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SpartanNash Announces First Quarter Fiscal 2021 Financial Results

Re-affirms Full Year Total Company Outlook

Plans Launch of Supply Chain Transformation Initiative

SpartanNash Company (the “Company”) (Nasdaq: SPTN) today reported financial results for its 16-week first quarter ended April 24, 2021.

First Quarter Fiscal 2021 Highlights

  • Net sales of $2.66 billion, declined 7.0% from the prior year quarter net sales of $2.86 billion, due to the prior year’s increased consumer demand related to the COVID-19 pandemic.
  • Retail comparable store sales declined 7.0% for the quarter. Comparable store sales increased by 9.3% on a two-year basis, representing a continuation of the trend experienced through the end of fiscal 2020.
  • EPS was $0.54 per share and adjusted EPS was $0.56 per share.
  • Adjusted EBITDA was $64.8 million, compared to $74.0 million in the prior year quarter.
  • Announced key additions to the leadership team during the quarter, including Jason Monaco as EVP and Chief Financial Officer; Masiar Tayebi as EVP and Chief Strategy Officer; and David Petko as SVP and Chief Supply Chain Officer.
  • Re-affirms full year total Company fiscal 2021 outlook, initially provided on Feb. 24, 2021. EPS expected to range from $1.48 to $1.67 per diluted share, with adjusted EPS ranging from $1.65 to $1.80 per diluted share, and adjusted EBITDA ranging from $195 to $210 million. Increases Retail comparable sales expectations for 2021.
  • The Company is in the planning phase of a supply chain improvement initiative, commencing in the second quarter. The initiative will be focused on executing sustained improvements to supply chain operations across the Company’s network.

“While this was a transitional quarter for SpartanNash, our overall profitability was consistent with our expectations to start the year,” said SpartanNash President and CEO Tony Sarsam. “We made meaningful progress against our key initiatives for 2021, including improvements in gross margin, service levels, our OwnBrands offering and associate safety and retention. Our recent and planned investments in our supply chain processes and leadership team will drive future efficiency, support our growth and enhance our People First culture.”

Consolidated Financial Results

Consolidated net sales for the first quarter decreased $198.7 million, or 7.0%, to $2.66 billion from $2.86 billion in the prior year quarter. The decrease in net sales was due to favorable prior year sales, attributable to increased consumer demand related to the COVID-19 pandemic in all segments. This decline was partly offset by continued growth with certain existing Food Distribution customers. Domestic base access and commissary shopping restrictions associated with COVID-19 continued to impact the Military segment.

Gross profit for the first quarter was $418.0 million, or 15.7% of net sales, compared to $423.6 million, or 14.8% of net sales, in the prior year quarter. Gross profit rate growth was driven by improvements in all three segments, as well as an increase in the proportion of margin accretive Food Distribution and Retail segment sales.

Reported operating expenses for the first quarter were $387.8 million, or 14.6% of net sales, compared to $401.5 million, or 14.1% of net sales, in the prior year quarter. The increase in expenses as a rate of sales compared to the prior year quarter was due to a higher rate of supply chain expenses in the Food Distribution and Military segments, cycling prior year labor rate leverage in the Retail segment, and increases in corporate administrative expenses. These increases in expense rates were partially offset by lower restructuring, severance charges and incentive compensation expense compared to the prior year quarter.

The Company reported operating earnings of $30.2 million, compared to $22.0 million in the prior year quarter, due to the changes in net sales, gross profit and operating expenses discussed above. Adjusted operating earnings(1) were $30.9 million compared to $40.2 million in the prior year quarter and were adjusted for the items detailed in Table 3.

Interest expense decreased $3.0 million from the prior year quarter due to the Company’s paydown of long-term debt resulting from free cash flow(4) over the past year, as well as rate cuts implemented by the Federal Reserve during the prior year. During the first quarter, the Company cycled a prior year quarter gain of $1.0 million related to a refund associated with the pension plan termination.

The Company reported net earnings of $19.5 million, or $0.54 per diluted share, compared to $15.4 million, or $0.43 per diluted share in the prior year quarter. The improvement reflects the operating earnings and non-operating expense changes noted above, mostly offset by cycling a tax benefit of $4.3 million related to the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. Adjusted earnings from continuing operations(2) for the first quarter were $20.0 million, or $0.56 per diluted share, compared to $24.1 million, or $0.67 per diluted share in the prior year quarter. A reconciliation of net earnings to adjusted earnings from continuing operations is included at Table 4.

Adjusted EBITDA(3) decreased $9.1 million to $64.8 million, compared to $74.0 million in the prior year quarter, due to the changes in adjusted operating earnings mentioned above. In addition, a decrease in losses associated with the disposal of assets was partially offset by increases in stock compensation expense. The timing of employee stock awards and incremental stock warrant expense impacted the relationship between net earnings and adjusted EBITDA for the quarter.

Please see the financial tables at the end of this press release for a reconciliation of each non-GAAP financial measure to the most directly comparable measure, prepared and presented in accordance with GAAP.

Segment Financial Results

Food Distribution

Net sales for Food Distribution decreased $35.4 million, or 2.6%, to $1.33 billion from $1.37 billion in the prior year quarter. The decrease in net sales was due to favorable prior year sales attributable to increased consumer demand related to COVID-19, as well as impacts from the Company’s decision to exit Fresh Production operations, partly offset by continued growth with certain existing Food Distribution customers. Net sales increased $163.8 million, or 14.0%, over the first quarter of 2019.

Reported operating earnings for Food Distribution were $21.1 million, compared to $11.4 million in the prior year quarter. The increase in reported operating earnings for Food Distribution was due to lower asset impairment and restructuring charges as well as favorable margin rates, partly offset by a higher rate of supply chain expenses. First quarter adjusted operating earnings(1) were $21.5 million, compared to $26.3 million in the prior year quarter. Adjusted operating earnings exclude asset impairment and restructuring charges, severance associated with cost-reduction initiatives, and losses associated with the Fresh Cut operations in the prior year quarter.

Retail

Net sales for Retail decreased $43.1 million, or 5.5%, to $739.4 million from $782.6 million in the prior year quarter, primarily due to favorable prior year sales attributable to increased consumer demand related to COVID-19. Retail comparable store sales declined 7.0% for the quarter and increased by 9.3% on a two-year comparable basis.

Reported operating earnings for Retail were $14.2 million, compared to $12.6 million in the prior year quarter. The increase in reported operating earnings was due to improved margin rates and lower incentive compensation expense, partially offset by the decrease in sales volume, as well as the resulting deleverage of certain expenses, including store labor. Adjusted operating earnings(1) were $14.4 million, compared to $15.3 million in the prior year quarter, and exclude restructuring in the both the current and prior year quarters, as well as severance associated with cost- reduction initiatives in the prior year quarter.

Military

Net sales for Military decreased $120.1 million, or 17.1%, to $584.3 million from $704.4 million in the prior year quarter. This was primarily due to cycling favorable sales attributable to increased consumer demand related to COVID-19 in the prior year quarter, in addition to the ongoing impact of restrictions for domestic base access and commissary shopping that followed the first quarter of the prior year. These restrictions continue to contribute to significant declines in the Military segment, as well as commissary sales as a whole. Net sales decreased $87.1 million, or 13.1% from the first quarter of 2019.

The reported operating loss for Military was $5.1 million, compared to $2.0 million in the prior year quarter. The increase in the reported operating loss was due to higher rate of supply chain expense and the decrease in sales volume, partially offset by improvements in gross margin rates. The adjusted operating loss(1) in the Military segment was $5.1 million compared to a $1.4 million loss in the prior year. Adjusted operating earnings exclude severance associated with cost-reduction initiatives in the prior year quarter.

Balance Sheet and Cash Flow

Cash flows used in operating activities for the first quarter were $31.8 million, compared to $129.3 million in cash provided by operating activities in the prior year quarter. In the prior year, significant increases in sales volume related to the COVID-19 pandemic resulted in decreases in inventory levels, which benefited prior year operating cash flows. Current year cash flows were unfavorably impacted by investments in working capital, including rebuilding inventory levels to serve current customer demand, and the payout of incentive compensation earned in the prior year. Net long-term debt(5) increased $37.2 million during the first quarter, resulting in an increase in the Company’s ratio of net long-term debt to adjusted EBITDA from 2.0x to 2.2x.

Capital expenditures and IT capital(6) totaled $24.1 million for the current year quarter compared to $19.5 million in the prior year quarter.

During the first quarter, the Company declared $7.2 million in cash dividends, equal to $0.20 per common share. The Company did not repurchase common stock in the current year quarter.

Outlook

“We are focused on continuing to expand our customer relationships within Food Distribution, retaining the Retail segment momentum we built during the pandemic and making investments in people and processes that will position us for future success,” Sarsam continued. “We remain committed to continued improvements in our key initiatives and are excited for the contributions from our recently appointed leaders.”

The following table provides the Company’s guidance for 2021, initially provided on Feb. 24, 2021:

 

53 Week

 

 

52 Week

 

 

Fiscal 2020

 

 

Fiscal 2021 Guidance

 

 

Actual

 

 

Low

 

 

High

 

Total net sales (millions)

$

 

9,348

 

 

$

 

8,800

 

 

$

 

9,000

 

Adjusted EBITDA(3) (millions)

$

 

239

 

 

$

 

195

 

 

$

 

210

 

Adjusted EPS(7)

$

 

2.53

 

 

$

 

1.65

 

 

$

 

1.80

 

Reported EPS

$

 

2.12

 

 

$

 

1.48

 

 

$

 

1.67

 

Capital expenditures and IT capital(6) (thousands)

$

 

78,932

 

 

$

 

80,000

 

 

$

 

90,000

 

Depreciation and amortization (thousands)

$

 

89,876

 

 

$

 

90,000

 

 

$

 

100,000

 

Interest expense (thousands)

$

 

14,418

 

 

$

 

14,000

 

 

$

 

15,000

 

Income tax rate

 

 

11.1

%

 

 

 

23.0

%

 

 

 

24.5

%

While the Company is re-affirming net sales guidance for fiscal 2021, it now expects that Retail comparable sales will be negative 5.0% to 7.0% for 2021. Food Distribution sales are still expected to decline 1.0% to 3.0% in 2021, while Military Distribution sales are now expected to decline 6.0% to 10.0% in 2021. In addition, the Company continues to monitor inflation that is expected to be passed on from many consumer packaged goods manufacturers. While legitimate price increases in both the distribution and retail businesses would traditionally be passed on to the retailer or consumer, the Company will evaluate these potential increases in connection with its Customer Growth strategy and initiatives related to key value item pricing. The Company’s outlook currently excludes the costs and potential current year benefits associated with the supply chain transformation initiative.

Conference Call

A telephone conference call to discuss the Company’s first quarter financial results is scheduled for Thursday, June 3, 2021 at 8 a.m. ET. 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 10 days.

About SpartanNash

SpartanNash (Nasdaq: SPTN) is a Fortune 400 company whose core businesses include distributing grocery products to a diverse group of independent and chain retailers, its corporate-owned retail stores and U.S. military commissaries and exchanges; as well as operating a premier fresh produce distribution network. SpartanNash serves customer locations in all 50 states and the District of Columbia, Europe, Cuba, Puerto Rico, Honduras, Iraq, Kuwait, Bahrain, Qatar and Djibouti. SpartanNash currently operates 150 supermarkets, primarily under the banners of Family Fare, Martin's Super Markets, D&W Fresh Market, VG's Grocery and Dan's Supermarket. Through its MDV military division, SpartanNash is a leading distributor of grocery products to U.S. military commissaries.

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,” “believe,” “anticipates,” “continue,” “expects,” “guidance,” “trend,” “on track,” “encouraged” or “plan” or similar expressions. The statements in the “Outlook” section of this press release are inherently forward looking. 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 Company, and actual results may vary materially from the results and expectations discussed. Additional risks and uncertainties include, but are not limited to, disruption associated with the COVID-19 pandemic and 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, 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.

(1) A reconciliation of operating earnings to adjusted operating earnings, a non-GAAP financial measure, is provided in Table 3 below.

(2) A reconciliation of net earnings to adjusted earnings from continuing operations, a non-GAAP financial measure, is provided in Table 4 below.

(3) A reconciliation of net earnings to Adjusted EBITDA, a non-GAAP financial measure, is provided in Table 2 below.

(4) A reconciliation of net cash provided by operating activities to free cash flow, a non-GAAP financial measure, is provided in Table 6 below.

(5) A reconciliation of long-term debt and finance lease obligations to net long-term debt, a non-GAAP financial measure, is provided in Table 5 below.

(6) A reconciliation of purchases of property and equipment to capital expenditures and IT capital, a non-GAAP financial measure, is provided in Table 7 below.

(7) A reconciliation of projected earnings per share from continuing operations to adjusted earnings per share from continuing operations, a non-GAAP financial measure, is provided in Table 8 below.

 

SPARTANNASH COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

 

 

16 Weeks Ended

 

 

 

April 24,

 

 

April 18,

 

 

(In thousands, except per share amounts)

2021

 

 

2020

 

 

Net sales

$

 

2,657,799

 

 

$

 

2,856,456

 

 

Cost of sales

 

 

2,239,769

 

 

 

 

2,432,889

 

 

Gross profit

 

 

418,030

 

 

 

 

423,567

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

387,937

 

 

 

 

391,300

 

 

Acquisition and integration

 

 

59

 

 

 

 

 

 

Restructuring and asset impairment, net

 

 

(161

)

 

 

 

10,237

 

 

Total operating expenses

 

 

387,835

 

 

 

 

401,537

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

 

 

30,195

 

 

 

 

22,030

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expenses and (income)

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

4,589

 

 

 

 

7,638

 

 

Other, net

 

 

(266

)

 

 

 

(1,041

)

 

Total other expenses, net

 

 

4,323

 

 

 

 

6,597

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before income taxes

 

 

25,872

 

 

 

 

15,433

 

 

Income tax expense

 

 

6,356

 

 

 

 

31

 

 

Net earnings

$

 

19,516

 

 

$

 

15,402

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net earnings per share:

$

 

0.55

 

 

$

 

0.43

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net earnings per share:

$

 

0.54

 

 

$

 

0.43

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

Basic

 

 

35,765

 

 

 

 

36,172

 

 

Diluted

 

 

35,876

 

 

 

 

36,172

 

 

 

 

 

 

 

 

 

 

 

 

 

SPARTANNASH COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

April 24,

 

 

January 2,

 

(In thousands)

2021

 

 

2021

 

Assets

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

 

23,292

 

 

$

 

19,903

 

Accounts and notes receivable, net

 

 

346,725

 

 

 

 

357,564

 

Inventories, net

 

 

602,565

 

 

 

 

541,785

 

Prepaid expenses and other current assets

 

 

64,474

 

 

 

 

72,229

 

Property and equipment held for sale

 

 

1,948

 

 

 

 

23,259

 

Total current assets

 

 

1,039,004

 

 

 

 

1,014,740

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

564,965

 

 

 

 

577,059

 

Goodwill

 

 

181,035

 

 

 

 

181,035

 

Intangible assets, net

 

 

114,538

 

 

 

 

116,142

 

Operating lease assets

 

 

276,811

 

 

 

 

289,173

 

Other assets, net

 

 

99,213

 

 

 

 

99,242

 

 

 

 

 

 

 

 

 

 

 

Total assets

$

 

2,275,566

 

 

$

 

2,277,391

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Accounts payable

$

 

441,772

 

 

$

 

464,784

 

Accrued payroll and benefits

 

 

79,245

 

 

 

 

113,789

 

Other accrued expenses

 

 

58,097

 

 

 

 

60,060

 

Current portion of operating lease liabilities

 

 

44,898

 

 

 

 

45,786

 

Current portion of long-term debt and finance lease liabilities

 

 

4,996

 

 

 

 

5,135

 

Total current liabilities

 

 

629,008

 

 

 

 

689,554

 

 

 

 

 

 

 

 

 

 

 

Long-term liabilities

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

56,696

 

 

 

 

45,728

 

Operating lease liabilities

 

 

266,842

 

 

 

 

278,859

 

Other long-term liabilities

 

 

50,432

 

 

 

 

46,892

 

Long-term debt and finance lease liabilities

 

 

522,068

 

 

 

 

481,309

 

Total long-term liabilities

 

 

896,038

 

 

 

 

852,788

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

 

 

 

Common stock, voting, no par value; 100,000 shares authorized; 36,266 and 35,851 shares outstanding

 

 

494,955

 

 

 

 

491,819

 

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

 

 

 

 

 

 

 

Accumulated other comprehensive loss

 

 

(2,219

)

 

 

 

(2,276

)

Retained earnings

 

 

257,784

 

 

 

 

245,506

 

Total shareholders’ equity

 

 

750,520

 

 

 

 

735,049

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

$

 

2,275,566

 

 

$

 

2,277,391

 

 

 

 

 

 

 

 

 

 

 

SPARTANNASH COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

16 Weeks Ended

 

(In thousands)

 

 

 

April 24, 2021

 

 

April 18, 2020

 

Cash flow activities

 

 

 

 

 

 

 

 

 

 

 

 

Net cash (used in) provided by operating activities

 

 

 

$

 

(31,778

)

 

$

 

129,296

 

Net cash provided by (used in) investing activities

 

 

 

 

 

4,257

 

 

 

 

(13,951

)

Net cash provided by (used in) financing activities

 

 

 

 

 

30,910

 

 

 

 

(118,262

)

Net increase (decrease) in cash and cash equivalents

 

 

 

 

 

3,389

 

 

 

 

(2,917

)

Cash and cash equivalents at beginning of the period

 

 

 

 

 

19,903

 

 

 

 

24,172

 

Cash and cash equivalents at end of the period

 

 

 

$

 

23,292

 

 

$

 

21,255

 

 

SPARTANNASH COMPANY AND SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA

Table 1: Net Sales and Operating Earnings (Loss) by Segment

(Unaudited)

 

 

16 Weeks Ended

 

 

(In thousands)

April 24, 2021

 

 

April 18, 2020

 

 

Food Distribution Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

 

1,334,082

 

 

50.2

%

 

$

 

1,369,495

 

 

47.9

%

 

Operating earnings

 

 

21,146

 

 

 

 

 

 

 

11,390

 

 

 

 

 

Retail Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

739,444

 

 

27.8

%

 

 

 

782,568

 

 

27.4

%

 

Operating earnings

 

 

14,192

 

 

 

 

 

 

 

12,645

 

 

 

 

 

Military Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

584,273

 

 

22.0

%

 

 

 

704,393

 

 

24.7

%

 

Operating loss

 

 

(5,143

)

 

 

 

 

 

 

(2,005

)

 

 

 

 

Total:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

 

2,657,799

 

 

100.0

%

 

$

 

2,856,456

 

 

100.0

%

 

Operating earnings

 

 

30,195

 

 

 

 

 

 

 

22,030

 

 

 

 

 

 

Non-GAAP Financial Measures

In addition to reporting financial results in accordance with GAAP, the Company also provides information regarding adjusted operating earnings, adjusted earnings from continuing operations, and adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”). These are non-GAAP financial measures, as defined below, and are used by management to allocate resources, assess performance against its peers and evaluate overall performance. The Company believes these measures provide useful information for both management and its investors. The Company believes these non-GAAP measures are useful to investors because they provide additional understanding of the trends and special circumstances that affect its business. These measures provide useful supplemental information that helps investors to establish a basis for expected performance and the ability to evaluate actual results against that expectation. The measures, when considered in connection with GAAP results, can be used to assess the overall performance of the Company as well as assess the Company’s performance against its peers. These measures are also used as a basis for certain compensation programs sponsored by the Company. In addition, securities analysts, fund managers and other shareholders and stakeholders that communicate with the Company request its financial results in these adjusted formats.

Current year adjusted operating earnings, adjusted earnings from continuing operations, and adjusted EBITDA exclude organizational realignment costs and severance associated with cost reduction initiatives. Organizational realignment costs include benefits for associates terminated as part of a leadership transition plan which do not meet the definition of a reduction-in-force. Prior year adjusted operating earnings, adjusted earnings from continuing operations, and adjusted EBITDA exclude “Fresh Cut operating losses” subsequent to the decision to exit these operations during the first quarter, severance associated with cost reduction initiatives, and fees paid to a third-party advisory firm associated with Project One Team, the Company’s initiative to drive growth while increasing efficiency and reducing costs. Pension termination income related to a refund from the annuity provider associated with the final reconciliation of participant data is excluded from adjusted earnings from continuing operations. Each of these items are considered “non-operational” or “non-core” in nature.

 

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

(Adjusted EBITDA)

(A Non-GAAP Financial Measure)

(Unaudited)

 

 

16 Weeks Ended

 

(In thousands)

April 24, 2021

 

 

April 18, 2020

 

Net earnings

$

 

19,516

 

 

$

 

15,402

 

Income tax expense

 

 

6,356

 

 

 

 

31

 

Other expenses, net

 

 

4,323

 

 

 

 

6,597

 

Operating earnings

 

 

30,195

 

 

 

 

22,030

 

Adjustments:

 

 

 

 

 

 

 

 

 

LIFO expense

 

 

1,655

 

 

 

 

1,583

 

Depreciation and amortization

 

 

28,091

 

 

 

 

27,656

 

Acquisition and integration

 

 

59

 

 

 

 

 

Restructuring and asset impairment, net

 

 

(161

)

 

 

 

10,237

 

Fresh Cut operating losses

 

 

 

 

 

 

2,262

 

Stock-based compensation

 

 

4,190

 

 

 

 

2,243

 

Stock warrant

 

 

645

 

 

 

 

 

Non-cash rent

 

 

(895

)

 

 

 

(1,594

)

Costs associated with Project One Team

 

 

 

 

 

 

493

 

Organizational realignment costs

 

 

641

 

 

 

 

 

Severance associated with cost reduction initiatives

 

 

125

 

 

 

 

5,156

 

(Gain) loss on disposal of assets

 

 

(182

)

 

 

 

3,911

 

Other non-cash charges

 

 

480

 

 

 

 

1

 

Adjusted EBITDA

$

 

64,843

 

 

$

 

73,978

 

 

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

and Amortization, continued

(Adjusted EBITDA)

(A Non-GAAP Financial Measure)

(Unaudited)

 

 

16 Weeks Ended

 

(In thousands)

April 24, 2021

 

 

April 18, 2020

 

Food Distribution:

 

 

 

 

 

 

 

 

 

Operating earnings

$

 

21,146

 

 

$

 

11,390

 

Adjustments:

 

 

 

 

 

 

 

 

 

LIFO expense

 

 

794

 

 

 

 

794

 

Depreciation and amortization

 

 

9,790

 

 

 

 

10,183

 

Restructuring and asset impairment, net

 

 

(18

)

 

 

 

9,222

 

Fresh Cut operating losses

 

 

 

 

 

 

2,262

 

Stock-based compensation

 

 

1,929

 

 

 

 

1,005

 

Stock warrant

 

 

645

 

 

 

 

 

Non-cash rent

 

 

774

 

 

 

 

58

 

Costs associated with Project One Team

 

 

 

 

 

 

265

 

Organizational realignment costs

 

 

313

 

 

 

 

 

Severance associated with cost reduction initiatives

 

 

99

 

 

 

 

3,180

 

(Gain) loss on disposal of assets

 

 

(37

)

 

 

 

2,140

 

Other non-cash charges (gains)

 

 

234

 

 

 

 

(1

)

Adjusted EBITDA

$

 

35,669

 

 

$

 

40,498

 

Retail:

 

 

 

 

 

 

 

 

 

Operating earnings

$

 

14,192

 

 

$

 

12,645

 

Adjustments:

 

 

 

 

 

 

 

 

 

LIFO expense

 

 

415

 

 

 

 

343

 

Depreciation and amortization

 

 

14,241

 

 

 

 

13,756

 

Acquisition and integration

 

 

59

 

 

 

 

 

Restructuring and asset impairment, net

 

 

(143

)

 

 

 

1,015

 

Stock-based compensation

 

 

1,480

 

 

 

 

750

 

Non-cash rent

 

 

(1,552

)

 

 

 

(1,534

)

Costs associated with Project One Team

 

 

 

 

 

 

164

 

Organizational realignment costs

 

 

234

 

 

 

 

 

Severance associated with cost reduction initiatives

 

 

29

 

 

 

 

1,451

 

(Gain) loss on disposal of assets

 

 

(123

)

 

 

 

1,805

 

Other non-cash charges

 

 

175

 

 

 

 

 

Adjusted EBITDA

$

 

29,007

 

 

$

 

30,395

 

Military:

 

 

 

 

 

 

 

 

 

Operating loss

$

 

(5,143

)

 

$

 

(2,005

)

Adjustments:

 

 

 

 

 

 

 

 

 

LIFO expense

 

 

446

 

 

 

 

446

 

Depreciation and amortization

 

 

4,060

 

 

 

 

3,717

 

Stock-based compensation

 

 

781

 

 

 

 

488

 

Non-cash rent

 

 

(117

)

 

 

 

(118

)

Costs associated with Project One Team

 

 

 

 

 

 

64

 

Organizational realignment costs

 

 

94

 

 

 

 

 

Severance associated with cost reduction initiatives

 

 

(3

)

 

 

 

525

 

Gain on disposal of assets

 

 

(22

)

 

 

 

(34

)

Other non-cash charges

 

 

71

 

 

 

 

2

 

Adjusted EBITDA

$

 

167

 

 

$

 

3,085

 

 

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.

Adjusted EBITDA and adjusted EBITDA by segment are not measures 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 definitions of adjusted EBITDA and adjusted EBITDA by segment 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)

(Unaudited)

 

 

16 Weeks Ended

 

(In thousands)

April 24, 2021

 

 

April 18, 2020

 

Operating earnings

$

 

30,195

 

 

$

 

22,030

 

Adjustments:

 

 

 

 

 

 

 

 

 

Acquisition and integration

 

 

59

 

 

 

 

 

Restructuring and asset impairment, net

 

 

(161

)

 

 

 

10,237

 

Costs associated with Project One Team

 

 

 

 

 

 

493

 

Organizational realignment costs

 

 

641

 

 

 

 

 

Severance associated with cost reduction initiatives

 

 

125

 

 

 

 

5,156

 

Fresh Cut operating losses

 

 

 

 

 

 

2,262

 

Adjusted operating earnings

$

 

30,859

 

 

$

 

40,178

 

Reconciliation of operating earnings (loss) to adjusted operating earnings (loss) by segment:

 

Food Distribution:

 

 

 

 

 

 

 

 

 

Operating earnings

$

 

21,146

 

 

$

 

11,390

 

Adjustments:

 

 

 

 

 

 

 

 

 

Restructuring and asset impairment, net

 

 

(18

)

 

 

 

9,222

 

Costs associated with Project One Team

 

 

 

 

 

 

265

 

Organizational realignment costs

 

 

313

 

 

 

 

 

Severance associated with cost reduction initiatives

 

 

99

 

 

 

 

3,180

 

Fresh Cut operating losses

 

 

 

 

 

 

2,262

 

Adjusted operating earnings

$

 

21,540

 

 

$

 

26,319

 

Retail:

 

 

 

 

 

 

 

 

 

Operating earnings

 

 

14,192

 

 

 

 

12,645

 

Adjustments:

 

 

 

 

 

 

 

 

 

Acquisition and integration

 

 

59

 

 

 

 

 

Restructuring and asset impairment, net

 

 

(143

)

 

 

 

1,015

 

Costs associated with Project One Team

 

 

 

 

 

 

164

 

Organizational realignment costs

 

 

234

 

 

 

 

 

Severance associated with cost reduction initiatives

 

 

29

 

 

 

 

1,451

 

Adjusted operating earnings

$

 

14,371

 

 

$

 

15,275

 

Military:

 

 

 

 

 

 

 

 

 

Operating loss

$

 

(5,143

)

 

$

 

(2,005

)

Adjustments:

 

 

 

 

 

 

 

 

 

Costs associated with Project One Team

 

 

 

 

 

 

64

 

Organizational realignment costs

 

 

94

 

 

 

 

 

Severance associated with cost reduction initiatives

 

 

(3

)

 

 

 

525

 

Adjusted operating loss

$

 

(5,052

)

 

$

 

(1,416

)

 

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.

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.

 

Table 4: Reconciliation of Net Earnings to

Adjusted Earnings from Continuing Operations

(A Non-GAAP Financial Measure)

(Unaudited)

 

 

16 Weeks Ended

 

 

 

April 24, 2021

 

 

April 18, 2020

 

 

 

 

 

 

per diluted

 

 

 

 

 

per diluted

 

 

(In thousands, except per share amounts)

Earnings

 

 

share

 

 

Earnings

 

 

share

 

 

Net earnings

$

 

19,516

 

 

$

 

0.54

 

 

$

 

15,402

 

 

$

 

0.43

 

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition and integration

 

 

59

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring and asset impairment, net

 

 

(161

)

 

 

 

 

 

 

 

 

10,237

 

 

 

 

 

 

 

Fresh Cut operating losses

 

 

 

 

 

 

 

 

 

 

 

2,262

 

 

 

 

 

 

 

Costs associated with Project One Team

 

 

 

 

 

 

 

 

 

 

 

493

 

 

 

 

 

 

 

Organizational realignment costs

 

 

641

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance associated with cost reduction initiatives

 

 

125

 

 

 

 

 

 

 

 

 

5,156

 

 

 

 

 

 

 

Pension termination

 

 

 

 

 

 

 

 

 

 

 

(1,004

)

 

 

 

 

 

 

Total adjustments

 

 

664

 

 

 

 

 

 

 

 

 

17,144

 

 

 

 

 

 

 

Income tax effect on adjustments (a)

 

 

(162

)

 

 

 

 

 

 

 

 

(4,095

)

 

 

 

 

 

 

Impact of CARES Act (b)

 

 

 

 

 

 

 

 

 

 

 

(4,345

)

 

 

 

 

 

 

Total adjustments, net of taxes

 

 

502

 

 

 

 

0.02

 

 

 

 

8,704

 

 

 

 

0.24

 

 

Adjusted earnings from continuing operations

$

 

20,018

 

 

$

 

0.56

 

 

$

 

24,106

 

 

$

 

0.67

 

 

(a)

The income tax effect on adjustments is computed by applying the applicable tax rate to the adjustments.

(b)

Represents tax impacts attributable to the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, primarily related to additional deductions and the utilization of net operating loss carrybacks.

 

 

Notes: Adjusted earnings from continuing operations is a non-GAAP operating financial measure that the Company defines as net 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.

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 Finance Lease Obligations to Net Long-Term Debt

(A Non-GAAP Financial Measure)

(Unaudited)

 

 

April 24,

 

 

January 2,

 

(In thousands)

2021

 

 

2020

 

Current portion of long-term debt and finance lease liabilities

$

 

4,996

 

 

$

 

5,135

 

Long-term debt and finance lease liabilities

 

 

522,068

 

 

 

 

481,309

 

Total debt

 

 

527,064

 

 

 

 

486,444

 

Cash and cash equivalents

 

 

(23,292

)

 

 

 

(19,903

)

Net long-term debt

$

 

503,772

 

 

$

 

466,541

 

 

Notes: Net long-term debt is a non-GAAP financial measure that is defined as long-term debt and finance lease obligations plus current maturities of long-term debt and finance lease obligations less cash and cash equivalents. The Company believes both management and its 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. Net long-term debt is not a substitute for GAAP financial measures and may differ from similarly titled measures of other companies.

 

Table 6: Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow

(A Non-GAAP Financial Measure)

(Unaudited)

 

 

 

 

 

16 Weeks Ended

 

(In thousands)

 

 

 

April 24, 2021

 

 

April 18, 2020

 

Net cash (used in) provided by operating activities

 

 

 

$

 

(31,778

)

 

$

 

129,296

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

 

 

 

22,124

 

 

 

 

17,893

 

Free cash flow

 

 

 

$

 

(53,902

)

 

$

 

111,403

 

 

Notes: Free cash flow is a non-GAAP financial measure calculated by subtracting capital expenditures from cash flows provided by operating activities, the most directly comparable GAAP measure. The Company believes it is a useful indicator of liquidity that provides information to both management and investors about the amount of cash generated from operations that, after capital expenditures, can be used for strategic business objectives, including the repayment of long-term debt. Free cash flow is not a substitute for GAAP financial measures and may differ from similarly titled measures of other companies.

 

Table 7: Reconciliation of Purchases of Property and Equipment to Capital Expenditures and IT Capital

(A Non-GAAP Financial Measure)

(Unaudited)

 

 

 

 

 

16 Weeks Ended

 

(In thousands)

 

 

 

April 24, 2021

 

 

April 18, 2020

 

Purchases of property and equipment

 

 

 

$

 

22,124

 

 

$

 

17,893

 

Plus:

 

 

 

 

 

 

 

 

 

 

 

 

Cloud computing spend

 

 

 

 

 

1,947

 

 

 

 

1,579

 

Capital expenditures and IT capital

 

 

 

$

 

24,071

 

 

$

 

19,472

 

 

Notes: Capital expenditures and IT capital is a non-GAAP financial measure calculated by adding spending related to the development of cloud computing applications spend to capital expenditures, the most directly comparable GAAP measure. Cloud computing spend only includes costs incurred during the application development phase and does not include ongoing costs of hosting or maintenance associated with these applications, which are expensed as incurred. The Company believes it is a useful indicator of the Company’s investment in its facilities and systems as it transitions to more cloud-based IT systems. Capital expenditures and IT capital is not a substitute for GAAP financial measures and may differ from similarly titled measures of other companies.

 

Table 8: Reconciliation of Projected Net Earnings per Diluted Share to

Projected Adjusted Earnings per Diluted Share from Continuing Operations

(A Non-GAAP Financial Measure)

(Unaudited)

 

 

52 Weeks Ending

January 1, 2022

 

 

Low

 

 

High

 

Net Earnings per Diluted Share

$

 

1.48

 

 

$

 

1.67

 

Adjustments, net of taxes:

 

 

 

 

 

 

 

 

 

Acquisition and integration expenses

 

 

0.01

 

 

 

 

0.01

 

Restructuring and asset impairment, net

 

 

0.13

 

 

 

 

0.10

 

Severance associated with cost reduction initiatives

 

 

0.01

 

 

 

 

0.01

 

Organizational realignment

 

 

0.02

 

 

 

 

0.01

 

Projected Adjusted Earnings per Diluted Share from Continuing Operations

$

 

1.65

 

 

$

 

1.80

 

 

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