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 10, 2015.April 23, 2016.
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.) |
|
|
|
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 |
| x |
| Accelerated filer |
| ¨ |
|
|
|
| |||
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 9, 2015,May 24, 2016, the registrant had 37,595,60737,471,675 outstanding shares of common stock, no par value.
The matters discussed in this Quarterly Report on Form 10-Q, in the Company’s press releases and in the Company’s 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” or the “Company”“the Company”). These forward-looking statements are identifiableinclude statements regarding the expected benefits of the merger and statements preceded by, words or phrases indicating that SpartanNash or management “expects,” “anticipates,” “plans,” “believes,” or “estimates,”followed by or that a particular occurrenceotherwise include the words "introduce," "anticipates," "continue," "expects," or similar expressions or that an event “will,” “may,” “could,” “should,” or “will likely” result,trend "will" 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."beginning." Accounting estimates, such as those described under the heading “Critical Accounting Policies” in Part I, Item 2 of this Quarterly Report on Form 10-Q, are inherently forward-looking. The Company’s asset impairment and 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. YouUndue reliance should not place undue reliancebe placed 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 fiscal year ended January 3, 20152, 2016 (in particular, you should refer to the discussion of “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K) and other periodic reports filed with the Securities and Exchange Commission (“SEC”), there are many important factors that could cause actual results to differ materially.
The Company’s ability to achieve sales and earnings expectations; improve operating results; continue to realize benefits of the merger with Nash-Finch Company (including realization of synergies); maintain or strengthen retail-store performance; assimilate acquired distribution centers and stores;merger; maintain or grow sales; respond successfully to competitors including remodels and new openings; maintain or improve gross margin;competitors; 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 its customer base; reduce operating costs; sell on favorable terms assets held for sale; generate cash; continue to meet the terms of the Company’s 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, the Company’s other reports, press releases and public comments will be affected by changes in economic conditions generally orand in the markets and geographic areas that the Company serves, adverse effects of the changing food and distributionchanges in our 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.statements for purposes of the safe harbor provision of the Private Securities Litigation Reform Act of 1995. This should not be construed as a complete list of all of the economic, competitive, governmental, technological and other factors that could adversely affect the Company’s 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. The Company undertakes no obligation to update or revise its forward-looking statements to reflect developments that occur or information obtained after the date of this Quarterly Report.
2
FINANCIAL INFORMATION
ITEM 1. Financial Statements
SPARTANNASH COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
| October 10, 2015 |
|
| January 3, 2015 |
| April 23, 2016 |
|
| January 2, 2016 |
| ||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cash and cash equivalents | $ | 8,510 |
|
| $ | 6,443 |
| $ |
| 28,687 |
|
| $ |
| 22,719 |
|
Accounts and notes receivable, net |
| 320,019 |
|
|
| 282,697 |
|
|
| 304,754 |
|
|
|
| 317,183 |
|
Inventories, net |
| 573,320 |
|
|
| 577,197 |
|
|
| 533,074 |
|
|
|
| 521,164 |
|
Prepaid expenses and other current assets |
| 24,494 |
|
|
| 31,882 |
|
|
| 29,517 |
|
|
|
| 22,521 |
|
Property and equipment held for sale |
| 4,002 |
|
|
| 15,180 |
| |||||||||
Total current assets |
| 930,345 |
|
|
| 913,399 |
|
|
| 896,032 |
|
|
|
| 883,587 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
| 586,361 |
|
|
| 597,150 |
|
|
| 573,397 |
|
|
|
| 583,698 |
|
Goodwill |
| 331,612 |
|
|
| 297,280 |
|
|
| 322,686 |
|
|
|
| 322,902 |
|
Other assets, net |
| 118,035 |
|
|
| 124,453 |
|
|
| 128,669 |
|
|
|
| 127,076 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets | $ | 1,966,353 |
|
| $ | 1,932,282 |
| $ |
| 1,920,784 |
|
| $ |
| 1,917,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable | $ | 365,818 |
|
| $ | 320,037 |
| $ |
| 333,440 |
|
| $ |
| 353,688 |
|
Accrued payroll and benefits |
| 63,693 |
|
|
| 73,220 |
|
|
| 62,808 |
|
|
|
| 71,973 |
|
Other accrued expenses |
| 36,824 |
|
|
| 44,690 |
|
|
| 35,446 |
|
|
|
| 42,660 |
|
Deferred income taxes |
| 29,453 |
|
|
| 22,494 |
| |||||||||
Current maturities of long-term debt and capital lease obligations |
| 21,993 |
|
|
| 19,758 |
|
|
| 19,083 |
|
|
|
| 19,003 |
|
Total current liabilities |
| 517,781 |
|
|
| 480,199 |
|
|
| 450,777 |
|
|
|
| 487,324 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes |
| 89,148 |
|
|
| 91,232 |
|
|
| 119,417 |
|
|
|
| 116,600 |
|
Postretirement benefits |
| 17,070 |
|
|
| 23,701 |
|
|
| 16,493 |
|
|
|
| 16,008 |
|
Other long-term liabilities |
| 37,870 |
|
|
| 39,387 |
|
|
| 46,501 |
|
|
|
| 38,759 |
|
Long-term debt and capital lease obligations |
| 525,889 |
|
|
| 550,510 |
|
|
| 496,114 |
|
|
|
| 467,793 |
|
Total long-term liabilities |
| 669,977 |
|
|
| 704,830 |
|
|
| 678,525 |
|
|
|
| 639,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, voting, no par value; 100,000 shares authorized; 37,596 and 37,524 shares outstanding |
| 520,953 |
|
|
| 520,791 |
| |||||||||
Common stock, voting, no par value; 100,000 shares authorized; 37,514 and 37,600 shares outstanding |
|
| 518,181 |
|
|
|
| 521,698 |
| |||||||
Preferred stock, no par value, 10,000 shares authorized; no shares outstanding |
| — |
|
|
| — |
|
|
| — |
|
|
|
| — |
|
Accumulated other comprehensive loss |
| (11,233 | ) |
|
| (11,655 | ) |
|
| (11,446 | ) |
|
|
| (11,447 | ) |
Retained earnings |
| 268,875 |
|
|
| 238,117 |
|
|
| 284,747 |
|
|
|
| 280,528 |
|
Total shareholders’ equity |
| 778,595 |
|
|
| 747,253 |
|
|
| 791,482 |
|
|
|
| 790,779 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity | $ | 1,966,353 |
|
| $ | 1,932,282 |
| $ |
| 1,920,784 |
|
| $ |
| 1,917,263 |
|
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 10, |
|
| October 4, |
|
| October 10, |
|
| October 4, |
|
| April 23, |
|
| April 25, |
|
| ||||||||
| 2015 |
|
| 2014 |
|
| 2015 |
|
| 2014 |
|
| 2016 |
|
| 2015 |
|
| ||||||||
Net sales | $ | 1,775,401 |
|
| $ | 1,809,571 |
|
| $ | 5,883,948 |
|
| $ | 5,953,473 |
|
| $ |
| 2,278,770 |
|
| $ |
| 2,312,683 |
|
|
Cost of sales |
| 1,516,352 |
|
|
| 1,548,162 |
|
|
| 5,026,611 |
|
|
| 5,079,612 |
|
|
|
| 1,944,528 |
|
|
|
| 1,976,437 |
|
|
Gross profit |
| 259,049 |
|
|
| 261,409 |
|
|
| 857,337 |
|
|
| 873,861 |
|
|
|
| 334,242 |
|
|
|
| 336,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
| 224,648 |
|
|
| 227,690 |
|
|
| 752,452 |
|
|
| 771,961 |
|
|
|
| 296,381 |
|
|
|
| 302,371 |
|
|
Merger integration and acquisition |
| 4,417 |
|
|
| 1,379 |
|
|
| 7,252 |
|
|
| 8,128 |
|
|
|
| 897 |
|
|
|
| 2,684 |
|
|
Restructuring charges (gains) and asset impairment |
| 760 |
|
|
| (1,272 | ) |
|
| 7,762 |
|
|
| (67 | ) |
| ||||||||||
Restructuring charges and asset impairment |
|
| 15,304 |
|
|
|
| 7,338 |
|
| ||||||||||||||||
Total operating expenses |
| 229,825 |
|
|
| 227,797 |
|
|
| 767,466 |
|
|
| 780,022 |
|
|
|
| 312,582 |
|
|
|
| 312,393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings |
| 29,224 |
|
|
| 33,612 |
|
|
| 89,871 |
|
|
| 93,839 |
|
|
|
| 21,660 |
|
|
|
| 23,853 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
| 4,983 |
|
|
| 5,467 |
|
|
| 16,627 |
|
|
| 18,416 |
|
|
|
| 5,823 |
|
|
|
| 6,750 |
|
|
Other, net |
| (148 | ) |
|
| (1 | ) |
|
| (202 | ) |
|
| 4 |
|
|
|
| (150 | ) |
|
|
| (28 | ) |
|
Total other expenses, net |
| 4,835 |
|
|
| 5,466 |
|
|
| 16,425 |
|
|
| 18,420 |
|
|
|
| 5,673 |
|
|
|
| 6,722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes and discontinued operations |
| 24,389 |
|
|
| 28,146 |
|
|
| 73,446 |
|
|
| 75,419 |
|
|
|
| 15,987 |
|
|
|
| 17,131 |
|
|
Income taxes |
| 9,141 |
|
|
| 10,977 |
|
|
| 27,444 |
|
|
| 28,336 |
|
|
|
| 6,027 |
|
|
|
| 6,684 |
|
|
Earnings from continuing operations |
| 15,248 |
|
|
| 17,169 |
|
|
| 46,002 |
|
|
| 47,083 |
|
|
|
| 9,960 |
|
|
|
| 10,447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from discontinued operations, net of taxes |
| 145 |
|
|
| (73 | ) |
|
| (21 | ) |
|
| (358 | ) |
| ||||||||||
Loss from discontinued operations, net of taxes |
|
| (109 | ) |
|
|
| (120 | ) |
| ||||||||||||||||
Net earnings | $ | 15,393 |
|
| $ | 17,096 |
|
| $ | 45,981 |
|
| $ | 46,725 |
|
| $ |
| 9,851 |
|
| $ |
| 10,327 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations | $ | 0.41 |
|
| $ | 0.46 |
|
| $ | 1.22 |
|
| $ | 1.25 |
|
| $ |
| 0.27 |
|
| $ |
| 0.28 |
|
|
Earnings (loss) from discontinued operations |
| — |
|
|
| (0.01 | ) | * |
| — |
|
|
| (0.01 | ) |
| ||||||||||
Loss from discontinued operations |
|
| (0.01 | ) | * |
|
| (0.01 | ) | * | ||||||||||||||||
Net earnings | $ | 0.41 |
|
| $ | 0.45 |
|
| $ | 1.22 |
|
| $ | 1.24 |
|
| $ |
| 0.26 |
|
| $ |
| 0.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations | $ | 0.40 |
|
| $ | 0.45 |
|
| $ | 1.22 |
|
| $ | 1.25 |
|
| $ |
| 0.27 |
|
| $ |
| 0.28 |
|
|
Earnings (loss) from discontinued operations |
| 0.01 |
| * |
| — |
|
|
| — |
|
|
| (0.01 | ) |
| ||||||||||
Loss from discontinued operations |
|
| (0.01 | ) | * |
|
| (0.01 | ) | * | ||||||||||||||||
Net earnings | $ | 0.41 |
|
| $ | 0.45 |
|
| $ | 1.22 |
|
| $ | 1.24 |
|
| $ |
| 0.26 |
|
| $ |
| 0.27 |
|
|
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 |
| |||||||||||||||||||
| October 10, |
|
| October 4, |
|
| October 10, |
|
| October 4, |
| 16 Weeks Ended |
| |||||||||||
| 2015 |
|
| 2014 |
|
| 2015 |
|
| 2014 |
| April 23, |
|
| April 25, |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2016 |
|
| 2015 |
| ||||
Net earnings | $ | 15,393 |
|
| $ | 17,096 |
|
| $ | 45,981 |
|
| $ | 46,725 |
| $ |
| 9,851 |
|
| $ |
| 10,327 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, before tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and postretirement liability adjustment |
| 204 |
|
|
| 203 |
|
|
| 681 |
|
|
| 678 |
|
|
| 2 |
|
|
|
| 272 |
|
Total other comprehensive income, before tax |
| 204 |
|
|
| 203 |
|
|
| 681 |
|
|
| 678 |
|
|
| 2 |
|
|
|
| 272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense related to items of other comprehensive income |
| (78 | ) |
|
| (78 | ) |
|
| (259 | ) |
|
| (259 | ) |
|
| (1 | ) |
|
|
| (103 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income, after tax |
| 126 |
|
|
| 125 |
|
|
| 422 |
|
|
| 419 |
|
|
| 1 |
|
|
|
| 169 |
|
Comprehensive income | $ | 15,519 |
|
| $ | 17,221 |
|
| $ | 46,403 |
|
| $ | 47,144 |
| $ |
| 9,852 |
|
| $ |
| 10,496 |
|
See accompanying notes to condensed consolidated financial statements.
5
SPARTANNASH COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
| ||||||
| Shares |
|
| Common |
|
| Comprehensive |
|
| Retained |
|
|
|
|
| Shares |
|
| Common |
|
| Comprehensive |
|
| Retained |
|
|
|
|
| ||||||||||||
| Outstanding |
|
| Stock |
|
| Income (Loss) |
|
| Earnings |
|
| Total |
| Outstanding |
|
| Stock |
|
| Income (Loss) |
|
| Earnings |
|
| Total |
| ||||||||||||||
Balance at January 3, 2015 |
| 37,524 |
|
| $ | 520,791 |
|
| $ | (11,655 | ) |
| $ | 238,117 |
|
| $ | 747,253 |
| |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Balance at January 2, 2016 |
| 37,600 |
|
| $ |
| 521,698 |
|
| $ |
| (11,447 | ) |
| $ |
| 280,528 |
|
| $ |
| 790,779 |
| |||||||||||||||||||
Net earnings |
| — |
|
|
| — |
|
|
| — |
|
|
| 45,981 |
|
|
| 45,981 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,851 |
|
|
| 9,851 |
| ||||
Other comprehensive income |
| — |
|
|
| — |
|
|
| 422 |
|
|
| — |
|
|
| 422 |
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| 1 |
| ||||
Dividends - $0.41 per share |
| — |
|
|
| — |
|
|
| — |
|
|
| (15,223 | ) |
|
| (15,223 | ) | |||||||||||||||||||||||
Dividends - $0.15 per share |
| — |
|
|
| — |
|
|
| — |
|
|
| (5,632 | ) |
|
|
| (5,632 | ) | ||||||||||||||||||||||
Share repurchase |
| (282 | ) |
|
| (9,000 | ) |
|
| — |
|
|
| — |
|
|
| (9,000 | ) |
| (396 | ) |
|
| (9,000 | ) |
|
| — |
|
|
| — |
|
|
|
| (9,000 | ) | |||
Stock-based employee compensation |
| — |
|
|
| 6,470 |
|
|
| — |
|
|
| — |
|
|
| 6,470 |
|
| — |
|
|
| 5,024 |
|
|
| — |
|
|
| — |
|
|
| 5,024 |
| ||||
Issuances of common stock and related tax benefit on stock option exercises and stock bonus plan and from deferred compensation plan |
| 218 |
|
|
| 4,174 |
|
|
| — |
|
|
| — |
|
|
| 4,174 |
| |||||||||||||||||||||||
Issuances of common stock and related tax benefit on stock option exercises and stock bonus plan |
| 75 |
|
|
| 1,739 |
|
|
| — |
|
|
| — |
|
|
| 1,739 |
| |||||||||||||||||||||||
Issuances of restricted stock and related income tax benefits |
| 314 |
|
|
| 1,244 |
|
|
| — |
|
|
| — |
|
|
| 1,244 |
|
| 297 |
|
|
| 22 |
|
|
|
| — |
|
|
|
| — |
|
|
| 22 |
| ||
Cancellations of restricted stock |
| (178 | ) |
|
| (2,726 | ) |
|
| — |
|
|
| — |
|
|
| (2,726 | ) |
| (62 | ) |
|
|
| (1,302 | ) |
|
|
| — |
|
|
|
| — |
|
|
|
| (1,302 | ) |
Balance at October 10, 2015 |
| 37,596 |
|
| $ | 520,953 |
|
| $ | (11,233 | ) |
| $ | 268,875 |
|
| $ | 778,595 |
| |||||||||||||||||||||||
Balance at April 23, 2016 |
| 37,514 |
|
| $ |
| 518,181 |
|
| $ |
| (11,446 | ) |
| $ |
| 284,747 |
|
| $ |
| 791,482 |
|
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 10, |
|
| October 4, |
| April 23, |
|
| April 25, |
| ||||||
| 2015 |
|
| 2014 |
| 2016 |
|
| 2015 |
| ||||||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings | $ | 45,981 |
|
| $ | 46,725 |
| $ |
| 9,851 |
|
| $ |
| 10,327 |
|
Loss from discontinued operations, net of tax |
| 21 |
|
|
| 358 |
|
|
| 109 |
|
|
|
| 120 |
|
Earnings from continuing operations |
| 46,002 |
|
|
| 47,083 |
|
|
| 9,960 |
|
|
|
| 10,447 |
|
Adjustments to reconcile net earnings to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash restructuring, asset impairment and other charges (gains) |
| 8,457 |
|
|
| (67 | ) | |||||||||
Non-cash restructuring, asset impairment and other charges |
|
| 14,662 |
|
|
|
| 5,864 |
| |||||||
Depreciation and amortization |
| 65,952 |
|
|
| 68,043 |
|
|
| 23,895 |
|
|
|
| 26,168 |
|
LIFO expense |
| 3,195 |
|
|
| 5,077 |
|
|
| 1,412 |
|
|
|
| 1,723 |
|
Postretirement benefits expense |
| 454 |
|
|
| 1,093 |
|
|
| 112 |
|
|
|
| 476 |
|
Deferred taxes on income |
| 4,615 |
|
|
| 3,640 |
|
|
| 2,816 |
|
|
|
| 4,023 |
|
Stock-based compensation expense |
| 6,470 |
|
|
| 6,017 |
|
|
| 5,024 |
|
|
|
| 4,753 |
|
Excess tax benefit on stock compensation |
| (1,232 | ) |
|
| (651 | ) |
|
| (122 | ) |
|
|
| (174 | ) |
Other, net |
| 70 |
|
|
| (205 | ) |
|
| (53 | ) |
|
|
| 123 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
| (38,214 | ) |
|
| (18,629 | ) |
|
| 15,494 |
|
|
|
| (30,205 | ) |
Inventories |
| 4,175 |
|
|
| (29,582 | ) |
|
| (14,009 | ) |
|
|
| 12,495 |
|
Prepaid expenses and other assets |
| 4,019 |
|
|
| 4,676 |
|
|
| (8,356 | ) |
|
|
| 5,195 |
|
Accounts payable |
| 45,796 |
|
|
| 59,079 |
|
|
| (13,386 | ) |
|
|
| 31,346 |
|
Accrued payroll and benefits |
| (10,572 | ) |
|
| (17,021 | ) |
|
| (12,804 | ) |
|
|
| (13,812 | ) |
Postretirement benefit payments |
| (729 | ) |
|
| (4,016 | ) |
|
| (77 | ) |
|
|
| (650 | ) |
Other accrued expenses and other liabilities |
| (8,589 | ) |
|
| (7,152 | ) |
|
| (16,015 | ) |
|
|
| (8,831 | ) |
Net cash provided by operating activities |
| 129,869 |
|
|
| 117,385 |
|
|
| 8,553 |
|
|
|
| 48,941 |
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
| (56,862 | ) |
|
| (57,611 | ) |
|
| (18,090 | ) |
|
|
| (12,724 | ) |
Net proceeds from the sale of assets |
| 20,342 |
|
|
| 5,368 |
|
|
| 4,739 |
|
|
|
| 9,670 |
|
Acquisition, net of cash acquired |
| (32,229 | ) |
|
| — |
| |||||||||
Loans to customers |
| (3,563 | ) |
|
| (4,915 | ) |
|
| — |
|
|
|
| (1,435 | ) |
Payments from customers on loans |
| 1,415 |
|
|
| 2,864 |
|
|
| 522 |
|
|
|
| 500 |
|
Other |
| (600 | ) |
|
| (68 | ) |
|
| (97 | ) |
|
|
| (534 | ) |
Net cash used in investing activities |
| (71,497 | ) |
|
| (54,362 | ) |
|
| (12,926 | ) |
|
|
| (4,523 | ) |
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from revolving credit facility |
| 777,075 |
|
|
| 788,740 |
|
|
| 428,755 |
|
|
|
| 269,916 |
|
Payments on revolving credit facility |
| (796,799 | ) |
|
| (831,688 | ) |
|
| (401,737 | ) |
|
|
| (301,949 | ) |
Share repurchase |
| (9,000 | ) |
|
| (2,492 | ) |
|
| (9,000 | ) |
|
|
| (2,526 | ) |
Repayment of other long-term debt |
| (6,515 | ) |
|
| (5,836 | ) |
|
| (2,841 | ) |
|
|
| (2,979 | ) |
Financing fees paid |
| (1,906 | ) |
|
| (479 | ) |
|
| (98 | ) |
|
|
| (1,845 | ) |
Excess tax benefit on stock compensation |
| 1,232 |
|
|
| 651 |
|
|
| 122 |
|
|
|
| 174 |
|
Proceeds from sale of common stock |
| 3,650 |
|
|
| 780 |
| |||||||||
Proceeds from exercise of stock options |
|
| 936 |
|
|
|
| 2,010 |
| |||||||
Dividends paid |
| (15,223 | ) |
|
| (13,588 | ) |
|
| (5,632 | ) |
|
|
| (5,092 | ) |
Net cash used in financing activities |
| (47,486 | ) |
|
| (63,912 | ) | |||||||||
Net cash provided by (used in) financing activities |
|
| 10,505 |
|
|
|
| (42,291 | ) | |||||||
Cash flows from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
| 640 |
|
|
| (279 | ) | |||||||||
Net cash used in investing activities |
| (9,459 | ) |
|
| — |
| |||||||||
Net cash used in operating activities |
|
| (164 | ) |
|
|
| (95 | ) | |||||||
Net cash used in discontinued operations |
| (8,819 | ) |
|
| (279 | ) |
|
| (164 | ) |
|
|
| (95 | ) |
Net increase (decrease) in cash and cash equivalents |
| 2,067 |
|
|
| (1,168 | ) | |||||||||
Net increase in cash and cash equivalents |
|
| 5,968 |
|
|
|
| 2,032 |
| |||||||
Cash and cash equivalents at beginning of period |
| 6,443 |
|
|
| 9,216 |
|
|
| 22,719 |
|
|
|
| 6,443 |
|
Cash and cash equivalents at end of period | $ | 8,510 |
|
| $ | 8,048 |
| $ |
| 28,687 |
|
| $ |
| 8,475 |
|
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
The accompanying unaudited Condensed Consolidated Financial Statementscondensed consolidated financial statements (the “financial statements”) are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of SpartanNash Company and its subsidiaries (“SpartanNash” or the “Company”“the Company”). All significant intercompany accounts and transactions have been eliminated. For further information, refer to the consolidated financial statements and footnotes included in the Annual Report on Form 10-K for the year ended January 3, 2015.2, 2016.
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 10, 2015,April 23, 2016, 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
In September 2015,March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-16, “Business Combinations: Simplifying the Accounting for Measurement-Period Adjustments.2016-09, “Compensation – Stock Compensation Improvements to Employee Share-Based Payment Accounting.” ASU 2015-16 requires that an acquirer recognize adjustments to provisional amounts that are identified during2016-09 provides for simplification of several aspects of the measurement periodaccounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The new guidance is effective for the Company in the same reporting period in which the adjustments are determined.first quarter of its fiscal year ending December 30, 2017. The Company adopted ASU 2015-16is currently in the third quarterprocess of fiscal 2015. Adoptionevaluating the impact of adoption of this standard did not have a material impact on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-04, “Liabilities – Extinguishment of Liabilities: Recognition of Breakage for Certain Prepaid Stored-Value Products.” ASU 2016-04 amends the guidance on extinguishing financial statements asliabilities for certain prepaid stored-value products. The new guidance requires entities that sell prepaid stored-value products redeemable for goods, services or cash at third-party merchants to recognize breakage for those liabilities consistent with the breakage guidance outlined in ASU 2014-09, “Revenue from Contracts with Customers.” The new guidance is effective for the Company has not recorded any significant measurement-period adjustments in the first quarter of its fiscal 2015.year ending December 29, 2018. The Company is currently in the process of evaluating the impact of adoption of this standard on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, “Leases,” which provides guidance for lease accounting. The new guidance contained in the ASU stipulates that lessees will need to recognize a right-of-use asset and a lease liability for substantially all leases (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease payments. Treatment in the consolidated statements of earnings will be similar to the current treatment of operating and capital leases. The new guidance is effective on a modified retrospective basis for the Company in the first quarter of its fiscal year ending December 28, 2019. The Company is currently in the process of evaluating the impact of adoption of this standard on its consolidated financial statements.
In April 2015, the FASB issued 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,In August 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 October 10, 2015, such amount was approximately $9.2 million.
In April 2014, the FASB issued ASU 2014-08, “Reporting Discontinued Operations2015-15, “Presentation and DisclosuresSubsequent Measurement of Disposals of Components of an Entity.Debt Issuance Costs Associated with Line-of-Credit Arrangements.” ASU 2014-08 changed2015-15 supplements the criteria for reporting discontinued operationsrequirements of ASU 2015-03 by allowing an entity to defer and modifiedpresent debt issuance costs related disclosure requirements.to a line of credit arrangement as an asset and subsequently amortize the deferred costs ratably over the term of the line of credit arrangement. The Company adopted ASU 2014-08the new standard in the first quarter of fiscal 2015.2016 on a retrospective basis for all periods presented. Adoption of thisthe standard did not have a material impactresulted in an $8.2 million reduction of Other assets and Long-term debt related to unamortized debt issuance costs on the financial statements.consolidated balance sheet as of January 2, 2016.
In May 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. In August 2015, the FASB issued ASU 2015-14, “Deferral of the Effective Date,” which results in the guidance being effective for the Company in the first quarter of its fiscal year ending December 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 standard on its consolidated financial statements.
Note 3– Acquisitions
On June 16, 2015, SpartanNash acquired certain assets and assumed certain liabilities of Dan’s Super Market, Inc. (“Dan’s”) for a total purchase price of $32.6 million, which included inventory of $3.7 million. The results of operations of the Dan’s acquisition are included in the accompanying financial statements from the date of acquisition. Dan’s is a six-store chain serving Bismarck and Mandan, North Dakota, and was not a customer of the SpartanNash Food Distribution segment prior to the acquisition. SpartanNash acquired the Dan’s stores to strengthen its offering in this region from both a retail and distribution perspective. The purchased assets include inventory, equipment, trade name, favorable lease, non-compete agreements, and goodwill. The acquired assets and assumed liabilities were recorded at their estimated fair values as of the acquisition date and were based on preliminary estimates that may be subject to further adjustments within the measurement period. Goodwillperiod, which will end in June 2016. As of $24.6 million and $1.0 million was preliminarily assignedApril 23, 2016, the Company has not recorded any material adjustments within the measurement period related to the Retail and Food Distribution segments, respectively.
8
acquisition.
Note 4 – Goodwill
Changes in the carrying amount of goodwill were as follows:
(In thousands) |
| Retail |
|
| Food Distribution |
|
| Total |
| Retail |
|
| Food Distribution |
|
| Total |
| |||||||||
Balance at January 3, 2015: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Balance at January 2, 2016: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Goodwill |
| $ | 252,532 |
|
| $ | 131,348 |
|
| $ | 383,880 |
| $ |
| 277,135 |
|
| $ |
| 132,367 |
|
| $ |
| 409,502 |
|
Accumulated impairment charges |
|
| (86,600 | ) |
|
| — |
|
|
| (86,600 | ) |
|
| (86,600 | ) |
|
|
| — |
|
|
|
| (86,600 | ) |
Goodwill, net |
|
| 165,932 |
|
|
| 131,348 |
|
|
| 297,280 |
|
|
| 190,535 |
|
|
|
| 132,367 |
|
|
|
| 322,902 |
|
Acquisition (Dan's) |
|
| 24,601 |
|
|
| 1,021 |
|
|
| 25,622 |
| ||||||||||||||
Other acquisition |
|
| — |
|
|
| 8,725 |
|
|
| 8,725 |
| ||||||||||||||
Other |
|
| (15 | ) |
|
| — |
|
|
| (15 | ) | ||||||||||||||
Balance at October 10, 2015: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Other (Note 5) |
|
| (216 | ) |
|
|
| — |
|
|
|
| (216 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Balance at April 23, 2016: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Goodwill |
|
| 277,118 |
|
|
| 141,094 |
|
|
| 418,212 |
|
|
| 276,919 |
|
|
|
| 132,367 |
|
|
|
| 409,286 |
|
Accumulated impairment charges |
|
| (86,600 | ) |
|
| — |
|
|
| (86,600 | ) |
|
| (86,600 | ) |
|
|
| — |
|
|
|
| (86,600 | ) |
Goodwill, net |
| $ | 190,518 |
|
| $ | 141,094 |
|
| $ | 331,612 |
| $ |
| 190,319 |
|
| $ |
| 132,367 |
|
| $ |
| 322,686 |
|
9
Note 5 – Restructuring Charges and Asset Impairment
The following table provides the activity of restructuring costsreserves for closed properties for the 4016 weeks ended October 10, 2015. Accrued restructuring costsApril 23, 2016. Reserves for closed properties recorded in the Condensed Consolidated Balance Sheetscondensed 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 |
|
|
|
|
|
|
|
| Lease and |
|
|
|
|
|
|
|
| ||||||||||||
(In thousands) | Ancillary Costs |
|
| Severance |
|
| Total |
|
| Ancillary Costs |
|
| Severance |
|
| Total |
|
| ||||||||||||
Balance at January 3, 2015 | $ |
| 13,988 |
|
| $ |
| 80 |
|
| $ |
| 14,068 |
|
| |||||||||||||||
Provision for lease and related ancillary costs, net of sublease income, related to store closings |
|
| 6,760 |
|
|
| — |
|
|
| 6,760 |
| (a) | |||||||||||||||||
Balance at January 2, 2016 | $ |
| 14,448 |
|
| $ |
| — |
|
| $ |
| 14,448 |
|
| |||||||||||||||
Provision for closing charges |
|
| 12,453 |
|
|
| — |
|
|
| 12,453 |
| (a) | |||||||||||||||||
Provision for severance |
|
| — |
|
|
| 344 |
|
|
| 344 |
| (b) |
|
| — |
|
|
| 895 |
|
|
| 895 |
| (b) | ||||
Changes in estimates |
|
| (302 | ) |
|
| (80 | ) |
|
| (382 | ) | (c) |
|
| (96 | ) |
|
| — |
|
|
| (96 | ) | (c) | ||||
Lease termination adjustment |
|
| (1,745 | ) |
|
| — |
|
|
| (1,745 | ) | (d) | |||||||||||||||||
Accretion expense |
|
| 461 |
|
|
| — |
|
|
| 461 |
|
|
|
| 186 |
|
|
| — |
|
|
| 186 |
|
| ||||
Payments |
|
| (4,598 | ) |
|
|
| (344 | ) |
|
|
| (4,942 | ) |
|
|
| (1,156 | ) |
|
|
| (354 | ) |
|
|
| (1,510 | ) |
|
Balance at October 10, 2015 | $ |
| 14,564 |
|
| $ |
| — |
|
| $ |
| 14,564 |
|
| |||||||||||||||
Balance at April 23, 2016 | $ |
| 25,835 |
|
| $ |
| 541 |
|
| $ |
| 26,376 |
|
|
(a) | The provision for closing charges represents initial costs estimated to be incurred for lease and related ancillary costs, |
(b) | The provision for severance relates to distribution center closings in the Food Distribution |
(c) |
|
|
|
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.
9
Restructuring and asset impairment charges included in the Condensed Consolidated Statementscondensed consolidated statements of Earningsearnings consisted of the following:
| 12 Weeks Ended |
|
| 40 Weeks Ended |
| 16 Weeks Ended |
| |||||||||||||||||||||
| October 10, |
|
| October 4, |
|
| October 10, |
|
| October 4, |
| April 23, |
|
| April 25, |
| ||||||||||||
(In thousands) | 2015 |
|
| 2014 |
|
| 2015 |
|
| 2014 |
| 2016 |
|
| 2015 |
| ||||||||||||
Asset impairment charges (a) | $ |
| 1,867 |
|
| $ |
| — |
|
| $ |
| 4,220 |
|
| $ |
| 906 |
| $ |
| — |
|
| $ |
| 2,353 |
|
Provision for leases and related ancillary costs, net of sublease income, related to store closings (b) |
|
| — |
|
|
| — |
|
|
| 6,760 |
|
|
| 236 |
| ||||||||||||
Gains on sales of assets related to closed facilities (c) |
|
| (1,150 | ) |
|
| (1,638 | ) |
|
| (3,026 | ) |
|
| (2,636 | ) | ||||||||||||
Provision for closing charges (b) |
|
| 12,453 |
|
|
| 6,760 |
| ||||||||||||||||||||
Loss (gain) on sales of assets related to closed facilities (c) |
|
| 367 |
|
|
| (1,540 | ) | ||||||||||||||||||||
Provision for severance (d) |
|
| 40 |
|
|
| 40 |
|
|
| 344 |
|
|
| 306 |
|
|
| 895 |
|
|
| 304 |
| ||||
Other costs associated with distribution center and store closings |
|
| 83 |
|
|
| 326 |
|
|
| 1,576 |
|
|
| 1,213 |
|
|
| 1,769 |
|
|
| 1,493 |
| ||||
Changes in estimates |
|
| (80 | ) |
|
| — |
|
|
| (367 | ) |
|
| (92 | ) |
|
| 120 |
|
|
| (287 | ) | ||||
Lease termination adjustment |
|
| — |
|
|
|
| — |
|
|
|
| (1,745 | ) |
|
|
| — |
|
|
| (300 | ) |
|
|
| (1,745 | ) |
| $ |
| 760 |
|
| $ |
| (1,272 | ) |
| $ |
| 7,762 |
|
| $ |
| (67 | ) | $ |
| 15,304 |
|
| $ |
| 7,338 |
|
(a) |
|
(b) | The provision for closing charges represents initial costs estimated to be incurred for lease and related ancillary costs, net of sublease income, |
(c) | The |
(d) | The provision for severance relates to distribution center closings in the Food Distribution |
(e) |
|
(f) | The changes in estimates relate to revised estimates of lease and ancillary costs associated with previously closed facilities. The Food Distribution segment realized $120 in the 16 weeks ended April 23, 2016. The Retail segment realized $(287) in the 16 weeks ended April 25, 2015. |
(g) | The lease termination |
10
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”). The Amendment reduced the interest rates by 0.25% and extended the maturity dateLong-term debt consists of the Loan Agreement from November 19, 2018 to January 9, 2020.following:
(In thousands) | April 23, 2016 |
|
| January 2, 2016 |
| ||||
Senior secured revolving credit facility, due January 2020 | $ |
| 424,841 |
|
| $ |
| 394,982 |
|
Senior secured term loan, due January 2020 |
|
| 32,002 |
|
|
|
| 34,842 |
|
Capital lease obligations |
|
| 59,688 |
|
|
|
| 58,599 |
|
Other, 2.61% - 9.25%, due 2016 - 2020 |
|
| 6,277 |
|
|
|
| 6,558 |
|
Total debt - Principal |
|
| 522,808 |
|
|
|
| 494,981 |
|
Unamortized debt issuance costs |
|
| (7,611 | ) |
|
|
| (8,185 | ) |
Total debt |
|
| 515,197 |
|
|
|
| 486,796 |
|
Less current portion |
|
| 19,083 |
|
|
|
| 19,003 |
|
Total long-term debt | $ |
| 496,114 |
|
| $ |
| 467,793 |
|
Note 7 – 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 10, 2015April 23, 2016 and January 3, 20152, 2016 the estimated fairbook value and the bookestimated fair value of the Company’s debt instruments, excluding debt financing costs, were as follows:
| April 23, |
|
| January 2, |
| |||||||||||||
(In thousands) | October 10, 2015 |
|
| January 3, 2015 |
| 2016 |
|
| 2016 |
| ||||||||
Book value of debt instruments: |
|
|
|
|
|
|
|
|
| |||||||||
Book value of debt instruments, excluding debt financing costs: |
|
|
|
|
|
|
|
|
| |||||||||
Current maturities of long-term debt and capital lease obligations | $ |
| 21,993 |
|
| $ |
| 19,758 |
| $ |
| 19,083 |
|
| $ |
| 19,003 |
|
Long-term debt and capital lease obligations |
|
| 525,889 |
|
|
|
| 550,510 |
|
|
| 503,725 |
|
|
|
| 475,978 |
|
Total book value of debt instruments |
|
| 547,882 |
|
|
|
| 570,268 |
|
|
| 522,808 |
|
|
|
| 494,981 |
|
Fair value of debt instruments |
|
| 551,796 |
|
|
|
| 574,008 |
| |||||||||
Fair value of debt instruments, excluding debt financing costs |
|
| 525,217 |
|
|
|
| 497,116 |
| |||||||||
Excess of fair value over book value | $ |
| 3,914 |
|
| $ |
| 3,740 |
| $ |
| 2,409 |
|
| $ |
| 2,135 |
|
The estimated fair value of debt is based on market quotes for instruments with similar terms and remaining maturities (Level 2 inputs and valuation techniques).
10
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 are measured at fair value on a nonrecurring basis using Level 3 inputs as defined in the fair value hierarchy. Assets with a book value of $11.9 million and $0.9$5.6 million were measured at a fair value of $7.7$3.2 million, and $0.0resulting in an impairment charge of $2.4 million, respectively, in the 4016 weeks ended October 10, 2015 and October 4, 2014, respectively.April 25, 2015. The Company’s accounting and finance team management, whichwho report to the chief financial officer, determineChief Financial Officer (“CFO”), determines the Company’s 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 the Company’s accounting and finance team management and are approved by the chief financial officer.CFO. 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. SpartanNashThe Company estimates future cash flows based on experience and knowledge of the marketgeographic area in which the assets are located, and when necessary, uses real estate brokers. See Note 5 for discussion of long-lived asset impairment charges.
Note 8 – Commitments and Contingencies
The Company is engaged from time-to-time in routine legal proceedings incidental to its business. The Company does not believe that these routine legal proceedings, taken as a whole, will have a material impact on its 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 Company’s consolidated financial position, operating results or liquidity of SpartanNash.liquidity.
SpartanNash11
The Company contributes to the Central States Southeast and Southwest Pension Fund (“Central States Plan” or “the Plan”), a multi-employer pension plan based on obligations arising from its collective bargaining agreements in Bellefontaine, Ohio,Ohio; Lima, Ohio,Ohio; and Grand Rapids, Michigan covering its distribution center union associates at those locations. 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. SpartanNashPlan. The Company currently contributes to the Central States Southeast and Southwest Areas Pension FundPlan 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. On December 13, 2014, Congress passed the MultiemployerMulti-employer Pension Reform Act of 2014 (“MPRA”). The MPRA is intended to address funding shortfalls in both multiemployermulti-employer 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.
On September 25, 2015, the Plan submitted a Rescue Plan to the United States Department of Treasury (“Department of Treasury”) as permitted under the provisions of the MPRA relating to plans in “critical and declining status.” Under the Rescue Plan, Trustees sought to suspend the pension benefits of retirees and actives in order to save the pension plan from future financial failure. On May 6, 2016, the Department of Treasury notified the Central States Plan that its Rescue Plan application for suspension of benefits had been denied. The Central States Plan Trustees subsequently announced that further action would not be taken regarding the Rescue Plan. The Company is currently unable to reasonably estimate the potential impact of these events on its withdrawal liability.
Based on the most recent information available to SpartanNash,the Company, 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’sthe Company’s contributions to this plan will increase each year. Management is not aware of any significant change in funding levels since January 3, 2015.April 23, 2016. 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 (see Note 9 todetermined.
The collective bargaining agreement covering associates at the financial statements).
In October 2015,Company’s Westville, Indiana facility was terminated on April 11, 2016 and a Closing Agreement was executed in its place. The collective bargaining agreement covering associates at the Company’s Norfolk, Virginia facility expired on April 23, 2016. The Company and the union representing its Grand Rapids, Michigan warehouse, transportationthe covered associates are currently operating under a Contract Extension that will expire on June 26, 2016. The Company and maintenancethe union representing the covered associates have reached a unanimous and fully recommended tentative agreement that the union intends to vote on or before June 26, 2016. The Agreement, if ratified, will be a new two-yearthree year labor agreement that was setand will run from April 23, 2016 to expire on October 10, 2015.April 27, 2019.
11
Note 9 – 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 10, 2015April 23, 2016 and October 4, 2014:April 25, 2015:
|
|
|
|
|
| SpartanNash Company Pension Plan |
|
| SpartanNash Medical Plan |
| ||||||||||||||||||||||||||||
| October 10, 2015 |
|
| October 4, 2014 |
| April 23, |
|
| April 25, |
|
| April 23, |
|
| April 25, |
| ||||||||||||||||||||||
12 Weeks Ended | SpartanNash |
|
| Combined SpartanNash |
|
| Cash Balance |
|
| Super Foods |
| |||||||||||||||||||||||||||
(In thousands) | Pension Plan |
|
| Pension Plan * |
|
| Pension Plan |
|
| Pension Plan |
| 2016 |
|
| 2015 |
|
| 2016 |
|
| 2015 |
| ||||||||||||||||
16 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Service cost | $ |
| — |
|
| $ |
| — |
|
| $ |
| 58 |
|
| $ |
| 71 |
| |||||||||||||||||||
Interest cost | $ |
| 767 |
|
| $ |
| 1,017 |
|
| $ |
| 556 |
|
| $ |
| 461 |
|
|
| 753 |
|
|
| 1,023 |
|
|
| 106 |
|
|
| 125 |
| |||
Amortization of prior service cost |
|
| — |
|
|
| — |
|
|
| (49 | ) |
|
| (49 | ) | ||||||||||||||||||||||
Expected return on plan assets |
|
| (1,136 | ) |
|
| (1,399 | ) |
|
| (867 | ) |
|
| (532 | ) |
|
| (1,324 | ) |
|
| (1,515 | ) |
|
| — |
|
|
| — |
| ||||||
Recognized actuarial net loss |
|
| 191 |
|
|
|
| 228 |
|
|
|
| 228 |
|
|
|
| — |
|
|
| 34 |
|
|
|
| 255 |
|
|
|
| 13 |
|
|
|
| 53 |
|
Net periodic benefit | $ |
| (178 | ) |
| $ |
| (154 | ) |
| $ |
| (83 | ) |
| $ |
| (71 | ) | $ |
| (537 | ) |
| $ |
| (237 | ) |
| $ |
| 128 |
|
| $ |
| 200 |
|
Settlement expense |
|
| 131 |
|
|
|
| 261 |
|
|
|
| 261 |
|
|
|
| — |
|
|
| 213 |
|
|
|
| 175 |
|
|
|
| — |
|
|
|
| — |
|
Total (income) expense | $ |
| (47 | ) |
| $ |
| 107 |
|
| $ |
| 178 |
|
| $ |
| (71 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
12 Weeks Ended | SERP |
|
| Spartan Stores Medical Plan |
| |||||||||||||||||||||||||||||||||
(In thousands) | October 10, 2015 |
|
| October 4, 2014 |
|
| October 10, 2015 |
|
| October 4, 2014 |
| |||||||||||||||||||||||||||
Service cost | $ |
| — |
|
| $ |
| — |
|
| $ |
| 54 |
|
| $ |
| 44 |
| |||||||||||||||||||
Interest cost |
|
| 8 |
|
|
| 8 |
|
|
| 93 |
|
|
| 91 |
| ||||||||||||||||||||||
Amortization of prior service cost |
|
| — |
|
|
| — |
|
|
| (36 | ) |
|
| (37 | ) | ||||||||||||||||||||||
Recognized actuarial net loss |
|
| 10 |
|
|
|
| 7 |
|
|
|
| 40 |
|
|
|
| 4 |
| |||||||||||||||||||
Net periodic expense | $ |
| 18 |
|
| $ |
| 15 |
|
| $ |
| 151 |
|
| $ |
| 102 |
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
| October 10, 2015 |
|
| October 4, 2014 |
| |||||||||||||||||||||||||||||||||
40 Weeks Ended | SpartanNash |
|
| Combined SpartanNash |
|
| Cash Balance |
|
| Super Foods |
| |||||||||||||||||||||||||||
(In thousands) | Pension Plan |
|
| Pension Plan * |
|
| Pension Plan |
|
| Pension Plan |
| |||||||||||||||||||||||||||
Interest cost | $ |
| 2,558 |
|
| $ |
| 3,390 |
|
| $ |
| 1,854 |
|
| $ |
| 1,536 |
| |||||||||||||||||||
Expected return on plan assets |
|
| (3,787 | ) |
|
| (4,664 | ) |
|
| (2,891 | ) |
|
| (1,773 | ) | ||||||||||||||||||||||
Recognized actuarial net loss |
|
| 636 |
|
|
|
| 761 |
|
|
|
| 761 |
|
|
|
| - |
| |||||||||||||||||||
Net periodic benefit | $ |
| (593 | ) |
| $ |
| (513 | ) |
| $ |
| (276 | ) |
| $ |
| (237 | ) | |||||||||||||||||||
Settlement expense |
|
| 437 |
|
|
|
| 783 |
|
|
|
| 783 |
|
|
|
| - |
| |||||||||||||||||||
Total (income) expense | $ |
| (156 | ) |
| $ |
| 270 |
|
| $ |
| 507 |
|
| $ |
| (237 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
| SERP |
|
| Spartan Stores Medical Plan |
| |||||||||||||||||||||||||||||||||
40 Weeks Ended |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
(In thousands) | October 10, 2015 |
|
| October 4, 2014 |
|
| October 10, 2015 |
|
| October 4, 2014 |
| |||||||||||||||||||||||||||
Service cost | $ |
| — |
|
| $ |
| — |
|
| $ |
| 178 |
|
| $ |
| 144 |
| |||||||||||||||||||
Interest cost |
|
| 25 |
|
|
| 27 |
|
|
| 311 |
|
|
| 303 |
| ||||||||||||||||||||||
Amortization of prior service cost |
|
| — |
|
|
| — |
|
|
| (121 | ) |
|
| (122 | ) | ||||||||||||||||||||||
Recognized actuarial net loss |
|
| 32 |
|
|
|
| 23 |
|
|
|
| 133 |
|
|
|
| 15 |
| |||||||||||||||||||
Net periodic expense | $ |
| 57 |
|
| $ |
| 50 |
|
| $ |
| 501 |
|
| $ |
| 340 |
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
*The amounts above reflect the combined values of the Cash Balance and Super Foods Pension Plans as of October 4, 2014. |
| |||||||||||||||||||||||||||||||||||||
Total expense (income) | $ |
| (324 | ) |
| $ |
| (62 | ) |
| $ |
| 128 |
|
| $ |
| 200 |
|
On December 31, 2014, the Super Foods Plan was merged into the Cash Balance Pension Plan which was renamed the SpartanNash Company Pension Plan. The Company madedid not make any contributions of $0.7 million to the SpartanNash Company Pension Plan during the 4016 weeks ended October 10, 2015. This amount was determined based on 2014 plan year funding valuation results of the legacy Super Foods Plan. The CompanyApril 23, 2016, and because there are no required payments, does not expect to make any additional contributions for the fiscal year ending January 2,December 31, 2016.
12
As previously statedIn addition to the plans listed above, the Company participates in Note 8, SpartanNash contributes to the Central States Southeast and Southwest Areas Pension Fund (EIN 7456500) under, the termsMichigan Conference of the existingTeamsters and Ohio Conference of Teamsters Health and Welfare plans (collectively referred to as “multi-employer plans”), and other company-sponsored defined contribution plans for most associates covered by collective bargaining agreements andagreements.
With respect to the Company’s participation in the amounts set forth in the related collective bargaining agreements. SpartanNash employerCentral States Plan, expense is recognized as contributions during the fiscal year ended January 3, 2015 totaled $12.9 million, which fund administrators represent is less than 5% of total employer contributions to the Fund. SpartanNash’s employerare funded. The Company’s contributions for the 4016 weeks ended October 10,April 23, 2016 and April 25, 2015 and October 4, 2014 were $9.9$4.2 million and $10.3 million, respectively. Based onin each period. See Note 8 for further information regarding the most recent information available to SpartanNash, management believes thatCompany’s participation in 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.Central States Plan.
Note 10 – Accumulated 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, accumulatedAccumulated other comprehensive income or loss (“AOCI”) represents the cumulative balance of other comprehensive income (loss), net of tax, as of the balance sheet date. For SpartanNash, AOCI isend of the cumulative balance relatedreporting period and relates to pension and other postretirement benefits.
During the 12 week periods ended October 10, 2015 and October 4, 2014, $0.1 million was reclassified frombenefits obligation adjustments. Changes in AOCI to the Condensed Consolidated Statement of Earnings, of which $0.2 million increased selling, general and administrative expenses and $0.1 million reduced income taxes. During the 40 week periods ended October 10, 2015 and October 4, 2014, $0.4 million was reclassified from AOCI to the Condensed Consolidated Statement of Earnings, of which $0.7 million increased selling, general and administrative expenses and $0.3 million reduced income taxes.are as follows:
| 16 Weeks Ended |
| |||||||
| April 23, |
|
| April 25, |
| ||||
(In thousands) | 2016 |
|
| 2015 |
| ||||
Balance at beginning of the fiscal year, net of tax | $ |
| (11,447 | ) |
| $ |
| (11,655 | ) |
Amortization of amounts included in net periodic benefit cost (1) |
|
| 2 |
|
|
|
| 272 |
|
Income tax expense (2) |
|
| (1 | ) |
|
|
| (103 | ) |
Amounts reclassified out of AOCI, net of tax |
|
| 1 |
|
|
|
| 169 |
|
Other comprehensive income (loss), net of tax |
|
| 1 |
|
|
|
| 169 |
|
Balance at end of the period, net of tax | $ |
| (11,446 | ) |
| $ |
| (11,486 | ) |
(1) | Reclassified from AOCI into Selling, general and administrative expense. Amortization of amounts included in net periodic benefit cost includes amortization of prior service cost and amortization of net actuarial loss. |
(2) | Reclassified from AOCI into Income tax expense. |
Note 11 – Income Taxes
The effective income tax rate was 37.5%37.7% and 39.0% for the 1216 weeks ended October 10,April 23, 2016 and April 25, 2015, and October 4, 2014, respectively. For the 40 weeks ended October 10, 2015 and October 4, 2014, the effective income tax rate was 37.4% and 37.6%, respectively. The differences from the Federalfederal statutory rate are due to states taxes and tax credits in the current year and state taxes in the prior year periods are primarily due to state income taxes.year.
Note 12 Share Based– Stock-Based Compensation
SpartanNashThe Company has a shareholder-approved stock incentive plan that provides 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 and stock-related 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-basedStock-based compensation expense (net of tax) recognized and included in “Selling, general and administrative expenses” and “Income taxes” in the condensed consolidated statements of $0.5earnings was $3.1 million ($0.010.08 per diluted share) and $0.6$2.9 million ($0.020.08 per diluted share) for the 1216 weeks ended October 10,April 23, 2016 and April 25, 2015, and October 4, 2014, 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 $4.0 million ($0.11 per diluted share) and $3.7 million ($0.10 per diluted share) for the 40 weeks ended October 10, 2015 and October 4, 2014, respectively.
13
The following table summarizes activity in the share-basedstock-based compensation plans for the 4016 weeks ended October 10, 2015:April 23, 2016:
| 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 |
| — |
|
|
|
| — |
|
|
| 314,595 |
|
|
| 26.59 |
|
Exercised/Vested |
| (184,877 | ) |
|
|
| 19.74 |
|
|
| (265,737 | ) |
|
| 23.19 |
|
Cancelled/Forfeited |
| (63 | ) |
|
|
| 11.50 |
|
|
| (11,136 | ) |
|
| 23.65 |
|
Outstanding at October 10, 2015 |
| 309,543 |
|
| $ |
| 21.13 |
|
|
| 638,375 |
|
|
| 24.75 |
|
Vested and expected to vest in the future at October 10, 2015 |
| 309,543 |
|
| $ |
| 21.13 |
|
|
|
|
|
|
|
|
|
Exercisable at October 10, 2015 |
| 309,543 |
|
| $ |
| 21.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted |
| ||
| Shares |
|
| Weighted |
|
| Restricted |
|
| Average |
| ||||||
| Under |
|
| Average |
|
| Stock |
|
| Grant-Date |
| ||||||
| Options |
|
| Exercise Price |
|
| Awards |
|
| Fair Value |
| ||||||
Outstanding at January 2, 2016 |
| 308,793 |
|
| $ |
| 21.15 |
|
|
| 637,555 |
|
| $ |
| 24.75 |
|
Granted |
| — |
|
|
|
| — |
|
|
| 296,672 |
|
|
|
| 28.30 |
|
Exercised/Vested |
| (45,038 | ) |
|
|
| 20.78 |
|
|
| (169,058 | ) |
|
|
| 24.95 |
|
Cancelled/Forfeited |
| — |
|
|
|
| — |
|
|
| (8,338 | ) |
|
|
| 24.65 |
|
Outstanding at April 23, 2016 |
| 263,755 |
|
| $ |
| 21.21 |
|
|
| 756,831 |
|
| $ |
| 26.10 |
|
Vested and expected to vest in the future at April 23, 2016 |
| 263,755 |
|
| $ |
| 21.21 |
|
|
|
|
|
|
|
|
|
|
Exercisable at April 23, 2016 |
| 263,755 |
|
| $ |
| 21.21 |
|
|
|
|
|
|
|
|
|
|
There were no13
The Company has not issued any stock options granted during the 40 weeks ended October 10, 2015since 2009 and October 4, 2014.all outstanding options are vested.
As of October 10, 2015,April 23, 2016, total unrecognized compensation costcosts related to non-vested share-based awards granted under the Company’s stock incentive plans was $6.4were $8.9 million for restricted stock. The remaining compensation costs not yet recognizedstock, and are expected to be recognized over a weighted average period of 2.5 years for restricted stock.2.6 years. All compensation costs related to stock options have been recognized.
Note 13 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.
Note 14– Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share forfrom continuing operations:
| 12 Weeks Ended |
|
| 40 Weeks Ended |
| 16 Weeks Ended |
| |||||||||||||||||||||
| October 10, |
|
| October 4, |
|
| October 10, |
|
| October 4, |
| April 23, |
|
| April 25, |
| ||||||||||||
(In thousands, except per share amounts) | 2015 |
|
| 2014 |
|
| 2015 |
|
| 2014 |
| 2016 |
|
| 2015 |
| ||||||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations | $ |
| 15,248 |
|
| $ |
| 17,169 |
|
| $ |
| 46,002 |
|
| $ |
| 47,083 |
| $ |
| 9,960 |
|
| $ |
| 10,447 |
|
Adjustment for earnings attributable to participating securities |
|
| (259 | ) |
|
|
| (280 | ) |
|
|
| (806 | ) |
|
|
| (820 | ) |
|
| (178 | ) |
|
|
| (189 | ) |
Earnings from continuing operations used in calculating earnings per share | $ |
| 14,989 |
|
| $ |
| 16,889 |
|
| $ |
| 45,196 |
|
| $ |
| 46,263 |
| $ |
| 9,782 |
|
| $ |
| 10,258 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, including participating securities |
|
| 37,553 |
|
|
|
| 37,717 |
|
|
| 37,617 |
|
|
| 37,678 |
|
|
| 37,488 |
|
|
| 37,689 |
| |||
Adjustment for participating securities |
|
| (639 | ) |
|
|
| (616 | ) |
|
|
| (659 | ) |
|
|
| (656 | ) |
|
| (669 | ) |
|
|
| (682 | ) |
Shares used in calculating basic earnings per share |
|
| 36,914 |
|
|
|
| 37,101 |
|
|
|
| 36,958 |
|
|
|
| 37,022 |
|
|
| 36,819 |
|
|
|
| 37,007 |
|
Effect of dilutive stock options |
|
| 100 |
|
|
|
| 61 |
|
|
|
| 118 |
|
|
|
| 71 |
|
|
| 56 |
|
|
|
| 113 |
|
Shares used in calculating diluted earnings per share |
|
| 37,014 |
|
|
|
| 37,162 |
|
|
|
| 37,076 |
|
|
|
| 37,093 |
|
|
| 36,875 |
|
|
|
| 37,120 |
|
Basic earnings per share from continuing operations | $ |
| 0.41 |
|
| $ |
| 0.46 |
|
| $ |
| 1.22 |
|
| $ |
| 1.25 |
| $ |
| 0.27 |
|
| $ |
| 0.28 |
|
Diluted earnings per share from continuing operations | $ |
| 0.40 |
|
| $ |
| 0.45 |
|
| $ |
| 1.22 |
|
| $ |
| 1.25 |
| $ |
| 0.27 |
|
| $ |
| 0.28 |
|
14
Note 1514 – Supplemental Cash Flow Information
Non-cash financing activities include the issuance of restricted stock to employees and directors of $8.4 million and $7.2 million for the 40 weeks ended October 10, 2015 and October 4, 2014, respectively. Non-cash investing activities include capital expenditures included in accounts payable of $2.6 million and $3.6 million for the 40 weeks ended October 10, 2015 and October 4, 2014, respectively. In the 40 weeks ended October 10, 2015, the Company entered into new capital lease agreements totaling $1.9 million.Supplemental cash flow information is as follows:
| 16 Weeks Ended |
| |||||||
| April 23, |
|
| April 25, |
| ||||
(In thousands) | 2016 |
|
| 2015 |
| ||||
Non-cash financing activities: |
|
|
|
|
|
|
|
|
|
Issuance of restricted stock to associates and directors | $ |
| 8,396 |
|
| $ |
| 8,274 |
|
Capital lease obligations |
|
| 3,651 |
|
|
|
| — |
|
Non-cash investing activities: |
|
|
|
|
|
|
|
|
|
Capital expenditures included in accounts payable |
|
| 2,644 |
|
|
|
| 2,038 |
|
Capital lease asset additions |
|
| 3,651 |
|
|
|
| — |
|
Other supplemental cash flow information: |
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
| 4,479 |
|
|
|
| 3,964 |
|
14
Note 16 Operating15 – Reporting Segment Information
The following tables set forth information about SpartanNashthe Company by operatingreporting segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(In thousands) | Military |
|
| Food Distribution |
|
| Retail |
|
| Total |
| Military |
|
| Food Distribution |
|
| Retail |
|
| Total |
| ||||||||||||
12 Week Period Ended October 10, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
16 Weeks Ended April 23, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net sales to external customers | $ | 505,971 |
|
| $ | 762,250 |
|
| $ | 507,180 |
|
| $ | 1,775,401 |
| $ |
| 674,523 |
|
| $ |
| 991,137 |
|
| $ |
| 613,110 |
|
| $ |
| 2,278,770 |
|
Inter-segment sales |
| — |
|
|
| 232,169 |
|
|
| — |
|
|
| 232,169 |
|
|
| — |
|
|
| 277,003 |
|
|
| — |
|
|
| 277,003 |
| |||
Merger integration and acquisition expenses |
| — |
|
|
| 323 |
|
|
| 4,094 |
|
|
| 4,417 |
|
|
| 1 |
|
|
| 468 |
|
|
| 428 |
|
|
| 897 |
| |||
Depreciation and amortization |
| 2,838 |
|
|
| 6,131 |
|
|
| 10,753 |
|
|
| 19,722 |
|
|
| 3,475 |
|
|
| 6,470 |
|
|
| 13,424 |
|
|
| 23,369 |
| |||
Operating earnings |
| 3,438 |
|
|
| 16,540 |
|
|
| 9,246 |
|
|
| 29,224 |
| |||||||||||||||||||
Operating earnings (loss) |
|
| 3,433 |
|
|
| 25,856 |
|
|
| (7,629 | ) |
|
| 21,660 |
| ||||||||||||||||||
Capital expenditures |
| 359 |
|
|
| 4,690 |
|
|
| 14,627 |
|
|
| 19,676 |
|
|
| 2,335 |
|
|
| 5,522 |
|
|
| 10,233 |
|
|
| 18,090 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
(In thousands) | Military |
|
| Food Distribution |
|
| Retail |
|
| Total |
| |||||||||||||||||||||||
12 Week Period Ended October 4, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
16 Weeks Ended April 25, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Net sales to external customers | $ | 523,553 |
|
| $ | 764,288 |
|
| $ | 521,730 |
|
| $ | 1,809,571 |
| $ |
| 699,394 |
|
| $ |
| 986,435 |
|
| $ |
| 626,854 |
|
| $ |
| 2,312,683 |
|
Inter-segment sales |
| — |
|
|
| 223,809 |
|
|
| — |
|
|
| 223,809 |
|
|
| — |
|
|
| 281,275 |
|
|
| — |
|
|
| 281,275 |
| |||
Merger integration and acquisition expenses |
| 3 |
|
|
| 1,375 |
|
|
| 1 |
|
|
| 1,379 |
|
|
| — |
|
|
| 2,187 |
|
|
| 497 |
|
|
| 2,684 |
| |||
Depreciation and amortization |
| 2,751 |
|
|
| 6,931 |
|
|
| 10,269 |
|
|
| 19,951 |
|
|
| 3,733 |
|
|
| 8,536 |
|
|
| 13,516 |
|
|
| 25,785 |
| |||
Operating earnings |
| 5,651 |
|
|
| 13,834 |
|
|
| 14,127 |
|
|
| 33,612 |
| |||||||||||||||||||
Operating earnings (loss) |
|
| 6,158 |
|
|
| 20,249 |
|
|
| (2,554 | ) |
|
| 23,853 |
| ||||||||||||||||||
Capital expenditures |
| 1,120 |
|
|
| 9,329 |
|
|
| 9,542 |
|
|
| 19,991 |
|
|
| 584 |
|
|
| 3,553 |
|
|
| 8,587 |
|
|
| 12,724 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(In thousands) | Military |
|
| Food Distribution |
|
| Retail |
|
| Total |
| |||||||||||||||||||||||
40 Week Period Ended October 10, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Net sales to external customers | $ | 1,702,412 |
|
| $ | 2,531,428 |
|
| $ | 1,650,108 |
|
| $ | 5,883,948 |
| |||||||||||||||||||
Inter-segment sales |
| — |
|
|
| 742,531 |
|
|
| — |
|
|
| 742,531 |
| |||||||||||||||||||
Merger integration and acquisition expenses |
| — |
|
|
| 1,359 |
|
|
| 5,893 |
|
|
| 7,252 |
| |||||||||||||||||||
Depreciation and amortization |
| 9,381 |
|
|
| 20,836 |
|
|
| 34,743 |
|
|
| 64,960 |
| |||||||||||||||||||
Operating earnings |
| 13,491 |
|
|
| 56,195 |
|
|
| 20,185 |
|
|
| 89,871 |
| |||||||||||||||||||
Capital expenditures |
| 2,738 |
|
|
| 13,785 |
|
|
| 40,339 |
|
|
| 56,862 |
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(In thousands) | Military |
|
| Food Distribution |
|
| 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 integration and acquisition 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) | October 10, 2015 |
|
| January 3, 2015 |
| April 23, 2016 |
|
| January 2, 2016 |
| ||||||
Total Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Military | $ | 457,827 |
|
| $ | 435,647 |
| $ |
| 410,675 |
|
| $ |
| 415,140 |
|
Food Distribution |
| 752,703 |
|
|
| 763,914 |
|
|
| 777,273 |
|
|
| 750,277 |
| |
Retail |
| 737,276 |
|
|
| 727,979 |
|
|
| 729,358 |
|
|
| 747,359 |
| |
Discontinued operations |
| 18,547 |
|
|
| 4,742 |
|
|
| 3,478 |
|
|
|
| 4,487 |
|
Total | $ | 1,966,353 |
|
| $ | 1,932,282 |
| $ |
| 1,920,784 |
|
| $ |
| 1,917,263 |
|
15
The Company offers a wide variety of grocery products, general merchandise and health and beauty care, pharmacy, fuel, and other items and services. 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 10, 2015 |
|
| October 4, 2014 |
|
| October 10, 2015 |
|
| October 4, 2014 |
| |||||||||||||||||||||||||||||||||||||
(in thousands, except percentages) | April 23, 2016 |
|
| April 25, 2015 |
| |||||||||||||||||||||||||||||||||||||||||||
Non-perishables (1) | $ | 1,123,748 |
|
|
| 63.3 | % |
| $ | 1,146,410 |
|
|
| 63.4 | % |
| $ | 3,719,370 |
|
|
| 63.2 | % |
| $ | 3,753,373 |
|
|
| 63.1 | % | $ |
| 1,452,576 |
|
|
| 63.7 | % |
| $ |
| 1,472,711 |
|
|
| 63.7 | % |
Perishables (2) |
| 550,682 |
|
|
| 31.0 | % |
|
| 554,970 |
|
|
| 30.7 | % |
|
| 1,834,636 |
|
|
| 31.2 | % |
|
| 1,840,802 |
|
|
| 30.9 | % |
|
| 694,450 |
|
|
| 30.5 | % |
|
| 713,034 |
|
|
| 30.8 | % | |
Pharmacy |
| 70,772 |
|
|
| 4.0 | % |
|
| 65,733 |
|
|
| 3.6 | % |
|
| 231,929 |
|
|
| 3.9 | % |
|
| 215,459 |
|
|
| 3.6 | % |
|
| 104,590 |
|
|
| 4.6 | % |
|
| 92,039 |
|
|
| 4.0 | % | |
Fuel |
| 30,199 |
|
|
| 1.7 | % |
|
| 42,458 |
|
|
| 2.3 | % |
|
| 98,013 |
|
|
| 1.7 | % |
|
| 143,839 |
|
|
| 2.4 | % |
|
| 27,154 |
|
|
| 1.2 | % |
|
|
| 34,899 |
|
|
| 1.5 | % |
Consolidated net sales | $ | 1,775,401 |
|
|
| 100.0 | % |
| $ | 1,809,571 |
|
|
| 100.0 | % |
| $ | 5,883,948 |
|
|
| 100.0 | % |
| $ | 5,953,473 |
|
|
| 100.0 | % | $ |
| 2,278,770 |
|
|
| 100.0 | % |
| $ |
| 2,312,683 |
|
|
| 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 17 Subsequent Events
On November 2, 2015, the Company called for redemption all of the outstanding $50.0 million aggregate principal amount of the 6.625% Senior Notes due December 2016 (the “Notes”). The Company will redeem the Notes for cash using borrowings under its revolving credit facility. The redemption will occur on December 15, 2015. Notes called for redemption became due and payable on the redemption date at a cash redemption price of 101.65625% of the principal amount of the Notes, plus accrued and unpaid interest. One-time charges of $1.1 million are expected to be incurred consisting of the redemption premium and the write-off of unamortized issuance costs. As a result of the redemption, the Company expects to reduce annual interest expense by approximately $2.0 million, partially offset by future interest rate increases.
16
15
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Executive This Management’s Discussion and Analysis of financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q, the information contained under the caption “Forward-Looking Statements,” which appears at the beginning of this report, and the information in the Company’s Annual Report on Form 10-K for the fiscal year ended January 2, 2016.
Overview
SpartanNash Company is headquartered in Grand Rapids, Michigan. The Company’s business consists of three primary operating segments: Military, Food DistributionMichigan and Retail. The Company is a leading multi-regional grocery distributor and grocery retailer and the largest distributor, by revenue, of grocery products to military commissaries and exchanges in the United States. The Company operates three reportable business segments: Military, Food Distribution and Retail.
The Company’s 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, Cuba, Puerto Rico, Bahrain and Egypt. The Company has over 40 years of experience acting as a distributor to U.S. military commissaries and exchanges.
The Company’s 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,delicatessen items, bakery goods, frozen food, seafood, floral products, general merchandise, pharmacy andbeverages, tobacco products, health and beauty care. The Company provides thesecare products from 12 distribution centersand pharmacy to approximately 2,100 independent retail locationsindependently-owned supermarkets and 164 corporate-owned160 Company-owned retail stores. The Food Distribution segment currently conducts business in 4647 states, primarily in the Midwest, Great Lakes, and Southeast regions of the United States. The Company also services a large national retailer, with certain product classes.Dollar General, through its Food Distribution salessegment. Sales are made to more than 13,50013,000 retail locations for this customer.
The Company’s Retail segment currently operates 164160 supermarkets in the Midwest and Great Lakes regions primarily under the banners of Family Fare Supermarkets, Family Fresh Markets, D&W Fresh Markets, and SunMart.Sun Mart. On June 16, 2015, SpartanNash acquired six supermarkets from Dan’s Super Market, Inc. (“Dan’s”) in BismarckCompany-owned retail stores offer nationally branded and Mandan, North Dakota. The Company’s retail supermarkets typically offerprivate label grocery products and perishable food products, including dry groceries, produce, dairy products, meat, delicatessen items, bakery goods, frozen food, seafood, floral products, general merchandise, beverages, tobacco products and health and beauty care products, delicatessen items and bakery goods.products. The Company offers pharmacy services in 7991 of its supermarkets and also operates 29 fuel centers. The retail supermarkets have a “neighborhood market” focus to distinguish them from supercenters and limited assortment stores.
Typically, allAll fiscal quarters are 12 weeks, except for the Company’s first quarter, which is 16 weeks and will generally include the Easter holiday. The fourth quarter includes the Thanksgiving and Christmas holidays. Fiscal 2014 was comprised of 53 weeks. As a result,
During the fourthfirst quarter of fiscal 2014 consisted2016, the Company continued to execute on its strategic initiatives, enhance its merchandising, pricing and promotional programs, and explore supply chain solutions to grow its business in the Food Distribution and Military segments. The Company continued to benefit from improvements in its overall operations and expense leverage through its supply chain optimization and merger integration efforts. In spite of 13 weeks.the challenging operating environment, the Company maintained its disciplined focus on its key strategic initiatives relating to driving new business, improving operational efficiencies and maximizing its merger synergies.
First quarter fiscal 2016 operational highlights include:
· | The Company began distributing private brand products to its newest independent customer Gordy's Market, the largest locally owned and operated grocer in Western Wisconsin, in February and was fully servicing the account as its primary distributor by the end of the first quarter. |
· | In the Military segment, the Company continued to roll out the distribution of fresh products to commissaries and is encouraged by the potential opportunity to secure new volume to the ongoing business. |
· | The Company continued to integrate its supply chain organization to further optimize the network and increase asset utilization. The Company consolidated its Westville, Indiana warehouse, which was underutilized, into its Lima, Ohio facility. The Company also announced its plans to combine its warehouse in Statesboro, Georgia with its facility in Columbus, Georgia in the second quarter. The Company expects that the merger of these facilities will lead to lower costs over time for its customers, as well as enhanced product freshness and selection. Additionally, the Company anticipates improved efficiency across its Food Distribution and Military channels as a result. |
· | The Company completed four remodels in Michigan and began remodeling activities on eight stores in Omaha while closing three as part of its rebranding and marketing strategy. The Company plans to re-launch the entire Omaha region as Family Fare while completing the rollout of its customer loyalty program to that region. |
16
· | Introduced Open Acres, a new private brand for fresh products. This new brand will be rolled out during the upcoming year featuring items in meat, deli, bakery and produce. The introduction of the brand closes a gap in the private brands portfolio that existed in the non-Michigan footprint. These products will deliver national brand or better quality at a significant savings to consumers in both Company-owned and independent store locations. |
· | The Company also continues to expand its private brand program and living well offering for both its independent customers and Company-owned stores. This expanded offering includes the Company’s natural and organic Full Circle private brand line as well as a significant increase in SKUs across organic produce and healthier specialty items. |
Results of Operations
The following table sets forth items from the Condensed Consolidated Statementscondensed consolidated statements of Earningsearnings as a percentage of net sales and the year-to-year percentage change in the dollar amounts:
| Percentage of Net Sales |
|
| Percentage Change |
|
|
|
|
|
|
|
|
| Percentage |
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 12 Weeks |
|
| 40 Weeks |
| Percentage of Net Sales |
|
| Change |
| ||||||||
| 12 Weeks Ended |
|
| 40 Weeks Ended |
|
| Ended |
|
| Ended |
|
|
|
|
|
|
|
|
| 16 Weeks |
| |||||||||||||
| October 10, |
|
| October 4, |
|
| October 10, |
|
| October 4, |
|
| October 10, |
|
| October 10, |
| 16 Weeks Ended |
|
| Ended |
| ||||||||||||
(Unaudited) | 2015 |
|
| 2014 |
|
| 2015 |
|
| 2014 |
|
| 2015 |
|
| 2015 |
| |||||||||||||||||
| April 23, |
|
| April 25, |
|
| April 23, |
| ||||||||||||||||||||||||||
| 2016 |
|
| 2015 |
|
| 2016 |
| ||||||||||||||||||||||||||
Net sales |
| 100.0 |
|
|
| 100.0 |
|
|
| 100.0 |
|
|
| 100.0 |
|
|
| (1.9 | ) |
|
| (1.2 | ) |
| 100.0 |
|
|
| 100.0 |
|
|
| (1.5 | ) |
Gross profit |
| 14.6 |
|
|
| 14.4 |
|
|
| 14.6 |
|
|
| 14.7 |
|
|
| (0.9 | ) |
|
| (1.9 | ) |
| 14.7 |
|
|
| 14.5 |
|
|
| (0.6 | ) |
Merger integration and acquisition |
| 0.2 |
|
|
| 0.1 |
|
|
| 0.1 |
|
|
| 0.1 |
|
| ** |
|
|
| (10.8 | ) |
| 0.0 |
|
|
| 0.1 |
|
|
| (66.6 | ) | |
Selling, general and administrative expenses |
| 12.8 |
| * |
| 12.5 |
| * |
| 12.9 |
| * |
| 13.0 |
|
|
| (1.3 | ) |
|
| (2.5 | ) |
| 13.0 |
|
|
| 13.1 |
|
|
| (2.0 | ) |
Restructuring charges and asset impairment |
| 0.0 |
|
|
| (0.1 | ) |
|
| 0.1 |
|
|
| (0.0 | ) |
| ** |
|
| ** |
|
| 0.7 |
|
|
| 0.3 |
|
|
| 108.6 |
| ||
Operating earnings |
| 1.6 |
|
|
| 1.9 |
|
|
| 1.5 |
|
|
| 1.6 |
|
|
| (13.1 | ) |
|
| (4.2 | ) |
| 1.0 |
|
|
| 1.0 |
|
|
| (9.2 | ) |
Other income and expenses |
| 0.2 |
| * |
| 0.3 |
|
|
| 0.3 |
|
|
| 0.3 |
|
|
| (11.5 | ) |
|
| (10.8 | ) |
| 0.3 |
| * |
| 0.3 |
|
|
| (15.6 | ) |
Earnings before income taxes and discontinued operations |
| 1.4 |
|
|
| 1.6 |
|
|
| 1.2 |
|
|
| 1.3 |
|
|
| (13.3 | ) |
|
| (2.6 | ) |
| 0.7 |
|
|
| 0.7 |
|
|
| (6.7 | ) |
Income taxes |
| 0.5 |
|
|
| 0.7 |
| * |
| 0.4 |
| * |
| 0.5 |
|
|
| (16.7 | ) |
|
| (3.1 | ) |
| 0.3 |
|
|
| 0.2 |
| * |
| (9.8 | ) |
Earnings from continuing operations |
| 0.9 |
|
|
| 0.9 |
|
|
| 0.8 |
|
|
| 0.8 |
|
|
| (11.2 | ) |
|
| (2.3 | ) |
| 0.4 |
|
|
| 0.5 |
|
|
| (4.7 | ) |
Loss from discontinued operations, net of taxes |
| 0.0 |
|
|
| (0.0 | ) |
|
| (0.0 | ) |
|
| (0.0 | ) |
| ** |
|
| ** |
|
| (0.0 | ) |
|
| (0.1 | ) | * |
| (9.5 | ) | ||
Net earnings |
| 0.9 |
|
|
| 0.9 |
|
|
| 0.8 |
|
|
| 0.8 |
|
|
| (10.0 | ) |
|
| (1.6 | ) |
| 0.4 |
|
|
| 0.4 |
|
|
| (4.6 | ) |
* | Difference due to rounding |
|
|
17
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 as a whole and for its operating segments. The Company considers adjusted operating earnings as an additional way to measure operating performance on an ongoing basis. Adjusted operating earnings is meant to reflect the ongoing operating performance of all of its distribution and retail operations; consequently, it excludes the impact of items that could be considered “non-operating” or “non-core” in nature, and also excludes the contributions of activities classified as discontinued operations. Because adjusted operating earnings and adjusted operating earnings by segment are performance measures that management uses to allocate resources, assess performance against its peers and evaluate overall performance, the Company believes it provides useful information for investors. In addition, securities analysts, fund managers and other shareholders and stakeholders that communicate with the Company request its operating financial results in adjusted operating earnings format.
Adjusted operating earnings is not a measure of performance under accounting principles generally accepted in the United States of America, and should not be considered as a substitute for operating earnings, cash flows from operating activities and other income or cash flow statement data. The Company’s definition of adjusted operating earnings may not be identical to similarly titled measures reported by other companies.
1817
Following is an unauditeda reconciliation of operating earnings to adjusted operating earnings for the 12 and 4016 weeks ended October 10, 2015April 23, 2016 and October 4, 2014.April 25, 2015.
(Unaudited) | 12 Weeks Ended |
|
| 40 Weeks Ended |
| ||||||||||
(In thousands) | October 10, 2015 |
|
| October 4, 2014 |
|
| October 10, 2015 |
|
| October 4, 2014 |
| ||||
Operating earnings | $ | 29,224 |
|
| $ | 33,612 |
|
| $ | 89,871 |
|
| $ | 93,839 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger integration and acquisition |
| 4,417 |
|
|
| 1,379 |
|
|
| 7,252 |
|
|
| 8,128 |
|
Restructuring charges (gains) and asset impairment |
| 760 |
|
|
| (1,272 | ) |
|
| 7,762 |
|
|
| (67 | ) |
One-time charges related to cost reduction initiatives |
| 371 |
|
|
| — |
|
|
| 371 |
|
|
| — |
|
Fees and expenses related to tax planning strategies |
| — |
|
|
| — |
|
|
| 569 |
|
|
| — |
|
Adjusted operating earnings | $ | 34,772 |
|
| $ | 33,719 |
|
| $ | 105,825 |
|
| $ | 101,900 |
|
Reconciliation of operating earnings to adjusted operating earnings by segment:
| 16 Weeks Ended |
| ||||||||||||||||||||||
(In thousands) | April 23, 2016 |
|
| April 25, 2015 |
| |||||||||||||||||||
Operating earnings |
|
| 21,660 |
|
|
|
| 23,853 |
| |||||||||||||||
Adjustments: |
|
|
|
|
|
|
|
|
| |||||||||||||||
Merger integration and acquisition |
|
| 897 |
|
|
|
| 2,684 |
| |||||||||||||||
Restructuring charges and asset impairment |
|
| 15,304 |
|
|
|
| 7,338 |
| |||||||||||||||
Severance associated with cost reduction initiatives |
|
| 679 |
|
|
|
| — |
| |||||||||||||||
Adjusted operating earnings | $ |
| 38,540 |
|
| $ |
| 33,875 |
| |||||||||||||||
Reconciliation of operating earnings to adjusted operating earnings by segment: | Reconciliation of operating earnings to adjusted operating earnings by segment: |
| ||||||||||||||||||||||
Military: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Operating earnings | $ | 3,438 |
|
| $ | 5,651 |
|
| $ | 13,491 |
|
| $ | 15,956 |
| $ |
| 3,433 |
|
| $ |
| 6,158 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger integration and acquisition |
| — |
|
|
| 3 |
|
|
| — |
|
|
| 27 |
|
|
| 1 |
|
|
|
| — |
|
Restructuring charges and asset impairment |
| 984 |
|
|
| — |
|
|
| 984 |
|
|
| — |
|
|
| 32 |
|
|
|
| — |
|
One-time charges related to cost reduction initiatives |
| 95 |
|
|
| — |
|
|
| 95 |
|
|
| — |
| |||||||||
Fees and expenses related to tax planning strategies |
| — |
|
|
| — |
|
|
| 75 |
|
|
| — |
| |||||||||
Severance associated with cost reduction initiatives |
|
| 222 |
|
|
|
| — |
| |||||||||||||||
Adjusted operating earnings | $ | 4,517 |
|
| $ | 5,654 |
|
| $ | 14,645 |
|
| $ | 15,983 |
| $ |
| 3,688 |
|
| $ |
| 6,158 |
|
Food Distribution: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings | $ | 16,540 |
|
| $ | 13,834 |
|
| $ | 56,195 |
|
| $ | 38,713 |
| $ |
| 25,856 |
|
| $ |
| 20,249 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger integration and acquisition |
| 323 |
|
|
| 1,375 |
|
|
| 1,359 |
|
|
| 8,097 |
|
|
| 468 |
|
|
|
| 2,187 |
|
Restructuring charges (gains) and asset impairment |
| 41 |
|
|
| — |
|
|
| (237 | ) |
|
| 1,029 |
|
|
| 2,233 |
|
|
|
| (281 | ) |
One-time charges related to cost reduction initiatives |
| 116 |
|
|
| — |
|
|
| 116 |
|
|
| — |
| |||||||||
Fees and expenses related to tax planning strategies |
| — |
|
|
| — |
|
|
| 282 |
|
|
| — |
| |||||||||
Severance associated with cost reduction initiatives |
|
| 206 |
|
|
|
| — |
| |||||||||||||||
Adjusted operating earnings | $ | 17,020 |
|
| $ | 15,209 |
|
| $ | 57,715 |
|
| $ | 47,839 |
| $ |
| 28,763 |
|
| $ |
| 22,155 |
|
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings | $ | 9,246 |
|
| $ | 14,127 |
|
| $ | 20,185 |
|
| $ | 39,170 |
| |||||||||
Operating loss | $ |
| (7,629 | ) |
| $ |
| (2,554 | ) | |||||||||||||||
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger integration and acquisition |
| 4,094 |
|
|
| 1 |
|
|
| 5,893 |
|
|
| 4 |
|
|
| 428 |
|
|
|
| 497 |
|
Restructuring (gains) charges and asset impairment |
| (265 | ) |
|
| (1,272 | ) |
|
| 7,015 |
|
|
| (1,096 | ) | |||||||||
One-time charges related to cost reduction initiatives |
| 160 |
|
|
| — |
|
|
| 160 |
|
|
| — |
| |||||||||
Fees and expenses related to tax planning strategies |
| — |
|
|
| — |
|
|
| 212 |
|
|
| — |
| |||||||||
Restructuring charges and asset impairment |
|
| 13,039 |
|
|
|
| 7,619 |
| |||||||||||||||
Severance associated with cost reduction initiatives |
|
| 251 |
|
|
|
| — |
| |||||||||||||||
Adjusted operating earnings | $ | 13,235 |
|
| $ | 12,856 |
|
| $ | 33,465 |
|
| $ | 38,078 |
| $ |
| 6,089 |
|
| $ |
| 5,562 |
|
Adjusted earningsEarnings from Continuing Operations
Adjusted earnings from continuing operations is a non-GAAP operating financial measure that the Company defines as earnings from continuing operations plus or minus adjustments for items that do not reflect the ongoing operating activities of the Company and costs associated with the closing of operational locations.
The Company believes that adjusted earnings from continuing operations provide a meaningful representation of its operating performance for the Company. The Company considers adjusted earnings from continuing operations as an additional way to measure operating performance on an ongoing basis. Adjusted earnings from continuing operations is meant to reflect the ongoing operating performance of all of its distribution and retail operations; consequently, it excludes the impact of items that could be considered “non-operating” or “non-core” in nature, and also excludes the contributions of activities classified as discontinued operations. Because adjusted earnings from continuing operations is a performance measure that management uses to allocate resources, assess performance against its peers and evaluate overall performance, the Company believes it provides useful information for investors. In addition, securities analysts, fund managers and other shareholders and stakeholders that communicate with the Company request its operating financial results in adjusted earnings from continuing operations format.
19
Adjusted earnings from continuing operations is not a measure of performance under accounting principles generally accepted in the United States of America, and should not be considered as a substitute for net earnings, cash flows from operating activities and other income or cash flow statement data. The Company’s definition of adjusted earnings from continuing operations may not be identical to similarly titled measures reported by other companies.
18
Following is an unauditeda reconciliation of earnings from continuing operations to adjusted earnings from continuing operations for the 12 and 4016 weeks ended October 10, 2015April 23, 2016 and October 4, 2014. April 25, 2015.
| 12 Weeks Ended |
|
| |||||||||||||
| October 10, 2015 |
|
| October 4, 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 | $ | 15,248 |
|
| $ | 0.40 |
|
| $ | 17,169 |
|
| $ | 0.45 |
|
|
Adjustments, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger integration and acquisition |
| 2,778 |
|
|
| 0.07 |
|
|
| 807 |
|
|
| 0.03 |
| * |
Restructuring charges (gains) and asset impairment |
| 469 |
|
|
| 0.01 |
|
|
| (782 | ) |
|
| (0.02 | ) |
|
One-time charges related to cost reduction initiatives |
| 229 |
|
|
| 0.01 |
|
|
| — |
|
|
| — |
|
|
Favorable settlement of unrecognized tax liability |
| (94 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
Adjusted earnings from continuing operations | $ | 18,630 |
|
| $ | 0.49 |
|
| $ | 17,194 |
|
| $ | 0.46 |
|
|
* Includes rounding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 40 Weeks Ended |
|
| |||||||||||||
| October 10, 2015 |
|
| October 4, 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 | $ | 46,002 |
|
| $ | 1.22 |
|
| $ | 47,083 |
|
| $ | 1.25 |
|
|
Adjustments, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger integration and acquisition |
| 4,474 |
|
|
| 0.12 |
|
|
| 4,999 |
|
|
| 0.13 |
|
|
Restructuring charges (gains) and asset impairment |
| 4,793 |
|
|
| 0.12 |
| * |
| (41 | ) |
|
| — |
|
|
One-time charges related to cost reduction initiatives |
| 229 |
|
|
| 0.01 |
|
|
| — |
|
|
| — |
|
|
Tax planning strategies, net of fees and expenses |
| (382 | ) |
|
| (0.01 | ) |
|
| — |
|
|
| — |
|
|
Favorable settlement of unrecognized tax liability |
| (94 | ) |
|
| — |
|
|
| (595 | ) |
|
| (0.02 | ) |
|
Adjusted earnings from continuing operations | $ | 55,022 |
|
| $ | 1.46 |
|
| $ | 51,446 |
|
| $ | 1.36 |
|
|
* Includes rounding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 16 Weeks Ended |
|
| |||||||||||||||||
| April 23, 2016 |
|
| April 25, 2015 |
|
| ||||||||||||||
|
|
|
|
|
| Earnings from |
|
|
|
|
|
|
| Earnings from |
|
| ||||
| Earnings |
|
| continuing |
|
| Earnings |
|
| continuing |
|
| ||||||||
| from |
|
| operations |
|
| from |
|
| operations |
|
| ||||||||
| continuing |
|
| per diluted |
|
| continuing |
|
| per diluted |
|
| ||||||||
(In thousands, except per share data) | operations |
|
| share |
|
| operations |
|
| share |
|
| ||||||||
Earnings from continuing operations | $ |
| 9,960 |
|
| $ |
| 0.27 |
|
| $ |
| 10,447 |
|
| $ |
| 0.28 |
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger integration and acquisition |
|
| 897 |
|
|
|
|
|
|
|
|
| 2,684 |
|
|
|
|
|
|
|
Restructuring charges and asset impairment |
|
| 15,304 |
|
|
|
|
|
|
|
|
| 7,338 |
|
|
|
|
|
|
|
Severance associated with cost reduction initiatives |
|
| 679 |
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
|
Total adjustments |
|
| 16,880 |
|
|
|
|
|
|
|
|
| 10,022 |
|
|
|
|
|
|
|
Income tax effect on adjustments |
|
| (6,428 | ) |
|
|
|
|
|
|
|
| (3,906 | ) |
|
|
|
|
|
|
Total adjustments, net of taxes |
|
| 10,452 |
|
|
|
| 0.27 |
|
|
|
| 6,116 |
|
|
|
| 0.16 |
|
|
Adjusted earnings from continuing operations | $ |
| 20,412 |
|
| $ |
| 0.54 |
|
| $ |
| 16,563 |
|
| $ |
| 0.44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Includes rounding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
Adjusted EBITDAEarnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) is a non-GAAP operating financial measure that the Company defines as operating earnings plus depreciation and amortization, and other non-cash items including deferred (stock) compensation, the LIFO provision, as well as adjustments for items that do not reflect the ongoing operating activities of the Company and costs associated with the closing of operational locations.
The Company believes that adjusted EBITDA provides a meaningful representation of its operating performance for the Company as a whole and for its operating segments. The Company considers adjusted EBITDA as an additional way to measure operating performance on an ongoing basis. Adjusted EBITDA is meant to reflect the ongoing operating performance of all of its distribution and retail operations; consequently, it excludes the impact of items that could be considered “non-operating” or “non-core” in nature, and also excludes the contributions of activities classified as discontinued operations. Because adjusted EBITDA and adjusted EBITDA by segment are performance measures that management uses to allocate resources, assess performance against its peers and evaluate overall performance, the Company believes it provides useful information for investors. In addition, securities analysts, fund managers and other shareholders and stakeholders that communicate with the Company request its operating financial results in adjusted EBITDA format.
20
Adjusted EBITDA is not a measure of performance under accounting principles generally accepted in the United States of America, and should not be considered as a substitute for net earnings, cash flows from operating activities and other income or cash flow statement data. The Company’s definition of adjusted EBITDA may not be identical to similarly titled measures reported by other companies.
19
Following is an unauditeda reconciliation of operatingnet earnings to adjusted EBITDA for the 12 and 4016 weeks ended October 10, 2015April 23, 2016 and October 4, 2014.April 25, 2015.
(Unaudited) | 12 Weeks Ended |
|
| 40 Weeks Ended |
| |||||||||||||||||||
| 16 Weeks Ended |
| ||||||||||||||||||||||
(In thousands) | October 10, 2015 |
|
| October 4, 2014 |
|
| October 10, 2015 |
|
| October 4, 2014 |
| April 23, 2016 |
|
| April 25, 2015 |
| ||||||||
Net earnings | $ |
| 9,851 |
|
| $ |
| 10,327 |
| |||||||||||||||
Loss from discontinued operations, net of tax |
|
| 109 |
|
|
| 120 |
| ||||||||||||||||
Income taxes |
|
| 6,027 |
|
|
|
| 6,684 |
| |||||||||||||||
Other expenses, net |
|
| 5,673 |
|
|
|
| 6,722 |
| |||||||||||||||
Operating earnings | $ | 29,224 |
|
| $ | 33,612 |
|
| $ | 89,871 |
|
| $ | 93,839 |
| $ |
| 21,660 |
|
| $ |
| 23,853 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
LIFO expense |
| 178 |
|
|
| 1,550 |
|
|
| 3,195 |
|
|
| 5,077 |
|
|
| 1,412 |
|
|
|
| 1,723 |
|
Depreciation and amortization |
| 19,722 |
|
|
| 19,951 |
|
|
| 64,960 |
|
|
| 66,921 |
|
|
| 23,369 |
|
|
|
| 25,785 |
|
Restructuring charges (gains) and asset impairment |
| 760 |
|
|
| (1,272 | ) |
|
| 7,762 |
|
|
| (67 | ) | |||||||||
Merger integration and acquisition |
| 4,417 |
|
|
| 1,379 |
|
|
| 7,252 |
|
|
| 8,128 |
|
|
| 897 |
|
|
|
| 2,684 |
|
Fees and expenses related to tax planning strategies |
| — |
|
|
| — |
|
|
| 569 |
|
|
| — |
| |||||||||
Stock based compensation |
| 808 |
|
|
| 953 |
|
|
| 6,470 |
|
|
| 6,017 |
| |||||||||
Restructuring charges and asset impairment |
|
| 15,304 |
|
|
|
| 7,338 |
| |||||||||||||||
Stock-based compensation |
|
| 5,024 |
|
|
|
| 4,753 |
| |||||||||||||||
Other non-cash charges (gains) |
| 123 |
|
|
| (262 | ) |
|
| (409 | ) |
|
| (812 | ) |
|
| 371 |
|
|
|
| (247 | ) |
Adjusted EBITDA | $ | 55,232 |
|
| $ | 55,911 |
|
| $ | 179,670 |
|
| $ | 179,103 |
| $ |
| 68,037 |
|
| $ |
| 65,889 |
|
Reconciliation of operating earnings to adjusted EBITDA by segment: | Reconciliation of operating earnings to adjusted EBITDA by segment: |
| ||||||||||||||||||||||
Military: |
|
|
|
|
|
|
|
| ||||||||||||||||
Operating earnings | $ |
| 3,433 |
|
| $ |
| 6,158 |
| |||||||||||||||
Adjustments: |
|
|
|
|
|
|
|
| ||||||||||||||||
LIFO expense |
|
| 311 |
|
|
|
| 388 |
| |||||||||||||||
Depreciation and amortization |
|
| 3,475 |
|
|
|
| 3,733 |
| |||||||||||||||
Merger integration and acquisition |
|
| 1 |
|
|
|
| — |
| |||||||||||||||
Restructuring charges and asset impairment |
|
| 32 |
|
|
|
| — |
| |||||||||||||||
Stock-based compensation |
|
| 781 |
|
|
|
| 704 |
| |||||||||||||||
Other non-cash charges |
|
| 208 |
|
|
|
| 97 |
| |||||||||||||||
Adjusted EBITDA | $ |
| 8,241 |
|
| $ |
| 11,080 |
| |||||||||||||||
Food Distribution: |
|
|
|
|
|
|
|
|
| |||||||||||||||
Operating earnings | $ |
| 25,856 |
|
| $ |
| 20,249 |
| |||||||||||||||
Adjustments: |
|
|
|
|
|
|
|
| ||||||||||||||||
LIFO expense |
|
| 737 |
|
|
|
| 890 |
| |||||||||||||||
Depreciation and amortization |
|
| 6,470 |
|
|
|
| 8,536 |
| |||||||||||||||
Merger integration and acquisition |
|
| 468 |
|
|
|
| 2,187 |
| |||||||||||||||
Restructuring charges (gains) and asset impairment |
|
| 2,233 |
|
|
|
| (281 | ) | |||||||||||||||
Stock-based compensation |
|
| 2,312 |
|
|
|
| 2,230 |
| |||||||||||||||
Other non-cash charges |
|
| 176 |
|
|
|
| 35 |
| |||||||||||||||
Adjusted EBITDA | $ |
| 38,252 |
|
| $ |
| 33,846 |
| |||||||||||||||
Retail: |
|
|
|
|
|
|
|
|
| |||||||||||||||
Operating loss | $ |
| (7,629 | ) |
| $ |
| (2,554 | ) | |||||||||||||||
Adjustments: |
|
|
|
|
|
|
|
| ||||||||||||||||
LIFO expense |
|
| 364 |
|
|
|
| 445 |
| |||||||||||||||
Depreciation and amortization |
|
| 13,424 |
|
|
|
| 13,516 |
| |||||||||||||||
Merger integration and acquisition |
|
| 428 |
|
|
|
| 497 |
| |||||||||||||||
Restructuring charges and asset impairment |
|
| 13,039 |
|
|
|
| 7,619 |
| |||||||||||||||
Stock-based compensation |
|
| 1,931 |
|
|
|
| 1,819 |
| |||||||||||||||
Other non-cash gains |
|
| (13 | ) |
|
|
| (379 | ) | |||||||||||||||
Adjusted EBITDA | $ |
| 21,544 |
|
| $ |
| 20,963 |
|
Reconciliation of operating earnings to adjusted EBITDA by segment:
Military: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings | $ | 3,438 |
|
| $ | 5,651 |
|
| $ | 13,491 |
|
| $ | 15,956 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIFO (income) expense |
| (59 | ) |
|
| 359 |
|
|
| 620 |
|
|
| 1,192 |
|
Depreciation and amortization |
| 2,838 |
|
|
| 2,751 |
|
|
| 9,381 |
|
|
| 8,580 |
|
Restructuring charges and asset impairment |
| 984 |
|
|
| — |
|
|
| 984 |
|
|
| — |
|
Merger integration and acquisition |
| — |
|
|
| 3 |
|
|
| — |
|
|
| 27 |
|
Fees and expenses related to tax planning strategies |
| — |
|
|
| — |
|
|
| 75 |
|
|
| — |
|
Stock based compensation |
| 144 |
|
|
| 86 |
|
|
| 998 |
|
|
| 502 |
|
Other non-cash charges (gains) |
| 101 |
|
|
| 4 |
|
|
| 204 |
|
|
| (55 | ) |
Adjusted EBITDA | $ | 7,446 |
|
| $ | 8,854 |
|
| $ | 25,753 |
|
| $ | 26,202 |
|
Food Distribution: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings | $ | 16,540 |
|
| $ | 13,834 |
|
| $ | 56,195 |
|
| $ | 38,713 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIFO expense |
| 16 |
|
|
| 794 |
|
|
| 1,575 |
|
|
| 2,551 |
|
Depreciation and amortization |
| 6,131 |
|
|
| 6,931 |
|
|
| 20,836 |
|
|
| 23,105 |
|
Restructuring charges (gains) and asset impairment |
| 41 |
|
|
| — |
|
|
| (237 | ) |
|
| 1,029 |
|
Merger integration and acquisition |
| 323 |
|
|
| 1,375 |
|
|
| 1,359 |
|
|
| 8,097 |
|
Fees and expenses related to tax planning strategies |
| — |
|
|
| — |
|
|
| 282 |
|
|
| — |
|
Stock based compensation |
| 363 |
|
|
| 440 |
|
|
| 2,992 |
|
|
| 2,839 |
|
Other non-cash charges (gains) |
| 123 |
|
|
| (96 | ) |
|
| 164 |
|
|
| (16 | ) |
Adjusted EBITDA | $ | 23,537 |
|
| $ | 23,278 |
|
| $ | 83,166 |
|
| $ | 76,318 |
|
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings | $ | 9,246 |
|
| $ | 14,127 |
|
| $ | 20,185 |
|
| $ | 39,170 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIFO expense |
| 221 |
|
|
| 397 |
|
|
| 1,000 |
|
|
| 1,334 |
|
Depreciation and amortization |
| 10,753 |
|
|
| 10,269 |
|
|
| 34,743 |
|
|
| 35,236 |
|
Restructuring (gains) charges and asset impairment |
| (265 | ) |
|
| (1,272 | ) |
|
| 7,015 |
|
|
| (1,096 | ) |
Merger integration and acquisition |
| 4,094 |
|
|
| 1 |
|
|
| 5,893 |
|
|
| 4 |
|
Fees and expenses related to tax planning strategies |
| — |
|
|
| — |
|
|
| 212 |
|
|
| — |
|
Stock based compensation |
| 301 |
|
|
| 427 |
|
|
| 2,480 |
|
|
| 2,676 |
|
Other non-cash gains |
| (101 | ) |
|
| (170 | ) |
|
| (777 | ) |
|
| (741 | ) |
Adjusted EBITDA | $ | 24,249 |
|
| $ | 23,779 |
|
| $ | 70,751 |
|
| $ | 76,583 |
|
2120
Net Sales – Net sales for the quarter ended October 10, 2015April 23, 2016 (“thirdfirst quarter”) decreased $34.2$33.9 million, or 1.9 percent,1.5%, from $1.81$2.31 billion in the quarter ended October 4, 2014April 25, 2015 (“prior year third quarter”) to $1.78$2.28 billion due toas increases in the Food Distribution segment were offset by lower sales in the Military and Retail segments. Net sales for the year-to-date period ended October 10, 2015 (“year-to-date”) decreased $69.5 million, or 1.2 percent, from $5.95 billion in the prior year-to-date period ended October 4, 2014 (“prior year-to-date”) to $5.88 billion. The year-to-date decrease is due to lower sales in the Retail and Military segments, partially offset by an increase in the Food Distribution segment.
Net sales for the thirdfirst quarter in the Military segment decreased $17.6$24.9 million, or 3.4 percent,3.6%, from $523.6$699.4 million in the prior year third quarter to $506.0 million. Net sales for the current year-to-date period decreased $7.7 million, or 0.5 percent, from $1,710.1 million in the prior year-to-date period to $1,702.4$674.5 million. The third quarter and year-to-date decreases weredecrease was primarily due to lower sales at the Defense Commissary Agency (“DeCA”) operated commissaries. commissaries and an unusually strong first quarter in the prior year, partially offset by new business gains associated with the distribution of new fresh products.
Net sales for the thirdfirst quarter in the Food Distribution segment after intercompany eliminations, were $762.3increased $4.7 million, compared to $764.3or 0.5%, from $986.4 million in the prior year third quarter. Net sales for the year-to-date period increased $28.2quarter to $991.1 million or 1.1 percent, from $2,503.2 million in the prior year-to-date period to $2,531.4 million. The year-to-date increase was primarily due to net new business. business gains.
Net sales for the thirdfirst quarter in the Retail segment decreased $14.5$13.8 million, or 2.8 percent,2.2%, from $521.7$626.9 million in the prior year third quarter to $507.2$613.1 million. Net sales for the year-to-date period decreased $90.0 million, or 5.2 percent, from $1,740.1 million in the prior year-to-date period to $1,650.1 million. The third quarter decrease was primarily due to a 3.0 percent3.4% decrease in comparable store sales, excluding fuel, $13.2$14.0 million in lower sales resulting from the closure of retail stores and fuel centers, and $6.2 million due to significantly lower retail fuel prices compared to the prior year, partially offset by salescontributions from recentlythe Dan’s stores acquired stores.in the second quarter of last year. Comparable store sales reflect the low inflationarychallenging economic headwinds in certain regions, a deflationary environment, competitive new store openings, and increased competitionthe impact of unseasonably warm weather in the western markets. The year-to-date decrease was primarily due to $58.5 million in lower sales due to the closure of retail stores and fuel centers, significantly lower retail fuel prices and a 2.3 percent decrease in comparable store sales, excluding fuel.northern geographies. The Company defines a retail store as comparable when it is in operation for 14 accounting periods (a period is four weeks), and it includeswith remodeled, expanded and relocated stores included 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 the 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 the Company’s 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 decreased $2.4$2.0 million, or 0.9 percent,0.6%, from $261.4$336.2 million in the prior year third quarter to $259.0$334.2 million. As a percent of net sales, gross profit for the thirdfirst quarter increased to 14.6 percent14.7% from 14.4 percent14.5% in the prior year third quarter. The third quarter gross profit rate increase is primarily reflects an increase in fuel margin rates, partially offset byattributable to certain favorable rebate programs and the impact of lower inflation-related gains in the Military segment. Gross profit for the current year-to-date period decreased $16.6 million, or 1.9 percent, from $873.9 million in the prior year-to-date period to $857.3 million. As a percent of net sales, gross profit for the current year-to-date period decreased to 14.6 percent from 14.7 percent in the prior year-to-date period. The year-to-date gross profit rate decrease was principally driven by a higher mix of lower margin Military and Food Distribution sales, partially offset by higher fuel margin rates.business operations.
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 decreased $3.1$6.0 million, or 1.3 percent,2.0%, from $227.7$302.4 million in the prior year third quarter to $224.6 million. As a percent$296.4 million, and were 13.0% of net sales SG&A expenses were 12.8 percent for the third quarter compared to 12.5 percent13.1% in the prior year third quarter. SG&A expenses for the current year-to-date period decreased $19.5 million, or 2.5 percent, from $772.0 million in the prior year-to-date period to $752.5 million. As a percent of net sales, SG&A expenses were 12.9 percent for the current year-to-date period compared to 13.0 percent in the prior year-to-date period. The third quarter and year-to-date decreases weredecrease was primarily due to ongoing benefits from merger synergies, operational efficiencies, lower health care costsutilities and depreciation expense associated with fully depreciated assets, and the impact of store closures. The decrease in the rate to net sales was primarily due to lower utilities, depreciation, and operating costs resulting from productivity and efficiency initiatives.
22
Merger Integration and Acquisition – Merger integration and acquisition expenses for the thirdfirst quarter increased $3.0decreased $1.8 million from $1.4$2.7 million in the prior year third quarter to $4.4$0.9 million. The increasedecrease was primarily due to costs related to systemsthe completion of certain merger integration activities. Merger integration and acquisition expenses for the current year-to-date period decreased $0.8 million from $8.1 million in the prior year-to-date period to $7.3 million.projects.
Restructuring Charges and Asset Impairment – ThirdFirst quarter restructuring charges and asset impairment charges consisted of charges related to three underperforming retail stores and closure of a Military distribution center, partially offset by the gain on sale of a previously closed retail store. The current year-to-date restructuring and asset impairment charges consisted primarily of charges related to the closure of three retail stores and a food distribution center as a result of the Company’s retail store and warehouse rationalization plan. The prior year quarter consisted primarily of charges related to asset impairments associated with underperforming retail stores and costs related to the closure of retail storesand a distribution centers,center, partially offset by the gains gain on salessale of assets related to a previously closed food distribution center and retail stores and favorable settlements onof lease terminations of previously closed stores. Restructuring and asset impairment gains in the prior year third quarter consisted primarily of gains on sales of assets related to closed stores, net of store closing costs. The prior year-to-date restructuring and asset impairment gain consisted primarily of gains on 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.
Interest Expense – Interest expense for the thirdfirst quarter decreased $0.5$1.0 million, or 8.9 percent,13.7%, from $5.5$6.8 million in the prior year third quarter to $5.0 million. Interest expense for the current year-to-date period decreased $1.8$5.8 million, or 9.7 percent, from $18.4 millionrepresenting 0.3% of net sales in the prior year-to-date period to $16.6 million.both years. The decrease in interest expense was primarily due to adecreased borrowings and lower interest rateresulting from the amended senior secured credit agreement and decreased borrowings. On January 9, 2015, the Company amended its credit agreement which reduced the interest rate.note redemption in December 2015.
21
Income Taxes – The effective income tax rate was 37.5%rates were 37.7% and 39.0% for the thirdfirst quarter and prior year third quarter, respectively. For the current year-to-date period and prior year-to-date period, the effective income tax rate was 37.4% and 37.6%, respectively. The differences from the Federalfederal statutory rate are due to state taxes and tax credits in the current year and state taxes in the prior year were primarily due to state income taxes.year.
Discontinued Operations
Certain of the Company’s 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.
Liquidity and Capital Resources
Cash Flow Information
The following table summarizes the Company’s consolidated statements of cash flows:
(Unaudited) | 40 Weeks Ended |
| ||||||||||||||
| 16 Weeks Ended |
| ||||||||||||||
(In thousands) | October 10, 2015 |
|
| October 4, 2014 |
| April 23, 2016 |
|
| April 25, 2015 |
| ||||||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities | $ | 129,869 |
|
| $ | 117,385 |
| $ |
| 8,553 |
|
| $ |
| 48,941 |
|
Net cash used in investing activities |
| (71,497 | ) |
|
| (54,362 | ) |
|
| (12,926 | ) |
|
| (4,523 | ) | |
Net cash used in financing activities |
| (47,486 | ) |
|
| (63,912 | ) | |||||||||
Net cash provided by (used in) financing activities |
|
| 10,505 |
|
|
| (42,291 | ) | ||||||||
Net cash used in discontinued operations |
| (8,819 | ) |
|
| (279 | ) |
|
| (164 | ) |
|
|
| (95 | ) |
Net increase (decrease) in cash and cash equivalents |
| 2,067 |
|
|
| (1,168 | ) | |||||||||
Net increase in cash and cash equivalents |
|
| 5,968 |
|
|
|
| 2,032 |
| |||||||
Cash and cash equivalents at beginning of period |
| 6,443 |
|
|
| 9,216 |
|
|
| 22,719 |
|
|
|
| 6,443 |
|
Cash and cash equivalents at end of period | $ | 8,510 |
|
| $ | 8,048 |
| $ |
| 28,687 |
|
| $ |
| 8,475 |
|
Net cash provided by operating activities. Net cash provided by operating activities increaseddecreased from the prior year-to-date periodyear first quarter by approximately $40.4 million primarily due to improvementschanges in working capital requirements.requirements, particularly around the timing of vendor and income tax payments, and inventory requirements for new business.
Net cash used in investing activities. Net cash used in investing activities during the current year-to-date periodfirst quarter increased $17.1$8.4 million to $71.5$12.9 million from $54.4$4.5 million in the prior year-to-date period. The increase wasyear quarter primarily due to the acquisition of Dan’s (see Note 3 to the financial statements), partially offset byan increase in capital expenditures and a decrease in proceeds on the salessale of assets of previously closed facilities.
The Military, Food Distribution and Retail segments utilized 4.8 percent, 24.2 percent12.9% , 30.5% and 71.0 percent56.6% of capital expenditures, respectively, in fiscal 2015.2016.
23
Net cash used inprovided by (used in) financing activities. Net cash provided by financing activities during the current year-to-date period resultedfirst quarter was $10.5 million compared to $42.3 million used in the prior year quarter, primarily resulting from changes in net payments oncash flows related to the revolving credit facility, of $19.7 million, the payment of dividends of $15.2 million,partially offset by an increase in share repurchases of $9.0 million and the repayment of other long term debt of $6.5 million. Net cash used in financing activities in the prior year-to-date period resulted primarily from net payments on the revolving credit facility of $42.9 million, the payment of dividends of $13.6 million, the repayment of other long-term debt of $5.8 million and share repurchases of $2.5 million. A 12.5 percent increase in the quarterly dividend rate from $0.12 per share to $0.135 per share was approved by the Board of Directors and announced on February 25, 2015. Although the Company expects 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 the Company’s future financial condition, anticipated profitability and cash flows and compliance with the terms of its credit facilities. Current maturities of long-term debt and capital lease obligations at October 10, 2015 are $22.0 million. The Company’s ability to borrow additional funds is governed by the terms of its credit facilities.
Net cash used in discontinued operations. Net cash used in discontinued operations consists primarilycontains the net cash flows of the acquisitionCompany’s Retail and operations of stores that met the criteria ofFood Distribution discontinued operations at the time of acquisition andas well as other facility maintenance expenditures.
Debt Management
Total debt, including capital lease obligations and current maturities, was $515.2 million and $486.8 million as of April 23, 2016 and January 2, 2016, respectively. The increase in total debt was driven by drawdowns on the credit facility to finance the Company’s working capital changes.
Liquidity
The Company’s principal sources of liquidity are cash flows generated from operations and its senior secured credit facility which has maximum available credit of $1.0 billion. As of October 10, 2015,April 23, 2016, the senior secured revolving credit facility and senior secured term loan collectively had outstanding borrowings of $430.5$456.8 million. Additional available borrowings under the Company’s $1.0 billion credit facility are based on stipulated advance rates on eligible assets, as defined in the credit agreement.Credit Agreement. The credit agreementCredit Agreement requires that SpartanNashthe Company maintain excess availability of 10 percent10% of the borrowing base as such term is defined in the credit agreement.Credit Agreement. The Company had excess availability after the 10 percent10% covenant of $354.7$279.5 million at October 10, 2015.April 23, 2016. 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 $11.6$10.0 million were outstanding as of October 10, 2015.April 23, 2016. The revolving credit facility matures January 2020, and is secured by substantially all of the Company’s assets. The Company believes 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 the business will continue to generate cash flow at or above current levels or that the Company will maintain its ability to borrow under the credit facility.
On November 2, 2015, the Company called for redemption all of the outstanding $50.0 million aggregate principal amount of the 6.625% Senior Notes due December 2016 (the “Notes”). The Company will redeem the Notes for cash using borrowings under its revolving credit facility. The redemption will occur on December 15, 2015. Notes called for redemption became due and payable on the redemption date at a cash redemption price of 101.65625% of the principal amount of the Notes, plus accrued and unpaid interest. One-time charges of $1.1 million are expected to be incurred consisting of the redemption premium and the write-off of unamortized issuance costs. As a result of the redemption, the Company expects to reduce annual interest expense by approximately $2.0 million, partially offset by future interest rate increases.22
The Company’s current ratio decreased to 1.80:was 1.99:1.00 at October 10, 2015 from 1.90:April 23, 2016 compared to 1.81:1.00 at January 3, 20152, 2016 and its investment in working capital decreased to $412.6was $445.3 million at October 10, 2015 from 433.2April 23, 2016 compared to $396.3 million at January 3, 2015.2, 2016. Net debt to total capital ratio decreased to 0.41:was 0.38:1.00 at October 10, 2015 from 0.43:April 23, 2016 compared to 0.37:1.00 at January 3, 2015.2, 2016.
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 10, 2015April 23, 2016 and January 3, 2015.2, 2016.
(Unaudited) |
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
| ||||||||
(In thousands) | October 10, 2015 |
|
| January 3, 2015 |
| April 23, 2016 |
|
| January 2, 2016 |
| ||||||
Current maturities of long-term debt and capital lease obligations | $ | 21,993 |
|
| $ | 19,758 |
| $ |
| 19,083 |
|
| $ |
| 19,003 |
|
Long-term debt and capital lease obligations |
| 525,889 |
|
|
| 550,510 |
|
|
| 496,114 |
|
|
|
| 467,793 |
|
Total debt |
| 547,882 |
|
|
| 570,268 |
|
|
| 515,197 |
|
|
|
| 486,796 |
|
Cash and cash equivalents |
| (8,510 | ) |
|
| (6,443 | ) |
|
| (28,687 | ) |
|
|
| (22,719 | ) |
Total net long-term debt | $ | 539,372 |
|
| $ | 563,825 |
| $ |
| 486,510 |
|
| $ |
| 464,077 |
|
24
For information on contractual obligations, see the Company’s Form 10-K for the fiscal year ended January 3, 2015.2, 2016. At October 10, 2015,April 23, 2016, there have been no material changes to the Company’s significant contractual obligations outside the ordinary course of business.
Ratio
Cash Dividends
An 11.1% increase in the quarterly dividend rate from $0.135 per share to $0.15 per share was approved by the Board of EarningsDirectors and announced on March 2, 2016. Although the Company expects to Fixed Charges
For purposescontinue to pay a quarterly cash dividend, adoption of calculatinga dividend policy does not commit the ratioBoard of earningsDirectors to fixed charges underdeclare 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 depends on a number of factors, including the Company’s future financial condition, anticipated profitability and cash flows and compliance with the terms of its credit facilities.
Under the Company’s Senior Notes, earnings consist of net earnings, as adjusted undersenior revolving credit facility, the termsCompany is generally permitted to pay dividends in any fiscal year up to an amount such that all cash dividends, together with any cash distributions, prepayment of the Senior Notes indenture, plus income tax expense, fixed chargessenior note and non-cash charges, lessshare repurchases, do not exceed $25.0 million. Additionally, the Company is generally permitted to pay cash payments relatingdividends in excess of $25.0 million in any fiscal year so long as its Excess Availability, as defined in the senior revolving credit facility, is in excess of 10% of the Total Borrowing Base before and after giving effect to non-cash charges added back to net earnings in prior periods. Fixed charges consistthe prepayments, repurchases and dividends.
Share Repurchase Plan
During the first quarter of interest cost, including capitalized interest, and amortizationfiscal 2016, the Company repurchased 396,030 shares of debt issue costs.its common stock for a total of $9.0 million under its existing $50.0 million repurchase program, leaving $3.3 million available for future share repurchases as of April 23, 2016. During the first quarter of fiscal 2016, the SpartanNash Board of Directors authorized a new five-year share repurchase program for an additional $50.0 million of its outstanding common stock. The rationew share repurchase program replaces the existing program, which expired on May 17, 2016. As of earnings to fixed charges was 10.16:1.00 forApril 23, 2016, the four quarters ended October 10, 2015.Company had not made any repurchases under its new share repurchase plan.
Off-Balance Sheet Arrangements
The Company has also made certain commercial commitments that extend beyond October 10, 2015.April 23, 2016. These commitments consist primarily of standby letters of credit of $11.6$10.0 million as of October 10, 2015.April 23, 2016.
23
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to bad debts, inventories, intangible assets, assets held for sale, long-lived assets, income taxes, self-insurance reserves, restructuring costs, retirement benefits, stock-based compensation, contingencies and litigation. Management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that may not be readily apparent from other sources. Based on the Company’s ongoing review, the Company makes adjustments it considers appropriate under the facts and circumstances. This discussion and analysis of the Company’s financial condition and results of operations is based upon the Company’s consolidated financial statements. The preparation ofCompany believes these accounting policies and others set forth in Item 8, Note 1 to the consolidated financial statements requiresin the CompanyCompany’s Form 10-K for the fiscal year ended January 2, 2016 should be reviewed as they are integral to make estimatesthe understanding the Company’s financial condition and assumptions that affect the reported amounts. On an ongoing basis, the Company evaluates its 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. The Company bases its estimates on historical experience and on various other assumptions and factors that are believed to be reasonable under the circumstances. Based on ongoing review, the Company makes adjustments it considers appropriate under the facts and circumstances.results of operations. The Company has discussed the development, selection and disclosure of these estimatesaccounting policies with the Audit Committee.Committee of the Board of Directors. The accompanying financial statements are prepared using the same critical accounting policies discussed in the Company’s Form 10-K for the fiscal year ended January 3, 2015.2, 2016.
Recently Issued Accounting Standards
In September 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-16, “Business Combinations: Simplifying the Accounting for Measurement-Period Adjustments.” ASU 2015-16 requires that an acquirer recognize adjustmentsRefer to provisional amounts that are identified during the measurement periodNote 2 in the same reporting period in whichnotes to the adjustments are determined. The Company adopted ASU 2015-16 in the third quarter of fiscal 2015. Adoption of this standard did not have a material impact on thecondensed consolidated financial statements as the Company has not recorded any significant measurement-period adjustments in fiscal 2015.
In April 2015, the FASB issued 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 October 10, 2015, such amount was approximately $9.2 million.
In April 2014, the FASB issued ASU 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” ASU 2014-08 changed the criteria for reporting discontinued operations and modified related disclosure requirements. The Company adopted ASU 2014-08 in the first quarter of fiscal 2015. Adoption of this standard did not have a material impact on the financial statements.
In May 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. In August 2015, the FASB issued ASU 2015-14, “Deferral of the Effective Date,” which results in the guidance being effective for the Company in the first quarter of its fiscal year ending December 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 standard on its financial statements.further information.
2524
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 Annual Report on Form 10-K for the fiscal year ended January 3, 2015.2, 2016.
ITEM 4. Controls and Procedures
An evaluation of the effectiveness of the design and operation of SpartanNash’sSpartanNash Company’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 10, 2015April 23, 2016 (the “Evaluation Date”). This evaluation was performed under the supervision and with the participation of SpartanNash’sSpartanNash Company’s management, including its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). SpartanNash’sAs of the Evaluation Date, SpartanNash Company’s management, including the CEO and CFO, 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 the Company files or submits 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 the Company files or submits under the Securities and Exchange Act of 1934 is accumulated and communicated to management, including the Company’sits 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.
2625
OTHER INFORMATION
ITEM 1a. Risk Factors
Changes in the Company’s vendor base may adversely affect its business.
The Company sources the products it sells from a wide variety of vendors. The Company generally does not have long-term written contracts with its major suppliers that would require them to continue supplying it with merchandise. The Company depends on its vendors for, among other things, appropriate allocation of merchandise, assortments of products, operation of vendor-focused shopping experiences within its stores, and funding for various forms of promotional allowances. There has been significant consolidation in the food industry, and this consolidation may continue to the Company’s commercial disadvantage. Such changes could have a material adverse impact on the Company’s revenues and profitability.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
There were no
The following table provides information regarding SpartanNash’s purchases of the Company’sits own common stock during the 1216 week period ended October 10, 2015.April 23, 2016. On March 2, 2016, the Board of Directors approved a new five-year share repurchase program for up to $50.0 million of SpartanNash’s common stock to replace the prior authorization, which expired May 17, 2016. As of April 23, 2016, the Company had not made any repurchases under this new plan. 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.
|
| Total |
|
|
|
|
|
| |
|
| Number |
|
| Average |
| |||
|
| of Shares |
|
| Price Paid |
| |||
Period |
| Purchased |
|
| per Share |
| |||
January 3 – January 30, 2016 |
|
|
|
|
|
|
|
|
|
Employee Transactions |
|
| — |
|
| $ |
| — |
|
Repurchase Program |
|
| 121,700 |
|
| $ |
| 19.53 |
|
January 31 – February 27, 2016 |
|
|
|
|
|
|
|
|
|
Employee Transactions |
|
| 28,507 |
|
| $ |
| 20.57 |
|
Repurchase Program |
|
| 139,900 |
|
| $ |
| 20.22 |
|
February 28 – March 26, 2016 |
|
|
|
|
|
|
|
|
|
Employee Transactions |
|
| 25,592 |
|
| $ |
| 27.97 |
|
Repurchase Program |
|
| 101,384 |
|
| $ |
| 27.85 |
|
March 27 – April 23, 2016 |
|
|
|
|
|
|
|
|
|
Employee Transactions |
|
| — |
|
| $ |
| — |
|
Repurchase Program |
|
| 33,046 |
|
| $ |
| 29.12 |
|
Total for Quarter ended April 23, 2016 |
|
|
|
|
|
|
|
|
|
Employee Transactions |
|
| 54,099 |
|
| $ |
| 24.07 |
|
Repurchase Program |
|
| 396,030 |
|
| $ |
| 22.71 |
|
2726
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 18, 2015. 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. |
|
|
|
|
|
|
|
|
|
|
| Form of |
10.3 | Form of 2016 Long-Term Executive Cash Incentive Award. | |
10.4 | Form of Executive Employment Agreement with certain executive officers. | |
10.5 | Form of Executive Severance Agreement with Christopher P. Meyers. | |
10.6 | Form of Indemnification Agreement. Previously filed as an exhibit to the Company’s | |
|
|
|
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. |
|
|
|
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 |
2827
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.
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| SPARTANNASH COMPANY (Registrant)
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Executive Vice President and Chief
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EXHIBIT INDEX
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