SpartanNash Announces Third Quarter Fiscal 2020 Financial Results

Nov 11th, 2020

Reports Third Quarter Retail Comparable Store Sales of 10.6%

Generates EPS of $0.56; Adjusted EPS Increased 133% to $0.70

Adjusted EBITDA increased 37.2% to $57.0 million

Updates Fiscal Year 2020 Outlook

GRAND RAPIDS, Mich. - SpartanNash Company (the "Company") (Nasdaq: SPTN) today reported financial results for its 12-week third quarter ended October 3, 2020.

Third Quarter Fiscal 2020 Highlights

  • Net sales growth of 3.1% to $2.06 billion from $2.00 billion in the prior year quarter, representing the eighteenth consecutive quarter of growth.
  • Retail comparable store sales of 10.6% were positive for the fifth consecutive quarter.
  • EPS of $0.56 per share, compared to a loss of $(0.01) per share in the prior year quarter; adjusted EPS of $0.70 per share, an increase of 133% over $0.30 per share in the prior year quarter.
  • Adjusted EBITDA increase of 37.2%, to $57.0 million from $41.6 million in the prior year quarter.
  • Subsequent to the end of the third quarter, the Company extended its commercial agreement with Amazon. In connection with this agreement, the Company issued stock warrants to a subsidiary of Amazon, subject to certain vesting conditions.

"In the past nine weeks since taking the CEO position I've visited a great number of our distribution centers and retail stores. The passion demonstrated by our associates is nothing short of inspirational," said Tony Sarsam, President and Chief Executive Officer. "I am energized and excited about the profitable growth opportunities that lie ahead for our business. As I immerse further into our business, I will continue to assess our long-term strategy, focus on motivating our associates and recognizing their accomplishments, identifying opportunities to make investments to improve the efficiency and effectiveness of our supply chain, and evaluating how to best position SpartanNash to deliver shareholder value for years to come."

Consolidated net sales for the third quarter increased $61.0 million, or 3.1%, to $2.06 billion from $2.00 billion in the prior year quarter. The increase in net sales was generated through higher sales attributable to increased consumer demand related to COVID-19 in the Company's Retail and Food Distribution segments, as well as continued growth with existing Food Distribution customers, partially offset by the continued impact of domestic base access and commissary shopping restrictions associated with COVID-19 in the Military segment.

Gross profit for the third quarter was $324.8 million, or 15.8% of net sales, compared to $290.4 million, or 14.5% of net sales, in the prior year quarter. The improvement in the gross profit rate was driven by improvements in margin rates at all three segments, as well as an increase in the proportion of Retail and Food Distribution segment sales, which generate higher margin rates than the Military segment.

Reported operating expenses for the third quarter were $295.8 million, or 14.4% of net sales, compared to $274.6 million, or 13.7% 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 increased incentive compensation related to improved Company performance, a higher mix of Retail segment sales which have higher operating expense rates, higher supply chain expenses in the Food Distribution segment, and a $5.2 million increase in restructuring and asset impairment charges, partially offset by increased leverage of retail store labor expenses and other fixed costs due to the higher sales volume in the quarter.

The Company reported operating earnings of $29.0 million compared to $15.8 million in the prior year quarter. The increase was attributable to increased sales volume, as well as the changes in rates of margin and operating expenses previously mentioned, partially offset by higher impairment charges. Adjusted operating earnings(1) were $35.8 million compared to $20.3 million in the prior year quarter and are adjusted for the items detailed in Table 3.

Interest expense decreased $3.9 million from the prior year quarter due to multiple rate cuts implemented by the Federal Reserve during 2019 and in early 2020, as well as the Company's pay down of the debt balance made possible by higher earnings and lower required investments in working capital. Postretirement benefit expense was favorable $10.1 million from cycling charges related to the termination of the Company's pension plan in the prior year quarter.

The Company reported earnings from continuing operations of $20.0 million, or $0.56 per diluted share, compared to a loss from continuing operations of $0.3 million, or $0.01 per diluted share, in the prior year quarter. The improvement reflects the operating earnings and non-operating expense changes noted above. Adjusted earnings from continuing operations(2) for the third quarter were $25.1 million, or $0.70 per diluted share. Adjusted earnings from continuing operations for the prior year quarter were $10.9 million, or $0.30 per diluted share. A reconciliation of reported earnings from continuing operations to adjusted earnings from continuing operations is included at Table 4.

Adjusted EBITDA(3) increased $15.4 million, or 37.2%, to $57.0 million compared to $41.6 million in the prior year quarter due to factors mentioned above.

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 increased $73.2 million, or 7.8%, to $1.01 billion from $0.94 billion in the prior year quarter. The increase was due to sales growth with existing customers, as well as incremental volume associated with increased consumer demand related to COVID-19, partially offset by the impact of the Company's decision to exit its Fresh Production operations.

Reported operating earnings for Food Distribution were $9.2 million compared to $11.7 million in the prior year quarter. During the quarter, the Company made the decision to abandon a tradename within this segment to better align with the Company's overall transportation operations and to provide a more integrated solution to its customers, resulting in a $7.0 million impairment of the associated indefinite-lived tradename asset. The decrease in reported operating earnings for Food Distribution was due to this asset impairment charge, as well as an increase in supply chain and corporate administrative expenses, partially offset by increased earnings due to the higher sales volume. Third quarter adjusted operating earnings(1) were $15.7 million compared to $15.5 million in the prior year quarter. Adjusted operating earnings exclude asset impairment and restructuring charges in both years and losses associated with the Fresh Kitchen operations in the prior year quarter.

Retail

Net sales for Retail increased $35.1 million, or 6.2%, to $596.7 million from $561.6 million in the prior year quarter primarily due to increased consumer demand related to COVID-19, as discussed above. Comparable store sales of 10.6% were partially offset by the impact of lower fuel sales, as well as store closures. During the quarter, the Company experienced more than 175% growth in its eCommerce business.

Reported operating earnings for Retail were $22.3 million compared to $6.7 million in the prior year quarter. The increase in reported operating earnings was due to the increase in sales volume, improvements in margin rates, including inventory shrink, and improved leverage of store labor. These favorable variances were partially offset by higher incentive compensation due to the improved segment performance. Adjusted operating earnings(1) were $22.6 million compared to $7.3 million in the prior year quarter and exclude merger/acquisition and integration expenses in the current year and restructuring charges in the prior year quarter.

Military Distribution

Net sales for Military Distribution decreased $47.2 million, or 9.5%, to $452.0 million from $499.2 million in the prior year quarter. Growth in private label and export sales were more than offset by the impact of domestic base access and commissary shopping restrictions associated with COVID-19, which have led to significant declines in Defense Commissary Agency sales as a whole.

The reported operating loss for Military Distribution was $2.5 million compared to $2.6 million in the prior year quarter. The change was driven by improved margin rates, partially offset by higher corporate administrative expenses, the impact of lower sales volumes and, to a lesser extent, increases in the rate of warehousing expenses. Adjusted operating loss(1) was $2.5 million for the quarter in both years.

Balance Sheet and Cash Flow

Cash flows provided by operating activities for the year-to-date period of fiscal 2020 were $223.8 million compared to $140.0 million in the prior year, driven by increased profitability and reductions in working capital. In 2020, the Company has generated $178.0 million in free cash flow(4) year-to-date, compared to $93.1 million in the prior year. The Company reduced net long-term debt(5) by $145.0 million year-to-date in fiscal 2020. The reduction in net long-term debt, combined with increased profitability, resulted in an improvement in the Company's net long-term debt to adjusted EBITDA ratio over this period of time from 3.7x to 2.3x, calculated on a trailing thirteen periods basis.

Capital expenditures and IT capital(6) totaled $53.5 million in the year-to-date period compared to $46.9 million in the prior year.

Through the third quarter of fiscal 2020, the Company has declared $20.8 million in quarterly cash dividends equal to $0.1925 per common share. The Company also repurchased 860,752 shares for a total of $10.0 million in the first quarter of fiscal 2020, at an average price of $11.62 per share.

Outlook

For the 53-week fiscal year ending January 2, 2021, the Company is updating its annual outlook from what was previously provided on August 12, 2020 to reflect actual financial results, its expectations for the remainder of the fiscal year, and the forecasted impact of stock warrants, which were granted early in the fourth quarter.

For fiscal year 2020, the Company now anticipates adjusted earnings per share from continuing operations(7) of approximately $2.42 to $2.50 compared to its prior projection of $2.40 to $2.60. The Company's updated guidance reflects the continued benefits of sales trends associated with COVID-19 and the related increase in consumer demand, offset by estimated non-cash stock warrant expense of $6.0 million to $7.0 million, or $0.13 to $0.15 per diluted share. Reported earnings per share from continuing operations are expected to range from $2.09 to $2.17 compared to its prior projection of $2.13 to $2.41.

The Company now expects fiscal 2020 adjusted EBITDA to range from $237.0 million to $242.0 million compared to its prior guidance of $232.0 million to $242.0 million.

The Company's updated guidance now reflects capital expenditures and IT capital in the range of $80.0 million to $85.0 million for the fiscal year. Depreciation and amortization have been updated to a range of $88.0 million to $90.0 million. Interest expense is now expected to range from $18.0 million to $18.5 million. The Company's updated guidance now reflects an adjusted effective tax rate of 23.5% to 24.0% and a reported effective tax rate of 13.0% to 13.5%.

Conference Call

A telephone conference call to discuss the Company's third quarter 2020 financial results is scheduled for Thursday, November 12, 2020 at 8:00 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 ten 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, Bahrain, Djibouti and Egypt. SpartanNash currently operates 156 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 earnings from continuing operations 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 OPERATIONS

(Unaudited)

 
 

 

12 Weeks Ended

 

 

40 Weeks Ended

 

 

 

October 3,

 

 

October 5,

 

 

October 3,

 

 

October 5,

 

 

(In thousands, except per share amounts)

2020

 

 

2019

 

 

2020

 

 

2019

 

 

Net sales

$

 

2,060,816

 

 

$

 

1,999,808

 

 

$

 

7,101,373

 

 

$

 

6,538,112

 

 

Cost of sales

 

 

1,735,994

 

 

 

 

1,709,447

 

 

 

 

6,014,610

 

 

 

 

5,581,015

 

 

Gross profit

 

 

324,822

 

 

 

 

290,361

 

 

 

 

1,086,763

 

 

 

 

957,097

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

289,039

 

 

 

 

273,286

 

 

 

 

981,066

 

 

 

 

900,160

 

 

Merger/acquisition and integration

 

 

242

 

 

 

 

-

 

 

 

 

242

 

 

 

 

1,364

 

 

Restructuring charges and asset impairment

 

 

6,543

 

 

 

 

1,296

 

 

 

 

20,455

 

 

 

 

10,215

 

 

Total operating expenses

 

 

295,824

 

 

 

 

274,582

 

 

 

 

1,001,763

 

 

 

 

911,739

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

 

 

28,998

 

 

 

 

15,779

 

 

 

 

85,000

 

 

 

 

45,358

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expenses and (income)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

3,522

 

 

 

 

7,375

 

 

 

 

14,810

 

 

 

 

27,952

 

 

Loss on debt extinguishment

 

 

-

 

 

 

 

329

 

 

 

 

-

 

 

 

 

329

 

 

Postretirement benefit expense (income)

 

 

101

 

 

 

 

10,221

 

 

 

 

(597

)

 

 

 

19,677

 

 

Other, net

 

 

(141

)

 

 

 

(180

)

 

 

 

(547

)

 

 

 

(1,071

)

 

Total other expenses, net

 

 

3,482

 

 

 

 

17,745

 

 

 

 

13,666

 

 

 

 

46,887

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) before income taxes and discontinued operations

 

 

25,516

 

 

 

 

(1,966

)

 

 

 

71,334

 

 

 

 

(1,529

)

 

Income tax expense (benefit)

 

 

5,564

 

 

 

 

(1,656

)

 

 

 

7,513

 

 

 

 

(1,973

)

 

Earnings (loss) from continuing operations

 

 

19,952

 

 

 

 

(310

)

 

 

 

63,821

 

 

 

 

444

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from discontinued operations, net of taxes

 

 

-

 

 

 

 

(27

)

 

 

 

-

 

 

 

 

(126

)

 

Net earnings (loss)

$

 

19,952

 

 

$

 

(337

)

 

$

 

63,821

 

 

$

 

318

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) from continuing operations

$

 

0.56

 

 

$

 

(0.01

)

 

$

 

1.78

 

 

$

 

0.01

 

 

Loss from discontinued operations

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

Net earnings (loss)

$

 

0.56

 

 

$

 

(0.01

)

 

$

 

1.78

 

 

$

 

0.01

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) from continuing operations

$

 

0.56

 

 

$

 

(0.01

)

 

$

 

1.78

 

 

$

 

0.01

 

 

Loss from discontinued operations

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

Net earnings (loss)

$

 

0.56

 

 

$

 

(0.01

)

 

$

 

1.78

 

 

$

 

0.01

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

35,730

 

 

 

 

36,340

 

 

 

 

35,900

 

 

 

 

36,248

 

 

Diluted

 

 

35,732

 

 

 

 

36,340

 

 

 

 

35,900

 

 

 

 

36,248

 

 

SPARTANNASH COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 
 

 

October 3,

 

 

December 28,

 

(In thousands)

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

 

26,903

 

 

$

 

24,172

 

Accounts and notes receivable, net

 

 

387,114

 

 

 

 

345,320

 

Inventories, net

 

 

586,351

 

 

 

 

537,212

 

Prepaid expenses and other current assets

 

 

73,192

 

 

 

 

58,775

 

Property and equipment held for sale

 

 

21,942

 

 

 

 

31,203

 

Total current assets

 

 

1,095,502

 

 

 

 

996,682

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

562,326

 

 

 

 

615,816

 

Goodwill

 

 

181,035

 

 

 

 

181,035

 

Intangible assets, net

 

 

119,039

 

 

 

 

130,434

 

Operating lease assets

 

 

269,025

 

 

 

 

268,982

 

Other assets, net

 

 

94,632

 

 

 

 

82,660

 

 

 

 

 

 

 

 

 

 

 

Total assets

$

 

2,321,559

 

 

$

 

2,275,609

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Accounts payable

$

 

501,099

 

 

$

 

405,370

 

Accrued payroll and benefits

 

 

91,001

 

 

 

 

59,680

 

Other accrued expenses

 

 

53,439

 

 

 

 

51,295

 

Current portion of operating lease liabilities

 

 

43,705

 

 

 

 

42,440

 

Current portion of long-term debt and finance lease liabilities

 

 

5,338

 

 

 

 

6,349

 

Total current liabilities

 

 

694,582

 

 

 

 

565,134

 

 

 

 

 

 

 

 

 

 

 

Long-term liabilities

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

52,952

 

 

 

 

43,111

 

Operating lease liabilities

 

 

261,621

 

 

 

 

267,350

 

Other long-term liabilities

 

 

48,033

 

 

 

 

30,272

 

Long-term debt and finance lease liabilities

 

 

540,920

 

 

 

 

682,204

 

Total long-term liabilities

 

 

903,526

 

 

 

 

1,022,937

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

 

 

 

 

 

Common stock, voting, no par value; 100,000 shares authorized; 35,871 and 36,351 shares outstanding

 

 

484,612

 

 

 

 

490,233

 

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

 

 

-

 

 

 

 

-

 

Accumulated other comprehensive loss

 

 

(1,479

)

 

 

 

(1,600

)

Retained earnings

 

 

240,318

 

 

 

 

198,905

 

Total shareholders' equity

 

 

723,451

 

 

 

 

687,538

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders' equity

$

 

2,321,559

 

 

$

 

2,275,609

 

SPARTANNASH COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 
 

 

40 Weeks Ended

 

(In thousands)

October 3, 2020

 

 

October 5, 2019

 

Cash flow activities

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

$

 

223,832

 

 

$

 

140,034

 

Net cash used in investing activities

 

 

(35,536

)

 

 

 

(117,645

)

Net cash used in financing activities

 

 

(185,565

)

 

 

 

(17,385

)

Net cash used in discontinued operations

 

 

-

 

 

 

 

(153

)

Net increase in cash and cash equivalents

 

 

2,731

 

 

 

 

4,851

 

Cash and cash equivalents at beginning of the period

 

 

24,172

 

 

 

 

18,585

 

Cash and cash equivalents at end of the period

$

 

26,903

 

 

$

 

23,436

 

SPARTANNASH COMPANY AND SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA

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

(Unaudited)

 
 

 

12 Weeks Ended

 

 

40 Weeks Ended

 

(In thousands)

October 3, 2020

 

 

October 5, 2019

 

 

October 3, 2020

 

 

October 5, 2019

 

Food Distribution Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

 

1,012,204

 

 

49.1

%

 

$

 

939,047

 

 

47.0

%

 

$

 

3,471,561

 

 

48.9

%

 

$

 

3,043,668

 

 

46.6

%

Operating earnings

 

 

9,191

 

 

 

 

 

 

 

11,699

 

 

 

 

 

 

 

34,990

 

 

 

 

 

 

 

36,564

 

 

 

 

Retail Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

596,659

 

 

29.0

%

 

 

 

561,605

 

 

28.1

%

 

 

 

2,010,483

 

 

28.3

%

 

 

 

1,833,347

 

 

28.0

%

Operating earnings

 

 

22,318

 

 

 

 

 

 

 

6,726

 

 

 

 

 

 

 

59,416

 

 

 

 

 

 

 

14,600

 

 

 

 

Military Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

451,953

 

 

21.9

%

 

 

 

499,156

 

 

24.9

%

 

 

 

1,619,329

 

 

22.8

%

 

 

 

1,661,097

 

 

25.4

%

Operating loss

 

 

(2,511

)

 

 

 

 

 

 

(2,646

)

 

 

 

 

 

 

(9,406

)

 

 

 

 

 

 

(5,806

)

 

 

 

Total:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

 

2,060,816

 

 

100.0

%

 

$

 

1,999,808

 

 

100.0

%

 

$

 

7,101,373

 

 

100.0

%

 

$

 

6,538,112

 

 

100.0

%

Operating earnings

 

 

28,998

 

 

 

 

 

 

 

15,779

 

 

 

 

 

 

 

85,000

 

 

 

 

 

 

 

45,358

 

 

 

 

Non-GAAP Financial Measures

In addition to reporting financial results in accordance with GAAP, the Company also provides information regarding Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("adjusted EBITDA"), adjusted operating earnings, adjusted earnings from continuing operations, total net long-term debt, free cash flow and projected adjusted earnings per diluted share from continuing operations. 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 "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. These items are considered "non-operational" or "non-core" in nature. Prior year adjusted operating earnings, adjusted earnings from continuing operations, and adjusted EBITDA exclude "Fresh Kitchen operating losses" subsequent to the decision to exit these operations at the beginning of the third quarter, costs associated with organizational realignment, which include significant changes to the Company's management team, 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 costs, primarily related to non-operating settlement expense associated with the distribution of pension assets, are excluded from adjusted earnings from continuing operations, and to a lesser extent adjusted operating earnings.

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

(Adjusted EBITDA)

(A Non-GAAP Financial Measure)

(Unaudited)

 
 

 

12 Weeks Ended

 

 

40 Weeks Ended

 

(In thousands)

October 3, 2020

 

 

October 5, 2019

 

 

October 3, 2020

 

 

October 5, 2019

 

Net earnings (loss)

$

 

19,952

 

 

$

 

(337

)

 

$

 

63,821

 

 

$

 

318

 

Loss from discontinued operations, net of tax

 

 

-

 

 

 

 

27

 

 

 

 

-

 

 

 

 

126

 

Income tax expense (benefit)

 

 

5,564

 

 

 

 

(1,656

)

 

 

 

7,513

 

 

 

 

(1,973

)

Other expenses, net

 

 

3,482

 

 

 

 

17,745

 

 

 

 

13,666

 

 

 

 

46,887

 

Operating earnings

 

 

28,998

 

 

 

 

15,779

 

 

 

 

85,000

 

 

 

 

45,358

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIFO expense

 

 

387

 

 

 

 

1,268

 

 

 

 

3,158

 

 

 

 

3,761

 

Depreciation and amortization

 

 

20,858

 

 

 

 

20,351

 

 

 

 

68,611

 

 

 

 

67,513

 

Merger/acquisition and integration

 

 

242

 

 

 

 

-

 

 

 

 

242

 

 

 

 

1,364

 

Restructuring, asset impairment and other charges

 

 

6,543

 

 

 

 

1,296

 

 

 

 

20,455

 

 

 

 

10,215

 

Fresh Cut operating losses

 

 

-

 

 

 

 

-

 

 

 

 

2,262

 

 

 

 

-

 

Fresh Kitchen operating losses

 

 

-

 

 

 

 

2,204

 

 

 

 

-

 

 

 

 

2,204

 

Stock-based compensation

 

 

1,033

 

 

 

 

638

 

 

 

 

5,181

 

 

 

 

6,735

 

Non-cash rent

 

 

(1,188

)

 

 

 

(1,082

)

 

 

 

(3,981

)

 

 

 

(4,542

)

Costs associated with Project One Team

 

 

-

 

 

 

 

-

 

 

 

 

493

 

 

 

 

5,428

 

Organizational realignment costs

 

 

-

 

 

 

 

935

 

 

 

 

-

 

 

 

 

1,812

 

Severance associated with cost reduction initiatives

 

 

40

 

 

 

 

-

 

 

 

 

5,121

 

 

 

 

-

 

Loss on disposal of assets

 

 

35

 

 

 

 

-

 

 

 

 

3,462

 

 

 

 

-

 

Other non-cash charges

 

 

94

 

 

 

 

187

 

 

 

 

193

 

 

 

 

710

 

Adjusted EBITDA

$

 

57,042

 

 

$

 

41,576

 

 

$

 

190,197

 

 

$

 

140,558

 

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

and Amortization, continued

(Adjusted EBITDA)

(A Non-GAAP Financial Measure)

(Unaudited)

 
 

 

12 Weeks Ended

 

 

40 Weeks Ended

 

(In thousands)

October 3, 2020

 

 

October 5, 2019

 

 

October 3, 2020

 

 

October 5, 2019

 

Food Distribution:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

$

 

9,191

 

 

$

 

11,699

 

 

$

 

34,990

 

 

$

 

36,564

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIFO expense

 

 

295

 

 

 

 

639

 

 

 

 

1,684

 

 

 

 

1,869

 

Depreciation and amortization

 

 

7,413

 

 

 

 

7,390

 

 

 

 

24,561

 

 

 

 

25,368

 

Merger/acquisition and integration

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

(130

)

Restructuring, asset impairment and other charges

 

 

6,538

 

 

 

 

1,043

 

 

 

 

19,222

 

 

 

 

10,724

 

Fresh Cut operating losses

 

 

-

 

 

 

 

-

 

 

 

 

2,262

 

 

 

 

-

 

Fresh Kitchen operating losses

 

 

-

 

 

 

 

2,204

 

 

 

 

-

 

 

 

 

2,204

 

Stock-based compensation

 

 

522

 

 

 

 

302

 

 

 

 

2,524

 

 

 

 

3,319

 

Non-cash rent

 

 

31

 

 

 

 

147

 

 

 

 

125

 

 

 

 

353

 

Costs associated with Project One Team

 

 

-

 

 

 

 

-

 

 

 

 

265

 

 

 

 

2,877

 

Organizational realignment costs

 

 

-

 

 

 

 

495

 

 

 

 

-

 

 

 

 

960

 

Severance associated with cost reduction initiatives

 

 

-

 

 

 

 

-

 

 

 

 

3,143

 

 

 

 

-

 

(Gain) loss on disposal of assets

 

 

(6

)

 

 

 

-

 

 

 

 

1,613

 

 

 

 

-

 

Other non-cash charges

 

 

52

 

 

 

 

14

 

 

 

 

103

 

 

 

 

391

 

Adjusted EBITDA

$

 

24,036

 

 

$

 

23,933

 

 

$

 

90,492

 

 

$

 

84,499

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

$

 

22,318

 

 

$

 

6,726

 

 

$

 

59,416

 

 

$

 

14,600

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIFO (gain) expense

 

 

(15

)

 

 

 

257

 

 

 

 

586

 

 

 

 

858

 

Depreciation and amortization

 

 

10,489

 

 

 

 

10,197

 

 

 

 

34,570

 

 

 

 

33,048

 

Merger/acquisition and integration

 

 

242

 

 

 

 

-

 

 

 

 

242

 

 

 

 

1,494

 

Restructuring charges (gains) and asset impairment

 

 

5

 

 

 

 

253

 

 

 

 

1,233

 

 

 

 

(509

)

Stock-based compensation

 

 

364

 

 

 

 

222

 

 

 

 

1,756

 

 

 

 

2,325

 

Non-cash rent

 

 

(1,134

)

 

 

 

(1,149

)

 

 

 

(3,818

)

 

 

 

(4,612

)

Costs associated with Project One Team

 

 

-

 

 

 

 

-

 

 

 

 

164

 

 

 

 

1,845

 

Organizational realignment costs

 

 

-

 

 

 

 

318

 

 

 

 

-

 

 

 

 

616

 

Severance associated with cost reduction initiatives

 

 

9

 

 

 

 

-

 

 

 

 

1,441

 

 

 

 

-

 

Loss on disposal of assets

 

 

34

 

 

 

 

-

 

 

 

 

1,905

 

 

 

 

-

 

Other non-cash charges

 

 

30

 

 

 

 

243

 

 

 

 

64

 

 

 

 

410

 

Adjusted EBITDA

$

 

32,342

 

 

$

 

17,067

 

 

$

 

97,559

 

 

$

 

50,075

 

Military:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

$

 

(2,511

)

 

$

 

(2,646

)

 

$

 

(9,406

)

 

$

 

(5,806

)

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIFO expense

 

 

107

 

 

 

 

372

 

 

 

 

888

 

 

 

 

1,034

 

Depreciation and amortization

 

 

2,956

 

 

 

 

2,764

 

 

 

 

9,480

 

 

 

 

9,097

 

Stock-based compensation

 

 

147

 

 

 

 

114

 

 

 

 

901

 

 

 

 

1,091

 

Non-cash rent

 

 

(85

)

 

 

 

(80

)

 

 

 

(288

)

 

 

 

(283

)

Costs associated with Project One Team

 

 

-

 

 

 

 

-

 

 

 

 

64

 

 

 

 

706

 

Organizational realignment costs

 

 

-

 

 

 

 

122

 

 

 

 

-

 

 

 

 

236

 

Severance associated with cost reduction initiatives

 

 

31

 

 

 

 

-

 

 

 

 

537

 

 

 

 

-

 

Loss (gain) on disposal of assets

 

 

7

 

 

 

 

-

 

 

 

 

(56

)

 

 

 

-

 

Other non-cash charges (gains)

 

 

12

 

 

 

 

(70

)

 

 

 

26

 

 

 

 

(91

)

Adjusted EBITDA

$

 

664

 

 

$

 

576

 

 

$

 

2,146

 

 

$

 

5,984

 

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)

 
 

 

12 Weeks Ended

 

 

40 Weeks Ended

 

(In thousands)

October 3, 2020

 

 

October 5, 2019

 

 

October 3, 2020

 

 

October 5, 2019

 

Operating earnings

$

 

28,998

 

 

$

 

15,779

 

 

$

 

85,000

 

 

$

 

45,358

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger/acquisition and integration

 

 

242

 

 

 

 

-

 

 

 

 

242

 

 

 

 

1,364

 

Restructuring, asset impairment and other

 

 

6,543

 

 

 

 

1,296

 

 

 

 

20,455

 

 

 

 

10,215

 

Fresh Cut operating losses

 

 

-

 

 

 

 

-

 

 

 

 

2,262

 

 

 

 

-

 

Fresh Kitchen operating losses

 

 

-

 

 

 

 

2,204

 

 

 

 

-

 

 

 

 

2,204

 

Costs associated with Project One Team

 

 

-

 

 

 

 

-

 

 

 

 

493

 

 

 

 

5,428

 

Organizational realignment costs

 

 

-

 

 

 

 

935

 

 

 

 

-

 

 

 

 

1,812

 

Expenses associated with tax planning

 

 

(15

)

 

 

 

-

 

 

 

 

82

 

 

 

 

-

 

Pension termination

 

 

-

 

 

 

 

28

 

 

 

 

-

 

 

 

 

48

 

Severance associated with cost reduction initiatives

 

 

40

 

 

 

 

43

 

 

 

 

5,121

 

 

 

 

484

 

Adjusted operating earnings

$

 

35,808

 

 

$

 

20,285

 

 

$

 

113,655

 

 

$

 

66,913

 

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

 

Food Distribution:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

$

 

9,191

 

 

$

 

11,699

 

 

$

 

34,990

 

 

$

 

36,564

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger/acquisition and integration

 

 

-

 

 

 

 

-

 

 

 

 

-

 

 

 

 

(130

)

Restructuring, asset impairment and other

 

 

6,538

 

 

 

 

1,043

 

 

 

 

19,222

 

 

 

 

10,724

 

Fresh Cut operating losses

 

 

-

 

 

 

 

-

 

 

 

 

2,262

 

 

 

 

-

 

Fresh Kitchen operating losses

 

 

-

 

 

 

 

2,204

 

 

 

 

-

 

 

 

 

2,204

 

Costs associated with Project One Team

 

 

-

 

 

 

 

-

 

 

 

 

265

 

 

 

 

2,877

 

Organizational realignment costs

 

 

-

 

 

 

 

495

 

 

 

 

-

 

 

 

 

960

 

Expenses associated with tax planning

 

 

(8

)

 

 

 

-

 

 

 

 

44

 

 

 

 

-

 

Pension termination

 

 

-

 

 

 

 

15

 

 

 

 

-

 

 

 

 

26

 

Severance associated with cost reduction initiatives

 

 

-

 

 

 

 

31

 

 

 

 

3,143

 

 

 

 

392

 

Adjusted operating earnings

$

 

15,721

 

 

$

 

15,487

 

 

$

 

59,926

 

 

$

 

53,617

 

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

$

 

22,318

 

 

$

 

6,726

 

 

$

 

59,416

 

 

$

 

14,600

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger/acquisition and integration

 

 

242

 

 

 

 

-

 

 

 

 

242

 

 

 

 

1,494

 

Restructuring charges (gains) and asset impairment

 

 

5

 

 

 

 

253

 

 

 

 

1,233

 

 

 

 

(509

)

Costs associated with Project One Team

 

 

-

 

 

 

 

-

 

 

 

 

164

 

 

 

 

1,845

 

Organizational realignment costs

 

 

-

 

 

 

 

318

 

 

 

 

-

 

 

 

 

616

 

Expenses associated with tax planning

 

 

(5

)

 

 

 

-

 

 

 

 

27

 

 

 

 

-

 

Pension termination

 

 

-

 

 

 

 

10

 

 

 

 

-

 

 

 

 

17

 

Severance associated with cost reduction initiatives

 

 

9

 

 

 

 

12

 

 

 

 

1,441

 

 

 

 

83

 

Adjusted operating earnings

$

 

22,569

 

 

$

 

7,319

 

 

$

 

62,523

 

 

$

 

18,146

 

Military:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

$

 

(2,511

)

 

$

 

(2,646

)

 

$

 

(9,406

)

 

$

 

(5,806

)

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs associated with Project One Team

 

 

-

 

 

 

 

-

 

 

 

 

64

 

 

 

 

706

 

Organizational realignment costs

 

 

-

 

 

 

 

122

 

 

 

 

-

 

 

 

 

236

 

Expenses associated with tax planning

 

 

(2

)

 

 

 

-

 

 

 

 

11

 

 

 

 

-

 

Pension termination

 

 

-

 

 

 

 

3

 

 

 

 

-

 

 

 

 

5

 

Severance associated with cost reduction initiatives

 

 

31

 

 

 

 

-

 

 

 

 

537

 

 

 

 

9

 

Adjusted operating loss

$

 

(2,482

)

 

$

 

(2,521

)

 

$

 

(8,794

)

 

$

 

(4,850

)

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 Earnings (loss) from Continuing Operations to

Adjusted Earnings from Continuing Operations

(A Non-GAAP Financial Measure)

(Unaudited)

 
 

 

12 Weeks Ended

 

 

 

October 3, 2020

 

 

October 5, 2019

 

 

 

 

 

 

per diluted

 

 

 

 

 

per diluted

 

 

(In thousands, except per share amounts)

Earnings

 

 

share

 

 

Earnings

 

 

share

 

 

Earnings (loss) from continuing operations

$

 

19,952

 

 

$

 

0.56

 

 

$

 

(310

)

 

$

 

(0.01

)

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger/acquisition and integration

 

 

242

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

Restructuring, asset impairment and other

 

 

6,543

 

 

 

 

 

 

 

 

 

1,296

 

 

 

 

 

 

 

Fresh Kitchen operating losses

 

 

-

 

 

 

 

 

 

 

 

 

2,204

 

 

 

 

 

 

 

Organizational realignment costs

 

 

-

 

 

 

 

 

 

 

 

 

935

 

 

 

 

 

 

 

Loss on debt extinguishment

 

 

-

 

 

 

 

 

 

 

 

 

329

 

 

 

 

 

 

 

Severance associated with cost reduction initiatives

 

 

40

 

 

 

 

 

 

 

 

 

43

 

 

 

 

 

 

 

Expenses associated with tax planning

 

 

(15

)

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

Pension termination

 

 

-

 

 

 

 

 

 

 

 

 

10,159

 

 

 

 

 

 

 

Total adjustments

 

 

6,810

 

 

 

 

 

 

 

 

 

14,966

 

 

 

 

 

 

 

Income tax effect on adjustments (a)

 

 

(1,830

)

 

 

 

 

 

 

 

 

(3,751

)

 

 

 

 

 

 

Impact of CARES Act (b)

 

 

212

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

Total adjustments, net of taxes

 

 

5,192

 

 

 

 

0.14

 *

 

 

11,215

 

 

 

 

0.31

 

 

Adjusted earnings from continuing operations

$

 

25,144

 

 

$

 

0.70

 

 

$

 

10,905

 

 

$

 

0.30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40 Weeks Ended

 

 

 

October 3, 2020

 

 

October 5, 2019

 

 

 

 

 

 

per diluted

 

 

 

 

 

per diluted

 

 

(In thousands, except per share amounts)

Earnings

 

 

share

 

 

Earnings

 

 

share

 

 

Earnings from continuing operations

$

 

63,821

 

 

$

 

1.78

 

 

$

 

444

 

 

$

 

0.01

 

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merger/acquisition and integration

 

 

242

 

 

 

 

 

 

 

 

 

1,364

 

 

 

 

 

 

 

Restructuring, asset impairment and other

 

 

20,455

 

 

 

 

 

 

 

 

 

10,215

 

 

 

 

 

 

 

Fresh Cut operating losses

 

 

2,262

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

Fresh Kitchen operating losses

 

 

-

 

 

 

 

 

 

 

 

 

2,204

 

 

 

 

 

 

 

Costs associated with Project One Team

 

 

493

 

 

 

 

 

 

 

 

 

5,428

 

 

 

 

 

 

 

Organizational realignment costs

 

 

-

 

 

 

 

 

 

 

 

 

1,812

 

 

 

 

 

 

 

Loss on debt extinguishment

 

 

-

 

 

 

 

 

 

 

 

 

329

 

 

 

 

 

 

 

Severance associated with cost reduction initiatives

 

 

5,121

 

 

 

 

 

 

 

 

 

484

 

 

 

 

 

 

 

Expenses associated with tax planning

 

 

82

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

Pension termination

 

 

(1,004

)

 

 

 

 

 

 

 

 

19,510

 

 

 

 

 

 

 

Total adjustments

 

 

27,651

 

 

 

 

 

 

 

 

 

41,346

 

 

 

 

 

 

 

Income tax effect on adjustments (a)

 

 

(6,827

)

 

 

 

 

 

 

 

 

(10,166

)

 

 

 

 

 

 

Impact of CARES Act (b)

 

 

(9,298

)

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

Total adjustments, net of taxes

 

 

11,526

 

 

 

 

0.32

 

 

 

 

31,180

 

 

 

 

0.86

 

 

Adjusted earnings from continuing operations

$

 

75,347

 

 

$

 

2.10

 

 

$

 

31,624

 

 

$

 

0.87

 

 

* Includes rounding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 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.

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)

 
 

 

October 3,

 

 

December 28,

 

(In thousands)

2020

 

 

2019

 

Current portion of long-term debt and finance lease liabilities

$

 

5,338

 

 

$

 

6,349

 

Long-term debt and finance lease liabilities

 

 

540,920

 

 

 

 

682,204

 

Total debt

 

 

546,258

 

 

 

 

688,553

 

Cash and cash equivalents

 

 

(26,903

)

 

 

 

(24,172

)

Net long-term debt

$

 

519,355

 

 

$

 

664,381

 

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)

 
 

 

40 Weeks Ended

 

(In thousands)

October 3, 2020

 

 

October 5, 2019

 

Net cash provided by operating activities

$

 

223,832

 

 

$

 

140,034

 

Less:

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

45,880

 

 

 

 

46,905

 

Free cash flow

$

 

177,952

 

 

$

 

93,129

 

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)

 
 

 

40 Weeks Ended

 

(In thousands)

October 3, 2020

 

 

October 5, 2019

 

Purchases of property and equipment

$

 

45,880

 

 

$

 

46,905

 

Plus:

 

 

 

 

 

 

 

 

 

Cloud computing spend

 

 

7,658

 

 

 

 

-

 

Capital expenditures and IT capital

$

 

53,538

 

 

$

 

46,905

 

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 Earnings per Diluted Share from Continuing Operations to

Projected Adjusted Earnings per Diluted Share from Continuing Operations

(A Non-GAAP Financial Measure)

(Unaudited)

 
 

 

53 Weeks Ending

January 2, 2021

 

 

Low

 

 

High

 

Earnings from continuing operations

$

 

2.09

 

 

$

 

2.17

 

Adjustments, net of taxes:

 

 

 

 

 

 

 

 

 

Merger/acquisition and integration expenses

 

 

0.01

 

 

 

 

0.01

 

Costs associated with Project One Team

 

 

0.01

 

 

 

 

0.01

 

Pension termination

 

 

(0.02

)

 

 

 

(0.02

)

Restructuring and asset impairment

 

 

0.43

 

 

 

 

0.43

 

Severance associated with cost reduction initiatives

 

 

0.11

 

 

 

 

0.11

 

Fresh Cut operating losses

 

 

0.05

 

 

 

 

0.05

 

Impact of CARES Act

 

 

(0.26

)

 

 

 

(0.26

)

Adjusted earnings from continuing operations

$

 

2.42

 

 

$

 

2.50

 

 

Investors:
Mark Shamber
Chief Financial Officer and Executive Vice President
(616) 878-8023

Chris Mandeville
ICR
(203) 682-8304

Jeff Sonnek
ICR
(646) 277-1263

Media:
Meredith Gremel
Vice President Corporate Affairs and Communications
(616) 878-2830



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