NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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|
1.
|
SIGNIFICANT ACCOUNTING POLICIES
|
United Natural Foods, Inc. and its subsidiaries (the "Company") is a leading distributor and retailer of natural, organic and specialty products. The Company sells its products primarily throughout the United States and Canada.
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(b)
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Basis of Presentation
|
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year's presentation.
The fiscal year of the Company ends on the Saturday closest to July 31. Fiscal
2016
,
2015
and
2014
ended on
July 30, 2016
,
August 1, 2015
and
August 2, 2014
, respectively. Fiscal 2016, 2015 and 2014 contained
52
weeks. Each of the Company's interim quarters consisted of
13
weeks.
Net sales consist primarily of sales of natural, organic and specialty products to retailers, adjusted for customer volume discounts, returns and allowances. Net sales also include amounts charged by the Company to customers for shipping and handling, and fuel surcharges. The principal components of cost of sales include the amounts paid to manufacturers and growers for product sold, plus the cost of transportation necessary to bring the product to the Company's distribution centers, offset by consideration received from suppliers in connection with the purchase of the suppliers' products. Cost of sales also includes amounts incurred by the Company's manufacturing subsidiary, Woodstock Farms Manufacturing, for inbound transportation costs and depreciation for manufacturing equipment, offset by consideration received from suppliers in connection with the purchase or promotion of the suppliers' products. Operating expenses include salaries and wages, employee benefits, warehousing and delivery, selling, occupancy, insurance, administrative, share-based compensation and amortization expense. Operating expenses also include depreciation expense related to the wholesale and retail divisions. Other expense (income) includes interest on outstanding indebtedness, interest income and miscellaneous income and expenses. Certain items in the consolidated balance sheet as of August 1, 2015 have been reclassified as a result of an immaterial correction explained in Note 15, "I
mmaterial Correction of Prior Period Financial Statements
." These revisions were not material to the Company's consolidated financial statements as a whole.
Cash equivalents consist of highly liquid investments with original maturities of
three
months or less.
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|
(d)
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Inventories and Cost of Sales
|
Inventories consist primarily of finished goods and are stated at the lower of cost or market, with cost being determined using the first-in, first-out (FIFO) method. Allowances received from suppliers are recorded as reductions in cost of sales upon the sale of the related products.
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(e)
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Property and Equipment
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Property and equipment are stated at cost less accumulated depreciation and amortization. Equipment under capital leases is stated at the lower of the present value of minimum lease payments at the inception of the lease or the fair value of the asset. Property and equipment includes the non-cash expenditures made by the landlord for the Aurora, Colorado distribution center in addition to office space utilized as the Company's Corporate headquarters in Providence, Rhode Island as the lease qualifies for capital lease treatment pursuant to Financial Accounting Standards Board Accounting Standards Codification 840,
Leases
. Property and equipment also includes accumulated depreciation with respect to these items. Refer to Note 8,
Long-Term Debt
, for additional information.
Applicable interest charges incurred during the construction of new facilities may be capitalized as one of the elements of cost and are amortized over the assets' estimated useful lives. The Company capitalized
$0.4 million
of interest during the fiscal year ended
July 30, 2016
related to the construction of a new distribution center in Gilroy, California which began operations in February 2016. The Company capitalized
$0.5 million
of interest during the fiscal year ended
August 1, 2015
related to the construction of new distribution centers in Prescott, Wisconsin and Gilroy, California. The Company capitalized
$0.9 million
of interest during the fiscal year ended
August 2, 2014
related to the construction of new distribution centers in Racine, Wisconsin and Hudson Valley, New York.
Property and equipment consisted of the following at
July 30, 2016
and
August 1, 2015
:
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|
|
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|
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|
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Original
Estimated
Useful Lives
(Years)
|
|
2016
|
|
2015
|
|
(In thousands, except years)
|
Land
|
|
|
$
|
52,641
|
|
|
$
|
43,033
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|
Buildings and improvements
|
20-40
|
|
403,822
|
|
|
302,066
|
|
Leasehold improvements
|
5-20
|
|
136,758
|
|
|
133,120
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|
Warehouse equipment
|
3-30
|
|
163,494
|
|
|
155,477
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|
Office equipment
|
3-10
|
|
55,915
|
|
|
57,519
|
|
Computer software
|
3-7
|
|
146,766
|
|
|
130,652
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|
Motor vehicles
|
3-7
|
|
4,597
|
|
|
4,357
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|
Construction in progress
|
|
|
15,018
|
|
|
63,557
|
|
|
|
|
979,011
|
|
|
889,781
|
|
Less accumulated depreciation and amortization
|
|
|
362,406
|
|
|
317,329
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|
Net property and equipment
|
|
|
$
|
616,605
|
|
|
$
|
572,452
|
|
Depreciation expense amounted to
$61.1 million
,
$55.0 million
and
$42.9 million
for the fiscal years ended
July 30, 2016
,
August 1, 2015
and
August 2, 2014
, respectively.
The Company accounts for income taxes under the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The calculation of the Company's tax liabilities includes addressing uncertainties in the application of complex tax regulations and is based on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return,
Management reviews long-lived assets, including definite-lived intangible assets, for indicators of impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Cash flows expected to be generated by the related assets are estimated over the assets' useful lives based on updated projections. If the evaluation indicates that the carrying amount of an asset may not be recoverable, the potential impairment is measured based on a fair value discounted cash flow model.
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(h)
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Goodwill and Intangible Assets
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Goodwill represents the excess of cost over the fair value of net assets acquired in a business combination. Goodwill and other intangible assets with indefinite lives are not amortized. Intangible assets with definite lives are amortized on a straight-line basis over the following lives:
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Customer relationships
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7-20 years
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Non-competition agreements
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1-10 years
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Trademarks and tradenames
|
|
4-10 years
|
Goodwill is assigned to the reporting units that are expected to benefit from the synergies of the business combination. The Company is required to test goodwill for impairment at least annually, and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company has elected to perform its annual tests for indications of goodwill impairment as of the first day of the fourth quarter of each fiscal year.
The Company's reporting units are at or one level below the operating segment level. Approximately
95.1%
of the Company's goodwill is within its wholesale reporting unit as of July 30, 2016. In accordance with Accounting Standards Update ("ASU") No. 2011-08,
Intangibles- Goodwill and Other (Topic 350): Testing Goodwill for Impairment
("ASU 2011-08"), the Company is allowed to perform a qualitative assessment for goodwill impairment unless it believes it is more likely than not that a reporting unit's fair value is less than the carrying value. The thresholds used by the Company for this determination in fiscal
2016
were for any reporting units that (1) have passed their previous two-step test with a margin of calculated fair value versus carrying value of at least
20%
, (2) have had a two-step test within the past five years, (3) have had no significant changes to their working capital structure, (4) have current year income which is at least
85%
of prior year amounts, and (5) present no other factors to be considered as outlined in ASU 2011-08. Based on the qualitative assessment performed for fiscal
2016
, three of the Company's four reporting units met these thresholds. As these reporting units have passed their previous two-step tests within the past 5 years, the reporting units' net income has not decreased more than
15%
and their working capital requirements have not increased significantly, no quantitative testing was performed on these reporting units as part of the annual test in fiscal
2016
.
For the reporting unit that did not meet the thresholds above for fiscal
2016
, the Company performed a two-step goodwill impairment analysis. The first step to identify potential impairment involves comparing the reporting unit's estimated fair value to its carrying value, including goodwill. The reporting unit regularly prepares discrete operating forecasts and uses these forecasts as the basis for the assumptions used in the discounted cash flow analysis which is the basis for the fair value analysis. If the estimated fair value of the reporting unit exceeds its carrying value, goodwill is considered not to be impaired and no further testing is required. This was the case for the reporting unit that required a quantitative test for the annual assessment in fiscal 2016. Had the carrying value exceeded estimated fair value for this unit, there would have been an indication of potential impairment and the second step would have been performed to measure the amount of impairment. If required, the second step involves calculating an implied fair value of goodwill for each reporting unit for which the first step indicated potential impairment. The implied fair value of goodwill is determined in a manner similar to the amount of goodwill calculated in a business combination, by measuring the excess of the estimated fair value of the reporting unit, as determined in the first step, over the aggregate estimated fair values of the individual assets, liabilities and identifiable intangible assets. If the implied fair value of goodwill exceeds the carrying value of goodwill assigned to the reporting unit, there is no impairment. If the carrying value of goodwill assigned to a reporting unit exceeds the implied fair value of the goodwill, an impairment charge is recorded for the excess.
Intangible assets with indefinite lives are tested for impairment at least annually as of the first day of the fourth fiscal quarter and if events occur or circumstances change that would indicate that the value of the asset may be impaired. Impairment is measured as the difference between the fair value of the asset and its carrying value.
In accordance with ASU No. 2012-02,
Intangibles- Goodwill and Other (Topic 350): Testing Indefinite Lived Intangible Assets for Impairment
, the Company is allowed to perform a qualitative assessment for intangible asset impairment unless it believes it is more likely than not that an intangible asset's fair value is less than the carrying value. The thresholds used by the Company for this determination in the fourth quarter of fiscal
2016
were for any intangible assets (or groups of assets) that (1) have passed their previous two-step test with a margin of calculated fair value versus carrying value of at least
20%
, (2) have had performed a two-step test within the past five years, and (3) have current year income which is at least
85%
of prior year amounts. The Company's only indefinite lived intangible assets are the branded product line asset group. During fiscal
2016
, the Company's annual qualitative assessment of its indefinite lived intangible assets indicated that no impairment existed.
During fiscal 2015, the Company ceased operations at its Canadian facility located in Scotstown, Quebec which was acquired in 2010. In connection with this closure, the Company recognized an impairment of
$0.6 million
during the first quarter of fiscal 2015 representing the remaining unamortized value of an intangible asset.
The changes in the carrying amount of goodwill and the amount allocated by reportable segment for the years presented are as follows (in thousands):
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|
|
|
|
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|
|
|
|
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Wholesale
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|
Other
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Total
|
Goodwill as of August 2, 2014
|
$
|
256,817
|
|
|
$
|
17,731
|
|
|
$
|
274,548
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|
Goodwill adjustment for prior year business combinations
|
(3,487
|
)
|
|
—
|
|
|
(3,487
|
)
|
Change in foreign exchange rates
|
(4,421
|
)
|
|
—
|
|
|
(4,421
|
)
|
Goodwill as of August 2, 2015
|
$
|
248,909
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|
|
$
|
17,731
|
|
|
$
|
266,640
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|
Goodwill from current year business combinations
|
99,142
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|
|
294
|
|
|
99,436
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|
Change in foreign exchange rates
|
92
|
|
|
—
|
|
|
92
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|
Goodwill as of July 30, 2016
|
$
|
348,143
|
|
|
$
|
18,025
|
|
|
$
|
366,168
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|
The following table presents the detail of the Company's other intangible assets (in thousands):
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July 30, 2016
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|
August 1, 2015
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Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
|
|
Gross Carrying
Amount
|
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Accumulated
Amortization
|
|
Net
|
Amortizing intangible assets:
|
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|
|
|
|
|
|
|
|
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Customer relationships
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$
|
196,313
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|
|
$
|
33,447
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|
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$
|
162,866
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|
|
$
|
96,192
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|
|
$
|
25,364
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|
|
$
|
70,828
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|
Non-compete agreements
|
2,900
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|
|
753
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|
|
2,147
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|
|
1,700
|
|
|
353
|
|
|
1,347
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|
Trademarks and tradenames
|
1,700
|
|
|
115
|
|
|
1,585
|
|
|
—
|
|
|
—
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|
|
—
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|
Total amortizing intangible assets
|
200,913
|
|
|
34,315
|
|
|
166,598
|
|
|
97,892
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|
|
25,717
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|
|
72,175
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|
Indefinite lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks and tradenames
|
55,716
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|
|
—
|
|
|
55,716
|
|
|
53,655
|
|
|
—
|
|
|
53,655
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|
Total
|
$
|
256,629
|
|
|
$
|
34,315
|
|
|
$
|
222,314
|
|
|
$
|
151,547
|
|
|
$
|
25,717
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|
|
$
|
125,830
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|
Amortization expense was
$8.9 million
,
$7.8 million
and
$5.1 million
for the fiscal years ended
July 30, 2016
,
August 1, 2015
and
August 2, 2014
, respectively. The estimated future amortization expense for each of the next five fiscal years and thereafter on definite lived intangible assets existing as of
July 30, 2016
is shown below:
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Fiscal Year:
|
(In thousands)
|
2017
|
$
|
15,099
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|
2018
|
14,720
|
|
2019
|
14,704
|
|
2020
|
14,047
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|
2021
|
13,130
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|
2022 and thereafter
|
94,898
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|
|
$
|
166,598
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(i)
|
Revenue Recognition and Concentration of Credit Risk
|
The Company records revenue upon delivery of products. Revenues are recorded net of applicable sales discounts and estimated sales returns. Sales incentives provided to customers are accounted for as reductions in revenue as the related revenue is recorded. The Company's sales are primarily to customers located throughout the United States and Canada.
Whole Foods Market, Inc. was the Company's largest customer in each fiscal year presented. Whole Foods Market, Inc. accounted for approximately
35%
and
34%
of the Company's net sales for the fiscal years ended
July 30, 2016
and
August 1, 2015
, respectively, and
36%
of the Company's net sales for the fiscal year ended
August 2, 2014
. There were no other customers that individually generated
10%
or more of the Company's net sales during those periods.
The Company analyzes customer creditworthiness, accounts receivable balances, payment history, payment terms and historical bad debt levels when evaluating the adequacy of its allowance for doubtful accounts. In instances where a reserve has been recorded for a particular customer, future sales to the customer are conducted using either cash-on-delivery terms, or the account is closely monitored so that as agreed upon payments are received, orders are released; a failure to pay results in held or canceled orders.
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(j)
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Fair Value of Financial Instruments
|
The carrying amounts of the Company's financial instruments including cash and cash equivalents, accounts receivable, accounts payable and certain accrued expenses approximate fair value due to the short-term nature of these instruments.
The following estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Refer to Note 9,
Fair Value Measurements
, for additional information regarding the fair value hierarchy. The fair value of notes payable and long-term debt are based on the instruments' interest rate, terms, maturity date and collateral, if any, in comparison to the Company's incremental borrowing rate for similar financial instruments. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
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|
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|
|
July 30, 2016
|
|
August 1, 2015
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|
Carrying Value
|
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Fair Value
|
|
Carrying Value
|
|
Fair Value
|
|
(In thousands)
|
Assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
18,593
|
|
|
$
|
18,593
|
|
|
$
|
17,380
|
|
|
$
|
17,380
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|
Accounts receivable
|
489,708
|
|
|
489,708
|
|
|
474,494
|
|
|
474,494
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|
Notes receivable
|
3,709
|
|
|
3,709
|
|
|
7,361
|
|
|
7,361
|
|
Liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
445,430
|
|
|
445,430
|
|
|
390,134
|
|
|
390,134
|
|
Notes payable
|
426,519
|
|
|
426,519
|
|
|
362,993
|
|
|
362,993
|
|
Long-term debt, including current portion
|
173,593
|
|
|
182,790
|
|
|
184,562
|
|
|
192,679
|
|
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based on amounts that differ from those estimates.
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(l)
|
Notes Receivable, Trade
|
The Company issues trade notes receivable to certain customers under
two
basic circumstances; inventory purchases for initial store openings and overdue accounts receivable. Notes issued in connection with store openings are generally receivable over a period not to exceed
thirty-six months
. Notes issued in connection with overdue accounts receivable may extend for periods greater than
one
year. All notes are issued at a market interest rate and contain certain guarantees and collateral assignments in favor of the Company.
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(m)
|
Share-Based Compensation
|
The Company accounts for its share-based compensation in accordance with FASB ASC 718,
Stock Compensation
("ASC 718"). ASC 718 requires the recognition of the fair value of share-based compensation in net income. The Company has
four
share-based employee compensation plans, which are described more fully in Note 3. Share-based compensation consists of stock options, restricted stock awards, restricted stock units, performance shares and performance units. Stock options are granted to employees and directors at exercise prices equal to the fair market value of the Company's stock at the dates of grant. Generally, stock options, restricted stock awards and restricted stock units granted to employees vest ratably over
4 years
from the grant date and grants to members of the Company's Board of Directors vest ratably over
6 months
with one half vesting immediately. The Company's President and Chief Executive Officer and its other executive officers or members of senior management have been granted performance units which have vested, when and if earned, in accordance with the terms of the related performance unit award agreements. During fiscal
2016
, fiscal
2015
and fiscal
2014
, the Company granted performance-based stock units to its executive officers that will vest if the Company achieves certain performance metrics as of and for the years ended
July 29, 2017
,
July 30, 2016
and
August 1, 2015
, respectively. The Company recognizes share-based compensation expense on a straight-line basis over the requisite service period of the individual grants, which generally equals the vesting period.
ASC 718 also requires that compensation expense be recognized for only the portion of share-based awards that are expected to vest. Therefore, we apply estimated forfeiture rates that are derived from historical employee and director termination activity to reduce the amount of compensation expense recognized. If the actual forfeitures differ from the estimate, additional adjustments to compensation expense may be required in future periods.
The Company receives an income tax deduction for restricted stock awards and restricted stock units when they vest and for non-qualified stock options exercised by employees equal to the excess of the fair market value of its common stock on the vesting or exercise date over the exercised price. Excess tax benefits (tax benefits resulting from tax deductions in excess of compensation cost recognized) and tax deficit (tax deficit resulting from compensation cost recognized in excess of tax deductions) are presented as a cash inflow or outflow provided by financing activities in the accompanying consolidated statement of cash flows.
Basic earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by adding the dilutive potential common shares to the weighted average number of common shares that were outstanding during the period. For purposes of the diluted earnings per share calculation, outstanding stock options, restricted stock awards, restricted stock units and performance-based awards, if applicable, are considered common stock equivalents, using the treasury stock method. A reconciliation of the weighted average number of shares outstanding used in the computation of the basic and diluted earnings per share for all periods presented follows:
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|
Fiscal year ended
|
|
July 30,
2016
|
|
August 1,
2015
|
|
August 2,
2014
|
|
(In thousands)
|
Basic weighted average shares outstanding
|
50,313
|
|
|
50,021
|
|
|
49,602
|
|
Net effect of dilutive common stock equivalents based upon the treasury stock method
|
86
|
|
|
246
|
|
|
286
|
|
Diluted weighted average shares outstanding
|
50,399
|
|
|
50,267
|
|
|
49,888
|
|
Potential anti-dilutive share-based payment awards excluded from the computation above
|
84
|
|
|
7
|
|
|
6
|
|
|
|
(o)
|
Comprehensive Income (Loss)
|
Comprehensive income (loss) is reported in accordance with ASU No. 2013-02, and includes net income and the change in other comprehensive income (loss). Other comprehensive income (loss) is comprised of the net change in fair value of derivative instruments designated as cash flow hedges, as well as foreign currency translation related to the translation of UNFI Canada, Inc. ("UNFI Canada") from the functional currency of Canadian dollars to U.S. dollar reporting currency. For all periods presented, the Company displays comprehensive income (loss) and its components in the consolidated statements of comprehensive income.
|
|
(p)
|
Derivative Financial Instruments
|
The Company is exposed to market risks arising from changes in interest rates, fuel costs, and with the operation of UNFI Canada, foreign currency exchange rates. The Company uses derivatives principally in the management of interest rate and fuel price exposure. From time to time the Company may use contracts to hedge transactions in foreign currency. The Company does not utilize derivatives that contain leverage features. For derivative transactions accounted for as hedges, on the date the Company enters into the derivative transaction, the exposure is identified. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking the hedge transaction. In this documentation, the Company specifically identifies the asset, liability, firm commitment, forecasted transaction, or net investment that has been designated as the hedged item and states how the hedging instrument is expected to reduce the risks related to the hedged item. The Company measures effectiveness of its hedging relationships both at hedge inception and on an ongoing basis as needed.
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|
(q)
|
Shipping and Handling Fees and Costs
|
The Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with inbound freight are generally recorded in cost of sales, whereas shipping and handling costs for selecting, quality assurance, and outbound transportation are recorded in operating expenses. Outbound shipping and handling costs totaled
$467.5 million
,
$452.9 million
and
$397.7 million
for the fiscal years ended
July 30, 2016
,
August 1, 2015
and
August 2, 2014
, respectively.
|
|
(r)
|
Reserves for Self-Insurance
|
The Company is primarily self-insured for workers' compensation and general and automobile liability insurance. It is the Company's policy to record the self-insured portion of workers' compensation and automobile liabilities based upon actuarial methods to estimate the future cost of claims and related expenses that have been reported but not settled, and that have been incurred but not yet reported. Any projection of losses concerning workers' compensation and automobile liability is subject to a considerable degree of variability. Among the causes of this variability are unpredictable external factors affecting litigation trends, benefit level changes and claim settlement patterns.
|
|
(s)
|
Operating Lease Expenses
|
The Company records lease expense via the straight-line method. For leases with step rent provisions whereby the rental payments increase over the life of the lease, and for leases where the Company receives rent-free periods, the Company recognizes expense based on a straight-line basis based on the total minimum lease payments to be made over the expected lease term.
|
|
(t)
|
Recently Issued Accounting Pronouncements
|
In March 2016, the FASB issued ASU No. 2016-09,
Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting
, which is intended to improve the accounting for share-based payment transactions as part of the FASB's simplification initiative. This ASU will change aspects of accounting for share-based payment award transactions including accounting for income taxes, the classification of excess tax benefits and the classification of employee taxes paid when shares are withheld for tax-withholding purposes on the statement of cash flows, forfeitures, and minimum statutory tax withholding requirements. The ASU is effective for public companies with interim and fiscal years beginning after December 15, 2017, which for the Company will be the first quarter of the fiscal year ending August 3, 2019. Early adoption is permitted provided that the entire ASU is adopted. The Company has not yet adopted this standard, but if the Company had adopted this standard in fiscal 2016, the result would have been a reclassification from additional paid-in capital to income tax expense. For fiscal 2016, the result would have increased current year income tax expense by
$0.1 million
and for fiscal 2015, the result would have decreased current year income tax expense by
$2.7 million
.
In February 2016, the FASB issued ASU No. 2016-2,
Leases (Topic 842)
, which will require companies as the lessee to recognize lease assets and liabilities for leases formerly classified as operating leases. The ASU is effective for public companies with interim and annual periods in fiscal years beginning after December 15, 2018, which for the Company will be the first quarter of the fiscal year ending August 1, 2020. We are in the process of evaluating the impact that this new guidance will have on the Company's consolidated financial statements.
In January 2016, the FASB issued ASU No. 2016-1,
Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities
, which will change the income statement impact of equity investments, and the recognition of changes in fair value of financial liabilities when the fair value option is elected. The ASU is effective for public companies with interim and annual periods in fiscal years beginning after December 15, 2017, which for the Company will be the first quarter of the fiscal year ending August 3, 2019. We do not expect the adoption of this guidance to have a significant impact on the Company’s consolidated financial statements.
In November 2015, the FASB issued ASU No. 2015-17,
Balance Sheet Classification of Deferred Taxes
, which requires entities with a classified balance sheet to present all deferred tax assets and liabilities as noncurrent. The new pronouncement is effective for public companies with annual periods, and interim periods within those periods, beginning after December 15, 2016, which for the Company will be the first quarter of the fiscal year ending July 28, 2018. Early adoption at the beginning of an interim or annual period is permitted. The Company has not yet adopted this standard, but if the Company had adopted this standard in fiscal 2016, the result would have been a reclassification from current deferred income tax assets to noncurrent deferred income tax liabilities of
$35.2 million
and
$32.3 million
as of July 30, 2016 and August 1, 2015, respectively.
In August 2015, the FASB issued ASU No. 2015-14,
Revenue from Contracts with Customers, (Topic 606): Deferral of the Effective Date
deferring the adoption of previously issued guidance published in May 2014, ASU No. 2014-09,
Revenue from Contracts with Customers, (Topic 606)
. The core principle of the new guidance is that an entity will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new pronouncement is effective for public companies with annual periods, and interim periods within those periods, beginning after December 15, 2017, which for the Company will be the first quarter of the fiscal year ending August 3, 2019. We are in the process of evaluating the impact that this new guidance will have on the Company's consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03,
Interest - Imputation of Interest
(Subtopic 835-30)
("ASU 2015-03"), which simplifies the presentation of debt issuance costs. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with the presentation of debt discounts. ASU 2015-03 is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company early adopted this standard in the fourth quarter of fiscal 2016, which resulted in the reclassification of
$1.6 million
and
$1.8 million
as of July 30, 2016 and August 1, 2015, respectively, from other long-term assets to long-term debt on the Company's Consolidated Balance Sheets.
|
|
(u)
|
Correction of Prior Period Errors
|
During the three months ended January 31, 2015, the Company recorded a cumulative adjustment to net sales for
$7.7 million
related to amounts owed to a customer resulting from an incorrect calculation of contractual obligations to that customer from fiscal year 2009 through fiscal year 2014. The aggregate amount of the reduction in net sales related to this incorrect calculation in fiscal 2015 was
$9.3 million
, including a
$1.6 million
reduction in the first quarter of fiscal 2015. The Company reviewed the impact of these corrections in accordance with Securities and Exchange Commission ("SEC") Staff Accounting Bulletin No. 99 "Materiality," and determined that these corrections were not material to prior periods or the periods in which the amounts were recorded.
During the fourth quarter of fiscal 2016, the Company revised previously reported amounts for identified errors in accounting for early payment discounts on inventory purchases. Management considered both the quantitative and qualitative factors within the provisions of SEC Staff Accounting Bulletin No. 99, "Materiality", and Staff Accounting Bulletin No. 108,
Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements
. Based on evaluation of the errors, management has concluded that the prior period errors were immaterial to the previously issued consolidated financial statements. Refer to Note 15,
"Immaterial Correction of Prior Period Financial Statements"
for further detail.
Wholesale Segment
Global Organic/Specialty Source, Inc.
On March 7, 2016, the Company acquired certain assets of Global Organic/Specialty Source Inc. and related affiliates (collectively "Global Organic") through its wholly owned subsidiary Albert's Organics, Inc. ("Albert's"). Global Organic is a premier distributor of organic fruits, vegetables, juices, milk, eggs, nuts, and coffee located in Sarasota, Florida serving customer locations across the Southeastern United States. Total cash consideration related to this acquisition was approximately
$20.6 million
, subject to certain customary post-closing adjustments. The fair value of identifiable intangible assets acquired was determined by using an income approach. During the three months ended July 30, 2016, the Company recorded an adjustment to certain provisional amounts recorded as of April 30, 2016. The adjustment included a decrease to the customer list intangible asset by
$1.0 million
based on updated valuation information with a corresponding increase to goodwill. The identifiable intangible asset recorded based on a provisional valuation consisted of customer lists of
$7.4 million
, which are being amortized on a straight-line basis over an estimated useful life of approximately
ten
years. Global Organic's operations have been combined with the existing Albert's business; therefore, the Company does not record the expenses separately from the rest of the wholesale distribution business and results are not separable.
Nor-Cal Produce, Inc.
On March 31, 2016 the Company acquired all of the outstanding stock of Nor-Cal Produce, Inc. ("Nor-Cal") and an affiliated entity as well as certain real estate. Founded in 1972, Nor-Cal is a family owned and operated distributor of conventional and organic produce and other fresh products in Northern California, with primary operations located in West Sacramento, California. Total cash consideration related to this acquisition was approximately
$68.6 million
, subject to certain customary post-closing adjustments. The identifiable intangible assets recorded based on provisional valuations include customer lists of
$30.3 million
, a tradename with an estimated fair value of
$1.0 million
, and a non-compete with an estimated fair value of
$0.5 million
, which are being amortized on a straight-line basis over estimated useful lives of approximately
13
and
five years
, respectively. The preliminary fair value of the identifiable intangible assets acquired was determined by using an income approach. Significant assumptions utilized in the income approach were based on company-specific information and projections, which are not observable in the market and are thus considered Level 3 measurements as defined by authoritative guidance. The goodwill of
$40.3 million
represents the future economic benefits expected to arise that could not be individually identified and separately recognized. Net sales attributed to Nor-Cal from the date of acquisition through the fiscal year ended
July 30, 2016
were
$51.4 million
.
The following table summarizes the preliminary fair values of assets and liabilities for the Nor-Cal acquisition and the amounts of assets acquired and liabilities assumed as of the acquisition date, including adjustments made through July 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Preliminary as of April 30, 2016
|
|
Adjustments in Current Fiscal Year
|
|
Preliminary as of July 30, 2016
|
Accounts receivable
|
$
|
8,483
|
|
|
$
|
—
|
|
|
$
|
8,483
|
|
Inventories
|
1,902
|
|
|
—
|
|
|
1,902
|
|
Property and equipment
|
10,743
|
|
|
(714
|
)
|
|
10,029
|
|
Other assets
|
1,097
|
|
|
(972
|
)
|
|
125
|
|
Customer relationships
|
30,000
|
|
|
300
|
|
|
30,300
|
|
Tradename
|
1,000
|
|
|
—
|
|
|
1,000
|
|
Non-compete
|
500
|
|
|
—
|
|
|
500
|
|
Goodwill
|
39,458
|
|
|
884
|
|
|
40,342
|
|
Total assets
|
$
|
93,183
|
|
|
$
|
(502
|
)
|
|
$
|
92,681
|
|
Liabilities
|
24,603
|
|
|
(502
|
)
|
|
24,101
|
|
Total purchase price
|
$
|
68,580
|
|
|
$
|
—
|
|
|
$
|
68,580
|
|
Haddon House Food Products, Inc.
On May 13, 2016 the Company acquired all of the outstanding stock of Haddon House Food Products, Inc. (“Haddon”) and certain affiliated entities and real estate. Founded in 1960 by the Anderson family, Haddon is a well-respected distributor and merchandiser of natural and organic and gourmet ethnic products throughout the Eastern United States. Haddon has a diverse, multi-channel customer base including conventional supermarkets, gourmet food stores and independently owned product retailers. Total consideration related to this acquisition was approximately
$219.1 million
,
$217.5 million
of which was paid in cash and
$1.6 million
of which was included in accounts payable as of July 30, 2016. The purchase price is subject to certain customary post-closing adjustments. The identifiable intangible assets recorded based on provisional valuations include customer relationships with an estimated fair value of
$62.7 million
, the Haddon tradename with an estimated fair value of
$0.7 million
, non-compete agreements with an estimated fair value of
$0.7 million
, and a trademark asset related to Haddon owned branded product lines with an estimated fair value of
$2.0 million
. The customer relationship intangible asset is currently being amortized on a straight-line basis over an estimated useful life of approximately
13
years, the Haddon tradename is being amortized over an estimated useful life of approximately
3
years, the non-compete agreements that the Company received from the owners of Haddon are being amortized over the
5
-year term of the agreements, and the Haddon trademark asset associated with its branded product lines is estimated to have an indefinite useful life. The preliminary fair value of the identifiable intangible assets acquired was determined by using an income approach. Significant assumptions utilized in the income approach were based on company-specific information and projections, which are not observable in the market and are thus considered Level 3 measurements as defined by authoritative guidance. The goodwill of
$45.9 million
represents the future economic benefits expected to arise that could not be individually identified and separately recognized.
Net sales of Haddon from the date of acquisition through the fiscal year ended
July 30, 2016
were
$100.4 million
.
The following table summarizes the preliminary fair values of assets and liabilities for the Haddon acquisition and the amounts of assets acquired and liabilities assumed as of the acquisition date:
|
|
|
|
|
(in thousands)
|
Preliminary as of July 30, 2016
|
Accounts receivable
|
$
|
40,434
|
|
Other receivable
|
3,621
|
|
Inventories
|
46,138
|
|
Prepaid expenses and other current assets
|
1,645
|
|
Property and equipment
|
54,501
|
|
Other assets
|
280
|
|
Customer relationships
|
62,700
|
|
Tradename
|
700
|
|
Non-compete
|
700
|
|
Other intangible assets
|
2,000
|
|
Goodwill
|
45,851
|
|
Total assets
|
$
|
258,570
|
|
Liabilities
|
39,510
|
|
Total purchase price
|
$
|
219,060
|
|
Cash paid for Nor-Cal, Global Organic and Haddon was financed through borrowings under the Company’s amended and restated revolving credit facility. Acquisition costs related to the current year acquisitions of Global Organic, Nor-Cal and Haddon were approximately
$2.1 million
for the year ended July 30, 2016 and have been expensed as incurred within "operating expenses" in the Consolidated Statements of Income. The results of the acquired businesses' operations have been included in the consolidated financial statements since the applicable date of acquisitions.
Tony's Fine Foods.
During the fourth quarter of fiscal 2015, the Company finalized its purchase accounting related to the Company's acquisition of all of the outstanding capital stock of Tony's Fine Foods (“Tony’s”) in the fourth quarter of fiscal 2014. Of the total purchase price of approximately
$202.7 million
, approximately
$196.5 million
was paid in cash. The remaining portion of the purchase price for Tony's was paid with approximately
112,000
shares of the Company’s common stock.
The fair value of identifiable intangible assets acquired was determined primarily by using an income approach. Identifiable intangible assets include customer relationships with an estimated fair value as of the acquisition date of
$54.8 million
, the Tony's tradename with an estimated fair value as of the acquisition date of approximately
$25.2 million
, and non-competition agreements with an estimated fair value as of the acquisition date of
$1.7 million
. The customer relationship intangible asset is currently being amortized on a straight-line basis over an estimated useful life of approximately
20 years
, the non-competition agreements that the Company received from the owners of Tony's are being amortized over the
5
-year terms of the agreements, and the Tony's tradename is estimated to have an indefinite useful life. Significant assumptions utilized in the income approach were based on certain information and projections, which are not observable in the market and are thus considered Level 3 measurements as defined by authoritative guidance. The goodwill of
$61.5 million
represents the future economic benefits expected to arise that could not be individually identified and separately recognized, including expansion of the Company's sales in natural protein and specialty cheeses.
The following table summarizes the consideration paid for the Tony's acquisition and the amounts of assets acquired and liabilities assumed recognized at the acquisition date:
|
|
|
|
|
|
(in thousands)
|
|
Final Opening Balance Sheet
|
Accounts receivable
|
|
$
|
40,577
|
|
Inventory
|
|
31,807
|
|
Property and equipment
|
|
41,983
|
|
Other assets
|
|
5,815
|
|
Customer relationships
|
|
54,800
|
|
Tradename and other intangible assets
|
|
26,900
|
|
Goodwill
|
|
61,487
|
|
Total assets
|
|
$
|
263,369
|
|
Liabilities
|
|
60,698
|
|
Total purchase price
|
|
$
|
202,671
|
|
Acquisition costs related to the Tony's acquisition were approximately
$0.3 million
and
$1.5 million
for the fiscal years ended August 1, 2015 and August 2, 2014, respectively, and have been expensed as incurred and are included within "Operating Expenses" in the Consolidated Statements of Income. The results of Tony's operations have been included in the consolidated financial statements since the date of acquisition.
During the first quarter of fiscal 2014, the Company, within its wholesale segment, completed a business combination related to the acquisition of all of the equity interests of Trudeau Foods, LLC from Trudeau Holdings, LLC, a portfolio company of Arbor Investments II, LP. The total cash consideration related to this acquisition was approximately
$23.0 million
. The fair value of the identifiable intangible assets acquired was determined by using an income approach. The identifiable intangible assets recorded based on the valuation consist of customer lists of
$9.5 million
, which are being amortized on a straight-line basis over an estimated useful life of approximately
ten
years. Significant assumptions utilized in the income approach were based on company-specific information and projections which are not observable in the market and are thus considered Level 3 measurements as defined by authoritative guidance. The results of the acquired operations of Trudeau have been included in the Company's results since September 26, 2013.
The Company recognized total share-based compensation expense of
$15.3 million
for the fiscal year ended
July 30, 2016
, compared to
$14.0 million
and
$14.6 million
for the fiscal years ended
August 1, 2015
and
August 2, 2014
, respectively. For the fiscal year ended July 30, 2016, the Company did
no
t record share-based compensation expense related to performance-based share awards, including compensation expense related to performance units with vestings tied to Company's performance in fiscal 2016, as a result of performance measures not being attained at the end of the fiscal year and the resulting forfeiture of these awards. The Company recognized a benefit of
$1.0 million
related to performance-based share awards for the fiscal year ended
August 1, 2015
due to the reversal of share-based compensation expense recorded in fiscal 2014 caused by performance measures not being attained as of the end of fiscal 2015 and the resulting forfeiture of these awards. The Company recorded
$1.0 million
share-based compensation expense related to performance-based share awards for the fiscal year ended
August 2, 2014
.
As of
July 30, 2016
, there was
$28.7 million
of total unrecognized compensation cost related to outstanding share-based compensation arrangements (including stock options, restricted stock units and performance-based restricted stock units). This cost is expected to be recognized over a weighted-average period of
2.6
years.
For stock options, the fair value of each grant was estimated at the date of grant using the Black-Scholes option pricing model. Black-Scholes utilizes assumptions related to volatility, the risk-free interest rate, the dividend yield and expected life. Expected volatilities utilized in the model are based on the historical volatility of the Company's stock price. The risk-free interest rate is derived from the U.S. Treasury yield curve in effect at the time of grant. The model incorporates exercise and post-vesting forfeiture assumptions based on an analysis of historical data. The expected term is derived from historical information and other factors. The fair value of restricted stock awards, restricted stock units, and performance share units are determined based on the number of shares or units, as applicable, granted and the quoted price of the Company's common stock as of the grant date.
The following summary presents the weighted average assumptions used for stock options granted in fiscal
2016
,
2015
and
2014
:
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended
|
|
July 30,
2016
|
|
August 1,
2015
|
|
August 2,
2014
|
Expected volatility
|
27.5
|
%
|
|
26.2
|
%
|
|
28.5
|
%
|
Dividend yield
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
Risk free interest rate
|
1.3
|
%
|
|
1.4
|
%
|
|
1.2
|
%
|
Expected term (in years)
|
4.0
|
|
|
4.0
|
|
|
3.0
|
|
The Company has
four
equity incentive plans that provide for the issuance of stock options: the 1996 Stock Option Plan (the "1996 Plan"), the 2002 Stock Incentive Plan (the "2002 Plan"), the 2004 Equity Incentive Plan, as amended (the "2004 Plan"), and the 2012 Equity Incentive Plan, as amended and restated (the "2012 Plan") (collectively, the "Plans"). The Plans provide, or prior to their expiration, in the case of the 1996, 2002, and 2004 Plans, provided, for grants of stock options to employees, officers, directors and others. Since fiscal 2010, the Company has not granted stock options intended to qualify as incentive stock options within the meaning of Section 422 of the Internal Revenue Code. Vesting requirements for awards under the Plans are at the discretion of the Company's Board of Directors, or Compensation Committee of the Board of Directors. Typically, awards granted to employees vest ratably over
4
years. The Company did not grant options to directors in fiscal 2014, fiscal 2015 or fiscal 2016. The maximum term of all incentive and non-statutory stock options granted under the Plans is
10 years
. There were
7,800,000
shares authorized for grant under the 1996 Plan and 2002 Plan and
1,250,000
under the 2012 Plan prior to December 16, 2015, when the 2012 Plan was amended to increase shares available for issuance by
2,000,000
. There were
1,054,267
remaining shares authorized for grant under the 2004 Plan as of December 16, 2010, the effective date when the 2004 Plan was amended to allow for the award of stock options. Prior to the expiration of the applicable plan, these shares may be used to issue stock options, restricted stock, restricted stock units or performance based awards. As of
July 30, 2016
,
2,354,570
shares were available for grant under the 2012 Plan. The authorization for new grants under the 1996 Plan, 2002 Plan and 2004 Plan has expired.
The following summary presents information regarding outstanding stock options as of
July 30, 2016
and changes during the fiscal year then ended with regard to options under the Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Options
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
Outstanding at beginning of year
|
444,516
|
|
|
$
|
46.97
|
|
|
|
|
|
|
Granted
|
33,030
|
|
|
$
|
51.52
|
|
|
|
|
|
|
Exercised
|
(84,110
|
)
|
|
$
|
30.51
|
|
|
|
|
|
|
Forfeited
|
(27,005
|
)
|
|
$
|
64.43
|
|
|
|
|
|
|
Cancelled
|
(22,802
|
)
|
|
$
|
61.01
|
|
|
|
|
|
|
Outstanding at end of year
|
343,629
|
|
|
$
|
49.13
|
|
|
5.8 years
|
|
$
|
2,586,141
|
|
Exercisable at end of year
|
223,711
|
|
|
$
|
42.99
|
|
|
4.7 years
|
|
$
|
2,586,141
|
|
The weighted average grant-date fair value of options granted during the fiscal years ended
July 30, 2016
,
August 1, 2015
, and
August 2, 2014
was
$15.59
,
$14.82
and
$16.48
, respectively. The aggregate intrinsic value of options exercised during the fiscal years ended
July 30, 2016
,
August 1, 2015
, and
August 2, 2014
, was
$2.6 million
,
$3.1 million
and
$2.5 million
, respectively.
Vesting requirements for awards under the Plans are at the discretion of the Company's Board of Directors, or the Compensation Committee thereof, and for time vesting awards are typically
four
equal annual installments for employees and
two
equal installments for non-employee directors with the first installment on the date of grant and the second installment on the six month anniversary of the grant date.
The following summary presents information regarding restricted stock awards, restricted stock units, performance shares and performance units under the Plans as of
July 30, 2016
and changes during the fiscal year then ended:
|
|
|
|
|
|
|
|
|
Number
of Shares
|
|
Weighted Average
Grant-Date
Fair Value
|
Outstanding at August 1, 2015
|
621,232
|
|
|
$
|
61.60
|
|
Granted
|
571,638
|
|
|
$
|
50.44
|
|
Vested
|
(256,210
|
)
|
|
$
|
56.72
|
|
Forfeited
|
(202,863
|
)
|
|
$
|
58.19
|
|
Outstanding at July 30, 2016
|
733,797
|
|
|
$
|
55.55
|
|
The total intrinsic value of restricted stock awards and restricted stock units vested was
$12.3 million
,
$17.3 million
and
$16.9 million
during the fiscal years ended
July 30, 2016
,
August 1, 2015
and
August 2, 2014
, respectively. The total intrinsic value of performance share awards and performance units vested was
$1.3 million
during the fiscal year ended
August 2, 2014
, respectively.
No
performance share awards or performance units vested during the fiscal years ended
July 30, 2016
or
August 1, 2015
.
During the fiscal year ended
July 30, 2016
,
29,115
performance units were granted (subject to the issuance of an additional
29,115
shares if the Company's performance exceeded specified targeted levels) to the Company's President and CEO, the vesting of which was contingent on the attainment of specific levels of earnings before interest and taxes and return on invested capital for fiscal 2016. The per share grant-date fair value of these awards was
$51.52
. Effective
July 30, 2016
, all of these performance units were forfeited as the underlying performance criteria that were required to be achieved in order for the units to vest were not achieved.
During the fiscal year ended
August 1, 2015
,
23,238
performance units were granted (subject to the issuance of an additional
23,238
shares if the Company's performance exceeded specified targeted levels), to the Company's President and CEO, the vesting of which was contingent on the attainment of specific levels of earnings before interest and taxes and return on invested capital. The per share grant-date fair value of these awards was
$64.55
. Effective
August 1, 2015
, all of these performance units were forfeited as the underlying performance criteria that were required to be achieved in order for the units to vest were not achieved.
During the fiscal year ended
August 2, 2014
,
22,229
performance shares were granted (subject to the issuance of an additional
22,229
shares if the Company's performance exceeded specified targeted levels) to the Company's President and CEO, the vesting of which was contingent on the attainment of specific levels of earnings before interest and taxes and return on invested capital. The per share grant-date fair value of these grants was
$67.48
. Effective
August 2, 2014
, a total of
19,396
performance shares for fiscal 2014 vested with a corresponding intrinsic value and fair value of
$1.3 million
and
$1.1 million
, respectively. The remainder of the performance shares were forfeited.
The Company has a performance-based equity compensation arrangement with a
2
-year performance-based vesting component that was established for members of the Company's executive leadership team. Under this arrangement, for the
2
-year performance periods ended July 30, 2016, August 1, 2015 and August 2, 2014, the executives were awarded performance-based stock units with a grant-date fair value equal to approximately
30%
of the sum of
125%
of their annual base salary and
50%
of their cash-based performance award earned in the prior fiscal year. Similar to the performance awards granted to the Company's President and CEO, if the Company's performance exceeded specified targeted levels, the grants could be increased up to an additional
100%
. For the
2
-year performance periods ended
July 30, 2016
,
August 1, 2015
, and August 2, 2014, it was determined that targeted levels of performance were not met and therefore, the Company did
no
t issue shares to the executive leadership team in settlement of the performance units and all the units were forfeited.
|
|
4.
|
ALLOWANCE FOR DOUBTFUL ACCOUNTS AND NOTES RECEIVABLE
|
The allowance for doubtful accounts and notes receivable consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended
|
|
|
July 30,
2016
|
|
August 1,
2015
|
|
August 2,
2014
|
|
|
(In thousands)
|
Balance at beginning of year
|
|
$
|
8,493
|
|
|
$
|
8,294
|
|
|
$
|
10,026
|
|
Additions charged to costs and expenses
|
|
6,426
|
|
|
5,059
|
|
|
3,152
|
|
Deductions
|
|
(3,689
|
)
|
|
(4,590
|
)
|
|
(5,743
|
)
|
Charged to Other Accounts (1)
|
|
—
|
|
|
(270
|
)
|
|
859
|
|
Balance at end of year
|
|
$
|
11,230
|
|
|
$
|
8,493
|
|
|
$
|
8,294
|
|
(1) Relates to acquisitions.
|
|
5.
|
RESTRUCTURING ACTIVITIES
|
2016 Cost-Saving Measures.
During the fourth quarter of fiscal 2015, the Company announced that its contract as a distributor to Albertsons Companies, Inc., which includes the Albertsons, Safeway and Eastern Supermarket chains, would terminate on September 20, 2015 rather than upon the original contract end date of July 31, 2016. During fiscal 2016, the Company implemented Company-wide cost-saving measures in response to this lost business which resulted in total restructuring costs of
$4.4 million
, all of which was recorded during the first six months of fiscal 2016. There were no additional costs recorded related to these cost-savings initiatives in fiscal 2016. These initiatives resulted in a reduction of employees, the majority of which were terminated during the first quarter of fiscal 2016, across the Company. The total work-force reduction charge of
$3.4 million
recorded during fiscal 2016 was primarily related to severance and fringe benefits. In addition to workforce reduction charges, the Company recorded
$0.9 million
during fiscal 2016 for costs due to an early lease termination and facility closure and operational transfer costs associated with these initiatives.
Earth Origins Market.
During the fourth quarter of fiscal 2016, the Company recorded restructuring and impairment charges of
$0.8 million
related to the Company's Earth Origins Market ("Earth Origins") retail business. The Company made the decision during the fourth quarter of fiscal 2016 to close
two
of its stores,
one
store located in Florida and the other located in Maryland, which resulted in restructuring costs of
$0.5 million
primarily related to severance and closure costs. The stores were closed during the first quarter of fiscal 2017. In addition, the Company recorded a total impairment charge of
$0.3 million
on long-lived assets.
Canadian facility closure.
During fiscal 2015, the Company ceased operations at its Canadian facility located in Scotstown, Quebec which was acquired in 2010. In connection with this closure, the Company recognized an impairment of
$0.6 million
during the first quarter of fiscal 2015 representing the remaining unamortized balance of an intangible asset. During the second quarter of fiscal 2015, the Company recognized a restructuring charge of
$0.2 million
in connection with this closure. Additionally, during the second quarter of fiscal 2016, the Company recognized an additional impairment charge of
$0.4 million
related to the long lived assets at the facility.
The following is a summary of the restructuring costs the Company recorded in fiscal 2016, as well as the remaining liability as of the fiscal year ended July 30, 2016 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring Costs
|
|
Cash Payments
|
|
Restructuring Cost Liability as of July 30, 2016
|
Cost saving measures:
|
|
|
|
|
|
Severance
|
$
|
3,443
|
|
|
$
|
(3,087
|
)
|
|
$
|
356
|
|
Early lease termination and facility closing costs
|
368
|
|
|
(368
|
)
|
|
—
|
|
Operational transfer costs
|
570
|
|
|
(570
|
)
|
|
—
|
|
Earth Origins:
|
|
|
|
|
|
Severance
|
41
|
|
|
—
|
|
|
41
|
|
Store closing costs
|
443
|
|
|
—
|
|
|
443
|
|
Total
|
$
|
4,865
|
|
|
$
|
(4,025
|
)
|
|
$
|
840
|
|
The following is a summary of the impairment costs the Company recorded in fiscal 2016 (in thousands):
|
|
|
|
|
|
Impairment Costs
|
Canadian facility closure
|
$
|
413
|
|
Earth Origins store
|
274
|
|
Total
|
$
|
687
|
|
|
|
6.
|
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
|
Accrued expenses and other current liabilities as of July 30, 2016 and August 1, 2015 consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
July 30,
2016
|
|
August 1,
2015
|
Accrued salaries and employee benefits
|
$
|
58,832
|
|
|
$
|
45,778
|
|
Workers' compensation and automobile liabilities
|
23,448
|
|
|
18,782
|
|
Customer incentives
|
16,410
|
|
|
15,011
|
|
Accrued freight
|
12,046
|
|
|
9,242
|
|
Interest rate swap liability
|
5,917
|
|
|
726
|
|
Other
|
45,785
|
|
|
36,654
|
|
Total accrued expenses and other current liabilities
|
$
|
162,438
|
|
|
$
|
126,193
|
|
On April 29, 2016, the Company entered into the Third Amended and Restated Loan and Security Agreement (the "Third A&R Credit Agreement") amending and restating certain terms and provisions of its revolving credit facility which increased the maximum borrowings under the amended and restated revolving credit facility and extended the maturity date to April 29, 2021. Up to
$850.0 million
is available to the Company's U.S. subsidiaries and up to
$50.0 million
is available to UNFI Canada. After giving effect to the Third A&R Credit Agreement, the amended and restated revolving credit facility provides an option to increase the U.S. or Canadian revolving commitments by up to an additional
$600.0 million
(but in not less than $10.0 million increments) subject to certain customary conditions and the lenders committing to provide the increase in funding.
The borrowings of the U.S. portion of the amended and restated revolving credit facility, after giving effect to the Third A&R Credit Agreement, accrue interest, at the base rate plus an applicable margin of
0.25%
or LIBOR rate plus an applicable margin of
1.25%
for the twelve month period ending April 29, 2017. After this period, the interest on the U.S. borrowings is accrued at the Company's option, at either (i) a base rate (generally defined as the highest of (x) the Bank of America Business Capital prime rate, (y) the average overnight
federal funds effective rate
plus one-half percent (
0.50%
) per annum and (z) one-month
LIBOR
plus one percent (
1%
) per annum) plus an applicable margin that varies depending on daily average aggregate availability, or (ii) the
LIBOR
rate plus an applicable margin that varies depending on daily average aggregate availability. The borrowings on the Canadian portion of the credit facility accrue interest at the Canadian prime rate plus an applicable margin of
0.25%
or a bankers' acceptance equivalent rate plus an applicable margin of
1.25%
for the twelve month period ending April 29, 2017. After this period, the borrowings on the Canadian portion of the credit facility accrue interest, at the Company's option, at either (i) a Canadian prime rate (generally defined as the highest of (x)
0.50%
over
30-day Reuters Canadian Deposit Offering Rate ("CDOR")
for bankers' acceptances, (y) the prime rate of Bank of America, N.A.'s Canada branch, and (z) a bankers' acceptance equivalent rate for a one month interest period plus
1.00%
) plus an applicable margin that varies depending on daily average aggregate availability, or (ii) a bankers' acceptance equivalent rate of the rate of interest per annum equal to the annual rates applicable to Canadian Dollar bankers' acceptances on the "CDOR Page" of Reuter Monitor Money Rates Service, plus five basis points, and an applicable margin that varies depending on daily average aggregate availability. Unutilized commitments are subject to an annual fee in the amount of
0.30%
if the total outstanding borrowings are less than
25%
of the aggregate commitments, or a per annum fee of
0.25%
if such total outstanding borrowings are
25%
or more of the aggregate commitments. The Company is also required to pay a letter of credit fronting fee to each letter of credit issuer equal to
0.125%
per annum of the stated amount of each such letter of credit (or such other amount as may be mutually agreed by the borrowers under the facility and the applicable letter of credit issuer), as well as a fee to all lenders equal to the applicable margin for LIBOR or bankers’ acceptance equivalent rate loans, as applicable, times the average daily stated amount of all outstanding letters of credit.
As of
July 30, 2016
, the Company's borrowing base, which is calculated based on eligible accounts receivable and inventory levels, net of
$7.4 million
of reserves, was
$832.7 million
. As of
July 30, 2016
, the Company had
$426.5 million
of borrowings
outstanding under the Company's amended and restated revolving credit facility and
$37.4 million
in letter of credit commitments which reduced the Company's available borrowing capacity under its revolving credit facility on a dollar for dollar basis. The Company's resulting remaining availability was
$368.7 million
as of
July 30, 2016
.
The amended and restated revolving credit facility, as amended by the Third A&R Credit Agreement, subjects the Company to a springing minimum fixed charge coverage ratio (as defined in the Third A&R Credit Agreement) of
1.0
to
1.0
calculated at the end of each of our fiscal quarters on a rolling
four
quarter basis when the adjusted aggregate availability (as defined in the Third A&R Credit Agreement) is less than the greater of (i)
$60.0 million
and (ii)
10%
of the aggregate borrowing base. The Company was not subject to the fixed charge coverage ratio covenant under the amended and restated credit agreement during the fiscal year ended
July 30, 2016
.
The credit facility also allows for the lenders thereunder to syndicate the credit facility to other banks and lending institutions. The Company has pledged the majority of its and its subsidiaries' accounts receivable and inventory for its obligations under the amended and restated revolving credit facility.
8.
LONG-TERM DEBT
On August 14, 2014, the Company and certain of its subsidiaries entered into a real estate backed term loan agreement (the "Term Loan Agreement"). The total initial borrowings under the Term Loan Agreement were
$150.0 million
. The Company is required to make
$2.5 million
principal payments quarterly, which began on November 1, 2014. Under the Term Loan Agreement, the Company at its option may request the establishment of one or more new term loan commitments in increments of at least
$10.0 million
, but not to exceed
$50.0 million
in total, subject to the approval of the lenders electing to participate in such incremental loans and the satisfaction of the conditions required by the Term Loan Agreement. The Company will be required to make quarterly principal payments on these incremental borrowings in accordance with the terms of the Term Loan Agreement. Proceeds from this Term Loan Agreement were used to pay down borrowings on the Company's amended and restated revolving credit facility.
On April 29, 2016, the Company entered into a First Amendment Agreement (the “Term Loan Amendment”) to the Term Loan Agreement which amends the Term Loan Agreement. The Term Loan Amendment was entered into to reflect the changes to the amended and restated revolving credit facility reflected in the Amendment. The Term Loan Agreement will terminate on the earlier of (a) August 14, 2022 and (b) the date that is ninety days prior to the termination date of the Company’s amended and restated revolving credit agreement. Under the Term Loan Agreement, the borrowers at their option may request the establishment of one or more new term loan commitments in increments of at least
$10.0 million
, but not to exceed
$50.0 million
in total, subject to the approval of the lenders electing to participate in such incremental loans and the satisfaction of the conditions required by the Term Loan Agreement. The borrowers will be required to make quarterly principal payments on these incremental borrowings in accordance with the terms of the Term Loan Agreement.
On September 1, 2016, the Company entered into a Second Amendment Agreement (the "Second Amendment") to the Term Loan Agreement which amends the Term Loan Agreement. The Second Amendment was entered into to adjust the applicable margin charged to borrowings under the Term Loan Agreement. As amended by the Second Amendment, borrowings under the Term Loan Agreement bear interest at rates that, at the Company's option, can be either: (1) a base rate generally defined as the sum of (i) the highest of (x) the administrative agent's prime rate, (y) the average overnight
federal funds effective rate
plus
0.50%
and (z)
one-month LIBOR
plus one percent (
1%
) per annum and (ii) a margin of
0.75%
; or, (2) a LIBOR rate generally defined as the sum of (i) LIBOR (as published by Reuters or other commercially available sources) for
one, two, three or six months or, if approved by all affected lenders, nine months
(all as selected by the Company), and (ii) a margin of
1.75%
. Interest accrued on borrowings under the Term Loan Agreement is payable in arrears. Interest accrued on any LIBOR loan is payable on the last day of the interest period applicable to the loan and, with respect to any LIBOR loan of more than three (3) months, on the last day of every three (3) months of such interest period. Interest accrued on base rate loans is payable on the first day of every month. The Company is also required to pay certain customary fees to the administrative agent. The borrowers' obligations under the Term Loan Agreement are secured by certain parcels of the borrowers' real property.
The Term Loan Agreement includes financial covenants that require (i) the ratio of the Company’s consolidated EBITDA (as defined in the Term Loan Agreement) minus the unfinanced portion of Capital Expenditures (as defined in the Term Loan Agreement) to the Company’s consolidated Fixed Charges (as defined in the Term Loan Agreement) to be at least 1.20 to 1.00 as of the end of any period of four fiscal quarters, (ii) the ratio of the Company’s Consolidated Funded Debt (as defined in the Term Loan Agreement) to the Company’s EBITDA for the four fiscal quarters most recently ended to be not more than 3.00 to 1.00 as of the end of any fiscal quarter and (iii) the ratio, expressed as a percentage, of the Company’s outstanding principal balance under the Loans (as defined in the Term Loan Agreement), divided by the Mortgaged Property Value (as defined in the Term Loan Agreement) to be not more than 75% at any time.
During the fiscal year ended August 1,
2015
, the Company entered into an amendment to an existing lease agreement for the office space utilized as the Company's corporate headquarters in Providence, Rhode Island. The amendment provides for additional office space to be utilized by the Company and extends the lease term for an additional 10 years. The lease qualifies for capital lease treatment pursuant to ASC 840,
Leases,
and the estimated fair value of the building is recorded on the balance sheet with the capital lease obligation included in long-term debt. A portion of each lease payment reduces the amount of the lease obligation, and a portion is recorded as interest expense at an effective rate of approximately
12.38%
.
During the fiscal year ended July 28, 2012, the Company entered into a lease agreement for a new distribution facility in Aurora, Colorado. As of the fiscal year ended August 3, 2013, actual construction costs exceeded the construction allowance as defined by the lease agreement, and therefore, the Company determined it met the criteria for continuing involvement pursuant to ASC 840,
Leases
, and applied the financing method to account for this transaction. Under the financing method, the book value of the distribution facility and related accumulated depreciation remains on the balance sheet. The construction allowance is recorded as a financing obligation in long-term debt. A portion of each lease payment will reduce the amount of the financing obligation, and a portion will be recorded as interest expense at an effective rate of approximately
7.32%
.
As of
July 30, 2016
and
August 1, 2015
, the Company's long-term debt consisted of the following:
|
|
|
|
|
|
|
|
|
|
July 30,
2016
|
|
August 1,
2015
|
|
(In thousands)
|
Financing obligation, due monthly, and maturing in October 2028 at an effective interest rate of 7.32%
|
$
|
31,502
|
|
|
$
|
32,510
|
|
Capital lease, Providence, Rhode Island corporate headquarters, due monthly, and maturing in April 2025 at an effective interest rate of 12.38%
|
13,643
|
|
|
13,883
|
|
Real-estate backed Term Loan Agreement, due quarterly (1)
|
128,448
|
|
|
138,169
|
|
|
$
|
173,593
|
|
|
$
|
184,562
|
|
Less: current installments
|
11,854
|
|
|
11,613
|
|
Long-term debt, excluding current installments
|
$
|
161,739
|
|
|
$
|
172,949
|
|
(1) Real-estate backed Term Loan Agreement balance is shown net of debt issuance costs of
$1.6 million
and
$1.8 million
as of
July 30, 2016
and
August 1, 2015
, respectively, due to the Company's adoption of ASU No. 2015-03 in the fourth quarter of fiscal 2016.
Aggregate maturities of long-term debt for the next five years and thereafter are as follows at
July 30, 2016
:
|
|
|
|
|
|
Year
|
|
(In thousands)
|
2017
|
|
$
|
11,854
|
|
2018
|
|
12,103
|
|
2019
|
|
12,515
|
|
2020
|
|
12,693
|
|
2021
|
|
93,181
|
|
2022 and thereafter
|
|
32,799
|
|
|
|
$
|
175,145
|
|
|
|
9.
|
FAIR VALUE MEASUREMENTS
|
The Company utilizes ASC 820,
Fair Value Measurements and Disclosures
("ASC 820"), for financial assets and liabilities and for non-financial assets and liabilities that are recognized or disclosed at fair value on at least an annual basis. ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be used to measure fair value:
|
|
•
|
Level 1 Inputs—Unadjusted quoted prices in active markets for identical assets or liabilities.
|
|
|
•
|
Level 2 Inputs—Inputs other than quoted prices included in Level 1 that are either directly or indirectly observable through correlation with market data. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs to valuation models or other pricing methodologies that do not require significant judgment because the inputs used in the model, such as interest rates and volatility, can be corroborated by readily observable market data.
|
|
|
•
|
Level 3 Inputs—One or more significant inputs that are unobservable and supported by little or no market activity, and that reflect the use of significant management judgment. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, and significant management judgment or estimation.
|
Interest Rate Swap Agreements
On January 23, 2015, the Company entered into a forward starting interest rate swap agreement with an effective date of August 3, 2015. The agreement provides for the Company to pay interest for a seven-year period at a fixed rate of
1.795%
on an initial amortizing principal amount of
$140.0 million
while receiving interest for the same period at the one-month LIBOR on the same notional amount. The interest rate swap has been entered into as a hedge against LIBOR movements on the current variable rate related to the Company’s real-estate backed Term Loan Agreement entered into on August 14, 2014, explained in more detail in Note 8 "Long-Term Debt," to protect against rising interest rates. We expect that the interest rate swap will effectively fix the Company’s interest rate payments on the
$140.0 million
of debt under the Company's Term Loan Agreement. The swap agreement qualifies as an “effective” hedge under ASC 815,
Derivatives and Hedging
("ASC 815").
On June 7, 2016, the Company entered into two pay fixed and receive float interest rate swap agreements to effectively fix the underlying variable rate debt on the Company’s amended and restated revolving credit facility. The first agreement has an effective date of June 9, 2016 and expires in June of 2019. This interest rate swap agreement has a notional principal amount of
$50.0 million
and provides for the Company to pay interest for a
three
-year period at a fixed annual rate of
0.8725%
while receiving interest for the same period at one-month LIBOR on the same notional principal amount. This swap, in conjunction with the amended and restated revolving credit facility, effectively fixes the interest rate on the
$50.0 million
notional amount. The second agreement has an effective date of June 9, 2016 and expires concurrent with the scheduled maturity of our amended and restated revolving credit facility in April of 2021. This interest rate swap agreement has a notional principal amount of
$25.0 million
and provides for the Company to pay interest for a
five
-year period at a fixed rate of
1.065%
while receiving interest for the same period at one-month LIBOR on the same notional principal amount. This swap, in conjunction with the amended and restated revolving credit facility, effectively fixes the interest rate on the
$25.0 million
notional amount.
On June 24, 2016, the Company entered into two additional pay fixed and receive float interest rate swap agreements to effectively fix the underlying variable rate debt on the Company’s amended and restated revolving credit facility. The first agreement has an effective date of June 24, 2016 and expires in June of 2019. This interest rate swap agreement has a notional principal amount of
$50.0 million
and provides for the Company to pay interest for a
three
-year period at a fixed annual rate of
0.7265%
while receiving interest for the same period at one-month LIBOR on the same notional principal amount. This swap, in conjunction with the amended and restated revolving credit facility, effectively fixes the interest rate on the
$50.0 million
notional amount. The second agreement has an effective date of June 24, 2016 and expires concurrent with the scheduled maturity of our amended and restated revolving credit facility in April of 2021. This interest rate swap agreement has a notional principal amount of
$25.0 million
and provides for the Company to pay interest for a
five
-year period at a fixed rate of
0.9260%
while receiving interest for the same period at one-month LIBOR on the same notional principal amount. This swap, in conjunction with the amended and restated revolving credit facility, effectively fixes the interest rate on the
$25.0 million
notional amount.
Interest rate swap agreements are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures. The Company’s interest rate swap agreements are designated as a cash flow hedges at
July 30, 2016
and are reflected at their fair value of
$5.9 million
in the consolidated balance sheet.
The Company uses the “Hypothetical Derivative Method” described in ASC 815 for quarterly prospective and retrospective assessments of hedge effectiveness, as well as for measurements of hedge ineffectiveness. Under this method, the Company assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged transactions. The effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income (outside of earnings) and subsequently reclassified to earnings in interest income when the hedged transactions affect earnings. Ineffectiveness resulting from the hedge is recorded as a gain or loss in the consolidated statement of income as part of other income. The Company did not have any material hedge ineffectiveness recognized in earnings during the fiscal year ended
July 30, 2016
. The Company also monitors the risk of counterparty default on an ongoing basis and noted that the counterparties are reputable financial institutions.
Fuel Supply Agreements
From time to time the Company is a party to fixed price fuel supply agreements. During the fiscal years ended
July 30, 2016
and
August 1, 2015
, the Company entered into several agreements which required it to purchase a portion of its diesel fuel each month at fixed prices through
December 2016
. These fixed price fuel agreements qualify for the "normal purchase" exception under ASC 815; therefore, the fuel purchases under these contracts are expensed as incurred and included within operating expenses.
Financial Instruments
The following table provides the fair value hierarchy for financial assets and liabilities measured on a recurring basis as of
July 30, 2016
and August 1, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at July 30, 2016
|
|
Fair Value at August 1, 2015
|
(In thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swap
|
|
—
|
|
|
$
|
(5,917
|
)
|
|
—
|
|
|
—
|
|
|
$
|
(726
|
)
|
|
—
|
|
The fair value of the Company's other financial instruments including cash and cash equivalents, accounts receivable, notes receivable, accounts payable and certain accrued expenses are derived using Level 2 inputs and approximate carrying amounts due to the short-term nature of these instruments. The fair value of notes payable approximate carrying amounts as they are variable rate instruments. The carrying amount of notes payable approximates fair value as interest rates on the credit facility approximates current market rates (level 2 criteria).
The following estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies taking into account the instruments' interest rate, terms, maturity date and collateral, if any, in comparison to the Company's incremental borrowing rate for similar financial instruments and are therefore deemed Level 2 inputs. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 30, 2016
|
|
August 1, 2015
|
(In thousands)
|
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
Liabilities
|
|
|
|
|
|
|
|
|
Long term debt, including current portion
|
|
$
|
173,593
|
|
|
$
|
182,790
|
|
|
$
|
184,562
|
|
|
$
|
192,679
|
|
|
|
10.
|
COMMITMENTS AND CONTINGENCIES
|
The Company leases various facilities and equipment under operating lease agreements with varying terms. Most of the leases contain renewal options and purchase options at several specific dates throughout the terms of the leases.
Rent and other lease expense for the fiscal years ended
July 30, 2016
,
August 1, 2015
and
August 2, 2014
totaled approximately
$65.4 million
,
$74.8 million
and
$65.1 million
, respectively.
Future minimum annual fixed payments required under non-cancelable operating leases having an original term of more than one year as of
July 30, 2016
are as follows:
|
|
|
|
|
|
Fiscal Year
|
|
(In thousands)
|
2017
|
|
$
|
56,269
|
|
2018
|
|
51,181
|
|
2019
|
|
44,632
|
|
2020
|
|
34,452
|
|
2021
|
|
22,734
|
|
2022 and thereafter
|
|
55,364
|
|
|
|
$
|
264,632
|
|
As of
July 30, 2016
, outstanding commitments for the purchase of inventory were approximately
$18.9 million
. The Company had outstanding letters of credit of approximately
$37.4 million
at
July 30, 2016
.
As of
July 30, 2016
, outstanding commitments for the purchase of diesel fuel were approximately
$2.6 million
.
The Company may from time to time be involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, amounts accrued, as well as the total amount of reasonably possible losses with respect to such matters, individually and in the aggregate, are not deemed to be material to the Company's consolidated financial position or results of operations. Legal expenses incurred in connection with claims and legal actions are expensed as incurred.
Retirement Plan
The Company has a defined contribution retirement plan under Section 401(k) of the Internal Revenue Code, the United Natural Foods, Inc. Retirement Plan (the "Retirement Plan"). In order to become a participant in the Retirement Plan, employees must meet certain eligibility requirements as described in the Retirement Plan document. In addition to amounts contributed to the Retirement Plan by employees, the Company makes contributions to the Retirement Plan on behalf of the employees. The Company also has the Millbrook Distribution Services Union Retirement Plan, which was assumed as part of an acquisition during fiscal 2008 and the Western Conference of Teamsters Pension Trust Fund, which was assumed as part of the Nor-Cal acquisition in March 2016. The Company's contributions to these plans were approximately
$7.3 million
,
$6.4 million
, and
$5.8 million
for the fiscal years ended
July 30, 2016
,
August 1, 2015
and
August 2, 2014
, respectively.
Deferred Compensation and Supplemental Retirement Plans
The Company's non-employee directors and certain of its employees are eligible to participate in the United Natural Foods Deferred Compensation Plan and the United Natural Foods Deferred Stock Plan (collectively the "
Deferral Plans
"). The Deferral Plans are nonqualified deferred compensation plans which are administered by the Company's Compensation Committee of the Board of Directors. The Deferral Plans were established to provide participants with the opportunity to defer the receipt of all or a portion of their compensation to a non-qualified retirement plan in amounts greater than the amount permitted to be deferred under the Company's 401(k) Plan. The Company believes that this is an appropriate benefit because (i) it operates to place employees and non-employee directors in the same position as other employees who are not affected by Internal Revenue Code limits placed on plans such as the Company's 401(k) Plan; (ii) does not substantially increase the Company's financial obligations to its employees and directors (there are no employer matching contributions, only a crediting of deemed earnings); and (iii) provides additional incentives to the Company's employees and directors, since amounts set aside by the employees and directors are subject to the claims of the Company's creditors until paid. Under the Deferral Plans, only the payment of the compensation earned by the participant is deferred and there is no deferral of the expense in the Company's financial statements related to the participants' earnings; the Company records the related compensation expense in the year in which the compensation is earned by the participants.
Under the Deferred Stock Plan, which was frozen to new deferrals effective January 1, 2007, each eligible participant could elect to defer between
0%
and
100%
of restricted stock awards granted during the election calendar year. Effective January 1, 2007, each participant may elect to defer up to
100%
of their restricted share unit awards, performance shares and performance units under the Deferred Compensation Plan. Under the Deferred Compensation Plan, each participant may also elect to defer a minimum of
$1,000
and a maximum of
90%
of base salary and
100%
of director fees, employee bonuses and commissions, as applicable, earned by the participants for the calendar year. Participants' cash-derived deferrals accrue earnings and appreciation based on the performance of mutual funds selected by the participant. The value of equity-based awards deferred under the Deferred Compensation and Deferred Stock Plans are based upon the performance of the Company's common stock.
The Millbrook Deferred Compensation Plan and the Millbrook Supplemental Retirement Plan were assumed by the Company as part of an acquisition during fiscal 2008. Deferred compensation relates to a compensation arrangement implemented in 1984 by a predecessor of the acquired company in the form of a non-qualified defined benefit plan and a supplemental retirement plan which permitted former officers and certain management employees, at the time, to defer portions of their compensation to earn specified maximum benefits upon retirement. The future obligations, which are fixed in accordance with the plans, have been recorded at a discount rate of
5.7%
. These plans do not allow new participants, and there are no active employees subject to these plans.
In an effort to provide for the benefits associated with these plans, the acquired company's predecessor purchased whole-life insurance contracts on the plan participants. The cash surrender value of these policies included in Other Assets in the Consolidated Balance Sheet was
$12.2 million
and
$11.5 million
at
July 30, 2016
and
August 1, 2015
, respectively. At
July 30, 2016
, total future obligations including interest, assuming commencement of payments at an individual's retirement age, as defined under the deferred compensation arrangement, were as follows:
|
|
|
|
|
|
Fiscal Year
|
|
(In thousands)
|
2017
|
|
$
|
1,248
|
|
2018
|
|
1,067
|
|
2019
|
|
1,147
|
|
2020
|
|
940
|
|
2021
|
|
785
|
|
2022 and thereafter
|
|
3,837
|
|
|
|
$
|
9,024
|
|
|
|
12.
|
EMPLOYEE STOCK OWNERSHIP PLAN
|
The Company adopted the UNFI Employee Stock Ownership Plan (the "ESOP") for the purpose of acquiring outstanding shares of the Company for the benefit of eligible employees. The ESOP was effective as of November 1, 1988 and received notice of qualification by the Internal Revenue Service.
In connection with the adoption of the ESOP, a Trust was established to hold the shares acquired. On November 1, 1988, the Trust purchased
40%
of the then outstanding common stock of the Company at a price of
$4.1 million
. The trustees funded this purchase by issuing promissory notes to the initial stockholders, with the Trust shares pledged as collateral. These notes bore interest at
1.33%
and were payable through May 2015. As the debt was repaid, the shares were released from collateral and allocated to active employees, based on the proportion of principal and interest paid in the year.
All shares held by the ESOP were purchased prior to December 31, 1992, except that
9,393
shares were purchased during the fourth quarter of fiscal 2015 to fund the final allocation of shares under the ESOP and during the first quarter of fiscal 2016, the Company purchased an additional
324
shares to correct a share shortage as the ESOP was merged with the Retirement Plan effective October 30, 2015. Prior to the final release of the shares in the ESOP, the Company considered unreleased shares of the ESOP to be outstanding for purposes of calculating both basic and diluted earnings per share, whether or not the shares had been committed to be released. Prior to the repayments, the debt of the ESOP was recorded as debt and the shares pledged as collateral are reported as unearned ESOP shares in the consolidated balance sheets. The debt was fully repaid as of August 1, 2015, and no contributions were made during fiscal 2016. During the fiscal year ended
August 1, 2015
, contributions totaling approximately
$0.1 million
were made to the Trust, less than
$0.1 million
of which represented interest.
The ESOP shares were classified as follows:
|
|
|
|
|
|
|
|
July 30,
2016
|
|
August 1,
2015
|
|
(In thousands)
|
Total ESOP shares—beginning of year
|
1,057
|
|
|
1,595
|
|
Shares distributed to employees
|
(1,057
|
)
|
|
(538
|
)
|
Total ESOP shares—end of year
|
—
|
|
|
1,057
|
|
Allocated shares
|
|
|
|
1,057
|
|
Unreleased shares
|
—
|
|
|
—
|
|
Total ESOP shares
|
—
|
|
|
1,057
|
|
During the fiscal year ended August 1, 2015,
24,512
shares were released for allocation based on note payments. All shares were released as of August 1, 2015.
For the fiscal year ended
July 30, 2016
, income (loss) before income taxes consists of
$208.8 million
from U.S. operations and
$(0.6) million
from foreign operations. For the fiscal year ended
August 1, 2015
, income before income taxes consists of
$227.4 million
from U.S. operations and
$2.4 million
from foreign operations. For the fiscal year ended
August 2, 2014
, income before income taxes consists of
$201.1 million
from U.S. operations and
$6.3 million
from foreign operations.
Total federal and state income tax (benefit) expense consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
Deferred
|
|
Total
|
|
(In thousands)
|
Fiscal year ended July 30, 2016
|
|
|
|
|
|
|
|
|
U.S. Federal
|
$
|
57,157
|
|
|
$
|
11,383
|
|
|
$
|
68,540
|
|
State & Local
|
12,718
|
|
|
1,310
|
|
|
$
|
14,028
|
|
Foreign
|
101
|
|
|
(213
|
)
|
|
$
|
(112
|
)
|
|
$
|
69,976
|
|
|
$
|
12,480
|
|
|
$
|
82,456
|
|
Fiscal year ended August 1, 2015
|
|
|
|
|
|
|
|
|
U.S. Federal
|
$
|
60,848
|
|
|
$
|
13,209
|
|
|
$
|
74,057
|
|
State & Local
|
14,119
|
|
|
2,098
|
|
|
16,217
|
|
Foreign
|
729
|
|
|
32
|
|
|
761
|
|
|
$
|
75,696
|
|
|
$
|
15,339
|
|
|
$
|
91,035
|
|
Fiscal year ended August 2, 2014
|
|
|
|
|
|
|
|
|
U.S. Federal
|
$
|
66,953
|
|
|
$
|
(894
|
)
|
|
$
|
66,059
|
|
State & Local
|
12,660
|
|
|
1,452
|
|
|
14,112
|
|
Foreign
|
1,432
|
|
|
323
|
|
|
1,755
|
|
|
$
|
81,045
|
|
|
$
|
881
|
|
|
$
|
81,926
|
|
Total income tax expense (benefit) was different than the amounts computed using the United States statutory income tax rate of 35% applied to income before income taxes as a result of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended
|
|
July 30,
2016
|
|
August 1,
2015
|
|
August 2,
2014
|
|
(In thousands)
|
Computed "expected" tax expense
|
$
|
72,878
|
|
|
$
|
80,419
|
|
|
$
|
72,593
|
|
State and local income tax, net of Federal income tax benefit
|
9,412
|
|
|
10,547
|
|
|
9,135
|
|
Non-deductible expenses
|
1,549
|
|
|
1,551
|
|
|
1,333
|
|
Tax effect of share-based compensation
|
86
|
|
|
165
|
|
|
160
|
|
General business credits
|
(135
|
)
|
|
(365
|
)
|
|
(114
|
)
|
Other, net
|
(1,334
|
)
|
|
(1,282
|
)
|
|
(1,181
|
)
|
Total income tax expense
|
$
|
82,456
|
|
|
$
|
91,035
|
|
|
$
|
81,926
|
|
The income tax expense (benefit) for the years ended
July 30, 2016
and
August 1, 2015
and August 2, 2014 was allocated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 30,
2016
|
|
August 1,
2015
|
|
August 2,
2014
|
|
(In thousands)
|
Income tax expense
|
$
|
82,456
|
|
|
$
|
91,035
|
|
|
$
|
81,926
|
|
Stockholders' equity, difference between compensation expense for tax purposes and amounts recognized for financial statement purposes
|
83
|
|
|
(2,746
|
)
|
|
(2,601
|
)
|
Other comprehensive income
|
(2,050
|
)
|
|
(293
|
)
|
|
—
|
|
|
$
|
80,489
|
|
|
$
|
87,996
|
|
|
$
|
79,325
|
|
The tax effects of temporary differences that give rise to significant portions of the net deferred tax assets and deferred tax liabilities at
July 30, 2016
and
August 1, 2015
are presented below:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
(In thousands)
|
Deferred tax assets:
|
|
|
|
Inventories, principally due to additional costs inventoried for tax purposes
|
$
|
10,682
|
|
|
$
|
9,034
|
|
Compensation and benefits related
|
25,453
|
|
|
23,651
|
|
Accounts receivable, principally due to allowances for uncollectible accounts
|
4,734
|
|
|
3,279
|
|
Accrued expenses
|
7,519
|
|
|
9,077
|
|
Net operating loss carryforwards
|
1,059
|
|
|
1,177
|
|
Interest rate swap agreements
|
2,343
|
|
|
293
|
|
Other deferred tax assets
|
29
|
|
|
20
|
|
Total gross deferred tax assets
|
51,819
|
|
|
46,531
|
|
Less valuation allowance
|
—
|
|
|
—
|
|
Net deferred tax assets
|
$
|
51,819
|
|
|
$
|
46,531
|
|
Deferred tax liabilities:
|
|
|
|
Plant and equipment, principally due to differences in depreciation
|
$
|
62,030
|
|
|
$
|
47,872
|
|
Intangible assets
|
48,996
|
|
|
31,955
|
|
Other
|
785
|
|
|
15
|
|
Total deferred tax liabilities
|
111,811
|
|
|
79,842
|
|
Net deferred tax liabilities
|
$
|
(59,992
|
)
|
|
$
|
(33,311
|
)
|
Current deferred income tax assets
|
$
|
35,228
|
|
|
$
|
32,333
|
|
Non-current deferred income tax liabilities
|
(95,220
|
)
|
|
(65,644
|
)
|
|
$
|
(59,992
|
)
|
|
$
|
(33,311
|
)
|
In assessing the need to establish a valuation reserve for the recoverability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company considers relevant evidence, both positive and negative, to determine the need for a valuation allowance. Information evaluated includes the Company's financial position and results of operations for the current and preceding years, the availability of deferred tax liabilities and tax carrybacks, as well as an evaluation of currently available information about future years. As of
July 30, 2016
, the Company has sufficient taxable income in the federal carryback period and anticipates sufficient future taxable income over the periods in which the deferred tax assets are deductible. The Company also has the availability of future reversals of taxable temporary differences that are expected to generate taxable income in the future. Therefore, the ultimate realization of deferred tax assets for federal and state tax purposes appears more likely than not at
July 30, 2016
and correspondingly no valuation allowance has been established.
At
July 30, 2016
, the Company had net operating loss carryforwards of approximately
$3.0 million
for federal income tax purposes. The federal carryforwards are subject to an annual limitation of approximately
$0.3 million
under Internal Revenue Code Section 382. The carryforwards expire at various times between fiscal years
2017
and
2027
.
The Company and its subsidiaries file income tax returns in the United States federal jurisdiction and in various state jurisdictions. UNFI Canada files income tax returns in Canada and certain of its provinces. U.S. federal income tax examination years prior to 2013 have either statutorily or administratively been closed with the Internal Revenue Service, and with limited exception, the fiscal tax years that remain subject to examination by state jurisdictions range from the Company's fiscal 2012 to fiscal 2015.
The Company records interest and penalties related to unrecognized tax benefits as a component of income tax expense. For the fiscal year ended
July 30, 2016
, the net tax benefit realized in the consolidated statement of income was de minimis. For the fiscal year ended
August 1, 2015
, the Company recognized net tax benefits of
$0.5 million
in its consolidated statement of income. For the fiscal year ended
August 2, 2014
, the Company recognized net tax benefits of
$0.3 million
in its consolidated statement of income related to tax examinations closed during the fiscal year.
The retained earnings of the Company's non-U.S. subsidiaries that have not been subject to U.S. tax are
$15.6 million
at
July 30, 2016
. The Company considers these unremitted earnings to be indefinitely reinvested; therefore, we have not provided a deferred tax liability for any residual U.S. tax that may be due upon repatriation of these earnings. Because of the effect of U.S. foreign tax credits, it is not practicable to estimate the amount of tax that might be payable on these earnings in the event they no longer are indefinitely reinvested.
The Company has several operating divisions aggregated under the wholesale segment, which is the Company's only reportable segment. These operating divisions have similar products and services, customer channels, distribution methods and historical margins. The wholesale segment is engaged in the national distribution of natural, organic and specialty foods, produce and related products in the United States and Canada.
The Company has additional operating divisions that do not meet the quantitative thresholds for reportable segments and are therefore aggregated under the caption of "Other". "Other" includes a retail division, which engages in the sale of natural foods and related products to the general public through retail storefronts on the east coast of the United States, a manufacturing division, which engages in importing, roasting and packaging of nuts, seeds, dried fruit and snack items, and the Company's branded product lines. "Other" also includes certain corporate operating expenses that are not allocated to operating divisions, which consist of depreciation, salaries, retainers, and other related expenses of officers, directors, corporate finance (including professional services), information technology, governance, legal, human resources and internal audit that are necessary to operate the Company's headquarters located in Providence, Rhode Island. As the Company continues to expand its business and serve its customers through a new national platform, these corporate expense amounts have increased, which is the primary driver behind the increasing operating losses within the "Other" category below. Non-operating expenses that are not allocated to the operating divisions are under the caption of "Unallocated Expenses". The Company does not record its revenues for financial reporting purposes by product group, and it is therefore impracticable for the Company to report them accordingly.
Following is business segment information for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale
|
|
Other
|
|
Eliminations
|
|
Unallocated
Expenses
|
|
Consolidated
|
|
(In thousands)
|
Fiscal year ended July 30, 2016
|
|
|
|
|
|
|
|
|
|
Net sales
|
8,395,821
|
|
|
238,691
|
|
|
(164,226
|
)
|
|
—
|
|
|
$
|
8,470,286
|
|
Restructuring and asset impairment expenses
|
2,811
|
|
|
2,741
|
|
|
—
|
|
|
—
|
|
|
5,552
|
|
Operating income (loss)
|
240,068
|
|
|
(15,080
|
)
|
|
(879
|
)
|
|
—
|
|
|
224,109
|
|
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
16,259
|
|
|
16,259
|
|
Interest income
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,115
|
)
|
|
(1,115
|
)
|
Other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
743
|
|
|
743
|
|
Income before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
208,222
|
|
Depreciation and amortization
|
68,278
|
|
|
2,728
|
|
|
—
|
|
|
—
|
|
|
71,006
|
|
Capital expenditures
|
39,464
|
|
|
1,911
|
|
|
—
|
|
|
—
|
|
|
41,375
|
|
Goodwill
|
348,143
|
|
|
18,025
|
|
|
—
|
|
|
—
|
|
|
366,168
|
|
Total assets
|
2,672,620
|
|
|
201,603
|
|
|
(22,068
|
)
|
|
—
|
|
|
2,852,155
|
|
Fiscal year ended August 1, 2015
|
|
|
|
|
|
|
|
|
|
Net sales
|
8,099,818
|
|
|
225,520
|
|
|
(140,360
|
)
|
|
—
|
|
|
$
|
8,184,978
|
|
Restructuring and asset impairment expenses
|
803
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
803
|
|
Operating income (loss)
|
259,214
|
|
|
(16,295
|
)
|
|
(962
|
)
|
|
|
|
|
241,957
|
|
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
14,498
|
|
|
14,498
|
|
Interest income
|
—
|
|
|
—
|
|
|
—
|
|
|
(356
|
)
|
|
(356
|
)
|
Other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,954
|
)
|
|
(1,954
|
)
|
Income before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
229,769
|
|
Depreciation and amortization
|
64,452
|
|
|
(652
|
)
|
|
—
|
|
|
—
|
|
|
63,800
|
|
Capital expenditures
|
125,217
|
|
|
3,917
|
|
|
—
|
|
|
—
|
|
|
129,134
|
|
Goodwill
|
248,909
|
|
|
17,731
|
|
|
—
|
|
|
—
|
|
|
266,640
|
|
Total assets
|
2,369,490
|
|
|
189,149
|
|
|
(17,645
|
)
|
|
—
|
|
|
2,540,994
|
|
Fiscal year ended August 2, 2014
|
|
|
|
|
|
|
|
|
|
Net sales
|
6,709,119
|
|
|
206,618
|
|
|
(121,290
|
)
|
|
—
|
|
|
$
|
6,794,447
|
|
Operating income (loss)
|
236,062
|
|
|
(24,542
|
)
|
|
(732
|
)
|
|
—
|
|
|
210,788
|
|
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
7,753
|
|
|
7,753
|
|
Interest income
|
—
|
|
|
—
|
|
|
—
|
|
|
(508
|
)
|
|
(508
|
)
|
Other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,865
|
)
|
|
(3,865
|
)
|
Income before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
207,408
|
|
Depreciation and amortization
|
46,516
|
|
|
2,242
|
|
|
—
|
|
|
—
|
|
|
48,758
|
|
Capital expenditures
|
145,875
|
|
|
1,428
|
|
|
—
|
|
|
—
|
|
|
147,303
|
|
Goodwill
|
256,817
|
|
|
17,731
|
|
|
—
|
|
|
—
|
|
|
274,548
|
|
Total assets
|
2,146,114
|
|
|
156,053
|
|
|
(13,276
|
)
|
|
—
|
|
|
2,288,891
|
|
|
|
15.
|
IMMATERIAL CORRECTION TO PRIOR PERIOD FINANCIAL STATEMENTS
|
During the fourth quarter of fiscal 2016, the Company revised previously reported amounts for identified errors in accounting for early payment discounts on inventory purchases. Management considered both the quantitative and qualitative factors within the provisions of SEC Staff Accounting Bulletin No. 99,
Materiality
, and Staff Accounting Bulletin No. 108,
Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements
. Based on evaluation
of the errors, management has concluded that the prior period errors were immaterial to the previously issued financial statements. As such, management has elected to correct the identified error in the prior periods. In doing so, balances in the consolidated financial statements included to which this footnote relates have been adjusted to reflect the correction in the proper periods. Future filings that include prior periods will be corrected, as needed, when filed.
The effect of recording the immaterial correction in the consolidated financial statements as of August 1, 2015 and August 2, 2014 is as follows (amounts in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the fiscal year ended August 1, 2015
|
|
|
As Reported
|
|
As Revised
|
|
Consolidated Balance Sheet
|
|
|
|
|
Inventories
|
$
|
982,559
|
|
|
$
|
975,194
|
|
|
Total current assets
|
1,553,742
|
|
|
1,546,377
|
|
|
Total assets
|
2,550,190
|
|
|
2,540,994
|
|
(1)
|
Accrued expenses and other current liabilities
|
129,113
|
|
|
126,193
|
|
|
Total current liabilities
|
530,860
|
|
|
527,940
|
|
|
Total liabilities
|
1,164,657
|
|
|
1,159,906
|
|
(1)
|
Retained earnings
|
983,891
|
|
|
979,446
|
|
|
Total stockholders’ equity
|
1,385,533
|
|
|
1,381,088
|
|
|
Total liabilities and stockholders’ equity
|
2,550,190
|
|
|
2,540,994
|
|
(1)
|
|
|
|
|
|
Consolidated Statement of Stockholders' Equity
|
|
|
|
|
Retained earnings beginning of year
|
$
|
845,157
|
|
|
$
|
840,712
|
|
|
Retained earnings end of year
|
983,891
|
|
|
979,446
|
|
|
|
|
|
|
|
|
As of and for the fiscal year ended August 2, 2014
|
|
|
As Reported
|
|
As Revised
|
|
Consolidated Statement of Stockholders' Equity
|
|
|
|
|
Retained Earnings beginning of year
|
$
|
719,675
|
|
|
$
|
715,230
|
|
|
Retained earnings end of year
|
845,157
|
|
|
840,712
|
|
|
(1) Amounts are also reflective of a reclassification of debt issuance costs of
$1.8 million
as the Company early adopted ASU No. 2015-03 during the fourth quarter of fiscal 2016. Refer to Note 1
"Significant Accounting Policies"
for further detail.
|
|
16.
|
QUARTERLY FINANCIAL DATA (UNAUDITED)
|
The following table sets forth certain key interim financial information for the fiscal years ended
July 30, 2016
and
August 1, 2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Full Year
|
|
|
(In thousands except per share data)
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
2,076,649
|
|
|
$
|
2,047,712
|
|
|
$
|
2,132,104
|
|
|
$
|
2,213,821
|
|
|
$
|
8,470,286
|
|
|
Gross profit
|
313,937
|
|
|
297,518
|
|
|
322,433
|
|
|
345,463
|
|
|
1,279,351
|
|
|
Income before income taxes
|
50,135
|
|
|
37,742
|
|
|
62,676
|
|
|
57,669
|
|
|
208,222
|
|
|
Net income
|
30,131
|
|
|
22,683
|
|
|
38,271
|
|
|
34,681
|
|
|
125,766
|
|
|
Per common share income
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
$
|
0.60
|
|
|
$
|
0.45
|
|
|
$
|
0.76
|
|
|
$
|
0.69
|
|
|
$
|
2.50
|
|
|
Diluted:
|
$
|
0.60
|
|
|
$
|
0.45
|
|
|
$
|
0.76
|
|
|
$
|
0.69
|
|
|
$
|
2.50
|
|
|
Weighted average basic
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding
|
50,194
|
|
|
50,326
|
|
|
50,350
|
|
|
50,381
|
|
|
50,313
|
|
|
Weighted average diluted
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding
|
50,313
|
|
|
50,388
|
|
|
50,379
|
|
|
50,516
|
|
|
50,399
|
|
|
Market Price
|
|
|
|
|
|
|
|
|
|
|
High
|
$
|
55.69
|
|
|
$
|
52.07
|
|
|
$
|
43.02
|
|
|
$
|
52.18
|
|
|
$
|
55.69
|
|
|
Low
|
$
|
44.05
|
|
|
$
|
33.85
|
|
|
$
|
29.75
|
|
|
$
|
33.16
|
|
|
$
|
29.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Full Year
|
|
|
(In thousands except per share data)
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
1,992,476
|
|
|
$
|
2,016,546
|
|
|
$
|
2,114,643
|
|
|
$
|
2,061,313
|
|
|
$
|
8,184,978
|
|
|
Gross profit
|
318,996
|
|
|
299,199
|
|
|
325,914
|
|
|
316,406
|
|
|
1,260,515
|
|
|
Income before income taxes
|
54,615
|
|
|
46,023
|
|
|
69,571
|
|
|
59,560
|
|
|
229,769
|
|
|
Net income
|
33,042
|
|
|
27,844
|
|
|
41,750
|
|
|
36,098
|
|
|
138,734
|
|
|
Per common share income
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
$
|
0.66
|
|
|
$
|
0.56
|
|
|
$
|
0.83
|
|
|
$
|
0.72
|
|
|
$
|
2.77
|
|
|
Diluted:
|
$
|
0.66
|
|
|
$
|
0.55
|
|
|
$
|
0.83
|
|
|
$
|
0.72
|
|
|
$
|
2.76
|
|
|
Weighted average basic
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding
|
49,889
|
|
|
50,025
|
|
|
50,079
|
|
|
50,091
|
|
|
50,021
|
|
|
Weighted average diluted
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding
|
50,113
|
|
|
50,277
|
|
|
50,348
|
|
|
50,330
|
|
|
50,267
|
|
|
Market Price
|
|
|
|
|
|
|
|
|
|
|
High
|
$
|
69.51
|
|
|
$
|
80.77
|
|
|
$
|
83.91
|
|
|
$
|
69.26
|
|
|
$
|
83.91
|
|
|
Low
|
$
|
58.48
|
|
|
$
|
67.71
|
|
|
$
|
66.34
|
|
|
$
|
45.26
|
|
|
$
|
45.26
|
|
|
17. SUBSEQUENT EVENTS
Acquisition of Gourmet Guru
Subsequent to the fiscal year ended July 30, 2016, the Company acquired all of the outstanding stock of Gourmet Guru. Founded in 1996, Gourmet Guru is a distributor and merchandiser of fresh and organic food focusing on new and emerging brands.