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Exhibit 99.1

 

 

For Immediate Release

  

 

Investor Contact: Dave Staples

  

Media Contact: Meredith Gremel

Executive Vice President & CFO

  

Director Corporate Affairs

(616) 878-8793

  

(616) 878-2830

 

SpartanNash Announces Third Quarter Fiscal Year 2014 Financial Results

Third Quarter EPS from Continuing Operations Exceeds Expectations at $0.45 per Diluted Share; Adjusted EPS from Continuing Operations of $0.46 per Diluted Share

Comparable Store Sales Increase 0.4%

Company Raises Fiscal 2014 Adjusted EPS Guidance to $1.75 to $1.80

GRAND RAPIDS, MICHIGAN – November 5, 2014 – SpartanNash Company (the “Company”) (Nasdaq: SPTN) today reported financial results for the 12-week third quarter ended October 4, 2014.

Third Quarter Results

Consolidated net sales for the third quarter increased 187.2 percent to $1.81 billion compared to $630.1 million last year, primarily due to $1.2 billion in sales generated as a result of the November 2013 merger with Nash Finch Company (“Nash Finch”).

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) for the quarter increased 103.6% percent to $55.9 million, or 3.1 percent of net sales, compared to $27.5 million, or 4.4 percent of net sales last year. Adjusted EBITDA is a non-Generally Accepted Accounting Principles (GAAP) financial measure.  Please see the financial tables at the end of this press release for a reconciliation of Adjusted EBITDA to net earnings, and a reconciliation of each non-GAAP financial measure to the most directly comparable measure prepared and presented in accordance with GAAP.  

Reported operating earnings increased 171.7 percent to $33.6 million compared to $12.4 million for the prior year quarter. The increase was primarily due to contributions from the merger with Nash Finch and lower expenses, primarily as a result of merger synergies, partially offset by higher LIFO expense and the impact of continued low center store inflation.  

Adjusted earnings from continuing operations for the third quarter were $17.2 million, or $0.46 per diluted share on approximately 37.8 million shares outstanding, compared to $9.3 million, or $0.43 per diluted share on approximately 22.0 million shares outstanding last year. For the third quarter of fiscal 2014, adjusted earnings from continuing operations excludes net after-tax charges of $0.01 per diluted share related to merger integration expenses, and net asset impairment and restructuring gains. For the prior year third quarter, adjusted earnings from continuing operations excluded net after-tax charges of $0.13 per diluted share, related to merger expenses and the favorable settlement of an unrecognized tax liability established in the prior year. Adjusted earnings from continuing operations is a non-GAAP operating financial measure. Reported earnings from continuing operations were $17.2 million, or $0.45 per diluted share, compared to $6.7 million, or $0.30 per diluted share, in the prior year quarter, primarily due to the factors previously mentioned.

“We are very pleased with our third quarter results,” stated Dennis Eidson, SpartanNash’s President and Chief Executive Officer. “Our team delivered strong earnings growth and positive comparable store sales, reflecting our efforts to provide the products and services that best fulfill the needs of our diverse customer base and the realization of synergies from the merger. The integration process is progressing well and we remain confident that we will exceed our previously announced cost-savings estimates. As we look to the remainder of 2014 and beyond, we are well positioned to leverage our expertise in food distribution and retail to develop impactful solutions for our customers and partners and to leverage our financial resources to take advantage of the growth opportunities in our industry.”

Gross profit margin for the third quarter was 14.4 percent compared to 20.7 percent in the prior year. The change in gross profit margin rate primarily reflects the change in segment mix of the Company’s operations due to the merger and the impact of higher LIFO expense, along with continued low center store inflation during the quarter.

1


 

Third quarter operating expenses would have been $227.7 million, or 12.6 percent of net sales, compared to $113.5 million, or 18.0 percent of net sales, in the same quarter last year, if the charges related to the merger, integration, and restructuring were excluded in both periods. The higher expenses were due to the inclusion of Nash Finch’s operations and the decrease in the rate to sales was due primarily to the change in mix of the Company’s segments and cost reduction efforts. Reported operating expenses were $227.8 million, or 12.6 percent of sales, compared to $118.1 million, or 18.7 percent of sales, in the third quarter last year.  

Operating Segments

In the third quarter of fiscal year 2014, the Company established its post-merger methodologies for the allocation of profit and corporate level expenses between its food distribution, retail and military reporting segments to better reflect Spartan Stores’ and the Nash Finch Company’s merged operations. There is no impact to consolidated financial results, but the operating segment results for the first and second quarters of fiscal 2014 and all quarters in fiscal year 2013 have been revised to reflect the new allocation methodologies.  A recap of the effects of the restatement of segment results for previous quarters will be included in the Company’s Form 10-Q for the third quarter of fiscal 2014.

Food Distribution Segment

Net sales for the food distribution segment increased 182.9 percent to $764.3 million in the third quarter from $270.2 million for the third quarter last year. The increase in sales was primarily due to $493.5 million in sales from Nash Finch being included in this year’s third quarter.

Third quarter adjusted operating earnings for the food distribution segment were $15.2 million, excluding $1.4 million of pre-tax merger integration expenses, compared to adjusted operating earnings of $6.0 million, excluding $4.6 million of pre-tax merger expenses, in the same period last year. The benefit from the sales volume of Nash Finch’s distribution operations was partially offset by higher LIFO expense and lower inflation-related gains. Adjusted operating earnings is a non-GAAP operating financial measure.  Reported operating earnings for the third quarter of fiscal year 2014 were $13.8 million compared to operating earnings of $1.4 million in the prior year third quarter.

Retail Segment

Net sales for the retail segment increased 45.0 percent to $521.7 million in the third quarter from $359.9 million for the third quarter last year, primarily due to $179.2 million in sales generated as a result of the merger and a 0.4 percent increase in comparable store sales, excluding fuel.  These gains were partially offset by $19.5 million in lower sales due to the closure of certain stores and lower retail fuel prices compared to the prior year.

Third quarter adjusted operating earnings for the retail segment were $12.9 million, excluding $1.3 million of the non-cash pre-tax asset impairment and restructuring gains, compared to adjusted operating earnings of $11.0 million in the same period last year. The improvement in adjusted operating earnings was primarily as a result of the store closures, as well as lower expenses due to cost reduction initiatives.  Reported operating earnings in the retail segment were $14.1 million compared to $11.0 million in the prior year quarter.  

During the third quarter, the Company completed two major remodels and opened one new store. Additionally, one supermarket was sold to a distribution customer and one underperforming supermarket was closed. SpartanNash ended the quarter with 165 corporate owned stores and 30 fuel centers.

Military Segment

Net sales for the Company’s military segment were $523.6 million and operating earnings were $5.7 million for the third quarter of fiscal 2014.

Balance Sheet and Cash Flow

Cash flow provided by operating activities for the year to date period was $117.4 million compared to $56.1 million for the comparable period last year.  The increase in cash provided was primarily the result of contributions from the merger.

As a result of the strong cash flow generation, the Company repurchased 121,000 shares of its common stock for a total expenditure of $2.5 million during the third quarter. As of October 4, 2014, the Company had $23.8 million available for future share repurchases under its $50.0 million repurchase program.

2


 

Net long-term debt (including current maturities and capital lease obligations and subtracting cash) for the Company was $548.8 million as of October 4, 2014 compared to $146.9 million at the end of the third quarter last year, due primarily to the incurrence of $436.1 million in debt as a result of the Nash Finch merger. Net long term debt decreased $47.6 million from $596.4 million at December 28, 2013. The Company’s total net long-term debt-to-capital ratio is 0.42-to-1.0 as of October 4, 2014.  Net long-term debt is a non-GAAP financial measure.  Long-term debt and capital lease obligations, including current maturities, was $556.9 million at October 4, 2014 compared to $152.4 million at October 12, 2013.

Outlook

Mr. Eidson continued, “Based on our strong third quarter performance and expectations for the remainder of the year, we are raising our adjusted earnings guidance for fiscal 2014 to a range of $1.75 to $1.80. Although the economic environment in some of our markets remains challenging, it appears to have stabilized and we are encouraged by our positive comparable store sales trend and pleased with the solid execution of both our operating plan and integration activities. During the fourth quarter, we will continue to introduce new merchandising, pricing and promotional programs to stores acquired in the merger with Nash Finch and will continue to expand our food distribution programs and services to the entire distribution network. We plan to complete three major remodels and re-banners and close two stores during the fourth quarter as part of the ongoing evaluation of our overall store base. As we move through the integration, we intend to further strengthen our strategic and competitive positions by increasing the operating efficiency of our business segments while improving the offering to our customers. Additionally, we will seek targeted acquisitions that will help us increase our scale, sales and cash flow. We remain committed to growing our business and creating value for our customers and shareholders.”

For the 13-week fourth quarter of fiscal 2014, the Company anticipates that net earnings from continuing operations per diluted share will be in the range of $0.39 to $0.44, excluding merger integration costs and any other one-time expenses. For comparative purposes, the Company's similarly adjusted earnings per diluted share were $0.31 for the comparable 11-week quarter of fiscal 2013, recast to the Company’s new fiscal year format, with approximately 7.6 million less in weighted average shares outstanding. For fiscal 2014, the Company is maintaining its previously issued guidance of consolidated net sales in the range of $7.90 billion to $8.04 billion and raising the low end of its Adjusted EBITDA to a range of $232.0 million to $239.0 million. The Company is also raising the range of adjusted earnings per share from continuing operations to approximately $1.75 to $1.80, excluding integration costs and other one-time expenses and gains.  

The Company expects capital expenditures for fiscal year 2014 to be in the range of $77.0 million to $82.0 million, net of anticipated sale leaseback proceeds related to a new store location, with depreciation and amortization in the range of $87.0 million to $89.0 million and total interest expense in the range of $24.0 million to $25.0 million.

As a reminder, the fiscal year ending January 3, 2015 will consist of 53 weeks with the fourth quarter comprised of 13 weeks.  Furthermore, the Company’s fiscal year end was changed from the last Saturday in March to the Saturday nearest to December 31, effective beginning with the transition period ended December 28, 2013. The prior year financial statements were recast to the new fiscal year format based upon the original fiscal period end dates.  As a result, the period end date for the prior year financial statements differs from the current year by one week and the comparable prior year will consist of 51 weeks with the fourth quarter comprised of 11 weeks.

Conference Call

A telephone conference call to discuss the Company’s third quarter of fiscal 2014 financial results is scheduled for 9:00 a.m. Eastern Time, Thursday, November 6, 2014.  A live webcast of this conference call will be available on the Company’s website, www.spartannash.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 SpartanNash

SpartanNash (SPTN) is the largest food distributor serving military commissaries and exchanges in the United States, in terms of revenue. The Company's core businesses include distributing food to military commissaries and exchanges and independent and corporate-owned retail stores located in 44 states and the District of Columbia, Europe, Cuba, Puerto Rico, the Azores, Bahrain and Egypt. SpartanNash currently operates 165 supermarkets, primarily under the banners of Family Fare Supermarkets, D&W Fresh Markets, Family Fresh, No Frills, Bag 'n Save, Sun Mart and Econofoods.

3


 

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 regarding the expected benefits of the merger and statements preceded by, followed by or that otherwise include the words “outlook,” “optimistic,” “committed,” “anticipates”, “appears” “believe,” “continue,” "expects," "look  to," “guidance,” “target,” “opportunities,” “confident” “position,” “taking steps,” “intend,” “seek”, or “plan” or similar expressions or that an event or trend “may,” "will" or is “likely to” occur, or is “beginning.” 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 combined company, and actual results may vary materially from the results and expectations discussed. Additional risks and uncertainties related to the merger include, but are not limited to, the successful integration of Spartan Stores' and Nash Finch's business and the combined company's ability to compete in the highly competitive grocery distribution and retail grocery industry. Additional information concerning these and other risks is contained in Spartan Stores' and Nash Finch's most recently filed Annual Reports on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K and other SEC filings. All subsequent written and oral forward-looking statements concerning SpartanNash, the merger, 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.

- More -

 

 

 

4


 

SPARTANNASH COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

(Unaudited)

 

 

12 Weeks Ended

 

 

40 Weeks Ended

 

 

October 4,

 

 

October 12,

 

 

October 4,

 

 

October 12,

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

Net sales

$

1,809,571

 

 

$

630,088

 

 

$

5,953,473

 

 

$

2,061,491

 

Cost of sales

 

1,548,162

 

 

 

499,627

 

 

 

5,079,612

 

 

 

1,625,890

 

Gross profit

 

261,409

 

 

 

130,461

 

 

 

873,861

 

 

 

435,601

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

207,739

 

 

 

103,747

 

 

 

705,040

 

 

 

345,814

 

Merger transaction and integration

 

1,379

 

 

 

4,634

 

 

 

8,128

 

 

 

7,011

 

Depreciation and amortization

 

19,951

 

 

 

9,708

 

 

 

66,921

 

 

 

31,926

 

Restructuring and asset impairment

 

(1,272

)

 

 

 

 

 

(67

)

 

 

2,220

 

Total operating expenses

 

227,797

 

 

 

118,089

 

 

 

780,022

 

 

 

386,971

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

 

33,612

 

 

 

12,372

 

 

 

93,839

 

 

 

48,630

 

Non-operating expense (income)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

5,467

 

 

 

2,205

 

 

 

18,416

 

 

 

7,832

 

Non-cash convertible debt interest

 

 

 

 

 

 

 

 

 

 

379

 

Debt extinguishment

 

 

 

 

 

 

 

 

 

 

2,762

 

Other, net

 

(1

)

 

 

(5

)

 

 

4

 

 

 

(20

)

Total non-operating expense, net

 

5,466

 

 

 

2,200

 

 

 

18,420

 

 

 

10,953

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before income taxes and discontinued operations

 

28,146

 

 

 

10,172

 

 

 

75,419

 

 

 

37,677

 

   Income taxes

 

10,977

 

 

 

3,513

 

 

 

28,336

 

 

 

14,050

 

Earnings from continuing operations

 

17,169

 

 

 

6,659

 

 

 

47,083

 

 

 

23,627

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from discontinued operations, net of taxes

 

(73

)

 

 

(88

)

 

 

(358

)

 

 

(428

)

Net earnings

$

17,096

 

 

$

6,571

 

 

$

46,725

 

 

$

23,199

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Earnings from continuing operations

 

0.46

 

 

 

0.30

 

 

 

1.25

 

 

 

1.08

 

   Loss from discontinued operations

 

(0.01

)

*

 

 

 

 

(0.01

)

 

 

(0.02

)

   Net earnings

 

0.45

 

 

 

0.30

 

 

 

1.24

 

 

 

1.06

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Earnings from continuing operations

$

0.45

 

 

$

0.30

 

 

$

1.25

 

 

$

1.08

 

   Loss from discontinued operations

 

 

 

 

 

 

 

(0.01

)

 

 

(0.02

)

   Net earnings

$

0.45

 

 

$

0.30

 

 

$

1.24

 

 

$

1.06

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Basic

 

37,717

 

 

 

21,876

 

 

 

37,678

 

 

 

21,820

 

   Diluted

 

37,778

 

 

 

21,969

 

 

 

37,749

 

 

 

21,908

 

*Includes rounding

 

 

 

5


 

SPARTANNASH COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

October 4, 2014

 

 

December 28, 2013

 

 

October 12, 2013

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

8,048

 

 

$

9,216

 

 

$

5,500

 

Accounts and notes receivable, net

 

305,433

 

 

 

285,393

 

 

 

60,247

 

Inventories, net

 

612,901

 

 

 

589,497

 

 

 

139,323

 

Prepaid expenses and other current assets

 

34,093

 

 

 

38,423

 

 

 

11,277

 

Deferred taxes on income

 

 

 

 

 

 

 

1,900

 

Property and equipment held for sale

 

11,013

 

 

 

440

 

 

 

 

Total current assets

 

971,488

 

 

 

922,969

 

 

 

218,247

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

596,294

 

 

 

628,482

 

 

 

270,701

 

Goodwill

 

297,352

 

 

 

299,186

 

 

 

246,437

 

Other assets, net

 

126,135

 

 

 

133,014

 

 

 

63,440

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

$

1,991,269

 

 

$

1,983,651

 

 

$

798,825

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

$

411,279

 

 

$

365,584

 

 

$

127,272

 

Accrued payroll and benefits

 

64,307

 

 

 

81,175

 

 

 

30,824

 

Other accrued expenses

 

43,851

 

 

 

51,992

 

 

 

26,583

 

Deferred income taxes

 

22,987

 

 

 

18,706

 

 

 

 

Current maturities of long-term debt and capital lease obligations

 

7,349

 

 

 

7,345

 

 

 

3,991

 

Total current liabilities

 

549,773

 

 

 

524,802

 

 

 

188,670

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term liabilities

 

 

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

91,602

 

 

 

86,750

 

 

 

80,833

 

Postretirement benefits

 

18,855

 

 

 

22,009

 

 

 

14,722

 

Other long-term liabilities

 

37,261

 

 

 

44,898

 

 

 

17,625

 

Long-term debt and capital lease obligations

 

549,530

 

 

 

598,319

 

 

 

148,400

 

Total long-term liabilities

 

697,248

 

 

 

751,976

 

 

 

261,580

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

 

 

 

 

 

Common stock, voting, no par value; 100,000 shares

     authorized; 37,625, 37,371 and 21,875 shares outstanding

 

521,875

 

 

 

518,056

 

 

 

147,514

 

Preferred stock, no par value, 10,000

       shares authorized; no shares outstanding

 

 

 

 

 

 

 

 

Accumulated other comprehensive loss

 

(8,375

)

 

 

(8,794

)

 

 

(13,275

)

Retained earnings

 

230,748

 

 

 

197,611

 

 

 

214,336

 

Total shareholders’ equity

 

744,248

 

 

 

706,873

 

 

 

348,575

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

$

1,991,269

 

 

$

1,983,651

 

 

$

798,825

 

 

 

 

6


 

SPARTANNASH COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

40 Weeks Ended

 

 

October 4, 2014

 

 

October 12, 2013

 

Cash flows from operating activities

 

 

 

 

 

 

 

Net cash provided by operating activities

$

117,385

 

 

$

56,137

 

Net cash used in investing activities

 

(54,362

)

 

 

(29,764

)

Net cash used in financing activities

 

(63,912

)

 

 

(29,379

)

Net cash used in discontinued operations

 

(279

)

 

 

(454

)

Net decrease in cash and cash equivalents

 

(1,168

)

 

 

(3,460

)

Cash and cash equivalents at beginning of period

 

9,216

 

 

 

8,960

 

Cash and cash equivalents at end of period

$

8,048

 

 

$

5,500

 

 

 

 

7


 

SPARTANNASH COMPANY AND SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA

Table 1: Sales and Operating Earnings by Segment

(In thousands)

(Unaudited)

 

 

12 Weeks Ended

 

 

40 Weeks Ended

 

 

October 4, 2014

 

 

 

 

 

 

October 12, 2013

 

 

 

 

 

 

October 4, 2014

 

 

 

 

 

 

October 12, 2013

 

 

 

 

 

Military Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

523,553

 

 

 

28.9

%

 

$

 

 

 

0.0

%

 

$

1,710,122

 

 

 

28.7

%

 

$

 

 

 

0.0

%

Operating earnings

$

5,651

 

 

 

 

 

 

$

 

 

 

 

 

 

$

15,956

 

 

 

 

 

 

$

 

 

 

 

 

Food Distribution Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

764,288

 

 

 

42.3

%

 

$

270,195

 

 

 

42.9

%

 

$

2,503,216

 

 

 

42.1

%

 

$

878,791

 

 

 

42.6

%

Operating earnings

$

13,834

 

 

 

 

 

 

$

1,366

 

 

 

 

 

 

$

38,713

 

 

 

 

 

 

$

15,519

 

 

 

 

 

Retail Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

521,730

 

 

 

28.8

%

 

$

359,893

 

 

 

57.1

%

 

$

1,740,135

 

 

 

29.2

%

 

$

1,182,700

 

 

 

57.4

%

Operating earnings

$

14,127

 

 

 

 

 

 

$

11,006

 

 

 

 

 

 

$

39,170

 

 

 

 

 

 

$

33,111

 

 

 

 

 

Total:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

1,809,571

 

 

 

100.0

%

 

$

630,088

 

 

 

100.0

%

 

$

5,953,473

 

 

 

100.0

%

 

$

2,061,491

 

 

 

100.0

%

Operating earnings

$

33,612

 

 

 

 

 

 

$

12,372

 

 

 

 

 

 

$

93,839

 

 

 

 

 

 

$

48,630

 

 

 

 

 

 

Notes: In the third quarter of fiscal year 2014, the Company established its post-merger methodologies for the allocation of profit and corporate level expenses between its food distribution, retail and military reporting segments to better reflect Spartan Stores’ and the Nash Finch Company’s merged operations. There is no impact to consolidated financial results, but the operating segment results for the first and second quarters of fiscal 2014 and all quarters in fiscal year 2013 have been revised to reflect the new allocation methodologies.  A recap of the effects of the restatement of segment results for previous quarters will be included in the Company’s Form 10-Q for the third quarter of fiscal 2014.

 

8


 

Table 2: Reconciliation of Net Earnings to Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization

(Adjusted EBITDA)

(A Non-GAAP Financial Measure)

(Unaudited)

(In thousands)

 

 

12 Weeks Ended

 

 

40 Weeks Ended

 

(In thousands)

October 4, 2014

 

 

October 12, 2013

 

 

October 4, 2014

 

 

October 12, 2013

 

Net earnings

$

17,096

 

 

$

6,571

 

 

$

46,725

 

 

$

23,199

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued operations

 

73

 

 

 

88

 

 

 

358

 

 

 

428

 

Income taxes

 

10,977

 

 

 

3,513

 

 

 

28,336

 

 

 

14,050

 

Interest expense

 

5,467

 

 

 

2,205

 

 

 

18,416

 

 

 

8,211

 

Debt extinguishment

 

-

 

 

 

-

 

 

 

-

 

 

 

2,762

 

Non-operating expense (income)

 

(1

)

 

 

(5

)

 

 

4

 

 

 

(20

)

Operating earnings

 

33,612

 

 

 

12,372

 

 

 

93,839

 

 

 

48,630

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIFO expense

 

1,550

 

 

 

167

 

 

 

5,077

 

 

 

413

 

Depreciation and amortization

 

19,951

 

 

 

9,708

 

 

 

66,921

 

 

 

31,926

 

Restructuring and asset impairment (gains) charges

 

(1,272

)

 

 

-

 

 

 

(67

)

 

 

2,220

 

Expenses related to merger transaction and integration

 

1,379

 

 

 

4,634

 

 

 

8,128

 

 

 

7,011

 

Non-cash stock compensation and other

 

691

 

 

 

577

 

 

 

5,205

 

 

 

2,285

 

Adjusted EBITDA

$

55,911

 

 

$

27,458

 

 

$

179,103

 

 

$

92,485

 

 

Reconciliation of operating earnings to adjusted EBITDA by segment:

 

Military:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

$

5,651

 

 

$

-

 

 

$

15,956

 

 

$

-

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIFO expense

 

359

 

 

 

-

 

 

 

1,192

 

 

 

-

 

Depreciation and amortization

 

2,751

 

 

 

-

 

 

 

8,580

 

 

 

-

 

Expenses related to merger transaction and integration

 

3

 

 

 

-

 

 

 

27

 

 

 

-

 

Non-cash stock compensation and other

 

4

 

 

 

-

 

 

 

(55

)

 

 

-

 

Adjusted EBITDA

$

8,768

 

 

$

-

 

 

$

25,700

 

 

$

-

 

Food Distribution:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

$

13,834

 

 

$

1,366

 

 

$

38,713

 

 

$

15,519

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIFO expense (income)

 

794

 

 

 

(5

)

 

 

2,551

 

 

 

(199

)

Depreciation and amortization

 

6,931

 

 

 

1,573

 

 

 

23,105

 

 

 

5,269

 

Restructuring and asset impairment charges

 

-

 

 

 

-

 

 

 

1,029

 

 

 

-

 

Expenses related to merger transaction and integration

 

1,375

 

 

 

4,634

 

 

 

8,097

 

 

 

7,011

 

Non-cash stock compensation and other

 

467

 

 

 

334

 

 

 

3,476

 

 

 

1,284

 

Adjusted EBITDA

$

23,401

 

 

$

7,902

 

 

$

76,971

 

 

$

28,884

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

$

14,127

 

 

$

11,006

 

 

$

39,170

 

 

$

33,111

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIFO expense

 

397

 

 

 

172

 

 

 

1,334

 

 

 

612

 

Depreciation and amortization

 

10,269

 

 

 

8,135

 

 

 

35,236

 

 

 

26,657

 

Restructuring and asset impairment  (gains) charges

 

(1,272

)

 

 

-

 

 

 

(1,096

)

 

 

2,220

 

Expenses related to merger transaction and integration

 

1

 

 

 

-

 

 

 

4

 

 

 

-

 

Non-cash stock compensation and other

 

220

 

 

 

243

 

 

 

1,784

 

 

 

1,001

 

Adjusted EBITDA

$

23,742

 

 

$

19,556

 

 

$

76,432

 

 

$

63,601

 

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 SpartanNash 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.

9


 

We believe that adjusted EBITDA provides a meaningful representation of our operating performance for SpartanNash 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 our military, food distribution and retail 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 and adjusted EBITDA by segment are performance measures 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.

 

 

 

10


 

Table 3: Reconciliation of Operating Earnings to Adjusted Operating Earnings

(A Non-GAAP Financial Measure)

(Unaudited)

(In thousands, except per share data)

 

 

12 Weeks Ended

 

 

40 Weeks Ended

 

 

October 4, 2014

 

 

October 12, 2013

 

 

October 4, 2014

 

 

October 12, 2013

 

Operating earnings

$

33,612

 

 

$

12,372

 

 

$

93,839

 

 

$

48,630

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset impairment and restructuring (gains) charges

 

(1,272

)

 

 

-

 

 

 

(67

)

 

 

2,220

 

Expenses related to merger transaction and integration

 

1,379

 

 

 

4,634

 

 

 

8,128

 

 

 

7,011

 

Adjusted operating earnings

$

33,719

 

 

$

17,006

 

 

$

101,900

 

 

$

57,861

 

 

Reconciliation of operating earnings to adjusted operating earnings by segment:

 

Military:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

$

5,651

 

 

$

-

 

 

$

15,956

 

 

$

-

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses related to merger transaction and integration

 

3

 

 

 

-

 

 

 

27

 

 

 

-

 

Adjusted operating earnings

$

5,654

 

 

$

-

 

 

$

15,983

 

 

$

-

 

Food Distribution:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

$

13,834

 

 

$

1,366

 

 

$

38,713

 

 

$

15,519

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset impairment and restructuring charges

 

-

 

 

 

-

 

 

 

1,029

 

 

 

-

 

Expenses related to merger transaction and integration

 

1,375

 

 

 

4,634

 

 

 

8,097

 

 

 

7,011

 

Adjusted operating earnings

$

15,209

 

 

$

6,000

 

 

$

47,839

 

 

$

22,530

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

$

14,127

 

 

$

11,006

 

 

$

39,170

 

 

$

33,111

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset impairment and restructuring (gains) charges

 

(1,272

)

 

 

-

 

 

 

(1,096

)

 

 

2,220

 

Expenses related to merger transaction and integration

 

1

 

 

 

-

 

 

 

4

 

 

 

-

 

Adjusted operating earnings

$

12,856

 

 

$

11,006

 

 

$

38,078

 

 

$

35,331

 

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.

The Company believes that adjusted operating earnings provide a meaningful representation of its operating performance for the Company. The Company considers adjusted operating earnings as an additional way to measure operating performance on an ongoing basis. Adjusted operating earnings is meant to reflect the ongoing operating performance of its military, food distribution and retail 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 operating earnings is a performance measure that management uses to allocate resources, assess performance against its peers and evaluate overall performance, the Company believes it provides useful information for investors. In addition, securities analysts, fund managers and other shareholders and stakeholders that communicate with the Company request its operating financial results in adjusted operating earnings format.

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.

 

 

 

 

 

 

 

 

 

 

 

11


 

Table 4: Reconciliation of Earnings from Continuing Operations to

Adjusted Earnings from Continuing Operations

(A Non-GAAP Financial Measure)

 

 

12 Weeks Ended

 

 

 

October 4, 2014

 

 

October 12, 2013

 

 

 

 

 

 

 

Earnings from

 

 

 

 

 

 

Earnings from

 

 

 

Earnings

 

 

continuing

 

 

Earnings

 

 

continuing

 

 

 

from

 

 

operations

 

 

from

 

 

operations

 

 

(Unaudited)

continuing

 

 

per diluted

 

 

continuing

 

 

per diluted

 

 

(In thousands, except per share data)

operations

 

 

share

 

 

operations

 

 

share

 

 

Earnings from continuing operations

$

17,169

 

 

$

0.45

 

 

$

6,659

 

 

$

0.30

 

 

Adjustments, net of taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring and asset impairment gains

 

(782

)

 

 

(0.02

)

 

 

-

 

 

 

-

 

 

Expenses related to merger transaction and integration

 

807

 

 

 

0.03

 

*

 

2,906

 

 

 

0.14

 

*

Favorable settlement of unrecognized tax liability

 

-

 

 

 

-

 

 

 

(238

)

 

 

(0.01

)

 

Adjusted earnings from continuing operations

$

17,194

 

 

$

0.46

 

 

$

9,327

 

 

$

0.43

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average diluted shares outstanding

 

37,778

 

 

 

 

 

 

 

21,969

 

 

 

 

 

 

* Includes rounding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40 Weeks Ended

 

 

 

October 4, 2014

 

 

October 12, 2013

 

 

 

 

 

 

 

Earnings from

 

 

 

 

 

 

Earnings from

 

 

 

Earnings

 

 

continuing

 

 

Earnings

 

 

continuing

 

 

 

from

 

 

operations

 

 

from

 

 

operations

 

 

(Unaudited)

continuing

 

 

per diluted

 

 

continuing

 

 

per diluted

 

 

(In thousands, except per share data)

operations

 

 

share

 

 

operations

 

 

share

 

 

Earnings from continuing operations

$

47,083

 

 

$

1.25

 

 

$

23,627

 

 

$

1.08

 

 

Adjustments, net of taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring and asset impairment (gains) charges

 

(41

)

 

 

(0.00

)

 

 

1,378

 

 

 

0.06

 

 

Debt extinguishment

 

-

 

 

 

-

 

 

 

1,715

 

 

 

0.08

 

 

Expenses related to merger transaction and integration

 

4,999

 

 

 

0.13

 

 

 

4,352

 

 

 

0.20

 

 

Favorable settlement of unrecognized tax liability

 

(595

)

 

 

(0.02

)

 

 

(238

)

 

 

(0.01

)

 

Adjusted earnings from continuing operations

$

51,446

 

 

$

1.36

 

 

$

30,834

 

 

$

1.41

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average diluted shares outstanding

 

37,749

 

 

 

 

 

 

 

21,908

 

 

 

 

 

 

* Includes rounding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes: Adjusted earnings from continuing operations is a non-GAAP operating financial measure that we define 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.

We believe that adjusted earnings from continuing operations provide a meaningful representation of our operating performance for the Company. We consider adjusted earnings from continuing operations as an additional way to measure operating performance on an ongoing basis. Adjusted earnings from continuing operations is meant to reflect the ongoing operating performance of our military, food distribution and retail 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. We believe that adjusted earnings from continuing operations provides useful information for our investors because it is a performance measure that management uses to allocate resources, assess performance against its peers and evaluate overall performance. In addition, securities analysts, fund managers and other shareholders and stakeholders that communicate with us request our operating financial results in adjusted earnings from continuing operations format.

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. Our definition of adjusted earnings from continuing operations may not be identical to similarly titled measures reported by other companies.

 

 

 

12


 

Table 5: 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)

 

 

October 4, 2014

 

 

December 28, 2013

 

 

October 12, 2013

 

Current maturities of long-term debt and capital lease obligations

$

7,349

 

 

$

7,345

 

 

$

3,991

 

Long-term debt and capital lease obligations

 

549,530

 

 

 

598,319

 

 

 

148,400

 

Total debt

 

556,879

 

 

 

605,664

 

 

 

152,391

 

Cash and cash equivalents

 

(8,048

)

 

 

(9,216

)

 

 

(5,500

)

Total net long-term debt

$

548,831

 

 

$

596,448

 

 

$

146,891

 

Notes: Total net 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.

 

 

 

13


 

Table 6: Projected Reconciliation of Net Earnings to Projected Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA)

(A Non-GAAP Financial Measure)

(Unaudited)

(In millions)

 

 

53 Weeks Ended January 3, 2015

 

 

Low

 

 

High

 

Net earnings

$

59.7

 

 

$

61.2

 

Add:

 

 

 

 

 

 

 

Discontinued operations

 

0.5

 

 

 

0.5

 

Income taxes

 

36.7

 

 

 

37.7

 

Interest expense

 

24.0

 

 

 

25.0

 

LIFO expense

 

6.6

 

 

 

7.5

 

Depreciation and amortization

 

87.0

 

 

 

89.0

 

Restructuring and asset impairment charges

 

-

 

 

 

-

 

Merger transaction and integration expenses

 

11.4

 

 

 

12.0

 

Non-cash stock compensation and other charges

 

6.1

 

 

 

6.1

 

Adjusted EBITDA

$

232.0

 

 

$

239.0

 

 

 

 

14


 

Table 7: 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)

 

 

13 Weeks Ended January 3, 2015

 

 

53 Weeks Ended January 3, 2015

 

 

Low

 

 

High

 

 

Low

 

 

High

 

Earnings from continuing operations

 

0.34

 

 

 

0.39

 

 

 

1.58

 

 

 

1.63

 

Adjustments, net of taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Expenses related to merger transaction and integration

 

0.05

 

 

 

0.05

 

 

 

0.19

 

 

 

0.19

 

   Favorable settlement of an unrecognized tax liability

 

-

 

 

 

-

 

 

 

(0.02

)

 

 

(0.02

)

Adjusted earnings from continuing operations

$

0.39

 

 

$

0.44

 

 

$

1.75

 

 

$

1.80

 

 

15