Exhibit 99.1
For Immediate Release | | |
Investor Contact: Dave Staples | | Media Contact: Meredith Gremel |
Executive Vice President & CFO | | Director Corporate Affairs |
(616) 878-8793 | | (616) 878-2830 |
SpartanNash Announces Third Quarter Fiscal Year 2014 Financial Results
Third Quarter EPS from Continuing Operations Exceeds Expectations at $0.45 per Diluted Share; Adjusted EPS from Continuing Operations of $0.46 per Diluted Share
Comparable Store Sales Increase 0.4%
Company Raises Fiscal 2014 Adjusted EPS Guidance to $1.75 to $1.80
GRAND RAPIDS, MICHIGAN – November 5, 2014 – SpartanNash Company (the “Company”) (Nasdaq: SPTN) today reported financial results for the 12-week third quarter ended October 4, 2014.
Third Quarter Results
Consolidated net sales for the third quarter increased 187.2 percent to $1.81 billion compared to $630.1 million last year, primarily due to $1.2 billion in sales generated as a result of the November 2013 merger with Nash Finch Company (“Nash Finch”).
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) for the quarter increased 103.6% percent to $55.9 million, or 3.1 percent of net sales, compared to $27.5 million, or 4.4 percent of net sales last year. 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 Adjusted EBITDA to net earnings, and a reconciliation of each non-GAAP financial measure to the most directly comparable measure prepared and presented in accordance with GAAP.
Reported operating earnings increased 171.7 percent to $33.6 million compared to $12.4 million for the prior year quarter. The increase was primarily due to contributions from the merger with Nash Finch and lower expenses, primarily as a result of merger synergies, partially offset by higher LIFO expense and the impact of continued low center store inflation.
Adjusted earnings from continuing operations for the third quarter were $17.2 million, or $0.46 per diluted share on approximately 37.8 million shares outstanding, compared to $9.3 million, or $0.43 per diluted share on approximately 22.0 million shares outstanding last year. For the third quarter of fiscal 2014, adjusted earnings from continuing operations excludes net after-tax charges of $0.01 per diluted share related to merger integration expenses, and net asset impairment and restructuring gains. For the prior year third quarter, adjusted earnings from continuing operations excluded net after-tax charges of $0.13 per diluted share, related to merger expenses and the favorable settlement of an unrecognized tax liability established in the prior year. Adjusted earnings from continuing operations is a non-GAAP operating financial measure. Reported earnings from continuing operations were $17.2 million, or $0.45 per diluted share, compared to $6.7 million, or $0.30 per diluted share, in the prior year quarter, primarily due to the factors previously mentioned.
“We are very pleased with our third quarter results,” stated Dennis Eidson, SpartanNash’s President and Chief Executive Officer. “Our team delivered strong earnings growth and positive comparable store sales, reflecting our efforts to provide the products and services that best fulfill the needs of our diverse customer base and the realization of synergies from the merger. The integration process is progressing well and we remain confident that we will exceed our previously announced cost-savings estimates. As we look to the remainder of 2014 and beyond, we are well positioned to leverage our expertise in food distribution and retail to develop impactful solutions for our customers and partners and to leverage our financial resources to take advantage of the growth opportunities in our industry.”
Gross profit margin for the third quarter was 14.4 percent compared to 20.7 percent in the prior year. The change in gross profit margin rate primarily reflects the change in segment mix of the Company’s operations due to the merger and the impact of higher LIFO expense, along with continued low center store inflation during the quarter.
1
Third quarter operating expenses would have been $227.7 million, or 12.6 percent of net sales, compared to $113.5 million, or 18.0 percent of net sales, in the same quarter last year, if the charges related to the merger, integration, and restructuring were excluded in both periods. The higher expenses were due to the inclusion of Nash Finch’s operations and the decrease in the rate to sales was due primarily to the change in mix of the Company’s segments and cost reduction efforts. Reported operating expenses were $227.8 million, or 12.6 percent of sales, compared to $118.1 million, or 18.7 percent of sales, in the third quarter last year.
Operating Segments
In the third quarter of fiscal year 2014, the Company established its post-merger methodologies for the allocation of profit and corporate level expenses between its food distribution, retail and military reporting segments to better reflect Spartan Stores’ and the Nash Finch Company’s merged operations. There is no impact to consolidated financial results, but the operating segment results for the first and second quarters of fiscal 2014 and all quarters in fiscal year 2013 have been revised to reflect the new allocation methodologies. A recap of the effects of the restatement of segment results for previous quarters will be included in the Company’s Form 10-Q for the third quarter of fiscal 2014.
Food Distribution Segment
Net sales for the food distribution segment increased 182.9 percent to $764.3 million in the third quarter from $270.2 million for the third quarter last year. The increase in sales was primarily due to $493.5 million in sales from Nash Finch being included in this year’s third quarter.
Third quarter adjusted operating earnings for the food distribution segment were $15.2 million, excluding $1.4 million of pre-tax merger integration expenses, compared to adjusted operating earnings of $6.0 million, excluding $4.6 million of pre-tax merger expenses, in the same period last year. The benefit from the sales volume of Nash Finch’s distribution operations was partially offset by higher LIFO expense and lower inflation-related gains. Adjusted operating earnings is a non-GAAP operating financial measure. Reported operating earnings for the third quarter of fiscal year 2014 were $13.8 million compared to operating earnings of $1.4 million in the prior year third quarter.
Retail Segment
Net sales for the retail segment increased 45.0 percent to $521.7 million in the third quarter from $359.9 million for the third quarter last year, primarily due to $179.2 million in sales generated as a result of the merger and a 0.4 percent increase in comparable store sales, excluding fuel. These gains were partially offset by $19.5 million in lower sales due to the closure of certain stores and lower retail fuel prices compared to the prior year.
Third quarter adjusted operating earnings for the retail segment were $12.9 million, excluding $1.3 million of the non-cash pre-tax asset impairment and restructuring gains, compared to adjusted operating earnings of $11.0 million in the same period last year. The improvement in adjusted operating earnings was primarily as a result of the store closures, as well as lower expenses due to cost reduction initiatives. Reported operating earnings in the retail segment were $14.1 million compared to $11.0 million in the prior year quarter.
During the third quarter, the Company completed two major remodels and opened one new store. Additionally, one supermarket was sold to a distribution customer and one underperforming supermarket was closed. SpartanNash ended the quarter with 165 corporate owned stores and 30 fuel centers.
Military Segment
Net sales for the Company’s military segment were $523.6 million and operating earnings were $5.7 million for the third quarter of fiscal 2014.
Balance Sheet and Cash Flow
Cash flow provided by operating activities for the year to date period was $117.4 million compared to $56.1 million for the comparable period last year. The increase in cash provided was primarily the result of contributions from the merger.
As a result of the strong cash flow generation, the Company repurchased 121,000 shares of its common stock for a total expenditure of $2.5 million during the third quarter. As of October 4, 2014, the Company had $23.8 million available for future share repurchases under its $50.0 million repurchase program.
2
Net long-term debt (including current maturities and capital lease obligations and subtracting cash) for the Company was $548.8 million as of October 4, 2014 compared to $146.9 million at the end of the third quarter last year, due primarily to the incurrence of $436.1 million in debt as a result of the Nash Finch merger. Net long term debt decreased $47.6 million from $596.4 million at December 28, 2013. The Company’s total net long-term debt-to-capital ratio is 0.42-to-1.0 as of October 4, 2014. Net long-term debt is a non-GAAP financial measure. Long-term debt and capital lease obligations, including current maturities, was $556.9 million at October 4, 2014 compared to $152.4 million at October 12, 2013.
Outlook
Mr. Eidson continued, “Based on our strong third quarter performance and expectations for the remainder of the year, we are raising our adjusted earnings guidance for fiscal 2014 to a range of $1.75 to $1.80. Although the economic environment in some of our markets remains challenging, it appears to have stabilized and we are encouraged by our positive comparable store sales trend and pleased with the solid execution of both our operating plan and integration activities. During the fourth quarter, we will continue to introduce new merchandising, pricing and promotional programs to stores acquired in the merger with Nash Finch and will continue to expand our food distribution programs and services to the entire distribution network. We plan to complete three major remodels and re-banners and close two stores during the fourth quarter as part of the ongoing evaluation of our overall store base. As we move through the integration, we intend to further strengthen our strategic and competitive positions by increasing the operating efficiency of our business segments while improving the offering to our customers. Additionally, we will seek targeted acquisitions that will help us increase our scale, sales and cash flow. We remain committed to growing our business and creating value for our customers and shareholders.”
For the 13-week fourth quarter of fiscal 2014, the Company anticipates that net earnings from continuing operations per diluted share will be in the range of $0.39 to $0.44, excluding merger integration costs and any other one-time expenses. For comparative purposes, the Company's similarly adjusted earnings per diluted share were $0.31 for the comparable 11-week quarter of fiscal 2013, recast to the Company’s new fiscal year format, with approximately 7.6 million less in weighted average shares outstanding. For fiscal 2014, the Company is maintaining its previously issued guidance of consolidated net sales in the range of $7.90 billion to $8.04 billion and raising the low end of its Adjusted EBITDA to a range of $232.0 million to $239.0 million. The Company is also raising the range of adjusted earnings per share from continuing operations to approximately $1.75 to $1.80, excluding integration costs and other one-time expenses and gains.
The Company expects capital expenditures for fiscal year 2014 to be in the range of $77.0 million to $82.0 million, net of anticipated sale leaseback proceeds related to a new store location, with depreciation and amortization in the range of $87.0 million to $89.0 million and total interest expense in the range of $24.0 million to $25.0 million.
As a reminder, the fiscal year ending January 3, 2015 will consist of 53 weeks with the fourth quarter comprised of 13 weeks. Furthermore, the Company’s fiscal year end was changed from the last Saturday in March to the Saturday nearest to December 31, effective beginning with the transition period ended December 28, 2013. The prior year financial statements were recast to the new fiscal year format based upon the original fiscal period end dates. As a result, the period end date for the prior year financial statements differs from the current year by one week and the comparable prior year will consist of 51 weeks with the fourth quarter comprised of 11 weeks.
Conference Call
A telephone conference call to discuss the Company’s third quarter of fiscal 2014 financial results is scheduled for 9:00 a.m. Eastern Time, Thursday, November 6, 2014. A live webcast of this conference call will be available on the Company’s website, www.spartannash.com. 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 the largest food distributor serving military commissaries and exchanges in the United States, in terms of revenue. The Company's core businesses include distributing food to military commissaries and exchanges and independent and corporate-owned retail stores located in 44 states and the District of Columbia, Europe, Cuba, Puerto Rico, the Azores, Bahrain and Egypt. SpartanNash currently operates 165 supermarkets, primarily under the banners of Family Fare Supermarkets, D&W Fresh Markets, Family Fresh, No Frills, Bag 'n Save, Sun Mart and Econofoods.
3
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 regarding the expected benefits of the merger and statements preceded by, followed by or that otherwise include the words “outlook,” “optimistic,” “committed,” “anticipates”, “appears” “believe,” “continue,” "expects," "look to," “guidance,” “target,” “opportunities,” “confident” “position,” “taking steps,” “intend,” “seek”, or “plan” or similar expressions or that an event or trend “may,” "will" or is “likely to” 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 related to the merger include, but are not limited to, the successful integration of Spartan Stores' and Nash Finch's business and the combined company's ability to compete in the highly competitive grocery distribution and retail grocery industry. Additional information concerning these and other risks is contained in Spartan Stores' and Nash Finch's most recently filed Annual Reports on Form 10-K, subsequent Quarterly Reports on Form 10-Q, 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.
- More -
4
SPARTANNASH COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
| 12 Weeks Ended | | | 40 Weeks Ended | |
| October 4, | | | October 12, | | | October 4, | | | October 12, | |
| 2014 | | | 2013 | | | 2014 | | | 2013 | |
Net sales | $ | 1,809,571 | | | $ | 630,088 | | | $ | 5,953,473 | | | $ | 2,061,491 | |
Cost of sales | | 1,548,162 | | | | 499,627 | | | | 5,079,612 | | | | 1,625,890 | |
Gross profit | | 261,409 | | | | 130,461 | | | | 873,861 | | | | 435,601 | |
| | | | | | | | | | | | | | | |
Operating expenses | | | | | | | | | | | | | | | |
Selling, general and administrative | | 207,739 | | | | 103,747 | | | | 705,040 | | | | 345,814 | |
Merger transaction and integration | | 1,379 | | | | 4,634 | | | | 8,128 | | | | 7,011 | |
Depreciation and amortization | | 19,951 | | | | 9,708 | | | | 66,921 | | | | 31,926 | |
Restructuring and asset impairment | | (1,272 | ) | | | — | | | | (67 | ) | | | 2,220 | |
Total operating expenses | | 227,797 | | | | 118,089 | | | | 780,022 | | | | 386,971 | |
| | | | | | | | | | | | | | | |
Operating earnings | | 33,612 | | | | 12,372 | | | | 93,839 | | | | 48,630 | |
Non-operating expense (income) | | | | | | | | | | | | | | | |
Interest expense | | 5,467 | | | | 2,205 | | | | 18,416 | | | | 7,832 | |
Non-cash convertible debt interest | | — | | | | — | | | | — | | | | 379 | |
Debt extinguishment | | — | | | | — | | | | — | | | | 2,762 | |
Other, net | | (1 | ) | | | (5 | ) | | | 4 | | | | (20 | ) |
Total non-operating expense, net | | 5,466 | | | | 2,200 | | | | 18,420 | | | | 10,953 | |
| | | | | | | | | | | | | | | |
Earnings before income taxes and discontinued operations | | 28,146 | | | | 10,172 | | | | 75,419 | | | | 37,677 | |
Income taxes | | 10,977 | | | | 3,513 | | | | 28,336 | | | | 14,050 | |
Earnings from continuing operations | | 17,169 | | | | 6,659 | | | | 47,083 | | | | 23,627 | |
| | | | | | | | | | | | | | | |
Loss from discontinued operations, net of taxes | | (73 | ) | | | (88 | ) | | | (358 | ) | | | (428 | ) |
Net earnings | $ | 17,096 | | | $ | 6,571 | | | $ | 46,725 | | | $ | 23,199 | |
| | | | | | | | | | | | | | | |
Basic earnings per share: | | | | | | | | | | | | | | | |
Earnings from continuing operations | | 0.46 | | | | 0.30 | | | | 1.25 | | | | 1.08 | |
Loss from discontinued operations | | (0.01 | ) | * | | — | | | | (0.01 | ) | | | (0.02 | ) |
Net earnings | | 0.45 | | | | 0.30 | | | | 1.24 | | | | 1.06 | |
| | | | | | | | | | | | | | | |
Diluted earnings per share: | | | | | | | | | | | | | | | |
Earnings from continuing operations | $ | 0.45 | | | $ | 0.30 | | | $ | 1.25 | | | $ | 1.08 | |
Loss from discontinued operations | | — | | | | — | | | | (0.01 | ) | | | (0.02 | ) |
Net earnings | $ | 0.45 | | | $ | 0.30 | | | $ | 1.24 | | | $ | 1.06 | |
| | | | | | | | | | | | | | | |
Weighted average shares outstanding: | | | | | | | | | | | | | | | |
Basic | | 37,717 | | | | 21,876 | | | | 37,678 | | | | 21,820 | |
Diluted | | 37,778 | | | | 21,969 | | | | 37,749 | | | | 21,908 | |
*Includes rounding
5
SPARTANNASH COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
| October 4, 2014 | | | December 28, 2013 | | | October 12, 2013 | |
Assets | | | | | | | | | | | |
Current assets | | | | | | | | | | | |
Cash and cash equivalents | $ | 8,048 | | | $ | 9,216 | | | $ | 5,500 | |
Accounts and notes receivable, net | | 305,433 | | | | 285,393 | | | | 60,247 | |
Inventories, net | | 612,901 | | | | 589,497 | | | | 139,323 | |
Prepaid expenses and other current assets | | 34,093 | | | | 38,423 | | | | 11,277 | |
Deferred taxes on income | | — | | | | — | | | | 1,900 | |
Property and equipment held for sale | | 11,013 | | | | 440 | | | | — | |
Total current assets | | 971,488 | | | | 922,969 | | | | 218,247 | |
| | | | | | | | | | | |
Property and equipment, net | | 596,294 | | | | 628,482 | | | | 270,701 | |
Goodwill | | 297,352 | | | | 299,186 | | | | 246,437 | |
Other assets, net | | 126,135 | | | | 133,014 | | | | 63,440 | |
| | | | | | | | | | | |
Total assets | $ | 1,991,269 | | | $ | 1,983,651 | | | $ | 798,825 | |
| | | | | | | | | | | |
Liabilities and Shareholders’ Equity | | | | | | | | | | | |
| | | | | | | | | | | |
Current liabilities | | | | | | | | | | | |
Accounts payable | $ | 411,279 | | | $ | 365,584 | | | $ | 127,272 | |
Accrued payroll and benefits | | 64,307 | | | | 81,175 | | | | 30,824 | |
Other accrued expenses | | 43,851 | | | | 51,992 | | | | 26,583 | |
Deferred income taxes | | 22,987 | | | | 18,706 | | | | — | |
Current maturities of long-term debt and capital lease obligations | | 7,349 | | | | 7,345 | | | | 3,991 | |
Total current liabilities | | 549,773 | | | | 524,802 | | | | 188,670 | |
| | | | | | | | | | | |
Long-term liabilities | | | | | | | | | | | |
Deferred income taxes | | 91,602 | | | | 86,750 | | | | 80,833 | |
Postretirement benefits | | 18,855 | | | | 22,009 | | | | 14,722 | |
Other long-term liabilities | | 37,261 | | | | 44,898 | | | | 17,625 | |
Long-term debt and capital lease obligations | | 549,530 | | | | 598,319 | | | | 148,400 | |
Total long-term liabilities | | 697,248 | | | | 751,976 | | | | 261,580 | |
| | | | | | | | | | | |
Commitments and contingencies | | | | | | | | | | | |
Shareholders’ equity | | | | | | | | | | | |
Common stock, voting, no par value; 100,000 shares authorized; 37,625, 37,371 and 21,875 shares outstanding | | 521,875 | | | | 518,056 | | | | 147,514 | |
Preferred stock, no par value, 10,000 shares authorized; no shares outstanding | | — | | | | — | | | | — | |
Accumulated other comprehensive loss | | (8,375 | ) | | | (8,794 | ) | | | (13,275 | ) |
Retained earnings | | 230,748 | | | | 197,611 | | | | 214,336 | |
Total shareholders’ equity | | 744,248 | | | | 706,873 | | | | 348,575 | |
| | | | | | | | | | | |
Total liabilities and shareholders’ equity | $ | 1,991,269 | | | $ | 1,983,651 | | | $ | 798,825 | |
6
SPARTANNASH COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| 40 Weeks Ended | |
| October 4, 2014 | | | October 12, 2013 | |
Cash flows from operating activities | | | | | | | |
Net cash provided by operating activities | $ | 117,385 | | | $ | 56,137 | |
Net cash used in investing activities | | (54,362 | ) | | | (29,764 | ) |
Net cash used in financing activities | | (63,912 | ) | | | (29,379 | ) |
Net cash used in discontinued operations | | (279 | ) | | | (454 | ) |
Net decrease in cash and cash equivalents | | (1,168 | ) | | | (3,460 | ) |
Cash and cash equivalents at beginning of period | | 9,216 | | | | 8,960 | |
Cash and cash equivalents at end of period | $ | 8,048 | | | $ | 5,500 | |
7
SPARTANNASH COMPANY AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA
Table 1: Sales and Operating Earnings by Segment
(In thousands)
(Unaudited)
| 12 Weeks Ended | | | 40 Weeks Ended | |
| October 4, 2014 | | | | | | | October 12, 2013 | | | | | | | October 4, 2014 | | | | | | | October 12, 2013 | | | | | |
Military Segment: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net sales | $ | 523,553 | | | | 28.9 | % | | $ | — | | | | 0.0 | % | | $ | 1,710,122 | | | | 28.7 | % | | $ | — | | | | 0.0 | % |
Operating earnings | $ | 5,651 | | | | | | | $ | — | | | | | | | $ | 15,956 | | | | | | | $ | — | | | | | |
Food Distribution Segment: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net sales | $ | 764,288 | | | | 42.3 | % | | $ | 270,195 | | | | 42.9 | % | | $ | 2,503,216 | | | | 42.1 | % | | $ | 878,791 | | | | 42.6 | % |
Operating earnings | $ | 13,834 | | | | | | | $ | 1,366 | | | | | | | $ | 38,713 | | | | | | | $ | 15,519 | | | | | |
Retail Segment: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net sales | $ | 521,730 | | | | 28.8 | % | | $ | 359,893 | | | | 57.1 | % | | $ | 1,740,135 | | | | 29.2 | % | | $ | 1,182,700 | | | | 57.4 | % |
Operating earnings | $ | 14,127 | | | | | | | $ | 11,006 | | | | | | | $ | 39,170 | | | | | | | $ | 33,111 | | | | | |
Total: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net sales | $ | 1,809,571 | | | | 100.0 | % | | $ | 630,088 | | | | 100.0 | % | | $ | 5,953,473 | | | | 100.0 | % | | $ | 2,061,491 | | | | 100.0 | % |
Operating earnings | $ | 33,612 | | | | | | | $ | 12,372 | | | | | | | $ | 93,839 | | | | | | | $ | 48,630 | | | | | |
Notes: In the third quarter of fiscal year 2014, the Company established its post-merger methodologies for the allocation of profit and corporate level expenses between its food distribution, retail and military reporting segments to better reflect Spartan Stores’ and the Nash Finch Company’s merged operations. There is no impact to consolidated financial results, but the operating segment results for the first and second quarters of fiscal 2014 and all quarters in fiscal year 2013 have been revised to reflect the new allocation methodologies. A recap of the effects of the restatement of segment results for previous quarters will be included in the Company’s Form 10-Q for the third quarter of fiscal 2014.
8
Table 2: Reconciliation of Net Earnings to Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
(Adjusted EBITDA)
(A Non-GAAP Financial Measure)
(Unaudited)
(In thousands)
| 12 Weeks Ended | | | 40 Weeks Ended | |
(In thousands) | October 4, 2014 | | | October 12, 2013 | | | October 4, 2014 | | | October 12, 2013 | |
Net earnings | $ | 17,096 | | | $ | 6,571 | | | $ | 46,725 | | | $ | 23,199 | |
Add: | | | | | | | | | | | | | | | |
Discontinued operations | | 73 | | | | 88 | | | | 358 | | | | 428 | |
Income taxes | | 10,977 | | | | 3,513 | | | | 28,336 | | | | 14,050 | |
Interest expense | | 5,467 | | | | 2,205 | | | | 18,416 | | | | 8,211 | |
Debt extinguishment | | - | | | | - | | | | - | | | | 2,762 | |
Non-operating expense (income) | | (1 | ) | | | (5 | ) | | | 4 | | | | (20 | ) |
Operating earnings | | 33,612 | | | | 12,372 | | | | 93,839 | | | | 48,630 | |
Add: | | | | | | | | | | | | | | | |
LIFO expense | | 1,550 | | | | 167 | | | | 5,077 | | | | 413 | |
Depreciation and amortization | | 19,951 | | | | 9,708 | | | | 66,921 | | | | 31,926 | |
Restructuring and asset impairment (gains) charges | | (1,272 | ) | | | - | | | | (67 | ) | | | 2,220 | |
Expenses related to merger transaction and integration | | 1,379 | | | | 4,634 | | | | 8,128 | | | | 7,011 | |
Non-cash stock compensation and other | | 691 | | | | 577 | | | | 5,205 | | | | 2,285 | |
Adjusted EBITDA | $ | 55,911 | | | $ | 27,458 | | | $ | 179,103 | | | $ | 92,485 | |
Reconciliation of operating earnings to adjusted EBITDA by segment: | |
Military: | | | | | | | | | | | | | | | |
Operating earnings | $ | 5,651 | | | $ | - | | | $ | 15,956 | | | $ | - | |
Add: | | | | | | | | | | | | | | | |
LIFO expense | | 359 | | | | - | | | | 1,192 | | | | - | |
Depreciation and amortization | | 2,751 | | | | - | | | | 8,580 | | | | - | |
Expenses related to merger transaction and integration | | 3 | | | | - | | | | 27 | | | | - | |
Non-cash stock compensation and other | | 4 | | | | - | | | | (55 | ) | | | - | |
Adjusted EBITDA | $ | 8,768 | | | $ | - | | | $ | 25,700 | | | $ | - | |
Food Distribution: | | | | | | | | | | | | | | | |
Operating earnings | $ | 13,834 | | | $ | 1,366 | | | $ | 38,713 | | | $ | 15,519 | |
Add: | | | | | | | | | | | | | | | |
LIFO expense (income) | | 794 | | | | (5 | ) | | | 2,551 | | | | (199 | ) |
Depreciation and amortization | | 6,931 | | | | 1,573 | | | | 23,105 | | | | 5,269 | |
Restructuring and asset impairment charges | | - | | | | - | | | | 1,029 | | | | - | |
Expenses related to merger transaction and integration | | 1,375 | | | | 4,634 | | | | 8,097 | | | | 7,011 | |
Non-cash stock compensation and other | | 467 | | | | 334 | | | | 3,476 | | | | 1,284 | |
Adjusted EBITDA | $ | 23,401 | | | $ | 7,902 | | | $ | 76,971 | | | $ | 28,884 | |
Retail: | | | | | | | | | | | | | | | |
Operating earnings | $ | 14,127 | | | $ | 11,006 | | | $ | 39,170 | | | $ | 33,111 | |
Add: | | | | | | | | | | | | | | | |
LIFO expense | | 397 | | | | 172 | | | | 1,334 | | | | 612 | |
Depreciation and amortization | | 10,269 | | | | 8,135 | | | | 35,236 | | | | 26,657 | |
Restructuring and asset impairment (gains) charges | | (1,272 | ) | | | - | | | | (1,096 | ) | | | 2,220 | |
Expenses related to merger transaction and integration | | 1 | | | | - | | | | 4 | | | | - | |
Non-cash stock compensation and other | | 220 | | | | 243 | | | | 1,784 | | | | 1,001 | |
Adjusted EBITDA | $ | 23,742 | | | $ | 19,556 | | | $ | 76,432 | | | $ | 63,601 | |
Notes: Consolidated adjusted EBITDA is a non-GAAP operating financial measure that we define as net earnings from continuing operations plus depreciation and amortization, and other non-cash items including imputed interest, deferred (stock) compensation, the LIFO provision, as well as adjustments for unusual items that do not reflect the ongoing operating activities of SpartanNash and costs associated with the closing of operational locations, interest expense and the provision for income taxes to the extent deducted in the computation of net earnings.
9
We believe that adjusted EBITDA provides a meaningful representation of our operating performance for SpartanNash as a whole and for our operating segments. We consider 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 our military, food 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, we believe it provides useful information for our investors. In addition, securities analysts, fund managers and other shareholders and stakeholders that communicate with us request our 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. Our definition of adjusted EBITDA may not be identical to similarly titled measures reported by other companies.
10
Table 3: Reconciliation of Operating Earnings to Adjusted Operating Earnings
(A Non-GAAP Financial Measure)
(Unaudited)
(In thousands, except per share data)
| 12 Weeks Ended | | | 40 Weeks Ended | |
| October 4, 2014 | | | October 12, 2013 | | | October 4, 2014 | | | October 12, 2013 | |
Operating earnings | $ | 33,612 | | | $ | 12,372 | | | $ | 93,839 | | | $ | 48,630 | |
Add: | | | | | | | | | | | | | | | |
Asset impairment and restructuring (gains) charges | | (1,272 | ) | | | - | | | | (67 | ) | | | 2,220 | |
Expenses related to merger transaction and integration | | 1,379 | | | | 4,634 | | | | 8,128 | | | | 7,011 | |
Adjusted operating earnings | $ | 33,719 | | | $ | 17,006 | | | $ | 101,900 | | | $ | 57,861 | |
Reconciliation of operating earnings to adjusted operating earnings by segment: | |
Military: | | | | | | | | | | | | | | | |
Operating earnings | $ | 5,651 | | | $ | - | | | $ | 15,956 | | | $ | - | |
Add: | | | | | | | | | | | | | | | |
Expenses related to merger transaction and integration | | 3 | | | | - | | | | 27 | | | | - | |
Adjusted operating earnings | $ | 5,654 | | | $ | - | | | $ | 15,983 | | | $ | - | |
Food Distribution: | | | | | | | | | | | | | | | |
Operating earnings | $ | 13,834 | | | $ | 1,366 | | | $ | 38,713 | | | $ | 15,519 | |
Add: | | | | | | | | | | | | | | | |
Asset impairment and restructuring charges | | - | | | | - | | | | 1,029 | | | | - | |
Expenses related to merger transaction and integration | | 1,375 | | | | 4,634 | | | | 8,097 | | | | 7,011 | |
Adjusted operating earnings | $ | 15,209 | | | $ | 6,000 | | | $ | 47,839 | | | $ | 22,530 | |
Retail: | | | | | | | | | | | | | | | |
Operating earnings | $ | 14,127 | | | $ | 11,006 | | | $ | 39,170 | | | $ | 33,111 | |
Add: | | | | | | | | | | | | | | | |
Asset impairment and restructuring (gains) charges | | (1,272 | ) | | | - | | | | (1,096 | ) | | | 2,220 | |
Expenses related to merger transaction and integration | | 1 | | | | - | | | | 4 | | | | - | |
Adjusted operating earnings | $ | 12,856 | | | $ | 11,006 | | | $ | 38,078 | | | $ | 35,331 | |
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. 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 its military, food 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 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 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.
11
Table 4: Reconciliation of Earnings from Continuing Operations to
Adjusted Earnings from Continuing Operations
(A Non-GAAP Financial Measure)
| 12 Weeks Ended | | |
| October 4, 2014 | | | October 12, 2013 | | |
| | | | | Earnings from | | | | | | | Earnings from | | |
| Earnings | | | continuing | | | Earnings | | | continuing | | |
| from | | | operations | | | from | | | operations | | |
(Unaudited) | continuing | | | per diluted | | | continuing | | | per diluted | | |
(In thousands, except per share data) | operations | | | share | | | operations | | | share | | |
Earnings from continuing operations | $ | 17,169 | | | $ | 0.45 | | | $ | 6,659 | | | $ | 0.30 | | |
Adjustments, net of taxes: | | | | | | | | | | | | | | | | |
Restructuring and asset impairment gains | | (782 | ) | | | (0.02 | ) | | | - | | | | - | | |
Expenses related to merger transaction and integration | | 807 | | | | 0.03 | | * | | 2,906 | | | | 0.14 | | * |
Favorable settlement of unrecognized tax liability | | - | | | | - | | | | (238 | ) | | | (0.01 | ) | |
Adjusted earnings from continuing operations | $ | 17,194 | | | $ | 0.46 | | | $ | 9,327 | | | $ | 0.43 | | |
| | | | | | | | | | | | | | | | |
Weighted average diluted shares outstanding | | 37,778 | | | | | | | | 21,969 | | | | | | |
* Includes rounding | | | | | | | | | | | | | | | | |
| 40 Weeks Ended | | |
| October 4, 2014 | | | October 12, 2013 | | |
| | | | | Earnings from | | | | | | | Earnings from | | |
| Earnings | | | continuing | | | Earnings | | | continuing | | |
| from | | | operations | | | from | | | operations | | |
(Unaudited) | continuing | | | per diluted | | | continuing | | | per diluted | | |
(In thousands, except per share data) | operations | | | share | | | operations | | | share | | |
Earnings from continuing operations | $ | 47,083 | | | $ | 1.25 | | | $ | 23,627 | | | $ | 1.08 | | |
Adjustments, net of taxes: | | | | | | | | | | | | | | | | |
Restructuring and asset impairment (gains) charges | | (41 | ) | | | (0.00 | ) | | | 1,378 | | | | 0.06 | | |
Debt extinguishment | | - | | | | - | | | | 1,715 | | | | 0.08 | | |
Expenses related to merger transaction and integration | | 4,999 | | | | 0.13 | | | | 4,352 | | | | 0.20 | | |
Favorable settlement of unrecognized tax liability | | (595 | ) | | | (0.02 | ) | | | (238 | ) | | | (0.01 | ) | |
Adjusted earnings from continuing operations | $ | 51,446 | | | $ | 1.36 | | | $ | 30,834 | | | $ | 1.41 | | |
| | | | | | | | | | | | | | | | |
Weighted average diluted shares outstanding | | 37,749 | | | | | | | | 21,908 | | | | | | |
* Includes rounding | | | | | | | | | | | | | | | | |
Notes: Adjusted earnings from continuing operations is a non-GAAP operating financial measure that we define 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.
We believe that adjusted earnings from continuing operations provide a meaningful representation of our operating performance for the Company. We consider 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 our military, food 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. We believe that adjusted earnings from continuing operations provides useful information for our investors because it is a performance measure that management uses to allocate resources, assess performance against its peers and evaluate overall performance. In addition, securities analysts, fund managers and other shareholders and stakeholders that communicate with us request our 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. Our definition of adjusted earnings from continuing operations may not be identical to similarly titled measures reported by other companies.
12
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)
| October 4, 2014 | | | December 28, 2013 | | | October 12, 2013 | |
Current maturities of long-term debt and capital lease obligations | $ | 7,349 | | | $ | 7,345 | | | $ | 3,991 | |
Long-term debt and capital lease obligations | | 549,530 | | | | 598,319 | | | | 148,400 | |
Total debt | | 556,879 | | | | 605,664 | | | | 152,391 | |
Cash and cash equivalents | | (8,048 | ) | | | (9,216 | ) | | | (5,500 | ) |
Total net long-term debt | $ | 548,831 | | | $ | 596,448 | | | $ | 146,891 | |
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.
13
Table 6: Projected Reconciliation of Net Earnings to Projected Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA)
(A Non-GAAP Financial Measure)
(Unaudited)
(In millions)
| 53 Weeks Ended January 3, 2015 | |
| Low | | | High | |
Net earnings | $ | 59.7 | | | $ | 61.2 | |
Add: | | | | | | | |
Discontinued operations | | 0.5 | | | | 0.5 | |
Income taxes | | 36.7 | | | | 37.7 | |
Interest expense | | 24.0 | | | | 25.0 | |
LIFO expense | | 6.6 | | | | 7.5 | |
Depreciation and amortization | | 87.0 | | | | 89.0 | |
Restructuring and asset impairment charges | | - | | | | - | |
Merger transaction and integration expenses | | 11.4 | | | | 12.0 | |
Non-cash stock compensation and other charges | | 6.1 | | | | 6.1 | |
Adjusted EBITDA | $ | 232.0 | | | $ | 239.0 | |
14
Table 7: 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)
| 13 Weeks Ended January 3, 2015 | | | 53 Weeks Ended January 3, 2015 | |
| Low | | | High | | | Low | | | High | |
Earnings from continuing operations | | 0.34 | | | | 0.39 | | | | 1.58 | | | | 1.63 | |
Adjustments, net of taxes: | | | | | | | | | | | | | | | |
Expenses related to merger transaction and integration | | 0.05 | | | | 0.05 | | | | 0.19 | | | | 0.19 | |
Favorable settlement of an unrecognized tax liability | | - | | | | - | | | | (0.02 | ) | | | (0.02 | ) |
Adjusted earnings from continuing operations | $ | 0.39 | | | $ | 0.44 | | | $ | 1.75 | | | $ | 1.80 | |
15
