UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended October 4, 2014.April 25, 2015.
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File Number: 000-31127
SPARTANNASH COMPANY
(Exact Name of Registrant as Specified in Its Charter)
Michigan |
| 38-0593940 |
(State or Other Jurisdiction of Incorporation or Organization) |
| (I.R.S. Employer Identification No.) |
|
|
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850 76th Street, S.W. P.O. Box 8700 Grand Rapids, Michigan |
| 49518 |
(Address of Principal Executive Offices) |
| (Zip Code) |
(616) 878-2000
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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| Accelerated filer |
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Non-accelerated filer |
| ¨ |
| Smaller Reporting Company |
| ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act) Yes ¨ No x
As of November 3, 2014,May 26, 2015, the registrant had 37,495,96037,610,923 outstanding shares of common stock, no par value.
FORWARD-LOOKING STATEMENTS
The matters discussed in this Quarterly Report on Form 10-Q, in our press releases and in our website-accessible conference calls with analysts and investor presentations include “forward-looking statements” about the plans, strategies, objectives, goals or expectations of SpartanNash Company and subsidiaries (“SpartanNash”). These forward-looking statements are identifiable by words or phrases indicating that SpartanNash or management “expects,” “anticipates,” “plans,” “believes,” or “estimates,” or that a particular occurrence or event “will,” “may,” “could,” “should” or “will likely” result, occur or be pursued or “continue” in the future, that the “outlook” or “trend” is toward a particular result or occurrence, that a development is an “opportunity,” “priority,” “strategy,” “focus,” that the Company is “positioned” for a particular result, or similarly stated expectations. Accounting estimates, such as those described under the heading “Critical Accounting Policies” in Part I, Item 2 of this Form 10-Q, are inherently forward-looking. Our asset impairment, restructuring cost provisions and fair value measurements are estimates and actual costs may be more or less than these estimates and differences may be material. You should not place undue reliance on these forward-looking statements, which speak only as of the date of the Quarterly Report, other report, release, presentation, or statement.
In addition to other risks and uncertainties described in connection with the forward-looking statements contained in this Quarterly Report on Form 10-Q, SpartanNash’s Annual Report on Form 10-K for the transition periodfiscal year ended December 28, 2013January 3, 2015 (in particular, you should refer to the discussion of “Risk Factors” in Item 1A of our TransitionAnnual Report on Form 10-K) and other periodic reports filed with the Securities and Exchange Commission, there are many important factors that could cause actual results to differ materially.
Our ability to achieve sales and earnings expectations; improve operating results; realize benefits of the merger with Nash-Finch Company (including realization of synergies); maintain or strengthen our retail-store performance; assimilate acquired distribution centers and stores; maintain or grow sales; respond successfully to competitors including remodels and new openings; maintain or improve gross margin; effectively address food cost or price inflation or deflation; maintain or improve customer and supplier relationships; realize expected synergies from other acquisition activity; realize expected benefits of restructuring; realize growth opportunities; maintain or expand our customer base; reduce operating costs; sell on favorable terms assets held for sale; generate cash; continue to meet the terms of our debt covenants; continue to pay dividends, and successfully implement and realize the expected benefits of the other programs, initiatives, systems, plans, priorities, strategies, objectives, goals or expectations described in this Quarterly Report, our other reports, our press releases and our public comments will be affected by changes in economic conditions generally or in the markets and geographic areas that we serve, adverse effects of the changing food and distribution industries, adverse changes in government funded consumer assistance programs, possible changes in the military commissary system, including those stemming from the redeployment of forces, congressional action, changes in funding levels, or the effects of mandated reductions in or sequestration of government expenditures, and other factors.
This section is intended to provide meaningful cautionary statements. This should not be construed as a complete list of all economic, competitive, governmental, technological and other factors that could adversely affect our expected consolidated financial position, results of operations or liquidity. Additional risks and uncertainties not currently known to SpartanNash or that SpartanNash currently believes are immaterial also may impair its business, operations, liquidity, financial condition and prospects. We undertake no obligation to update or revise our forward-looking statements to reflect developments that occur or information obtained after the date of this Quarterly Report.
2
PART I
FINANCIAL INFORMATION
ITEM 1. Financial Statements
SPARTANNASH COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
| October 4, 2014 |
|
| December 28, 2013 |
| April 25, 2015 |
|
| January 3, 2015 |
| ||||
Assets |
|
|
|
|
|
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Current assets |
|
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|
|
|
|
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|
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|
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Cash and cash equivalents | $ | 8,048 |
|
| $ | 9,216 |
| $ | 8,475 |
|
| $ | 6,443 |
|
Accounts and notes receivable, net |
| 305,433 |
|
|
| 285,393 |
|
| 312,521 |
|
|
| 282,697 |
|
Inventories, net |
| 612,901 |
|
|
| 589,497 |
|
| 562,979 |
|
|
| 577,197 |
|
Prepaid expenses and other current assets |
| 34,093 |
|
|
| 38,423 |
|
| 26,397 |
|
|
| 31,882 |
|
Property and equipment held for sale |
| 11,013 |
|
|
| 440 |
|
| 8,947 |
|
|
| 15,180 |
|
Total current assets |
| 971,488 |
|
|
| 922,969 |
|
| 919,319 |
|
|
| 913,399 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Property and equipment, net |
| 596,294 |
|
|
| 628,482 |
|
| 579,825 |
|
|
| 597,150 |
|
Goodwill |
| 297,352 |
|
|
| 299,186 |
|
| 297,280 |
|
|
| 297,280 |
|
Other assets, net |
| 126,135 |
|
|
| 133,014 |
|
| 119,371 |
|
|
| 124,453 |
|
|
|
|
|
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|
|
|
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|
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|
|
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Total assets | $ | 1,991,269 |
|
| $ | 1,983,651 |
| $ | 1,915,795 |
|
| $ | 1,932,282 |
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Liabilities and Shareholders’ Equity |
|
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Current liabilities |
|
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Accounts payable | $ | 411,279 |
|
| $ | 365,584 |
| $ | 349,893 |
|
| $ | 320,037 |
|
Accrued payroll and benefits |
| 64,307 |
|
|
| 81,175 |
|
| 58,800 |
|
|
| 73,220 |
|
Other accrued expenses |
| 43,851 |
|
|
| 51,992 |
|
| 39,045 |
|
|
| 44,690 |
|
Deferred income taxes |
| 22,987 |
|
|
| 18,706 |
|
| 28,086 |
|
|
| 22,494 |
|
Current maturities of long-term debt and capital lease obligations |
| 7,349 |
|
|
| 7,345 |
|
| 19,019 |
|
|
| 19,758 |
|
Total current liabilities |
| 549,773 |
|
|
| 524,802 |
|
| 494,843 |
|
|
| 480,199 |
|
|
|
|
|
|
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|
Long-term liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
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Deferred income taxes |
| 91,602 |
|
|
| 86,750 |
|
| 89,766 |
|
|
| 91,232 |
|
Postretirement benefits |
| 18,855 |
|
|
| 22,009 |
|
| 16,734 |
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|
| 23,701 |
|
Other long-term liabilities |
| 37,261 |
|
|
| 44,898 |
|
| 41,608 |
|
|
| 39,387 |
|
Long-term debt and capital lease obligations |
| 549,530 |
|
|
| 598,319 |
|
| 516,237 |
|
|
| 550,510 |
|
Total long-term liabilities |
| 697,248 |
|
|
| 751,976 |
|
| 664,345 |
|
|
| 704,830 |
|
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Commitments and contingencies (Note 7) |
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Commitments and contingencies (Note 6) |
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Shareholders’ equity |
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Common stock, voting, no par value; 100,000 shares authorized; 37,625 and 37,371 shares outstanding |
| 521,875 |
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| 518,056 |
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Common stock, voting, no par value; 100,000 shares authorized; 37,761 and 37,524 shares outstanding |
| 524,741 |
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| 520,791 |
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Preferred stock, no par value, 10,000 shares authorized; no shares outstanding |
| — |
|
|
| — |
|
| — |
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|
| — |
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Accumulated other comprehensive loss |
| (8,375 | ) |
|
| (8,794 | ) |
| (11,486 | ) |
|
| (11,655 | ) |
Retained earnings |
| 230,748 |
|
|
| 197,611 |
|
| 243,352 |
|
|
| 238,117 |
|
Total shareholders’ equity |
| 744,248 |
|
|
| 706,873 |
|
| 756,607 |
|
|
| 747,253 |
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Total liabilities and shareholders’ equity | $ | 1,991,269 |
|
| $ | 1,983,651 |
| $ | 1,915,795 |
|
| $ | 1,932,282 |
|
See accompanying notes to condensed consolidated financial statements.
3
SPARTANNASH COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
| 12 Weeks Ended |
|
| 40 Weeks Ended |
| 16 Weeks Ended |
|
| |||||||||||||||
| October 4, |
|
| October 12, |
|
| October 4, |
|
| October 12, |
| April 25, |
|
| April 19, |
|
| ||||||
| 2014 |
|
| 2013 |
|
| 2014 |
|
| 2013 |
| 2015 |
|
| 2014 |
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Net sales | $ | 1,809,571 |
|
| $ | 630,088 |
|
| $ | 5,953,473 |
|
| $ | 2,061,491 |
| $ | 2,312,683 |
|
| $ | 2,333,727 |
|
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Cost of sales |
| 1,548,162 |
|
|
| 499,627 |
|
|
| 5,079,612 |
|
|
| 1,625,890 |
|
| 1,976,437 |
|
|
| 1,986,389 |
|
|
Gross profit |
| 261,409 |
|
|
| 130,461 |
|
|
| 873,861 |
|
|
| 435,601 |
|
| 336,246 |
|
|
| 347,338 |
|
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Operating expenses |
|
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|
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|
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Selling, general and administrative |
| 227,690 |
|
|
| 113,455 |
|
|
| 771,961 |
|
|
| 377,740 |
|
| 302,371 |
|
|
| 315,465 |
|
|
Merger transaction and integration |
| 1,379 |
|
|
| 4,634 |
|
|
| 8,128 |
|
|
| 7,011 |
| ||||||||
Merger integration and acquisition |
| 2,684 |
|
|
| 4,168 |
|
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Restructuring and asset impairment |
| (1,272 | ) |
|
| — |
|
|
| (67 | ) |
|
| 2,220 |
|
| 7,338 |
|
|
| 127 |
|
|
Total operating expenses |
| 227,797 |
|
|
| 118,089 |
|
|
| 780,022 |
|
|
| 386,971 |
|
| 312,393 |
|
|
| 319,760 |
|
|
|
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|
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|
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|
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Operating earnings |
| 33,612 |
|
|
| 12,372 |
|
|
| 93,839 |
|
|
| 48,630 |
|
| 23,853 |
|
|
| 27,578 |
|
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|
|
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|
|
|
|
|
|
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|
Other income and expenses |
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
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Interest expense |
| 5,467 |
|
|
| 2,205 |
|
|
| 18,416 |
|
|
| 8,211 |
|
| 6,750 |
|
|
| 7,474 |
|
|
Debt extinguishment |
| — |
|
|
| — |
|
|
| — |
|
|
| 2,762 |
| ||||||||
Other, net |
| (1 | ) |
|
| (5 | ) |
|
| 4 |
|
|
| (20 | ) |
| (28 | ) |
|
| 5 |
|
|
Total other income and expenses |
| 5,466 |
|
|
| 2,200 |
|
|
| 18,420 |
|
|
| 10,953 |
|
| 6,722 |
|
|
| 7,479 |
|
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|
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Earnings before income taxes and discontinued operations |
| 28,146 |
|
|
| 10,172 |
|
|
| 75,419 |
|
|
| 37,677 |
|
| 17,131 |
|
|
| 20,099 |
|
|
Income taxes |
| 10,977 |
|
|
| 3,513 |
|
|
| 28,336 |
|
|
| 14,050 |
|
| 6,684 |
|
|
| 7,580 |
|
|
Earnings from continuing operations |
| 17,169 |
|
|
| 6,659 |
|
|
| 47,083 |
|
|
| 23,627 |
|
| 10,447 |
|
|
| 12,519 |
|
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Loss from discontinued operations, net of taxes |
| (73 | ) |
|
| (88 | ) |
|
| (358 | ) |
|
| (428 | ) |
| (120 | ) |
|
| (209 | ) |
|
Net earnings | $ | 17,096 |
|
| $ | 6,571 |
|
| $ | 46,725 |
|
| $ | 23,199 |
| $ | 10,327 |
|
| $ | 12,310 |
|
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Basic earnings per share: |
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|
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|
|
|
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Earnings from continuing operations |
| 0.46 |
|
|
| 0.30 |
|
|
| 1.25 |
|
|
| 1.08 |
| $ | 0.28 |
|
| $ | 0.33 |
|
|
Loss from discontinued operations |
| (0.01 | ) | * |
| — |
|
|
| (0.01 | ) |
|
| (0.02 | ) |
| (0.01 | ) | * |
| — |
| * |
Net earnings |
| 0.45 |
|
|
| 0.30 |
|
|
| 1.24 |
|
|
| 1.06 |
| $ | 0.27 |
|
| $ | 0.33 |
|
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|
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Diluted earnings per share: |
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Earnings from continuing operations | $ | 0.45 |
|
| $ | 0.30 |
|
| $ | 1.25 |
|
| $ | 1.08 |
| $ | 0.28 |
|
| $ | 0.33 |
|
|
Loss from discontinued operations |
| — |
|
|
| — |
|
|
| (0.01 | ) |
|
| (0.02 | ) |
| (0.01 | ) | * |
| — |
| * |
Net earnings | $ | 0.45 |
|
| $ | 0.30 |
|
| $ | 1.24 |
|
| $ | 1.06 |
| $ | 0.27 |
|
| $ | 0.33 |
|
|
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|
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| ||||||||
Weighted average shares outstanding: |
|
|
|
|
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|
|
|
|
|
|
|
|
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| ||||||||
Basic |
| 37,717 |
|
|
| 21,876 |
|
|
| 37,678 |
|
|
| 21,820 |
| ||||||||
Diluted |
| 37,778 |
|
|
| 21,969 |
|
|
| 37,749 |
|
|
| 21,908 |
|
See accompanying notes to condensed consolidated financial statements.
* | Includes rounding |
4
SPARTANNASH COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
| 12 Weeks Ended |
|
| 40 Weeks Ended |
| 16 Weeks Ended |
| |||||||||||||||
| October 4, |
|
| October 12, |
|
| October 4, |
|
| October 12, |
| April 25, |
|
| April 19, |
| ||||||
| 2014 |
|
| 2013 |
|
| 2014 |
|
| 2013 |
| 2015 |
|
| 2014 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
Net earnings | $ | 17,096 |
|
| $ | 6,571 |
|
| $ | 46,725 |
|
| $ | 23,199 |
| $ | 10,327 |
|
| $ | 12,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, before tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and postretirement liability adjustment |
| 203 |
|
|
| 336 |
|
|
| 678 |
|
|
| 845 |
|
| 272 |
|
|
| 271 |
|
Total other comprehensive income, before tax |
| 203 |
|
|
| 336 |
|
|
| 678 |
|
|
| 845 |
|
| 272 |
|
|
| 271 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
Income tax benefit related to items of other comprehensive income |
| (78 | ) |
|
| (130 | ) |
|
| (259 | ) |
|
| (327 | ) | |||||||
Income tax expense related to items of other comprehensive income |
| (103 | ) |
|
| (103 | ) | |||||||||||||||
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income, after tax |
| 125 |
|
|
| 206 |
|
|
| 419 |
|
|
| 518 |
|
| 169 |
|
|
| 168 |
|
Comprehensive income | $ | 17,221 |
|
| $ | 6,777 |
|
| $ | 47,144 |
|
| $ | 23,717 |
| $ | 10,496 |
|
| $ | 12,478 |
|
See accompanying notes to condensed consolidated financial statements.
5
SPARTANNASH COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(In thousands)
(Unaudited)
|
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| Accumulated |
|
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| Accumulated |
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| ||
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|
|
|
|
| Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
| ||
| Shares |
|
| Common |
|
| Comprehensive |
|
| Retained |
|
|
|
|
| Shares |
|
| Common |
|
| Comprehensive |
|
| Retained |
|
|
|
|
| ||||||||
| Outstanding |
|
| Stock |
|
| Income (Loss) |
|
| Earnings |
|
| Total |
| Outstanding |
|
| Stock |
|
| Income (Loss) |
|
| Earnings |
|
| Total |
| ||||||||||
Balance – December 28, 2013 |
| 37,371 |
|
| $ | 518,056 |
|
| $ | (8,794 | ) |
| $ | 197,611 |
|
| $ | 706,873 |
| |||||||||||||||||||
Balance - January 3, 2015 |
| 37,524 |
|
| $ | 520,791 |
|
| $ | (11,655 | ) |
| $ | 238,117 |
|
| $ | 747,253 |
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
| — |
|
|
| — |
|
|
| — |
|
|
| 46,725 |
|
|
| 46,725 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 10,327 |
|
|
| 10,327 |
|
Other comprehensive income |
| — |
|
|
| — |
|
|
| 419 |
|
|
| — |
|
|
| 419 |
|
| — |
|
|
| — |
|
|
| 169 |
|
|
| — |
|
|
| 169 |
|
Dividends ($0.36 per share) |
| — |
|
|
| — |
|
|
| — |
|
|
| (13,588 | ) |
|
| (13,588 | ) | |||||||||||||||||||
Dividends - $0.135 per share |
| — |
|
|
| — |
|
|
| — |
|
|
| (5,092 | ) |
|
| (5,092 | ) | |||||||||||||||||||
Share repurchase |
| (121 | ) |
|
| (2,492 | ) |
|
| — |
|
|
| — |
|
|
| (2,492 | ) |
| (79 | ) |
|
| (2,526 | ) |
|
| — |
|
|
| — |
|
|
| (2,526 | ) |
Stock-based employee compensation |
| — |
|
|
| 6,017 |
|
|
| — |
|
|
| — |
|
|
| 6,017 |
|
| — |
|
|
| 4,753 |
|
|
| — |
|
|
| — |
|
|
| 4,753 |
|
Issuances of common stock and related tax benefit on stock option exercises and stock bonus plan and from deferred compensation plan |
| 145 |
|
|
| 1,393 |
|
|
| — |
|
|
| — |
|
|
| 1,393 |
|
| 115 |
|
|
| 2,336 |
|
|
| — |
|
|
| — |
|
|
| 2,336 |
|
Issuances of restricted stock and related income tax benefits |
| 317 |
|
|
| 530 |
|
|
| — |
|
|
| — |
|
|
| 530 |
|
| 312 |
|
|
| 175 |
|
|
| — |
|
|
| — |
|
|
| 175 |
|
Cancellations of restricted stock |
| (87 | ) |
|
| (1,629 | ) |
|
| — |
|
|
| — |
|
|
| (1,629 | ) |
| (111 | ) |
|
| (788 | ) |
|
| — |
|
|
| — |
|
|
| (788 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Balance – October 4, 2014 |
| 37,625 |
|
| $ | 521,875 |
|
| $ | (8,375 | ) |
| $ | 230,748 |
|
| $ | 744,248 |
| |||||||||||||||||||
Balance - April 25, 2015 |
| 37,761 |
|
| $ | 524,741 |
|
| $ | (11,486 | ) |
| $ | 243,352 |
|
| $ | 756,607 |
|
See accompanying notes to condensed consolidated financial statements.
6
SPARTANNASH COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| 40 Weeks Ended |
| 16 Weeks Ended |
| ||||||||||
| October 4, |
|
| October 12, |
| April 25, |
|
| April 19, |
| ||||
| 2014 |
|
| 2013 |
| 2015 |
|
| 2014 |
| ||||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings | $ | 46,725 |
|
| $ | 23,199 |
| $ | 10,327 |
|
| $ | 12,310 |
|
Loss from discontinued operations, net of tax |
| 358 |
|
|
| 428 |
|
| 120 |
|
|
| 209 |
|
Earnings from continuing operations |
| 47,083 |
|
|
| 23,627 |
|
| 10,447 |
|
|
| 12,519 |
|
Adjustments to reconcile net earnings to net cash |
|
|
|
|
|
|
| |||||||
provided by operating activities: |
|
|
|
|
|
|
| |||||||
Restructuring and asset impairment charges |
| (67 | ) |
|
| 2,220 |
| |||||||
Convertible debt interest |
| — |
|
|
| 379 |
| |||||||
Loss on debt extinguishment |
| — |
|
|
| 2,762 |
| |||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: |
|
|
|
|
|
|
| |||||||
Non-cash restructuring and asset impairment charges |
| 5,864 |
|
|
| 127 |
| |||||||
Depreciation and amortization |
| 68,043 |
|
|
| 31,586 |
|
| 26,168 |
|
|
| 27,976 |
|
LIFO expense |
| 5,077 |
|
|
| 413 |
|
| 1,723 |
|
|
| 1,972 |
|
Postretirement benefits expense |
| 1,093 |
|
|
| 147 |
|
| 476 |
|
|
| 1,378 |
|
Deferred income taxes |
| 3,640 |
|
|
| (7,885 | ) | |||||||
Deferred taxes on income |
| 4,023 |
|
|
| 2,766 |
| |||||||
Stock-based compensation expense |
| 6,017 |
|
|
| 2,865 |
|
| 4,753 |
|
|
| 3,929 |
|
Excess tax benefit on stock compensation |
| (651 | ) |
|
| (146 | ) |
| (174 | ) |
|
| (131 | ) |
Other, net |
| (205 | ) |
|
| 99 |
|
| 123 |
|
|
| (106 | ) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
| (18,629 | ) |
|
| (9,540 | ) |
| (30,205 | ) |
|
| (24,229 | ) |
Inventories |
| (29,582 | ) |
|
| (5,857 | ) |
| 12,495 |
|
|
| 29,511 |
|
Prepaid expenses and other assets |
| 4,676 |
|
|
| 6,841 |
|
| 5,195 |
|
|
| 6,626 |
|
Accounts payable |
| 59,079 |
|
|
| 11,245 |
|
| 31,346 |
|
|
| (1,042 | ) |
Accrued payroll and benefits |
| (17,021 | ) |
|
| (4,273 | ) |
| (13,812 | ) |
|
| (13,105 | ) |
Postretirement benefit payments |
| (4,016 | ) |
|
| (252 | ) |
| (650 | ) |
|
| (3,623 | ) |
Other accrued expenses and other liabilities |
| (7,152 | ) |
|
| 1,906 |
|
| (8,831 | ) |
|
| (11,973 | ) |
Net cash provided by operating activities |
| 117,385 |
|
|
| 56,137 |
|
| 48,941 |
|
|
| 32,595 |
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
| (57,611 | ) |
|
| (28,784 | ) |
| (12,724 | ) |
|
| (22,839 | ) |
Net proceeds from the sale of assets |
| 5,368 |
|
|
| 115 |
|
| 9,670 |
|
|
| 1,804 |
|
Loans to customers |
| (4,915 | ) |
|
| — |
|
| (1,435 | ) |
|
| (2,050 | ) |
Payments from customers on loans |
| 2,864 |
|
|
| — |
|
| 500 |
|
|
| 1,041 |
|
Other |
| (68 | ) |
|
| (1,095 | ) |
| (534 | ) |
|
| (19 | ) |
Net cash used in investing activities |
| (54,362 | ) |
|
| (29,764 | ) |
| (4,523 | ) |
|
| (22,063 | ) |
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from revolving credit facility |
| 788,740 |
|
|
| 424,384 |
|
| 269,916 |
|
|
| 320,864 |
|
Payments on revolving credit facility |
| (831,688 | ) |
|
| (387,315 | ) |
| (301,949 | ) |
|
| (319,051 | ) |
Share repurchase |
| (2,492 | ) |
|
| — |
|
| (2,526 | ) |
|
| — |
|
Repurchase of convertible notes |
| — |
|
|
| (57,973 | ) | |||||||
Repayment of other long-term debt |
| (5,836 | ) |
|
| (3,139 | ) |
| (2,979 | ) |
|
| (2,395 | ) |
Financing fees paid |
| (479 | ) |
|
| (27 | ) |
| (1,845 | ) |
|
| (123 | ) |
Excess tax benefit on stock compensation |
| 651 |
|
|
| 146 |
|
| 174 |
|
|
| 131 |
|
Proceeds from sale of common stock |
| 780 |
|
|
| 224 |
|
| 2,010 |
|
|
| 657 |
|
Dividends paid |
| (13,588 | ) |
|
| (5,679 | ) |
| (5,092 | ) |
|
| (4,533 | ) |
Net cash used in financing activities |
| (63,912 | ) |
|
| (29,379 | ) |
| (42,291 | ) |
|
| (4,450 | ) |
Cash flows from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
| (279 | ) |
|
| (454 | ) |
| (95 | ) |
|
| (234 | ) |
Net cash used in discontinued operations |
| (279 | ) |
|
| (454 | ) |
| (95 | ) |
|
| (234 | ) |
Net decrease in cash and cash equivalents |
| (1,168 | ) |
|
| (3,460 | ) | |||||||
Net increase in cash and cash equivalents |
| 2,032 |
|
|
| 5,848 |
| |||||||
Cash and cash equivalents at beginning of period |
| 9,216 |
|
|
| 8,960 |
|
| 6,443 |
|
|
| 9,216 |
|
Cash and cash equivalents at end of period | $ | 8,048 |
|
| $ | 5,500 |
| $ | 8,475 |
|
| $ | 15,064 |
|
See accompanying notes to condensed consolidated financial statements.
7
SPARTANNASH COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 Summary of Significant Accounting Policies and Basis of Presentation
SpartanNash Company was formerly known as Spartan Stores, Inc. which began doing business under the assumed name of “SpartanNash Company,” upon completion of the merger with Nash-Finch Company (“Nash-Finch”) on November 19, 2013. The formal name change to SpartanNash Company was approved and became effective after the annual shareholders meeting on May 28, 2014. The accompanying unaudited Condensed Consolidated Financial Statements (the “financial statements”) include the accounts of SpartanNash Company and its subsidiaries (“SpartanNash”). The operating results of Nash-Finch are included in the financial statements for the year-to-date and third quarter ended October 4, 2014 only. All significant intercompany accounts and transactions have been eliminated.
In connection with the merger with Nash-Finch, effective November 19, 2013, the Board of Directors of SpartanNash determined to change the Company’s fiscal year end from the last Saturday in March to the Saturday nearest to December 31, beginning with the transition period ended December 28, 2013. Beginning with fiscal 2014 the Company’s interim quarters consist of 12 weeks, except for the first quarter which consists of 16 weeks. As a result of this change, in these financial statements, including the notes thereto, financial results for the current third quarter and year-to-date ended October 4, 2014 are for 12 and 40 weeks, respectively. In addition, our Condensed Consolidated Statements of Earnings include an unaudited 12-week period and 40-week period ended October 12, 2013 and the Condensed Consolidated Statements of Cash Flows for the prior year include an unaudited 40-week period ended October 12, 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 with the current year by one week and the full prior fiscal year will consist of 51 weeks with the fourth quarter comprised of only 11 weeks. Fiscal year 2014 will consist of 53 weeks with the fourth quarter comprised of 13 weeks.
In the opinion of management, the accompanying financial statements, taken as a whole, contain all adjustments, which are of a normal recurring nature, necessary to present fairly the financial position of SpartanNash as of October 4, 2014,April 25, 2015, and the results of its operations and cash flows for the interim periods presented. Interim results are not necessarily indicative of results for a full year.
Note 2 Recently Issued Accounting Standards
On April 7, 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03 “Interest - Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs.” ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The new guidance is effective on a retrospective basis for fiscal years beginning after December 15, 2015, and interim periods within those years. Adoption of this standard in fiscal 2016 will retroactively decrease Other long-term assets and Long-term debt as of April 25, 2015 by approximately $9.9 million.
On April 10, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08 “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” ASU No. 2014-08 changeschanged the criteria for reporting discontinued operations and modifiesmodified related disclosure requirements. The new guidance is effective on a prospective basis forCompany adopted ASU 2014-08 in the first quarter of fiscal years beginning after December 15, 2014, and interim periods within those years. The Company is currently assessing the potential impact2015. Adoption of ASU No. 2014-08 did not have a material impact on its financial statements.the Consolidated Financial Statements.
On May 28, 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” which provides guidance for revenue recognition. The new guidance contained in the ASU affects any reporting organization that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ThisOn April 29, 2015, the FASB issued a one-year deferral of the effective date of this new guidance, will bewhich would result in the guidance being effective for the Company in the first quarter of its fiscal year ending December 30, 2017.29, 2018. Adoption is allowed by either the full retrospective or modified retrospective approach. The Company is currently in the process of evaluating the impact of adoption of this ASUASC on the Company’s financial statements.
Note 3 Merger
On November 19, 2013, Spartan Stores, Inc. completed a merger with Nash-Finch, a food distribution company serving military commissaries and exchanges and independent grocery retailers as well as an operator of retail grocery stores.
The merger was accounted for under the provisions of FASB Accounting Standards Codification Topic 805, “Business Combinations.” The related assets acquired and liabilities assumed were recorded at estimated fair values on the acquisition date.
The following table summarizes the fair values of the assets acquired and liabilities assumed on November 19, 2013. During the measurement period, which will end on November 18, 2014, net adjustments of $7.0 million have been made to the fair values of the assets acquired and liabilities assumed with a corresponding adjustment to goodwill. These adjustments are summarized in the table presented below. The accompanying condensed consolidated balance sheet as of December 28, 2013 has been retrospectively adjusted to reflect these adjustments made as of November 19, 2013 as required by the accounting guidance for business combinations. The valuation process is not complete and the final determination of the fair values may result in further adjustments to the values presented below:
(In thousands) |
| Initial Valuation |
|
| 2014 Adjustments |
|
| October 4, 2014 |
| |||
Current assets |
| $ | 790,296 |
|
| $ | (2,866 | ) |
| $ | 787,430 |
|
Property and equipment |
|
| 369,495 |
|
|
| (22,995 | ) |
|
| 346,500 |
|
Goodwill |
|
| 43,584 |
|
|
| (6,962 | ) |
|
| 36,622 |
|
Intangible assets |
|
| 10,750 |
|
|
| 17,800 |
|
|
| 28,550 |
|
Other |
|
| 38,160 |
|
|
| — |
|
|
| 38,160 |
|
Total assets acquired |
|
| 1,252,285 |
|
|
| (15,023 | ) |
|
| 1,237,262 |
|
Current liabilities |
|
| 353,484 |
|
|
| (11,263 | ) |
|
| 342,221 |
|
Other long-term liabilities |
|
| 81,047 |
|
|
| (4,516 | ) |
|
| 76,531 |
|
Long-term debt and capital lease obligations |
|
| 438,140 |
|
|
| 756 |
|
|
| 438,896 |
|
Total liabilities assumed |
|
| 872,671 |
|
|
| (15,023 | ) |
|
| 857,648 |
|
Net assets acquired |
| $ | 379,614 |
|
| $ | — |
|
| $ | 379,614 |
|
During the second quarter ended July 12, 2014, management of the Company made revisions to the cash flow projections to correct the allocation between certain reporting units related to the valuation analysis completed in 2013. Management has concluded that the purchase accounting effect of the revisions is not material to the consolidated financial statements for any period presented. As a result of the revisions, property and equipment was decreased by $23.0 million, while intangible assets were increased by $19.3 million and goodwill was increased by $3.7 million.
The excess of the purchase price over the fair value of net assets acquired of $36.6 million was preliminarily recorded as goodwill in the condensed consolidated balance sheet and allocated to the Food Distribution segment. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of Nash-Finch. No goodwill is expected to be deductible for tax purposes.
Intangible assets acquired are currently valued as follows:
(In thousands) |
| Intangible |
|
| Useful Life |
| ||
Trade names |
| $ | 6,700 |
|
|
| Indefinite |
|
Customer lists |
|
| 5,100 |
|
|
| 7 years |
|
Customer relationships |
|
| 12,100 |
|
|
| 20 years |
|
Favorable leases |
|
| 4,650 |
|
|
| 7 to 22 years |
|
|
| $ | 28,550 |
|
|
|
|
|
The following supplemental pro forma financial information presents sales and net earnings as if the Nash-Finch Company was acquired on the first day of the 40-week period ended October 12, 2013. This pro forma information is not necessarily indicative of the results that would have been obtained if the acquisition had occurred at the beginning of the 40-week period presented or that may be obtained in the future.
|
| October 12, 2013 |
| |||||
(In thousands) |
| 12 Weeks |
|
| 40 Weeks |
| ||
Net sales |
| $ | 1,796,656 |
|
| $ | 5,928,875 |
|
Net earnings from continuing operations |
|
| 13,799 |
|
|
| 41,980 |
|
Note 4 Goodwill and Other Intangible Assets
Changes in the carrying amount of goodwill were as follows:
(In thousands) |
| Retail |
|
| Food |
|
| Total |
| |||
Balance at December 28, 2013: |
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
| $ | 254,438 |
|
| $ | 131,348 |
|
| $ | 385,786 |
|
Accumulated impairment charges |
|
| (86,600 | ) |
|
| — |
|
|
| (86,600 | ) |
Goodwill, net |
|
| 167,838 |
|
|
| 131,348 |
|
|
| 299,186 |
|
Other |
|
| (1,834 | ) |
|
| — |
|
|
| (1,834 | ) |
Balance at October 4, 2014: |
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
| 252,604 |
|
|
| 131,348 |
|
|
| 383,952 |
|
Accumulated impairment charges |
|
| (86,600 | ) |
|
| — |
|
|
| (86,600 | ) |
Goodwill, net |
| $ | 166,004 |
|
| $ | 131,348 |
|
| $ | 297,352 |
|
The following table reflects the components of amortized intangible assets, included in “Other, net” on the Condensedour Consolidated Balance Sheets:Financial Statements.
|
| October 4, 2014 |
|
| December 28, 2013 |
| ||||||||||
(In thousands) |
| Gross |
|
| Accumulated |
|
| Gross |
|
| Accumulated |
| ||||
Non-compete agreements |
| $ | 2,527 |
|
| $ | 1,732 |
|
| $ | 4,566 |
|
| $ | 3,427 |
|
Favorable leases |
|
| 8,408 |
|
|
| 2,601 |
|
|
| 8,408 |
|
|
| 2,215 |
|
Pharmacy customer script lists |
|
| 17,223 |
|
|
| 10,951 |
|
|
| 17,423 |
|
|
| 8,946 |
|
Customer relationships |
|
| 12,100 |
|
|
| 597 |
|
|
| 12,100 |
|
|
| 78 |
|
Trade names |
|
| 1,219 |
|
|
| 408 |
|
|
| 1,219 |
|
|
| 233 |
|
Franchise fees and other |
|
| 400 |
|
|
| 165 |
|
|
| 370 |
|
|
| 129 |
|
Total |
| $ | 41,877 |
|
| $ | 16,454 |
|
| $ | 44,086 |
|
| $ | 15,028 |
|
The weighted average amortization period for amortizable intangible assets is as follows:
|
| |||
|
| |||
|
| |||
|
| |||
|
| |||
|
|
Estimated amortization expense for fiscal year 2014 through 2018 is as follows:
(In thousands) |
| Fiscal Year |
|
| Amortization |
| ||
|
|
| 2014 |
|
| $ | 3,413 |
|
|
|
| 2015 |
|
|
| 3,156 |
|
|
|
| 2016 |
|
|
| 2,622 |
|
|
|
| 2017 |
|
|
| 2,397 |
|
|
|
| 2018 |
|
|
| 2,033 |
|
Indefinite-lived intangible assets that are not amortized consist primarily of trade names and licenses for the sale of alcoholic beverages which totaled $33.1 million and $33.2 million as of October 4, 2014 and December 28, 2013.
Note 53 Restructuring and Asset Impairment
The following table provides the activity of restructuring costs for the 4016 weeks ended October 4, 2014.April 25, 2015. Accrued restructuring costs recorded in the Condensed Consolidated Balance Sheets are included in “Other accrued expenses” in Current liabilities and “Other long-term liabilities” in Long-term liabilities based on when the obligations are expected to be paid.
| Lease and |
|
|
|
|
|
|
|
| ||||||||||||||||||
(In thousands) |
| Lease and |
|
| Severance |
|
| Total |
| Ancillary Costs |
|
| Severance |
|
| Total |
|
| |||||||||
Balance at December 28, 2013 |
| $ | 19,496 |
|
| $ | 1,035 |
|
| $ | 20,531 |
| |||||||||||||||
Balance - January 3, 2015 | $ |
| 13,988 |
|
| $ |
| 80 |
|
| $ |
| 14,068 |
|
| ||||||||||||
Provision for lease and related ancillary costs, net of sublease income |
|
| 236 |
|
|
| — |
|
|
| 236 | (a) |
|
| 6,760 |
|
| — |
|
|
| 6,760 |
| (a) | |||
Provision for severance |
|
| — |
|
|
| 306 |
|
|
| 306 | (b) |
| — |
|
|
| 304 |
|
|
| 304 |
| (b) | |||
Changes in estimates |
|
| (1,436 | ) |
|
| — |
|
|
| (1,436 | )(c) |
|
| (287 | ) |
| — |
|
|
| (287 | ) | (c) | |||
Lease termination adjustment |
|
| (1,745 | ) |
| — |
|
|
| (1,745 | ) | (d) | |||||||||||||||
Accretion expense |
|
| 523 |
|
|
| — |
|
|
| 523 |
|
|
| 175 |
|
| — |
|
|
| 175 |
|
| |||
Payments |
|
| (5,378 | ) |
|
| (1,257 | ) |
|
| (6,635 | ) |
|
| (2,522 | ) |
|
|
| (284 | ) |
|
|
| (2,806 | ) |
|
Balance at October 4, 2014 |
| $ | 13,441 |
|
| $ | 84 |
|
| $ | 13,525 |
| |||||||||||||||
Balance - April 25, 2015 | $ |
| 16,369 |
|
| $ |
| 100 |
|
| $ |
| 16,469 |
|
|
(a) | The provision for lease and related ancillary costs represents the initial charges estimated to be incurred for store closings in the Retail segment. |
(b) | The provision for severance |
8
(c) | The changes in estimates relate to revised estimates of lease and |
|
|
Included in the liability are lease obligations recorded at the present value of future minimum lease payments, calculated using a risk-free interest rate, and related ancillary costs from the date of closure to the end of the remaining lease term, net of estimated sublease income.
Restructuring and asset impairment charges included in the Condensed Consolidated Statements of Earnings consisted of the following:
|
| 12 Weeks Ended |
|
| 40 Weeks Ended |
| ||||||||||
(In thousands) |
| October 4, |
|
| October 12, |
|
| October 4, |
|
| October 12, |
| ||||
Asset impairment charges (a) |
| $ | — |
|
| $ | — |
|
| $ | 906 |
|
| $ | 2,220 |
|
Provision for leases and related ancillary costs, net of |
|
| — |
|
|
| — |
|
|
| 236 |
|
|
| — |
|
Gains on sales of assets related to stores closed |
|
| (1,638 | ) |
|
| — |
|
|
| (2,636 | ) |
|
| — |
|
Provision for severance (c) |
|
| 40 |
|
|
| — |
|
|
| 306 |
|
|
| — |
|
Other costs associated with distribution center and |
|
| 326 |
|
|
| — |
|
|
| 1,213 |
|
|
| — |
|
Changes in estimates (d) |
|
| — |
|
|
| — |
|
|
| (92 | ) |
|
| — |
|
|
| $ | (1,272 | ) |
| $ | — |
|
| $ | (67 | ) |
| $ | 2,220 |
|
| 16 Weeks Ended |
|
| |||||||
| April 25, |
|
| April 19, |
|
| ||||
(In thousands) | 2015 |
|
| 2014 |
|
| ||||
Asset impairment charges | $ |
| 2,353 |
|
| $ |
| 906 |
| (a) |
Provision for leases and related ancillary costs, net of sublease income, related to store closings |
|
| 6,760 |
|
|
|
| 18 |
| (b) |
Gains on sales of assets related to closed facilities |
|
| (1,540 | ) |
|
|
| (1,318 | ) | (c) |
Provision for severance |
|
| 304 |
|
|
|
| 196 |
| (d) |
Other costs associated with distribution center and store closings |
|
| 1,493 |
|
|
|
| 724 |
|
|
Changes in estimates |
|
| (287 | ) |
|
|
| (399 | ) | (e) |
Lease termination adjustment |
|
| (1,745 | ) |
|
| — |
| (f) | |
| $ |
| 7,338 |
|
| $ |
| 127 |
|
|
(a) | The asset impairment charges were incurred in the Retail segment due to the economic and competitive environment of certain stores. |
(b) | The provision for lease and related ancillary costs, net of sublease income, represents the initial charges estimated to be incurred for store closings in the Retail segment. |
(c) | The |
(d) | The |
(e) | The changes in estimates relates to revised estimates of lease ancillary costs associated with previously closed facilities in the Retail and Food Distribution segments. The Retail segment realized $(287) and |
(f) | The lease termination adjustment represents the benefit recognized in connection with lease buyouts on two previously closed stores. |
Note 4 Long-Term Debt
On January 9, 2015, SpartanNash Company and certain of its subsidiaries entered into an amendment (the “Amendment”) to the Company’s Amended and Restated Loan and Security Agreement (the “Credit Agreement”) with Wells Fargo Capital Finance, LLC, as administrative agent, and certain lenders to the Credit Agreement. The Amendment reduced the interest rates by 0.25% and extended the maturity date of the Loan Agreement from November 19, 2018 to January 9, 2020.
9
Note 65 Fair Value Measurements
Financial instruments include cash and cash equivalents, accounts and notes receivable, accounts payable and long-term debt. The carrying amounts of cash and cash equivalents, accounts and notes receivable, and accounts payable approximate fair value because of the short-term maturities of these financial instruments. At October 4, 2014April 25, 2015 and December 28, 2013January 3, 2015 the estimated fair value and the book value of our debt instruments were as follows:
(In thousands) |
| October 4, 2014 |
|
| December 28, 2013 |
| April 25, 2015 |
|
| January 3, 2015 |
| ||||||
Book value of debt instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Current maturities of long-term debt and capital lease |
| $ | 7,349 |
|
| $ | 7,345 |
| $ |
| 19,019 |
|
| $ |
| 19,758 |
|
Long-term debt and capital lease obligations |
|
| 549,530 |
|
|
| 598,319 |
|
|
| 516,237 |
|
|
|
| 550,510 |
|
Total book value of debt instruments |
|
| 556,879 |
|
|
| 605,664 |
|
|
| 535,256 |
|
|
|
| 570,268 |
|
Fair value of debt instruments |
|
| 561,500 |
|
|
| 609,682 |
|
|
| 540,421 |
|
|
|
| 574,008 |
|
Excess of fair value over book value |
| $ | 4,621 |
|
| $ | 4,018 |
| $ |
| 5,165 |
|
| $ |
| 3,740 |
|
The estimated fair value of debt is based on market quotes for instruments with similar terms and remaining maturities (level 2 valuation techniques).
ASC 820 prioritizes the inputs to valuation techniques used to measure fair value into the following hierarchy:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Unobservable inputs for the asset or liability, reflecting the reporting entity’s own assumptions about the assumptions that market participants would use in pricing.
Long-lived assets with a book value of $5.6 million and $0.9 million as of April 25, 2015 and $3.6 million in the 40 week periods ended October 4,April 19, 2014, and October 12, 2013, respectively, were measured at a fair value of $0.0$3.2 million and $1.4$0.0 million, respectively, on a nonrecurring basis using Level 3 inputs as defined in the fair value hierarchy. Our accounting and finance team management, which report to the chief financial officer, determine our valuation policies and procedures. The development and determination of the unobservable inputs for level 3 fair value measurements and fair value calculations are the responsibility of our accounting and finance team management and are approved by the chief financial officer. Fair value of long-lived assets is determined by estimating the amount and timing of net future cash flows, discounted using a risk-adjusted rate of interest. SpartanNash estimates future cash flows based on experience and knowledge of the market in which the assets are located, and when necessary, uses real estate brokers. See Note 53 for discussion of long-lived asset impairment charges.
Note 76 Commitments and Contingencies
We are engaged from time-to-time in routine legal proceedings incidental to our business. We do not believe that these routine legal proceedings, taken as a whole, will have a material impact on our business or financial condition. While the ultimate effect of such actions cannot be predicted with certainty, management believes that their outcome will not result in a materialan adverse effect on the consolidated financial position, operating results or liquidity of SpartanNash.
On or about July 24, 2013, a putative class action complaint (the “State Court Action”) was filed in the District Court for the Fourth Judicial District, State of Minnesota, County of Hennepin (the “State Court”), by a stockholder of Nash-Finch Company in connection with the pending merger with Spartan Stores, Inc. The State Court Action was styled Greenblatt v. Nash-Finch Co. et al., Case No. 27-cv-13-13710. That complaint was amended on August 28, 2013, after Spartan Stores filed a registration statement with the Securities and Exchange Commission containing a preliminary version of the joint proxy statement/prospectus. On September 9, 2013, the defendants filed motions to dismiss the State Court Action. On or about September 19, 2013, a second putative class action complaint (the “Federal Court Action” and, together with the State Court Action, the “Putative Class Actions”) was filed in the United States District Court for the District of Minnesota (the “Federal Court”), by a stockholder of Nash-Finch. The Federal Court Action was styled Benson v. Covington et al., Case No. 0:13-cv-02574.
The Putative Class Actions alleged that the directors of Nash-Finch breached their fiduciary duties by, among other things, approving a merger that provided for inadequate consideration under circumstances involving certain alleged conflicts of interest; that the merger agreement included allegedly preclusive deal protection provisions; and that Nash-Finch and Spartan Stores allegedly aided and abetted the directors in breaching their duties to Nash-Finch’s stockholders. Both Putative Class Actions also alleged that the preliminary joint proxy statement/prospectus was false and misleading due to the omission of a variety of allegedly material information. The complaint in the Federal Court Action also asserted additional claims individually on behalf of the plaintiff under the federal securities laws. The Putative Class Actions sought, on behalf of their putative classes, various remedies, including enjoining the merger from being consummated in accordance with its agreed-upon terms, damages, and costs and disbursements relating to the lawsuit.
SpartanNash believed that these lawsuits were without merit; however, to eliminate the burden, expense and uncertainties inherent in such litigation, Nash-Finch and Spartan Stores agreed, as part of settlement discussions, to make certain supplemental disclosures in the joint proxy statement/prospectus requested by the Putative Class Actions in the definitive joint proxy statement/prospectus. On October 30, 2013, the defendants entered into the Memorandum of Understanding regarding the settlement of the Putative Class Actions. The Memorandum of Understanding outlined the terms of the parties’ agreement in principle to settle and release all claims which were or could have been asserted in the Putative Class Actions. In consideration for such settlement and release, Nash-Finch and Spartan Stores acknowledged that the supplemental disclosures in the joint proxy statement/prospectus were made in response to the Putative Class Actions. The Memorandum of Understanding contemplated that the parties will use their best efforts to agree upon, execute and present to the State Court for approval a stipulation of settlement within thirty days after the later of the date that the Merger is consummated or the date that plaintiffs and their counsel have confirmed the fairness, adequacy, and reasonableness of the settlement, and that upon execution of such stipulation, and as a condition to final approval of the settlement, the plaintiff in the Federal Action would withdraw the claims in and cause to be dismissed the Federal Action, with any individual claims being dismissed with prejudice. The Memorandum of Understanding provided that Nash-Finch would pay, on behalf of all defendants, the plaintiffs’ attorneys’ fees and expenses, subject to approval by the State Court, in an amount not to exceed $550,000. On February 11, 2014, the parties executed the Stipulation and Agreement Compromise, Settlement and Release (the “Stipulation of Settlement.”) to resolve, discharge and settle the Putative Class Actions. The Stipulation of Settlement was subject to customary conditions, including approval by the State Court, which will consider the fairness, reasonableness and adequacy of such settlement. On February 18, 2014, the Federal Court entered a final order dismissing the Federal Court Action with prejudice. On February 28, 2014, pursuant to the terms of the Stipulation of Settlement, the plaintiffs in the State Court Action filed an unopposed motion for preliminary approval of class action settlement, conditional certification of class, and approval of notice to be furnished to the class. On March 7, 2014, the State Court entered an order preliminarily approving the Settlement Stipulation, subject to a hearing, scheduled for May 20, 2014. At the hearing on May 20, 2014, the Settlement Stipulation was approved. On July 21, 2014, the appeals period expired and the matter is now closed.
SpartanNash contributes to the Central States multi-employer pension plan based on obligations arising from its collective bargaining agreements in Bellefontaine, Ohio, Lima, Ohio, and Grand Rapids, Michigan covering its distribution center union associates. This plan provides retirement benefits to participants based on their service to contributing employers. The benefits are paid from assets held in trust for that purpose. Trustees are appointed by contributing employers and unions; however, SpartanNash is not a trustee. The trustees typically are responsible for determining the level of benefits to be provided to participants, as well as for such matters as the investment of the assets and the administration of the plan. SpartanNash currently contributes to the Central States, Southeast and Southwest Areas Pension Fund under the terms outlined in the “Primary Schedule” of Central States’ Rehabilitation Plan. This schedule requires varying increases in employer contributions over the previous year’s contribution. Increases are set within the collective bargaining agreement and vary by location.
10
Based on the most recent information available to SpartanNash, management believes that the present value of actuarial accrued liabilities in this multi-employer plan significantly exceeds the value of the assets held in trust to pay benefits. Because SpartanNash is one of a number of employers contributing to this plan, it is difficult to ascertain what the exact amount of the underfunding would be, although management anticipates that SpartanNash’s contributions to this plan will increase each year. Management is not aware of any significant change in funding levels since December 28, 2013.January 3, 2015. To reduce this underfunding, management expects meaningful increases in expense as a result of required incremental multi-employer pension plan contributions in future years. Any adjustment for withdrawal liability will be recorded when it is probable that a liability exists and can be reasonably determined.
Note 87 Associate Retirement Plans
The following table provides the components of net periodic pension and postretirement benefit costs for the 12 weeks and 4016 weeks ended October 4, 2014April 25, 2015 and October 12, 2013:April 19, 2014:
(In thousands) 12 Weeks Ended |
| Cash Balance Pension Plan |
|
| Super Foods |
| |||||||||||||||||||||||||
(In thousands) | April 25, |
|
| April 19, |
| ||||||||||||||||||||||||||
16 Weeks Ended | 2015 |
|
| 2014 |
| ||||||||||||||||||||||||||
| SpartanNash |
|
| Combined SpartanNash |
| * | Cash Balance |
|
| Super Foods |
| ||||||||||||||||||||
|
| October 4, 2014 |
|
| October 12, 2013 |
|
| October 4, 2014 |
| Pension Plan |
|
| Pension Plan |
|
| Pension Plan |
|
| Pension Plan |
| |||||||||||
Interest cost |
| $ | 556 |
|
| $ | 517 |
|
| $ | 461 |
| $ |
| 1,023 |
|
| $ |
| 1,355 |
|
| $ |
| 741 |
|
| $ |
| 614 |
|
Expected return on plan assets |
|
| (867 | ) |
|
| (944 | ) |
|
| (532 | ) |
|
| (1,515 | ) |
|
| (1,865 | ) |
|
| (1,156 | ) |
|
| (709 | ) | |||
Recognized actuarial net loss |
|
| 228 |
|
|
| 300 |
|
|
| — |
|
|
| 255 |
|
|
|
| 305 |
|
|
|
| 305 |
|
|
|
| — |
|
Net periodic income |
| $ | (83 | ) |
| $ | (127 | ) |
| $ | (71 | ) | |||||||||||||||||||
Net periodic benefit | $ |
| (237 | ) |
| $ |
| (205 | ) |
| $ |
| (110 | ) |
| $ |
| (95 | ) | ||||||||||||
Settlement expense |
|
| 261 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
Total expense (income) |
| $ | 178 |
|
| $ | (127 | ) |
| $ | (71 | ) | $ |
| (237 | ) |
| $ |
| (205 | ) |
| $ |
| (110 | ) |
| $ |
| (95 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
(In thousands) | SERP |
|
| Spartan Stores Medical Plan |
| ||||||||||||||||||||||||||
16 Weeks Ended | April 25, |
|
| April 19, |
|
| April 25, |
|
| April 19, |
| ||||||||||||||||||||
| 2015 |
|
| 2014 |
|
| 2015 |
|
| 2014 |
| ||||||||||||||||||||
Service cost | $ |
| — |
|
| $ |
| — |
|
| $ |
| 71 |
|
| $ |
| 57 |
| ||||||||||||
Interest cost |
|
| 10 |
|
|
| 11 |
|
|
| 125 |
|
|
| 121 |
| |||||||||||||||
Amortization of prior service cost |
|
| — |
|
|
| — |
|
|
| (49 | ) |
|
| (48 | ) | |||||||||||||||
Recognized actuarial net loss |
|
| 13 |
|
|
|
| 9 |
|
|
|
| 53 |
|
|
|
| 6 |
| ||||||||||||
Net periodic benefit | $ |
| 23 |
|
| $ |
| 20 |
|
| $ |
| 200 |
|
| $ |
| 136 |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
*The amounts above reflect the combined values of the Cash Balance and Super Foods Pension Plans as of April 19, 2014. | *The amounts above reflect the combined values of the Cash Balance and Super Foods Pension Plans as of April 19, 2014. |
|
(In thousands) 12 Weeks Ended |
| SERP |
|
| Spartan Stores Medical Plan |
| ||||||||||
|
| October 4, 2014 |
|
| October 12, 2013 |
|
| October 4, 2014 |
|
| October 12, 2013 |
| ||||
Service cost |
| $ | — |
|
| $ | — |
|
| $ | 44 |
|
| $ | 59 |
|
Interest cost |
|
| 8 |
|
|
| 8 |
|
|
| 91 |
|
|
| 89 |
|
Amortization of prior service cost |
|
| — |
|
|
| — |
|
|
| (37 | ) |
|
| (13 | ) |
Recognized actuarial net loss |
|
| 7 |
|
|
| 6 |
|
|
| 4 |
|
|
| 41 |
|
Net periodic cost |
| $ | 15 |
|
| $ | 14 |
|
| $ | 102 |
|
| $ | 176 |
|
(In thousands) 40 Weeks Ended |
| Cash Balance Pension Plan |
|
| Super Foods |
| ||||||
|
| October 4, 2014 |
|
| October 12, 2013 |
|
| October 4, 2014 |
| |||
Interest cost |
| $ | 1,854 |
|
| $ | 1,804 |
|
| $ | 1,536 |
|
Expected return on plan assets |
|
| (2,891 | ) |
|
| (3,241 | ) |
|
| (1,773 | ) |
Recognized actuarial net loss |
|
| 761 |
|
|
| 995 |
|
|
| — |
|
Net periodic income |
| $ | (276 | ) |
| $ | (442 | ) |
| $ | (237 | ) |
Settlement expense |
|
| 783 |
|
|
| — |
|
|
| — |
|
Total expense (income) |
| $ | 507 |
|
| $ | (442 | ) |
| $ | (237 | ) |
(In thousands) 40 Weeks Ended |
| SERP |
|
| Spartan Stores Medical Plan |
| ||||||||||
|
| October 4, 2014 |
|
| October 12, 2013 |
|
| October 4, 2014 |
|
| October 12, 2013 |
| ||||
Service cost |
| $ | — |
|
| $ | — |
|
| $ | 144 |
|
| $ | 183 |
|
Interest cost |
|
| 27 |
|
|
| 28 |
|
|
| 303 |
|
|
| 300 |
|
Amortization of prior service cost |
|
| — |
|
|
| — |
|
|
| (122 | ) |
|
| (42 | ) |
Recognized actuarial net loss |
|
| 23 |
|
|
| 22 |
|
|
| 15 |
|
|
| 127 |
|
Net periodic cost |
| $ | 50 |
|
| $ | 50 |
|
| $ | 340 |
|
| $ | 568 |
|
On January 1, 2015, the Super Foods Plan was merged into the Cash Balance Pension Plan which was renamed the SpartanNash Company Pension Plan. The Company made contributions of $2.0 million and $1.1$0.4 million to the Super FoodsSpartanNash Company Pension Plan during the 40 weeks and 1216 weeks ended October 4,April 25, 2015. This quarterly amount was determined based on 2014 respectively, and expectsplan year funding valuation results of the legacy Super Foods Plan. The 2015 valuation results for the merged SpartanNash Company Pension Plan may reduce or even eliminate the need for required quarterly contributions for 2015; therefore the Company does not expect to make any additional contributions totaling $2.3 million for the fiscal year ending January 3, 2015. No contributions were made to the Cash Balance Pension Plan for the 40 weeks ended October 4, 2014, nor are any expected to be made for the fiscal year ending January 3, 2015.2, 2016.
As previously stated in Note 7,6, SpartanNash contributes to the Central States Southeast and Southwest Areas Pension Fund (“Fund”) (EIN 7456500) under the terms of the existing collective bargaining agreements and in the amounts set forth in the related collective bargaining agreements. SpartanNash employer contributions during the 39-week transition fiscal year ended December 28, 2013January 3, 2015 totaled $6.8$12.9 million, which Fund administrators represent is less than 5% of total employer contributions to the Fund. SpartanNash’s employer contributions for the 4016 weeks ended October 4,April 25, 2015 and April 19, 2014 and October 12, 2013 were $10.3$4.2 million and $7.2$4.1 million, respectively. Based on the most recent information available to SpartanNash, management believes that the present value of actuarial accrued liabilities in this multi-employer plan significantly exceeds the value of the assets held in trust to pay benefits. Because SpartanNash is one of a number of employers contributing to this plan, it is difficult to ascertain what the exact amount of the underfunding would be, although management anticipates that SpartanNash’s contributions to this plan will increase each year. On December 13, 2014, Congress passed the Multiemployer Pension Reform Act of 2014 (“MPRA”). The MPRA is intended to address funding shortfalls in both multiemployer pension plans and the Pension Benefit Guaranty Corporation. Because the MPRA is a complex piece of legislation, its effects on the Plan and potential implications for the Company are not known at this time. Any adjustment for withdrawal liability will be recorded when it is probable that a liability exists and can be reasonably determined.
11
Note 98 Other Comprehensive Income or Loss
SpartanNash reports comprehensive income or loss in accordance with ASU 2012-13, “Comprehensive Income,” in the financial statements. Total comprehensive income is defined as all changes in shareholders’ equity during a period, other than those resulting from investments by and distributions to shareholders. Generally, for SpartanNash, total comprehensive income equals net earnings plus or minus adjustments for pension and other postretirement benefits.
While total comprehensive income is the activity in a period and is largely driven by net earnings in that period, accumulated other comprehensive income or loss (“AOCI”) represents the cumulative balance of other comprehensive income, net of tax, as of the balance sheet date. For SpartanNash, AOCI is the cumulative balance related to pension and other postretirement benefits.
During the 1216 week periods ended October 4,April 25, 2015 and April 19, 2014, and October 12, 2013, $0.1$0.2 million and $0.2 million, respectively, was reclassified from AOCI to the Condensed Consolidated Statement of Earnings, of which $0.2$0.3 million and $0.3 million, respectively, increased selling, general and administrative expenses and $0.1 million reduced income taxes in each period. During the 40 week periods ended October 4, 2014 and October 12, 2013, $0.4 million and $0.5$0.1 million, respectively, was reclassified from AOCI to the Condensed Consolidated Statement of Earnings, of which $0.7 million and $0.8 million, respectively, increased selling, general and administrative expenses and $0.3 million reduced income taxes in each period.
Note 109 Income Taxes
The effective income tax rate was 39.0% and 34.5%37.7% for the 1216 weeks ended October 4,April 25, 2015 and April 19, 2014, and October 12, 2013, respectively. For the 40 weeks ended October 4, 2014 and October 12, 2013, the effective income tax rate was 37.6% and 37.3%, respectively. The differences from the Federal statutory rate in the current and prior year periods are primarily due primarily to state income taxes, partially offset by the benefit resulting from the favorable settlement of unrecognized tax liabilities established in the prior year.taxes.
Note 11 Share-Based10 Share Based Compensation
SpartanNash has threetwo shareholder-approved stock incentive plans that provide for the granting of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards, and other stock-based awards to directors, officers and other key associates.
SpartanNash accounts for share-based compensation awards in accordance with the provisions of ASC Topic 718 which requires that share-based payment transactions be accounted for using a fair value method and the related compensation cost recognized in the financial statements over the period that an employee is required to provide services in exchange for the award. SpartanNash recognized share-based compensation expense (net of tax) of $0.6$2.9 million ($0.020.08 per diluted share) and $0.5$2.4 million ($0.020.06 per diluted share) for the 1216 weeks ended October 4,April 25, 2015 and April 19, 2014, and October 12, 2013, respectively, as a component of Operating expenses and Income taxes in the Condensed Consolidated Statements of Earnings. Share-based compensation expense (net of tax) was $3.7 million ($0.10 per diluted share) and $1.8 million ($0.8 per diluted share) for the 40 weeks ended October 4, 2014 and October 12, 2013, respectively.
The following table summarizes activity in the share-based compensation plans for the 4016 weeks ended October 4, 2014:April 25, 2015:
|
| Shares |
|
| Weighted |
|
| Restricted |
|
| Weighted |
| ||||
Outstanding at December 28, 2013 |
|
| 586,766 |
|
| $ | 19.30 |
|
|
| 518,835 |
|
| $ | 23.56 |
|
Granted |
|
| — |
|
|
| — |
|
|
| 317,576 |
|
|
| 22.63 |
|
Exercised/Vested |
|
| (64,120 | ) |
|
| 12.17 |
|
|
| (219,894 | ) |
|
| 16.41 |
|
Cancelled/Forfeited |
|
| (4,131 | ) |
|
| 3.25 |
|
|
| (11,840 | ) |
|
| 21.82 |
|
Outstanding at October 4, 2014 |
|
| 518,515 |
|
| $ | 20.31 |
|
|
| 604,677 |
|
| $ | 23.09 |
|
Vested and expected to vest in the future at October 4, 2014 |
|
| 518,515 |
|
| $ | 20.31 |
|
|
|
|
|
|
|
|
|
Exercisable at October 4, 2014 |
|
| 518,515 |
|
| $ | 20.31 |
|
|
|
|
|
|
|
|
|
| Shares |
|
| Weighted |
|
| Restricted |
|
| Weighted Average |
| |||||
| Under |
|
| Average |
|
| Stock |
|
| Grant-Date |
| |||||
| Options |
|
| Exercise Price |
|
| Awards |
|
| Fair Value |
| |||||
Outstanding at January 3, 2015 |
| 494,483 |
|
| $ |
| 20.61 |
|
|
| 600,653 |
|
|
| 23.08 |
|
Granted |
| — |
|
|
|
| — |
|
|
| 311,622 |
|
|
| 26.55 |
|
Exercised/Vested |
| (91,875 | ) |
|
|
| 21.99 |
|
|
| (112,360 | ) |
|
| 22.68 |
|
Cancelled/Forfeited |
| — |
|
|
|
| — |
|
|
| (6,943 | ) |
|
| 21.40 |
|
Outstanding at April 25, 2015 |
| 402,608 |
|
| $ |
| 20.30 |
|
|
| 792,972 |
|
|
| 24.50 |
|
Vested and expected to vest in the future at April 25, 2015 |
| 402,608 |
|
| $ |
| 20.30 |
|
|
|
|
|
|
|
|
|
Exercisable at April 25, 2015 |
| 402,608 |
|
| $ |
| 20.30 |
|
|
|
|
|
|
|
|
|
There were no stock options granted during the 4016 weeks ended October 4, 2014April 25, 2015 and October 12, 2013.April 19, 2014.
As of October 4, 2014,April 25, 2015, total unrecognized compensation cost related to non-vested share-based awards granted under our stock incentive plans was $5.6$8.0 million for restricted stock. The remaining compensation costs not yet recognized are expected to be recognized over a weighted average period of 2.42.8 years for restricted stock. All compensation costs related to stock options have been recognized.
Note 1211 Discontinued Operations
Results of the discontinued operations are excluded from the accompanying notes to the consolidated financial statements for all periods presented, unless otherwise noted. There were no additional operations that were reclassified to discontinued operations during the 4016 weeks ended October 4, 2014.April 25, 2015.
Note 1312 Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share for continuing operations:
| 16 Weeks Ended |
| |||||||||||||||||||||||
|
| 12 Weeks Ended |
|
| 40 Weeks Ended |
| April 25, |
|
| April 19, |
| ||||||||||||||
(In thousands, except per share amounts) |
| October 4, |
|
| October 12, |
|
| October 4, |
|
| October 12, |
| 2015 |
|
| 2014 |
| ||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Earnings from continuing operations |
| $ | 17,169 |
|
| $ | 6,659 |
|
| $ | 47,083 |
|
| $ | 23,627 |
| $ |
| 10,447 |
|
| $ |
| 12,519 |
|
Adjustment for earnings attributable to participating securities |
|
| (280 | ) |
|
| (155 | ) |
|
| (820 | ) |
|
| (564 | ) |
|
| (189 | ) |
|
|
| (232 | ) |
Earnings from continuing operations used in calculating earnings per share |
| $ | 16,889 |
|
| $ | 6,504 |
|
| $ | 46,263 |
|
| $ | 23,063 |
| $ |
| 10,258 |
|
| $ |
| 12,287 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Weighted average shares outstanding, including participating securities |
|
| 37,717 |
|
|
| 21,876 |
|
|
| 37,678 |
|
|
| 21,820 |
|
|
| 37,689 |
|
|
| 37,600 |
| |
Adjustment for participating securities |
|
| (616 | ) |
|
| (508 | ) |
|
| (656 | ) |
|
| (521 | ) |
|
| (682 | ) |
|
|
| (697 | ) |
Shares used in calculating basic earnings per share |
|
| 37,101 |
|
|
| 21,368 |
|
|
| 37,022 |
|
|
| 21,299 |
|
|
| 37,007 |
|
|
|
| 36,903 |
|
Effect of dilutive stock options |
|
| 61 |
|
|
| 93 |
|
|
| 71 |
|
|
| 88 |
|
|
| 113 |
|
|
|
| 118 |
|
Shares used in calculating diluted earnings per share |
|
| 37,162 |
|
|
| 21,461 |
|
|
| 37,093 |
|
|
| 21,387 |
|
|
| 37,120 |
|
|
|
| 37,021 |
|
Basic earnings per share from continuing operations |
| $ | 0.46 |
|
| $ | 0.30 |
|
| $ | 1.25 |
|
| $ | 1.08 |
| $ |
| 0.28 |
|
| $ |
| 0.33 |
|
Diluted earnings per share from continuing operations |
| $ | 0.45 |
|
| $ | 0.30 |
|
| $ | 1.25 |
|
| $ | 1.08 |
| $ |
| 0.28 |
|
| $ |
| 0.33 |
|
Note 1413 Supplemental Cash Flow Information
Non-cash financing activities include the issuance of restricted stock to employees and directors of $7.2$8.3 million and $3.8$6.9 million for the 4016 weeks ended October 4,April 25, 2015 and April 19, 2014, and October 12, 2013, respectively. Non-cash investing activities include capital expenditures included in accounts payable of $3.6$2.0 million and $1.9$1.8 million for the 4016 weeks ended October 4,April 25, 2015 and April 19, 2014, and October 12, 2013, respectively.
Note 1514 Operating Segment Information
The allocation of intersegment profit and corporate level expenses to the reporting segments was historically performed for the legacy Spartan Stores operations and the legacy Nash-Finch Company operations using methodologies consistent with Spartan Stores’ and Nash-Finch Company’s respective historical practices. As previously disclosed, subsequent to the merger management commenced an evaluation of potential methodologies for allocating intersegment profit and corporate level expenses to the reporting segments to determine the most appropriate manner for the newly merged operations. During the third quarter of fiscal 2014, management completed this evaluation. The new allocation methodology was applied in the third quarter of fiscal year 2014 and reflects the manner in which the business is now managed and how management allocates resources and assesses performance. In accordance with generally accepted accounting principles, 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. There was no impact to consolidated financial results.
The following tables set forth information about SpartanNash by operating segment under the new methodologies:segment:
(In thousands) |
| Military |
|
| Food |
|
| Retail |
|
| Total |
| ||||
12 Week Period Ended October 4, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
| $ | 523,553 |
|
| $ | 764,288 |
|
| $ | 521,730 |
|
| $ | 1,809,571 |
|
Inter-segment sales |
|
| — |
|
|
| 223,809 |
|
|
| — |
|
|
| 223,809 |
|
Merger transaction and integration expenses |
|
| 3 |
|
|
| 1,375 |
|
|
| 1 |
|
|
| 1,379 |
|
Depreciation and amortization |
|
| 2,751 |
|
|
| 6,931 |
|
|
| 10,269 |
|
|
| 19,951 |
|
Operating earnings |
|
| 5,651 |
|
|
| 13,834 |
|
|
| 14,127 |
|
|
| 33,612 |
|
Capital expenditures |
|
| 1,120 |
|
|
| 9,329 |
|
|
| 9,542 |
|
|
| 19,991 |
|
(In thousands) |
| Food |
|
| Retail |
|
| Total |
| ||||||||
12 Week Period Ended October 12, 2013 |
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net sales to external customers |
| $ | 270,195 |
|
| $ | 359,893 |
|
| $ | 630,088 |
| |||||
Inter-segment sales |
|
| 150,561 |
|
|
| — |
|
|
| 150,561 |
| |||||
Merger transaction and integration expenses |
|
| 4,634 |
|
|
| — |
|
|
| 4,634 |
| |||||
Depreciation and amortization |
|
| 1,529 |
|
|
| 8,179 |
|
|
| 9,708 |
| |||||
Operating earnings |
|
| 1,366 |
|
|
| 11,006 |
|
|
| 12,372 |
| |||||
Capital expenditures |
|
| 3,059 |
|
|
| 6,199 |
|
|
| 9,258 |
| |||||
(In thousands) |
| Military |
|
|
Food |
|
| Retail |
|
| Total |
| |||||
40 Week Period Ended October 4, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net sales to external customers |
| $ | 1,710,122 |
|
| $ | 2,503,216 |
|
| $ | 1,740,135 |
|
| $ | 5,953,473 |
| |
Inter-segment sales |
|
| — |
|
|
| 751,777 |
|
|
| — |
|
|
| 751,777 |
| |
Merger transaction and integration expenses |
|
| 27 |
|
|
| 8,097 |
|
|
| 4 |
|
|
| 8,128 |
| |
Depreciation and amortization |
|
| 8,580 |
|
|
| 23,105 |
|
|
| 35,236 |
|
|
| 66,921 |
| |
Operating earnings |
|
| 15,956 |
|
|
| 38,713 |
|
|
| 39,170 |
|
|
| 93,839 |
| |
Capital expenditures |
|
| 13,968 |
|
|
| 19,319 |
|
|
| 24,324 |
|
|
| 57,611 |
| |
(In thousands) |
|
Food |
|
| Retail |
|
| Total |
| ||||||||
40 Week Period Ended October 12, 2013 |
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net sales to external customers |
| $ | 878,791 |
|
| $ | 1,182,700 |
|
| $ | 2,061,491 |
| |||||
Inter-segment sales |
|
| 493,936 |
|
|
| — |
|
|
| 493,936 |
| |||||
Merger transaction and integration expenses |
|
| 7,011 |
|
|
| — |
|
|
| 7,011 |
| |||||
Depreciation and amortization |
|
| 5,225 |
|
|
| 26,701 |
|
|
| 31,926 |
| |||||
Operating earnings |
|
| 15,519 |
|
|
| 33,111 |
|
|
| 48,630 |
| |||||
Capital expenditures |
|
| 8,528 |
|
|
| 20,256 |
|
|
| 28,784 |
|
12 Week Period Ended July 12, 2014 (second quarter)
(In thousands) |
| Military |
|
| Food |
|
| Retail |
|
| Total |
| ||||
As currently reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
| $ | 502,402 |
|
| $ | 767,926 |
|
| $ | 539,847 |
|
| $ | 1,810,175 |
|
Inter-segment sales |
|
| — |
|
|
| 231,622 |
|
|
| — |
|
|
| 231,622 |
|
Merger transaction and integration expenses |
|
| 24 |
|
|
| 2,554 |
|
|
| 3 |
|
|
| 2,581 |
|
Depreciation and amortization |
|
| 1,552 |
|
|
| 7,155 |
|
|
| 10,710 |
|
|
| 19,417 |
|
Operating earnings |
|
| 5,884 |
|
|
| 10,670 |
|
|
| 16,095 |
|
|
| 32,649 |
|
Capital expenditures |
|
| 2,653 |
|
|
| 3,423 |
|
|
| 8,705 |
|
|
| 14,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) | Military |
|
| Food Distribution |
|
| Retail |
|
| Total |
| ||||
16 Week Period Ended April 25, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers | $ | 699,394 |
|
| $ | 986,435 |
|
| $ | 626,854 |
|
| $ | 2,312,683 |
|
Inter-segment sales |
| — |
|
|
| 281,275 |
|
|
| — |
|
|
| 281,275 |
|
Merger integration and acquisition expenses |
| — |
|
|
| 2,187 |
|
|
| 497 |
|
|
| 2,684 |
|
Depreciation and amortization |
| 3,733 |
|
|
| 8,536 |
|
|
| 13,516 |
|
|
| 25,785 |
|
Operating earnings |
| 6,158 |
|
|
| 20,249 |
|
|
| (2,554 | ) |
|
| 23,853 |
|
Capital expenditures |
| 584 |
|
|
| 3,553 |
|
|
| 8,587 |
|
|
| 12,724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) | Military |
|
| Food Distribution |
|
| Retail |
|
| Total |
| ||||
16 Week Period Ended April 19, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers | $ | 684,167 |
|
| $ | 971,002 |
|
| $ | 678,558 |
|
| $ | 2,333,727 |
|
Inter-segment sales |
| — |
|
|
| 296,346 |
|
|
| — |
|
|
| 296,346 |
|
Merger integration and acquisition expenses |
| — |
|
|
| 4,168 |
|
|
| — |
|
|
| 4,168 |
|
Depreciation and amortization |
| 4,277 |
|
|
| 9,019 |
|
|
| 14,257 |
|
|
| 27,553 |
|
Operating earnings |
| 4,421 |
|
|
| 14,209 |
|
|
| 8,948 |
|
|
| 27,578 |
|
Capital expenditures |
| 10,195 |
|
|
| 6,567 |
|
|
| 6,077 |
|
|
| 22,839 |
|
|
| Military |
|
| Food |
|
| Retail |
|
| Total |
| ||||
Allocation methodology changes applied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Inter-segment sales |
|
| — |
|
|
| (12,244 | ) |
|
| — |
|
|
| (12,244 | ) |
Merger transaction and integration expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Depreciation and amortization |
|
| 66 |
|
|
| (550 | ) |
|
| 484 |
|
|
| — |
|
Operating earnings |
|
| (847 | ) |
|
| (458 | ) |
|
| 1,305 |
|
|
| — |
|
Capital expenditures |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
| April 25, 2015 |
|
| January 3, 2015 |
| ||
Total Assets |
|
|
|
|
|
|
|
Military | $ | 462,978 |
|
| $ | 435,647 |
|
Food Distribution |
| 742,732 |
|
|
| 763,914 |
|
Retail |
| 705,343 |
|
|
| 727,979 |
|
Discontinued operations |
| 4,742 |
|
|
| 4,742 |
|
Total | $ | 1,915,795 |
|
| $ | 1,932,282 |
|
|
| Military |
|
| Food |
|
| Retail |
|
| Total |
| ||||
As originally reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
| $ | 502,402 |
|
| $ | 767,926 |
|
| $ | 539,847 |
|
| $ | 1,810,175 |
|
Inter-segment sales |
|
| — |
|
|
| 243,866 |
|
|
| — |
|
|
| 243,866 |
|
Merger transaction and integration expenses |
|
| 24 |
|
|
| 2,554 |
|
|
| 3 |
|
|
| 2,581 |
|
Depreciation and amortization |
|
| 1,486 |
|
|
| 7,705 |
|
|
| 10,226 |
|
|
| 19,417 |
|
Operating earnings |
|
| 6,731 |
|
|
| 11,128 |
|
|
| 14,790 |
|
|
| 32,649 |
|
Capital expenditures |
|
| 2,653 |
|
|
| 3,423 |
|
|
| 8,705 |
|
|
| 14,781 |
|
12 Week Period Ended July 20, 2013 (second quarter)
(In thousands) |
| Food |
|
| Retail |
|
| Total |
| |||
As currently reported |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
| $ | 271,890 |
|
| $ | 379,235 |
|
| $ | 651,125 |
|
Inter-segment sales |
|
| 153,126 |
|
|
| — |
|
|
| 153,126 |
|
Merger transaction and integration expenses |
|
| 2,377 |
|
|
| — |
|
|
| 2,377 |
|
Depreciation and amortization |
|
| 1,565 |
|
|
| 7,927 |
|
|
| 9,492 |
|
Operating earnings |
|
| 1,100 |
|
|
| 14,066 |
|
|
| 15,166 |
|
Capital expenditures |
|
| 2,562 |
|
|
| 7,237 |
|
|
| 9,799 |
|
|
| Food |
|
| Retail |
|
| Total |
| |||
Allocation methodology changes applied |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
| $ | — |
|
| $ | — |
|
| $ | — |
|
Inter-segment sales |
|
| (7,083 | ) |
|
| — |
|
|
| (7,083 | ) |
Merger transaction and integration expenses |
|
| — |
|
|
| — |
|
|
| — |
|
Depreciation and amortization |
|
| (522 | ) |
|
| 522 |
|
|
| — |
|
Operating earnings |
|
| (5,665 | ) |
|
| 5,665 |
|
|
| — |
|
Capital expenditures |
|
| — |
|
|
| — |
|
|
| — |
|
|
| Food |
|
| Retail |
|
| Total |
| |||
As originally reported |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
| $ | 271,890 |
|
| $ | 379,235 |
|
| $ | 651,125 |
|
Inter-segment sales |
|
| 160,209 |
|
|
| — |
|
|
| 160,209 |
|
Merger transaction and integration expenses |
|
| 2,377 |
|
|
| — |
|
|
| 2,377 |
|
Depreciation and amortization |
|
| 2,087 |
|
|
| 7,405 |
|
|
| 9,492 |
|
Operating earnings |
|
| 6,765 |
|
|
| 8,401 |
|
|
| 15,166 |
|
Capital expenditures |
|
| 2,562 |
|
|
| 7,237 |
|
|
| 9,799 |
|
16 Week Period Ended April 19, 2014 (first quarter)
(In thousands) |
| Military |
|
| Food |
|
| Retail |
|
| Total |
| ||||
As currently reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
| $ | 684,167 |
|
| $ | 971,002 |
|
| $ | 678,558 |
|
| $ | 2,333,727 |
|
Inter-segment sales |
|
| — |
|
|
| 296,346 |
|
|
| — |
|
|
| 296,346 |
|
Merger transaction and integration expenses |
|
| — |
|
|
| 4,168 |
|
|
| — |
|
|
| 4,168 |
|
Depreciation and amortization |
|
| 4,277 |
|
|
| 9,019 |
|
|
| 14,257 |
|
|
| 27,553 |
|
Operating earnings |
|
| 4,421 |
|
|
| 14,209 |
|
|
| 8,948 |
|
|
| 27,578 |
|
Capital expenditures |
|
| 10,195 |
|
|
| 6,567 |
|
|
| 6,077 |
|
|
| 22,839 |
|
|
| Military |
|
| Food |
|
| Retail |
|
| Total |
| ||||
Allocation methodology changes applied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Inter-segment sales |
|
| — |
|
|
| (15,470 | ) |
|
| — |
|
|
| (15,470 | ) |
Merger transaction and integration expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Depreciation and amortization |
|
| 84 |
|
|
| (709 | ) |
|
| 625 |
|
|
| — |
|
Operating earnings |
|
| (1,140 | ) |
|
| (152 | ) |
|
| 1,292 |
|
|
| — |
|
Capital expenditures |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| Military |
|
| Food |
|
| Retail |
|
| Total |
| ||||
As originally reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
| $ | 684,167 |
|
| $ | 971,002 |
|
| $ | 678,558 |
|
| $ | 2,333,727 |
|
Inter-segment sales |
|
| — |
|
|
| 311,816 |
|
|
| — |
|
|
| 311,816 |
|
Merger transaction and integration expenses |
|
| — |
|
|
| 4,168 |
|
|
| — |
|
|
| 4,168 |
|
Depreciation and amortization |
|
| 4,193 |
|
|
| 9,728 |
|
|
| 13,632 |
|
|
| 27,553 |
|
Operating earnings |
|
| 5,561 |
|
|
| 14,361 |
|
|
| 7,656 |
|
|
| 27,578 |
|
Capital expenditures |
|
| 10,195 |
|
|
| 6,567 |
|
|
| 6,077 |
|
|
| 22,839 |
|
16 Week Period Ended April 27, 2013 (first quarter)
(In thousands) |
| Food |
|
| Retail |
|
| Total |
| |||
As currently reported |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
| $ | 336,706 |
|
| $ | 443,572 |
|
| $ | 780,278 |
|
Inter-segment sales |
|
| 190,249 |
|
|
| — |
|
|
| 190,249 |
|
Depreciation and amortization |
|
| 2,131 |
|
|
| 10,595 |
|
|
| 12,726 |
|
Operating earnings |
|
| 13,053 |
|
|
| 8,039 |
|
|
| 21,092 |
|
Capital expenditures |
|
| 2,907 |
|
|
| 6,820 |
|
|
| 9,727 |
|
|
| Food |
|
| Retail |
|
| Total |
| |||
Allocation methodology changes applied |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
| $ | — |
|
| $ | — |
|
| $ | — |
|
Inter-segment sales |
|
| (8,624 | ) |
|
| — |
|
|
| (8,624 | ) |
Depreciation and amortization |
|
| (685 | ) |
|
| 685 |
|
|
| — |
|
Operating earnings |
|
| (6,268 | ) |
|
| 6,268 |
|
|
| — |
|
Capital expenditures |
|
| — |
|
|
| — |
|
|
| — |
|
|
| Food |
|
| Retail |
|
| Total |
| |||
As originally reported |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
| $ | 336,706 |
|
| $ | 443,572 |
|
| $ | 780,278 |
|
Inter-segment sales |
|
| 198,873 |
|
|
| — |
|
|
| 198,873 |
|
Depreciation and amortization |
|
| 2,816 |
|
|
| 9,910 |
|
|
| 12,726 |
|
Operating earnings |
|
| 19,321 |
|
|
| 1,771 |
|
|
| 21,092 |
|
Capital expenditures |
|
| 2,907 |
|
|
| 6,820 |
|
|
| 9,727 |
|
(In thousands) |
| Military |
|
| Food |
|
| Retail |
|
| Total |
| ||||
11 Week Period Ended December 28, 2013 (fourth quarter) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers |
| $ | 248,642 |
|
| $ | 473,900 |
|
| $ | 406,005 |
|
| $ | 1,128,547 |
|
Inter-segment sales |
|
| — |
|
|
| 179,708 |
|
|
| — |
|
|
| 179,708 |
|
Merger transaction and integration expenses |
|
| — |
|
|
| 13,985 |
|
|
| — |
|
|
| 13,985 |
|
Depreciation and amortization |
|
| 1,412 |
|
|
| 3,972 |
|
|
| 9,355 |
|
|
| 14,739 |
|
Operating earnings |
|
| 1,901 |
|
|
| (4,132 | ) |
|
| (10,846 | ) |
|
| (13,077 | ) |
Capital expenditures |
|
| 2,246 |
|
|
| 2,202 |
|
|
| 7,009 |
|
|
| 11,457 |
|
|
| October 4, 2014 |
|
| December 28, |
| ||
Total Assets |
|
|
|
|
|
|
|
|
Military |
| $ | 480,599 |
|
| $ | 451,518 |
|
Food Distribution |
|
| 810,725 |
|
|
| 805,468 |
|
Retail |
|
| 695,192 |
|
|
| 721,898 |
|
Discontinued operations |
|
| 4,753 |
|
|
| 4,767 |
|
Total |
| $ | 1,991,269 |
|
| $ | 1,983,651 |
|
|
|
The following table presents sales by type of similar product and services:
|
| 12 Weeks Ended |
|
| 40 Weeks Ended |
| 16 Weeks Ended |
| |||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) |
| October 4, 2014 |
|
| October 12, 2013 |
|
| October 4, 2014 |
|
| October 12, 2013 |
| April 25, 2015 |
|
| April 19, 2014 |
| ||||||||||||||||||||||||||||||
Non-perishables (1) |
| $ | 1,146,410 |
|
|
| 63.4 | % |
| $ | 312,038 |
|
|
| 49.5 | % |
| $ | 3,753,373 |
|
|
| 63.1 | % |
| $ | 1,012,545 |
|
|
| 49.1 | % | $ | 1,472,711 |
|
|
| 63.7 | % |
| $ | 1,475,060 |
|
|
| 63.2 | % |
Perishables (2) |
|
| 554,970 |
|
|
| 30.7 |
|
|
| 223,841 |
|
|
| 35.5 |
|
|
| 1,840,802 |
|
|
| 30.9 |
|
|
| 740,582 |
|
|
| 35.9 |
|
| 713,034 |
|
|
| 30.8 | % |
|
| 719,004 |
|
|
| 30.8 | % |
Pharmacy |
|
| 65,733 |
|
|
| 3.6 |
|
|
| 50,909 |
|
|
| 8.1 |
|
|
| 215,459 |
|
|
| 3.6 |
|
|
| 163,242 |
|
|
| 7.9 |
|
| 92,039 |
|
|
| 4.0 | % |
|
| 84,693 |
|
|
| 3.6 | % |
Fuel |
|
| 42,458 |
|
|
| 2.3 |
|
|
| 43,300 |
|
|
| 6.9 |
|
|
| 143,839 |
|
|
| 2.4 |
|
|
| 145,122 |
|
|
| 7.1 |
|
| 34,899 |
|
|
| 1.5 | % |
|
| 54,970 |
|
|
| 2.4 | % |
Consolidated net sales |
| $ | 1,809,571 |
|
|
| 100 | % |
| $ | 630,088 |
|
|
| 100 | % |
| $ | 5,953,473 |
|
|
| 100 | % |
| $ | 2,061,491 |
|
|
| 100 | % | $ | 2,312,683 |
|
|
| 100.0 | % |
| $ | 2,333,727 |
|
|
| 100.0 | % |
(1) | Consists primarily of general merchandise, grocery, beverages, snacks, tobacco products and frozen foods. |
(2) | Consists primarily of produce, dairy, meat, bakery, deli, floral and seafood. |
Note 15 Subsequent Event
On April 27, 2015, the Company entered into an asset purchase agreement with Dan’s Supermarket Inc., a six-store chain serving Bismarck and Mandan, North Dakota. The transaction is expected to close in June, 2015.
14
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Executive Overview
SpartanNash Company is headquartered in Grand Rapids, Michigan. Our business consists of three primary operating segments: Military, Food Distribution and Retail. We are a leading regionalmulti-regional grocery distributor and grocery retailer operating principally in the Midwest, and the largest distributor, by revenue, of grocery products to military commissaries and exchanges in the United States.
Our Military segment contracts with manufacturers to distribute a wide variety of grocery products primarily to military commissaries and exchanges located in the United States, the District of Columbia, Europe, Puerto Rico, Cuba, the Azores, Egypt, Bahrain and Bahrain.Honduras. We have over 3040 years of experience acting as a distributor to U.S. military commissaries and exchanges.
Our Food Distribution segment provides a wide variety of nationally branded and private label grocery products and perishable food products, including dry groceries, produce, dairy products, meat, deli, bakery, frozen food, seafood, floral products, general merchandise, pharmacy and health and beauty care from 1312 distribution centers to approximately 2,100 independent retail locations and 165159 corporate-owned retail stores located in 3144 states, primarily in the Midwest, Great Lakes, and Southeast regions of the United States. We also service a large national retailer with certain product classes. Food Distribution sales are made to more than 11,500 retail locations for this customer.
Our Retail segment operates 165159 supermarkets in the Midwest and Great Lakes which operate primarily under the banners of Family Fare Supermarkets, No Frills, Bag ‘N Save, Family Fresh Markets, D&W Fresh Markets, Sun Mart and Econofoods. Our retail supermarkets typically offer dry groceries, produce, dairy products, meat, frozen food, seafood, floral products, general merchandise, beverages, tobacco products, health and beauty care products, delicatessen items and bakery goods. We offer pharmacy services in 79 of our supermarkets and we operate 30 fuel centers. Our retail supermarkets have a “neighborhood market” focus to distinguish them from supercenters and limited assortment stores.
Typically, all fiscal quarters are 12 weeks, except for our first quarter, which is 16 weeks and will generally include the Easter holiday. Our fourth quarter includes the Thanksgiving and Christmas holidays. Fiscal 2014 will bewas comprised of 53 weeks. As a result, the fourth quarter of fiscal 2014 will consistconsisted of 13 weeks.
The following table sets forth items from our Condensed Consolidated Statements of Earnings as a percentage of net sales and the year-to-year percentage change in the dollar amounts:
|
| Percentage of Net Sales |
|
| Percentage Change |
| Percentage of Net Sales |
|
|
|
|
| |||||||||||||||||||||||
|
| 12 Weeks Ended |
|
| 40 Weeks Ended |
|
| 12 Weeks |
|
| 40 Weeks |
| April 25, |
|
| April 19, |
|
|
|
|
| ||||||||||||||
(Unaudited) |
| October 4, |
|
| October 12, |
|
| October 4, |
|
| October 12, |
|
| October 4, |
|
| October 4, |
| 2015 |
|
| 2014 |
|
| Percentage Change |
| |||||||||
Net sales |
|
| 100.0 |
|
|
| 100.0 |
|
|
| 100.0 |
|
|
| 100.0 |
|
|
| 187.2 |
|
|
| 188.8 |
|
| 100.0 |
|
|
| 100.0 |
|
|
| (0.9 | ) |
Gross profit |
|
| 14.4 |
|
|
| 20.7 |
|
|
| 14.7 |
|
|
| 21.1 |
|
|
| 100.4 |
|
|
| 100.6 |
|
| 14.5 |
|
|
| 14.9 |
|
|
| (3.2 | ) |
Merger integration and acquisition |
| 0.1 |
|
|
| 0.2 |
|
|
| (35.6 | ) | ||||||||||||||||||||||||
Selling, general and administrative expenses |
|
| 12.5 | * |
|
| 18.0 |
|
|
| 13.0 |
|
|
| 18.3 |
|
|
| 100.7 |
|
|
| 104.4 |
|
| 13.1 |
|
|
| 13.5 |
|
|
| (4.2 | ) |
Merger transaction and integration expenses |
|
| 0.1 |
|
|
| 0.7 |
|
|
| 0.1 |
|
|
| 0.3 |
|
|
| (70.2 | ) |
|
| 15.9 |
| |||||||||||
Restructuring and asset impairment charges (gains) |
|
| (0.1 | ) |
|
| - |
|
|
| - |
|
|
| 0.1 |
|
|
| ** |
|
|
| (103.0 | ) | |||||||||||
Restructuring and asset impairment |
| 0.3 |
|
|
| 0.0 |
|
| ** |
| |||||||||||||||||||||||||
Operating earnings |
|
| 1.9 |
|
|
| 2.0 |
|
|
| 1.6 |
|
|
| 2.4 |
|
|
| 171.7 |
|
|
| 93.0 |
|
| 1.0 |
|
|
| 1.2 |
|
|
| (13.5 | ) |
Other income and expenses |
|
| 0.3 |
|
|
| 0.4 | * |
|
| 0.3 |
|
|
| 0.6 | * |
|
| 148.5 |
|
|
| 68.2 |
|
| 0.3 |
|
|
| 0.3 |
|
|
| (10.1 | ) |
Earnings before income taxes and discontinued operations |
|
| 1.6 |
|
|
| 1.6 |
|
|
| 1.3 |
|
|
| 1.8 |
|
|
| 176.7 |
|
|
| 100.2 |
|
| 0.7 |
|
|
| 0.9 |
|
|
| (14.8 | ) |
Income taxes |
|
| 0.7 | * |
|
| 0.6 |
|
|
| 0.5 |
|
|
| 0.7 |
|
|
| 212.5 |
|
|
| 101.7 |
|
| 0.2 |
| * |
| 0.4 |
| * |
| (11.8 | ) |
Earnings from continuing operations |
|
| 0.9 |
|
|
| 1.0 | * |
|
| 0.8 |
|
|
| 1.1 |
|
|
| 157.8 |
|
|
| 99.3 |
|
| 0.5 |
|
|
| 0.5 |
|
|
| (16.6 | ) |
Loss from discontinued operations, net of taxes |
|
| (0.0 | ) |
|
| (0.0 | ) |
|
| (0.0 | ) |
|
| (0.0 | ) |
|
| (17.0 | ) |
|
| (16.4 | ) |
| (0.1 | ) | * |
| (0.0 | ) |
|
| (42.6 | ) |
Net earnings |
|
| 0.9 |
|
|
| 1.0 |
|
|
| 0.8 |
|
|
| 1.1 |
|
|
| 160.2 |
|
|
| 101.4 |
|
| 0.4 |
|
|
| 0.5 |
|
|
| (16.1 | ) |
* | Difference due to rounding |
** | Not meaningful |
15
Adjusted Operating Earnings
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 all 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.
Following is an unaudited reconciliation of Operatingoperating earnings to adjusted operating earnings for the twelve and fortysixteen weeks ended October 4, 2014April 25, 2015 and October 12, 2013.April 19, 2014.
| 12 Weeks Ended |
|
| 40 Weeks Ended |
| |||||||||||||||||
| October 4, 2014 |
|
| October 12, 2013 |
|
| October 4, 2014 |
|
| October 12, 2013 |
| |||||||||||
(Unaudited) | 16 Weeks Ended |
| ||||||||||||||||||||
(In thousands) | April 25, 2015 |
|
| April 19, 2014 |
| |||||||||||||||||
Operating earnings | $ | 33,612 |
|
| $ | 12,372 |
|
| $ | 93,839 |
|
| $ | 48,630 |
| $ | 23,853 |
|
| $ | 27,578 |
|
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 |
| |||||||
Adjustments: |
|
|
|
|
|
|
| |||||||||||||||
Merger integration and acquisition |
| 2,684 |
|
|
| 4,168 |
| |||||||||||||||
Restructuring and asset impairment |
| 7,338 |
|
|
| 127 |
| |||||||||||||||
Adjusted operating earnings | $ | 33,719 |
|
| $ | 17,006 |
|
| $ | 101,900 |
|
| $ | 57,861 |
| $ | 33,875 |
|
| $ | 31,873 |
|
Reconciliation of operating earnings to adjusted operating earnings by segment: |
Reconciliation of operating earnings to adjusted operating earnings by segment: |
| Reconciliation of operating earnings to adjusted operating earnings by segment: |
| ||||||||||||||||||
Military: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings | $ | 5,651 |
|
| $ | - |
|
| $ | 15,956 |
|
| $ | - |
| $ | 6,158 |
|
| $ | 4,421 |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Expenses related to merger transaction and integration |
| 3 |
|
|
| - |
|
|
| 27 |
|
|
| - |
| |||||||
Adjusted operating earnings | $ | 5,654 |
|
| $ | - |
|
| $ | 15,983 |
|
| $ | - |
| $ | 6,158 |
|
| $ | 4,421 |
|
Food Distribution: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings | $ | 13,834 |
|
| $ | 1,366 |
|
| $ | 38,713 |
|
| $ | 15,519 |
| $ | 20,249 |
|
| $ | 14,209 |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Asset impairment and restructuring charges |
| - |
|
|
| - |
|
|
| 1,029 |
|
|
| - |
| |||||||
Expenses related to merger transaction and integration |
| 1,375 |
|
|
| 4,634 |
|
|
| 8,097 |
|
|
| 7,011 |
| |||||||
Adjustments: |
|
|
|
|
|
|
| |||||||||||||||
Merger integration and acquisition |
| 2,187 |
|
|
| 4,168 |
| |||||||||||||||
Restructuring (gains) charges and asset impairment |
| (281 | ) |
|
| 722 |
| |||||||||||||||
Adjusted operating earnings | $ | 15,209 |
|
| $ | 6,000 |
|
| $ | 47,839 |
|
| $ | 22,530 |
| $ | 22,155 |
|
| $ | 19,099 |
|
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 |
|
|
| - |
| |||||||
Operating (loss) earnings | $ | (2,554 | ) |
| $ | 8,948 |
| |||||||||||||||
Adjustments: |
|
|
|
|
|
|
| |||||||||||||||
Merger integration and acquisition |
| 497 |
|
|
| — |
| |||||||||||||||
Restructuring charges (gains) and asset impairment |
| 7,619 |
|
|
| (595 | ) | |||||||||||||||
Adjusted operating earnings | $ | 12,856 |
|
| $ | 11,006 |
|
| $ | 38,078 |
|
| $ | 35,331 |
| $ | 5,562 |
|
| $ | 8,353 |
|
Adjusted earnings from Continuing Operations
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.
16
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 all 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.
Following is aan unaudited reconciliation of Earningsearnings from continuing operations to adjusted earnings from continuing operations for the twelve and fortysixteen weeks ended October 4, 2014April 25, 2015 and October 12, 2013.April 19, 2014.
| 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 |
|
|
|
|
|
|
|
|
| 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 |
|
|
|
|
|
|
|
|
| 16 Weeks Ended |
|
| |||||||||||||
| April 25, 2015 |
|
| April 19, 2014 |
|
| ||||||||||
|
|
|
|
| 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 | $ | 10,447 |
|
| $ | 0.28 |
|
| $ | 12,519 |
|
| $ | 0.33 |
|
|
Adjustments, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger integration and acquisition |
| 1,638 |
|
|
| 0.04 |
|
|
| 2,596 |
|
|
| 0.07 |
|
|
Restructuring and asset impairment charges |
| 4,478 |
|
|
| 0.12 |
|
|
| 79 |
|
|
| 0.00 |
|
|
Adjusted earnings from continuing operations | $ | 16,563 |
|
| $ | 0.44 |
|
| $ | 15,194 |
|
| $ | 0.40 |
|
|
Adjusted EBITDA
Consolidated adjustedAdjusted EBITDA is a non-GAAP operating financial measure that we define as netoperating earnings from continuing operations plus depreciation and amortization, and other non-cash items including imputed interest, non-cash stockdeferred (stock) compensation, the LIFO provision, as well as adjustments for unusual items that do not reflect the ongoing operating activities of SpartanNashthe Company 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.locations.
We believe that adjusted EBITDA provides a meaningful representation of our operating performance for SpartanNashthe Company 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 all 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.
17
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.
Following is aan unaudited reconciliation of netoperating earnings to Adjustedadjusted EBITDA for the twelve and fortysixteen weeks ended October 4, 2014April 25, 2015 and October 12, 2013.April 19, 2014.
| 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 |
|
(Unaudited) | 16 Weeks Ended |
| |||||
(In thousands) | April 25, 2015 |
|
| April 19, 2014 |
| ||
Operating earnings | $ | 23,853 |
|
| $ | 27,578 |
|
Adjustments: |
|
|
|
|
|
|
|
LIFO expense |
| 1,723 |
|
|
| 1,972 |
|
Depreciation and amortization |
| 25,785 |
|
|
| 27,553 |
|
Restructuring and asset impairment charges |
| 7,338 |
|
|
| 127 |
|
Merger integration and acquisition |
| 2,684 |
|
|
| 4,168 |
|
Stock based compensation |
| 4,753 |
|
|
| 3,929 |
|
Other non-cash (gains) |
| (247 | ) |
|
| (415 | ) |
Adjusted EBITDA | $ | 65,889 |
|
| $ | 64,912 |
|
Reconciliation of operating earnings to adjusted EBITDA by segment:
Military: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings | $ | 5,651 |
|
| $ | - |
|
| $ | 15,956 |
|
| $ | - |
| $ | 6,158 |
|
| $ | 4,421 |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Adjustments: |
|
|
|
|
|
|
| |||||||||||||||
LIFO expense |
| 359 |
|
|
| - |
|
|
| 1,192 |
|
|
| - |
|
| 388 |
|
|
| 471 |
|
Depreciation and amortization |
| 2,751 |
|
|
| - |
|
|
| 8,580 |
|
|
| - |
|
| 3,733 |
|
|
| 4,277 |
|
Expenses related to merger transaction and integration |
| 3 |
|
|
| - |
|
|
| 27 |
|
|
| - |
| |||||||
Non-cash stock compensation and other |
| 4 |
|
|
| - |
|
|
| (55 | ) |
|
| - |
| |||||||
Stock based compensation |
| 704 |
|
|
| 310 |
| |||||||||||||||
Other non-cash charges |
| 97 |
|
|
| 5 |
| |||||||||||||||
Adjusted EBITDA | $ | 8,768 |
|
| $ | - |
|
| $ | 25,700 |
|
| $ | - |
| $ | 11,080 |
|
| $ | 9,484 |
|
Food Distribution: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings | $ | 13,834 |
|
| $ | 1,366 |
|
| $ | 38,713 |
|
| $ | 15,519 |
| $ | 20,249 |
|
| $ | 14,209 |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
LIFO expense (income) |
| 794 |
|
|
| (5 | ) |
|
| 2,551 |
|
|
| (199 | ) | |||||||
Adjustments: |
|
|
|
|
|
|
| |||||||||||||||
LIFO expense |
| 890 |
|
|
| 962 |
| |||||||||||||||
Depreciation and amortization |
| 6,931 |
|
|
| 1,573 |
|
|
| 23,105 |
|
|
| 5,269 |
|
| 8,536 |
|
|
| 9,019 |
|
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 |
| |||||||
Restructuring (gains) charges and asset impairment |
| (281 | ) |
|
| 722 |
| |||||||||||||||
Merger integration and acquisition |
| 2,187 |
|
|
| 4,168 |
| |||||||||||||||
Stock based compensation |
| 2,230 |
|
|
| 1,911 |
| |||||||||||||||
Other non-cash charges (gains) |
| 35 |
|
|
| (78 | ) | |||||||||||||||
Adjusted EBITDA | $ | 23,401 |
|
| $ | 7,902 |
|
| $ | 76,971 |
|
| $ | 28,884 |
| $ | 33,846 |
|
| $ | 30,913 |
|
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings | $ | 14,127 |
|
| $ | 11,006 |
|
| $ | 39,170 |
|
| $ | 33,111 |
| |||||||
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Operating (loss) earnings | $ | (2,554 | ) |
| $ | 8,948 |
| |||||||||||||||
Adjustments: |
|
|
|
|
|
|
| |||||||||||||||
LIFO expense |
| 397 |
|
|
| 172 |
|
|
| 1,334 |
|
|
| 612 |
|
| 445 |
|
|
| 539 |
|
Depreciation and amortization |
| 10,269 |
|
|
| 8,135 |
|
|
| 35,236 |
|
|
| 26,657 |
|
| 13,516 |
|
|
| 14,257 |
|
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 |
| |||||||
Restructuring charges (gains) and asset impairment |
| 7,619 |
|
|
| (595 | ) | |||||||||||||||
Merger integration and acquisition |
| 497 |
|
|
| — |
| |||||||||||||||
Stock based compensation |
| 1,819 |
|
|
| 1,708 |
| |||||||||||||||
Other non-cash (gains) |
| (379 | ) |
|
| (342 | ) | |||||||||||||||
Adjusted EBITDA | $ | 23,742 |
|
| $ | 19,556 |
|
| $ | 76,432 |
|
| $ | 63,601 |
| $ | 20,963 |
|
| $ | 24,515 |
|
Net Sales – Net sales for the quarter ended October 4, 2014April 25, 2015 (“thirdfirst quarter”) increased $1,179.5decreased $21.0 million, or 187.20.9 percent, from $630.1$2,333.7 million in the quarter ended October 12, 2013April 19, 2014 (“prior year thirdfirst quarter”) to $1,809.6 million. $2,312.7 million as increases in the food distribution and military segments were offset by the impact of our store rationalization plan and significantly lower retail fuel prices.
18
Net sales for the year-to-date period ended October 4, 2014 (“year-to-date”)first quarter in our Military segment increased $3,892.0$15.2 million, or 188.82.2 percent, from $2,061.5$684.2 million in the prior year-to-date period ended October 12, 2013 (“prior year-to-date”)year first quarter to $5,953.5$699.4 million. The thirdfirst quarter increase in net sales was primarily due to $1.2 billion inincreased export sales generated as a result of the merger with Nash-Finch and positive Retail comparable store sales, excluding fuel, of 0.4 percent, partially offset by decreased sales due to closed stores in the Retail segment. The increase in year-to-date net sales was primarily due to $3.9 billion in sales generated as a result of the merger with Nash-Finch, as well as an increase in Retail comparable store sales, excluding fuel, of 1.0 percent and net new business gains in the Food Distribution segment. The increase in year-to-date net sales was partially offset by decreased sales due to closed stores in the Retail segment.business.
Net sales for the third quarter and the year-to-date period in our Military segment were $523.6 million and $1,710.1 million, respectively.
Net sales for the thirdfirst quarter in our Food Distribution segment, after intercompany eliminations, increased $494.1$15.4 million, or 182.91.6 percent, from $270.2$971.0 million in the prior year thirdfirst quarter to $764.3 million. Net sales for the current year-to-date period in our Food Distribution segment, after intercompany eliminations, increased $1,624.4 million, or 184.8 percent, from $878.8 million in the prior year-to-date period to $2,503.2 million. The third quarter increase was primarily due to additional sales of $493.5 million resulting from the merger. The year-to-date increase was primarily due to additional sales of $1,614.6 million resulting from the merger, net new business of $6.6 million and a net increase in pharmacy sales of $6.3$986.4 million.
Net sales for the thirdfirst quarter in our Retail segment increased $161.8decreased $51.7 million, or 45.07.6 percent, from $359.9$678.6 million in the prior year thirdfirst quarter to $521.7 million. Net sales for the year-to-date period increased $557.4$626.9 million, or 47.1 percent, from $1,182.7 million in the prior year-to-date period to $1,740.1 million. The third quarter increase was primarily due to $27.8 million in lower sales due to the closure of $179.2retail stores and fuel centers, $15.8 million resulting from the mergerin significantly lower retail fuel prices and positivea 1.2 percent decrease in comparable store sales, excluding fuel, of 0.4 percent, partially offset by a decrease in sales of $19.5 million due to store closures. The year-to-date increase was primarily due to sales of $605.5 million resulting from the merger and afuel. As anticipated, comparable store sales increasereflect the inclusion of 1.0 percent, partially offset by a decreasethe stores obtained in sales of $56.1 million due tothe merger with Nash Finch, the significant winter weather benefit in the first quarter last year and limited center store closures.inflation. We define a retail store as comparable when it is in operation for 14 periods (a period is four weeks), and we include remodeled, expanded and relocated stores in comparable stores.
Gross Profit – Gross profit represents net sales less cost of sales, which include purchase costs, freight, physical inventory adjustments, markdowns and promotional allowances. Vendor allowances that relate to our buying and merchandising activities consist primarily of promotional allowances, which are generally allowances on purchased quantities and, to a lesser extent, slotting allowances, which are billed to vendors for our merchandising costs, such as setting up warehouse infrastructure. Vendor allowances associated with product cost are recognized as a reduction in cost of sales when the product is sold. Lump sum payments received for multi-year contracts are amortized over the life of the contracts based on contractual terms.
Gross profit for the thirdfirst quarter increased $130.9decreased $11.1 million, or 100.43.2 percent, from $130.5$347.3 million in the prior year thirdfirst quarter to $261.4$336.2 million. As a percent of net sales, gross profit for the thirdfirst quarter decreased to 14.414.5 percent from 20.7 percent. Gross profit for the year-to-date period increased $438.3 million, or 100.6 percent, from $435.6 million in the prior year-to-date period to $873.9 million. As a percent of net sales, gross profit for the year-to-date period decreased to 14.7 percent from 21.114.9 percent. The thirdfirst quarter and year-to-date gross profit rate decreases weredecrease was principally driven by salesa higher mix due to the merger with Nash-Finch, the impact of higher LIFO expenselower margin military and lower center store inflation. Excluding the gross profit resulting from the merger with Nash-Finch, third quarter gross profit decreased $4.2 million, or 3.2 percent, and as a rate to sales decreased to 20.6 percent from 20.7 percent. Excluding the gross profit resulting from the merger with Nash-Finch, year-to-date gross profit decreased $14.6 million, or 3.4 percent, and as a rate to sales decreased to 20.8 percent from 21.1 percent.food distribution sales.
Selling, General and Administrative Expenses – Selling, general and administrative (“SG&A”) expenses consist primarily of salaries and wages, employee benefits, warehousing costs, store occupancy costs, shipping and handling, utilities, equipment rental, depreciation and other administrative costs.
SG&A expenses for the thirdfirst quarter increased $114.2decreased $13.1 million, or 100.74.2 percent, from $113.5$315.5 million in the prior year thirdfirst quarter to $227.7$302.4 million. As a percent of net sales, SG&A expenses were 12.513.1 percent for the thirdfirst quarter compared to 18.013.5 percent in the prior year thirdfirst quarter. SG&A expenses for the year-to-date period increased $394.3 million, or 104.4 percent, from $377.7 million in the prior year-to-date period to $772.0 million. As a percent of net sales, SG&A expenses were 13.0 percent for the current year-to-date period compared to 18.3 percent in the prior year-to-date period. The dollar increase in the third quarter was due primarily to $121.8 million in expenses related to the Nash-Finch operations, partially offset by decreased store labor and SG&A expenses of $5.4 million due to store closures and a reduction of health care expenses of $2.0 million. The decrease as a percent of sales was primarily due to benefits from merger synergies, lower fuel and health care costs as well as the merger with Nash-Finchimpact of closed stores and related synergies. Excluding the expenses related to Nash-Finch operations, SG&Aone closed warehouse.
Merger Integration and Acquisition –Merger integration and acquisition expenses for the thirdfirst quarter would have decreased $7.6$1.5 million, or 6.6 percent,35.6%, from $113.5$4.2 million in the prior year thirdfirst quarter to $105.9 million. As a percent of sales, SG&A expenses excluding the Nash-Finch operations would have been 17.3 percent for the third quarter compared to 18.0 percent in the prior year third quarter. The dollar increase in the year-to-date period was due primarily to $410.5$2.7 million in expenses related to the Nash-Finch operations, partially offset by decreased store labor and SG&A expenses of $14.7 million due to store closures and reduced health care expenses. The decrease as a percent of sales was primarily due toon-going integration activities following the merger with Nash-Finch and related synergies. Excluding the expenses related to Nash-Finch operations, SG&A expenses for the year-to-date period would have decreased $16.2 million, or 4.3 percent, from $377.7 million in the prior year-to-date period to $361.5 million. As a percent of sales, SG&A expenses excluding the Nash-Finch operations would have been 17.9 percent for the year-to-date period compared to 18.3 percent in the prior year-to-date period.
Merger Transaction and Integration – Merger transaction and integration expenses consist of expenses related to consummating the merger with Nash-Finch Company on November 19, 2013 and costs to integrate the operations of the two companies. Merger transaction and integration expenses decreased $3.2 million, or 70.2 percent, from $4.6 million to $1.4 million. For the year-to-date period, merger transaction and integration expenses increased $1.1 million, or 15.9%, from $7.0 million to $8.1 million. Company.
Restructuring and Asset Impairment – The thirdfirst quarter restructuring and asset impairment gaincharges consisted primarily of gains charges related to underperforming retail stores and costs related to the closure of retail storesand a distribution center, partially offset by the gain on salessale of assets related to a previously closed stores, netfood distribution center and favorable settlements on lease terminations of store closing costs. The current year-to-date restructuringpreviously closed stores. Restructuring and asset impairment gaincharges in the prior year first quarter consisted primarily of gains on the sales of assets related to certain closed stores and a favorable settlement on a lease termination of a previously closed store, partially offset by asset impairment charges for a retail store and restructuring charges related to the closure of a distribution center. Restructuring and asset impairment in the prior year-to-date period consistedcenter, partially offset by gains on sales of asset impairment chargesassets related to an underperforming retail store.certain closed stores.
Interest Expense – Interest expense increased $3.3decreased $0.7 million, or 147.99.7 percent, from $2.2$7.5 million in the prior year thirdfirst quarter to $5.5 million. For the year-to-date period, interest expense increased $10.2 million, or 124.3 percent, from $8.2 million to $18.4$6.8 million. The increasedecrease in interest expense was primarily due to increaseddecreased borrowings and a lower interest rate from the amended and restatedsenior secured credit agreement. On January 9, 2015, the Company amended its credit agreement that was entered into contemporaneously withwhich reduced the closing of the merger with Nash-Finch Company, partially offset by the redemption of the convertible senior notes in the prior year first quarter.
Debt Extinguishment – Debt extinguishment charges of $2.8 million were incurred in the prior year first quarter in connection with the redemption of $57.4 million of Convertible Senior Notes.interest rate.
Income Taxes – The effective income tax rate was 39.0 percent39.0% and 34.5 percent37.7% for the 1216 weeks ended October 4,April 25, 2015 and April 19, 2014, and October 12, 2013, respectively. For the 40 weeks ended October 4, 2014 and October 12, 2013, the effective income tax rate was 37.6 percent and 37.3 percent, respectively. The differencedifferences from the Federal statutory rate in both the current and prior year periods wasare primarily due primarily to state income taxes, partially offset by a benefit for the favorable settlement of an unrecognized tax liabilities established in the prior year.taxes.
Discontinued Operations
Certain of our retail and food distribution operations have been recorded as discontinued operations. Results of the discontinued operations are excluded from the accompanying notes to the financial statements for all periods presented, unless otherwise noted.
19
Liquidity and Capital Resources
The following table summarizes our consolidated statements of cash flows for the 4016 weeks ended:
| 40 Weeks Ended |
| 16 Weeks Ended |
| ||||||||||
| October 4, 2014 |
|
| October 12, 2013 |
| April 25, 2015 |
|
| April 19, 2014 |
| ||||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities | $ | 117,385 |
|
| $ | 56,137 |
| $ | 48,941 |
|
| $ | 32,595 |
|
Net cash used in investing activities |
| (54,362 | ) |
|
| (29,764 | ) |
| (4,523 | ) |
|
| (22,063 | ) |
Net cash used in financing activities |
| (63,912 | ) |
|
| (29,379 | ) |
| (42,291 | ) |
|
| (4,450 | ) |
Net cash used in discontinued operations |
| (279 | ) |
|
| (454 | ) |
| (95 | ) |
|
| (234 | ) |
Net decrease in cash and cash equivalents |
| (1,168 | ) |
|
| (3,460 | ) | |||||||
Net increase in cash and cash equivalents |
| 2,032 |
|
|
| 5,848 |
| |||||||
Cash and cash equivalents at beginning of period |
| 9,216 |
|
|
| 8,960 |
|
| 6,443 |
|
|
| 9,216 |
|
Cash and cash equivalents at end of period | $ | 8,048 |
|
| $ | 5,500 |
| $ | 8,475 |
|
| $ | 15,064 |
|
Net cash provided by operating activities increased from the prior year-to-date periodyear first quarter primarily due to the merger with Nash-Finch and by the timing of seasonal working capital requirements.
Net cash used in investing activities increased $24.6decreased $17.5 million to $54.4$4.5 million during the current year-to-date periodfirst quarter from $22.1 million in the prior year first quarter. The decrease was primarily due to an increaseproceeds from the sale of assets related to a previously closed food distribution center in the first quarter and capital expenditures resulting fromrelated to the merger with Nash-Finch.expansion of a military distribution center in the prior year first quarter. Military, Food Distribution and Retail segments utilized 24.34.6 percent, 33.527.9 percent and 42.267.5 percent of capital expenditures, respectively.respectively in fiscal 2015.
Net cash used in financing activities in the current year-to-date periodfirst quarter resulted primarily from net payments from the revolving credit facility of $42.9$32.0 million, the payment of dividends of $13.6$5.1 million, the repayment of other long term debt of $5.8$3.0 million and share repurchases of $2.5 million. Net cash used in financing activities in the prior year-to-date period consisted ofyear first quarter resulted primarily from the repurchase of the Convertible Senior Notes for $58.0 million, payment of dividends of $5.7 million and the repayment of other long term debt of $3.1 million, partially offset by net proceeds from the revolving credit facility of $37.1$4.5 million. The increase in dividends paid was due to an increase in shares outstanding due to the merger with Nash-Finch and a 33.3A 12.5 percent increase in the quarterly dividend rate from $0.09$0.12 per share to $0.12$0.135 per share that was approved by the Board of Directors and announced on March 3, 2014.February 25, 2015. Although we expect to continue to pay a quarterly cash dividend, adoption of a dividend policy does not commit the Board of Directors to declare future dividends. Each future dividend will be considered and declared by the Board of Directors at its discretion. Whether the Board of Directors continues to declare dividends and repurchase shares depends on a number of factors, including our future financial condition, anticipated profitability and cash flows and compliance with the terms of our credit facilities. Our current maturities of long-term debt and capital lease obligations at October 4, 2014April 25, 2015 are $7.3$19.0 million. Our ability to borrow additional funds is governed by the terms of our credit facilities.
Net cash used in discontinued operations contains the net cash flows of our discontinued operations and consists primarily of insurance run-off claims and facility maintenance expenditures.
Our principal sources of liquidity are cash flows generated from operations and our senior secured credit facility which has maximum available credit of $1.0 billion. As of October 4, 2014,April 25, 2015, our senior secured revolving credit facility and senior secured term loan had outstanding borrowings of $437.7 million; additional$418.2 million. Additional available borrowings under our $1.0 billion credit facility are based on stipulated advance rates on eligible assets, as defined in the credit agreement. The credit agreement requires that SpartanNash maintain excess availability of 10 percent of the borrowing base as such term is defined in the credit agreement. SpartanNash had excess availability after the 10 percent covenant of $372.6$370.3 million at October 4, 2014.April 25, 2015. Payment of dividends and repurchases of outstanding shares are permitted, provided that certain levels of excess availability are maintained. The credit facility provides for the issuance of letters of credit, of which $11.5$12.6 million were outstanding as of October 4, 2014.April 25, 2015. The revolving credit facility matures November 2018,January 2020, and is secured by substantially all of our assets. We believe that cash generated from operating activities and available borrowings under the credit facility will be sufficient to meet anticipated requirements for working capital, capital expenditures, dividend payments, and senior note debt redemption and debt service obligations for the foreseeable future. However, there can be no assurance that our business will continue to generate cash flow at or above current levels or that we will maintain our ability to borrow under our credit facility.
Our current ratio increaseddecreased to 1.77:1.86:1.00 at October 4, 2014April 25, 2015 from 1.76:1.90:1.00 at December 28, 2013January 3, 2015 and our investment in working capital increaseddecreased to $421.7$424.5 million at October 4, 2014April 25, 2015 from $398.2$433.2 million at December 28, 2013.January 3, 2015. Our net debt to total capital ratio decreased to 0.42:0.41:1.00 at October 4, 2014April 25, 2015 versus 0.46:0.43:1.00 at December 28, 2013.January 3, 2015.
20
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.
Following is a reconciliation of long-term debt and capital lease obligations to total net long-term debt and capital lease obligations as of October 4, 2014April 25, 2015 and December 28, 2013.January 3, 2015.
| October 4, 2014 |
|
| December 28, 2013 |
| April 25, 2015 |
|
| January 3, 2015 |
| ||||
Current maturities of long-term debt and capital lease obligations | $ | 7,349 |
|
| $ | 7,345 |
| $ | 19,019 |
|
| $ | 19,758 |
|
Long-term debt and capital lease obligations |
| 549,530 |
|
|
| 598,319 |
|
| 516,237 |
|
|
| 550,510 |
|
Total debt |
| 556,879 |
|
|
| 605,664 |
|
| 535,256 |
|
|
| 570,268 |
|
Cash and cash equivalents |
| (8,048 | ) |
|
| (9,216 | ) |
| (8,475 | ) |
|
| (6,443 | ) |
Total net long-term debt | $ | 548,831 |
|
| $ | 596,448 |
| $ | 526,781 |
|
| $ | 563,825 |
|
For information on contractual obligations, see our Transition Report on Form 10-K for the 39 week periodfiscal year ended December 28, 2013.January 3, 2015. At October 4, 2014,April 25, 2015, there have been no material changes to our significant contractual obligations outside the ordinary course of business.
Ratio of Earnings to Fixed Charges
For purposes of calculating the ratio of earnings to fixed charges under the terms of tourour Senior Notes, earnings consist of net earnings, as adjusted under the terms of the Senior Notes indenture, plus income tax expense, fixed charges and non-cash charges, less cash payments relating to non-cash charges added back to net earnings in prior periods. Fixed charges consist of interest cost, including capitalized interest, and amortization of debt issue costs. Our ratio of earnings to fixed charges was 9.50:9.70:1.00 for the four quarters ended October 4, 2014.April 25, 2015.
Off-Balance Sheet Arrangements
We have also made certain commercial commitments that extend beyond October 4, 2014.April 25, 2015. These commitments consist primarily of standby letters of credit of $11.5$12.6 million as of October 4, 2014.April 25, 2015.
21
Critical Accounting Policies
This discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts. On an ongoing basis, we evaluate our estimates, including those related to bad debts, inventories, intangible assets, long-lived assets, income taxes, self-insurance reserves, restructuring costs, retirement benefits, stock-based compensation and contingencies and litigation. We base our estimates on historical experience and on various other assumptions and factors that we believe to be reasonable under the circumstances. Based on our ongoing review, we make adjustments we consider appropriate under the facts and circumstances. We have discussed the development, selection and disclosure of these estimates with the Audit Committee. The accompanying condensed consolidated financial statements are prepared using the same critical accounting policies discussed in our Transition Report on Form 10-K for the 39 week periodfiscal year ended December 28, 2013.January 3, 2015.
Recently Issued Accounting Standards
On April 7, 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03 “Interest - Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs.” ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The new guidance is effective on a retrospective basis for fiscal years beginning after December 15, 2015, and interim periods within those years. Adoption of this standard in fiscal 2016 will retroactively decrease Other long-term assets and Long-term debt as of April 25, 2015 by approximately $9.9 million.
On April 10, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08 “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” ASU No. 2014-08 changeschanged the criteria for reporting discontinued operations and modifiesmodified related disclosure requirements. The new guidance is effective on a prospective basis forCompany adopted ASU 2014-08 in the first quarter of fiscal years beginning after December 15, 2014, and interim periods within those years. We are currently assessing the potential impact2015. Adoption of ASU No. 2014-08 did not have a material impact on our financial statements.the Consolidated Financial Statements.
On May 28, 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” which provides guidance for revenue recognition. The new guidance contained in the ASU affects any reporting organization that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ThisOn April 29, 2015, the FASB issued a one-year deferral of the effective date of this new guidance, will bewhich would result in the guidance being effective for the Company in the first quarter of its fiscal year ending December 30, 2017.29, 2018. Adoption is allowed by either the full retrospective or modified retrospective approach. We are currently in the process of evaluating the impact of adoption of this ASUASC on our Consolidated Financial Statements.
ITEM 3. Quantitative and Qualitative Disclosure about Market Risk
There have been no material changes in market risk of SpartanNash from the information provided under Part II, Item 7A, “Quantitative and Qualitative Disclosure About Market Risk”, of the Company’s TransitionAnnual Report on Form 10-K for the fiscal year ended December 28, 2013.January 3, 2015.
ITEM 4. Controls and Procedures
An evaluation of the effectiveness of the design and operation of SpartanNash’s disclosure controls and procedures (as currently defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) was performed as of October 4, 2014April 25, 2015 (the “Evaluation Date”). This evaluation was performed under the supervision and with the participation of SpartanNash’s management, including its Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) and Interim Chief Accounting Officer (“CAO”). SpartanNash’s management, including the CEO, CFO and Interim CAO, concluded that SpartanNash’s disclosure controls and procedures were effective as of the Evaluation Date to ensure that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities and Exchange Act of 1934 is accumulated and communicated to management, including our principal executive and principal financial officers as appropriate to allow for timely decisions regarding required disclosure. During the thirdfirst quarter there was no change in SpartanNash’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, SpartanNash’s internal control over financial reporting.
22
PART II
OTHER INFORMATION
ITEM 1. Legal Proceedings
The information regarding the Putative Class Actions set forth in Note 76 “Commitments and Contingencies” to the Condensed Consolidated Financial Statements set forth under Item 1 of this report is incorporated herein by reference.
ITEM 1a. Risk Factors
Changes in our vendor base may adversely affect our business.
We source the products we sell from a wide variety of vendors. We generally do not have long-term written contracts with our major suppliers that would require them to continue supplying us with merchandise. We depend on our vendors for, among other things, appropriate allocation of merchandise, assortments of products, operation of vendor-focused shopping experiences within our stores, and funding for various forms of promotional allowances. There has been significant consolidation in the food industry, and this consolidation may continue to our commercial disadvantage. Such changes could have a material adverse impact on our revenues and profitability.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information regarding SpartanNash’s purchases of its own common stock during the 1216 week period ended October 4, 2014.April 25, 2015. On May 17, 2011, the Board of Directors authorized a five-year share repurchase program for up to $50 million of the SpartanNash’s common stock. The approximate dollar value of shares that may yet be purchased under the repurchase plan was $23.8$18.8 million as of October 4, 2014.April 25, 2015. All employee transactions are under associate stock compensation plans. These may include: (1) shares of SpartanNash common stock delivered in satisfaction of the exercise price and/or tax withholding obligations by holders of employee stock options who exercised options, and (2) shares submitted for cancellation to satisfy tax withholding obligations that occur upon the vesting of the restricted shares. The value of the shares delivered or withheld is determined by the applicable stock compensation plan.
SpartanNash Purchases of Equity Securities
|
| Total |
|
|
|
|
| |||||||||
|
| Number |
|
| Average |
| ||||||||||
|
| of Shares |
|
| Price Paid |
| ||||||||||
Period |
| Total Number |
|
| Average |
|
| Purchased |
|
| per Share |
| ||||
July 13, 2014 – August 9, 2014 |
|
|
|
|
|
|
| |||||||||
January 3 – January 31, 2015 |
|
|
|
|
|
|
|
| ||||||||
Employee Transactions |
|
| — |
|
| $ | — |
|
|
| — |
|
| $ | — |
|
Repurchase Program |
|
| — |
|
| $ | — |
|
|
| — |
|
| $ | — |
|
August 10, 2014 – September 6, 2014 |
|
|
|
|
| |||||||||||
February 1 – February 28, 2015 |
|
|
|
|
|
|
|
| ||||||||
Employee Transactions |
|
| — |
|
| $ | — |
|
|
| 30,567 |
|
| $ | 25.78 |
|
Repurchase Program |
|
| 63,800 |
|
| $ | 21.57 |
|
|
| — |
|
| $ | — |
|
September 7, 2014 – October 4, 2014 |
|
|
|
|
| |||||||||||
March 1 – March 28, 2015 |
|
|
|
|
|
|
|
| ||||||||
Employee Transactions |
|
| — |
|
| $ | — |
|
|
| — |
|
| $ | — |
|
Repurchase Program |
|
| 57,200 |
|
| $ | 19.51 |
|
|
| — |
|
| $ | — |
|
Total for Quarter ended October 4, 2014 |
|
|
|
|
| |||||||||||
March 29 – April 25, 2015 |
|
|
|
|
|
|
|
| ||||||||
Employee Transactions |
|
| — |
|
| $ | — |
|
|
| — |
|
| $ | — |
|
Repurchase Program |
|
| 121,000 |
|
| $ | 20.60 |
|
|
| 79,400 |
|
| $ | 31.80 |
|
Total for Quarter ended April 25, 2015 |
|
|
|
|
|
|
|
| ||||||||
Employee Transactions |
|
| 30,567 |
|
| $ | 25.78 |
| ||||||||
Repurchase Program |
|
| 79,400 |
|
| $ | 31.80 |
|
23
ITEM 6. Exhibits
The following documents are filed as exhibits to this Quarterly Report on Form 10-Q:
Exhibit |
| Document |
|
|
|
2.1 |
| Agreement and Plan of Merger dated July 21, 2013. Previously filed as an exhibit to the Company’s Current Report on Form 8-K on July 22, 2013. Here incorporated by reference. |
|
|
|
3.1 |
| Restated Articles of Incorporation of SpartanNash Company, as amended. Previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 12, 2014, filed on August 14, 2014. Here incorporated by reference. |
|
|
|
3.2 |
| Bylaws of SpartanNash Company, as amended. Previously filed as an exhibit to Spartan Stores’ Quarterly Report on Form 10-Q for the quarter ended September 10, 2011, filed on November 10, 2011. Here incorporated by reference. |
|
|
|
4.1 |
| Indenture dated December 6, 2012 by and among SpartanNash Company, The Bank of New York Mellon Trust Company, N.A., as Trustee, and the Company’s subsidiaries as Guarantors. Previously filed as an exhibit to the Company’s Current Report on Form 8-K on December 6, 2012. Here incorporated by reference. |
|
|
|
4.2 |
| Form of 6.625% Senior Notes Due 2016. Previously filed as an exhibit to the Company’s Current Report on Form 8-K on December 6, 2012. Here incorporated by reference. |
|
|
|
10.1 | Form of Restricted Stock Award to Non-Employee Directors. | |
10.2 | Form of Restricted Stock Award to Executive Officers. | |
10.3 | Form of 2015 Long-Term Executive Cash Incentive Award. | |
10.4 | Amendment No. 1 to Amended and Restated Loan and Security Agreement, dated January 9, 2015, among SpartanNash Company and certain of its subsidiaries, as borrowers, and Wells Fargo Capital Finance, LLC, as administrative agent, and certain lenders from time to time party thereto. Previously filed as an exhibit to the Company's Current Report on Form 8-K filed January 12, 2015. Incorporated herein by reference. | |
31.1 |
| Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
31.2 |
| Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
31.3 |
| Certification of Chief Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.1 |
| Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
101.INS |
| XBRL Instance Document |
|
|
|
101.SCH |
| XBRL Taxonomy Extension Schema Document |
|
|
|
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document |
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
| SPARTANNASH COMPANY (Registrant)
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Date: |
| By |
| /s/ David M. Staples |
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| David M. Staples Executive Vice President and Chief (Principal Financial authorized to sign for Registrant) |
25
EXHIBIT INDEX
Exhibit |
| Document |
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2.1 |
| Agreement and Plan of Merger dated July 21, 2013. Previously filed as an exhibit to the Company’s Current Report on Form 8-K on July 22, 2013. Here incorporated by reference. |
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3.1 |
| Restated Articles of Incorporation of SpartanNash Company, as amended. Previously filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 12, 2014, filed on August 14, 2014. Here incorporated by reference. |
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3.2 |
| Bylaws of SpartanNash Company, as amended. Previously filed as an exhibit to Spartan Stores’ Quarterly Report on Form 10-Q for the quarter ended September 10, 2011, filed on November 10, 2011. Here incorporated by reference. |
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4.1 |
| Indenture dated December 6, 2012 by and among SpartanNash Company, The Bank of New York Mellon Trust Company, N.A., as Trustee, and the Company’s subsidiaries as Guarantors. Previously filed as an exhibit to the Company’s Current Report on Form 8-K on December 6, 2012. Here incorporated by reference. |
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4.2 |
| Form of 6.625% Senior Notes Due 2016. Previously filed as an exhibit to the Company’s Current Report on Form 8-K on December 6, 2012. Here incorporated by reference. |
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10.1 | Form of Restricted Stock Award to Non-Employee Directors. | |
10.2 | Form of Restricted Stock Award to Executive Officers. | |
10.3 | Form of 2015 Long-Term Executive Cash Incentive Award. | |
10.4 | Amendment No. 1 to Amended and Restated Loan and Security Agreement, dated January 9, 2015, among SpartanNash Company and certain of its subsidiaries, as borrowers, and Wells Fargo Capital Finance, LLC, as administrative agent, and certain lenders from time to time party thereto. Previously filed as an exhibit to the Company's Current Report on Form 8-K filed January 12, 2015. Incorporated herein by reference. | |
31.1 |
| Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2 |
| Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.3 |
| Certification of Chief Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1 |
| Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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101.INS |
| XBRL Instance Document |
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101.SCH |
| XBRL Taxonomy Extension Schema Document |
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101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document |
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101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document |
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101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document |
3326