Delaware | 05-0376157 | |
(State or Other Jurisdiction of | (I.R.S. Employer Identification No.) | |
Incorporation or Organization) |
313 Iron Horse Way, Providence, RI | 02908 | |
(Address of Principal Executive Offices) | (Zip Code) |
Large accelerated filer X | Accelerated filer _ | |
Non-accelerated filer _ | Smaller reporting company _ | |
(Do not check if a smaller reporting company) |
October 29, 2016 | July 30, 2016 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 13,556 | $ | 18,593 | ||||
Accounts receivable, less allowances of $9,915 and $9,638 | 534,322 | 489,708 | ||||||
Inventories | 1,077,931 | 1,021,663 | ||||||
Deferred income taxes | 35,219 | 35,228 | ||||||
Prepaid expenses and other current assets | 43,530 | 45,998 | ||||||
Total current assets | 1,704,558 | 1,611,190 | ||||||
Property & equipment, net | 608,296 | 616,605 | ||||||
Goodwill | 375,226 | 366,168 | ||||||
Intangible assets, less accumulated amortization of $37,801 and $34,315 | 219,467 | 222,314 | ||||||
Other assets | 35,494 | 35,878 | ||||||
Total assets | $ | 2,943,041 | $ | 2,852,155 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 514,362 | $ | 445,430 | ||||
Accrued expenses and other current liabilities | 156,741 | 162,438 | ||||||
Current portion of long-term debt | 11,919 | 11,854 | ||||||
Total current liabilities | 683,022 | 619,722 | ||||||
Notes payable | 421,241 | 426,519 | ||||||
Deferred income taxes | 96,227 | 95,220 | ||||||
Other long-term liabilities | 28,926 | 29,451 | ||||||
Long-term debt, excluding current portion | 161,138 | 161,739 | ||||||
Total liabilities | 1,390,554 | 1,332,651 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, par value $0.01 per share, authorized 5,000 shares; issued none | — | — | ||||||
Common stock, par value $0.01 per share, authorized 100,000 shares; issued and outstanding 50,581 and 50,383 | 506 | 504 | ||||||
Additional paid-in capital | 440,237 | 436,167 | ||||||
Accumulated other comprehensive loss | (22,685 | ) | (22,379 | ) | ||||
Retained earnings | 1,134,429 | 1,105,212 | ||||||
Total stockholders’ equity | 1,552,487 | 1,519,504 | ||||||
Total liabilities and stockholders’ equity | $ | 2,943,041 | $ | 2,852,155 |
13-Week Period Ending | ||||||||
October 29, 2016 | October 31, 2015 | |||||||
Net sales | $ | 2,278,364 | $ | 2,076,649 | ||||
Cost of sales | 1,929,348 | 1,762,712 | ||||||
Gross profit | 349,016 | 313,937 | ||||||
Operating expenses | 295,677 | 257,224 | ||||||
Restructuring and asset impairment expenses | — | 2,809 | ||||||
Total operating expenses | 295,677 | 260,033 | ||||||
Operating income | 53,339 | 53,904 | ||||||
Other expense (income): | ||||||||
Interest expense | 4,522 | 3,748 | ||||||
Interest income | (99 | ) | (152 | ) | ||||
Other expense (income), net | 383 | 173 | ||||||
Total other expense, net | 4,806 | 3,769 | ||||||
Income before income taxes | 48,533 | 50,135 | ||||||
Provision for income taxes | 19,316 | 20,004 | ||||||
Net income | $ | 29,217 | $ | 30,131 | ||||
Basic per share data: | ||||||||
Net income | $ | 0.58 | $ | 0.60 | ||||
Weighted average basic shares of common stock outstanding | 50,475 | 50,194 | ||||||
Diluted per share data: | ||||||||
Net income | $ | 0.58 | $ | 0.60 | ||||
Weighted average diluted shares of common stock outstanding | 50,599 | 50,313 |
13-Week Period Ending | ||||||||
October 29, 2016 | October 31, 2015 | |||||||
Net income | $ | 29,217 | $ | 30,131 | ||||
Other comprehensive income (loss): | ||||||||
Change in fair value of swap agreements, net of tax | 1,595 | (990 | ) | |||||
Foreign currency translation adjustments | (1,901 | ) | 61 | |||||
Total other comprehensive loss | (306 | ) | (929 | ) | ||||
Total comprehensive income | $ | 28,911 | $ | 29,202 |
Common Stock | Additional Paid in Capital | Accumulated Other Comprehensive (Loss) Income | Retained Earnings | Total Stockholders’ Equity | |||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||
Balances at July 30, 2016 | 50,383 | $ | 504 | $ | 436,167 | $ | (22,379 | ) | $ | 1,105,212 | $ | 1,519,504 | |||||||||||
Stock option exercises and restricted stock vestings, net of tax | 198 | 2 | (1,162 | ) | (1,160 | ) | |||||||||||||||||
Share-based compensation | 6,653 | 6,653 | |||||||||||||||||||||
Tax deficit associated with stock plans | (1,421 | ) | (1,421 | ) | |||||||||||||||||||
Fair value of swap agreements, net of tax | 1,595 | 1,595 | |||||||||||||||||||||
Foreign currency translation | (1,901 | ) | (1,901 | ) | |||||||||||||||||||
Net income | 29,217 | 29,217 | |||||||||||||||||||||
Balances at October 29, 2016 | 50,581 | $ | 506 | $ | 440,237 | $ | (22,685 | ) | $ | 1,134,429 | 1,552,487 |
13-Week Period Ended | ||||||||
(In thousands) | October 29, 2016 | October 31, 2015 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 29,217 | $ | 30,131 | ||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||
Depreciation and amortization | 21,215 | 16,704 | ||||||
Share-based compensation | 6,653 | 5,973 | ||||||
Loss on disposals of property and equipment | 265 | 194 | ||||||
Excess tax deficit (benefit) from share-based payment arrangements | 1,421 | (414 | ) | |||||
Provision for doubtful accounts | 626 | 3,207 | ||||||
Non-cash interest income | (96 | ) | (102 | ) | ||||
Changes in assets and liabilities, net of acquired businesses: | ||||||||
Accounts receivable | (43,272 | ) | (19,866 | ) | ||||
Inventories | (55,127 | ) | (100,387 | ) | ||||
Prepaid expenses and other assets | 1,581 | 4,455 | ||||||
Accounts payable | 33,913 | 58,395 | ||||||
Accrued expenses and other liabilities | (3,651 | ) | 7,202 | |||||
Net cash (used in) provided by operating activities | (7,255 | ) | 5,492 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Capital expenditures | (9,198 | ) | (7,588 | ) | ||||
Purchases of acquired businesses, net of cash acquired | (10,074 | ) | (17 | ) | ||||
Net cash used in investing activities | (19,272 | ) | (7,605 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Repayments of long-term debt | (367 | ) | (2,890 | ) | ||||
Proceeds from borrowings under revolving credit line | 94,356 | 122,650 | ||||||
Repayments of borrowings under revolving credit line | (99,408 | ) | (169,591 | ) | ||||
Increase in bank overdraft | 29,787 | 47,084 | ||||||
Proceeds from exercise of stock options | — | 921 | ||||||
Payment of employee restricted stock tax withholdings | (1,160 | ) | (1,576 | ) | ||||
Excess tax (deficit) benefit from share-based payment arrangements | (1,421 | ) | 414 | |||||
Capitalized debt issuance costs | (180 | ) | — | |||||
Net cash provided by (used in) financing activities | 21,607 | (2,988 | ) | |||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH | (117 | ) | 14 | |||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (5,037 | ) | (5,087 | ) | ||||
Cash and cash equivalents at beginning of period | 18,593 | 17,380 | ||||||
Cash and cash equivalents at end of period | $ | 13,556 | $ | 12,293 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid for interest | $ | 4,522 | $ | 4,354 | ||||
Cash paid for federal and state income taxes, net of refunds | $ | 2,873 | $ | 1,768 |
(in thousands) | Preliminary as of July 30, 2016 | Adjustments in Current Fiscal Year | Preliminary as of October 29, 2016 | ||||||||
Accounts receivable | $ | 40,434 | $ | (300 | ) | $ | 40,134 | ||||
Other receivable | 3,621 | — | 3,621 | ||||||||
Inventories | 46,138 | 302 | 46,440 | ||||||||
Prepaid expenses and other current assets | 1,645 | — | 1,645 | ||||||||
Property and equipment | 54,501 | — | 54,501 | ||||||||
Other assets | 280 | — | 280 | ||||||||
Customer relationships | 62,700 | — | 62,700 | ||||||||
Tradename | 700 | — | 700 | ||||||||
Non-compete | 700 | — | 700 | ||||||||
Other intangible assets | 2,000 | — | 2,000 | ||||||||
Goodwill | 45,851 | (2 | ) | 45,849 | |||||||
Total assets | $ | 258,570 | $ | — | $ | 258,570 | |||||
Liabilities | 39,510 | — | 39,510 | ||||||||
Total purchase price | $ | 219,060 | $ | — | $ | 219,060 |
Restructuring Costs | Cash Payments | Restructuring Cost Liability as of October 29, 2016 | ||||||||||
Severance | $ | 3,443 | $ | (3,365 | ) | $ | 78 | |||||
Early lease termination and facility closing costs | 368 | (368 | ) | — | ||||||||
Operational transfer costs | 570 | (570 | ) | — | ||||||||
Earth Origins: | ||||||||||||
Severance | 41 | (13 | ) | 28 | ||||||||
Store closing costs | 443 | (271 | ) | 172 | ||||||||
Total | $ | 4,865 | $ | (4,587 | ) | $ | 278 |
13-Week Period Ended | ||||||
October 29, 2016 | October 31, 2015 | |||||
Basic weighted average shares outstanding | 50,475 | 50,194 | ||||
Net effect of dilutive stock awards based upon the treasury stock method | 124 | 119 | ||||
Diluted weighted average shares outstanding | 50,599 | 50,313 |
Maturity Date of Swap | Notional Value (in millions) | Fixed Coupon Rate on Hedged Debt | Floating Interest Rate on Swap | Floating Rate Reset Terms | |||||||
August 3, 2022 | $ | 140.0 | 1.7950 | % | One-Month LIBOR | Monthly | |||||
June 9, 2019 | $ | 50.0 | 0.8725 | % | One-Month LIBOR | Monthly | |||||
April 29, 2021 | $ | 25.0 | 1.0650 | % | One-Month LIBOR | Monthly | |||||
June 24, 2019 | $ | 50.0 | 0.7265 | % | One-Month LIBOR | Monthly | |||||
April 29, 2021 | $ | 25.0 | 0.9260 | % | One-Month LIBOR | Monthly |
Fair Value at October 29, 2016 | Fair Value at July 30, 2016 | |||||||||||||||||||
(In thousands) | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | ||||||||||||||
Liabilities: | ||||||||||||||||||||
Interest Rate Swap | — | $ | (3,282 | ) | — | — | $ | (5,917 | ) | — |
October 29, 2016 | July 30, 2016 | |||||||||||||||
(In thousands) | Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||
Liabilities: | ||||||||||||||||
Long-term debt, including current portion | $ | 173,057 | $ | 181,463 | $ | 173,593 | $ | 182,790 |
Wholesale | Other | Eliminations | Unallocated | Consolidated | ||||||||||||||||
13-Week Period Ended October 29, 2016: | ||||||||||||||||||||
Net sales | $ | 2,260,900 | $ | 57,740 | $ | (40,276 | ) | $ | — | $ | 2,278,364 | |||||||||
Restructuring and asset impairment expenses | — | — | — | — | — | |||||||||||||||
Operating income (loss) | 58,663 | (5,168 | ) | (156 | ) | — | 53,339 | |||||||||||||
Interest expense | — | — | — | 4,522 | 4,522 | |||||||||||||||
Interest income | — | — | — | (99 | ) | (99 | ) | |||||||||||||
Other, net | — | — | — | 383 | 383 | |||||||||||||||
Income before income taxes | 48,533 | |||||||||||||||||||
Depreciation and amortization | 20,691 | 524 | — | — | 21,215 | |||||||||||||||
Capital expenditures | 8,355 | 843 | — | — | 9,198 | |||||||||||||||
Goodwill | 357,201 | 18,025 | — | — | 375,226 | |||||||||||||||
Total assets | 2,771,800 | 198,915 | (27,674 | ) | — | 2,943,041 | ||||||||||||||
13-Week Period Ended October 31, 2015: | ||||||||||||||||||||
Net sales | $ | 2,059,622 | $ | 57,807 | $ | (40,780 | ) | $ | — | $ | 2,076,649 | |||||||||
Restructuring and asset impairment expenses | 2,809 | — | — | — | 2,809 | |||||||||||||||
Operating income (loss) | 60,313 | (4,920 | ) | (1,489 | ) | — | 53,904 | |||||||||||||
Interest expense | — | — | — | 3,748 | 3,748 | |||||||||||||||
Interest income | — | — | — | (152 | ) | (152 | ) | |||||||||||||
Other, net | — | — | — | 173 | 173 | |||||||||||||||
Income before income taxes | 50,135 | |||||||||||||||||||
Depreciation and amortization | 16,083 | 621 | — | — | 16,704 | |||||||||||||||
Capital expenditures | 7,122 | 466 | — | — | 7,588 | |||||||||||||||
Goodwill | 248,929 | 17,731 | — | — | 266,660 | |||||||||||||||
Total assets | 2,485,086 | 189,442 | (24,343 | ) | — | 2,650,185 |
October 29, 2016 | July 30, 2016 | ||||||
Accrued salaries and employee benefits | $ | 45,400 | $ | 58,832 | |||
Workers' compensation and automobile liabilities | 23,354 | 23,448 | |||||
Interest rate swap liability | 3,282 | 5,917 | |||||
Other | 84,705 | 74,241 | |||||
Total accrued expenses and other current liabilities | $ | 156,741 | $ | 162,438 |
• | our ability to retain customers of Haddon House Food Products, Inc. ("Haddon"), Nor-Cal Produce, Inc. ("Nor-Cal"), Global Organic/Specialty Source, Inc. ("Global Organic") and Gourmet Guru, Inc. ("Gourmet Guru") and their affiliated entities of which we purchased on terms similar to those in place prior to our acquisition of these businesses; |
• | our ability to reduce our expenses in amounts sufficient to offset our increased focus on sales to conventional supermarkets and the shift in our product mix as a result of our acquisition of Tony's Fine Foods ("Tony's") and the resulting lower gross margins on those sales; |
• | our reliance on the continued growth in sales of natural and organic foods and non-food products in comparison to conventional products; |
• | increased competition in our industry as a result of increased distribution of natural, organic and specialty products by conventional grocery distributors and direct distribution of those products by large retailers; |
• | our ability to timely and successfully deploy our warehouse management system throughout our distribution centers and our transportation management system across the Company; |
• | the ability to identify and successfully complete acquisitions of other natural, organic and specialty food and non-food products distributors; |
• | our ability to successfully deploy our operational initiatives to achieve synergies from the acquisitions of Tony's, Global Organic, Nor-Cal, Haddon, and Gourmet Guru. |
• | our wholesale division, which includes: |
◦ | our broadline natural, organic and specialty distribution business in the United States; |
◦ | UNFI Canada, Inc. ("UNFI Canada"), which is our natural, organic and specialty distribution business in Canada; |
◦ | Tony's, which is a leading distributor of a wide array of specialty protein, cheese, deli, food service and bakery goods, principally throughout the Western United States; |
◦ | Albert's, which is a leading distributor of organically grown produce and non-produce perishable items within the United States; |
◦ | Nor-Cal, a distributor of organic and conventional produce and non-produce perishable items in Northern California; |
◦ | Haddon, a distributor and merchandiser of natural and organic specialty and gourmet ethnic products throughout the Eastern United States; and |
◦ | Select Nutrition, which distributes vitamins, minerals and supplements. |
• | our retail division, consisting of Earth Origins, which operates our eleven natural products retail stores within the United States; and |
• | our manufacturing and branded products divisions, consisting of: |
◦ | Woodstock Farms Manufacturing, which specializes in importing, roasting, packaging and the distribution of nuts, dried fruit, seeds, trail mixes, granola, natural and organic snack items and confections; and |
◦ | our Blue Marble Brands branded product lines. |
• | expand our marketing and customer service programs across regions; |
• | expand our national purchasing opportunities; |
• | offer a broader product selection than our competitors; |
• | offer operational excellence with high service levels and a higher percentage of on-time deliveries than our competitors; |
• | centralize general and administrative functions to reduce expenses; |
• | consolidate systems applications among physical locations and regions; |
• | increase our investment in people, facilities, equipment and technology; |
• | integrate administrative and accounting functions; and |
• | reduce the geographic overlap between regions. |
13-Week Period Ended | |||||||
October 29, 2016 | October 31, 2015 | ||||||
Net sales | 100.0 | % | 100.0 | % | |||
Cost of sales | 84.7 | % | 84.9 | % | |||
Gross profit | 15.3 | % | 15.1 | % | |||
Operating expenses | 13.0 | % | 12.4 | % | |||
Restructuring and asset impairment expenses | — | % | 0.1 | % | |||
Total operating expenses | 13.0 | % | 12.5 | % | |||
Operating income | 2.3 | % | 2.6 | % | |||
Other expense (income): | |||||||
Interest expense | 0.2 | % | 0.2 | % | |||
Interest income | — | % | — | % | |||
Other, net | — | % | — | % | |||
Total other expense, net | 0.2 | % | 0.2 | % | |||
Income before income taxes | 2.1 | % | 2.4 | % | |||
Provision for income taxes | 0.8 | % | 1.0 | % | |||
Net income | 1.3 | % | 1.5 | % | * |
Net Sales for the 13-Week Period Ended | |||||||||||||||
Customer Type | October 29, 2016 | % of Net Sales | October 31, 2015 | % of Net Sales | |||||||||||
Supernatural chains | $ | 747 | 33 | % | $ | 713 | 34 | % | |||||||
Independently owned natural products retailers | 622 | 27 | % | 566 | 27 | % | |||||||||
Conventional supermarkets | 652 | 29 | % | 575 | 28 | % | |||||||||
Other | 257 | 11 | % | 223 | 11 | % | |||||||||
Total | $ | 2,278 | 100 | % | $ | 2,077 | 100 | % |
Exhibit No. | Description | |
10.1+ | Employment Agreement, dated as of October 28, 2016, by and among United Natural Foods, Inc., and Steven L. Spinner (incorporated by reference to the Registrant’s Current Report on Form 8-K, filed on November 2, 2016 (File No. 1-15723)). | |
10.2+ | Form of Restricted Share Unit Award Agreement pursuant to the Company’s Amended and Restated 2012 Equity Incentive Plan (incorporated by reference to the Registrant’s Current Report on Form 8-K, filed on November 2, 2016 (File No. 1-15723)). | |
10.3+ | Form of Restricted Share Unit Award Agreement pursuant to the Company’s Amended and Restated 2012 Equity Incentive Plan (incorporated by reference to the Registrant’s Current Report on Form 8-K, filed on November 2, 2016 (File No. 1-15723)). | |
10.4+ | Form of Performance-Based Vesting Restricted Share Unit Award Agreement pursuant to the Company’s Amended and Restated 2012 Equity Incentive Plan (incorporated by reference to the Registrant’s Current Report on Form 8-K, filed on November 2, 2016 (File No. 1-15723)). | |
10.5+ | Form of Performance-Based Vesting Restricted Share Unit Award Agreement pursuant to the Company’s Amended and Restated 2012 Equity Incentive Plan (incorporated by reference to the Registrant’s Current Report on Form 8-K, filed on November 2, 2016 (File No. 1-15723)). | |
10.6+ | Fiscal 2017 Senior Management Annual Cash Incentive Plan (incorporated by reference to the Registrant’s Current Report on Form 8-K, filed on November 2, 2016 (File No. 1-15723)). | |
31.1* | Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2* | Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1* | Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2* | Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101* | The following materials from the United Natural Foods, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended October 29, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statement of Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements. |
United Natural Foods, Inc. |
Investor Relations |
313 Iron Horse Way |
Providence, RI 02908 |
UNITED NATURAL FOODS, INC. | |
/s/ Michael P. Zechmeister | |
Michael P. Zechmeister | |
Chief Financial Officer | |
(Principal Financial and Accounting Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of United Natural Foods, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Steven L. Spinner | |
Steven L. Spinner | |
Chief Executive Officer | |
Note: | A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. |
1. | I have reviewed this quarterly report on Form 10-Q of United Natural Foods, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Michael P. Zechmeister | |
Michael P. Zechmeister | |
Chief Financial Officer | |
Note: | A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. |
/s/ Steven L. Spinner | |
Steven L. Spinner | |
Chief Executive Officer | |
December 8, 2016 |
Note: | A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. |
/s/ Michael P. Zechmeister | |
Michael P. Zechmeister | |
Chief Financial Officer | |
December 8, 2016 |
Note: | A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. |
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Document and Entity Information - shares |
3 Months Ended | |
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Oct. 29, 2016 |
Dec. 01, 2016 |
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Document and Entity Information | ||
Entity Registrant Name | UNITED NATURAL FOODS INC | |
Entity Central Index Key | 0001020859 | |
Current Fiscal Year End Date | --07-29 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Oct. 29, 2016 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 50,584,496 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands |
Oct. 29, 2016 |
Jul. 30, 2016 |
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Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance (in dollars) | $ 9,915 | $ 9,638 |
Intangible assets, accumulated amortization (in dollars) | $ 37,801 | $ 34,315 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, authorized shares | 5,000 | 5,000 |
Preferred stock, issued shares | 0 | 0 |
Preferred stock, outstanding shares | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized shares | 100,000 | 100,000 |
Common stock, issued shares | 50,581 | 50,383 |
Common stock, outstanding shares | 50,581 | 50,383 |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |
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Oct. 29, 2016 |
Oct. 31, 2015 |
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Income Statement [Abstract] | ||
Net sales | $ 2,278,364 | $ 2,076,649 |
Cost of sales | 1,929,348 | 1,762,712 |
Gross profit | 349,016 | 313,937 |
Operating expenses | 295,677 | 257,224 |
Restructuring and asset impairment expenses | 0 | 2,809 |
Total operating expenses | 295,677 | 260,033 |
Operating income | 53,339 | 53,904 |
Other expense (income): | ||
Interest expense | 4,522 | 3,748 |
Interest income | (99) | (152) |
Other expense (income), net | 383 | 173 |
Total other expense, net | 4,806 | 3,769 |
Income before income taxes | 48,533 | 50,135 |
Provision for income taxes | 19,316 | 20,004 |
Net income | $ 29,217 | $ 30,131 |
Basic per share data: | ||
Net income (usd per share) | $ 0.58 | $ 0.60 |
Weighted average basic shares of common stock outstanding | 50,475 | 50,194 |
Diluted per share data: | ||
Net income (usd per share) | $ 0.58 | $ 0.60 |
Weighted average diluted shares of common stock outstanding | 50,599 | 50,313 |
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - USD ($) $ in Thousands |
3 Months Ended | |
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Oct. 29, 2016 |
Oct. 31, 2015 |
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Statement of Comprehensive Income [Abstract] | ||
Net income | $ 29,217 | $ 30,131 |
Other comprehensive income (loss): | ||
Fair value of swap agreements, net of tax | 1,595 | (990) |
Foreign currency translation adjustments | (1,901) | 61 |
Total other comprehensive loss | (306) | (929) |
Total comprehensive income | $ 28,911 | $ 29,202 |
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - 3 months ended Oct. 29, 2016 - USD ($) shares in Thousands, $ in Thousands |
Total |
Common Stock |
Additional Paid in Capital |
Accumulated Other Comprehensive (Loss) Income |
Retained Earnings |
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Beginning Balance (shares) at Jul. 30, 2016 | 50,383 | 50,383 | |||
Beginning Balance at Jul. 30, 2016 | $ 1,519,504 | $ 504 | $ 436,167 | $ (22,379) | $ 1,105,212 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Stock option exercises and restricted stock vestings, net of tax | 198 | ||||
Stock option exercises and restricted stock vestings, net of tax | (1,160) | $ 2 | (1,162) | ||
Share-based compensation | 6,653 | 6,653 | |||
Tax deficit associated with stock plans | (1,421) | (1,421) | |||
Fair value of swap agreements, net of tax | 1,595 | 1,595 | |||
Foreign currency translation adjustments | (1,901) | (1,901) | |||
Net income | $ 29,217 | 29,217 | |||
Ending Balance (shares) at Oct. 29, 2016 | 50,581 | 50,581 | |||
Ending Balance at Oct. 29, 2016 | $ 1,552,487 | $ 506 | $ 440,237 | $ (22,685) | $ 1,134,429 |
SIGNIFICANT ACCOUNTING POLICIES |
3 Months Ended |
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Oct. 29, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
SIGNIFICANT ACCOUNTING POLICIES | SIGNIFICANT ACCOUNTING POLICIES (a) Nature of Business United Natural Foods, Inc. and its subsidiaries (the “Company”) is a leading distributor and retailer of natural, organic and specialty products. The Company sells its products primarily throughout the United States and Canada. (b) Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") for interim financial information, including the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and note disclosures normally required in complete financial statements prepared in conformity with accounting principles generally accepted in the United States have been condensed or omitted. In the Company’s opinion, these condensed consolidated financial statements include all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for interim periods, however, may not be indicative of the results that may be expected for a full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 30, 2016. Net sales consist primarily of sales of natural, organic and specialty products to retailers, adjusted for customer volume discounts, returns and allowances. Net sales also include amounts charged by the Company to customers for shipping and handling and fuel surcharges. The principal components of cost of sales include the amounts paid to manufacturers and growers for product sold, plus the cost of transportation necessary to bring the product to the Company’s distribution facilities. Cost of sales also includes amounts incurred by the Company’s manufacturing subsidiary, United Natural Trading LLC, which does business as Woodstock Farms Manufacturing, for inbound transportation costs and depreciation of manufacturing equipment offset by consideration received from suppliers in connection with the purchase or promotion of the suppliers’ products. Operating expenses include salaries and wages, employee benefits, warehousing and delivery, selling, occupancy, insurance, administrative, share-based compensation and amortization expense. Operating expenses also include depreciation expense related to the wholesale and retail divisions. Other expense (income) includes interest on outstanding indebtedness, interest income and miscellaneous income and expenses. As noted above, the Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with inbound freight are generally recorded in cost of sales, whereas shipping and handling costs for selecting, quality assurance, and outbound transportation are recorded in operating expenses. Outbound shipping and handling costs, including allocated employee benefit expenses, totaled $126.9 million and $114.5 million for the first quarter of fiscal 2017 and 2016, respectively. |
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS |
3 Months Ended |
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Oct. 29, 2016 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which is intended to improve the accounting for share-based payment transactions as part of the FASB's simplification initiative. This ASU will change aspects of accounting for share-based payment award transactions including accounting for income taxes, the classification of excess tax benefits and the classification of employee taxes paid when shares are withheld for tax-withholding purposes on the statement of cash flows, forfeitures, and minimum statutory tax withholding requirements. The ASU is effective for public companies with interim periods and fiscal years beginning after December 15, 2016, which for the Company will be the first quarter of the fiscal year ending July 28, 2018. Early adoption is permitted provided that the entire ASU is adopted. The Company has not yet adopted this standard, but if the Company had adopted this standard in the first quarter of fiscal 2017, the result would have been a reclassification from additional paid-in capital to income tax expense. For the first quarter of fiscal 2017 and 2016, the result would have increased current year income tax expense by $1.4 million and $0.2 million, respectively. In February 2016, the FASB issued ASU No. 2016-2, Leases (Topic 842). The objective of this ASU is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. Lessees are permitted to make an accounting policy election to not recognize the asset and liability for leases with a term of twelve months or less. In addition, this ASU expands the disclosure requirements of lease arrangements. Lessees and lessors will use a modified retrospective transition approach, which includes a number of practical expedients. The ASU is effective for public companies with interim and annual periods in fiscal years beginning after December 15, 2018, which for the Company will be the first quarter of the fiscal year ending August 1, 2020, with early adoption permitted. We are currently reviewing the provisions of the new standard and evaluating its impact on the Company's financial statements. In January 2016, the FASB issued ASU No. 2016-1, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities, which will change the income statement impact of equity investments, and the recognition of changes in fair value of financial liabilities when the fair value option is elected. The ASU is effective for public companies with interim and annual periods in fiscal years beginning after December 15, 2017, which for the Company will be the first quarter of the fiscal year ending August 3, 2019. We do not expect the adoption of this guidance to have a significant impact on the Company’s consolidated financial statements. In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which requires entities with a classified balance sheet to present all deferred tax assets and liabilities as noncurrent. The new pronouncement is effective for public companies with annual periods, and interim periods within those periods, beginning after December 15, 2016, which for the Company will be the first quarter of fiscal 2018. Early adoption at the beginning of an interim or annual period is permitted. The Company expects to adopt this new guidance in fiscal year 2018. If the Company had adopted this standard in the first quarter of fiscal 2017, the result would have been a reclassification from current deferred income tax assets to noncurrent deferred income tax liabilities of $35.2 million as of October 29, 2016 and July 30, 2016. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers, (Topic 606): Deferral of the Effective Date deferring the adoption of previously issued guidance published in May 2014, ASU No. 2014-09, Revenue from Contracts with Customers, (Topic 606). The core principle of the new guidance is that an entity will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies the implementation guidance on principal versus agent considerations. The collective guidance is effective for public companies with annual periods, and interim periods within those periods, beginning after December 15, 2017, which for the Company will be the first quarter of the fiscal year ending August 3, 2019. The Company expects to adopt this new guidance in fiscal year 2019 but has not yet selected a transition method. We are in the process of evaluating the impact of the pending adoption of this guidance on the Company's financial reporting. |
ACQUISITIONS ACQUISITIONS (Notes) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACQUISITIONS [Text Block] | ACQUISITIONS Wholesale Segment - Wholesale Distribution Acquisitions Nor-Cal Produce, Inc. On March 31, 2016 the Company acquired all of the outstanding equity securities of Nor-Cal Produce, Inc. ("Nor-Cal") and an affiliated entity as well as certain real estate. Founded in 1972, Nor-Cal is a distributor of conventional and organic produce and other fresh products in Northern California, with primary operations located in West Sacramento, California. Total cash consideration related to this acquisition was approximately $68.6 million, subject to certain customary post-closing adjustments. The identifiable intangible assets recorded based on provisional valuations include customer lists of $30.3 million, a tradename with an estimated fair value of $1.0 million, and a non-compete with an estimated fair value of $0.5 million, which are being amortized on a straight-line basis over estimated useful lives of approximately thirteen years, five years, and five years, respectively. The preliminary fair value of the identifiable intangible assets acquired was determined by using an income approach. Significant assumptions utilized in the income approach were based on company-specific information and projections, which are not observable in the market and are thus considered Level 3 measurements as defined by authoritative guidance. The goodwill of $40.3 million represents the future economic benefits expected to arise that could not be individually identified and separately recognized. Nor-Cal's operations have been combined with the existing Albert's business. The Company is in the process of finalizing certain post-closing net working capital adjustments. The Company did not record adjustments to the preliminary opening balance sheet during the first quarter of fiscal 2017. Haddon House Food Products, Inc. On May 13, 2016 the Company acquired all of the outstanding equity interests of Haddon House Food Products, Inc. (“Haddon”) and certain affiliated entities and real estate. Haddon is a well-respected distributor and merchandiser of natural and organic and gourmet ethnic products throughout the Eastern United States. Haddon has a diverse, multi-channel customer base including conventional supermarkets, gourmet food stores and independently owned product retailers. Total consideration related to this acquisition was approximately $219.1 million, $217.5 million of which was paid in cash and $1.6 million of which was included in accounts payable as of October 29, 2016. The purchase price is subject to certain customary post-closing adjustments. The identifiable intangible assets recorded based on provisional valuations include customer relationships with an estimated fair value of $62.7 million, the Haddon tradename with an estimated fair value of $0.7 million, non-compete agreements with an estimated fair value of $0.7 million, and a trademark asset related to Haddon owned branded product lines with an estimated fair value of $2.0 million. The customer relationship intangible asset is currently being amortized on a straight-line basis over an estimated useful life of approximately thirteen years, the Haddon tradename is being amortized over an estimated useful life of approximately three years, the non-compete agreements that the Company received from the owners of Haddon are being amortized over the five-year term of the agreements, and the Haddon trademark asset associated with its branded product lines is estimated to have an indefinite useful life. The preliminary fair value of the identifiable intangible assets acquired was determined by using an income approach. Significant assumptions utilized in the income approach were based on company-specific information and projections, which are not observable in the market and are thus considered Level 3 measurements as defined by authoritative guidance. The goodwill of $45.8 million represents the future economic benefits expected to arise that could not be individually identified and separately recognized. The Company is in the process of finalizing certain post-closing net working capital adjustments, and has recorded adjustments in the current year. The following table summarizes the consideration paid for the acquisition and the amounts of assets acquired and liabilities assumed as of the acquisition date:
Gourmet Guru, Inc. On August 10, 2016, the Company acquired all of the outstanding stock of Gourmet Guru, Inc. ("Gourmet Guru"). Founded in 1996, Gourmet Guru is a distributor and merchandiser of fresh and organic food focusing on new and emerging brands. Total cash consideration related to this acquisition was approximately $10.1 million, subject to certain customary post-closing adjustments. The fair value of identifiable intangible assets acquired was determined by using an income approach. The identifiable intangible asset recorded based on a provisional valuation consisted of customer lists of $1.0 million, which are being amortized on a straight-line basis over an estimated useful life of approximately two years. The goodwill of $9.6 million represents the future economic benefits expected to arise that could not be individually identified and separately recognized. Gourmet Guru's operations have been combined with the Company's existing business; therefore, the Company does not record the expenses separately from the rest of the wholesale distribution business and results are not separable. Cash paid for Nor-Cal, Haddon and Gourmet Guru was financed through borrowings under the Company’s amended and restated revolving credit facility. Acquisition costs were de minimus for the quarter ended October 29, 2016 and have been expensed as incurred within "operating expenses" in the Condensed Consolidated Statements of Income. The results of the acquired businesses' operations have been included in the consolidated financial statements since the applicable date of acquisitions. |
RESTRUCTURING ACTIVITIES AND ASSET IMPAIRMENTS |
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Restructuring Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities Disclosure [Text Block] | RESTRUCTURING ACTIVITIES AND ASSET IMPAIRMENTS 2016 Cost-Saving Measures During the fourth quarter of fiscal 2015, the Company announced that its contract as a distributor to Albertsons Companies, Inc., which includes the Albertsons, Safeway and Eastern Supermarket chains, would terminate on September 20, 2015 rather than upon the original contract end date of July 31, 2016. During fiscal 2016, the Company implemented Company-wide cost-saving measures in response to this lost business which resulted in total restructuring costs of $4.4 million, all of which was recorded during the first and second quarters of fiscal 2016. There were no additional costs recorded during the first quarter of fiscal 2017. These initiatives resulted in a reduction of employees, the majority of which were terminated during the first quarter of fiscal 2016, across the Company. The total work-force reduction charge of $3.4 million recorded during fiscal 2016 was primarily related to severance and fringe benefits. In addition to workforce reduction charges, the Company recorded $0.9 million during fiscal 2016 for costs due to an early lease termination and facility closure and operational transfer costs associated with these initiatives. Earth Origins Market During the fourth quarter of fiscal 2016, the Company recorded restructuring and impairment charges of $0.8 million related to the Company's Earth Origins Market ("Earth Origins") retail business. The Company made the decision during the fourth quarter of fiscal 2016 to close two of its stores, one store located in Florida and the other located in Maryland, which resulted in restructuring costs of $0.5 million primarily related to severance and closure costs. The stores were closed during the first quarter of fiscal 2017. In addition, the restructuring charge includes an impairment charge of $0.3 million on long-lived assets which was recorded during the fourth quarter of fiscal 2016. Canadian Facility Closure During fiscal 2015, the Company ceased operations at its Canadian facility located in Scotstown, Quebec. In connection with this closure, the Company recognized restructuring and impairment charges of $0.8 million during the first and second quarters of fiscal 2015. Additionally, during the second quarter of fiscal 2016, the Company recognized an additional impairment charge of $0.4 million related to the long lived assets at the facility. The following is a summary of the restructuring costs the Company recorded in fiscal 2016, as well as the remaining liability as of October 29, 2016 (in thousands):
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EARNINGS PER SHARE |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS PER SHARE | EARNINGS PER SHARE The following is a reconciliation of the basic and diluted number of shares used in computing earnings per share (in thousands):
For the first quarters of fiscal 2017 and 2016, there were 48,808 and 50,453 anti-dilutive share-based awards outstanding, respectively. These anti-dilutive share-based awards were excluded from the calculation of diluted earnings per share. |
FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS | FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS Hedging of Interest Rate Risk The Company manages its debt portfolio with interest rate swaps from time to time to achieve an overall desired position of fixed and floating rates. Details of outstanding swap agreements as of October 29, 2016, which are all pay fixed and receive floating, are as follows:
Interest rate swap agreements are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures. The Company’s interest rate swap agreements are designated as cash flow hedges at October 29, 2016 and are reflected at their fair value of $3.3 million in the Condensed Consolidated Balance Sheet. The Company uses the “Hypothetical Derivative Method” described in Accounting Standards Codification ("ASC") 815 for quarterly prospective and retrospective assessments of hedge effectiveness, as well as for measurements of hedge ineffectiveness. Under this method, the Company assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged transactions. The effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income (outside of earnings) and subsequently reclassified to earnings in interest income when the hedged transactions affect earnings. Ineffectiveness resulting from the hedge is recorded as a gain or loss in the condensed consolidated statement of income as part of other income. The Company did not have any hedge ineffectiveness recognized in earnings during the first quarter of fiscal 2017. The Company also monitors the risk of counterparty default on an ongoing basis and noted that the counterparties are reputable financial institutions. Fuel Supply Agreements From time to time the Company is a party to fixed price fuel supply agreements. During the fiscal year ended July 30, 2016, the Company entered into several agreements to purchase a portion of its diesel fuel each month at fixed prices through December 31, 2016. These fixed price fuel agreements qualify for the "normal purchase" exception under ASC 815; therefore, the fuel purchases under these contracts are expensed as incurred and included within operating expenses. Financial Instruments The following table provides the fair value hierarchy for financial assets and liabilities measured on a recurring basis as of October 29, 2016 and July 30, 2016:
The fair value of the Company's other financial instruments including cash and cash equivalents, accounts receivable, notes receivable, accounts payable and certain accrued expenses are derived using Level 2 inputs and approximate carrying amounts due to the short-term nature of these instruments. The fair value of notes payable approximate carrying amounts as they are variable rate instruments. The carrying amount of notes payable approximates fair value as interest rates on the credit facility approximates current market rates (Level 2 criteria). The following estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies taking into account the instruments' interest rate, terms, maturity date and collateral, if any, in comparison to the Company's incremental borrowing rate for similar financial instruments and are therefore deemed Level 2 inputs. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
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BUSINESS SEGMENTS |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BUSINESS SEGMENTS | BUSINESS SEGMENTS The Company has several operating divisions aggregated under the wholesale segment, which is the Company’s only reportable segment. These operating divisions have similar products and services, customer channels, distribution methods and historical margins. The wholesale segment is engaged in the national distribution of natural, organic and specialty foods, produce and related products in the United States and Canada. The Company has additional operating divisions that do not meet the quantitative thresholds for reportable segments and are therefore aggregated under the caption of “Other.” “Other” includes a retail division, which engages in the sale of natural foods and related products to the general public through retail storefronts on the east coast of the United States, a manufacturing division, which engages in importing, roasting, packaging, and distributing of nuts, dried fruit, seeds, trail mixes, granola, natural and organic snack items and confections, and the Company’s branded product lines. “Other” also includes certain corporate operating expenses that are not allocated to operating divisions and are necessary to operate the Company’s headquarters located in Providence, Rhode Island, which include depreciation, salaries, retainers, and other related expenses of officers, directors, corporate finance (including professional services), information technology, governance, legal, human resources and internal audit. As the Company continues to expand its business and serve its customers through a new national platform, these corporate expense amounts have increased, which is the primary driver behind the increasing operating losses within the “Other” category below. Non-operating expenses that are not allocated to the operating divisions are under the caption of “Unallocated Expenses.” The Company does not record its revenues for financial reporting purposes by product group, and it is therefore impracticable for the Company to report them accordingly. Beginning in the first quarter of fiscal 2017, a change in how the Company's chief operating decision maker assesses performance and allocates resources resulted in a change in how the Company allocates certain corporate operating expenses in order to better support segment operations. Certain corporate operating expenses were previously reported under the caption of “Other.” The following table sets forth certain financial information for the Company's business segments. Prior year amounts have been reclassified to conform to current year presentation and include the impact of a change in the allocation of certain corporate operating expenses between the captions "Other" and "Wholesale." The amount reclassified is not considered to be material and is consistent with management's assessment of segment performance in fiscal 2017. The following table reflects business segment information for the periods indicated (in thousands):
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ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Notes) |
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ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Payable, Accrued Liabilities, and Other Liabilities Disclosure, Current [Text Block] | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities as of October 29, 2016 and July 30, 2016 consisted of the following (in thousands):
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NOTES PAYABLE (Notes) |
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Oct. 29, 2016 | |
Debt Disclosure [Abstract] | |
NOTES PAYABLE | NOTES PAYABLE On April 29, 2016, the Company entered into the Third Amended and Restated Loan and Security Agreement (the "Third A&R Credit Agreement") amending and restating certain terms and provisions of its revolving credit facility which increased the maximum borrowings under the amended and restated revolving credit facility and extended the maturity date to April 29, 2021. Up to $850.0 million is available to the Company's U.S. subsidiaries and up to $50.0 million is available to UNFI Canada. After giving effect to the Third A&R Credit Agreement, the amended and restated revolving credit facility provides an option to increase the U.S. or Canadian revolving commitments by up to an additional $600.0 million (but in not less than $10.0 million increments) subject to certain customary conditions and the lenders committing to provide the increase in funding. The borrowings of the U.S. portion of the amended and restated revolving credit facility, after giving effect to the Third A&R Credit Agreement, accrue interest, at the base rate plus an applicable margin of 0.25% or LIBOR rate plus an applicable margin of 1.25% for the twelve month period ending April 29, 2017. After this period, the interest on the U.S. borrowings is accrued at the Company's option, at either (i) a base rate (generally defined as the highest of (x) the Bank of America Business Capital prime rate, (y) the average overnight federal funds effective rate plus one-half percent (0.50%) per annum and (z) one-month LIBOR plus one percent (1%) per annum) plus an applicable margin that varies depending on daily average aggregate availability, or (ii) the LIBOR rate plus an applicable margin that varies depending on daily average aggregate availability. The borrowings on the Canadian portion of the credit facility accrue interest at the Canadian prime rate plus an applicable margin of 0.25% or a bankers' acceptance equivalent rate plus an applicable margin of 1.25% for the twelve month period ending April 29, 2017. After this period, the borrowings on the Canadian portion of the credit facility accrue interest, at the Company's option, at either (i) a Canadian prime rate (generally defined as the highest of (x) 0.50% over 30-day Reuters Canadian Deposit Offering Rate ("CDOR") for bankers' acceptances, (y) the prime rate of Bank of America, N.A.'s Canada branch, and (z) a bankers' acceptance equivalent rate for a one month interest period plus 1.00%) plus an applicable margin that varies depending on daily average aggregate availability, or (ii) a bankers' acceptance equivalent rate of the rate of interest per annum equal to the annual rates applicable to Canadian Dollar bankers' acceptances on the "CDOR Page" of Reuter Monitor Money Rates Service, plus five basis points, and an applicable margin that varies depending on daily average aggregate availability. Unutilized commitments are subject to an annual fee in the amount of 0.30% if the total outstanding borrowings are less than 25% of the aggregate commitments, or a per annum fee of 0.25% if such total outstanding borrowings are 25% or more of the aggregate commitments. The Company is also required to pay a letter of credit fronting fee to each letter of credit issuer equal to 0.125% per annum of the stated amount of each such letter of credit (or such other amount as may be mutually agreed by the borrowers under the facility and the applicable letter of credit issuer), as well as a fee to all lenders equal to the applicable margin for LIBOR or bankers’ acceptance equivalent rate loans, as applicable, times the average daily stated amount of all outstanding letters of credit. As of October 29, 2016, the Company's borrowing base, which is calculated based on eligible accounts receivable and inventory levels, net of $6.2 million of reserves, was $880.6 million. As of October 29, 2016, the Company had $421.2 million of borrowings outstanding under the Company's amended and restated revolving credit facility and $37.4 million in letter of credit commitments which reduced the Company's available borrowing capacity under its revolving credit facility on a dollar for dollar basis. The Company's resulting remaining availability was $421.9 million as of October 29, 2016. The amended and restated revolving credit facility, as amended by the Third A&R Credit Agreement, subjects the Company to a springing minimum fixed charge coverage ratio (as defined in the Third A&R Credit Agreement) of 1.0 to 1.0 calculated at the end of each of our fiscal quarters on a rolling four quarter basis when the adjusted aggregate availability (as defined in the Third A&R Credit Agreement) is less than the greater of (i) $60.0 million and (ii) 10% of the aggregate borrowing base. The Company was not subject to the fixed charge coverage ratio covenant under the amended and restated credit agreement during the first quarter of fiscal 2017. The credit facility also allows for the lenders thereunder to syndicate the credit facility to other banks and lending institutions. The Company has pledged the majority of its and its subsidiaries' accounts receivable and inventory for its obligations under the amended and restated revolving credit facility. |
LONG-TERM DEBT |
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Oct. 29, 2016 | |
Debt Disclosure [Abstract] | |
Long-term Debt | LONG-TERM DEBT On August 14, 2014, the Company and certain of its subsidiaries entered into a real estate backed term loan agreement (the "Term Loan Agreement"). The total initial borrowings under the Term Loan Agreement were $150.0 million. The Company is required to make $2.5 million principal payments quarterly, which began on November 1, 2014. Under the Term Loan Agreement, the Company at its option may request the establishment of one or more new term loan commitments in increments of at least $10.0 million, but not to exceed $50.0 million in total, subject to the approval of the lenders electing to participate in such incremental loans and the satisfaction of the conditions required by the Term Loan Agreement. The Company will be required to make quarterly principal payments on these incremental borrowings in accordance with the terms of the Term Loan Agreement. Proceeds from this Term Loan Agreement were used to pay down borrowings on the Company's amended and restated revolving credit facility. On April 29, 2016, the Company entered into a First Amendment Agreement (the “Term Loan Amendment”) to the Term Loan Agreement which amends the Term Loan Agreement. The Term Loan Amendment was entered into to reflect the changes to the amended and restated revolving credit facility reflected in the Amendment. The Term Loan Agreement will terminate on the earlier of (a) August 14, 2022 and (b) the date that is ninety days prior to the termination date of the Company’s amended and restated revolving credit agreement, as amended. Under the Term Loan Agreement, the borrowers at their option may request the establishment of one or more new term loan commitments in increments of at least $10.0 million, but not to exceed $50.0 million in total, subject to the approval of the lenders electing to participate in such incremental loans and the satisfaction of the conditions required by the Term Loan Agreement. The borrowers will be required to make quarterly principal payments on these incremental borrowings in accordance with the terms of the Term Loan Agreement. On September 1, 2016, the Company entered into a Second Amendment Agreement (the "Second Amendment") to the Term Loan Agreement which amends the Term Loan Agreement. The Second Amendment was entered into to adjust the applicable margin charged to borrowings under the Term Loan Agreement. As amended by the Second Amendment, borrowings under the Term Loan Agreement bear interest at rates that, at the Company's option, can be either: (1) a base rate generally defined as the sum of (i) the highest of (x) the administrative agent's prime rate, (y) the average overnight federal funds effective rate plus 0.50% and (z) one-month LIBOR plus one percent (1%) per annum and (ii) a margin of 0.75%; or, (2) a LIBOR rate generally defined as the sum of (i) LIBOR (as published by Reuters or other commercially available sources) for one, two, three or six months or, if approved by all affected lenders, nine months (all as selected by the Company), and (ii) a margin of 1.75%. Interest accrued on borrowings under the Term Loan Agreement is payable in arrears. Interest accrued on any LIBOR loan is payable on the last day of the interest period applicable to the loan and, with respect to any LIBOR loan of more than three (3) months, on the last day of every three (3) months of such interest period. Interest accrued on base rate loans is payable on the first day of every month. The Company is also required to pay certain customary fees to the administrative agent. The borrowers' obligations under the Term Loan Agreement are secured by certain parcels of the borrowers' real property. The Term Loan Agreement includes financial covenants that require (i) the ratio of the Company’s consolidated EBITDA (as defined in the Term Loan Agreement) minus the unfinanced portion of Capital Expenditures (as defined in the Term Loan Agreement) to the Company’s consolidated Fixed Charges (as defined in the 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 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 principal balance under the Loans (as defined in the Term Loan Agreement), divided by the Mortgaged Property Value (as defined in the Term Loan Agreement) to be not more than 75% at any time. As of October 29, 2016, the Company was in compliance with the financial covenants of its Term Loan Agreement. As of October 29, 2016, the Company had borrowings of $128.3 million under the Term Loan Agreement which is included in "Long-term debt" on the Condensed Consolidated Balance Sheet. During the fiscal year ended August 1, 2015, the Company entered into an amendment to an existing lease agreement for the office space utilized as the Company's corporate headquarters in Providence, Rhode Island. The amendment provides for additional office space to be utilized by the Company and extends the lease term for an additional 10 years. The lease qualifies for capital lease treatment pursuant to ASC 840, Leases, and the estimated fair value of the building is recorded on the balance sheet with the capital lease obligation included in long-term debt. A portion of each lease payment reduces the amount of the lease obligation, and a portion is recorded as interest expense at an effective rate of approximately 12.38%. The capital lease obligation as of October 29, 2016 was $13.5 million. The Company recorded $0.4 million of interest expense related to this lease during each of the first quarters of fiscal 2017 and 2016. During the fiscal year ended July 28, 2012, the Company entered into a lease agreement for a new distribution facility in Aurora, Colorado. At the conclusion of the fiscal year ended August 3, 2013, actual construction costs exceeded the construction allowance as defined by the lease agreement, and therefore, the Company determined it met the criteria for continuing involvement pursuant to FASB ASC 840, Leases, and applied the financing method to account for this transaction during the fourth quarter of fiscal 2013. Under the financing method, the book value of the distribution facility and related accumulated depreciation remains on the Condensed Consolidated Balance Sheet. The construction allowance is recorded as a financing obligation in "Long-term debt." A portion of each lease payment reduces the amount of the financing obligation, and a portion is recorded as interest expense at an effective rate of approximately 7.32%. The financing obligation as of October 29, 2016 was $31.2 million. The Company recorded $0.6 million of interest expense related to this lease during each of the first quarters of fiscal 2017 and 2016. |
SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Oct. 29, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | (b) Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") for interim financial information, including the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and note disclosures normally required in complete financial statements prepared in conformity with accounting principles generally accepted in the United States have been condensed or omitted. In the Company’s opinion, these condensed consolidated financial statements include all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for interim periods, however, may not be indicative of the results that may be expected for a full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 30, 2016. Net sales consist primarily of sales of natural, organic and specialty products to retailers, adjusted for customer volume discounts, returns and allowances. Net sales also include amounts charged by the Company to customers for shipping and handling and fuel surcharges. The principal components of cost of sales include the amounts paid to manufacturers and growers for product sold, plus the cost of transportation necessary to bring the product to the Company’s distribution facilities. Cost of sales also includes amounts incurred by the Company’s manufacturing subsidiary, United Natural Trading LLC, which does business as Woodstock Farms Manufacturing, for inbound transportation costs and depreciation of manufacturing equipment offset by consideration received from suppliers in connection with the purchase or promotion of the suppliers’ products. Operating expenses include salaries and wages, employee benefits, warehousing and delivery, selling, occupancy, insurance, administrative, share-based compensation and amortization expense. Operating expenses also include depreciation expense related to the wholesale and retail divisions. Other expense (income) includes interest on outstanding indebtedness, interest income and miscellaneous income and expenses. As noted above, the Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with inbound freight are generally recorded in cost of sales, whereas shipping and handling costs for selecting, quality assurance, and outbound transportation are recorded in operating expenses. Outbound shipping and handling costs, including allocated employee benefit expenses, totaled $126.9 million and $114.5 million for the first quarter of fiscal 2017 and 2016, respectively. |
ACQUISITIONS ACQUISITIONS (Tables) |
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Haddon House Food Products, Inc. [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block] | The Company is in the process of finalizing certain post-closing net working capital adjustments, and has recorded adjustments in the current year. The following table summarizes the consideration paid for the acquisition and the amounts of assets acquired and liabilities assumed as of the acquisition date:
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RESTRUCTURING ACTIVITIES AND ASSET IMPAIRMENTS RESTRUCTURING ACTIVITIES AND ASSET IMPAIRMENTS (Tables) |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Costs [Table Text Block] | The following is a summary of the restructuring costs the Company recorded in fiscal 2016, as well as the remaining liability as of October 29, 2016 (in thousands):
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EARNINGS PER SHARE (Tables) |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of reconciliation of the weighted average number of shares outstanding used in the computation of the basic and diluted earnings per share | The following is a reconciliation of the basic and diluted number of shares used in computing earnings per share (in thousands):
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FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Text Block] | Details of outstanding swap agreements as of October 29, 2016, which are all pay fixed and receive floating, are as follows:
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Fair Value, Assets and Liabilities Measured on Recurring Basis |
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Schedule of Carrying Values and Estimated Fair Values of Debt Instruments |
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BUSINESS SEGMENTS (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of business segment information | The following table reflects business segment information for the periods indicated (in thousands):
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ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued Expenses and Other Current Liabilities (Tables) |
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Oct. 29, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses and Other Current Liabilities [Table Text Block] | Accrued expenses and other current liabilities as of October 29, 2016 and July 30, 2016 consisted of the following (in thousands):
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SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Millions |
3 Months Ended | |
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Oct. 29, 2016 |
Oct. 31, 2015 |
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Significant Accounting Policies | ||
Total outbound shipping and handling costs | $ 126.9 | $ 114.5 |
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
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Oct. 29, 2016 |
Oct. 31, 2015 |
Jul. 30, 2016 |
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Recent Accounting Pronouncements [Abstract] | |||
Deferred income taxes | $ 35,219 | $ 35,228 | |
Adjustment to Additional Paid in Capital, Income Tax Effect from Share-based Compensation, Net | $ 1,400 | $ 200 |
EARNINGS PER SHARE (Details) - shares |
3 Months Ended | |
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Oct. 29, 2016 |
Oct. 31, 2015 |
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Reconciliation of the basic and diluted number of shares used in computing earnings per share: | ||
Basic weighted average shares outstanding | 50,475,000 | 50,194,000 |
Net effect of dilutive stock awards based upon the treasury stock method | 124,000 | 119,000 |
Diluted weighted average shares outstanding | 50,599,000 | 50,313,000 |
Anti-dilutive share-based payment awards outstanding (in shares) | 48,808 | 50,453 |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands |
Oct. 29, 2016 |
Jul. 30, 2016 |
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ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES [Abstract] | ||
Accrued salaries and employee benefits | $ 45,400 | $ 58,832 |
Workers' compensation and automobile liabilities | 23,354 | 23,448 |
Interest rate swap liability | 3,282 | 5,917 |
Other | 84,705 | 74,241 |
Accrued expenses and other current liabilities | $ 156,741 | $ 162,438 |