United Natural Foods, Inc. (Nasdaq: UNFI) has reported net income of $10.8 million, or $0.26 per diluted share, excluding special items, for the second quarter of fiscal 2006, ended January 28, 2006. Net income for the second quarter of fiscal 2006, including the effect of special items, was $10.6 million, or $0.25 per diluted share. The Company reported revenues for the second quarter of fiscal 2006 of $601.1 million, an increase of $96.4 million, or 19%, from the $504.7 million recorded in the second quarter of fiscal 2005. The Company stated that strong growth across all major sales channels of the wholesale segment contributed to the record sales.
In December 2004, the Financial Accounting Standards Board finalized FAS 123R, which requires all companies to expense share-based payments, including stock options, at fair value as of the beginning of the first annual reporting period that begins after June 15, 2005. As such, the Company began expensing stock options on August 1, 2005. The Company has adopted the modified prospective method allowed under FAS 123R. The charge to earnings during fiscal 2006 includes the impact of the vesting of stock options granted in prior years, because the expense is recognized over the vesting period of the options, which is typically four years. For the second quarter of fiscal 2006, share-based compensation negatively impacted earnings before taxes by $0.9 million or 16 basis points.
For the second quarter of fiscal 2006, net income, excluding the effect of special items, increased 14.3% to $10.8 million, or $0.26 per diluted share, compared to $9.4 million, or $0.23 per diluted share, excluding special items, for the second quarter of fiscal 2005. Special items in the second quarter of fiscal 2006 consisted of incremental and redundant costs incurred during the transition from our former warehouses and outside storage facility in Auburn, California into our new larger facility in Rocklin, California. Net income for the second quarter of fiscal 2006, including the effect of special items, increased 15.3% to $10.6 million, or $0.25 per diluted share, compared to $9.2 million, or $0.22 per diluted share, for the second quarter of fiscal 2005.
“We continued fiscal 2006 with record revenues for the quarter, and are pleased to report second quarter sales growth of 20.4% and comparable distribution sales growth of 18.7% based on comparable shipping days, excluding the two acquisitions made during fiscal 2005,” said Michael Funk, Chief Executive Officer.
The Company is raising its guidance for fiscal 2006, ending July 29, 2006, with projected revenues increasing to $2.38 to $2.42 billion, and projected earnings per share, excluding special items, increasing to a range of $1.05 – $1.10 per diluted share. Previously, the Company had announced revenue guidance from $2.25 to $2.35 billion and earnings per share guidance, excluding potential special items, from $1.03 – $1.08 per diluted share for the fiscal year.
At this time, the Company is also narrowing the anticipated impact of share-based compensation expense to approximately $5.5 million to $6.8 million on a pre-tax basis, or $0.08 to $0.10 per diluted share after taxes. Previously, the Company had expected to incur approximately $6.0 million to $8.2 million of share-based compensation expense on a pre-tax basis, or $0.08 to $0.11 per diluted share after taxes, excluding potential special items.