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8-K - SPTN Q3 2016/10/08 ER - SpartanNash Cosptn-8k_20161008.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 Third Quarter Fiscal Year 2016 Financial Results

 

Consolidated Net Sales Increased 1.4% Despite Prolonged Deflationary Environment

 

Reported Third Quarter EPS from Continuing Operations Improved $0.05 to $0.45 per Diluted Share;

Adjusted Third Quarter EPS from Continuing Operations Improved $0.04 to $0.53 per Diluted Share

 

Announced Definitive Agreement to Acquire Caito Foods Service

 

GRAND RAPIDS, MICHIGAN – November 9, 2016 – SpartanNash Company (the “Company”) (Nasdaq: SPTN) today reported financial results for the 12-week third quarter and 40-week period ended October 8, 2016.

 

Third Quarter Results

Consolidated net sales for the 12-week third quarter increased to $1.80 billion from $1.78 billion in the prior year quarter, driven primarily by increases in the food distribution segment.

Reported operating earnings improved to $29.9 million from $29.2 million in the prior year quarter primarily due to sales growth at food distribution and lower operating expenses due in part to lower depreciation as well as productivity and efficiency initiatives, which offset the negative impact of deflation in all segments. Adjusted operating earnings improved to $35.1 million from $34.8 million in the prior year quarter.

Reported earnings from continuing operations for the third quarter increased to $16.7 million, or $0.45 per diluted share, from $15.2 million, or $0.40 per diluted share, in the prior year quarter. Reported earnings from continuing operations for the third quarter include a $0.02 per diluted share benefit associated with tax credits. Adjusted earnings from continuing operations for the third quarter increased to $20.1 million, or $0.53 per diluted share, from $18.6 million, or $0.49 per diluted share, in the prior year quarter. Current year adjusted earnings from continuing operations exclude net after-tax charges of $0.08 per diluted share primarily related to asset impairment and restructuring charges associated with the Company’s retail store rationalization plan as well as merger integration activities. Prior year adjusted earnings from continuing operations exclude net after-tax charges of $0.09 per diluted share primarily related to merger integration and acquisition expenses, as well as net restructuring and asset impairment charges. Adjusted earnings from continuing operations is a non-GAAP operating financial measure.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) was $53.4 million, or 3.0 percent of consolidated net sales, compared to $55.2 million, or 3.1 percent of consolidated 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.

1


 

“We are pleased with our ability to overcome the continued challenging economic conditions and prolonged deflationary environment to deliver third quarter sales and earnings growth,” stated Dennis Eidson, SpartanNash's Chief Executive Officer. “These results reflect the strength of our strategy to provide innovative and impactful solutions for our food distribution and retail customers as we benefited from new customer supply agreements and our third consecutive quarter of improved retail comparable store sales trends. During the quarter, we continued to invest in our merchandising, pricing and promotional initiatives, including expanded produce and private brand product offerings, as well as the continued roll out of Open Acres™. We also celebrated the grand re-openings of our newly remodeled Omaha stores with encouraging results. In addition, we realized further benefits from our ongoing investments in our supply chain network.”

Gross profit margin for the third quarter was 14.2 percent compared to 14.6 percent in the prior year quarter primarily due to the mix of business operations and the impact of continued deflation.

Reported operating expenses for the third quarter decreased to $225.4 million, or 12.5 percent of sales, from $229.8 million, or 12.9 percent of sales, in the prior year quarter. Third quarter operating expenses would have been $220.2 million, or 12.2 percent of net sales, compared to $224.3 million, or 12.6 percent of net sales in the prior year quarter, if restructuring, asset impairment, and merger integration charges were excluded from both periods. The decrease as a rate to sales was primarily due to lower depreciation expense associated with fully depreciated assets and lower occupancy costs, as well as improved operating expense leverage resulting from sales growth and ongoing productivity and efficiency initiatives.

Food Distribution Segment

Net sales for the food distribution segment increased to $804.5 million from $762.3 million in the prior year quarter primarily due to new business gains as well as the growth of certain existing accounts, which more than offset the impact of continued deflation.

Reported operating earnings for the food distribution segment increased to $19.0 million from $16.5 million in the prior year quarter. Third quarter adjusted operating earnings increased to $19.8 million from $17.0 million in the prior year quarter. The increases were due to higher sales, supply chain improvements, and lower depreciation expense, partially offset by costs associated with a water main break, transition-related expenses associated with warehouse consolidation efforts, and continued deflation. Third quarter adjusted operating earnings exclude $0.8 million of net pre-tax charges primarily related to merger integration expenses. The prior year third quarter excludes $0.5 million of pre-tax charges related to merger integration and acquisition costs and other charges associated with cost reduction initiatives. Adjusted operating earnings is a non-GAAP operating financial measure. Please see the financial tables at the end of this press release for a reconciliation of operating earnings to adjusted operating earnings by segment.

Retail Segment

Net sales for the retail segment were $489.0 million in the third quarter compared to $507.2 million for the prior year quarter. Comparable store sales for the quarter, excluding fuel, improved to -1.8 percent from -3.0 percent in the second quarter. Despite the sequential improvements in comparable store sales as well as higher fuel gallons, the ongoing deflationary environment and continued challenging economic conditions, particularly in certain western geographies, contributed to the lower sales at retail. Specifically, the decrease in net sales was attributable to the negative comparable store sales, excluding fuel; $7.9 million in lower sales resulting from retail store closures; and $3.8 million due to lower retail fuel prices compared to the prior year.

2


 

Reported operating earnings in the retail segment were $8.0 million compared to $9.2 million in the prior year quarter. Adjusted operating earnings were $12.4 million compared to $13.2 million in the prior year quarter. Current year adjusted operating earnings exclude $4.4 million of pre-tax asset impairment and restructuring charges and merger integration expenses. The prior year third quarter excludes $4.0 million of pre-tax merger integration and acquisition costs, and net asset impairment charges. The decrease in adjusted operating earnings was primarily due to lower comparable store sales volumes and the impact of deflation, partially offset by favorable rebate programs, lower occupancy costs, and the impact of store closures.

During the third quarter, the Company opened one new fuel center and closed one store upon lease expiration, ending the quarter with 159 Company-owned retail stores, 79 pharmacies, and 30 fuel centers.

Military Segment

Net sales for the Company's military segment increased to $506.6 million from $506.0 million in the prior year quarter. The increase was 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 $2.9 million compared to $3.4 million in the prior year quarter. Third quarter adjusted operating earnings were $2.9 million compared to $4.5 million in the prior year period. In the prior year third quarter, adjusted operating earnings exclude $1.1 million of pre-tax restructuring and asset impairment charges primarily related to a facility closure. The decrease was primarily due to the lack of inflationary gains and a shift in the business mix.

Balance Sheet and Cash Flow

Cash flow provided by operating activities for the year-to-date period was $78.6 million, compared to $129.9 million in the comparable period last year, primarily due to customer advances to support sales growth and the timing of working capital requirements.

Long-term debt and capital lease obligations, including current maturities, were $494.4 million at October 8, 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 $468.0 million as of October 8, 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, which approximates the Company’s goal, as of October 8, 2016. Net long-term debt is a non-GAAP financial measure. Please see the financial tables at the end of this press release for a reconciliation of long-term debt and capital lease obligations to total net long-term debt and capital lease obligations.

Outlook

Mr. Eidson continued, “While we anticipate continued deflationary pressure for the remainder of the year, we are confident that we will continue to improve our top line performance as we deliver value to our food distribution and retail customers through our solutions-focused approach and commitment to exceeding our customers’ expectations. We expect our targeted capital investments and enhancements to our merchandising, pricing and promotional strategies will offset some of the deflationary and competitive pressures in the retail segment. In our food distribution and military network, we continue to allocate resources to drive new business development, which will better enable us to pursue opportunities within the alternative channel space.”

3


 

The Company is narrowing its previously issued fiscal 2016 guidance of adjusted earnings per diluted share from continuing operations to approximately $2.09 to $2.16, excluding merger integration costs and other adjusted charges and gains, compared to $1.98 in the prior year. The Company anticipates that reported earnings from continuing operations will now be in the range of approximately $1.58 to $1.65 per diluted share, compared to $1.67 in the prior year. The guidance reflects the continuation of negative comparable retail store sales and the variability associated with deflation and its related positive impact on LIFO.

The Company expects capital expenditures for fiscal year 2016 to now approximate $72.0 million, with depreciation and amortization of approximately $76.0 million to $77.0 million, and total interest expense of approximately $18.0 to $19.0 million.

Recent Developments

On November 3, 2016, the Company entered into a definitive agreement to acquire certain assets of Caito Foods Service (“Caito”) and Blue Ribbon Transport (“BRT”) for $217.5 million in cash, in addition to reimbursing Caito for certain transaction costs and providing two earn-out opportunities that have the potential to pay the sellers an additional $12.4 million collectively if the business achieves certain performance targets. The purchase price will be funded with proceeds from the Company’s asset-based lending facility.

Founded in Indianapolis in 1965, Caito Foods Service is a leading supplier of fresh fruit and vegetables to grocery retailers and food service distributors across 22 states in the Southeast, Midwest and Eastern United States. Caito and BRT, which generate combined annual revenues in excess of $600 million, currently service customers from facilities in Indiana, Ohio and Florida. Caito also has a central fresh cut fruit and vegetable facility in Indianapolis and is completing construction on its new 118,000 square foot Fresh Kitchen facility, also in Indianapolis. The $32 million Fresh Kitchen will process, cook, and package fresh protein-based foods and complete meals; it is expected to be fully operational in the first quarter of 2017. The company offers temperature-controlled distribution and logistics services throughout North America through its affiliate Blue Ribbon Transport.

The acquisition will strengthen the Company’s product offerings to its existing customer base by expanding into the fast-growing freshly-prepared centerplate and side dish categories. The Company expects to close the acquisition by early January 2017, subject to regulatory approval and customary closing conditions.

Conference Call

A telephone conference call to discuss the Company’s third quarter of fiscal 2016 financial results is scheduled for 9:00 a.m. Eastern Time, Thursday, November 10, 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 (Nasdaq: SPTN) is a Fortune 400 company whose core businesses include distributing grocery products to independent grocery retailers, national accounts, its corporate owned retail stores, and U.S. military commissaries. SpartanNash serves customer locations in 47 states and the District of Columbia, Europe, Cuba, Puerto Rico, Bahrain and Egypt. SpartanNash currently operates 159 supermarkets, primarily under the banners of Family Fare Supermarkets, Family Fresh Market, D&W Fresh Market and Sun Mart. Through its MDV military division, SpartanNash is the leading distributor of grocery products to military commissaries in the United States.  

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 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, 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

 

 

40 Weeks Ended

 

 

 

October 8,

 

 

October 10,

 

 

October 8,

 

 

October 10,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

Net sales

$

 

1,800,085

 

 

$

 

1,775,401

 

 

$

 

5,906,416

 

 

$

 

5,883,948

 

 

Cost of sales

 

 

1,544,790

 

 

 

 

1,516,352

 

 

 

 

5,054,180

 

 

 

 

5,026,611

 

 

Gross profit

 

 

255,295

 

 

 

 

259,049

 

 

 

 

852,236

 

 

 

 

857,337

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

220,339

 

 

 

 

224,648

 

 

 

 

740,138

 

 

 

 

752,452

 

 

Merger integration and acquisition

 

 

2,427

 

 

 

 

4,417

 

 

 

 

4,237

 

 

 

 

7,252

 

 

Restructuring charges and asset impairment

 

 

2,662

 

 

 

 

760

 

 

 

 

23,714

 

 

 

 

7,762

 

 

Total operating expenses

 

 

225,428

 

 

 

 

229,825

 

 

 

 

768,089

 

 

 

 

767,466

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

 

 

29,867

 

 

 

 

29,224

 

 

 

 

84,147

 

 

 

 

89,871

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (income) and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

4,419

 

 

 

 

4,983

 

 

 

 

14,678

 

 

 

 

16,627

 

 

Other, net

 

 

(146

)

 

 

 

(148

)

 

 

 

(416

)

 

 

 

(202

)

 

Total other expenses, net

 

 

4,273

 

 

 

 

4,835

 

 

 

 

14,262

 

 

 

 

16,425

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before income taxes and discontinued operations

 

 

25,594

 

 

 

 

24,389

 

 

 

 

69,885

 

 

 

 

73,446

 

 

Income taxes

 

 

8,864

 

 

 

 

9,141

 

 

 

 

25,635

 

 

 

 

27,444

 

 

Earnings from continuing operations

 

 

16,730

 

 

 

 

15,248

 

 

 

 

44,250

 

 

 

 

46,002

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) earnings from discontinued operations, net of taxes

 

 

(82

)

 

 

 

145

 

 

 

 

(268

)

 

 

 

(21

)

 

Net earnings

$

 

16,648

 

 

$

 

15,393

 

 

$

 

43,982

 

 

$

 

45,981

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from continuing operations

$

 

0.45

 

 

$

 

0.41

 

 

$

 

1.18

 

 

$

 

1.22

 

 

(Loss) earnings from discontinued operations

 

 

(0.01

)

*

 

 

 

 

 

 

(0.01

)

 

 

 

 

 

Net earnings

$

 

0.44

 

 

$

 

0.41

 

 

$

 

1.17

 

 

$

 

1.22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from continuing operations

$

 

0.45

 

 

$

 

0.40

 

 

$

 

1.18

 

 

$

 

1.22

 

 

(Loss) earnings from discontinued operations

 

 

(0.01

)

*

 

 

0.01

 

*

 

 

(0.01

)

 

 

 

 

 

Net earnings

$

 

0.44

 

 

$

 

0.41

 

 

$

 

1.17

 

 

$

 

1.22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

37,470

 

 

 

 

37,553

 

 

 

 

37,479

 

 

 

 

37,617

 

 

Diluted

 

 

37,546

 

 

 

 

37,653

 

 

 

 

37,539

 

 

 

 

37,735

 

 

*Includes rounding

 

 

 

6


 

SPARTANNASH COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

  

October 8, 2016

 

 

October 10, 2015

 

Assets

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

 

26,398

 

 

$

 

8,510

 

Accounts and notes receivable, net

 

 

321,989

 

 

 

 

320,019

 

Inventories, net

 

 

561,772

 

 

 

 

573,320

 

Prepaid expenses and other current assets

 

 

29,589

 

 

 

 

24,494

 

Property and equipment held for sale

 

 

 

 

 

 

4,002

 

Total current assets

 

 

939,748

 

 

 

 

930,345

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

570,709

 

 

 

 

586,361

 

Goodwill

 

 

322,686

 

 

 

 

331,612

 

Other assets, net

 

 

160,736

 

 

 

 

108,850

 

 

 

 

 

 

 

 

 

 

 

Total assets

$

 

1,993,879

 

 

$

 

1,957,168

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Accounts payable

$

 

398,945

 

 

$

 

365,818

 

Accrued payroll and benefits

 

 

66,980

 

 

 

 

63,693

 

Other accrued expenses

 

 

40,149

 

 

 

 

36,824

 

Current maturities of long-term debt and capital lease obligations

 

 

18,998

 

 

 

 

21,993

 

Total current liabilities

 

 

525,072

 

 

 

 

488,328

 

 

 

 

 

 

 

 

 

 

 

Long-term liabilities

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

116,277

 

 

 

 

118,601

 

Postretirement benefits

 

 

16,282

 

 

 

 

17,070

 

Other long-term liabilities

 

 

45,300

 

 

 

 

37,870

 

Long-term debt and capital lease obligations

 

 

475,365

 

 

 

 

516,704

 

Total long-term liabilities

 

 

653,224

 

 

 

 

690,245

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

 

 

 

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

     authorized; 37,488 and 37,517 shares outstanding

 

 

519,390

 

 

 

 

520,953

 

Preferred stock, no par value, 10,000 shares

     authorized; no shares outstanding

 

 

 

 

 

 

 

Accumulated other comprehensive loss

 

 

(11,444

)

 

 

 

(11,233

)

Retained earnings

 

 

307,637

 

 

 

 

268,875

 

Total shareholders’ equity

 

 

815,583

 

 

 

 

778,595

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

$

 

1,993,879

 

 

$

 

1,957,168

 

 

 

 

7


 

SPARTANNASH COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited) 

 

  

40 Weeks Ended

 

 

October 8, 2016

 

 

October 10, 2015

 

Cash flow activities

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

$

 

78,573

 

 

$

 

129,869

 

Net cash used in investing activities

 

 

(52,536

)

 

 

 

(71,497

)

Net cash used in financing activities

 

 

(21,944

)

 

 

 

(47,486

)

Net cash used in discontinued operations

 

 

(414

)

 

 

 

(8,819

)

Net increase in cash and cash equivalents

 

 

3,679

 

 

 

 

2,067

 

Cash and cash equivalents at beginning of period

 

 

22,719

 

 

 

 

6,443

 

Cash and cash equivalents at end of period

$

 

26,398

 

 

$

 

8,510

 

 

 

 

 

SPARTANNASH COMPANY AND SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA

Table 1: Sales and Operating Earnings by Segment

(In thousands)

(Unaudited)

 

12 Weeks Ended

 

 

40 Weeks Ended

 

 

October 8, 2016

 

 

October 10, 2015

 

 

October 8, 2016

 

 

October 10, 2015

 

Military Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

 

506,626

 

 

28.1

%

 

$

 

505,971

 

 

28.5

%

 

$

 

1,686,567

 

 

28.5

%

 

$

 

1,702,412

 

 

29.0

%

Operating earnings

$

 

2,862

 

 

 

 

 

$

 

3,438

 

 

 

 

 

$

 

8,792

 

 

 

 

 

$

 

13,491

 

 

 

 

Food Distribution Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

804,500

 

 

44.7

%

 

 

 

762,250

 

 

42.9

%

 

 

 

2,615,964

 

 

44.3

%

 

 

 

2,531,428

 

 

43.0

%

Operating earnings

 

 

18,957

 

 

 

 

 

 

 

16,540

 

 

 

 

 

 

 

64,040

 

 

 

 

 

 

 

56,195

 

 

 

 

Retail Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

488,959

 

 

27.2

%

 

 

 

507,180

 

 

28.6

%

 

 

 

1,603,885

 

 

27.2

%

 

 

 

1,650,108

 

 

28.0

%

Operating earnings

 

 

8,048

 

 

 

 

 

 

 

9,246

 

 

 

 

 

 

 

11,315

 

 

 

 

 

 

 

20,185

 

 

 

 

Total:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

 

1,800,085

 

 

100.0

%

 

$

 

1,775,401

 

 

100.0

%

 

$

 

5,906,416

 

 

100.0

%

 

$

 

5,883,948

 

 

100.0

%

Operating earnings

$

 

29,867

 

 

 

 

 

$

 

29,224

 

 

 

 

 

$

 

84,147

 

 

 

 

 

$

 

89,871

 

 

 

 

 

 

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

 

 

40 Weeks Ended

 

 

October 8,

 

 

October 10,

 

 

October 8,

 

 

October 10,

 

(In thousands)

2016

 

 

2015

 

 

2016

 

 

2015

 

Net earnings

$

 

16,648

 

 

$

 

15,393

 

 

$

 

43,982

 

 

$

 

45,981

 

Loss (earnings) from discontinued operations, net of tax

 

 

82

 

 

 

 

(145

)

 

 

 

268

 

 

 

 

21

 

Income taxes

 

 

8,864

 

 

 

 

9,141

 

 

 

 

25,635

 

 

 

 

27,444

 

Other expenses, net

 

 

4,273

 

 

 

 

4,835

 

 

 

 

14,262

 

 

 

 

16,425

 

Operating earnings

 

 

29,867

 

 

 

 

29,224

 

 

 

 

84,147

 

 

 

 

89,871

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIFO (benefit) expense

 

 

(341

)

 

 

 

178

 

 

 

 

2,130

 

 

 

 

3,195

 

Depreciation and amortization

 

 

17,927

 

 

 

 

19,722

 

 

 

 

58,931

 

 

 

 

64,960

 

Merger integration and acquisition expenses

 

 

2,427

 

 

 

 

4,417

 

 

 

 

4,237

 

 

 

 

7,252

 

Restructuring charges and asset impairment

 

 

2,662

 

 

 

 

760

 

 

 

 

23,714

 

 

 

 

7,762

 

Fees and expenses related to tax planning strategies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

569

 

Stock-based compensation

 

 

943

 

 

 

 

808

 

 

 

 

7,010

 

 

 

 

6,470

 

Other non-cash (gains) charges

 

 

(71

)

 

 

 

123

 

 

 

 

3

 

 

 

 

(409

)

Adjusted EBITDA

$

 

53,414

 

 

$

 

55,232

 

 

$

 

180,172

 

 

$

 

179,670

 

Reconciliation of operating earnings to adjusted EBITDA by segment:

 

Military:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

$

 

2,862

 

 

$

 

3,438

 

 

$

 

8,792

 

 

$

 

13,491

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIFO expense (benefit)

 

 

134

 

 

 

 

(59

)

 

 

 

678

 

 

 

 

620

 

Depreciation and amortization

 

 

2,693

 

 

 

 

2,838

 

 

 

 

8,850

 

 

 

 

9,381

 

Merger integration and acquisition expenses

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

Restructuring charges (gains) and asset impairment

 

 

18

 

 

 

 

984

 

 

 

 

(241

)

 

 

 

984

 

Fees and expenses related to tax planning strategies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

75

 

Stock-based compensation

 

 

171

 

 

 

 

144

 

 

 

 

1,178

 

 

 

 

998

 

Other non-cash charges

 

 

58

 

 

 

 

101

 

 

 

 

262

 

 

 

 

204

 

Adjusted EBITDA

$

 

5,936

 

 

$

 

7,446

 

 

$

 

19,520

 

 

$

 

25,753

 

Food Distribution:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

$

 

18,957

 

 

$

 

16,540

 

 

$

 

64,040

 

 

$

 

56,195

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIFO (benefit) expense

 

 

(348

)

 

 

 

16

 

 

 

 

941

 

 

 

 

1,575

 

Depreciation and amortization

 

 

4,842

 

 

 

 

6,131

 

 

 

 

16,139

 

 

 

 

20,836

 

Merger integration and acquisition expenses

 

 

639

 

 

 

 

323

 

 

 

 

1,201

 

 

 

 

1,359

 

Restructuring charges (gains) and asset impairment

 

 

207

 

 

 

 

41

 

 

 

 

4,749

 

 

 

 

(237

)

Fees and expenses related to tax planning strategies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

282

 

Stock-based compensation

 

 

409

 

 

 

 

363

 

 

 

 

3,090

 

 

 

 

2,992

 

Other non-cash (gains) charges

 

 

(61

)

 

 

 

123

 

 

 

 

137

 

 

 

 

164

 

Adjusted EBITDA

$

 

24,645

 

 

$

 

23,537

 

 

$

 

90,297

 

 

$

 

83,166

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

$

 

8,048

 

 

$

 

9,246

 

 

$

 

11,315

 

 

$

 

20,185

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIFO (benefit) expense

 

 

(127

)

 

 

 

221

 

 

 

 

511

 

 

 

 

1,000

 

Depreciation and amortization

 

 

10,392

 

 

 

 

10,753

 

 

 

 

33,942

 

 

 

 

34,743

 

Merger integration and acquisition expenses

 

 

1,788

 

 

 

 

4,094

 

 

 

 

3,035

 

 

 

 

5,893

 

Restructuring charges (gains) and asset impairment

 

 

2,437

 

 

 

 

(265

)

 

 

 

19,206

 

 

 

 

7,015

 

Fees and expenses related to tax planning strategies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

212

 

Stock-based compensation

 

 

363

 

 

 

 

301

 

 

 

 

2,742

 

 

 

 

2,480

 

Other non-cash gains

 

 

(68

)

 

 

 

(101

)

 

 

 

(396

)

 

 

 

(777

)

Adjusted EBITDA

$

 

22,833

 

 

$

 

24,249

 

 

$

 

70,355

 

 

$

 

70,751

 

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 both management and its 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 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.

10


 

 

Table 3: Reconciliation of Operating Earnings to Adjusted Operating Earnings

(A Non-GAAP Financial Measure)

(In thousands)

(Unaudited)

 

12 Weeks Ended

 

 

40 Weeks Ended

 

 

October 8,

 

 

October 10,

 

 

October 8,

 

 

October 10,

 

(In thousands)

2016

 

 

2015

 

 

2016

 

 

2015

 

Operating earnings

$

 

29,867

 

 

$

 

29,224

 

 

$

 

84,147

 

 

$

 

89,871

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger integration and acquisition expenses

 

 

2,427

 

 

 

 

4,417

 

 

 

 

4,237

 

 

 

 

7,252

 

Restructuring charges and asset impairment

 

 

2,662

 

 

 

 

760

 

 

 

 

23,714

 

 

 

 

7,762

 

Fees and expenses related to tax planning strategies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

569

 

Severance associated with cost reduction initiatives

 

 

149

 

 

 

 

371

 

 

 

 

839

 

 

 

 

371

 

Adjusted operating earnings

$

 

35,105

 

 

$

 

34,772

 

 

$

 

112,937

 

 

$

 

105,825

 

Reconciliation of operating earnings to adjusted operating earnings by segment:

 

Military:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

$

 

2,862

 

 

$

 

3,438

 

 

$

 

8,792

 

 

$

 

13,491

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger integration and acquisition expenses

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

Restructuring charges (gains) and asset impairment

 

 

18

 

 

 

 

984

 

 

 

 

(241

)

 

 

 

984

 

Fees and expenses related to tax planning strategies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

75

 

Severance associated with cost reduction initiatives

 

 

20

 

 

 

 

95

 

 

 

 

242

 

 

 

 

95

 

Adjusted operating earnings

$

 

2,900

 

 

$

 

4,517

 

 

$

 

8,794

 

 

$

 

14,645

 

Food Distribution:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

$

 

18,957

 

 

$

 

16,540

 

 

$

 

64,040

 

 

$

 

56,195

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger integration and acquisition expenses

 

 

639

 

 

 

 

323

 

 

 

 

1,201

 

 

 

 

1,359

 

Restructuring charges (gains) and asset impairment

 

 

207

 

 

 

 

41

 

 

 

 

4,749

 

 

 

 

(237

)

Fees and expenses related to tax planning strategies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

282

 

Severance associated with cost reduction initiatives

 

 

12

 

 

 

 

116

 

 

 

 

218

 

 

 

 

116

 

Adjusted operating earnings

$

 

19,815

 

 

$

 

17,020

 

 

$

 

70,208

 

 

$

 

57,715

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

$

 

8,048

 

 

$

 

9,246

 

 

$

 

11,315

 

 

$

 

20,185

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger integration and acquisition expenses

 

 

1,788

 

 

 

 

4,094

 

 

 

 

3,035

 

 

 

 

5,893

 

Restructuring charges (gains) and asset impairment

 

 

2,437

 

 

 

 

(265

)

 

 

 

19,206

 

 

 

 

7,015

 

Fees and expenses related to tax planning strategies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

212

 

Severance associated with cost reduction initiatives

 

 

117

 

 

 

 

160

 

 

 

 

379

 

 

 

 

160

 

Adjusted operating earnings

$

 

12,390

 

 

$

 

13,235

 

 

$

 

33,935

 

 

$

 

33,465

 

 

11


 

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 both management and its 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.

 

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

 

 

 

October 8, 2016

 

 

October 10, 2015

 

 

 

 

 

 

per diluted

 

 

 

 

 

per diluted

 

 

(In thousands, except per share data)

Earnings

 

 

share

 

 

Earnings

 

 

share

 

 

Earnings from continuing operations

$

 

16,730

 

 

$

 

0.45

 

 

$

 

15,248

 

 

$

 

0.40

 

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger integration and acquisition expenses

 

 

2,427

 

 

 

 

 

 

 

 

 

4,417

 

 

 

 

 

 

 

Restructuring charges and asset impairment

 

 

2,662

 

 

 

 

 

 

 

 

 

760

 

 

 

 

 

 

 

Severance associated with cost reduction initiatives

 

 

149

 

 

 

 

 

 

 

 

 

371

 

 

 

 

 

 

 

Total adjustments

 

 

5,238

 

 

 

 

 

 

 

 

 

5,548

 

 

 

 

 

 

 

Favorable settlement of unrecognized tax liability

 

 

 

 

 

 

 

 

 

 

 

(94

)

 

 

 

 

 

 

Income tax effect on adjustments (a)

 

 

(1,918

)

 

 

 

 

 

 

 

 

(2,072

)

 

 

 

 

 

 

Total adjustments, net of taxes

 

 

3,320

 

 

 

 

0.08

 

*

 

 

3,382

 

 

 

 

0.09

 

 

Adjusted earnings from continuing operations

$

 

20,050

 

 

$

 

0.53

 

 

$

 

18,630

 

 

$

 

0.49

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40 Weeks Ended

 

 

 

October 8, 2016

 

 

October 10, 2015

 

 

 

 

 

 

per diluted

 

 

 

 

 

per diluted

 

 

(In thousands, except per share data)

Earnings

 

 

share

 

 

Earnings

 

 

share

 

 

Earnings from continuing operations

$

 

44,250

 

 

$

 

1.18

 

 

$

 

46,002

 

 

$

 

1.22

 

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger integration and acquisition expenses

 

 

4,237

 

 

 

 

 

 

 

 

 

7,252

 

 

 

 

 

 

 

Restructuring charges and asset impairment

 

 

23,714

 

 

 

 

 

 

 

 

 

7,762

 

 

 

 

 

 

 

Fees and expenses related to tax planning strategies

 

 

 

 

 

 

 

 

 

 

 

569

 

 

 

 

 

 

 

Severance associated with cost reduction initiatives

 

 

839

 

 

 

 

 

 

 

 

 

371

 

 

 

 

 

 

 

Total adjustments

 

 

28,790

 

 

 

 

 

 

 

 

 

15,954

 

 

 

 

 

 

 

Favorable settlement of unrecognized tax liability

 

 

 

 

 

 

 

 

 

 

 

(94

)

 

 

 

 

 

 

Tax planning strategies

 

 

 

 

 

 

 

 

 

 

 

(730

)

 

 

 

 

 

 

Income tax effect on adjustments (a)

 

 

(10,871

)

 

 

 

 

 

 

 

 

(6,110

)

 

 

 

 

 

 

Total adjustments, net of taxes

 

 

17,919

 

 

 

 

0.48

 

 

 

 

9,020

 

 

 

 

0.24

 

 

Adjusted earnings from continuing operations

$

 

62,169

 

 

$

 

1.66

 

 

$

 

55,022

 

 

$

 

1.46

 

 

* Includes rounding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12


 

(a)

The income tax effect on adjustments is computed by applying the effective tax rate, before discrete tax items, to the total adjustments for the period.

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 both management and its 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.

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)

October 8, 2016

 

 

January 2, 2016

 

Current maturities of long-term debt and capital lease obligations

$

 

18,998

 

 

$

 

19,003

 

Long-term debt and capital lease obligations

 

 

475,365

 

 

 

 

467,793

 

Total debt

 

 

494,363

 

 

 

 

486,796

 

Cash and cash equivalents

 

 

(26,398

)

 

 

 

(22,719

)

Total net long-term debt

$

 

467,965

 

 

$

 

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 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. Total net debt is not a substitute for GAAP financial measures and may differ from similarly titled measures of other companies.

 

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

$

 

1.58

 

 

$

 

1.65

 

Adjustments, net of taxes:

 

 

 

 

 

 

 

 

 

   Merger integration and acquisition

 

 

0.10

 

 

 

 

0.10

 

   Restructuring and asset impairment

 

 

0.40

 

 

 

 

0.40

 

   Severance associated with cost reduction initiatives

 

 

0.01

 

 

 

 

0.01

 

Adjusted earnings from continuing operations

$

 

2.09

 

 

$

 

2.16

 

 

13