UNITED NATURAL FOODS INC (UNFI) SEC Filing 10-Q Quarterly report for the period ending Saturday, October 27, 2018
13-Week Period Ended
($ in thousands, except for per share data)
Net (Loss) Income
(Loss) Earnings Per Diluted Share (EPS)
Please refer to the tables in this press release for a reconciliation of non-GAAP financial measures to the most directly comparable financial measure calculated in accordance with GAAP.
13-Week Period Ended
October 27, 2018
October 28, 2017
The following information was filed by UNITED NATURAL FOODS INC on Thursday, December 6, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.
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- 18489023_310Revenue - ProductAfter the valuation process is completed, the held for sale business is reported at the lower of its carrying value or fair value less cost to sell, and no additional depreciation or amortization expense is recognized.
- 18489023_326Other - OtherRisk Factors of this Quarterly Report on Form 10-Q or our other reports filed with the SEC from time to time, as the occurrence of any of these events could have an adverse effect, which may be material, on our business, results of operations and financial condition.
- 18489023_200MA - OtherThis change was primarily due to an increase in cash paid for acquisitions in the 13-week period ended October 27, 2018 for the acquisition of Supervalu compared to the 13-week period ended October 28, 2017, offset in part by cash received from the sale and leaseback of two distribution centers for $149.5 million.
- 18489023_295Financial - ExpenseAmortization of net actuarial loss expense recognition We recognize the amortization of net actuarial loss on the SUPERVALU Retirement Plan over the remaining life expectancy of inactive participants based on our determination that almost all of the defined benefit pension plan participants are inactive and the plan is frozen to new participants.
- 18489023_114Financial - EarningsA significant reduction in operating earnings or the incurrence of operating losses could have a negative impact on our operating cash flow, which may limit our ability to pay down our outstanding indebtedness as planned.
- 18489023_46Financial - ExpenseThese costs and charges, which may be material, include severance, multiemployer plan charges and related costs.
- 18489023_204Financial - Shares / EquityOn October 6, 2017, the Company announced that its Board of Directors authorized a share repurchase program for up to $200.0 million of the Company?s outstanding common stock.
- 18489023_218Other - OtherPlan trustees typically are responsible for determining the level of benefits to be provided to participants as well as the investment of the assets and plan administration.
- 18489023_91Financial - Shares / EquityThese charges were primarily due to $33.8 million of charges related for change-in-control payments made to satisfy outstanding equity awards and severance related costs and acquisition and integration costs of approximately $31.9 million.
- 18489023_275Revenue - ProductIf vendor advertising allowances were substantially reduced or eliminated, we would consider changing the volume, type and frequency of the advertising, which could increase or decrease our advertising expense.
- 18489023_178Financial - DebtDerivatives and Hedging Activity The Company enters into interest rate swap contracts from time to time to mitigate its exposure to changes in market interest rates as part of its overall strategy to manage its debt portfolio to achieve an overall desired position of notional debt amounts subject to fixed and floating interest rates.
- 18489023_166Other - OtherUnder the Term Loan Agreement, the Term Borrowers may, at their option, increase the amount of the Term B Tranche, add one or more additional tranches of term loans or add one or more additional tranches of revolving credit commitments, without the consent of any Term Lenders not participating in such additional borrowings, up to an aggregate amount of $656.25 million plus additional amounts based on satisfaction of certain leverage ratio tests, subject to certain customary conditions and applicable lenders committing to provide the additional funding.
- 18489023_129MA - OtherThe ABL Credit Facility replaced the Company?s $900.0 million prior asset-based revolving credit facility (the "Former ABL Credit Facility"), and $1,475.0 million of proceeds from the ABL Credit Facility were used to finance the Supervalu acquisition and related transaction costs.
- 18489023_28MA - OtherOn July 25, 2018, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") pursuant to which we agreed to acquire Supervalu for an aggregate purchase price of approximately $2.3 billion (the "Merger"), including the assumption of outstanding debt and liabilities.
- 18489023_289Other - OtherThe 10-year rolling average annualized return for a portfolio of investments applied in a manner consistent with our target allocations have generated average returns of approximately 8.04 percent based on returns from 1990 to 2017.
- 18489023_292Financial - ExpenseSimilarly, for postretirement benefits, a 100 basis point increase in the healthcare cost trend rate would increase the accumulated postretirement benefit obligation by approximately $3.2 million as of the end of the first quarter of fiscal 2019 and would increase service and interest cost by less than $0.1 million.
- 18489023_163MA - OtherThe entire amount of the net proceeds from the Term Loan Facility were used to finance the Supervalu acquisition and related transaction costs.
- 18489023_274Financial - ExpenseHowever, if such changes were to occur, cost of sales and advertising expense could change, depending on the specific vendors involved.
- 18489023_21Other - OtherOur strategic plan is focused on increasing the type of products we distribute to our customers, including perishable products and conventional produce to "build out the store" and cover center of the store, as well as perimeter offerings.
- 18489023_24MA - OtherFollowing the acquisition of Whole Foods Market by Amazon.com, Inc. in August 2017, our sales to Whole Foods Market increased resulting in year-over-year growth in net sales to this customer in the first quarter of fiscal 2019 of 20% compared to the first quarter fiscal 2018.
- 18489023_86Financial - EarningsOur gross profit as a percentage of net sales decreased to 14.38% for the 13-week period ended October 27, 2018 compared to 14.94% for the 13-week period ended October 28, 2017.
- 18489023_156Financial - DebtThe Former Term Loan Agreement included financial covenants that required (i) the ratio of the Company?s consolidated EBITDA (as defined in the Former Term Loan Agreement) minus the unfinanced portion of Capital Expenditures (as defined in the Former Term Loan Agreement) to the Company?s consolidated Fixed Charges (as defined in the Former Term Loan Agreement) to be at least 1.20 to 1.00 as of the end of any period of four fiscal quarters, (ii) the ratio of the Company?s Consolidated Funded Debt (as defined in the Former Term Loan Agreement) to the Company?s EBITDA for the four fiscal quarters most recently ended to be not more than 3.00 to 1.00 as of the end of any fiscal quarter and (iii) the ratio, expressed as a percentage, of the Company?s outstanding borrowings under the Former Term Loan Facility), divided by the Mortgaged Property Value (as defined in the Former Term Loan Agreement) to be not more than 75% at any time.
- 18489023_27Other - OtherOur continued growth has allowed us to expand our existing facilities and open new facilities in an effort to achieve increasing operating efficiencies.
- 18489023_106Financial - IncomeThe decrease in the effective income tax rate was primarily driven by a full year of tax savings due to the TCJA.
- 18489023_103MA - OtherAs a result of the Supervalu acquisition, we acquired defined benefit pension and other postretirement benefit obligations and expect to record net periodic benefit plan income, excluding service costs, of $35 million for fiscal 2019.
- 18489023_315Revenue - ProductHowever, our sales and operating results may vary significantly from quarter to quarter due to factors such as changes in our operating expenses, management?s ability to execute our operating and growth strategies, personnel changes, demand for natural products, supply shortages and general economic conditions.
- 18489023_5Financial - Shares / EquityWe believe our significant scale and footprint will generate long-term shareholder value by positioning us to continue to grow sales of natural, organic, specialty, produce, and conventional grocery products across our vast network.
- 18489023_278Other - OtherOur defined benefit pension plan, the SUPERVALU Retirement Plan, and certain supplemental executive retirement plans were closed to new participants and service crediting ended for all participants as of December 31, 2007.
- 18489023_104Financial - Income(Benefit) Provision for Income Taxes Our effective income tax rate for continuing operations was 16.6% and 41.8% for the 13-week periods ended October 27, 2018 and October 28, 2017, respectively.
- 18489023_76Revenue - ProductThe increase in net sales to Whole Foods Market is primarily due to an increase in same store sales following its acquisition by Amazon.com, Inc. in August 2017 coupled with growth in new product categories, most notably the health, beauty and supplement categories.
- 18489023_184Other - OtherThe agreements have an effective date of November 16, 2018 and expire at varied dates between March 2023 and October 2025.
- 18489023_187Other - OtherThe agreements have an effective date of November 30, 2018 and expire at varied dates between October 2021 and October 2024.
- 18489023_159Other - OtherOn October 1, 2018, the Company prepaid the $110.0 million of borrowings outstanding under the Former Term Loan Agreement utilizing borrowings under its Former ABL Credit Facility and terminated the Former Term Loan Agreement.
- 18489023_269Other - OtherThe amount and timing of recognition of vendor funds as well as the amount of vendor funds to be recognized as a reduction to ending inventory requires management judgment and estimates.
- 18489023_102Financial - ExpenseWe expect interest expense to increase substantially in future periods due to the increased indebtedness incurred to finance the acquisition of Supervalu.
- 18489023_268Other - OtherVendor funds that have been earned as a result of completing the required performance under the terms of the underlying agreements but for which the product has not yet been sold are recognized as reductions of inventory.
- 18489023_299Financial - Cash FlowWe believe the "full yield curve" approach reflects a greater correlation between projected benefit cash flows and the corresponding yield curve spot rates and provides a more precise measurement of interest and service costs.
- 18489023_309Revenue - ProductEvaluating the recoverability of the assets of a business classified as held for sale follows a defined order in which property and intangible assets subject to amortization are considered only after the recoverability of goodwill, indefinite lived intangible assets and other assets are assessed.
- 18489023_179Other - OtherInterest rate swap contracts are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures.
- 18489023_62Revenue - ProductAs part of the sale, Coborn's will enter into a long-term agreement for the Company to serve as the primary supplier of the Hornbacher's locations and an expanded supply agreement for Coborn?s other locations.
- 18489023_317Other - OtherIn some cases you can identify these statements by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plans," "planned," "seek," "should," "will," and "would," or similar words.
- 18489023_157Other - OtherOn August 22, 2018, the Company notified its lenders of its intention to prepay its borrowings outstanding under its Former Term Loan Facility on October 1, 2018, which were approximately $110.0 million as of July 28, 2018.
- 18489023_51Financial - ExpenseThe assets of these retail operations were recorded at what we believe to be their estimated fair value less costs to sell.
- 18489023_164Legal - OtherThe loans under the Term B Tranche will be payable in full on October 22, 2025; provided that if on or prior to December 31, 2024 that certain Agreement for Distribution of Products, dated as of October 30, 2015, by and between Whole Foods Market Distribution, Inc., a Delaware corporation, and the Company has not been extended until at least October 23, 2025 on terms not materially less favorable, taken as a whole, to the Company and its subsidiaries than those in effect on the date of the Acquisition, then the loans under the Term B Tranche will be payable in full on December 31, 2024.
- 18489023_20Revenue - GeographyThrough these efforts, we believe that we have been able to broaden our geographic penetration, expand our customer base, enhance and diversify our product selections and increase our market share.
- 18489023_78Revenue - ProductNet sales to our independents channel increased by approximately $28 million, or 4%, during the 13-week period ended October 27, 2018 compared to the 13-week period ended October 28, 2017, and accounted for 23% and 26% of our total net sales for the 13-week period ended October 27, 2018 and October 28, 2017, respectively.
- 18489023_229Other - OtherFurthermore, if we were to significantly reduce contributions, exit certain markets or otherwise cease making contributions to these plans, it could trigger one or more partial or complete withdrawal that would require us to record a withdrawal liability.
- 18489023_75Revenue - ProductOur net sales by customer channel for the 13-week period ended October 27, 2018 and October 28, 2017 were as follows (in millions): * Reflects rounding Whole Foods Market is our only supernatural customer, and net sales to Whole Foods Market for the 13-week period ended October 27, 2018 increased by approximately $174 million, or 20%, as compared to the prior fiscal year?s comparable period, and accounted for approximately 36% of our total net sales for the 13-week period ended October 27, 2018 compared to 35% for the 13-week period ended October 28, 2017.
- 18489023_94Financial - IncomeOperating (Loss) Income Reflecting the factors described above, operating income decreased approximately 134.2%, or $73.9 million, to an operating loss of $18.8 million for the 13-week period ended October 27, 2018, from operating income of $55.1 million for the 13-week period ended October 28, 2017.
- 18489023_313Revenue - ProductThe sale of a business can result in the recognition of a gain or loss that differs from that anticipated prior to closing.
- 18489023_241Other - Other(6) Represents the minimum rents payable under operating leases, excluding common area maintenance, insurance or tax payments, for which we are also obligated, offset by minimum subtenant rentals of $95.7 million total, $19.2 million, $21.1 million, $27.5 million, $11.1 million and $16.8 million, respectively.
- 18489023_139Financial - DebtThe Company had $1,327.3 million of ABL Loans as of October 27, 2018, which are presented net of debt issuance costs of $11.9 million and are included in Notes payable in the Condensed Consolidated Balance Sheet.
- 18489023_124Financial - Cash FlowOur continued access to short-term and long-term financing through credit markets depends on numerous factors including the condition of the credit markets and our results of operations, cash flows, financial position and credit ratings.
- 18489023_67Other - OtherSupervalu has provided back-office administrative support services under transition services agreements ("TSA") with New Albertson?s, Inc. ("NAI") and Albertson?s LLC and also provide services as needed to transition and wind down the TSA with NAI and Albertson?s LLC.
- 18489023_210Other - OtherGuarantees We have outstanding guarantees and are contingently liable under other contractual arrangements.
- 18489023_79Revenue - ProductThe increase in net sales in this channel is primarily due to growth in our wholesale division, which includes our broadline distribution business.
- 18489023_81Revenue - ProductThe increase in net sales in this channel is primarily due to growth in our wholesale division, which includes our broadline distribution business.
- 18489023_142Financial - EarningsThe borrowings of the U.S. Borrowers under the ABL Credit Facility bear interest at rates that, at the U.S. Borrowers? option, can be either: (i) a base rate and an applicable margin, or (ii) a LIBOR rate and an applicable margin.
- 18489023_48Financial - ExpenseAt this time, however, we are unable to make a reasonable estimate of the amount or type of costs and charges expected to be incurred in connection with the foregoing actions.
- 18489023_64Revenue - ProductIn connection with the sale of Save-A-Lot on December 5, 2016, Supervalu entered into a services agreement (the "Services Agreement") with Moran Foods, LLC ("Moran Foods"), the entity that operates the Save-A-Lot business.
- 18489023_148Financial - EarningsThe Borrowers are also required to pay a letter of credit fronting fee to each letter of credit issuer equal to 0.125% per annum of the amount available to be drawn under each such letter of credit, as well as a fee to all lenders equal to the applicable margin for LIBOR or Canadian dollar bankers? acceptance equivalent rate loans, as applicable, times the average daily amount available to be drawn under all outstanding letters of credit.
- 18489023_216Other - OtherThese multiemployer plans generally provide retirement benefits to participants based on their service to contributing employers.
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- Form Type: Quarterly
- Number of times amended: 0
- Accession Number: 0001020859-18-000142
- Submitted to the SEC: Thursday, December 6, 2018 5:06:07 PM EST
- Accepted by the SEC: Thursday, December 6, 2018
- Period ending: October 2018
- Industry: Wholesale Groceries General Line
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UNITED NATURAL FOODS INC
Intrinsic Value, Financial Stability and Ratios