United Natural Foods, Inc. (NYSE: UNFI) (the “Company” or
“UNFI”) today reported financial results for the third quarter of
fiscal 2021 (13 weeks) ended May 1, 2021.
Third Quarter Fiscal 2021 Highlights
(comparisons to third quarter fiscal 2020)
- Net sales of $6.62 billion, a decrease of 5.9% (+6.7% on a
two-year stack basis)
- Net income of $49 million, a decrease of approximately $40
million
- Adjusted EBITDA of $179 million, a decrease of
19.2%
- Earnings per diluted share (EPS) of $0.80, a decrease of
50.0%
- Adjusted EPS of $0.94, a decrease of 29.3%
- Net debt reduction of $62 million bringing fiscal
year-to-date total to $175 million
- Full-year outlook for fiscal 2021 reflects record year for
net sales and adjusted EBITDA
“Our results reflect our unrelenting focus on efficiency and the
profitability of our business, as we cycled the highest spikes of
sales revenue from pantry loading in the prior-year quarter,” said
Steven L. Spinner, Chairman and Chief Executive Officer. “We
continue to focus on helping our customers operate their businesses
and meet the needs of their shoppers through our differentiated
business model. As the industry and economic backdrop continue to
evolve, UNFI remains well positioned for future growth.” Spinner
concluded by saying, “Fiscal 2020 was a record year for UNFI and
fiscal 2021 is on-track to set another record. Looking ahead, we
fully expect fiscal 2022 to be even better than this year.”
13-Week Period Ended
($ in millions, except per share
data)(1)
May 1, 2021
May 2, 2020
Percent Change
Two-Year
Stack (4)
Net Sales
$
6,620
$
7,032
(5.9)
%
6.7
%
Chains(2)
$
2,949
$
3,125
(5.6)
%
5.4
%
Independent retailers
$
1,599
$
1,805
(11.4)
%
3.8
%
Supernatural
$
1,287
$
1,279
0.6
%
16.6
%
Retail
$
578
$
637
(9.3)
%
14.9
%
Other(2)
$
580
$
599
(3.2)
%
(0.6)
%
Eliminations(2)
$
(373)
$
(414)
(9.9)
%
13.7
%
Net Income
$
49
$
88
(44.9)
%
Adjusted EBITDA(3)
$
179
$
222
(19.2)
%
EPS
$
0.80
$
1.60
(50.0)
%
Adjusted EPS(3)
$
0.94
$
1.33
(29.3)
%
(1)
As a result of displaying amounts in
millions, totals may not sum due to rounding.
(2)
In the first quarter of fiscal 2021, the
presentation of net sales by customer channel was recast to present
the Chains and Other channel exclusive of the intercompany
eliminations and present total eliminations separately. There was
no impact to the Condensed Consolidated Statements of Operations.
The Company believes this modified basis better reflects its
channel presentation, as it further aligns with segment
presentation and how sales channel information would appear
following the potential disposition of Retail, assuming all banners
retain a supply agreement. In addition, during the fourth quarter
of fiscal 2020, the presentation of net sales by customer channel
was recast to be presented on a basis consistent with customer
size. International customers other than Canada, and alternative
format sales continue to be classified within Other. The main
effect of the change was to re-categorize the former Supermarkets
and Independents channels, previously classified by the majority of
product carried by those customers between conventional and natural
products, respectively, to classify those stores by the number of
customer locations we supply. There was no impact to the Condensed
Consolidated Statements of Operations as a result of the
reclassification of customer types. The Company believes this
modified basis better reflects the nature and economic risks of
cash flows from customers.
(3)
Please refer to the tables in this press
release for a reconciliation of these non-GAAP financial measures
to the most directly comparable financial measure calculated in
accordance with U.S. GAAP.
(4)
The two-year stack is calculated by adding
the percent change in sales in the current year period to the
percent change in sales in the prior-year period. The Company
believes this information is helpful to understanding trends in
periods impacted by variations in prior-year growth rates.
Third Quarter Fiscal 2021
Summary
Net sales from continuing operations were lower than
those in the third quarter of fiscal 2020 which benefited from
strong customer demand driven by the initial responses to
COVID-19.
Gross margin rate in the third quarter of fiscal 2021 was
14.60% of net sales compared to 14.94% of net sales for the third
quarter of fiscal 2020. The decline was driven by lower levels of
supplier-related income in the Wholesale segment. Retail gross
margin rate was approximately flat to last year.
Operating expenses in the third quarter of fiscal 2021
were $866.5 million, or 13.09% of net sales, compared to $911.0
million, or 12.96% of net sales, in the third quarter of fiscal
2020. The increase in operating expenses as a percent of net sales
resulted from the deleveraging effect of lower sales, partially
offset by lower pandemic-related costs.
Restructuring, acquisition and integration related
expenses in the third quarter of fiscal 2021 were $9.9 million,
primarily reflecting costs associated with advisory and
transformational activities as we position our business for further
value creation post SUPERVALU acquisition compared to $14.6 million
in the third quarter of fiscal 2020, which primarily reflected
closed property charges and costs.
Operating income in the third quarter of fiscal 2021 was
$90.5 million and included $9.9 million of restructuring,
acquisition and integration related expenses. When excluding this
item, operating income in the third quarter of fiscal 2021 was
$100.4 million, or 1.52% of net sales. Operating income in the
third quarter of fiscal 2020 was $124.3 million and included $14.6
million of restructuring, acquisition, and integration related
expenses. When excluding the restructuring, acquisition and
integration expenses, operating income in the third quarter of
fiscal 2020 was $138.9 million, or 1.97% of net sales. The decrease
in adjusted operating income, as a percent of net sales, was driven
by a lower gross margin rate and the deleveraging effect of lower
sales, partially offset by lower COVID-19 related costs and lower
incentive compensation expense.
Interest expense, net for the third quarter of fiscal
2021 was $43.5 million compared to $47.3 million for the third
quarter of fiscal 2020. The decrease in interest expense, net was
driven by lower amounts of outstanding debt balances.
Effective tax rate for continuing operations for the
third quarter of fiscal 2021 was 25.8% of pre-tax income compared
to a benefit of 3.1% for the third quarter of fiscal 2020 on
pre-tax income. The change in the effective tax rate for the third
quarter of fiscal 2021 was primarily driven by the impact of a tax
benefit from the revaluation of net operating loss deferred tax
assets in the third quarter of fiscal 2020 due to passage of the
CARES Act.
Net income for the third quarter of fiscal 2021 was $48.6
million, which included $9.9 million of pre-tax restructuring,
acquisition and integration related expenses. Net income for the
third quarter of fiscal 2020 was $88.1 million, which included
$14.6 million of pre-tax restructuring, acquisition and integration
related expenses and $6.8 million of pre-tax discontinued
operations restructuring, store closure and other charges.
Net income per diluted share was $0.80 for the third
quarter of fiscal 2021 compared to a net income per diluted share
of $1.60 for the third quarter of fiscal 2020. Adjusted earnings
per share (adjusted EPS) was $0.94 for the third quarter of fiscal
2021 compared to adjusted EPS of $1.33 in the third quarter of
fiscal 2020.
Adjusted EBITDA for the third quarter of fiscal 2021 was
$179.5 million compared to $222.2 million for the third quarter of
fiscal 2020. The decrease primarily reflects the items discussed in
operating income.
Total Outstanding Debt, net of cash, ended the quarter at
$2.43 billion, reflecting a decrease of $62 million in the third
quarter of fiscal 2021 (compared to the second quarter of fiscal
2021). This reduction was driven by $129 million in cash provided
by operations in the third quarter of fiscal 2021, including the
benefit of lower levels of net working capital, partially offset by
capital expenditures. The net debt to adjusted EBITDA leverage
ratio increased slightly to 3.3x.
Fiscal 2021 Outlook (1)
“Although our sales have moderated, as expected, from the
unprecedented levels experienced during last year’s third quarter,
our focus on operational efficiencies and our ValuePath
productivity initiative keep us on track to deliver full-year
results at the upper end of the range for adjusted EBITDA and
adjusted EPS,” said John Howard, Chief Financial Officer. “Due to
the extended timing of onboarding new business wins, we now expect
to finish at the low end of the current range for net sales, which
we expect will result in a second consecutive record sales year for
UNFI.”
Fiscal Year Ending July 31,
2021
Net Sales ($ in billions)
$27.0 - $27.8
Net Income ($ in millions)
$130 - $160
EPS
$2.15 - $2.65
Adjusted EPS (2)(3)
$3.05 - $3.55
Adjusted EBITDA(3) ($ in millions)
$690 - $730
Capital Expenditures ($ in millions)
$250 - $300
(1)
The outlook provided above is for fiscal
2021 only and replaces and supersedes any and all guidance provided
prior to the date hereof covering fiscal 2021 or subsequent years.
This outlook is forward-looking, is based on management’s current
estimates and expectations and is subject to a number of risks,
including many that are outside of management's control. See
cautionary Safe Harbor Statement below.
(2)
The Company uses an adjusted effective tax
rate in calculating Adjusted EPS. The adjusted effective tax rate
is calculated based on adjusted net income before tax. It also
excludes the potential impact of changes to uncertain tax
positions, valuation allowances, stock compensation accounting (ASU
2016-09) and discrete GAAP tax items which could impact the
comparability of the operational effective tax rate. The Company
believes using this adjusted effective tax rate provides better
consistency across the interim reporting periods since each of
these discrete items can cause volatility in the GAAP tax rate that
is not indicative of the underlying ongoing operations of the
Company. By providing this non-GAAP measure, management intends to
provide investors with a meaningful, consistent comparison of the
Company’s effective tax rate on ongoing operations.
(3)
Please refer to the tables in this press
release for a reconciliation of these non-GAAP financial measures
to the most directly comparable financial measures calculated in
accordance with GAAP.
Conference Call and Webcast
The Company’s third quarter fiscal 2021 conference call and
audio webcast will be held today, Wednesday, June 9, 2021 at 8:30
a.m. ET. A webcast of the conference call (and supplemental
materials) will be available to the public, on a listen only basis,
via the internet at the Investors section of the Company’s website
www.unfi.com. The call can also be accessed at (877) 682-3423
(conference ID 9242359). An online archive of the webcast (and
supplemental materials) will be available for 120 days.
About United Natural Foods
UNFI is North America's premier food wholesaler delivering the
widest variety of products to customer locations throughout North
America including natural product superstores, independent
retailers, conventional supermarket chains, ecommerce retailers,
and food service customers. By providing this deeper ‘full-store’
selection and compelling brands for every aisle, UNFI is uniquely
positioned to deliver great food, more choices, and fresh thinking
to customers everywhere. Today, UNFI is the largest publicly-traded
grocery distributor in America. To learn more about how UNFI is
Moving Food Forward, visit www.unfi.com.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995: Statements in this press release regarding the
Company’s business that are not historical facts are
“forward-looking statements” that involve risks and uncertainties
and are based on current expectations and management estimates;
actual results may differ materially. The risks and uncertainties
which could impact these statements are described in the Company’s
filings under the Securities Exchange Act of 1934, as amended,
including its annual report on Form 10-K for the year ended August
1, 2020 filed with the Securities and Exchange Commission (the
“SEC”) on September 29, 2020 and other filings the Company makes
with the SEC, and include, but are not limited to, the impact and
duration of the COVID-19 pandemic; the Company’s dependence on
principal customers; the Company’s sensitivity to general economic
conditions including changes in disposable income levels and
consumer spending trends; the Company’s ability to realize
anticipated benefits of its acquisitions and dispositions, in
particular, its acquisition of SUPERVALU; the Company’s reliance on
the continued growth in sales of higher margin natural and organic
foods and non-food products in comparison to lower margin
conventional grocery products; increased competition in the
Company’s industry as a result of increased distribution of
natural, organic and specialty products and direct distribution of
those products by large retailers and online distributors; the
possibility that restructuring, asset impairment, and other charges
and costs we may incur in connection with the sale or closure of
our retail operations will exceed our current expectations;
increased competition as a result of continuing consolidation of
retailers in the natural product industry and the growth of
supernatural chains; the addition or loss of significant customers
or material changes to the Company’s relationships with these
customers; union-organizing activities that could cause labor
relations difficulties and increased costs; the Company’s ability
to operate, and rely on third parties to operate reliable and
secure technology systems; the relatively low margins of the
Company’s business; moderated supplier promotional activity,
including decreased forward buying opportunities; the Company’s
ability to timely and successfully deploy its warehouse management
system throughout its distribution centers and its transportation
management system across the Company and to achieve efficiencies
and cost savings from these efforts; the potential for additional
asset impairment charges; the Company’s sensitivity to inflationary
and deflationary pressures; the potential for disruptions in the
Company’s supply chain or its distribution capabilities by
circumstances beyond its control, including a health epidemic; the
risk of interruption of supplies due to lack of long-term
contracts, severe weather, work stoppages or otherwise; volatility
in fuel costs; volatility in foreign exchange rates; and our
ability to identify and successfully complete asset or business
acquisitions. Any forward-looking statements are made pursuant to
the Private Securities Litigation Reform Act of 1995 and, as such,
speak only as of the date made. The Company is not undertaking to
update any information in the foregoing reports until the effective
date of its future reports required by applicable laws. Any
estimates of future results of operations are based on a number of
assumptions, many of which are outside the Company’s control and
should not be construed in any manner as a guarantee that such
results will in fact occur. These estimates are subject to change
and could differ materially from final reported results. The
Company may from time to time update these publicly announced
estimates, but it is not obligated to do so.
Non-GAAP Financial Measures: To supplement the financial
information presented on a U.S. generally accepted accounting
principles (“GAAP”) basis, the Company has included in this press
release non-GAAP financial measures for adjusted EBITDA, adjusted
earnings per diluted common share (“adjusted EPS”), adjusted
effective tax rate, free cash flow and net debt to adjusted EBITDA
leverage ratio. The non-GAAP adjusted earnings per diluted common
share measure is a consolidated measure, which the Company
reconciles by adding Net income attributable to UNFI plus goodwill
and asset impairment benefits and charges, restructuring,
acquisition, and integration related expenses, gains and losses on
sales of assets, certain legal charges and gains, surplus property
depreciation and interest expense, losses on debt extinguishment,
discontinued operations store closures and other charges, net, the
impact of diluted shares when GAAP earnings is presented as a loss
and non-GAAP earnings represent income, and the tax impact of
adjustments and the adjusted effective tax rate, which tax impact
is calculated using the adjusted effective tax rate, and certain
other non-cash charges or items, as determined by management. The
non-GAAP adjusted effective tax rate excludes the potential impact
of changes to various uncertain tax positions and valuation
allowances, as well as stock compensation accounting (ASU 2016-09).
The non-GAAP adjusted EBITDA measure is defined as a consolidated
measure inclusive of continuing and discontinued operations
results, which we reconcile by adding Net income (loss) from
continuing operations, less net income attributable to
noncontrolling interests, plus Total other expense, net and
(Benefit) provision for income taxes, plus Depreciation and
amortization calculated in accordance with GAAP, plus non-GAAP
adjustments for Share-based compensation, Restructuring,
acquisition and integration related expenses, Goodwill and asset
impairment charges, Loss (gain) on sale of assets, certain legal
charges and gains, certain other non-cash charges or items, as
determined by management, plus Adjusted EBITDA of discontinued
operations calculated in a manner consistent with the results of
continuing operations outlined above. The non-GAAP free cash flow
measure is defined as net cash provided by operating activities
less capital expenditures. The non-GAAP net debt to adjusted EBITDA
leverage ratio is defined as the total face value of the Company’s
outstanding short and long term debt and finance lease liabilities
less net cash and cash equivalents, the sum of which is divided by
adjusted EBITDA.
The reconciliation of these non-GAAP financial measures to their
comparable GAAP financial measures and the calculation of net debt
to adjusted EBITDA leverage are presented in the tables appearing
below. The presentation of non-GAAP financial measures is not
intended to be considered in isolation or as a substitute for any
measure prepared in accordance with GAAP. The Company believes that
presenting the non-GAAP financial measures adjusted EBITDA and
adjusted EPS aids in making period-to-period comparisons, assessing
the performance of our business and understanding the underlying
operating performance and core business trends by excluding certain
adjustments not expected to recur in the normal course of business
and are meaningful indicators of actual and estimated operating
performance. The inclusion of free cash flow assists investors in
understanding the cash generating ability of the Company separate
from cash generated by the sale of assets. Net debt to adjusted
EBITDA leverage ratio is a commonly used metric that assists
investors in understanding and evaluating the Company’s capital
structure and changes to its capital structure over time. The
Company currently expects to continue to exclude the items listed
above from non-GAAP financial measures. Management utilizes and
plans to utilize these non-GAAP financial measures to compare the
Company’s operating performance during the 2021 fiscal year to the
comparable periods in the 2020 fiscal year and to internally
prepared projections. These non-GAAP financial measures may differ
from similarly titled measures of other companies.
UNITED NATURAL FOODS,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (unaudited)
(In thousands, except for per
share data)
13-Week Period Ended
39-Week Period Ended
May 1, 2021
May 2, 2020
May 1, 2021
May 2, 2020
Net sales
$
6,619,842
$
7,031,718
$
20,180,582
$
19,759,712
Cost of sales
5,653,043
5,981,486
17,256,925
16,884,944
Gross profit
966,799
1,050,232
2,923,657
2,874,768
Operating expenses
866,463
911,007
2,634,305
2,657,427
Goodwill and asset impairment charges
—
—
—
425,405
Restructuring, acquisition and integration
related expenses
9,867
14,557
44,078
65,751
(Gain) loss on sale of assets
(25
)
351
144
785
Operating income (loss)
90,494
124,317
245,130
(274,600
)
Other expense (income):
Net periodic benefit income, excluding
service cost
(17,128
)
(12,758
)
(51,288
)
(27,419
)
Interest expense, net
43,500
47,269
163,577
145,814
Other, net
(989
)
(1,842
)
(3,461
)
(3,462
)
Total other expense, net
25,383
32,669
108,828
114,933
Income (loss) from continuing operations
before income taxes
65,111
91,648
136,302
(389,533
)
Provision (benefit) for income taxes
16,812
(2,799
)
32,213
(82,562
)
Net income (loss) from continuing
operations
48,299
94,447
104,089
(306,971
)
Income (loss) from discontinued
operations, net of tax
1,653
(4,078
)
6,752
(16,128
)
Net income (loss) including noncontrolling
interests
49,952
90,369
110,841
(323,099
)
Less net income attributable to
noncontrolling interests
(1,394
)
(2,238
)
(4,366
)
(3,407
)
Net income (loss) attributable to United
Natural Foods, Inc.
$
48,558
$
88,131
$
106,475
$
(326,506
)
Basic earnings (loss) per share:
Continuing operations
$
0.83
$
1.72
$
1.78
$
(5.80
)
Discontinued operations
$
0.03
$
(0.08
)
$
0.12
$
(0.30
)
Basic earnings (loss) per share
$
0.86
$
1.64
$
1.90
$
(6.10
)
Diluted earnings (loss) per share:
Continuing operations
$
0.77
$
1.67
$
1.67
$
(5.80
)
Discontinued operations
$
0.03
$
(0.08
)
$
0.11
$
(0.30
)
Diluted earnings (loss) per share
$
0.80
$
1.60
$
1.78
$
(6.10
)
Weighted average shares outstanding:
Basic
56,458
53,718
56,028
53,485
Diluted
60,539
55,217
59,676
53,485
UNITED NATURAL FOODS,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS (unaudited)
(In thousands, except for per
share data)
May 1, 2021
August 1, 2020
ASSETS
Cash and cash equivalents
$
39,495
$
46,993
Accounts receivable, net
1,106,578
1,120,199
Inventories, net
2,293,877
2,280,767
Prepaid expenses and other current
assets
140,948
251,891
Current assets of discontinued
operations
4,899
5,067
Total current assets
3,585,797
3,704,917
Property and equipment, net
1,715,034
1,701,216
Operating lease assets
1,088,058
982,808
Goodwill
20,495
19,607
Intangible assets, net
909,590
969,600
Deferred income taxes
105,332
107,624
Other long-term assets
95,088
97,285
Long-term assets of discontinued
operations
1,430
3,915
Total assets
$
7,520,824
$
7,586,972
LIABILITIES AND STOCKHOLDERS’
EQUITY
Accounts payable
$
1,599,995
$
1,633,448
Accrued expenses and other current
liabilities
259,702
281,956
Accrued compensation and benefits
235,677
228,832
Current portion of operating lease
liabilities
138,844
131,022
Current portion of long-term debt and
finance lease liabilities
23,700
83,378
Current liabilities of discontinued
operations
6,996
11,438
Total current liabilities
2,264,914
2,370,074
Long-term debt
2,314,215
2,426,994
Long-term operating lease liabilities
976,691
873,990
Long-term finance lease liabilities
132,975
143,303
Pension and other postretirement benefit
obligations
236,927
292,128
Other long-term liabilities
294,025
336,487
Long-term liabilities of discontinued
operations
15
1,738
Total liabilities
6,219,762
6,444,714
Stockholders’ equity:
Preferred stock, $0.01 par value,
authorized 5,000 shares; none issued or outstanding
—
—
Common stock, $0.01 par value, authorized
100,000 shares; 56,956 shares issued and 56,341 shares outstanding
at May 1, 2021; 55,306 shares issued and 54,691 shares outstanding
at August 1, 2020
570
553
Additional paid-in capital
588,324
568,736
Treasury stock at cost
(24,231
)
(24,231
)
Accumulated other comprehensive loss
(197,092
)
(237,946
)
Retained earnings
934,871
837,633
Total United Natural Foods, Inc.
stockholders’ equity
1,302,442
1,144,745
Noncontrolling interests
(1,380
)
(2,487
)
Total stockholders’ equity
1,301,062
1,142,258
Total liabilities and stockholders’
equity
$
7,520,824
$
7,586,972
UNITED NATURAL FOODS,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (unaudited)
39-Week Period Ended
(In thousands)
May 1, 2021
May 2, 2020
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) including noncontrolling
interests
$
110,841
$
(323,099)
Income (loss) from discontinued
operations, net of tax
6,752
(16,128)
Net income (loss) from continuing
operations
104,089
(306,971)
Adjustments to reconcile net income (loss)
from continuing operations to net cash provided by operating
activities:
Depreciation and amortization
210,088
214,002
Share-based compensation
32,847
15,088
Loss on sale of assets
144
785
Closed property and other restructuring
charges
3,399
36,662
Goodwill and asset impairment charges
—
425,405
Net pension and other postretirement
benefit income
(51,252)
(27,419)
Deferred income tax benefit
(2,076)
(17,381)
LIFO charge
18,741
20,463
(Recoveries) provision for losses on
receivables, net
(2,672)
44,238
Loss on debt extinguishment
30,373
73
Non-cash interest expense and other
adjustments
15,127
10,993
Changes in operating assets and
liabilities
(24,438)
33,290
Net cash provided by operating activities
of continuing operations
334,370
449,228
Net cash provided by operating activities
of discontinued operations
2,074
3,051
Net cash provided by operating
activities
336,444
452,279
CASH FLOWS FROM INVESTING
ACTIVITIES:
Payments for capital expenditures
(165,457)
(126,803)
Proceeds from dispositions of assets
57,329
29,650
Other
(4,111)
(2,380)
Net cash used in investing activities of
continuing operations
(112,239)
(99,533)
Net cash provided by investing activities
of discontinued operations
1,523
26,503
Net cash used in investing activities
(110,716)
(73,030)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from borrowings of long-term
debt
500,000
2,050
Proceeds from borrowings under revolving
credit line
3,451,529
3,244,573
Proceeds from issuance of other loans
—
6,266
Repayments of borrowings under revolving
credit line
(3,368,951)
(3,508,573)
Repayments of long-term debt and finance
leases
(787,232)
(111,923)
Proceeds from the issuance of common stock
and exercise of stock options
721
5,662
Payment of employee restricted stock tax
withholdings
(13,449)
(1,015)
Payments for debt issuance costs
(12,339)
—
Distributions to noncontrolling
interests
(3,082)
(2,525)
Repayments of other loans
(163)
—
Other
(691)
—
Net cash used in financing activities
(233,657)
(365,485)
EFFECT OF EXCHANGE RATE CHANGES ON
CASH
443
(290)
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS
(7,486)
13,474
Cash and cash equivalents, at beginning of
period
47,117
45,263
Cash and cash equivalents, at end of
period
39,631
58,737
Less: cash and cash equivalents of
discontinued operations
(136)
(120)
Cash and cash equivalents
$
39,495
$
58,617
Supplemental disclosures of cash flow
information:
Cash paid for interest
$
118,441
$
139,040
Cash (refunds) for federal and state
income taxes, net
(21,847)
(24,236)
Leased assets obtained in exchange for new
operating lease liabilities
226,570
154,888
Leased assets obtained in exchange for new
finance lease liabilities
468
92,843
Additions of property and equipment
included in accounts payable
$
49,182
$
20,547
SUPPLEMENTAL NON-GAAP
FINANCIAL INFORMATION
UNITED NATURAL FOODS,
INC.
UNAUDITED
Reconciliation of Net income
(loss) from continuing operations and to Income (loss) from
discontinued operations, net of tax to Adjusted EBITDA
(unaudited)
13-Week Period Ended
39-Week Period Ended
(in thousands)
May 1, 2021
May 2, 2020
May 1, 2021
May 2, 2020
Net income (loss) from continuing
operations
$
48,299
$
94,447
$
104,089
$
(306,971
)
Adjustments to continuing operations net
income (loss):
Less net income attributable to
noncontrolling interests
(1,394
)
(2,238
)
(4,366
)
(3,407
)
Total other expense, net
25,383
32,669
108,828
114,933
Provision (benefit) for income taxes
16,812
(2,799
)
32,213
(82,562
)
Depreciation and amortization
66,365
69,642
210,088
214,002
Share-based compensation
11,668
12,992
38,490
22,051
Goodwill and asset impairment
charges(1)
—
—
—
425,405
Restructuring, acquisition and integration
related expenses(2)
9,867
14,557
44,078
65,751
(Gain) loss on sale of assets
(25
)
351
144
785
Note receivable charges(3)
—
—
—
12,516
Legal reserve charge(4)
—
—
—
1,196
Other retail expense(5)
355
—
3,358
—
Adjusted EBITDA of continuing
operations
177,330
219,621
536,922
463,699
Adjusted EBITDA of discontinued
operations(6)
2,168
2,587
7,828
11,313
Adjusted EBITDA
$
179,498
$
222,208
$
544,750
$
475,012
Income (loss) from discontinued
operations, net of tax
$
1,653
$
(4,078
)
$
6,752
$
(16,128
)
Adjustments to discontinued operations net
income (loss):
Other income, net
—
(107
)
—
(171
)
Provision (benefit) for income taxes
713
20
341
(3,322
)
Restructuring, store closure and other
charges, net
(198
)
6,752
735
30,934
Adjusted EBITDA of discontinued
operations
$
2,168
$
2,587
$
7,828
$
11,313
(1)
Fiscal 2020 reflects a goodwill impairment
charge attributable to a reorganization of our reporting units and
a sustained decrease in market capitalization and enterprise value
of the Company, resulting in a decline in the estimated fair value
of the U.S. Wholesale reporting unit. In addition, this charge
includes a goodwill finalization charge attributable to the
SUPERVALU acquisition and an asset impairment charge.
(2)
Fiscal 2021 primarily reflects costs
associated with advisory and transformational activities as we
position our business for further value-creation post SUPERVALU
acquisition, as well as costs associated with distribution center
consolidations. Fiscal 2020 primarily reflects integration charges,
closed property reserve charges and administrative and operational
restructuring costs.
(3)
Reflects reserves and charges for notes
receivable issued by the SUPERVALU business prior to its
acquisition to finance the purchase of stores by its customers.
(4)
Reflects a charge to settle a legal
proceeding, net of income received to settle a separate legal
proceeding.
(5)
Reflects expenses associated with
event-specific damages to certain retail stores.
(6)
We believe the inclusion of discontinued
operations results within Adjusted EBITDA provides investors a
meaningful measure of total performance.
Reconciliation of Net income
(loss) per Diluted Common Share to Adjusted Net income per Diluted
Common Share (unaudited)
13-Week Period Ended
39-Week Period Ended
May 1, 2021
May 2, 2020
May 1, 2021
May 2, 2020
Net income (loss) attributable to UNFI per
diluted common share
$
0.80
$
1.60
$
1.78
$
(6.10
)
Goodwill and asset impairment
charges(1)
—
—
—
7.95
Restructuring, acquisition and integration
related expenses(2)
0.16
0.26
0.74
1.23
(Gain) loss on sale of assets(3)
—
0.01
—
0.01
Pension settlement charge(4)
—
—
—
0.19
Surplus property depreciation and interest
expense(5)
0.02
0.03
0.04
0.16
Note receivable charges(6)
—
—
—
0.23
Loss on debt extinguishment(7)
0.01
—
0.51
—
Legal reserve charge(8)
—
—
—
0.02
Other retail expense(9)
0.01
—
0.06
—
Discontinued operations store closures and
other charges, net(10)
—
0.12
0.01
0.58
Tax impact of adjustments and adjusted
effective tax rate(11)
(0.06
)
(0.61
)
(0.44
)
(2.37
)
Impact of dilutive shares
—
—
—
(0.02
)
Adjusted net income per diluted common
share (Retail in Discontinued Operations)(12)
0.94
1.41
2.70
1.88
Depreciation and amortization
adjustment(13)
—
(0.08
)
—
(0.25
)
Adjusted net income per diluted common
share (Retail in Continuing Operations)
$
0.94
$
1.33
$
2.70
$
1.63
(1)
Fiscal 2020 reflects a goodwill impairment
charge attributable to a reorganization of our reporting units and
a sustained decrease in market capitalization and enterprise value
of the Company, resulting in a decline in the estimated fair value
of the U.S. Wholesale reporting unit. In addition, this charge
includes a goodwill finalization charge attributable to the
SUPERVALU acquisition and an asset impairment charge.
(2)
Fiscal 2021 primarily reflects costs
associated with advisory and transformational activities as we
position our business for further value-creation post SUPERVALU
acquisition, as well as costs associated with distribution center
consolidations. Fiscal 2020 primarily reflects integration charges,
closed property reserve charges and administrative and operational
restructuring costs.
(3)
Beginning in the fourth quarter of fiscal
2020, Adjusted EPS now excludes gains and losses on the sale of
assets, which had an insignificant increase on Adjusted EPS as
previously reported.
(4)
Reflects a non-cash pension settlement
charge associated with the acceleration of a portion of the
accumulated unrecognized actuarial loss as a result of the lump sum
settlement payments.
(5)
Reflects surplus, non-operating property
depreciation and interest expense. Fiscal 2020 includes accelerated
depreciation related to a location on which the Company recognized
a gain that is included in Restructuring, acquisition and
integration related expenses.
(6)
Reflects reserves and charges for notes
receivable issued by the SUPERVALU business prior to its
acquisition to finance the purchase of stores by its customers.
(7)
Reflects non-cash charges related to the
acceleration of unamortized debt issuance costs and original issue
discounts due to term loan prepayments.
(8)
Reflects a charge to settle a legal
proceeding, net of income received to settle a separate legal
proceeding.
(9)
Reflects expenses associated with
event-specific damages to certain retail stores.
(10)
Amounts represent store closure charges
and costs, operational wind-down and inventory charges, and asset
impairment charges related to discontinued operations.
(11)
Represents the tax effect of the pre-tax
adjustments using an adjusted effective tax rate. The adjusted
effective tax rate is calculated based on adjusted net income
before tax, and its impact reflects the exclusion of changes to
uncertain tax positions, valuation allowances, tax impacts related
to the exercise of share-based compensation awards and discrete
GAAP tax items which could impact the comparability of the
operational effective tax rate. The Company believes using this
adjusted effective tax rate will provide better consistency across
the interim reporting periods since each of these discrete items
can cause volatility in the GAAP tax rate that is not indicative of
the true operations of the Company. By providing this non-GAAP
measure, management intends to provide investors with a meaningful,
consistent comparison of the Company’s effective tax rate on
ongoing operations.
(12)
The computation of diluted earnings per
share is calculated using diluted weighted average shares
outstanding, which includes the net effect of dilutive stock
awards.
(13)
In the fourth quarter of fiscal 2020 the
Company recorded a pre-tax charge of $50.0 million related to the
change in presentation of Retail to continuing operations. This
charge was calculated under GAAP as the depreciation and
amortization expense that would have been recognized had Retail
been included in continuing operations for the full time period
since the SUPERVALU acquisition date. This adjustment attributes
the pro rata amount of the non-cash charge recognized in the fourth
quarter of fiscal 2020 to the applicable time periods in which it
would have been recognized had Retail been included within
continuing operations since the acquisition date. UNFI believes the
inclusion of this adjustment is a useful indicator of performance
to both management and investors, as it provides a relative
comparison to how UNFI’s results of operations will be reported on
an ongoing basis.
Calculation of Net Debt to
Adjusted EBITDA Leverage Ratio (unaudited)
(in thousands, except ratios)
May 1, 2021
Current portion of long-term debt and
finance lease liabilities
$
23,700
Long-term debt
2,314,215
Long-term finance lease liabilities
132,975
Less: Cash and cash equivalents
(39,495
)
Net carrying value of debt and finance
lease liabilities
2,431,395
Debt issuance costs, net
36,374
Original issue discount on debt
17,523
Net debt and finance lease liabilities
2,485,292
Adjusted EBITDA(1)
$
742,660
Adjusted EBITDA leverage ratio
3.3x
(1)
Adjusted EBITDA reflects the summation of
the trailing four quarters ended May 1, 2021.
Reconciliation of Trailing
Four Quarters Net income from continuing operations and Income from
discontinued operations, net of tax to Adjusted EBITDA
(unaudited)
(in thousands)
52-Week Period Ended May 1,
2021
Net income from continuing operations
$
157,051
Adjustments to continuing operations net
income:
Less net income attributable to
noncontrolling interests
(5,888
)
Total other expense, net
142,734
Provision for income taxes
24,330
Depreciation and amortization
277,621
Share-based compensation
50,128
Restructuring, acquisition and integration
related expenses
64,710
Loss on sale of assets
16,491
Other retail expense
5,108
Adjusted EBITDA of continuing
operations
732,285
Adjusted EBITDA of discontinued
operations
10,375
Adjusted EBITDA
$
742,660
Income from discontinued operations, net
of tax
$
7,678
Adjustments to discontinued operations net
income:
Total other expense, net
167
Benefit for income taxes
(802
)
Restructuring, store closure and other
charges, net
3,332
Adjusted EBITDA of discontinued
operations
$
10,375
Reconciliation of Net cash
provided by operating activities to Free cash flow
(unaudited)
39-Week Period Ended
(in thousands)
May 1, 2021
May 2, 2020
Net cash provided by operating
activities
$
336,444
$
452,279
Payments for capital expenditures
(165,457
)
(126,803
)
Free cash flow
$
170,987
$
325,476
FISCAL
2021 GUIDANCE
Reconciliation of 2021
Guidance for Estimated Net Income per diluted Common Share to
Estimated Non-GAAP Adjusted Net Income per diluted Common Share
(unaudited)
Fiscal Year Ending July 31,
2021
Low Range
Estimate
High Range
Net income attributable to United Natural
Foods, Inc. per diluted common share
$
2.15
$
2.65
Restructuring, acquisition and integration
related expenses
0.46
Loss on debt extinguishment
0.55
Surplus property depreciation and interest
expense
0.10
Discontinued operations store closures and
other charges, net
0.12
Tax impact of adjustments and adjusted
effective tax rate(1)
(0.33)
Adjusted net income per diluted common
share
$
3.05
$
3.55
(1)
The estimated adjusted effective tax rate
excludes the potential impact of changes in uncertain tax
positions, tax impacts related to ASU 2016-09 regarding stock
compensation and valuation allowances. Refer to the reconciliation
for adjusted effective tax rate.
Reconciliation of 2021
Guidance for Net Income Attributable to United Natural Foods, Inc.
to Adjusted EBITDA (unaudited)
Fiscal Year Ending July 31,
2021
(in thousands)
Low Range
Estimate
High Range
Net income attributable to United Natural
Foods, Inc.
$
130,000
$
160,000
Provision for income taxes
48,000
58,000
Restructuring, acquisition and integration
related costs
27,000
Closed property depreciation and interest
expense
6,000
Discontinued operations store closures and
other charges, net
7,000
Net interest expense
209,000
Other (income) expense, net
(1,000
)
Depreciation and amortization
278,000
Share-based compensation
54,000
Net periodic benefit income, excluding
service costs
(68,000
)
Adjusted EBITDA
$
690,000
$
730,000
Reconciliation of Estimated
2021 and Actual 2020 U.S. GAAP Effective Tax Rate to Adjusted
Effective Tax Rate (unaudited)
Estimated
Fiscal 2021
Actual Fiscal 2020
U.S. GAAP Effective Tax Rate
24
%
26
%
Discrete quarterly recognition of GAAP
items(1)
2
%
(1)
%
Tax impact of other charges and
adjustments(2)
1
%
1
%
Changes in valuation allowances(3)
(1)
%
1
%
Impact of goodwill impairment
—
%
11
%
Impact of CARES Act(4)
—
%
(11)
%
Other(5)
1
%
—
%
Adjusted Effective Tax Rate
27
%
27
%
Note: As part of the year-end
reconciliation, we will update the reconciliation of the GAAP
effective tax rate for actual results.
(1)
Reflects changes in tax laws excluding the
CARES Act, uncertain tax positions, the tax impacts related to the
exercise of share-based compensation awards and any prior-year
Internal Revenue Service or other tax jurisdiction audit
adjustments.
(2)
Reflects the tax impact of pre-tax
adjustments other than the goodwill impairment that are excluded
from pre-tax income when calculating adjusted EPS.
(3)
Reflects changes in valuation allowances
related to changes in judgment regarding the realizability of
deferred tax assets or current year operations.
(4)
Reflects the impact of tax loss carrybacks
to 35% tax years allowed under the CARES Act as compared to the 21%
tax rate applicable to tax loss carryforwards.
(5)
Tax impacts related to full-year
forecasted tax opportunities and related costs. The Company
establishes an estimated adjusted effective tax rate at the
beginning of the fiscal year based on the best available
information. The Company re-evaluates its estimated adjusted
effective tax rate as appropriate throughout the year and adjusts
for any material changes. The actual adjusted effective tax rate at
the end of the fiscal year is based on actual results and
accordingly may differ from the estimated adjusted effective tax
rate used during the year.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210609005149/en/
INVESTOR CONTACT: Steve Bloomquist Vice President,
Investor Relations 952-828-4144
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