<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 January 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-21531
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, Including Zip Code)
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 March 13, 1998, there were 17,356,705 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 JANUARY 31, 1998
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of July 31, 1997 and
January 31, 1998
Consolidated Statements of Income for the three months and
six months ended January 31, 1997 and January 31, 1998
Consolidated Statements of Cash Flows for the six months ended
January 31, 1997 and January 31, 1998
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
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, 1997 JANUARY 31, 1998
------------- ----------------
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents $ 952,498 $ 3,457,686
Accounts receivable, net of allowance 42,952,127 49,580,967
Notes receivable, trade 866,160 908,043
Inventories 71,508,896 78,034,786
Prepaid expenses 4,109,945 3,568,397
Deferred income taxes 1,031,767 1,031,767
-------------- ---------------------
Total current assets 121,421,393 136,581,646
-------------- ---------------------
Property & equipment, net 32,412,128 32,722,554
-------------- ---------------------
Other assets:
Notes receivable, trade 995,398 1,274,486
Goodwill, net 7,579,408 8,453,358
Covenants not to compete, net 591,665 511,930
Other, net 1,560,583 792,937
-------------- ---------------------
Total assets $ 164,560,575 $ 180,336,911
============== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes payable $ 27,221,690 $ 38,602,765
Current installments of long-term debt 3,016,218 1,425,549
Current installment of obligations under capital leases 680,533 151,002
Accounts payable 30,535,786 31,961,690
Accrued expenses 6,298,682 6,296,402
Income taxes payable 377,322 419,047
Other 190,667 318,150
-------------- ---------------------
Total current liabilities 68,320,898 79,174,605
Long-term debt, excluding current installments 26,453,762 21,802,750
Deferred income taxes 677,560 677,560
Obligations under capital leases, excluding current installments 1,235,928 1,112,987
-------------- ---------------------
Total liabilities 96,688,148 102,767,902
-------------- ---------------------
Stockholders' equity:
Common stock, $.01 par value, authorized 25,000,000 shares;
issued 17,377,110 and outstanding 17,356,705 173,771 173,771
Additional paid-in capital 45,702,244 51,745,339
Unallocated shares of ESOP (2,910,400) (2,828,800)
Retained earnings 24,951,266 28,523,153
Treasury stock, 20,405 shares at cost (44,454) (44,454)
-------------- ---------------------
Total stockholders' equity 67,872,427 77,569,009
-------------- ---------------------
Total liabilities and stockholders' equity $ 164,560,575 $ 180,336,911
=============== =====================
</TABLE>
See notes to consolidated fianancial statements.
<PAGE>
UNITED NATURAL FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JANUARY 31, JANUARY 31,
----------- -----------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C>
Net sales $ 160,272,203 $ 177,975,654 $ 306,575,184 $ 351,358,640
Cost of sales 127,879,281 141,667,506 244,535,898 280,861,361
---------------- -------------- --------------- --------------
Gross profit 32,392,922 36,308,148 62,039,286 70,497,279
---------------- -------------- --------------- --------------
Operating expenses 27,073,200 27,917,446 52,148,227 55,576,899
Merger expenses - - - 4,063,912
Amortization of intangibles 264,679 244,956 530,356 505,019
---------------- -------------- --------------- --------------
Total operating expenses 27,337,879 28,162,402 52,678,583 60,145,830
---------------- -------------- --------------- --------------
Operating income 5,055,043 8,145,746 9,360,703 10,351,449
---------------- -------------- --------------- --------------
Other expense (income):
Interest expense 1,397,311 1,191,968 3,508,216 2,273,137
Other, net (153,252) (180,467) (301,626) (348,460)
---------------- -------------- --------------- --------------
Total other expense 1,244,059 1,011,501 3,206,590 1,924,677
---------------- -------------- --------------- --------------
Income before income taxes and extraordinary item 3,810,984 7,134,245 6,154,113 8,426,772
Income taxes 1,516,949 2,934,061 2,570,854 4,854,885
---------------- -------------- --------------- --------------
Income before extraordinary item 2,294,035 4,200,184 3,583,259 3,571,887
Extraordinary item - loss on early extinguishment
of debt, net of income tax benefit of $661,822 932,929 - 932,929 -
---------------- -------------- --------------- --------------
Net income $ 1,361,106 $ 4,200,184 $ 2,650,330 $ 3,571,887
================ ============== =============== ==============
Pro forma additional income tax expense 42,257 - 6,377 320,098
---------------- -------------- --------------- --------------
Pro forma net income before extraordinary item $ 2,251,778 $ 4,200,184 $ 3,576,882 $ 3,251,789
================ ============== =============== ==============
Per share data (basic):
Income before extraordinary item $ 0.13 $ 0.24 $ 0.23 $ 0.21
Extraordinary item - loss on early extinguishment
of debt, net of income tax benefit of $661,822 0.05 $ - $ 0.06 $ -
---------------- -------------- --------------- --------------
Net income $ 0.08 $ 0.24 $ 0.17 $ 0.21
================ ============== =============== ==============
Pro forma net income before extraordinary item $ 0.13 $ 0.24 $ 0.23 $ 0.19
================ ============== =============== ==============
Weighted average basic shares of common stock 17,116,331 17,356,705 15,393,653 17,356,705
================ ============== =============== ==============
Per share data (diluted):
Income before extraordinary item $ 0.13 $ 0.24 $ 0.23 $ 0.20
Extraordinary item - loss on early extinguishment
of debt, net of income tax benefit of $661,822 0.05 - 0.06 -
---------------- -------------- --------------- --------------
Net income $ 0.08 $ 0.24 $ 0.17 $ 0.20
================ ============== =============== ==============
Pro forma net income before extraordinary item $ 0.13 $ 0.24 $ 0.23 $ 0.19
================ ============== =============== ==============
Weighted average diluted shares of common stock 17,389,505 17,797,639 15,657,943 17,787,612
================ ============== =============== ==============
</TABLE>
See notes to consolidated financial statements.
Pro forma income tax expense to reflect Stow as though it were C corporation for
all periods presented is calculated as follows: Total income tax expense plus
Stow pretax income multiplied by 35% (note fiscal 1998 adds back merger expenses
as well before calculating tax expense for Stow since merger expenses are
nondeductible for tax purposes).
<PAGE>
UNITED NATURAL FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JANUARY 31,
-----------
1997 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,650,330 $ 3,571,887
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 2,995,949 2,956,708
Loss (gain) on disposals of property & equipment 5,946 (1,042)
Accretion of original issue discount 152,847 -
Deferred income tax benefit (100,597) -
Provision for doubtful accounts 1,528,950 704,032
Increase in accounts receivable (6,897,585) (7,954,381)
Increase in inventory (4,858,312) (6,014,629)
Decrease in prepaid expenses 32,793 541,549
Increase in refundable income taxes (305,803) -
(Increase) decrease in other assets (207,266) 96,658
Decrease (increase) in notes receivable, trade 37,553 (320,971)
Increase in accounts payable 5,490,954 1,074,507
(Decrease) increase in accrued expenses (1,882,764) 379,467
Increase (decrease) in income taxes payable 358,309 (551,607)
Net cash used in operating activities ------------- --------------
(65,767) (5,517,822)
------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of new businesses - (2,697,261)
Proceeds from disposals of property and equipment 71,531 258,685
Capital expenditures (2,460,783) (2,022,165)
Net cash used in investing activities ------------- --------------
(2,389,252) (4,460,741)
------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under note payable (17,033,148) 11,381,075
Repayments on long-term debt (16,160,308) (6,798,584)
Proceeds from long-term debt 804,807 8,584,408
Principal payments of capital lease obligations (251,174) (683,148)
Proceeds from issuance of common stock, net 35,509,500 -
Net borrowings on Stow Mills stockholder loans 560,529 -
Dividends paid to Stow Mills stockholders (25,470) -
Cash distributions to Hendrickson partners (420,000) -
Net cash provided by financing activities ------------- --------------
2,984,736 12,483,751
------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 529,717 2,505,188
Cash and cash equivalents at beginning of period 1,282,471 952,498
------------- --------------
Cash and cash equivalents at end of period $ 1,812,188 $ 3,457,686
============= ==============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 3,406,282 $ 2,298,333
============= ==============
Income taxes $ 2,502,825 $ 4,612,289
============= ==============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
UNITED NATURAL FOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1998 (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.
On October 31, 1997, a subsidiary of the Company completed its merger with Stow
Mills, Inc. ("Stow") wherein Stow became a wholly owned subsidiary of the
Company. The merger with Stow 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. Net sales for the quarters
ended January 31 and October 31, 1997 and for the six months ended January 31,
1997 for the Company excluding Stow were approximately $103.4 million, $116.5
million, and $202.9 million, respectively. Net income for the quarters ended
January 31 and October 31, 1997 and for the six months ended January 31, 1997
for the Company excluding Stow was $1.3 million, $1.2 million and $2.6 million,
respectively. Net sales for the quarters ended January 31 and October 31, 1997
and for the six months ended January 31, 1997 for Stow were $57.0 million, $56.9
million and $104.2 million, respectively. Net income (loss) for the quarters
ended January 31 and October 31, 1997 for Stow was $0.1 million and $(1.8)
million, respectively. Net income for the six months ended January 31, 1997 for
Stow was less than $0.1 million.
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. 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 fiscal 1997 balances have been reclassified to conform to the fiscal
1998 presentation.
1. CASH EQUIVALENTS
Cash equivalents consist of highly liquid investment instruments with original
maturities of three months or less.
2. 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
$2,411,379 at July 31, 1997 and $2,116,801 at January 31, 1998.
4. NOTE PAYABLE
In October 1997, the Company amended its credit agreement with its bank to
increase the amount of the facility from $50 million to $100 million, to
increase the limit on inventory advances to $50 million and the advance rate to
60%, to establish a term loan of $6.6 million and to increase the aggregate
amount of real estate acquisition loans and real estate term loans to $20
million. The agreement also provides for the bank to syndicate the credit
facility to other banks and lending institutions. The credit facility was
used to repay existing indebtedness of Stow owing to the Company's bank and will
be used for general operating capital needs.
Interest under the facility, except the portion related to the mortgage
commitments, accrues at the Company's option at the 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 January 31, 1998, the Company's outstanding
borrowings under the credit agreement totaled $38.6 million. The credit
agreement expires on July 31, 2002, and contains certain restrictive covenants.
The Company was in compliance with its restrictive covenants at January 31,
1998.
In connection with the amendment to the Company's credit agreement with its bank
as above, an Agency and Interlender Agreement was entered into by the Company,
its bank and two additional participating banks effective December 1, 1997. This
agreement states, among other things, that the Company's primary bank will
participate in this credit facility with the other banks.
5. PRO FORMA NET INCOME
Stow was subject to taxation as an S corporation until the merger on October 31,
1997. For pro forma disclosure purposes, income tax adjustments were assumed in
order to reflect results as if Stow had been subject to taxation as a C
corporation for periods prior to the merger.
<PAGE>
6. 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. This statement is effective for periods ending
after December 15, 1997. The Company has calculated earnings per share under the
standard for all periods presented.
<PAGE>
ITEM 2.
MANAGEMENT'S 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. On
October 31, 1997, a subsidiary of the Company completed its merger with Stow
Mills, Inc. ("Stow"), whereupon Stow became a wholly owned subsidiary of the
Company. Upon consummation of the merger, Stow became subject to taxation as C
corporation. The merger with Stow was accounted for as a pooling of interests
and, accordingly, all financial information included herein is reported as
though the companies had been combined for all periods reported.
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 1998 and beyond to differ materially from those expressed in any forward-
looking statements made by, or on behalf of, the Company. See "Certain Factors
That May Affect Future Results" under this item for a discussion of these
factors.
QUARTER ENDED JANUARY 31, 1997 COMPARED TO QUARTER ENDED JANUARY 31, 1998
- -------------------------------------------------------------------------
The following table is derived from the Company's consolidated statements
of income.
<TABLE>
<CAPTION>
QUARTER ENDED
JANUARY 31,
(Dollars in millions) 1997 1998
---- ----
% OF NET % OF NET
$$$ SALES $$$ SALES
-------- ---------- -------- ---------
<S> <C> <C> <C> <C>
Net sales $160.3 100.0% $178.0 100.0%
Cost of sales 127.9 79.8% 141.7 79.6%
----------- ----------- --------- ------------
Gross profit 32.4 20.2% 36.3 20.4%
----------- ----------- --------- ------------
Operating expenses 27.1 16.9% 27.9 15.7%
Amortization of intangibles 0.2 0.1% 0.3 0.1%
----------- ----------- --------- ------------
Total operating expenses 27.3 17.0% 28.2 15.8%
----------- ----------- --------- ------------
Operating income 5.1 3.2% 8.1 4.6%
----------- ----------- --------- ------------
Other expense (income):
Interest expense 1.4 1.0% 1.3 0.7%
Other, net (0.1) (0.1%) (0.3) (0.1%)
----------- ----------- --------- ------------
Total other expense 1.3 0.9% 1.0 0.6%
----------- ----------- --------- ------------
Income before income taxes and
extraordinary item 3.8 2.3% 7.1 4.0%
Income taxes 1.5 0.9% 2.9 1.6%
----------- ----------- --------- ------------
Income before extraordinary item 2.3 1.4% 4.2 2.4%
Extraordinary item - loss on early extinguishment
of debt, net of income tax benefit 0.9 0.6% - -
----------- ----------- --------- ------------
Net income $ 1.4 0.8% $ 4.2 2.4%
=========== =========== ========= ============
</TABLE>
Net Sales. The Company's net sales increased approximately 11.0%, or
$17.7 million, to $178.0 million for the quarter ended January 31, 1998 from
$160.3 million for the quarter ended January 31, 1997. The overall increase in
net sales was primarily attributable to increased sales to existing customers,
sales to
<PAGE>
new accounts in existing geographic areas and the introduction of new products
not previously offered by the Company.
Historical information for Stow includes twelve and fourteen week periods
for the quarters ended October 31, 1996 and January 31, 1997, respectively.
Accordingly, net sales of approximately $4.2 million have been included in
Stow's amounts for the quarter ended January 31, 1997 which would have been
included in the quarter ended October 31, 1996 had Stow been on the Company's
financial calendar at the time. Therefore, the increase in net sales for the
quarter ended January 31, 1998 as adjusted to comparable weeks would have been
14.1%. The previously reported increase in net sales for the quarter ended
October 31, 1997 of 18.5% would have been 15.2% subsequent to this adjustment.
The increase in income before extraordinary item for the quarter ended January
31, 1998 as adjusted for the above-mentioned item would have been $2.0 million.
The previously reported decrease in net income for the quarter ended October 31,
1997 would have been $2.0 million subsequent to this adjustment.
Gross Profit. The Company's gross profit increased approximately 12.0%,
or $3.9 million, to $36.3 million for the quarter ended January 31, 1998 from
$32.4 million for the quarter ended January 31, 1997. The Company's gross
profit as a percentage of net sales increased to 20.4% for the quarter ended
January 31, 1998 from 20.2% for the quarter ended January 31, 1997. The
increase in gross profit as a percentage of net sales resulted partially from
greater purchasing efficiencies resulting from the integration of Stow,
partially offset by increased sales to existing customers under the Company's
volume discount program.
Operating Expenses. The Company's total operating expenses increased
approximately 3.3%, or $0.9 million, to $28.2 million for the quarter ended
January 31, 1998 from $27.3 million for the quarter ended January 31, 1997. As
a percentage of net sales, operating expenses decreased to 15.8% for the quarter
ended January 31, 1998 from 17.0% for the quarter ended January 31, 1997. The
decrease in total operating expenses as a percentage of net sales was primarily
attributable to the Company's ability to leverage its overhead and realize
synergies from recent acquisitions.
Included in operating expenses for the quarter ended January 31, 1997 were
Stow officer salaries totaling $1.0 million in excess of the contractual
agreements entered into in connection with the merger with Stow. Excluding
these excess amounts, operating expenses for the quarter ended January 31, 1997
would have been $26.3 million, or 16.4% of net sales.
Operating Income. Operating income increased $3.0 million, or
approximately 58.8%, to $8.1 million for the quarter ended January 31, 1998 from
$5.1 million for the quarter ended January 31, 1997. As a percentage of net
sales, operating income increased to 4.6% in the quarter ended January 31, 1998
from 3.2% in the quarter ended January 31, 1997.
Other (Income)/Expense. The $0.3 million decrease in other expense in the
quarter ended January 31, 1998 compared to the quarter ended January 31, 1997
was primarily attributable to the reduction in interest expense as a result of
the debt consolidation related to the Stow merger. The Stow debt was repaid with
proceeds from the Company's credit facility, which bears interest at a lower
rate.
Income Taxes. The Company's effective income tax rates were 41.1% and 39.8%
for the quarters ended January 31, 1998 and 1997, respectively. The effective
rates were higher than the federal statutory rate primarily due to state and
local income taxes. The increase in the effective rate was primarily
attributable to increased earnings in higher state tax jurisdictions.
Net Income. As a result of the foregoing, the Company's income before
extraordinary item increased by $1.9 million to $4.2 million, or 2.4% of net
sales, for the quarter ended January 31, 1998 from $2.3 million, or 1.4% of net
sales, in the quarter ended January 31, 1997.
9
<PAGE>
SIX MONTHS ENDED JANUARY 31, 1997 COMPARED TO SIX MONTHS ENDED JANUARY 31, 1998
- -------------------------------------------------------------------------------
The following table is derived from the Company's consolidated statements
of income.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JANUARY 31,
----------------
(Dollars in millions) 1997 1998
------- ------
% OF NET % OF NET
$$$ SALES $$$ SALES
------------ --------- ---------- ---------
<S> <C> <C> <C> <C>
Net sales $306.6 100.0% $351.4 100.0%
Cost of sales 244.5 79.7% 280.9 79.9%
------------ --------- ---------- ---------
Gross profit 62.1 20.3% 70.5 20.1%
------------ --------- ---------- ---------
Operating expenses 52.1 17.0% 55.6 15.8%
Merger expenses - - 4.1 1.2%
Amortization of intangibles 0.6 0.2% 0.4 0.1%
------------ --------- ---------- ---------
Total operating expenses 52.7 17.2% 60.1 17.1%
------------ --------- ---------- ---------
Operating income 9.4 3.1% 10.4 3.0%
------------ --------- ---------- ---------
Other expense (income):
Interest expense 3.5 1.2% 2.3 0.7%
Other, net (0.3) (0.1%) (0.3) (0.1%)
------------ --------- ---------- ---------
Total other expense 3.2 1.1% 2.0 0.6%
------------ --------- ---------- ---------
Income before income taxes and
extraordinary item 6.2 2.0% 8.4 2.4%
Income taxes 2.6 0.8% 4.8 1.4%
------------ --------- ---------- ---------
Income before extraordinary item 3.6 1.2% 3.6 1.0%
Extraordinary item - loss on early extinguishment
of debt, net of income tax benefit 0.9 0.3% - -
------------ --------- ---------- ---------
Net income $ 2.7 0.9% $ 3.6 1.0%
============ ========= ========== =========
</TABLE>
Net Sales. The Company's net sales increased approximately 14.6%, or
$44.8 million, to $351.4 million for the six months ended January 31, 1998 from
$306.6 million for the six months ended January 31, 1997. The overall increase
in net sales was primarily attributable to increased sales to existing
customers, sales to new accounts in existing geographic areas and the
introduction of new products not previously offered by the Company.
Gross Profit. The Company's gross profit increased approximately 13.5%,
or $8.4 million, to $70.5 million for the six months ended January 31, 1998 from
$62.1 million for the six months ended January 31,
10
<PAGE>
1997. The Company's gross profit as a percentage of net sales decreased to 20.1%
for the six months ended January 31, 1998 from 20.3% for the six months ended
January 31, 1997. The decrease in gross profit as a percentage of net sales
resulted partially from the comparatively lower gross margin contribution from
Stow's operations in the first quarter of fiscal 1998 prior to the effective
date of the merger. Also, as in prior periods, increased sales to existing
customers under the Company's volume discount program resulted in a further
reduction in gross margin. These factors were partially offset by purchasing
efficiencies gained with the integration with Stow in the second quarter of
fiscal 1998.
Operating Expenses. The Company's total operating expenses increased
approximately 14.0%, or $7.4 million, to $60.1 million for the six months ended
January 31, 1998 from $52.7 million for the six months ended January 31, 1997.
As a percentage of net sales, operating expenses decreased to 17.1% for the six
months ended January 31, 1998 from 17.2% for the six months ended January 31,
1997. Excluding merger costs of $4.1 million, the Company's total operating
expenses during the first six months of the current fiscal year would have been
$56.0 million, or 15.9% of net sales, representing an increase of $3.3 million,
or 6.3% over the comparable prior period. The decrease in total operating
expenses as a percentage of net sales was primarily attributable to the
Company's ability to leverage its overhead and realize synergies from recent
acqisitions. Additionally, because of the October 31, 1997 effective date of the
Stow merger, resulting operational efficiencies were not realized in the first
quarter of fiscal 1998.
Included in operating expenses for the six months ended January 31, 1998
and 1997 were Stow officer salaries totaling $0.7 million and $1.8 million,
respectively, in excess of the contractual agreements entered into in connection
with the merger with Stow. Excluding these excess amounts, operating expenses
for the six months ended January 31, 1998 and 1997 would have been $59.4
million, or 16.9% of net sales, and $50.9 million, or 16.6% of net sales,
respectively.
Operating Income. Operating income increased $1.0 million, or
approximately 10.6%, to $10.4 million for the six months ended January 31, 1998
from $9.4 million for the six months ended January 31, 1997. As a percentage of
net sales, operating income was 3.0% and 3.1% in the six months ended January
31, 1998 and 1997, respectively. Excluding the merger costs and Stow officer
salaries noted above, operating income would have been $15.2 million, or 4.3% of
net sales and $11.2 million, or 3.6% of net sales, for the six months ended
January 31, 1998 and 1997, respectively.
Other (Income)/Expense. The $1.2 million decrease in other expense in the
six months ended January 31, 1998 compared to the six months ended January 31,
1997 was primarily attributable to the reduction in interest expense relating to
the repayment of Stow debt with proceeds from the Company's credit facility,
which bears interest at a lower rate. In addition, the proceeds from the
Company's initial public offering were used to repay debt.
Income Taxes. The Company's effective income tax rates were 57.1% and 41.9%
for the six months ended January 31, 1998 and 1997, respectively. The effective
rates were higher than the federal statutory rate primarily due to nondeductible
merger costs incurred during the first quarter of fiscal 1998 and state and
local income taxes.
Net Income. As a result of the foregoing, the Company's net income
increased by $0.9 million to $3.6 million for the six months ended January 31,
1998 from $2.7 million in the six months ended January 31, 1997. Excluding the
$4.1 million in merger costs and $0.9 million extraordinary item (net of tax)
related to the early extinguishment of debt, net income would have been $7.7
million, or 2.2% of net sales, and $3.6 million, or 1.2% of net sales, for the
six months ended January 31, 1998 and 1997, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has financed its operations and growth primarily
from cash flows from operations, borrowings under its credit facility, seller
financing of acquisitions, operating and capital leases, trade payables, bank
indebtedness and the sale or exchange of equity securities. Primary uses of
capital have been acquisitions, expansion of property and equipment and
investment in accounts receivable and inventory.
In connection with the consummation of the merger with Stow, the former
Stow shareholders contributed to equity the promissory notes issued to them by
Stow in exchange for shares of Stow stock.
Net cash used in operations was $5.5 million and $0.1 million for the six
months ended January 31, 1998 and 1997, respectively. The increase in cash used
in operations relates to increased investments in accounts receivable and
inventory and a decrease in accounts payable, all in the ordinary course of
11
<PAGE>
business. The 19% increase in accounts receivable results from increased volume.
The increase in inventory relates to supporting increased sales combined with
gaining purchasing efficiencies. The decrease in accounts payable is the result
of accelerating payments to capture early payment discounts in excess of the
Company's cost of capital. Excluding the merger expenses, net cash used in
operations for fiscal 1998 would have been $1.4 million. The Company's working
capital at January 31, 1998 was $57.4 million.
Net cash used in investing activities was $4.5 million and $2.4 million for
the six months ended January 31, 1998 and 1997, respectively. Investing
activities included primarily capital expenditures related to the purchase of
material handling equipment and the continued upgrade of existing management
information systems. In addition, investing activities in the six months ended
January 31, 1998 included the acquisition of two natural foods retail stores.
The capital expenditures were primarily funded from senior bank indebtedness,
including term loans.
Net cash provided by financing activities was $12.5 million and $3.0
million for the six months ended January 31, 1998 and 1997, respectively. The
increase in net cash provided for the six months ended January 31, 1998 compared
to the comparable prior period resulted primarily from proceeds from borrowings
under the Company's credit facility and from long-term debt.
In October 1997, the Company amended its credit agreement with its bank to
increase the amount of the facility from $50 million to $100 million, to
increase the limit on inventory advances to $50 million and the advance rate to
60%, to establish a term loan of $6.6 million and to increase the aggregate
amount of real estate acquisition loans and real estate term loans to $20
million. The agreement also provides for the bank to syndicate the credit
facility to other banks and lending institutions. The credit facility was used
to repay existing indebtedness of Stow owing to the Company's bank and will be
used for general operating capital needs. Interest under the facility, except
the portion related to the mortgage commitments, accrues at the Company's option
at the 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 rate for U.S Treasury Notes. The Company has pledged all of
its assets as collateral for its obligations under the credit agreement. As of
January 31, 1998, the Company's outstanding borrowings under the credit
agreement totaled $38.6 million. The credit agreement expires on July 31, 2002.
In connection with this amendment, an Agency and Interlender Agreement was
entered into by the Company, its bank and two additional participating banks
effective December 1, 1997. This agreement states, among other things, that the
Company's primary bank will participate in this credit facility with the other
banks.
The Company expects to spend approximately $25 million over the next five
years in capital expenditures to fund the expansion of existing facilities,
upgrade information systems and technology and to update its material handling
equipment. Management believes that it will have adequate capital resources and
liquidity to meets its debt obligations and to fund its planned capital
expenditures and operate its business for the foreseeable future.
IMPACT OF INFLATION
Historically, the Company has been able to pass along inflation-related
increases. Consequently, inflation has not had a material impact upon the
results of the Company's operations or profitability.
SEASONALITY
Generally, the Company does not experience any material seasonality.
However, 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, supply shortages and
general economic conditions.
12
<PAGE>
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board recently issued SFAS No. 129,
"Disclosure of Information about Capital Structure." This statement establishes
standards for disclosing information about an entity's capital structure. This
statement is effective for periods ending after December 15, 1997. The Company
is in compliance with this standard.
The Financial Accounting Standards Board recently issued SFAS No. 130,
"Reporting Comprehensive Income." This statement establishes standards for
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements. This statement is effective for fiscal
years beginning after December 15, 1997 and requires reclassification of
financial statements for earlier periods provided for comparative purposes. The
Company will comply with the required presentation in fiscal 1999.
The Financial Accounting Standards Board recently issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." This
statement establishes standards for reporting operating segments of publicly
traded business enterprises in annual and interim financial statements and
requires those enterprises report selected information about operating segments.
This statement supersedes SFAS No. 14, "Financial Reporting for Segments of a
Business," but retains the requirement to report information about major
customers. This statement also amends SFAS No. 94, "Consolidation of All
Majority-Owned Subsidiaries." SFAS No. 131 is effective for financial statements
for fiscal years beginning after December 15, 1997 and requires that comparative
information for earlier years be restated. The Company has not yet determined
what impact, if any, this standard will have on its financial statement
presentation.
YEAR 2000 ISSUES
The Company's Western Region and a portion of its Central Region employ
operating systems functioning on a Julian calendar thereby achieving Year 2000
compliance. In addition, the Company's financial accounting systems are Year
2000 compliant. The Company's Eastern Region and its Chicago facility are not
currently Year 2000 compliant. The Company is currently reviewing its systems in
order to ensure Year 2000 compliance and to enhance its business systems
functionality to achieve operating efficiencies and customer service
improvements. The Company will purchase packaged software to address Year 2000
issues when available. The Company expects to incur $3 - $5 million in cash
expenditures in the 1998 and 1999 calendar years for its Year 2000 upgrade and
new warehouse management system, including new hardware and installation.
However, there can be no assurance that the systems of other companies on which
the Company's systems rely also will be timely converted or that any such
failure to convert by another company would not have an adverse effect on the
Company's systems.
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.
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.
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
13
<PAGE>
Company's acquisition strategy, competitive pressures, general economic
conditions, the success of new product introductions and government 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 four large regional distributors of
natural products. The successful and timely integration of these acquisitions
and mergers is critical to future operating and financial performance of the
Company. While the integration of these acquisitions and mergers with the
Company's existing operations has begun, the Company believes that the
integration will not be substantially completed until the end of calendar 1998.
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 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 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 it
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.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders of the Company (the "Annual Meeting") held
on December 19, 1997, the stockholders of the Company considered and voted upon
two proposals:
1) That Barclay McFadden, III, Kevin T. Michel and Richard S. Youngman be
elected as Class I directors for the ensuing three years and Thomas B.
Simone be elected as a Class II director for the ensuing year. The results
of the voting were as follows for each nominee: (i) 10,845,120 votes FOR,
and (ii) 3,950 votes WITHHELD. There were no broker non-votes.
2) That the selection of KPMG Peat Marwick LLP as the Corporation's
independent public accountants for the fiscal year ending July 31, 1998 be
ratified. The results of the voting were as follows: (i) 10,847,170 votes
FOR, (ii) 1,550 votes AGAINST and (iii) 350 votes ABSTAINING. There were no
broker non-votes.
The number of shares of Common Stock outstanding and entitled to vote at the
Annual Meeting was 17,356,705, and 10,849,070 shares were represented in person
or by proxy.
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.
On November 12, 1997, the Company filed a Current Report on Form 8-K dated
October 31, 1997 announcing under Item 2 (Acquisition or Disposition of Assets)
the completion of its acquisition of Stow Mills, Inc. pursuant to an Agreement
and Plan of Reorganization, and presenting under Item 7 (Financial Statements,
Pro Forma Financial Information and Exhibits) the following information:
Stow Mills, Inc. and Hendrickson Partners Combined Balance Sheets as of December
31, 1996 and 1995.
Stow Mills, Inc. and Hendrickson Partners Combined Statements of Operations,
Stockholders' Equity and Cash Flows for the Years Ended December 31, 1996, 1995
and 1994.
United Natural Foods, Inc. Unaudited Pro Forma Condensed Combined Balance Sheet
as of April 30, 1997.
United Natural Foods, Inc. Unaudited Pro Forma Condensed Combined Statements of
Operations for the Years Ended October 31, 1994 and 1995 and the Nine Months
Ended July 31, 1996 and April 30, 1997.
15
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
10.29 Employment Agreement for Robert Cirulnick
10.30 Employment Agreement for Richard S. Youngman
10.31 Termination Agreement for Steven Townsend
10.32 Addendum to Incentive Stock Option Agreement for Steven H. Townsend
11 Computation of Earnings Per Share
27 Financial Data Schedule
</TABLE>
<PAGE>
EXHIBIT 10.29
UNITED NATURAL FOODS, INC.
260 Lake Road
Dayville, Connecticut 06241
February 3, 1998
Mr. Robert Cirulnick
Dear Bob:
We are pleased that you have accepted employment with UNITED NATURAL FOODS,
INC. (the "Company") on the following terms and conditions:
1. Employment. Subject to the terms and conditions of this Agreement,
----------
the Company hereby agrees to employ you, and you accept such employment, as
Chief Financial Officer of the Company and such of its subsidiaries and
Affiliates as may be designated by the Company from time to time. You will
serve in such other capacity or capacities as the Company and you may from time
to time determine.
2. Duties. Consistent with Section 1 above, you shall have such duties
------
as the Chief Executive Officer of the Company may from time to time determine.
You agree to perform faithfully, industriously and to the best of your ability,
experience and talents, all of the duties that may be required by the terms of
this Agreement, to the reasonable satisfaction of the Company.
3. Compensation. (a) As compensation for your services, the Company
------------
will pay you a base salary at an annual rate of Two Hundred Twenty Five Thousand
Dollars ($225,000) (the "Base Salary"), payable in accordance with the Company's
usual payroll procedures. The Board of Directors of the Company (or appropriate
committee thereof) will review periodically and may increase your Base Salary in
its discretion based upon the Company's performance and your particular
contributions.
(b) You shall be entitled to participate in all employee benefit
plans, medical insurance plans, employee education plans, life insurance plans,
disability plans and other benefit plans for which you are otherwise eligible
and qualified, customarily made available by the Company from time to time to
its employees generally. Such participation shall be subject to (i) the terms
of the applicable plan documents and (ii) generally applicable policies of the
Company, provided, however, initial eligibility requirements thereunder shall be
waived to provide for coverage for you and your family, as appropriate, as of
the date of this Agreement.
(c) You shall be entitled to up to three (3) weeks paid vacation each
year. Such vacation shall be taken at a time mutually convenient to the Company
and you.
(d) You shall be entitled to paid holidays in accordance with the
Company's normal policies.
(e) You shall be eligible to participate in all performance bonus
plans and stock option plans available to senior executives of the Company in
accordance with applicable terms and conditions. Subject in each case to your
continued employment, (i) you will receive a performance bonus of Seventy Five
Thousand Dollars ($75,000) for the period ending December 31, 1998, payable on
or before February 1, 1999 and (ii) upon commencement of your employment, the
Company will grant you Incentive Stock Options ("ISO") and Non-Statutory Options
to acquire in the aggregate 100,000 shares of the Company's common stock in
accordance with the Company's Amended and Restated 1996 Stock Option Plan (the
"Plan") and the Company will enter into separate stock option agreements with
you with the understanding that of such Options the maximum number shall be
allocated to ISO's to the extent permitted by the Plan. Options with respect to
one-third (1/3) of such shares shall vest on December 1, 1998 and options for
the remaining shares shall vest on December 31, 1999, in each case subject to
your continued employment through each such date. Options which have vested may
be exercised in your discretion after the vesting date in accordance with the
Plan.
(f) Concurrently with the commencement of the Employment Period, the
Company will reimburse you (including gross-up for applicable taxes) for the
following relocation expenses: (i) up to $5,000
<PAGE>
for travel and lodging expenses incurred in your house search; (ii) reasonable
temporary living expenses for up to six (6) months in the aggregate; (iii) all
closing and moving costs, including brokers' commissions and so-called "points",
payable by you in connection with selling your current home and purchasing a new
home; and (iv) reasonable packing, storage and moving expenses for your
household goods and transportation of you and your family.
4. Business Expenses. The Company will reimburse you for all authorized
-----------------
travel and out-of-pocket expenses reasonably incurred by you for the purposes of
and in connection with performing your services to the Company hereunder. The
Company will provide you with an automobile and you will be responsible for
recording all business and non-business use and for the payment of any income
taxes attributable to your non-business use of such automobile.
5. Non-Competition. During your employment and for a period of two years
---------------
thereafter (the "Restriction Period"), you agree that you shall not, directly
or indirectly, singly or with others, manage, operate or control or work for, as
an employee or otherwise, any person, corporation or entity which (a) is in
direct competition with the business of the Company or its Affiliates being
conducted by the Company or its Affiliates in the United States or any foreign
country in which the Company or its Affiliates is then conducting business (the
"Restricted Territory"). In addition, during this restriction period, you agree
not to recruit any employee of the Company or its Affiliates or encourage any
employee of the Company or its Affiliates to terminate his or her employment
with the Company or its Affiliates or directly or indirectly to counsel, advise,
induce or attempt to influence any customer of the Company or its Affiliates to
terminate any commercial or business relationship between such customer and the
Company or its Affiliates.
6. Confidentiality. You acknowledge that in the course of employment,
---------------
you will obtain information relating to legitimate, predictable business
interests of the Company or its Affiliates, information concerning business
operations, customer lists, patents, inventions, copyrights, methods of doing
business, suppliers, and strategic plans (the "Confidential Information"). you
agree that at all times, you will hold in strict confidence, will not use for
your own account or for the benefit of any person other than the Company or its
Affiliates, and will not publish or otherwise disclose to persons not under an
obligation of secrecy or confidentiality to the Company no less restrictive than
this Agreement, all Confidential Information disclosed or made available to you
by the Company or its Affiliates, except for: Confidential Information which (a)
was already known to you at the time such Confidential Information was disclosed
to you; (b) is or becomes publicly known or publicly available through no
violation of any of your obligations in this Agreement; (c) is or has been
furnished to a third party by the Company without limitation on the third
party's use or disclosure of such Confidential Information; or (d) is disclosed
pursuant to a regulatory requirement or request of a governmental agency or in
response to a valid subpoena or the like or an order, judgment or decree of a
court of competent jurisdiction.
7. Enforcement. (a) If you violate or threaten to commit a breach of any
-----------
of the provisions of Section 5 or 6 this Agreement (the "Restrictive
Covenants"), the Company, in addition to, and not in lieu of, any other rights
and remedies available to the Company at law or in equity, shall have the right
and remedy to have the Restrictive Covenants specifically enforced by any court
having equity jurisdiction and to have your breach or threatened breach of the
Restrictive Covenants restricted by temporary restraining order, temporary or
permanent injunction or the like, it being acknowledged and agreed that any such
breach or threatened breach will cause irreparable injury to the Company and
that monetary damages will not provide adequate remedy to the Company.
(b) If any court of competent jurisdiction determines that any of the
Restrictive Covenants or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full force and effect, without regard to the invalid parts or portions.
If any such court determines that any of the Restrictive Covenants, or any part
thereof, is unenforceable because of the duration or geographic scope of such
provision, such court shall have the power to reduce the duration or scope of
such provision, as the case may be, and in its reduced form such provision shall
then be enforceable and shall be enforced.
8. Definition of Affiliate. The term "Affiliate" or "Affiliates" as used
-----------------------
herein shall mean an entity controlled by the Company, under common control with
the Company, controlling the Company or otherwise affiliated with the Company,
directly or indirectly through stock ownership, and shall include (but not be
limited to) each corporation a majority of the voting stock of which is owned by
the Company or any such other majority-owned subsidiary (or chain thereof) of
the Company.
9. Non-waiver of Rights. The failure to enforce at any time of the
--------------------
provisions of this Agreement or to require at any time performance by the other
party of any of the provisions hereof shall in no way be
<PAGE>
construed to be a waiver of such provisions or to affect either the validity of
this Agreement, or any part hereof, or the right of either party thereafter to
enforce each and every provision in accordance with the terms of this Agreement.
10. Term/Termination. (a) Your employment under this Agreement shall
----------------
commence February 3, 1998 and continue until terminated on not less than thirty
(30) days written notice by either party, or immediately upon written notice by
the Company at any time for cause. The term "cause" as used herein shall mean
(i) gross or habitual neglect of duty, (ii) prolonged absence from duty without
the consent of the Company other than from illness or disability and (iii)
intentional or willful or serious misconduct.
(b) In the event your employment is terminated by the Company for reasons
other than for cause, the Company will continue to pay you Base Salary and
provide the benefits described in Section 3(b) for a period of six (6) months or
your earlier employment by a third party.
11. Indemnification and Related Insurance. The Company, at all times
-------------------------------------
during the term of this Agreement, shall maintain officers and directors errors
and omission insurance in amounts as are in force as of the date of this
Agreement and you shall be covered by such insurance as an officer of the
Company. In addition, as set forth in Article Ninth of the Certificate of
Incorporation of the Company, the Company shall indemnify you to the full extent
as so set forth in the Certificate of Incorporation in connection with the
performance by you of your duties under this Agreement and as an officer of the
Company.
12. Notices. All notices required or permitted under this Agreement shall
-------
be in writing and shall be deemed delivered when delivered in person or
deposited in the United States mail, postage paid, addressed as follows:
to the Company:
United Natural Foods, Inc.
260 Lake Road
Dayville, CT 06241
ATTN: Norman A. Cloutier, Chairman
and Chief Executive Officer
to you at your address above.
Such addresses may be changed from time to time by either party by providing
written notice in the manner set forth above.
13. Entire Agreement. This Agreement contains the entire agreement of the
----------------
parties and there are no other promises or conditions in any other agreement
whether oral or written. This Agreement supersedes any prior written or oral
agreements between the parties.
14. Amendment. This Agreement may be modified or amended, if the
---------
amendment is made in writing and is signed by both parties.
15. Severability. If any provisions of this Agreement shall be held to be
------------
invalid or unenforceable for any reason, the remaining provisions shall to be
valid and enforceable. If a court finds that a provision of this Agreement is
invalid or unenforceable, then such provision shall be deemed to be written,
construed and enforced as so limited.
16. Applicable Law. This Agreement shall be governed by and contained in
--------------
accordance with the laws of the State of Connecticut.
17. Binding Agreement. This Agreement shall bind and inure to the benefit
-----------------
of the parties and their respective legal representatives, successors and
assigns, except that you may not delegate any of your obligations under this
Agreement or assign this Agreement. A successor to the Company shall be deemed
to include any successor of any nature including a change of control of the
Company whereunder any entity or person shall acquire, directly or indirectly,
more than 50% of the voting power of all classes of stock of the Company.
18. Public Announcement. The Company will make no public announcement of
-------------------
your employment prior to February 12, 1998 without your prior written
permission.
<PAGE>
19. Liquidated Damages. You expressly acknowledge that the Company has
------------------
incurred significant expenses in connection with the negotiation of your
employment, including the payment of fees to Korn/Ferry International, and that
the Company has relied on your agreements set forth above. Accordingly, in the
event that you fail to report for employment with the Company on February 3,
1998, except by reason of death or disability or delays not exceeding five (5)
business days on account of weather or similar events, you agree to pay the
Company, on demand, One Hundred Thousand Dollars ($100,000) as liquidated
damages.
Please confirm your agreement to the foregoing by signing in the space
below.
Sincerely,
UNITED NATURAL FOODS, INC.
By: /s/ Norman A. Cloutier
----------------------
Norman A. Cloutier
Chief Executive Officer
Agreement confirmed:
/s/ Robert Cirulnick
- --------------------
Robert Cirulnick
February 3, 1998
<PAGE>
EXHIBIT 10.30
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT ("Agreement") is made and entered into this 31st day of
October, 1997, by and between UNITED NATURAL FOODS, INC., a Delaware corporation
(the "Company"), and RICHARD S. YOUNGMAN of P.O. Box 88, Foley Road,
Chesterfield, New Hampshire 03443 ("Executive").
WITNESSETH:
----------
WHEREAS, each of the Company and Stow Mills, Inc. a Vermont corporation
("Stow Mills"), are engaged in the wholesale distribution of natural foods and
related products (the "Company Business");
WHEREAS, Stow Mills has become a wholly-owned subsidiary of the Company
effective the date hereof;
WHEREAS, Executive has heretofore been employed by Stow Mills for a number
of years and possesses significant knowledge and information respecting the
Company Business, which knowledge and information will be increased, developed
and enhanced by his continued employment;
WHEREAS, Executive is a key employee of Stow Mills familiar with and
responsible for the success of the Company Business; and
WHEREAS, the parties hereto desire to enter into this Agreement as to the
Company's employment of Executive on the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the parties agree as follows:
1. Employment and Term. Subject to the terms and conditions of this
-------------------
Agreement, the Company hereby employs Executive, and Executive hereby accepts
employment by the Company as President and Chief Executive Officer of Stow
Mills and President and Chief Executive Officer of the Company's Eastern Region
which includes the business operations of Stow Mills and the Company's
Cornucopia Natural Foods division (the "Eastern Region"). Additionally, during
the term hereof, Executive shall serve as one of two Directors of Stow Mills.
In such capacity Executive shall have full management responsibility for the
business and operations of the Company's Eastern Region, which responsibilities
shall include, without limitation, integration of Stow Mills into the Company's
Eastern Region operations. The Executive shall report to the Chairman and Chief
Executive officer of the Company. Executive's employment under this Agreement
shall be for an initial term (the "Initial Term") terminating on the second
anniversary of the date hereof. On such date and on each anniversary of such
date (the "Renewal Date"), Executive's employment hereunder shall automatically
be extended for an additional one-year term ("Renewal Term"), unless either
party shall notify the other party in writing not less than ninety (90) days
prior to any such Renewal Date of his or its election to terminate Executive's
employment with the Company upon the expiration of the then current term.
Executive and the Company agree that any relocation of Executive shall only be
by mutual agreement of the parties. In the event of any such relocation, the
Company shall pay all reasonable and necessary moving expenses to relocate the
Executive and his immediate family.
2. Duties. Executive hereby agrees that during the term of this
------
Agreement he will devote his full time, attention and energies to the diligent
performance of his duties as an employee of the Company, provided that Executive
may engage in any venture or activity which (a) is not competitive with or
adverse to the business of the Company or any subsidiary or affiliate of the
Company (other than the ownership of not more than five percent (5%) of the
stock or other equity interest of any publicly traded corporation or other
entity), and (b) does not interfere with Executive's performance of his duties
hereunder.
3. Compensation. In consideration of Executive's services hereunder, the
------------
Company shall pay to Executive during the term of his employment with the
Company a salary at the rate of not less than One Hundred Thirty Thousand
Dollars ($130,000) per annum, in equal installments at such times as the Company
shall make payments of salary and wages to its employees generally. Executive's
salary will be reviewed by the Compensation Committee of the Board of Directors
of the Company at the beginning of each of its fiscal years and, in the sole
discretion of the Compensation Committee of the Board of Directors of the
Company, may be increased, but not decreased, for such year.
<PAGE>
4. Other Benefits. The Company will furnish Executive with four (4)
--------------
weeks paid vacation each year; an automobile allowance sufficient to allow him
to retain his current, or a comparable, automobile; and reimbursement of
reasonable and necessary out-of-pocket expenses incurred in the course of
performing his duties hereunder. Executive shall further be entitled to other
employee benefits substantially equivalent to those generally provided by the
Company to its senior executive employees similarly situated for so long as the
Company provides or offers such benefits, and to bonuses and stock options as
determined by the Compensation Committee of the Company's Board of Directors and
substantially equivalent to those provided to other Senior Executive Officers of
the Company and its subsidiaries.
5. Termination.
-----------
(a) The Executive may terminate this Agreement at any time during the
Initial Term or any Renewal Term, without cause, upon ninety (90) days prior
written notice to the Company.
(b) Following the Initial Term, the Company may terminate this Agreement
at any time, without cause, upon ninety (90) days prior written notice to the
Executive.
(c) The Executive shall have the right to terminate this Agreement upon
thirty (30) days prior written notice to the Company, unless the grounds for
termination have been eliminated during such notice period, if (i) the Company
fails to make any salary or other payment due to Executive hereunder, (ii) the
Company removes or demotes Executive from his position as President and Chief
Executive Officer of Stow Mills or from his position as President and Chief
Executive Officer of the Eastern Region or otherwise materially reduces the
scope of Executive's title, duties or authority, or (iii) the Company otherwise
breaches any material covenant, obligation or agreement hereunder.
(d) The Company shall have the right to terminate this Agreement for cause
upon thirty (30) days prior written notice to the Executive, unless the grounds
for termination have been eliminated during such notice period, and provided the
Executive has been given an opportunity to be heard by the Board of Directors,
if any of the following occurs:
(i) conviction of Executive for commission of a felony involving an
act of dishonesty;
(ii) the willful and continued failure by Executive to substantially
perform his duties hereunder (other than any such failure resulting from
Executive's incapacity due to physical or mental illness); or
(iii) Executive shall have given aid to a competitor of the Company
or any of its subsidiaries to the material detriment of the Company.
(e) The Company may terminate this Agreement in the event that Executive
shall fail, because of illness, physical or mental disability or other
incapacity for an aggregate of one hundred twenty (120) days in any 365-day
period, to render the services provided for by this Agreement and as provided
immediately prior to the onset of such illness, disability or incapacity. The
effective date of termination based on disability shall be the date that is
thirty (30) days after the date that the Company gives the Executive notice of
termination based on disability. If any controversy should arise as to whether
such a disability exists, the Executive shall be examined by a physician or
physicians mutually selected by the parties and the determination of such
physician(s) shall be binding.
(f) This Agreement shall terminate on the date of death of the Executive.
(g) If this Agreement is terminated pursuant to paragraphs (a), (b),
(d), (e) or (f) above, the Executive shall receive the compensation and benefits
owing to him hereunder, pro-rated to the date of termination. If however, the
Executive terminates this Agreement during the Initial Term pursuant to
paragraph (c) above, or if the Company terminates this Agreement other than
pursuant to paragraphs (d), (e) or (f) above prior to the expiration of the
Initial Term, the Executive shall be entitled to full compensation and benefits
provided hereunder through the end of the Initial Term.
6. Non-Competition.
---------------
(a) For a period of one (1) year following (i) the voluntary
termination or non-renewal of this Agreement by Executive, other than pursuant
to Section 5(c) or (ii) termination of this Agreement by the
<PAGE>
Company pursuant to Section 5(d), Executive shall not, directly or indirectly,
either as an employee, employer consultant, agent, principal, partner,
stockholder, corporate officer, director, or in any other individual or
representative capacity, engage or participate in (x) any wholesale distribution
business that is in competition with the wholesale distribution business of the
Company or any of its subsidiaries or affiliates as now conducted or in the
future during the Initial Term or any Renewal Term conducted or planned, or (y)
any retail business that is in competition with any retail operations of the
Company or its subsidiaries as now conducted or in the future during the Initial
Term or any Renewal Term conducted or planned and has a location within twenty-
five (25) miles from a retail store now owned by the Company or its subsidiaries
or planned or acquired during the Initial Term or any Renewal Term, provided,
--------
however, that Executive's ownership of not more than five percent (5%) of the
- -------
shares or other equity interest of any publicly traded corporation or other
entity engaged in any such business shall not be deemed a breach of this
covenant. For purposes hereof, "affiliate" means a company controlling,
controlled by or under common control with the Company.
(b) During the Initial Term and any Renewal Term, Executive shall not
divert, take away, interfere with or attempt to take away, interfere with or
attempt to take away any present or future employee or customer of the company
or Stow Mills or any of their respective subsidiaries or affiliates.
(c) In the event that the provisions of this Section 6 shall ever be
deemed to exceed the time or geographic limitations or any other limitations
permitted by applicable law, then such provision shall be deemed reformed to he
maximum permitted by applicable law. Executive acknowledges and agrees that the
foregoing covenant is an essential element of this Agreement and that, but for
the agreement of Executive to comply with the covenant, the Company would not
have entered into this Agreement, and that the remedy at law for any breach of
the covenant will be inadequate and the Company, in addition to any other relief
available to it, shall be entitled to temporary and permanent injunctive relief
without the necessity of proving actual damage.
7. Confidential Information.
------------------------
(a) The parties acknowledge and agree that during the Initial Term and
any Renewal Term and in the course of the discharge of his duties hereunder,
Executive shall have access to and become acquainted with information concerning
the operation of the Company and Stow Mills, including without limitation,
customer lists, patents, inventions, copyrights, methods or doing business, and
proprietary information that is owned by the Company or Stow Mills and regularly
used in the operation of the Company's or Stow Mills' business and that this
information constitutes the Company's or Stow Mills' trade secrets.
(b) Executive agrees that he shall not disclose any such trade
secrets, directly or indirectly, to any other person or use them in any way,
during the Initial Term, any Renewal Term and for a period of one (1) year
following the voluntary termination or non-renewal of this Agreement by
Executive (other than pursuant to Section 5(c)) or termination of this Agreement
by the Company pursuant to Section 5(d), except as is (i) required in the course
of his employment with the Company or Stow Mills; (ii) in the public domain;
(iii) acquired prior to the discussions concerning the acquisition of Stow Mills
by the Company; (iv) required to be disclosed in litigation or to governmental
authorities; or (v) acquired from third parties without knowledge or any
confidentiality obligation.
(c) Execute specifically acknowledges and agrees that the remedy at
law for any breach of the foregoing shall be inadequate and that the Company or
Stow Mills, in addition to any other relief available to them, shall be entitled
to temporary and permanent injunctive relief without the necessity of proving
actual damage.
8. Return of Company Documents and Equipment. Upon the termination or
-----------------------------------------
expiration of his employment hereunder, Executive agrees to deliver promptly to
the Company all Company files, customer lists, catalogs, price lists, management
reports, memoranda, research, Company forms, financial data and reports and
other documents supplied to or created by him in connection with his employment
hereunder (including all copies of the foregoing) in his possession or control
and all of the Company's equipment and other materials in his possession or
control.
9. Provisions Severable. If any provision or covenant of this Agreement,
--------------------
or any part thereof, should be held by any court to be invalid, illegal or
unenforceable, either in whole or in part, the invalidity, legality or
enforceability of any such provisions shall not affect the remaining provisions
or covenants of this Agreement, or any part thereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provisions were
omitted.
<PAGE>
10. Waiver. Failure of either party to insist, in one or more instances,
------
on performance by the other in strict accordance with the terms and conditions
of this Agreement shall not be deemed a waiver or relinquishment of any right
granted in this Agreement or of the future performance of any such term or
condition or of any other term or condition of this Agreement, unless such
waiver is contained in a writing signed by the party making the waiver.
11. Amendments and Modifications. This Agreement may be amended or
----------------------------
modified only by a writing signed by both parties hereto.
12. Governing Law. The validity and effect of this Agreement shall be
-------------
governed by and construed and enforced in accordance with the laws of the State
of Delaware.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
/s/ Richard S. Youngman
-----------------------
Richard S. Youngman
UNITED NATURAL FOODS, INC.
By: /s/ Norman A. Cloutier
----------------------
Norman A. Cloutier
Chairman of the Board
<PAGE>
EXHIBIT 10.31
UNITED NATURAL FOODS, INC.
260 LAKE ROAD
DAYVILLE, CT 06241
October 31, 1997
PERSONAL AND CONFIDENTIAL
Mr. Steven Townsend
169 Barrett Hill Road
Brooklyn, CT 06234
Dear Steve:
On behalf of United Natural Foods, Inc. (the "Company") and the other
members of its Board of Directors (the "Board"), and in acknowledgement of your
extraordinary efforts extended over your fourteen years of service to the
Company as well as your efforts in connection with the successful initial public
offering by the Company of its stock and the general business good fortunes of
the Company accomplished in no small part as a result of your efforts, and
consistent with your stated personal career objectives and your desire to
undertake new business opportunities outside of the wholesale distribution of
natural foods business, the Company is pleased to undertake the following:
1. You will remain employed by the Company and serve in your officer capacity
as Vice President-Finance and Administration and Chief Financial Officer
until December 1, 1997 or such earlier date as we mutually agree in the
event the Company has hired your successor. You agree that you will assist
the Company in retaining your successor.
2. Your compensation and benefits currently payable by the Company will
continue until December 1, 1997 or such earlier date as referenced in
Section 1 above.
3. The Company will provide a salary continuation benefit to you such that on
December 1, 1997, it will pay you $30,000, on March 1, 1998 it will pay you
$30,000 and on August 1, 1998 it will pay $60,000, all subject to necessary
withholdings. In addition, the Company will provide, at its expense, health
insurance benefits as are currently made available to you and your family
to August 31, 1998. You will pay your normal share of premiums for such
health insurance through August 31, 1998. Subsequent to August 31, 1998,
you will have the right to continue such insurance benefits under COBRA.
4. The Company anticipates granting Non-Statutory Stock Options to certain of
its employees as well as to those Board of Directors who are not employed
by the Company (the "Outside Directors") and for purposes of the 1997-1998
grant of non-statutory options under the Company Non-Statutory Stock Option
Plan, the Company will grant non-statutory to you to purchase 5,333 shares
of the Company common stock as of the date the Board of Directors takes
action to issue such options to its employees and to its Outside Directors,
it being agreed that such options when granted to you for such 5,333 shares
will be fully vested as of the date of the grant. If upon the expiration of
your current term as a Director of the Company you are re-elected as a
Director, then during your re-elected term or terms, you shall be granted
options for such number of shares as shall equal the number of shares it
will grant to its other Outside Directors. The Non-Statutory Stock Option
Agreement with respect to those options to be granted to you during you re-
elected term(s) shall provide for vesting at the rate of 1/3 of the amount
of the grant per year for three (3) years while you shall serve as
Director.
5. The Company will provide to potential future employers its letter of
recommendation in the form attached hereto and all inquiries from future
employers will be directed to the undersigned who will respond directly on
behalf of the Company.
6. Subsequent to December 1, 1997, you may be called upon by the Company to
render consulting services from time to time and the Company and you will
separately agree to mutual terms and conditions with respect thereto
including consulting fees.
7. You will continue to serve on the Board of Directors of the Company through
the remainder of your current elected term and, if requested by the Board,
will agree to stand for re-election at the end of that term.
8. You agree that will not without prior written consent of the Company
disclose to any other party any trade secrets or confidential and/or
proprietary information of the
<PAGE>
Company obtained during your employment by the Company which trade secrets
and confidential information shall mean any and all confidential and
proprietary information not otherwise in the public domain including,
without limitation, financial information, projected budgets, marketing
strategies, customer lists, pricing policies, operational methods,
marketing plans and strategies, product development techniques or plans,
business acquisition plans, inventions and/or research projects and other
business affairs of the Company which are proprietary and are confidential.
You further agree that until August 31, 1998, you shall not at any time,
directly or indirectly, induce, persuade, solicit or attempt to induce,
persuade or solicit any employee of the Company or its subsidiaries to
terminate his or her employment by the Company or its subsidiaries or to
otherwise, directly or indirectly, or through any other person, firm or
entity induce, persuade or solicit or attempt to induce, persuade or
solicit any such employee to become employed by you, or any other firm,
person or entity with whom you may be affiliated.
Please confirm your understanding as to the foregoing be signing this and a copy
of this letter and returning the same to the undersigned.
All of the employees of the Company join me in wishing you nothing but the best
with regard to your future business undertakings.
Very truly yours,
UNITED NATURAL FOODS, INC.
By: /s/ Norman A. Cloutier
------------------------
Norman A. Cloutier
Chairman of the Board
Read and Agreed to as of
October 31, 1997
/s/ Steven Townsend
- -------------------
Steven Townsend
<PAGE>
EXHIBIT 10.32
UNITED NATURAL FOODS, INC.
260 LAKE ROAD
DAYVILLE, CT 06241
January 31, 1998
PERSONAL AND CONFIDENTIAL
Mr. Steven H. Townsend
169 Barrett Hill Road
Brooklyn, CT 06234
Dear Steve:
On behalf of United Natural Foods, Inc. (the "Company") and the other
members of its Board of Directors (the "Board"), and in further acknowledgement
of your extraordinary efforts extended over your fourteen years of service to
the company as well as your efforts in connection with the successful initial
public offering by the Company of its stock and the general business good
fortunes of the Company accomplished in no small part as a result of your
efforts, and consistent with your stated personal career objectives and your
desire to undertake new business opportunities outside of the wholesale
distribution of natural foods business, and in addition to the agreements set
forth in a letter between the Company and you dated October 31, 1997, the
Company is pleased to undertake the following:
With reference to the Incentive Stock Option Agreement between you and the
Company dated July 31, 1996 (the "ISO Agreement"), the Company agrees that
effective as of the date of this letter, the options for 6,754 shares otherwise
not vested under the ISO Agreement be, and hereby are, vested such that as of
this date the number of shares of Company common stock as to which you may
exercise options under the ISO Agreement and the Plan referenced therein.
With reference to the Non-Statutory Stock Option Agreement dated July 31,
1996, your option to purchase 68,750 shares of Company common stock thereunder
were fully vested as of July 31, 1996 and remain vested.
Please confirm your understanding as to the foregoing by signing this and
copy of this letter and returning the same to the undersigned.
Very truly yours,
UNITED NATURAL FOODS, INC.
By: /s/ Norman A. Cloutier
------------------------
Norman A. Cloutier
Chairman of the Board
Read and agreed to as of
January 31, 1998
/s/ Steven H. Townsend
- ----------------------
Steven H. Townsend
<PAGE>
EXHIBIT 11
UNITED NATURAL FOODS, INC.C
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JANUARY 31, JANUARY 31,
----------- -----------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic weighted average shares outstanding 17,116,331 17,356,705 15,393,653 17,356,705
Net effect of dilutive stock options based upon the treasury
stock method using the average stock price 273,174 440,934 264,290 430,907
----------- ----------- ----------- -----------
Diluted weighted average shares outstanding 17,389,505 17,797,639 15,657,943 17,787,611
=========== =========== =========== ===========
Income before extraordinary item $ 2,294,035 $ 4,200,184 $ 3,583,259 $ 3,571,887
Extraordinary item - loss on early extinguishment
of debt, net of income tax benefit of $661,822 932,929 - 932,929 -
------------ ------------ ------------ -----------
Net income $ 1,361,106 $ 4,200,184 $ 2,650,330 $ 3,571,887
============ ============ ============ ===========
Pro forma net income before extraordinary item $ 2,251,778 $ 4,200,184 $ 3,576,882 $ 3,251,789
============ ============ ============ ===========
Basic Per Share Data:
Income before extraordinary item $ 0.13 $ 0.24 $ 0.23 $ 0.21
Extraordinary item - loss on early extinguishment
of debt, net of income tax benefit of $661,822 $ 0.05 $ - $ 0.06 $ -
------------ ------------ ------------ -----------
Net income $ 0.08 $ 0.24 $ 0.17 $ 0.21
============ ============ ============ ===========
Pro forma net income before extraordinary item $ 0.13 $ 0.24 $ 0.23 $ 0.19
============ ============ ============ ===========
Diluted Per Share Data:
Income before extraordinary item $ 0.13 $ 0.24 $ 0.23 $ 0.20
Extraordinary item - loss on early extinguishment
of debt, net of income tax benefit of $661,822 $ 0.05 $ - $ 0.06 $ -
------------ ------------ ------------ -----------
Net income $ 0.08 $ 0.24 $ 0.17 $ 0.20
============ ============ ============ ===========
Pro forma net income before extraordinary item $ 0.13 $ 0.24 $ 0.23 $ 0.19
============ ============ ============ ===========
</TABLE>
Pro forma income tax expense to reflect Stow as though it were a C corporation
for the entire period is calculated as follows: Total income tax expense plus
Stow pretax income multiplied by 35% (note fiscal 1998 adds back merger
expenses as well before calculating tax expense for Stow since merger expenses
are nondeductible for tax purposes).
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE INTERIM
CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED JANUARY 31, 1998 AND
THE CONSOLIDATED BALANCE SHEET AS OF JANUARY 31, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 3,457,686
<SECURITIES> 0
<RECEIVABLES> 52,605,812
<ALLOWANCES> 2,116,801
<INVENTORY> 78,034,786
<CURRENT-ASSETS> 136,581,646
<PP&E> 54,656,739
<DEPRECIATION> 21,934,185
<TOTAL-ASSETS> 180,336,911
<CURRENT-LIABILITIES> 79,174,605
<BONDS> 22,915,737
0
0
<COMMON> 173,771
<OTHER-SE> 77,395,238
<TOTAL-LIABILITY-AND-EQUITY> 180,336,911
<SALES> 351,358,640
<TOTAL-REVENUES> 351,358,640
<CGS> 280,861,361
<TOTAL-COSTS> 280,861,361
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 704,032
<INTEREST-EXPENSE> 2,273,137
<INCOME-PRETAX> 8,426,772
<INCOME-TAX> 4,854,885
<INCOME-CONTINUING> 3,571,887
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,571,887
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.20
</TABLE>
