First Quarter Net Sales Increase in All Three Business Segments
Expects to Achieve Over $20 Million in Annual Run Rate Cost Savings
from Project One Team Initiatives Over the Next 24 Months
SpartanNash Company (the “Company”) (Nasdaq: SPTN) today reported
financial results for the 16-week first quarter ended April 20, 2019.
“We are pleased with our team’s efforts to grow net sales across all
three business segments, particularly in light of the challenging
operating environment,” said David Staples, President and Chief
Executive Officer. “While we are not satisfied with our bottom-line
results for the quarter, our team remains committed to our fiscal 2019
objectives and long-term strategy, which we believe will support both
future growth and profitability long-term.”
Strategic Business Objectives
As outlined in its fourth quarter earnings release, the Company has
defined its top five objectives for 2019. These objectives remain
critical in the context of the Company’s long-term strategic objective
to evolve into a company with a national, highly efficient distribution
platform servicing a diverse customer base through its three highly
complementary business units of Food Distribution, Military Distribution
and Retail.
The following summarizes these objectives and the Company’s progress
during the first quarter of 2019, consistent with its preliminary
earnings release on May 9, 2019:
Achieve Mid-Single Digit Sales Growth. The Company achieved this
objective in the first quarter, realizing 6.6% net sales growth versus
the same quarter in the prior year. This growth was bolstered by
contributions from newly acquired Martin’s Super Markets (“Martin’s”) in
the Retail segment, as well as growth in both the Food Distribution and
Military Distribution segments. Before the intercompany elimination of
Martin’s sales, the Food Distribution segment realized growth of 5.2%.
Realize at least $15 Million of Annual Run Rate Savings Over the Next
24 Months from Project One Team. The Company has exceeded its
objective by identifying over $20 million in savings opportunities,
which it expects to achieve in annual run rate over the next 24 months.
The effect of implementing these opportunities is not currently expected
to be material to earnings in 2019.
Strengthen Management Team, Systems and Supply Chain Operations.
During the first quarter, the Company appointed a new Chief
Merchandising and Marketing Officer, Chief Information Officer and
several other key additions throughout the IT and supply chain
operations. Other strategic additions to the management team at various
levels are in process. The Company continues to invest in enhancements
to its systems and supply chain operations, however some improvements
are developing more slowly than initially expected, partly due to the
competitive employment environment in both warehousing and
transportation.
Reduce Debt and Working Capital While Lowering Financial Leverage
Ratios. Adjusted for the funding of the Martin’s acquisition, the
Company paid down over $20 million of debt in the first quarter of
fiscal 2019. The Company also reduced its inventory levels by over 2%
from the first quarter of fiscal 2018, without negatively impacting
customer service levels, despite continued sales growth. The Company
will continue to focus on debt and working capital improvements in
fiscal 2019.
Improve Adjusted Operating Earnings and Adjusted EBITDA Growth. First
quarter of fiscal 2019 profitability did not meet the Company’s
expectations due to the factors discussed in the consolidated and
segment financial results below. The Company is focused on improving its
financial performance through various initiatives aligned with the
organization’s overall long-term strategy, which include the strategic
objectives noted above. The Company is also in the process of executing
strategic investments in the Retail segment in connection with the
implementation of its new retail brand positioning.
Consolidated Financial Results
Consolidated net sales for the first quarter increased $157.3 million,
or 6.6%, to $2.54 billion from $2.39 billion in the prior year quarter.
The increase in net sales was bolstered by the acquisition of Martin’s,
as well as sales growth in the Food Distribution and Military
Distribution segments.
Gross profit for the first quarter of fiscal 2019 was $377.7 million, or
14.9% of net sales, compared to $343.2 million, or 14.4% of net sales,
in the prior year quarter. As a percent of net sales, the change in
gross profit was primarily driven by the acquisition of Martin’s
partially offset by the other factors described below within the Segment
Financial Results, as well as the losses associated with the voluntary
product recall for certain fresh-cut products, which were approximately
$0.02 per diluted share.
Reported operating expenses for the first quarter were $355.5 million,
or 14.0% of net sales, compared to $317.5 million, or 13.3% of net
sales, in the prior year quarter. The increase in expenses as a rate of
sales compared to the prior year quarter was primarily due to the
acquisition of Martin’s and one-time costs associated with Project One
Team, partially offset by restructuring gains related to the sale of
real property for a previously closed site. Operating expenses were
unfavorable to the prior year quarter as a rate of sales on an adjusted
basis, due to the higher mix of sales within the Retail segment as well
as higher supply chain costs in both the Military Distribution and Food
Distribution segments and operational inefficiencies within the
Company’s food processing operations. First quarter operating expenses
would have been $354.6 million, or 13.9% of net sales, compared to
$308.8 million, or 12.9% of net sales, in the prior year quarter,
excluding the adjustments related to restructuring gains, one-time costs
associated with Project One Team, merger and integration costs and
organizational realignment costs.
The Company reported operating earnings of $22.2 million compared to
$25.7 million in the prior year quarter. The decrease was primarily
attributable to lower Food Distribution and Retail margin rates, higher
supply chain costs and one-time expenses associated with the Project One
Team initiative, partially offset by favorable restructuring gains and
the incremental earnings from the Martin’s business. Non-GAAP adjusted
operating earnings(1) were $23.2 million compared to $35.8
million in the prior year quarter, due to previously mentioned gross
margin rate pressures and higher supply chain costs. 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.
Adjusted EBITDA(2) was $54.7 million compared to $67.2
million in the prior year quarter due to the factors mentioned above.
The Company reported first quarter earnings from continuing operations
of $7.5 million, or $0.21 per diluted share, compared to $12.4 million,
or $0.34 per diluted share, in the prior year quarter. The decrease
reflects the factors noted above, as well as increased interest expense
due to higher interest rates on the Company’s borrowings.
Adjusted earnings from continuing operations(3) for the first
quarter were $8.5 million, or $0.24 per diluted share, compared to $20.0
million, or $0.55 per diluted share, in the prior year quarter.
Segment Financial Results
Food Distribution
Net sales for Food Distribution increased $14.0 million, or 1.2%, to
$1,169.2 million from $1,155.2 million in the prior year quarter.
Excluding the impact of the elimination of intercompany sales to
Martin’s subsequent to the acquisition, net sales increased 5.2%,
primarily due to sales growth from existing customers.
Reported operating earnings for Food Distribution were $24.6 million
compared to $24.5 million in the prior year quarter. The increase in
reported operating earnings was primarily attributable to higher sales
volumes and the gain on the sale of real property for a previously
closed site, offset by lower margin rates and higher supply chain costs,
including warehouse operational issues at one of the Company’s
distribution centers. First quarter adjusted operating earnings(4)
were $21.3 million compared to $29.5 million in the prior year quarter.
Adjusted operating earnings for the current year quarter exclude $3.3
million of net pre-tax gains related to the sale of real property, the
allocation of one-time costs associated with Project One Team and
severance; the prior year quarter excluded $5.0 million in
merger/acquisition and integration costs, Fresh Kitchen start-up
activities and an asset impairment charge related to certain
discontinued warehouse equipment.
Military Distribution
Net sales for Military Distribution increased $7.7 million, or 1.2%, to
$671.3 million from $663.6 million in the prior year quarter. The
increase was primarily due to incremental volume from new business with
an existing customer that commenced late in the fourth quarter of 2018
and DeCA’s private brand program, partially offset by lower comparable
sales at DeCA operated locations.
Reported operating loss for Military Distribution was $1.6 million
compared to operating earnings of $1.5 million in the prior year
quarter. The decrease was primarily attributable to warehouse
operational issues at one of the Company’s distribution centers and
increases in transportation costs, partially offset by favorable price
changes. First quarter adjusted operating loss(4) was $0.8
million compared to earnings of $1.6 million in the prior year quarter.
Adjusted operating earnings in the current year exclude the allocation
of one-time costs associated with Project One Team.
Retail
Net sales for Retail increased $135.6 million, or 23.9%, to $701.8
million from $566.2 million in the prior year quarter. Excluding the
acquisition of Martin’s, sales decreased 3.0%, due to lower sales
resulting from store closures of $12.4 million and a decrease in fuel
prices per gallon. Retail comparable store sales were -0.3% in the first
quarter.
Reported operating loss for Retail was $0.8 million compared to $0.3
million in the prior year quarter. The decrease in reported operating
earnings was primarily attributable to lower supermarket margin rates,
the allocation of one-time costs associated with Project One Team,
higher healthcare costs, merger/acquisition and integration expenses
related to the Martin’s acquisition and higher fees paid to pharmacy
benefit managers. Mostly offsetting these items were the contribution of
the acquired Martin’s stores, lower occupancy costs due to the adoption
of the new lease accounting standard and the favorable impact of closing
underperforming stores. Adjusted operating earnings(4) were
$2.7 million compared to $4.7 million in the prior year quarter and
exclude $3.5 million of pre-tax charges primarily related to the
allocation of one-time costs associated with Project One Team,
merger/acquisition and integration expenses, and store closing expenses
in the current year versus $5.0 million of store closing and asset
impairment expenses in the prior year quarter.
Balance Sheet and Cash Flow
Cash flows provided by operating activities for the first quarter were
$13.5 million compared to $60.4 million in the prior year, representing
a decrease of $46.9 million. The decrease in cash flows provided by
operating activities was primarily related to the change in working
capital requirements, mostly due to timing with respect to the Easter
holiday, partially offset by improvements in accounts payable compared
to the prior year.
During the first quarter, the Company returned $6.9 million to
shareholders in the form of cash dividends equal to $0.19 per common
share.
Outlook
Based on the Company’s performance to date and the current outlook for
the remainder of fiscal 2019, SpartanNash is reaffirming its previous
sales guidance provided on February 20, 2019, and maintaining its fiscal
2019 guidance regarding its effective tax rate, capital expenditures,
depreciation and amortization, and interest expense.
Additionally, the Company is maintaining the updated fiscal 2019
adjusted EBITDA and adjusted earnings per share guidance provided on May
9, 2019. Fiscal 2019 adjusted EBITDA is expected to be $190 million to
$205 million, while the Company anticipates adjusted earnings per share(5)
from continuing operations of approximately $1.20 to $1.50, excluding
the adjusted items totaling $16.5 million to $18.5 million after taxes,
as detailed in Table 6. The Company anticipates that reported earnings
from continuing operations will be in the range of approximately $0.70
to $1.04 per diluted share, compared to earnings from continuing
operations of $0.94 per diluted share in fiscal 2018.
Conference Call
A telephone conference call to discuss the Company’s first quarter 2019
financial results is scheduled for today, Monday, May 20, 2019 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 premier fresh
produce distribution and fresh food processing. SpartanNash serves
customer locations in all 50 states and the District of Columbia,
Europe, Cuba, Puerto Rico, Bahrain, Djibouti and Egypt. SpartanNash
currently operates 160 supermarkets, primarily under the banners of Family
Fare Supermarkets, Martin’s Super Markets, D&W Fresh Market, VG’s
Grocery, Dan’s Supermarket and Family Fresh Market. 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, 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 below.
(2)
A reconciliation of net earnings to Adjusted EBITDA, a non-GAAP
financial measure, is provided below.
(3) A
reconciliation of earnings from continuing operations to adjusted
earnings from continuing operations, a non-GAAP financial measure, is
provided below.
(4) A reconciliation of operating (loss)
earnings to adjusted operating earnings (loss) by segment, a non-GAAP
financial measure, is provided below.
(5) 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 below.
|
SPARTANNASH COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) |
||||||||||
| 16 Weeks Ended | ||||||||||
| April 20, | April 21, | |||||||||
|
(In thousands, except per share amounts) |
2019 | 2018 | ||||||||
| Net sales | $ | 2,542,375 | $ | 2,385,073 | ||||||
| Cost of sales | 2,164,646 | 2,041,859 | ||||||||
| Gross profit | 377,729 | 343,214 | ||||||||
| Operating expenses | ||||||||||
| Selling, general and administrative | 360,400 | 309,058 | ||||||||
| Merger/acquisition and integration | 782 | 2,206 | ||||||||
| Restructuring (gains) charges and asset impairment | (5,662 | ) | 6,202 | |||||||
| Total operating expenses | 355,520 | 317,466 | ||||||||
| Operating earnings | 22,209 | 25,748 | ||||||||
| Other expenses and (income) | ||||||||||
| Interest expense | 11,881 | 8,778 | ||||||||
| Other, net | 183 | (225 | ) | |||||||
| Total other expenses, net | 12,064 | 8,553 | ||||||||
| Earnings before income taxes and discontinued operations | 10,145 | 17,195 | ||||||||
| Income tax expense | 2,624 | 4,760 | ||||||||
| Earnings from continuing operations | 7,521 | 12,435 | ||||||||
| Loss from discontinued operations, net of taxes | (52 | ) | (92 | ) | ||||||
| Net earnings | $ | 7,469 | $ | 12,343 | ||||||
| Basic earnings per share: | ||||||||||
| Earnings from continuing operations | $ | 0.21 | $ | 0.34 | ||||||
| Loss from discontinued operations | – | – | ||||||||
| Net earnings | $ | 0.21 | $ | 0.34 | ||||||
| Diluted earnings per share: | ||||||||||
| Earnings from continuing operations | $ | 0.21 | $ | 0.34 | ||||||
| Loss from discontinued operations | – | – | ||||||||
| Net earnings | $ | 0.21 | $ | 0.34 | ||||||
| Weighted average shares outstanding: | ||||||||||
| Basic | 36,121 | 36,186 | ||||||||
| Diluted | 36,121 | 36,197 | ||||||||
|
SPARTANNASH COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) |
||||||||||||
| April 20, | December 29, | |||||||||||
| (In thousands) | 2019 | 2018 | ||||||||||
|
Assets |
||||||||||||
| Current assets | ||||||||||||
| Cash and cash equivalents | $ | 21,360 | $ | 18,585 | ||||||||
| Accounts and notes receivable, net | 376,708 | 346,260 | ||||||||||
| Inventories, net | 595,741 | 553,799 | ||||||||||
| Prepaid expenses and other current assets | 59,014 | 73,798 | ||||||||||
| Property and equipment held for sale | – | 8,654 | ||||||||||
| Total current assets | 1,052,823 | 1,001,096 | ||||||||||
| Property and equipment, net | 623,132 | 579,060 | ||||||||||
| Goodwill | 178,648 | 178,648 | ||||||||||
| Intangible assets, net | 144,451 | 128,926 | ||||||||||
| Operating lease assets | 273,537 | – | ||||||||||
| Other assets, net | 86,905 | 84,182 | ||||||||||
| Total assets | $ | 2,359,496 | $ | 1,971,912 | ||||||||
|
Liabilities and Shareholders’ Equity |
||||||||||||
| Current liabilities | ||||||||||||
| Accounts payable | $ | 391,315 | $ | 357,802 | ||||||||
| Accrued payroll and benefits | 55,922 | 57,180 | ||||||||||
| Other accrued expenses | 48,437 | 43,206 | ||||||||||
| Current portion of operating lease liabilities | 41,425 | – | ||||||||||
| Current portion of long-term debt and finance lease liabilities | 18,006 | 18,263 | ||||||||||
| Total current liabilities | 555,105 | 476,451 | ||||||||||
| Long-term liabilities | ||||||||||||
| Deferred income taxes | 45,087 | 49,254 | ||||||||||
| Operating lease liabilities | 279,599 | – | ||||||||||
| Other long-term liabilities | 32,785 | 50,463 | ||||||||||
| Long-term debt and finance lease liabilities | 753,118 | 679,797 | ||||||||||
| Total long-term liabilities | 1,110,589 | 779,514 | ||||||||||
| Commitments and contingencies | ||||||||||||
| Shareholders’ equity | ||||||||||||
|
Common stock, voting, no par value; 100,000 shares
authorized; 36,319 and 35,952 shares outstanding |
488,155 | 484,064 | ||||||||||
|
Preferred stock, no par value, 10,000 shares
authorized; no shares outstanding |
– | – | ||||||||||
| Accumulated other comprehensive loss | (15,699 | ) | (15,759 | ) | ||||||||
| Retained earnings | 221,346 | 247,642 | ||||||||||
| Total shareholders’ equity | 693,802 | 715,947 | ||||||||||
| Total liabilities and shareholders’ equity | $ | 2,359,496 | $ | 1,971,912 | ||||||||
|
SPARTANNASH COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) |
|||||||||||||
| 16 Weeks Ended | |||||||||||||
|
(In thousands) |
April 20, 2019 | April 21, 2018 | |||||||||||
| Cash flow activities | |||||||||||||
| Net cash provided by operating activities | $ | 13,519 | $ | 60,381 | |||||||||
| Net cash used in investing activities | (87,225 | ) | (20,933 | ) | |||||||||
| Net cash provided by (used in) financing activities | 76,567 | (37,863 | ) | ||||||||||
| Net cash used in discontinued operations | (86 | ) | (85 | ) | |||||||||
| Net increase in cash and cash equivalents | 2,775 | 1,500 | |||||||||||
| Cash and cash equivalents at beginning of the period | 18,585 | 15,667 | |||||||||||
| Cash and cash equivalents at end of the period | $ | 21,360 | $ | 17,167 | |||||||||
| SPARTANNASH COMPANY AND SUBSIDIARIES | ||||||||||||||||||
| SUPPLEMENTAL FINANCIAL DATA | ||||||||||||||||||
| Table 1: Sales and Operating Earnings by Segment | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
| 16 Weeks Ended | ||||||||||||||||||
| (In thousands) | April 20, 2019 | April 21, 2018 | ||||||||||||||||
|
Food Distribution Segment: |
||||||||||||||||||
| Net sales | $ | 1,169,238 | 46.0 | % | $ | 1,155,211 | 48.5 | % | ||||||||||
| Operating earnings | 24,592 | 24,521 | ||||||||||||||||
|
Military Segment: |
||||||||||||||||||
| Net sales | 671,370 | 26.4 | % | 663,620 | 27.8 | % | ||||||||||||
| Operating (loss) earnings | (1,557 | ) | 1,513 | |||||||||||||||
|
Retail Segment: |
||||||||||||||||||
| Net sales | 701,767 | 27.6 | % | 566,242 | 23.7 | % | ||||||||||||
| Operating loss | (826 | ) | (286 | ) | ||||||||||||||
|
Total: |
||||||||||||||||||
| Net sales | $ | 2,542,375 | 100.0 | % | $ | 2,385,073 | 100.0 | % | ||||||||||
| Operating earnings | 22,209 | 25,748 | ||||||||||||||||
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, 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 costs associated with
the organizational realignment, which include significant changes to the
Company’s management team. Also excluded are the 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. 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
start-up costs associated with the Fresh Kitchen operation, which
concluded during the first quarter of 2018. The Fresh Kitchen
represented a new line of business for the Company, and provides the
Company with the ability to process, cook, and package fresh
protein-based foods and complete meal solutions.
|
Table 2: Reconciliation of Net Earnings to Adjusted Earnings (Adjusted EBITDA) (A Non-GAAP Financial Measure) (Unaudited) |
||||||||||||
| 16 Weeks Ended | ||||||||||||
|
(In thousands) |
April 20, 2019 | April 21, 2018 | ||||||||||
| Net earnings | $ | 7,469 | $ | 12,343 | ||||||||
| Loss from discontinued operations, net of tax | 52 | 92 | ||||||||||
| Income tax expense | 2,624 | 4,760 | ||||||||||
| Other expenses, net | 12,064 | 8,553 | ||||||||||
| Operating earnings | 22,209 | 25,748 | ||||||||||
| Adjustments: | ||||||||||||
| LIFO expense | 1,425 | 1,540 | ||||||||||
| Depreciation and amortization | 26,632 | 25,018 | ||||||||||
| Merger/acquisition and integration | 782 | 2,206 | ||||||||||
| Restructuring (gains) charges and asset impairment | (5,662 | ) | 6,202 | |||||||||
| Fresh Kitchen start-up costs | – | 1,366 | ||||||||||
| Stock-based compensation | 5,383 | 5,290 | ||||||||||
| Non-cash rent | (1,918 | ) | (77 | ) | ||||||||
| Costs associated with Project One Team | 4,618 | – | ||||||||||
| Organizational realignment costs | 858 | – | ||||||||||
| Other non-cash charges (gains) | 342 | (122 | ) | |||||||||
|
Adjusted EBITDA |
$ | 54,669 | $ | 67,171 | ||||||||
| 16 Weeks Ended | ||||||||||||
|
(In thousands) |
April 20, 2019 | April 21, 2018 | ||||||||||
| Food Distribution: | ||||||||||||
| Operating earnings | $ | 24,592 | $ | 24,521 | ||||||||
| Adjustments: | ||||||||||||
| LIFO expense | 703 | 766 | ||||||||||
| Depreciation and amortization | 10,233 | 9,321 | ||||||||||
| Merger/acquisition and integration | (130 | ) | 2,195 | |||||||||
| Restructuring (gains) charges and asset impairment | (6,343 | ) | 1,260 | |||||||||
| Fresh Kitchen start-up costs | – | 1,366 | ||||||||||
| Stock-based compensation | 2,676 | 2,526 | ||||||||||
| Non-cash rent | 57 | (22 | ) | |||||||||
| Costs associated with Project One Team | 2,448 | – | ||||||||||
| Organizational realignment costs | 455 | – | ||||||||||
| Other non-cash charges | 319 | 237 | ||||||||||
| Adjusted EBITDA | $ | 35,010 | $ | 42,170 | ||||||||
| Military: | ||||||||||||
| Operating (loss) earnings | $ | (1,557 | ) | $ | 1,513 | |||||||
| Adjustments: | ||||||||||||
| LIFO expense | 378 | 424 | ||||||||||
| Depreciation and amortization | 3,597 | 3,678 | ||||||||||
| Merger/acquisition and integration | – | 4 | ||||||||||
| Stock-based compensation | 854 | 805 | ||||||||||
| Non-cash rent | (122 | ) | (1 | ) | ||||||||
| Costs associated with Project One Team | 600 | – | ||||||||||
| Organizational realignment costs | 111 | – | ||||||||||
| Other non-cash gains | (20 | ) | (70 | ) | ||||||||
| Adjusted EBITDA | $ | 3,841 | $ | 6,353 | ||||||||
| Retail: | ||||||||||||
| Operating loss | $ | (826 | ) | $ | (286 | ) | ||||||
| Adjustments: | ||||||||||||
| LIFO expense | 344 | 350 | ||||||||||
| Depreciation and amortization | 12,802 | 12,019 | ||||||||||
| Merger/acquisition and integration | 912 | 7 | ||||||||||
| Restructuring charges and asset impairment | 681 | 4,942 | ||||||||||
| Stock-based compensation | 1,853 | 1,959 | ||||||||||
| Non-cash rent | (1,853 | ) | (54 | ) | ||||||||
| Costs associated with Project One Team | 1,570 | – | ||||||||||
| Organizational realignment costs | 292 | – | ||||||||||
| Other non-cash charges (gains) | 43 | (289 | ) | |||||||||
| Adjusted EBITDA | $ | 15,818 | $ | 18,648 | ||||||||
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 (A Non-GAAP Financial Measure) (Unaudited) |
||||||||||||
| 16 Weeks Ended | ||||||||||||
|
(In thousands) |
April 20, 2019 | April 21, 2018 | ||||||||||
| Operating earnings | $ | 22,209 | $ | 25,748 | ||||||||
| Adjustments: | ||||||||||||
| Merger/acquisition and integration | 782 | 2,206 | ||||||||||
| Restructuring (gains) charges and asset impairment | (5,662 | ) | 6,202 | |||||||||
| Fresh Kitchen start-up costs | – | 1,366 | ||||||||||
| Costs associated with Project One Team | 4,618 | – | ||||||||||
| Organizational realignment costs | 858 | – | ||||||||||
| Severance associated with cost reduction initiatives | 362 | 274 | ||||||||||
| Adjusted operating earnings | $ | 23,167 | $ | 35,796 | ||||||||
| Reconciliation of operating earnings (loss) to adjusted operating earnings by segment: |
||||||||||||
| Food Distribution: | ||||||||||||
| Operating earnings | $ | 24,592 | $ | 24,521 | ||||||||
| Adjustments: | ||||||||||||
| Merger/acquisition and integration | (130 | ) | 2,195 | |||||||||
| Restructuring (gains) charges and asset impairment | (6,343 | ) | 1,260 | |||||||||
| Fresh Kitchen start-up costs | – | 1,366 | ||||||||||
| Costs associated with Project One Team | 2,448 | – | ||||||||||
| Organizational realignment costs | 455 | – | ||||||||||
| Severance associated with cost reduction initiatives | 324 | 193 | ||||||||||
| Adjusted operating earnings | $ | 21,346 | $ | 29,535 | ||||||||
| Military: | ||||||||||||
| Operating (loss) earnings | $ | (1,557 | ) | $ | 1,513 | |||||||
| Adjustments: | ||||||||||||
| Merger/acquisition and integration | – | 4 | ||||||||||
| Costs associated with Project One Team | 600 | – | ||||||||||
| Organizational realignment costs | 111 | – | ||||||||||
| Severance associated with cost reduction initiatives | 9 | 52 | ||||||||||
| Adjusted operating (loss) earnings | $ | (837 | ) | $ | 1,569 | |||||||
| Retail: | ||||||||||||
| Operating loss | $ | (826 | ) | $ | (286 | ) | ||||||
| Adjustments: | ||||||||||||
| Merger/acquisition and integration | 912 | 7 | ||||||||||
| Restructuring charges and asset impairment | 681 | 4,942 | ||||||||||
| Costs associated with Project One Team | 1,570 | – | ||||||||||
| Organizational realignment costs | 292 | – | ||||||||||
| Severance associated with cost reduction initiatives | 29 | 29 | ||||||||||
| Adjusted operating earnings | $ | 2,658 | $ | 4,692 | ||||||||
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 from Continuing Operations Adjusted Earnings from Continuing Operations (A Non-GAAP Financial Measure) (Unaudited) |
|||||||||||||||||||||||
| 16 Weeks Ended | |||||||||||||||||||||||
| April 20, 2019 | April 21, 2018 | ||||||||||||||||||||||
| per diluted | per diluted | ||||||||||||||||||||||
|
(In thousands, except per share amounts) |
Earnings | share | Earnings | share | |||||||||||||||||||
| Earnings from continuing operations | $ | 7,521 | $ | 0.21 | $ | 12,435 | $ | 0.34 | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Merger/acquisition and integration | 782 | 2,206 | |||||||||||||||||||||
| Restructuring (gains) charges and asset impairment | (5,662 | ) | 6,202 | ||||||||||||||||||||
| Fresh Kitchen start-up costs | – | 1,366 | |||||||||||||||||||||
| Costs associated with Project One Team | 4,618 | – | |||||||||||||||||||||
| Organizational realignment costs | 858 | – | |||||||||||||||||||||
| Severance associated with cost reduction initiatives | 362 | 274 | |||||||||||||||||||||
| Pension termination | 353 | – | |||||||||||||||||||||
| Total adjustments | 1,311 | 10,048 | |||||||||||||||||||||
| Income tax effect on adjustments (1) | (304 | ) | (2,437 | ) | |||||||||||||||||||
| Total adjustments, net of taxes | 1,007 | 0.03 | 7,611 | 0.21 | |||||||||||||||||||
| Adjusted earnings from continuing operations | $ | 8,528 | $ | 0.24 | $ | 20,046 | $ | 0.55 | |||||||||||||||
| (1) |
The income tax effect on adjustments is computed by applying the applicable tax rate to the adjustments. |
|||||
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 Capital Lease Lease Obligations (A Non-GAAP Financial Measure) (Unaudited) |
||||||||||||
| April 20, | December 29, | |||||||||||
|
(In thousands) |
2019 | 2018 | ||||||||||
| Current portion of long-term debt and finance lease liabilities | $ | 18,006 | $ | 18,263 | ||||||||
| Long-term debt and finance lease liabilities | 753,118 | 679,797 | ||||||||||
| Total debt | 771,124 | 698,060 | ||||||||||
| Cash and cash equivalents | (21,360 | ) | (18,585 | ) | ||||||||
| Total net long-term debt | $ | 749,764 | $ | 679,475 | ||||||||
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 Projected Adjusted Earnings per Diluted Share from Continuing (A Non-GAAP Financial Measure) (Unaudited) |
||||||||||||
| 52 Weeks Ending
December 29, 2018 |
||||||||||||
| Low | High | |||||||||||
| Earnings from continuing operations | $ | 0.70 | $ | 1.04 | ||||||||
| Adjustments, net of taxes: | ||||||||||||
| Merger/acquisition and integration expenses | 0.03 | 0.02 | ||||||||||
| Gain on sale of assets | (0.15 | ) | (0.15 | ) | ||||||||
| Termination of frozen pension plan | 0.43 | 0.43 | ||||||||||
| Costs associated with Project One Team | 0.10 | 0.10 | ||||||||||
| Restructuring and asset impairment | 0.02 | 0.01 | ||||||||||
| Severance associated with cost reduction initiatives | 0.03 | 0.02 | ||||||||||
| Organizational realignment costs | 0.04 | 0.03 | ||||||||||
| Adjusted earnings from continuing operations | $ | 1.20 | $ | 1.50 | ||||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20190520005150/en/
Investor Contacts:
Mark Shamber
Chief Financial Officer and
Executive Vice President
(616) 878-8023
Katie Turner
Partner, ICR
(646) 277-1228
Media Contact:
Meredith Gremel
Vice President Corporate
Affairs and Communications
(616) 878-2830