United Natural Foods, Inc. (NYSE: UNFI) (the “Company” or
“UNFI”) today reported financial results for the fourth quarter (13
weeks) and fiscal year (52 weeks) ended August 1, 2020.
Fiscal 2020 Full Year
Highlights (Fiscal 2019 was a 53 week year that included
the contribution from an acquisition for 41 weeks)
- Net sales increased to $26.5 billion
- Net loss of $(274) million, including $425 million pre-tax
goodwill and asset impairment charges recorded in the first quarter
of fiscal 2020
- Adjusted EBITDA increased to $673 million
- Loss per diluted share (EPS) improved to $(5.10)
- Adjusted EPS increased to $2.72
- Reduced outstanding debt, net of cash, by $388 million;
year-end adjusted EBITDA leverage ratio of 4.0x
Fourth Quarter Fiscal 2020
Highlights (All periods recast to present Retail in
Continuing Operations; comparable basis changes are based on 13
week comparisons)
- Net sales increased 0.4% to $6.75 billion, an 8.0% increase
on a comparable basis
- Net income increased 173.7% to $52 million, a 207.1%
increase on a comparable basis
- Adjusted EBITDA increased 19.3% to $198 million, a 27.9%
increase on a comparable basis
- Earnings per diluted share (EPS) increased 147.2% to $0.89,
a 177.9% increase on a comparable basis
- Adjusted EPS increased 202.9% to $1.06, a 205.2% increase on
a comparable basis
“Fiscal 2020 was a monumental year for UNFI as the demonstrated
flexibility and strength of our supply chain network led to full
year results that exceeded our expectations,” said Steven L.
Spinner, Chairman and Chief Executive Officer. “At the same time,
we’re focused on keeping our associates safe and maintaining the
food supply chain for communities across North America through the
unprecedented events of 2020, including the pandemic, civil unrest,
and natural disasters. We’re continuing to execute with passion and
purpose on our strategy and expect further growth in fiscal
2021.”
Fourth Quarter Ended
Fiscal Year
($ in millions, except for per share
data)
August 1, 2020 (13
weeks)
August 3, 2019 (14
weeks)
Percent Change
Comparable 13 Week Percent
Change(3)
August 1, 2020 (52
weeks)
August 3, 2019 (53
weeks)
Percent Change(4)
Net sales
$
6,755
$
6,731
0.4
%
8.0
%
$
26,514
$
22,307
18.9
%
Chains(1)
$
2,713
$
2,729
(0.6
)%
6.9
%
$
10,663
$
8,812
21.0
%
Independent retailers(1)
$
1,776
$
1,714
3.6
%
11.4
%
$
6,699
$
5,536
21.0
%
Supernatural(1)
$
1,119
$
1,164
(3.9
)%
3.6
%
$
4,720
$
4,394
7.4
%
Retail(1)
$
640
$
567
12.9
%
21.4
%
$
2,331
$
1,653
41.0
%
Other(1)
$
507
$
557
(9.0
)%
(2.1
)%
$
2,101
$
1,912
9.9
%
Net Income (Loss)
$
52
$
19
173.7
%
207.1
%
$
(274
)
$
(285
)
3.9
%
Adjusted EBITDA(2)
$
198
$
166
19.3
%
27.9
%
$
673
$
563
19.6
%
Earnings (Loss) Per Diluted Share
(EPS)
$
0.89
$
0.36
147.2
%
177.9
%
$
(5.10
)
$
(5.56
)
8.3
%
Adjusted EPS(2)
$
1.06
$
0.35
202.9
%
205.2
%
$
2.72
$
1.68
61.9
%
(1)
For the fourth quarter of fiscal 2020, the
presentation of net sales by customer channel has been 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 UNFI
supplies. There was no impact to the Consolidated Statements of
Operations as a result of the reclassification of customer types.
UNFI believes this new basis better reflects the nature and
economic risks of cash flows from customers: Chains, which consists
of customer accounts that typically have more than 10 operating
stores and exclude stores included within the Supernatural and
Other channels defined below; Independent retailers, which include
smaller size accounts and include single store and multiple store
locations, but are not classified within Chains above or Other
discussed below; Supernatural, which consists of chain accounts
that are national in scope and carry primarily natural products,
and currently consists solely of Whole Foods Market; Retail, which
includes our Retail segment, including the Cub Foods business and
the majority of the remaining Shoppers locations, excluding five
Shoppers locations that are held for sale; and Other, which
includes international customers outside of Canada, foodservice,
e-commerce, conventional military business and other sales.
(2)
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.
(3)
The comparable 13 week percent change
removes the estimated contribution from the additional week in
fiscal 2019 which is calculated by subtracting one-fifth of the
respective metrics for the last five-week period within the 14-week
fourth quarter of fiscal 2019.
(4)
Fiscal 2019 included 53 weeks and
benefited from the contribution from an acquisition for 41 of the
53 weeks.
Fourth Quarter Fiscal 2020
Summary
Net sales from continuing operations in the fourth
quarter of fiscal 2020 were $6.75 billion compared to $6.26 billion
last year when excluding the additional week in fiscal 2019, which
accounted for $475 million in net sales last year. The increase in
net sales on a 13 week comparable basis was driven by strong
customer demand as well as the benefits from cross selling. Retail
identical store sales for the fourth quarter of fiscal 2020
increased 21.0% compared to the fourth quarter of fiscal 2019.
Gross margin rate in the fourth quarter of fiscal 2020
was 14.81% of net sales compared to 14.40% of net sales for the
fourth quarter of fiscal 2019. Retail contributed approximately 29
basis points of the increase due to a higher gross margin rate
driven by lower promotional spending and the retail segment
representing a greater percentage of total net sales. Wholesale
contributed the remaining 12 basis points of the increase primarily
due to lower inbound freight expense and a lower LIFO charge.
Operating expenses in the fourth quarter of fiscal 2020
were $884.1 million, or 13.09% of net sales, compared to $894.3
million, or 13.29% of net sales in the fourth quarter of fiscal
2019. The decrease in operating expenses as a percent of net sales
was driven by leveraging fixed operating and administrative
expenses over higher revenues as well as the benefit of synergy and
integration efforts, partially offset by $31 million, or 45 basis
points of net sales, of incremental costs related to COVID-19.
Goodwill and asset impairment benefit was $39.8 million
in the fourth quarter of fiscal 2019, resulting from adjustments to
the purchase price allocation undertaken in the fourth quarter
related primarily to acquired tax assets and liabilities. There
were no goodwill and asset impairment charges or adjustments in the
fourth quarter of fiscal 2020.
Restructuring, acquisition and integration related
expenses in the fourth quarter of fiscal 2020 were $20.6
million, primarily reflecting distribution center consolidation
expenses, compared to $19.4 million in the fourth quarter of fiscal
2019.
Loss on sale of assets in the fourth quarter of fiscal
2020 was $16.3 million, which included a $50.0 million accumulated
depreciation and amortization charge related to the requirement to
move Retail from discontinued operations to continuing operations,
partially offset by $33.7 million of gains on the sale of
distribution centers and other assets.
Operating income in the fourth quarter of fiscal 2020 was
$79.0 million and included $20.6 million of restructuring,
acquisition, and integration related expenses and $16.3 million of
loss on sale of assets. When excluding these items, operating
income was $116.0 million, or 1.72% of net sales, in the fourth
quarter of fiscal 2020. Operating income in the fourth quarter of
fiscal 2019 was $95.7 million and included a benefit from a
goodwill and asset impairment adjustment of $39.8 million and a
gain on sale of assets, partially offset by restructuring,
acquisition, and integration related expenses of $19.4 million.
When excluding these items, operating income for the fourth quarter
of fiscal 2019 was $74.7 million, or 1.11% of net sales. The 61
basis point increase in operating income, as a percent of net sales
when excluding the items listed, was driven by higher net sales,
the benefit of higher gross margin rates, the leveraging of fixed
operating and administrative expenses over higher sales, and the
benefit of synergy and integration efforts, partially offset by
$30.7 million of incremental costs related to COVID-19.
Interest expense, net for the fourth quarter of fiscal
2020 was $45.8 million. Interest expense, net for the fourth
quarter of fiscal 2019 was $59.0 million. The decrease in interest
expense, net was driven by lower amounts of outstanding debt and
lower average interest rates.
Effective tax rate for continuing operations for the
fourth quarter of fiscal 2020 was a benefit of (17.5)% of pre-tax
income compared to expense of 56.0% of pre-tax income for the
fourth quarter of fiscal 2019. The change in the effective tax rate
for the fourth quarter was primarily driven by an additional fiscal
2020 tax benefit resulting from the Coronavirus Aid, Relief, and
Economic Security (CARES) Act, which provides that net operating
losses be carried back into tax years with higher statutory rates,
as well as the favorable resolution of state tax audits. The tax
impact of the goodwill and asset impairment benefit recorded in the
fourth quarter of fiscal 2019 increased the effective tax rate by
approximately 53.0%.
Net income for the fourth quarter of fiscal 2020 was
$52.4 million compared to $19.2 million for the fourth quarter of
fiscal 2019 due to the factors described above impacting operating
income, interest expense, and the tax rate.
Net income per diluted share (EPS) was $0.89 for the
fourth quarter of fiscal 2020, compared to $0.36 for the fourth
quarter of fiscal 2019. Adjusted EPS was $1.06 for the fourth
quarter of fiscal 2020, compared to adjusted EPS of $0.35 in the
fourth quarter of fiscal 2019.
Adjusted EBITDA for the fourth quarter of fiscal 2020 was
$197.9 million, compared to $165.9 million for the fourth quarter
of fiscal 2019. The increase primarily reflects the items discussed
in adjusted operating income.
Total Outstanding Debt, net of cash, ended the year at
$2.61 billion of total outstanding debt, net of cash, reflecting a
decrease of $55 million in the fourth quarter of fiscal 2020
(compared to the third quarter of fiscal 2020) and a total decrease
of $388 million in fiscal 2020. Cash provided by operating
activities of $457 million led to free cash flow of $284 million
which, when combined with proceeds from asset sales of $147 million
(the sum of which totaled $431 million), were the primary drivers
of fiscal 2020 debt reduction. Fiscal 2020 ending total outstanding
debt, net of cash, included a $96 million finance lease obligation
recorded in the third quarter of fiscal 2020 associated with the
newest Moreno Valley distribution center.
Fiscal 2021 Outlook (1)
Based on its strong performance in fiscal 2020 and expectations
for continued momentum in fiscal 2021, the Company is providing the
following outlook for fiscal 2021. This outlook assumes that
food-at-home consumption remains elevated and exceeds food consumed
away from home for the rest of fiscal 2021. Compared to fiscal
2020, the sales growth of nearly $900 million (at the midpoint of
the range provided below) will be more pronounced in the first half
of fiscal 2021 prior to cycling the pandemic-related increase in
customer demand that began the third quarter of fiscal 2020.
Fiscal Year Ending July 31,
2021
% Growth Over FY20 at
Midpoint
Net Sales ($ in billions)
$27.0 - $27.8
3.3%
Net Income ($ in millions)
$154 - $183
-
Earnings Per Diluted Share (EPS)
$2.55 - $3.05
-
Adjusted EPS (2) (3)
$3.05 - $3.55
21.3%
Adjusted EBITDA(3) ($ in millions)
$690 - $730
5.5%
Capital Expenditures ($ in millions)
$200 - $250
-
(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 & Webcast
The Company’s fourth quarter and full year fiscal 2020
conference call and audio webcast will be held tomorrow, Tuesday,
September 29, 2020 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 5884972). 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
3, 2019 filed with the Securities and Exchange Commission (the
“SEC”) on October 1, 2019, as updated in its quarterly report on
Form 10-Q for the quarter ended May 2, 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 outbreak; 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 Adjusted EBITDA leverage.
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, 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
for fiscal 2020 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 (loss) income
from continuing operations, plus Total other expense, net and
(Benefit) provision for income taxes, plus Depreciation and
amortization calculated in accordance with GAAP, plus adjustments
for Share-based compensation, Restructuring, acquisition and
integration related expenses, goodwill and asset impairment
charges, 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 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 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.
CONSOLIDATED STATEMENTS OF
OPERATIONS (unaudited)
(In thousands, except for per
share data)
Fourth Quarter Ended
Fiscal Year Ended
August 1, 2020 (13
weeks)
August 3, 2019 (14
weeks)
August 1, 2020 (52
weeks)
August 3, 2019 (53
weeks)
Net sales
$
6,754,555
$
6,731,294
$
26,514,267
$
22,307,456
Cost of sales
5,754,531
5,762,315
22,639,475
19,098,850
Gross profit
1,000,024
968,979
3,874,792
3,208,606
Operating expenses
884,060
894,255
3,541,487
2,967,912
Goodwill and asset impairment (adjustment)
charges
—
(39,845
)
425,405
292,770
Restructuring, acquisition and integration
related expenses
20,632
19,439
86,383
148,195
Loss (gain) on sale of assets
16,347
(529
)
17,132
(499
)
Operating income (loss)
78,985
95,659
(195,615
)
(199,772
)
Other expense (income):
Net periodic benefit income, excluding
service cost
(11,758
)
(12,045
)
(39,177
)
(35,041
)
Interest expense, net
45,793
59,008
191,607
180,789
Other, net
(129
)
(834
)
(3,591
)
(1,063
)
Total other expense, net
33,906
46,129
148,839
144,685
Income (loss) from continuing operations
before income taxes
45,079
49,530
(344,454
)
(344,457
)
(Benefit) provision for income taxes
(7,883
)
27,724
(90,445
)
(58,936
)
Net income (loss) from continuing
operations
52,962
21,806
(254,009
)
(285,521
)
Income (loss) from discontinued
operations, net of tax
926
(2,386
)
(15,202
)
898
Net income (loss) including noncontrolling
interests
53,888
19,420
(269,211
)
(284,623
)
Less net income attributable to
noncontrolling interests
(1,522
)
(223
)
(4,929
)
(107
)
Net income (loss) attributable to United
Natural Foods, Inc.
$
52,366
$
19,197
$
(274,140
)
$
(284,730
)
Basic earnings (loss) per share:
Continuing operations
$
0.94
$
0.41
$
(4.81
)
$
(5.57
)
Discontinued operations
$
0.02
$
(0.05
)
$
(0.28
)
$
0.02
Basic earnings (loss) per share
$
0.96
$
0.36
$
(5.10
)
$
(5.56
)
Diluted earnings (loss) per share:
Continuing operations
$
0.88
$
0.41
$
(4.81
)
$
(5.57
)
Discontinued operations
$
0.02
$
(0.05
)
$
(0.28
)
$
0.02
Diluted earnings (loss) per share
$
0.89
$
0.36
$
(5.10
)
$
(5.56
)
Weighted average shares outstanding:
Basic
54,670
52,631
53,778
51,245
Diluted
58,540
52,976
53,778
51,245
UNITED NATURAL FOODS,
INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(In thousands, except for per
share data)
August 1, 2020
August 3, 2019
ASSETS
Cash and cash equivalents
$
46,993
$
44,468
Accounts receivable, net
1,120,199
1,067,012
Inventories
2,280,767
2,190,681
Prepaid expenses and other current
assets
251,891
235,774
Current assets of discontinued
operations
5,067
20,994
Total current assets
3,704,917
3,558,929
Property and equipment, net
1,701,216
1,896,164
Operating lease assets
982,808
—
Goodwill
19,607
442,256
Intangible assets, net
969,600
1,089,846
Deferred income taxes
107,624
34,262
Other assets
97,285
107,921
Long-term assets of discontinued
operations
3,915
44,957
Total assets
$
7,586,972
$
7,174,335
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable
$
1,633,448
$
1,532,310
Accrued expenses and other current
liabilities
281,956
260,531
Accrued compensation and benefits
228,832
188,484
Current portion of operating lease
liabilities
131,022
—
Current portion of long-term debt and
finance lease liabilities
83,378
112,103
Current liabilities of discontinued
operations
11,438
15,517
Total current liabilities
2,370,074
2,108,945
Long-term debt
2,426,994
2,819,050
Long-term operating lease liabilities
873,990
—
Long-term finance lease liabilities
143,303
108,208
Pension and other postretirement benefit
obligations
292,128
237,266
Deferred income taxes
—
1,042
Other long-term liabilities
336,487
394,749
Long-term liabilities of discontinued
operations
1,738
770
Total liabilities
6,444,714
5,670,030
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; 55,306 shares issued and 54,691 shares outstanding
at August 1, 2020; 53,501 shares issued and 52,886 shares
outstanding at August 3, 2019
553
535
Additional paid-in capital
568,736
530,801
Treasury stock at cost
(24,231
)
(24,231
)
Accumulated other comprehensive loss
(237,946
)
(108,953
)
Retained earnings
837,633
1,108,890
Total United Natural Foods, Inc.
stockholders’ equity
1,144,745
1,507,042
Noncontrolling interests
(2,487
)
(2,737
)
Total stockholders' equity
1,142,258
1,504,305
Total liabilities and stockholders’
equity
$
7,586,972
$
7,174,335
UNITED NATURAL FOODS,
INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS (unaudited)
Fiscal Year Ended
(In thousands)
August 1, 2020 (52
weeks)
August 3, 2019 (53
weeks)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss including noncontrolling
interests
$
(269,211
)
$
(284,623
)
(Loss) income from discontinued
operations, net of tax
(15,202
)
898
Net loss from continuing operations
(254,009
)
(285,521
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
281,535
247,746
Share-based compensation
24,643
25,551
Loss (gain) on disposal of assets
17,132
(499
)
Closed property and other restructuring
charges
45,501
30,204
Goodwill and asset impairments
425,405
292,770
Net pension and other postretirement
benefit income
(39,177
)
(34,868
)
Deferred income tax benefit
(70,933
)
(61,208
)
LIFO charge
17,900
25,372
Provision for doubtful accounts, net
46,032
9,749
Non-cash interest expense and other
adjustments
14,706
15,654
Changes in operating assets and
liabilities, net of acquired businesses
Accounts and notes receivable
(123,970
)
53,351
Inventories
(111,267
)
183,105
Prepaid expenses and other assets
112,771
(47,708
)
Accounts payable
107,050
(24,833
)
Accrued expenses, other liabilities and
other
(40,954
)
(139,879
)
Net cash provided by operating activities
of continuing operations
452,365
288,986
Net cash provided by (used in) operating
activities of discontinued operations
4,171
(4,456
)
Net cash provided by operating
activities
456,536
284,530
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures
(172,568
)
(228,477
)
Purchases of acquired businesses, net of
cash acquired
—
(2,292,435
)
Proceeds from dispositions of assets
147,382
180,362
Other
(2,498
)
(280
)
Net cash used in investing activities of
continuing operations
(27,684
)
(2,340,830
)
Net cash provided by investing activities
of discontinued operations
26,218
82,043
Net cash used in investing activities
(1,466
)
(2,258,787
)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from borrowings of long-term
debt
2,050
1,926,642
Proceeds from borrowings under revolving
credit line
4,278,202
3,971,504
Proceeds from issuance of other loans
6,266
22,358
Repayments of borrowings under revolving
credit line
(4,601,490
)
(3,101,679
)
Repayments of long-term debt and finance
leases
(122,302
)
(779,909
)
Repayments of other loans
(24,408
)
—
Proceeds from the issuance of common stock
and exercise of stock options
14,276
23,975
Payment of employee restricted stock tax
withholdings
(1,023
)
(2,727
)
Payments for debt issuance costs
—
(62,600
)
Distributions to noncontrolling
interests
(4,642
)
(1,212
)
Net cash (used in) provided by financing
activities
(453,071
)
1,996,352
EFFECT OF EXCHANGE RATE ON CASH
(154
)
(143
)
NET INCREASE IN CASH AND CASH
EQUIVALENTS
1,845
21,952
Cash and cash equivalents, at beginning of
period
45,267
23,315
Cash and cash equivalents, at end of
period
47,112
45,267
Less: cash and cash equivalents of
discontinued operations
(119
)
(799
)
Cash and cash equivalents
$
46,993
$
44,468
Supplemental disclosures of cash flow
information:
Cash paid for interest
$
181,815
$
183,042
Cash (refunds) payments for federal and
state income taxes, net
$
(21,886
)
$
77,676
SUPPLEMENTAL NON-GAAP
FINANCIAL INFORMATION
UNITED NATURAL FOODS,
INC.
Reconciliation of Net Income
(Loss) from continuing operations and Income (loss) from
discontinued operations, net of tax to Adjusted EBITDA
(unaudited)
(in thousands)
Fourth Quarter Ended
Fiscal Year Ended
August 1, 2020 (13
weeks)
August 3, 2019 (14
weeks)
August 1, 2020 (52
weeks)
August 3, 2019 (53
weeks)
Net income (loss) from continuing
operations
$
52,962
$
21,806
$
(254,009
)
$
(285,521
)
Adjustments to continuing operations net
income (loss):
Less net income attributable to
noncontrolling interests
(1,522
)
(223
)
(4,929
)
(107
)
Total other expense, net
33,906
46,129
148,839
144,685
(Benefit) provision for income
taxes(1)
(7,883
)
27,724
(90,445
)
(58,936
)
Depreciation and amortization
67,533
77,063
281,535
247,746
Share-based compensation
11,638
11,426
33,689
40,495
Goodwill and asset impairment (benefit)
charges(2)
—
(39,845
)
425,405
292,770
Restructuring, acquisition, and
integration related expenses(3)
20,632
19,439
86,383
148,195
Loss (gain) on sale of assets(4)
16,347
(529
)
17,132
(499
)
Notes receivable charges(5)
—
—
12,516
—
Inventory fair value adjustment(6)
—
—
—
10,463
Legal settlement income, net of reserve
adjustment(7)
—
(3,590
)
1,196
(1,390
)
Other retail expense(8)
1,750
—
1,750
—
Adjusted EBITDA of continuing
operations
195,363
159,400
659,062
537,901
Adjusted EBITDA of discontinued
operations(9)
2,547
6,513
13,860
24,954
Adjusted EBITDA
$
197,910
$
165,913
$
672,922
$
562,855
Income (loss) from discontinued
operations, net of tax(9)
$
926
$
(2,386
)
$
(15,202
)
$
898
Adjustments to discontinued operations net
income (loss):
Total other expense, net
167
25
(4
)
150
Benefit for income taxes
(1,143
)
(52
)
(4,465
)
(3,723
)
Other expense
—
12
—
(62
)
Restructuring, store closure and other
charges, net(10)
2,597
8,914
33,531
27,691
Adjusted EBITDA of discontinued
operations(9)
$
2,547
$
6,513
$
13,860
$
24,954
(1)
Fiscal 2020 includes the tax benefit from
the CARES Act, which includes the impact of tax loss carrybacks to
35% tax years allowed under the CARES Act.
(2)
Fiscal 2020 primarily 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. Fiscal 2019 reflects a goodwill impairment charge
attributable to the SUPERVALU acquisition.
(3)
Fiscal 2020 primarily reflects Shoppers
asset impairment charges, closed property and distribution center
impairment charges and costs, and administrative fees associated
with integration activities. Fiscal 2019 primarily reflects
expenses resulting from the acquisition of SUPERVALU and
acquisition and integration expenses, including employee-related
costs.
(4)
The fourth quarter of fiscal 2020
primarily reflects a $50.0 million accumulated depreciation and
amortization charge related to the requirement to move Retail from
discontinued operations to continuing operations, partially offset
by $33.7 million of gains on the sale of distribution centers and
other assets.
(5)
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.
(6)
Reflects a non-cash charge related to the
step-up of inventory values as part of purchase accounting.
(7)
Reflects a charge to settle a legal
proceeding and a charge related to our assessment of legal
proceedings, net of income received to settle a legal
proceeding.
(8)
Reflects expenses associated with
event-specific damages to certain retail stores.
(9)
Income from discontinued operations, net
of tax and Adjusted EBITDA of discontinued operations excludes rent
expense of $0.5 million, $2.9 million in the fourth quarters of
fiscal 2020 and 2019, respectively; and $5.8 million and $9.5
million in fiscal 2020 and 2019, respectively, of operating lease
rent expense related to stores within discontinued operations, but
for which GAAP requires the expense to be included within
continuing operations, as we remain or expect to remain primarily
obligated under these leases. We expect to assign these leases with
the obligation to pay this rent expense to buyers of our retail
discontinued operations upon sale. Due to these GAAP requirements
to show rent expense, along with other administrative expenses of
discontinued operations within continuing operations, UNFI believes
the inclusion of discontinued operations results within Adjusted
EBITDA provides UNFI and investors a meaningful measure of
performance.
(10)
Amounts represent store closure charges
and costs, operational wind-down and inventory charges, and asset
impairment charges related to discontinued operations.
Reconciliation of Net Income
(Loss) per Diluted Common Share to Adjusted Net Income per Diluted
Common Share (unaudited)
Fourth Quarter Ended
Fiscal Year Ended
August 1, 2020 (13
weeks)
August 3, 2019 (14
weeks)
August 1, 2020
August 3, 2019
Net income (loss) attributable to UNFI per
diluted common share
$
0.89
$
0.36
$
(5.10
)
$
(5.56
)
Goodwill and asset impairment (benefit)
charges(1)
—
(0.75
)
7.91
5.70
Restructuring, acquisition, and
integration related expenses(2)
0.35
0.37
1.61
2.89
Loss (gain) on sale of assets(3)
0.28
(0.01
)
0.32
(0.01
)
Pension settlement charge(4)
0.02
—
0.21
—
Surplus property depreciation and interest
expense(5)
(0.01
)
—
0.15
—
Note receivable charges(6)
—
—
0.23
—
Loss on debt extinguishment(7)
—
0.01
—
0.06
Interest expense on senior notes(8)
—
—
—
0.06
Inventory fair value adjustment(9)
—
—
—
0.20
Legal reserve charge, net of settlement
income(10)
—
(0.07
)
0.02
(0.03
)
Other retail expense(11)
0.03
—
0.03
—
Discontinued operations store closures and
other charges, net(12)
0.06
0.17
0.64
0.55
Tax impact of adjustments and adjusted
effective tax rate(13)
(0.49
)
0.36
(2.90
)
(1.78
)
Impact of dilutive shares(14)
—
—
(0.09
)
—
Adjusted net income per diluted common
share (Retail in Discontinued Operations)
1.13
0.44
3.03
2.08
Depreciation and amortization
adjustment(15)
(0.07
)
(0.09
)
(0.31
)
(0.40
)
Adjusted net income per diluted common
share (Retail in Continuing Operations)(13)(14)
$
1.06
$
0.35
$
2.72
$
1.68
(1)
Fiscal 2020 primarily 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. Fiscal 2019 reflects a goodwill impairment charge
attributable to the SUPERVALU acquisition.
(2)
Fiscal 2020 primarily reflects Shoppers
asset impairment charges, closed property and distribution center
impairment charges and costs, and administrative fees associated
with integration activities. Fiscal 2019 primarily reflects
expenses resulting from the acquisition of SUPERVALU and
acquisition and integration expenses, including employee-related
costs.
(3)
The fourth quarter of fiscal 2020
primarily reflects a $50.0 million accumulated depreciation and
amortization charge related to the requirement to move Retail from
discontinued operations to continuing operations, partially offset
by $33.7 million of gains on the sale of distribution centers and
other assets.
(4)
Reflects a non-cash pension settlement
charges 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, including accelerated
depreciation related to a location on which we 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 due to term loan
prepayments and extinguishment charges from the Company’s term
loan, which was in place prior to the acquisition of SUPERVALU.
(8)
Interest expense recorded on the SUPERVALU
senior notes in the mandatory 30-day redemption notice period.
(9)
Reflects a non-cash charge related to the
step-up of inventory values as part of purchase accounting.
(10)
Reflects a charge to settle a legal
proceeding and a charge related to our assessment of legal
proceedings, net of income received to settle a legal
proceeding.
(11)
Reflects expenses associated with
event-specific damages to certain retail stores.
(12)
Amounts represent store closure charges
and costs, operational wind-down and inventory charges, and asset
impairment charges related to discontinued operations.
(13)
Represents the tax effect of the pre-tax
adjustments and beginning in the first quarter of fiscal 2020 an
adjustment to utilize an adjusted effective tax rate to calculate
Adjusted EPS. 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. For the fourth
quarter of fiscal 2020 and fiscal year 2020, the use of the
effective tax rate methodology used in fiscal 2019 to calculate
Adjusted EPS would have resulted in the tax impact of adjustments
being $(0.35) and $(2.85) per diluted share, respectively; and
Adjusted EPS of $1.20 and $2.77, respectively. If the Company had
utilized an adjusted effective tax rate in calculating Adjusted EPS
in the fourth quarter of fiscal 2019 and fiscal year 2019, the tax
impact of adjustments using the adjusted effective tax rate would
have been $0.36 and $(1.90) per diluted share, respectively, and
Adjusted EPS would have been $0.35 and $1.56 per diluted share,
respectively.
(14)
The computation of diluted earnings per
share is calculated using diluted weighted average shares
outstanding, which includes the net effect of dilutive stock
awards.
(15)
Included within Loss (gain) on sale of
assets in the fourth quarter of fiscal 2020 is 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.
Reconciliation of Net Debt to
Adjusted EBITDA Leverage Ratio (unaudited)
(in thousands, except ratios)
Fiscal Year Ended
August 1, 2020 (52
weeks)
Current portion of long-term debt and
finance lease liabilities
$
83,378
Long-term debt
2,426,994
Long-term finance lease liabilities
143,303
Less: Cash and cash equivalents
(46,993
)
Net carrying value of debt and finance
lease liabilities
2,606,682
Debt issuance costs, net
45,846
Original issue discount on debt
35,508
Net debt and finance lease liabilities
2,688,036
Adjusted EBITDA
$
672,922
Adjusted EBITDA leverage ratio
4.0
x
Reconciliation of Net cash
provided by operating activities to Free cash flow
(unaudited)
(in thousands)
Fiscal Year Ended
August 1, 2020 (52
weeks)
August 3, 2019 (53
weeks)
Net cash provided by operating
activities
$
456,536
$
284,530
Capital expenditures
(172,568
)
(228,477
)
Free cash flow
$
283,968
$
56,053
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
$
2.55
$
3.05
Restructuring, acquisition and integration
related expenses
0.46
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)
(0.18
)
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 2006-09 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.
$
154,000
$
183,000
Benefit for income taxes
57,000
68,000
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
176,000
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
2020 and Actual 2019 U.S. GAAP Effective Tax Rate to Adjusted
Effective Tax Rate (unaudited)
Estimated Fiscal 2021
Actual Fiscal 2020
Actual Fiscal 2019
U.S. GAAP Effective Tax Rate
28
%
26
%
18
%
Discrete quarterly recognition of GAAP
items(1)
(1
)%
(1
)%
(2
)%
Tax impact of other charges and
adjustments(2)
—
%
1
%
—
%
Changes in valuation allowances(3)
—
%
1
%
—
%
Impact of Goodwill Impairment
—
%
11
%
11
%
Impact of CARES Act(4)
—
%
(11
)%
—
%
Adjusted Effective Tax Rate(5)
27
%
27
%
27
%
Note: As part of the year-end
reconciliation, we have updated the reconciliation of the fiscal
2020 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
deferred tax or payable adjustments. This includes 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)
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200928005614/en/
INVESTOR CONTACT: Steve Bloomquist Vice President,
Investor Relations 952-828-4144
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