Albertsons Companies, Inc. (NYSE: ACI) (the "Company") today
reported results for the first quarter of fiscal 2020, which ended
June 20, 2020.
First Quarter of Fiscal 2020
Highlights
- Identical sales growth of 26.5%
- Digital sales growth of 276%
- Diluted net income per share of $1.00; Adjusted net income per
share of $1.35
- Net income of $586 million
- Adjusted EBITDA of $1.7 billion, an increase of 93% compared to
the first quarter last year
- COVID-19 related investments of approximately $615 million to
support and protect our front-line associates and customers,
including more than $275 million in appreciation pay and $53
million for hunger relief in our communities
"I am inspired by the many ways my colleagues continue to step
up to serve our customers and help our communities around the
country during this time of need," said Vivek Sankaran, President
and Chief Executive Officer. "Their hard work and dedication have
also allowed us to successfully navigate this extraordinary
environment and we have accelerated our digital and eCommerce
strategy to adapt to market conditions. We generated strong
financial performance in the first quarter, including robust cash
flow and enhanced liquidity, which support our continued investment
to benefit our associates, customers, communities and
stockholders."
First Quarter of Fiscal 2020
Results
Sales and other revenue increased 21.4% to $22.8 billion during
the 16 weeks ended June 20, 2020 ("first quarter of fiscal 2020")
compared to $18.7 billion during the 16 weeks ended June 15, 2019
("first quarter of fiscal 2019"). The increase was driven by the
Company's 26.5% increase in identical sales, partially offset by a
reduction in sales related to store closures and lower fuel sales.
Identical sales benefited from our 276% growth in digital sales and
an increase in store sales, both largely driven by the COVID-19
pandemic.
Gross profit margin increased to 29.8% during the first quarter
of fiscal 2020 compared to 28.0% during the first quarter of fiscal
2019. Excluding the impact of fuel, gross profit margin increased
80 basis points compared to the first quarter of fiscal 2019,
primarily due to a reduction in shrink expense as a percent of
sales. Gross profit margin also benefited from lower promotional
activity during most of the first quarter of fiscal 2020 before
promotional activity started to increase in the last week of May
and throughout June.
Selling and administrative expenses decreased to 25.4% of sales
during the first quarter of fiscal 2020 compared to 26.4% of sales
for the first quarter of fiscal 2019. Excluding the impact of fuel,
selling and administrative expenses as a percentage of sales
decreased 190 basis points. The decrease in selling and
administrative expenses was primarily attributable to sales
leverage driven by significantly higher identical sales. The
improved selling and administrative rate included the Company's
incremental COVID-19 investments, including more than $275 million
in appreciation pay to front-line associates, and the Company's $53
million contribution to hunger relief and other investments related
to supporting and protecting our associates and customers. In
addition, the Company incurred incremental expenses related to the
civil disruption in certain of our markets in late May and
June.
Interest expense was $180.6 million during the first quarter of
fiscal 2020 compared to $225.2 million during the first quarter of
fiscal 2019. The decrease in interest expense was primarily
attributable to lower average outstanding borrowings and lower
average interest rates. The weighted average interest rate during
the first quarter of fiscal 2020 was 6.0% compared to 6.5% during
the first quarter of fiscal 2019, excluding amortization and
write-off of deferred financing costs and original issue
discount.
Income tax expense was $201.9 million during the first quarter
of fiscal 2020 compared to income tax expense of $15.7 million
during the first quarter of fiscal 2019. The increase in income tax
expense is the result of the increase in income before taxes.
Net income was $586.2 million during the first quarter of fiscal
2020 compared to net income of $49.0 million during the first
quarter of fiscal 2019.
Adjusted EBITDA was $1,691.0 million, or 7.4% of sales, during
the first quarter of fiscal 2020 compared to $876.8 million, or
4.7% of sales, during the first quarter of fiscal 2019. The
increase in Adjusted EBITDA was primarily attributable to the
Company's 26.5% increase in identical sales and the improved sales
leverage experienced in gross margin and selling and administrative
expenses.
Liquidity, Capital Expenditures and
Strategic Transactions
Net cash provided by operating activities was $2,091.9 million
during the first quarter of fiscal 2020 compared to $802.7 million
during the first quarter of fiscal 2019. The increase in cash flow
from operations compared to the first quarter last year was
primarily due to improvements in operating performance and changes
in working capital primarily related to inventory and accounts
payable driven by the increase in sales volume during the first
quarter of fiscal 2020.
During the first quarter of fiscal 2020, the Company spent
approximately $402.3 million in capital expenditures, which
included investments in strategic technology and accelerated
investment in eCommerce and the completion of 46 remodel
projects.
Private Placement of Convertible
Preferred Stock and Initial Public Offering
On June 9, 2020, the Company completed the sale and issuance of
$1.75 billion liquidation preference of convertible preferred stock
to certain investors led by funds managed, advised or controlled by
affiliates of Apollo Global Management, Inc. The aggregate proceeds
received by the Company, net of original issue discount, was $1.68
billion. The Company used cash in an amount equal to the proceeds
from the sale and issuance of the convertible preferred stock to
repurchase shares of ACI common stock from its existing
stockholders.
The Company's common stock began trading on the New York Stock
Exchange on June 26, 2020 under the symbol "ACI" and on June 30,
2020, certain selling stockholders completed the sale of a total of
50,000,000 shares of the Company's common stock at an initial price
to the public of $16.00 per share (resulting in aggregate gross
proceeds of $800 million). The Company did not receive any proceeds
from the sale of shares of common stock by the selling stockholders
in the initial public offering.
Update on COVID-19
Since the beginning of fiscal 2020, the Company has experienced
significant increases in product demand and overall basket size in
stores and in our eCommerce business as customers responded to the
circumstances around COVID-19. Due to these circumstances, the
Company remains unable to predict the continuing impact of COVID-19
on its business for the balance of the year with reasonable
certainty. The ongoing COVID-19 pandemic has dramatically changed
the landscape of food-at-home consumption and the Company continues
to prioritize the health and safety of our associates, customers
and communities.
Conference Call
The Company will hold a conference call today at 11:00 a.m.
Eastern Time, which will be hosted by Vivek Sankaran, President and
CEO, and Bob Dimond, CFO. The call will be webcast and can be
accessed at
https://investor.albertsonscompanies.com/Event-Calendar. A replay
of the webcast will be available for approximately two weeks
following the completion of the call.
About Albertsons
Companies
Albertsons Companies is a leading food and drug retailer in the
United States. As of June 20, 2020, the Company operated 2,252
retail food and drug stores with 1,726 pharmacies, 402 associated
fuel centers, 23 dedicated distribution centers and 20
manufacturing facilities. The Company operates stores across 34
states and the District of Columbia under 20 well-known banners
including Albertsons, Safeway, Vons, Jewel-Osco, Shaw's, Acme, Tom
Thumb, Randalls, United Supermarkets, Pavilions, Star Market,
Haggen and Carrs. The Company is committed to helping people across
the country live better lives by making a meaningful difference,
neighborhood by neighborhood. In 2019 alone, along with the
Albertsons Companies Foundation, the Company gave $225 million in
food and financial support. In 2020, the Company made a $53 million
commitment to community hunger relief efforts and a $5 million
commitment to organizations supporting social justice. These
efforts have helped millions of people in the areas of hunger
relief, education, cancer research and treatment, social justice
and programs for people with disabilities and veterans'
outreach.
Forward-Looking Statements, Non-GAAP
Measures and Identical Sales
This earnings report may include forward-looking statements
within the meaning of the federal securities laws. Forward-looking
statements contain information about future operating or financial
performance. Forward-looking statements are based on the Company's
current expectations and assumptions about market conditions and
our future operating performance which the Company believes to be
reasonable at this time. The Company's results may vary
significantly from quarter to quarter, and these expectations and
assumptions involve risks and uncertainties, including changes in
macroeconomic conditions and the Company's industry, failure to
achieve anticipated synergies and cost-savings, increased rates of
food price inflation or deflation and other factors, that could
cause actual results or events to be materially different from
those anticipated. These risks and uncertainties that could cause
actual results to differ materially from those expressed or implied
in the forward-looking statements include those related to the
COVID-19 pandemic, about which there are still many unknowns,
including the duration of the pandemic and the extent of its
impact. The Company undertakes no obligation to update or revise
any such statements as a result of new information, future events
or otherwise.
EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Net
Income Per Class A Common Share and the total Net Debt to Adjusted
EBITDA ratio (collectively, the "Non-GAAP Measures") are
performance measures that provide supplemental information the
Company believes is useful to analysts and investors to evaluate
its ongoing results of operations, when considered alongside other
GAAP measures such as net income, operating income, gross profit,
and net income per Class A common share. These Non-GAAP Measures
exclude the financial impact of items management does not consider
in assessing the Company's ongoing operating performance, and
thereby facilitate review of its operating performance on a
period-to-period basis. Other companies may have different capital
structures or different lease terms, and comparability to the
Company's results of operations may be impacted by the effects of
acquisition accounting on its depreciation and amortization. As a
result of the effects of these factors and factors specific to
other companies, the Company believes EBITDA, Adjusted EBITDA,
Adjusted Net Income and Adjusted Net Income Per Class A Common
Share provide helpful information to analysts and investors to
facilitate a comparison of its operating performance to that of
other companies. The Company also uses Adjusted EBITDA, as further
adjusted for additional items defined in its debt instruments, for
board of director and bank compliance reporting. The Company's
presentation of Non-GAAP Measures should not be construed as an
implication that its future results will be unaffected by unusual
or non-recurring items.
As used in this earnings release, the term "identical sales"
includes stores operating during the same period in both the
current fiscal year and the prior fiscal year, comparing sales on a
daily basis. Direct to consumer internet sales are included in
identical sales, and fuel sales are excluded from identical
sales.
Albertsons Companies, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Operations
(dollars in millions)
(unaudited)
16 weeks ended
June 20, 2020
June 15, 2019
Net sales and other revenue
$
22,751.6
$
18,738.4
Cost of sales
15,980.1
13,498.8
Gross profit
6,771.5
5,239.6
Selling and administrative
expenses
5,769.4
4,946.6
Loss (gain) on property dispositions
and impairment losses, net
30.3
(28.5
)
Operating income
971.8
321.5
Interest expense, net
180.6
225.2
Loss on debt extinguishment
—
42.7
Other expense (income), net
3.1
(11.1
)
Income before income taxes
788.1
64.7
Income tax expense
201.9
15.7
Net income
$
586.2
$
49.0
Net income per Class A common
share
Basic net income per Class A common
share
$
1.03
$
0.08
Diluted net income per Class A common
share
1.00
0.08
Weighted average Class A common shares
outstanding
Basic
568.0
579.2
Diluted
583.7
579.4
Margins
Gross profit
29.8
%
28.0
%
Selling and administrative
expenses
25.4
%
26.4
%
Store data
Number of stores at end of
quarter
2,252
2,268
Albertsons Companies, Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
(in millions)
(unaudited)
June 20, 2020
February 29, 2020
ASSETS
Current assets
Cash and cash equivalents
$
2,022.2
$
470.7
Receivables, net
530.0
525.3
Inventories, net
4,271.6
4,352.5
Other current assets
309.0
382.8
Total current assets
7,132.8
5,731.3
Property and equipment, net
9,103.7
9,211.9
Operating lease right-of-use assets
5,771.8
5,867.4
Intangible assets, net
2,085.5
2,087.2
Goodwill
1,183.3
1,183.3
Other assets
710.7
654.0
TOTAL ASSETS
$
25,987.8
$
24,735.1
LIABILITIES
Current liabilities
Accounts payable
$
3,399.8
$
2,891.1
Accrued salaries and wages
1,308.2
1,126.0
Current maturities of long-term debt and
finance lease obligations
219.1
221.4
Current maturities of operating lease
obligations
567.7
563.1
Other current liabilities
1,255.5
1,102.7
Total current liabilities
6,750.3
5,904.3
Long-term debt and finance lease
obligations
8,484.5
8,493.3
Long-term operating lease obligations
5,398.3
5,402.8
Deferred income taxes
561.5
613.8
Other long-term liabilities
1,999.2
2,042.8
Commitments and contingencies
Series A convertible preferred stock
310.7
—
Series A-1 convertible preferred stock
1,288.4
—
STOCKHOLDERS' EQUITY
Class A common stock
5.8
5.8
Additional paid-in capital
1,837.1
1,824.3
Treasury stock, at cost
(1,705.8
)
(25.8
)
Accumulated other comprehensive loss
(116.8
)
(118.5
)
Retained earnings
1,174.6
592.3
Total stockholders' equity
1,194.9
2,278.1
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
$
25,987.8
$
24,735.1
Albertsons Companies, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows
(in millions)
(unaudited)
16 weeks ended
June 20, 2020
June 15, 2019
Cash flows from operating
activities:
Net income
$
586.2
$
49.0
Adjustments to reconcile net income to net
cash provided by operating activities:
Loss (gain) on property dispositions and
impairment losses, net
30.3
(28.5
)
Depreciation and amortization
460.1
515.9
Operating lease right-of-use assets
amortization
176.4
162.7
LIFO expense
13.1
10.5
Deferred income tax
(51.2
)
2.8
Contributions to pension and
post-retirement benefit plans, net of (income) expense
(63.5
)
(8.1
)
Loss on interest rate swaps and commodity
hedges, net
24.5
0.3
Loss on debt extinguishment
—
42.7
Equity-based compensation expense
19.0
11.1
Other
(1.8
)
3.6
Changes in operating assets and
liabilities
Receivables, net
(4.7
)
88.7
Inventories, net
67.8
(63.0
)
Accounts payable, accrued salaries and
wages and other accrued liabilities
733.1
141.4
Operating lease liabilities
(98.7
)
(151.7
)
Self-insurance assets and liabilities
24.1
12.2
Other operating assets and liabilities
177.2
13.1
Net cash provided by operating
activities
2,091.9
802.7
Cash flows from investing
activities:
Payments for property, equipment and
intangibles, including payments for lease buyouts
(402.3
)
(362.1
)
Proceeds from sale of assets
6.7
73.4
Other
(3.8
)
(5.3
)
Net cash used in investing
activities
(399.4
)
(294.0
)
Cash flows from financing
activities:
Proceeds from issuance of long-term
debt
2,000.0
—
Payments on long-term borrowings
(2,001.4
)
(722.5
)
Payments of obligations under finance
leases
(14.1
)
(27.7
)
Proceeds from convertible preferred
stock
1,680.0
—
Third party issuance costs on convertible
preferred stock
(80.9
)
—
Treasury stock purchase, at cost
(1,680.0
)
—
Other
(10.5
)
(12.5
)
Net cash used in financing
activities
(106.9
)
(762.7
)
Net increase (decrease) in cash and
cash equivalents and restricted cash
1,585.6
(254.0
)
Cash and cash equivalents and
restricted cash at beginning of period
478.9
967.7
Cash and cash equivalents and
restricted cash at end of period
$
2,064.5
$
713.7
Albertsons Companies, Inc. and
Subsidiaries
Adjusted Net Income Per Class
A Common Share
(in millions, except per share
data)
The following tables reconcile Net income
to Adjusted net income, and Net income per Class A common share to
Adjusted net income per Class A common share:
16 weeks ended
June 20, 2020
June 15, 2019
Numerator:
Net income
$
586.2
$
49.0
Adjustments:
Loss on interest rate and commodity
hedges, net
24.5
0.3
Facility closure and related transition
costs
9.8
—
Acquisition and integration costs (1)
6.3
26.1
Equity based compensation expense
19.0
11.1
Net loss (gain) on property dispositions
and impairment losses, net
30.3
(28.5
)
LIFO expense
13.1
10.5
Discretionary COVID-19 pandemic related
costs (2)
89.9
—
Civil disruption related costs (3)
14.9
—
Transaction and reorganization costs
related to convertible preferred stock issuance and initial public
offering
20.3
—
Amortization of debt discount, deferred
financing costs and loss on debt extinguishment
6.5
51.1
Amortization of intangible assets
resulting from acquisitions
17.5
92.8
Miscellaneous adjustments (4)
34.1
8.8
Tax impact of adjustments to Adjusted net
income
(71.2
)
(44.6
)
Adjusted net income
$
801.2
$
176.6
Denominator:
Weighted average Class A common shares
outstanding - diluted
583.7
579.4
Adjustments:
Restricted stock units and awards (5)
8.2
9.5
Adjusted weighted average Class A common
shares outstanding - diluted
591.9
588.9
Adjusted net income per Class A common
share - diluted
$
1.35
$
0.30
16 weeks ended
June 20, 2020
June 15, 2019
Net income per Class A common share -
diluted
$
1.00
$
0.08
Non-GAAP adjustments (6)
0.37
0.22
Dilutive effect of incremental restricted
stock units and awards
(0.02
)
—
Adjusted net income per Class A common
share - diluted
$
1.35
$
0.30
(1)
Related to conversion activities and
related costs associated with integrating acquired businesses,
primarily the Safeway acquisition. Also includes expenses related
to acquisitions and expenses related to management fees paid
in connection with acquisition and financing activities.
(2)
Includes $53 million of charitable
contributions to our communities and hunger relief and $36.9
million in final reward payments to front-line associates at the
end of the first quarter of fiscal 2020.
(3)
Primarily includes costs related to store
damage, inventory losses and community support as a result of the
civil disruption during late May and early June in certain
markets.
(4)
Primarily includes lease adjustments
related to non-cash rent expense and costs incurred on leased
surplus properties, net realized and unrealized gains and losses
related to non-operating investments and adjustments for
unconsolidated equity investments.
(5)
Represents incremental unvested restricted
stock units and restricted stock awards to adjust the diluted
weighted average Class A common shares outstanding during each
respective quarter to the number of dilutive shares outstanding as
of the end of each respective quarter.
(6)
Reflects the per share impact of Non-GAAP
adjustments for each quarter. See the reconciliation of Net income
to Adjusted net income above for further details.
Albertsons Companies, Inc. and
Subsidiaries
Adjusted EBITDA
(in millions)
The following table is a reconciliation of
Net income to Adjusted EBITDA:
16 weeks ended
June 20, 2020
June 15, 2019
Net income
$
586.2
$
49.0
Depreciation and amortization
460.1
515.9
Interest expense, net
180.6
225.2
Income tax expense
201.9
15.7
EBITDA
1,428.8
805.8
Loss on interest rate and commodity
hedges, net
24.5
0.3
Facility closures and related transition
costs
9.8
—
Acquisition and integration costs (1)
6.3
26.1
Equity-based compensation expense
19.0
11.1
Loss on debt extinguishment
—
42.7
Loss (gain) on property dispositions and
impairment losses, net
30.3
(28.5
)
LIFO expense
13.1
10.5
Discretionary COVID-19 pandemic related
costs (2)
89.9
—
Civil disruption related costs (3)
14.9
—
Transaction and reorganization costs
related to convertible preferred stock issuance and initial public
offering
20.3
—
Miscellaneous adjustments (4)
34.1
8.8
Adjusted EBITDA
$
1,691.0
$
876.8
(1)
Related to conversion activities and
related costs associated with integrating acquired businesses,
primarily the Safeway acquisition. Also includes expenses related
to acquisitions and expenses related to management fees paid
in connection with acquisition and financing activities.
(2)
Includes $53.0 million of charitable
contributions to our communities and hunger relief and $36.9
million in final reward payments to front-line associates at the
end of the first quarter of fiscal 2020.
(3)
Primarily includes costs related to store
damage, inventory losses and community support as a result of civil
disruption during late May and early June in certain markets.
(4)
Primarily includes lease adjustments
related to non-cash rent expense and costs incurred on leased
surplus properties, net realized and unrealized gains and losses
related to non-operating investments and adjustments for
unconsolidated equity investments.
The following table is the total net debt
to Adjusted EBITDA ratio on a rolling four quarter basis:
June 20, 2020
June 15, 2019
Total debt (including finance leases and
excluding operating leases)
$
8,703.6
$
9,833.6
Cash and cash equivalents
2,022.2
662.1
Total debt net of cash
6,681.4
9,171.5
Rolling four quarters Adjusted EBITDA
$
3,648.6
$
2,802.3
Total net debt to Adjusted EBITDA
ratio
1.8
3.3
Albertsons Companies, Inc. and
Subsidiaries
Adjusted EBITDA
(in millions)
The following table is a reconciliation of
Net income to Adjusted EBITDA on a rolling four quarter basis:
Rolling four quarters
ended
June 20, 2020
June 15, 2019
Net income
$
1,003.6
$
197.8
Depreciation and amortization
1,635.5
1,718.1
Interest expense, net
653.4
801.4
Income tax expense (benefit)
319.0
(60.2
)
EBITDA
3,611.5
2,657.1
Loss on interest rate and commodity
hedges, net
74.8
0.3
Facility closures and related transition
costs
28.1
—
Integration costs (1)
19.6
134.0
Acquisition-related costs (2)
21.1
68.0
Equity-based compensation expense
40.7
45.4
Loss on debt extinguishment
68.7
51.4
Gain on property dispositions and
impairment losses, net (3)
(426.0
)
(153.5
)
LIFO expense
21.0
9.0
Discretionary COVID-19 pandemic related
costs (4)
89.9
—
Civil disruption related costs (5)
14.9
—
Transaction and reorganization costs
related to convertible preferred stock issuance and initial public
offering
24.0
—
Miscellaneous adjustments (6)
60.3
(9.4
)
Adjusted EBITDA
$
3,648.6
$
2,802.3
(1)
Related to conversion activities and
related costs associated with integrating acquired businesses,
primarily the Safeway acquisition.
(2)
Includes expenses related to acquisitions
(including the mutually terminated merger with Rite Aid Corporation
in fiscal 2018) and expenses related to management fees paid in
connection with acquisition and financing activities.
(3)
Primarily due to gains related to sale
leaseback transactions.
(4)
Includes $53 million of charitable
contributions to our communities and hunger relief and $36.9
million in final reward payments to front-line associates at the
end of the first quarter of fiscal 2020.
(5)
Primarily includes costs related to store
damage, inventory losses and community support as a result of civil
disruption during late May and early June in certain markets.
(6)
Primarily includes lease adjustments
related to non-cash rent expense and costs incurred on leased
surplus properties, net realized and unrealized gains and losses
related to non-operating investments and adjustments for
unconsolidated equity investments.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200727005158/en/
Melissa Plaisance melissa.plaisance@albertsons.com
925-226-5115
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