Third Quarter Net Sales Increased 6.0%,
Including Positive Retail Comparable Store Sales
Profitability Consistent with Company
Guidance
SpartanNash Company (the “Company”) (Nasdaq: SPTN) today
reported financial results for the 12-week third quarter and
40-week period ended October 5, 2019.
Third Quarter Fiscal 2019 Highlights
- Net sales growth of 6.0%, to $2.00 billion from $1.89 billion
in the prior year quarter
- Retail comparable store sales increased 0.1%
- EPS of $(0.01) per share; Adjusted EPS of $0.30, including
$0.08 in CEO transition and supplemental incentive program costs
(“Transition Costs”), which were specifically excluded from August
14, 2019 guidance
- The Company reaffirms full year guidance; quantifies previously
excluded Transition Costs
“We are encouraged to have delivered third quarter profitability
and sales growth in-line with the guidance we provided in August,”
said Dennis Eidson, Interim President and Chief Executive Officer.
“Our results were driven by a solid increase in net sales,
representing our fourteenth consecutive quarter of growth and we
are pleased with the return to positive retail comparable store
sales. Our team is focused on driving improvements in operational
execution and positioning the Company to realize profitable growth
as we deliver value to our shareholders.”
Consolidated Financial Results
Consolidated net sales for the third quarter increased $113.1
million, or 6.0%, to $2.00 billion from $1.89 billion in the prior
year quarter. The increase in net sales was generated through
incremental volume resulting from the acquisition of Martin’s Super
Markets (“Martins”) as well as higher sales within the Food
Distribution segment, prior to the elimination of the intercompany
sales for the acquired business.
Gross profit for the third quarter of fiscal 2019 was $290.4
million, or 14.5% of net sales, compared to $256.1 million, or
13.6% of net sales, in the prior year quarter. The growth in gross
profit and improvement as a percent of net sales was primarily
driven by the acquisition of Martin’s and the resulting higher mix
of Retail sales.
Reported operating expenses for the third quarter were $274.6
million, or 13.7% of net sales, compared to $229.3 million, or
12.2% of net sales, in the prior year quarter. The increase in
expenses as a rate of sales compared to the prior year quarter was
due to additional Retail segment business associated with Martin’s
and, to a lesser extent, an increase in administrative expenses,
primarily related to Transition Costs, and incremental supply chain
costs. Third quarter operating expenses would have been $272.3
million, or 13.6% of net sales, compared to $228.3 million, or
12.1% of net sales, in the prior year quarter, excluding the asset
impairment charges and other adjustments detailed in Table 3.
The Company reported operating earnings of $15.8 million
compared to $26.8 million in the prior year quarter. The decrease
was primarily attributable to higher administrative expenses and
supply chain costs, partially offset by incremental earnings from
the newly acquired Martin’s business and growth in the Food
Distribution segment. Adjusted operating earnings(1) were $20.3
million compared to $27.8 million in the prior year and were
adjusted for Fresh Kitchen operating losses subsequent to the
decision to exit the business at the end of the second quarter. The
decrease in adjusted operating earnings was due to the factors
mentioned above, partially offset by the adjustment of Fresh
Kitchen operating losses. 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.
The Company reported a third quarter loss from continuing
operations of $0.3 million, or $0.01 per share, compared to
earnings of $17.5 million, or $0.49 per diluted share, in the prior
year quarter. The decrease reflects $7.7 million in expense
associated with the previously announced termination of the
Company’s corporate pension plan as well as the operating earnings
changes noted above.
Adjusted earnings from continuing operations(3) for the third
quarter were $10.9 million, or $0.30 per diluted share, and include
$2.9 million, or $0.08 per diluted share, in Transition Costs which
were specifically excluded from the guidance provided on August 14,
2019. Adjusted earnings from continuing operations in the prior
year quarter were $17.9 million, or $0.50 per diluted share. A
reconciliation of reported earnings from continuing operations to
adjusted earnings from continuing operations is included at Table
4.
Adjusted EBITDA(2) was $41.6 million compared to $48.3 million
in the prior year quarter due to the factors mentioned above.
Segment Financial Results
Food Distribution
Net sales for Food Distribution decreased $1.2 million, or 0.1%,
to $939.0 million from $940.2 million in the prior year quarter.
Excluding the impact of the elimination of intercompany sales to
Martin’s subsequent to the acquisition, sales increased 3.6%,
primarily due to sales growth with existing customers.
Reported operating earnings for Food Distribution were $11.7
million compared to $19.8 million in the prior year quarter. The
decrease in reported operating earnings was due to higher corporate
administrative expenses, including Transition Costs, as well as
supply chain costs, partially offset by contributions from sales
growth. Third quarter adjusted operating earnings(1) were $15.5
million compared to $20.4 million in the prior year quarter
primarily due to the same items. Adjusted operating earnings
exclude Fresh Kitchen operating losses subsequent to the decision
to exit the business and asset impairment charges in the current
year quarter, and merger/acquisition and integration expenses in
the prior year quarter.
Military Distribution
Net sales for Military Distribution decreased $1.0 million, or
0.2%, to $499.2 million from $500.2 million in the prior year
quarter. The decrease was due to lower comparable sales at DeCA
operated locations partially offset by incremental volume from new
business with an existing customer that commenced late in the
fourth quarter of 2018 and the continued expansion of DeCA’s
private brand program.
Reported operating loss for Military Distribution was $2.6
million compared to operating earnings of $1.5 million in the prior
year quarter. The decrease was primarily attributable to higher
supply chain costs and corporate administrative expenses. The third
quarter adjusted operating loss(1) was $2.5 million compared to
earnings of $1.6 million in the prior year quarter.
Retail
Net sales for Retail increased $115.3 million, or 25.8%, to
$561.6 million from $446.3 million in the prior year quarter.
Comparable store sales were positive at 0.1%, however were offset
by a decrease in fuel sales primarily due to a lower price per
gallon.
Reported operating earnings for Retail were $6.7 million
compared to operating earnings of $5.5 million in the prior year
quarter. The increase in reported operating earnings was primarily
attributable to the contribution of the acquired Martin’s stores,
the favorable impact of closing underperforming stores and
improvements in margin rates, partially offset by higher corporate
administrative expenses, including Transition Costs. Adjusted
operating earnings(1) were $7.3 million compared to $5.9 million in
the prior year quarter and exclude restructuring charges in both
periods.
Cash Flow
Cash flows provided by operating activities for the 40 weeks
ended October 5, 2019 were $140.0 million, materially consistent
with the 40 weeks ended October 6, 2018 at $142.5 million. The
Company generated $93.1 million in free cash flow(5) over the same
period in the current year and $89.9 million in the prior year.
During the first three quarters of fiscal 2019, the Company
returned $20.7 million to shareholders in the form of cash
dividends equal to $0.57 per common share.
Strategic Business Objectives
The following are key updates to the Company’s progress towards
its strategic business objectives during the third quarter of
2019:
- Sustained mid-single digit sales growth in the third quarter,
realizing 6.0% net sales growth from the same quarter in the prior
year and delivering its 14th consecutive quarter of net sales
growth.
- Continued to implement Project One Team initiatives and remains
on track to achieve a run rate of over $20.0 million in annual cost
savings by April 20, 2021.
- Continued to reduce both working capital and debt compared to
the prior year, despite sustaining net sales growth and the
acquisition of Martin’s in early 2019.
Outlook
The Company is reaffirming its net sales and profitability
outlook previously provided on August 14, 2019, and has now
estimated Transition Costs which were not previously quantified.
These costs are expected to range from $9.0 to $9.7 million in
adjusted EBITDA(2) and $6.6 to $7.1 million in adjusted earnings
from continuing operations(3), or $0.18 to $0.20 per diluted
share.
August 14, 2019
Guidance
Guidance Including
Transition Costs
52 Weeks Ending
December 28, 2019
Transition costs
52 Weeks Ending
December 28, 2019
Net Sales Growth
Mid-single digits
—
Mid-single digits
Adjusted EBITDA(2)
$183.0 - $195.0 million
$9.0 - $9.7 million
$173.3 - $186.0 million
Adjusted EPS from Continuing
Operations(4)
$1.20 - $1.35
$0.18 - $0.20
$1.00 - $1.17
Reported EPS from Continuing
Operations
$0.21 - $0.47
$0.18 - $0.20
$0.01 - $0.29
The Company’s fiscal 2019 reported earnings guidance reflects an
effective tax rate benefit of 17.0% to 20.0% and the adjusted
earnings guidance reflects an effective tax rate expense of 18.0%
to 18.5%. The Company expects capital expenditures for fiscal year
2019 to be in the range of $80.0 million to $89.0 million, with
depreciation and amortization of $88.0 million to $89.0 million.
Interest expense is expected to range from $34.5 million to $35.0
million.
The Fresh Kitchen will cease production during the fourth
quarter of fiscal 2019 and the Company anticipates a disposition of
the facility and related assets as early as the first quarter of
fiscal 2020.
The Board of Directors has begun a formal process to identify
the Company’s next Chief Executive Officer. Spencer Stuart, a
leading executive search and leadership consulting firm, has been
retained as an advisor in the process.
Conference Call
A telephone conference call to discuss the Company’s third
quarter 2019 financial results is scheduled for Thursday, November
7, 2019 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 158 supermarkets,
primarily under the banners of Family Fare, Martin’s Super Markets,
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) A reconciliation of operating earnings to adjusted operating
earnings, a non-GAAP financial measure, is provided below. (2) A
reconciliation of net loss to Adjusted EBITDA, a non-GAAP financial
measure, is provided below. (3) A reconciliation of loss from
continuing operations to adjusted earnings from continuing
operations, a non-GAAP financial measure, is provided below. (4) 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. (5) A
reconciliation of net cash provided by operating activities to free
cash flow, a non-GAAP financial measure, is provided below.
SPARTANNASH COMPANY AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
12 Weeks Ended
40 Weeks Ended
October 5,
October 6,
October 5,
October 6,
(In thousands,
except per share amounts)
2019
2018
2019
2018
Net sales
$
1,999,808
$
1,886,730
$
6,538,112
$
6,167,756
Cost of sales
1,709,447
1,630,588
5,581,015
5,302,740
Gross profit
290,361
256,142
957,097
865,016
Operating expenses
Selling, general and administrative
273,286
228,583
900,160
773,844
Merger/acquisition and integration
—
521
1,364
3,531
Restructuring charges and asset
impairment
1,296
232
10,215
5,269
Total operating expenses
274,582
229,336
911,739
782,644
Operating earnings
15,779
26,806
45,358
82,372
Other expenses and (income)
Interest expense
7,375
7,082
27,952
22,828
Loss on debt extinguishment
329
—
329
—
Postretirement benefit expense
(income)
10,221
(6
)
19,677
(20
)
Other, net
(180
)
(189
)
(1,071
)
(635
)
Total other expenses, net
17,745
6,887
46,887
22,173
(Loss) earnings before income taxes and
discontinued operations
(1,966
)
19,919
(1,529
)
60,199
Income tax (benefit) expense
(1,656
)
2,374
(1,973
)
12,381
(Loss) earnings from continuing
operations
(310
)
17,545
444
47,818
Loss from discontinued operations, net
of taxes
(27
)
(80
)
(126
)
(238
)
Net (loss) earnings
$
(337
)
$
17,465
$
318
$
47,580
Basic (loss) earnings per
share:
(Loss) earnings from continuing
operations
$
(0.01
)
$
0.49
$
0.01
$
1.33
Loss from discontinued operations
—
—
—
(0.01
)
Net (loss) earnings
$
(0.01
)
$
0.49
$
0.01
$
1.32
Diluted (loss) earnings per
share:
(Loss) earnings from continuing
operations
$
(0.01
)
$
0.49
$
0.01
$
1.33
Loss from discontinued operations
—
—
—
(0.01
)
Net (loss) earnings
$
(0.01
)
$
0.49
$
0.01
$
1.32
Weighted average shares
outstanding:
Basic
36,340
35,934
36,248
36,033
Diluted
36,340
35,946
36,248
36,045
SPARTANNASH COMPANY AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(Unaudited)
October 5,
December 29,
(In thousands)
2019
2018
Assets
Current assets
Cash and cash equivalents
$
23,436
$
18,585
Accounts and notes receivable, net
374,287
346,260
Inventories, net
594,676
553,799
Prepaid expenses and other current
assets
52,176
73,798
Property and equipment held for sale
3,968
8,654
Total current assets
1,048,543
1,001,096
Property and equipment, net
618,126
579,060
Goodwill
181,035
178,648
Intangible assets, net
128,351
128,926
Operating lease assets
272,591
—
Other assets, net
85,900
84,182
Total assets
$
2,334,546
$
1,971,912
Liabilities and
Shareholders’ Equity
Current liabilities
Accounts payable
$
456,991
$
357,802
Accrued payroll and benefits
59,472
57,180
Other accrued expenses
45,667
43,206
Current portion of operating lease
liabilities
41,795
—
Current portion of long-term debt and
finance lease liabilities
7,044
18,263
Total current liabilities
610,969
476,451
Long-term liabilities
Deferred income taxes
43,734
49,254
Operating lease liabilities
273,631
—
Other long-term liabilities
30,861
50,463
Long-term debt and finance lease
liabilities
686,055
679,797
Total long-term liabilities
1,034,281
779,514
Commitments and contingencies
Shareholders’ equity
Common stock, voting, no par value;
100,000 shares
authorized; 36,350 and 35,952 shares
outstanding
489,656
484,064
Preferred stock, no par value, 10,000
shares
authorized; no shares outstanding
—
—
Accumulated other comprehensive loss
(748
)
(15,759
)
Retained earnings
200,388
247,642
Total shareholders’ equity
689,296
715,947
Total liabilities and shareholders’
equity
$
2,334,546
$
1,971,912
SPARTANNASH COMPANY AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
40 Weeks Ended
(In thousands)
October 5, 2019
October 6, 2018
Cash flow activities
Net cash provided by operating
activities
$
140,034
$
142,546
Net cash used in investing activities
(117,645
)
(45,533
)
Net cash used in financing activities
(17,385
)
(91,773
)
Net cash used in discontinued
operations
(153
)
(234
)
Net increase in cash and cash
equivalents
4,851
5,006
Cash and cash equivalents at beginning
of the period
18,585
15,667
Cash and cash equivalents at end of the
period
$
23,436
$
20,673
SPARTANNASH COMPANY AND
SUBSIDIARIES
SUPPLEMENTAL FINANCIAL
DATA
Table 1: Sales and Operating
Earnings by Segment
(Unaudited)
12 Weeks Ended
40 Weeks Ended
(In
thousands)
October 5, 2019
October 6, 2018
October 5, 2019
October 6, 2018
Food Distribution
Segment:
Net sales
$
939,047
47.0
%
$
940,183
49.8
%
$
3,043,668
46.6
%
$
3,037,096
49.3
%
Operating earnings
11,699
19,815
36,564
63,060
Military
Segment:
Net sales
499,156
24.9
%
500,222
26.5
%
1,661,097
25.4
%
1,653,496
26.8
%
Operating (loss) earnings
(2,646
)
1,508
(5,806
)
6,120
Retail
Segment:
Net sales
561,605
28.1
%
446,325
23.7
%
1,833,347
28.0
%
1,477,164
23.9
%
Operating earnings
6,726
5,483
14,600
13,192
Total:
Net sales
$
1,999,808
100.0
%
$
1,886,730
100.0
%
$
6,538,112
100.0
%
$
6,167,756
100.0
%
Operating earnings
15,779
26,806
45,358
82,372
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, total net long-term debt, free cash
flow and projected adjusted earnings per diluted share from
continuing operations. 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 “Fresh Kitchen
operating losses” subsequent to the decision to exit these
operations at the beginning of the third quarter, costs associated
with organizational realignment, which include significant changes
to the Company’s management team, and fees paid to a third-party
advisory firm associated with Project One Team, the Company’s
initiative to drive growth while increasing efficiency and reducing
costs. Pension termination costs, primarily related to
non-operating settlement expense associated with the distribution
of pension assets, are excluded from adjusted earnings from
continuing operations, and to a lesser extent adjusted operating
earnings. These items are considered “non-operational” or
“non-core” in nature. Prior year adjusted operating earnings,
adjusted earnings from continuing operations, and adjusted EBITDA
exclude start-up costs associated with the Fresh Kitchen operation,
which concluded during the first quarter of 2018. The Fresh Kitchen
represented a new line of business for the Company.
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
40 Weeks Ended
(In
thousands)
October 5, 2019
October 6, 2018
October 5, 2019
October 6, 2018
Net (loss) earnings
$
(337
)
$
17,465
$
318
$
47,580
Loss from discontinued operations, net of
tax
27
80
126
238
Income tax (benefit) expense
(1,656
)
2,374
(1,973
)
12,381
Other expenses, net
17,745
6,887
46,887
22,173
Operating earnings
15,779
26,806
45,358
82,372
Adjustments:
LIFO expense
1,268
654
3,761
2,349
Depreciation and amortization
20,351
19,247
67,513
63,272
Merger/acquisition and integration
—
521
1,364
3,531
Restructuring charges and asset
impairment
1,296
232
10,215
5,269
Fresh Kitchen start-up costs
—
—
—
1,366
Fresh Kitchen operating losses
2,204
—
2,204
—
Stock-based compensation
638
773
6,735
7,040
Non-cash rent
(1,082
)
(187
)
(4,542
)
(818
)
Costs associated with Project One Team
—
—
5,428
—
Organizational realignment costs
935
—
1,812
—
Other non-cash charges
187
258
710
785
Adjusted EBITDA
$
41,576
$
48,304
$
140,558
$
165,166
Table 2: Reconciliation of Net
Earnings to Adjusted Earnings Before Interest, Taxes, Depreciation
and Amortization, continued
(Adjusted EBITDA)
(A Non-GAAP Financial
Measure)
(Unaudited)
12 Weeks Ended
40 Weeks Ended
(In
thousands)
October 5, 2019
October 6, 2018
October 5, 2019
October 6, 2018
Food Distribution:
Operating earnings
$
11,699
$
19,815
$
36,564
$
63,060
Adjustments:
LIFO expense
639
245
1,869
929
Depreciation and amortization
7,390
7,540
25,368
24,179
Merger/acquisition and integration
—
479
(130
)
3,419
Restructuring charges (gains) and asset
impairment
1,043
(68
)
10,724
1,292
Fresh Kitchen start-up costs
—
—
—
1,366
Fresh Kitchen operating losses
2,204
—
2,204
—
Stock-based compensation
302
351
3,319
3,318
Non-cash rent
147
41
353
115
Costs associated with Project One Team
—
—
2,877
—
Organizational realignment costs
495
—
960
—
Other non-cash charges
14
119
391
466
Adjusted EBITDA
$
23,933
$
28,522
$
84,499
$
98,144
Military:
Operating (loss) earnings
$
(2,646
)
$
1,508
$
(5,806
)
$
6,120
Adjustments:
LIFO expense
372
146
1,034
544
Depreciation and amortization
2,764
2,816
9,097
9,257
Merger/acquisition and integration
—
—
—
4
Restructuring charges (gains)
—
29
—
(801
)
Stock-based compensation
114
155
1,091
1,181
Non-cash rent
(80
)
(74
)
(283
)
(249
)
Costs associated with Project One Team
—
—
706
—
Organizational realignment costs
122
—
236
—
Other non-cash (gains) charges
(70
)
31
(91
)
57
Adjusted EBITDA
$
576
$
4,611
$
5,984
$
16,113
Retail:
Operating earnings
$
6,726
$
5,483
$
14,600
$
13,192
Adjustments:
LIFO expense
257
263
858
876
Depreciation and amortization
10,197
8,891
33,048
29,836
Merger/acquisition and integration
—
42
1,494
108
Restructuring charges (gains) and asset
impairment
253
271
(509
)
4,778
Stock-based compensation
222
267
2,325
2,541
Non-cash rent
(1,149
)
(154
)
(4,612
)
(684
)
Costs associated with Project One Team
—
—
1,845
—
Organizational realignment costs
318
—
616
—
Other non-cash charges
243
108
410
262
Adjusted EBITDA
$
17,067
$
15,171
$
50,075
$
50,909
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
40 Weeks Ended
(In
thousands)
October 5, 2019
October 6, 2018
October 5, 2019
October 6, 2018
Operating earnings
$
15,779
$
26,806
$
45,358
$
82,372
Adjustments:
Merger/acquisition and integration
—
521
1,364
3,531
Restructuring charges and asset
impairment
1,296
232
10,215
5,269
Fresh Kitchen start-up costs
—
—
—
1,366
Fresh Kitchen operating losses
2,204
—
2,204
—
Expenses associated with tax planning
strategies
—
225
—
225
Costs associated with Project One Team
—
—
5,428
—
Organizational realignment costs
935
—
1,812
—
Pension termination
28
—
48
—
Severance associated with cost reduction
initiatives
43
50
484
668
Adjusted operating earnings
$
20,285
$
27,834
$
66,913
$
93,431
Reconciliation of operating earnings
(loss) to adjusted operating earnings (loss) by segment:
Food Distribution:
Operating earnings
$
11,699
$
19,815
$
36,564
$
63,060
Adjustments:
Merger/acquisition and integration
—
479
(130
)
3,419
Restructuring charges (gains) and asset
impairment
1,043
(68
)
10,724
1,292
Fresh Kitchen start-up costs
—
—
—
1,366
Fresh Kitchen operating losses
2,204
—
2,204
—
Expenses associated with tax planning
strategies
—
116
—
116
Costs associated with Project One Team
—
—
2,877
—
Organizational realignment costs
495
—
960
—
Pension termination
15
—
26
—
Severance associated with cost reduction
initiatives
31
66
392
517
Adjusted operating earnings
$
15,487
$
20,408
$
53,617
$
69,770
Military:
Operating (loss) earnings
$
(2,646
)
$
1,508
$
(5,806
)
$
6,120
Adjustments:
Merger/acquisition and integration
—
—
—
4
Restructuring charges (gains)
—
29
—
(801
)
Expenses associated with tax planning
strategies
—
28
—
28
Costs associated with Project One Team
—
—
706
—
Organizational realignment costs
122
—
236
—
Pension termination
3
—
5
—
Severance associated with cost reduction
initiatives
—
(1
)
9
69
Adjusted operating (loss) earnings
$
(2,521
)
$
1,564
$
(4,850
)
$
5,420
Retail:
Operating earnings
$
6,726
$
5,483
$
14,600
$
13,192
Adjustments:
Merger/acquisition and integration
—
42
1,494
108
Restructuring charges (gains) and asset
impairment
253
271
(509
)
4,778
Expenses associated with tax planning
strategies
—
81
—
81
Costs associated with Project One Team
—
—
1,845
—
Organizational realignment costs
318
—
616
—
Pension termination
10
—
17
—
Severance associated with cost reduction
initiatives
12
(15
)
83
82
Adjusted operating earnings
$
7,319
$
5,862
$
18,146
$
18,241
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
October 5, 2019
October 6, 2018
per diluted
per diluted
(In thousands,
except per share amounts)
Earnings
share
Earnings
share
(Loss) earnings from continuing
operations
$
(310
)
$
(0.01
)
$
17,545
$
0.49
Adjustments:
Merger/acquisition and integration
—
521
Restructuring charges and asset
impairment
1,296
232
Fresh Kitchen operating losses
2,204
—
Expenses associated with tax planning
strategies
—
225
Organizational realignment costs
935
—
Loss on debt extinguishment
329
—
Severance associated with cost reduction
initiatives
43
50
Pension termination
10,159
—
Total adjustments
14,966
1,028
Income tax effect on adjustments (a)
(3,751
)
(176
)
Impact of Tax Cuts and Jobs Act (b)
—
(494
)
Total adjustments, net of taxes
11,215
0.31
358
0.01
Adjusted earnings from continuing
operations
$
10,905
$
0.30
$
17,903
$
0.50
40 Weeks Ended
October 5, 2019
October 6, 2018
per diluted
per diluted
(In thousands,
except per share amounts)
Earnings
share
Earnings
share
Earnings from continuing operations
$
444
$
0.01
$
47,818
$
1.33
Adjustments:
Merger/acquisition and integration
1,364
3,531
Restructuring charges and asset
impairment
10,215
5,269
Fresh Kitchen start-up costs
—
1,366
Fresh Kitchen operating losses
2,204
—
Expenses associated with tax planning
strategies
—
225
Costs associated with Project One Team
5,428
—
Organizational realignment costs
1,812
—
Loss on debt extinguishment
329
—
Severance associated with cost reduction
initiatives
484
668
Pension termination
19,510
—
Total adjustments
41,346
11,059
Income tax effect on adjustments (a)
(10,166
)
(2,564
)
Impact of Tax Cuts and Jobs Act (b)
—
(494
)
Total adjustments, net of taxes
31,180
0.86
8,001
0.22
Adjusted earnings from continuing
operations
$
31,624
$
0.87
$
55,819
$
1.55
(a)
The income tax effect on adjustments is
computed by applying the applicable tax rate to the
adjustments.
(b)
Includes a $1.1 million tax benefit
attributable to tax planning strategies related to the Tax Cuts and
Jobs Act.
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)
October 5,
December 29,
(In
thousands)
2019
2018
Current portion of long-term debt and
finance lease liabilities
$
7,044
$
18,263
Long-term debt and finance lease
liabilities
686,055
679,797
Total debt
693,099
698,060
Cash and cash equivalents
(23,436
)
(18,585
)
Total net long-term debt
$
669,663
$
679,475
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 Net
Cash Provided by Operating Activities to Free Cash Flow
(A Non-GAAP Financial
Measure)
(Unaudited)
40 Weeks Ended
(In
thousands)
October 5, 2019
October 6, 2018
Net cash provided by operating
activities
$
140,034
$
142,546
Less:
Capital expenditures
46,905
52,600
Free cash flow
$
93,129
$
89,946
Notes: Free cash flow is a non-GAAP financial measure calculated
by subtracting capital expenditures from cash flows provided by
operating activities, the most directly comparable GAAP measure.
The Company believes it is a useful indicator of liquidity that
provides information to both management and investors about the
amount of cash generated from operations that, after capital
expenditures, can be used for strategic business objectives,
including the repayment of long-term debt. Free cash flow is not a
substitute for GAAP financial measures and may differ from
similarly titled measures of other companies.
Table 7: 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 28, 2019
Low
High
Earnings from continuing operations
$
0.01
$
0.29
Adjustments, net of taxes:
Merger/acquisition and integration
expenses
0.04
0.03
Gain on sale of assets
(0.15
)
(0.15
)
Termination of frozen pension plan
0.41
0.38
Costs associated with Project One Team
0.12
0.11
Exit of Fresh Kitchen
0.12
0.10
Restructuring and asset impairment
0.38
0.36
Severance associated with cost reduction
initiatives
0.03
0.02
Organizational realignment costs
0.04
0.03
Adjusted earnings from continuing
operations
$
1.00
$
1.17
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191106005999/en/
Investor Contacts: Mark Shamber Chief Financial Officer and
Executive Vice President (616) 878-8023
Katie Turner Partner, ICR (646) 277-1228
Media Contact: Meredith Gremel Vice President Corporate Affairs
and Communications (616) 878-2830
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