<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-1020859
UNITED NATURAL FOODS, INC.
(Exact name of Registrant as Specified in Its Charter)
Delaware 05-0376157
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
260 Lake Road
Dayville, CT 06241
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (860) 779-2800
-------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
Yes X No
--- ---
As of June 11, 1997, there were 12,378,425 shares of the Registrant's Common
Stock, $0.01 par value per share, outstanding.
================================================================================
<PAGE>
UNITED NATURAL FOODS, INC.
FORM 10-Q
FOR THE QUARTER ENDED APRIL 30, 1997
TABLE OF CONTENTS
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of July 31, 1996 and
April 30, 1997
Consolidated Statements of Income for the three months and
nine months ended April 30, 1996 and April 30, 1997
Consolidated Statements of Cash Flows for the nine months
ended April 30, 1996 and April 30, 1997
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
UNITED NATURAL FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
JULY 31, 1996 APRIL 30, 1997
------------- --------------
ASSETS
------
<S> <C> <C>
Current assets:
Cash $51,255 $20,619
Accounts receivable, net of allowance 25,657,156 30,454,789
Notes receivable, trade 360,137 675,126
Inventories 38,667,548 48,619,416
Prepaid expenses 1,691,548 1,793,734
Deferred income taxes 796,216 1,002,577
------------- --------------
Total current assets 67,223,860 82,566,261
------------- --------------
Property & equipment, net 20,603,663 20,511,115
------------- --------------
Other assets:
Notes receivable, trade 1,067,697 873,627
Goodwill, net 7,977,316 7,626,869
Covenants not to compete, net 1,236,313 752,073
Other, net 635,290 693,490
------------- --------------
Total assets $98,744,139 $113,023,435
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes payable $30,112,868 $15,525,182
Current installments of long-term debt 4,086,795 1,915,727
Current installment of obligations under capital leases 357,404 438,611
Accounts payable 17,139,406 19,381,731
Accrued expenses 4,978,331 4,251,509
Income taxes payable 303,513 1,143,905
Other 158,149 161,118
------------- --------------
Total current liabilities 57,136,466 42,817,783
Long-term debt, excluding current installments 22,170,855 9,770,079
Deferred income taxes 407,346 158,647
Obligations under capital leases, excluding current installments 847,918 943,944
------------- --------------
Total liabilities 80,562,585 53,690,453
------------- --------------
Stockholders' equity:
Common stock, $.01 par value, authorized 25,000,000 shares;
issued 8,713,100 and outstanding 8,692,695 shares for 1996
and issued 12,398,830 and outstanding 12,378,425 shares
for 1997 87,131 123,988
Additional paid-in capital 1,383,511 40,056,154
Stock warrants 3,200,000 -
Unallocated shares of ESOP (3,073,600) (2,951,200)
Retained earnings 16,628,966 22,148,494
Treasury stock, 20,405 shares at cost (44,454) (44,454)
------------- --------------
Total stockholders' equity 18,181,554 59,332,982
------------- --------------
------------- --------------
Total liabilities and stockholders' equity $98,744,139 $113,023,435
============= ==============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
UNITED NATURAL FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
----------- -----------
THREE MONTHS ENDED NINE MONTHS ENDED
APRIL 30, APRIL 30,
--------- ---------
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $96,432,295 $108,132,374 $ 283,537,354 $311,038,311
Cost of sales 76,213,615 85,733,368 224,928,448 246,621,679
-------------- -------------- -------------- --------------
Gross profit 20,218,680 22,399,006 58,608,906 64,416,632
-------------- -------------- -------------- --------------
Operating expenses 15,936,990 16,757,940 47,839,678 50,203,028
Amortization of intangibles 267,195 264,678 2,345,991 795,034
-------------- -------------- -------------- --------------
Total operating expenses 16,204,185 17,022,618 50,185,669 50,998,062
-------------- -------------- -------------- --------------
Operating income 4,014,495 5,376,388 8,423,237 13,418,570
-------------- -------------- -------------- --------------
Other expense (income):
Interest expense 1,294,543 520,157 3,853,579 2,564,713
Other, net (59,223) (61,957) (154,987) (204,317)
-------------- -------------- -------------- --------------
Total other expense 1,235,320 458,200 3,698,592 2,360,396
-------------- -------------- -------------- --------------
Income before income taxes and
extraordinary item 2,779,175 4,918,188 4,724,645 11,058,174
Income taxes 1,227,152 2,036,236 2,694,089 4,605,717
-------------- -------------- -------------- --------------
Income before extraordinary item 1,552,023 2,881,952 2,030,556 6,452,457
Extraordinary item-loss on early extinguishment
of debt, net of income tax benefit of $661,822 - - - 932,929
-------------- -------------- -------------- --------------
Net income $1,552,023 $2,881,952 $2,030,556 $5,519,528
============== ============== ============== ==============
Income per share of common stock
before extraordinary item $ 0.15 $ 0.23 $ 0.20 $ 0.57
============== ============== ============== ==============
Extraordinary item $ - $ - $ - $ 0.08
============== ============== ============== ==============
Net income per share of common stock $ 0.15 $ 0.23 $ 0.20 $ 0.49
============== ============== ============== ==============
Weighted average shares of common stock 10,134,693 12,677,035 10,134,693 11,331,810
============== ============== ============== ==============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
UNITED NATURAL FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED)
-----------
NINE MONTHS ENDED
APRIL 30,
---------
1996 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,030,558 $5,519,528
Adjustments to reconcile net income to net cash
used in operating activities:
Extraordinary loss on early extinguishment of debt, net of tax benefit - 932,929
Depreciation, amortization and write-off of intangibles 4,797,363 3,317,291
(Gain) loss on disposals of property & equipment 37,301 (13,511)
Accretion of original issue discount 438,195 152,847
Deferred income taxes (benefit) 105,244 (455,060)
Provision for doubtful accounts 1,020,663 1,687,889
Increase in accounts receivable (4,449,731) (6,485,522)
Increase in inventory (8,005,926) (9,951,868)
Increase in prepaid expenses (556,162) (102,186)
(Increase) decrease in other assets 102,358 (303,089)
Increase in notes receivable, trade (236,542) (120,919)
Increase in accounts payable 4,675,398 2,242,325
Decrease in accrued expenses (1,124,734) (723,853)
Increase in income taxes payable 531,495 840,392
------------- --------------
Net cash used in operating activities (633,522) (3,462,807)
------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposals of property and equipment 96,100 75,412
Capital expenditures (12,860,238) (2,632,234)
------------- --------------
Net cash used in investing activities (12,764,138) (2,556,822)
------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under note payable 4,668,963 (14,587,686)
Repayments on long-term debt (4,363,812) (15,100,664)
Proceeds from long-term debt 13,375,579 528,820
Principal payments of capital lease obligations (347,012) (360,977)
Proceeds from issuance of common stock, net - 35,509,500
------------- --------------
Net cash provided by financing activities 13,333,718 5,988,993
------------- --------------
NET DECREASE IN CASH (63,942) (30,636)
Cash at beginning of period 286,242 51,255
------------- --------------
Cash at end of period $222,300 $20,619
============= ==============
Supplemental disclosures of cash flow information:
- --------------------------------------------------
Cash paid during the period for:
Interest $3,560,143 $2,810,316
============= ==============
Income taxes $2,313,904 $3,312,525
============= ==============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
UNITED NATURAL FOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED APRIL 30, 1997
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements ("financial statements")
include the accounts of United Natural Foods, Inc. and its wholly owned
subsidiaries (the "Company"). The Company is a distributor and retailer of
natural foods and related products.
The financial statements have been prepared pursuant to rules and regulations of
the Securities and Exchange Commission for interim financial information,
including the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, certain information and footnote disclosures normally required in
complete financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The balance sheet as of
July 31, 1996 has been derived from the audited financial statements as of and
for the nine months ended July 31, 1996. Effective November 1, 1995, the Company
elected to change its fiscal year end from October 31 to July 31. Operating
results for fiscal 1995 have been presented for interim periods that coincide
with the new fiscal year. In the opinion of management, these financial
statements include all adjustments necessary for a fair presentation of the
results of operations 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.
Certain 1996 balances have been reclassified to conform to the 1997
presentation.
2. SALE OF COMMON STOCK
The Company completed an initial public offering of 2,900,000 shares of its
common stock (the "Offering") on November 6, 1996 at a price of $13.50 per
share. The Company's Common Stock began trading on November 1, 1996 on the
Nasdaq National Market under the ticker symbol "UNFI."
The proceeds received by the Company from the Offering totaled $35,509,500 after
deducting underwriting discounts and commissions and offering expenses. The
Company used the proceeds to repay certain indebtedness consisting of (i)
$20,836,918 due to Fleet Capital Corporation under a revolving line of credit
that would have matured on July 31, 1998 and bore interest at a rate of 0.25%
over New York Prime or 2.25% over LIBOR; (ii) $6,504,059 due to Triumph
Connecticut Limited Partnership (Triumph) (including the remaining original
issue discount of approximately $1.6 million ($.9 million net of tax) which is
recorded as an extraordinary item in the second quarter) under a Senior Note
(the "Triumph Note") that would have matured on October 31, 1998 and immediately
before repayment bore interest at a rate of 10%; (iii) $4,469,556 due to Fleet
Capital Corporation under a term loan that would have matured on July 31, 1998
and bore interest at a rate of 0.25% over New York Prime; (iv) $2,846,069 due to
Prem Mark, Inc. under a term note issued in connection with the Rainbow Natural
Foods, Inc. acquisition that would have matured on July 31, 1998 and bore
interest at a rate of 10%; and (v) $852,898 due under certain notes that would
have matured between 1998 and 2002 and bore interest at rates ranging from 0.5%
to 1.0% over New York Prime issued by Natural Retail Group, Inc. in connection
<PAGE>
UNITED NATURAL FOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
2. SALE OF COMMON STOCK (Continued)
with the acquisition of certain retail natural products stores. Accrued interest
through the date of payment (i.e., November 6, 1996) is included in the above
amounts.
On November 6, 1996, in connection with the Offering, Triumph exercised its
warrant to purchase 1,166,660 shares of the Company's Common Stock at an
exercise price of $.01 per share. Based upon the provisions of the Triumph Note,
the Company then repurchased 380,930 of such shares at a purchase price of $.01
per share.
The following table summarizes the changes in stockholders' equity for the nine
months ended April 30, 1997 and reflects the issuance and sale by the Company of
2,900,000 shares of Common Stock at a public offering price of $13.50 per share.
The net proceeds therefrom (after deducting the underwriting discounts and
commissions and offering expenses) were used to repay the indebtedness noted
above, including the remaining original issue discount of approximately $1.6
million ($.9 million net of tax) which has been recorded as an extraordinary
item in the quarter ended January 31, 1997.
<TABLE>
<CAPTION>
Unallocated
Shares of
Employee
Additional Stock
Common Paid-in Stock Ownership Retained Treasury Stockholders'
Stock Capital Warrants Plan Earnings Stock Equity
----- ------- -------- ---- -------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at July 31, 1996 $ 87,131 $ 1,383,511 $3,200,000 $(3,073,600) $16,628,966 $(44,454) $18,181,554
Issuance of 2,900,000
shares of common stock
at $13.50 per share, net of
expenses of issuance 29,000 35,480,500 - - - - 35,509,500
Exercise of stock warrants 7,857 3,192,143 (3,200,000) - - - -
Allocation of shares to Employee
Stock Ownership Plan - - - 122,400 - - 122,400
Net income for the nine
months ended April 30, 1997 - - - - 5,519,528 - 5,519,528
-------- ----------- -- ----------- ----------- --------- -----------
Balances at April 30, 1997 $123,988 $40,056,154 $0 $(2,951,200) $22,148,494 $(44,454) $59,332,982
======== =========== == =========== =========== ========= ===========
</TABLE>
3. TRADE ACCOUNTS RECEIVABLE
An allowance for doubtful accounts is deducted from trade accounts receivable in
the accompanying financial statements. The allowance for doubtful accounts was
$1,277,755 at July 31, 1996 and $2,565,644 at April 30, 1997.
<PAGE>
UNITED NATURAL FOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
4. COMMITMENTS AND CONTINGENCIES
The Company entered into a $1 million leasing arrangement with Mellon US Leasing
effective October 1, 1996. The Company leased computer equipment with a cost of
approximately $461,000 under the lease line through the nine months ended April
30, 1997.
The Company extended its $1 million leasing arrangement with Citizens Leasing
Corporation effective January 31, 1997 for a one-year period. The Company had
not drawn down on this facility as of April 30, 1997.
5. STOCK OPTIONS
The Company is required to adopt Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" (Statement 123), effective July
31, 1997. Statement 123 requires financial statement disclosure about
stock-based employee compensation arrangements. As allowed by Statement 123, the
Company intends to continue to account for employee stock-based compensation
using the "Intrinsic Value Based Method." The Company does not believe the
adoption of Statement 123 will have a material impact on its operating results.
6. NET INCOME PER SHARE OF COMMON STOCK
Net income per share of common stock is calculated using the weighted average
number of common shares outstanding during the period, and the net additional
number of shares which would be issuable upon the exercise of stock options,
assuming the Company used the proceeds received upon exercise of the options to
purchase shares at market value (treasury stock method). Pursuant to Securities
and Exchange Commission Staff Accounting Bulletin No. 83, common and common
equivalent shares issued during the twelve-month period prior to the date of the
initial filing of the Company's Registration Statement on Form S-1 have been
included in the calculation, using the treasury stock method, as if they were
outstanding for all periods presented. Fair market value for the purpose of this
calculation was the daily weighted average per share price of the Company's
Common Stock. Accounting Principles Board Opinion 15 requires presentation of
supplementary net income per share of common stock in the event shares of common
stock are sold for cash and a portion or all of the proceeds are used to retire
debt. Assuming that the Company's initial public offering of Common Stock and
repayment of debt with the proceeds thereof, including the extraordinary expense
of approximately $1.6 million ($.9 million net of tax) resulting from the
charge-off of the remaining original issue discount upon repayment of the
Triumph Note as described in Note 2 above, had occurred effective August 1,
1996, supplementary per share data for the nine months ended April 30, 1997
would have been as follows:
<TABLE>
<S> <C>
Income per share of common stock before
extraordinary item $0.51
Extraordinary item (0.07)
------
Net income per share of common stock $0.44
=====
Supplementary weighted average shares of common stock 12,670,732
==========
</TABLE>
<PAGE>
UNITED NATURAL FOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
6. NET INCOME PER SHARE OF COMMON STOCK (Continued)
No dividends were declared or paid during the nine months ended April 30, 1997.
7. NOTE PAYABLE
In March 1997, the Company amended its $50 million credit agreement with its
bank to provide for working capital, mortgages and term loans. In connection
with this facility, the Company has the ability to borrow up to $10 million for
acquisitions. Interest under the facility accrues at the Company's option at New
York Prime Rate or 1.00% above the bank's London Interbank Offered Rate (LIBOR),
and the Company has the option to fix the rate for all or a portion of the debt
for a period up to 180 days. Interest on the mortgage facility will accrue at
1.25% above the bank's LIBOR rate, although the Company has the option to fix
the rate for a period of five years at a rate of 1.25% above the five-year U.S
Treasury Note rate. The Company has pledged all of its assets as collateral for
its obligations under the credit agreement. As of April 30, 1997, the Company's
outstanding borrowings under the credit agreement totaled $15.5 million. The
credit agreement expires on July 31, 2002.
8. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board released Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." This
Statement establishes standards for computing and presenting earnings per share
(EPS) and applies to entities with publicly held common stock or potential
common stock. The Statement replaces the presentation of primary EPS with a
presentation of basic EPS. The Statement also requires a dual presentation of
basic and diluted EPS on the face of the income statement for all entities with
complex capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation.
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity.
The Company has calculated basic and diluted EPS under the provisions of SFAS
No. 128. In performing this calculation, basic and diluted EPS were equal to
primary and fully diluted EPS.
<PAGE>
ITEM 2
Management Discussion And Analysis Of
Financial Condition And Results Of Operations
BACKGROUND AND OTHER INFORMATION
- --------------------------------
United Natural Foods, Inc. (the Company) is one of only two national
distributors of natural foods and related products in the United States. In
November 1996, the Company sold 2,900,000 shares of Common Stock in an initial
public offering which generated $35.5 million of net cash proceeds to the
Company. The Company used the proceeds to reduce its long-term debt and other
amounts owed under its revolving line of credit.
In February 1996, a subsidiary of the Company merged with and into
Mountain Peoples Warehouse, Inc. (Mountain Peoples) whereupon Mountain Peoples
became a wholly owned subsidiary of the Company. The merger with Mountain
Peoples was accounted for as a pooling of interests and, accordingly, all
financial information included is reported as though the companies had been
combined for all periods reported.
In May 1995, prior to its merger with the Company, Mountain Peoples
acquired Nutrasource, Inc. (Nutrasource), a distributor of natural foods in the
Pacific Northwest region. In July 1995, the Company acquired Rainbow Natural
Foods Inc. (Rainbow), a distributor of natural foods in the Rocky Mountains and
Plains regions. These two acquisitions were accounted for under the purchase
method of accounting, and accordingly, all the financial information for
Nutrasource and Rainbow have been included since their respective dates of
acquisition.
Statements contained in this Form 10-Q that are not historical facts
are forward-looking statements that are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. The Company
cautions that a number of important factors could cause the Company's actual
results for fiscal 1997 and beyond to differ materially from those expressed in
any forward-looking statements made by, or on behalf of, the Company.
Forward-looking statements involve a number of risks and uncertainties
including, but not limited to, continued demand for current products, the
success of new product introductions, the success of the Company's acquisition
strategy, competitive pressures, general economic conditions, and possible
regulatory matters. The Company cannot assure that it will be able to anticipate
or respond timely to changes in any of the factors listed above, which could
adversely affect the operating results in one or more fiscal quarters. Results
of operations in any past period should not be considered indicative of the
results to be expected for future periods. Fluctuations in operating results may
also result in fluctuations in the price of the Company's common stock. See
"Certain Factors That May Affect Future Results."
Quarter Ended April 30, 1997 Compared to Quarter Ended April 30, 1996
---------------------------------------------------------------------
The following table presents certain items from the Company's
consolidated statements of income, and such amounts as a percentage of net
sales, for the periods indicated in millions, except the percentages.
<PAGE>
THREE MONTHS ENDED
APRIL 30,
<TABLE>
<CAPTION>
1996 1997
---- ----
$$$ % $$$ %
--- - --- -
<S> <C> <C> <C> <C>
Net Sales $ 96.4 100.0% $ 108.1 100.0%
Cost of sales 76.2 79.0% 85.7 79.3%
-------- -------- -------- --------
Gross profit 20.2 21.0% 22.4 20.7%
-------- -------- -------- --------
Operating expenses 15.9 16.5% 16.7 15.5%
Amortization of intangibles 0.3 0.3% 0.3 0.2%
-------- -------- -------- --------
Total operating expenses 16.2 16.8% 17.0 15.7%
-------- -------- -------- --------
Operating income 4.0 4.2% 5.4 5.0%
-------- -------- -------- --------
Other expense (income):
Interest expense 1.3 1.3% 0.5 0.5%
Other, net (0.1) (0.1%) (0.1) (0.1%)
-------- -------- -------- --------
Total other expense 1.2 1.2% 0.4 0.4%
-------- -------- -------- --------
Income before income taxes and
extraordinary item 2.8 3.0% 5.0 4.6%
Income taxes 1.2 1.3% 2.1 2.0%
-------- -------- -------- --------
Income before extraordinary item 1.6 1.7% 2.9 2.6%
Extraordinary item - loss on early extinguishment
debt, net of income tax benefit - 0.0% - 0.0%
-------- -------- -------- --------
Net income $ 1.6 1.7% $ 2.9 2.6%
======== ======== ======== ========
</TABLE>
<PAGE>
Net Sales. The Company's net sales increased approximately 12.1%, or
$11.7 million, to $108.1 million for the three months ended April 30, 1997 from
$96.4 million for the three months ended April 30, 1996. The increase in net
sales was primarily attributable to increased sales by the Company to existing
customers and the introduction of new products not formerly offered by the
Company. The Company also realized an increase in net sales as a result of sales
to new customers in existing geographic areas.
Gross Profit. The Company's gross profit increased approximately
10.9%, or $2.2 million, to $22.4 million for the three months ended April 30,
1997 from $20.2 million for the three months ended April 30, 1996. The Company's
gross profit as a percentage of net sales decreased to 20.7% for the three
months ended April 30, 1997 from 21.0% for the three months ended April 30 1996.
The decrease in gross profit as a percentage of net sales was primarily
attributable to the Company's increased sales to existing customers, which
resulted in greater discounts being earned by these customers through the
Company's volume discount program.
Operating Expenses. The Company's total operating expenses increased
approximately 4.9%, or $0.8 million, to $17.0 million for the three months ended
April 30, 1997 from $16.2 million for the three months ended April 30, 1996.
However, as a percentage of net sales, operating expenses decreased to 15.7% for
the three months ended April 30, 1997 from 16.8% for the three months ended
April 30, 1996. In the third quarter of fiscal 1996, the Company incurred a
non-recurring charge of $0.5 million associated with the merger with Mountain
Peoples. Excluding this non-recurring charge, total operating expenses would
have been $15.7 million, or 16.3% of net sales for the third quarter of fiscal
1996.
The decrease in total operating expenses as a percentage of net sales
was primarily attributable to the Company's increased absorption of fixed
expenses and overhead over a larger sales base. In addition, the Company
achieved increased operating efficiencies through the continued integration of
its acquisitions.
Operating Income. Operating income increased $1.4 million, or
approximately 33.9%, to $5.4 million for the three months ended April 30, 1997
from $4.0 million for the three months ended April 30, 1996. As a percentage of
net sales, operating income increased to 5.0% in the three months ended April
30, 1997 from 4.2% in the three months ended April 30, 1996. Excluding the
non-recurring charge of $0.5 million associated with the merger with Mountain
Peoples, total operating income in the three months ended April 30, 1996 would
have been $4.5 million, or 4.7% of net sales.
<PAGE>
Other Income/(Expense). Other expense, net decreased $0.7 million, or
approximately 62.9%, to $0.5 million for the three months ended April 30, 1997
from $1.2 million for the three months ended April 30, 1996. The decrease was
primarily attributable to lower interest payments in the three months ended
April 30, 1997 resulting from the use of the proceeds of the initial public
offering to repay debt.
Income Taxes. The Company's effective income tax rate was 41.4% and
44.2% for the three months ended April 30, 1997 and April 30, 1996,
respectively. The effective rates were higher than the federal statutory rate
primarily due to state and local taxes for the three months ended April 30, 1997
and April 30, 1996, respectively.
Net Income. As a result of the foregoing, the Company's net income
increased by $1.3 million to $2.9 million for the three months ended April 30,
1997 from $1.6 million for the three months ended April 30, 1996. Excluding the
non-recurring charge of $0.5 million ($0.3 million net of taxes) associated with
the merger with Mountain Peoples, net income in the three months ended April 30,
1996 would have been $1.9 million.
Nine Months Ended April 30, 1997 Compared to Nine Months Ended April 30, 1996
-----------------------------------------------------------------------------
The following table presents certain items from the Company's
consolidated statements of income, and such amounts as a percentage of net
sales, for the periods indicated in millions, except the percentages.
<PAGE>
NINE MONTHS ENDED
APRIL 30,
<TABLE>
<CAPTION>
1996 1997
---- ----
$$$ % $$$ %
--- - --- -
<S> <C> <C> <C> <C>
Net Sales $ 283.5 100.0% $ 311.0 100.0%
Cost of sales 224.9 79.3% 246.6 79.3%
-------- -------- -------- --------
Gross profit 58.6 20.7% 64.4 20.7%
-------- -------- -------- --------
Operating expenses 47.9 16.9% 50.2 16.1%
Amortization of intangibles 2.3 0.8% 0.8 0.3%
-------- -------- -------- --------
Total operating expenses 50.2 17.7% 51.0 16.4%
-------- -------- -------- --------
Operating income 8.4 3.0% 13.4 4.3%
-------- -------- -------- --------
Other expense (income):
Interest expense 3.9 1.4% 2.6 0.8%
Other, net (0.2) (0.1%) (0.2) (0.1%)
-------- -------- -------- --------
Total other expense 3.7 1.3% 2.4 0.7%
-------- -------- -------- --------
Income before income taxes and
extraordinary item 4.7 1.7% 11.0 3.6%
Income taxes 2.7 1.0% 4.6 1.5%
-------- -------- -------- --------
Income before extraordinary item 2.0 0.7% 6.4 2.1%
Extraordinary item - loss on early extinguishment
debt, net of income tax benefit - 0.0% 0.9 0.3%
-------- -------- -------- --------
Net income $ 2.0 0.7% $ 5.5 1.8%
======== ======== ======== ========
</TABLE>
<PAGE>
Net Sales. The Company's net sales increased approximately 9.7%, or
$27.5 million, to $311.0 million for the nine months ended April 30, 1997 from
$283.5 million for the nine months ended April 30, 1996. The increase in net
sales was primarily attributable to increased volume by the Company to existing
customers and the introduction of new products not formerly offered by the
Company. The Company also realized an increase in net sales as a result of sales
to new customers in existing geographic areas. The Company believes that sales
were negatively impacted by winter storms in the Northwest region during the
second quarter of fiscal 1997.
Gross Profit. The Company's gross profit increased approximately
9.9%, or $5.8 million, to $64.4 million for the nine months ended April 30, 1997
from $58.6 million for the nine months ended April 30, 1996. The Company's gross
profit as a percentage of net sales held constant at 20.7% for both nine-month
periods.
Operating Expenses. The Company's total operating expenses increased
approximately 1.6%, or $0.8 million, to $51.0 million for the nine months ended
April 30, 1997 from $50.2 million for the nine months ended April 30, 1996.
However, as a percentage of net sales, operating expenses decreased to 16.4% for
the for the nine months ended April 30, 1997 from 17.7% for the nine months
ended April 30, 1996.
Operating expenses for the nine months ended April 30, 1997 included
a charge of $0.4 million related to the replenishment of the Allowance for
Doubtful Accounts resulting from the charge-off of a customer receivable when
that customer filed for Chapter 11 bankruptcy in September 1996. This customer
accounted for less than 1% of total Company sales in fiscal 1996. Excluding this
charge, operating expenses would have been $50.6 million, or 16.3% of net sales.
Operating expenses for the nine months ended April 30, 1996 included
a non-recurring charge of $1.6 million for the write-down of intangible assets.
The Company continually evaluates its intangible assets in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of". In addition, the Company had a non-recurring charge of $0.5 million for
costs associated with the merger with Mountain Peoples. Excluding these non-
recurring charges, the Company's total operating expenses would have been $48.1
million, or 17.0% of net sales, for the nine months ended April 30, 1996.
The decrease in total operating expenses as a percentage of net sales
was primarily attributable to the Company's increased absorption of fixed
expenses and overhead over a larger sales base. In addition, the Company
achieved increased operating efficiencies through the continued integration of
its acquisitions.
Operating Income. Operating income increased $5.0 million, or
approximately 59.3%, to $13.4 million for the nine months ended April 30, 1997
from $8.4 million for the nine months ended April 30, 1996. As a percentage of
net sales, operating income increased to 4.3% for the nine months ended April
30, 1997 from 3.0% for the nine months ended April 30, 1996.
<PAGE>
Excluding the $0.4 million charge discussed above for the nine months
ended April 30, 1997 and the $2.1 million in non-recurring charges for the nine
months ended April 30, 1996, operating income would have been $13.8 million, or
4.4% of net sales, for the nine months ended April 30, 1997, and $10.5 million,
or 3.7% of net sales, for the nine months ended April 30, 1996.
Other Income/(Expense). Other expense, net decreased approximately
36.2%, or $1.3 million, to $2.4 million for the nine months ended April 30, 1997
from $3.7 million for the nine months ended April 30, 1996. The decrease was
primarily attributable to lower interest payments in the nine months ended April
30, 1997 resulting from the use of the proceeds of the initial public offering
to repay debt.
Income Taxes. The Company's effective income tax rate was 41.6% and
57.0% for the nine months ended April 30, 1997 and 1996, respectively. The
effective rate at April 30, 1997 was higher than the federal statutory rate
primarily due to state and local taxes. The effective rate at April 30, 1996 was
higher than the federal statutory rate primarily due to nondeductible goodwill
amortization, especially the write-off of the intangible assets in the nine
months ended April 30, 1996, as well as state and local income taxes.
Net Income. As a result of the foregoing, the Company's net income
increased by $3.5 million to $5.5 million for the nine months ended April 30,
1997 from $2.0 million for the nine months ended April 30, 1996. Excluding the
$2.0 million ($1.2 million net of taxes) in non-recurring charges discussed
above for the nine months ended April 30, 1997 and the $2.1 million ($1.5
million net of taxes) in non-recurring charges for the nine months ended April
30, 1996, net income would have been $6.7 million for the nine months ended
April 30, 1997 and $3.5 million for the nine months ended April 30, 1996.
Liquidity and Capital Resources
- -------------------------------
In November 1996, the Company sold 2,900,000 shares of Common Stock
in an initial public offering which generated $35.5 million of net cash proceeds
to the Company. The Company used the net proceeds to reduce its long-term debt
and amounts owed under its revolving line of credit.
In March 1997, the Company amended its $50 million credit agreement
with its bank to provide for working capital, mortgages and term loans. In
connection with this facility, the Company has the ability to borrow up to $10
million for acquisitions. Interest under the credit facility accrues at the
Company's option at New York Prime Rate or 1.00% above the bank's London
Interbank Offered Rate (LIBOR), and the Company has the option to fix the rate
for all or a portion of the debt for a period of up to 180 days. Interest on the
mortgage facility will accrue at 1.25% above the bank's LIBOR rate, although the
Company has the option to fix the rate for a period of five years at a rate of
1.25% above the five-year U.S. Treasury Note. The Company has pledged all of its
assets as collateral for its obligations under the credit agreement. As of April
30, 1997, the Company's outstanding borrowings under the credit agreement
totaled
<PAGE>
$15.5 million. The credit agreement expires on July 31, 2002.
Historically, the Company has financed its operations and growth
primarily with cash flows generated from operations, borrowings under its credit
facility, seller financing from acquisitions, operating and capital leases and
normal trade credit terms. The Company finances its investment in inventory and
accounts receivable principally with its credit facility and trade accounts
payable.
The Company's cash used in operations was ($3.5 million) and ($0.6
million) for the nine months ended April 30, 1997 and April 30, 1996,
respectively. The decrease in cash generated from operations for the nine months
ended April 30, 1997 relates primarily to the increases in inventory and
accounts receivable necessary to support sales growth, increases in inventory
related to building expansions in Connecticut and changes in accrued expense. On
April 30, 1997, the Company had working capital of $39.8 million.
Cash used in investing activities was $2.6 million and $12.8 million
for the nine months ended April 30, 1997 and April 30, 1996, respectively. The
1997 period includes the purchase of material handling equipment, tractors and
trailers and the development and implementation of new management information
systems. The 1996 period includes the purchase of the Company's Connecticut
distribution facility and the related purchase of material handling equipment.
Capital expenditures were primarily funded from senior bank indebtedness, term
loans, and cash provided from operating activities.
The Company's cash flows generated from financing activities were
$6.0 million and $13.3 million for the nine months ended April 30, 1997 and
April 30, 1996, respectively. During the nine months ended April 30, 1997, cash
from financing activities consisted of the proceeds from the issuance of common
stock, a portion of which was used to repay long-term debt, notes payable and
the expenses associated with the initial public offering. During the nine months
ended April 30, 1996, net cash provided by financing activities included
proceeds from the long-term debt used to purchase the Connecticut distribution
facility.
On October 1, 1996, the Company entered into a $1 million leasing
arrangement with Mellon Bank/US Leasing. The leasing facility has been used for
the purchase of management information systems and material handling equipment.
As of April 30, 1997, the Company's outstanding balance under the capital lease
totaled $461,000.
On January 31, 1997, the Company extended its $1 million leasing
arrangement with Citizens Leasing Corporation for a one-year period. The leasing
facility will be used for the purchase of management information systems and
material handling equipment. As of April 30, 1997, the Company had not drawn
down on this facility.
The Company currently expects to make aggregate capital expenditures
of approximately $7.0 million for fiscal 1998 and 1999 to fund the expansion of
its existing facilities, to upgrade its management information systems and to
expand and replace its material handling equipment.
<PAGE>
Management believes that the Company will have adequate capital
resources and liquidity to meet its borrowing obligations, fund all required
capital expenditures and to operate its business through fiscal 1999.
Seasonality
- -----------
Generally, the Company's operating results have not reflected any
material seasonal variations, although the Company's sales and operating results
may vary significantly from quarter to quarter due to factors such as changes in
the Company's operating expenses, management's ability to execute the Company's
operating and growth strategies, personnel changes, demand for natural products,
product shortages and general economic conditions.
Certain Factors That May Affect Future Results
- ----------------------------------------------
The following important factors, among others, could cause actual
results to differ materially from those indicated by forward-looking statements
made in this Quarterly Report on Form 10-Q and presented elsewhere by management
from time to time. Any statements contained herein (including without
limitations statements to the effect that the Company or its management
"believes", "expects", "anticipates", "plans", and similar expressions) that are
not statements of historical fact should be considered forward-looking
statements.
A number of uncertainties exist that could affect the Company's
future operating results, including, without limitation, continued demand for
current products offered by the Company, the success of the Company's
acquisition strategy, competitive pressures, general economic conditions, the
success of new product introductions and governmental regulation.
A significant portion of the Company's historical growth has been
achieved through acquisitions of or mergers with other distributors of natural
products. The Company recently acquired or merged with three large regional
distributors of natural products. The successful and timely integration of these
acquisitions and merger is critical to the future operating and financial
performance of the Company. While the integration of these acquisitions and
merger with the Company's existing operations has begun, the Company believes
that the integration will not be substantially completed until the end of
calendar 1997. The integration will require, among other things, coordination of
administrative, sales and marketing, distribution, and accounting and finance
functions and expansion of information and warehouse management systems among
the Company's regional operations. The integration process could divert the
attention of management, and any difficulties or problems encountered in the
transition process could have a material adverse effect on the Company's
business, financial condition or results of operations. In addition, the process
of combining the companies could cause the interruption of, or a loss of
momentum in, the activities of the respective businesses, which could have an
adverse effect on their combined operations.
The Company is currently experiencing a period of growth which could
place a significant strain on its management and other resources. The Company's
business has grown significantly in size and complexity over the past several
years. The growth in the size of the
<PAGE>
Company's business and operations has placed and is expected to continue to
place a significant strain on the Company's management. The Company's future
growth is limited in part by the size and location of its distribution centers.
There can be no assurance that the Company will be able to successfully expand
its existing distribution facilities or open new distribution facilities in new
or existing markets to facilitate growth. In addition, the Company's growth
strategy to expand its market presence includes possible additional
acquisitions. To the extent the Company's future growth includes acquisitions,
there can be no assurance that the Company will successfully identify suitable
acquisition candidates, consummate and integrate such potential acquisitions or
expand into new markets.
The Company operates in highly competitive markets, and its future
success will be largely dependent on its ability to provide quality products and
services at competitive prices. The Company's competition comes from a variety
of sources, including other distributors of natural products as well as
specialty grocery and mass market grocery distributors. There can be no
assurance that the mass market grocery distributors will not increase their
emphasis on natural products and more directly compete with the Company or that
new competitors will not enter the market.
The grocery distribution industry generally is characterized by
relatively high volume with relatively low profit margins. The continuing
consolidation of retailers in the natural products industry and the emergence of
natural products supermarket chains may have an adverse effect on the Company's
profit margins in the future as more customers qualify for greater volume
discounts offered by the Company. The grocery industry is also sensitive to
national and regional economic conditions, and the demand for product supply may
be adversely affected from time to time by economic downturns.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED NATURAL FOODS, INC.
/s/ Steven Townsend
-----------------------------
Steven Townsend
Chief Financial Officer
(Principal Financial and Accounting Officer)
Dated: June 13, 1997
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
The exhibits listed in the Exhibit Index immediately preceding such Exhibits are
filed as part of this Quarterly Report on Form 10-Q.
b) Reports on Form 8-K.
The Company did not file any Current Reports on Form 8-K during the quarter
covered by this Report.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
First Amendment to Amended and Restated Loan Agreement
10 with Fleet Capital Corporation, dated March 1, 1997
11 Computation of Earnings Per Share
27 Financial Data Schedule
</TABLE>
<PAGE>
EXHIBIT 10 UNITED NATURAL FOODS, INC.
260 LAKE ROAD
DAYVILLE, CONNECTICUT 06241
As of March 1, 1997
FLEET CAPITAL CORPORATION
200 Glastonbury Boulevard
Glastonbury, Connecticut 06033
Re: First Amendment to Amended and Restated Loan Agreement
------------------------------------------------------
Ladies and Gentlemen:
Reference is made to the Amended and Restated Loan and Security
Agreement dated February 20, 1996 ("Loan Agreement") and all promissory notes,
mortgages, guaranties, agreements, documents and instruments entered into by
United Natural Foods, Inc., Mountain People's Warehouse Incorporated, Natural
Retail Group, Inc., Rainbow Natural Foods, Inc., and Nutrasource, Inc.
(collectively, the "Borrowers") and any other person or obligor pursuant thereto
(collectively, the "Loan Documents") with or for the benefit of Fleet Capital
Corporation ("Lender"). Except as otherwise defined herein, capitalized terms
used herein shall have the meanings given them in the Loan Agreement. This First
Amendment to Loan Agreement is referred to as the "First Amendment".
Background. The Borrowers have requested that the Lender agree to (a)
----------
decrease the interest rates charged on the Loans, (b) provide mortgage financing
in connection with contemplated purchases of real estate in Denver, Colorado and
Auburn, California, (c) provide up to $10,000,000 in Loans to finance the
acquisition of businesses by the Borrowers and (d) to extend the term of the
Loan Agreement. The Lender has agreed to the foregoing changes, subject to the
terms and conditions of this First Amendment.
Subject to the satisfaction of the terms and conditions hereof,
Lender and Borrower have agreed that the Loan Agreement shall be amended as
follows:
1. Amendments to the Loan Agreement.
--------------------------------
1.1 Section 1.2 of the Loan Agreement is amended to add the
following subsection 1.2.3 thereto:
"1.2.3 Real Estate Acquisition Loans. The Lender agrees
-----------------------------
to make to the Borrowers two additional Loans (the "Real Estate Acquisition
Loans") in the original principal amounts of up to $7,500,000 for the purchase
of real Property in Denver, Colorado and up to $5, 500,000 for the purchase of
real Property in Auburn, California. Such Real Estate Acquisition Loans shall
(a) amortize in equal monthly payments over a twenty (20) year period, (b) be
due and payable at the first to occur of (i) at the election of Lender upon and
during the existence of an Event of Default or (ii) upon the expiration of the
term of this Agreement, and (c) be secured by all the Collateral. In addition,
the making of such Real Estate Acquisition Loans will be subject to the
satisfaction of
<PAGE>
Fleet Capital Corporation
March 1, 1997
Page 2
such conditions as the Lender normally and customarily requires upon the making
of a mortgage loan including, without limitation, (a) the receipt of a Secured
Promissory Real Estate Note duly executed by the Borrowers in substantially the
form of Exhibit A-2 hereto, (b) the receipt of duly executed mortgages, deeds of
trust or security deeds and collateral assignments in form and substance
satisfactory to the Lender covering the real Property to be purchased, (c) the
recording of such collateral documents in each office where such recording is
required to constitute a valid Lien on the real Property, (d) delivery to the
Lender of title insurance policies issued by companies satisfactory to Lender
insuring the Lender's valid first Lien on the real Property and with such
coverages and subject to such exceptions as the Lender may require or accept,
and (e) delivery to the Lender of environmental assessments, surveys and other
due diligence and other information concerning the real Property as the Lender
may reasonably request."
1.2 Section 1 of the Loan Agreement is amended to add the
following subsection 1.4 thereto:
"1.4 Acquisition Loans. The Lender agrees to make
-----------------
Loans ("Acquisition Loans") from time to time to the Borrowers to be used for
the purpose of purchasing businesses in the lines of business conducted by the
Borrowers which the Borrowers have determined, in their reasonable business
judgment, would enhance the business, operations, prospects and condition
(financial and otherwise) of the Borrowers. The aggregate amount of Acquisition
Loans made under this subsection shall not exceed $10,000,000 during the term of
this Agreement. All Acquisition Loans shall be evidenced by and payable in
accordance with the terms of the Secured Promissory Acquisition Term Note in the
form of Exhibit A-1 hereto and will be secured by all the Collateral. The
Borrowers agree to furnish to the Lender notice and copies of any letter of
intent or memorandum of understanding and purchase documents for any acquisition
they may contemplate and allow Lender and its representatives reasonable access
to financial information and the assets and properties to be acquired which
will, upon consummation of the acquisition, become Collateral for the
Obligations. If any such acquisition is structured as the acquisition of the
stock or other securities of a Person to be acquired or Borrowers create a
subsidiary to make the acquisition, Borrowers shall cause such entity to enter
into a guaranty of the Obligations and to grant to Lender a security interest in
its assets to secure such guaranty reasonably satisfactory to the Lender. The
Lender agrees to enter into confidentiality agreements with the Persons that
Borrower may acquire on terms mutually agreeable to Lender and any such Person."
1.3 Subsection 2.1.1 of the Loan Agreement is amended to delete
subparagraphs (i) and (ii) thereof and to replace such subparagraphs with the
following:
"(i) For each Revolving Credit Loan bearing interest
based upon the Base Rate, at a fluctuating rate per annum equal to the Base
Rate; and
(ii) For each Euro-Dollar Revolving Credit Loan, at a
rate per annum equal to one percent (1.00%) plus the Euro-Dollar Rate for the
applicable Euro-Dollar Interest Period selected by Borrowers in conformity with
this Agreement."
<PAGE>
Fleet Capital Corporation
March 1, 1997
Page 3
1.4 Section 3 of the Loan Agreement is amended to add the
following subsection 3.1.4 thereto:
3.1.4. Fixed Rate Loan Requests. (a) Notwithstanding the
------------------------
provisions of Section 3.1.1 above, in the event that Borrowers shall request a
Fixed Rate Loan under this Agreement, Borrowers shall give Lender not less than
three (3) Business Days prior irrevocable written notice thereof specifying (i)
the date of the requested Fixed Rate Loan (which shall be a Business Day), (ii)
the amount of such Fixed Rate Loan which shall be not less than $1,000,000.00 or
an integral multiple thereof, and (iii) the duration of the Fixed Rate Interest
Period of such Fixed Rate Loan.
(b) Borrowers shall indemnify Lender against all out-
of-pocket costs and expenses (including, without limitation, any cancellation or
similar fees paid by Lender to lenders of funds borrowed by it to make or carry
any Loan as a Fixed Rate Loan and any loss sustained by Lender in connection
with the reemployment of funds with respect to any Fixed Rate Loan) which Lender
may sustain (i) if the making of any Loan as a Fixed Rate Loan does not occur on
the date specified therefor in the notice of borrowing given by Borrowers
pursuant to Section 3.1.1 hereof, (ii) if Borrowers fail to give the required
notice of its intent to prepay a Fixed Rate Loan, (iii) if any prepayment of a
Fixed Rate Loan occurs on a date which is not the expiration date of the Fixed
Rate Interest Period of such Fixed Rate Loans, (iv) if any prepayment of a Fixed
Rate Loan is not made on the date specified in a notice of prepayment given by
Borrowers, or (v) as a consequence of any default by Borrowers under this
Agreement. The amount payable upon any such prepayment shall equal Lender's out-
of-pocket costs plus an amount computed as follows: the latest rate preceding
the date of prepayment for United States Treasury Notes or Bills (Bills on a
discounted basis shall be converted to a bond equivalent) as determined by the
Bank with a maturity date closest to the scheduled maturity date on the term of
the Fixed Rate applicable to the Loan, or portion thereof, to be prepared shall
be subtracted from the Fixed Rate applicable to the Fixed Rate Loan, or portion
thereof, to be prepaid. If the result is zero or a negative number, there shall
be no prepayment premium. If the result is a positive number, then the resulting
percentage shall be multiplied by the amount of the Loan principal balance being
prepaid. The resulting amount shall be divided by 360 and multiplied by the
number of days remaining in the term of the Fixed Rate Loan as to which the
prepayment is made. Said amount shall be reduced to present value calculated by
using the number of months remaining in the term of such Fixed Rate Loan and
using the above referenced United States Treasury Note or Bill rate and the
number of days remaining on the term of the Fixed Rate Loan as of the date of
the prepayment. A statement by Lender claiming compensation under this Section
shall be sent to the Borrowers and shall set forth the additional amount or
amounts to be paid to Lender hereunder. Such statement shall be conclusive and
binding on Borrowers, absent manifest error.
(c) Notwithstanding any other provision hereof, if
any applicable law, treaty, regulation or direction, or any change therein or in
the interpretation or application thereof, shall make it unlawful for Lender to
make or maintain its Fixed Rate Loans, or if with respect to any Fixed Rate
Interest Period, the Lender is unable to determine the Fixed Rate relating
thereto, or adverse or unusual conditions in or changes in applicable law
relating to the applicable interbank
<PAGE>
Fleet Capital Corporation
March 1, 1997
Page 4
federal discount market make it, in the reasonable good faith judgment of
Lender, impracticable to fund any Fixed Rate Loans or make the projected Fixed
Rate unreflective of the actual costs of funds therefor to Lender, the
obligation of Lender to make Fixed Rate Loans hereunder shall forthwith be
canceled and the Borrowers shall, if any affected Fixed Rate Loans are then
outstanding, promptly upon request of Lender, either pay all such affected Fixed
Rate Loans or convert such affected Fixed Rate Loans into Loans of another type.
If such payment or conversion of any Fixed Rate Loan is made on a day that is
not applicable to such Fixed Rate Loan, Borrowers shall pay Lender, upon
Lender's request, such amount or amounts as may be necessary to compensate
Lender for any loss or expense sustained or incurred by Lender in respect of
such Fixed Rate Loan as a result of such payment or conversion, including (but
not limited to) any interest or other amounts payable by Lender to lenders of
funds obtained by Lender to make or maintain such Fixed Rate Loan. A certificate
as to any additional amounts payable pursuant to the foregoing sentence
submitted by Lender to Borrowers shall be conclusive absent manifest error.
1.5 Subsection 4.1 is amended to delete the date "July 31,
1998" therefrom and to substitute in place thereof the date "July 31, 2002"
1.6 Subsection 4.2.3 is deleted in its entirety and the
following is substituted therefore:
"4.2.3 Termination Charges. At the effective date of
-------------------
termination of this Agreement by Borrowers for any reason, Borrowers shall pay
to Lender (in addition to the then outstanding principal, accrued interest and
other charges owing under the terms of this Agreement and any of the other Loan
Documents) in lieu of the payment of financing fees and charges that would
otherwise be charged by Lender upon the closing of the Loans and otherwise as
liquidated damages for the loss of the bargain and not as a penalty, (a) an
amount equal to one percent (1%) of the Average Monthly Loan Balance (during the
prior 12 months) if termination occurs during the period from March 1, 1997
through July 31, 1998, (b) an amount equal to three quarter percent (3/4%) of
the Average Loan Balance (during the prior 12 months) if termination occurs
during the period from August 1, 1998 through July 31, 1999, (c) an amount equal
to one half percent (1/2%) of the Average Monthly Loan Balance (during the prior
12 months) if termination occurs during the period from August 1, 1999 through
July 31, 2000, an amount equal to one-quarter percent (1/4%) from August 1, 2000
to July 31, 2001, and (d) from and after August 1, 2001, no termination charge
will be required to be paid."
1.7 Subsections 8.3.1, 8.3.2 and 8.3.3 are hereby deleted in
their entirety.
1.8 Appendix A. General Definitions is hereby amended as
----------
follows:
(a) The following definitions are added between the
definitions "Accounts" and "Adjusted Net Earnings from Operations":
"Acquisition Loans - the Loans described in Subsection 1.4
-----------------
of the Agreements.
<PAGE>
Fleet Capital Corporation
March 1, 1997
Page 5
"Acquisition Note - the Secured Promissory Acquisition Loan
----------------
Note to be executed by Borrowers to evidence the Acquisition Loans which shall
be in substantially the form of Exhibit A-1 to the Agreement."
(b) The following definition is added between the
definitions "Availability" and "Bank":
"Average Monthly Loan Balance - for any month, the amount
----------------------------
obtained by adding up the unpaid balance of the Loans and LC Guaranties at the
end of each day for each day during the applicable month and by dividing such
sum by the number of days in such month."
(c) The definition of Borrowing Base is amended to
delete clause (i) thereof and to substitute in place thereof:
"(i) $50,000,000 minus the unpaid principal balance of
-----
(a) the Term Loan; (b) the Real Estate Term Loan; (c) the Acquisition Loans; (d)
the Real Estate Acquisition Loans; and (d) the face amount of any LC Guaranty
outstanding at such date; or"
(d) The following definitions are added between the
definitions of "Event of Default" and "GAAP":
"Fixed Rate - with respect to any Fixed Rate
----------
Interest Period, a fixed interest rate per annum equal to the sum of:
(i) the rate to maturity of U.S. Treasury
issues maturing on, or as nearly as possible prior to, the last day of such
Fixed Rate Interest Period, such rate to be determined by the Bank as of the
Business Day immediately preceding the first day of such Fixed Rate Interest
Period; plus
(ii) Lender's cost (expressed as a percentage
per annum) to acquire such U.S. Treasury issues; plus
(iii) one and one-quarter (1.25%) percent
The determination of the Fixed Rate by Lender shall, in the
absence of manifest error, be conclusive.
Fixed Rate Interest Period - with respect to each Fixed Rate
--------------------------
Loan, the period commencing on (and including) the date that such Fixed Rate
Loan is made and ending on (but excluding) the numerically corresponding
maturity date of the U.S. Treasury issue by which the Fixed Rate is established,
provided that:
<PAGE>
Fleet Capital Corporation
March 1, 1997
Page 6
(a) each such Fixed Rate Interest Period occurring after the
initial Fixed Rate Interest Period shall commence on the day on which the next
preceding Fixed Rate Interest Period expires,
(b) if any Fixed Rate Interest Period would otherwise commence or
expire on a day which is not a Business Day, such Fixed Rate Interest Period
shall commence or expire, as the case may be, on the next succeeding Business
Day unless the result would be to cause such Fixed Rate Interest period to
commence or expire, as the case may be, in another calendar month, in which case
such Fixed Rate Interest Period shall commence or expire on that next preceding
Business Day,
(c) if any Fixed Rate Interest Period commenced on the last
Business Day in a calendar month and there is no numerically corresponding day
in the month in which such Fixed Rate Interest Period ends, such Fixed Rate
Interest period shall expire on the last day in such later month,
(d) no Fixed Rate Interest period shall extend beyond the last
day of the Original Term or any Renewal Term, as applicable.
Fixed Rate Loans - any portion of the Term Loan, Real Estate
----------------
Loan, Real Estate Acquisition Loans or Acquisition Loans on which Borrowers
elect pursuant to the terms of the applicable Note or this Agreement, to pay
interest at a fixed rate of interest equal to the Fixed Rate for the applicable
Fixed Rate Interest period."
(e) The following definitions are added between the definitions
of "Purchase Money Loan" and "Real Estate Loan":
"Real Estate Acquisition Loans - the Loans described in
-----------------------------
subsection 1.2.3.
Real Estate Acquisition Notes - the Real Estate Acquisition
-----------------------------
Term Notes to be executed by Borrowers to evidence the Real Estate Acquisition
Loans which shall be in substantially the form of Exhibit A-2 to the Agreement."
(f) All references in the Agreement to Loans or to specific Loans
shall be amended to include references to the Acquisition Loans and Real Estate
Acquisition Loans and the context may require.
2. Representations and Warranties.
------------------------------
To induce Lender to enter into this First Amendment, each
Borrower warrants, represents and covenants to Lender that:
(a) Organization and Qualification. Each Borrower is a
------------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its
<PAGE>
Fleet Capital Corporation
March 1, 1997
Page 7
incorporation. Each Borrower is duly qualified or is authorized to do business
and is in good standing as a foreign corporation or limited liability company in
all states and jurisdictions in which the failure of such Borrower to be so
qualified would have a material adverse effect on the financial condition,
business or properties of the Borrower.
(b) Corporate Power and Authority. Each Borrower is
-----------------------------
duly authorized and empowered to enter into, execute, deliver and perform this
First Amendment, the Amended and Restated Real Estate Term Note, the Acquisition
Note (collectively the "Amended and Additional Notes) and each of the Loan
Documents to which it is a party. The execution, delivery and performance of
this First Amendment and each of the other Loan Documents have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval of the shareholders or members of a Borrower; (ii)
contravene any Borrower's charter, by-laws or operating agreement; (iii)
violate, or cause Borrower to be in default under, any provision of any law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award in effect having applicability to any Borrower; (iv) result in a breach of
or constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which any Borrower is a party or by
which Borrower's Properties may be bound or affected; or (v) result in, or
require, the creation or imposition of any Lien (other than Permitted Liens)
upon or with respect to any of the Properties now owned or hereafter acquired by
Borrower.
(c) Legally Enforceable Agreement. This First
-----------------------------
Amendment, the Amended and Additional Notes and each of the other Loan Documents
when delivered under this First Amendment will be, a legal, valid and binding
obligation of each Borrower, enforceable against each Borrower in accordance
with its respective terms.
(d) No Material Adverse Change. Since the date of the
--------------------------
last financial statements provided by the Borrower to the Lender, there has been
no material adverse change in the condition, financial or otherwise, of any
Borrower as shown on the Consolidated balance sheet as of such date and no
change in the aggregate value of Equipment and real property owned by Borrowers,
except changes in the ordinary course of business, none of which individually or
in the aggregate has been materially adverse.
(e) Continuous Nature of Representations and
----------------------------------------
Warranties. Each representation and warranty contained in the Loan Agreement and
- ----------
the other Loan Documents remains accurate, complete and not misleading in any
material respect on the date of this First Amendment, except for representations
and warranties that explicitly relate to an earlier date and changes in the
nature of any Borrower's business or operations that would render the
information in any exhibit attached thereto either inaccurate, incomplete or
misleading, so long as such changes were disclosed in the Form S-1 Registration
Statement of UNF as filed with the Securities and Exchange Commission on
September 4, 1996, as amended, or Lender has consented to such changes or such
changes are expressly permitted by the Loan Agreement.
<PAGE>
Fleet Capital Corporation
March 1, 1997
Page 8
3. Conditions Precedent.
--------------------
Notwithstanding any other provision of this First Amendment
or any of the other Loan Documents, and without affecting in any manner the
rights of Lender under the other sections of this First Amendment, this First
Amendment shall not be effective as to Lender unless and until each of the
following conditions has been and continues to be satisfied:
(a) Documentation. Lender shall have received, in
-------------
form and substance satisfactory to Lender and its counsel, a duly executed copy
of this First Amendment and the Amended and Additional Notes in the form
attached hereto, together with such additional documents, instruments and
certificates as Lender and its counsel shall require in connection therewith,
all in form and substance satisfactory to Lender and its counsel.
(b) No Default. No Default or Event of Default shall
----------
exist except as previously disclosed to and consented to by Lender.
(c) No Litigation. Except as previously disclosed to
-------------
and consented to by Lender, no action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises out of the Loan
Agreement or this First Amendment or the consummation of the transactions
contemplated thereby or hereby.
4. Acknowledgment of Obligations.
-----------------------------
Each Borrower hereby (1) reaffirms and ratifies all of the
promises, agreements, covenants and obligations to Lender under or in respect of
the Loan Agreement and other Loan Documents as amended hereby and (2)
acknowledges that it is unconditionally liable for the punctual and full payment
of all Obligations, including, without limitation, all charges, fees, expenses
and costs (including reasonable attorneys' fees and expenses) under the Loan
Documents, as amended hereby, and that it has no defenses, counterclaims or
setoffs with respect to full, complete and timely payment and performance of all
Obligations.
5. Confirmation of Liens.
---------------------
Each Borrower acknowledges, confirms and agrees that the
Loan Documents, as amended hereby, are effective to grant to Lender duly
perfected, valid and enforceable first priority security interests and liens in
the Collateral described therein and that the locations for such Collateral
specified in the Loan Documents have not changed. Borrower further acknowledges
and agrees that all Obligations of Borrower are and shall be secured by the
Collateral.
<PAGE>
Fleet Capital Corporation
March 1, 1997
Page 9
6. Miscellaneous.
-------------
Except as set forth herein, the undersigned confirms and
agrees that the Loan Documents remain in full force and effect without amendment
or modification of any kind. Each Borrower hereby acknowledges its obligation to
pay to Lender's reasonable attorneys' fees and costs incurred in connection with
this First Amendment, as set forth in the Loan Agreement. The execution and
delivery of this First Amendment by Lender shall not be construed as a waiver by
Lender of any Default or Event of Default under the Loan Documents. This First
Amendment, together with the Loan Agreement and other Loan Documents,
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior dealings, correspondence, conversations
or communications between the parties with respect to the subject matter hereof.
This First Amendment and the transactions hereunder shall be deemed to be
consummated in the State of Connecticut and shall be governed by and interpreted
in accordance with the laws of that state. This First Amendment and the
agreements, instruments and documents entered into pursuant hereto or in
connection herewith shall be "Loan Documents" under and as defined in the Loan
Agreement.
Executed under seal on the date set forth above.
ATTEST: UNITED NATURAL FOODS, INC.
/s/ JOHN F. BREGGIA By: /s/ STEVEN TOWNSEND
- --------------------------- ------------------------------------
Name: STEVEN TOWNSEND
-------------------------------
Title: CHIEF FINANCIAL OFFICER
-------------------------------
ATTEST: MOUNTAIN PEOPLE'S WAREHOUSE, INC.
/s/ JOHN F. BREGGIA By: /s/ STEVEN TOWNSEND
- --------------------------- ------------------------------------
Name: STEVEN TOWNSEND
-------------------------------
Title: CHIEF FINANCIAL OFFICER
-------------------------------
ATTEST: NATURAL RETAIL GROUP, INC.
/s/ JOHN F. BREGGIA By: /s/ STEVEN TOWNSEND
- --------------------------- ------------------------------------
Name: STEVEN TOWNSEND
-------------------------------
Title: CHIEF FINANCIAL OFFICER
-------------------------------
<PAGE>
Fleet Capital Corporation
March 1, 1997
Page 10
ATTEST: NUTRASOURCE, INC.
/s/ JOHN F. BREGGIA By: /s/ STEVEN TOWNSEND
- --------------------------- ------------------------------------
Name: STEVEN TOWNSEND
-------------------------------
Title: CHIEF FINANCIAL OFFICER
-------------------------------
ATTEST: RAINBOW NATURAL FOODS, INC.
/s/ JOHN F. BREGGIA By: /s/ STEVEN TOWNSEND
- --------------------------- ------------------------------------
Name: STEVEN TOWNSEND
-------------------------------
Title: CHIEF FINANCIAL OFFICER
-------------------------------
Accepted in Glastonbury, Connecticut
on March 25, 1997
FLEET CAPITAL CORPORATION
By: /s/ TIMOTHY G. JOHNSON
------------------------
Name: TIMOTHY G. JOHNSON
--------------------
Title: VICE PRESIDENT
-------------------
<PAGE>
EXHIBIT A-1
SECURED PROMISSORY ACQUISITION TERM NOTE
$10,000,000.00 March 1, 1996
Glastonbury, Connecticut
FOR VALUE RECEIVED, the undersigned (hereinafter, jointly and severally,
"Borrowers"), hereby promise to pay to the order of FLEET CAPITAL CORPORATION, a
Rhode Island corporation (hereinafter "Lender"), in such coin or currency of the
United States which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment, the principal sum of TEN MILLION
DOLLARS ($10,000,000.00) or so much as has been loaned to Borrowers as
Acquisition Loans under the Loan Agreement (as hereinafter defined) together
with interest from and after the date hereof on the unpaid principal balance
outstanding as set forth herein.
This Secured Promissory Acquisition Term Note (the "Note") is the
Acquisition Note referred to in, and is issued pursuant to, that certain Amended
and Restated Loan and Security Agreement between Borrowers and Lender dated
February 20, 1996, as amended by a First Amendment thereto of even date
(hereinafter, as further amended from time to time, the "Loan Agreement"), and
is entitled to all of the benefits and security of the Loan Agreement. All of
the terms, covenants and conditions of the Loan Agreement and the Security
Documents are hereby made a part of this Note and are deemed incorporated herein
in full. All capitalized terms used herein, unless otherwise specifically
defined in this Note, shall have the meanings ascribed to them in the Loan
Agreement.
The unpaid principal (not at the time overdue) under this Note shall
bear interest, at the Borrowers' election subject to the terms and conditions of
the Loan Agreement, at (i) a variable rate per annum equal to Base Rate, (ii)
the Euro-Dollar Rate plus 1.25% for the applicable Euro-Dollar Interest Period
selected in accordance with the Loan Agreement or (iii) the Fixed Rate for the
Fixed Rate Interest Period applicable to such Fixed Rate Loan. Accrued interest
on the unpaid principal under this Note shall be payable as provided below.
The rate of interest in effect hereunder for Loans bearing interest
based upon the Base Rate shall increase or decrease by an amount equal to any
increase or decrease in the Base Rate, effective as of the opening of business
on the date that any such change in the Base Rate occurs. The Euro-Dollar Rate
and the Fixed Rate shall be determined as provided in the Loan Agreement.
Interest shall be computed in the manner provided in subsection 2.2 of the Loan
Agreement.
For so long as no Event of Default shall have occurred the principal
amount and accrued interest of this Note shall be due and payable on the dates
and in the manner hereinafter set forth:
1
<PAGE>
(a) Interest shall be due and payable monthly, in arrears, on the first
day of each month, commencing on the first day of the month following the date
that the first Acquisition Loan is made hereunder, and continuing until such
time as the full principal balance, together with all other amounts owing
hereunder, shall have been paid in full; and
(b) The entire principal amount then outstanding, together with any and
all other amounts due hereunder, shall be due and payable on July 31, 2002.
Notwithstanding the foregoing, the entire unpaid principal balance and accrued
interest on this Note shall be due and payable immediately upon any termination
of the Loan Agreement pursuant to Section 4 thereof.
This Note shall be subject to mandatory prepayment in accordance with
the provisions of Section 3.2.5 of the Loan Agreement. Prepayment of this Note
is permitted provided that Borrowers pay any amount due upon the prepayment of a
Euro-Dollar Loan prior to this applicable Euro-Dollar Interest Period and any
Fixed Rate Loan prior to the applicable Fixed Rate Interest Period. Borrower may
also terminate the Loan Agreement and, in connection with such termination,
prepay this Note in the manner provided in Section 4 of the Loan Agreement. All
computations of interest payable under this Note shall be made by the Lender on
the basis of the actual number of days elapsed divided by 360.
Upon the occurrence of an Event of Default, Lender shall have all of the
rights and remedies set forth in Section 10 of the Loan Agreement and the unpaid
principal outstanding hereunder shall bear interest, payable on demand, at the
rate set forth in 2.1.2 of the Loan Agreement.
Borrower shall pay a late payment fee equal to 5% of the amount of any
installment of principal or interest, or both, required hereunder which is
received by Lender more than 10 days after the due date thereof.
Time is of the essence of this Note. To the fullest extent permitted by
applicable law, Borrower, for itself and its legal representatives, successors
and assigns, expressly waives presentment, demand, protest, notice of dishonor,
notice of non-payment, notice of maturity, notice of protest, presentment for
the purpose of accelerating maturity, diligence in collection, and the benefit
of any exemption or insolvency laws.
Wherever possible, each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or remaining provisions of
this Note. No delay or failure on the part of Lender in the exercise of any
right or remedy hereunder shall operate as a waiver thereof, nor as an
acquiescence in any default, nor shall any single or partial exercise by Lender
of any right or remedy preclude any other right or remedy. Lender, at its
option, may enforce its rights against any collateral securing this Note without
enforcing its rights against Borrowers, any guarantor of the indebtedness
evidenced hereby or any other property or indebtedness due or to become due to
any Borrower. Each Borrower agrees that, without releasing
2
<PAGE>
or impairing Borrowers' liability hereunder, Lender may at any time release,
surrender, substitute or exchange any collateral securing this Note and may at
any time release any party primarily or secondarily liable for the indebtedness
evidenced by this Note.
EACH BORROWER HEREBY WAIVES SUCH RIGHTS AS IT MAY HAVE TO NOTICE AND/OR
HEARING UNDER ANY APPLICABLE FEDERAL OR STATE LAWS INCLUDING, WITHOUT
LIMITATION, CONNECTICUT GENERAL STATUTES SECTIONS 52-278A, ET-SEQ., AS AMENDED,
--
PERTAINING TO THE EXERCISE BY LENDER OF SUCH RIGHTS AS THE LENDER MAY HAVE
INCLUDING, BUT NOT LIMITED TO, THE RIGHT TO SEEK PREJUDGMENT REMEDIES AND/OR
DEPRIVE BORROWERS OF OR AFFECT THE USE OF OR POSSESSION OR ENJOYMENT OF
BORROWERS' PROPERTY PRIOR TO THE RENDITION OF A FINAL JUDGMENT AGAINST A
BORROWER. EACH BORROWER FURTHER WAIVES ANY RIGHT IT MAY HAVE TO REQUIRE LENDER
TO PROVIDE A BOND OR OTHER SECURITY AS A PRECONDITION TO OR IN CONNECTION WITH
ANY PREJUDGMENT REMEDY SOUGHT BY LENDER.
This Note shall be governed by, and construed and enforced in accordance
with, the laws of the State of Connecticut.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
3
<PAGE>
IN WITNESS WHEREOF, each Borrower, jointly and severally, has caused
this Note to be duly executed and delivered in Glastonbury, Connecticut, on the
date first above written.
ATTEST: UNITED NATURAL FOODS,
INC.
/s/ STEVEN TOWNSEND By: /s/ NORMAN CLOUTIER
- ---------------------------- -------------------------------------
Secretary Name:
-------------------------------
[CORPORATE SEAL] Title:
------------------------------
ATTEST: MOUNTAIN PEOPLE'S WAREHOUSE
INCORPORATED
/s/ STEVEN TOWNSEND By: /s/ NORMAN CLOUTIER
- ---------------------------- -------------------------------------
Secretary Name:
-------------------------------
[CORPORATE SEAL] Title:
------------------------------
ATTEST: NATURAL RETAIL GROUP, INC.
/s/ STEVEN TOWNSEND By: /s/ NORMAN CLOUTIER
- ---------------------------- -------------------------------------
Secretary Name:
-------------------------------
[CORPORATE SEAL] Title:
------------------------------
ATTEST: NUTRASOURCE, INC.
/s/ STEVEN TOWNSEND By: /s/ NORMAN CLOUTIER
- ---------------------------- -------------------------------------
Secretary Name:
-------------------------------
[CORPORATE SEAL] Title:
------------------------------
ATTEST: RAINBOW NATURAL FOODS, INC.
/s/ STEVEN TOWNSEND By: /s/ NORMAN CLOUTIER
- ---------------------------- -------------------------------------
Secretary Name:
-------------------------------
[CORPORATE SEAL] Title:
------------------------------
4
<PAGE>
Exhibit 11
UNITED NATURAL FOODS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
APRIL 30, APRIL 30,
--------- ---------
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary:
Weighted average shares outstanding 8,713,100 12,378,425 8,713,100 11,055,343
Net effect of dilutive stock options and stock warrants
based upon the treasury stock method using the
initial public offering price for 1996 periods and
average stock price for 1997 periods 1,421,593 298,610 1,421,593 276,467
------------ ----------- ------------ -----------
Total 10,134,693 12,677,035 10,134,693 11,331,810
============ =========== ============ ===========
Net income $1,552,023 $2,881,952 $2,030,556 $5,519,528
============ =========== ============ ===========
Per share amount $0.15 $0.23 $0.20 $0.49
============ =========== ============ ===========
Fully diluted:
Weighted average shares outstanding 8,713,100 12,378,425 8,713,100 11,055,343
Net effect of dilutive stock options and stock warrants
based upon the treasury stock method using the
initial public offering price for 1996 periods and
period end stock price if higher than average stock
price for 1997 periods 1,421,593 304,361 1,421,593 304,361
------------ ----------- ------------ -----------
Total 10,134,693 12,682,786 10,134,693 11,359,704
============ =========== ============ ===========
Net income $1,552,023 $2,881,952 $2,030,556 $5,519,528
============ =========== ============ ===========
Per share amount $0.15 $0.23 $0.20 $0.49
============ =========== ============ ===========
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE INTERIM
CONSOLIDATED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED APRIL 30, 1997 AND
THE CONSOLIDATED BALANCE SHEET AS OF APRIL 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> ^TO COME^
<PERIOD-END> APR-30-1997
<CASH> 20,619
<SECURITIES> 0
<RECEIVABLES> 33,020,433
<ALLOWANCES> 2,565,644
<INVENTORY> 48,619,416
<CURRENT-ASSETS> 82,566,261
<PP&E> 31,610,225
<DEPRECIATION> 11,099,110
<TOTAL-ASSETS> 113,023,435
<CURRENT-LIABILITIES> 42,817,783
<BONDS> 10,714,023
0
0
<COMMON> 123,988
<OTHER-SE> 59,208,994
<TOTAL-LIABILITY-AND-EQUITY> 113,023,435
<SALES> 311,038,311
<TOTAL-REVENUES> 311,038,311
<CGS> 246,621,679
<TOTAL-COSTS> 246,621,679
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,687,889
<INTEREST-EXPENSE> 2,564,713
<INCOME-PRETAX> 11,058,174
<INCOME-TAX> 4,605,717
<INCOME-CONTINUING> 5,519,528
<DISCONTINUED> 0
<EXTRAORDINARY> 923,929
<CHANGES> 0
<NET-INCOME> 5,519,528
<EPS-PRIMARY> 0.49
<EPS-DILUTED> 0.49
</TABLE>
