GRAND RAPIDS, Mich.--(BUSINESS WIRE)--SpartanNash Company (the “Company”) (Nasdaq: SPTN) today reported financial results for the 16-week first quarter ended April 22, 2017.
First Quarter Results
Consolidated net sales for the first quarter increased $123.7 million to $2.40 billion from $2.28 billion in the prior year quarter. The increase in net sales was driven primarily by contributions from the Caito Foods Service (“Caito”) acquisition and organic growth in the food distribution segment, which more than offset lower sales in the military and retail segments.
Reported operating earnings improved $7.9 million to $29.6 million from $21.7 million in the prior year quarter. The increase was primarily due to lower restructuring and asset impairment charges compared to the prior year, partially offset by higher merger/acquisition and integration expenses and start-up costs associated with the new Caito Fresh Kitchen operation. Adjusted operating earnings(1) improved slightly to $38.6 million from $38.5 million in the prior year quarter, as organic sales growth in food distribution helped mitigate an increase in health care costs, which were partially due to the timing of certain health care funding requirements, the negative impact of food deflation and the shift of New Year’s Day into the first 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.
Reported earnings from continuing operations improved $5.1 million to $15.1 million, or $0.40 per diluted share, compared to $10.0 million, or $0.27 per diluted share, in the prior year quarter. Adjusted earnings from continuing operations(2) for the first quarter increased to $20.7 million, or $0.55 per diluted share, from $20.4 million, or $0.54 per diluted share, in the prior year quarter. As anticipated, the shift of New Year’s Day into the first quarter negatively impacted reported and adjusted earnings from continuing operations by $0.03 per diluted share. The negative impact from the holiday shift was offset by a $0.03 per-share benefit related to the required adoption of the new accounting standard for taxes associated with share-based compensation. The new accounting treatment, which is impacted by fluctuations in the Company’s stock price, is expected to predominantly benefit the first quarter.
Current year adjusted earnings from continuing operations exclude net after-tax charges of $0.15 per diluted share primarily related to merger/acquisition and integration activities mainly associated with the acquisition of Caito and Blue Ribbon Transport (“BRT”), start-up costs associated with the new Fresh Kitchen operation, a retirement stock compensation award, as well as net restructuring and asset impairment charges associated with the Company’s retail store and warehouse rationalization plans. The Fresh Kitchen is a newly constructed facility that provides the Company with the ability to process, cook, and package fresh protein-based foods and complete meal solutions. Given the Fresh Kitchen represents a new line of business for the Company in a fast growth category, the start-up activities associated with testing, training, and preparing the Fresh Kitchen for production, as well as incorporating the related operations into the business, are considered “non-operational” or “non-core” in nature. Prior year adjusted earnings from continuing operations exclude net after-tax charges of $0.27 per diluted share primarily related to restructuring activities associated with the Company’s retail store and warehouse rationalization plan, as well as ongoing merger integration activities.
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA)(3) improved to $70.2 million, or 2.9 percent of net sales, compared to $68.0 million, or 3.0 percent of net sales in the prior year quarter.
“Our solid first quarter performance reflects the successful implementation and execution of our strategy to deliver growth in a challenging environment,” said David M. Staples, President and Chief Executive Officer. “Despite the ongoing impact of deflation and higher health care costs, we delivered positive results in food distribution as we continue to leverage our network to grow sales. During the first quarter, we began integrating Caito into our operations and further optimizing our network, made significant progress toward launching production in our new Fresh Kitchen facility and prepared for the introduction of private brand products to U.S. military commissaries. Our momentum is strong, and we are excited about the prospects for delivering another year of sales and earnings growth to our shareholders.”
Gross profit margin for the first quarter improved to 14.9 percent from 14.7 percent in the prior year quarter primarily due to higher margins at Caito and the mix of business operations.
Reported operating expenses for the first quarter were $327.7 million, or 13.6 percent of sales, compared to $312.6 million, or 13.7 percent of sales, in the prior year quarter. First quarter operating expenses would have been $318.8 million, or 13.3 percent of net sales, compared to $295.7 million, or 13.0 percent of net sales in the prior year quarter, if the previously mentioned adjustments were excluded. The higher adjusted expenses as a rate to sales was primarily attributable to higher health care costs and the mix of business operations, including the addition of Caito.
Food Distribution Segment
Net sales for the food distribution segment increased $171.8 million to $1.16 billion from $991.1 million in the prior year quarter. The increase was due to contributions from the Caito acquisition and organic sales growth of 4.2 percent, which more than offset the negative impact of food deflation.
Reported operating earnings for the food distribution segment were $25.3 million compared to $25.9 million in the prior year quarter. First quarter adjusted operating earnings increased to $33.1 million from $28.8 million in the prior year quarter. Higher organic sales and benefits associated with continued supply chain improvements were partially offset by the negative impact of the New Year’s Day shift and continued deflation. First quarter adjusted operating earnings in the current and prior year exclude $7.8 million and $2.9 million, respectively, of pre-tax charges primarily related to merger/acquisition and integration expenses, Fresh Kitchen start-up costs, as well as restructuring charges related to the Company’s warehouse optimization plan. Adjusted operating earnings by segment(4) is a non-GAAP operating financial measure.
Military Segment
Net sales for the military segment were $643.3 million compared to $674.5 million in the prior year quarter. The decrease was primarily due to lower sales at the Defense Commissary Agency (“DeCA”) operated commissaries and the shift of New Year’s Day into the first quarter.
Reported operating earnings for the military segment were $0.9 million compared to $3.4 million in the prior year quarter. Adjusted operating earnings were $1.0 million compared to $3.7 million in the prior year period. The decrease in operating earnings was primarily due to lower sales volume, the negative impact of the New Year’s Day shift, higher health care costs and a large insurance claim.
Retail Segment
Net sales for the retail segment were $596.2 million in the first quarter compared to $613.1 million for the prior year quarter. The decrease in net sales was primarily attributable to negative comparable store sales and $11.5 million in lower sales resulting from retail store closures, partially offset by higher sales from increased fuel prices. Comparable store sales, excluding fuel, were -2.2 percent for the quarter and reflect a 40 basis point negative impact from the New Year’s Day shift, competitive new store openings, the impact of ongoing deflation and unseasonably warm weather in the northern geographies.
Reported operating earnings in the retail segment were $3.4 million compared to a loss of $7.6 million in the prior year quarter. Adjusted operating earnings were $4.5 million compared to $6.1 million in the prior year quarter. The decrease in adjusted operating earnings was primarily attributable to higher health care costs, lower comparable store sales and the shift of New Year’s Day, partially offset by improved margin rates and the closure of unprofitable stores. Current year adjusted operating earnings exclude $1.1 million of net pre-tax charges primarily associated with net restructuring and asset impairment charges. The prior year first quarter excludes $13.7 million of pre-tax charges primarily associated with restructuring costs.
During the first quarter, the Company sold one store and closed three others in connection with lease expirations and store rationalization plans, ending the quarter with 153 corporate owned retail stores, 78 pharmacies and 30 fuel centers.
Balance Sheet and Cash Flow
Cash flow used in operating activities for the first quarter was $10.3 million, compared to $10.0 million provided by operating activities in the comparable period last year. The change in cash flow was primarily due to the timing of working capital payments.
As previously announced, the Board of Directors also authorized an increase in the regular quarterly dividend of 10 percent, to $0.165 per share, beginning in the first quarter of 2017.
Long-term debt and capital lease obligations, including current maturities, were $675.7 million at April 22, 2017 compared to $431.1 million at December 31, 2016. The increase was a result of the Company funding the Caito and BRT acquisition with proceeds from the Company’s Credit Agreement. Net long-term debt(5) (including current maturities and capital lease obligations and subtracting cash) was $656.1 million as of April 22, 2017 compared to $406.7 million at December 31, 2016. The Company's total net long-term debt-to-capital ratio is 0.4-to-1.0 and net long-term debt to Adjusted EBITDA(6) is 2.8-to-1.0, as of April 22, 2017.
Outlook
Mr. Staples continued, “We are excited about our growth opportunities in fiscal 2017 as we focus on providing value and innovative solutions to our customers and further leverage our expertise and extensive network to drive new and existing business. Our sales and earnings are positioned to benefit from food distribution growth, contributions from Caito and from ongoing improvements to our supply chain. We continue to anticipate slight inflation in the second half of the year. The customer response to the improvements we have made in our western stores, particularly in Omaha, has been very encouraging. For our retail segment, we are on track to achieve comparable store sales in the slightly negative to flat range in 2017. In our military business, we expect to begin shipping DeCA private brand products to commissaries during the second quarter, although we expect limited financial contributions for the year due to the start-up costs associated with the rollout of the program.”
The Company is reaffirming its guidance for fiscal 2017, including adjusted earnings per share from continuing operations(7) of approximately $2.26 to $2.35, excluding merger/acquisition and integration costs and other adjusted expenses and gains. This guidance is based on the Caito integration meeting expectations for the second half of the year. Consistent with the first quarter results, the Company anticipates the second quarter to slightly exceed the prior year as it continues to work through the integration. The Company anticipates that reported earnings from continuing operations will now be in the range of approximately $1.99 to $2.08 per diluted share based on expected Fresh Kitchen start-up costs, a retirement stock compensation award, and other anticipated integration and restructuring costs.
The Company continues to expect capital expenditures for fiscal year 2017 to be in the range of $70.0 million to $72.0 million, with depreciation and amortization of approximately $86.0 million to $88.0 million, and total interest expense of approximately $25.0 million to $27.0 million.
(1) A reconciliation of operating earnings to adjusted operating earnings, a non-GAAP financial measure, is provided below.
(2) A reconciliation of earnings from continuing operations to adjusted earnings from continuing operations, a non-GAAP financial measure, is provided below.
(3) A reconciliation of net earnings to Adjusted EBITDA, a non-GAAP financial measure, is provided below.
(4) A reconciliation of operating earnings to adjusted operating earnings by segment, a non-GAAP financial measure, is provided below.
(5) A reconciliation of long-term debt and capital lease obligations to total net long-term debt and capital lease obligations, a non-GAAP financial measure, is provided below.
(6) The net long-term debt to Adjusted EBITDA ratio has not been adjusted for Caito and BRT results on a pro forma or annualized basis.
(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 below.
Conference Call
A telephone conference call to discuss the Company’s first quarter of fiscal 2017 financial results is scheduled for 9:00 a.m. Eastern Time, Thursday, May 25, 2017. A live webcast of this conference call will be available on the Company’s website, www.spartannash.com/webcasts. Simply click on “For Investors” and follow the links to the live webcast. The webcast will remain available for replay on the Company’s website for approximately ten days.
About SpartanNash
SpartanNash (Nasdaq: SPTN) is a Fortune 400 company whose core businesses include distributing grocery products to independent grocery retailers, national accounts, its corporate owned retail stores and U.S. military commissaries. SpartanNash serves customer locations in 47 states and the District of Columbia, Europe, Cuba, Puerto Rico, Bahrain and Egypt. SpartanNash currently operates 153 supermarkets, primarily under the banners of Family Fare Supermarkets, VG’s Food and Pharmacy, D&W Fresh Market, Sun Mart, and Family Fresh Market. Through its MDV military division, SpartanNash is the 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," "momentum," "encouraging," "anticipates," "continue," "expects," "guidance," "positioned," "focus, " or "plan" or similar expressions. 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.
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SPARTANNASH COMPANY AND SUBSIDIARIES |
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|
CONSOLIDATED STATEMENTS OF EARNINGS |
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|
(In thousands, except per share data) |
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|
(Unaudited) |
|||||||||||||
| 16 Weeks Ended | |||||||||||||
| April 22, | April 23, | ||||||||||||
| 2017 | 2016 | ||||||||||||
| Net sales | $ | 2,402,504 | $ | 2,278,770 | |||||||||
| Cost of sales | 2,045,128 | 1,944,528 | |||||||||||
| Gross profit | 357,376 | 334,242 | |||||||||||
| Operating expenses | |||||||||||||
| Selling, general and administrative | 322,694 | 296,381 | |||||||||||
| Merger/acquisition and integration | 4,017 | 897 | |||||||||||
| Restructuring charges and asset impairment | 1,021 | 15,304 | |||||||||||
| Total operating expenses | 327,732 | 312,582 | |||||||||||
| Operating earnings | 29,644 | 21,660 | |||||||||||
| Other (income) and expenses | |||||||||||||
| Interest expense | 7,315 | 5,823 | |||||||||||
| Other, net | (105 | ) | (150 | ) | |||||||||
| Total other expenses, net | 7,210 | 5,673 | |||||||||||
| Earnings before income taxes and discontinued operations | 22,434 | 15,987 | |||||||||||
| Income taxes | 7,369 | 6,027 | |||||||||||
| Earnings from continuing operations | 15,065 | 9,960 | |||||||||||
| Loss from discontinued operations, net of taxes | (40 | ) | (109 | ) | |||||||||
| Net earnings | $ | 15,025 | $ | 9,851 | |||||||||
| Basic earnings per share: | |||||||||||||
| Earnings from continuing operations | $ | 0.40 | $ | 0.27 | |||||||||
| Loss from discontinued operations | — |
(0.01 |
) |
* |
|||||||||
| Net earnings | $ | 0.40 | $ | 0.26 | |||||||||
| Diluted earnings per share: | |||||||||||||
| Earnings from continuing operations | $ | 0.40 | $ | 0.27 | |||||||||
| Loss from discontinued operations | — |
(0.01 |
) |
* | |||||||||
| Net earnings | $ | 0.40 | $ | 0.26 | |||||||||
| Weighted average shares outstanding: | |||||||||||||
| Basic | 37,692 | 37,488 | |||||||||||
| Diluted | 37,756 | 37,544 | |||||||||||
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* Includes rounding |
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| SPARTANNASH COMPANY AND SUBSIDIARIES | ||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||||
| (In thousands) | ||||||||||||
| (Unaudited) | ||||||||||||
| April 22, | April 23, | |||||||||||
| 2017 | 2016 | |||||||||||
|
Assets |
||||||||||||
| Current assets | ||||||||||||
| Cash and cash equivalents | $ | 19,516 | $ | 28,687 | ||||||||
| Accounts and notes receivable, net | 342,364 | 304,754 | ||||||||||
| Inventories, net | 539,908 | 533,074 | ||||||||||
| Prepaid expenses and other current assets | 42,878 | 29,517 | ||||||||||
| Total current assets | 944,666 | 896,032 | ||||||||||
| Property and equipment, net | 628,047 | 573,397 | ||||||||||
| Goodwill | 367,497 | 322,686 | ||||||||||
| Intangible assets, net | 131,376 | 61,362 | ||||||||||
| Other assets, net | 109,029 | 67,307 | ||||||||||
| Total assets | $ | 2,180,615 | $ | 1,920,784 | ||||||||
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Liabilities and Shareholders’ Equity |
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| Current liabilities | ||||||||||||
| Accounts payable | $ | 370,682 | $ | 333,440 | ||||||||
| Accrued payroll and benefits | 60,449 | 62,808 | ||||||||||
| Other accrued expenses | 40,967 | 35,446 | ||||||||||
| Current maturities of long-term debt and capital lease obligations | 17,404 | 19,083 | ||||||||||
| Total current liabilities | 489,502 | 450,777 | ||||||||||
| Long-term liabilities | ||||||||||||
| Deferred income taxes | 132,374 | 119,417 | ||||||||||
| Postretirement benefits | 16,433 | 16,493 | ||||||||||
| Other long-term liabilities | 42,592 | 46,501 | ||||||||||
| Long-term debt and capital lease obligations | 658,261 | 496,114 | ||||||||||
| Total long-term liabilities | 849,660 | 678,525 | ||||||||||
| Commitments and contingencies | ||||||||||||
| Shareholders’ equity | ||||||||||||
|
Common stock, voting, no par value; 100,000 shares authorized; 37,860 and 37,514 shares outstanding |
529,235 | 518,181 | ||||||||||
|
Preferred stock, no par value, 10,000 shares authorized; no shares outstanding |
— | — | ||||||||||
| Accumulated other comprehensive loss |
(11,412 |
) |
(11,446 | ) | ||||||||
| Retained earnings | 323,630 | 284,747 | ||||||||||
| Total shareholders’ equity | 841,453 | 791,482 | ||||||||||
| Total liabilities and shareholders’ equity | $ | 2,180,615 | $ | 1,920,784 | ||||||||
| SPARTANNASH COMPANY AND SUBSIDIARIES | ||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||
| (In thousands) | ||||||||||||
| (Unaudited) | ||||||||||||
| 16 Weeks Ended | ||||||||||||
| April 22, | April 23, | |||||||||||
| 2017 | 2016 | |||||||||||
| Cash flow activities | ||||||||||||
| Net cash (used in) provided by operating activities | $ | (10,291 | ) | $ | 9,977 | |||||||
| Net cash used in investing activities | (232,893 | ) | (12,926 | ) | ||||||||
| Net cash provided by financing activities | 238,297 | 9,081 | ||||||||||
| Net cash provided by (used in) discontinued operations | 52 | (164 | ) | |||||||||
| Net (decrease) increase in cash and cash equivalents | (4,835 | ) | 5,968 | |||||||||
| Cash and cash equivalents at beginning of fiscal year | 24,351 | 22,719 | ||||||||||
| Cash and cash equivalents at end of fiscal year | $ | 19,516 | $ | 28,687 | ||||||||
| SPARTANNASH COMPANY AND SUBSIDIARIES | |||||||||||||||||||||
| SUPPLEMENTAL FINANCIAL DATA | |||||||||||||||||||||
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Table 1: Sales and Operating Earnings by Segment |
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| (In thousands) | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| 16 Weeks Ended | |||||||||||||||||||||
| April 22, 2017 | April 23, 2016 | ||||||||||||||||||||
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Food Distribution Segment: |
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| Net sales | $ | 1,162,950 | 48.4 | % | $ | 991,137 | 43.5 | % | |||||||||||||
| Operating earnings | $ | 25,315 | $ | 25,856 | |||||||||||||||||
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Military Segment: |
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| Net sales | 643,313 | 26.8 | % | 674,523 | 29.6 | % | |||||||||||||||
| Operating earnings | 890 | 3,433 | |||||||||||||||||||
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Retail Segment: |
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| Net sales | 596,241 | 24.8 | % | 613,110 | 26.9 | % | |||||||||||||||
| Operating earnings (loss) | 3,439 | (7,629 | ) | ||||||||||||||||||
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Total: |
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| Net sales | $ | 2,402,504 | 100.0 | % | $ | 2,278,770 | 100.0 | % | |||||||||||||
| Operating earnings | $ | 29,644 | $ | 21,660 | |||||||||||||||||
| Table 2: Reconciliation of Net Earnings to Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization | ||||||||||||
| (Adjusted EBITDA) | ||||||||||||
| (A Non-GAAP Financial Measure) | ||||||||||||
| (In thousands) | ||||||||||||
| (Unaudited) | ||||||||||||
| 16 Weeks Ended | ||||||||||||
| April 22, | April 23, | |||||||||||
|
(In thousands) |
2017 | 2016 | ||||||||||
| Net earnings | $ | 15,025 | $ | 9,851 | ||||||||
| Loss from discontinued operations, net of tax | 40 | 109 | ||||||||||
| Income taxes | 7,369 | 6,027 | ||||||||||
| Other expenses, net | 7,210 | 5,673 | ||||||||||
| Operating earnings | 29,644 | 21,660 | ||||||||||
| Adjustments: | ||||||||||||
| LIFO expense | 1,590 | 1,412 | ||||||||||
| Depreciation and amortization | 25,080 | 23,369 | ||||||||||
| Merger/acquisition and integration | 4,017 | 897 | ||||||||||
| Restructuring charges and asset impairment | 1,021 | 15,304 | ||||||||||
| Caito Fresh Kitchen start-up costs | 2,748 | — | ||||||||||
| Stock-based compensation | 6,352 | 5,024 | ||||||||||
| Other non-cash (gains) charges | (222 | ) | 371 | |||||||||
| Adjusted EBITDA | $ | 70,230 | $ | 68,037 | ||||||||
| Reconciliation of operating earnings to adjusted EBITDA by segment: | ||||||||||||
| Food Distribution: | ||||||||||||
| Operating earnings | $ | 25,315 | $ | 25,856 | ||||||||
| Adjustments: | ||||||||||||
| LIFO expense | 883 | 737 | ||||||||||
| Depreciation and amortization | 8,602 | 6,470 | ||||||||||
| Merger/acquisition and integration | 3,847 | 468 | ||||||||||
| Restructuring charges and asset impairment | 599 | 2,233 | ||||||||||
| Caito Fresh Kitchen start-up costs | 2,748 | — | ||||||||||
| Stock-based compensation | 2,961 | 2,312 | ||||||||||
| Other non-cash charges | 46 | 176 | ||||||||||
| Adjusted EBITDA | $ | 45,001 | $ | 38,252 | ||||||||
| Military: | ||||||||||||
| Operating earnings | $ | 890 | $ | 3,433 | ||||||||
| Adjustments: | ||||||||||||
| LIFO expense | 308 | 311 | ||||||||||
| Depreciation and amortization | 3,439 | 3,475 | ||||||||||
| Merger/acquisition and integration | — | 1 | ||||||||||
| Restructuring charges and asset impairment | — | 32 | ||||||||||
| Stock-based compensation | 962 | 781 | ||||||||||
| Other non-cash (gains) charges | (2 | ) | 208 | |||||||||
| Adjusted EBITDA | $ | 5,597 | $ | 8,241 | ||||||||
| Retail: | ||||||||||||
| Operating earnings (loss) | $ | 3,439 | $ | (7,629 | ) | |||||||
| Adjustments: | ||||||||||||
| LIFO expense | 399 | 364 | ||||||||||
| Depreciation and amortization | 13,039 | 13,424 | ||||||||||
| Merger/acquisition and integration | 170 | 428 | ||||||||||
| Restructuring charges and asset impairment | 422 | 13,039 | ||||||||||
| Stock-based compensation | 2,429 | 1,931 | ||||||||||
| Other non-cash gains | (266 | ) | (13 | ) | ||||||||
| Adjusted EBITDA | $ | 19,632 | $ | 21,544 | ||||||||
Notes: Adjusted EBITDA is a non-GAAP operating financial measure that the Company defines as net earnings plus interest, discontinued operations, depreciation and amortization, and other non-cash items including deferred (stock) compensation, the LIFO provision, as well as adjustments for items that do not reflect the ongoing operating activities of the Company and costs associated with the closing of operational locations.
The Company believes that adjusted EBITDA provides a meaningful representation of its operating performance for the Company as a whole and for its operating segments. The Company considers adjusted EBITDA as an additional way to measure operating performance on an ongoing basis. Adjusted EBITDA is meant to reflect the ongoing operating performance of all of its distribution and retail operations; consequently, it excludes the impact of items that could be considered “non-operating” or “non-core” in nature, and also excludes the contributions of activities classified as discontinued operations. Because adjusted EBITDA and adjusted EBITDA by segment are performance measures that management uses to allocate resources, assess performance against its peers and evaluate overall performance, the Company believes it provides useful information for both management and its investors. In addition, securities analysts, fund managers and other shareholders and stakeholders that communicate with the Company request its operating financial results in adjusted EBITDA format.
Adjusted EBITDA and adjusted EBITDA by segment are not measures of performance under accounting principles generally accepted in the United States of America, and should not be considered as a substitute for net earnings, cash flows from operating activities and other income or cash flow statement data. The Company’s definitions of adjusted EBITDA and adjusted EBITDA by segment may not be identical to similarly titled measures reported by other companies.
| Table 3: Reconciliation of Operating Earnings to Adjusted Operating Earnings | |||||||||||
| (A Non-GAAP Financial Measure) | |||||||||||
| (In thousands) | |||||||||||
| (Unaudited) | |||||||||||
| 16 Weeks Ended | |||||||||||
| April 22, | April 23, | ||||||||||
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(In thousands) |
2017 | 2016 | |||||||||
| Operating earnings | $ | 29,644 | $ | 21,660 | |||||||
| Adjustments: | |||||||||||
| Merger/acquisition and integration | 4,017 | 897 | |||||||||
| Restructuring charges and asset impairment | 1,021 | 15,304 | |||||||||
| Caito Fresh Kitchen start-up costs | 2,748 | — | |||||||||
| Stock compensation associated with executive retirement | 1,172 | — | |||||||||
| Severance associated with cost reduction initiatives | 3 | 679 | |||||||||
| Adjusted operating earnings | $ | 38,605 | $ | 38,540 | |||||||
| Reconciliation of operating earnings to adjusted operating earnings by segment: | |||||||||||
| Food Distribution: | |||||||||||
| Operating earnings | $ | 25,315 | $ | 25,856 | |||||||
| Adjustments: | |||||||||||
| Merger/acquisition and integration | 3,847 | 468 | |||||||||
| Restructuring charges and asset impairment | 599 | 2,233 | |||||||||
| Caito Fresh Kitchen start-up costs | 2,748 | — | |||||||||
| Stock compensation associated with executive retirement | 591 | — | |||||||||
| Severance associated with cost reduction initiatives | 1 | 206 | |||||||||
| Adjusted operating earnings | $ | 33,101 | $ | 28,763 | |||||||
| Military: | |||||||||||
| Operating earnings | $ | 890 | $ | 3,433 | |||||||
| Adjustments: | |||||||||||
| Merger/acquisition and integration | — | 1 | |||||||||
| Restructuring charges and asset impairment | — | 32 | |||||||||
| Stock compensation associated with executive retirement | 147 | — | |||||||||
| Severance associated with cost reduction initiatives | 1 | 222 | |||||||||
| Adjusted operating earnings | $ | 1,038 | $ | 3,688 | |||||||
| Retail: | |||||||||||
| Operating earnings (loss) | $ | 3,439 | $ | (7,629 | ) | ||||||
| Adjustments: | |||||||||||
| Merger/acquisition and integration | 170 | 428 | |||||||||
| Restructuring charges and asset impairment | 422 | 13,039 | |||||||||
| Stock compensation associated with executive retirement | 434 | — | |||||||||
| Severance associated with cost reduction initiatives | 1 | 251 | |||||||||
| Adjusted operating earnings | $ | 4,466 | $ | 6,089 | |||||||
Notes: Adjusted operating earnings is a non-GAAP operating financial measure that the Company defines as operating earnings plus or minus adjustments for items that do not reflect the ongoing operating activities of the Company and costs associated with the closing of operational locations.
The Company believes that adjusted operating earnings provide a meaningful representation of its operating performance for the Company as a whole and for its operating segments. The Company considers adjusted operating earnings as an additional way to measure operating performance on an ongoing basis. Adjusted operating earnings is meant to reflect the ongoing operating performance of all of its distribution and retail operations; consequently, it excludes the impact of items that could be considered “non-operating” or “non-core” in nature, and also excludes the contributions of activities classified as discontinued operations. Because adjusted operating earnings and adjusted operating earnings by segment are performance measures that management uses to allocate resources, assess performance against its peers and evaluate overall performance, the Company believes it provides useful information for both management and its investors. In addition, securities analysts, fund managers and other shareholders and stakeholders that communicate with the Company request its operating financial results in adjusted operating earnings format.
Adjusted operating earnings is not a measure of performance under accounting principles generally accepted in the United States of America, and should not be considered as a substitute for operating earnings, cash flows from operating activities and other income or cash flow statement data. The Company’s definition of adjusted operating earnings may not be identical to similarly titled measures reported by other companies.
| Table 4: Reconciliation of Earnings from Continuing Operations to | |||||||||||||||||||||||
| Adjusted Earnings from Continuing Operations | |||||||||||||||||||||||
| (A Non-GAAP Financial Measure) | |||||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| 16 Weeks Ended | |||||||||||||||||||||||
| April 22, 2017 | April 23, 2016 | ||||||||||||||||||||||
| per diluted | per diluted | ||||||||||||||||||||||
|
(In thousands, except per share amounts) |
Earnings | share | Earnings | share | |||||||||||||||||||
| Earnings from continuing operations | $ | 15,065 | $ | 0.40 | $ | 9,960 | $ | 0.27 | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Merger/acquisition and integration | 4,017 | 897 | |||||||||||||||||||||
| Restructuring charges and asset impairment | 1,021 | 15,304 | |||||||||||||||||||||
| Caito Fresh Kitchen start-up costs | 2,748 | — | |||||||||||||||||||||
| Stock compensation associated with executive retirement | 1,172 | — | |||||||||||||||||||||
| Severance associated with cost reduction initiatives | 3 | 679 | |||||||||||||||||||||
| Total adjustments | 8,961 | 16,880 | |||||||||||||||||||||
| Income tax effect on adjustments (a) | (3,362 | ) | (6,428 | ) | |||||||||||||||||||
| Total adjustments, net of taxes | 5,599 | 0.15 | 10,452 | 0.27 | * | ||||||||||||||||||
| Adjusted earnings from continuing operations | $ | 20,664 | $ | 0.55 | $ | 20,412 | $ | 0.54 | |||||||||||||||
| * 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. | |
Notes: Adjusted earnings from continuing operations is a non-GAAP operating financial measure that the Company defines as earnings from continuing operations plus or minus adjustments for items that do not reflect the ongoing operating activities of the Company and costs associated with the closing of operational locations.
The Company believes that adjusted earnings from continuing operations provide a meaningful representation of its operating performance for the Company. The Company considers adjusted earnings from continuing operations as an additional way to measure operating performance on an ongoing basis. Adjusted earnings from continuing operations is meant to reflect the ongoing operating performance of all of its distribution and retail operations; consequently, it excludes the impact of items that could be considered “non-operating” or “non-core” in nature, and also excludes the contributions of activities classified as discontinued operations. Because adjusted earnings from continuing operations is a performance measure that management uses to allocate resources, assess performance against its peers and evaluate overall performance, the Company believes it provides useful information for both management and its investors. In addition, securities analysts, fund managers and other shareholders and stakeholders that communicate with the Company request its operating financial results in adjusted earnings from continuing operations format.
Adjusted earnings from continuing operations is not a measure of performance under accounting principles generally accepted in the United States of America, and should not be considered as a substitute for net earnings, cash flows from operating activities and other income or cash flow statement data. The Company’s definition of adjusted earnings from continuing operations may not be identical to similarly titled measures reported by other companies.
| Table 5: Reconciliation of Long-Term Debt and Capital Lease Obligations to Total Net Long-Term Debt and Capital Lease Obligations | ||||||||||||
| (A Non-GAAP Financial Measure) | ||||||||||||
| (In thousands) | ||||||||||||
| (Unaudited) | ||||||||||||
| April 22, | December 31, | |||||||||||
| 2017 | 2016 | |||||||||||
| Current maturities of long-term debt and capital lease obligations | $ | 17,404 | $ | 17,424 | ||||||||
| Long-term debt and capital lease obligations | 658,261 | 413,675 | ||||||||||
| Total debt | 675,665 | 431,099 | ||||||||||
| Cash and cash equivalents | (19,516 | ) | (24,351 | ) | ||||||||
| Total net long-term debt | $ | 656,149 | $ | 406,748 | ||||||||
Notes: Total net debt is a non-GAAP financial measure that is defined as long-term debt and capital lease obligations plus current maturities of long-term debt and capital lease obligations less cash and cash equivalents. The Company believes both management and its investors find the information useful because it reflects the amount of long term debt obligations that are not covered by available cash and temporary investments. Total net debt is not a substitute for GAAP financial measures and may differ from similarly titled measures of other companies.
| Table 6: Reconciliation of Projected Earnings per Diluted Share from Continuing Operations to | ||||||||||
| Projected Adjusted Earnings per Diluted Share from Continuing Operations | ||||||||||
| (A Non-GAAP Financial Measure) | ||||||||||
|
(Unaudited) |
||||||||||
| 52 Weeks Ending | ||||||||||
| December 30, 2017 | ||||||||||
| Low | High | |||||||||
| Earnings from continuing operations | $ | 1.99 | $ | 2.08 | ||||||
| Adjustments, net of taxes: | ||||||||||
| Merger integration and acquisition expenses | 0.11 | 0.11 | ||||||||
| Restructuring charges and asset impairment | 0.09 | 0.09 | ||||||||
| Caito Fresh Kitchen start-up costs | 0.05 | 0.05 | ||||||||
| Stock compensation associated with retirement | 0.02 | 0.02 | ||||||||
| Adjusted earnings from continuing operations | $ | 2.26 | $ | 2.35 | ||||||