Reaffirms Full-Year Guidance

United Natural Foods, Inc. (NYSE: UNFI) (the “Company” or “UNFI”) today reported financial results for the first quarter of fiscal 2023 (13 weeks) ended October 29, 2022.

First Quarter Fiscal 2023 Highlights (comparisons to first quarter fiscal 2022)

  • Net sales increased 7.6% to $7.5 billion, primarily driven by inflation and new business
  • Gross profit increased $54 million, or 5.2%, to nearly $1.1 billion; prior to LIFO, gross profit increased 6.1%
  • Net income decreased 13.2% to $66 million; Earnings per diluted share (EPS) decreased 14.4% to $1.07
  • Adjusted EBITDA increased 3.5% to $207 million
  • Adjusted EPS increased 2.7% to $1.13
  • Entered into commercial agreement to implement an industry-leading warehouse automation system
  • Subsequent to quarter end, reduced net debt by $253 million with initial proceeds from A/R monetization

“Our performance this quarter reflects continued execution of our strategy in a dynamic operating environment as we improved fill rates and operating performance and saw more customers buying more categories from us than ever before,” said Sandy Douglas, UNFI’s Chief Executive Officer. “We are leveraging our scale, diversification, and capabilities to enhance connectivity between customers and suppliers, finding unique ways to create more value for both. We continued to invest in people and technology as part of our commitment to becoming a more effective, more efficient, and more disciplined business, well-positioned to capture a growing share of our $140 billion core addressable market and create even more value for shareholders.”

Mr. Douglas concluded, “Looking ahead, our customer pipeline is robust, with new customer acquisition and expansion from existing customers expected in the second half of the year. We have enduring confidence in the opportunities before us and in our ability to capture them. We remain energized and focused on meeting the needs of our customers during the important holiday selling season, while delivering our fiscal 2023 guidance.”

 

13-Week Period Ended

 

 

($ in millions, except for per share data)

October 29, 2022

 

October 30, 2021

 

Percent Change

Net sales

$

7,532

 

 

$

6,997

 

 

7.6

%

Chains

$

3,224

 

 

$

3,082

 

 

4.6

%

Independent retailers

$

1,947

 

 

$

1,750

 

 

11.3

%

Supernatural

$

1,513

 

 

$

1,378

 

 

9.8

%

Retail

$

613

 

 

$

602

 

 

1.8

%

Other

$

635

 

 

$

580

 

 

9.5

%

Eliminations

$

(400

)

 

$

(395

)

 

1.3

%

Net income

$

66

 

 

$

76

 

 

(13.2

) %

Adjusted EBITDA(1)

$

207

 

 

$

200

 

 

3.5

%

EPS(2)

$

1.07

 

 

$

1.25

 

 

(14.4

) %

Adjusted EPS(1)(2)

$

1.13

 

 

$

1.10

 

 

2.7

%

(1)

During fiscal 2022, the Company revised its definition of Adjusted EBITDA and Adjusted EPS to exclude the impact of the non-cash LIFO charge or benefit. The Company believes that this change provides a better indicator of its underlying operating performance and permits better comparability between periods. Prior-year periods have been recast to reflect the new definition. Please refer to the tables in this press release for a reconciliation of these non-GAAP financial measures to the most directly comparable financial measure calculated in accordance with U.S. GAAP and for a reconciliation of previously reported Adjusted EBITDA and Adjusted EPS to their revised presentation under the new definitions.

(2)

The decrease in EPS compared to the increase in Adjusted EPS in the first quarter of fiscal 2023 was primarily driven by a higher LIFO charge compared to the first quarter of fiscal 2022 which is excluded from adjusted EPS.

First Quarter Fiscal 2023 Summary

Net sales increased 7.6% in the first quarter of fiscal 2023 compared to the same period last year, primarily driven by inflation and new business. This new business resulted from selling new or expanded categories to existing customers and adding new customers from our robust pipeline. These increases were partially offset by an expected decrease in unit volume consistent with the overall industry.

Gross profit in the first quarter of fiscal 2023 increased $54 million, or 5.2%, compared to the first quarter of fiscal 2022. Excluding the non-cash LIFO charge in both periods, gross profit increased $64 million, or 6.1%. The gross profit rate in the first quarter of fiscal 2023 was 14.6% of net sales and included a $21 million LIFO charge. Excluding this non-cash charge, gross profit rate was 14.8% of net sales. Gross profit rate in the first quarter of fiscal 2022 was 14.9% of net sales and included an $11 million LIFO charge. Excluding this non-cash charge, gross profit rate in the first quarter of fiscal 2022 was 15.0% of net sales. The decrease in gross profit rate, excluding the LIFO charge, was driven by changes in customer mix as we continued to grow sales with larger customers.

Operating expenses in the first quarter of fiscal 2023 were $1,000 million, or 13.3% of net sales, compared to $932 million, or 13.3% of net sales, in the first quarter of fiscal 2022. Operating expenses in the quarter were primarily driven by continued investments in servicing our customers, which led to higher transportation and distribution center labor costs in the first quarter of fiscal 2023, and higher occupancy costs. These were partially offset by leveraging fixed expenses across higher sales. Operating expenses as a percent of net sales improved sequentially from the fourth quarter of fiscal 2022 to the first quarter of fiscal 2023.

Interest expense, net for the first quarter of fiscal 2023 was $35 million compared to $40 million for the first quarter of fiscal 2022. The decrease in interest expense, net was primarily driven by lower outstanding debt balances.

Effective tax rate for the first quarter of fiscal 2023 was 6.9% compared to a benefit of 1.3% on pre-tax income for the first quarter of fiscal 2022. The change was driven mainly by the reduction of tax benefits related to the vesting of employee stock awards during the first quarter of fiscal 2023.

Net income for the first quarter of fiscal 2023 was $66 million. Net income for the first quarter of fiscal 2022 was $76 million.

Net income per diluted share (EPS) was $1.07 for the first quarter of fiscal 2023 compared to net income per diluted share of $1.25 for the first quarter of fiscal 2022. Adjusted EPS was $1.13 for the first quarter of fiscal 2023 compared to $1.10 in the first quarter of fiscal 2022.

Adjusted EBITDA for the first quarter of fiscal 2023 was $207 million compared to $200 million for the first quarter of fiscal 2022.

Capital Allocation and Financing Overview

  • Free Cash Flow – During the first quarter of 2023, free cash flow was $(329) million, compared to $(137) million in the first quarter of fiscal 2022. The results for the first quarter of fiscal 2023 reflect net cash used in operating activities of $262 million, driven by expected seasonally higher levels of working capital and the impact of inflation, and payments for capital expenditures of $67 million.
  • Leverage – The net debt to adjusted EBITDA leverage ratio was 3.0x as of October 29, 2022. Total outstanding debt, net of cash, increased by $378 million during the first quarter of fiscal 2023 to $2.49 billion primarily driven by investments in working capital.
  • Liquidity – As of October 29, 2022, total liquidity was approximately $1.3 billion, consisting of approximately $39 million in cash, plus the ability to borrow an aggregate of approximately $1.25 billion under the Company’s asset-based lending facility.
  • Repurchase program – During the first quarter of fiscal 2023, the Company repurchased approximately 339,000 shares at an average price of $35.85 for an aggregate cost of approximately $12 million, including fees and commissions.
  • Accounts Receivable monetization - Early in the second quarter of fiscal 2023, the Company entered into a monetization program with an initial sale of qualified accounts receivable of approximately $253 million. Proceeds have been used to pay down debt.

Fiscal 2023 Outlook (1)

The Company is reaffirming its full-year outlook for fiscal 2023.

Fiscal Year Ending July 29, 2023

 

 

 

 

% Growth Over FY22 at Midpoint

Net sales ($ in billions)

 

 

$29.8 - $30.4

 

4%

Net income ($ in millions)

 

 

$247 - $266

 

3%

EPS

 

 

$3.95 - $4.25

 

1%

Adjusted EPS(2)(3)(4)

 

 

$4.85 - $5.15

 

4%

Adjusted EBITDA(3)($ in millions)

 

 

$850 - $880

 

4%

Capital expenditures ($ in millions)

 

 

~ $350

 

39%

(1)

The outlook provided above is for fiscal 2023 only and replaces and supersedes any and all guidance provided prior to the date hereof covering fiscal 2023. This outlook is forward-looking, is based on management's current estimates and expectations and is subject to a number of risks, including many that are outside of management's control. See cautionary Safe Harbor Statement below.

(2)

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

(3)

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

(4)

Lower non-cash pension income and higher depreciation and amortization expense from elevated investments are expected to reduce adjusted EPS growth by approximately 4% on a combined basis.

Conference Call and Webcast

The Company’s first quarter fiscal 2023 conference call and audio webcast will be held today, Wednesday, December 7, 2022 at 8:30 a.m. ET. A webcast of the conference call (and supplemental materials) will be available to the public, on a listen only basis, via the internet at the Investors section of the Company’s website www.unfi.com. The call can also be accessed at (888) 660 - 6768 (conference ID 1099581). An online archive of the webcast (and supplemental materials) will be available for 120 days.

About United Natural Foods

UNFI is North America's premier grocery wholesaler delivering the widest variety of fresh, branded, and owned brand products to more than 30,000 locations throughout North America, including natural product superstores, independent retailers, conventional supermarket chains, ecommerce providers, and foodservice customers. UNFI also provides a broad range of value-added services and segmented marketing expertise, including proprietary technology, data, market insights, and shelf management to help customers and suppliers build their businesses and brands. As the largest full-service grocery partner in North America, UNFI is committed to building a food system that is better for all and is uniquely positioned to deliver great food, more choices, and fresh thinking to customers. To learn more about how UNFI is Fueling the Future of Food, visit www.unfi.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding the Company’s business that are not historical facts are “forward-looking statements” that involve risks and uncertainties and are based on current expectations and management estimates; actual results may differ materially. The risks and uncertainties which could impact these statements are described in the Company’s filings under the Securities Exchange Act of 1934, as amended, including its annual report on Form 10-K for the year ended July 30, 2022 filed with the Securities and Exchange Commission (the “SEC”) on September 27, 2022 and other filings the Company makes with the SEC, and include, but are not limited to, our dependence on principal customers; the relatively low margins of our business, which are sensitive to inflationary and deflationary pressures; the impact and duration of any pandemics or disease outbreaks; our ability to operate, and rely on third parties to operate, reliable and secure technology systems; labor and other workforce shortages and challenges; our ability to realize anticipated benefits of our strategic initiatives, including any acquisitions; the addition or loss of significant customers or material changes to our relationships with these customers; our sensitivity to general economic conditions including inflation, changes in disposable income levels and consumer spending trends; our ability to continue to grow sales, including of our higher margin natural and organic foods and non-food products, and to manage that growth; increased competition in our industry, including as a result of continuing consolidation of retailers and the growth of chains, direct distribution by large retailers and the growth of online distributors; our ability to timely and successfully deploy our warehouse management system throughout our distribution centers and our transportation management system across the Company and to achieve efficiencies and cost savings from these efforts; the potential for disruptions in our supply chain or our distribution capabilities from circumstances beyond our control, including due to lack of long-term contracts, severe weather, labor shortage or work stoppages or otherwise; moderated supplier promotional activity, including decreased forward buying opportunities; union-organizing activities that could cause labor relations difficulties and increased costs; the potential for additional asset impairment charges; our ability to maintain food quality and safety; volatility in fuel costs; volatility in foreign exchange rates; and our ability to identify and successfully complete asset or business acquisitions. Any forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. The Company is not undertaking to update any information in the foregoing reports until the effective date of its future reports required by applicable laws. Any estimates of future results of operations are based on a number of assumptions, many of which are outside the Company’s control and should not be construed in any manner as a guarantee that such results will in fact occur. These estimates are subject to change and could differ materially from final reported results. The Company may from time to time update these publicly announced estimates, but it is not obligated to do so.

Non-GAAP Financial Measures: To supplement the financial information presented on a U.S. generally accepted accounting principles (“GAAP”) basis, the Company has included in this press release the non-GAAP financial measures Adjusted EBITDA, adjusted earnings per diluted common share (“Adjusted EPS”), adjusted effective tax rate, free cash flow and net debt to Adjusted EBITDA leverage ratio. Adjusted EPS is a consolidated measure, which the Company reconciles by adding Net income attributable to UNFI plus the LIFO charge or benefit, Goodwill impairment benefits and charges, Restructuring, acquisition, and integration related expenses, gains and losses on sales of assets, certain legal charges and gains, surplus property depreciation and interest expense, losses on debt extinguishment, the impact of diluted shares when GAAP earnings is presented as a loss and non-GAAP earnings represent income, and the tax impact of adjustments and the adjusted effective tax rate, which tax impact is calculated using the adjusted effective tax rate, and certain other non-cash charges or items, as determined by management. The non-GAAP adjusted effective tax rate excludes the potential impact of changes to various uncertain tax positions and valuation allowances, as well as stock compensation accounting (ASU 2016-09). The non-GAAP Adjusted EBITDA measure is a consolidated measure which the Company reconciles by adding Net income (loss) including noncontrolling interests, less Net income attributable to noncontrolling interests, plus non-operating income and expenses, including Net periodic benefit income, excluding service cost, Interest expense, net and Other (income) expense, net, plus Provision (benefit) for income taxes and Depreciation and amortization all calculated in accordance with GAAP, plus adjustments for Share-based compensation, non-cash LIFO charge or benefit, Restructuring, acquisition and integration related expenses, Goodwill impairment charges, (Gain) loss on sale of assets, certain legal charges and gains, and certain other non-cash charges or other items, as determined by management. The changes to the definition of Adjusted EBITDA from prior periods reflect changes to line item references in our Condensed Consolidated Financial Statements, which do not impact the calculation of Adjusted EBITDA. The non-GAAP free cash flow measure is defined as net cash provided by operating activities less payments for capital expenditures. The non-GAAP net debt to Adjusted EBITDA leverage ratio is defined as the total carrying value of the Company’s outstanding short- and long-term debt and finance lease liabilities less net cash and cash equivalents, the sum of which is divided by Adjusted EBITDA.

The reconciliation of these non-GAAP financial measures to their comparable GAAP financial measures and the calculation of net debt to Adjusted EBITDA leverage are presented in the tables appearing below. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for any measure prepared in accordance with GAAP. The Company believes that presenting the non-GAAP financial measures Adjusted EBITDA and Adjusted EPS aids in making period-to-period comparisons, assessing the performance of our business and understanding the underlying operating performance and core business trends by excluding certain adjustments not expected to recur in the normal course of business or that are not meaningful indicators of actual and estimated operating performance. The inclusion of free cash flow assists investors in understanding the cash generating ability of the Company separate from cash generated by the sale of assets. Net debt to Adjusted EBITDA leverage ratio is a commonly used metric that assists investors in understanding and evaluating the Company’s capital structure and changes to its capital structure over time. The Company currently expects to continue to exclude the items listed above from non-GAAP financial measures. Management utilizes and plans to utilize these non-GAAP financial measures to compare the Company’s operating performance during the 2023 fiscal year to the comparable periods in the 2022 fiscal year and to internally prepared projections. These non-GAAP financial measures may differ from similarly titled measures of other companies.

UNITED NATURAL FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in millions, except for per share data)

 

 

 

13-Week Period Ended

 

 

October 29, 2022

 

October 30, 2021

Net sales

 

$

7,532

 

 

$

6,997

 

Cost of sales

 

 

6,436

 

 

 

5,955

 

Gross profit

 

 

1,096

 

 

 

1,042

 

Operating expenses

 

 

1,000

 

 

 

932

 

Restructuring, acquisition and integration related expenses

 

 

2

 

 

 

3

 

Gain on sale of assets

 

 

(5

)

 

 

 

Operating income

 

 

99

 

 

 

107

 

Net periodic benefit income, excluding service cost

 

 

(7

)

 

 

(10

)

Interest expense, net

 

 

35

 

 

 

40

 

Other (income) expense, net

 

 

(1

)

 

 

1

 

Income before income taxes

 

 

72

 

 

 

76

 

Provision (benefit) for income taxes

 

 

5

 

 

 

(1

)

Net income including noncontrolling interests

 

 

67

 

 

 

77

 

Less net income attributable to noncontrolling interests

 

 

(1

)

 

 

(1

)

Net income attributable to United Natural Foods, Inc.

 

$

66

 

 

$

76

 

 

 

 

 

 

Basic earnings per share

 

$

1.12

 

 

$

1.34

 

Diluted earnings per share

 

$

1.07

 

 

$

1.25

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

Basic

 

 

58.8

 

 

 

57.0

 

Diluted

 

 

61.6

 

 

 

61.1

 

UNITED NATURAL FOODS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in millions, except for par values)

 

 

 

October 29, 2022

 

July 30, 2022

ASSETS

 

 

 

 

Cash and cash equivalents

 

$

39

 

 

$

44

 

Accounts receivable, net

 

 

1,351

 

 

 

1,214

 

Inventories, net

 

 

2,756

 

 

 

2,355

 

Prepaid expenses and other current assets

 

 

214

 

 

 

184

 

Total current assets

 

 

4,360

 

 

 

3,797

 

Property and equipment, net

 

 

1,684

 

 

 

1,690

 

Operating lease assets

 

 

1,187

 

 

 

1,176

 

Goodwill

 

 

20

 

 

 

20

 

Intangible assets, net

 

 

801

 

 

 

819

 

Other long-term assets

 

 

147

 

 

 

126

 

Total assets

 

$

8,199

 

 

$

7,628

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Accounts payable

 

$

1,924

 

 

$

1,742

 

Accrued expenses and other current liabilities

 

 

258

 

 

 

260

 

Accrued compensation and benefits

 

 

199

 

 

 

232

 

Current portion of operating lease liabilities

 

 

157

 

 

 

156

 

Current portion of long-term debt and finance lease liabilities

 

 

27

 

 

 

27

 

Total current liabilities

 

 

2,565

 

 

 

2,417

 

Long-term debt

 

 

2,485

 

 

 

2,109

 

Long-term operating lease liabilities

 

 

1,078

 

 

 

1,067

 

Long-term finance lease liabilities

 

 

20

 

 

 

23

 

Pension and other postretirement benefit obligations

 

 

18

 

 

 

18

 

Deferred income taxes

 

 

17

 

 

 

8

 

Other long-term liabilities

 

 

181

 

 

 

194

 

Total liabilities

 

 

6,364

 

 

 

5,836

 

Stockholders’ equity:

 

 

 

 

Preferred stock, $0.01 par value, authorized 5.0 shares; none issued or outstanding

 

 

 

 

 

 

Common stock, $0.01 par value, authorized 100.0 shares; 60.9 shares issued and 59.9 shares outstanding at October 29, 2022; 58.9 shares issued and 58.3 shares outstanding at July 30, 2022

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

583

 

 

 

608

 

Treasury stock at cost

 

 

(36

)

 

 

(24

)

Accumulated other comprehensive loss

 

 

(5

)

 

 

(20

)

Retained earnings

 

 

1,292

 

 

 

1,226

 

Total United Natural Foods, Inc. stockholders’ equity

 

 

1,835

 

 

 

1,791

 

Noncontrolling interests

 

 

 

 

 

1

 

Total stockholders’ equity

 

 

1,835

 

 

 

1,792

 

Total liabilities and stockholders’ equity

 

$

8,199

 

 

$

7,628

 

UNITED NATURAL FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

 

 

 

13-Week Period Ended

(in millions)

 

October 29, 2022

 

October 30, 2021

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

Net income including noncontrolling interests

 

$

67

 

 

$

77

 

Adjustments to reconcile net income to net cash used in operating activities:

 

 

 

 

Depreciation and amortization

 

 

74

 

 

 

69

 

Share-based compensation

 

 

12

 

 

 

11

 

Gain on sale of assets

 

 

(5

)

 

 

 

Closed property and other restructuring charges

 

 

 

 

 

1

 

Net pension and other postretirement benefit income

 

 

(7

)

 

 

(10

)

Deferred income tax expense

 

 

2

 

 

 

 

LIFO charge

 

 

21

 

 

 

11

 

Provision for losses on receivables

 

 

 

 

 

1

 

Non-cash interest expense and other adjustments

 

 

3

 

 

 

5

 

Changes in operating assets and liabilities

 

 

(429

)

 

 

(246

)

Net cash used in operating activities

 

 

(262

)

 

 

(81

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

Payments for capital expenditures

 

 

(67

)

 

 

(56

)

Proceeds from dispositions of assets

 

 

7

 

 

 

1

 

Payments for investments

 

 

(1

)

 

 

(26

)

Net cash used in investing activities

 

 

(61

)

 

 

(81

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

Proceeds from borrowings under revolving credit line

 

 

1,206

 

 

 

1,238

 

Repayments of borrowings under revolving credit line

 

 

(829

)

 

 

(1,028

)

Repayments of long-term debt and finance leases

 

 

(6

)

 

 

(13

)

Repurchases of common stock

 

 

(12

)

 

 

 

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

 

 

 

 

 

5

 

Payments of employee restricted stock tax withholdings

 

 

(37

)

 

 

(33

)

Distributions to noncontrolling interests

 

 

(2

)

 

 

(2

)

Repayments of other loans

 

 

(1

)

 

 

 

Net cash provided by financing activities

 

 

319

 

 

 

167

 

EFFECT OF EXCHANGE RATE ON CASH

 

 

(1

)

 

 

 

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

 

 

(5

)

 

 

5

 

Cash and cash equivalents, at beginning of period

 

 

44

 

 

 

41

 

Cash and cash equivalents, at end of period

 

$

39

 

 

$

46

 

Supplemental disclosures of cash flow information:

 

 

 

 

Cash paid for interest

 

$

40

 

 

$

46

 

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

 

$

(1

)

 

$

(1

)

Leased assets obtained in exchange for new operating lease liabilities

 

$

57

 

 

$

71

 

Additions of property and equipment included in Accounts payable

 

$

26

 

 

$

17

 

SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION (unaudited)

UNITED NATURAL FOODS, INC.

 

Reconciliation of Net income including noncontrolling interests to Adjusted EBITDA (unaudited)

 

 

 

13-Week Period Ended

(in millions)

 

October 29, 2022

 

October 30, 2021

Net income including noncontrolling interests

 

$

67

 

 

$

77

 

Adjustments to net income including noncontrolling interests:

 

 

 

 

Less net income attributable to noncontrolling interests

 

 

(1

)

 

 

(1

)

Net periodic benefit income, excluding service cost

 

 

(7

)

 

 

(10

)

Interest expense, net

 

 

35

 

 

 

40

 

Other (income) expense, net

 

 

(1

)

 

 

1

 

Provision (benefit) for income taxes

 

 

5

 

 

 

(1

)

Depreciation and amortization

 

 

74

 

 

 

69

 

Share-based compensation

 

 

12

 

 

 

11

 

LIFO charge(1)

 

 

21

 

 

 

11

 

Restructuring, acquisition and integration related expenses

 

 

2

 

 

 

3

 

Gain on sale of assets

 

 

(5

)

 

 

 

Other(2)

 

 

5

 

 

 

 

Adjusted EBITDA

 

$

207

 

 

$

200

 

(1)

During fiscal 2022, the Company revised its definition of Adjusted EBITDA to exclude the impact of the non-cash LIFO charge or benefit. The following illustrates the impact of the revised definition on previously reported periods to show the effect of this change

 

13-Week Period Ended

(in millions)

October 30, 2021

Adjusted EBITDA (previously reported definition)

$

189

LIFO charge

 

11

Adjusted EBITDA (current definition)

$

200

(2)

Includes costs for certain technology-related initiatives.

Reconciliation of Net income attributable to United Natural Foods, Inc. to Adjusted net income and Adjusted EPS (unaudited)

 

 

13-Week Period Ended

(in millions, except per share amounts)

October 29, 2022

 

October 30, 2021

Net income attributable to United Natural Foods, Inc.

$

66

 

 

$

76

 

Restructuring, acquisition and integration related expenses

 

2

 

 

 

3

 

Gain on sale of assets

 

(5

)

 

 

 

LIFO charge

 

21

 

 

 

11

 

Surplus property depreciation and interest expense(1)

 

1

 

 

 

1

 

Other(2)

 

5

 

 

 

 

Tax impact of adjustments and adjusted effective tax rate(3)

 

(20

)

 

 

(24

)

Adjusted net income

$

70

 

 

$

67

 

 

 

 

 

Diluted weighted average shares outstanding

 

61.6

 

 

 

61.1

 

Adjusted EPS(4)(5)

$

1.13

 

 

$

1.10

 

(1)

Reflects surplus, non-operating property depreciation and interest expense.

(2)

Includes costs for certain technology-related initiatives.

(3)

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

(4)

Earnings per share amounts are calculated using actual unrounded figures.

(5)

During the third quarter of fiscal 2022, the Company revised its definition of Adjusted EPS to exclude the impact of the non-cash LIFO charge. The following illustrates the impact of the revised definition on previously reported periods to show the effect of this change:

13-Week Period Ended

 

October 30, 2021

Adjusted EPS (previously reported definition)

$

0.97

 

LIFO charge

 

0.18

 

Tax impact of adjustment

 

(0.05

)

Adjusted EPS (current definition)

$

1.10

 

Calculation of net debt to Adjusted EBITDA leverage ratio (unaudited)

 

(in millions, except ratios)

October 29, 2022

Current portion of long-term debt and finance lease liabilities

$

27

 

Long-term debt

 

2,485

 

Long-term finance lease liabilities

 

20

 

Less: Cash and cash equivalents

 

(39

)

Net carrying value of debt and finance lease liabilities

 

2,493

 

Adjusted EBITDA(1)

$

836

 

Adjusted EBITDA leverage ratio(2)

3.0x

 

(1)

Adjusted EBITDA for purposes of this calculation reflects the summation of the trailing four quarters ended October 29, 2022. Refer to the following table for the reconciliation of Adjusted EBITDA trailing four quarters, which is calculated under the revised definition discussed above.

(2)

During fiscal 2022, the Company revised its definition of Adjusted EBITDA, to exclude the impact of removing the non-cash LIFO charge.

Reconciliation of trailing four quarters Net income including noncontrolling interests to Adjusted EBITDA (unaudited)

 

(in millions)

 

52-Week Period Ended October 29, 2022

Net income including noncontrolling interests

 

$

244

 

Adjustments to net income including noncontrolling interests:

 

 

Less net income attributable to noncontrolling interests

 

 

(6

)

Net periodic benefit income, excluding service cost

 

 

(37

)

Interest expense, net

 

 

150

 

Other (income) expense, net

 

 

(4

)

Provision for income taxes

 

 

62

 

Depreciation and amortization

 

 

290

 

Share-based compensation

 

 

44

 

LIFO charge

 

 

168

 

Restructuring, acquisition and integration related expenses

 

 

20

 

Gain on sale of assets

 

 

(92

)

Multiemployer pension plan withdrawal charges

 

 

(8

)

Other

 

 

5

 

Adjusted EBITDA(1)

 

$

836

 

(1)

Adjusted EBITDA for purposes of this calculation reflects the summation of the trailing four quarters ended October 29, 2022.

Reconciliation of Net cash used in operating activities to Free cash flow (unaudited)

 

 

 

 

 

13-Week Period Ended

(in millions)

October 29, 2022

 

October 30, 2021

Net cash used in operating activities

$

(262

)

 

$

(81

)

Payments for capital expenditures

 

(67

)

 

 

(56

)

Free cash flow

$

(329

)

 

$

(137

)

FISCAL 2023 GUIDANCE

 

Reconciliation of 2023 guidance for estimated EPS to estimated Adjusted EPS (unaudited)

 

 

 

Fiscal Year Ending July 29, 2023

 

 

Low Range

 

Estimate

 

High Range

EPS

 

$

3.95

 

 

 

$

4.25

LIFO charge

 

 

 

1.20

 

 

 

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

 

 

 

(0.30

)

 

 

Adjusted EPS

 

$

4.85

 

 

 

$

5.15

(1)

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

Reconciliation of 2023 guidance for Net income attributable to United Natural Foods, Inc. to Adjusted EBITDA (unaudited)

 

 

 

Fiscal Year Ending July 29, 2023

(in millions)

 

Low Range

 

Estimate

 

High Range

Net income attributable to United Natural Foods, Inc.

 

$

247

 

 

 

$

266

Provision for income taxes

 

 

86

 

 

 

 

97

LIFO charge

 

 

 

75

 

 

 

Interest expense, net

 

 

 

138

 

 

 

Depreciation and amortization

 

 

 

287

 

 

 

Share-based compensation and other

 

 

 

46

 

 

 

Net periodic benefit income, excluding service costs

 

 

 

(29

)

 

 

Adjusted EBITDA

 

$

850

 

 

 

$

880

Reconciliation of estimated 2023 and actual 2022 U.S. GAAP effective tax rate to adjusted effective tax rate (unaudited)

 

 

 

Estimated

Fiscal 2023

 

Actual Fiscal 2022

U.S. GAAP effective tax rate

 

23

%

 

18

%

Discrete quarterly recognition of GAAP items(1)

 

3

%

 

8

%

Tax impact of other charges and adjustments(2)

 

%

 

%

Changes in valuation allowances(3)

 

%

 

%

Other(4)

 

%

 

%

Adjusted effective tax rate(4)

 

26

%

 

26

%

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

 

(1)

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

(2)

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

(3)

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

(4)

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

 

INVESTOR CONTACTS: Steve Bloomquist Vice President, Investor Relations 952-828-4144 sbloomquist@unfi.com Kristyn Farahmand Senior Vice President, Investor Relations and Transformation Finance 401-213-2160 kristyn.farahmand@unfi.com

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