United Natural Foods reports preliminary second quarter earnings

United Natural Foods Inc. (Nasdaq: UNFI) today reported preliminary unaudited net sales and earnings per diluted share for its second fiscal quarter and six months ended Jan. 30, 2016.

Preliminary unaudited financial results
For the second quarter of fiscal 2016, UNFI anticipates net sales in the range of $2.046 billion to $2.048 billion, an increase of approximately 1.5 percent from net sales of $2.017 billion in the same period last year. Net sales for the six months ended Jan. 30, 2016, are expected to be in the range of $4.122 billion to $4.124 billion, a 2.8 percent to 2.9 percent increase from net sales of $4.009 billion in same period last year.

The company anticipates adjusted net sales for the second quarter of fiscal 2016 to increase 6.4 percent to 6.5 percent compared to the same period in fiscal 2015, excluding the year-over-year impact of the previously disclosed termination of a customer distribution contract and, for the second quarter of fiscal 2015, the previously disclosed non-recurring reduction in net sales. Adjusted net sales for the six months ended Jan. 30, 2016, is expected to increase approximately 6.6 percent to 6.7 percent compared to the same period in fiscal 2015, excluding these same items.

UNFI expects GAAP net earnings per diluted share in the range of $0.43 to $0.45 for the second quarter of fiscal 2016 and $1.03 to $1.05 for the six months ended January 30, 2016, compared to fiscal 2015 GAAP earnings per diluted share of $0.55 and $1.21 for the same periods, respectively. Adjusted for estimated severance and other transition costs due to the previously disclosed restructuring plan of $2.0 million and $4.8 million for the three and six months ended January 30, 2016, respectively, and anticipated acquisition costs of approximately $1 million in the second quarter, adjusted earnings per diluted share is expected to be in the range of $0.47 to $0.49 for the second quarter of fiscal 2016 and $1.10 to $1.12 for the first half of fiscal 2016, compared to adjusted earnings per diluted share of $0.65 and $1.31 for the same periods of fiscal 2015, respectively, which exclude the non-recurring reduction in net sales occurring in the second quarter of fiscal 2015.

The company expects to have generated free cash flow in the range of $102 million to $107 million during the second quarter of fiscal 2016. Adjusted net sales, adjusted earnings per diluted share and free cash flow are non-GAAP financial measures. Please refer to the tables in this press release for a reconciliation of all non-GAAP financial measures.

Steven Spinner, president and chief executive officer commented, “Our updated results reflect the rapidly changing near term industry dynamics facing UNFI and its constituents. We have made significant progress in developing our fresh platform, e-commerce, brands and infrastructure. UNFI’s second quarter preliminary results and our view of fiscal 2016 reflect our commitment to investing in growth throughout our organization while we continue to evaluate our cost structure and customer experience.”

“We are excited about the announcement we made this morning regarding our proposed acquisition of Haddon House, whose unique product and service offering will play an important role in our continued strategy to build-out UNFI's gourmet and ethnic product categories across the country,” added Mr. Spinner.

UNFI expects to release its full results for its fiscal second quarter and six months ended January 30, 2016, on March 7, 2016.

The company does not plan to release preliminary financial information on an ongoing basis. The information above is preliminary and based upon information available as of the date of this release.

As of the date of this release, UNFI has not completed its financial close process for the second quarter and six months ended January 30, 2016. During the course of that process, the company may identify items that would require it to make adjustments, which may be material, to the information presented in this release. As a result, the estimates above constitute forward-looking information and are subject to risks and uncertainties, including possible adjustments to preliminary operating results.

Fiscal 2016 guidance
Based on UNFI's performance to date and the current outlook for the remainder of fiscal 2016, the company is revising its previous financial guidance for fiscal 2016 provided on December 7, 2015. For fiscal 2016, ending July 30, 2016, the company expects net sales in the range of approximately $8.31 billion to $8.43 billion, an increase of approximately 1.5 percent to 3 percent over fiscal 2015. The company expects GAAP earnings per diluted share for fiscal 2016 in the range of approximately $2.27 to $2.37 compared to fiscal 2015 GAAP earnings per diluted share of $2.76. Adjusting for severance and other transition costs related to the aforementioned restructuring plan of $4.8 million in the first half of fiscal 2016 related to the previously disclosed termination of a customer distribution agreement and anticipated acquisition costs of approximately $1 million in the second quarter, adjusted earnings per diluted share for fiscal 2016 is estimated to be in the range of $2.34 to $2.44, compared to fiscal 2015 adjusted earnings per diluted share of $2.85. Fiscal 2015 earnings per diluted share was adjusted for the $7.7 million second quarter fiscal 2015 impact of the previously disclosed $9.3 million non-recurring reduction in net sales the Company recognized in fiscal 2015. Capital expenditures for fiscal 2016 are expected to be approximately $49.8 million to $59.0 million, or approximately 0.6 percent to 0.7 percent of estimated fiscal 2016 net sales. Finally, the Company expects its fiscal 2016 tax rate to be in the range of 39.7 percent to 40.1 percent. The company's revised guidance does not reflect any anticipated sales or earnings in connection with the announcement this morning to acquire Haddon House Food Products Inc. ("Haddon House") and certain affiliated entities as well as certain related real estate, which is currently expected to close early in the fourth quarter of fiscal 2016.