Net Sales Increase Driven by Continued Strong
Growth in Our Distribution Businesses of 4.2%
Second Quarter EPS from Continuing Operations
of $0.50 per Diluted Share, Including $0.06 in Estimated Losses
Associated with Voluntary Product Recall
SpartanNash Company (the “Company”) (Nasdaq: SPTN) today
reported financial results for the 12-week second quarter and
28-week period ended July 14, 2018.
Consolidated net sales for the second quarter increased $39.8
million, or 2.1%, to $1.90 billion from $1.86 billion in the prior
year quarter(1). The increase in net sales was driven by continued
sales growth in the food distribution and military segments of 4.3%
and 3.9%, respectively, partially offset by lower sales at
retail.
“We continue to make progress towards our long-term strategic
objective of becoming a growth company focused on developing a
national, highly efficient distribution platform that services a
diverse customer base and is known for solving unique and complex
logistical issues. Our business will be driven by an efficient and
versatile supply chain that services our highly complementary
business units of food distribution, military distribution and
retail. In line with our strategy, the food distribution and
military segments completed another quarter of strong sales growth
and we realized sequential improvements in comparable store sales
at retail for the second consecutive quarter as we enhance and
develop innovative solutions for our diverse customer base. As a
result, we remain excited about the opportunities to grow our
business, despite a difficult operating environment,” said David
Staples, President and Chief Executive Officer.
Gross profit for the second quarter of fiscal 2018 was $265.7
million, or 14.0% of net sales, compared to $271.0 million, or
14.6% of net sales, in the prior year quarter. As a percent of net
sales, the change in gross margin was primarily due to an increased
mix of Food Distribution and Military sales as a percentage of the
total sales combined with investments in margin.
Reported operating expenses for the second quarter were $235.8
million, or 12.4% of net sales, compared to $232.1 million, or
12.5% of net sales, in the prior year quarter. The decrease in
expenses as a rate of sales compared to the prior year quarter was
primarily attributable to a shift in the mix of business operations
to segments with lower operating expense rates, cost-saving
initiatives and gains on sales of real estate, partially offset the
reinvestment of some of our tax savings and certain higher
operating expenses.
The Company reported operating earnings of $29.8 million
compared to $38.9 million in the prior year quarter. The decrease
was attributable to the items noted above. Non-GAAP adjusted
operating earnings(2) were $41.4 million in the prior year quarter.
Please see the financial tables at the end of this press release
for a reconciliation of each non-GAAP financial measure to the most
directly comparable measure prepared and presented in accordance
with GAAP.
Adjusted EBITDA(3) was $49.7 million compared to $61.9 million
in the prior year quarter due to the factors mentioned above.
The Company reported second quarter earnings from continuing
operations of $17.8 million, or $0.50 per diluted share, compared
to $21.1 million, or $0.56 per diluted share, in the prior year
quarter. The decrease reflects the previously mentioned factors,
including $0.06 per diluted share in estimated losses associated
with the voluntary product recall discussed further below, as well
as higher interest expense associated with the Company’s
borrowings, partially offset by lower income tax expense. Adjusted
earnings from continuing operations(4) for the second quarter were
$17.9 million, or $0.50 per diluted share, compared to $22.6
million, or $0.60 per diluted share, in the prior year quarter.
Adjusted earnings from continuing operations exclude net after-tax
charges of $0.04 per diluted share in the prior year quarter
primarily related to restructuring, merger/acquisition and
integration and Caito Fresh Kitchen start-up costs. There was no
material impact from net adjustments in this year’s second
quarter.
Food Distribution Segment
Net sales for the food distribution segment increased $38.6
million, or 4.3%, to $941.7 million from $903.1 million in the
prior year quarter, primarily due to sales growth from new and
existing customer programs, partially offset by reduced sales
volume as a result of the product recall.
Reported operating earnings for the food distribution segment
were $18.7 million compared to $23.2 million in the prior year
quarter. The decrease in reported operating earnings was primarily
attributable to product recall expenses, lower inflation, higher
healthcare costs and higher transportation and warehousing costs
resulting from the rapid expansion of volumes in certain of our
regions. Second quarter adjusted operating earnings(5) were $19.8
million compared to $25.8 million in the prior year quarter. Second
quarter adjusted operating earnings in the current year exclude
$1.1 million of pre-tax charges primarily related to
merger/acquisition and integration. Adjusted operating earnings in
the prior year quarter exclude $2.6 million of start-up costs
associated with the Fresh Kitchen, merger/acquisition and
integration and warehouse closing costs.
In June 2018, Caito Foods (“Caito”) announced a voluntary
product recall for certain fresh-cut products produced at the Caito
facility in Indianapolis, Indiana, and the Company temporarily
suspended production and distribution of the recalled products due
to potential contamination with salmonella. Testing was performed
within the manufacturing environment by third party food safety
experts as well as the Food and Drug Administration (“FDA”) and no
evidence of salmonella contamination was detected in any of the
tests. The Company recognized $2.9 million in pre-tax estimated
losses, or $0.06 per diluted share after taxes, associated with the
product recall primarily related to the disposal of product,
decreased efficiencies and increased production and other
costs.
“The voluntary product recall at Caito negatively impacted both
our sales growth and profitability in food distribution during the
quarter,” added Mr. Staples. “We continue to focus on being a
best-in-class producer, working to ensure our suppliers are leaders
in food safety and that consumers are provided the highest quality
fresh products. It is worth noting that not one of the over 500
tests taken by the various parties showed positive evidence of
salmonella. I believe these results are a testament to our
commitment to operating a high quality manufacturing process.”
Mr. Staples commented, “Additionally, to support the rapid
growth of our customers in certain regions of our distribution
business and maintain our high level of customer service, we
incurred higher than anticipated supply chain costs during the
second quarter. We are confident in our ability to execute the
plans to begin mitigating these short-term challenges within our
supply chain network during the second half of the year and look
forward to increasing contribution margins on this growing
business.”
Military Segment
Net sales for the military segment increased $18.6 million, or
3.9%, to $489.7 million from $471.1 million in the prior year
quarter. The increase was primarily due to the commissary business
in the Southwest obtained in last year’s third quarter and
incremental volume from the private brand program, partially offset
by lower comparable sales at Defense Commissary Agency (“DeCA”)
operated locations.
Reported operating earnings for the military segment increased
to $3.1 million from $2.5 million in the prior year quarter. The
increase was primarily attributable to sales growth, margin
improvements and a gain on the sale of real estate, partially
offset by higher transportation, warehousing and healthcare costs.
Second quarter adjusted operating earnings(5) were $2.3 million
compared to $2.5 million in the prior year quarter. Second quarter
adjusted operating earnings in the current year exclude $0.8
million of pre-tax gains primarily related to the aforementioned
sale of real estate.
Retail Segment
Net sales for the retail segment were $464.6 million in the
second quarter compared to $482.0 million in the prior year
quarter. The decrease in net sales was primarily attributable to
$15.5 million in lower sales resulting from the closure and sale of
retail stores, as well as a 1.9% decrease in comparable store
sales, which exclude fuel. These decreases were partially offset by
higher fuel sales compared to the prior year quarter.
The Company reported operating earnings for the retail segment
of $8.0 million compared to $13.2 million in the prior year
quarter. The decrease in reported operating earnings was primarily
attributable to the re-investments of tax savings in margin and
store labor, lower comparable store sales and higher fees paid to
pharmacy benefit managers, partially offset by the closure of
underperforming stores. Adjusted operating earnings(5) were $7.7
million compared to $13.1 million in the prior year quarter due to
the factors mentioned previously. Second quarter adjusted operating
earnings(5) in the current year exclude $0.3 million of pre-tax
gains primarily associated with restructuring activities and $0.1
million of pre-tax gains in the prior year’s second quarter.
During the second quarter, as part of its retail store
rationalization plan, the Company closed one retail store and sold
one retail store, ending the quarter with 140 corporate owned
retail stores compared to 151 stores for the prior year
quarter.
Balance Sheet and Cash Flow
Cash flow provided by operating activities for the first half of
fiscal 2018 was $104.3 million, compared to $38.4 million in
operating activities in the prior year. The change was primarily
due to the timing of working capital requirements, particularly
improvements in inventory and accounts receivable, compared to the
prior year.
In the first half of fiscal 2018, the Company returned $33.0
million to shareholders, including $13.0 million in cash dividends
and $20.0 million in share repurchases of its common stock. As of
July 14, 2018, the Company had $45.0 million available for future
repurchases.
Outlook
Mr. Staples continued, “We expect to see continued strong
distribution sales growth during the back half of fiscal 2018 and
into 2019. As I stated previously, we remain excited about our
long-term strategic objectives as we continue to build our
distribution businesses, move forward with the rebranding of our
Family Fare banner and grow our fresh product offering. However, we
will continue to face some challenges as we move into the second
half of the year. Within our military segment, all parties are very
pleased with the performance of the private brand products released
to-date, and we continue to expect growth for the remainder of this
year and significant growth in fiscal 2019. However, the release of
new products under the program for the back half of the year is now
expected to be much slower than our original plan for fiscal 2018.
We also anticipate lower sales and profit growth than originally
expected from our food processing operations. Despite strong
interest in our offerings, the new business development timeline is
taking longer than anticipated and production efficiency
improvements are running behind plan partially due to disruption
caused by the voluntary product recall. Lastly, within the food
distribution segment, the roll out of one of our significant
customer programs is taking longer than our initial expectations.
While this program has now launched, and we believe it will provide
substantial volume going forward, the volume and profit
contributions to the business for the second half of 2018 will be
below our initial forecast. We expect all of these efforts to
benefit our fiscal 2019 results.”
The Company is updating its guidance for the remainder of fiscal
2018 primarily due to the above noted headwinds. Food distribution
sales are expected to grow at an even stronger rate during the
second half, while military sales become slightly negative as we
cycle the new business obtained in the prior year’s third quarter.
We also expect the retail segment sales trend to continue improving
over the second half of the year as we remodel and launch more
stores with our repositioning and also begin inserting elements of
the repositioning into additional stores. For fiscal 2018, the
Company anticipates adjusted earnings per share from continuing
operations(6) of approximately $1.96 to $2.08, including the $0.06
loss associated with the recall and excluding merger/acquisition
and integration expenses, restructuring charges and other adjusted
items of $8.7 million to $9.2 million after tax, compared to $2.10
in the prior year. The Company anticipates that reported earnings
from continuing operations will be in the range of approximately
$1.69 to $1.84 per diluted share, compared to a loss from
continuing operations of $(1.41) per diluted share in the prior
year. The adjusted guidance reflects an effective tax rate of 23.0%
to 24.0% for fiscal 2018 and the reported guidance reflects an
effective tax rate of 22.0% to 23.0%.
The Company continues to expect capital expenditures for fiscal
year 2018 to be in the range of $64.0 million to $70.0 million,
with depreciation and amortization of approximately $82.0 million
to $86.0 million, and total interest expense of approximately $28.5
million to $29.5 million.
Conference Call
A telephone conference call to discuss the Company’s second
quarter of fiscal 2018 financial results is scheduled for Thursday,
August 16, 2018 at 8:00 a.m. ET. A live webcast of this conference
call will be available on the Company’s website,
www.spartannash.com/webcasts. Simply click on “For Investors” and
follow the links to the live webcast. The webcast will remain
available for replay on the Company’s website for approximately ten
days.
About SpartanNash
SpartanNash (Nasdaq: SPTN) is a Fortune 400 company whose core
businesses include distributing grocery products to a diverse group
of independent and chain retailers, its corporate-owned retail
stores and U.S. military commissaries and exchanges; as well as
premier fresh produce distribution and fresh food processing.
SpartanNash serves customer locations in all 50 states and the
District of Columbia, Europe, Cuba, Puerto Rico, Bahrain, Djibouti
and Egypt. SpartanNash currently operates 140 supermarkets,
primarily under the banners of Family Fare Supermarkets, D&W
Fresh Market, VG’s Grocery, Dan’s Supermarket and Family Fresh
Market. Through its MDV military division, SpartanNash is a leading
distributor of grocery products to U.S. military commissaries.
Forward-Looking Statements
This press release contains "forward-looking" statements within
the meaning of Section 27A of the Securities Act of 1933, and
Section 21E of the Securities Exchange Act of 1934. These include
statements preceded by, followed by or that otherwise include the
words "outlook," "believe," "anticipates," "continue," "expects,"
"guidance," "trend," “on track,” “encouraged” or "plan" or similar
expressions. The statements in the “Outlook” section of this press
release are inherently forward looking. Forward-looking statements
relating to expectations about future results or events are based
upon information available to SpartanNash as of today's date, and
are not guarantees of the future performance of the Company, and
actual results may vary materially from the results and
expectations discussed. Additional risks and uncertainties include,
but are not limited to, the Company's ability to compete in the
highly competitive grocery distribution, retail grocery, and
military distribution industries. Additional information concerning
these and other risks is contained in SpartanNash’s most recently
filed Annual Report on Form 10-K, recent Current Reports on Form
8-K and other SEC filings. All subsequent written and oral
forward-looking statements concerning SpartanNash, or other matters
and attributable to SpartanNash or any person acting on its behalf
are expressly qualified in their entirety by the cautionary
statements above. SpartanNash does not undertake any obligation to
publicly update any of these forward-looking statements to reflect
events or circumstances that may arise after the date hereof.
(1) Net sales reflect the adoption of the new revenue
recognition standard on the first day of the first quarter,
December 31, 2017. Under the new accounting standard, certain
contracts in the food distribution segment are reported on a net
basis compared to previously being reported on a gross basis. As
the new accounting standard was adopted on a full retrospective
basis, the aforementioned amounts refer to the prior period’s
results as if the new revenue recognition standard was in effect in
both periods. The decreases to net sales and cost of sales were
$38.5 million and $87.3 million, respectively, for the 12 and 28
weeks for the period ended July 15, 2017.(2) A reconciliation of
operating earnings to adjusted operating earnings, a non-GAAP
financial measure, is provided below.(3) A reconciliation of net
earnings to Adjusted EBITDA, a non-GAAP financial measure, is
provided below.(4) A reconciliation of earnings from continuing
operations to adjusted earnings from continuing operations, a
non-GAAP financial measure, is provided below.(5) A reconciliation
of operating earnings to adjusted operating earnings by segment, a
non-GAAP financial measure, is provided below.(6) A reconciliation
of projected earnings per share from continuing operations to
adjusted earnings per share from continuing operations, a non-GAAP
financial measure, is provided below.
SPARTANNASH COMPANY AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF EARNINGS
(Unaudited)
12 Weeks Ended 28 Weeks Ended July 14,
July 15, July 14, July 15,
(In thousands,
except per share amounts)
2018 2017 2018 2017 Net sales $
1,895,953 $ 1,856,199 $ 4,281,026 $
4,209,901
Cost of sales 1,630,293
1,585,173 3,672,152 3,581,499
Gross profit 265,660 271,026 608,874 628,402
Operating expenses Selling, general and administrative
236,202 231,532 545,261 554,311 Merger/acquisition and integration
804 622 3,010 4,638 Restructuring gains and asset impairment
(1,164 ) (14 ) 5,037
1,008
Total operating expenses 235,842
232,140 553,308 559,957
Operating earnings 29,818 38,886 55,566 68,445
Other expenses and (income) Interest expense 6,969 5,682
15,747 12,997 Other, net (236 ) (123 )
(461 ) (313 )
Total other expenses,
net 6,733 5,559
15,286 12,684
Earnings before income taxes
and discontinued operations 23,085 33,327 40,280 55,761 Income
tax expense 5,247 12,267
10,007 19,636
Earnings from continuing
operations 17,838 21,060 30,273 36,125
Loss from
discontinued operations, net of taxes (66 )
(31 ) (158 ) (71 )
Net
earnings $ 17,772 $ 21,029 $ 30,115 $
36,054
Basic earnings per share: Earnings from
continuing operations $ 0.50 $ 0.56 $ 0.84 $ 0.96 Loss from
discontinued operations (0.01 ) * —
(0.01 ) * — Net earnings $ 0.49
$ 0.56 $ 0.83 $ 0.96
Diluted
earnings per share: Earnings from continuing operations $ 0.50
$ 0.56 $ 0.84 $ 0.96 Loss from discontinued operations
(0.01 ) * — (0.01 ) *
(0.01 ) Net earnings $ 0.49 $ 0.56 $
0.83 $ 0.95
Weighted average shares
outstanding: Basic 35,928 37,809 36,075 37,742 Diluted 35,940
37,832 36,087 37,787 * Includes rounding
SPARTANNASH COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE
SHEETS
(Unaudited)
July 14, July 15,
(In
thousands)
2018 2017
Assets
Current assets Cash and cash equivalents $
15,913 $ 22,726 Accounts and notes receivable, net 355,050 349,279
Inventories, net 562,443 555,578 Prepaid expenses and other current
assets 43,713 32,712 Property and equipment held for sale
8,654 173
Total current assets 985,773
960,468
Property and equipment, net 581,824 621,618
Goodwill 178,648 366,636
Intangible assets, net
131,159 130,048
Other assets, net 133,408
119,765
Total assets $ 2,010,812
$ 2,198,535
Liabilities and
Shareholders’ Equity
Current liabilities Accounts payable $ 364,700 $ 394,276
Accrued payroll and benefits 59,155 60,363 Other accrued expenses
46,725 41,166 Current maturities of long-term debt and capital
lease obligations 7,793 19,001
Total
current liabilities 478,373 514,806
Long-term
liabilities Deferred income taxes 49,128 137,219 Postretirement
benefits 16,263 16,689 Other long-term liabilities 39,718 39,496
Long-term debt and capital lease obligations 702,864
641,257
Total long-term liabilities 807,973
834,661
Commitments and contingencies
Shareholders’ equity Common stock, voting, no par value;
100,000 shares
authorized; 35,934 and 37,536 shares
outstanding
482,330 522,046 Preferred stock, no par value, 10,000 shares
authorized; no shares outstanding
— — Accumulated other comprehensive loss (14,989 ) (11,392 )
Retained earnings 257,125 338,414
Total shareholders’ equity 724,466
849,068
Total liabilities and shareholders’
equity $ 2,010,812 $ 2,198,535
SPARTANNASH COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
28 Weeks Ended
(In
thousands)
July 14, 2018 July 15,
2017 Cash flow activities Net cash
provided by operating activities $ 104,300 $ 38,357 Net cash used
in investing activities (28,141 ) (247,801 ) Net cash (used in)
provided by financing activities (75,771 ) 207,796 Net cash (used
in) provided by discontinued operations (142 )
23
Net increase (decrease) in cash and cash
equivalents 246 (1,625 )
Cash and cash equivalents at
beginning of the period 15,667
24,351
Cash and cash equivalents at end of the period $
15,913 $ 22,726
SPARTANNASH COMPANY
AND SUBSIDIARIES SUPPLEMENTAL FINANCIAL DATA
Table 1: Sales and Operating Earnings by Segment
(Unaudited)
12 Weeks Ended 28 Weeks Ended
(In
thousands)
July 14, 2018 July 15, 2017 July 14,
2018 July 15, 2017
Food Distribution
Segment:
Net sales $ 941,702 49.7 % $ 903,126 48.6 % $
2,096,913 49.0 % $ 2,017,274 47.9 % Operating earnings 18,724
23,176 43,245 48,447
Military
Segment:
Net sales 489,654 25.8 % 471,077 25.4 % 1,153,274 26.9 % 1,114,390
26.5 % Operating earnings 3,099 2,501 4,612 3,381
Retail
Segment:
Net sales 464,597 24.5 % 481,996 26.0 % 1,030,839 24.1 % 1,078,237
25.6 % Operating earnings 7,995 13,209 7,709 16,617
Total:
Net sales $ 1,895,953 100.0 % $ 1,856,199 100.0 % $ 4,281,026 100.0
% $ 4,209,901 100.0 % Operating earnings 29,818 38,886 55,566
68,445
Non-GAAP Financial Measures
In addition to reporting financial results in accordance with
GAAP, the Company also provides information regarding Adjusted
Earnings Before Interest, Taxes, Depreciation and Amortization
(“adjusted EBITDA”), adjusted operating earnings, adjusted earnings
from continuing operations, and total net long-term debt. These are
non-GAAP financial measures, as defined below, and are used by
management to allocate resources, assess performance against its
peers and evaluate overall performance. The Company believes these
measures provide useful information for both management and its
investors. The Company believes these non-GAAP measures are useful
to investors because they provide additional understanding of the
trends and special circumstances that affect its business. These
measures provide useful supplemental information that helps
investors to establish a basis for expected performance and the
ability to evaluate actual results against that expectation. The
measures, when considered in connection with GAAP results, can be
used to assess the overall performance of the Company as well as
assess the Company’s performance against its peers. These measures
are also used as a basis for certain compensation programs
sponsored by the Company. In addition, securities analysts, fund
managers and other shareholders and stakeholders that communicate
with the Company request its financial results in these adjusted
formats.
Current year adjusted operating earnings, adjusted earnings from
continuing operations, and adjusted EBITDA exclude start-up costs
associated with the new Fresh Kitchen operation through the
start-up period, which concluded during the first quarter. The
Fresh Kitchen is a newly constructed facility that provides the
Company with the ability to process, cook, and package fresh
protein-based foods and complete meal solutions. Given the Fresh
Kitchen represents a new line of business for the Company, the
start-up activities associated with testing, training, and
preparing the Fresh Kitchen for production, as well as
incorporating the related operations into the business, are
considered “non-operational” or “non-core” in nature. The
retirement stock compensation award represents incremental
compensation expense in connection with an executive retirement
that is also considered “non-operational” or “non-core” in
nature.
Table 2: Reconciliation of Net Earnings
to Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization
(Adjusted EBITDA) (A Non-GAAP Financial Measure)
(Unaudited)
12 Weeks Ended 28 Weeks Ended
(In
thousands)
July 14, 2018 July 15, 2017 July 14,
2018 July 15, 2017 Net earnings $ 17,772 $
21,029 $ 30,115 $ 36,054 Loss from
discontinued operations, net of tax 66 31 158 71 Income tax expense
5,247 12,267 10,007 19,636 Other expenses, net 6,733
5,559 15,286 12,684
Operating earnings 29,818 38,886 55,566 68,445 Adjustments: LIFO
expense 155 692 1,695 2,282 Depreciation and amortization 19,007
19,018 44,025 44,099 Merger/acquisition and integration 804 622
3,010 4,638 Restructuring (gains) charges and asset impairment
(1,164 ) (14 ) 5,037 1,008 Fresh Kitchen start-up costs (1) — 1,854
1,366 4,602 Stock-based compensation 976 1,139 6,267 7,491 Other
non-cash charges (gains) 94 (300 )
(105 ) (523 ) Adjusted EBITDA $
49,690 $ 61,897 $ 116,861 $ 132,042
Reconciliation of operating earnings to adjusted EBITDA by
segment: Food Distribution: Operating earnings $ 18,724
$ 23,176 $ 43,245 $ 48,447 Adjustments: LIFO (benefit) expense (82
) 380 683 1,263 Depreciation and amortization 7,318 6,827 16,639
15,429 Merger/acquisition and integration 745 468 2,940 4,315
Restructuring charges and asset impairment 100 301 1,360 901 Fresh
Kitchen start-up costs (1) — 1,854 1,366 4,602 Stock-based
compensation 441 551 2,968 3,511 Other non-cash charges (gains)
205 (1 ) 420
46 Adjusted EBITDA $ 27,451 $ 33,556 $
69,621 $ 78,514
Military: Operating earnings $ 3,099
$ 2,501 $ 4,612 $ 3,381 Adjustments: LIFO (benefit) expense (26 )
84 399 392 Depreciation and amortization 2,763 2,607 6,441 6,046
Merger/acquisition and integration — — 4 — Restructuring gains (830
) — (830 ) — Stock-based compensation 220 165 1,025 1,127 Other
non-cash gains (77 ) (14 )
(149 ) (16 ) Adjusted EBITDA $ 5,149 $
5,343 $ 11,502 $ 10,930
Retail:
Operating earnings $ 7,995 $ 13,209 $ 7,709 $ 16,617 Adjustments:
LIFO expense 263 228 613 627 Depreciation and amortization 8,926
9,584 20,945 22,624 Merger/acquisition and integration 59 154 66
323 Restructuring (gains) charges and asset impairment (434 ) (315
) 4,507 107 Stock-based compensation 315 423 2,274 2,853 Other
non-cash gains (34 ) (285 )
(376 ) (553 ) Adjusted EBITDA $ 17,090
$ 22,998 $ 35,738 $ 42,598
(1) Fresh Kitchen operations were no
longer treated as start-up midway through the first quarter of
fiscal 2018.
Notes: Adjusted EBITDA is a non-GAAP operating financial measure
that the Company defines as net earnings plus interest,
discontinued operations, depreciation and amortization, and other
non-cash items including deferred (stock) compensation, the LIFO
provision, as well as adjustments for items that do not reflect the
ongoing operating activities of the Company and costs associated
with the closing of operational locations.
Adjusted EBITDA and adjusted EBITDA by segment are not measures
of performance under accounting principles generally accepted in
the United States of America, and should not be considered as a
substitute for net earnings, cash flows from operating activities
and other income or cash flow statement data. The Company’s
definitions of adjusted EBITDA and adjusted EBITDA by segment may
not be identical to similarly titled measures reported by other
companies.
Table 3: Reconciliation of Operating Earnings to Adjusted
Operating Earnings (A Non-GAAP Financial Measure)
(Unaudited)
12 Weeks Ended 28 Weeks Ended
(In
thousands)
July 14, 2018 July 15, 2017 July 14,
2018 July 15, 2017 Operating earnings $
29,818 $ 38,886 $ 55,566 $ 68,445 Adjustments:
Merger/acquisition and integration 804 622 3,010 4,638
Restructuring (gains) charges and asset impairment (1,164 ) (14 )
5,037 1,008 Fresh Kitchen start-up costs (1) — 1,854 1,366 4,602
Stock compensation associated with executive retirement — — — 1,172
Severance associated with cost reduction initiatives
344 21 618 24 Adjusted
operating earnings $ 29,802 $ 41,369 $ 65,597
$ 79,889
Reconciliation of operating earnings to adjusted
operating earnings by segment: Food Distribution:
Operating earnings $ 18,724 $ 23,176 $ 43,245 $ 48,447 Adjustments:
Merger/acquisition and integration 745 468 2,940 4,315
Restructuring charges and asset impairment 100 301 1,360 901 Fresh
Kitchen start-up costs (1) — 1,854 1,366 4,602 Stock compensation
associated with executive retirement — — — 591 Severance associated
with cost reduction initiatives 258 21
451 22 Adjusted operating earnings $
19,827 $ 25,820 $ 49,362 $ 58,878
Military: Operating earnings $ 3,099 $ 2,501 $ 4,612 $ 3,381
Adjustments: Merger/acquisition and integration — — 4 —
Restructuring gains (830 ) — (830 ) — Stock compensation associated
with executive retirement — — — 147 Severance associated with cost
reduction initiatives 18 —
70 1 Adjusted operating earnings $
2,287 $ 2,501 $ 3,856 $ 3,529
Retail:
Operating earnings $ 7,995 $ 13,209 $ 7,709 $ 16,617 Adjustments:
Merger/acquisition and integration 59 154 66 323 Restructuring
(gains) charges and asset impairment (434 ) (315 ) 4,507 107 Stock
compensation associated with executive retirement — — — 434
Severance associated with cost reduction initiatives
68 — 97 1 Adjusted
operating earnings $ 7,688 $ 13,048 $ 12,379 $
17,482
(1) Fresh Kitchen operations were no
longer treated as start-up midway through the first quarter of
fiscal 2018.
Notes: Adjusted operating earnings is a non-GAAP operating
financial measure that the Company defines as operating earnings
plus or minus adjustments for items that do not reflect the ongoing
operating activities of the Company and costs associated with the
closing of operational locations.
Adjusted operating earnings is not a measure of performance
under accounting principles generally accepted in the United States
of America, and should not be considered as a substitute for
operating earnings, cash flows from operating activities and other
income or cash flow statement data. The Company’s definition
of adjusted operating earnings may not be identical to similarly
titled measures reported by other companies.
Table 4: Reconciliation of Earnings from Continuing
Operations to Adjusted Earnings from Continuing
Operations (A Non-GAAP Financial Measure)
(Unaudited)
12 Weeks Ended July 14, 2018
July 15, 2017 per diluted per
diluted
(In thousands,
except per share amounts)
Earnings share Earnings share Earnings
from continuing operations $ 17,838 $ 0.50 $
21,060 $ 0.56 Adjustments: Merger/acquisition and
integration 804 622 Restructuring gains and asset impairment (1,164
) (14 ) Fresh Kitchen start-up costs (1) — 1,854 Severance
associated with cost reduction initiatives 344 21
Total adjustments (16 ) 2,483 Income tax effect on adjustments (2)
48 (932 ) Total adjustments, net of taxes
32 — 1,551 0.04
Adjusted earnings from continuing operations $ 17,870 $
0.50 $ 22,611 $ 0.60
28 Weeks
Ended July 14, 2018 July 15, 2017 per
diluted per diluted
(In thousands,
except per share amounts)
Earnings share Earnings share Earnings
from continuing operations $ 30,273 $ 0.84 $ 36,125 $ 0.96
Adjustments: Merger/acquisition and integration 3,010 4,638
Restructuring charges and goodwill/asset impairment 5,037 1,008
Fresh Kitchen start-up costs (1) 1,366 4,602 Severance associated
with cost reduction initiatives 618 24 Stock compensation
associated with executive retirement — 1,172 Total
adjustments 10,031 11,444 Income tax effect on adjustments (2)
(2,388 ) (4,295 ) Total adjustments, net of taxes
7,643 0.21 7,149
0.19 Adjusted earnings from continuing operations $
37,916 $ 1.05 $ 43,274 $ 1.15
(1) Fresh Kitchen operations were no
longer treated as start-up midway through the first quarter of
fiscal 2018.
(2) The income tax effect on adjustments is computed by applying
the applicable tax rate to the adjustment.
Notes: Adjusted earnings from continuing operations is a
non-GAAP operating financial measure that the Company defines as
earnings from continuing operations plus or minus adjustments for
items that do not reflect the ongoing operating activities of the
Company and costs associated with the closing of operational
locations.
Adjusted earnings from continuing operations is not a measure of
performance under accounting principles generally accepted in the
United States of America, and should not be considered as a
substitute for net earnings, cash flows from operating activities
and other income or cash flow statement data. The Company’s
definition of adjusted earnings from continuing operations may not
be identical to similarly titled measures reported by other
companies.
Table 5: Reconciliation of Long-Term
Debt and Capital Lease Obligations to Total Net Long-Term Debt and
Capital Lease Obligations
(A Non-GAAP Financial Measure)
(Unaudited)
July 14, December 30,
(In
thousands)
2018 2017 Current maturities of long-term debt and
capital lease obligations $ 7,793 $ 9,196 Long-term
debt and capital lease obligations 702,864
740,755 Total debt 710,657 749,951 Cash and cash equivalents
(15,913 ) (15,667 ) Total net long-term
debt $ 694,744 $ 734,284
Notes: Total net debt is a non-GAAP financial measure that is
defined as long-term debt and capital lease obligations plus
current maturities of long-term debt and capital lease obligations
less cash and cash equivalents. The Company believes both
management and its investors find the information useful because it
reflects the amount of long-term debt obligations that are not
covered by available cash and temporary investments. Total net debt
is not a substitute for GAAP financial measures and may differ from
similarly titled measures of other companies.
Table 6: Reconciliation of Projected Earnings per Diluted
Share from Continuing Operations to Projected Adjusted
Earnings per Diluted Share from Continuing Operations (A
Non-GAAP Financial Measure)
(Unaudited)
52 Weeks Ending
December 29, 2018
Low High Earnings from continuing operations $
1.69 $ 1.84 Adjustments, net of taxes:
Merger/acquisition and integration expenses 0.08 0.07 Restructuring
and asset impairment 0.16 0.15 Fresh Kitchen start-up costs 0.03
0.03 Severance associated with cost reduction initiatives 0.02 0.02
Tax planning initiatives (0.02 ) (0.03
) Adjusted earnings from continuing operations $ 1.96 $
2.08
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version on businesswire.com: https://www.businesswire.com/news/home/20180815005682/en/
Investor Contacts:SpartanNash CompanyMark ShamberChief Financial
Officer and Executive Vice President616-878-8023orICRKatie
TurnerPartner646-277-1228orMedia Contact:SpartanNash
CompanyMeredith GremelVice President Corporate Affairs and
Communications616-878-2830
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