First Quarter Net Sales Increase 12.4% to $2.86
Billion Reports First Quarter Retail Comparable Store Sales of
15.6% Generates EPS of $0.43, an Increase of 105%; Adjusted EPS of
$0.67, an Increase of 179% Improves Leverage Ratio Through Pay Down
of Over $90 Million in Long-Term Debt Raises Fiscal Year 2020
Outlook
SpartanNash Company (the “Company”) (Nasdaq:SPTN) today reported
financial results for its 16-week first quarter ended April 18,
2020.
First Quarter Fiscal 2020 Highlights
- Net sales growth of 12.4%, to $2.86 billion from $2.54 billion
in the prior year quarter, representing the sixteenth consecutive
quarter of growth.
- Retail comparable store sales of 15.6% were positive for the
third consecutive quarter, representing a significant acceleration
from recent trends driven by the COVID-19 pandemic.
- EPS of $0.43 per share, an increase of 105% over the prior year
quarter; adjusted EPS of $0.67 per share, an increase of 179% over
the prior year quarter.
- Adjusted EBITDA increase of 35%, to $74.0 million from $54.7
million in the prior year quarter.
- Cash generated from operating activities of $129.3 million,
leading to an over $90 million pay down of long-term debt.
- Raised full year outlook to reflect actual year-to-date results
as well as for increased sales and earnings trends the Company
began to realize prior to the onset of the COVID-19 pandemic. First
quarter results include an estimated $0.38 of additional EPS from
increased consumer demand related to COVID-19.
“I am incredibly proud of our family of associates, from those
within our retail stores to our supply chain team and all of those
supporting their efforts to serve our local customers and
communities during this significant time of need for food,
pharmacy, household and personal care products,” said Dennis
Eidson, Interim President and Chief Executive Officer. “Our number
one priority continues to be the wellbeing and safety of our entire
team, particularly those on the frontlines, who have been driving
our business forward every day. Our ability to respond to
unprecedented consumer demand during the quarter enabled us to
significantly exceed our expectations for the quarter and we are
raising our annual outlook to reflect our strong first quarter
execution in a challenging and evolving environment. Going forward,
we remain committed to enhancing our long-term strategy as we build
upon SpartanNash’s existing foundation and increasingly position
the Company to sustain profitable growth.”
COVID-19 Response
The following are key actions the Company has taken in response
to the COVID-19 pandemic during the first quarter of 2020. A
COVID-19 task force was created to focus on two priorities: the
well-being and safety of the Company’s family of associates,
customers and communities; and supporting health officials and
government leaders to contain the virus:
Increased safety and sanitation efforts implemented during the
pandemic include:
- Installed sneeze guards at key points of customer interaction
within retail stores as well as within distribution center
receiving areas.
- Purchased facemasks and gloves for all frontline associates
working in retail stores and distribution centers.
- Required all associates and guests to wear facemasks at Company
sites.
- Promoted social distancing through signs and floor markings
throughout retail stores and distribution centers to remind guests
and associates to remain six feet apart.
- Set aside time twice per week for store and pharmacy guests
most at risk of contracting coronavirus, including seniors,
pregnant women and immunocompromised individuals.
- Increased Fast Lane staffing levels to best accommodate
significant increase in the number of customers shopping online as
well as offered free, same-day home delivery of prescription
medications.
- On-site health screenings, including temperature checks, for
all associates upon arrival at work.
- Suspended certain services within retail stores, including
self-serve areas, bottle returns, and product returns due to the
increased risk of contamination.
- Increased procedures for sanitizing high-touch surfaces within
retail stores, such as shopping carts and baskets, food service
counters, checkout lanes, conveyor belts, fuel pump handles, pin
pads and touch screens at least every 30 minutes as well as
installed sanitation stations. In distribution centers, implemented
fogging as well as sanitizing high-touch areas including time
clocks, headsets and equipment controls at least every 30
minutes.
- Provided robust communications and resources for independent
customers to help them navigate the COVID-19 operational and
legislative landscape.
Additional resources to help associates during various times of
the pandemic include:
- Provided its more than 16,000 part- and full-time frontline
associates with weekly appreciation bonuses, as well as an
additional $2 per hour for hours worked during times of
significantly increased demand.
- Increased the associate discount in its company-owned retail
stores to 20 percent off.
- Extended emergency leave benefits to ensure associates who are
sick or are displaying symptoms of COVID-19 are able to remain off
work until they have fully recovered. SpartanNash's expanded
emergency pay now provides up to 80 hours of paid leave.
- The Company continues to provide telemedicine visits, employee
assistance programs for mental and physical wellbeing as well as
assistance managing childcare and prescription drug coverage.
Telemedicine visit and COVID-19 testing fees have been waived since
the onset of the pandemic.
- Recruited and onboarded more than 3,000 new hires since the
beginning of the pandemic to support current associates and provide
career opportunities to displaced workers.
- Provide daily and weekly robust communication updates to inform
associates of the changing protocols and procedures implemented as
a result of COVID-19.
COVID-19 Financial Impacts
The Company experienced a significant increase in demand across
all three business segments, beginning in mid-March, the eleventh
week of the fiscal quarter. These increases reflected a meaningful
change in customer behavior in response to the pandemic as volumes
increased due to retail consumers stocking up. This was followed by
a shift to food-at-home in connection with state mandated business
shutdowns, including restaurants, as well as stay-at-home
orders.
- Within the Food Distribution segment, sales comparisons to the
prior year increased 9.5% for the first ten weeks of the quarter.
In the last six weeks of the quarter, sales trended higher than the
prior year by 29.7% and ended the quarter ahead of the prior year
by 17.1%.
- Within the Retail segment through the first ten weeks of the
quarter, the Company’s comparable store sales, which exclude fuel,
were on track to achieve its guidance of approximately flat and
accelerated to an increase of 42.0% for the last six weeks of the
quarter, ending the quarter at 15.6%.
- Within the Military segment, sales comparisons to the prior
year decreased 3.2% for the first ten weeks of the quarter. In the
last six weeks of the quarter, sales trended higher than the prior
year by 18.1% and ended the quarter ahead of the prior year by
4.9%.
The Company incurred direct costs associated with its efforts to
support frontline associates as well as to increase cleaning and
sanitation frequency within all operating locations. Incremental
direct labor costs include weekly appreciation bonuses and an
additional $2 per hour for frontline workers. Sanitation costs
include additional cleaning of high-touch surfaces, fogging of
distribution locations, installation of sneeze guards and providing
masks and gloves to all associates.
Consolidated Financial Results
Consolidated net sales for the first quarter increased $314.1
million, or 12.4%, to $2.86 billion from $2.54 billion in the prior
year quarter. The increase in net sales was generated through
higher sales attributable to COVID-19 impacts across all segments,
as well as growth with existing customers in the Food Distribution
segment.
Gross profit for the first quarter of fiscal 2020 was $423.6
million, or 14.8% of net sales, compared to $377.7 million, or
14.9% of net sales, in the prior year quarter. The growth in gross
profit was primarily driven by the increased sales volume.
Reported operating expenses for the first quarter were $401.5
million, or 14.1% of net sales, compared to $355.5 million, or
14.0% 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 higher restructuring and asset impairment charges of $15.9
million, including charges related to the closure of the Caito
Fresh Cut business compared to gains on the sale of a closed
distribution center in the prior year, which are discussed further
within the segment financial results below. During the first half
of the quarter, the Company executed a voluntary early retirement
program, along with a reduction-in-force, which will result in
longer-term cost savings, however these initiatives resulted in
$5.2 million in incremental expense in the quarter. The Company
also recognized significant increases in incentive compensation due
to improved overall company performance, as well as incremental pay
and bonuses for frontline associates, as noted above. These
incremental costs were mostly offset by improved operating leverage
related to store labor and other operating expenses, as well as
significantly lower healthcare costs and lower stock compensation
expense due, in part, to the timing of a portion of the fiscal 2020
stock award, which will occur in the second quarter. First quarter
operating expenses would have been $385.7 million, or 13.5% of net
sales, compared to $354.6 million, or 13.9% of net sales, in the
prior year quarter, excluding the restructuring and asset
impairment charges and other adjustments detailed in Table 3.
The Company reported operating earnings of $22.0 million
compared to $22.2 million in the prior year quarter. The decline
was primarily attributable to the changes in operating expenses
mentioned above, mostly offset by increased volume. Adjusted
operating earnings(1) were $40.2 million compared to $23.2 million
in the prior year quarter and exclude the adjustments detailed in
Table 3.
Interest expense decreased $4.2 million from the prior year
quarter primarily due to significant rate cuts executed by the
federal reserve during 2019 and in the first quarter of 2020, as
well as due to the Company’s pay down of the debt balance resulting
from higher earnings and lower working capital requirements.
The Company reported earnings from continuing operations of
$15.4 million, or $0.43 per share, compared to $7.5 million, or
$0.21 per diluted share, in the prior year quarter. The improvement
reflects the operating earnings changes noted above, as well as tax
benefits associated with the Coronavirus Aid, Relief, and Economic
Security (“CARES”) Act and lower interest expense.
Adjusted earnings from continuing operations(3) for the first
quarter were $24.1 million, or $0.67 per diluted share. Adjusted
earnings from continuing operations for the prior year quarter were
$8.5 million, or $0.24 per diluted share. In addition to the
adjusted items noted above, adjusted earnings from continuing
operations exclude tax benefits associated with the CARES Act. A
reconciliation of reported earnings from continuing operations to
adjusted earnings from continuing operations is included at Table
4.
Adjusted EBITDA(2) increased $19.3 million, or 35.3%, to $74.0
million compared to $54.7 million in the prior year quarter due to
factors mentioned above.
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.
Segment Financial Results
Food Distribution
Net sales for Food Distribution increased $200.3 million, or
17.1%, to $1.37 billion from $1.17 billion in the prior year
quarter. The increase was due to incremental volume associated with
COVID-19 impacts as well as sales growth with existing
customers.
Reported operating earnings for Food Distribution were $11.4
million compared $24.6 million in the prior year quarter. During
the quarter, as a result of the loss of a significant customer of
the Fresh Cut business, the Company made the decision to exit these
operations. Wind down of the operations began in March 2020 and was
complete as of the end of the first quarter. The Company incurred
$11.1 million in asset impairment charges, severance costs,
operating losses and other charges during the wind down period.
Profitability was also impacted by the increase in sales volume,
the compensation related items mentioned above and by the closure
of Fresh Kitchen operations during 2019, which previously generated
operating losses.
First quarter adjusted operating earnings(1) were $26.3 million
compared to $21.3 million in the prior year quarter. Adjusted
operating earnings exclude charges associated with the Fresh Cut
operations and severance in the current year, and gains related to
the sale of real property, the allocation of one-time costs
associated with Project One Team and severance in the prior year
quarter.
Retail
Net sales for Retail increased $80.8 million, or 11.5%, to
$782.6 million from $701.8 million in the prior year quarter
primarily due to incremental volume associated with COVID-19, as
discussed above. Comparable store sales of 15.6% were partially
offset by the impact of lower fuel prices and store closures, with
e-commerce sales volume increasing by more than 300% during the
last six weeks of the quarter.
Reported operating earnings for Retail were $12.6 million
compared to an operating loss of $0.8 million in the prior year
quarter. The increase in reported operating earnings was due to the
increase in sales volume, improvements in labor rates as a rate of
sales and lower health insurance costs, partially offset by the
compensation related items mentioned above. Adjusted operating
earnings(1) were $15.3 million compared to $2.7 million in the
prior year quarter and exclude restructuring costs and severance in
the current year, and one-time costs associated with Project One
Team, merger/acquisition and integration expenses, and store
closing expenses in the prior year quarter.
Military Distribution
Net sales for Military Distribution increased $33.0 million, or
4.9%, to $704.4 million from $671.4 million in the prior year
quarter. The increase was due to incremental volume associated with
COVID-19, partially offset by lower comparable sales at Defense
Commissary Agency (“DeCA”) operated locations prior to the onset of
the pandemic.
The reported operating loss for Military Distribution was $2.0
million compared to $1.6 million in the prior year quarter. The
change was primarily attributable to higher incentive compensation
costs, partially offset by the impact of the increase in sales
volume. Adjusted operating loss(1) was $1.4 million compared to
$0.8 million in the prior year quarter. Adjusted operating loss in
the current year excludes severance, and excludes the allocation of
one-time costs associated with Project One Team in the prior year
quarter.
Balance Sheet and Cash Flow
Cash flows provided by operating activities for the first
quarter were $129.3 million compared to $13.5 million in the prior
year quarter. The increase was due to changes in working capital
and improved profitability. The Company generated $111.4 million in
free cash flow(5) in the first quarter compared to a use of cash of
$2.5 million in the prior year quarter. The Company reduced net
long-term debt(6) levels by $88.4 million during the first quarter
of 2020, and net long-term debt to adjusted EBITDA improved from
3.7x to 2.9x.
Capital expenditures and IT capital(7) totaled $19.5 million in
the first quarter compared to $16.0 million in the prior year
quarter.
During the first quarter, the Company declared $7.0 million in
cash dividends equal to $0.1925 per common share. The Company also
repurchased 860,752 shares for a total of $10.0 million in the
quarter, an average price of $11.62 per share.
Revised Outlook
For the 53-week fiscal year ending January 2, 2021, the Company
expects to continue to benefit from higher consumer food-at-home
consumption related to COVID-19, however, the duration and
magnitude of the impact are uncertain. As a result, although the
Company believes that its sales for fiscal 2020 will materially
exceed its initial 2020 guidance, the Company is unable to fully
estimate the impact COVID-19 will have on the remainder of 2020.
The Company is updating its annual outlook, originally provided on
February 19, 2020, to reflect actual financial results experienced
to-date, as well as expectations for the remainder of the fiscal
year related to earnings trends. Specifically, these updates
include incremental adjusted earnings per share from continuing
operations for the COVID-19 impact experienced to-date, other first
quarter earnings in excess of management’s initial guidance
expectations as well as the benefits associated with cost reduction
initiatives and increased sales and earnings trends the Company was
experiencing prior to the onset of the pandemic. The Company’s
updated outlook for the second half of the year does not include
any adjustment for future impacts from the COVID-19 pandemic.
However, the Company currently anticipates any incremental costs
related to COVID-19 will be more than offset by the improved
food-at-home sales trend.
For fiscal year 2020, the Company now anticipates adjusted
earnings per share from continuing operations(4) of approximately
$1.85 to $2.00 compared to its prior projection of $1.12 to $1.20.
Reported earnings per share from continuing operations are expected
to range from $1.48 to $1.81 compared to its prior projection of
$0.93 to $1.04. For the second quarter of fiscal 2020, adjusted
earnings per share are expected to increase 70-100% over fiscal
2019 second quarter adjusted earnings per share of $0.33.
The Company now expects fiscal 2020 adjusted EBITDA of $205
million to $215 million compared to its prior guidance of $180
million to $190 million, consistent with the Company’s projected
increases in operating earnings.
The Company's guidance continues to reflect capital expenditures
and IT capital in the range of $80.0 million to $90.0 million for
fiscal year 2020. Depreciation and amortization are now expected to
be $88.0 million to $92.0 million for the fiscal year. Interest
expense is now expected to range from $19.5 million to $21.0
million in fiscal 2020. The Company’s guidance reflects an adjusted
effective tax rate of 23.5% to 24.5% and a reported effective tax
rate of 14.0% to 18.0%.
The Board of Directors is engaged in a comprehensive process to
identify the Company’s next Chief Executive Officer and has
continued to make progress in the search over the last quarter.
Conference Call
A telephone conference call to discuss the Company’s first
quarter 2020 financial results is scheduled for Thursday, May 28,
2020 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
operating a premier fresh produce distribution network. SpartanNash
serves customer locations in all 50 states and the District of
Columbia, Europe, Cuba, Puerto Rico, Honduras, Bahrain, Djibouti
and Egypt. SpartanNash currently operates 155 supermarkets,
primarily under the banners of Family Fare, Martin's Super Markets,
D&W Fresh Market, VG's Grocery and Dan's Supermarket. 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, disruption associated with the COVID-19
pandemic and 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 earnings to
Adjusted EBITDA, a non-GAAP financial measure, is provided
below.
(3) A reconciliation of earnings 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.
(6) A reconciliation of long-term debt and
finance lease obligations to net long-term debt, a non-GAAP
financial measure, is provided below.
(7) A reconciliation of purchases of
property and equipment to capital expenditures and IT capital, a
non-GAAP financial measure, is provided below.
SPARTANNASH COMPANY AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
EARNINGS
(Unaudited)
16 Weeks Ended
April 18,
April 20,
(In thousands,
except per share amounts)
2020
2019
Net sales
$
2,856,456
$
2,542,375
Cost of sales
2,432,889
2,164,646
Gross profit
423,567
377,729
Operating expenses
Selling, general and administrative
391,300
360,400
Merger/acquisition and integration
—
782
Restructuring charges (gains) and asset
impairment
10,237
(5,662
)
Total operating expenses
401,537
355,520
Operating earnings
22,030
22,209
Other expenses and (income)
Interest expense
7,638
11,881
Postretirement benefit (income)
expense
(799
)
635
Other, net
(242
)
(452
)
Total other expenses, net
6,597
12,064
Earnings before income taxes and
discontinued operations
15,433
10,145
Income tax expense
31
2,624
Earnings from continuing
operations
15,402
7,521
Loss from discontinued operations, net
of taxes
—
(52
)
Net earnings
$
15,402
$
7,469
Basic and diluted earnings per
share:
Earnings from continuing operations
$
0.43
$
0.21
Loss from discontinued operations
—
—
Net earnings
$
0.43
$
0.21
Weighted average shares
outstanding:
Basic and diluted
36,172
36,121
SPARTANNASH COMPANY AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(Unaudited)
April 18,
December 28,
(In
thousands)
2020
2019
Assets
Current assets
Cash and cash equivalents
$
21,255
$
24,172
Accounts and notes receivable, net
417,684
345,320
Inventories, net
516,517
537,212
Prepaid expenses and other current
assets
68,094
58,775
Property and equipment held for sale
24,706
31,203
Total current assets
1,048,256
996,682
Property and equipment, net
585,185
615,816
Goodwill
181,035
181,035
Intangible assets, net
128,654
130,434
Operating lease assets
268,370
268,982
Other assets, net
102,715
82,660
Total assets
$
2,314,215
$
2,275,609
Liabilities and
Shareholders’ Equity
Current liabilities
Accounts payable
$
509,164
$
405,370
Accrued payroll and benefits
71,655
59,680
Other accrued expenses
49,574
51,295
Current portion of operating lease
liabilities
42,832
42,440
Current portion of long-term debt and
finance lease liabilities
6,157
6,349
Total current liabilities
679,382
565,134
Long-term liabilities
Deferred income taxes
62,849
43,111
Operating lease liabilities
264,738
267,350
Other long-term liabilities
30,457
30,272
Long-term debt and finance lease
liabilities
591,097
682,204
Total long-term liabilities
949,141
1,022,937
Commitments and contingencies
Shareholders’ equity
Common stock, voting, no par value;
100,000 shares authorized; 35,682 and 36,351 shares outstanding
481,514
490,233
Preferred stock, no par value, 10,000
shares authorized; no shares outstanding
—
—
Accumulated other comprehensive loss
(1,520
)
(1,600
)
Retained earnings
205,698
198,905
Total shareholders’ equity
685,692
687,538
Total liabilities and shareholders’
equity
$
2,314,215
$
2,275,609
SPARTANNASH COMPANY AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
16 Weeks Ended
(In
thousands)
April 18, 2020
April 20, 2019
Cash flow activities
Net cash provided by operating
activities
$
129,296
$
13,519
Net cash used in investing activities
(13,951
)
(87,225
)
Net cash (used in) provided by financing
activities
(118,262
)
76,567
Net cash used in discontinued
operations
—
(86
)
Net (decrease) increase in cash and
cash equivalents
(2,917
)
2,775
Cash and cash equivalents at beginning
of the period
24,172
18,585
Cash and cash equivalents at end of the
period
$
21,255
$
21,360
SPARTANNASH COMPANY AND
SUBSIDIARIES
SUPPLEMENTAL FINANCIAL
DATA
Table 1: Sales and Operating
Earnings (Loss) by Segment
(Unaudited)
16 Weeks Ended
(In
thousands)
April 18, 2020
April 20, 2019
Food Distribution
Segment:
Net sales
$
1,369,495
47.9
%
$
1,169,238
46.0
%
Operating earnings
11,390
24,592
Retail
Segment:
Net sales
782,568
27.4
%
701,767
27.6
%
Operating earnings (loss)
12,645
(826
)
Military
Segment:
Net sales
704,393
24.7
%
671,370
26.4
%
Operating loss
(2,005
)
(1,557
)
Total:
Net sales
$
2,856,456
100.0
%
$
2,542,375
100.0
%
Operating earnings
22,030
22,209
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 Cut
operating losses” subsequent to the decision to exit these
operations during the first quarter, severance associated with cost
reduction initiatives , 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 related to a refund from the annuity provider
associated with the final reconciliation of participant data is
excluded from adjusted earnings from continuing operations. 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 costs associated
with the organizational realignment, which include significant
changes to the Company’s management team. Also excluded are the
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.
Table 2: Reconciliation of Net
Earnings to Adjusted Earnings Before Interest, Taxes, Depreciation
and Amortization
(Adjusted EBITDA)
(A Non-GAAP Financial
Measure)
(Unaudited)
16 Weeks Ended
(In
thousands)
April 18, 2020
April 20, 2019
Net earnings
$
15,402
$
7,469
Loss from discontinued operations, net of
tax
—
52
Income tax expense
31
2,624
Other expenses, net
6,597
12,064
Operating earnings
22,030
22,209
Adjustments:
LIFO expense
1,583
1,425
Depreciation and amortization
27,656
26,632
Merger/acquisition and integration
—
782
Restructuring, asset impairment and other
charges (gains)
10,237
(5,662
)
Fresh Cut operating losses
2,262
—
Stock-based compensation
2,243
5,383
Non-cash rent
(1,594
)
(1,918
)
Costs associated with Project One Team
493
4,618
Organizational realignment costs
—
858
Severance associated with cost reduction
initiatives
5,156
362
Loss (gain) on disposal of assets
3,911
(3
)
Other non-cash charges (gains)
1
(17
)
Adjusted EBITDA
$
73,978
$
54,669
Table 2: Reconciliation of Net
Earnings to Adjusted Earnings Before Interest, Taxes,
Depreciation
and Amortization,
continued
(Adjusted EBITDA)
(A Non-GAAP Financial
Measure)
(Unaudited)
16 Weeks Ended
(In
thousands)
April 18, 2020
April 20, 2019
Food Distribution:
Operating earnings
$
11,390
$
24,592
Adjustments:
LIFO expense
794
703
Depreciation and amortization
10,183
10,233
Merger/acquisition and integration
—
(130
)
Restructuring, asset impairment and other
charges (gains)
9,222
(6,343
)
Fresh Cut operating losses
2,262
—
Stock-based compensation
1,005
2,676
Non-cash rent
58
57
Costs associated with Project One Team
265
2,448
Organizational realignment costs
—
455
Severance associated with cost reduction
initiatives
3,180
324
Loss (gain) on disposal of assets
2,140
(5
)
Other non-cash gains
(1
)
—
Adjusted EBITDA
$
40,498
$
35,010
Retail:
Operating earnings (loss)
$
12,645
$
(826
)
Adjustments:
LIFO expense
343
344
Depreciation and amortization
13,756
12,802
Merger/acquisition and integration
—
912
Restructuring charges and asset
impairment
1,015
681
Stock-based compensation
750
1,853
Non-cash rent
(1,534
)
(1,853
)
Costs associated with Project One Team
164
1,570
Organizational realignment costs
—
292
Severance associated with cost reduction
initiatives
1,451
29
Loss on disposal of assets
1,805
36
Other non-cash gains
—
(22
)
Adjusted EBITDA
$
30,395
$
15,818
Military:
Operating loss
$
(2,005
)
$
(1,557
)
Adjustments:
LIFO expense
446
378
Depreciation and amortization
3,717
3,597
Stock-based compensation
488
854
Non-cash rent
(118
)
(122
)
Costs associated with Project One Team
64
600
Organizational realignment costs
—
111
Severance associated with cost reduction
initiatives
525
9
Gain on disposal of assets
(34
)
(34
)
Other non-cash charges
2
5
Adjusted EBITDA
$
3,085
$
3,841
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)
16 Weeks Ended
(In
thousands)
April 18, 2020
April 20, 2019
Operating earnings
$
22,030
$
22,209
Adjustments:
Merger/acquisition and integration
—
782
Restructuring, asset impairment and other
charges (gains)
10,237
(5,662
)
Fresh Cut operating losses
2,262
—
Costs associated with Project One Team
493
4,618
Organizational realignment costs
—
858
Severance associated with cost reduction
initiatives
5,156
362
Adjusted operating earnings
$
40,178
$
23,167
Reconciliation of operating earnings
(loss) to adjusted operating earnings (loss) by segment:
Food Distribution:
Operating earnings
$
11,390
$
24,592
Adjustments:
Merger/acquisition and integration
—
(130
)
Restructuring, asset impairment and other
charges (gains)
9,222
(6,343
)
Fresh Cut operating losses
2,262
—
Costs associated with Project One Team
265
2,448
Organizational realignment costs
—
455
Severance associated with cost reduction
initiatives
3,180
324
Adjusted operating earnings
$
26,319
$
21,346
Retail:
Operating earnings (loss)
$
12,645
$
(826
)
Adjustments:
Merger/acquisition and integration
—
912
Restructuring charges and asset
impairment
1,015
681
Costs associated with Project One Team
164
1,570
Organizational realignment costs
—
292
Severance associated with cost reduction
initiatives
1,451
29
Adjusted operating earnings
$
15,275
$
2,658
Military:
Operating loss
$
(2,005
)
$
(1,557
)
Adjustments:
Costs associated with Project One Team
64
600
Organizational realignment costs
—
111
Severance associated with cost reduction
initiatives
525
9
Adjusted operating loss
$
(1,416
)
$
(837
)
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)
16 Weeks Ended
April 18, 2020
April 20, 2019
per diluted
per diluted
(In thousands,
except per share amounts)
Earnings
share
Earnings
share
Earnings from continuing operations
$
15,402
$
0.43
$
7,521
$
0.21
Adjustments:
Merger/acquisition and integration
—
782
Restructuring, asset impairment and other
charges (gains)
10,237
(5,662
)
Fresh Cut operating losses
2,262
—
Costs associated with Project One Team
493
4,618
Organizational realignment costs
—
858
Severance associated with cost reduction
initiatives
5,156
362
Pension termination
(1,004
)
353
Total adjustments
17,144
1,311
Income tax effect on adjustments (a)
(4,095
)
(304
)
Impact of CARES Act (b)
(4,345
)
—
Total adjustments, net of taxes
8,704
0.24
1,007
0.03
Adjusted earnings from continuing
operations
$
24,106
$
0.67
$
8,528
$
0.24
(a)
The income tax effect on adjustments is
computed by applying the applicable tax rate to the
adjustments.
(b)
Represents tax impacts attributable to the
Coronavirus Aid, Relief and Economic Security (“CARES”) Act,
primarily related to additional deductions and the utilization of
net operating loss carrybacks.
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 Finance Lease Obligations to Net Long-Term
Debt
(A Non-GAAP Financial
Measure)
(Unaudited)
April 18,
December 28,
(In
thousands)
2020
2019
Current portion of long-term debt and
finance lease liabilities
$
6,157
$
6,349
Long-term debt and finance lease
liabilities
591,097
682,204
Total debt
597,254
688,553
Cash and cash equivalents
(21,255
)
(24,172
)
Net long-term debt
$
575,999
$
664,381
Notes: Net long-term debt is a non-GAAP financial measure that
is defined as long-term debt and finance lease obligations plus
current maturities of long-term debt and finance 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. Net long-term
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)
16 Weeks Ended
(In
thousands)
April 18, 2020
April 20, 2019
Net cash provided by operating
activities
$
129,296
$
13,519
Less:
Purchases of property and equipment
17,893
16,006
Free cash flow
$
111,403
$
(2,487
)
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
Purchases of Property and Equipment to Capital Expenditures and IT
Capital
(A Non-GAAP Financial
Measure)
(Unaudited)
16 Weeks Ended
(In
thousands)
April 18, 2020
April 20, 2019
Purchases of property and equipment
$
17,893
$
16,006
Plus:
Cloud computing spend
1,579
—
Capital expenditures and IT capital
$
19,472
$
16,006
Notes: Capital expenditures and IT capital is a non-GAAP
financial measure calculated by adding spending related to the
development of cloud computing applications spend to capital
expenditures, the most directly comparable GAAP measure. Cloud
computing spend only includes costs incurred during the application
development phase and does not include ongoing costs of hosting or
maintenance associated with these applications, which are expensed
as incurred. The Company believes it is a useful indicator of the
Company’s investment in its facilities and systems as it
transitions to more cloud-based IT systems. Capital expenditures
and IT capital is not a substitute for GAAP financial measures and
may differ from similarly titled measures of other companies.
Table 8: 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)
53 Weeks Ending
January 2, 2021
Low
High
Earnings from continuing operations
$
1.48
$
1.81
Adjustments, net of taxes:
Merger/acquisition and integration
expenses
0.03
0.02
Costs associated with Project One Team
0.01
0.01
Pension termination
(0.01
)
(0.02
)
Restructuring and asset impairment
0.30
0.28
Severance associated with cost reduction
initiatives
0.11
0.11
Fresh Cut operating losses
0.05
0.05
Impact of CARES Act
(0.12
)
(0.26
)
Adjusted earnings from continuing
operations
$
1.85
$
2.00
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200527005857/en/
Investors: Mark Shamber Chief Financial Officer and Executive
Vice President (616) 878-8023
Katie Turner Partner, ICR (646) 277-1228
Media: Meredith Gremel Vice President Corporate Affairs and
Communications (616) 878-2830
SpartanNash (NASDAQ:SPTN)
Historical Stock Chart
From Mar 2024 to Apr 2024
SpartanNash (NASDAQ:SPTN)
Historical Stock Chart
From Apr 2023 to Apr 2024