Greetings, and welcome to the United Natural Foods Fourth Quarter and Full Year 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Katie Turner of ICR. Thank you, Ms. Turner, you may begin.

Thank you, and good afternoon, everyone. By now, you should all have access to the fourth quarter and full year fiscal 2013 earnings press release issued this afternoon at approximately 4:05 p.m. Eastern Time. If anyone still needs to review the release, please reference the Investors section of the company's website at www.unfi.com. As a reminder, the webcast of the earnings call is also available on the company's website. On the call today are Steve Spinner, President and Chief Executive Officer; Mark Shamber, Chief Financial Officer; and Sean Griffin, Group President. Before I begin, we'd like to remind everyone the comments made by management during today's call, may contain forward-looking statements. These forward-looking statements discuss plans, expectations, estimates and projections that might involve significant risks and uncertainties. Actual results may differ materially from the results discussed in these forward-looking statements. Additionally, in today's earnings press release and during the call, the company will provide both GAAP and non-GAAP financial measures, including operating expenses, operating income, net income and earnings per diluted share. Presentation of these non-GAAP financial measures is not intended to be considered in isolation or in substitute for any measure prepared in accordance with GAAP. For a complete reconciliation of GAAP and non-GAAP financial measures, please refer to the company's earnings release issued earlier and available, as we mentioned, on our Investor website under Investors. And with that, I'd now like to turn the call over to Steve Spinner.

Thanks, Katie. Good afternoon, everyone, and thanks for joining us today to discuss UNFI's financial results for the fourth quarter and the full year of fiscal 2013. We are really pleased to report another year of very strong top and bottom line growth. We finished the year on a strong note and achieved record sales of over $6 billion. Our growth underscores the consumers' growing appetite for our natural, organic and specialty products, as well as our focus on enhancing our efficiency and driving further operational excellence across our business. For the full year, our sales grew nearly 16% compared to 2012 fiscal, and sales during the fourth quarter grew 22% on a year-over-year basis, reflecting an acceleration in demand, which has continued throughout the first 5 weeks of fiscal 2014. UNFI is now a Fortune 500 company, and we are now included in the S&P mid-cap 400. Our operating income grew 20% year-over-year to $185 million, also a record, and our operating margins expanded by 10 basis points to 3.1%. For the year, our net income increased 18.1% versus the prior year. Looking at the fourth quarter in particular, 2013 demonstrated that our strategies for managing cost and gross margin were on the mark. Gross margin was up 11 basis points versus prior year and 53 basis points versus Q3 2013. The various initiatives focused on during fiscal 2013 are yielding benefits, specifically with respect to inbound freight, the implementation of our inventory optimization technology and the migration to a true national supply chain, inbound logistics, category management and inventory planning platform. Operationally, we continue to be extremely diligent in managing our distribution network, with significant improvements made in the management of our fleet. All of our key indicators, including miles per gallon, cases per route and delivery service…

Thanks, Steve, and good afternoon, everyone. Net sales for the fourth quarter of fiscal 2013 were $1.64 billion, which represents growth of 22.2% or approximately $299 million over the prior year fourth quarter's net sales of $1.34 billion. In Q4, sales growth related to acquisitions accounted for approximately $15.8 million or 1.2%. As a reminder, fiscal 2013 was a 53-week fiscal year, and an extra week occurred in our fourth quarter. Adjusted for the extra week, which represented approximately $119 million in net sales, fourth quarter sales growth was 13.4%, an increase of approximately 60 basis points sequentially. Inflation increased sequentially in the quarter for the first time in more than a year, coming in at 1.92%, a 16 basis point increase over Q3. On a year-over-year basis, the spread in the decline of inflation moderated to 109 basis points as inflation in last year's fourth quarter was 3.01%. On a full year basis, fiscal 2013 net sales increased by 15.8% to $6.06 billion or 13.6%, excluding the impact of the extra week. Acquisitions contributed $53.8 million or approximately 1% of our fiscal 2013 sales growth. Through the first 5 weeks of our first quarter of fiscal 2014, our sales growth has further accelerated, trending north of 14.5%, which is more than 100 basis point acceleration from our average for the fourth quarter adjusting for the extra week. For the fourth quarter of fiscal 2013, the company reported net income of $32.1 million or $0.65 per diluted share, an increase of approximately 27.6% or $6.9 million over the prior year's fourth quarter. Net income for the fourth quarter of fiscal 2012 was $25.1 million or $0.51 per diluted share. With respect to breaking down our growth by channel, I'll provide the results discussing actual growth, and then adjust it for…

[Operator Instructions] Our first question comes from the line of Sean Naughton from Piper Jaffray.

Just in terms of the acceleration that you continue to see here to start the new fiscal year, is it a continuation of similar trends that you were seeing in the fourth quarter or is there something that is really driving that -- one of the particular channels at this point in time?

Sean, no, this is -- it's really a continuation of an increase in demand that we saw towards the fourth quarter of last year. And it has continued nicely through the beginning of this year. I wouldn't say that it's directed in any one particular channel. The acceleration is across all 3 of the channels that we report against.

Okay, that's great to hear. And then secondly, I know you touched on this a number of times, but just thinking about the out-of-stocks and understanding how that impacted your gross margin. How would you -- and I know that in Q1 here that would be called out as a little bit of an impact in your last year. What -- how much would you say that, that impacted your ability to maintain or expand margins in 2013? And then what kind of gives you some of the confidence that this may normalize post-holiday?

I mean, if you think about what happens when this -- we're always going to have a certain amount of supplier out-of-stocks. It's just the nature of the beast. What happens is when it accelerates beyond historical levels, I mean the biggest loss is the lost gross margin on the sales that we lose because we don't have the inventory. But there's also a fair amount of promotional gross margin that we lose related to those lost sales, as well as freight revenue and a whole slew of other things that just don't take place when we don't have the inventory. I think we quantified the amount at some point during the last year. We had said that the out-of-stocks were about 100 basis points worse year-over-year in our third or fourth quarter of last year.

Yes, I mean, we vary depending on where they've been, but when we talked about the third quarter, we referenced that we lost about $17 million in sales in the third quarter and when we have the first quarter earnings call back in late November, early December 2012, I think we had referenced about $25 million in lost sales that we didn't break it out in Q2, but we did break it out in these 2 quarters.

I think it is important to note that we have seen some improvement over the last month or so. I think that we're probably prepared for a rocky road through the holidays. But we're still optimistic that we'll get it back to more historic levels in January, February.

And that's great, and then just a quick clarification, Mark, maybe on Q4, if you remove the impact of the accounting treatment for the Denver facility, did you say the margin expansion will be closer to about 5 basis points? Is that the correct way to read it?

On the operating margin?

Yes, that's correct.

Yes. Yes.

Actually before we take the next question, I mean, one thing I would add, Sean, is that the benefit would have been a spread over the other quarters. So, I mean, as much as it's all concentrated in one quarter, that benefit still would have been reflected during the course of the year. It just wouldn't have been in one quarter.

Our next question comes from the line of Andrew Wolf from BB&T Capital Markets. Andrew P. Wolf - BB&T Capital Markets, Research Division: Okay, so as a follow-up on the accounting, so the first -- Q1 through Q3, your auditors said they wanted that reversed out. Is that how we should look at it?

Well, yes, I mean it's -- I could probably take up 15 minutes of the call trying to explain exactly what went on. Andrew P. Wolf - BB&T Capital Markets, Research Division: Is it close enough for horseshoes, was that what happened?

So basically we reversed some of it out. Some of it is now below-the-line and interest expense or has led to increased interest expense. And that's when we're talking about the fiscal 2014. We'll still have the total amount of expense per year going forward, but a portion of it will be above the line in operating expenses and a portion will be below-the-line in interest expense. But there's no net change in the amount of money that we're expensing or incurring.

It's just under $0.03 in EPS.

Yes, just under $0.03 for the quarter. Andrew P. Wolf - BB&T Capital Markets, Research Division: Oh, there was $0.03 charge this quarter?

Benefit. Andrew P. Wolf - BB&T Capital Markets, Research Division: Benefit, okay. And that's the offset, but what was the net for the year because you did bring up your interest expense. There was some net cost to the move, right?

Yes, I don't have it -- I know the increase on the interest expense was $600,000. I don't know what the net rent expense for Denver was off the top, maybe I have to follow up with you... Andrew P. Wolf - BB&T Capital Markets, Research Division: I'm just trying to figure out sort of the negative swing, and you called out next year a couple of million, $2.2 million or something.

Yes, it will be about $2.5 million next year. It's a shift next year. It will move from operating expenses to interest expense.

That's all reflected in our guidance. Andrew P. Wolf - BB&T Capital Markets, Research Division: Okay, so -- all right. So on the operating line, the margins has adjusted at a 5 basis point expansion, that's how we should think of modeling, and so forth? There's nothing -- it's all going through interest expense now and some rent expense we're not going to see. And what about this duplicate rent you're paying? Can you tell us what that is, because that's just dead rent on an empty warehouse?

Yes, if we talked about we moved from 3 buildings or 4 buildings in Denver to a new location. Not all of those leases end at the same time. So we're going to be paying rent expense, CAM charges, have minimal electricity and water for those buildings until the leases end. Some of them end as soon as 6 months, some of them don't end for another 2.5 years...

But again, it's important to note we're very particular here. And that, we called them out just to give you the data but all of these things are reflected in our guidance. Andrew P. Wolf - BB&T Capital Markets, Research Division: I know. I just want to know, I mean, when the company's paying rent for an empty building, it's real money, but it's also not part of your ongoing earnings because it's going to go away at some point. Is that a couple million or can you just give us a sense of what it is?

It's about -- it's anywhere from $1.4 million to $1.8 million for next year. Andrew P. Wolf - BB&T Capital Markets, Research Division: Okay, and as bigger picture question, hopefully for Steve, there's so much consolidation going on in supermarkets. We could -- whether it's SUPERVALU being sold to private equity, Harris Teeter to strategic Fresh & Easy and Piggly Wiggly in the last few couple of days, strategic and one private equity. Is this an opportunity for -- I mean, I'm sure each one is different but when you look at it as a whole, is this an opportunity because things are being shaken out or is it more like these assets are changing, and they got to sort of settle in to their new ownership structure and maybe plans that might have been happening are on hold? Can you give us a sense of how you're viewing the current consolidation for it and how it might affect UNFI?

Yes, I think the answer, short answer is yes to all of the above, but I think generally, it creates an opportunity for us because there's kind of -- there's enough empirical data that says that we know how to do this and certainly a lot of the supermarket customers that have made the switch over the last couple of years are seeing the benefit of that in their increased consumption in organic and natural. And you're certainly seeing it in our overall supermarket sales growth. And for the most part, we have relationships with most of these customers. And so we -- I think generally we look at it as an opportunity. It's certainly not a negative.

Our next question comes from the line of Scott Mushkin from Wolfe Research.

I'm probably going to beat this dead horse because I'm confused, which is not unusual necessarily. So if we're looking at -- basically you're shifting into, what is it operating lease to a capital leases or something like that, Mark, is that what happened here with the treatment or it's not that or...

It's basically going from a sales leaseback to a financed building that we, from an accounting standpoint, are perceived to still own. It shows up on the books on the noncash side.

So as we compare next year to this year on a yearly basis, you trued up in the fourth quarter but basically the margin look for the year is going to be the same. In other words, the expenses will look the same next year as you made this correction, is that correct?

Yes, the only thing that would be different and Andy was partially right with what he was saying is that a portion of the expense, if I -- and this is rough numbers, but let's say that 40% of the expense, 40% to 45% of the expense is going to be captured in operating expenses where 50% to -- or 55% to 60% of the expense will now be in interest expense. So the full number still hits in our expenses, but they're now split based on the way this is treated.

And this was all made up in the fourth quarter, but for the year as we look at year-over-year numbers, it's going to be apples-to-apples as we go forward?

Yes, yes.

Okay. Second question on the line of guidance, you guys had a ton of onetime charges this year. I'm just trying to get a feel as we look through the couple of million, $2.5 million that you talked about and then the debt rent expense. My impression always was, as we go forward, '14 is a little easier with some of these onetime expenses versus '13. Is that not true?

That is correct.

That is true.

I mean, again, we typically don't break out the nonrecurring for the new buildings. But having said that, as much as we provided the figures, those numbers are down $2.5 million to $3 million on a year-over-year basis.

They're down $2.5 million to $3 million?

Yes, we guided $5 million to $5.5 million in fiscal '13, we're guiding $2.5 million to $3 million in fiscal '14.

Okay, so then these leads to not -- my third but not my final question. If I go to the midpoint of your guidance, unless I'm doing something wrong, your guidance implies margins to be down a little bit.

I think it depends on how you choose to pick the numbers, Andy -- I'm sorry, Scott. The only way -- I think if you were to take the high end of the sales and the low end of the guidance, that's the only scenario in which we have any margin dilution and even then that's a basis point. When you take the numbers, I think that it translates into anywhere from half dozen basis points of expansion to -- in certain scenarios, as much as a little bit above the high end of our guidance.

Okay, that's good clarity. We'll have to run through our model again, so I appreciate that. And then the -- this is my fourth and my fifth one, I promise I'll be done, I'll yield the floor. CapEx, Steve, you made a comment that $80 million to $95 million, 1.3% of sales, but then it was going to continue to ramp up as a percentage of sales. Just wanted to make sure I heard that right and...

I didn't make that clear. I didn't mean to communicate that it was going to ramp up as a percentage of sales beyond that.

Okay, so it's not going to ramp up as a percentage of sales, I just want to clarify for the record there. Okay. Then, the final thing and this is really to Steve. Clearly, the company's running really well and you guys are doing a wonderful job. So it's not really meant to be a criticism at all. But the big, I guess, negative UNFI had through its history is the idea that they really weren't able to get any free cash flow that they grew so fast, it forced them to build facilities they couldn't really leverage as much as they would like their current facilities and free cash flow really never showed up. What's your thought as we move forward on that criticism?

I mean, I think the -- I understand the criticism and everybody's got their point of view. I just don't happen to share that one. I mean, the reality is if you look at our top line sales growth, we could be shortsighted and say, well, we'll push for $100 million in free cash next year and we won't build any buildings and we won't invest in inventory. And our service level will fall, our buildings will be way over-capacity. And 2 years from now, we won't be in a good place. So I think my job is to look long-term and to think less about quarter-to-quarter. And as a result of that, I need to make sure that we're building the buildings to satisfy the demands that are put upon the company by our customers. And that means building new buildings. And unfortunately, every one of the buildings is $50 million. Now it doesn't mean that free cash isn't important to us because it is, and we demonstrated that we could deliver pretty strong free cash in 2010 and '11, fell off a little bit in '12, and it will certainly fall off a little bit in '13 as we -- and '14 as we continue to build these buildings.

And just to expand on that, Scott, I mean one of the reasons I referenced the inventory levels is that we were shortsighted, we could have finished the quarter, finished the year at, say, the midpoint of our target range, which is 48, 49 days. And the day of inventory for us right now is about $14 million. So if we took out 3 to 3.5 days’ worth of inventory, instead of generating $49 million of free cash in the fourth quarter, we would have generated $100 million, and we would have had $30 million of free cash. But with the ongoing supplier issues that we've had, we probably would have negatively impacted sales growth in the first quarter and potentially had to move product around like we did in the last -- in the first quarter of last year. So we understand it, but you got to think about the best interest of the business long-term.

And just one other comment, return on invested capital is an important metric for us. It's something that the senior leadership -- actually everybody who is on a annual incentive plan is -- one of the metrics is return on invested capital. So while it's not quite the same, looking at the balance sheet and the components of the balance sheet, is very important to us.

Our next question comes from the line of Karen Short from Deutsche Bank.

Just following on Scott's question, I guess, back to your response as it relates to margin expansion in fiscal '14, I guess, my question is what are you using as a base earnings in fiscal '13 when you make the comment that you expect margin expansion in fiscal '14. Because, I guess, I would look at your base earnings as $2.22 this year, not the $2.20. And I actually do show, maybe there could be some margin contraction implied in your guidance for fiscal '14. So any color there?

I think when we look at it on the adjusted basis, we think we're at roughly $2.20. Sorry, I'm not -- we were backing out roughly $0.03 for the 3 items in the first quarter. And so the way rounding comes out is it ends up being about $0.02-plus. And so from that standpoint, I mean, when I ran the guidance with where we have projected that we would come out, I mean, depending on -- again, depending on the puts and takes as to where you put the sales versus where you put the EPS versus sales, I see only in the scenario where I have the high end -- the low end of sales and the low end -- sorry, the high end of sales and low end of guidance do I actually have dilution in the other scenarios, I see us having varying levels of expansion.

Okay, so when we think about your model and your kind of long-term goals, should we still assume that 10 to 15 basis point expansion in operating margins is kind of what you're striving for on an annual basis?

Yes, I mean, we -- I would say that it's 9 to 12. I mean we'd adjust -- I think the 10 to 15 was what we put out about 4 years ago and a couple of years ago, we adjusted it to 9 to 12. But yes, that's still what we're targeting.

Okay, and then in terms of the CapEx in fiscal '14, so is it fair to say that's just a 1-year situation? And then you do think you'd revert back to the 1%, with all the things being equal?

No, I think it's going to be a '14 and '15. Because we've got one building coming online in '14, 2 buildings coming online in '15. And we haven't determined how we're ultimately going to finance those buildings, but I think it's reasonable to think that our CapEx is going to be similar '14 to '15 and then hopefully come back down.

Okay, and then what are your thoughts on inflation expectations for next year? I mean, obviously Hain made some comments on where their inflation was this last quarter and it seems like you saw some acceleration sequentially, so that's consistent. But what are you thinking for next year?

The inflation was up sequentially but very small. I think first half of the year, Karen, it's maybe 2.25%, give or take 10, 15 basis points either way. But I wouldn't expect anything north of say 2.5% through the first half of the fiscal year. And it gets a little dicey predicting more than 5 or 6 months [indiscernible]

But if there's anything you can do to get up over 3, we'd appreciate it.

People just have to keep demanding the product, right? And then I guess the last thing was just, is there anything going on with the $1 million in other? It just seemed a little higher than normal?

Yes, I mean really what that is, is we have our Canadian division and at the end of every quarter, every period, actually, we have to revalue the assets on the Canadian books. And so the Canadian dollar with the strength of the U.S. dollar, as they talked about, cutting back on QE and taper, the Canadian dollar has weakened. And as a result, that's all revaluation of the Canadian net assets, which is a noncash expense.

Just one other comment back to Scott's question and that is on return on invested capital. Our UNFI's return on invested capital fiscal '13 versus fiscal '12 was actually up 66 basis points which from our perspective was a very strong performance.

Do you have those actual numbers handy?

Yes, as you and I've talked and I've had with other conversations, I mean, we -- the way we model it, we came in at about 9.38% for the year. In the prior year, we're at about 8.72%. But everyone has a different way in which they perform the calculations. So I think in your model, Karen, you have us at a north of 10% number because of what you put in versus don't put in. But from our model standpoint, we had it going up by about 66 basis points.

Our next question comes from the line of Scott Van Winkle from Canaccord Genuity.

First on gross margin in the commentary, you talked about the shift towards supermarket having a positive impact on gross margin. I think relative to supernaturals, did I get that right? And then second, I was thinking that the decline as a percentage of sales going to independents would have been more than an offset.

Well, again, I mean the way I had said it, yes, I mean, it's the fact that the supermarket business on an average, not any individual customer, but on average, it causes -- it's a contributor in a sense that it's less dilution. I mean, the much bigger drivers were the procurement team and the inbound logistics and how we performed on those. But we didn't get by virtue of supermarkets growing faster than supernaturals for the quarter, we got less pressure than we've experienced in the last few quarters. It's more -- it's not that it's so much help to expand, but by virtue of the growth it didn't pressure as much as it had in prior quarters.

And then -- in that gross margin, particularly the sequential improvement, is there any seasonality? I mean, obviously, you have scenarios like a vitamin mix or independent mix that sometimes it has a positive impact on gross margin. Was there any seasonality towards that 50-plus basis points sequential improvement?

No, I think -- no, there wasn't. I think that we've talked about this for quite a few quarters and I think that we are starting to hit our stride, as it relates to becoming one company on a national supply chain logistics, inventory planning, inventory optimization. And so I think a lot of the improvement that we got was related to those things, proving themselves out in the quarter.

Okay, great. And then is there anything with that extra week? I guess, intuitively, there shouldn't be but is there anything in that extra week that has an impact on the operating expenses? These are positively or negatively...

No, I mean because we're on an accrual basis, Scott, I mean, we would accrue for the extra rent and the extra electricity, depending on the trucks running, the lease expense for that extra week, all of that gets factored in. So I mean, there's maybe a little bit of leverage that you gained for items that you don't buy regularly but that's really about it.

Great. And lastly, on the acceleration you've seen since the end of July, you mentioned it was broad-based, I think, Steve, across channels. Is there anything specific to UNFI that you would see acceleration maybe more than some of the public retailers that we would see Whole Foods or Natural Grocers that's happening in your branded product? Is there anything you're seeing with branded versus private label? I'm just -- obviously, I'm trying to see if I can extrapolate that on to the rest of the group.

I don't think so. I think it's -- I think the demand is growing across all the channels as I said earlier. I think that we're starting to see some significant growth from some of the supermarket customers that we brought on in the last couple of years. And that could be based on the fact that they now have a really strong mix of the products that they need to have. But I wouldn't point to any one particular set of SKUs or channels.

Okay. And one other question if I would and maybe you gave the numbers and I can add this up, but if you were to take all of the captive brands to UNFI today, what percentage of your sales would that be?

You're talking about the brands that we own or control?

Correct.

4%.

Our next question comes from the line of Greg Badishkanian from Citigroup.

I just want to follow up on Scott's question in terms of the accelerated growth. Is there -- would you say the industry is growing or are you picking up maybe incrementally new customers or new business that the industry wouldn't be seeing?

Well, I mean, Greg, we haven't seen the published industry growth numbers. We see them [ph] directionally, we think it's probably around 10%, and obviously we're growing considerably faster than the industry. I think -- selfishly, I mean, I think we're just doing a good job, merchandising the products, providing retail category management, I think, our field sales people are doing a good job, and that's pushing the demand up. I can't comment about what some of our competitors are doing because I don't see their numbers.

That's helpful, that's very helpful. And then also -- have you noticed any changes in the industry in the last few months in terms of the competitive landscape, whether it's pricing, or discounting or anything or has it been pretty consistent?

No, it's been -- I think it's been pretty consistent. I haven't real [ph] change.

Our next question comes from the line of Jason DeRise from UBS.

It's Jason DeRise. So obviously there was the change in the accounting for the quarter but if we just put that aside, you did better than the guidance. What changed during the period operationally that surprised you?

Well, I think a lot of it was just the sales strength was much better than we had projected. The operations teams continued to deliver from an expense standpoint so that we've continued to achieve improvement on the leverage side. But with the additional sales volume, we're able to gain that much more leverage.

And in terms of which categories or customer groups? I know you've been talking about the recent acceleration has been broad-based. Would you say it was -- that independents maybe did a little bit better than you originally expecting?

I mean for the quarter-to-date, we really don't break that out particularly because we have one customer that represents an entire channel for us and they're publicly held. So, I mean, we generally stick to just the overall trend, and we don't go into sales by channel for the quarter-to-date.

I guess, I meant for the quarter that happened.

For the past quarter? I mean, I think that the supermarkets when we look at where they were, third quarter versus fourth quarter, I think that even after adjusting for the extra week, the supermarket growth saw a noticeable uptick from 3Q to 4Q.

Okay, and in terms of the -- just wrapping up the full year of fiscal '13, when you clean up your EBIT margin, I know you're referencing in the press release 10 basis points. I just want to make sure I'm thinking about that right. That is like fully cleaned up for the accounting change, that really should have been in place for the whole year, it adjusts for the strike, it adjusts for -- that's like a clean number would you say that, that still needs to be adjusted further?

What I would say is on a GAAP-to-GAAP basis, it's 10 basis points expansion. So fiscal 2012 on a GAAP basis was just under 3% and fiscal 2013 on a GAAP basis was just under 3.1%. If you were to do it on a non-GAAP basis, I would say that we had a modest -- I think it would be 3 or 4 basis point dilution. But we'll be at 3.1% both years.

And the fourth quarter?

In the fourth quarter, it would be 5 -- 4, 5 basis point expansion non-GAAP to -- I mean, the fourth quarter last year didn't have any adjustments. So GAAP to GAAP, it's 22 basis points. Non-GAAP to GAAP, it was 4, 5 basis points expansion for the fourth quarter.

All right. I probably going to follow up with you after this call to make sure I get all these moving pieces right. And I guess, the last thing I wanted to ask, are there any -- in the guidance, is there any contemplation of any big wins coming up in terms of new customers on-boarded?

There is not.

Our last question comes from the line of Stephen Grambling from Goldman Sachs.

You helped quantify some of the out-of-stocks, and I know that you expect them to improve but can you just provide a little bit more detail on some of the drivers there? Is it specific categories, is there something that there's just something longer-term that's happening with the suppliers giving them issues with getting the appropriate product?

Yes, sure, Stephen. It's driven by first and foremost by the fact that we have a lot of suppliers that are growing 20%, 30%, 40%. And they just cannot keep up with that kind of demand. In many situations, suppliers roll out new products. They allocate lines to produce it, with a forecast that says, hey, we're going to get 15% consumption online. And they get 40%. Well, if you only have one line, you'll only have one line, and it just takes time to catch up. So I think that's the biggest single driver. And the plus of that scenario is that we will ultimately catch up. Where it gets a little bit more complicated is where you're dealing with commodities, quinoa, products that may grow once a year, specifically to organic products that grow once a year where there's just a limited amount of capacity around the world to produce the product. So those out-of-stocks will probably be a little bit longer than the others. But we feel very confident that it's going to plague us for some period of time, it has already, that the industry will adapt and we'll get through it. And we'll produce the product just under the notion that everybody wants to sell more.

That's helpful. And 2 very quick follow-ups on that. The first would be you mentioned that on the customer side, you've been seeing -- there were some discussion about some consolidation, but on the supplier's side, are you starting to see some consolidation that can maybe help alleviate some of that as you get some bigger players? And then the other follow-up is just on the commodities where you do see some limitation in terms of supply, are you starting to see some inflation or pockets of inflation in those categories?

Let me answer the last one first. I mean, interestingly, no, we haven't seen the inflation come. I guess, it will at some point, but we certainly haven't seen it yet. As far as the manufacturers' consolidation, I think we have to keep in mind is that the majority of these suppliers are still very, very small relative to what you would typically think of as a conventional manufacturer. And I'm talking about suppliers who are sub $50 million in size. And so there hasn't been a lot of manufacturer consolidation, relatively speaking. I guess, there could. I guess you're talking about the Procter & Gambles of the world acquire some of the smaller organic brands. And in theory, that should be able to help control some of the out-of-stocks. It's possible, we haven't seen it. A large percentage of the manufacturers that play in our space have products that are co-packed. In other words, they're made by third parties, which gives them a little bit less control over the capacity. So we haven't seen it. I guess, it could happen. But in the end, I think we're ultimately somewhat optimistic that the supplier out-of-stocks will alleviate over time.

I'd like to hand the call back over to management for closing comments.

I want to thank you once again for joining us this afternoon. UNFI's fiscal 2013 was a terrific year. We're now focused on 2014 and look forward to discussing our Q1 results later this year. Thanks for your continued interest in UNFI and eat organic.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.