SpartanNash Announces Third Quarter Fiscal 2021 Financial Results


Full Year Adjusted EBITDA Outlook Improves

Retail Comparable Store Sales Guidance Raised

GRAND RAPIDS, Mich. –
SpartanNash Company (the “Company”) (Nasdaq: SPTN) today reported financial results for its 12-week third quarter ended Oct. 9, 2021.

Third Quarter Fiscal 2021 Highlights

  • Net sales of $2.07 billion increased 0.6% from prior year quarter net sales of $2.06 billion, due to positive sales contributions associated with growth from Food Distribution and Retail.
  • Retail comparable store sales increased 3.1% for the quarter. Comparable store sales increased by 13.5% on a two-year basis, representing sequential improvement on a quarterly basis.
  • EPS was $0.42 per share, and adjusted EPS was $0.43 per share.
  • Adjusted EBITDA was $51.5 million, compared to $57.0 million in the prior year quarter.
  • Cash generated from operating activities was $70.4 million during the third quarter, leading to a $47.1 million net paydown of long-term debt and an improvement in the Company’s net long-term debt-to-adjusted-EBITDA ratio to 1.7x at quarter end.
  • The Company increased the low end of the fiscal 2021 profitability outlook range. Adjusted EBITDA is now expected to range from $205 to $210 million. In addition, the Company increased and narrowed the range of retail comparable sales expectations from a decline of 5% to 3% to a decline of 2% to 1%.

“We are proud of these solid third-quarter results, and we are appreciative of our frontline associates who continue to execute on a daily basis through industry-wide labor, inflation and supply chain challenges,” said SpartanNash President and CEO Tony Sarsam. “Across our organization, we have shown great resolve and discipline, helping to deliver strong performance and allowing for us to once again raise our full-year earnings outlook.”

Sarsam continued, “To position ourselves for continued success, we are doubling down on our People First culture and remaining keenly focused on operational excellence. With the upfront investments we are making with our supply chain transformation initiative, we will become better positioned for sustainable and profitable growth over the long term.”

Consolidated Financial Results

Consolidated net sales for the third quarter increased $12.4 million, or 0.6%, to $2.07 billion from $2.06 billion in the prior year quarter. The increase was due to continued growth with certain existing Food Distribution customers and an increase in comparable store sales within the Retail segment, partially offset by lower sales within the Military segment.

Gross profit for the third quarter was $329.5 million, or 15.9% of net sales, compared to $324.8 million, or 15.8% of net sales, in the prior year quarter. Gross profit rate growth was driven by inflation within the Food Distribution and Military segments, partially offset by LIFO expense, as well as an increase in the proportion of margin accretive Retail and Food Distribution segment sales.

Reported operating expenses for the third quarter were $306.8 million, or 14.8% of net sales, compared to $295.8 million, or 14.4% 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 primarily to higher labor and transportation costs across the supply chain network, related to the ongoing tight labor conditions, and higher corporate administrative costs. These increases in expense rates were partially offset by lower restructuring and asset impairment charges compared to the prior year quarter.

The Company reported operating earnings of $22.7 million, compared to $29.0 million in the prior year quarter, due to the changes in net sales, gross profit and operating expenses discussed above. Adjusted operating earnings(1) were $22.9 million compared to $35.8 million in the prior year quarter, and were adjusted for the items detailed in Table 3.

Interest expense decreased $0.5 million from the prior year quarter due to the Company’s paydown of long-term debt resulting from free cash flow(4) over the past year.

The Company reported net earnings of $15.2 million, or $0.42 per diluted share, compared to $20.0 million, or $0.56 per diluted share in the prior year quarter. The decline reflects the operating earnings and non-operating expense changes noted above. Adjusted earnings from continuing operations(2) for the third quarter were $15.3 million, or $0.43 per diluted share, compared to $25.1 million, or $0.70 per diluted share in the prior year quarter. A reconciliation of net earnings to adjusted earnings from continuing operations is included in Table 4.

Adjusted EBITDA(3) decreased $5.5 million to $51.5 million, compared to $57.0 million in the prior year quarter, due to the changes in adjusted operating earnings mentioned above. In addition, the increase in LIFO expense impacted the relationship between adjusted operating earnings and adjusted EBITDA(3) for the quarter.

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

Segment Financial Results

Food Distribution

Net sales for Food Distribution increased $19.1 million, or 1.9%, to $1.03 billion from $1.01 billion in the prior year quarter. The increase in net sales was due to continued growth with certain existing Food Distribution customers and the favorable impact of inflation. Net sales increased $92.3 million, or 9.8%, over the third quarter of 2019.

Reported operating earnings for Food Distribution were $10.0 million, compared to $9.2 million in the prior year quarter. During the prior year quarter, the Company made the decision to abandon a tradename within this segment, resulting in an impairment of the associated indefinite-lived tradename asset. The increase in reported operating earnings for Food Distribution compared to the prior year was due to cycling this asset impairment charge, as well as increased earnings due to the growth in net sales and gross profit rate, mostly offset by increases in supply chain expenses. The growth in the gross profit rate was driven primarily by an increase in average sales price due to inflation, partially offset by an increase in LIFO expense. Adjusted operating earnings(1) were $10.1 million, compared to $15.7 million in the prior year quarter. Adjusted operating earnings exclude asset impairment and restructuring charges in both the current and prior year quarters.

Retail

Net sales for Retail increased $12.1 million, or 2.0%, to $608.7 million from $596.6 million in the prior year quarter, primarily due to increases in comparable store sales and fuel sales in the current year, partially offset by store closures. Retail comparable store sales grew by 3.1% for the quarter and grew by 13.5% on a two-year comparable basis.

Reported operating earnings for Retail were $16.8 million, compared to $22.3 million in the prior year quarter. The decrease in reported operating earnings was due to lower gross margin rates driven by lower fuel margins, cycling favorable prior year inventory shrink, and reduced vendor promotional activity in the current year. These unfavorable variances were partially offset by the increase in net sales. Adjusted operating earnings(1) were $17.1 million, compared to $22.6 million in the prior year quarter. Adjusted operating earnings exclude asset impairment and restructuring charges and acquisition and integration charges in both the current and prior year quarters.

Military

Net sales for Military decreased $18.8 million, or 4.1%, to $433.2 million from $452.0 million in the prior year quarter. The decrease was primarily related to a reduction in export sales as a result of cycling the prior year quarter’s increased consumer demand, coupled with supply chain challenges at international shipping ports in the current year quarter, in addition to the continuation of lower volumes at domestic commissaries. Net sales decreased $66.0 million, or 13.2% from the third quarter of 2019.

The reported operating loss for Military was $4.0 million, compared to $2.5 million in the prior year quarter. The increase in the reported operating loss was due to the decrease in net sales and higher rate of supply chain expense, partially offset by improvements in gross margin rates. Gross margin rates increased due to inflation and were partially offset by higher LIFO expense. The adjusted operating loss(1) in the Military segment was $4.4 million compared to a $2.5 million loss in the prior year. Adjusted operating earnings exclude asset impairment and restructuring gains in the current year quarter.

Balance Sheet and Cash Flow

Cash flows provided by operating activities for the year-to-date period were $144.0 million compared to $223.8 million in the prior year. In the prior year, significant increases in sales volume related to the COVID-19 pandemic resulted in a reduction in working capital and incremental earnings, which benefited operating cash flows. The Company reduced net long-term debt(5) by $87.0 million for the year-to-date period, which resulted in an improvement in the Company’s net long-term debt to adjusted EBITDA ratio over this period from 2.0x to 1.7x.

Capital expenditures and IT capital(6) totaled $61.9 million in the year-to-date period compared to $53.5 million in the prior year.

Through the third quarter, the Company declared $21.6 million in cash dividends, equal to $0.20 per common share.

Outlook

Based on year-to-date performance and our expectations for the remainder of the year, the Company is updating its full-year guidance for 2021, initially provided on Feb. 24, 2021, and last updated on Aug. 18, 2021:

Previous Full Year 2021 Outlook

Updated Full Year 2021 Outlook

Low

High

Low

High

Total net sales (millions)

$

8,800

$

9,000

$

8,800

$

9,000

Segment sales % decline

Retail comp sales

(5.0%)

(2.0%)

(2.0%)

(1.0%)

Food Distribution sales

(3.0%)

(1.0%)

(3.0%)

(1.0%)

Military sales

(13.0%)

(9.0%)

(13.0%)

(9.0%)

Adjusted EBITDA(3) (millions)

$

200

$

210

$

205

$

210

Adjusted EPS(7)

$

1.70

$

1.80

$

1.70

$

1.80

Reported EPS

$

1.56

$

1.69

$

1.61

$

1.71

Capital expenditures and IT capital(6) (thousands)

$

80,000

$

90,000

$

80,000

$

90,000

Depreciation and amortization (thousands)

$

90,000

$

100,000

$

90,000

$

100,000

Interest expense (thousands)

$

14,000

$

15,000

$

14,000

$

15,000

Income tax rate

24.5%

25.5%

24.5%

25.5%

Conference Call

A telephone conference call to discuss the Company’s third quarter financial results is scheduled for Thursday, Nov. 11, 2021, at 8 a.m. ET. A live webcast of this conference call will be available on the Company’s website, www.spartannash.com/webcasts. Simply click on “For Investors” and follow the links to the live webcast. The webcast will remain available for replay on the Company’s website for approximately 10 days.

About SpartanNash

SpartanNash (Nasdaq: SPTN) is a food solutions company that delivers the ingredients for a better life through customer-focused innovation. Its 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 and the Our Family® private label brand. SpartanNash serves customer locations in all 50 states and the District of Columbia, Europe, Cuba, Puerto Rico, Honduras, Iraq, Kuwait, Bahrain, Qatar and Djibouti. The company owns 146 supermarkets-primarily under the banners of Family Fare, Martin’s Super Markets, D&W Fresh Market, VG’s Grocery and Dan’s Supermarket-and shares its operational insights to drive solutions for SpartanNash food retail customers. Committed to fostering a People First culture, the SpartanNash family of Associates is 19,000 strong and growing. For more information, visit spartannash.com.

Forward-Looking Statements

This press release contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These include statements preceded by, followed by or that otherwise include the words “outlook,” “believe,” “anticipates,” “continue,” “expects,” “guidance,” “trend,” “on track,” “encouraged” or “plan” or similar expressions. The statements in the “Outlook” section of this press release are inherently forward looking. Forward-looking statements relating to expectations about future results or events are based upon information available to SpartanNash as of today’s date, and are not guarantees of the future performance of the Company, and actual results may vary materially from the results and expectations discussed. Additional risks and uncertainties include, but are not limited to, disruption associated with the COVID-19 pandemic and the Company’s ability to compete in the highly competitive grocery distribution, retail grocery, and military distribution industries. Additional information concerning these and other risks is contained in SpartanNash’s most recently filed Annual Report on Form 10-K, recent Current Reports on Form 8-K and other SEC filings. All subsequent written and oral forward-looking statements concerning SpartanNash, or other matters and attributable to SpartanNash or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. SpartanNash does not undertake any obligation to publicly update any of these forward-looking statements to reflect events or circumstances that may arise after the date hereof.

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

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

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

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

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

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

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

SPARTANNASH COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

12 Weeks Ended

40 Weeks Ended

October 9,

October 3,

October 9,

October 3,

(In thousands, except per share amounts)

2021

2020

2021

2020

Net sales

$

2,073,253

$

2,060,816

$

6,837,612

$

7,101,373

Cost of sales

1,743,769

1,735,994

5,756,471

6,014,610

Gross profit

329,484

324,822

1,081,141

1,086,763

Operating expenses and (income)

Selling, general and administrative

306,847

289,039

999,032

981,066

Acquisition and integration

101

242

281

242

Restructuring and asset impairment, net

(195

)

6,543

2,981

20,455

Total operating expenses, net

306,753

295,824

1,002,294

1,001,763

Operating earnings

22,731

28,998

78,847

85,000

Other expenses and (income)

Interest expense

3,020

3,522

10,877

14,810

Other, net

(16

)

(40

)

(293

)

(1,144

)

Total other expenses, net

3,004

3,482

10,584

13,666

Earnings before income taxes

19,727

25,516

68,263

71,334

Income tax expense

4,551

5,564

16,757

7,513

Net earnings

$

15,176

$

19,952

$

51,506

$

63,821

Basic net earnings per share:

$

0.43

$

0.56

$

1.44

$

1.78

Diluted net earnings per share:

$

0.42

$

0.56

$

1.44

$

1.78

Weighted average shares outstanding:

Basic

35,525

35,730

35,671

35,900

Diluted

35,816

35,732

35,871

35,900

SPARTANNASH COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

October 9,

January 2,

(In thousands)

2021

2021

Assets

Current assets

Cash and cash equivalents

$

24,645

$

19,903

Accounts and notes receivable, net

372,029

357,564

Inventories, net

550,240

541,785

Prepaid expenses and other current assets

60,316

72,229

Property and equipment held for sale

23,259

Total current assets

1,007,230

1,014,740

Property and equipment, net

559,239

577,059

Goodwill

181,035

181,035

Intangible assets, net

112,132

116,142

Operating lease assets

285,580

289,173

Other assets, net

97,464

99,242

Total assets

$

2,242,680

$

2,277,391

Liabilities and Shareholders’ Equity

Current liabilities

Accounts payable

$

490,604

$

464,784

Accrued payroll and benefits

98,897

113,789

Other accrued expenses

59,817

60,060

Current portion of operating lease liabilities

47,047

45,786

Current portion of long-term debt and finance lease liabilities

5,680

5,135

Total current liabilities

702,045

689,554

Long-term liabilities

Deferred income taxes

53,699

45,728

Operating lease liabilities

271,969

278,859

Other long-term liabilities

50,936

46,892

Long-term debt and finance lease liabilities

398,465

481,309

Total long-term liabilities

775,069

852,788

Commitments and contingencies

Shareholders’ equity

Common stock, voting, no par value; 100,000 shares authorized; 35,944 and 35,851 shares outstanding

492,306

491,819

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

Accumulated other comprehensive loss

(2,132

)

(2,276

)

Retained earnings

275,392

245,506

Total shareholders’ equity

765,566

735,049

Total liabilities and shareholders’ equity

$

2,242,680

$

2,277,391

SPARTANNASH COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

40 Weeks Ended

(In thousands)

October 9, 2021

October 3, 2020

Cash flow activities

Net cash provided by operating activities

$

143,953

$

223,832

Net cash used in investing activities

(24,051

)

(35,536

)

Net cash used in financing activities

(115,160

)

(185,565

)

Net increase in cash and cash equivalents

4,742

2,731

Cash and cash equivalents at beginning of the period

19,903

24,172

Cash and cash equivalents at end of the period

$

24,645

$

26,903

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 9, 2021

October 3, 2020

October 9, 2021

October 3, 2020

Food Distribution Segment:

Net sales

$

1,031,315

49.7

%

$

1,012,204

49.1

%

$

3,421,923

50.0

%

$

3,471,561

48.9

%

Operating earnings

9,969

9,191

47,793

34,990

Retail Segment:

Net sales

608,737

29.4

%

596,659

29.0

%

1,968,158

28.8

%

2,010,483

28.3

%

Operating earnings

16,802

22,318

43,705

59,416

Military Segment:

Net sales

433,201

20.9

%

451,953

21.9

%

1,447,531

21.2

%

1,619,329

22.8

%

Operating loss

(4,040

)

(2,511

)

(12,651

)

(9,406

)

Total:

Net sales

$

2,073,253

100.0

%

$

2,060,816

100.0

%

$

6,837,612

100.0

%

$

7,101,373

100.0

%

Operating earnings

22,731

28,998

78,847

85,000

Non-GAAP Financial Measures

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

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

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

(Adjusted EBITDA)

(A Non-GAAP Financial Measure)

(Unaudited)

12 Weeks Ended

40 Weeks Ended

(In thousands)

October 9, 2021

October 3, 2020

October 9, 2021

October 3, 2020

Net earnings

$

15,176

$

19,952

$

51,506

$

63,821

Income tax expense

4,551

5,564

16,757

7,513

Other expenses, net

3,004

3,482

10,584

13,666

Operating earnings

22,731

28,998

78,847

85,000

Adjustments:

LIFO expense

5,887

387

10,444

3,158

Depreciation and amortization

21,763

20,858

71,260

68,611

Acquisition and integration

101

242

281

242

Restructuring and asset impairment, net

(195

)

6,543

2,981

20,455

Costs associated with Project One Team

493

Organizational realignment, net

589

Severance associated with cost reduction initiatives

239

40

377

5,121

Stock-based compensation

920

1,033

6,084

5,181

Stock warrant

403

1,478

Non-cash rent

(994

)

(1,188

)

(2,980

)

(3,981

)

Fresh Cut operating losses

2,262

Loss (gain) on disposal of assets

49

35

(213

)

3,462

Other non-cash charges

570

94

1,528

193

Adjusted EBITDA

$

51,474

$

57,042

$

170,676

$

190,197

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 9, 2021

October 3, 2020

October 9, 2021

October 3, 2020

Food Distribution:

Operating earnings

$

9,969

$

9,191

$

47,793

$

34,990

Adjustments:

LIFO expense

3,760

295

6,180

1,684

Depreciation and amortization

7,954

7,413

25,348

24,561

Restructuring and asset impairment, net

36

6,538

799

19,222

Costs associated with Project One Team

265

Organizational realignment, net

287

Severance associated with cost reduction initiatives

143

246

3,143

Stock-based compensation

407

522

2,772

2,524

Stock warrant

403

1,478

Non-cash rent

208

31

1,125

125

Fresh Cut operating losses

2,262

Loss (gain) on disposal of assets

4

(6

)

(95

)

1,613

Other non-cash charges

364

52

881

103

Adjusted EBITDA

$

23,248

$

24,036

$

86,814

$

90,492

Retail:

Operating earnings

$

16,802

$

22,318

$

43,705

$

59,416

Adjustments:

LIFO expense

690

(15

)

1,582

586

Depreciation and amortization

10,633

10,489

35,559

34,570

Acquisition and integration

101

242

281

242

Restructuring and asset impairment, net

137

5

2,550

1,233

Costs associated with Project One Team

164

Organizational realignment, net

215

Severance associated with cost reduction initiatives

69

9

98

1,441

Stock-based compensation

371

364

2,241

1,756

Non-cash rent

(1,116

)

(1,134

)

(3,813

)

(3,818

)

Loss (gain) on disposal of assets

24

34

(101

)

1,905

Other non-cash charges

147

30

461

64

Adjusted EBITDA

$

27,858

$

32,342

$

82,778

$

97,559

Military:

Operating loss

$

(4,040

)

$

(2,511

)

$

(12,651

)

$

(9,406

)

Adjustments:

LIFO expense

1,437

107

2,682

888

Depreciation and amortization

3,176

2,956

10,353

9,480

Restructuring and asset impairment, gain

(368

)

(368

)

Costs associated with Project One Team

64

Organizational realignment, net

87

Severance associated with cost reduction initiatives

27

31

33

537

Stock-based compensation

142

147

1,071

901

Non-cash rent

(86

)

(85

)

(292

)

(288

)

Loss (gain) on disposal of assets

21

7

(17

)

(56

)

Other non-cash charges

59

12

186

26

Adjusted EBITDA

$

368

$

664

$

1,084

$

2,146

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 share-based payments (equity awards measured in accordance with ASC 718, Stock Compensation, which include both stock-based compensation to employees and stock warrants issued to non-employees) and 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 9, 2021

October 3, 2020

October 9, 2021

October 3, 2020

Operating earnings

$

22,731

$

28,998

$

78,847

$

85,000

Adjustments:

Acquisition and integration

101

242

281

242

Restructuring and asset impairment, net

(195

)

6,543

2,981

20,455

Costs associated with Project One Team

493

Organizational realignment, net

589

Expenses associated with tax planning

(15

)

82

Severance associated with cost reduction initiatives

239

40

377

5,121

Fresh Cut operating losses

2,262

Adjusted operating earnings

$

22,876

$

35,808

$

83,075

$

113,655

12 Weeks Ended

40 Weeks Ended

(In thousands)

October 9, 2021

October 3, 2020

October 9, 2021

October 3, 2020

Food Distribution:

Operating earnings

$

9,969

$

9,191

$

47,793

$

34,990

Adjustments:

Restructuring and asset impairment, net

36

6,538

799

19,222

Costs associated with Project One Team

265

Organizational realignment, net

287

Expenses associated with tax planning

(8

)

44

Severance associated with cost reduction initiatives

143

246

3,143

Fresh Cut operating losses

2,262

Adjusted operating earnings

$

10,148

$

15,721

$

49,125

$

59,926

Retail:

Operating earnings

$

16,802

$

22,318

$

43,705

$

59,416

Adjustments:

Acquisition and integration

101

242

281

242

Restructuring and asset impairment, net

137

5

2,550

1,233

Costs associated with Project One Team

164

Organizational realignment, net

215

Expenses associated with tax planning

(5

)

27

Severance associated with cost reduction initiatives

69

9

98

1,441

Adjusted operating earnings

$

17,109

$

22,569

$

46,849

$

62,523

Military:

Operating loss

$

(4,040

)

$

(2,511

)

$

(12,651

)

$

(9,406

)

Adjustments:

Restructuring and asset impairment, gain

(368

)

(368

)

Costs associated with Project One Team

64

Organizational realignment, net

87

Expenses associated with tax planning

(2

)

11

Severance associated with cost reduction initiatives

27

31

33

537

Adjusted operating loss

$

(4,381

)

$

(2,482

)

$

(12,899

)

$

(8,794

)

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, and other income statement data. The Company’s definition of adjusted operating earnings may not be identical to similarly titled measures reported by other companies.

Table 4: Reconciliation of Net Earnings to Adjusted Earnings from Continuing Operations

(A Non-GAAP Financial Measure)

(Unaudited)

12 Weeks Ended

October 9, 2021

October 3, 2020

per diluted

per diluted

(In thousands, except per share amounts)

Earnings

share

Earnings

share

Net earnings

$

15,176

$

0.42

$

19,952

$

0.56

Adjustments:

Acquisition and integration

101

242

Restructuring and asset impairment, net

(195

)

6,543

Expenses associated with tax planning

(15

)

Severance associated with cost reduction initiatives

239

40

Total adjustments

145

6,810

Income tax effect on adjustments (a)

(36

)

(1,830

)

Impact of CARES Act (b)

212

Total adjustments, net of taxes

109

0.01

5,192

0.14

*

Adjusted earnings from continuing operations

$

15,285

$

0.43

$

25,144

$

0.70

40 Weeks Ended

October 9, 2021

October 3, 2020

per diluted

per diluted

(In thousands, except per share amounts)

Earnings

share

Earnings

share

Net earnings

$

51,506

$

1.44

$

63,821

$

1.78

Adjustments:

Acquisition and integration

281

242

Restructuring and asset impairment, net

2,981

20,455

Costs associated with Project One Team

493

Organizational realignment, net

589

Expenses associated with tax planning

82

Severance associated with cost reduction initiatives

377

5,121

Fresh Cut operating losses

2,262

Pension termination

(1,004

)

Total adjustments

4,228

27,651

Income tax effect on adjustments (a)

(1,060

)

(6,827

)

Impact of CARES Act (b)

(9,298

)

Total adjustments, net of taxes

3,168

0.08

*

11,526

0.32

Adjusted earnings from continuing operations

$

54,674

$

1.52

$

75,347

$

2.10

* Includes rounding

(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.

(b)

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

Notes: Adjusted earnings from continuing operations is a non-GAAP operating financial measure that the Company defines as net earnings plus or minus adjustments for items that do not reflect the ongoing operating activities of the Company and costs associated with the closing of operational locations.

Adjusted earnings from continuing operations is not a measure of performance under accounting principles generally accepted in the United States of America and should not be considered as a substitute for net earnings, cash flows from operating activities and other income or cash flow statement data. The Company’s definition of adjusted earnings from continuing operations may not be identical to similarly titled measures reported by other companies.

Table 5: Reconciliation of Long-Term Debt and Finance Lease Obligations to Net Long-Term Debt

(A Non-GAAP Financial Measure)

(Unaudited)

October 9,

January 2,

(In thousands)

2021

2021

Current portion of long-term debt and finance lease liabilities

$

5,680

$

5,135

Long-term debt and finance lease liabilities

398,465

481,309

Total debt

404,145

486,444

Cash and cash equivalents

(24,645

)

(19,903

)

Net long-term debt

$

379,500

$

466,541

Notes: Net long-term debt is a non-GAAP financial measure that is defined as long-term debt and finance lease obligations plus current maturities of long-term debt and finance lease liabilities, 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 9, 2021

October 3, 2020

Net cash provided by operating activities

$

143,953

$

223,832

Less:

Purchases of property and equipment

54,957

45,880

Free cash flow

$

88,996

$

177,952

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 9, 2021

October 3, 2020

Purchases of property and equipment

$

54,957

$

45,880

Plus:

Cloud computing spend

6,961

7,658

Capital expenditures and IT capital

$

61,918

$

53,538

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

Table 8: Reconciliation of Projected Net Earnings per Diluted Share to Projected Adjusted Earnings per Diluted Share from Continuing Operations

(A Non-GAAP Financial Measure)

(Unaudited)

52 Weeks Ending

January 1, 2022

Low

High

Net Earnings per Diluted Share

$

1.61

$

1.71

Adjustments, net of taxes:

Acquisition and integration expenses

0.01

0.01

Restructuring and asset impairment, net

0.06

0.06

Severance associated with cost reduction initiatives

0.01

0.01

Organizational realignment, net

0.01

0.01

Projected Adjusted Earnings per Diluted Share from Continuing Operations

$

1.70

$

1.80

Investor Contacts:

Jason Monaco

Executive Vice President and Chief Financial Officer

[email protected]

Chris Mandeville

ICR

[email protected]

Anna Kate Heller

ICR

[email protected]

Media Contact:

Adrienne Chance

Vice President Communications

[email protected]