Second Quarter Net Sales Increase 9.4% to $2.18
billion
Reports Second Quarter Retail Comparable Store
Sales of 17.1%
Generates EPS of $0.80; Adjusted EPS Increases
115% to $0.73
Improves Leverage Through Pay Down of Over $40
Million in Long-Term Debt
Raises Fiscal Year 2020 Outlook
SpartanNash Company (the “Company”) (Nasdaq:
SPTN) today reported financial results for its 12-week second
quarter ended July 11, 2020.
Second Quarter Fiscal 2020 Highlights
- Net sales growth of 9.4% to $2.18 billion from $2.00 billion in
the prior year quarter, representing the seventeenth consecutive
quarter of growth.
- Retail comparable store sales of 17.1% were positive for the
fourth consecutive quarter, representing a continuation of trends
driven by increased consumer demand related to the COVID-19
pandemic.
- EPS of $0.80 per share, compared to a loss of $0.19 per share
in the prior year quarter; adjusted EPS of $0.73 per share, an
increase of 115% over the prior year quarter.
- Adjusted EBITDA increase of 33.5%, to $59.2 million from $44.3
million in the prior year quarter.
- Cash generated from operating activities of $69.0 million
during the second quarter, leading to an over $40 million pay down
of long-term debt.
- Raised full year adjusted EPS outlook to a range of $2.40 to
$2.60 per share, and full year reported EPS outlook to a range of
$2.13 to $2.41 per share.
“The strength and resiliency of our team was demonstrated by
their ability to continue to execute in a dynamic operating
environment as they supported the surge in consumer demand related
to the COVID-19 pandemic, which enabled us to exceed our financial
expectations for the second quarter,” said Dennis Eidson, Interim
President and Chief Executive Officer. “We are pleased with the
collaboration across our organization and our ability to respond to
the challenges associated with this incremental demand, while
remaining focused on our priority of ensuring the wellbeing and
safety of our associates and customers. Based on our strong
year-to-date results and expectations for the remainder of the
fiscal year, we are raising our full year guidance.”
Consolidated net sales for the second quarter increased $188.2
million, or 9.4%, to $2.18 billion from $2.00 billion in the prior
year quarter. The increase in net sales was generated through
higher sales attributable to increased consumer demand related to
COVID-19 in the Retail and Food Distribution segments, as well as
continued growth with existing Food Distribution customers.
Gross profit for the second quarter of fiscal 2020 was $338.4
million, or 15.5% of net sales, compared to $289.0 million, or
14.5% of net sales, in the prior year quarter. The improvement in
gross profit rate was primarily driven by an increase in Retail
segment sales, which traditionally generate higher margin rates, in
proportion to total Company sales, as well as reduced levels of
inventory shrink in the Retail segment.
Reported operating expenses for the second quarter were $304.4
million, or 13.9% of net sales, compared to $281.6 million, or
14.1% of net sales, in the prior year quarter. The decrease in
expenses as a rate of sales compared to the prior year quarter was
due to a decrease in restructuring charges, lower health insurance
costs, and increased leverage of expenses from higher sales volume,
particularly retail store labor and certain fixed costs. This
decrease was partially offset by significant increases in incentive
compensation due to improved overall Company performance, as well
as increases in supply chain expenses as a rate to sales. The
Company incurred direct costs associated with the COVID-19
pandemic, including additional compensation for frontline
associates and increased cleaning and sanitation frequency within
all operating locations. Incremental direct labor costs included
appreciation bonuses and an additional $2 per hour for frontline
workers for a portion of the quarter. Sanitation costs included
additional cleaning of high-touch surfaces, fogging of distribution
locations and providing masks and gloves to associates.
The Company reported operating earnings of $34.0 million
compared to $7.4 million in the prior year quarter. The increase
was attributable to the changes in margin and operating expenses
mentioned above, primarily resulting from increased sales volume.
Adjusted operating earnings(1) were $37.7 million compared to $23.5
million in the prior year quarter and are adjusted for the items
detailed in Table 3.
Interest expense decreased $5.0 million from the prior year
quarter due to multiple rate cuts implemented by the Federal
Reserve during 2019 and in early 2020, as well as the Company’s pay
down of the debt balance made possible by higher earnings and lower
investment in working capital.
The Company reported earnings from continuing operations of
$28.5 million, or $0.80 per diluted share, compared to a loss from
continuing operations of $6.8 million, or $0.19 per diluted share,
in the prior year quarter. The improvement reflects the operating
earnings changes noted above and lower interest expense, as well as
tax benefits associated with the Coronavirus Aid, Relief, and
Economic Security (“CARES”) Act.
Adjusted earnings from continuing operations(2) for the second
quarter were $26.1 million, or $0.73 per diluted share. Adjusted
earnings from continuing operations for the prior year quarter were
$12.2 million, or $0.34 per diluted share. In addition to the 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(3) increased $14.9 million, or 33.5%, to $59.2
million compared to $44.3 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 $154.5 million, or
16.5%, to $1.09 billion from $0.94 billion in the prior year
quarter. The increase was due to incremental volume associated with
increased consumer demand related to COVID-19, as well as sales
growth with existing customers.
Reported operating earnings for Food Distribution were $14.4
million compared to $0.3 million in the prior year quarter. The
increase in reported operating earnings was due to asset impairment
charges associated with changes to the Fresh Production business in
the prior year quarter, a current year quarter increase in sales
volume associated with the impacts of COVID-19, as well as cycling
prior year operational losses in the Fresh Production business.
These increases in operating earnings were largely offset by higher
incentive compensation and a higher rate of supply chain expenses,
including additional compensation for frontline workers and
additional sanitation measures. Second quarter adjusted operating
earnings(1) were $17.9 million compared to $16.8 million in the
prior year quarter. Adjusted operating earnings exclude asset
impairment charges in both years and the allocation of one-time
costs associated with Project One Team in the prior year
quarter.
Retail
Net sales for Retail increased $61.3 million, or 10.8%, to
$631.3 million from $570.0 million in the prior year quarter
primarily due to incremental sales volume associated with increased
consumer demand related to COVID-19, as discussed above. Comparable
store sales of 17.1% were partially offset by the impact of lower
fuel prices and gallons sold, as well as store closures. During the
quarter, the Company experienced more than 300% growth in eCommerce
and realized growth of over 24% in private label sales.
Reported operating earnings for Retail were $24.5 million
compared to $8.7 million in the prior year quarter. The increase in
reported operating earnings was due to the increase in sales
volume, improvements in margin rates, including inventory shrink,
as well as favorable variances in both labor rates and health
insurance costs. These favorable variances were partially offset by
higher incentive compensation and incremental compensation for
frontline workers. Adjusted operating earnings(1) were $24.7
million compared to $8.2 million in the prior year quarter and
exclude restructuring costs in the current year and restructuring
gains and merger/acquisition and integration expenses in the prior
year quarter.
Military Distribution
Net sales for Military Distribution decreased $27.6 million, or
5.6%, to $463.0 million from $490.6 million in the prior year
quarter. Growth in export sales were more than offset by the impact
of domestic base access and commissary shopping restrictions
associated with COVID-19, which led to an overall decline of over
10% for the Defense Commissary Agency as a whole.
The reported operating loss for Military Distribution was $4.9
million compared to $1.6 million in the prior year quarter. The
change was driven by increases in the rate of supply chain
expenses, including additional compensation for frontline workers
and additional sanitation measures, partially offset by improved
margin rates. Adjusted operating loss(1) was $4.9 million compared
to a loss of $1.5 million in the prior year quarter. Adjusted
operating loss 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 half
of fiscal 2020 were $198.2 million compared to $103.8 million in
the prior year. The increase was due to reductions in working
capital and improved profitability. The Company generated $167.6
million in free cash flow(4) in the first half of fiscal 2020
compared to $72.1 million in the prior year. The Company reduced
net long-term debt(5) by $141.3 million during the first half of
fiscal 2020, including net payments of over $40 million in the
second quarter. These reductions, combined with increased
profitability, resulted in an improvement in the Company’s net
long-term debt to adjusted EBITDA ratio over this period from 3.7x
to 2.5x, which is calculated on a trailing thirteen period
basis.
Capital expenditures and IT capital(6) totaled $35.6 million in
the first half of fiscal 2020 compared to $31.8 million in the
first half of the prior year.
During the first half of fiscal 2020, the Company declared $13.9
million in quarterly 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 first half of fiscal 2020, an average price of
$11.62 per share.
Outlook
For the 53-week fiscal year ending January 2, 2021, the Company
continues to expect to benefit from higher consumer food-at-home
consumption related to the effects of COVID-19, however, the
duration and magnitude of the impact remain uncertain. Given this
uncertainty, the Company is unable to fully estimate the impact
COVID-19 will have on sales for the remainder of 2020, although it
believes sales will materially exceed its initial 2020 guidance.
The Company is updating its annual outlook, from what was
previously provided on May 27, 2020, to reflect actual year-to-date
financial results, 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, as well as
an estimate of the impact for the remainder of fiscal 2020.
For fiscal year 2020, the Company now anticipates adjusted
earnings per share from continuing operations(7) of approximately
$2.40 to $2.60 compared to its prior projection of $1.85 to $2.00.
Reported earnings per share from continuing operations are expected
to range from $2.13 to $2.41 compared to its prior projection of
$1.48 to $1.81.
The Company now expects fiscal 2020 adjusted EBITDA of $232
million to $242 million compared to its prior guidance of $205
million to $215 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 expected to
range from $88.0 million to $92.0 million for the fiscal year.
Interest expense is now expected to range from $17.5 million to
$18.5 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 15.0%.
The Board of Directors continues to be engaged in a
comprehensive process to identify the Company’s next Chief
Executive Officer. As previously disclosed, on August 4, 2020 the
Company extended the term of the agreement with Mr. Eidson to serve
as Interim President and CEO for up to an additional 90 days.
Conference Call
A telephone conference call to discuss the Company’s first
quarter 2020 financial results is scheduled for Thursday, August
13, 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 in Table 3
below.
(2) A reconciliation of earnings from continuing operations to
adjusted earnings from continuing operations, a non-GAAP financial
measure, is provided in Table 4 below.
(3) A reconciliation of net earnings to Adjusted EBITDA, a
non-GAAP financial measure, is provided in Table 2 below.
(4) A reconciliation of net cash provided by operating
activities to free cash flow, a non-GAAP financial measure, is
provided in Table 6 below.
(5) A reconciliation of long-term debt and finance lease
obligations to net long-term debt, a non-GAAP financial measure, is
provided in Table 5 below.
(6) A reconciliation of purchases of property and equipment to
capital expenditures and IT capital, a non-GAAP financial measure,
is provided in Table 7 below.
(7) 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 in
Table 8 below.
SPARTANNASH COMPANY AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
12 Weeks Ended
28 Weeks Ended
July 11,
July 13,
July 11,
July 13,
(In thousands, except per share
amounts)
2020
2019
2020
2019
Net sales
$
2,184,101
$
1,995,929
$
5,040,557
$
4,538,304
Cost of sales
1,845,727
1,706,922
4,278,616
3,871,568
Gross profit
338,374
289,007
761,941
666,736
Operating expenses
Selling, general and administrative
300,727
266,474
692,027
626,874
Merger/acquisition and integration
—
582
—
1,364
Restructuring charges and asset
impairment
3,675
14,581
13,912
8,919
Total operating expenses
304,402
281,637
705,939
637,157
Operating earnings
33,972
7,370
56,002
29,579
Other expenses and (income)
Interest expense
3,650
8,696
11,288
20,577
Postretirement benefit expense
(income)
101
8,821
(698
)
9,456
Other, net
(164
)
(439
)
(406
)
(891
)
Total other expenses, net
3,587
17,078
10,184
29,142
Earnings (loss) before income taxes and
discontinued operations
30,385
(9,708
)
45,818
437
Income tax expense (benefit)
1,918
(2,941
)
1,949
(317
)
Earnings (loss) from continuing
operations
28,467
(6,767
)
43,869
754
Loss from discontinued operations, net
of taxes
—
(47
)
—
(99
)
Net earnings (loss)
$
28,467
$
(6,814
)
$
43,869
$
655
Basic and diluted earnings (loss) per
share:
Earnings (loss) from continuing
operations
$
0.80
$
(0.19
)
$
1.22
$
0.02
Loss from discontinued operations
—
—
—
—
Net earnings (loss)
$
0.80
$
(0.19
)
$
1.22
$
0.02
Weighted average shares
outstanding:
Basic
35,706
36,323
35,972
36,208
Diluted
35,707
36,323
35,973
36,208
SPARTANNASH COMPANY AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(Unaudited)
July 11,
December 28,
(In thousands)
2020
2019
Assets
Current assets
Cash and cash equivalents
$
34,645
$
24,172
Accounts and notes receivable, net
374,394
345,320
Inventories, net
552,379
537,212
Prepaid expenses and other current
assets
75,219
58,775
Property and equipment held for sale
22,038
31,203
Total current assets
1,058,675
996,682
Property and equipment, net
562,806
615,816
Goodwill
181,035
181,035
Intangible assets, net
127,320
130,434
Operating lease assets
266,765
268,982
Other assets, net
99,948
82,660
Total assets
$
2,296,549
$
2,275,609
Liabilities and Shareholders’
Equity
Current liabilities
Accounts payable
$
489,412
$
405,370
Accrued payroll and benefits
84,444
59,680
Other accrued expenses
54,629
51,295
Current portion of operating lease
liabilities
43,398
42,440
Current portion of long-term debt and
finance lease liabilities
5,489
6,349
Total current liabilities
677,372
565,134
Long-term liabilities
Deferred income taxes
57,681
43,111
Operating lease liabilities
260,770
267,350
Other long-term liabilities
39,269
30,272
Long-term debt and finance lease
liabilities
552,206
682,204
Total long-term liabilities
909,926
1,022,937
Commitments and contingencies
Shareholders’ equity
Common stock, voting, no par value;
100,000 shares
authorized; 35,842 and 36,351 shares
outstanding
483,484
490,233
Preferred stock, no par value, 10,000
shares
authorized; no shares outstanding
—
—
Accumulated other comprehensive loss
(1,500
)
(1,600
)
Retained earnings
227,267
198,905
Total shareholders’ equity
709,251
687,538
Total liabilities and shareholders’
equity
$
2,296,549
$
2,275,609
SPARTANNASH COMPANY AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
28 Weeks Ended
(In thousands)
July 11, 2020
July 13, 2019
Cash flow activities
Net cash provided by operating
activities
$
198,248
$
103,836
Net cash used in investing activities
(21,844
)
(102,609
)
Net cash (used in) provided by financing
activities
(165,931
)
267
Net cash used in discontinued
operations
—
(130
)
Net increase in cash and cash
equivalents
10,473
1,364
Cash and cash equivalents at beginning
of the period
24,172
18,585
Cash and cash equivalents at end of the
period
$
34,645
$
19,949
SPARTANNASH COMPANY AND
SUBSIDIARIES
SUPPLEMENTAL FINANCIAL
DATA
Table 1: Sales and Operating
Earnings (Loss) by Segment
(Unaudited)
12 Weeks Ended
28 Weeks Ended
(In thousands)
July 11, 2020
July 13, 2019
July 11, 2020
July 13, 2019
Food Distribution Segment:
Net sales
$
1,089,861
49.9
%
$
935,383
46.9
%
$
2,459,357
48.8
%
$
2,104,621
46.4
%
Operating earnings
14,409
272
25,799
24,864
Retail Segment:
Net sales
631,257
28.9
%
569,975
28.6
%
1,413,824
28.0
%
1,271,742
28.0
%
Operating earnings (loss)
24,453
8,701
37,098
7,875
Military Segment:
Net sales
462,983
21.2
%
490,571
24.5
%
1,167,376
23.2
%
1,161,941
25.6
%
Operating loss
(4,890
)
(1,603
)
(6,895
)
(3,160
)
Total:
Net sales
$
2,184,101
100.0
%
$
1,995,929
100.0
%
$
5,040,557
100.0
%
$
4,538,304
100.0
%
Operating earnings
33,972
7,370
56,002
29,579
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 income 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 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)
12 Weeks Ended
28 Weeks Ended
(In thousands)
July 11, 2020
July 13, 2019
July 11, 2020
July 13, 2019
Net earnings (loss)
$
28,467
$
(6,814
)
$
43,869
$
655
Loss from discontinued operations, net of
tax
—
47
—
99
Income tax expense (benefit)
1,918
(2,941
)
1,949
(317
)
Other expenses, net
3,587
17,078
10,184
29,142
Operating earnings
33,972
7,370
56,002
29,579
Adjustments:
LIFO expense
1,187
1,068
2,771
2,493
Depreciation and amortization
20,097
20,529
47,753
47,161
Merger/acquisition and integration
—
582
—
1,364
Restructuring, asset impairment and other
charges
3,675
14,581
13,912
8,919
Fresh Cut operating losses
—
—
2,262
—
Stock-based compensation
1,905
715
4,148
6,098
Non-cash rent
(1,199
)
(1,516
)
(2,793
)
(3,434
)
Costs associated with Project One Team
—
810
493
5,428
Organizational realignment costs
—
19
—
877
Severance associated with cost reduction
initiatives
(75
)
80
5,081
442
(Gain) loss on disposal of assets
(484
)
63
3,427
61
Other non-cash charges (gains)
99
11
99
(7
)
Adjusted EBITDA
$
59,177
$
44,312
$
133,155
$
98,981
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
28 Weeks Ended
(In thousands)
July 11, 2020
July 13, 2019
July 11, 2020
July 13, 2019
Food Distribution:
Operating earnings
$
14,409
$
272
$
25,799
$
24,864
Adjustments:
LIFO expense
594
527
1,389
1,230
Depreciation and amortization
6,965
7,744
17,148
17,977
Merger/acquisition and integration
—
—
—
(130
)
Restructuring, asset impairment and other
charges
3,462
16,024
12,684
9,681
Fresh Cut operating losses
—
—
2,262
—
Stock-based compensation
997
341
2,002
3,017
Non-cash rent
36
149
94
206
Costs associated with Project One Team
—
429
265
2,877
Organizational realignment costs
—
10
—
465
Severance associated with cost reduction
initiatives
(37
)
37
3,143
361
(Gain) loss on disposal of assets
(521
)
11
1,619
6
Other non-cash charges
53
11
51
11
Adjusted EBITDA
$
25,958
$
25,555
$
66,456
$
60,565
Retail:
Operating earnings
$
24,453
$
8,701
$
37,098
$
7,875
Adjustments:
LIFO expense
258
257
601
601
Depreciation and amortization
10,325
10,049
24,081
22,851
Merger/acquisition and integration
—
582
—
1,494
Restructuring charges (gains) and asset
impairment
213
(1,443
)
1,228
(762
)
Stock-based compensation
642
250
1,392
2,103
Non-cash rent
(1,150
)
(1,573
)
(2,684
)
(3,426
)
Costs associated with Project One Team
—
275
164
1,845
Organizational realignment costs
—
6
—
298
Severance associated with cost reduction
initiatives
(19
)
43
1,432
72
Loss on disposal of assets
66
51
1,871
88
Other non-cash charges (gains)
34
(8
)
34
(31
)
Adjusted EBITDA
$
34,822
$
17,190
$
65,217
$
33,008
Military:
Operating loss
$
(4,890
)
$
(1,603
)
$
(6,895
)
$
(3,160
)
Adjustments:
LIFO expense
335
284
781
662
Depreciation and amortization
2,807
2,736
6,524
6,333
Stock-based compensation
266
124
754
978
Non-cash rent
(85
)
(92
)
(203
)
(214
)
Costs associated with Project One Team
—
106
64
706
Organizational realignment costs
—
3
—
114
Severance associated with cost reduction
initiatives
(19
)
—
506
9
(Gain) loss on disposal of assets
(29
)
1
(63
)
(33
)
Other non-cash charges
12
8
14
13
Adjusted EBITDA
$
(1,603
)
$
1,567
$
1,482
$
5,408
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 11, 2020
July 13, 2019
July 11, 2020
July 13, 2019
Operating earnings
$
33,972
$
7,370
$
56,002
$
29,579
Adjustments:
Merger/acquisition and integration
—
582
—
1,364
Restructuring, asset impairment and
other
3,675
14,581
13,912
8,919
Fresh Cut operating losses
—
—
2,262
—
Costs associated with Project One Team
—
810
493
5,428
Organizational realignment costs
—
19
—
877
Expenses associated with tax planning
97
—
97
—
Pension termination
—
20
—
20
Severance associated with cost reduction
initiatives
(75
)
80
5,081
442
Adjusted operating earnings
$
37,669
$
23,462
$
77,847
$
46,629
Reconciliation of operating earnings
(loss) to adjusted operating earnings (loss) by segment:
Food Distribution:
Operating earnings
$
14,409
$
272
$
25,799
$
24,864
Adjustments:
Merger/acquisition and integration
—
—
—
(130
)
Restructuring, asset impairment and
other
3,462
16,024
12,684
9,681
Fresh Cut operating losses
—
—
2,262
—
Costs associated with Project One Team
—
429
265
2,877
Organizational realignment costs
—
10
—
465
Expenses associated with tax planning
52
—
52
—
Pension termination
—
11
—
11
Severance associated with cost reduction
initiatives
(37
)
37
3,143
361
Adjusted operating earnings
$
17,886
$
16,783
$
44,205
$
38,129
Retail:
Operating earnings
$
24,453
$
8,701
$
37,098
$
7,875
Adjustments:
Merger/acquisition and integration
—
582
—
1,494
Restructuring charges (gains) and asset
impairment
213
(1,443
)
1,228
(762
)
Costs associated with Project One Team
—
275
164
1,845
Organizational realignment costs
—
6
—
298
Expenses associated with tax planning
32
—
32
—
Pension termination
—
7
—
7
Severance associated with cost reduction
initiatives
(19
)
43
1,432
72
Adjusted operating earnings
$
24,679
$
8,171
$
39,954
$
10,829
Military:
Operating loss
$
(4,890
)
$
(1,603
)
$
(6,895
)
$
(3,160
)
Adjustments:
Costs associated with Project One Team
—
106
64
706
Organizational realignment costs
—
3
—
114
Expenses associated with tax planning
13
—
13
—
Pension termination
—
2
—
2
Severance associated with cost reduction
initiatives
(19
)
—
506
9
Adjusted operating loss
$
(4,896
)
$
(1,492
)
$
(6,312
)
$
(2,329
)
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 11, 2020
July 13, 2019
per diluted
per diluted
(In thousands, except per share
amounts)
Earnings
share
Earnings
share
Earnings (loss) from continuing
operations
$
28,467
$
0.80
$
(6,767
)
$
(0.19
)
Adjustments:
Merger/acquisition and integration
—
582
Restructuring, asset impairment and
other
3,675
14,581
Costs associated with Project One Team
—
810
Organizational realignment costs
—
19
Severance associated with cost reduction
initiatives
(75
)
80
Expenses associated with tax planning
97
—
Pension termination
—
8,998
Total adjustments
3,697
25,070
Income tax effect on adjustments (a)
(903
)
(6,112
)
Impact of CARES Act (b)
(5,165
)
—
Total adjustments, net of taxes
(2,371
)
(0.07
)
18,958
0.53
*
Adjusted earnings from continuing
operations
$
26,096
$
0.73
$
12,191
$
0.34
28 Weeks Ended
July 11, 2020
July 13, 2019
per diluted
per diluted
(In thousands, except per share
amounts)
Earnings
share
Earnings
share
Earnings from continuing operations
$
43,869
$
1.22
$
754
$
0.02
Adjustments:
Merger/acquisition and integration
—
1,364
Restructuring, asset impairment and
other
13,912
8,919
Fresh Cut operating losses
2,262
—
Costs associated with Project One Team
493
5,428
Organizational realignment costs
—
877
Severance associated with cost reduction
initiatives
5,081
442
Expenses associated with tax planning
97
—
Pension termination
(1,004
)
9,351
Total adjustments
20,841
26,381
Income tax effect on adjustments (a)
(4,997
)
(6,416
)
Impact of CARES Act (b)
(9,510
)
—
Total adjustments, net of taxes
6,334
0.18
19,965
0.55
Adjusted earnings from continuing
operations
$
50,203
$
1.40
$
20,719
$
0.57
* Includes rounding
- The income tax effect on adjustments is computed by applying
the applicable tax rate to the adjustments.
- Represents tax impacts attributable to the Coronavirus Aid,
Relief and Economic Security (“CARES”) Act and related tax
planning, 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.
July 11,
December 28,
(In thousands)
2020
2019
Current portion of long-term debt and
finance lease liabilities
$
5,489
$
6,349
Long-term debt and finance lease
liabilities
552,206
682,204
Total debt
557,695
688,553
Cash and cash equivalents
(34,645
)
(24,172
)
Net long-term debt
$
523,050
$
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)
28 Weeks Ended
(In thousands)
July 11, 2020
July 13, 2019
Net cash provided by operating
activities
$
198,248
$
103,836
Less:
Purchases of property and equipment
30,609
31,771
Free cash flow
$
167,639
$
72,065
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)
28 Weeks Ended
(In thousands)
July 11, 2020
July 13, 2019
Purchases of property and equipment
$
30,609
$
31,771
Plus:
Cloud computing spend
4,970
—
Capital expenditures and IT capital
$
35,579
$
31,771
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
$
2.13
$
2.41
Adjustments, net of taxes:
Merger/acquisition and integration
expenses
0.06
0.01
Costs associated with Project One Team
0.01
0.01
Pension termination
(0.02
)
(0.02
)
Restructuring and asset impairment
0.32
0.29
Severance associated with cost reduction
initiatives
0.11
0.11
Fresh Cut operating losses
0.05
0.05
Impact of CARES Act
(0.26
)
(0.26
)
Adjusted earnings from continuing
operations
$
2.40
$
2.60
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200812005655/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
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