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8-K - FORM 8-K - SpartanNash Cod427716d8k.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 Second Quarter Fiscal 2013 Financial Results

Company Reports Second Quarter Earnings from Continuing Operations

per Diluted Share of $0.47 Versus $0.45 per Diluted Share in the Prior Year Period

GRAND RAPIDS, MICHIGAN – October 24, 2012 – Spartan Stores, Inc., (Nasdaq: SPTN) a leading regional grocery distributor and retailer, today reported financial results for its 12-week second quarter of fiscal 2013 ended September 15, 2012.

Second Quarter Results

Consolidated net sales for the 12-week second quarter increased 0.3 percent to $621.6 million compared to $619.6 million in the same period last year.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) for the quarter was $29.0 million, or 4.7 percent of net sales, compared to $31.1 million, or 5.0 percent of net sales last year.

Earnings from continuing operations for the second quarter of fiscal 2013 were $10.4 million, or $0.47 per diluted share, including an after-tax asset impairment charge of $0.2 million, or $0.01 per diluted share, and an after-tax benefit from the sale of assets of $0.4 million, or $0.02 per diluted share. For the second quarter of fiscal 2012, earnings from continuing operations were $10.3 million, or $0.45 per diluted share, including an after-tax charge for unusual corporate professional fees of $0.7 million, or $0.03 per diluted share.

“We continue to invest in the initiatives that are helping us to best deliver value and convenience to consumers in today’s challenging economy,” stated Dennis Eidson, Spartan’s President and Chief Executive Officer. “While the cost of these investments has had an impact on retail margins, our second quarter retail market share and volume results reflect the consumer’s acceptance of these initiatives, as well as, the growing momentum of our YES Rewards loyalty program.”


Gross profit margin for the second quarter of fiscal 2013 was 21.0 percent versus 21.4 percent in the same period last year. The decline in gross profit margin was due to reduced inflation-driven inventory gains in both the retail and distribution segments, investments associated with the second phase of our “Price Freeze” and “Yes Is Even More” promotional campaign in the retail segment, as well as, a higher mix of lower margin distribution and fuel sales.

Second quarter operating expenses were $111.3 million, or 17.9 percent of net sales, compared to $112.8 million, or 18.2 percent of net sales in the same period last year due to continued productivity improvements in the distribution segment, lower employee-related expenses compared to the prior year period and the impact of unusual corporate professional fees in the second quarter of the prior year. The Company’s expense leverage was partially offset by a non-cash pre-tax asset impairment charge of $0.4 million in the second quarter of fiscal 2013, compared to a restructuring benefit of $0.1 million recorded in the same period last year.

Distribution Segment

Net sales for the distribution segment increased to $259.2 million in the second quarter of fiscal 2013 from $256.2 million in the same period last year.

Second quarter fiscal 2013 operating earnings for the distribution segment were $10.8 million compared to $8.8 million in the same period last year. The increase in operating earnings is due mainly to the cycling of unusual corporate professional fees in the prior year period, as well as continued improvements in warehouse efficiency and lower employee-related expenses, partially offset by a lower gross profit margin due primarily to a continuation of reduced inflation-driven inventory gains.

Retail Segment

Net sales for the retail segment were $362.3 million in the second quarter of fiscal 2013 compared to $363.4 million in the same period last year. Comparable store sales, excluding fuel, were down 1.0 percent. As anticipated, second quarter sales were negatively affected by a one week shift in the quarter end date which resulted in less high volume summer sales days being included in this year’s second quarter. The calendar shift impacted comparable store sales by 70 basis points.

Second quarter fiscal 2013 operating earnings for the retail segment were $8.1 million compared to $11.2 million in the second quarter of fiscal 2012. The decrease in operating earnings was primarily due to higher promotional expenses, reduced inflation-driven inventory gains, lower fuel margins and the aforementioned asset impairment charge.

During the second quarter, the Company remodeled two stores and opened one new fuel center, ending the quarter with 97 stores and 29 fuel centers. The Company plans to complete two major remodels and open three new Valu Land locations during the second half of fiscal 2013.


Balance Sheet and Cash Flow

The Company generated cash flow provided by operating activities of $20.1 million for the second quarter ended September 15, 2012 compared to $35.7 million for the comparable period last year. The decrease was primarily due to the timing of working capital requirements and tax pre-payments related to a tax law change which will reverse over the remainder of fiscal 2013.

During the fiscal 2013 second quarter, the Company repurchased approximately 30,000 shares of its common stock for a total expenditure of $0.5 million. At of the end of the second quarter, the Company had approximately 50 percent of the authorized $50.0 million repurchase program available for future stock repurchases.

The Company had total net long-term debt (including current maturities and capital lease obligations and subtracting cash) of $147.5 million as of September 15, 2012 compared to $115.5 million as of September 10, 2011, due primarily to funding share repurchases, the timing of working capital requirements and tax pre-payments. As anticipated, the Company has lowered its total net long-term debt from $154.6 million at the end of the first quarter of fiscal 2013. The Company’s total net long-term debt-to-capital ratio is 0.31-to-1.0 for the second quarter of fiscal 2013 and the net long-term debt-to-Adjusted EBITDA ratio on an annual Adjusted EBITDA basis is 1.40-to-1.0.

The Company continues to believe that cash flow from operations and the $165.3 million of availability under its revolving credit facility will be sufficient to fund its operations and strategic growth initiatives for the remainder of fiscal 2013.

Outlook

Mr. Eidson continued, “Although we are seeing signs of improvement in the Michigan economic indices, the overall pace of recovery is slower than we had originally anticipated and the majority of our consumers are still highly price sensitive. We remain focused on all aspects of our business in order to drive sales and are encouraged by the initial benefits of our recent pricing and promotional efforts, as well as the new Valu Land store format. We will continue to make strategic promotional and capital investments to drive higher volumes, while focusing on improving profitability.”

For the remainder of fiscal 2013 comparable store sales are expected to trend favorably compared to the second quarter due to the Company’s promotional programs, store remodeling efforts and a shift in the calendar. Diluted earnings per share from continuing operations for the remainder of the year are expected to slightly exceed the prior year’s results, excluding the 53rd week last year and the previously disclosed items that are not expected to recur in this year’s fourth quarter. The net effect of these items in the prior year’s fourth quarter was a benefit of $0.05 to $0.06 per diluted share, predominately related to a LIFO credit, favorable incentive compensation expenses and occupancy costs.

The Company reiterates its previous guidance for 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 and total interest expense in the range of $13.0 to $14.0 million.


Conference Call

A telephone conference call to discuss the Company’s second quarter of fiscal 2013 financial results is scheduled for 9:00 a.m. Eastern Time, Thursday, October 25, 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 “initiatives”, “guidance”, “priority”, “trend”, “outlook”, “position”, “momentum”, 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. 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, our loyalty program, 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

(In thousands, except per share data)

(Unaudited)

 

     12 Weeks Ended     24 Weeks Ended  
     September 15,
2012
    September 10,
2011
    September 15,
2012
    September 10,
2011
 

Net sales

   $ 621,559      $ 619,647      $ 1,225,471      $ 1,222,211   

Cost of sales

     491,333        486,910        973,525        964,137   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     130,226        132,737        251,946        258,074   

Operating expenses

        

Selling, general and administrative

     102,117        104,483        203,454        207,457   

Depreciation and amortization

     8,805        8,408        17,475        16,775   

Restructuring, asset impairment and other

     356        (135     356        (135
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     111,278        112,756        221,285        224,097   

Operating earnings

     18,948        19,981        30,661        33,977   

Non-operating expense (income)

        

Interest expense

     2,150        2,530        4,387        4,876   

Non-cash convertible debt interest

     904        835        1,794        1,658   

Other, net

     (664     5        (674     8   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total non-operating expense, net

     2,390        3,370        5,498        6,542   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings before income taxes and discontinued operations

     16,558        16,611        25,163        27,435   

Income taxes

     6,203        6,341        8,732        11,030   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings from continuing operations

     10,355        10,270        16,431        16,405   

Loss from discontinued operations, net of taxes

     (50     (18     (123     (124
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

   $ 10,305      $ 10,252      $ 16,308      $ 16,281   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per share:

        

Earnings from continuing operations

   $ 0.48      $ 0.45      $ 0.75      $ 0.72   

Loss from discontinued operations

     (0.01 )*      —          —       (0.01
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

   $ 0.47      $ 0.45      $ 0.75      $ 0.71   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per share:

        

Earnings from continuing operations

   $ 0.47      $ 0.45      $ 0.75      $ 0.72   

Loss from discontinued operations

     —          —          —       (0.01
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

   $ 0.47      $ 0.45      $ 0.75      $ 0.71   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding:

        

Basic

     21,747        22,862        21,800        22,777   

Diluted

     21,824        22,962        21,880        22,872   

 

* Includes Rounding


SPARTAN STORES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

      September 15,
2012
    September 10,
2011
 

Assets

    

Current assets

    

Cash and cash equivalents

   $ 7,491      $ 62,080   

Accounts receivable, net

     59,719        60,026   

Inventories, net

     136,032        121,287   

Prepaid expenses

     10,606        8,466   

Other current assets

     10,896        1,537   

Property held for sale

     710        1,708   
  

 

 

   

 

 

 

Total current assets

     225,454        255,104   

Goodwill

     239,834        240,704   

Property and equipment, net

     261,552        243,545   

Other, net

     57,173        56,773   
  

 

 

   

 

 

 

Total assets

   $ 784,013      $ 796,126   
  

 

 

   

 

 

 

Liabilities and Shareholders’ Equity

    

Current liabilities

    

Accounts payable

   $ 128,803      $ 129,185   

Accrued payroll and benefits

     30,089        32,384   

Other accrued expenses

     17,611        14,580   

Current portion of restructuring costs

     3,271        4,101   

Current maturities of long-term debt and capital lease obligations

     4,185        4,249   
  

 

 

   

 

 

 

Total current liabilities

     183,959        184,499   

Long-term liabilities

    

Deferred taxes on income

     87,805        76,585   

Postretirement benefits

     13,521        14,321   

Other long-term liabilities

     14,975        17,118   

Restructuring costs

     6,313        8,908   

Long-term debt and capital lease obligations

     150,789        173,282   
  

 

 

   

 

 

 

Total long-term liabilities

     273,403        290,214   

Commitments and contingencies

    

Shareholders’ equity

    

Common stock, voting, no par value; 50,000 shares authorized; 21,754 and 22,215 shares outstanding

     145,289        164,648   

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

     —          —     

Accumulated other comprehensive loss

     (13,793     (12,981

Retained earnings

     195,155        169,746   
  

 

 

   

 

 

 

Total shareholders’ equity

     326,651        321,413   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 784,013      $ 796,126   
  

 

 

   

 

 

 


SPARTAN STORES, INC. AND SUBSIDIARIES CONDENSED

CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)

(Unaudited)

 

     12 Weeks Ended  
     September 15,
2012
    September 10,
2011
 

Cash flows from operating activities

    

Net cash provided by operating activities

   $ 20,083      $ 35,741   

Net cash (used in) investing activities

     (11,758     (11,055

Net cash (used in) financing activities

     (7,026     (211

Net cash provided by (used in) discontinued operations

     99        (108
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     1,398        24,367   

Cash and cash equivalents at beginning of period

     6,093        37,713   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 7,491      $ 62,080   
  

 

 

   

 

 

 

SPARTAN STORES, INC. AND SUBSIDIARIES SUPPLEMENTAL FINANCIAL DATA

(In thousands)

(Unaudited)

 

     12 Weeks Ended      24 Weeks Ended  
     September 15,
2012
     September 10,
2011
     September 15,
2012
     September 10,
2011
 

Retail Segment:

           

Net sales

   $ 362,317       $ 363,421       $ 707,881       $ 708,856   

Operating Earnings

   $ 8,099       $ 11,217       $ 11,990       $ 17,811   

Distribution Segment:

           

Net sales

   $ 259,242       $ 256,226       $ 517,590       $ 513,355   

Operating Earnings

   $ 10,849       $ 8,764       $ 18,671       $ 16,166   


SPARTAN STORES, INC. AND SUBSIDIARIES

RECONCILIATION OF NET EARNINGS TO ADJUSTED EARNINGS BEFORE INTEREST,

TAXES, DEPRECIATION AND AMORTIZATION (Adjusted EBITDA)

(Unaudited)

(In thousands)

 

     Second Quarter     Year-to-Date  
     Sept. 15,
2012
    Sept. 10,
2011
    Sept. 15,
2012
    Sept. 10,
2011
 

Net earnings

   $ 10,305      $ 10,252      $ 16,308      $ 16,281   

Add:

        

Discontinued operations

     50        18        123        124   

Income taxes

     6,203        6,341        8,732        11,030   

Interest expense, net

     3,071        3,412        6,227        6,654   

Non-operating expense

     (681     (42     (729     (112
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating earnings

     18,948        19,981        30,661        33,977   

Add:

        

Depreciation and amortization

     8,805        8,408        17,475        16,775   

LIFO expense

     590        869        1,380        1,527   

Restructuring and asset impairment costs

     356        (135     356        (135

Other unusual items

     —          1,194        —          1,194   

Non-cash stock compensation and other charges

     292        810        1,761        2,360   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 28,991      $ 31,127      $ 51,633      $ 55,698   
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of operating earnings to adjusted EBITDA by segment:

        

Retail:

        

Operating earnings

   $ 8,099      $ 11,217      $ 11,990      $ 17,811   

Add:

        

Depreciation and amortization

     6,833        6,432        13,544        12,886   

LIFO expense

     424        526        848        964   

Restructuring and asset impairment costs

     356        (98     356        (98

Non-cash stock compensation and other charges

     687        365        1,457        1,137   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 16,399      $ 18,442      $ 28,195      $ 32,700   
  

 

 

   

 

 

   

 

 

   

 

 

 

Distribution:

        

Operating earnings

   $ 10,849      $ 8,764      $ 18,671      $ 16,166   

Add:

        

Depreciation and amortization

     1,972        1,976        3,931        3,889   

LIFO expense

     166        343        532        563   

Restructuring and asset impairment costs

     —          (37     —          (37

Other unusual items

     —          1,194        —          1,194   

Non-cash stock compensation and other charges

     (395     445        304        1,223   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 12,592      $ 12,685      $ 23,438      $ 22,998   
  

 

 

   

 

 

   

 

 

   

 

 

 

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 to the extent deducted in the computation of Net Earnings.

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)

(In thousands)

(Unaudited)

 

     September 15,
2012
    March 31,
2012
    September 10,
2011
 

Current maturities of long-term debt and capital lease obligations

   $ 4,185      $ 4,449      $ 4,249   

Long-term debt and capital lease obligations

     150,789        133,565        173,282   
  

 

 

   

 

 

   

 

 

 

Total Debt

     154,974        138,014        177,531   

Cash and cash equivalents

     (7,491     (26,476     (62,080
  

 

 

   

 

 

   

 

 

 

Total net long-term debt

   $ 147,483      $ 111,538      $ 115,451   
  

 

 

   

 

 

   

 

 

 

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.