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SpartanNash Announces Second Quarter 2019 Financial Results

GRAND RAPIDS, Mich.--(BUSINESS WIRE)--

Second Quarter Net Sales Increase 5.3%, 13th Consecutive Quarter of Growth

Announced Leadership Transition, Appointed Dennis Eidson Interim President and CEO

Continued Significant Debt Paydown and Working Capital Improvements

SpartanNash Company (the “Company”) (SPTN) today reported financial results for the 12-week second quarter and 28-week period ended July 13, 2019.

“Consistent with our comments in the press release issued earlier this week, the Board of Directors and I remain confident in the Company’s overall strategic direction,” said Dennis Eidson, Interim President and Chief Executive Officer. “I am excited to work with our team of talented associates as we focus our efforts on improved execution, while continuing to drive our top-line sales growth.”

Consolidated Financial Results

Consolidated net sales for the second quarter increased $100.0 million, or 5.3%, to $2.00 billion from $1.90 billion in the prior year quarter. The increase in net sales was generated through incremental volume in the Retail segment resulting from the acquisition of Martin’s and growth in the Military Distribution segment, despite a slow start to the quarter due to the Easter shift and unseasonably cool weather for the first two periods of the second quarter.

Gross profit for the second quarter of fiscal 2019 was $289.0 million, or 14.5% of net sales, compared to $265.7 million, or 14.0% of net sales, in the prior year quarter. As a percent of net sales, the improvement in gross profit was primarily driven by the higher mix of Retail sales due to the acquisition of Martin’s and was partially offset by the other factors described below within the Segment Financial Results.

Reported operating expenses for the second quarter were $281.6 million, or 14.1% of net sales, compared to $235.8 million, or 12.4% of net sales, in the prior year quarter. The increase in expenses as a rate of sales compared to the prior year quarter was due to asset impairment charges primarily associated with the changes the Company recently announced related to its Caito Fresh Production business including the decision to exit the Fresh Kitchen operations, additional Retail segment business associated with Martin’s, as well as an increase in supply chain expenses. Second quarter operating expenses would have been $265.5 million, or 13.3% of net sales, compared to $235.9 million, or 12.4% of net sales, in the prior year quarter, excluding the adjustments related to the non-cash impairment charges and other adjustments detailed in Table 3.

The Company reported operating earnings of $7.4 million compared to $29.8 million in the prior year quarter. The decrease was primarily attributable to the impairment charges noted above, lower margin rates on comparable sales, higher supply chain costs and incremental losses from the Fresh Kitchen operations, partially offset by favorable incentive compensation, incremental earnings from the newly acquired Martin’s business and lower recall charges than in the prior year. Non-GAAP adjusted operating earnings(1) were $23.5 million compared to $29.8 million in the prior year quarter due to the factors mentioned above. Please see the financial tables at the end of this press release for a reconciliation of each non-GAAP financial measure to the most directly comparable measure, prepared and presented in accordance with GAAP.

Adjusted EBITDA(2) was $44.3 million compared to $49.7 million in the prior year quarter due to the factors mentioned above.

The Company reported a second quarter loss from continuing operations of $6.8 million, or $0.19 per diluted share, compared to earnings of $17.8 million, or $0.50 per diluted share, in the prior year quarter. The decrease reflects the factors noted above, as well as settlement expense of $8.7 million associated with the previously announced termination of the Company’s corporate pension plan and increased interest expense due to higher interest rates on the Company’s borrowings.

Adjusted earnings from continuing operations(3) for the second quarter were $12.2 million, or $0.34 per diluted share, compared to $17.9 million, or $0.50 per diluted share, in the prior year quarter.

Segment Financial Results

Food Distribution

Net sales for Food Distribution decreased $6.3 million, or 0.7%, to $935.4 million from $941.7 million in the prior year quarter. Excluding the impact of the elimination of intercompany sales to Martin’s subsequent to the acquisition, sales increased 3.0%, primarily due to sales growth from existing customers. The Company’s rate of sales growth within this segment decelerated from recent quarters, largely due to the unseasonably cool and wet weather during the months of May and June. These trends improved during the month of July as the weather returned to more seasonable levels.

Reported operating earnings for Food Distribution were $0.3 million compared to $18.7 million in the prior year quarter. The decrease in reported operating earnings was due to asset impairment charges primarily associated with changes to the Caito Fresh Production business noted above, losses associated with the Fresh Kitchen operations, and higher supply chain expenses, partially offset by lower recall charges than in the prior year, and favorable adjustments to incentive compensation. Second quarter adjusted operating earnings(1) were $16.8 million compared to $19.8 million in the prior year quarter primarily due to higher supply chain expenses. Adjusted operating earnings exclude $16.0 million of asset impairment charges and the allocation of one-time costs associated with Project One Team in the current year quarter, and merger/acquisition and integration expenses in the prior year quarter.

Military Distribution

Net sales for Military Distribution increased $0.9 million, or 0.2%, to $490.6 million from $489.7 million in the prior year quarter. The increase was primarily due to incremental volume from new business with an existing customer that commenced late in the fourth quarter of 2018 and DeCA’s private brand program, partially offset by lower comparable sales at DeCA operated locations.

Reported operating loss for Military Distribution was $1.6 million compared to operating earnings of $3.1 million in the prior year quarter. The decrease was primarily attributable to lower margin rates, partly due to a shift in the mix of business, and higher supply chain costs, as well as the cycling of gains related to the sale of a closed facility in the prior year quarter, partially offset by favorable adjustments to incentive compensation. The second quarter adjusted operating loss(1) was $1.5 million compared to earnings of $2.3 million in the prior year quarter. The adjusted operating loss in the current year quarter excludes the allocation of one-time costs associated with Project One Team and the gain on the sale of a closed location in the prior year quarter.

Retail

Net sales for Retail increased $105.4 million, or 22.7%, to $570.0 million from $464.6 million in the prior year quarter. Excluding the acquisition of Martin’s, sales decreased 3.3%, due to lower sales resulting from store closures and a decrease in comparable store sales of 2.0%. Comparable store sales were negatively impacted by the shift of the post-Easter week into the second quarter by 0.5%, as well as the unseasonably cool weather for the first two periods of the quarter.

Reported operating earnings for Retail were $8.7 million compared to operating earnings of $8.0 million in the prior year quarter. The increase in reported operating earnings was primarily attributable to the contribution of the acquired Martin’s stores, the favorable impact of closing underperforming stores and favorable adjustments to incentive compensation, partially offset by higher fees paid to pharmacy benefit managers. Adjusted operating earnings(1) were $8.2 million compared to $7.7 million in the prior year quarter and exclude restructuring gains and merger/acquisition and integration expenses in the current year and restructuring gains in the prior year quarter.

Cash Flow

Cash flows provided by operating activities for the first half of 2019 were $103.8 million, consistent with the prior year period at $104.3 million. The Company generated $72.1 million of free cash in the 28 weeks ended July 13, 2019, compared to $69.7 million of free cash in same period of fiscal 2018.

In the first half of fiscal 2019, the Company returned $13.8 million to shareholders in the form of cash dividends equal to $0.38 per common share.

Strategic Business Objectives

The Company remains focused on the execution of its top five objectives for 2019. These objectives are critical in the context of the Company’s long-term strategic objective to build and operate a national, highly efficient distribution platform servicing a diverse customer base through three highly complementary business units of Food Distribution, Military Distribution and Retail.

The following summarizes these objectives and the Company’s progress during the second quarter of 2019:

Achieve Mid-Single Digit Sales Growth. The Company sustained this objective in the second quarter, realizing 5.3% sales growth from the same quarter in the prior year and delivering its 13th consecutive quarter of sales growth.

Realize More Than $15.0 Million of Savings Over the Next 24 Months from Project One Team. The Company has completed the implementation of a number of initiatives and is in process with others. The Company remains on track to achieve a run rate of over $20.0 million in annual cost savings within the next 24 months.

Strengthen Management Team, Systems and Supply Chain Operations. During the second quarter, the Company appointed Walt Lentz as the President of Food Distribution. Mr. Lentz has an extensive background in logistics, supply chain and food manufacturing, including roles as Acting Chief Executive Officer and Chief Supply Chain Officer of Peapod LLC, the grocery eCommerce business division of Ahold Delhaize. He oversees the Food Distribution segment and has assumed responsibility for the Company’s supply chain.

Reduce Debt and Working Capital While Lowering Financial Leverage Ratios. Since the second quarter of 2018, the Company has paid down over $90.0 million in debt, resulting in an $8 million reduction in the debt balance despite the acquisition of Martin’s at the beginning of fiscal 2019. The Company also reduced its working capital by over $15.0 million from the second quarter of fiscal 2018, while continuing to grow sales. The Company will continue to focus on working capital improvements and debt reduction and expects to achieve total working capital improvements of $30.0 million for the full fiscal year.

Improve Adjusted Operating Earnings and Adjusted EBITDA Trend. The Company has recently executed a significant number of changes in leadership, including a transition in the President and CEO position. The leaders of SpartanNash have a renewed focus on driving operational execution and organizational development, while enhancing the distribution business. As part of these efforts to improve operating earnings and EBITDA trends, the Company recently announced its decision to exit the Indianapolis-based Fresh Kitchen operations and shift the Company’s focus and expertise to the produce distribution and Fresh Cut operations, which have been the hallmark of the Caito business. The Company expects to complete this transition by the end of fiscal 2019. These changes, along with the other strategies of the Company discussed above, are believed to be critical to return the Company to long-term profitable growth.

Outlook

The Company continues to expect financial results for the fiscal year ending December 28, 2019 consistent with its outlook previously provided on August 12, 2019, as outlined below and detailed in Table 6:

 

52 Weeks Ending

December 28, 2019

Net Sales Growth

Mid-single digits

Adjusted EBITDA (2)

$183 - $195 million

Adjusted EPS from Continuing Operations (4)

$1.20 - $1.35

Reported EPS from Continuing Operations

$0.21 - $0.47

The Company’s fiscal year guidance reflects an effective tax rate of 22.0% to 23.0%, due to a shift in profitability into lower tax jurisdictions. The Company expects capital expenditures for fiscal year 2019 to be in the range of $86.0 million to $92.0 million, with depreciation and amortization of $89.0 million to $91.0 million. Interest expense is now expected to range from $34.0 million to $35.0 million in fiscal 2019.

The Company's updated guidance for fiscal 2019 does not include costs associated with the CEO transition and costs from a non-recurring, supplemental, transition incentive program for eligible associates.

Conference Call

A telephone conference call to discuss the Company’s second quarter 2019 financial results is scheduled for Thursday, August 15, 2019 at 8:00 a.m. ET. A live webcast of this conference call will be available on the Company’s website, www.spartannash.com/webcasts. Simply click on “For Investors” and follow the links to the live webcast. The webcast will remain available for replay on the Company’s website for approximately ten days.

About SpartanNash

SpartanNash (SPTN) is a Fortune 400 company whose core businesses include distributing grocery products to a diverse group of independent and chain retailers, its corporate-owned retail stores and U.S. military commissaries and exchanges; as well as premier fresh produce distribution and fresh food processing. SpartanNash serves customer locations in all 50 states and the District of Columbia, Europe, Cuba, Puerto Rico, Bahrain, Djibouti and Egypt. SpartanNash currently operates 160 supermarkets, primarily under the banners of Family Fare, Martin’s Super Markets, D&W Fresh Market, VG’s Grocery, Dan’s Supermarket and Family Fresh Market. Through its MDV military division, SpartanNash is a leading distributor of grocery products to U.S. military commissaries.

Forward-Looking Statements

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

(1) A reconciliation of operating earnings to adjusted operating earnings, a non-GAAP financial measure, is provided below.
(2) A reconciliation of net earnings to Adjusted EBITDA, a non-GAAP financial measure, is provided below.
(3) A reconciliation of loss from continuing operations to adjusted earnings from continuing operations, a non-GAAP financial measure, is provided below.
(4) A reconciliation of projected earnings per share from continuing operations to adjusted earnings per share from continuing operations, a non-GAAP financial measure, is provided below.

 

SPARTANNASH COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

12 Weeks Ended

 

 

28 Weeks Ended

 

 

 

July 13,

 

 

July 14,

 

 

July 13,

 

 

July 14,

 

 

(In thousands, except per share amounts)

2019

 

 

2018

 

 

2019

 

 

2018

 

 

Net sales

$

 

1,995,929

 

 

$

 

1,895,953

 

 

$

 

4,538,304

 

 

$

 

4,281,026

 

 

Cost of sales

 

 

1,706,922

 

 

 

 

1,630,293

 

 

 

 

3,871,568

 

 

 

 

3,672,152

 

 

Gross profit

 

 

289,007

 

 

 

 

265,660

 

 

 

 

666,736

 

 

 

 

608,874

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

266,474

 

 

 

 

236,202

 

 

 

 

626,874

 

 

 

 

545,261

 

 

Merger/acquisition and integration

 

 

582

 

 

 

 

804

 

 

 

 

1,364

 

 

 

 

3,010

 

 

Restructuring charges (gains) and asset impairment

 

 

14,581

 

 

 

 

(1,164

)

 

 

 

8,919

 

 

 

 

5,037

 

 

Total operating expenses

 

 

281,637

 

 

 

 

235,842

 

 

 

 

637,157

 

 

 

 

553,308

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

 

 

7,370

 

 

 

 

29,818

 

 

 

 

29,579

 

 

 

 

55,566

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expenses and (income)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

8,696

 

 

 

 

6,969

 

 

 

 

20,577

 

 

 

 

15,747

 

 

Postretirement benefit expense (income)

 

 

8,821

 

 

 

 

(10

)

 

 

 

9,456

 

 

 

 

(14

)

 

Other, net

 

 

(439

)

 

 

 

(226

)

 

 

 

(891

)

 

 

 

(447

)

 

Total other expenses, net

 

 

17,078

 

 

 

 

6,733

 

 

 

 

29,142

 

 

 

 

15,286

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) earnings before income taxes and discontinued operations

 

 

(9,708

)

 

 

 

23,085

 

 

 

 

437

 

 

 

 

40,280

 

 

Income tax (benefit) expense

 

 

(2,941

)

 

 

 

5,247

 

 

 

 

(317

)

 

 

 

10,007

 

 

(Loss) earnings from continuing operations

 

 

(6,767

)

 

 

 

17,838

 

 

 

 

754

 

 

 

 

30,273

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from discontinued operations, net of taxes

 

 

(47

)

 

 

 

(66

)

 

 

 

(99

)

 

 

 

(158

)

 

Net (loss) earnings

$

 

(6,814

)

 

$

 

17,772

 

 

$

 

655

 

 

$

 

30,115

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic (loss) earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) earnings from continuing operations

$

 

(0.19

)

 

$

 

0.50

 

 

$

 

0.02

 

 

$

 

0.84

 

 

Loss from discontinued operations

 

 

 

 

 

 

(0.01

)

*

 

 

 

 

 

 

(0.01

)

*

Net (loss) earnings

$

 

(0.19

)

 

$

 

0.49

 

 

$

 

0.02

 

 

$

 

0.83

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted (loss) earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) earnings from continuing operations

$

 

(0.19

)

 

$

 

0.50

 

 

$

 

0.02

 

 

$

 

0.84

 

 

Loss from discontinued operations

 

 

 

 

 

 

(0.01

)

*

 

 

 

 

 

 

(0.01

)

*

Net (loss) earnings

$

 

(0.19

)

 

$

 

0.49

 

 

$

 

0.02

 

 

$

 

0.83

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

36,323

 

 

 

 

35,928

 

 

 

 

36,208

 

 

 

 

36,075

 

 

Diluted

 

 

36,323

 

 

 

 

35,940

 

 

 

 

36,208

 

 

 

 

36,087

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* includes rounding

 

SPARTANNASH COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

July 13,

 

 

December 29,

 

(In thousands)

2019

 

 

2018

 

Assets

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

 

19,949

 

 

$

 

18,585

 

Accounts and notes receivable, net

 

 

362,605

 

 

 

 

346,260

 

Inventories, net

 

 

572,723

 

 

 

 

553,799

 

Prepaid expenses and other current assets

 

 

43,219

 

 

 

 

73,798

 

Property and equipment held for sale

 

 

 

 

 

 

8,654

 

Total current assets

 

 

998,496

 

 

 

 

1,001,096

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

619,613

 

 

 

 

579,060

 

Goodwill

 

 

181,035

 

 

 

 

178,648

 

Intangible assets, net

 

 

129,131

 

 

 

 

128,926

 

Operating lease assets

 

 

274,336

 

 

 

 

 

Other assets, net

 

 

89,353

 

 

 

 

84,182

 

 

 

 

 

 

 

 

 

 

 

Total assets

$

 

2,291,964

 

 

$

 

1,971,912

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Accounts payable

$

 

406,896

 

 

$

 

357,802

 

Accrued payroll and benefits

 

 

53,072

 

 

 

 

57,180

 

Other accrued expenses

 

 

48,306

 

 

 

 

43,206

 

Current portion of operating lease liabilities

 

 

41,767

 

 

 

 

 

Current portion of long-term debt and finance lease liabilities

 

 

17,709

 

 

 

 

18,263

 

Total current liabilities

 

 

567,750

 

 

 

 

476,451

 

 

 

 

 

 

 

 

 

 

 

Long-term liabilities

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

43,200

 

 

 

 

49,254

 

Operating lease liabilities

 

 

276,888

 

 

 

 

 

Other long-term liabilities

 

 

31,954

 

 

 

 

50,463

 

Long-term debt and finance lease liabilities

 

 

684,527

 

 

 

 

679,797

 

Total long-term liabilities

 

 

1,036,569

 

 

 

 

779,514

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

 

 

 

Common stock, voting, no par value; 100,000 shares authorized; 36,334 and 35,952 shares outstanding

 

 

488,947

 

 

 

 

484,064

 

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

 

 

 

 

 

 

 

Accumulated other comprehensive loss

 

 

(8,932

)

 

 

 

(15,759

)

Retained earnings

 

 

207,630

 

 

 

 

247,642

 

Total shareholders’ equity

 

 

687,645

 

 

 

 

715,947

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

$

 

2,291,964

 

 

$

 

1,971,912

 

 

 

 

 

 

 

 

 

 

 

SPARTANNASH COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

28 Weeks Ended

 

(In thousands)

 

 

 

July 13, 2019

 

 

July 14, 2018

 

Cash flow activities

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

 

 

$

 

103,836

 

 

$

 

104,300

 

Net cash used in investing activities

 

 

 

 

 

(102,609

)

 

 

 

(28,141

)

Net cash provided by (used in) financing activities

 

 

 

 

 

267

 

 

 

 

(75,771

)

Net cash used in discontinued operations

 

 

 

 

 

(130

)

 

 

 

(142

)

Net increase in cash and cash equivalents

 

 

 

 

 

1,364

 

 

 

 

246

 

Cash and cash equivalents at beginning of the period

 

 

 

 

 

18,585

 

 

 

 

15,667

 

Cash and cash equivalents at end of the period

 

 

 

$

 

19,949

 

 

$

 

15,913

 

 

SPARTANNASH COMPANY AND SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA

 

Table 1: Sales and Operating Earnings by Segment

(Unaudited)

 

 

12 Weeks Ended

 

 

28 Weeks Ended

 

(In thousands)

July 13, 2019

 

 

July 14, 2018

 

 

July 13, 2019

 

 

July 14, 2018

 

Food Distribution Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

 

935,383

 

 

46.9

%

 

$

 

941,702

 

 

49.7

%

 

$

 

2,104,621

 

 

46.4

%

 

$

 

2,096,913

 

 

49.0

%

Operating earnings

 

 

272

 

 

 

 

 

 

 

18,724

 

 

 

 

 

 

 

24,864

 

 

 

 

 

 

 

43,245

 

 

 

 

Military Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

490,571

 

 

24.5

%

 

 

 

489,654

 

 

25.8

%

 

 

 

1,161,941

 

 

25.6

%

 

 

 

1,153,274

 

 

26.9

%

Operating (loss) earnings

 

 

(1,603

)

 

 

 

 

 

 

3,099

 

 

 

 

 

 

 

(3,160

)

 

 

 

 

 

 

4,612

 

 

 

 

Retail Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

 

569,975

 

 

28.6

%

 

 

 

464,597

 

 

24.5

%

 

 

 

1,271,742

 

 

28.0

%

 

 

 

1,030,839

 

 

24.1

%

Operating earnings

 

 

8,701

 

 

 

 

 

 

 

7,995

 

 

 

 

 

 

 

7,875

 

 

 

 

 

 

 

7,709

 

 

 

 

Total:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

 

1,995,929

 

 

100.0

%

 

$

 

1,895,953

 

 

100.0

%

 

$

 

4,538,304

 

 

100.0

%

 

$

 

4,281,026

 

 

100.0

%

Operating earnings

 

 

7,370

 

 

 

 

 

 

 

29,818

 

 

 

 

 

 

 

29,579

 

 

 

 

 

 

 

55,566

 

 

 

 

Non-GAAP Financial Measures

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

Current year adjusted operating earnings, adjusted earnings from continuing operations, and adjusted EBITDA exclude costs associated with organizational realignment, which include significant changes to the Company’s management team. Also excluded are the fees paid to a third-party advisory firm associated with Project One Team, the Company’s initiative to drive growth while increasing efficiency and reducing costs. Pension termination costs, primarily related to non-operating settlement expense associated with the distribution of pension assets, are excluded from adjusted earnings from continuing operations, and to a lesser extent adjusted operating earnings. These items are considered “non-operational” or “non-core” in nature. Prior year adjusted operating earnings, adjusted earnings from continuing operations, and adjusted EBITDA exclude start-up costs associated with the Fresh Kitchen operation, which concluded during the first quarter of 2018. The Fresh Kitchen represented a new line of business for the Company, and provides the Company with the ability to process, cook, and package fresh protein-based foods and complete meal solutions.

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

(Adjusted EBITDA)

(A Non-GAAP Financial Measure)

(Unaudited)

 

 

12 Weeks Ended

 

 

28 Weeks Ended

 

(In thousands)

July 13, 2019

 

 

July 14, 2018

 

 

July 13, 2019

 

 

July 14, 2018

 

Net (loss) earnings

$

 

(6,814

)

 

$

 

17,772

 

 

$

 

655

 

 

$

 

30,115

 

Loss from discontinued operations, net of tax

 

 

47

 

 

 

 

66

 

 

 

 

99

 

 

 

 

158

 

Income tax (benefit) expense

 

 

(2,941

)

 

 

 

5,247

 

 

 

 

(317

)

 

 

 

10,007

 

Other expenses, net

 

 

17,078

 

 

 

 

6,733

 

 

 

 

29,142

 

 

 

 

15,286

 

Operating earnings

 

 

7,370

 

 

 

 

29,818

 

 

 

 

29,579

 

 

 

 

55,566

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIFO expense

 

 

1,068

 

 

 

 

155

 

 

 

 

2,493

 

 

 

 

1,695

 

Depreciation and amortization

 

 

20,529

 

 

 

 

19,007

 

 

 

 

47,161

 

 

 

 

44,025

 

Merger/acquisition and integration

 

 

582

 

 

 

 

804

 

 

 

 

1,364

 

 

 

 

3,010

 

Restructuring charges (gains) and asset impairment

 

 

14,581

 

 

 

 

(1,164

)

 

 

 

8,919

 

 

 

 

5,037

 

Fresh Kitchen start-up costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,366

 

Stock-based compensation

 

 

715

 

 

 

 

976

 

 

 

 

6,098

 

 

 

 

6,267

 

Non-cash rent

 

 

(1,516

)

 

 

 

(41

)

 

 

 

(3,434

)

 

 

 

(117

)

Costs associated with Project One Team

 

 

810

 

 

 

 

 

 

 

 

5,428

 

 

 

 

 

Organizational realignment costs

 

 

19

 

 

 

 

 

 

 

 

877

 

 

 

 

 

Other non-cash charges

 

 

154

 

 

 

 

135

 

 

 

 

496

 

 

 

 

12

 

Adjusted EBITDA

$

 

44,312

$

 

49,690

 

 

$

 

98,981

 

 

$

 

116,861

 

...

 

12 Weeks Ended

 

 

28 Weeks Ended

 

(In thousands)

July 13, 2019

 

 

July 14, 2018

 

 

July 13, 2019

 

 

July 14, 2018

 

Food Distribution:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

$

 

272

 

 

$

 

18,724

 

 

$

 

24,864

 

 

$

 

43,245

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIFO expense (benefit)

 

 

527