was $138.9 million, or 1.97% of net sales. The decrease in adjusted operating income, as a percent of net sales, was driven by a lower gross margin rate and the deleveraging effect of lower sales, partially offset by lower COVID-19 related costs and lower incentive compensation expense.

Interest expense, net for the third quarter of fiscal 2021 was $43.5 million compared to $47.3 million for the third quarter of fiscal 2020. The decrease in interest expense, net was driven by lower amounts of outstanding debt balances.

Effective tax rate for continuing operations for the third quarter of fiscal 2021 was 25.8% of pre-tax income compared to a benefit of 3.1% for the third quarter of fiscal 2020 on pre-tax income. The change in the effective tax rate for the third quarter of fiscal 2021 was primarily driven by the impact of a tax benefit from the revaluation of net operating loss deferred tax assets in the third quarter of fiscal 2020 due to passage of the CARES Act.

Net income for the third quarter of fiscal 2021 was $48.6 million, which included $9.9 million of pre-tax restructuring, acquisition and integration related expenses. Net income for the third quarter of fiscal 2020 was $88.1 million, which included $14.6 million of pre-tax restructuring, acquisition and integration related expenses and $6.8 million of pre-tax discontinued operations restructuring, store closure and other charges.

Net income per diluted share was $0.80 for the third quarter of fiscal 2021 compared to a net income per diluted share of $1.60 for the third quarter of fiscal 2020. Adjusted earnings per share (adjusted EPS) was $0.94 for the third quarter of fiscal 2021 compared to adjusted EPS of $1.33 in the third quarter of fiscal 2020.

Adjusted EBITDA for the third quarter of fiscal 2021 was $179.5 million compared to $222.2 million for the third quarter of fiscal 2020. The decrease primarily reflects the items discussed in operating income.

Total Outstanding Debt, net of cash, ended the quarter at $2.43 billion, reflecting a decrease of $62 million in the third quarter of fiscal 2021 (compared to the second quarter of fiscal 2021). This reduction was driven by $129 million in cash provided by operations in the third quarter of fiscal 2021, including the benefit of lower levels of net working capital, partially offset by capital expenditures. The net debt to adjusted EBITDA leverage ratio increased slightly to 3.3x.

Fiscal 2021 Outlook (1)

“Although our sales have moderated, as expected, from the unprecedented levels experienced during last year’s third quarter, our focus on operational efficiencies and our ValuePath productivity initiative keep us on track to deliver full-year results at the upper end of the range for adjusted EBITDA and adjusted EPS,” said John Howard, Chief Financial Officer. “Due to the extended timing of onboarding new business wins, we now expect to finish at the low end of the current range for net sales, which we expect will result in a second consecutive record sales year for UNFI.”

Fiscal Year Ending July 31, 2021

 

Net Sales ($ in billions)

$27.0 - $27.8

Net Income ($ in millions)

$130 - $160

EPS

$2.15 - $2.65

Adjusted EPS (2)(3)

$3.05 - $3.55

Adjusted EBITDA(3) ($ in millions)

$690 - $730

Capital Expenditures ($ in millions)

$250 - $300

(1)

The outlook provided above is for fiscal 2021 only and replaces and supersedes any and all guidance provided prior to the date hereof covering fiscal 2021 or subsequent years. This outlook is forward-looking, is based on management’s current estimates and expectations and is subject to a number of risks, including many that are outside of management's control. See cautionary Safe Harbor Statement below.

(2)

The Company uses an adjusted effective tax rate in calculating Adjusted EPS. The adjusted effective tax rate is calculated based on adjusted net income before tax. It also excludes the potential impact of changes to uncertain tax positions, valuation allowances, stock compensation accounting (ASU 2016-09) and discrete GAAP tax items which could impact the comparability of the operational effective tax rate. The Company believes using this adjusted effective tax rate provides better consistency across the interim reporting periods since each of these discrete items can cause volatility in the GAAP tax rate that is not indicative of the underlying ongoing operations of the Company. By providing this non-GAAP measure, management intends to provide investors with a meaningful, consistent comparison of the Company’s effective tax rate on ongoing operations.

(3)

Please refer to the tables in this press release for a reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP.

Conference Call and Webcast

The Company’s third quarter fiscal 2021 conference call and audio webcast will be held today, Wednesday, June 9, 2021 at 8:30 a.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. The call can also be accessed at (877) 682-3423 (conference ID 9242359). An online archive of the webcast (and supplemental materials) will be available for 120 days.

About United Natural Foods

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. Today, UNFI is the largest publicly-traded grocery distributor in America. To learn more about how UNFI is Moving Food Forward, visit 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 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 annual report on Form 10-K for the year ended August 1, 2020 filed with the Securities and Exchange Commission (the “SEC”) on September 29, 2020 and other filings the Company makes with the SEC, and include, but are not limited to, the impact and duration of the COVID-19 pandemic; 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 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 and direct distribution of those products by large retailers and online distributors; the possibility that restructuring, asset impairment, and other charges and costs we may incur in connection with the sale or closure of our retail operations will exceed our current expectations; increased competition as a result of continuing consolidation of retailers in the natural product industry and the growth of supernatural chains; the addition or loss of significant customers or material changes to the Company’s relationships with these customers; union-organizing activities that could cause labor relations difficulties and increased costs; the Company’s ability to operate, and rely on third parties to operate reliable and secure technology systems; the relatively low margins of the Company’s business; moderated supplier promotional activity, including decreased forward buying opportunities; 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 potential for additional asset impairment charges; the Company’s sensitivity to inflationary and deflationary pressures; the potential for disruptions in the Company’s supply chain or its distribution capabilities by circumstances beyond its control, including a health epidemic; the risk of interruption of supplies due to lack of long-term contracts, severe weather, work stoppages or otherwise; volatility in fuel costs; volatility in foreign exchange rates; and our ability to identify and successfully complete asset or business acquisitions. 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, adjusted earnings per diluted common share (“adjusted EPS”), adjusted effective tax rate, free cash flow and net debt to adjusted EBITDA leverage ratio. The non-GAAP adjusted earnings per diluted common share measure is a consolidated measure, which the Company reconciles by adding Net income attributable to UNFI plus goodwill and asset impairment benefits and charges, restructuring, acquisition, and integration related expenses, gains and losses on sales of assets, certain legal charges and gains, surplus property depreciation and interest expense, losses on debt extinguishment, discontinued operations store closures and other charges, net, the impact of diluted shares when GAAP earnings is presented as a loss and non-GAAP earnings represent income, and the tax impact of adjustments and the adjusted effective tax rate, which tax impact is calculated using the adjusted effective tax rate, and certain other non-cash charges or items, as determined by management. The non-GAAP adjusted effective tax rate excludes the potential impact of changes to various uncertain tax positions and valuation allowances, as well as stock compensation accounting (ASU 2016-09). The non-GAAP adjusted EBITDA measure is defined as a consolidated measure inclusive of continuing and discontinued operations results, which we reconcile by adding Net income (loss) from continuing operations, less net income attributable to noncontrolling interests, plus Total other expense, net and (Benefit) provision for income taxes, plus Depreciation and amortization calculated in accordance with GAAP, plus non-GAAP adjustments for Share-based compensation, Restructuring, acquisition and integration related expenses, Goodwill and asset impairment charges, Loss (gain) on sale of assets, certain legal charges and gains, certain other non-cash charges or items, as determined by management, plus Adjusted EBITDA of discontinued operations calculated in a manner consistent with the results of continuing operations outlined above. The non-GAAP free cash flow measure is defined as net cash provided by operating activities less capital expenditures. The non-GAAP net debt to adjusted EBITDA leverage ratio is defined as the total face value of the Company’s outstanding short and long term debt and finance lease liabilities less net cash and cash equivalents, the sum of which is divided by adjusted EBITDA.

The reconciliation of these non-GAAP financial measures to their comparable GAAP financial measures and the calculation of net debt to adjusted EBITDA leverage 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 the non-GAAP financial measures adjusted EBITDA and adjusted EPS aids in making period-to-period comparisons, assessing the performance of our business and understanding the underlying operating performance and core business trends by excluding certain adjustments not expected to recur in the normal course of business and are meaningful indicators of actual and estimated operating performance. The inclusion of free cash flow assists investors in understanding the cash generating ability of the Company separate from cash generated by the sale of assets. Net debt to adjusted EBITDA leverage ratio is a commonly used metric that assists investors in understanding and evaluating the Company’s capital structure and changes to its capital structure over time. The Company currently expects to continue to exclude the items listed above from non-GAAP financial measures. Management utilizes and plans to utilize these non-GAAP financial measures to compare the Company’s operating performance during the 2021 fiscal year to the comparable periods in the 2020 fiscal year and to internally prepared projections. These non-GAAP financial measures may differ from similarly titled measures of other companies.

 

UNITED NATURAL FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(In thousands, except for per share data)

 

 

 

13-Week Period Ended

 

39-Week Period Ended

 

 

May 1,
2021

 

May 2,
2020

 

May 1,
2021

 

May 2,
2020

Net sales

 

$

6,619,842

 

 

$

7,031,718

 

 

$

20,180,582

 

 

$

19,759,712

 

Cost of sales

 

5,653,043

 

 

5,981,486

 

 

17,256,925

 

 

16,884,944

 

Gross profit

 

966,799

 

 

1,050,232

 

 

2,923,657

 

 

2,874,768

 

Operating expenses

 

866,463

 

 

911,007

 

 

2,634,305

 

 

2,657,427

 

Goodwill and asset impairment charges

 

 

 

 

 

 

 

425,405

 

Restructuring, acquisition and integration related expenses

 

9,867

 

 

14,557

 

 

44,078

 

 

65,751

 

(Gain) loss on sale of assets

 

(25

)

 

351

 

 

144

 

 

785

 

Operating income (loss)

 

90,494

 

 

124,317

 

 

245,130

 

 

(274,600

)

Other expense (income):

 

 

 

 

 

 

 

 

Net periodic benefit income, excluding service cost

 

(17,128

)

 

(12,758

)

 

(51,288

)

 

(27,419

)

Interest expense, net

 

43,500

 

 

47,269

 

 

163,577

 

 

145,814

 

Other, net

 

(989

)

 

(1,842

)

 

(3,461

)

 

(3,462

)

Total other expense, net

 

25,383

 

 

32,669

 

 

108,828

 

 

114,933

 

Income (loss) from continuing operations before income taxes

 

65,111

 

 

91,648

 

 

136,302

 

 

(389,533

)

Provision (benefit) for income taxes

 

16,812

 

 

(2,799

)

 

32,213

 

 

(82,562

)

Net income (loss) from continuing operations

 

48,299

 

 

94,447

 

 

104,089

 

 

(306,971

)

Income (loss) from discontinued operations, net of tax

 

1,653

 

 

(4,078

)

 

6,752

 

 

(16,128

)

Net income (loss) including noncontrolling interests

 

49,952

 

 

90,369

 

 

110,841

 

 

(323,099

)

Less net income attributable to noncontrolling interests

 

(1,394

)

 

(2,238

)

 

(4,366

)

 

(3,407

)

Net income (loss) attributable to United Natural Foods, Inc.

 

$

48,558

 

 

$

88,131

 

 

$

106,475

 

 

$

(326,506

)

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share:

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.83

 

 

$

1.72

 

 

$

1.78

 

 

$

(5.80

)

Discontinued operations

 

$

0.03

 

 

$

(0.08

)

 

$

0.12

 

 

$

(0.30

)

Basic earnings (loss) per share

 

$

0.86

 

 

$

1.64

 

 

$

1.90

 

 

$

(6.10

)

Diluted earnings (loss) per share:

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.77

 

 

$

1.67

 

 

$

1.67

 

 

$

(5.80

)

Discontinued operations

 

$

0.03

 

 

$

(0.08

)

 

$

0.11

 

 

$

(0.30

)

Diluted earnings (loss) per share

 

$

0.80

 

 

$

1.60

 

 

$

1.78

 

 

$

(6.10

)

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

56,458

 

 

53,718

 

 

56,028

 

 

53,485

 

Diluted

 

60,539

 

 

55,217

 

 

59,676

 

 

53,485

 

 

UNITED NATURAL FOODS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(In thousands, except for per share data)

 

 

 

May 1,
2021

 

August 1,
2020

ASSETS

 

 

 

 

Cash and cash equivalents

 

$

39,495

 

 

$

46,993

 

Accounts receivable, net

 

1,106,578

 

 

1,120,199

 

Inventories, net

 

2,293,877

 

 

2,280,767

 

Prepaid expenses and other current assets

 

140,948

 

 

251,891

 

Current assets of discontinued operations

 

4,899

 

 

5,067

 

Total current assets

 

3,585,797

 

 

3,704,917

 

Property and equipment, net

 

1,715,034

 

 

1,701,216

 

Operating lease assets

 

1,088,058

 

 

982,808

 

Goodwill

 

20,495

 

 

19,607

 

Intangible assets, net

 

909,590

 

 

969,600

 

Deferred income taxes

 

105,332

 

 

107,624

 

Other long-term assets

 

95,088

 

 

97,285

 

Long-term assets of discontinued operations

 

1,430

 

 

3,915

 

Total assets

 

$

7,520,824

 

 

$

7,586,972

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Accounts payable

 

$

1,599,995

 

 

$

1,633,448

 

Accrued expenses and other current liabilities

 

259,702

 

 

281,956

 

Accrued compensation and benefits

 

235,677

 

 

228,832

 

Current portion of operating lease liabilities

 

138,844

 

 

131,022

 

Current portion of long-term debt and finance lease liabilities

 

23,700

 

 

83,378

 

Current liabilities of discontinued operations

 

6,996

 

 

11,438

 

Total current liabilities

 

2,264,914

 

 

2,370,074

 

Long-term debt

 

2,314,215

 

 

2,426,994

 

Long-term operating lease liabilities

 

976,691

 

 

873,990

 

Long-term finance lease liabilities

 

132,975

 

 

143,303

 

Pension and other postretirement benefit obligations

 

236,927

 

 

292,128

 

Other long-term liabilities

 

294,025

 

 

336,487

 

Long-term liabilities of discontinued operations

 

15

 

 

1,738

 

Total liabilities

 

6,219,762

 

 

6,444,714

 

Stockholders’ equity:

 

 

 

 

Preferred stock, $0.01 par value, authorized 5,000 shares; none issued or outstanding

 

 

 

 

Common stock, $0.01 par value, authorized 100,000 shares; 56,956 shares issued and 56,341 shares outstanding at May 1, 2021; 55,306 shares issued and 54,691 shares outstanding at August 1, 2020

 

570

 

 

553

 

Additional paid-in capital

 

588,324

 

 

568,736

 

Treasury stock at cost

 

(24,231

)

 

(24,231

)

Accumulated other comprehensive loss

 

(197,092

)

 

(237,946

)

Retained earnings

 

934,871

 

 

837,633

 

Total United Natural Foods, Inc. stockholders’ equity

 

1,302,442

 

 

1,144,745

 

Noncontrolling interests

 

(1,380

)

 

(2,487

)

Total stockholders’ equity

 

1,301,062

 

 

1,142,258

 

Total liabilities and stockholders’ equity

 

$

7,520,824

 

 

$

7,586,972

 

 

UNITED NATURAL FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

 

 

 

39-Week Period Ended

(In thousands)

 

May 1,
2021

 

May 2,
2020

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

Net income (loss) including noncontrolling interests

 

$

110,841

 

$

(323,099)

Income (loss) from discontinued operations, net of tax

 

6,752

 

(16,128)

Net income (loss) from continuing operations

 

104,089

 

(306,971)

Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

210,088

 

214,002

Share-based compensation

 

32,847

 

15,088

Loss on sale of assets

 

144

 

785

Closed property and other restructuring charges

 

3,399

 

36,662

Goodwill and asset impairment charges

 

 

425,405

Net pension and other postretirement benefit income

 

(51,252)

 

(27,419)

Deferred income tax benefit

 

(2,076)

 

(17,381)

LIFO charge

 

18,741

 

20,463

(Recoveries) provision for losses on receivables, net

 

(2,672)

 

44,238

Loss on debt extinguishment

 

30,373

 

73

Non-cash interest expense and other adjustments

 

15,127

 

10,993

Changes in operating assets and liabilities

 

(24,438)

 

33,290

Net cash provided by operating activities of continuing operations

 

334,370

 

449,228

Net cash provided by operating activities of discontinued operations

 

2,074

 

3,051

Net cash provided by operating activities

 

336,444

 

452,279

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

Payments for capital expenditures

 

(165,457)

 

(126,803)

Proceeds from dispositions of assets

 

57,329

 

29,650

Other

 

(4,111)

 

(2,380)

Net cash used in investing activities of continuing operations

 

(112,239)

 

(99,533)

Net cash provided by investing activities of discontinued operations

 

1,523

 

26,503

Net cash used in investing activities

 

(110,716)

 

(73,030)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

Proceeds from borrowings of long-term debt

 

500,000

 

2,050

Proceeds from borrowings under revolving credit line

 

3,451,529

 

3,244,573

Proceeds from issuance of other loans

 

 

6,266

Repayments of borrowings under revolving credit line

 

(3,368,951)

 

(3,508,573)

Repayments of long-term debt and finance leases

 

(787,232)

 

(111,923)

Proceeds from the issuance of common stock and exercise of stock options

 

721

 

5,662

Payment of employee restricted stock tax withholdings

 

(13,449)

 

(1,015)

Payments for debt issuance costs

 

(12,339)

 

Distributions to noncontrolling interests

 

(3,082)

 

(2,525)

Repayments of other loans

 

(163)

 

Other

 

(691)

 

Net cash used in financing activities

 

(233,657)

 

(365,485)

EFFECT OF EXCHANGE RATE CHANGES ON CASH

 

443

 

(290)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

 

(7,486)

 

13,474

Cash and cash equivalents, at beginning of period

 

47,117

 

45,263

Cash and cash equivalents, at end of period

 

39,631

 

58,737

Less: cash and cash equivalents of discontinued operations

 

(136)

 

(120)

Cash and cash equivalents

 

$

39,495

 

$

58,617

Supplemental disclosures of cash flow information:

 

 

 

 

Cash paid for interest

 

$

118,441

 

$

139,040

Cash (refunds) for federal and state income taxes, net

 

(21,847)

 

(24,236)

Leased assets obtained in exchange for new operating lease liabilities

 

226,570

 

154,888

Leased assets obtained in exchange for new finance lease liabilities

 

468

 

92,843

Additions of property and equipment included in accounts payable

 

$

49,182

 

$

20,547

 

SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION

UNITED NATURAL FOODS, INC.

UNAUDITED

 

Reconciliation of Net income (loss) from continuing operations and to Income (loss) from discontinued operations, net of tax to Adjusted EBITDA (unaudited)

 

 

13-Week Period Ended

 

39-Week Period Ended

(in thousands)

May 1, 2021

 

May 2, 2020

 

May 1, 2021

 

May 2, 2020

Net income (loss) from continuing operations

$

48,299

 

 

$

94,447

 

 

$

104,089

 

 

$

(306,971

)

Adjustments to continuing operations net income (loss):

 

 

 

 

 

 

 

Less net income attributable to noncontrolling interests

(1,394

)

 

(2,238

)

 

(4,366

)

 

(3,407

)

Total other expense, net

25,383

 

 

32,669

 

 

108,828

 

 

114,933

 

Provision (benefit) for income taxes

16,812

 

 

(2,799

)

 

32,213

 

 

(82,562

)

Depreciation and amortization

66,365

 

 

69,642

 

 

210,088

 

 

214,002

 

Share-based compensation

11,668

 

 

12,992

 

 

38,490

 

 

22,051

 

Goodwill and asset impairment charges(1)

 

 

 

 

 

 

425,405

 

Restructuring, acquisition and integration related expenses(2)

9,867

 

 

14,557

 

 

44,078

 

 

65,751

 

(Gain) loss on sale of assets

(25

)

 

351

 

 

144

 

 

785

 

Note receivable charges(3)

 

 

 

 

 

 

12,516

 

Legal reserve charge(4)

 

 

 

 

 

 

1,196

 

Other retail expense(5)

355

 

 

 

 

3,358

 

 

 

Adjusted EBITDA of continuing operations

177,330

 

 

219,621

 

 

536,922

 

 

463,699

 

Adjusted EBITDA of discontinued operations(6)

2,168

 

 

2,587

 

 

7,828

 

 

11,313

 

Adjusted EBITDA

$

179,498

 

 

$

222,208

 

 

$

544,750

 

 

$

475,012

 

 

 

 

 

 

 

 

 

Income (loss) from discontinued operations, net of tax

$

1,653

 

 

$

(4,078

)

 

$

6,752

 

 

$

(16,128

)

Adjustments to discontinued operations net income (loss):

 

 

 

 

 

 

 

Other income, net

 

 

(107

)

 

 

 

(171

)

Provision (benefit) for income taxes

713

 

 

20

 

 

341

 

 

(3,322

)

Restructuring, store closure and other charges, net

(198

)

 

6,752

 

 

735

 

 

30,934

 

Adjusted EBITDA of discontinued operations

$

2,168

 

 

$

2,587

 

 

$

7,828

 

 

$

11,313

 

(1)

Fiscal 2020 reflects a goodwill impairment charge attributable to a reorganization of our reporting units and a sustained decrease in market capitalization and enterprise value of the Company, resulting in a decline in the estimated fair value of the U.S. Wholesale reporting unit. In addition, this charge includes a goodwill finalization charge attributable to the SUPERVALU acquisition and an asset impairment charge.

(2)

Fiscal 2021 primarily reflects costs associated with advisory and transformational activities as we position our business for further value-creation post SUPERVALU acquisition, as well as costs associated with distribution center consolidations. Fiscal 2020 primarily reflects integration charges, closed property reserve charges and administrative and operational restructuring costs.

(3)

Reflects reserves and charges for notes receivable issued by the SUPERVALU business prior to its acquisition to finance the purchase of stores by its customers.

(4)

Reflects a charge to settle a legal proceeding, net of income received to settle a separate legal proceeding.

(5)

Reflects expenses associated with event-specific damages to certain retail stores.

(6)

We believe the inclusion of discontinued operations results within Adjusted EBITDA provides investors a meaningful measure of total performance.

 

Reconciliation of Net income (loss) per Diluted Common Share to Adjusted Net income per Diluted Common Share (unaudited)

 

 

 

13-Week Period Ended

 

39-Week Period Ended

 

 

May 1, 2021

 

May 2, 2020

 

May 1, 2021

 

May 2, 2020

Net income (loss) attributable to UNFI per diluted common share

 

$

0.80

 

 

$

1.60

 

 

$

1.78

 

 

$

(6.10

)

Goodwill and asset impairment charges(1)

 

 

 

 

 

 

 

7.95

 

Restructuring, acquisition and integration related expenses(2)

 

0.16

 

 

0.26

 

 

0.74

 

 

1.23

 

(Gain) loss on sale of assets(3)

 

 

 

0.01

 

 

 

 

0.01

 

Pension settlement charge(4)

 

 

 

 

 

 

 

0.19

 

Surplus property depreciation and interest expense(5)

 

0.02

 

 

0.03

 

 

0.04

 

 

0.16

 

Note receivable charges(6)

 

 

 

 

 

 

 

0.23

 

Loss on debt extinguishment(7)

 

0.01

 

 

 

 

0.51

 

 

 

Legal reserve charge(8)

 

 

 

 

 

 

 

0.02

 

Other retail expense(9)

 

0.01

 

 

 

 

0.06

 

 

 

Discontinued operations store closures and other charges, net(10)

 

 

 

0.12

 

 

0.01

 

 

0.58

 

Tax impact of adjustments and adjusted effective tax rate(11)

 

(0.06

)

 

(0.61

)

 

(0.44

)

 

(2.37

)

Impact of dilutive shares

 

 

 

 

 

 

 

(0.02

)

Adjusted net income per diluted common share (Retail in Discontinued Operations)(12)

 

0.94

 

 

1.41

 

 

2.70

 

 

1.88

 

Depreciation and amortization adjustment(13)

 

 

 

(0.08

)

 

 

 

(0.25

)

Adjusted net income per diluted common share (Retail in Continuing Operations)

 

$

0.94

 

 

$

1.33

 

 

$

2.70

 

 

$

1.63

 

(1)

Fiscal 2020 reflects a goodwill impairment charge attributable to a reorganization of our reporting units and a sustained decrease in market capitalization and enterprise value of the Company, resulting in a decline in the estimated fair value of the U.S. Wholesale reporting unit. In addition, this charge includes a goodwill finalization charge attributable to the SUPERVALU acquisition and an asset impairment charge.

(2)

Fiscal 2021 primarily reflects costs associated with advisory and transformational activities as we position our business for further value-creation post SUPERVALU acquisition, as well as costs associated with distribution center consolidations. Fiscal 2020 primarily reflects integration charges, closed property reserve charges and administrative and operational restructuring costs.

(3)

Beginning in the fourth quarter of fiscal 2020, Adjusted EPS now excludes gains and losses on the sale of assets, which had an insignificant increase on Adjusted EPS as previously reported.

(4)

Reflects a non-cash pension settlement charge associated with the acceleration of a portion of the accumulated unrecognized actuarial loss as a result of the lump sum settlement payments.

(5)

Reflects surplus, non-operating property depreciation and interest expense. Fiscal 2020 includes accelerated depreciation related to a location on which the Company recognized a gain that is included in Restructuring, acquisition and integration related expenses.

(6)

Reflects reserves and charges for notes receivable issued by the SUPERVALU business prior to its acquisition to finance the purchase of stores by its customers.

(7)

Reflects non-cash charges related to the acceleration of unamortized debt issuance costs and original issue discounts due to term loan prepayments.

(8)

Reflects a charge to settle a legal proceeding, net of income received to settle a separate legal proceeding.

(9)

Reflects expenses associated with event-specific damages to certain retail stores.

(10)

Amounts represent store closure charges and costs, operational wind-down and inventory charges, and asset impairment charges related to discontinued operations.

(11)

Represents the tax effect of the pre-tax adjustments using an adjusted effective tax rate. The adjusted effective tax rate is calculated based on adjusted net income before tax, and its impact reflects the exclusion of changes to uncertain tax positions, valuation allowances, tax impacts related to the exercise of share-based compensation awards and discrete GAAP tax items which could impact the comparability of the operational effective tax rate. The Company believes using this adjusted effective tax rate will provide better consistency across the interim reporting periods since each of these discrete items can cause volatility in the GAAP tax rate that is not indicative of the true operations of the Company. By providing this non-GAAP measure, management intends to provide investors with a meaningful, consistent comparison of the Company’s effective tax rate on ongoing operations.

(12)

The computation of diluted earnings per share is calculated using diluted weighted average shares outstanding, which includes the net effect of dilutive stock awards.

(13)

In the fourth quarter of fiscal 2020 the Company recorded a pre-tax charge of $50.0 million related to the change in presentation of Retail to continuing operations. This charge was calculated under GAAP as the depreciation and amortization expense that would have been recognized had Retail been included in continuing operations for the full time period since the SUPERVALU acquisition date. This adjustment attributes the pro rata amount of the non-cash charge recognized in the fourth quarter of fiscal 2020 to the applicable time periods in which it would have been recognized had Retail been included within continuing operations since the acquisition date. UNFI believes the inclusion of this adjustment is a useful indicator of performance to both management and investors, as it provides a relative comparison to how UNFI’s results of operations will be reported on an ongoing basis.

 

Calculation of Net Debt to Adjusted EBITDA Leverage Ratio (unaudited)

 

(in thousands, except ratios)

May 1, 2021

Current portion of long-term debt and finance lease liabilities

$

23,700

 

Long-term debt

2,314,215

 

Long-term finance lease liabilities

132,975

 

Less: Cash and cash equivalents

(39,495

)

Net carrying value of debt and finance lease liabilities

2,431,395

 

Debt issuance costs, net

36,374

 

Original issue discount on debt

17,523

 

Net debt and finance lease liabilities

2,485,292

 

Adjusted EBITDA(1)

$

742,660

 

Adjusted EBITDA leverage ratio

3.3x

(1)

Adjusted EBITDA reflects the summation of the trailing four quarters ended May 1, 2021.

 

Reconciliation of Trailing Four Quarters Net income from continuing operations and Income from discontinued operations, net of tax to Adjusted EBITDA (unaudited)

 

(in thousands)

 

52-Week Period
Ended May 1,
2021

Net income from continuing operations

 

$

157,051

 

Adjustments to continuing operations net income:

 

 

Less net income attributable to noncontrolling interests

 

(5,888

)

Total other expense, net

 

142,734

 

Provision for income taxes

 

24,330

 

Depreciation and amortization

 

277,621

 

Share-based compensation

 

50,128

 

Restructuring, acquisition and integration related expenses

 

64,710

 

Loss on sale of assets

 

16,491

 

Other retail expense

 

5,108

 

Adjusted EBITDA of continuing operations

 

732,285

 

Adjusted EBITDA of discontinued operations

 

10,375

 

Adjusted EBITDA

 

$

742,660

 

 

 

 

Income from discontinued operations, net of tax

 

$

7,678

 

Adjustments to discontinued operations net income:

 

 

Total other expense, net

 

167

 

Benefit for income taxes

 

(802

)

Restructuring, store closure and other charges, net

 

3,332

 

Adjusted EBITDA of discontinued operations

 

$

10,375

 

 

Reconciliation of Net cash provided by operating activities to Free cash flow (unaudited)

 

 

 

 

 

 

39-Week Period Ended

(in thousands)

May 1, 2021

 

May 2, 2020

Net cash provided by operating activities

$

336,444

 

 

$

452,279

 

Payments for capital expenditures

(165,457

)

 

(126,803

)

Free cash flow

$

170,987

 

 

$

325,476

 

 

FISCAL 2021 GUIDANCE

 

Reconciliation of 2021 Guidance for Estimated Net Income per diluted Common Share to Estimated Non-GAAP Adjusted Net Income per diluted Common Share (unaudited)

 

 

 

Fiscal Year Ending July 31, 2021

 

 

Low Range

 

Estimate

 

High Range

Net income attributable to United Natural Foods, Inc. per diluted common share

 

$

2.15

 

 

 

 

$

2.65

 

Restructuring, acquisition and integration related expenses

 

 

 

0.46

 

 

 

Loss on debt extinguishment

 

 

 

0.55

 

 

 

Surplus property depreciation and interest expense

 

 

 

0.10

 

 

 

Discontinued operations store closures and other charges, net

 

 

 

0.12

 

 

 

Tax impact of adjustments and adjusted effective tax rate(1)

 

 

 

(0.33)

 

 

 

Adjusted net income per diluted common share

 

$

3.05

 

 

 

 

$

3.55

 

(1)

The estimated adjusted effective tax rate excludes the potential impact of changes in uncertain tax positions, tax impacts related to ASU 2016-09 regarding stock compensation and valuation allowances. Refer to the reconciliation for adjusted effective tax rate.

 

Reconciliation of 2021 Guidance for Net Income Attributable to United Natural Foods, Inc. to Adjusted EBITDA (unaudited)

 

 

 

Fiscal Year Ending July 31, 2021

(in thousands)

 

Low Range

 

Estimate

 

High Range

Net income attributable to United Natural Foods, Inc.

 

$

130,000

 

 

 

 

$

160,000

 

Provision for income taxes

 

48,000

 

 

 

 

58,000

 

Restructuring, acquisition and integration related costs

 

 

 

27,000

 

 

 

Closed property depreciation and interest expense

 

 

 

6,000

 

 

 

Discontinued operations store closures and other charges, net

 

 

 

7,000

 

 

 

Net interest expense

 

 

 

209,000

 

 

 

Other (income) expense, net

 

 

 

(1,000

)

 

 

Depreciation and amortization

 

 

 

278,000

 

 

 

Share-based compensation

 

 

 

54,000

 

 

 

Net periodic benefit income, excluding service costs

 

 

 

(68,000

)

 

 

Adjusted EBITDA

 

$

690,000

 

 

 

 

$

730,000

 

 

Reconciliation of Estimated 2021 and Actual 2020 U.S. GAAP Effective Tax Rate to Adjusted Effective Tax Rate (unaudited)

 

 

 

Estimated

Fiscal 2021

 

Actual Fiscal 2020

U.S. GAAP Effective Tax Rate

 

24

%

 

26

%

Discrete quarterly recognition of GAAP items(1)

 

2

%

 

(1)

%

Tax impact of other charges and adjustments(2)

 

1

%

 

1

%

Changes in valuation allowances(3)

 

(1)

%

 

1

%

Impact of goodwill impairment

 

%

 

11

%

Impact of CARES Act(4)

 

%

 

(11)

%

Other(5)

 

1

%

 

%

Adjusted Effective Tax Rate

 

27

%

 

27

%

Note: As part of the year-end reconciliation, we will update the reconciliation of the GAAP effective tax rate for actual results.

(1)

Reflects changes in tax laws excluding the CARES Act, uncertain tax positions, the tax impacts related to the exercise of share-based compensation awards and any prior-year Internal Revenue Service or other tax jurisdiction audit adjustments.

(2)

Reflects the tax impact of pre-tax adjustments other than the goodwill impairment that are excluded from pre-tax income when calculating adjusted EPS.

(3)

Reflects changes in valuation allowances related to changes in judgment regarding the realizability of deferred tax assets or current year operations.

(4)

Reflects the impact of tax loss carrybacks to 35% tax years allowed under the CARES Act as compared to the 21% tax rate applicable to tax loss carryforwards.

(5)

Tax impacts related to full-year forecasted tax opportunities and related costs. The Company establishes an estimated adjusted effective tax rate at the beginning of the fiscal year based on the best available information. The Company re-evaluates its estimated adjusted effective tax rate as appropriate throughout the year and adjusts for any material changes. The actual adjusted effective tax rate at the end of the fiscal year is based on actual results and accordingly may differ from the estimated adjusted effective tax rate used during the year.

 

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20210609005149/en/

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