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8-K - Q2 2016 EARNINGS RELEASE - SpartanNash Cosptn-8k_20160817.htm

 

Exhibit 99.1

 

For Immediate Release

  

 

Investor Contact: Chris Meyers

  

Media Contact: Meredith Gremel

Executive Vice President & CFO

  

Vice President Corporate Affairs and Communications

(616) 878-8023

  

(616) 878-2830

 

 

 

SpartanNash Announces Second Quarter Fiscal Year 2016 Financial Results

 

Achieved 1.8% Increase in Net Sales in a Deflationary Environment

 

Reported Second Quarter EPS from Continuing Operations of $0.47 per Diluted Share; Adjusted Second Quarter EPS from Continuing Operations Improved Nine Percent to $0.58 per Diluted Share

 

GRAND RAPIDS, MICHIGAN – August 17, 2016 – SpartanNash Company (the “Company”) (Nasdaq: SPTN) today reported financial results for the 12-week second quarter and 28-week period ended July 16, 2016.

 

Second Quarter Results

Consolidated net sales for the 12-week second quarter increased to $1.83 billion from $1.80 billion in the prior year quarter, driven by increases in the food distribution and military segments.

Reported operating earnings were $32.6 million compared to $36.8 million for the prior year quarter primarily due to higher restructuring and asset impairment charges. Adjusted operating earnings improved $2.1 million to $39.3 million from $37.2 million for the prior year quarter due to lower operating expenses resulting from productivity and efficiency initiatives as well as the benefit from increased sales, partially offset by higher health care costs and expenses related to the start-up of new business.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) was $58.7 million, or 3.2 percent of net sales, compared to $58.5 million, or 3.3 percent of net sales in the prior year quarter. 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 net earnings to Adjusted EBITDA, and a reconciliation of each non-GAAP financial measure to the most directly comparable measure prepared and presented in accordance with GAAP.

Reported earnings from continuing operations for the second quarter were $17.6 million, or $0.47 per diluted share, compared to $20.3 million, or $0.54 per diluted share, in the prior year quarter. Adjusted earnings from continuing operations for the second quarter increased to $21.7 million, or $0.58 per diluted share, from $19.8 million, or $0.53 per diluted share, in the prior year quarter. Current year adjusted earnings from continuing operations exclude net after-tax charges of $0.11 per diluted share primarily related to asset impairment charges, restructuring activities associated with the Company’s warehouse rationalization plan, and ongoing merger integration activities. Prior year adjusted earnings from continuing operations excluded a net after-tax gain of $0.01 per diluted share related to a benefit associated with tax planning initiatives and net gains on sales of previously-closed stores, partially offset by expenses associated with merger integration activities. Adjusted earnings from continuing operations is a non-GAAP operating financial measure.

1


 

“We are generally pleased with our execution in the second quarter and the progress we have made operationally and strategically, particularly our ability to grow sales in a challenging operating environment,” stated Dennis Eidson, SpartanNash's President and Chief Executive Officer. “New business growth and operational efficiencies helped mitigate the impact of deflation on our bottom line. We are also encouraged by our diverse pipeline of sales opportunities and remain on track to achieve our financial objectives for the year. Additionally, we continue to take steps to position the company for growth by: enhancing our merchandising, pricing, and promotional strategies to drive greater customer engagement and improve the overall shopping experience; expanding our organic and private brand product offerings to provide our customers with quality products at affordable prices; investing in select retail markets; and improving operations and expense leverage through our supply chain optimization and merger integration efforts.”

Gross profit margin for the second quarter was 14.4 percent compared to 14.6 percent in the prior year quarter primarily due to changes in the mix of business operations, new business, and deflationary impacts.

Reported operating expenses for the second quarter were $230.1 million, or 12.6 percent of sales, compared to $225.2 million, or 12.5 percent of sales, in the prior year quarter. Second quarter operating expenses would have been $223.4 million, or 12.2 percent of net sales, compared to $224.9 million, or 12.5 percent of net sales in the prior year quarter, if restructuring, asset impairment, and merger integration charges were excluded from both periods and last year’s net gains on property sales and expenses related to tax planning initiatives were excluded. The decrease as a rate to sales would have been primarily due to lower: depreciation expense associated with fully depreciated assets; utility and occupancy costs; and various operating expenses resulting from productivity and efficiency initiatives, partially offset by higher health care costs.

Food Distribution Segment

Net sales for the food distribution segment increased to $820.3 million from $782.7 million in the prior year quarter primarily due to new business gains and growth of existing accounts.

Reported operating earnings for the food distribution segment were $19.2 million compared to $19.4 million in the prior year quarter. Second quarter adjusted operating earnings increased to $21.6 million from $18.5 million in the prior year quarter. The increase was due to improvements from new sales, supply chain optimization efforts, merger synergies and lower depreciation expense partially offset by higher health care costs.

Second quarter adjusted operating earnings exclude $2.4 million of net pre-tax charges consisting of restructuring charges related to the Company’s warehouse optimization plan and merger integration expenses. The prior year second quarter excludes $0.9 million of pre-tax gains related to a legal settlement, net of merger integration costs and professional fees associated with tax planning initiatives. Adjusted operating earnings is a non-GAAP operating financial measure.

Retail Segment

Net sales for the retail segment were $501.8 million in the second quarter compared to $516.1 million for the prior year quarter. The decrease was primarily attributable to a 3.0 percent decrease in comparable store sales, excluding fuel; $9.8 million in lower sales resulting from the closure of retail stores and fuel centers; and $4.1 million due to lower retail fuel prices compared to the prior year; partially offset by contributions from stores acquired in the second quarter of last year.

Comparable store sales reflect the continued challenging economic conditions in select geographies, retail price deflation and competitive store openings, particularly in the Company’s western region.

2


 

Reported operating earnings in the retail segment were $10.9 million compared to $13.5 million in the prior year quarter primarily due to asset impairment charges incurred in the current year. Adjusted operating earnings increased to $15.5 million from $14.7 million in the prior year quarter. Current year adjusted operating earnings exclude $4.6 million of pre-tax asset impairment and merger integration charges. The prior year second quarter excludes $1.2 million of pre-tax merger integration and acquisition costs and net gains on the sales of previously closed stores. The increase in adjusted operating earnings was primarily due to improved fuel margins and favorable rebate programs, partially offset by the lower comparable store sales volumes.

During the second quarter, the Company completed one remodel in Michigan and eight remodels in Omaha. Grand re-openings for the Omaha stores, which were re-bannered to Family Fare, were held the first week of the third quarter. SpartanNash ended the quarter with 160 Company-owned retail stores, 79 pharmacies, and 29 fuel centers.

Military Segment

Net sales for the Company's military segment increased to $505.4 million from $497.0 million in the prior year quarter. The increase was primarily due to new business gains associated with the distribution of fresh products, partially offset by continued lower sales at the Defense Commissary Agency (DeCA) operated commissaries.

Reported operating earnings for the military segment were $2.5 million compared to $3.9 million in the prior year quarter. The decrease was primarily due to the lack of inflationary gains, higher health care costs, and a shift in business mix. Second quarter adjusted operating earnings were $2.2 million compared to $4.0 million in the prior year period.

Balance Sheet and Cash Flow

Cash flow provided by operating activities for the year-to-date period was $54.7 million, compared to $123.4 million in the comparable period last year. The decrease was primarily due to changes in working capital, particularly around the timing of vendor and income tax payments and increased working capital requirements to support sales growth.

Long-term debt and capital lease obligations, including current maturities, were $492.5 million at July 16, 2016 compared to $486.8 million at January 2, 2016. Net long-term debt (including current maturities and capital lease obligations and subtracting cash) for the Company was $468.7 million as of July 16, 2016 compared to $464.1 million at January 2, 2016. The Company's total net long-term debt-to-capital ratio is 0.4-to-1.0 and net long-term debt to Adjusted EBITDA is 2.0-to-1.0 as of July 16, 2016. Net long-term debt is a non-GAAP financial measure.

3


 

Outlook

Mr. Eidson continued, “With current market headwinds and economic conditions likely to persist, particularly in our western geographic areas, we remain focused on operating our business with a disciplined approach. We will continue to implement our initiatives to enhance our merchandising, pricing and promotional strategies, including expanding our organic and private brand product offerings, improving our produce offering, and driving greater customer engagement through our loyalty program. We are excited about the initial roll out of Open Acres™, our new private brand for fresh products, as this will provide our consumers in both Company-owned and independent store locations with quality fresh products at a significant savings. Additionally, we recently completed eight remodels and re-banners to Family Fare in Omaha, Nebraska, improving our offering to the customer while highlighting our variety and value, especially as it relates to produce and private brand, and have been encouraged by the initial customer response. In our combined food distribution and military network, we consolidated our Statesboro, Georgia warehouse facility and continue to look for ways to optimize our supply chain. We also continue to see opportunities to drive new business and growth, including those within the alternative channel space, and we remain dedicated to offering solutions to complicated logistic issues. We will also proactively pursue financially and strategically attractive acquisition opportunities.”

Based on the first half results and outlook for the remainder of the year, the Company is maintaining its previously issued fiscal 2016 guidance of adjusted earnings per diluted share from continuing operations of approximately $2.07 to $2.18, excluding merger integration costs and other adjusted charges and gains, compared to $1.98 in the prior year. We anticipate that reported earnings from continuing operations will be in the range of approximately $1.66 to $1.77 per diluted share, compared to $1.67 in the prior year. The guidance is based on expectations for the second half of the year of sales growth in food distribution; continued contributions from new fresh business in the Company’s military division, which will lessen the volume impact of the poor performance at the DeCA operated commissaries; and slightly negative to flat comparable retail store sales, reflecting deflation and the competitive sales environment, partially offset by improvements resulting from capital investments, merchandising initiatives and the cycling of competitive openings. The Company anticipates that fourth quarter adjusted earnings per diluted share from continuing operations will be lower than the prior year due to the significant inflation-related benefit from LIFO realized in the fourth quarter of fiscal 2015 of approximately $0.07 per diluted share.

The Company continues to expect capital expenditures for fiscal year 2016 to be in the range of $72.0 million to $75.0 million, with depreciation and amortization of approximately $76.0 million to $78.0 million and total interest expense of approximately $18.0 to $20.0 million.

Conference Call

A telephone conference call to discuss the Company’s second quarter of fiscal 2016 financial results is scheduled for 9:00 a.m. Eastern Time, Thursday, August 18, 2016. A live webcast of this conference call will be available on the Company’s website, www.spartannash.com/webcasts. Simply click on “For Investors” and follow the links to the live webcast. The webcast will remain available for replay on the Company’s website for approximately ten days.

About SpartanNash

SpartanNash (SPTN) is a Fortune 400 company and the leading distributor serving U.S. military commissaries and exchanges in the world, in terms of revenue. The Company's core businesses include distributing grocery products to military commissaries and exchanges and independent and Company-owned retail stores located in 47 states and the District of Columbia, Europe, Cuba, Puerto Rico, Bahrain and Egypt. SpartanNash currently operates 160 supermarkets, primarily under the banners of Family Fare Supermarkets, Family Fresh Markets, D&W Fresh Markets, and Sun Mart.

4


 

Forward-Looking Statements

This press release contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These include statements preceded by, followed by or that otherwise include the words "outlook," "pipeline," "optimistic," "committed," "anticipates," "continue," "expects," "look forward," "guidance," "opportunities," "position," "focus," or "plan" or similar expressions or that an event or trend "will" 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 include, but are not limited to, the company's ability to compete in the highly competitive grocery distribution, retail grocery, and military distribution industries. Additional information concerning these and other risks is contained in SpartanNash’s most recently filed Annual Report on Form 10-K, recent Current Reports on Form 8-K and other SEC filings. All subsequent written and oral forward-looking statements concerning SpartanNash, 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 –

5


 

SPARTANNASH COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

(Unaudited)

 

12 Weeks Ended

 

 

28 Weeks Ended

 

 

 

July 16,

 

 

July 18,

 

 

July 16,

 

 

July 18,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

Net sales

$

 

1,827,562

 

 

$

 

1,795,864

 

 

$

 

4,106,332

 

 

$

 

4,108,547

 

 

Cost of sales

 

 

1,564,863

 

 

 

 

1,533,822

 

 

 

 

3,509,391

 

 

 

 

3,510,259

 

 

Gross profit

 

 

262,699

 

 

 

 

262,042

 

 

 

 

596,941

 

 

 

 

598,288

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

223,418

 

 

 

 

225,433

 

 

 

 

519,799

 

 

 

 

527,804

 

 

Merger integration and acquisition

 

 

913

 

 

 

 

151

 

 

 

 

1,810

 

 

 

 

2,835

 

 

Restructuring charges (gains) and asset impairment

 

 

5,748

 

 

 

 

(336

)

 

 

 

21,052

 

 

 

 

7,002

 

 

Total operating expenses

 

 

230,079

 

 

 

 

225,248

 

 

 

 

542,661

 

 

 

 

537,641

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

 

 

32,620

 

 

 

 

36,794

 

 

 

 

54,280

 

 

 

 

60,647

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (income) and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

4,437

 

 

 

 

4,894

 

 

 

 

10,260

 

 

 

 

11,644

 

 

Other, net

 

 

(120

)

 

 

 

(26

)

 

 

 

(270

)

 

 

 

(54

)

 

Total other expenses, net

 

 

4,317

 

 

 

 

4,868

 

 

 

 

9,990

 

 

 

 

11,590

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before income taxes and discontinued operations

 

 

28,303

 

 

 

 

31,926

 

 

 

 

44,290

 

 

 

 

49,057

 

 

Income taxes

 

 

10,743

 

 

 

 

11,619

 

 

 

 

16,770

 

 

 

 

18,303

 

 

Earnings from continuing operations

 

 

17,560

 

 

 

 

20,307

 

 

 

 

27,520

 

 

 

 

30,754

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from discontinued operations, net of taxes

 

 

(76

)

 

 

 

(46

)

 

 

 

(185

)

 

 

 

(166

)

 

Net earnings

$

 

17,484

 

 

$

 

20,261

 

 

$

 

27,335

 

 

$

 

30,588

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from continuing operations

$

 

0.47

 

 

$

 

0.54

 

 

$

 

0.73

 

 

$

 

0.82

 

 

Loss from discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.01

)

*

Net earnings

$

 

0.47

 

 

$

 

0.54

 

 

$

 

0.73

 

 

$

 

0.81

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from continuing operations

$

 

0.47

 

 

$

 

0.54

 

 

$

 

0.73

 

 

$

 

0.81

 

 

Loss from discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

$

 

0.47

 

 

$

 

0.54

 

 

$

 

0.73

 

 

$

 

0.81

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

37,475

 

 

 

 

37,584

 

 

 

 

37,483

 

 

 

 

37,644

 

 

Diluted

 

 

37,547

 

 

 

 

37,710

 

 

 

 

37,541

 

 

 

 

37,770

 

 

*Includes rounding

 

 

 

6


 

SPARTANNASH COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

July 16, 2016

 

 

July 18, 2015

 

Assets

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

 

23,816

 

 

$

 

13,085

 

Accounts and notes receivable, net

 

 

306,418

 

 

 

 

298,034

 

Inventories, net

 

 

536,299

 

 

 

 

552,327

 

Prepaid expenses and other current assets

 

 

28,862

 

 

 

 

21,678

 

Property and equipment held for sale

 

 

 

 

 

 

5,996

 

Total current assets

 

 

895,395

 

 

 

 

891,120

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

575,063

 

 

 

 

587,871

 

Goodwill

 

 

322,686

 

 

 

 

331,523

 

Other assets, net

 

 

130,719

 

 

 

 

112,864

 

 

 

 

 

 

 

 

 

 

 

Total assets

$

 

1,923,863

 

 

$

 

1,923,378

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Accounts payable

$

 

339,084

 

 

$

 

350,719

 

Accrued payroll and benefits

 

 

62,687

 

 

 

 

60,541

 

Other accrued expenses

 

 

42,788

 

 

 

 

45,705

 

Current maturities of long-term debt and capital lease obligations

 

 

19,106

 

 

 

 

21,669

 

Total current liabilities

 

 

463,665

 

 

 

 

478,634

 

 

 

 

 

 

 

 

 

 

 

Long-term liabilities

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

121,352

 

 

 

 

116,135

 

Postretirement benefits

 

 

16,061

 

 

 

 

17,022

 

Other long-term liabilities

 

 

45,519

 

 

 

 

39,379

 

Long-term debt and capital lease obligations

 

 

473,399

 

 

 

 

506,398

 

Total long-term liabilities

 

 

656,331

 

 

 

 

678,934

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

 

 

 

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

     authorized; 37,468 and 37,517 shares outstanding

 

 

518,702

 

 

 

 

518,615

 

Preferred stock, no par value, 10,000 shares

     authorized; no shares outstanding

 

 

 

 

 

 

 

Accumulated other comprehensive loss

 

 

(11,445

)

 

 

 

(11,359

)

Retained earnings

 

 

296,610

 

 

 

 

258,554

 

Total shareholders’ equity

 

 

803,867

 

 

 

 

765,810

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

$

 

1,923,863

 

 

$

 

1,923,378

 

 

 

 

7


 

SPARTANNASH COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited) 

 

28 Weeks Ended

 

 

July 16, 2016

 

 

July 18, 2015

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

$

 

54,665

 

 

$

 

123,355

 

Net cash used in investing activities

 

 

(35,528

)

 

 

 

(54,606

)

Net cash used in financing activities

 

 

(17,759

)

 

 

 

(52,725

)

Net cash used in discontinued operations

 

 

(281

)

 

 

 

(9,382

)

Net increase in cash and cash equivalents

 

 

1,097

 

 

 

 

6,642

 

Cash and cash equivalents at beginning of period

 

 

22,719

 

 

 

 

6,443

 

Cash and cash equivalents at end of period

$

 

23,816

 

 

$

 

13,085

 

 

 

 

 

SPARTANNASH COMPANY AND SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA

Table 1: Sales and Operating Earnings by Segment

(In thousands)

(Unaudited)

 

12 Weeks Ended

 

 

28 Weeks Ended

 

 

July 16, 2016

 

 

July 18, 2015

 

 

July 16, 2016

 

 

July 18, 2015

 

Military Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

 

505,418

 

 

27.6

%

 

$

 

497,047

 

 

27.7

%

 

$

 

1,179,941

 

 

28.7

%

 

$

 

1,196,441

 

 

29.1

%

Operating earnings

$

 

2,497

 

 

 

 

 

$

 

3,895

 

 

 

 

 

$

 

5,930

 

 

 

 

 

$

 

10,053

 

 

 

 

Food Distribution Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

 

820,328

 

 

44.9

%

 

$

 

782,743

 

 

43.6

%

 

$

 

1,811,465

 

 

44.1

%

 

$

 

1,769,178

 

 

43.1

%

Operating earnings

$

 

19,227

 

 

 

 

 

$

 

19,406

 

 

 

 

 

$

 

45,083

 

 

 

 

 

$

 

39,655

 

 

 

 

Retail Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

 

501,816

 

 

27.5

%

 

$

 

516,074

 

 

28.7

%

 

$

 

1,114,926

 

 

27.2

%

 

$

 

1,142,928

 

 

27.8

%

Operating earnings

$

 

10,896

 

 

 

 

 

$

 

13,493

 

 

 

 

 

$

 

3,267

 

 

 

 

 

$

 

10,939

 

 

 

 

Total:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

 

1,827,562

 

 

100.0

%

 

$

 

1,795,864

 

 

100.0

%

 

$

 

4,106,332

 

 

100.0

%

 

$

 

4,108,547

 

 

100.0

%

Operating earnings

$

 

32,620

 

 

 

 

 

$

 

36,794

 

 

 

 

 

$

 

54,280

 

 

 

 

 

$

 

60,647

 

 

 

 

 

 

8


 

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

(Adjusted EBITDA)

(A Non-GAAP Financial Measure)

(In thousands)

(Unaudited)

 

12 Weeks Ended

 

 

28 Weeks Ended

 

(In thousands)

July 16, 2016

 

 

July 18, 2015

 

 

July 16, 2016

 

 

July 18, 2015

 

Net earnings

$

 

17,484

 

 

$

 

20,261

 

 

$

 

27,335

 

 

$

 

30,588

 

Loss from discontinued operations, net of tax

 

 

76

 

 

 

 

46

 

 

 

 

185

 

 

 

 

166

 

Income taxes

 

 

10,743

 

 

 

 

11,619

 

 

 

 

16,770

 

 

 

 

18,303

 

Other expenses, net

 

 

4,317

 

 

 

 

4,868

 

 

 

 

9,990

 

 

 

 

11,590

 

Operating earnings

$

 

32,620

 

 

$

 

36,794

 

 

$

 

54,280

 

 

$

 

60,647

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIFO expense

 

 

1,059

 

 

 

 

1,294

 

 

 

 

2,471

 

 

 

 

3,017

 

Depreciation and amortization

 

 

17,635

 

 

 

 

19,453

 

 

 

 

41,004

 

 

 

 

45,238

 

Merger integration and acquisition expenses

 

 

913

 

 

 

 

151

 

 

 

 

1,810

 

 

 

 

2,835

 

Restructuring charges (gains) and asset impairment

 

 

5,748

 

 

 

 

(336

)

 

 

 

21,052

 

 

 

 

7,002

 

Fees and expenses related to tax planning strategies

 

 

 

 

 

 

569

 

 

 

 

 

 

 

 

569

 

Stock-based compensation

 

 

1,043

 

 

 

 

909

 

 

 

 

6,067

 

 

 

 

5,662

 

Other non-cash (gains) charges

 

 

(295

)

 

 

 

(285

)

 

 

 

76

 

 

 

 

(532

)

Adjusted EBITDA

$

 

58,723

 

 

$

 

58,549

 

 

$

 

126,760

 

 

$

 

124,438

 

Reconciliation of operating earnings to adjusted EBITDA by segment:

 

Military:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

$

 

2,497

 

 

$

 

3,895

 

 

$

 

5,930

 

 

$

 

10,053

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIFO expense

 

 

234

 

 

 

 

291

 

 

 

 

545

 

 

 

 

679

 

Depreciation and amortization

 

 

2,682

 

 

 

 

2,810

 

 

 

 

6,157

 

 

 

 

6,543

 

Merger integration and acquisition expenses

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

Restructuring gains and asset impairment

 

 

(291

)

 

 

 

 

 

 

 

(259

)

 

 

 

 

Fees and expenses related to tax planning strategies

 

 

 

 

 

 

75

 

 

 

 

 

 

 

 

75

 

Stock-based compensation

 

 

226

 

 

 

 

150

 

 

 

 

1,007

 

 

 

 

854

 

Other non-cash (gains) charges

 

 

(5

)

 

 

 

6

 

 

 

 

203

 

 

 

 

103

 

Adjusted EBITDA

$

 

5,343

 

 

$

 

7,227

 

 

$

 

13,584

 

 

$

 

18,307

 

Food Distribution:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

$

 

19,227

 

 

$

 

19,406

 

 

$

 

45,083

 

 

$

 

39,655

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIFO expense

 

 

551

 

 

 

 

669

 

 

 

 

1,288

 

 

 

 

1,559

 

Depreciation and amortization

 

 

4,827

 

 

 

 

6,169

 

 

 

 

11,297

 

 

 

 

14,705

 

Merger integration and acquisition expenses (benefit)

 

 

93

 

 

 

 

(1,151

)

 

 

 

561

 

 

 

 

1,036

 

Restructuring charges (gains) and asset impairment

 

 

2,308

 

 

 

 

3

 

 

 

 

4,541

 

 

 

 

(278

)

Fees and expenses related to tax planning strategies

 

 

 

 

 

 

282

 

 

 

 

 

 

 

 

282

 

Stock-based compensation

 

 

369

 

 

 

 

399

 

 

 

 

2,681

 

 

 

 

2,629

 

Other non-cash charges

 

 

25

 

 

 

 

6

 

 

 

 

201

 

 

 

 

41

 

Adjusted EBITDA

$

 

27,400

 

 

$

 

25,783

 

 

$

 

65,652

 

 

$

 

59,629

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

$

 

10,896

 

 

$

 

13,493

 

 

$

 

3,267

 

 

$

 

10,939

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIFO expense

 

 

274

 

 

 

 

334

 

 

 

 

638

 

 

 

 

779

 

Depreciation and amortization

 

 

10,126

 

 

 

 

10,474

 

 

 

 

23,550

 

 

 

 

23,990

 

Merger integration and acquisition expenses

 

 

820

 

 

 

 

1,302

 

 

 

 

1,248

 

 

 

 

1,799

 

Restructuring charges (gains) and asset impairment

 

 

3,731

 

 

 

 

(339

)

 

 

 

16,770

 

 

 

 

7,280

 

Fees and expenses related to tax planning strategies

 

 

 

 

 

 

212

 

 

 

 

 

 

 

 

212

 

Stock-based compensation

 

 

448

 

 

 

 

360

 

 

 

 

2,379

 

 

 

 

2,179

 

Other non-cash gains

 

 

(315

)

 

 

 

(297

)

 

 

 

(328

)

 

 

 

(676

)

Adjusted EBITDA

$

 

25,980

 

 

$

 

25,539

 

 

$

 

47,524

 

 

$

 

46,502

 

9


 

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

The Company believes that adjusted EBITDA provides a meaningful representation of its operating performance for the Company as a whole and for its operating segments. The Company considers 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 its 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, 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 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. The Company’s definition of adjusted EBITDA may not be identical to similarly titled measures reported by other companies.

 

Table 3: Reconciliation of Operating Earnings to Adjusted Operating Earnings

(A Non-GAAP Financial Measure)

(In thousands)

(Unaudited)

 

12 Weeks Ended

 

 

28 Weeks Ended

 

(In thousands)

July 16, 2016

 

 

July 18, 2015

 

 

July 16, 2016

 

 

July 18, 2015

 

Operating earnings

$

 

32,620

 

 

$

 

36,794

 

 

 

 

54,280

 

 

 

 

60,647

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger integration and acquisition expenses

 

 

913

 

 

 

 

151

 

 

 

 

1,810

 

 

 

 

2,835

 

Restructuring charges (gains) and asset impairment

 

 

5,748

 

 

 

 

(336

)

 

 

 

21,052

 

 

 

 

7,002

 

Fees and expenses related to tax planning strategies

 

 

 

 

 

 

569

 

 

 

 

 

 

 

 

569

 

Severance associated with cost reduction initiatives

 

 

11

 

 

 

 

 

 

 

 

690

 

 

 

 

 

Adjusted operating earnings

$

 

39,292

 

 

$

 

37,178

 

 

$

 

77,832

 

 

$

 

71,053

 

Reconciliation of operating earnings to adjusted operating earnings by segment:

 

Military:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

$

 

2,497

 

 

$

 

3,895

 

 

$

 

5,930

 

 

$

 

10,053

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger integration and acquisition expenses

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

Restructuring gains and asset impairment

 

 

(291

)

 

 

 

 

 

 

 

(259

)

 

 

 

 

Fees and expenses related to tax planning strategies

 

 

 

 

 

 

75

 

 

 

 

 

 

 

 

75

 

Severance associated with cost reduction initiatives

 

 

1

 

 

 

 

 

 

 

 

223

 

 

 

 

 

Adjusted operating earnings

$

 

2,207

 

 

$

 

3,970

 

 

$

 

5,895

 

 

$

 

10,128

 

Food Distribution:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

$

 

19,227

 

 

$

 

19,406

 

 

$

 

45,083

 

 

$

 

39,655

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger integration and acquisition expenses (benefit)

 

 

93

 

 

 

 

(1,151

)

 

 

 

561

 

 

 

 

1,036

 

Restructuring charges (gains) and asset impairment

 

 

2,308

 

 

 

 

3

 

 

 

 

4,541

 

 

 

 

(278

)

Fees and expenses related to tax planning strategies

 

 

 

 

 

 

282

 

 

 

 

 

 

 

 

282

 

Severance associated with cost reduction initiatives

 

 

 

 

 

 

 

 

 

 

206

 

 

 

 

 

Adjusted operating earnings

$

 

21,628

 

 

$

 

18,540

 

 

$

 

50,391

 

 

$

 

40,695

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

$

 

10,896

 

 

$

 

13,493

 

 

$

 

3,267

 

 

$

 

10,939

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger integration and acquisition expenses

 

 

820

 

 

 

 

1,302

 

 

 

 

1,248

 

 

 

 

1,799

 

Restructuring charges (gains) and asset impairment

 

 

3,731

 

 

 

 

(339

)

 

 

 

16,770

 

 

 

 

7,280

 

Fees and expenses related to tax planning strategies

 

 

 

 

 

 

212

 

 

 

 

 

 

 

 

212

 

Severance associated with cost reduction initiatives

 

 

10

 

 

 

 

 

 

 

 

261

 

 

 

 

 

Adjusted operating earnings

$

 

15,457

 

 

$

 

14,668

 

 

$

 

21,546

 

 

$

 

20,230

 

10


 

 

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 as a whole and for its operating segments. 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 all of its 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 and adjusted operating earnings by segment are performance measures 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)

(In thousands, except per share data)

(Unaudited)

 

12 Weeks Ended

 

 

 

July 16, 2016

 

 

July 18, 2015

 

 

 

 

 

 

 

 

Earnings from

 

 

 

 

 

 

 

Earnings from

 

 

 

Earnings

 

 

continuing

 

 

Earnings

 

 

continuing

 

 

 

from

 

 

operations

 

 

from

 

 

operations

 

 

 

continuing

 

 

per diluted

 

 

continuing

 

 

per diluted

 

 

(In thousands, except per share data)

operations

 

 

share

 

 

operations

 

 

share

 

 

Earnings from continuing operations

$

 

17,560

 

 

$

 

0.47

 

 

$

 

20,307

 

 

$

 

0.54

 

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger integration and acquisition expenses

 

 

913

 

 

 

 

 

 

 

 

 

151

 

 

 

 

 

 

 

Restructuring charges (gains) and asset impairment

 

 

5,748

 

 

 

 

 

 

 

 

 

(336

)

 

 

 

 

 

 

Fees and expenses related to tax planning strategies

 

 

 

 

 

 

 

 

 

 

 

569

 

 

 

 

 

 

 

Severance associated with cost reduction initiatives

 

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total adjustments

 

 

6,672

 

 

 

 

 

 

 

 

 

384

 

 

 

 

 

 

 

Tax planning strategies

 

 

 

 

 

 

 

 

 

 

 

(730

)

 

 

 

 

 

 

Income tax effect on adjustments

 

 

(2,525

)

 

 

 

 

 

 

 

 

(132

)

 

 

 

 

 

 

Total adjustments, net of taxes

 

 

4,147

 

 

 

 

0.11

 

 

 

 

(478

)

 

 

 

(0.01

)

 

Adjusted earnings from continuing operations

$

 

21,707

 

 

$

 

0.58

 

 

$

 

19,829

 

 

$

 

0.53

 

 

* Includes rounding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28 Weeks Ended

 

 

 

July 16, 2016

 

 

July 18, 2015

 

 

 

 

 

 

 

 

Earnings from

 

 

 

 

 

 

 

Earnings from

 

 

 

Earnings

 

 

continuing

 

 

Earnings

 

 

continuing

 

 

 

from

 

 

operations

 

 

from

 

 

operations

 

 

 

continuing

 

 

per diluted

 

 

continuing

 

 

per diluted

 

 

(In thousands, except per share data)

operations

 

 

share

 

 

operations

 

 

share

 

 

Earnings from continuing operations

$

 

27,520

 

 

$

 

0.73

 

 

$

 

30,754

 

 

$

 

0.81

 

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger integration and acquisition expenses

 

 

1,810

 

 

 

 

 

 

 

 

 

2,835

 

 

 

 

 

 

 

Restructuring charges and asset impairment

 

 

21,052

 

 

 

 

 

 

 

 

 

7,002

 

 

 

 

 

 

 

Fees and expenses related to tax planning strategies

 

 

 

 

 

 

 

 

 

 

 

569

 

 

 

 

 

 

 

Severance associated with cost reduction initiatives

 

 

690

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total adjustments

 

 

23,552

 

 

 

 

 

 

 

 

 

10,406

 

 

 

 

 

 

 

Tax planning strategies

 

 

 

 

 

 

 

 

 

 

 

(730

)

 

 

 

 

 

 

Income tax effect on adjustments

 

 

(8,953

)

 

 

 

 

 

 

 

 

(4,038

)

 

 

 

 

 

 

Total adjustments, net of taxes

 

 

14,599

 

 

 

 

0.39

 

 

 

 

5,638

 

 

 

 

0.15

 

 

Adjusted earnings from continuing operations

$

 

42,119

 

 

$

 

1.12

 

 

$

 

36,392

 

 

$

 

0.96

 

 

* Includes rounding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes: Adjusted earnings from continuing operations is a non-GAAP operating financial measure that the Company defines as earnings from continuing operations plus or minus adjustments for items that do not reflect the ongoing operating activities of the Company and costs associated with the closing of operational locations.

The Company believes that adjusted earnings from continuing operations provide a meaningful representation of its operating performance for the Company. The Company considers 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 all of its 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 earnings from continuing operations 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 earnings from continuing operations format.

12


 

Adjusted earnings from continuing operations is not a measure of performance under accounting principles generally accepted in the United States of America, and should not be considered as a substitute for net earnings, cash flows from operating activities and other income or cash flow statement data. The Company’s definition of adjusted earnings from continuing operations may not be identical to similarly titled measures reported by other companies.

 

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)

 

 

 

 

 

 

 

 

 

 

(In thousands)

July 16, 2016

 

 

January 2, 2016

 

Current maturities of long-term debt and capital lease obligations

$

 

19,106

 

 

$

 

19,003

 

Long-term debt and capital lease obligations

 

 

473,399

 

 

 

 

467,793

 

Total debt

 

 

492,505

 

 

 

 

486,796

 

Cash and cash equivalents

 

 

(23,816

)

 

 

 

(22,719

)

Total net long-term debt

$

 

468,689

 

 

$

 

464,077

 

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.

 

Table 6: 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)

 

52 Weeks Ending December 31, 2016

 

 

Low

 

 

High

 

Earnings from continuing operations

$

 

1.66

 

 

$

 

1.77

 

Adjustments, net of taxes:

 

 

 

 

 

 

 

 

 

   Restructuring and asset impairment

 

 

0.38

 

 

 

 

0.38

 

   Merger integration and acquisition

 

 

0.03

 

 

 

 

0.03

 

Adjusted earnings from continuing operations

$

 

2.07

 

 

$

 

2.18

 

 

13