United Natural Foods, Inc. (NYSE: UNFI) (the “Company” or
“UNFI”) today reported financial results for the first quarter of
fiscal 2024 (13 weeks) ended October 28, 2023.
First Quarter Fiscal 2024 Performance
(comparisons to first quarter fiscal 2023)
- Net sales increased 0.3% to $7.6 billion
- Net loss of $39 million; Loss per diluted share (EPS) of
$(0.67)
- Adjusted EBITDA decreased 43.5% to $117 million
- Adjusted EPS decreased to $(0.04)
Recent Financial and Operational
Summary
- Affirmed fiscal 2024 outlook for net sales, Adjusted EBITDA,
Adjusted EPS and capital and cloud implementation expenditures;
updated net loss and EPS expectations to reflect an asset charge
and gain on sale
- Delivered benefits of $150 million near-term value creation
initiatives earlier than projected
- Drove improved operational execution and transformation
progress
- Revamped processes and management routines resulting in
meaningful shrink reduction
- Completed consolidation of Logan Township into Allentown
distribution center and the automation system expansion at Carlisle
distribution center
- Onboarded new directors, CIO and Retail CEO
“Our performance this quarter exceeded our expectations as we
drove improved operational execution, which helped deliver savings
from our near-term value creation initiatives earlier in the year
than previously expected. These savings partially offset the
anticipated decline in procurement gains resulting from lower
levels of inflation,” said Sandy Douglas, UNFI’s Chief Executive
Officer.
“As we work to restore profitability in the near-term, we also
continue to make progress on our multi-year transformation agenda
designed to enhance shareholder value by structurally improving our
capabilities, efficiency and profitability while meaningfully
enhancing the customer and supplier experience. Given our
leadership position and the tremendous long-term value creation
opportunity we see for our customers, suppliers and our
shareholders, we refuse to be incremental in our approach. We
remain focused on sustaining operating and transformation momentum
as we service our customers throughout the busy holiday season and
will continue to drive operational improvement as quickly as
possible. ”
First Quarter Fiscal 2024
Summary
13-Week Period Ended
Percent Change
($ in millions, except for per share
data)
October 28, 2023
October 29, 2022
Net sales
$
7,552
$
7,532
0.3
%
Chains
$
3,184
$
3,224
(1.2
)%
Independent retailers
$
1,899
$
1,947
(2.5
)%
Supernatural
$
1,612
$
1,513
6.5
%
Retail
$
606
$
613
(1.1
)%
Other
$
646
$
635
1.7
%
Eliminations
$
(395
)
$
(400
)
(1.3
)%
Net (loss) income
$
(39
)
$
66
(159.1
)%
Adjusted EBITDA (1)
$
117
$
207
(43.5
)%
EPS
$
(0.67
)
$
1.07
(162.6
)%
Adjusted EPS (1)
$
(0.04
)
$
1.13
(103.5
)%
(1)
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.
Net sales increased 0.3% in the first quarter of fiscal
2024 compared to the same period last year, primarily driven by
inflation and new business with existing customers, primarily in
our Supernatural channel. These increases were largely offset by a
decrease in units sold. While unit volumes continued to decline,
there was 60 basis points of sequential improvement from levels in
the fourth quarter of fiscal 2023.
Gross profit in the first quarter of fiscal 2024 was $1.0
billion, a decrease of $66 million, or 6.0%, compared to the first
quarter of fiscal 2023. Excluding the non-cash LIFO charge in both
periods, gross profit decreased $80 million, or 7.2%. The gross
profit rate in the first quarter of fiscal 2024 was 13.6% of net
sales and included a $7 million LIFO charge. Excluding this
non-cash charge, gross profit rate was 13.7% of net sales. 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 in the first quarter of fiscal
2023 was 14.8% of net sales. The decrease in gross profit rate,
excluding the LIFO charge, was primarily driven by lower levels of
procurement gains resulting from decelerating inflation.
Operating expenses in the first quarter of fiscal 2024
were $1,023 million, or 13.5% of net sales, compared to $1,000
million, or 13.3% of net sales, in the first quarter of fiscal
2023. The increase in operating expenses as a percentage of net
sales was primarily driven by investments in our transformation
initiatives, partially offset by lower transportation and
distribution center labor costs due to increased operational
efficiencies across our supply chain and a decrease in volume.
Interest expense, net for the first quarter of fiscal
2024 and fiscal 2023 was $35 million, as higher average interest
rates were offset by lower outstanding debt balances.
Effective tax rate for the first quarter of fiscal 2024
was a benefit of 18.8% on pre-tax loss compared to an expense rate
of 6.9% for the first quarter of fiscal 2023. The change from the
first quarter of fiscal 2023 was primarily driven by the reduction
of discrete tax benefits related to employee stock award vestings
in the first quarter of fiscal 2024. In addition, the first quarter
of fiscal 2023 included a tax benefit from the release of reserves
for unrecognized tax positions that did not recur in the first
quarter of fiscal 2024.
Net loss for the first quarter of fiscal 2024 was $39
million. Net income for the first quarter of fiscal 2023 was $66
million.
Net loss per diluted share (EPS) was $(0.67) for the
first quarter of fiscal 2024 compared to net income per diluted
share of $1.07 for the first quarter of fiscal 2023. Adjusted EPS
was $(0.04) for the first quarter of fiscal 2024 compared to $1.13
in the first quarter of fiscal 2023.
Adjusted EBITDA for the first quarter of fiscal 2024 was
$117 million compared to $207 million for the first quarter of
fiscal 2023.
Capital Allocation and Financing Overview
- Free Cash Flow – During the first quarter of fiscal
2024, free cash flow was $(328) million compared to $(329) million
in the first quarter of fiscal 2023. The results for the first
quarter of fiscal 2024 reflect net cash used in operating
activities of $254 million, including expected seasonally higher
levels of holiday-driven working capital, and payments for capital
expenditures of $74 million.
- Leverage – Total outstanding debt, net of cash, ended
the quarter at $2.29 billion, reflecting an increase of $336
million in the first quarter of fiscal 2024. The net debt to
Adjusted EBITDA leverage ratio was 4.2x as of October 28,
2023.
- Liquidity – As of October 28, 2023, total liquidity was
approximately $1.29 billion, consisting of approximately $37
million in cash, plus the unused capacity of approximately $1.25
billion under the Company’s asset-based lending facility.
Fiscal 2024 Outlook (1)
The Company is updating its full-year outlook for fiscal 2024
for net loss and EPS to reflect non-cash asset charges and a gain
on sale and reaffirming its expectations for net sales, Adjusted
EBITDA, Adjusted EPS and capital and cloud implementation
expenditures:
Fiscal Year Ending August 3, 2024 (53
weeks)
Previous Full Year
Outlook
Updated Full Year
Outlook
Change
Net sales ($ in billions)
$30.9 - $31.5
$30.9 - $31.5
—
Net loss ($ in millions)
$(110) - $(36)
$(120) - $(46)
$(10)
EPS (2)
$(1.86) - $(0.60)
$(2.02) - $(0.76)
$(0.16)
Adjusted EPS (2)(3)(4)
$(0.88) - $0.38
$(0.88) - $0.38
—
Adjusted EBITDA (4) ($ in millions)
$450 - $550
$450 - $550
—
Capital and cloud implementation
expenditures (5) ($ in millions)
~ $400
~ $400
—
(1)
The outlook provided above is for fiscal
2024 only. 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. The 53rd week
is expected to add approximately $600 million to Net sales and $9
million to Adjusted EBITDA in the ranges provided.
(2)
(Loss) earnings per share amounts as
presented include rounding.
(3)
The Company uses an adjusted effective tax
rate in calculating Adjusted EPS. The adjusted effective tax rate
is calculated based on adjusted net (loss) income before tax. It
also excludes the potential impact of changes to uncertain tax
positions, valuation allowances, tax impacts related to the vesting
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 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.
(4)
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.
(5)
Reflects the sum of payments for capital
expenditures and cloud technology implementation expenditures. The
Company believes that providing this non-GAAP measure provides
investors with better visibility to the Company's total investment
spend. The increase compared to fiscal 2023 is primarily driven by
investments in the Company’s transformation program. The components
of fiscal 2024 will be primarily dependent on the nature of certain
contracts to be executed.
Conference Call and Webcast
The Company’s first quarter fiscal 2024 conference call and
audio webcast will be held today, Wednesday, December 6, 2023 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 delivering value for
its stakeholders, 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
29, 2023 filed with the Securities and Exchange Commission (the
“SEC”) on September 26, 2023 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 and
intense competition, including as a result of the continuing
consolidation of retailers and the growth of consumer choices for
grocery and consumable purchases; our ability to realize the
anticipated benefits of our transformation initiatives; changes in
relationships with our suppliers; our ability to operate, and rely
on third parties to operate, reliable and secure technology
systems; labor and other workforce shortages and challenges; the
addition or loss of significant customers or material changes to
our relationships with these customers; our ability to realize
anticipated benefits of our acquisitions; 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; our ability
to maintain sufficient volume in our wholesale segment to support
our operating infrastructure; the impact and duration of any
pandemics or disease outbreaks; our ability to access additional
capital; increases in healthcare, pension and other costs under our
and multiemployer benefit plans; the potential for additional asset
impairment charges; our sensitivity to general economic conditions
including inflation, changes in disposable income levels and
consumer purchasing habits; 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
shortages 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; our ability to maintain
food quality and safety; and volatility in fuel costs. 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, net debt to Adjusted EBITDA
leverage ratio and capital and cloud implementation expenditures.
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 tax impacts related to the vesting
of share-based compensation awards. The non-GAAP Adjusted EBITDA
measure is a consolidated measure which the Company reconciles by
adding Net (loss) income 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 (Benefit) provision 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, Loss (gain) on sale
of assets and other asset charges, 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
Consolidated Financial Statements, which do not impact the
calculation of Adjusted EBITDA. The non-GAAP free cash flow measure
is defined as net cash (used in) 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 the trailing four quarters Adjusted
EBITDA. The non-GAAP capital and cloud implementation expenditures
measure is defined as the sum of payments for capital expenditures
and cloud technology implementation expenditures.
The reconciliation of these non-GAAP financial measures to their
comparable GAAP financial measures (except for capital and cloud
implementation expenditures) and the calculation of net debt to
Adjusted EBITDA leverage are presented in the tables appearing
below. The components of capital and cloud implementation
expenditures for fiscal 2024 will be primarily dependent on the
nature of certain contracts to be executed. 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 2024 fiscal year to the
comparable periods in the 2023 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 28,
2023
October 29,
2022
Net sales
$
7,552
$
7,532
Cost of sales
6,522
6,436
Gross profit
1,030
1,096
Operating expenses
1,023
1,000
Restructuring, acquisition and integration
related expenses
4
2
Loss (gain) on sale of assets and other
asset charges
19
(5
)
Operating (loss) income
(16
)
99
Net periodic benefit income, excluding
service cost
(3
)
(7
)
Interest expense, net
35
35
Other income, net
—
(1
)
(Loss) income before income taxes
(48
)
72
(Benefit) provision for income taxes
(9
)
5
Net (loss) income including noncontrolling
interests
(39
)
67
Less net income attributable to
noncontrolling interests
—
(1
)
Net (loss) income attributable to United
Natural Foods, Inc.
$
(39
)
$
66
Basic (loss) earnings per share
$
(0.67
)
$
1.12
Diluted (loss) earnings per share
$
(0.67
)
$
1.07
Weighted average shares outstanding:
Basic
58.7
58.8
Diluted
58.7
61.6
UNITED NATURAL FOODS,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS (unaudited)
(in millions, except for par
values)
October 28,
2023
July 29, 2023
ASSETS
Cash and cash equivalents
$
37
$
37
Accounts receivable, net
1,013
889
Inventories, net
2,648
2,292
Prepaid expenses and other current
assets
259
245
Total current assets
3,957
3,463
Property and equipment, net
1,744
1,767
Operating lease assets
1,218
1,228
Goodwill
19
20
Intangible assets, net
703
722
Deferred income taxes
32
32
Other long-term assets
175
162
Total assets
$
7,848
$
7,394
LIABILITIES AND STOCKHOLDERS’
EQUITY
Accounts payable
$
1,934
$
1,781
Accrued expenses and other current
liabilities
277
283
Accrued compensation and benefits
169
143
Current portion of operating lease
liabilities
181
180
Current portion of long-term debt and
finance lease liabilities
16
18
Total current liabilities
2,577
2,405
Long-term debt
2,296
1,956
Long-term operating lease liabilities
1,090
1,099
Long-term finance lease liabilities
10
12
Pension and other postretirement benefit
obligations
16
16
Other long-term liabilities
160
162
Total liabilities
6,149
5,650
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; 61.9 shares issued and 59.4 shares outstanding at
October 28, 2023; 61.0 shares issued and 58.5 shares outstanding at
July 29, 2023
1
1
Additional paid-in capital
606
606
Treasury stock at cost
(86
)
(86
)
Accumulated other comprehensive loss
(33
)
(28
)
Retained earnings
1,211
1,250
Total United Natural Foods, Inc.
stockholders’ equity
1,699
1,743
Noncontrolling interests
—
1
Total stockholders’ equity
1,699
1,744
Total liabilities and stockholders’
equity
$
7,848
$
7,394
UNITED NATURAL FOODS,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (unaudited)
13-Week Period Ended
(in millions)
October 28,
2023
October 29,
2022
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net (loss) income including noncontrolling
interests
$
(39
)
$
67
Adjustments to reconcile net (loss) income
to net cash used in operating activities:
Depreciation and amortization
78
74
Share-based compensation
6
12
Gain on sale of long-lived assets
(7
)
(5
)
Long-lived asset impairment charges
21
—
Net pension and other postretirement
benefit income
(3
)
(7
)
Deferred income tax expense
—
2
LIFO charge
7
21
Non-cash interest expense and other
adjustments
2
3
Changes in operating assets and
liabilities
(319
)
(429
)
Net cash used in operating activities
(254
)
(262
)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Payments for capital expenditures
(74
)
(67
)
Proceeds from dispositions of assets
9
7
Payments for investments
(7
)
(1
)
Net cash used in investing activities
(72
)
(61
)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from borrowings under revolving
credit line
597
1,206
Repayments of borrowings under revolving
credit line
(257
)
(829
)
Repayments of long-term debt and finance
leases
(6
)
(6
)
Repurchases of common stock
—
(12
)
Payments of employee restricted stock tax
withholdings
(6
)
(37
)
Distributions to noncontrolling
interests
(1
)
(2
)
Repayments of other loans
—
(1
)
Other
(1
)
—
Net cash provided by financing
activities
326
319
EFFECT OF EXCHANGE RATE ON CASH
—
(1
)
NET DECREASE IN CASH AND CASH
EQUIVALENTS
—
(5
)
Cash and cash equivalents, at beginning of
period
37
44
Cash and cash equivalents, at end of
period
$
37
$
39
Supplemental disclosures of cash flow
information:
Cash paid for interest
$
44
$
40
Cash (refunds) for federal, state, and
foreign income taxes, net
$
(12
)
$
(1
)
Leased assets obtained in exchange for new
operating lease liabilities
$
39
$
57
Additions of property and equipment
included in Accounts payable
$
18
$
26
SUPPLEMENTAL NON-GAAP
FINANCIAL INFORMATION (unaudited)
UNITED NATURAL FOODS,
INC.
Reconciliation of Net (loss)
income including noncontrolling interests to Adjusted EBITDA
(unaudited)
13-Week Period Ended
(in millions)
October 28, 2023
October 29, 2022
Net (loss) income including noncontrolling
interests
$
(39
)
$
67
Adjustments to net (loss) income including
noncontrolling interests:
Less net income attributable to
noncontrolling interests
—
(1
)
Net periodic benefit income, excluding
service cost
(3
)
(7
)
Interest expense, net
35
35
Other income, net
—
(1
)
(Benefit) provision for income taxes
(9
)
5
Depreciation and amortization
78
74
Share-based compensation
6
12
LIFO charge
7
21
Restructuring, acquisition and integration
related expenses
4
2
Loss (gain) on sale of assets and other
asset charges (1)
19
(5
)
Business transformation costs (2)
15
5
Other adjustments (3)
4
—
Adjusted EBITDA
$
117
$
207
(1)
The first quarter of fiscal 2024 includes
a $21 million non-cash asset impairment charge related to one of
our corporate-owned office locations.
(2)
Reflects costs associated with business
transformation initiatives, primarily including third-party
consulting costs and licensing costs, which are included within
Operating expenses in the Condensed Consolidated Statements of
Operations.
(3)
Primarily reflects third-party
professional service fees related to shareholder negotiations.
Reconciliation of Net (loss)
income attributable to United Natural Foods, Inc. to Adjusted net
(loss) income and
Adjusted EPS
(unaudited)
13-Week Period Ended
(in millions, except per share
amounts)
October 28, 2023
October 29, 2022
Net (loss) income attributable to United
Natural Foods, Inc.
$
(39
)
$
66
Restructuring, acquisition and integration
related expenses
4
2
Loss (gain) on sale of assets and other
asset charges other than losses on sales of receivables (1)
14
(5
)
LIFO charge
7
21
Surplus property depreciation and interest
expense (2)
1
1
Business transformation costs (3)
15
5
Other adjustments (4)
4
—
Tax impact of adjustments and adjusted
effective tax rate (5)
(8
)
(20
)
Adjusted net (loss) income
$
(2
)
$
70
Diluted weighted average shares
outstanding
58.7
61.6
Adjusted EPS (6)
$
(0.04
)
$
1.13
(1)
Loss (gain) on sale of assets and other
asset charges, as reflected here, does not include losses on sales
of receivables under the accounts receivable monetization program,
which are included in Loss (gain) on sale of assets and other asset
charges on the Consolidated Statements of Operations and are not
adjusted in the calculation of Adjusted EPS. The first quarter of
fiscal 2024 includes a $21 million non-cash asset impairment charge
related to one of our corporate-owned office locations.
(2)
Reflects surplus, non-operating property
depreciation and interest expense.
(3)
Reflects costs associated with business
transformation initiatives, primarily including third-party
consulting costs and licensing costs, which are included within
Operating expenses in the Condensed Consolidated Statements of
Operations.
(4)
Primarily reflects third-party
professional service fees related to shareholder negotiations.
(5)
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 vesting 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
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.
(6)
Adjusted earnings per share amounts are
calculated using actual unrounded figures.
Calculation of net debt to
Adjusted EBITDA leverage ratio (unaudited)
(in millions, except ratios)
October 28, 2023
Current portion of long-term debt and
finance lease liabilities
$
16
Long-term debt
2,296
Long-term finance lease liabilities
10
Less: Cash and cash equivalents
(37 )
Net carrying value of debt and finance
lease liabilities
2,285
Adjusted EBITDA (1)
$
550
Adjusted EBITDA leverage ratio
4.2x
(1)
Adjusted EBITDA for purposes of this
calculation reflects the summation of the trailing four quarters
ended October 28, 2023. Refer to the following table for the
reconciliation of Adjusted EBITDA trailing four quarters.
Reconciliation of trailing
four quarters Net loss including noncontrolling interests to
Adjusted EBITDA (unaudited)
(in millions)
52-Week Period Ended October
28, 2023
Net loss including noncontrolling
interests
$
(76
)
Adjustments to net income including
noncontrolling interests:
Less net income attributable to
noncontrolling interests
(5
)
Net periodic benefit income, excluding
service cost
(25
)
Interest expense, net
144
Other income, net
(1
)
Benefit for income taxes
(37
)
Depreciation and amortization
308
Share-based compensation
32
LIFO charge
105
Restructuring, acquisition and integration
related expenses
10
Loss on sale of assets and other asset
charges
54
Multiemployer pension plan withdrawal
charges
1
Other retail expense
1
Business transformation costs
35
Other adjustments
4
Adjusted EBITDA (1)
$
550
(1)
Adjusted EBITDA for purposes of this
calculation reflects the summation of the trailing four quarters
ended October 28, 2023.
Reconciliation of Net cash
used in operating activities to Free cash flow (unaudited)
13-Week Period Ended
(in millions)
October 28, 2023
October 29, 2022
Net cash used in operating activities
$
(254
)
$
(262
)
Payments for capital expenditures
(74
)
(67
)
Free cash flow
$
(328
)
$
(329
)
FISCAL
2024 GUIDANCE
Reconciliation of 2024
guidance for estimated Net loss attributable to United Natural
Foods, Inc. to Adjusted net (loss)
income and estimated Adjusted
EPS (unaudited)
Fiscal Year Ending August 3,
2024
(in millions, except per share
amounts)
Low Range
Estimate
High Range
Net loss attributable to United Natural
Foods, Inc.
$
(120
)
$
(46
)
Restructuring, acquisition and integration
related expenses
2
LIFO charge
25
Loss on sale of assets and other asset
charges (1)
13
Business transformation costs
51
Tax impact of adjustments and adjusted
effective tax rate (2)
(23
)
Adjusted net (loss) income
$
(52
)
$
22
Diluted weighted average shares
outstanding
59
60
Adjusted EPS (3)
$
(0.88
)
$
0.38
(1)
Loss on sale of assets and other asset
charges, as reflected here, does not include losses on sales of
receivables under the accounts receivable monetization program,
which are included in Loss (gain) on sale of assets and other asset
charges on the Consolidated Statements of Operations and are not
adjusted in the calculation of Adjusted EPS.
(2)
The estimated adjusted effective tax rate
excludes the potential impact of changes in uncertain tax
positions, tax impacts related to the vesting of share-based
compensation awards and valuation allowances. Refer to the
reconciliation for adjusted effective tax rate.
(3)
Adjusted (loss) earnings per share amounts
as presented include rounding.
Reconciliation of 2024
guidance for Net loss attributable to United Natural Foods, Inc. to
Adjusted EBITDA (unaudited)
Fiscal Year Ending August 3,
2024
(in millions)
Low Range
Estimate
High Range
Net loss attributable to United Natural
Foods, Inc.
$
(120
)
$
(46
)
Benefit for income taxes
(42
)
(16
)
LIFO charge
25
Interest expense, net
161
Depreciation and amortization
314
Share-based compensation and other
42
Net periodic benefit income, excluding
service costs
(15
)
Loss on sale of assets and other asset
charges
32
Restructuring, acquisition and integration
related expenses
2
Business transformation costs
51
Adjusted EBITDA
$
450
$
550
Reconciliation of estimated 2024 and actual
2023 U.S. GAAP effective tax rate to adjusted effective tax rate
(unaudited)
Estimated
Fiscal 2024
Actual Fiscal 2023
U.S. GAAP effective tax rate
22 %
(329) %
Discrete quarterly recognition of GAAP
items (1)
(47) %
270 %
Tax impact of other charges and
adjustments (2)
30 %
139 %
Changes in valuation allowances (3)
2 %
(57) %
Other (4)
19 %
— %
Adjusted effective tax rate (4)
26 %
23 %
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, 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231206455390/en/
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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