Attached files

file filename
8-K - FORM 8-K - SpartanNash Cod387950d8k.htm

Exhibit 99.1

 

LOGO

 

For Immediate Release   
Investor Contact: Dave Staples    Media Contact: Jeanne Norcross
Executive Vice President & CFO    Vice President Corporate Affairs
(616) 878-8793    (616) 878-2830

Spartan Stores Announces First Quarter Fiscal Year 2013 Financial Results

Company Reports First Quarter of Fiscal 2013 Earnings from Continuing Operations of $6.1 Million, or $0.28 per Diluted Share

GRAND RAPIDS, MICHIGAN – August 1, 2012 – Spartan Stores, Inc., (Nasdaq:SPTN) a leading regional grocery distributor and retailer, today reported financial results for its 12-week first quarter of fiscal 2013 ended June 23, 2012.

First Quarter Results

Consolidated net sales for the 12-week first quarter increased 0.2 percent to $603.9 million compared to $602.6 million in the same period last year, as sales increased in both the distribution and retail segments.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) for the quarter was $22.6 million, or 3.8 percent of net sales, compared to $24.6 million, or 4.1 percent of net sales last year.

“We are pleased with our ability to improve the sales momentum in our retail segment, despite continuing to operate in a challenging environment during the first quarter,” stated Dennis Eidson, Spartan’s President and Chief Executive Officer. “We remain focused on tightly managing the controllable aspects of our business and believe the marketing and promotional efforts around our YES Rewards program will continue to enhance and emphasize our value offering to the consumer. Additionally, we remain committed to increasing the return to our shareholders, as demonstrated by the increase in our quarterly dividend and continued share repurchases.”

First quarter gross profit margin decreased 60 basis points to 20.2 percent from 20.8 percent in the same period last year. The decline in gross profit margin was due to lower margins in both business segments due to reduced inflation-driven inventory gains, the launch of the Company’s “Yes Is More” promotional campaign in the retail segment and market conditions in certain fresh departments, as well as, grand opening promotional expenses.

First quarter operating expenses were $110.0 million, or 18.2 percent of net sales, compared to $111.3 million, or 18.5 percent of net sales in the same period last year. The Company’s expense leverage was driven by productivity improvements in the distribution and retail segments, as well as lower employee incentive compensation expenses compared to the prior year period, offset by increased marketing and supply expenses associated with the “Yes Is More” promotional campaign and grand opening expenses associated with one new store, one relocated store and two remodeled stores.


Earnings from continuing operations for the first quarter of fiscal 2013 were $6.1 million, or $0.28 per diluted share, compared to $6.1 million, or $0.27 per diluted share in the first quarter of fiscal 2012. As a result of changes to the state of Michigan’s tax laws, the first quarter of fiscal 2013 includes a net after-tax benefit of $0.6 million, or $0.03 per diluted share, and the first quarter of fiscal 2012 includes a net after-tax charge of $0.5 million, or $0.02 per diluted share.

Distribution Segment

Net sales for the distribution segment were $258.3 million in the first quarter of fiscal 2013 compared to $257.1 million in the same period last year.

First quarter fiscal 2013 operating earnings for the distribution segment were $7.8 million compared to $7.4 million in the same period last year. The increase in operating earnings is due to lower employee incentive compensation expense and continued improvements in operating expense controls, partially offset by a lower gross profit margin due to reduced inflation-driven inventory gains.

Retail Segment

Net sales for the retail segment were $345.6 million in the first quarter of fiscal 2013 compared to $345.4 million in the same period last year. Comparable store sales, excluding fuel, were up 0.1 percent, a significant improvement in the run-rate due to the Company’s capital plan and the “Yes Is More” promotional program, as well as a favorable calendar shift.

First quarter fiscal 2013 operating earnings for the retail segment were $3.9 million compared to $6.6 million in the first quarter of fiscal 2012. The decrease in operating earnings was due to the launch of the “Yes Is More” promotional program and the grand openings of one new store, one relocated store and two remodeled stores. In addition, earnings were impacted by reduced inflation-driven inventory gains and market conditions in certain fresh departments, partially offset by lower employee incentive compensation and cost containment initiatives.

Balance Sheet and Cash Flow

Cash flow used in operating activities for the first quarter of 2013 was $19.2 million compared to cash flow provided by operating activities of $6.7 million for the first quarter of fiscal 2012. This decrease was primarily due to the timing of seasonal working capital requirements given that the first quarter ended one week closer to the July 4th holiday than last year and a $9.8 million tax payment related to the previously mentioned tax law change which will reverse over the remainder of fiscal 2013.

As previously announced, the Company continued to strengthen its financial position by amending its credit facility to increase operational flexibility, extend the maturity date to June 2017 and lower its interest expense by $0.4 million annually. In addition, the Company repurchased approximately 604,000 shares of its common stock in the first quarter of fiscal 2013 for a total expenditure of $10.9 million. As of the end of the first quarter, the Company had approximately 50 percent of the authorized $50.0 million repurchase program available for future stock repurchases. The Company also increased its dividend for the second consecutive year, to $0.32 on an annual basis, from $0.26, which represents a 23 percent increase.

The Company had total net long-term debt (including current maturities and capital lease obligations and subtracting cash) of $154.6 million as of June 23, 2012 versus $137.0 million at the end of the first quarter of fiscal 2012. The Company’s total net long-term debt-to-capital ratio is 0.33-to-1.0 for the


first quarter of fiscal 2013 and the net long-term debt-to-Adjusted EBITDA ratio on an annual Adjusted EBITDA basis is 1.44-to-1.0. The Company anticipates substantially reducing its net long-term borrowings from these levels over the remainder of fiscal 2013 due to the Company’s strong cash flow and the non-recurring nature of certain significant first quarter cash payments.

The Company believes that cash flow from operations and the approximately $155.0 million of availability under its revolving credit facility will be sufficient to fund its operations and strategic growth initiatives for fiscal 2013.

Outlook

Mr. Eidson continued, “While the economic environment in our markets remains challenging, we are pleased with the improvement in our comparable store sales trend, the solid execution of our operating plan and our ability to provide the brands, products and services that best deliver value to our consumer in today’s economy. We are encouraged by the sales performance of our latest Valu Land store and continue to work on opening three to five new Valu Land locations during the second half of fiscal 2013. As we look to the remainder of the year, we continue to expect the pace of the economic recovery to be slow although at a slower rate. We also expect lower inflation-related gains when compared to the prior year for the next couple of quarters. However, we expect the unfavorable impact to be lower in the second and third quarters of fiscal 2013 than we experienced in the first quarter.”

The Company expects that second quarter comparable store sales will be lower when compared to the first quarter of fiscal 2013 by 1.0 to 1.5 percent and earnings from continuing operations will be slightly below the prior year’s results. This expectation reflects the continued economic challenges, lower inflation-related gains and the calendar shift previously mentioned.

For the full year of fiscal 2013, the Company expects flat comparable store sales and anticipates that earnings per diluted share from continuing operations for fiscal 2013 will approximate fiscal year 2012 excluding the 53rd week last year.

The Company continues to expect capital expenditures for fiscal year 2013 to be in the range of $42.0 million to $44.0 million, with depreciation and amortization in the range of $39.0 million to $40.0 million. Following the amendment to the Company’s credit facility, the Company now expects total interest expense to approximate $13.0 to $14.0 million.

Conference Call

A telephone conference call to discuss the Company’s first quarter of fiscal 2013 financial results is scheduled for 9:00 a.m. Eastern Time, Thursday, August 2, 2012. A live webcast of this conference call will be available on the Company’s website, www.spartanstores.com. 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 Spartan Stores

Grand Rapids, Michigan-based Spartan Stores, Inc. (Nasdaq:SPTN) is the nation’s tenth largest grocery distributor with 1.4 million square feet of warehouse, distribution, and office space located in Grand Rapids, Michigan. The Company distributes more than 40,000 private and national brand products to approximately 375 independent grocery locations in Michigan, Indiana and Ohio, and to our 97 corporate owned stores located in Michigan, including Family Fare Supermarkets, Glen’s Markets, D&W Fresh Markets, VG’s Food and Pharmacy, and Valu Land.


Forward-Looking Statements

This press release contains forward-looking statements. Forward-looking statements are identifiable by words or phrases such as “priority”, “trend”, “outlook”, “position”, “opportunity”, “momentum”, “potential” or “strategy” ; that an event or trend “could”, “will” or “should” occur “begin” “remain” or “continue” or is “likely” or that Spartan Stores or its management “anticipates”, “believes”, “expects” or “plans” a particular result, or is “confident” or “optimistic” that a particular result will occur. Accounting estimates are inherently forward-looking. Our restructuring cost provisions are estimates and actual costs may be more or less than these estimates and differences may be material. These forward-looking statements are subject to a number of factors that could cause actual results to differ materially. Our ability to achieve the results stated in our “Outlook” discussion, successfully realize growth opportunities, expand our customer base, effectively implement and achieve the expected benefits of capital investments, our new retail banner and model, warehouse consolidation and store openings, successfully respond to the weak economic environment and changing consumer behavior, anticipate and successfully respond to openings of competitors’ stores, achieve expected sales, cash flows, operating efficiencies and earnings, implement plans, programs and strategies, reduce debt, and continue to pay dividends and repurchase shares is not certain and depends on many factors, not all of which are in our control. Additional information about the risk factors to which Spartan Stores is exposed and other factors that may adversely affect these forward-looking statements is contained in Spartan Stores’ reports and filings with the Securities and Exchange Commission. Other risk factors exist and new risk factors may emerge at any time. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as predictions of future results. Spartan Stores undertakes no obligation to update or revise any forward-looking statements to reflect developments or information obtained after the date of this press release.

- More -


SPARTAN STORES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF

EARNINGS

(Unaudited)

(In thousands, except per share amounts)

 

     12 Weeks (Year-to-Date) Ended  
     June 23, 2012     June 18, 2011  

Net sales

   $ 603,912      $ 602,564   

Cost of sales

     482,192        477,227   
  

 

 

   

 

 

 

Gross margin

     121,720        125,337   

Operating expenses

    

Selling, general and administrative

     101,337        102,974   

Depreciation and amortization

     8,670        8,367   
  

 

 

   

 

 

 

Total operating expenses

     110,007        111,341   

Operating earnings

     11,713        13,996   

Non-operating expense (income)

    

Interest expense

     2,266        2,419   

Non-cash convertible debt interest

     890        823   

Other, net

     (48     (70
  

 

 

   

 

 

 

Total non-operating expense, net

     3,108        3,172   
  

 

 

   

 

 

 

Earnings before income taxes and discontinued operations

     8,605        10,824   

Income taxes

     2,529        4,689   
  

 

 

   

 

 

 

Earnings from continuing operations

     6,076        6,135   

Income/(Loss) from discontinued operations, net of taxes

     (73     (106
  

 

 

   

 

 

 

Net earnings

   $ 6,003      $ 6,029   
  

 

 

   

 

 

 

Basic earnings per share:

    

Earnings from continuing operations

   $ 0.28      $ 0.27   

Loss from discontinued operations

     (0.01     —     
  

 

 

   

 

 

 

Net earnings

   $ 0.27      $ 0.27   
  

 

 

   

 

 

 

Diluted earnings per share:

    

Earnings from continuing operations

   $ 0.28      $ 0.27   

Loss from discontinued operations

     (0.01     (0.01
  

 

 

   

 

 

 

Net earnings

   $ 0.27      $ 0.26   
  

 

 

   

 

 

 

Weighted average shares outstanding:

    

Basic

     21,853        22,691   
  

 

 

   

 

 

 

Diluted

     21,939        22,777   
  

 

 

   

 

 

 


SPARTAN STORES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

 

     June 23, 2012     June 18, 2011  

ASSETS

    

Current assets

    

Cash and cash equivalents

   $ 6,093      $ 37,713   

Accounts receivable, net

     61,253        62,228   

Inventories

     132,435        132,476   

Prepaid expenses

     10,011        7,927   

Other current assets

     13,880        1,289   

Deferred taxes on income

     725        2,041   

Property and equipment held for sale

     1,708        1,708   
  

 

 

   

 

 

 

Total current assets

     226,105        245,382   

Other assets

    

Goodwill, net

     240,037        241,132   

Other, net

     61,310        56,781   
  

 

 

   

 

 

 

Total other assets

     301,347        297,913   

Property and equipment

    

Land and improvements

     22,087        21,569   

Buildings and improvements

     242,506        221,937   

Equipment

     288,820        308,908   
  

 

 

   

 

 

 

Total property and equipment

     553,413        552,414   

Less accumulated depreciation and amortization

     296,519        312,615   
  

 

 

   

 

 

 

Net property and equipment

     256,894        239,799   
  

 

 

   

 

 

 

Total assets

   $ 784,346      $ 783,094   
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

    

Current liabilities

    

Accounts payable

   $ 127,873      $ 129,737   

Accrued payroll and benefits

     32,146        30,035   

Other accrued expenses

     19,350        19,411   

Current portion of restructuring costs

     3,340        4,330   

Current maturities of long-term debt

     4,328        4,235   
  

 

 

   

 

 

 

Total current liabilities

     187,037        187,748   

Other long-term liabilities

     15,627        17,765   

Restructuring costs

     7,315        10,158   

Deferred taxes

     86,813        71,324   

Postretirement benefits

     13,590        14,635   

Long-term debt

     156,397        170,489   
  

 

 

   

 

 

 

Total long-term liabilities

     279,742        284,371   

Shareholders’ equity

    

Common stock, voting, no par value; authorized 50,000 shares; outstanding 21,774 and 22,837 shares

     153,848        172,672   

Preferred stock, no par value, authorized 10,000 shares; no shares outstanding

     —          —     

Deferred stock-based compensation

     (9,078     (9,593

Accumulated other comprehensive loss

     (13,793     (13,084

Retained earnings

     186,590        160,980   
  

 

 

   

 

 

 

Total shareholders’ equity

     317,567        310,975   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 784,346      $ 783,094   
  

 

 

   

 

 

 


SPARTAN STORES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED

STATEMENT OF CASH FLOWS

(Unaudited)

(In thousands)

 

     Year-to-Date  
     (12 weeks)
June 23, 2012
    (12 weeks)
June 18, 2011
 

Net cash (used in), provided by operating activitites

     (19,188   $ 6,722   

Net cash (used in) investing activities

     (6,596     (10,384

Net cash provided by, (used in) financing activities

     5,465        (2,251

Net cash (used in) discontinued operations

     (64     (198
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (20,383     (6,111

Cash and cash equivalents at beginning of period

     26,476        43,824   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 6,093      $ 37,713   
  

 

 

   

 

 

 

SPARTAN STORES, INC. AND SUBSIDIARIES SUPPLEMENTAL FINANCIAL DATA

(Unaudited)

(In thousands)

 

     Year-to-Date Ended  
     June 23, 2012      June 18, 2011  
     (12 weeks)      (12 weeks)  

Retail Segment:

     

Net Sales

   $ 345,564       $ 345,435   

Operating Earnings

   $ 3,891       $ 6,594   

Distribution Segment:

     

Net Sales

   $ 258,348       $ 257,129   

Operating Earnings

   $ 7,822       $ 7,402   


SPARTAN STORES, INC. AND SUBSIDIARIES

RECONCILIATION OF NET EARNINGS TO ADJUSTED EARNINGS BEFORE INTEREST,

TAXES, DEPRECIATION AND AMORTIZATION

(Unaudited)

(In thousands)

 

     Year-to-Date  
     June 23, 2012
(12 Weeks)
     June 18, 2011
(12 Weeks)
 

Consolidated:

     

Net earnings

   $ 6,003       $ 6,029   

Plus:

     

Discontinued operations

     73         106   

Income taxes

     2,529         4,689   

Non-operating expense

     3,108         3,172   
  

 

 

    

 

 

 

Operating earnings

   $ 11,713       $ 13,996   
  

 

 

    

 

 

 

Plus:

     

Depreciation and amortization

     8,670         8,367   

LIFO (income) expense

     790         658   

Non-cash stock compensation & other charges

     1,469         1,550   
  

 

 

    

 

 

 

Adjusted EBITDA

   $ 22,642       $ 24,571   
  

 

 

    

 

 

 

Retail Segment:

     

Operating Earnings

   $ 3,891       $ 6,594   

Plus:

     

Depreciation and amortization

     6,711         6,454   

LIFO expense

     424         438   

Non-cash stock compensation & other charges

     770         772   
  

 

 

    

 

 

 

Adjusted EBITDA

   $ 11,796       $ 14,258   
  

 

 

    

 

 

 

Distribution Segment:

     

Operating Earnings

   $ 7,822       $ 7,402   

Plus:

     

Depreciation and amortization

     1,959         1,913   

LIFO (income) expense

     366         220   

Non-cash stock compensation & other charges

     699         778   
  

 

 

    

 

 

 

Adjusted EBITDA

   $ 10,846       $ 10,313   
  

 

 

    

 

 

 

Notes: Consolidated Adjusted EBITDA is a non-GAAP operating financial measure that we define as net earnings from continuing operations plus depreciation and amortization, and other non-cash items including imputed interest, deferred (stock) compensation, the LIFO provision, as well as adjustments for unusual items that do not reflect the ongoing operating activities of the Company and costs associated with the closing of operational locations, interest expense and the provision for income taxes.

We believe that Adjusted EBITDA provides a meaningful representation of our operating performance for the Company as a whole and for our operating segments. We consider Adjusted EBITDA as an additional way to measure operating performance on an ongoing basis. Adjusted EBITDA is meant to reflect the ongoing operating performance of all of our retail stores and wholesale operations; consequently, it excludes the impact of items that could be considered “non-operating” or “non-core” in nature, and also excludes the contributions of activities classified as discontinued operations. Because Adjusted EBITDA is a performance measure that management uses to allocate resources, assess performance against its peers


and evaluate overall performance, we believe it provides useful information for our investors. In addition, securities analysts, fund managers and other shareholders and stakeholders that communicate with us request our operating financial results in Adjusted EBITDA format.

Adjusted EBITDA 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. Our definition of Adjusted EBITDA may not be identical to similarly titled measures reported by other companies.

SPARTAN STORES, INC. AND SUBSIDIARIES RECONCILIATION OF LONG-TERM

DEBT AND CAPITAL LEASE OBLIGATIONS TO TOTAL NET LONG TERM DEBT AND

CAPITAL LEASE OBLIGATIONS

(A NON-GAAP FINANCIAL MEASURE)

(Unaudited)

(In thousands)

 

     June 23, 2012     June 18, 2011  

Current maturities of long-term debt and capital lease obligations

   $ 4,328      $ 4,235   

Long-term debt and capital lease obligations

     156,397        170,489   
  

 

 

   

 

 

 

Total Debt

     160,725        174,724   

Cash and cash equivalents

     (6,093     (37,713
  

 

 

   

 

 

 

Total net long-term debt

   $ 154,632      $ 137,011   
  

 

 

   

 

 

 

Notes: Total net long-term debt is a non-GAAP financial measure that is defined as long-term debt and capital lease obligations plus current maturities of long-term debt and capital lease obligations less cash and cash equivalents. The Company believes 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.