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Exhibit 99.1

LOGO

 

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

Spartan Stores Announces Fourth Quarter and Fiscal 2011

Financial Results

Fourth Quarter Adjusted Earnings from Continuing Operations Increased Almost 20 Percent to $7.8 Million, or

$0.34 per Diluted Share

Net Debt Reduced by $45 Million from Last Year

GRAND RAPIDS, MICHIGAN – May 11, 2011 – Spartan Stores, Inc., (Nasdaq:SPTN) a leading regional grocery distributor and retailer, today reported financial results for its 12-week fourth quarter ended March 26, 2011.

Fourth Quarter Results

Consolidated net sales for the 12-week fourth quarter increased 2.3 percent to $571.5 million compared with $558.8 million in the same period last year. Both the retail and distribution segments reported improved sales during the quarter.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) for the quarter increased 14.2 percent to $25.5 million, or 4.5 percent of net sales, compared to $22.3 million, or 4.0 percent of net sales in the year-ago period.

Fourth quarter operating earnings increased 80.0 percent to $15.9 million compared with $8.9 million in the year-ago period. Excluding a pre-tax charge associated with restructuring costs of $0.2 million this year and $4.8 million last year, adjusted fourth quarter operating earnings were $16.1 million compared with $13.7 million in the previous year. Last year’s fourth quarter pretax charge related to a previously disclosed warehouse consolidation initiative and its associated administrative cost reductions as well as adjustments for certain real estate projects.

“We are pleased that we concluded fiscal 2011 with a strong fourth quarter financial performance,” stated Dennis Eidson, Spartan’s President and Chief Executive Officer. “Our profitability remains at historically high levels and we continue to generate strong cash from operations.”

Fourth quarter earnings from continuing operations improved 129.6 percent to $7.7 million, or $0.34 per diluted share, from $3.3 million, or $0.15 per diluted share in the year-ago quarter. Excluding the previously mentioned net charges, adjusted earnings from continuing operations for the quarter increased 19.5 percent to $7.8 million, or $0.34 per diluted share, compared to $6.5 million, or $0.29 per diluted share last year.


Sales increases, improved overall margins, a continued focus on cost control and increased operating efficiencies related to the Company’s spring 2010 warehouse consolidation initiative primarily contributed to the earnings improvement.

Fourth quarter gross profit margin increased 10 basis points to 22.7 percent from 22.6 percent in the same period last year. The increase was due to improved margin contribution from the Company’s distribution segment and higher fuel margins partially offset by lower retail supermarket margins.

Operating expenses totaled $113.9 million, or 19.9 percent of net sales, compared with $117.3 million, or 21.0 percent of sales in the year-ago quarter. Excluding the previously mentioned net pretax charge, the adjusted fourth quarter operating expense-to-sales ratio was 19.9 percent this year versus 20.1 percent last year. The Company’s expense leverage was improved by a shift in mix of sales towards fuel, productivity improvements in both segments and cost containment initiatives which were partially offset by higher debit/credit card fees and employee incentive compensation costs.

Distribution Segment

Fourth quarter net sales for the distribution segment rose to $248.9 million from $244.3 million in the year-ago period due largely to an improvement in pharmacy related sales and new customers gained.

Operating earnings for the segment increased 74.4 percent to $13.9 million compared with $8.0 million in the same period last year. Adjusted for restructuring costs, operating earnings were $13.7 million this year compared to $12.2 million last year. The increase was due to procurement related gains, an incremental $0.7 million in LIFO inventory valuation credit, operating efficiencies and expense leverage, partially offset by higher transportation and employee incentive compensation expenses.

Retail Segment

Fourth quarter net sales for the retail segment increased 2.6 percent to $322.6 million compared to $314.4 million in the same period last year. The higher sales were due primarily to higher retail fuel selling prices and a new supermarket location partially offset by a decline in comparable store sales, excluding fuel of 0.9 percent. The fourth quarter comparable store sales results continued the Company’s trend of sequential quarter-over-quarter improvement.

Retail segment operating earnings for the quarter increased to $2.1 million compared to $0.9 million in the year-ago period. Excluding the retail segment’s share of the previously mentioned net pretax charge, fiscal 2011’s adjusted fourth quarter operating earnings were $2.4 million compared to $1.5 million in the same period last year. The increase in operating earnings was attributed to lower employee incentive costs, improved fuel margins, and the cycling of the cost of an employee benefit change last year, partially offset by lower supermarket gross margins due in part to the launch of the YES (customer loyalty) card at the VG’s banner and an increased LIFO inventory valuation charge.

Balance Sheet and Cash Flow

The Company continued to report strong levels of net cash provided by operating activities of $89.8 million for fiscal year 2011.

As of March 26, 2011, total net long-term debt (including current maturities and capital lease obligations and subtracting cash) decreased $45.0 million to $131.1 million from $176.1 million at the end of last year. The Company’s financial position continued to improve as its total net long-term debt-to-capital ratio is now 0.30 to 1.0 at the end of the fourth quarter and its net debt-to-Adjusted EBITDA ratio on an annual Adjusted EBITDA basis is at 1.26 to 1.0.

 

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“I am pleased to report we achieved our third consecutive year of over $100 million in Adjusted EBITDA. We continued to improve the fundamental operating structure and effectiveness of our business which allowed us to generate increased cash flow and reduce net debt,” said Mr. Eidson. “Our consistent improvement of these key financial metrics reflects the strength of our business model and the commitment and the ability of our entire team to execute our business strategy.”

Fiscal 2011 Results

Consolidated net sales for the fiscal year were $2.53 billion compared with $2.55 billion last year. The annual net sales decline resulted from continuing adverse regional economic conditions and competitive pressures partially offset by higher retail fuel selling prices. Also contributing to the decline were lost sales of $13.0 million related to retail stores that were closed or sold during fiscal 2010.

Fiscal 2011’s adjusted operating earnings, excluding the pretax impacts of restructuring were $65.0 million compared with $64.8 million last year. As reported, fiscal 2011’s operating earnings were $68.0 million.

Adjusted net earnings from continuing operations for fiscal 2011, excluding after tax impacts of restructuring of $1.8 million, were $30.7 million, or $1.36 per diluted share compared with $29.9 million, or $1.33 per diluted share, last year. As reported, fiscal 2011’s net earnings were $32.3 million, or $1.42 per diluted share.

Fiscal 2012 Outlook

“The Michigan economy is slowly improving and we believe that our sales trends will similarly continue to improve. We expect to experience a moderate level of overall product cost and retail price inflation. These trends will result in a significant increase in LIFO expense for next year. However, on balance we are optimistic about our outlook for continued improvement in our operating results in fiscal 2012,” said Mr. Eidson.

The Company expects first quarter retail comparable store sales, excluding fuel centers, to be comparable to the fourth quarter of fiscal 2011 results, with distribution sales again increasing compared to last year’s levels. The Company expects fiscal 2012 first quarter adjusted net earnings to approximate last year’s performance. Excluding the 53rd week in fiscal 2012, the Company expects comparable store sales to turn positive in the second half of the year. For the full fiscal year, the Company anticipates that adjusted net earnings, excluding the 53rd week, will modestly exceed fiscal 2011’s.

Capital expenditures for fiscal 2012 are expected to range from $42.0 million to $45.0 million with depreciation and amortization ranging from $36.0 million to $38.0 million and total interest expense approximating $15.0 million.

“Our priorities for fiscal 2012 will continue to focus on improving sales growth in both our distribution and retail segments enhancing our value proposition to the consumer and achieving additional efficiencies, through tight management of the controllable aspects of our business. The key initiatives to achieve these results will include the continued development of our private brand program, rollout of our loyalty card program to the remainder of our banners, a focus on fresh excellence across our banners and a continued emphasis on providing health and wellness solutions to the consumer. Additionally, we will continue to seek prudent growth opportunities in our existing markets or adjacent states through new customer development or acquisitions and we remain confident in our long-term strategy,” concluded Mr. Eidson.

 

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Conference Call

A telephone conference call to discuss the Company’s fourth quarter and fiscal 2011 financial results is scheduled for 9:00 a.m. Eastern Time, Thursday, May 12, 2011. A live webcast of this conference call will be available on the Company’s website, www.spartanstores.com. Simply click on “For Investors” and follow the links to the live webcast. The webcast will remain available for replay on the Company’s website for approximately ten days.

About Spartan Stores

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

Forward-Looking Statements

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

- More -

 

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SPARTAN STORES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

(In thousands, except per share amounts)

 

     Fourth Quarter Ended (12 weeks)     Year-to-Date Ended (52 weeks)  
     March 26, 2011     March 27, 2010     March 26, 2011     March 27, 2010  

Net sales

   $ 571,471      $ 558,777      $ 2,533,064      $ 2,551,956   

Cost of sales

     441,650        432,645        1,976,549        1,993,306   
                                

Gross Margin

     129,821        126,132        556,515        558,650   

Operating expenses

        

Other selling, general and administrative

     105,480        104,476        452,859        459,192   

Restructuring, asset impairment and other

     192        4,838        532        6,154   

Depreciation and amortization

     8,208        7,962        35,158        34,640   
                                

Total operating expenses

     113,880        117,276        488,549        499,986   

Operating earnings

     15,941        8,856        67,966        58,664   

Non-operating expense (income)

        

Interest expense

     3,505        3,816        15,104        16,394   

Other, net

     (44     (42     (97     (138
                                

Total non-operating expense, net

     3,461        3,774        15,007        16,256   
                                

Earnings before income taxes and discontinued operations

     12,480        5,082        52,959        42,408   

Income taxes

     4,831        1,751        20,420        16,475   
                                

Earnings from continuing operations

     7,649        3,331        32,539        25,933   

Earnings (Loss) from discontinued operations, net of taxes

     124        (95     (232     (375
                                

Net earnings

   $ 7,773      $ 3,236      $ 32,307      $ 25,558   
                                

Basic earnings per share:

        

Earnings from continuing operations

   $ 0.34      $ 0.15      $ 1.44      $ 1.16   

Gain (loss) from discontinued operations

     —          (0.01     (0.01     (0.02
                                

Net earnings

   $ 0.34      $ 0.14      $ 1.43      $ 1.14   
                                

Diluted earnings per share:

        

Earnings from continuing operations

   $ 0.34      $ 0.15      $ 1.43      $ 1.15   

Gain (loss) from discontinued operations

     —          (0.01     (0.01     (0.01
                                

Net earnings

   $ 0.34      $ 0.14      $ 1.42      $ 1.14   
                                

Weighted average shares outstanding:

        

Basic

     22,629        22,452        22,606        22,406   
                                

Diluted

     22,712        22,509        22,688        22,480   
                                

 

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SPARTAN STORES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

 

     March 26, 2011     March 27, 2010  

ASSETS

    

Current assets

    

Cash and cash equivalents

   $ 43,824      $ 9,170   

Accounts receivable, net

     56,344        54,529   

Inventories

     103,814        117,514   

Other current assets

     8,934        14,982   
                

Total current assets

     212,916        196,195   

Other assets

    

Goodwill, net

     241,244        247,916   

Other, net

     55,788        61,409   
                

Total other assets

     297,032        309,325   

Net property and equipment

     241,448        247,961   
                

Total assets

   $ 751,396      $ 753,481   
                

LIABILITIES AND SHAREHOLDERS' EQUITY

    

Current liabilities

    

Accounts payable

   $ 100,919      $ 114,549   

Accrued payroll and benefits

     37,679        31,983   

Other accrued expenses

     18,343        20,838   

Current portion of restructuring costs

     4,470        8,877   

Current maturities of long-term debt

     4,205        4,209   
                

Total current liabilities

     165,616        180,456   

Other long-term liabilities

     18,269        19,937   

Restructuring costs

     10,832        27,061   

Deferred taxes

     66,241        49,996   

Postretirement benefits

     14,222        21,060   

Long-term debt

     170,711        181,066   
                

Total long-term liabilities

     280,275        299,120   

Shareholders' equity

    

Common stock, voting, no par value; authorized 50,000 shares; outstanding 22,619 and 22,450 shares

     169,072        166,577   

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

     —          —     

Deferred stock-based compensation

     (6,986     (8,352

Accumulated other comprehensive loss

     (13,016     (12,973

Retained earnings

     156,435        128,653   
                

Total shareholders' equity

     305,505        273,905   
                

Total liabilities and shareholders' equity

   $ 751,396      $ 753,481   
                

 

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SPARTAN STORES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

     Year-to-Date  
     (52 weeks)
March  26, 2011
    (52 weeks)
March 27, 2010
 

Net cash provided by operating activities

   $ 89,756      $ 91,702   

Net cash used in investing activities

     (33,123     (58,028

Net cash used in financing activities

     (19,369     (27,896

Net cash used in discontinued operations

     (2,610     (3,127
                

Net increase in cash and cash equivalents

     34,654        2,651   

Cash and cash equivalents at beginning of period

     9,170        6,519   
                

Cash and cash equivalents at end of period

   $ 43,824      $ 9,170   
                

SPARTAN STORES, INC. AND SUBSIDIARIES SUPPLEMENTAL FINANCIAL DATA

(Unaudited)

(In thousands)

 

     Fourth Quarter Ended      Year-to-Date Ended  
     (12 weeks)      (52 weeks)  
     March 26, 2011      March 27, 2010      March 26, 2011      March 27, 2010  

Retail Segment:

           

Net Sales

   $ 322,551       $ 314,440       $ 1,443,375       $ 1,460,671   

Operating Earnings

   $ 2,073       $ 905       $ 19,979       $ 20,591   

Distribution Segment:

           

Net Sales

   $ 248,920       $ 244,337       $ 1,089,689       $ 1,091,285   

Operating Earnings

   $ 13,868       $ 7,951       $ 47,987       $ 38,073   

 

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SPARTAN STORES, INC. AND SUBSIDIARIES

RECONCILIATION OF NET EARNINGS TO ADJUSTED EARNINGS BEFORE INTEREST, TAXES,

DEPRECIATION AND AMORTIZATION

(A NON-GAAP FINANCIAL MEASURE)

(Unaudited)

(In thousands)

 

     Fourth Quarter Ended
(12 weeks)
    Year-to-Date
(52 Weeks)
 
     March 26, 2011     March 27, 2010     March 26, 2011     March 27, 2010  

Consolidated:

        

Net earnings

   $ 7,773      $ 3,236      $ 32,307      $ 25,558   

Plus:

        

Discontinued operations

     (124     95        232        375   

Income taxes

     4,831        1,751        20,420        16,475   

Non-operating expense

     3,461        3,774        15,007        16,256   
                                

Operating earnings

   $ 15,941      $ 8,856      $ 67,966      $ 58,664   

Plus:

        

Depreciation and amortization

     8,208        7,962        35,158        34,640   

LIFO (income) expense

     (282     (72     (4,185     (176

Restructuring, asset impairment & other

     192        4,838        532        6,154   

Non-cash stock compensation & other charges

     1,466        764        4,793        3,996   
                                

Adjusted EBITDA

   $ 25,525      $ 22,348      $ 104,264      $ 103,278   
                                

Retail Segment:

        

Operating Earnings

   $ 2,073      $ 905      $ 19,979      $ 20,591   

Plus:

        

Depreciation and amortization

     6,159        6,074        26,693        26,042   

LIFO expense

     289        (171     954        185   

Restructuring, asset impairment & other

     361        632        267        1,948   

Non-cash stock compensation & other charges

     (216     48        (123     (198
                                

Adjusted EBITDA

   $ 8,666      $ 7,488      $ 47,770      $ 48,568   
                                

Distribution Segment:

        

Operating Earnings

   $ 13,868      $ 7,951      $ 47,987      $ 38,073   

Plus:

        

Depreciation and amortization

     2,049        1,888        8,465        8,598   

LIFO income

     (571     99        (5,139     (361

Restructuring, asset impairment & other

     (169     4,206        265        4,206   

Non-cash stock compensation & other charges

     1,682        716        4,916        4,194   
                                

Adjusted EBITDA

   $ 16,859      $ 14,860      $ 56,494      $ 54,710   
                                

Notes: Consolidated Adjusted EBITDA is a non-GAAP financial measure that is defined under the terms of our credit facility as Net earnings from continuing operations plus depreciation and amortization, and other non-cash charges including imputed interest, deferred (stock) compensation, LIFO expense 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. 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 Adjusted EBITDA information has been included as one measure of the Company's operating performance and historical ability to service debt. The Company believes investors find the information useful because it reflects the resources available for strategic investments including, for example, capital needs of the business, strategic acquisitions and debt service. Our definition of Adjusted EBITDA may not be identical to similarly titled measures reported by other companies.

 

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SPARTAN STORES, INC. AND SUBSIDIARIES RECONCILIATION OF LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS TO TOTAL NET LONG TERM DEBT AND CAPITAL LEASE OBLIGATIONS

(A NON-GAAP FINANCIAL MEASURE)

(Unaudited)

(In thousands)

 

     March 26, 2011     March 27, 2010  

Current maturities of long-term debt and capital lease obligations

   $ 4,205      $ 4,209   

Long-term debt and capital lease obligations

     170,711        181,066   
                

Total Debt

     174,916        185,275   

Cash and cash equivalents

     (43,824     (9,170
                

Total net long-term debt

   $ 131,092      $ 176,105   
                

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.

 

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