GRAND RAPIDS, Mich.--(BUSINESS WIRE)--SpartanNash Company (the “Company”) (Nasdaq: SPTN) today reported financial results for the 12-week second quarter and 28-week period ended July 16, 2016.
Second Quarter Results
Consolidated net sales for the 12-week second quarter increased to $1.83 billion from $1.80 billion in the prior year quarter, driven by increases in the food distribution and military segments.
Reported operating earnings were $32.6 million compared to $36.8 million for the prior year quarter primarily due to higher restructuring and asset impairment charges. Adjusted operating earnings improved $2.1 million to $39.3 million from $37.2 million for the prior year quarter due to lower operating expenses resulting from productivity and efficiency initiatives as well as the benefit from increased sales, partially offset by higher health care costs and expenses related to the start-up of new business.
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) was $58.7 million, or 3.2 percent of net sales, compared to $58.5 million, or 3.3 percent of net sales in the prior year quarter. Adjusted EBITDA is a non-Generally Accepted Accounting Principles (GAAP) financial measure. Please see the financial tables at the end of this press release for a reconciliation of net earnings to Adjusted EBITDA, and a reconciliation of each non-GAAP financial measure to the most directly comparable measure prepared and presented in accordance with GAAP.
Reported earnings from continuing operations for the second quarter were $17.6 million, or $0.47 per diluted share, compared to $20.3 million, or $0.54 per diluted share, in the prior year quarter. Adjusted earnings from continuing operations for the second quarter increased to $21.7 million, or $0.58 per diluted share, from $19.8 million, or $0.53 per diluted share, in the prior year quarter. Current year adjusted earnings from continuing operations exclude net after-tax charges of $0.11 per diluted share primarily related to asset impairment charges, restructuring activities associated with the Company’s warehouse rationalization plan, and ongoing merger integration activities. Prior year adjusted earnings from continuing operations excluded a net after-tax gain of $0.01 per diluted share related to a benefit associated with tax planning initiatives and net gains on sales of previously closed stores, partially offset by expenses associated with merger integration activities. Adjusted earnings from continuing operations is a non-GAAP operating financial measure.
“We are generally pleased with our execution in the second quarter and the progress we have made operationally and strategically, particularly our ability to grow sales in a challenging operating environment,” stated Dennis Eidson, SpartanNash's President and Chief Executive Officer. “New business growth and operational efficiencies helped mitigate the impact of deflation on our bottom line. We are also encouraged by our diverse pipeline of sales opportunities and remain on track to achieve our financial objectives for the year. Additionally, we continue to take steps to position the company for growth by: enhancing our merchandising, pricing, and promotional strategies to drive greater customer engagement and improve the overall shopping experience; expanding our organic and private brand product offerings to provide our customers with quality products at affordable prices; investing in select retail markets; and improving operations and expense leverage through our supply chain optimization and merger integration efforts.”
Gross profit margin for the second quarter was 14.4 percent compared to 14.6 percent in the prior year quarter primarily due to changes in the mix of business operations, new business, and deflationary impacts.
Reported operating expenses for the second quarter were $230.1 million, or 12.6 percent of sales, compared to $225.2 million, or 12.5 percent of sales, in the prior year quarter. Second quarter operating expenses would have been $223.4 million, or 12.2 percent of net sales, compared to $224.9 million, or 12.5 percent of net sales in the prior year quarter, if restructuring, asset impairment, and merger integration charges were excluded from both periods and last year’s net gains on property sales and expenses related to tax planning initiatives were excluded. The decrease as a rate to sales would have been primarily due to lower: depreciation expense associated with fully depreciated assets; utility and occupancy costs; and various operating expenses resulting from productivity and efficiency initiatives, partially offset by higher health care costs.
Food Distribution Segment
Net sales for the food distribution segment increased to $820.3 million from $782.7 million in the prior year quarter primarily due to new business gains and growth of existing accounts.
Reported operating earnings for the food distribution segment were $19.2 million compared to $19.4 million in the prior year quarter. Second quarter adjusted operating earnings increased to $21.6 million from $18.5 million in the prior year quarter. The increase was due to improvements from new sales, supply chain optimization efforts, merger synergies and lower depreciation expense partially offset by higher health care costs.
Second quarter adjusted operating earnings exclude $2.4 million of net pre-tax charges consisting of restructuring charges related to the Company’s warehouse optimization plan and merger integration expenses. The prior year second quarter excludes $0.9 million of pre-tax gains related to a legal settlement, net of merger integration costs and professional fees associated with tax planning initiatives. Adjusted operating earnings is a non-GAAP operating financial measure.
Retail Segment
Net sales for the retail segment were $501.8 million in the second quarter compared to $516.1 million for the prior year quarter. The decrease was primarily attributable to a 3.0 percent decrease in comparable store sales, excluding fuel; $9.8 million in lower sales resulting from the closure of retail stores and fuel centers; and $4.1 million due to lower retail fuel prices compared to the prior year; partially offset by contributions from stores acquired in the second quarter of last year.
Comparable store sales reflect the continued challenging economic conditions in select geographies, retail price deflation and competitive store openings, particularly in the Company’s western region.
Reported operating earnings in the retail segment were $10.9 million compared to $13.5 million in the prior year quarter primarily due to asset impairment charges incurred in the current year. Adjusted operating earnings increased to $15.5 million from $14.7 million in the prior year quarter. Current year adjusted operating earnings exclude $4.6 million of pre-tax asset impairment and merger integration charges. The prior year second quarter excludes $1.2 million of pre-tax merger integration and acquisition costs and net gains on the sales of previously closed stores. The increase in adjusted operating earnings was primarily due to improved fuel margins and favorable rebate programs, partially offset by the lower comparable store sales volumes.
During the second quarter, the Company completed one remodel in Michigan and eight remodels in Omaha. Grand re-openings for the Omaha stores, which were re-bannered to Family Fare, were held the first week of the third quarter. SpartanNash ended the quarter with 160 Company-owned retail stores, 79 pharmacies, and 29 fuel centers.
Military Segment
Net sales for the Company's military segment increased to $505.4 million from $497.0 million in the prior year quarter. The increase was primarily due to new business gains associated with the distribution of fresh products, partially offset by continued lower sales at the Defense Commissary Agency (DeCA) operated commissaries.
Reported operating earnings for the military segment were $2.5 million compared to $3.9 million in the prior year quarter. The decrease was primarily due to the lack of inflationary gains, higher health care costs, and a shift in business mix. Second quarter adjusted operating earnings were $2.2 million compared to $4.0 million in the prior year period.
Balance Sheet and Cash Flow
Cash flow provided by operating activities for the year-to-date period was $54.7 million, compared to $123.4 million in the comparable period last year. The decrease was primarily due to changes in working capital, particularly around the timing of vendor and income tax payments and increased working capital requirements to support sales growth.
Long-term debt and capital lease obligations, including current maturities, were $492.5 million at July 16, 2016 compared to $486.8 million at January 2, 2016. Net long-term debt (including current maturities and capital lease obligations and subtracting cash) for the Company was $468.7 million as of July 16, 2016 compared to $464.1 million at January 2, 2016. The Company's total net long-term debt-to-capital ratio is 0.4-to-1.0 and net long-term debt to Adjusted EBITDA is 2.0-to-1.0 as of July 16, 2016. Net long-term debt is a non-GAAP financial measure.
Outlook
Mr. Eidson continued, “With current market headwinds and economic conditions likely to persist, particularly in our western geographic areas, we remain focused on operating our business with a disciplined approach. We will continue to implement our initiatives to enhance our merchandising, pricing and promotional strategies, including expanding our organic and private brand product offerings, improving our produce offering, and driving greater customer engagement through our loyalty program. We are excited about the initial roll out of Open Acres™, our new private brand for fresh products, as this will provide our consumers in both Company-owned and independent store locations with quality fresh products at a significant savings. Additionally, we recently completed eight remodels and re-banners to Family Fare in Omaha, Nebraska, improving our offering to the customer while highlighting our variety and value, especially as it relates to produce and private brand, and have been encouraged by the initial customer response. In our combined food distribution and military network, we consolidated our Statesboro, Georgia warehouse facility and continue to look for ways to optimize our supply chain. We also continue to see opportunities to drive new business and growth, including those within the alternative channel space, and we remain dedicated to offering solutions to complicated logistic issues. We will also proactively pursue financially and strategically attractive acquisition opportunities.”
Based on the first half results and outlook for the remainder of the year, the Company is maintaining its previously issued fiscal 2016 guidance of adjusted earnings per diluted share from continuing operations of approximately $2.07 to $2.18, excluding merger integration costs and other adjusted charges and gains, compared to $1.98 in the prior year. We anticipate that reported earnings from continuing operations will be in the range of approximately $1.66 to $1.77 per diluted share, compared to $1.67 in the prior year. The guidance is based on expectations for the second half of the year of sales growth in food distribution; continued contributions from new fresh business in the Company’s military division, which will lessen the volume impact of the poor performance at the DeCA operated commissaries; and slightly negative to flat comparable retail store sales, reflecting deflation and the competitive sales environment, partially offset by improvements resulting from capital investments, merchandising initiatives and the cycling of competitive openings. The Company anticipates that fourth quarter adjusted earnings per diluted share from continuing operations will be lower than the prior year due to the significant inflation-related benefit from LIFO realized in the fourth quarter of fiscal 2015 of approximately $0.07 per diluted share.
The Company continues to expect capital expenditures for fiscal year 2016 to be in the range of $72.0 million to $75.0 million, with depreciation and amortization of approximately $76.0 million to $78.0 million and total interest expense of approximately $18.0 to $20.0 million.
Conference Call
A telephone conference call to discuss the Company’s second quarter of fiscal 2016 financial results is scheduled for 9:00 a.m. Eastern Time, Thursday, August 18, 2016. A live webcast of this conference call will be available on the Company’s website, www.spartannash.com/webcasts. Simply click on “For Investors” and follow the links to the live webcast. The webcast will remain available for replay on the Company’s website for approximately ten days.
About SpartanNash
SpartanNash (SPTN) is a Fortune 400 company and the leading distributor serving U.S. military commissaries and exchanges in the world, in terms of revenue. The Company's core businesses include distributing grocery products to military commissaries and exchanges and independent and Company-owned retail stores located in 47 states and the District of Columbia, Europe, Cuba, Puerto Rico, Bahrain and Egypt. SpartanNash currently operates 160 supermarkets, primarily under the banners of Family Fare Supermarkets, Family Fresh Markets, D&W Fresh Markets, and Sun Mart.
Forward-Looking Statements
This press release contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These include statements preceded by, followed by or that otherwise include the words "outlook," "pipeline," "optimistic," "committed," "anticipates," "continue," "expects," "look forward," "guidance," "opportunities," "position," "focus," or "plan" or similar expressions or that an event or trend "will" occur, or is "beginning." Forward-looking statements relating to expectations about future results or events are based upon information available to SpartanNash as of today's date, and are not guarantees of the future performance of the combined 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, the merger, 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.
| SPARTANNASH COMPANY AND SUBSIDIARIES | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF EARNINGS | ||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| 12 Weeks Ended | 28 Weeks Ended | |||||||||||||||
| July 16, | July 18, | July 16, | July 18, | |||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Net sales | $ | 1,827,562 | $ | 1,795,864 | $ | 4,106,332 | $ | 4,108,547 | ||||||||
| Cost of sales | 1,564,863 | 1,533,822 | 3,509,391 | 3,510,259 | ||||||||||||
| Gross profit | 262,699 | 262,042 | 596,941 | 598,288 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Selling, general and administrative | 223,418 | 225,433 | 519,799 | 527,804 | ||||||||||||
| Merger integration and acquisition | 913 | 151 | 1,810 | 2,835 | ||||||||||||
| Restructuring charges (gains) and asset impairment | 5,748 | (336 | ) | 21,052 | 7,002 | |||||||||||
| Total operating expenses | 230,079 | 225,248 | 542,661 | 537,641 | ||||||||||||
| Operating earnings | 32,620 | 36,794 | 54,280 | 60,647 | ||||||||||||
| Other (income) and expenses | ||||||||||||||||
| Interest expense | 4,437 | 4,894 | 10,260 | 11,644 | ||||||||||||
| Other, net | (120 | ) | (26 | ) | (270 | ) | (54 | ) | ||||||||
| Total other expenses, net | 4,317 | 4,868 | 9,990 | 11,590 | ||||||||||||
| Earnings before income taxes and discontinued operations | 28,303 | 31,926 | 44,290 | 49,057 | ||||||||||||
| Income taxes | 10,743 | 11,619 | 16,770 | 18,303 | ||||||||||||
| Earnings from continuing operations | 17,560 | 20,307 | 27,520 | 30,754 | ||||||||||||
| Loss from discontinued operations, net of taxes | (76 | ) | (46 | ) | (185 | ) | (166 | ) | ||||||||
| Net earnings | $ | 17,484 | $ | 20,261 | $ | 27,335 | $ | 30,588 | ||||||||
| Basic earnings per share: | ||||||||||||||||
| Earnings from continuing operations | $ | 0.47 | $ | 0.54 | $ | 0.73 | $ | 0.82 | ||||||||
| Loss from discontinued operations | — | — | — |
(0.01 |
)* |
|||||||||||
| Net earnings | $ | 0.47 | $ | 0.54 | $ | 0.73 | $ | 0.81 | ||||||||
| Diluted earnings per share: | ||||||||||||||||
| Earnings from continuing operations | $ | 0.47 | $ | 0.54 | $ | 0.73 | $ | 0.81 | ||||||||
| Loss from discontinued operations | — | — | — | — | ||||||||||||
| Net earnings | $ | 0.47 | $ | 0.54 | $ | 0.73 | $ | 0.81 | ||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 37,475 | 37,584 | 37,483 | 37,644 | ||||||||||||
| Diluted | 37,547 | 37,710 | 37,541 | 37,770 | ||||||||||||
|
* Includes rounding |
||||||||||||||||
| SPARTANNASH COMPANY AND SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (In thousands) | ||||||||
| (Unaudited) | ||||||||
| July 16, 2016 | July 18, 2015 | |||||||
|
Assets |
||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 23,816 | $ | 13,085 | ||||
| Accounts and notes receivable, net | 306,418 | 298,034 | ||||||
| Inventories, net | 536,299 | 552,327 | ||||||
| Prepaid expenses and other current assets | 28,862 | 21,678 | ||||||
| Property and equipment held for sale | — | 5,996 | ||||||
| Total current assets | 895,395 | 891,120 | ||||||
| Property and equipment, net | 575,063 | 587,871 | ||||||
| Goodwill | 322,686 | 331,523 | ||||||
| Other assets, net | 130,719 | 112,864 | ||||||
| Total assets | $ | 1,923,863 | $ | 1,923,378 | ||||
|
Liabilities and Shareholders’ Equity |
||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 339,084 | $ | 350,719 | ||||
| Accrued payroll and benefits | 62,687 | 60,541 | ||||||
| Other accrued expenses | 42,788 | 45,705 | ||||||
| Current maturities of long-term debt and capital lease obligations | 19,106 | 21,669 | ||||||
| Total current liabilities | 463,665 | 478,634 | ||||||
| Long-term liabilities | ||||||||
| Deferred income taxes | 121,352 | 116,135 | ||||||
| Postretirement benefits | 16,061 | 17,022 | ||||||
| Other long-term liabilities | 45,519 | 39,379 | ||||||
| Long-term debt and capital lease obligations | 473,399 | 506,398 | ||||||
| Total long-term liabilities | 656,331 | 678,934 | ||||||
| Commitments and contingencies | ||||||||
| Shareholders’ equity | ||||||||
|
Common stock, voting, no par value; 100,000 shares authorized; 37,468 and 37,517 shares outstanding |
518,702 | 518,615 | ||||||
|
Preferred stock, no par value, 10,000 shares authorized; no shares outstanding |
— | — | ||||||
| Accumulated other comprehensive loss | (11,445 | ) | (11,359 | ) | ||||
| Retained earnings | 296,610 | 258,554 | ||||||
| Total shareholders’ equity | 803,867 | 765,810 | ||||||
| Total liabilities and shareholders’ equity | $ | 1,923,863 | $ | 1,923,378 | ||||
| SPARTANNASH COMPANY AND SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (In thousands) | ||||||||
| (Unaudited) | ||||||||
| 28 Weeks Ended | ||||||||
| July 16, 2016 | July 18, 2015 | |||||||
| Cash flows from operating activities | ||||||||
| Net cash provided by operating activities | $ | 54,665 | $ | 123,355 | ||||
| Net cash used in investing activities | (35,528 | ) | (54,606 | ) | ||||
| Net cash used in financing activities | (17,759 | ) | (52,725 | ) | ||||
| Net cash used in discontinued operations | (281 | ) | (9,382 | ) | ||||
| Net increase in cash and cash equivalents | 1,097 | 6,642 | ||||||
| Cash and cash equivalents at beginning of period | 22,719 | 6,443 | ||||||
| Cash and cash equivalents at end of period | $ | 23,816 | $ | 13,085 | ||||
| SPARTANNASH COMPANY AND SUBSIDIARIES | ||||||||||||||||||||
| SUPPLEMENTAL FINANCIAL DATA | ||||||||||||||||||||
|
Table 1: Sales and Operating Earnings by Segment |
||||||||||||||||||||
|
(In thousands) |
||||||||||||||||||||
|
(Unaudited) |
||||||||||||||||||||
| 12 Weeks Ended | 28 Weeks Ended | |||||||||||||||||||
| July 16, 2016 | July 18, 2015 | July 16, 2016 | July 18, 2015 | |||||||||||||||||
|
Military Segment: |
||||||||||||||||||||
| Net sales | $ | 505,418 | 27.6% | $ | 497,047 | 27.7% | $ | 1,179,941 | 28.7% | $ | 1,196,441 | 29.1% | ||||||||
| Operating earnings | $ | 2,497 | $ | 3,895 | $ | 5,930 | $ | 10,053 | ||||||||||||
|
Food Distribution Segment: |
||||||||||||||||||||
| Net sales | $ | 820,328 | 44.9% | $ | 782,743 | 43.6% | $ | 1,811,465 | 44.1% | $ | 1,769,178 | 43.1% | ||||||||
| Operating earnings | $ | 19,227 | $ | 19,406 | $ | 45,083 | $ | 39,655 | ||||||||||||
|
Retail Segment: |
||||||||||||||||||||
| Net sales | $ | 501,816 | 27.5% | $ | 516,074 | 28.7% | $ | 1,114,926 | 27.2% | $ | 1,142,928 | 27.8% | ||||||||
| Operating earnings | $ | 10,896 | $ | 13,493 | $ | 3,267 | $ | 10,939 | ||||||||||||
|
Total: |
||||||||||||||||||||
| Net sales | $ | 1,827,562 | 100.0% | $ | 1,795,864 | 100.0% | $ | 4,106,332 | 100.0% | $ | 4,108,547 | 100.0% | ||||||||
| Operating earnings | $ | 32,620 | $ | 36,794 | $ | 54,280 | $ | 60,647 | ||||||||||||
| Table 2: Reconciliation of Net Earnings to Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization | ||||||||||||||||
| (Adjusted EBITDA) | ||||||||||||||||
| (A Non-GAAP Financial Measure) | ||||||||||||||||
| (In thousands) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| 12 Weeks Ended | 28 Weeks Ended | |||||||||||||||
|
(In thousands) |
July 16, 2016 | July 18, 2015 | July 16, 2016 | July 18, 2015 | ||||||||||||
| Net earnings | $ | 17,484 | $ | 20,261 | $ | 27,335 | $ | 30,588 | ||||||||
| Loss from discontinued operations, net of tax | 76 | 46 | 185 | 166 | ||||||||||||
| Income taxes | 10,743 | 11,619 | 16,770 | 18,303 | ||||||||||||
| Other expenses, net | 4,317 | 4,868 | 9,990 | 11,590 | ||||||||||||
| Operating earnings | $ | 32,620 | $ | 36,794 | $ | 54,280 | $ | 60,647 | ||||||||
| Adjustments: | ||||||||||||||||
| LIFO expense | 1,059 | 1,294 | 2,471 | 3,017 | ||||||||||||
| Depreciation and amortization | 17,635 | 19,453 | 41,004 | 45,238 | ||||||||||||
| Merger integration and acquisition expenses | 913 | 151 | 1,810 | 2,835 | ||||||||||||
| Restructuring charges (gains) and asset impairment | 5,748 | (336 | ) | 21,052 | 7,002 | |||||||||||
| Fees and expenses related to tax planning strategies | — | 569 | — | 569 | ||||||||||||
| Stock-based compensation | 1,043 | 909 | 6,067 | 5,662 | ||||||||||||
| Other non-cash (gains) charges | (295 | ) | (285 | ) | 76 | (532 | ) | |||||||||
| Adjusted EBITDA | $ | 58,723 | $ | 58,549 | $ | 126,760 | $ | 124,438 | ||||||||
| Reconciliation of operating earnings to adjusted EBITDA by segment: | ||||||||||||||||
| Military: | ||||||||||||||||
| Operating earnings | $ | 2,497 | $ | 3,895 | $ | 5,930 | $ | 10,053 | ||||||||
| Adjustments: | ||||||||||||||||
| LIFO expense | 234 | 291 | 545 | 679 | ||||||||||||
| Depreciation and amortization | 2,682 | 2,810 | 6,157 | 6,543 | ||||||||||||
| Merger integration and acquisition expenses | — | — | 1 | — | ||||||||||||
| Restructuring gains and asset impairment | (291 | ) | — | (259 | ) | — | ||||||||||
| Fees and expenses related to tax planning strategies | — | 75 | — | 75 | ||||||||||||
| Stock-based compensation | 226 | 150 | 1,007 | 854 | ||||||||||||
| Other non-cash (gains) charges | (5 | ) | 6 | 203 | 103 | |||||||||||
| Adjusted EBITDA | $ | 5,343 | $ | 7,227 | $ | 13,584 | $ | 18,307 | ||||||||
| Food Distribution: | ||||||||||||||||
| Operating earnings | $ | 19,227 | $ | 19,406 | $ | 45,083 | $ | 39,655 | ||||||||
| Adjustments: | ||||||||||||||||
| LIFO expense | 551 | 669 | 1,288 | 1,559 | ||||||||||||
| Depreciation and amortization | 4,827 | 6,169 | 11,297 | 14,705 | ||||||||||||
| Merger integration and acquisition expenses (benefit) | 93 | (1,151 | ) | 561 | 1,036 | |||||||||||
| Restructuring charges (gains) and asset impairment | 2,308 | 3 | 4,541 | (278 | ) | |||||||||||
| Fees and expenses related to tax planning strategies | — | 282 | — | 282 | ||||||||||||
| Stock-based compensation | 369 | 399 | 2,681 | 2,629 | ||||||||||||
| Other non-cash charges | 25 | 6 | 201 | 41 | ||||||||||||
| Adjusted EBITDA | $ | 27,400 | $ | 25,783 | $ | 65,652 | $ | 59,629 | ||||||||
| Retail: | ||||||||||||||||
| Operating earnings | $ | 10,896 | $ | 13,493 | $ | 3,267 | $ | 10,939 | ||||||||
| Adjustments: | ||||||||||||||||
| LIFO expense | 274 | 334 | 638 | 779 | ||||||||||||
| Depreciation and amortization | 10,126 | 10,474 | 23,550 | 23,990 | ||||||||||||
| Merger integration and acquisition expenses | 820 | 1,302 | 1,248 | 1,799 | ||||||||||||
| Restructuring charges (gains) and asset impairment | 3,731 | (339 | ) | 16,770 | 7,280 | |||||||||||
| Fees and expenses related to tax planning strategies | — | 212 | — | 212 | ||||||||||||
| Stock-based compensation | 448 | 360 | 2,379 | 2,179 | ||||||||||||
| Other non-cash gains | (315 | ) | (297 | ) | (328 | ) | (676 | ) | ||||||||
| Adjusted EBITDA | $ | 25,980 | $ | 25,539 | $ | 47,524 | $ | 46,502 | ||||||||
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 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 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 EBITDA 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) | ||||||||||||||||
| 12 Weeks Ended | 28 Weeks Ended | |||||||||||||||
|
(In thousands) |
July 16, 2016 | July 18, 2015 | July 16, 2016 | July 18, 2015 | ||||||||||||
| Operating earnings | $ | 32,620 | $ | 36,794 | 54,280 | 60,647 | ||||||||||
| Adjustments: | ||||||||||||||||
| Merger integration and acquisition expenses | 913 | 151 | 1,810 | 2,835 | ||||||||||||
| Restructuring charges (gains) and asset impairment | 5,748 | (336 | ) | 21,052 | 7,002 | |||||||||||
| Fees and expenses related to tax planning strategies | — | 569 | — | 569 | ||||||||||||
| Severance associated with cost reduction initiatives | 11 | — | 690 | — | ||||||||||||
| Adjusted operating earnings | $ | 39,292 | $ | 37,178 | $ | 77,832 | $ | 71,053 | ||||||||
| Reconciliation of operating earnings to adjusted operating earnings by segment: | ||||||||||||||||
| Military: | ||||||||||||||||
| Operating earnings | $ | 2,497 | $ | 3,895 | $ | 5,930 | $ | 10,053 | ||||||||
| Adjustments: | ||||||||||||||||
| Merger integration and acquisition expenses | — | — | 1 | — | ||||||||||||
| Restructuring gains and asset impairment | (291 | ) | — | (259 | ) | — | ||||||||||
| Fees and expenses related to tax planning strategies | — | 75 | — | 75 | ||||||||||||
| Severance associated with cost reduction initiatives | 1 | — | 223 | — | ||||||||||||
| Adjusted operating earnings | $ | 2,207 | $ | 3,970 | $ | 5,895 | $ | 10,128 | ||||||||
| Food Distribution: | ||||||||||||||||
| Operating earnings | $ | 19,227 | $ | 19,406 | $ | 45,083 | $ | 39,655 | ||||||||
| Adjustments: | ||||||||||||||||
| Merger integration and acquisition expenses (benefit) | 93 | (1,151 | ) | 561 | 1,036 | |||||||||||
| Restructuring charges (gains) and asset impairment | 2,308 | 3 | 4,541 | (278 | ) | |||||||||||
| Fees and expenses related to tax planning strategies | — | 282 | — | 282 | ||||||||||||
| Severance associated with cost reduction initiatives | — | — | 206 | — | ||||||||||||
| Adjusted operating earnings | $ | 21,628 | $ | 18,540 | $ | 50,391 | $ | 40,695 | ||||||||
| Retail: | ||||||||||||||||
| Operating earnings | $ | 10,896 | $ | 13,493 | $ | 3,267 | $ | 10,939 | ||||||||
| Adjustments: | ||||||||||||||||
| Merger integration and acquisition expenses | 820 | 1,302 | 1,248 | 1,799 | ||||||||||||
| Restructuring charges (gains) and asset impairment | 3,731 | (339 | ) | 16,770 | 7,280 | |||||||||||
| Fees and expenses related to tax planning strategies | — | 212 | — | 212 | ||||||||||||
| Severance associated with cost reduction initiatives | 10 | — | 261 | — | ||||||||||||
| Adjusted operating earnings | $ | 15,457 | $ | 14,668 | $ | 21,546 | $ | 20,230 | ||||||||
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 investors. In addition, securities analysts, fund managers and other shareholders and stakeholders that communicate with the Company request its operating financial results in adjusted operating earnings format.
Adjusted operating earnings is not a measure of performance under accounting principles generally accepted in the United States of America, and should not be considered as a substitute for operating earnings, cash flows from operating activities and other income or cash flow statement data. The Company’s definition of adjusted operating earnings may not be identical to similarly titled measures reported by other companies.
| Table 4: Reconciliation of Earnings from Continuing Operations to | ||||||||||||||||
| Adjusted Earnings from Continuing Operations | ||||||||||||||||
| (A Non-GAAP Financial Measure) | ||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| 12 Weeks Ended | ||||||||||||||||
| July 16, 2016 | July 18, 2015 | |||||||||||||||
| Earnings from | Earnings from | |||||||||||||||
| Earnings | continuing | Earnings | continuing | |||||||||||||
| from | operations | from | operations | |||||||||||||
| continuing | per diluted | continuing | per diluted | |||||||||||||
|
(In thousands, except per share data) |
operations | share | operations | share | ||||||||||||
| Earnings from continuing operations | $ | 17,560 | $ | 0.47 | $ | 20,307 | $ | 0.54 | ||||||||
| Adjustments: | ||||||||||||||||
| Merger integration and acquisition expenses | 913 | 151 | ||||||||||||||
| Restructuring charges (gains) and asset impairment | 5,748 | (336 | ) | |||||||||||||
| Fees and expenses related to tax planning strategies | — | 569 | ||||||||||||||
| Severance associated with cost reduction initiatives | 11 | — | ||||||||||||||
| Total adjustments | 6,672 | 384 | ||||||||||||||
| Tax planning strategies | — | (730 | ) | |||||||||||||
| Income tax effect on adjustments | (2,525 | ) | (132 | ) | ||||||||||||
| Total adjustments, net of taxes | 4,147 | 0.11 | (478 | ) | (0.01 | ) | ||||||||||
| Adjusted earnings from continuing operations | $ | 21,707 | $ | 0.58 | $ | 19,829 | $ | 0.53 | ||||||||
| * Includes rounding | ||||||||||||||||
| 28 Weeks Ended | ||||||||||||||||
| July 16, 2016 | July 18, 2015 | |||||||||||||||
| Earnings from | Earnings from | |||||||||||||||
| Earnings | continuing | Earnings | continuing | |||||||||||||
| from | operations | from | operations | |||||||||||||
| continuing | per diluted | continuing | per diluted | |||||||||||||
|
(In thousands, except per share data) |
operations | share | operations | share | ||||||||||||
| Earnings from continuing operations | $ | 27,520 | $ | 0.73 | $ | 30,754 | $ | 0.81 | ||||||||
| Adjustments: | ||||||||||||||||
| Merger integration and acquisition expenses | 1,810 | 2,835 | ||||||||||||||
| Restructuring charges and asset impairment | 21,052 | 7,002 | ||||||||||||||
| Fees and expenses related to tax planning strategies | — | 569 | ||||||||||||||
| Severance associated with cost reduction initiatives | 690 | — | ||||||||||||||
| Total adjustments | 23,552 | 10,406 | ||||||||||||||
| Tax planning strategies | — | (730 | ) | |||||||||||||
| Income tax effect on adjustments | (8,953 | ) | (4,038 | ) | ||||||||||||
| Total adjustments, net of taxes | 14,599 | 0.39 | 5,638 | 0.15 | ||||||||||||
| Adjusted earnings from continuing operations | $ | 42,119 | $ | 1.12 | $ | 36,392 | $ | 0.96 | ||||||||
| * Includes rounding | ||||||||||||||||
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 investors. In addition, securities analysts, fund managers and other shareholders and stakeholders that communicate with the Company request its operating financial results in adjusted earnings from continuing operations format.
Adjusted earnings from continuing operations is not a measure of performance under accounting principles generally accepted in the United States of America, and should not be considered as a substitute for net earnings, cash flows from operating activities and other income or cash flow statement data. The Company’s definition of adjusted earnings from continuing operations may not be identical to similarly titled measures reported by other companies.
|
Table 5: Reconciliation of Long-Term Debt and Capital Lease Obligations to Total Net Long-Term Debt and Capital Lease Obligations |
||||||||
| (A Non-GAAP Financial Measure) | ||||||||
| (In thousands) | ||||||||
| (Unaudited) | ||||||||
|
(In thousands) |
July 16, 2016 | January 2, 2016 | ||||||
| Current maturities of long-term debt and capital lease obligations | $ | 19,106 | $ | 19,003 | ||||
| Long-term debt and capital lease obligations | 473,399 | 467,793 | ||||||
| Total debt | 492,505 | 486,796 | ||||||
| Cash and cash equivalents | (23,816 | ) | (22,719 | ) | ||||
| Total net long-term debt | $ | 468,689 | $ | 464,077 | ||||
Notes: Total net debt is a non-GAAP financial measure that is defined as long term debt and capital lease obligations plus current maturities of long-term debt and capital lease obligations less cash and cash equivalents. The Company believes 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.
| Table 6: Reconciliation of Projected Earnings per Diluted Share from Continuing Operations to | ||||||
| Projected Adjusted Earnings per Diluted Share from Continuing Operations | ||||||
| (A Non-GAAP Financial Measure) | ||||||
|
(Unaudited) |
||||||
| 52 Weeks Ending December 31, 2016 | ||||||
| Low | High | |||||
| Earnings from continuing operations | $ | 1.66 | $ | 1.77 | ||
| Adjustments, net of taxes: | ||||||
| Restructuring and asset impairment | 0.38 | 0.38 | ||||
| Merger integration and acquisition | 0.03 | 0.03 | ||||
| Adjusted earnings from continuing operations | $ | 2.07 | $ | 2.18 | ||