UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended October 7, 2017.April 18, 2020.
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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, no par value | SPTN | NASDAQ Global Select Market |
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 ☒ 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 ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
|
|
| Accelerated filer |
|
|
| Non-accelerated filer |
| ☐ |
| Smaller reporting company |
| ☐ |
Emerging growth company |
| ☐ |
|
|
|
|
|
|
|
|
|
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 7, 2017,May 26, 2020, the registrant had 36,971,73135,680,866 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”). These forward-looking statements are identifiable by words or phrases indicating that SpartanNash or management “expects,” “anticipates,” “plans,” “believes,” or “estimates,” or that a particular occurrence or event “will,” “may,” “could,” “should” or “will likely” result, occur or be pursued or “continue” in the future, that the “outlook” or “trend” is toward a particular result or occurrence, that a development is an “opportunity,” “priority,” “strategy,” “focus,” that the Company is “positioned” for a particular result, or similarly stated expectations. Accounting estimates, such as those described under the heading “Critical Accounting Policies” in Part I, Item 2 of this Quarterly Report on Form 10-Q, are inherently forward-looking. The Company’s asset impairment and restructuring cost provisions are estimates and actual costs may be more or less than these estimates and differences may be material. Undue reliance should not be 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 December 31, 201628, 2019 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. These risks and uncertainties include disruptions associated with the COVID-19 pandemic, general business conditions, changes in overall economic conditions that impact consumer spending, the Company’s ability to integrate acquired assets, the impact of competition and other factors which are often beyond the control of the Company, and other risks listed in the “Risk Factors” discussiondiscussions in ItemItems 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 201628, 2019 and this Quarterly Report on Form 10-Q, and risks and uncertainties not presently known to the Company or that the Company currently deems immaterial.
This section and the discussions contained in Item 1A “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 201628, 2019 and in Item 1A “Risk Factors” and Part I, Item 2 “Critical Accounting Policy”Policies” of thethis Quarterly Report on Form 10-Q, are intended to provide meaningful cautionary 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
Page | ||
PART I. | ||
Item 1. | 4 | |
4 | ||
5 | ||
6 | ||
7 | ||
8 | ||
9 | ||
Item 1A. | 17 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 |
Item 3. | 29 | |
Item 4. | 29 | |
PART II. | ||
Item 2. | 30 | |
Item 6. | 31 | |
32 |
3
PART I
FINANCIAL INFORMATION
ITEM 1. Financial Statements
SPARTANNASH COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)thousands, Unaudited)
| April 18, |
|
| December 28, |
| |||||
| 2020 |
|
| 2019 |
| |||||
Assets |
|
|
|
|
|
|
|
|
| |
Current assets |
|
|
|
|
|
|
|
|
| |
Cash and cash equivalents | $ |
| 21,255 |
|
| $ |
| 24,172 |
| |
Accounts and notes receivable, net |
|
| 417,684 |
|
|
|
| 345,320 |
| |
Inventories, net |
|
| 516,517 |
|
|
|
| 537,212 |
| |
Prepaid expenses and other current assets |
|
| 68,094 |
|
|
|
| 58,775 |
| |
Property and equipment held for sale |
|
| 24,706 |
|
|
|
| 31,203 |
| |
Total current assets |
|
| 1,048,256 |
|
|
|
| 996,682 |
| |
|
|
|
|
|
|
|
|
|
| |
Property and equipment, net |
|
| 585,185 |
|
|
|
| 615,816 |
| |
Goodwill |
|
| 181,035 |
|
|
|
| 181,035 |
| |
Intangible assets, net |
|
| 128,654 |
|
|
|
| 130,434 |
| |
Operating lease assets |
|
| 268,370 |
|
|
|
| 268,982 |
| |
Other assets, net |
|
| 102,715 |
|
|
|
| 82,660 |
| |
|
|
|
|
|
|
|
|
|
| |
Total assets | $ |
| 2,314,215 |
|
| $ |
| 2,275,609 |
| |
|
|
|
|
|
|
|
|
|
| |
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
| |
Current liabilities |
|
|
|
|
|
|
|
|
| |
Accounts payable | $ |
| 509,164 |
|
| $ |
| 405,370 |
| |
Accrued payroll and benefits |
|
| 71,655 |
|
|
|
| 59,680 |
| |
Other accrued expenses |
|
| 49,574 |
|
|
|
| 51,295 |
| |
Current portion of operating lease liabilities |
|
| 42,832 |
|
|
|
| 42,440 |
| |
Current portion of long-term debt and finance lease liabilities |
|
| 6,157 |
|
|
|
| 6,349 |
| |
Total current liabilities |
|
| 679,382 |
|
|
|
| 565,134 |
| |
|
|
|
|
|
|
|
|
|
| |
Long-term liabilities |
|
|
|
|
|
|
|
|
| |
Deferred income taxes |
|
| 62,849 |
|
|
|
| 43,111 |
| |
Operating lease liabilities |
|
| 264,738 |
|
|
|
| 267,350 |
| |
Other long-term liabilities |
|
| 30,457 |
|
|
|
| 30,272 |
| |
Long-term debt and finance lease liabilities |
|
| 591,097 |
|
|
|
| 682,204 |
| |
Total long-term liabilities |
|
| 949,141 |
|
|
|
| 1,022,937 |
| |
|
|
|
|
|
|
|
|
|
| |
Commitments and contingencies (Note 8) |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| |
Shareholders’ equity |
|
|
|
|
|
|
|
|
| |
Common stock, voting, no par value; 100,000 shares authorized; 35,682 and 36,351 shares outstanding |
|
| 481,514 |
|
|
|
| 490,233 |
| |
Preferred stock, no par value, 10,000 shares authorized; 0 shares outstanding |
|
| — |
|
|
|
| — |
| |
Accumulated other comprehensive loss |
|
| (1,520 | ) |
|
|
| (1,600 | ) | |
Retained earnings |
|
| 205,698 |
|
|
|
| 198,905 |
| |
Total shareholders’ equity |
|
| 685,692 |
|
|
|
| 687,538 |
| |
|
|
|
|
|
|
|
|
|
| |
Total liabilities and shareholders’ equity | $ |
| 2,314,215 |
|
| $ |
| 2,275,609 |
|
See accompanying notes to condensed consolidated financial statements.
4
SPARTANNASH COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)
| 16 Weeks Ended |
|
| |||||||
| April 18, 2020 |
|
| April 20, 2019 |
|
| ||||
Net sales | $ |
| 2,856,456 |
|
| $ |
| 2,542,375 |
|
|
Cost of sales |
|
| 2,432,889 |
|
|
|
| 2,164,646 |
|
|
Gross profit |
|
| 423,567 |
|
|
|
| 377,729 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
| 391,300 |
|
|
|
| 360,400 |
|
|
Merger/acquisition and integration |
|
| — |
|
|
|
| 782 |
|
|
Restructuring charges (gains) and asset impairment |
|
| 10,237 |
|
|
|
| (5,662 | ) |
|
Total operating expenses |
|
| 401,537 |
|
|
|
| 355,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings |
|
| 22,030 |
|
|
|
| 22,209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses and (income) |
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| 7,638 |
|
|
|
| 11,881 |
|
|
Postretirement benefit (income) expense |
|
| (799 | ) |
|
|
| 635 |
|
|
Other, net |
|
| (242 | ) |
|
|
| (452 | ) |
|
Total other expenses, net |
|
| 6,597 |
|
|
|
| 12,064 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes and discontinued operations |
|
| 15,433 |
|
|
|
| 10,145 |
|
|
Income tax expense |
|
| 31 |
|
|
|
| 2,624 |
|
|
Earnings from continuing operations |
|
| 15,402 |
|
|
|
| 7,521 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of taxes |
|
| — |
|
|
|
| (52 | ) |
|
Net earnings | $ |
| 15,402 |
|
| $ |
| 7,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share: |
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations | $ |
| 0.43 |
|
| $ |
| 0.21 |
|
|
Loss from discontinued operations |
|
| — |
|
|
|
| — |
|
|
Net earnings | $ |
| 0.43 |
|
| $ |
| 0.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
5
SPARTANNASH COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, Unaudited)
| 16 Weeks Ended |
| |||||||
| April 18, 2020 |
|
| April 20, 2019 |
| ||||
Net earnings | $ |
| 15,402 |
|
| $ |
| 7,469 |
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, before tax |
|
|
|
|
|
|
|
|
|
Pension and postretirement liability adjustment |
|
| 106 |
|
|
|
| 79 |
|
|
|
|
|
|
|
|
|
|
|
Income tax expense related to items of other comprehensive income |
|
| (26 | ) |
|
|
| (19 | ) |
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income, after tax |
|
| 80 |
|
|
|
| 60 |
|
Comprehensive income | $ |
| 15,482 |
|
| $ |
| 7,529 |
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
6
SPARTANNASH COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands, Unaudited)
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
|
|
| ||
| Shares |
|
| Common |
|
| Comprehensive |
|
| Retained |
|
|
|
|
|
| |||||||
| Outstanding |
|
| Stock |
|
| Income (Loss) |
|
| Earnings |
|
| Total |
| |||||||||
Balance at December 28, 2019 |
| 36,351 |
|
| $ |
| 490,233 |
|
| $ |
| (1,600 | ) |
| $ |
| 198,905 |
|
| $ |
| 687,538 |
|
Impact of adoption of new credit loss standard (ASU 2016-13) |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (1,612 | ) |
|
|
| (1,612 | ) |
Net earnings |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 15,402 |
|
|
|
| 15,402 |
|
Other comprehensive income |
| — |
|
|
|
| — |
|
|
|
| 80 |
|
|
|
| — |
|
|
|
| 80 |
|
Dividends - $0.1925 per share |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (6,997 | ) |
|
|
| (6,997 | ) |
Share repurchase |
| (861 | ) |
|
|
| (10,000 | ) |
|
|
| — |
|
|
|
| — |
|
|
|
| (10,000 | ) |
Stock-based employee compensation |
| — |
|
|
|
| 2,342 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 2,342 |
|
Issuances of common stock for stock bonus plan and associate stock purchase plan |
| 21 |
|
|
|
| 291 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 291 |
|
Issuances of restricted stock |
| 293 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
Cancellations of stock-based awards |
| (122 | ) |
|
|
| (1,352 | ) |
|
|
| — |
|
|
|
| — |
|
|
|
| (1,352 | ) |
Balance at April 18, 2020 |
| 35,682 |
|
| $ |
| 481,514 |
|
| $ |
| (1,520 | ) |
| $ |
| 205,698 |
|
| $ |
| 685,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| October 7, |
|
| December 31, |
| ||||
| 2017 |
|
| 2016 |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents | $ |
| 13,154 |
|
| $ |
| 24,351 |
|
Accounts and notes receivable, net |
|
| 370,482 |
|
|
|
| 291,568 |
|
Inventories, net |
|
| 598,493 |
|
|
|
| 539,857 |
|
Prepaid expenses and other current assets |
|
| 33,426 |
|
|
|
| 37,187 |
|
Property and equipment held for sale |
|
| — |
|
|
|
| 521 |
|
Total current assets |
|
| 1,015,555 |
|
|
|
| 893,484 |
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
| 588,416 |
|
|
|
| 559,722 |
|
Goodwill |
|
| 178,392 |
|
|
|
| 322,686 |
|
Intangible assets, net |
|
| 135,656 |
|
|
|
| 60,202 |
|
Other assets, net |
|
| 115,755 |
|
|
|
| 94,242 |
|
|
|
|
|
|
|
|
|
|
|
Total assets | $ |
| 2,033,774 |
|
| $ |
| 1,930,336 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
Accounts payable | $ |
| 440,590 |
|
| $ |
| 372,432 |
|
Accrued payroll and benefits |
|
| 60,632 |
|
|
|
| 75,333 |
|
Other accrued expenses |
|
| 39,361 |
|
|
|
| 40,788 |
|
Current maturities of long-term debt and capital lease obligations |
|
| 19,407 |
|
|
|
| 17,424 |
|
Total current liabilities |
|
| 559,990 |
|
|
|
| 505,977 |
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities |
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
| 60,397 |
|
|
|
| 123,243 |
|
Postretirement benefits |
|
| 16,564 |
|
|
|
| 16,266 |
|
Other long-term liabilities |
|
| 39,330 |
|
|
|
| 45,768 |
|
Long-term debt and capital lease obligations |
|
| 651,537 |
|
|
|
| 413,675 |
|
Total long-term liabilities |
|
| 767,828 |
|
|
|
| 598,952 |
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity |
|
|
|
|
|
|
|
|
|
Common stock, voting, no par value; 100,000 shares authorized; 36,974 and 37,539 shares outstanding |
|
| 508,570 |
|
|
|
| 521,984 |
|
Preferred stock, no par value, 10,000 shares authorized; no shares outstanding |
|
| — |
|
|
|
| — |
|
Accumulated other comprehensive loss |
|
| (11,373 | ) |
|
|
| (11,437 | ) |
Retained earnings |
|
| 208,759 |
|
|
|
| 314,860 |
|
Total shareholders’ equity |
|
| 705,956 |
|
|
|
| 825,407 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity | $ |
| 2,033,774 |
|
| $ |
| 1,930,336 |
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
|
|
| ||
| Shares |
|
| Common |
|
| Comprehensive |
|
| Retained |
|
|
|
|
|
| |||||||
| Outstanding |
|
| Stock |
|
| Income (Loss) |
|
| Earnings |
|
| Total |
| |||||||||
Balance at December 29, 2018 |
| 35,952 |
|
| $ |
| 484,064 |
|
| $ |
| (15,759 | ) |
| $ |
| 247,642 |
|
| $ |
| 715,947 |
|
Impact of adoption of new lease standard (ASU 2016-02) |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (26,863 | ) |
|
|
| (26,863 | ) |
Net earnings |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 7,469 |
|
|
|
| 7,469 |
|
Other comprehensive income |
| — |
|
|
|
| — |
|
|
|
| 60 |
|
|
|
| — |
|
|
|
| 60 |
|
Dividends - $0.19 per share |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (6,902 | ) |
|
|
| (6,902 | ) |
Stock-based employee compensation |
| — |
|
|
|
| 5,383 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 5,383 |
|
Issuances of common stock on stock option exercises and for stock bonus plan and associate stock purchase plan |
| 30 |
|
|
|
| 452 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 452 |
|
Issuances of restricted stock |
| 444 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
Cancellations of stock-based awards |
| (107 | ) |
|
|
| (1,744 | ) |
|
|
| — |
|
|
|
| — |
|
|
|
| (1,744 | ) |
Balance at April 20, 2019 |
| 36,319 |
|
| $ |
| 488,155 |
|
| $ |
| (15,699 | ) |
| $ |
| 221,346 |
|
| $ |
| 693,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
7
SPARTANNASH COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, Unaudited)
| 16 Weeks Ended |
| |||||||
| April 18, 2020 |
|
| April 20, 2019 |
| ||||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
Net earnings | $ |
| 15,402 |
|
| $ |
| 7,469 |
|
Loss from discontinued operations, net of tax |
|
| — |
|
|
|
| 52 |
|
Earnings from continuing operations |
|
| 15,402 |
|
|
|
| 7,521 |
|
Adjustments to reconcile net earnings to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Non-cash restructuring, asset impairment, and other charges |
|
| 9,425 |
|
|
|
| 893 |
|
Depreciation and amortization |
|
| 28,029 |
|
|
|
| 26,632 |
|
Non-cash rent |
|
| (1,823 | ) |
|
|
| (2,555 | ) |
LIFO expense |
|
| 1,583 |
|
|
|
| 1,425 |
|
Postretirement benefits (income) expense |
|
| (224 | ) |
|
|
| 948 |
|
Deferred taxes on income |
|
| 3,068 |
|
|
|
| 4,396 |
|
Stock-based compensation expense |
|
| 2,342 |
|
|
|
| 5,383 |
|
Postretirement benefit plan contributions |
|
| (255 | ) |
|
|
| (130 | ) |
Loss (gain) on disposals of assets |
|
| 3,911 |
|
|
|
| (6,925 | ) |
Amortization of financing fees and other |
|
| 631 |
|
|
|
| 769 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (73,854 | ) |
|
|
| (27,069 | ) |
Inventories |
|
| 18,957 |
|
|
|
| (10,786 | ) |
Prepaid expenses and other assets |
|
| (5,725 | ) |
|
|
| 1,388 |
|
Accounts payable |
|
| 122,168 |
|
|
|
| 20,077 |
|
Accrued payroll and benefits |
|
| 11,569 |
|
|
|
| (5,191 | ) |
Other accrued expenses and other liabilities |
|
| (5,908 | ) |
|
|
| (3,257 | ) |
Net cash provided by operating activities |
|
| 129,296 |
|
|
|
| 13,519 |
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
| (17,893 | ) |
|
|
| (16,006 | ) |
Net proceeds from the sale of assets |
|
| 3,609 |
|
|
|
| 15,872 |
|
Acquisitions, net of cash acquired |
|
| — |
|
|
|
| (86,659 | ) |
Loans to customers |
|
| (612 | ) |
|
|
| (1,233 | ) |
Payments from customers on loans |
|
| 946 |
|
|
|
| 833 |
|
Other |
|
| (1 | ) |
|
|
| (32 | ) |
Net cash used in investing activities |
|
| (13,951 | ) |
|
|
| (87,225 | ) |
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
Proceeds from senior secured revolving credit facility |
|
| 332,155 |
|
|
|
| 435,769 |
|
Payments on senior secured revolving credit facility |
|
| (423,142 | ) |
|
|
| (366,407 | ) |
Proceeds from other long-term debt |
|
| — |
|
|
|
| 5,800 |
|
Repayment of other long-term debt and finance lease liabilities |
|
| (1,957 | ) |
|
|
| (4,778 | ) |
Financing fees paid |
|
| (62 | ) |
|
|
| (352 | ) |
Proceeds from resolution of acquisition contingencies |
|
| — |
|
|
|
| 15,000 |
|
Share repurchase |
|
| (10,000 | ) |
|
|
| — |
|
Net payments related to stock-based award activities |
|
| (1,352 | ) |
|
|
| (1,744 | ) |
Proceeds from exercise of stock options |
|
| — |
|
|
|
| 181 |
|
Dividends paid |
|
| (13,904 | ) |
|
|
| (6,902 | ) |
Net cash (used in) provided by financing activities |
|
| (118,262 | ) |
|
|
| 76,567 |
|
Cash flows from discontinued operations |
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
| — |
|
|
|
| (86 | ) |
Net cash used in discontinued operations |
|
| — |
|
|
|
| (86 | ) |
Net (decrease) increase in cash and cash equivalents |
|
| (2,917 | ) |
|
|
| 2,775 |
|
Cash and cash equivalents at beginning of period |
|
| 24,172 |
|
|
|
| 18,585 |
|
Cash and cash equivalents at end of period | $ |
| 21,255 |
|
| $ |
| 21,360 |
|
See accompanying notes to condensed consolidated financial statements.
38
SPARTANNASH COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
| 12 Weeks Ended |
|
| 40 Weeks Ended |
|
| ||||||||||||||
| October 7, |
|
| October 8, |
|
| October 7, |
|
| October 8, |
|
| ||||||||
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| ||||||||
Net sales | $ |
| 1,906,644 |
|
| $ |
| 1,800,085 |
|
| $ |
| 6,203,857 |
|
| $ |
| 5,906,416 |
|
|
Cost of sales |
|
| 1,644,952 |
|
|
|
| 1,544,790 |
|
|
|
| 5,313,763 |
|
|
|
| 5,054,180 |
|
|
Gross profit |
|
| 261,692 |
|
|
|
| 255,295 |
|
|
|
| 890,094 |
|
|
|
| 852,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
| 228,489 |
|
|
|
| 220,339 |
|
|
|
| 782,659 |
|
|
|
| 740,138 |
|
|
Merger/acquisition and integration |
|
| 2,392 |
|
|
|
| 2,427 |
|
|
|
| 7,031 |
|
|
|
| 4,237 |
|
|
Goodwill impairment |
|
| 189,027 |
|
|
|
| — |
|
|
|
| 189,027 |
|
|
|
| — |
|
|
Restructuring charges and asset impairment |
|
| 35,626 |
|
|
|
| 2,662 |
|
|
|
| 36,633 |
|
|
|
| 23,714 |
|
|
Total operating expenses |
|
| 455,534 |
|
|
|
| 225,428 |
|
|
|
| 1,015,350 |
|
|
|
| 768,089 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) earnings |
|
| (193,842 | ) |
|
|
| 29,867 |
|
|
|
| (125,256 | ) |
|
|
| 84,147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| 6,130 |
|
|
|
| 4,419 |
|
|
|
| 19,128 |
|
|
|
| 14,678 |
|
|
Other, net |
|
| (75 | ) |
|
|
| (146 | ) |
|
|
| (248 | ) |
|
|
| (416 | ) |
|
Total other expenses, net |
|
| 6,055 |
|
|
|
| 4,273 |
|
|
|
| 18,880 |
|
|
|
| 14,262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings before income taxes and discontinued operations |
|
| (199,897 | ) |
|
|
| 25,594 |
|
|
|
| (144,136 | ) |
|
|
| 69,885 |
|
|
Income taxes |
|
| (76,445 | ) |
|
|
| 8,864 |
|
|
|
| (56,809 | ) |
|
|
| 25,635 |
|
|
(Loss) earnings from continuing operations |
|
| (123,452 | ) |
|
|
| 16,730 |
|
|
|
| (87,327 | ) |
|
|
| 44,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of taxes |
|
| (54 | ) |
|
|
| (82 | ) |
|
|
| (125 | ) |
|
|
| (268 | ) |
|
Net (loss) earnings | $ |
| (123,506 | ) |
| $ |
| 16,648 |
|
| $ |
| (87,452 | ) |
| $ |
| 43,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings from continuing operations | $ |
| (3.31 | ) |
| $ |
| 0.45 |
|
| $ |
| (2.32 | ) |
| $ |
| 1.18 |
|
|
Loss from discontinued operations |
|
| (0.01 | ) | * |
|
| (0.01 | ) | * |
|
| (0.01 | ) | * |
|
| (0.01 | ) |
|
Net (loss) earnings | $ |
| (3.32 | ) |
| $ |
| 0.44 |
|
| $ |
| (2.33 | ) |
| $ |
| 1.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings from continuing operations | $ |
| (3.31 | ) |
| $ |
| 0.45 |
|
| $ |
| (2.32 | ) |
| $ |
| 1.18 |
|
|
Loss from discontinued operations |
|
| (0.01 | ) | * |
|
| (0.01 | ) | * |
|
| (0.01 | ) | * |
|
| (0.01 | ) |
|
Net (loss) earnings | $ |
| (3.32 | ) |
| $ |
| 0.44 |
|
| $ |
| (2.33 | ) |
| $ |
| 1.17 |
|
|
See accompanying notes to condensed consolidated financial statements.
|
|
4
SPARTANNASH COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In thousands)
(Unaudited)
| 12 Weeks Ended |
|
| 40 Weeks Ended |
| ||||||||||||||
| October 7, |
|
| October 8, |
|
| October 7, |
|
| October 8, |
| ||||||||
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||||||
Net (loss) earnings | $ |
| (123,506 | ) |
| $ |
| 16,648 |
|
| $ |
| (87,452 | ) |
| $ |
| 43,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, before tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and postretirement liability adjustment |
|
| 31 |
|
|
|
| 1 |
|
|
|
| 103 |
|
|
|
| 4 |
|
Total other comprehensive income, before tax |
|
| 31 |
|
|
|
| 1 |
|
|
|
| 103 |
|
|
|
| 4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense related to items of other comprehensive income |
|
| (12 | ) |
|
|
| — |
|
|
|
| (39 | ) |
|
|
| (1 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income, after tax |
|
| 19 |
|
|
|
| 1 |
|
|
|
| 64 |
|
|
|
| 3 |
|
Comprehensive (loss) income | $ |
| (123,487 | ) |
| $ |
| 16,649 |
|
| $ |
| (87,388 | ) |
| $ |
| 43,985 |
|
See accompanying notes to condensed consolidated financial statements.
5
SPARTANNASH COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
|
|
| ||
| Shares |
|
| Common |
|
| Comprehensive |
|
| Retained |
|
|
|
|
|
| |||||||
| Outstanding |
|
| Stock |
|
| Income (Loss) |
|
| Earnings |
|
| Total |
| |||||||||
Balance at December 31, 2016 |
| 37,539 |
|
| $ |
| 521,984 |
|
| $ |
| (11,437 | ) |
| $ |
| 314,860 |
|
| $ |
| 825,407 |
|
Net loss |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (87,452 | ) |
|
|
| (87,452 | ) |
Other comprehensive income |
| — |
|
|
|
| — |
|
|
|
| 64 |
|
|
|
| — |
|
|
|
| 64 |
|
Dividends - $0.495 per share |
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| (18,649 | ) |
|
|
| (18,649 | ) |
Share repurchase |
| (862 | ) |
|
|
| (22,500 | ) |
|
|
| — |
|
|
|
| — |
|
|
|
| (22,500 | ) |
Stock-based employee compensation |
| — |
|
|
|
| 8,593 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 8,593 |
|
Issuances of common stock on stock option exercises and stock bonus plan |
| 172 |
|
|
|
| 3,697 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 3,697 |
|
Issuances of restricted stock |
| 296 |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
Cancellations of stock-based awards |
| (171 | ) |
|
|
| (3,204 | ) |
|
|
| — |
|
|
|
| — |
|
|
|
| (3,204 | ) |
Balance at October 7, 2017 |
| 36,974 |
|
| $ |
| 508,570 |
|
| $ |
| (11,373 | ) |
| $ |
| 208,759 |
|
| $ |
| 705,956 |
|
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 |
| |||||||
| October 7, |
|
| October 8, |
| ||||
| 2017 |
|
| 2016 |
| ||||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
Net (loss) earnings | $ |
| (87,452 | ) |
| $ |
| 43,982 |
|
Loss from discontinued operations, net of tax |
|
| 125 |
|
|
|
| 268 |
|
(Loss) earnings from continuing operations |
|
| (87,327 | ) |
|
|
| 44,250 |
|
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Non-cash goodwill/asset impairment, restructuring, and other charges |
|
| 225,101 |
|
|
|
| 22,938 |
|
Depreciation and amortization |
|
| 66,366 |
|
|
|
| 60,436 |
|
LIFO expense |
|
| 2,474 |
|
|
|
| 2,130 |
|
Postretirement benefits expense |
|
| 1,276 |
|
|
|
| 157 |
|
Deferred taxes on income |
|
| (62,257 | ) |
|
|
| (715 | ) |
Stock-based compensation expense |
|
| 8,593 |
|
|
|
| 7,010 |
|
Other, net |
|
| (86 | ) |
|
|
| (234 | ) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (44,737 | ) |
|
|
| (5,628 | ) |
Inventories |
|
| (49,442 | ) |
|
|
| (44,115 | ) |
Prepaid expenses and other assets |
|
| (3,546 | ) |
|
|
| (42,287 | ) |
Accounts payable |
|
| 42,842 |
|
|
|
| 52,496 |
|
Accrued payroll and benefits |
|
| (19,881 | ) |
|
|
| (6,653 | ) |
Postretirement benefit payments |
|
| (280 | ) |
|
|
| (256 | ) |
Other accrued expenses and other liabilities |
|
| (7,533 | ) |
|
|
| (8,395 | ) |
Net cash provided by operating activities |
|
| 71,563 |
|
|
|
| 81,134 |
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
| (55,292 | ) |
|
|
| (57,215 | ) |
Net proceeds from the sale of assets |
|
| 3,928 |
|
|
|
| 5,650 |
|
Acquisitions, net of cash acquired |
|
| (226,412 | ) |
|
|
| — |
|
Loans to customers |
|
| (1,005 | ) |
|
|
| (1,962 | ) |
Payments from customers on loans |
|
| 1,904 |
|
|
|
| 1,697 |
|
Other |
|
| (279 | ) |
|
|
| (706 | ) |
Net cash used in investing activities |
|
| (277,156 | ) |
|
|
| (52,536 | ) |
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
Proceeds from revolving credit facility |
|
| 1,160,066 |
|
|
|
| 1,013,812 |
|
Payments on revolving credit facility |
|
| (918,425 | ) |
|
|
| (1,004,077 | ) |
Share repurchase |
|
| (22,500 | ) |
|
|
| (9,000 | ) |
Net payments related to stock-based award activities |
|
| (3,204 | ) |
|
|
| (2,229 | ) |
Repayment of other long-term debt |
|
| (5,795 | ) |
|
|
| (7,071 | ) |
Financing fees paid |
|
| (256 | ) |
|
|
| (99 | ) |
Proceeds from exercise of stock options |
|
| 3,207 |
|
|
|
| 1,032 |
|
Dividends paid |
|
| (18,649 | ) |
|
|
| (16,873 | ) |
Net cash provided by (used in) financing activities |
|
| 194,444 |
|
|
|
| (24,505 | ) |
Cash flows from discontinued operations |
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
| (48 | ) |
|
|
| (414 | ) |
Net cash used in discontinued operations |
|
| (48 | ) |
|
|
| (414 | ) |
Net (decrease) increase in cash and cash equivalents |
|
| (11,197 | ) |
|
|
| 3,679 |
|
Cash and cash equivalents at beginning of period |
|
| 24,351 |
|
|
|
| 22,719 |
|
Cash and cash equivalents at end of period | $ |
| 13,154 |
|
| $ |
| 26,398 |
|
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 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”). Intercompany accounts and transactions have been eliminated. For further information, refer to the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.28, 2019.
In the opinion of management, the accompanying condensed consolidated financial statements, taken as a whole, contain all adjustments, including normal recurring items, necessary to present fairly the financial position of SpartanNash as of October 7, 2017,April 18, 2020, and the results of its operations and cash flows for the interim periods presented. The preparation of the condensed consolidated financial statements and related notes to the financial statements requires management to make estimates. Estimates are based on historical experience, where applicable, and expectations of future outcomes which management believes are reasonable under the circumstances, including but not limited to the potential impacts arising from the COVID-19 pandemic. Due to the uncertainty of the magnitude and duration of the impacts of the COVID-19 pandemic, these estimates are inherently subject to judgment and actual results could differ from those estimates. Interim results are not necessarily indicative of results for a full year.
The unaudited information in the condensed consolidated financial statements for the thirdfirst quarter of 2020 and year to date periods of 2017 and 20162019 include the results of operations of the Company for the 12 and 40-week16-week periods ended October 7, 2017April 18, 2020 and October 8, 2016,April 20, 2019, respectively.
Note 2 – Adoption of New Accounting Standards and Recently Issued Accounting Standards
In January 2017,June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-04, “Intangibles2016-13, “Financial Instruments – GoodwillCredit Losses”. The ASU changed the impairment model for most financial assets and Other: Simplifyingcertain other instruments. The standard requires entities to use a forward-looking “expected loss” model that replaces the Test for Goodwill Impairment.” ASU 2017-04 simplifiesprevious “incurred loss” model, which generally results in the subsequent measurementearlier recognition of goodwill by eliminating Step 2credit losses.
In the first quarter of 2020, the goodwill impairment test. If a reporting unit fails Step 1 of the goodwill impairment test, entities are no longer required to compute the implied fair value of goodwill following the same procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, the guidance requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and to recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The Company early adopted this guidance as ofstandard through the modified retrospective approach, with a cumulative-effect adjustment at the beginning of the third quarter of fiscal 2017.
In January 2017, the FASB issued ASU 2017-01, “Business Combinations – Clarifying the Definition of a Business.” ASU 2017-01 narrows the definition of a business and provides a screen to determine when a set of the three elements of a business – inputs, processes, and outputs – are not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. If the screen is not met, the amendments (1) require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements. The amendments provide a framework to assist entities in evaluating whether both an input and a substantive process are present. The new guidance is effective for the Company in the fiscal year ending December 29, 2018. The Company is currently evaluating the impact of adoption of this standard on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting.” ASU 2016-09 provides for simplification of several aspects of the accounting for share-based payment transactions including income tax consequences, classification of awards as either equity or liabilities, accounting for forfeitures, and classification on the statement of cash flows. The Company adopted the new standard in the first quarter of fiscal 2017. Accordingly the tax benefits or deficiencies related to stock-based compensation are reflected in the condensed consolidated statements of operations as a component of the provision for income taxes, whereas they previously were recognized in equity.year. As a result of the adoption, the Company recognized $1.3 millionhas established revised processes and controls to estimate expected losses for trade and other receivables in accordance with the new standard. The Company’s process for estimating losses for trade and other receivables includes an evaluation of tax benefits related to share-based payments in its provisionboth historical collection experience and expectations for income taxes in 2017. Additionally, the Company’s condensed consolidated statements of cash flows now include tax benefits as an operating activity, while cash paidcurrent credit risks based on associates’ behalf related to shares withheld for tax purposes is classified as a financing activity. Retrospective applicationseveral customer and environmental factors.
The adoption of the cash flow presentationstandard resulted in $2.6a transition adjustment to beginning of the year retained earnings of $2.2 million increases(gross of the deferred tax impact of $0.6 million). The transition adjustment relates to both net cash provided by operating activitiesincremental trade and net cash usednotes receivable allowances due to the earlier recognition of expected losses under the new standard of $1.9 million and $0.3 million, respectively. Changes in financing activities, respectively,the balance of the allowance for doubtful accounts were as follows:
|
|
|
| Allowance for Doubtful Accounts |
| ||||||||||||
(In thousands) |
|
|
| Current Accounts and Notes Receivable |
|
| Long-term Notes Receivable |
|
| Total |
| ||||||
Balance at December 28, 2019 |
|
|
| $ |
| 2,739 |
|
| $ |
| 233 |
|
| $ |
| 2,972 |
|
Impact of adoption of new credit loss standard (ASU 2016-13) |
|
|
|
|
| 1,911 |
|
|
|
| 259 |
|
|
|
| 2,170 |
|
Provision for expected credit losses |
|
|
|
|
| 365 |
|
|
|
| — |
|
|
|
| 365 |
|
Write-offs charged against the allowance |
|
|
|
|
| (249 | ) |
|
|
| — |
|
|
|
| (249 | ) |
Balance at April 18, 2020 |
|
|
| $ |
| 4,766 |
|
| $ |
| 492 |
|
| $ |
| 5,258 |
|
The Company evaluated the year-to-date period ended October 8, 2016. The Company’s stock compensation expense continueseffects of the COVID-19 pandemic in performing its quarterly evaluation of the adequacy of its allowance for doubtful accounts. While the duration and impact of these affects is uncertain, the Company did not deem it necessary to reflect estimated forfeitures.record incremental allowances for doubtful accounts as no additional credit exposure was identified.
In February 2016,August 2018, the FASB issued ASU 2016-02, “Leases.2018-14, “Compensation—Retirement Benefits—Defined Benefit Plans—General: Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans.” The amendments in this ASU 2016-02 provides guidanceremove disclosures that are no longer considered to be cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. The amendments in ASU 2018-14 are effective for lease accountingfiscal years ending after December 15, 2020 and 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 operations will be similar to the current treatment of operating and capital leases. The new guidance is effectiveapplied on a modified retrospective basis for the Company in the first quarter of its fiscal year ending December 28, 2019.to all periods presented. The adoption of this ASU will result inguidance is not expected to have a significant increaseeffect on the Company’s financial statements.
9
Note 3 – Revenue
Disaggregation of Revenue
The following table provides information about disaggregated revenue by type of products and customers for each of the Company’s reportable segments:
| 16 Weeks Ended April 18, 2020 |
| |||||||||||||||||
(In thousands) | Food Distribution |
|
| Retail |
|
| Military |
|
| Total |
| ||||||||
Type of products: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Center store (a) | $ |
| 451,321 |
|
| $ |
| 328,326 |
|
| $ |
| 340,296 |
|
| $ |
| 1,119,943 |
|
Fresh (b) |
|
| 467,663 |
|
|
|
| 295,003 |
|
|
|
| 195,667 |
|
|
|
| 958,333 |
|
Non-food (c) |
|
| 424,312 |
|
|
|
| 125,845 |
|
|
|
| 166,321 |
|
|
|
| 716,478 |
|
Fuel |
|
| — |
|
|
|
| 33,000 |
|
|
|
| — |
|
|
|
| 33,000 |
|
Other |
|
| 26,199 |
|
|
|
| 394 |
|
|
|
| 2,109 |
|
|
|
| 28,702 |
|
Total | $ |
| 1,369,495 |
|
| $ |
| 782,568 |
|
| $ |
| 704,393 |
|
| $ |
| 2,856,456 |
|
Type of customers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individuals | $ |
| — |
|
| $ |
| 782,333 |
|
| $ |
| — |
|
| $ |
| 782,333 |
|
Manufacturers, brokers and distributors |
|
| 38,522 |
|
|
|
| — |
|
|
|
| 658,940 |
|
|
|
| 697,462 |
|
Retailers |
|
| 1,309,422 |
|
|
|
| — |
|
|
|
| 43,344 |
|
|
|
| 1,352,766 |
|
Other |
|
| 21,551 |
|
|
|
| 235 |
|
|
|
| 2,109 |
|
|
|
| 23,895 |
|
Total | $ |
| 1,369,495 |
|
| $ |
| 782,568 |
|
| $ |
| 704,393 |
|
| $ |
| 2,856,456 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 16 Weeks Ended April 20, 2019 |
| |||||||||||||||||
(In thousands) | Food Distribution |
|
| Retail |
|
| Military |
|
| Total |
| ||||||||
Type of products: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Center store (a) | $ |
| 355,471 |
|
| $ |
| 270,773 |
|
| $ |
| 310,410 |
|
| $ |
| 936,654 |
|
Fresh (b) |
|
| 428,768 |
|
|
|
| 262,947 |
|
|
|
| 197,022 |
|
|
|
| 888,737 |
|
Non-food (c) |
|
| 362,994 |
|
|
|
| 126,395 |
|
|
|
| 162,056 |
|
|
|
| 651,445 |
|
Fuel |
|
| — |
|
|
|
| 41,249 |
|
|
|
| — |
|
|
|
| 41,249 |
|
Other |
|
| 22,005 |
|
|
|
| 403 |
|
|
|
| 1,882 |
|
|
|
| 24,290 |
|
Total | $ |
| 1,169,238 |
|
| $ |
| 701,767 |
|
| $ |
| 671,370 |
|
| $ |
| 2,542,375 |
|
Type of customers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individuals | $ |
| — |
|
| $ |
| 701,482 |
|
| $ |
| — |
|
| $ |
| 701,482 |
|
Manufacturers, brokers and distributors |
|
| 60,711 |
|
|
|
| — |
|
|
|
| 642,636 |
|
|
|
| 703,347 |
|
Retailers |
|
| 1,105,326 |
|
|
|
| — |
|
|
|
| 26,852 |
|
|
|
| 1,132,178 |
|
Other |
|
| 3,201 |
|
|
|
| 285 |
|
|
|
| 1,882 |
|
|
|
| 5,368 |
|
Total | $ |
| 1,169,238 |
|
| $ |
| 701,767 |
|
| $ |
| 671,370 |
|
| $ |
| 2,542,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Center store includes dry grocery, frozen and beverages. |
| ||||||||||||||||||
(b) Fresh includes produce, meat, dairy, deli, bakery, prepared proteins, seafood and floral. |
|
|
|
|
|
| |||||||||||||
(c) Non-food includes general merchandise, health and beauty care, tobacco products and pharmacy. |
|
|
|
|
|
|
Contract Assets and Liabilities
In the ordinary course of business, the Company may advance funds to certain independent retailers which are earned by the retailers primarily through achieving specified purchase volume requirements, as outlined in their supply agreements with the Company, or in limited instances, for remaining a SpartanNash customer for a specified time period. These advances must be repaid if the purchase volume requirements are not met or if the retailer no longer remains a customer for the specified time period. For volume-based arrangements, the Company estimates the amount of the advanced funds earned by the retailers based on the expected volume of purchases by the retailer and amortizes the advances as a reduction of the transaction price and revenue earned. Realizability of the advances, or collectability in event of default, is not assured and is dependent on the financial condition of the customer, economic and industry factors and the quality of the underlying collateral. No reserves related to the Company’s consolidated balance sheets for lease liabilities and right-of-userealizability or collectability of customer advances were necessary as of April 18, 2020. These advances are not considered contract assets and the Company is currently evaluating the other effects of adoption of this ASU on its consolidated financial statements.
8
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers.” The new guidance affects any reporting organization that either enters into contracts with customers to transfer goods or services or enters into contracts forunder ASC 606 as they are not generated through 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 customersthe retailers. These advances are included in an amount“Prepaid expenses and other current assets” or “Other assets, net” on the Company’s balance sheets.
10
When the Company transfers goods or services to a customer, payment is due - subject to normal terms - and is not conditional on anything other than the passage of time. Typical payment terms range from due upon receipt to 30 days, depending on the type of customer and relationship. At contract inception, the Company expects that reflects the considerationperiod of time between the transfer of goods to which the company expects to be entitled in exchangecustomer and when the customer pays for those goods or services. In August 2015,will be less than one year, which is consistent with the FASB issued ASU 2015-14, “Deferral ofCompany’s standard payment terms. Accordingly, the Effective Date,” which results inCompany has elected the guidance being effectivepractical expedient under ASC 606 to not adjust for the effects of a significant financing component. As such, these amounts are recorded as receivables and not contract assets. The Company in the first quarter of its fiscal year ending December 29, 2018. The adoption will include updates as provided under ASU 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net);” ASU 2016-10, “Identifying Performance Obligations and Licensing;” and ASU 2016-12, “Narrow-Scope Improvements and Practical Expedients.” Adoption is allowed by either the full retrospective or modified retrospective approach.had 0 contract assets for any period presented.
The Company is currently in the processdoes not typically incur incremental costs of evaluating the impact of adoption of this standard on its consolidated financial statementsobtaining a contract that are contingent upon successful contract execution and has substantially completed its initial evaluation of the major focus areas that could impact the Company. From a principal versus agent considerations perspective, the Company has evaluated its significant arrangements and has determined that revenue recognition on a gross reporting basis will remain relatively unchanged, with the exception of a few smaller contracts that couldwould therefore be reported on a net basis depending on the nature of the arrangements and management’s final assessment. As it pertains to the Food Distribution and Military segments, the Company determined that the promised goods or services other than grocery products outlined in the contracts with customers are immaterial in the context of the contracts. As a result of this determination, the Company is not required to assess whether these promised goods or services are performance obligations, and therefore, believes revenue recognition practices will remain relatively unchanged as there are no additional deliverables for which the transaction price will need to be allocated. Many of these contracts also include contingent amounts of variable consideration, and the Company expects there to be few, if any, changes to the timing of revenue as the Company currently recognizes these amounts under the presumption that they are determinable and can be estimated. The Company also expects there to be few, if any, changes to revenue recognition in its Retail segment based on how the Company currently records gift card breakage and loyalty rewards, which are immaterial to the consolidated financial statements.
capitalized.
Note 3 4 – Acquisitions
On January 6, 2017,December 31, 2018, the Company acquired certain assets and assumed certain liabilitiesall of Caito Foods Servicethe outstanding shares of Martin’s Super Markets, Inc. (“Caito”) and Blue Ribbon Transport (“BRT”Martin’s”) for $214.6$86.7 million, in cash, net of $2.5$7.8 million of cash acquired. Acquired assets consist primarily of property and equipment of $77.5$55.0 million, intangible assets of $72.9$23.9 million, and working capital. Intangible assets are primarily composed of an indefinite-lived trade name of $20.6 million and pharmacy customer relationships,prescription lists of $3.1 million which will beare amortized over fifteen years, and indefinite lived trade names. In connection with the purchase, the Company is providing certain earn-out opportunities that have the potential to pay the sellers an additional $27.4 million, collectively, if the business achieves certain performance targets during the first three years after acquisition. If certain performance targets are not met in the first year after acquisition, the Company will be reimbursed a portion of the initial purchase price at an amount not to exceed the sum of: a) $15.0 million, representing the funds paid into escrow, and b) any earn-out opportunities earned by the sellers. The reduction in purchase price, if applicable, will first be applied to funds paid into escrow and then as an offset against and a reduction to any payments owed on the various earn-out opportunities. The acquisition was funded with proceeds from the Company’s Credit Agreement. As of October 7, 2017, the Company has incurred $4.9 million of costs related to the acquisition, of which $2.7 million was incurred in 2017, and is recorded in merger/acquisition and integration expense.
Founded in Indianapolis in 1965, Caito is a leading supplier of fresh fruits and vegetables as well as value-added meal solutions to grocery retailers and food service distributors across 21 states in the Southeast, Midwest and Eastern United States. BRT offers temperature-controlled distribution and logistics services throughout North America. Caito and BRT service customers from facilities in Indiana and Florida. Caito also has a fresh cut fruit and vegetable facility in Indianapolis and a new 118,000 square foot Fresh Kitchen facility, also in Indianapolis. The Fresh Kitchen provides the Company with the ability to process, cook, and package fresh protein-based foods and complete meal solutions. The Company has begun production in the Fresh Kitchen facility and is in the process of ramping up to full production. The Company acquired Caito and BRT to strengthen its fresh product offerings to its existing customer base and to expand into fast-growing, value-added services, such as freshly-prepared centerplate and side dish categories.
seven years. The acquired assets and assumed liabilities were recorded at their estimated fair values as of the acquisition date and were based on preliminary estimates. These estimates, are subject to revision uponwhich were subsequently finalized during the finalization of the valuations of the acquired real estate and intangible assets. Additional adjustments, if any, will be made prior to January 5, 2018. During the thirdfourth quarter of fiscal 2017, the Company increased2019. NaN goodwill by $0.8 million to reflect an updated valuation of certain acquired long-lived assets. The excess of the purchase price over the fair value of net assets acquired, currently estimated at $46.0 million, was recorded as goodwill in the consolidated balance sheet and allocatedrelated to the Food Distribution segment. The goodwill recognized is attributable primarily to the assembled workforce of Caito and BRT and expected synergies.acquisition. The Company expects that all goodwill attributableincurred $0.9 million of merger/acquisition and integration costs related to the acquisition will be deductible for tax purposes.in the prior year quarter. The acquisition was funded with proceeds from the Company’s Credit Agreement.
Martin’s operatessupermarkets in Northern Indiana and Southwest Michigan. Martin’s was an independent retailer and customer of the Company’s Food Distribution segment prior to the acquisition.
9
Note 45 – Goodwill and Other Intangible Assets
Changes inThe Company has 3 reporting units; however, 0 goodwill exists within the Military or Retail reporting units. The carrying amount of goodwill wererecorded within the Food Distribution reporting unit was $181.0 million as follows:of April 18, 2020 and December 28, 2019.
(In thousands) | Food Distribution |
|
| Retail |
|
|
| Total |
|
| ||||||
Balance at December 31, 2016 | $ |
| 132,367 |
|
| $ |
| 190,319 |
| (a) |
| $ |
| 322,686 |
| (a) |
Acquisitions (Note 3) |
|
| 46,025 |
|
|
|
| — |
|
|
|
|
| 46,025 |
|
|
Impairment |
|
| — |
|
|
|
| (189,027 | ) |
|
|
|
| (189,027 | ) |
|
Disposals |
|
| — |
|
|
|
| (1,292 | ) |
|
|
|
| (1,292 | ) |
|
Balance at October 7, 2017 | $ |
| 178,392 |
|
| $ |
| — |
| (b) |
| $ |
| 178,392 |
| (b) |
|
|
|
|
The Company reviews goodwill and other indefinite-lived intangible assets for impairment annually, during the fourth quarter of each fiscal year, and more frequently if circumstances indicate the possibilitya risk of impairment. Testing goodwill and other indefinite-lived intangible assets for impairment requires management to make significant estimates about the Company’s future performance, cash flows, and other assumptions that can be affected by potential changes in economic, industry or market conditions, business operations, competition, or the Company’s stock price and market capitalization. On the first day of the third quarter of fiscal 2017, the
The Company early adopted ASU 2017-04, which simplifies the subsequent measurement of goodwill by eliminating Step 2 of the goodwill impairment test.
During the 12 weeks ended October 7, 2017, the Company experienced significantly lower than expected Retail operating results and, due to an increasingly competitive retail environment and the related pricing pressureshas indefinite-lived intangible assets that are anticipated to negatively impact gross margin, operating profit,not amortized, consisting primarily of indefinite-lived trade names and future cash flows, revised its future projectionslicenses for the Retail reporting unit. As a resultsale of the lower than previously estimated Retail operating results, the Company performed Step 1alcoholic beverages. The carrying amount of the goodwill impairment test by calculating the fair valueindefinite-lived intangible assets was $76.3 million as of the Retail reporting unit based on its discounted estimated future cash flows. The Company then benchmarked the calculated fair value against a market approach using the guideline public companies method. Given there has been a sustained decline in the market multiples of publicly traded peer companies, management considered this market information when assessing the reasonableness of the fair value of the reporting unit under both the incomeApril 18, 2020 and market approaches.December 28, 2019.
Based on the factors outlined above, together with the results of the Step 1 goodwill impairment test, it was determined that the carrying value of the Retail segment exceeded its fair value. Consequently, the Company recorded an estimated goodwill impairment charge of $189.0 million. The measurement of the fair value of the Retail segment requires significant judgments and estimates regarding short- and long-term growth rates and profitability, as well as assumptions regarding the market valuation of the business. These represent Level 3 valuation inputs under the ASC 820 fair value hierarchy, as further described in Note 7 – Fair Value Measurements. Due to the complexity and effort required to estimate the fair value of the reporting unit, the fair value estimates were based on preliminary analysis and assumptions that are subject to change. The measurement of impairment will be completed in the fourth quarter of fiscal 2017 as the Company performs its annual impairment test for the Food Distribution reporting unit as well as a market capitalization reconciliation to assess the reasonableness of the fair values determined for each of the reporting units.
The Food Distribution reporting unit has a fair value that is substantially in excess of its carrying value.
Note 56 – Restructuring Charges and Asset Impairment
The following table provides the activity of reserves for closed properties for fiscal 2017.the 16-week period ended April 18, 2020. Included in the liability are lease-related ancillary costs from the date of closure to the end of the remaining lease term. Reserves for closed properties recorded in the condensed consolidated balance sheets are included in “Other accrued expenses” in Current liabilities and “Other long-term liabilities” in Long-term liabilities based on the timing of when the obligations are expected to be paid.
Reserves for severance are recorded in “Accrued payroll and benefits”.
|
|
|
| Lease |
|
|
|
|
|
|
| |||||||||||||||||||||||
|
|
|
| Lease and |
|
|
|
|
|
|
|
|
|
| Ancillary |
|
|
|
|
|
|
| ||||||||||||
(In thousands) |
|
|
| Ancillary Costs |
|
| Severance |
|
| Total |
|
|
|
| Costs |
|
| Severance |
|
| Total |
| ||||||||||||
Balance at December 31, 2016 |
|
|
| $ |
| 21,932 |
|
| $ |
| — |
|
| $ |
| 21,932 |
| |||||||||||||||||
Balance at December 28, 2019 |
|
|
| $ |
| 4,971 |
|
| $ |
| 17 |
|
| $ |
| 4,988 |
| |||||||||||||||||
Provision for closing charges |
|
|
|
|
| 886 |
|
|
| — |
|
|
| 886 |
|
|
|
|
|
| 325 |
|
|
|
| — |
|
|
|
| 325 |
| ||
Provision for severance |
|
|
|
|
| — |
|
|
| 620 |
|
|
| 620 |
|
|
|
|
|
| — |
|
|
|
| 2,198 |
|
|
|
| 2,198 |
| ||
Lease termination adjustments |
|
|
|
|
| (1,910 | ) |
|
| — |
|
|
| (1,910 | ) | |||||||||||||||||||
Changes in estimates |
|
|
|
|
| 1,141 |
|
|
|
|
|
|
| 1,141 |
|
|
|
|
|
| 68 |
|
|
|
| — |
|
|
|
| 68 |
| ||
Accretion expense |
|
|
|
|
| 408 |
|
|
| — |
|
|
| 408 |
|
|
|
|
|
| 32 |
|
|
|
| — |
|
|
|
| 32 |
| ||
Payments |
|
|
|
|
| (5,045 | ) |
|
|
| (452 | ) |
|
|
| (5,497 | ) |
|
|
|
|
| (814 | ) |
|
|
| (17 | ) |
|
|
| (831 | ) |
Balance at October 7, 2017 |
|
|
| $ |
| 17,412 |
|
| $ |
| 168 |
|
| $ |
| 17,580 |
| |||||||||||||||||
Balance at April 18, 2020 |
|
|
| $ |
| 4,582 |
|
| $ |
| 2,198 |
|
| $ |
| 6,780 |
|
11
Included in the liability are lease obligations recorded at the present value of future minimum lease payments, calculated using a risk-free interest rate, and related ancillary costs from the date of closure to the end of the remaining lease term, net of estimated sublease income.
Restructuring and asset impairment chargesactivity included in the condensed consolidated statements of operationsearnings consisted of the following:
| 16 Weeks Ended |
| |||||||
| April 18, |
|
| April 20, |
| ||||
(In thousands) | 2020 |
|
| 2019 |
| ||||
Asset impairment charges (a) | $ |
| 6,733 |
|
| $ |
| 100 |
|
Provision for closing charges |
|
| 325 |
|
|
|
| 366 |
|
Gain on sales of assets related to closed facilities (b) |
|
| (90 | ) |
|
|
| (6,923 | ) |
Provision for severance (c) |
|
| 2,198 |
|
|
|
| 149 |
|
Other costs associated with site closures (d) |
|
| 1,003 |
|
|
|
| 611 |
|
Changes in estimates (e) |
|
| 68 |
|
|
|
| 35 |
|
| $ |
| 10,237 |
|
| $ |
| (5,662 | ) |
| 12 Weeks Ended |
|
| 40 Weeks Ended |
| ||||||||||||||
| October 7, |
|
| October 8, |
|
| October 7, |
|
| October 8, |
| ||||||||
(In thousands) | 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||||||
Asset impairment charges | $ |
| 33,158 |
|
| $ |
| 2,059 |
|
| $ |
| 33,678 |
|
| $ |
| 5,542 |
|
Provision for closing charges |
|
| 481 |
|
|
|
| 375 |
|
|
|
| 886 |
|
|
|
| 13,546 |
|
Loss on sales of assets related to closed facilities |
|
| 238 |
|
|
|
| — |
|
|
|
| 912 |
|
|
|
| 266 |
|
Provision for severance |
|
| 76 |
|
|
|
| — |
|
|
|
| 620 |
|
|
|
| 895 |
|
Other costs associated with distribution center and store closings |
|
| 532 |
|
|
|
| 268 |
|
|
|
| 1,306 |
|
|
|
| 3,371 |
|
Changes in estimates |
|
| 1,141 |
|
|
|
| (40 | ) |
|
|
| 1,141 |
|
|
|
| 394 |
|
Lease termination adjustments |
|
| — |
|
|
|
| — |
|
|
|
| (1,910 | ) |
|
|
| (300 | ) |
| $ |
| 35,626 |
|
| $ |
| 2,662 |
|
| $ |
| 36,633 |
|
| $ |
| 23,714 |
|
(a) Asset impairment charges in the current year were substantially all incurred primarily in the Food Distribution segment and primarily relate to the exit of the Fresh Cut business.
(b) Gain on long-livedsales of assets in the Retail segment dueprior year primarily relate to the economicsale of a previously closed distribution center in the Food Distribution segment.
(c) Severance in the current year was related to the exit of the Fresh Cut business.
(d) Other costs primarily relate to the Fresh Cut and competitive environment of certain storesstore closings in the current year, and a Food Distribution warehouse and store closings in conjunction with the Company’s retail store rationalization plan. The changesprior year.
(e) Changes in estimates primarily relate to revised estimates offor turnover and other lease and ancillary costs and sublease income associated with previously closed locations, due to lost subtenants and deterioration of the condition of certain properties. The lease termination adjustments represent the benefits recognized in connection with lease buyouts negotiated related to previously closed stores.
Long-lived assets are measured at fair value on a nonrecurring basis using Level 3 inputs underinputs. In connection primarily with the fair value hierarchy, as further described in Note 7 – Fair Value Measurements. AssetsCompany’s plan to exit the Fresh Cut operations, long-lived assets and definite-lived intangible assets were tested for recoverability. Long-lived assets with a book value of $48.6$29.1 million were measured at a fair value of $14.9$22.4 million, resulting in impairment charges of $6.7 million in 2020. Assets with a book value of $0.3 million were measured at a fair value of $0.2 million, resulting in an impairment charge of $33.7$0.1 million in 2017.2019. Fair value of long-lived assets is determined by estimating the amount and timing of net future cash flows, including the expected proceeds from the sale of assets, discounted using a risk-adjusted rate of interest. The Company estimates future cash flows based on historical results of operations, external factors expected to impact future performance, experience and knowledge of the geographic area in which the assets are located, and when necessary, uses real estate brokers.
Note 6 – Long-Term Debt
Long-term debt consists The Company has evaluated assets held for sale as of April 18, 2020 and concluded that the following:
| October 7, |
|
| December 31, |
| ||||
(In thousands) | 2017 |
|
| 2016 |
| ||||
Senior secured revolving credit facility, due December 2021 | $ |
| 575,550 |
|
| $ |
| 359,127 |
|
Senior secured term loan, due December 2021 |
|
| 52,172 |
|
|
|
| 26,954 |
|
Capital lease obligations |
|
| 44,114 |
|
|
|
| 48,255 |
|
Other, 2.61% - 8.75%, due 2019 - 2020 |
|
| 6,238 |
|
|
|
| 5,028 |
|
Total debt - Principal |
|
| 678,074 |
|
|
|
| 439,364 |
|
Unamortized debt issuance costs |
|
| (7,130 | ) |
|
|
| (8,265 | ) |
Total debt |
|
| 670,944 |
|
|
|
| 431,099 |
|
Less current portion |
|
| 19,407 |
|
|
|
| 17,424 |
|
Total long-term debt | $ |
| 651,537 |
|
| $ |
| 413,675 |
|
Subsequent toFresh Kitchen facility meets the end ofrequirements for held for sale classification. Assets classified as held for sale in the third quarter of fiscal 2017,consolidated balance sheet are valued at the Company paid the outstanding balance on the Senior secured term loan of $52.2 million with proceeds from its Senior secured revolving credit facility. As a result of this transaction, annual interest expense is expected to be reduced through a reduction of the average interest rates paid.net proceeds.
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. See Note 5 for discussion of the fair value measurements related to long-lived asset impairment charges and Note 4 for discussion of the fair value measurements related to goodwill. At October 7, 2017 and December 31, 2016, the book value and estimated fair value of the Company’s debt instruments, excluding debt financing costs, were as follows:
| October 7, |
|
| December 31, |
| ||||
(In thousands) | 2017 |
|
| 2016 |
| ||||
Book value of debt instruments, excluding debt financing costs: |
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt and capital lease obligations | $ |
| 19,407 |
|
| $ |
| 17,424 |
|
Long-term debt and capital lease obligations |
|
| 658,667 |
|
|
|
| 421,940 |
|
Total book value of debt instruments |
|
| 678,074 |
|
|
|
| 439,364 |
|
Fair value of debt instruments, excluding debt financing costs |
|
| 679,367 |
|
|
|
| 440,759 |
|
Excess of fair value over book value | $ |
| 1,293 |
|
| $ |
| 1,395 |
|
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).
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.
12
CertainFinancial 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 Company’s business combinations involveshort-term maturities of these financial instruments. See Note 6 for discussion of the potential forfair value measurements related to long-lived asset impairment charges. At April 18, 2020 and December 28, 2019 the receipt or payment of future contingent consideration upon the shortfall or achievement of various operating thresholds, respectively. The additional consideration is generally contingent on the acquired company reaching certain performance milestones, including attaining specified EBITDA levels. For business combinations including contingent consideration provisions an asset or liability is recorded for thebook value and estimated fair value of the contingent consideration on the acquisition date. Company’s debt instruments, excluding debt financing costs, were as follows:
| April 18, |
|
| December 28, |
| ||||
(In thousands) | 2020 |
|
| 2019 |
| ||||
Book value of debt instruments, excluding debt financing costs: |
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt and finance lease liabilities | $ |
| 6,157 |
|
| $ |
| 6,349 |
|
Long-term debt and finance lease liabilities |
|
| 596,100 |
|
|
|
| 687,659 |
|
Total book value of debt instruments |
|
| 602,257 |
|
|
|
| 694,008 |
|
Fair value of debt instruments, excluding debt financing costs |
|
| 606,561 |
|
|
|
| 700,631 |
|
Excess of fair value over book value | $ |
| 4,304 |
|
| $ |
| 6,623 |
|
12
The estimated fair value of the contingent considerationdebt is remeasured at each reporting period with the change in fair value recognized as income or expense within operating expenses in the condensed consolidated statements of income. The Company measures the asset and liability on a recurring basis using Level 3 inputs.
The fair value of contingent consideration is measured using projected payment dates, discount rates, probabilities of payment, and projected EBITDA. Projected contingent payment or receipt amounts are discounted back to the current period using a discounted cash flow model. Projected EBITDA amounts are based on initial deal model forecasts at the time of acquisition as well as the Company’s most recent internal operational budget,market quotes for instruments with similar terms and include a probability weighted range of outcomes. Changes in projected EBITDA, probabilities of payment, discount rates, or projected payment dates may result in higher or lower fair value measurements. The recurring Level 3 fair value measurements of contingent consideration include the following significant unobservableremaining maturities (Level 2 inputs as of October 7, 2017:
|
| ||
|
| ||
|
| ||
|
|
The fair value of contingent consideration receivable and payable associated with the Caito and BRT acquisition was $18.4 million and $3.4 million, respectively, as of October 7, 2017. The net receivable of $15 million was recorded in other assets, net in the condensed consolidated balance sheets as there is a right of offset for the payable and receivable. Upon payment, the portion of the contingent consideration related to the acquisition date fair value is reported as a financing activity in the condensed consolidated statements of cash flows. Amounts received or paid in excess of the acquisition date fair value are reported as an operating activity in the consolidated statements of cash flows.valuation techniques).
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 an adverse effect on the Company’s consolidated financial position, operating results or liquidity.
From time to time, the Company may advance funds to independent retailers which are earned by the retailers primarily through achieving specified purchase volume requirements, as outlined in their supply agreements with the Company, or in limited instances, for remaining a SpartanNash customer for a specified time period. These advances must be repaid if the purchase volume requirements are not met or if the retailer no longer remains a customer for the specified time period. As of October 7, 2017, the Company has an unearned advance to one independent retailer for an amount representing approximately two percent of the Company’s total assets, and also has outstanding receivables from this customer in the amount of $6.2 million; the Company has established a reserve of $4.8 million given the past due status on those receivables. The Company’s collateral related to the advanced funds is a security interest in select business assets of the independent retailer’s stores, including select real property assets and other collateral, including personal guarantees, from the shareholders. However, the Company may be unable to recover the entire unearned portion of the funds advanced to this independent retailer. The Company is currently involved in an ongoing state law proceeding pursuing recovery of amounts owed. Based on the uncertainty associated with estimating the value of the collateral and the risks related to taking possession of and divesting the secured business assets, the Company cannot reasonably estimate the amount of advanced funds, if any, that should be reserved. The Company estimates that the possible range of loss related to this customer, including past due amounts, is between zero and $25.0 million, depending on the circumstances discussed above.
13
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 (“CBAs”) in Bellefontaine, Ohio, Lima, Ohio, and Grand Rapids, Michigan covering its supply chain 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. The Company currently contributes to the Central States Plan under the terms outlined in the “Primary Schedule” of Central States’ Rehabilitation Plan or those outlined in the “Default Schedule.” Both the Primary and Default schedules require varying increases in employer contributions over the previous year’s contribution. Increases are set within the collective bargaining agreementCBAs and vary by location. The Plan continues to be in red zone status, whichand according to the Pension Protection Act (“PPA”), is considered to be in critical status as red“critical and declining” zone statusstatus. Among other factors, plans in the “critical and declining” zone are generally less than 65% funded.
funded and are projected to become insolvent within the next 15 years (or 20 years depending on the ratio of active-to-inactive participants). Based on the most recent information available to 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 one1 of a number of employers contributing to this plan, it is difficult to ascertain what the exact amount of the underfunding would be. Management is not aware of any significant change in funding levels since December 31, 2016.28, 2019. 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.
The terms of the existing collective bargaining agreement between the Company and union representing its associates in the Grand Rapids distribution center have been mutually extended by the parties through December 2, 2017. The parties have agreed to continue negotiations in an effort to reach agreement on a longer term collective bargaining agreement.
Note 9 – Associate Retirement Plans
During the 12 weeks16-week period ended October 7, 2017 and October 8, 2016,April 18, 2020, the Company recognized net periodic postretirement benefit costs of$0.2 million related to the SpartanNash Retiree Medical Plan (“Retiree Medical Plan”). The Company also realized a gain of $1.0 million related to a refund from the annuity provider associated with the final reconciliation of participant data of the terminated SpartanNash Company Pension Plan (“Pension Plan”). In addition to the remaining assets in the pension trust, these funds will be used to satisfy obligations associated with other qualified retirement programs. During the 16-week period ended April 20, 2019, the Company recognized net periodic pension incomeexpense of $0.1$0.4 million and $0.2 million, respectively, related to the SpartanNash Company Pension Plan and net periodic postretirement benefit costs of $0.1 million in both periods related tofor the SpartanNash Medical Plan.
For the 40 weeks ended October 7, 2017 and October 8, 2016, the Company recognized net periodic pension income of $0.5 and $0.8 million, respectively, related to the SpartanNash Company Pension Plan and net postretirementMedical Plan, respectively. Substantially all of these amounts are included in Postretirement benefit costsexpense (income) in the condensed consolidated statements of $0.3 million in both periods related to the SpartanNash Medical Plan.earnings.
The Company did notexpects to make anytotal contributions of $0.5 million in 2020 to the SpartanNash Company PensionRetiree Medical Plan duringand has made $0.1 million in the 40 weeks ended October 7, 2017. The Company does not expect, and is not required, to make any contributions for the remainder of the fiscal year ending December 30, 2017.
first quarter. The Company’s retirement programs also include defined contribution plans providing contributory benefits, as well as executive compensation plans for a select group of management personnel and/or highly compensated associates.
Multi-Employer Plans
In addition to the plans listed above, the Company participates in the Central States Southeast and Southwest Pension Fund, (EIN 7456500), the Michigan Conference of Teamsters 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.
With respect to the Company’s participation in the Central States Plan, expense is recognized as contributions are funded. The Company’s contributions forduring the 40 weeks16-week periods ended October 7, 2017April 18, 2020 and October 8, 2016April 20, 2019 were $10.2$4.6 million and $10.1$4.8 million, respectively. See Note 8 for further information regarding contingencies related to the Company’s participation in the Central States Plan.
13
Note 10 – Income Taxes
The effective income tax rate was 38.2%0.2% and 34.6%25.9% for the 1216 weeks ended October 7, 2017April 18, 2020 and October 8, 2016, respectively. For the 40 weeks ended October 7, 2017 and October 8, 2016, the effective income tax rate was 39.4% and 36.7%,April 20, 2019, respectively. The differencesdifference from the federal statutory rate arein the current year was primarily due to tax benefits related to state taxes, stock-based compensationas a result of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act and federal tax credits, in the current year andpartially offset by state taxes and stock-based compensation. In the prior year, the difference from the federal statutory rate was primarily due to state taxes and stock-based compensation, partially offset by federal tax credits incredits.
On March 27, 2020, the prior year. The Company adopted ASU 2016-09 on January 1, 2017, which requiresU.S. government enacted tax benefits or deficiencies relatedlegislation to stock-based compensationprovide economic stimulus and support businesses and individuals during the COVID-19 pandemic, referred to be reflected inas the condensed consolidated statements of operations as a componentCARES Act. In connection with initial analysis of the provision for income taxes whereas they were previously recognized in equity. Total tax benefits related to stock-based compensation recognized in fiscal 2017 were $1.3 million. As discussed in Note 4 – Goodwill, duringimpact of the third quarter of fiscal 2017,CARES Act, the Company recorded a goodwill impairment loss of $189.0 million. This loss resulted in a reduction of deferrednet discrete income tax liabilities (net)benefit of $70.9 million.$4.3 million during the first quarter, associated with the additional deductibility of certain expenses combined with provisions which enable companies to carry back tax losses to years prior to the enactment of the Tax Cuts and Jobs Act, where the federal statutory income tax rate was 35%.
Note 11 – Stock-Based Compensation
The Company has a shareholder-approved stock incentive plan (the “2015 Plan”) that provides for the granting of 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.
Stock-based compensation expense recognized and included in “Selling, general and administrative expenses” in the condensed consolidated statements of operations,earnings, and related tax benefitsimpacts were as follows:
| 12 Weeks Ended |
|
| 40 Weeks Ended |
| |||||||||||||||||||||||
| October 7, |
|
| October 8, |
|
| October 7, |
|
| October 8, |
| 16 Weeks Ended |
| |||||||||||||||
(In thousands) | 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| April 18, 2020 |
|
| April 20, 2019 |
| ||||||||||||
Restricted stock | $ |
| 1,103 |
|
| $ |
| 944 |
|
| $ |
| 8,593 |
|
| $ |
| 7,010 |
| $ |
| 2,342 |
|
| $ |
| 5,383 |
|
Tax benefits |
|
| (439 | ) |
|
|
| (352 | ) |
|
|
| (3,149 | ) |
|
|
| (2,646 | ) | |||||||||
Income tax expense (benefit) |
|
| 224 |
|
|
|
| (866 | ) | |||||||||||||||||||
Stock-based compensation expense, net of tax | $ |
| 664 |
|
| $ |
| 592 |
|
| $ |
| 5,444 |
|
| $ |
| 4,364 |
| $ |
| 2,566 |
|
| $ |
| 4,517 |
|
The following table summarizes activity in the stock-based compensation plans2015 Plan for the 4016 weeks ended October 7, 2017:
April 18, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted |
|
|
|
|
|
| Weighted |
| |||||
| Shares |
|
| Weighted |
|
| Restricted |
|
| Average |
|
| Restricted |
|
| Average |
| |||||||||
| Under |
|
| Average |
|
| Stock |
|
| Grant-Date |
|
| Stock |
|
| Grant-Date |
| |||||||||
| Options |
|
| Exercise Price |
|
| Awards |
|
| Fair Value |
|
| Awards |
|
| Fair Value |
| |||||||||
Outstanding at December 31, 2016 |
| 200,517 |
|
| $ |
| 19.94 |
|
|
| 660,143 |
|
| $ |
| 26.48 |
| |||||||||
Outstanding at December 28, 2019 | $ |
| 928,733 |
|
| $ |
| 20.28 |
| |||||||||||||||||
Granted |
| — |
|
|
| — |
|
|
| 296,297 |
|
|
| 34.68 |
|
|
| 292,884 |
|
|
| 12.43 |
| |||
Exercised/Vested |
| (152,589 | ) |
|
| 21.02 |
|
|
| (258,183 | ) |
|
| 25.90 |
|
|
| (361,446 | ) |
|
| 21.71 |
| |||
Cancelled/Forfeited |
| — |
|
|
|
| — |
|
|
| (82,739 | ) |
|
|
| 29.09 |
|
|
| (15,757 | ) |
|
|
| 19.10 |
|
Outstanding at October 7, 2017 |
| 47,928 |
|
| $ |
| 16.52 |
|
|
| 615,518 |
|
| $ |
| 30.32 |
| |||||||||
Outstanding at April 18, 2020 | $ |
| 844,414 |
|
| $ |
| 16.97 |
|
The Company has not issued any stock options since 2009 and all outstanding options are vested and exercisable at October 7, 2017.
As of October 7, 2017,April 18, 2020, total unrecognized compensation costscost related to non-vested stock-basedrestricted stock awards granted under the Company’s stock incentive plans were $5.1plan is $5.9 million for restricted stock, and areis expected to be recognized over a weighted average period of 2.22.7 years. All compensation costs related to
On May 20, 2020 the Company’s shareholders approved a new stock incentive plan (“the 2020 Plan”). The 2020 Plan provides for the granting of stock options, have been recognized.stock appreciation rights, restricted stock, restricted stock units, performance shares, performance share units, dividend equivalent rights, and other stock-based and stock-related awards to directors, employees, or contractors of the Company, as determined by the Compensation Committee of the Board of Directors. The number of shares of the Company’s common stock that may be issued under the 2020 Stock Plan consists of 1,635,000 newly reserved shares plus the 734,341 remaining shares available for grant under the 2015 Stock Plan.
14
Note 12 – Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share from continuing operations:
| 12 Weeks Ended |
|
| 40 Weeks Ended |
| ||||||||||||||
| October 7, |
|
| October 8, |
|
| October 7, |
|
| October 8, |
| ||||||||
(In thousands, except per share amounts) | 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings from continuing operations | $ |
| (123,452 | ) |
| $ |
| 16,730 |
|
| $ |
| (87,327 | ) |
| $ |
| 44,250 |
|
Adjustment for loss (earnings) attributable to participating securities |
|
| 2,064 |
|
|
|
| (292 | ) |
|
|
| 1,522 |
|
|
|
| (785 | ) |
(Loss) earnings from continuing operations used in calculating earnings per share | $ |
| (121,388 | ) |
| $ |
| 16,438 |
|
| $ |
| (85,805 | ) |
| $ |
| 43,465 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, including participating securities |
|
| 37,254 |
|
|
|
| 37,470 |
|
|
|
| 37,596 |
|
|
|
| 37,479 |
|
Adjustment for participating securities |
|
| (623 | ) |
|
|
| (654 | ) |
|
|
| (655 | ) |
|
|
| (665 | ) |
Shares used in calculating basic earnings per share |
|
| 36,631 |
|
|
|
| 36,816 |
|
|
|
| 36,941 |
|
|
|
| 36,814 |
|
Effect of dilutive stock options |
|
| — |
|
|
|
| 76 |
|
|
|
| — |
|
|
|
| 60 |
|
Shares used in calculating diluted earnings per share |
|
| 36,631 |
|
|
|
| 36,892 |
|
|
|
| 36,941 |
|
|
|
| 36,874 |
|
Basic (loss) earnings per share from continuing operations | $ |
| (3.31 | ) |
| $ |
| 0.45 |
|
| $ |
| (2.32 | ) |
| $ |
| 1.18 |
|
Diluted (loss) earnings per share from continuing operations | $ |
| (3.31 | ) |
| $ |
| 0.45 |
|
| $ |
| (2.32 | ) |
| $ |
| 1.18 |
|
| 16 Weeks Ended |
| |||||||
(In thousands, except per share amounts) | April 18, 2020 |
|
| April 20, 2019 |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
Earnings from continuing operations | $ |
| 15,402 |
|
| $ |
| 7,521 |
|
Adjustment for earnings attributable to participating securities |
|
| (385 | ) |
|
|
| (183 | ) |
Earnings from continuing operations used in calculating earnings per share | $ |
| 15,017 |
|
| $ |
| 7,338 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, including participating securities |
|
| 36,172 |
|
|
|
| 36,121 |
|
Adjustment for participating securities |
|
| (904 | ) |
|
|
| (878 | ) |
Shares used in calculating basic and diluted earnings per share |
|
| 35,268 |
|
|
|
| 35,243 |
|
Basic and diluted earnings per share from continuing operations | $ |
| 0.43 |
|
| $ |
| 0.21 |
|
Note 13 – Supplemental Cash Flow Information
Supplemental cash flow information is as follows:
| 40 Weeks Ended |
| ||||||||||||||||
| October 7, |
|
| October 8, |
| 16 Weeks Ended |
| |||||||||||
(In thousands) | 2017 |
|
| 2016 |
| April 18, 2020 |
|
| April 20, 2019 |
| ||||||||
Non-cash financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease obligations | $ |
| 405 |
|
| $ |
| 3,490 |
| |||||||||
Issuance of note payable as consideration for acquisition |
|
| 2,460 |
|
|
| — |
| ||||||||||
Recognition of operating lease liabilities | $ |
| 12,749 |
|
| $ | 4,609 |
| ||||||||||
Recognition of finance lease liabilities |
|
| 1,192 |
|
|
| — |
| ||||||||||
Non-cash investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Capital expenditures included in accounts payable |
|
| 1,711 |
|
|
| 1,429 |
|
|
| 4,643 |
|
|
| 3,466 |
| ||
Capital lease asset additions |
|
| 405 |
|
|
| 3,490 |
| ||||||||||
Acquisition financed through issuance of note payable |
|
| 2,460 |
|
|
| — |
| ||||||||||
Operating lease asset additions |
|
| 12,749 |
|
|
| 4,609 |
| ||||||||||
Finance lease asset additions |
|
| 1,192 |
|
|
| — |
| ||||||||||
Other supplemental cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash paid for interest |
|
| 18,379 |
|
|
| 12,830 |
|
|
| 8,187 |
|
|
| 11,718 |
|
16
Note 14 – Reporting Segment Information
The following tables set forth information about the Company by reporting segment:
(In thousands) | Food Distribution |
|
| Military |
|
| Retail |
|
| Total |
| Food Distribution |
|
| Retail |
|
| Military |
|
| Total |
| ||||||||||||||||
12 Weeks Ended October 7, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
16 Weeks Ended April 18, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Net sales to external customers | $ |
| 937,397 |
|
| $ |
| 505,631 |
|
| $ |
| 463,616 |
|
| $ |
| 1,906,644 |
| $ |
| 1,369,495 |
|
| $ |
| 782,568 |
|
| $ |
| 704,393 |
|
| $ |
| 2,856,456 |
|
Inter-segment sales |
|
| 204,605 |
|
|
| — |
|
|
| — |
|
|
| 204,605 |
|
|
| 324,127 |
|
|
| — |
|
|
| — |
|
|
| 324,127 |
| ||||||
Merger/acquisition and integration |
|
| 939 |
|
|
| 1,453 |
|
|
| — |
|
|
| 2,392 |
| ||||||||||||||||||||||
Restructuring charges and asset impairment |
|
| 379 |
|
|
| 500 |
|
|
| 34,747 |
|
|
| 35,626 |
|
|
| 9,222 |
|
|
| 1,015 |
|
|
| — |
|
|
| 10,237 |
| ||||||
Depreciation and amortization |
|
| 6,354 |
|
|
| 2,786 |
|
|
| 9,807 |
|
|
| 18,947 |
|
|
| 10,556 |
|
|
| 13,756 |
|
|
| 3,717 |
|
|
| 28,029 |
| ||||||
Operating earnings (loss) |
|
| 20,350 |
|
|
| 1,118 |
|
|
| (215,310 | ) |
|
| (193,842 | ) |
|
| 11,390 |
|
|
| 12,645 |
|
|
| (2,005 | ) |
|
| 22,030 |
| ||||||
Capital expenditures |
|
| 4,402 |
|
|
| 1,940 |
|
|
| 11,161 |
|
|
| 17,503 |
|
|
| 7,019 |
|
|
|
| 9,594 |
|
|
| 1,280 |
|
|
| 17,893 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
12 Weeks Ended October 8, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
16 Weeks Ended April 20, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net sales to external customers | $ |
| 804,500 |
|
| $ |
| 506,626 |
|
| $ |
| 488,959 |
|
| $ |
| 1,800,085 |
| $ |
| 1,169,238 |
|
| $ |
| 701,767 |
|
| $ |
| 671,370 |
|
| $ |
| 2,542,375 |
|
Inter-segment sales |
|
| 219,516 |
|
|
| — |
|
|
| — |
|
|
| 219,516 |
|
|
| 288,408 |
|
|
| — |
|
|
| — |
|
|
| 288,408 |
| ||||||
Merger/acquisition and integration |
|
| 639 |
|
|
| — |
|
|
| 1,788 |
|
|
| 2,427 |
|
|
| (130 | ) |
|
| 912 |
|
|
| — |
|
|
| 782 |
| ||||||
Restructuring charges and asset impairment |
|
| 207 |
|
|
| 18 |
|
|
| 2,437 |
|
|
| 2,662 |
| ||||||||||||||||||||||
Depreciation and amortization |
|
| 4,842 |
|
|
| 2,693 |
|
|
| 10,392 |
|
|
| 17,927 |
| ||||||||||||||||||||||
Operating earnings |
|
| 18,957 |
|
|
| 2,862 |
|
|
| 8,048 |
|
|
| 29,867 |
| ||||||||||||||||||||||
Capital expenditures |
|
| 3,386 |
|
|
| 1,151 |
|
|
| 11,342 |
|
|
| 15,879 |
| ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
40 Weeks Ended October 7, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net sales to external customers | $ |
| 3,041,983 |
|
| $ |
| 1,620,021 |
|
| $ |
| 1,541,853 |
|
| $ |
| 6,203,857 |
| |||||||||||||||||||
Inter-segment sales |
|
| 681,368 |
|
|
|
| — |
|
|
| — |
|
|
| 681,368 |
| |||||||||||||||||||||
Merger/acquisition and integration |
|
| 5,254 |
|
|
|
| 1,453 |
|
|
| 324 |
|
|
| 7,031 |
| |||||||||||||||||||||
Restructuring charges and asset impairment |
|
| 1,280 |
|
|
| 500 |
|
|
| 34,853 |
|
|
| 36,633 |
| ||||||||||||||||||||||
Restructuring (gains) charges and asset impairment |
|
| (6,343 | ) |
|
| 681 |
|
|
| — |
|
|
| (5,662 | ) | ||||||||||||||||||||||
Depreciation and amortization |
|
| 21,370 |
|
|
| 8,832 |
|
|
| 32,430 |
|
|
| 62,632 |
|
|
| 10,233 |
|
|
| 12,802 |
|
|
| 3,597 |
|
|
| 26,632 |
| ||||||
Operating earnings (loss) |
|
| 68,868 |
|
|
| 4,517 |
|
|
| (198,641 | ) |
|
| (125,256 | ) |
|
| 24,592 |
|
|
| (826 | ) |
|
| (1,557 | ) |
|
| 22,209 |
| ||||||
Capital expenditures |
|
| 18,431 |
|
|
| 5,994 |
|
|
| 30,867 |
|
|
| 55,292 |
|
|
| 4,249 |
|
|
| 10,615 |
|
|
| 1,142 |
|
|
| 16,006 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
40 Weeks Ended October 8, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net sales to external customers | $ |
| 2,615,964 |
|
| $ |
| 1,686,567 |
|
| $ |
| 1,603,885 |
|
| $ |
| 5,906,416 |
| |||||||||||||||||||
Inter-segment sales |
|
| 716,665 |
|
|
| — |
|
|
| — |
|
|
| 716,665 |
| ||||||||||||||||||||||
Merger/acquisition and integration |
|
| 1,201 |
|
|
| 1 |
|
|
| 3,035 |
|
|
| 4,237 |
| ||||||||||||||||||||||
Restructuring charges and asset impairment |
|
| 4,749 |
|
|
| (241 | ) |
|
| 19,206 |
|
|
| 23,714 |
| ||||||||||||||||||||||
Depreciation and amortization |
|
| 16,139 |
|
|
| 8,850 |
|
|
| 33,942 |
|
|
| 58,931 |
| ||||||||||||||||||||||
Operating earnings |
|
| 64,040 |
|
|
| 8,792 |
|
|
| 11,315 |
|
|
| 84,147 |
| ||||||||||||||||||||||
Capital expenditures |
|
| 13,581 |
|
|
| 4,198 |
|
|
| 39,436 |
|
|
| 57,215 |
|
15
|
|
|
|
|
|
| April 18, |
|
| December 28, |
| |||||||||||||||||||
(In thousands) |
|
|
|
|
| October 7, 2017 |
|
| December 31, 2016 |
|
|
|
|
|
| 2020 |
|
| 2019 |
| ||||||||||
Total Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Food Distribution |
|
|
|
|
| $ |
| 1,088,383 |
|
| $ |
| 776,725 |
|
|
|
|
|
| $ |
| 1,143,165 |
|
| $ |
| 1,087,307 |
| ||
Retail |
|
|
|
|
|
|
| 755,305 |
|
|
|
| 794,413 |
| ||||||||||||||||
Military |
|
|
|
|
|
|
| 449,845 |
|
|
|
| 395,737 |
|
|
|
|
|
|
|
| 415,745 |
|
|
|
| 390,799 |
| ||
Retail |
|
|
|
|
|
|
| 492,079 |
|
|
|
| 754,625 |
| ||||||||||||||||
Discontinued operations |
|
|
|
|
|
|
| 3,467 |
|
|
|
| 3,249 |
|
|
|
|
|
|
|
| — |
|
|
|
| 3,090 |
| ||
Total |
|
|
|
|
| $ |
| 2,033,774 |
|
| $ |
| 1,930,336 |
|
|
|
|
|
| $ |
| 2,314,215 |
|
| $ |
| 2,275,609 |
|
17
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 products and services:
| 12 Weeks Ended |
| 40 Weeks Ended | ||||||||||||||||||||||||||||||||||||
| October 7, |
| October 8, |
| October 7, |
| October 8, | ||||||||||||||||||||||||||||||||
(In thousands, except percentages) | 2017 |
| 2016 |
| 2017 |
| 2016 | ||||||||||||||||||||||||||||||||
Center store (a) | $ |
| 1,187,631 |
|
|
| 62.3 |
| % |
| $ |
| 1,143,964 |
|
|
| 63.6 |
| % |
| $ |
| 3,784,779 |
|
|
| 61.0 |
| % |
| $ |
| 3,731,362 |
|
|
| 63.2 |
| % |
Fresh (b) |
|
| 608,136 |
|
|
| 31.9 |
|
|
|
|
| 544,200 |
|
|
| 30.2 |
|
|
|
|
| 2,051,954 |
|
|
| 33.1 |
|
|
|
|
| 1,821,347 |
|
|
| 30.8 |
|
|
Pharmacy |
|
| 80,455 |
|
|
| 4.2 |
|
|
|
|
| 84,039 |
|
|
| 4.7 |
|
|
|
|
| 271,170 |
|
|
| 4.4 |
|
|
|
|
| 269,524 |
|
|
| 4.6 |
|
|
Fuel |
|
| 30,422 |
|
|
| 1.6 |
|
|
|
|
| 27,882 |
|
|
| 1.5 |
|
|
|
|
| 95,954 |
|
|
| 1.5 |
|
|
|
|
| 84,183 |
|
|
| 1.4 |
|
|
Consolidated net sales | $ |
| 1,906,644 |
|
|
| 100.0 |
| % |
| $ |
| 1,800,085 |
|
|
| 100.0 |
| % |
| $ |
| 6,203,857 |
|
|
| 100.0 |
| % |
| $ |
| 5,906,416 |
|
|
| 100.0 |
| % |
16
ITEM 1A. Risk Factors
There have been no material changes in the Company's risk factors from those set forth in the Company's Annual Report on Form 10-K for the year ended December 28, 2019, except for the following risk factor which should be considered in conjunction with those previously disclosed:
Disease outbreaks, such as the COVID-19 pandemic, could have an adverse impact on the Company's operations and financial results.
On March 11, 2020, the World Health Organization characterized coronavirus (COVID-19) as a pandemic, and on March 13, 2020 the President of the United States declared a national emergency relating to the disease. In addition to the President’s declaration, state and local authorities have recommended social distancing and have imposed quarantine and isolation measures on large portions of the population, including mandatory business closures. These measures are designed to protect the overall public health, they are expected to have material adverse impacts on domestic and foreign economies and may result in the United States entering a period of recession.
While the Company is an essential business and has seen significant increases in sales volume during the pandemic, its business may be negatively impacted by the several factors associated with the disease outbreak and the related effects on the retail grocery and wholesale distribution industries. These impacts may include:
|
| Increased costs due to significant increases in customer traffic and demand for grocery |
|
| Failure of |
• | Supply chain risks due to significantly increased demand, including the availability of warehouse and transportation personnel and service providers or the inability to procure adequate quantities of certain goods; |
• | Reduced workforce or temporary store and distribution center closures associated with the presence of COVID-19 infections among the Company’s associates; or |
• | Inability to accurately forecast financial results due to the uncertainty associated with the short- and long-term effects on the U.S. economy, consumer behavior and the unknown duration of social distancing, quarantine or isolation measures or the lasting effects that may result after such mandates have been removed. |
• | Increased and accelerated competition from alternative channels, including e-commerce retailers, due to a change in consumer behavior and continued social distancing. |
Any of the foregoing factors, or other effects of the pandemic that are not currently foreseeable, may materially increase costs, negatively impact sales and damage the Company’s financial condition, results of operations, cash flows and its liquidity position. The significance and duration of any such impacts are not possible to predict due to the overall uncertainty associated with the COVID-19 pandemic.
18
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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 December 31, 2016.28, 2019.
Overview
SpartanNash, headquartered in Grand Rapids, Michigan, is a leading multi-regional grocery distributor and grocery retailer whose core businesses include distributing grocery products to a diverse group of independent grocery retailers (“independent retailers”), select nationaland chain retailers, its corporate owned retail stores, and military commissaries and exchanges in the United States.States, as well as operating a premier fresh produce distribution network. The Company operates three reportable business segments: Food Distribution, MilitaryRetail and Retail.Military. The Company serves customers in all 50 states.
The Company’s Food Distribution segment provides a wide variety of nationally branded and private brand grocery products and perishable food products to over 2,000 independent retailers, food distributors andgrocers, the Company’s corporate owned retail stores.stores, national retailers, food service distributors, and other customers. The Food Distribution segment currentlyprimarily conducts business in 47 states, primarily in the Midwest Great Lakes, and Southeast regions of the United States. Through its Food Distribution
17
At the end of the first quarter, the Company’s Retail segment operated 155 corporate owned retail stores in the Midwest region primarily under the banners of Family Fare, Martin’s Super Markets, VG’s Grocery, D&W Fresh Market and Dan’s Supermarket. The Company also offers pharmacy services select national retailers, including Dollar General. Sales to Dollar General are made to over 14,100in 97 of its corporate owned retail locations. Through its recent acquisition of Caito Foods Service (“Caito”)stores and Blue Ribbon Transport (“BRT”) (“the recent acquisition”)operates 37 fuel centers. The retail stores have a “neighborhood market” focus to distinguish them from supercenters and limited assortment stores. The Company’s Customer First strategy is focused on January 7, 2017, the Company processes fresh-cut fruitsmeeting changing customer needs and vegetablespreferences through a data-based decision-making process, while also increasing customer satisfaction through quality service and other value-added meal solutions and supplies these products to grocery retailers and food service distributors through its Indiana and Florida facilities. With the new Caito Fresh Kitchen facility, the Company is developing the ability to process, cook and package fresh protein-based foods and complete meal solutions for a number of different customers. With the acquisition of BRT, the Company offers temperature-controlled logistics services throughout North America.convenience.
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, Honduras, Bahrain, Djibouti and Egypt. The Company has over 40 years of experience acting as a distributordistributes grocery products to U.S.160 military commissaries and exchanges. As of December 8, 2016,over 400 exchanges and, together with its third-party partner, Coastal Pacific Food Distributors, represents the only delivery solution to service the Defense Commissary Agency (“DeCA”) worldwide. The Company is the exclusive worldwide supplier of private brand products to U.S. military commissaries and began shippingis continuing to partner with DeCA in the rollout of private brand products to military commissaries, which began during the second quarter of fiscal 2017.
At the end of the third quarter, the Company’s Retail segment operated 147 corporate owned retail stores in the Midwest and Great Lakes regions primarily under the banners of Family Fare Supermarkets, VG’s Food and Pharmacy, D&W Fresh Markets, Sun Mart and Family Fresh Market. The Company also offers pharmacy services in 88 of its corporate owned retail stores and operates 31 fuel centers. The retail stores have a “neighborhood market” focus to distinguish them from supercenters and limited assortment stores.
All fiscal quarters are 12 weeks, except for the Company’s first quarter, which is 16 weeks and will generally include the Easter holiday. Fiscal 2020 will contain 53 weeks; therefore, the fourth quarter of fiscal 2020 will contain 13 weeks. The fourth quarter includes the Thanksgiving and Christmas holidays, and depending on the fiscal year end, may include the New Year’s holiday.
In certain geographic areas, the Company’s sales and operating performance may vary with seasonality. Many stores are dependent on tourism and therefore, are most affected by seasons and weather patterns, including, but not limited to, the amount and timing of snowfall during the winter months and the range of temperature during the summer months. Travel restrictions and other effects of the COVID-19 pandemic may also impact the performance of these stores.
Fiscal 2017 Third2020 First Quarter Highlights
The Company’s sales growth trends accelerated in the third quarter of fiscal 2017 due to contributions from the recent acquisition, continued growth in the Food Distribution segment from both new and existing customers, and the significant improvement in the Military segment’s sales trends, despite challenging retail market conditions. The Company continues to execute against key elements of its long-term strategic plan as is demonstrated by the continued sales growth in its distribution operations, and is committed to delivering increased value and convenience to its customers.
Third quarter and year-to-date fiscal 2017 operational highlights include:
The Company completed the Caito and BRT acquisition intop priority for the first quarter of fiscal 20172020 was the well-being and continuessafety of its family of associates, customers and communities during the COVID-19 pandemic. SpartanNash is incredibly proud of its family of associates for their dedication to make progress integrating operations. serve local customers and communities during this unprecedented time of need and respond to the dramatic increase in demand for food, pharmacy, household and personal care products.
The Company now offersundertook numerous initiatives to protect and serve its own fresh-cut fruitsassociates and vegetablescustomers in response to a number of different customers and corporate owned retail stores, and has also begun limited production at its new Fresh Kitchen facility. While the startup ofpandemic, including the facility has been slower than anticipated, the Company remains confident in the value of the product offerings to its customers and in the long-term growth of the business.following:
• | Installed sneeze guards at key points of customer interaction within retail stores as well as within distribution center receiving areas. |
| • |
|
• | Promoted social distancing through signs and floor markings throughout retail stores to remind guests and associates to remain six feet apart. |
• | Reserved shopping times twice per week for store guests most at risk of contracting coronavirus, including seniors, pregnant women and immunocompromised individuals. |
• | Dedicated additional Fast Lane resources to accommodate the significant increase in the number of customers shopping online as well as offered free, same-day home delivery of prescription medications, where available. |
• | Instructed associates to take their temperature at home before coming onsite to a SpartanNash location, as well as onsite health status screenings for all associates upon arrival. |
• | Suspended certain services within retail stores, including self-serve areas, bottle returns, and product returns in accordance with CDC recommendations. |
• | Increased procedures for sanitizing high-touch surfaces within retail stores, such as shopping carts and baskets, food service counters, checkout lanes, conveyor belts, fuel pump handles, pin pads and touch screens at least every 30 minutes as well as installed sanitation stations. In distribution centers, increased fogging as well as sanitizing high-touch areas including time clocks, headsets and equipment controls at least every 30 minutes. |
• | Provided more than 16,000 part- and full-time hourly frontline associates with weekly appreciation bonuses, as well as an additional $2 per hour for hours worked during times of significantly increased demand. |
• | Increased the associate discount in its |
• | Extended emergency leave benefits to |
1918
• | Recruited and onboarded more than 3,000 new hires since the beginning of the pandemic to support current associates and provide career opportunities to displaced workers. |
Key financial highlights related to the impact of COVID-19 and other actions undertaken by the Company include the following:
• | The Food Distribution segment generated sales growth of 9.5% prior to the impact of the COVID-19 pandemic through growth with existing customers. Sales growth during the pandemic, the last 6 weeks of the quarter, |
• | Retail comparable store sales, which exclude fuel, were |
• | The Military segment sales declined 3.2% prior to the impact of the COVID-19 pandemic. Sales growth during the pandemic was 18.1% and ended the quarter ahead of the prior year by |
• | The Company continued to pay down debt and improve its leverage ratios through improved profitability and working capital reductions. |
• | As a result of the loss of a significant customer, the Company made the decision to exit the Caito Fresh Cut operations. Wind down of the operations began in March 2020 and was complete as of the end of the first quarter. The Company incurred $10.6 million in asset impairment charges, |
• | During the first half of the quarter, |
AtThe Company has updated its outlook for the end53-week fiscal year ending January 2, 2021. The Company expects to continue to benefit from higher consumer food at home consumption related to COVID-19, however, the duration and magnitude of the second quarter,impact are uncertain. As a result, although the Company first introduced Fast Lane,believes that its new online ordering and curbside pick-up service, and now offers the service at more than 20 retail stores. The Company believes Fast Lane is essential to increasing customer satisfaction through quality service and convenience, and accordingly, anticipates rolling out the service to approximately 40 total stores by the end of the year with up to another 40 scheduled next year. Additionally,sales for fiscal 2020 will materially exceed its initial 2020 guidance, the Company is piloting home delivery services inunable to fully estimate the fourth quarterimpact COVID-19 will have on the remainder of 2017.
2020. The Company continueshas updated its annual outlook, originally provided on February 19, 2020, to make targeted capital investments by remodeling select retail stores in key geographies, including the conversion of certain stores to the Family Fare banner. The Company also continued its store rationalization program, and in connection with overall business strategies, sold four corporate owned retail stores to new and existing Food Distribution customers and closed seven others in connection with lease expirations and store rationalization plans during the fiscal year. The Company was also able to negotiate favorable lease terminations at two of its previously closed Retail stores during the year.
The Company continues to enhance its private brand programs for both independent customers and corporate owned stores. In the third quarter, the Company began the launch of its Our Family® private brand into the Michigan region, which provides the Company with a system-wide, national brand equivalent or better quality program. The move to Our Family® also allows the Company to streamline its supply chain to deliver a larger variety of product offerings at a lower cost to consumers. While it is still quite early in the process, the Company has been generally pleased with customer acceptance of the brand and the transition is progressing smoothly. In the second quarter, the Company began incorporating its own fresh-cut fruits and vegetables into the Open Acres™ private brand, and during the third quarter, continued to grow this initiative in volume and selection based on customer acceptance and demand. Lastly, the Company continues to expand its livingreflect actual financial results experienced to-date, as well offering, which includes the natural and organic Full Circle® private brand line, fresh products offered through the recent acquisition, and a significant number of new SKUs across organic produce and healthier specialty items.
As the Company enters the fourth quarter of fiscal 2017, it remains committed to delivering long-term value to its shareholders and focusing on top-line and earnings growth. At the beginning of the third quarter, the Company entered into an agreement to obtain incremental distribution business from a DeCA provider exiting these operations in the Southwest United States. This new business, together with increasing contributions from the DeCA private brand program, are expected to grow Military’s sales in the fourth quarter of fiscal 2017. Retail sales trends - while improving - are anticipated to remain negativeas expectations for the remainder of the year.fiscal year related to earnings trends. Specifically, these updates include incremental adjusted earnings per share from continuing operations for the COVID-19 impact experienced to-date, other first quarter earnings in excess of management’s initial guidance expectations, as well as the benefits associated with cost reduction initiatives and increased sales and earnings trends the Company was experiencing prior to the onset of the pandemic. The Company also expects continued organic sales growth inCompany’s updated outlook for the Food Distribution segment.
The Company expects a slight easingsecond half of deflationary pressures with modest food inflation anticipated in the fourth quarter, and thereforeyear does not anticipateinclude any ofadjustment for future impacts from the LIFO benefit realized inCOVID-19 pandemic. However, the prior year fourth quarterCompany currently anticipates any incremental costs related to recur. The Company also anticipates that projected fourth quarter sales growth at Food Distribution and the continuation of improved sales trends at MilitaryCOVID-19 will be more than offset by the cycling of the prior year LIFO benefit, and that headwinds associated with hurricane impacts and the onboarding of new business will negatively affect fill rates and cause inbound freight disruptions in the fourth quarter. Retail earnings are anticipated to remain challenged for the remainder of the year as the competitive landscape and inflationary environment are expected to persist. Based on the factors noted above, the Company anticipates fourth quarter earnings will be significantly below the prior year.improved food at home sales trend.
2019
The following table sets forth items from the condensed consolidated statements of operationsearnings as a percentage of net sales and the year-to-year percentage change in the dollar amounts:
| Percentage of Net Sales |
|
| Percentage Change |
| ||||||
| 16 Weeks Ended |
|
| 16 Weeks Ended |
| ||||||
| April 18, 2020 |
|
| April 20, 2019 |
|
| April 18, 2020 |
| |||
Net sales |
| 100.0 |
|
|
| 100.0 |
|
|
| 12.4 |
|
Gross profit |
| 14.8 |
|
|
| 14.9 |
|
|
| 12.1 |
|
Selling, general and administrative |
| 13.7 |
|
|
| 14.2 |
|
|
| 8.6 |
|
Merger/acquisition and integration |
| — |
|
|
| 0.0 |
|
|
| (100.0 | ) |
Restructuring charges (gains) and asset impairment |
| 0.4 |
|
|
| (0.2 | ) |
|
| 280.8 |
|
Operating earnings |
| 0.8 |
|
|
| 0.9 |
|
|
| (0.8 | ) |
Other expenses and income |
| 0.2 |
|
|
| 0.5 |
|
|
| (45.3 | ) |
Earnings before income taxes and discontinued operations |
| 0.5 |
|
|
| 0.4 |
|
|
| 52.1 |
|
Income tax expense |
| 0.0 |
|
|
| 0.1 |
|
|
| (98.8 | ) |
Earnings from continuing operations |
| 0.5 |
|
|
| 0.3 |
|
|
| 104.8 |
|
Loss from discontinued operations, net of taxes |
| — |
|
|
| (0.0 | ) |
|
| 100.0 |
|
Net earnings |
| 0.5 |
|
|
| 0.3 |
|
|
| 106.2 |
|
Note: Certain totals do not sum due to rounding.
| Percentage of Net Sales |
|
| Percentage Change |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 12 Weeks |
| |
| 12 Weeks Ended |
|
| 40 Weeks Ended |
|
| Ended |
| |||||||||||
| October 7, |
|
| October 8, |
|
| October 7, |
|
| October 8, |
|
| October 7, |
| |||||
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2017 |
| |||||
Net sales |
| 100.0 |
| % |
| 100.0 |
| % |
| 100.0 |
| % |
| 100.0 |
| % |
| 5.9 |
|
Gross profit |
| 13.7 |
|
|
| 14.2 |
|
|
| 14.3 |
|
|
| 14.4 |
|
|
| 2.5 |
|
Selling, general and administrative expenses |
| 12.0 |
|
|
| 12.3 |
| * |
| 12.6 |
|
|
| 12.5 |
|
|
| 3.7 |
|
Merger/acquisition and integration |
| 0.1 |
|
|
| 0.1 |
|
|
| 0.1 |
|
|
| 0.1 |
|
|
| (1.4 | ) |
Restructuring charges and goodwill/asset impairment |
| 11.8 |
|
|
| 0.1 |
|
|
| 3.6 |
|
|
| 0.4 |
|
|
| 8,339.3 |
|
Operating (loss) earnings |
| (10.2 | ) |
|
| 1.7 |
|
|
| (2.0 | ) |
|
| 1.4 |
|
|
| (749.0 | ) |
Other income and expenses |
| 0.3 |
|
|
| 0.3 |
| * |
| 0.3 |
|
|
| 0.2 |
|
|
| 41.7 |
|
(Loss) earnings before income taxes and discontinued operations |
| (10.5 | ) |
|
| 1.4 |
|
|
| (2.3 | ) |
|
| 1.2 |
|
|
| (881.0 | ) |
Income taxes |
| (4.0 | ) | * |
| 0.5 |
|
|
| (0.9 | ) |
|
| 0.5 |
| * |
| (962.4 | ) |
(Loss) earnings from continuing operations |
| (6.5 | ) |
|
| 0.9 |
|
|
| (1.4 | ) |
|
| 0.7 |
|
|
| (837.9 | ) |
Loss from discontinued operations, net of taxes |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (34.1 | ) |
Net (loss) earnings |
| (6.5 | ) | % |
| 0.9 |
| % |
| (1.4 | ) | % |
| 0.7 |
| % |
| (841.9 | ) |
|
|
Net Sales – The following table presents net sales by segment and variances in net sales:
| 12 Weeks Ended |
|
| 40 Weeks Ended |
| ||||||||||||||||||||||||||||||||||||||
| October 7, |
|
| October 8, |
|
|
|
|
| October 7, |
|
| October 8, |
|
|
|
| 16 Weeks Ended |
| ||||||||||||||||||||||||
(In thousands) | 2017 |
|
| 2016 |
|
| Variance |
|
| 2017 |
|
| 2016 |
|
| Variance |
| April 18, 2020 |
|
| April 20, 2019 |
|
| Variance |
| ||||||||||||||||||
Food Distribution | $ |
| 937,397 |
|
| $ |
| 804,500 |
|
| $ |
| 132,897 |
|
| $ |
| 3,041,983 |
|
| $ |
| 2,615,964 |
|
| $ |
| 426,019 |
| $ |
| 1,369,495 |
|
| $ |
| 1,169,238 |
|
| $ |
| 200,257 |
|
Retail |
|
| 782,568 |
|
|
|
| 701,767 |
|
|
|
| 80,801 |
| |||||||||||||||||||||||||||||
Military |
|
| 505,631 |
|
|
|
| 506,626 |
|
|
|
| (995 | ) |
|
|
| 1,620,021 |
|
|
|
| 1,686,567 |
|
|
|
| (66,546 | ) |
|
| 704,393 |
|
|
|
| 671,370 |
|
|
|
| 33,023 |
|
Retail |
|
| 463,616 |
|
|
|
| 488,959 |
|
|
|
| (25,343 | ) |
|
|
| 1,541,853 |
|
|
|
| 1,603,885 |
|
|
|
| (62,032 | ) | ||||||||||||||
Total net sales | $ |
| 1,906,644 |
|
| $ |
| 1,800,085 |
|
| $ |
| 106,559 |
|
| $ |
| 6,203,857 |
|
| $ |
| 5,906,416 |
|
| $ |
| 297,441 |
| $ |
| 2,856,456 |
|
| $ |
| 2,542,375 |
|
| $ |
| 314,081 |
|
Net sales for the quarter ended October 7, 2017April 18, 2020 (“thirdfirst quarter”) increased $106.6$314.1 million, or 5.9%12.4%, to $1.91$2.86 billion from $1.80$2.54 billion in the quarter ended October 8, 2016April 20, 2019 (“prior year quarter”). Net sales for the year-to-date period ended October 7, 2017 (“year-to-date period”) increased $297.4 million, or 5.0%, to $6.20 billion from $5.91 billion in the year-to-date period ended October 8, 2016 (“prior year-to-date period”). The increase was driven primarily by contributions fromincremental sales related to a shift in consumer behavior associated with the Caito acquisition and organicCOVID-19 pandemic, particularly for the last 6 weeks of the fiscal quarter, as well as growth fromwith existing customers in the Food Distribution segment, which more than offset lower sales in the Retail segment. Third quarter net sales trends increased sequentially from the second quarter due to significantly improved sales comparisons in the Military commissary business.
Food Distribution net sales after intercompany eliminations, increased $132.9$200.3 million, or 16.5%17.1%, to $937.4$1.37 billion in the first quarter from $1.17 billion in the prior year quarter due to incremental volume associated with the impact of COVID-19 as well as sales growth with existing customers.
Retail net sales increased $80.8 million, or 11.5%, to $782.6 million in the thirdfirst quarter from $804.5$701.8 million in the prior year quarter. Net sales for the year-to-date period increased $426.0 million, or 16.3%, from $2.62 billion in the prior year-to-date period to $3.04 billion. The third quarter and year-to-date increases were due to contributions from the Caito acquisition and organic volume growth from existing customers.
21
Military net sales decreased $1.0 million, or 0.2%, to $505.6 million in the third quarter from $506.6 million in the prior year quarter, representing a significant improvement from the 6.8% decline in the second quarter. Net sales for the year-to-date period decreased $66.5 million, or 3.9%, from $1.69 billion in the prior year-to-date period to $1.62 billion. The third quarter and year-to-date decreases were primarily due to lower sales at the DeCA operated commissaries, which for the third quarter were mostly offset by new business.
Retail net sales decreased $25.4 million, or 5.2%, to $463.6 million in the third quarter from $489.0 million in the prior year quarter. Net sales for the year-to-date period decreased $62.0 million, or 3.9%, from $1.60 billion in the prior year-to-date period to $1.54 billion. The decreaseincrease in net sales was primarily attributabledue to lowerincremental volume associated with the impact of COVID-19, as discussed above. Comparable store sales resulting from the closures and sales of retail stores ($16.7 millionincreased 15.6% for the quarter and $42.8 million year-to-date)were partially offset by the impact of lower fuel prices and negative comparable store sales. Comparable store sales, excluding fuel, were down 2.5% for the quarter and 2.2% for the year-to-date period, and reflect continued strong competition within the industry.closures. The Company defines a retail store as comparable when it is in operation for 14 accounting periods (a period equals four weeks), regardless of remodels, expansions, or relocated stores. Please note thatAcquired stores are included in the comparable sales calculation 13 periods after the acquisition date. Fuel is excluded from the comparable sales calculation due to volatility in price. Comparable store sales is a widely used metric among retailers, which is useful to management and investors to assess performance. The Company’s definition of comparable store sales may differ from similarly titled measures at other companies.
Military net sales increased $33.0 million, or 4.9%, to $704.4 million in the first quarter from $671.4 million in the prior year quarter. The increase from the prior year quarter was due to the increased volume resulting from the impact of the COVID-19 pandemic, partially offset by lower comparable sales at Defense Commissary Agency (“DeCA”) operated locations prior to the onset of the pandemic.
20
Gross Profit – Gross profit represents net sales less cost of sales, which for all non-production operations includes product purchase costs, in-bound freight, physical inventory adjustments, markdowns and promotional allowances and excludes warehousing costs, depreciation and other administrative expenses. For the Company’s food processing operations, cost of sales includes direct product and production costs, inbound freight, purchasing and receiving costs, utilities, depreciation, and other indirect production costs and excludes out-bound freight and other administrative expenses. The Company’s gross profit definition may not be identical to similarly titled measures reported by other companies. 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. The distribution segments include shipping and handling costs in the Selling, general and administrative section of operating expenses in the consolidated statements of earnings.
Gross profit increased $45.8 million, or 12.1%, to $261.7$423.6 million in the thirdfirst quarter from $255.3$377.7 million in the prior year quarter. As a percent of net sales, gross profit was 13.7%14.8% compared to 14.2%14.9% in the prior year quarter. Gross profit for the year-to-date period increased $37.9 million, or 4.4%, from $852.2 million in the prior year-to-date period to $890.1 million. As a percent of net sales, gross profit for the year-to-date period was 14.3% compared to 14.4% in the prior year-to-date period. As a percent of net sales, the thirdThe first quarter and year-to-date changeschange in gross margin werewas primarily due todriven by the increased mix of Food Distribution sales as a percentage of total sales combined with margin investments in the Retail segment.volume.
Selling, General and Administrative Expenses – Selling, general and administrative (“SG&A”) expenses consist primarily of salaries and wages, employee benefits, warehousing costs, store occupancyfacility costs, shipping and handling, utilities, equipment rental, depreciation (to the extent not included in Costcost of sales), out-bound freight and other administrative expenses.
SG&A expenses increased $8.2 million, or 3.7%, to $228.5$391.3 million in the thirdfirst quarter from $220.3$360.4 million in the prior year quarter, representing 12.0%13.7% of net sales in the thirdfirst quarter compared to 12.3%14.2% in the prior year quarter. SG&AThe decrease in expenses for the year-to-date period increased $42.6 million, or 5.7%, from $740.1 million in the prior year-to-date period to $782.7 million, and increased to 12.6% as a percentagerate of net sales compared to 12.5% in the prior year-to-date period. The third quarter and year-to-date increases in expense were primarily due to the addition of the Caito acquisition, partly offset by lower incentive compensation expenses. The rate to sales decrease in the thirdyear quarter was primarily due to improved operating leverage related to store labor and other operating expenses, as well as lower healthcare costs and stock compensation expense due to executive turnover and a shift in the mixtiming of business operations and lowera portion of the 2020 stock award into the second quarter, partially offset by incremental incentive compensation expenses.expense related to improved overall company performance, incremental pay and bonuses for frontline associates, and severance costs associated with a voluntary early retirement program and a reduction-in-force.
Merger/Acquisition and Integration – ThirdPrior year quarter and year-to-date period results included $2.4$0.8 million and $7.0 million, respectively, of merger/associated with the acquisition and integration expenses mainly associated with recent acquisitions. Prior year quarter and year-to-date results included $2.4 million and $4.2 million, respectively, of merger/acquisition and integration primarily associated withMartin’s Supermarkets in the merger of Spartan Stores, Inc. and Nash-Finch Company.prior year.
22
Restructuring Charges and Goodwill and Asset Impairment – Third First quarter results include net charges of $10.2 million andyear-to-date prior year quarter results included $224.7net gains of $5.7 million and $225.7 million, respectively, of netrelated to restructuring and asset impairment charges predominantly associated with thirdactivity. The first quarter goodwill andactivity consists primarily of asset impairment charges. In the third quarter, the Company recorded a non-cash goodwill impairment charge of $189.0 millioncharges and severance costs related to the Retail segment. As a result of significantly lower than expected Retail operating results due to an increasingly competitive retail environment and the related pricing pressures that are anticipated to negatively impact gross margin, operating profit, and future cash flows, the Company revised its future projections for the Retail reporting unit. The Company performed Step 1 of the goodwill impairment test by calculating the fair value of the Retail reporting unit based on its discounted estimated future cash flows. It was determined that the carrying value of the Retail segment exceeded its fair value, and consequently, the Company recorded an estimated goodwill impairment charge of $189.0 million. The Company also recorded $35.6 million of asset impairment and restructuring charges in the third quarter primarily associated with the underlying performance of Company’s retail store base and the execution of its store rationalization program. Prior year quarter and year-to-date results included $2.7 million and $23.7 million, respectively, of restructuring and asset impairment charges. Prior year quarter restructuring charges and asset impairment consisted primarily of impairment charges related to three underperforming retail stores and additional costs, incurred in connection with winding down operations at certain closed facilities in the Food Distribution and Retail segments. Prior year-to-date period restructuring charges and asset impairment consisted primarily of charges related to the closure of three retail stores and two food distribution centers which were part of the Company’s retail store and warehouse rationalization plan,Fresh Cut facility, as well as impairment charges related to three underperforming retail stores.store closing charges. The prior year quarter includes gains on the sale of a previously closed distribution center, partially offset by store and distribution center closing charges.
Operating Earnings (Loss) – The following table presents operating earnings (loss) earnings by segment and variances in operating earnings:
earnings (loss):
| 12 Weeks Ended |
|
| 40 Weeks Ended |
| ||||||||||||||||||||||||||||||||||||||
| October 7, |
|
| October 8, |
|
|
|
|
| October 7, |
|
| October 8, |
|
|
|
| 16 Weeks Ended |
| ||||||||||||||||||||||||
(In thousands) | 2017 |
|
| 2016 |
|
| Variance |
|
| 2017 |
|
| 2016 |
|
| Variance |
| April 18, 2020 |
|
| April 20, 2019 |
|
| Variance |
| ||||||||||||||||||
Food Distribution | $ |
| 20,350 |
|
| $ |
| 18,957 |
|
| $ |
| 1,393 |
|
| $ |
| 68,868 |
|
| $ |
| 64,040 |
|
| $ |
| 4,828 |
| $ |
| 11,390 |
|
| $ |
| 24,592 |
|
| $ |
| (13,202 | ) |
Retail |
|
| 12,645 |
|
|
|
| (826 | ) |
|
|
| 13,471 |
| |||||||||||||||||||||||||||||
Military |
|
| 1,118 |
|
|
|
| 2,862 |
|
|
|
| (1,744 | ) |
|
|
| 4,517 |
|
|
|
| 8,792 |
|
|
|
| (4,275 | ) |
|
| (2,005 | ) |
|
|
| (1,557 | ) |
|
|
| (448 | ) |
Retail |
|
| (215,310 | ) |
|
|
| 8,048 |
|
|
|
| (223,358 | ) |
|
|
| (198,641 | ) |
|
|
| 11,315 |
|
|
|
| (209,956 | ) | ||||||||||||||
Total operating (loss) earnings | $ |
| (193,842 | ) |
| $ |
| 29,867 |
|
| $ |
| (223,709 | ) |
| $ |
| (125,256 | ) |
| $ |
| 84,147 |
|
| $ |
| (209,403 | ) | ||||||||||||||
Total operating earnings | $ |
| 22,030 |
|
| $ |
| 22,209 |
|
| $ |
| (179 | ) |
Operating earnings decreased $223.7$0.2 million, or 0.8% to a loss of $193.8$22.0 million in the thirdfirst quarter from earnings of $29.9$22.2 million in the prior year quarter. Operating earnings for the year-to-date period decreased $209.4 million to a loss of $125.3 million from earnings of $84.1 million in the prior year-to-date period. The thirdfirst quarter decrease was primarily dueattributable to the goodwill impairment, higher restructuring and asset impairment charges, start-up costs associated withmostly offset by the new Fresh Kitchen operation and the negative impact of lower sales in the Retail segment, which more than offset lower incentive compensation costs and organic sales growth in Food Distribution. The year-to-date decrease was primarily due to the goodwill impairment, higher asset impairment and restructuring charges predominantly related to the Retail segmentincreased volume, as well as higher merger/acquisition and integration expenses and start-up costs associated with the recent acquisition, which more than offset the positive impacts of lower incentive compensation and organic sales growth in Food Distribution.related items mentioned above.
Food Distribution operating earnings increased $1.4decreased $13.2 million, or 7.3%53.7%, to $20.3$11.4 million in the thirdfirst quarter from $19.0$24.6 million in the prior year quarter. OperatingThe exit of the Caito Fresh Cut business resulted in $11.1 million in asset impairment charges, severance costs, operating losses and other costs during the wind down period. Profitability within the Food Distribution segment benefited from the increase in sales volume and was impacted by the compensation related items mentioned above.
Retail operating earnings for the year-to-date period increased $4.8$13.5 million or 7.5%, to $68.9 million from $64.0$12.6 million in the first quarter from a $0.8 million loss in the prior year-to-date period.year quarter. The increase forin operating earnings was primarily attributable to the quarter was driven by organicincrease in sales growthvolume, improvements in labor rates as a rate of sales and lower incentive compensation,healthcare costs, partially offset by Fresh Kitchen start-up costs. The increase for the year-to-date period was driven by organic sales growth and lower incentive compensation and lower restructuring charges related to the Company’s warehouse optimization plan, partially offset by charges related to Fresh Kitchen start-up costs and merger/acquisition and integration expenses.items mentioned above.
Military operating earnings decreased $1.7loss increased $0.4 million or 60.9%, to $1.1$2.0 million in the first quarter from $2.9$1.6 million in the prior year quarter. Operating earnings forThe first quarter increase was primarily attributable to higher incentive compensation costs, partially offset by the year-to-date periodimpact of the increase in sales volume.
21
Interest Expense – Interest expense decreased $4.3$4.2 million, or 48.6%35.7%, to $4.5 million from $8.8$7.6 million in the prior year-to-date period. The third quarter decrease was due to higher merger/acquisition and integration and impairment expenses partly offset by margin rate improvements and lower incentive compensation expenses. The year-to-date decrease in operating earnings was primarily due to higher merger/acquisition and integration expenses, the negative impact of the shift of New Year’s Day into the first quarter and higher costs for health care and a large insurance claim.
Retail operating earnings decreased $223.4 million to a loss of $215.3 million in the third quarter from earnings of $8.0$11.9 million in the prior year quarter. Operating earnings for the year-to-date period decreased $210.0 million to a loss of $198.6 million from earnings of $11.3 millionThe decrease in the prior year-to-date period. The third quarter decrease was primarily due to the goodwill impairment, higher asset impairment charges, lower sales, and investments in margin, partly offset by lower merger/acquisition and integration expenses. The year-to-date decrease was primarily due to higher asset impairment charges, higher health care costs, lower comparable store sales and the shift of New Year’s Day, partially offset by lower merger/acquisition and integration expenses and the closure of unprofitable stores.
23
Interest Expense – Interest expense increased $1.7 million, or 38.7%, to $6.1 million in the third quarter from $4.4 million in the prior year quarter. Interestinterest expense for the year-to-date period increased $4.4 million, or 30.3%, from $14.7 millionquarter was due to rate decreases executed by the federal reserve during 2019 as well as during the first quarter of fiscal 2020 and, to a lesser extent, a decrease in the prior year-to-date period to $19.1 million. The increase in interest expense was primarily due to increased borrowings related to the Caito and BRT acquisition.average debt balance.
Income Taxes – The effective income tax rates were 38.2%0.2% and 34.6%25.9% for the thirdfirst quarter and prior year quarter, respectively. For the year-to-date period and prior year-to-date period, the effective income tax rates were 39.4% and 36.7%, respectively. The differencesdifference from the federal statutory rate arein the current year was primarily as a result of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act and federal tax credits, partially offset by state taxes and stock-based compensation. In the prior year, the difference from the federal statutory rate was primarily due to state taxes tax benefits related toand stock-based compensation, andpartially offset by federal tax credits incredits.
On March 27, 2020, the current yearU.S. government enacted tax legislation to provide economic stimulus and state taxessupport businesses and individuals during the COVID-19 pandemic, referred to as the CARES Act. In connection with initial analysis of the impact of the CARES Act, the Company recorded a net discrete income tax benefit of $4.3 million during the first quarter, associated with the additional deductibility of certain expenses combined with provisions which enable companies to carry back tax losses to years prior to the enactment of the Tax Cuts and Jobs Act, where the federal tax credits in the prior year. The Company’s effectivestatutory income tax rate was impacted by the stock-based compensation benefits recognized resulting from the adoption of ASU 2016-09. The tax impacts of stock-based compensation are primarily generated in the first quarter due to the timing of awards and vesting schedules.35%.
Non-GAAP Financial Measures
In addition to reporting financial results in accordance with GAAP, the Company also provides information regarding adjusted operating earnings, adjusted earnings from continuing operations, and Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“adjusted EBITDA”). These are non-GAAP financial measures, as defined below, and are used by management to allocate resources, assess performance against its peers and evaluate overall performance. The Company believes these measures provide useful information for both management and its investors. The Company believes these non-GAAP measures are useful to investors because they provide additional understanding of the trends and special circumstances that affect its business. These measures provide useful supplemental information that helps investors to establish a basis for expected performance and the ability to evaluate actual results against that expectation. The measures, when considered in connection with GAAP results, can be used to assess the overall performance of the Company as well as assess the Company’s performance against its peers. These measures are also used as a basis for certain compensation programs sponsored by the Company. In addition, securities analysts, fund managers and other shareholders and stakeholders that communicate with the Company request its financial results in these adjusted formats.
Current year adjusted operating earnings, adjusted earnings from continuing operations, and adjusted EBITDA exclude start-up costs“Fresh Cut operating losses” subsequent to the decision to exit these operations during the first quarter, severance associated with cost reduction initiatives , and fees paid to a third-party advisory firm associated with Project One Team, the Company’s initiative to drive growth while increasing efficiency and reducing costs. Pension termination related to a refund from the annuity provider associated with the new Fresh Kitchen operation as well as an executive retirement stock compensation award. The Fresh Kitchenfinal reconciliation of participant data is a newly constructed facility that provides the Company with the ability to process, cook, and package fresh protein-based foods and complete meal solutions. Given the Fresh Kitchen represents a new line of business for the Company, the start-up activities associated with testing, training, and preparing the Fresh Kitchen for production, as well as incorporating the related operations into the business,excluded from adjusted earnings from continuing operations. These items are considered “non-operational” or “non-core” in nature. The retirement stock compensation award represents incremental compensationPrior year adjusted operating earnings, adjusted earnings from continuing operations, and adjusted EBITDA exclude costs associated with the organizational realignment, which include significant changes to the Company’s management team. Also excluded are the fees paid to a third-party advisory firm associated with Project One Team, the Company’s initiative to drive growth while increasing efficiency and reducing costs. Pension termination costs, primarily related to non-operating settlement expense in connectionassociated with an executive retirement that is also considered “non-operational” or “non-core” in nature.the distribution of pension assets, are excluded from adjusted earnings from continuing operations, and to a lesser extent adjusted operating earnings.
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 both management and its 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 (“GAAP”), 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.
2422
Following is a reconciliation of operating earnings (loss) earnings to adjusted operating earnings (loss) for the 12 weeks and 4016 weeks ended October 7, 2017April 18, 2020 and October 8, 2016.April 20, 2019.
| 16 Weeks Ended |
| |||||||
(In thousands) | April 18, 2020 |
|
| April 20, 2019 |
| ||||
Operating earnings | $ |
| 22,030 |
|
| $ |
| 22,209 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Merger/acquisition and integration |
|
| — |
|
|
|
| 782 |
|
Restructuring, asset impairment and other charges (gains) |
|
| 10,237 |
|
|
|
| (5,662 | ) |
Fresh Cut operating losses |
|
| 2,262 |
|
|
|
| — |
|
Costs associated with Project One Team |
|
| 493 |
|
|
|
| 4,618 |
|
Organizational realignment costs |
|
| — |
|
|
|
| 858 |
|
Severance associated with cost reduction initiatives |
|
| 5,156 |
|
|
|
| 362 |
|
Adjusted operating earnings | $ |
| 40,178 |
|
| $ |
| 23,167 |
|
Reconciliation of operating earnings (loss) to adjusted operating earnings (loss) by segment: |
| ||||||||
Food Distribution: |
|
|
|
|
|
|
|
|
|
Operating earnings | $ |
| 11,390 |
|
| $ |
| 24,592 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Merger/acquisition and integration |
|
| — |
|
|
|
| (130 | ) |
Restructuring, asset impairment and other charges (gains) |
|
| 9,222 |
|
|
|
| (6,343 | ) |
Fresh Cut operating losses |
|
| 2,262 |
|
|
|
| — |
|
Costs associated with Project One Team |
|
| 265 |
|
|
|
| 2,448 |
|
Organizational realignment costs |
|
| — |
|
|
|
| 455 |
|
Severance associated with cost reduction initiatives |
|
| 3,180 |
|
|
|
| 324 |
|
Adjusted operating earnings | $ |
| 26,319 |
|
| $ |
| 21,346 |
|
Retail: |
|
|
|
|
|
|
|
|
|
Operating earnings (loss) | $ |
| 12,645 |
|
| $ |
| (826 | ) |
Adjustments: |
|
|
|
|
|
|
|
|
|
Merger/acquisition and integration |
|
| — |
|
|
|
| 912 |
|
Restructuring charges and asset impairment |
|
| 1,015 |
|
|
|
| 681 |
|
Costs associated with Project One Team |
|
| 164 |
|
|
|
| 1,570 |
|
Organizational realignment costs |
|
| — |
|
|
|
| 292 |
|
Severance associated with cost reduction initiatives |
|
| 1,451 |
|
|
|
| 29 |
|
Adjusted operating earnings | $ |
| 15,275 |
|
| $ |
| 2,658 |
|
Military: |
|
|
|
|
|
|
|
|
|
Operating loss | $ |
| (2,005 | ) |
| $ |
| (1,557 | ) |
Adjustments: |
|
|
|
|
|
|
|
|
|
Costs associated with Project One Team |
|
| 64 |
|
|
|
| 600 |
|
Organizational realignment costs |
|
| — |
|
|
|
| 111 |
|
Severance associated with cost reduction initiatives |
|
| 525 |
|
|
|
| 9 |
|
Adjusted operating loss | $ |
| (1,416 | ) |
| $ |
| (837 | ) |
|
|
|
|
|
|
|
|
|
|
| 12 Weeks Ended |
|
| 40 Weeks Ended |
| ||||||||||||||
| October 7, |
|
| October 8, |
|
| October 7, |
|
| October 8, |
| ||||||||
(In thousands) | 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||||||
Operating (loss) earnings | $ |
| (193,842 | ) |
| $ |
| 29,867 |
|
| $ |
| (125,256 | ) |
| $ |
| 84,147 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger/acquisition and integration |
|
| 2,392 |
|
|
|
| 2,427 |
|
|
|
| 7,031 |
|
|
|
| 4,237 |
|
Restructuring charges and asset impairment |
|
| 224,653 |
|
|
|
| 2,662 |
|
|
|
| 225,660 |
|
|
|
| 23,714 |
|
Fresh Kitchen start-up costs |
|
| 2,086 |
|
|
|
| — |
|
|
|
| 6,688 |
|
|
|
| — |
|
Stock compensation associated with executive retirement |
|
| — |
|
|
|
| — |
|
|
|
| 1,172 |
|
|
|
|
|
|
Severance associated with cost reduction initiatives |
|
| 4 |
|
|
|
| 149 |
|
|
|
| 27 |
|
|
|
| 839 |
|
Adjusted operating earnings | $ |
| 35,293 |
|
| $ |
| 35,105 |
|
| $ |
| 115,322 |
|
| $ |
| 112,937 |
|
Reconciliation of operating earnings (loss) to adjusted operating earnings by segment: |
| ||||||||||||||||||
Food Distribution: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings | $ |
| 20,350 |
|
| $ |
| 18,957 |
|
| $ |
| 68,868 |
|
| $ |
| 64,040 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger/acquisition and integration |
|
| 939 |
|
|
|
| 639 |
|
|
|
| 5,254 |
|
|
|
| 1,201 |
|
Restructuring charges and asset impairment |
|
| 379 |
|
|
|
| 207 |
|
|
|
| 1,280 |
|
|
|
| 4,749 |
|
Fresh Kitchen start-up costs |
|
| 2,086 |
|
|
|
| — |
|
|
|
| 6,688 |
|
|
|
| — |
|
Stock compensation associated with executive retirement |
|
| — |
|
|
|
| — |
|
|
|
| 591 |
|
|
|
| — |
|
Severance associated with cost reduction initiatives |
|
| 4 |
|
|
|
| 12 |
|
|
|
| 25 |
|
|
|
| 218 |
|
Adjusted operating earnings | $ |
| 23,758 |
|
| $ |
| 19,815 |
|
| $ |
| 82,706 |
|
| $ |
| 70,208 |
|
Military: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings | $ |
| 1,118 |
|
| $ |
| 2,862 |
|
| $ |
| 4,517 |
|
| $ |
| 8,792 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger/acquisition and integration |
|
| 1,453 |
|
|
|
| — |
|
|
|
| 1,453 |
|
|
|
| 1 |
|
Restructuring charges (gains) |
|
| 500 |
|
|
|
| 18 |
|
|
|
| 500 |
|
|
|
| (241 | ) |
Stock compensation associated with executive retirement |
|
| — |
|
|
|
| — |
|
|
|
| 147 |
|
|
|
| — |
|
Severance associated with cost reduction initiatives |
|
| — |
|
|
|
| 20 |
|
|
|
| 1 |
|
|
|
| 242 |
|
Adjusted operating earnings | $ |
| 3,071 |
|
| $ |
| 2,900 |
|
| $ |
| 6,618 |
|
| $ |
| 8,794 |
|
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) earnings | $ |
| (215,310 | ) |
| $ |
| 8,048 |
|
| $ |
| (198,641 | ) |
| $ |
| 11,315 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger/acquisition and integration |
|
| — |
|
|
|
| 1,788 |
|
|
|
| 324 |
|
|
|
| 3,035 |
|
Restructuring charges and asset impairment |
|
| 223,774 |
|
|
|
| 2,437 |
|
|
|
| 223,880 |
|
|
|
| 19,206 |
|
Stock compensation associated with executive retirement |
|
| — |
|
|
|
| — |
|
|
|
| 434 |
|
|
|
| — |
|
Severance associated with cost reduction initiatives |
|
| — |
|
|
|
| 117 |
|
|
|
| 1 |
|
|
|
| 379 |
|
Adjusted operating earnings | $ |
| 8,464 |
|
| $ |
| 12,390 |
|
| $ |
| 25,998 |
|
| $ |
| 33,935 |
|
Adjusted Earnings 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 both management and its 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.
2523
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.
Following is a reconciliation of (loss) earnings from continuing operations to adjusted earnings from continuing operations for the 12 weeks and 4016 weeks ended October 7, 2017April 18, 2020 and October 8, 2016.
April 20, 2019.
| 12 Weeks Ended |
|
| 16 Weeks Ended |
|
| ||||||||||||||||||||||||||||||||||
| October 7, 2017 |
|
| October 8, 2016 |
|
| April 18, 2020 |
|
| April 20, 2019 |
|
| ||||||||||||||||||||||||||||
|
|
|
| per diluted |
|
|
|
|
| per diluted |
|
|
|
|
| per diluted |
|
|
|
|
| per diluted |
|
| ||||||||||||||||
(In thousands, except per share amounts) | Earnings |
|
| share |
|
| Earnings |
|
| share |
|
| Earnings |
|
| share |
|
| Earnings |
|
| share |
|
| ||||||||||||||||
(Loss) earnings from continuing operations | $ |
| (123,452 | ) |
| $ |
| (3.31 | ) |
| $ |
| 16,730 |
|
| $ |
| 0.45 |
|
| ||||||||||||||||||||
Earnings from continuing operations | $ |
| 15,402 |
|
| $ |
| 0.43 |
|
| $ |
| 7,521 |
|
| $ |
| 0.21 |
|
| ||||||||||||||||||||
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger/acquisition and integration |
|
| 2,392 |
|
|
|
|
|
|
|
|
| 2,427 |
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
|
|
| 782 |
|
|
|
|
|
|
|
Restructuring charges and asset impairment |
|
| 224,653 |
|
|
|
|
|
|
|
|
| 2,662 |
|
|
|
|
|
|
| ||||||||||||||||||||
Fresh Kitchen start-up costs |
|
| 2,086 |
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
| ||||||||||||||||||||
Restructuring, asset impairment and other charges (gains) |
|
| 10,237 |
|
|
|
|
|
|
|
|
| (5,662 | ) |
|
|
|
|
|
| ||||||||||||||||||||
Fresh Cut operating losses |
|
| 2,262 |
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
| ||||||||||||||||||||
Costs associated with Project One Team |
|
| 493 |
|
|
|
|
|
|
|
|
| 4,618 |
|
|
|
|
|
|
| ||||||||||||||||||||
Organizational realignment costs |
|
| — |
|
|
|
|
|
|
|
|
| 858 |
|
|
|
|
|
|
| ||||||||||||||||||||
Severance associated with cost reduction initiatives |
|
| 4 |
|
|
|
|
|
|
|
|
| 149 |
|
|
|
|
|
|
|
|
| 5,156 |
|
|
|
|
|
|
|
|
| 362 |
|
|
|
|
|
|
|
Pension termination |
|
| (1,004 | ) |
|
|
|
|
|
|
|
| 353 |
|
|
|
|
|
|
| ||||||||||||||||||||
Total adjustments |
|
| 229,135 |
|
|
|
|
|
|
|
|
| 5,238 |
|
|
|
|
|
|
|
|
| 17,144 |
|
|
|
|
|
|
|
|
| 1,311 |
|
|
|
|
|
|
|
Income tax effect on adjustments (a) |
|
| (85,546 | ) |
|
|
|
|
|
|
|
| (1,918 | ) |
|
|
|
|
|
|
|
| (4,095 | ) |
|
|
|
|
|
|
|
| (304 | ) |
|
|
|
|
|
|
Impact of CARES Act (b) |
|
| (4,345 | ) |
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
| ||||||||||||||||||||
Total adjustments, net of taxes |
|
| 143,589 |
|
|
|
| 3.85 |
|
|
|
| 3,320 |
|
|
|
| 0.08 |
|
|
|
| 8,704 |
|
|
|
| 0.24 |
|
|
|
| 1,007 |
|
|
|
| 0.03 |
|
|
Adjusted earnings from continuing operations | $ |
| 20,137 |
|
| $ |
| 0.54 |
|
| $ |
| 20,050 |
|
| $ |
| 0.53 |
|
| $ |
| 24,106 |
|
| $ |
| 0.67 |
|
| $ |
| 8,528 |
|
| $ |
| 0.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
| 40 Weeks Ended |
|
| |||||||||||||||||||||||||||||||||||||
| October 7, 2017 |
|
| October 8, 2016 |
|
| ||||||||||||||||||||||||||||||||||
|
|
|
| per diluted |
|
|
|
|
| per diluted |
|
| ||||||||||||||||||||||||||||
(In thousands, except per share amounts) | Earnings |
|
| share |
|
| Earnings |
|
| share |
|
| ||||||||||||||||||||||||||||
(Loss) earnings from continuing operations | $ |
| (87,327 | ) |
| $ |
| (2.32 | ) |
| $ |
| 44,250 |
|
| $ |
| 1.18 |
|
| ||||||||||||||||||||
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Merger integration and acquisition expenses |
|
| 7,031 |
|
|
|
|
|
|
|
|
| 4,237 |
|
|
|
|
|
|
| ||||||||||||||||||||
Restructuring charges and asset impairment |
|
| 225,660 |
|
|
|
|
|
|
|
|
| 23,714 |
|
|
|
|
|
|
| ||||||||||||||||||||
Fresh Kitchen start-up costs |
|
| 6,688 |
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
| ||||||||||||||||||||
Severance associated with cost reduction initiatives |
|
| 27 |
|
|
|
|
|
|
|
|
| 839 |
|
|
|
|
|
|
| ||||||||||||||||||||
Stock compensation associated with executive retirement |
|
| 1,172 |
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
| ||||||||||||||||||||
Total adjustments |
|
| 240,578 |
|
|
|
|
|
|
|
|
| 28,790 |
|
|
|
|
|
|
| ||||||||||||||||||||
Income tax effect on adjustments (a) |
|
| (89,840 | ) |
|
|
|
|
|
|
|
| (10,871 | ) |
|
|
|
|
|
| ||||||||||||||||||||
Total adjustments, net of taxes |
|
| 150,738 |
|
|
|
| 4.01 |
|
|
|
| 17,919 |
|
|
|
| 0.48 |
|
| ||||||||||||||||||||
Adjusted earnings from continuing operations | $ |
| 63,411 |
|
| $ |
| 1.69 |
|
| $ |
| 62,169 |
|
| $ |
| 1.66 |
|
| ||||||||||||||||||||
* Includes rounding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (a) | The income tax effect on adjustments is computed by applying the effective tax rate, before discrete tax items, to the total adjustments for the period. |
(b) | Represents tax impacts attributable to the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, primarily related to additional deductions and the utilization of net operating loss carryback. |
2624
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“adjusted EBITDA”) is a non-GAAP operating financial measure that the Company defines as net earnings plus interest, discontinued operations, depreciation and amortization, and other non-cash items including deferred (stock) compensation, the LIFO provision, as well as adjustments for items that do not reflect the ongoing operating activities of the Company and costs associated with the closing of operational locations.
The Company believes that adjusted EBITDA provides a meaningful representation of its operating performance for the Company as a whole and for its operating segments. The Company considers adjusted EBITDA as an additional way to measure operating performance on an ongoing basis. Adjusted EBITDA is meant to reflect the ongoing operating performance of all of its distribution and retail operations; consequently, it excludes the impact of items that could be considered “non-operating” or “non-core” in nature, and also excludes the contributions of activities classified as discontinued operations. Because adjusted EBITDA and adjusted EBITDA by segment are performance measures that management uses to allocate resources, assess performance against its peers and evaluate overall performance, the Company believes it provides useful information for both management and its investors. In addition, securities analysts, fund managers and other shareholders and stakeholders that communicate with the Company request its operating financial results in adjusted EBITDA format.
Adjusted EBITDA and adjusted EBITDA by segment are not measures 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 definitions of adjusted EBITDA and adjusted EBITDA by segment may not be identical to similarly titled measures reported by other companies.
27
Following is a reconciliation of net earnings to adjusted EBITDA for the 12 weeks and 4016 weeks ended October 7, 2017April 18, 2020 and October 8, 2016.
April 20, 2019.
| 12 Weeks Ended |
|
| 40 Weeks Ended |
| |||||||||||||||||||||||
| October 7, |
|
| October 8, |
|
| October 7, |
|
| October 8, |
| 16 Weeks Ended |
| |||||||||||||||
(In thousands) | 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| April 18, 2020 |
|
| April 20, 2019 |
| ||||||||||||
Net (loss) earnings | $ |
| (123,506 | ) |
| $ |
| 16,648 |
|
| $ |
| (87,452 | ) |
| $ |
| 43,982 |
| |||||||||
Net earnings | $ |
| 15,402 |
|
| $ |
| 7,469 |
| |||||||||||||||||||
Loss from discontinued operations, net of tax |
|
| 54 |
|
|
| 82 |
|
|
| 125 |
|
|
| 268 |
|
|
| — |
|
|
| 52 |
| ||||
Income taxes |
|
| (76,445 | ) |
|
|
| 8,864 |
|
|
|
| (56,809 | ) |
|
|
| 25,635 |
| |||||||||
Income tax expense |
|
| 31 |
|
|
|
| 2,624 |
| |||||||||||||||||||
Other expenses, net |
|
| 6,055 |
|
|
|
| 4,273 |
|
|
|
| 18,880 |
|
|
|
| 14,262 |
|
|
| 6,597 |
|
|
|
| 12,064 |
|
Operating (loss) earnings |
|
| (193,842 | ) |
|
|
| 29,867 |
|
|
|
| (125,256 | ) |
|
|
| 84,147 |
| |||||||||
Operating earnings |
|
| 22,030 |
|
|
|
| 22,209 |
| |||||||||||||||||||
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
LIFO expense (benefit) |
|
| 192 |
|
|
|
| (341 | ) |
|
|
| 2,474 |
|
|
|
| 2,130 |
| |||||||||
LIFO expense |
|
| 1,583 |
|
|
|
| 1,425 |
| |||||||||||||||||||
Depreciation and amortization |
|
| 19,455 |
|
|
|
| 17,927 |
|
|
|
| 63,553 |
|
|
|
| 58,931 |
|
|
| 27,656 |
|
|
|
| 26,632 |
|
Merger/acquisition and integration |
|
| 2,392 |
|
|
|
| 2,427 |
|
|
|
| 7,031 |
|
|
|
| 4,237 |
|
|
| — |
|
|
|
| 782 |
|
Restructuring charges and asset impairment |
|
| 224,653 |
|
|
|
| 2,662 |
|
|
|
| 225,660 |
|
|
|
| 23,714 |
| |||||||||
Fresh Kitchen start-up costs |
|
| 2,086 |
|
|
|
| — |
|
|
|
| 6,688 |
|
|
|
| — |
| |||||||||
Restructuring, asset impairment and other charges (gains) |
|
| 10,237 |
|
|
|
| (5,662 | ) | |||||||||||||||||||
Fresh Cut operating losses |
|
| 2,262 |
|
|
|
| — |
| |||||||||||||||||||
Stock-based compensation |
|
| 1,102 |
|
|
|
| 943 |
|
|
|
| 8,593 |
|
|
|
| 7,010 |
|
|
| 2,243 |
|
|
|
| 5,383 |
|
Other non-cash (gains) charges |
|
| (138 | ) |
|
|
| (71 | ) |
|
|
| (661 | ) |
|
|
| 3 |
| |||||||||
Adjusted EBITDA | $ |
| 55,900 |
|
| $ |
| 53,414 |
|
| $ |
| 188,082 |
|
| $ |
| 180,172 |
| |||||||||
Reconciliation of operating earnings (loss) to adjusted EBITDA by segment: |
| |||||||||||||||||||||||||||
Food Distribution: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Operating earnings | $ |
| 20,350 |
|
| $ |
| 18,957 |
|
| $ |
| 68,868 |
|
| $ |
| 64,040 |
| |||||||||
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
LIFO expense (benefit) |
|
| 98 |
|
|
|
| (348 | ) |
|
|
| 1,361 |
|
|
|
| 941 |
| |||||||||
Depreciation and amortization |
|
| 6,862 |
|
|
|
| 4,842 |
|
|
|
| 22,291 |
|
|
|
| 16,139 |
| |||||||||
Merger/acquisition and integration |
|
| 939 |
|
|
|
| 639 |
|
|
|
| 5,254 |
|
|
|
| 1,201 |
| |||||||||
Restructuring charges and asset impairment |
|
| 379 |
|
|
|
| 207 |
|
|
|
| 1,280 |
|
|
|
| 4,749 |
| |||||||||
Fresh Kitchen start-up costs |
|
| 2,086 |
|
|
|
| — |
|
|
|
| 6,688 |
|
|
|
| — |
| |||||||||
Stock-based compensation |
|
| 488 |
|
|
|
| 409 |
|
|
|
| 3,999 |
|
|
|
| 3,090 |
| |||||||||
Other non-cash (gains) charges |
|
| (57 | ) |
|
|
| (61 | ) |
|
|
| (11 | ) |
|
|
| 137 |
| |||||||||
Adjusted EBITDA | $ |
| 31,145 |
|
| $ |
| 24,645 |
|
| $ |
| 109,730 |
|
| $ |
| 90,297 |
| |||||||||
Military: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Operating earnings | $ |
| 1,118 |
|
| $ |
| 2,862 |
|
| $ |
| 4,517 |
|
| $ |
| 8,792 |
| |||||||||
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
LIFO (benefit) expense |
|
| (63 | ) |
|
|
| 134 |
|
|
|
| 329 |
|
|
|
| 678 |
| |||||||||
Depreciation and amortization |
|
| 2,786 |
|
|
|
| 2,693 |
|
|
|
| 8,832 |
|
|
|
| 8,850 |
| |||||||||
Merger/acquisition and integration |
|
| 1,453 |
|
|
|
| — |
|
|
|
| 1,453 |
|
|
|
| 1 |
| |||||||||
Restructuring charges (gains) |
|
| 500 |
|
|
|
| 18 |
|
|
|
| 500 |
|
|
|
| (241 | ) | |||||||||
Stock-based compensation |
|
| 186 |
|
|
|
| 171 |
|
|
|
| 1,313 |
|
|
|
| 1,178 |
| |||||||||
Non-cash rent |
|
| (1,594 | ) |
|
|
| (1,918 | ) | |||||||||||||||||||
Costs associated with Project One Team |
|
| 493 |
|
|
|
| 4,618 |
| |||||||||||||||||||
Organizational realignment costs |
|
| — |
|
|
|
| 858 |
| |||||||||||||||||||
Severance associated with cost reduction initiatives |
|
| 5,156 |
|
|
|
| 362 |
| |||||||||||||||||||
Loss (gain) on disposal of assets |
|
| 3,911 |
|
|
|
| (3 | ) | |||||||||||||||||||
Other non-cash charges (gains) |
|
| 1 |
|
|
|
| 58 |
|
|
|
| (15 | ) |
|
|
| 262 |
|
|
| 1 |
|
|
|
| (17 | ) |
Adjusted EBITDA | $ |
| 5,981 |
|
| $ |
| 5,936 |
|
| $ |
| 16,929 |
|
| $ |
| 19,520 |
| $ |
| 73,978 |
|
| $ |
| 54,669 |
|
Retail: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Operating (loss) earnings | $ |
| (215,310 | ) |
| $ |
| 8,048 |
|
| $ |
| (198,641 | ) |
| $ |
| 11,315 |
| |||||||||
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
LIFO expense (benefit) |
|
| 157 |
|
|
|
| (127 | ) |
|
|
| 784 |
|
|
|
| 511 |
| |||||||||
Depreciation and amortization |
|
| 9,807 |
|
|
|
| 10,392 |
|
|
|
| 32,430 |
|
|
|
| 33,942 |
| |||||||||
Merger/acquisition and integration |
|
| — |
|
|
|
| 1,788 |
|
|
|
| 324 |
|
|
|
| 3,035 |
| |||||||||
Restructuring charges and asset impairment |
|
| 223,774 |
|
|
|
| 2,437 |
|
|
|
| 223,880 |
|
|
|
| 19,206 |
| |||||||||
Stock-based compensation |
|
| 428 |
|
|
|
| 363 |
|
|
|
| 3,281 | �� |
|
|
| 2,742 |
| |||||||||
Other non-cash gains |
|
| (82 | ) |
|
|
| (68 | ) |
|
|
| (635 | ) |
|
|
| (396 | ) | |||||||||
Adjusted EBITDA | $ |
| 18,774 |
|
| $ |
| 22,833 |
|
| $ |
| 61,423 |
|
| $ |
| 70,355 |
|
2825
Following is a reconciliation of operating earnings (loss) to adjusted EBITDA by segment for the 16 weeks ended April 18, 2020 and April 20, 2019.
| 16 Weeks Ended |
| |||||||
(In thousands) | April 18, 2020 |
|
| April 20, 2019 |
| ||||
Food Distribution: |
|
|
|
|
|
|
|
|
|
Operating earnings | $ |
| 11,390 |
|
| $ |
| 24,592 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
LIFO expense |
|
| 794 |
|
|
|
| 703 |
|
Depreciation and amortization |
|
| 10,183 |
|
|
|
| 10,233 |
|
Merger/acquisition and integration |
|
| — |
|
|
|
| (130 | ) |
Restructuring, asset impairment and other charges (gains) |
|
| 9,222 |
|
|
|
| (6,343 | ) |
Fresh Cut operating losses |
|
| 2,262 |
|
|
|
| — |
|
Stock-based compensation |
|
| 1,005 |
|
|
|
| 2,676 |
|
Non-cash rent |
|
| 58 |
|
|
|
| 57 |
|
Costs associated with Project One Team |
|
| 265 |
|
|
|
| 2,448 |
|
Organizational realignment costs |
|
| — |
|
|
|
| 455 |
|
Severance associated with cost reduction initiatives |
|
| 3,180 |
|
|
|
| 324 |
|
Loss (gain) on disposal of assets |
|
| 2,140 |
|
|
|
| (5 | ) |
Other non-cash gains |
|
| (1 | ) |
|
|
| — |
|
Adjusted EBITDA | $ |
| 40,498 |
|
| $ |
| 35,010 |
|
Retail: |
|
|
|
|
|
|
|
|
|
Operating earnings (loss) | $ |
| 12,645 |
|
| $ |
| (826 | ) |
Adjustments: |
|
|
|
|
|
|
|
|
|
LIFO expense |
|
| 343 |
|
|
|
| 344 |
|
Depreciation and amortization |
|
| 13,756 |
|
|
|
| 12,802 |
|
Merger/acquisition and integration |
|
| — |
|
|
|
| 912 |
|
Restructuring charges and asset impairment |
|
| 1,015 |
|
|
|
| 681 |
|
Stock-based compensation |
|
| 750 |
|
|
|
| 1,853 |
|
Non-cash rent |
|
| (1,534 | ) |
|
|
| (1,853 | ) |
Costs associated with Project One Team |
|
| 164 |
|
|
|
| 1,570 |
|
Organizational realignment costs |
|
| — |
|
|
|
| 292 |
|
Severance associated with cost reduction initiatives |
|
| 1,451 |
|
|
|
| 29 |
|
Loss on disposal of assets |
|
| 1,805 |
|
|
|
| 36 |
|
Other non-cash gains |
|
| — |
|
|
|
| (22 | ) |
Adjusted EBITDA | $ |
| 30,395 |
|
| $ |
| 15,818 |
|
Military: |
|
|
|
|
|
|
|
|
|
Operating loss | $ |
| (2,005 | ) |
| $ |
| (1,557 | ) |
Adjustments: |
|
|
|
|
|
|
|
|
|
LIFO expense |
|
| 446 |
|
|
|
| 378 |
|
Depreciation and amortization |
|
| 3,717 |
|
|
|
| 3,597 |
|
Stock-based compensation |
|
| 488 |
|
|
|
| 854 |
|
Non-cash rent |
|
| (118 | ) |
|
|
| (122 | ) |
Costs associated with Project One Team |
|
| 64 |
|
|
|
| 600 |
|
Organizational realignment costs |
|
| — |
|
|
|
| 111 |
|
Severance associated with cost reduction initiatives |
|
| 525 |
|
|
|
| 9 |
|
Gain on disposal of assets |
|
| (34 | ) |
|
|
| (34 | ) |
Other non-cash charges |
|
| 2 |
|
|
|
| 5 |
|
Adjusted EBITDA | $ |
| 3,085 |
|
| $ |
| 3,841 |
|
|
|
|
|
|
|
|
|
|
|
26
Liquidity and Capital Resources
Cash Flow Information
The following table summarizes the Company’s consolidated statements of cash flows:
|
|
|
| 40 Weeks Ended |
| |||||||||||||||||||
|
|
|
| October 7, |
|
| October 8, |
|
|
|
| 16 Weeks Ended |
| |||||||||||
(In thousands) |
|
|
| 2017 |
|
| 2016 |
|
|
|
| April 18, 2020 |
|
| April 20, 2019 |
| ||||||||
Cash flow activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net cash provided by operating activities (a) |
|
|
| $ |
| 71,563 |
|
| $ |
| 81,134 |
| ||||||||||||
Net cash provided by operating activities |
|
|
| $ |
| 129,296 |
|
| $ |
| 13,519 |
| ||||||||||||
Net cash used in investing activities |
|
|
|
|
| (277,156 | ) |
|
| (52,536 | ) |
|
|
|
|
| (13,951 | ) |
|
| (87,225 | ) | ||
Net cash provided by (used in) financing activities (a) |
|
|
|
|
| 194,444 |
|
|
| (24,505 | ) | |||||||||||||
Net cash (used in) provided by financing activities |
|
|
|
|
| (118,262 | ) |
|
| 76,567 |
| |||||||||||||
Net cash used in discontinued operations |
|
|
|
|
| (48 | ) |
|
|
| (414 | ) |
|
|
|
|
| — |
|
|
|
| (86 | ) |
Net (decrease) increase in cash and cash equivalents |
|
|
|
|
| (11,197 | ) |
|
|
| 3,679 |
|
|
|
|
|
| (2,917 | ) |
|
|
| 2,775 |
|
Cash and cash equivalents at beginning of fiscal year |
|
|
|
|
| 24,351 |
|
|
|
| 22,719 |
| ||||||||||||
Cash and cash equivalents at end of fiscal year |
|
|
| $ |
| 13,154 |
|
| $ |
| 26,398 |
| ||||||||||||
Cash and cash equivalents at beginning of the period |
|
|
|
|
| 24,172 |
|
|
|
| 18,585 |
| ||||||||||||
Cash and cash equivalents at end of the period |
|
|
| $ |
| 21,255 |
|
| $ |
| 21,360 |
|
(a) Prior period amounts have been adjusted for the impact of the adoption of ASU 2016-09. Refer to Note 2 of the notes to condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q for further information.
Net cash provided by operating activities. Net cash provided by operating activities decreasedincreased during the current year-to-date period from the prior year-to-date period by approximately $9.6$115.8 million mainlyand was primarily due to the timing ofan increase in cash generated from earnings and changes in working capital requirements, particularly higher accounts receivable balanceslargely associated with sales to new and existing distribution customers, largely offset by lower customer advances to support sales growth compared to the prior year period.COVID-19 pandemic.
Net cash used in investing activities. Net cash used in investing activities increased $224.6decreased $73.3 million in the current year compared to the prior year primarily due to the recent acquisition (see Note 3of Martin’s in the prior year.
Capital expenditures were $17.9 in the current year compared to $16.0 million in the condensed consolidated financial statements).
prior year. The Company expects full fiscal year 2020 capital expenditures to range from $80.0 million to $90.0 million. The Food Distribution, MilitaryRetail and RetailMilitary segments utilized 25.1%39.2%, 11.1%53.6% and 63.8%7.2% of capital expenditures, respectively, in the current year.
Net cash provided by (used in)used in financing activities. Net cash provided byused in financing activities increased $218.9$194.8 million in the current year compared to the prior year primarily due to borrowings onpayment of debt balances in the revolving credit facilitycurrent year, which were funded from cash provided by operating activities, and borrowings to fund the recent acquisition.
Net cash usedMartin’s acquisition in discontinued operations. Net cash used in discontinued operations contains the net cash flows of the Company’s Retail and Food Distribution discontinued operations and is primarily composed of facility maintenance expenditures.prior year.
Debt Management
Total debt, including capitalfinance lease obligations and current maturities,liabilities, was $670.9$597.3 million and $431.1$688.6 million as of October 7, 2017April 18, 2020 and December 31, 2016,28, 2019, respectively. The increasedecrease in total debt was drivendue to increased paymentsfrom cash provided by drawdowns on the credit facility to finance the recent acquisition.
Subsequent to the end of the third quarter of fiscal 2017, the Company paid the outstanding balance on the Senior secured term loan of $52.2 million with proceeds from its Senior secured revolving credit facility. As a result of this transaction, annual interest expense is expected to be reduced through a reduction of the average interest rates paid.operating activities.
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.facility. As of October 7, 2017,April 18, 2020, the senior secured revolving credit facility and senior secured term loan collectively had outstanding borrowings of $627.7$549.4 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. The Credit Agreement requires that the Company maintain excess availability of 10% of the borrowing base, as such term is defined in the Credit Agreement. The Company had excess availability after the 10% covenant of $348.2$317.2 million at October 7, 2017.April 18, 2020. 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 $9.2$11.7 million were outstanding as of October 7, 2017.April 18, 2020. The revolving credit facility matures December 2021,18, 2023 and is secured by substantially all of the Company’s assets.
29
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 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.Credit Agreement.
The Company’s current ratio (current assets to current liabilities) was 1.81-to-11.54-to-1 at October 7, 2017April 18, 2020 compared to 1.77-to-11.76-to-1 at December 31, 2016,28, 2019, and its investment in working capital was $455.6$368.9 million at October 7, 2017April 18, 2020 compared to $387.5$431.5 million at December 31, 2016.28, 2019. Net debt to total capital ratio was 0.48-to-10.46-to-1 at October 7, 2017April 18, 2020 compared to 0.33-to-10.49-to-1 at December 31, 2016.28, 2019.
Total net27
Net long-term debt is a non-GAAP financial measure that is defined as long-term debt and capitalfinance lease obligations,liabilities, plus current maturities of long-term debt and capitalfinance lease obligations,liabilities, less cash and cash equivalents. The ratio of net debt to capital is a non-GAAP financial measure that is calculated by dividing net debt, as defined previously, by total capital (net debt plus total shareholders’ equity). The Company believes both management and its 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. Total net debt is not a substitute for GAAP financial measures and may differ from similarly titled measures of other companies.
Following is a reconciliation of “Long-term debt and finance lease liabilities” to Net long-term debt and capital lease obligations to total net long-term debt and capital lease obligations as of October 7, 2017April 18, 2020 and December 31, 2016.
28, 2019.
| October 7, |
|
| December 31, |
| ||||
| 2017 |
|
| 2016 |
| ||||
Current maturities of long-term debt and capital lease obligations | $ |
| 19,407 |
|
| $ |
| 17,424 |
|
Long-term debt and capital lease obligations |
|
| 651,537 |
|
|
|
| 413,675 |
|
Total debt |
|
| 670,944 |
|
|
|
| 431,099 |
|
Cash and cash equivalents |
|
| (13,154 | ) |
|
|
| (24,351 | ) |
Total net long-term debt | $ |
| 657,790 |
|
| $ |
| 406,748 |
|
| April 18, |
|
| December 28, |
| ||||
(In thousands) | 2020 |
|
| 2019 |
| ||||
Current portion of long-term debt and finance lease liabilities | $ |
| 6,157 |
|
| $ |
| 6,349 |
|
Long-term debt and finance lease liabilities |
|
| 591,097 |
|
|
|
| 682,204 |
|
Total debt |
|
| 597,254 |
|
|
|
| 688,553 |
|
Cash and cash equivalents |
|
| (21,255 | ) |
|
|
| (24,172 | ) |
Net long-term debt | $ |
| 575,999 |
|
| $ |
| 664,381 |
|
For information on contractual obligations, see the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.28, 2019. At October 7, 2017,April 18, 2020, there have been no material changes to the Company’s significant contractual obligations outside the ordinary course of business.
Cash Dividends
During the year-to-date periodquarter ended October 7, 2017,April 18, 2020, the Company declared $7.0 million quarterly dividends and returned $41.1$10.0 million to shareholders from dividend payments andin the form of share repurchases. A 10.0%1.3% increase in the quarterly dividend rate from $0.15$0.19 per share to $0.165$0.1925 per share was approved by the Board of Directors and announced on March 6, 2017.February 27, 2020. 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 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 senior revolving credit facility, the Company is generally permitted to pay dividends in any fiscal year up to an amount such that all cash dividends, together with any cash distributions and share repurchases, do not exceed $25.0$35.0 million. Additionally, the Company is generally permitted to pay cash dividends and repurchase shares in excess of $25.0$35.0 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, as defined in the senior revolving credit facility, before and after giving effect to the repurchases and dividends.
Off-Balance Sheet Arrangements
The Company has also made certain commercial commitments that extend beyond October 7, 2017.April 18, 2020. These commitments consist primarily of operating leases and purchase commitments (as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016)28, 2019), standby letters of credit of $9.2$11.7 million as of October 7, 2017,April 18, 2020, and interest on long-term debt and capitalfinance lease obligations.liabilities.
30
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 Company believes these accounting policies and others set forth in Item 8, Note 17 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 201628, 2019 should be reviewed as they are integral to the understanding the Company’s financial condition and results of operations. The Company has discussed the development, selection and disclosure of these accounting policies with the Audit Committee of the Board of Directors. The accompanying financial statements are prepared using the same critical accounting policies discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.28, 2019.
28
Recently Issued Accounting Standards
Refer to Note 2 in the notes to the condensed consolidated financial statements for further information.
31
ITEM 3. Quantitative and Qualitative Disclosure about Market Risk
There have been no material changes in market risk of SpartanNash from the information provided in 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 December 31, 2016.28, 2019.
ITEM 4. Controls and Procedures
An evaluation of the effectiveness of the design and operation of SpartanNash 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 7, 2017April 18, 2020 (the “Evaluation Date”). This evaluation was performed under the supervision and with the participation of SpartanNash Company’s management, including its Interim Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) andChief Accounting Officer (“CAO”). As of the Evaluation Date, SpartanNash Company’s management, including the CEO, CFO and CAO, concluded that SpartanNash’s disclosure controls and procedures were effective as of the Evaluation Date to ensure that material information required to be disclosed in the reports that 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 its principal executive and principal financial officers as appropriate to allow for timely decisions regarding required disclosure. During the thirdfourth quarter of 2019 and the first quarter of 2020 there waswere no changechanges in SpartanNash’s internal control over financial reporting that has materially affected, or iswere reasonably likely to materially affect, SpartanNash’s internal control over financial reporting. In response to the COVID-19 pandemic, many of the Company’s associates began working from home during the first quarter of 2020. Management has taken measures to ensure that our internal controls over financial reporting remained effective and were not materially affected during this period.
3229
OTHER INFORMATION
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information regarding SpartanNash’s purchases of its own common stock during the 12 week16-week period ended October 7, 2017. All employee transactions are under associate stock compensation plans.April 18, 2020. 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. For the first quarter of 2020, all employee transactions related to shares submitted for cancellation to satisfy tax withholding obligations that occur upon the vesting of the restricted shares.
During the fourth quarter of 2017, the Board authorized a publicly announced $50 million share repurchase program, expiring in 2022. There were $10.0 million of share repurchases made under this program during the first quarter of 2020. At April 18, 2020, $35.0 million remains available under the program.
|
| Total |
|
|
|
|
|
| |
|
| Number |
|
| Average |
| |||
|
| of Shares |
|
| Price Paid |
| |||
Period |
| Purchased |
|
| per Share |
| |||
July 16 – August 12, 2017 |
|
|
|
|
|
|
|
|
|
Repurchase Program |
|
| 265,378 |
|
| $ |
| 26.86 |
|
August 13 – September 9, 2017 |
|
|
|
|
|
|
|
|
|
None |
|
| — |
|
| $ |
| — |
|
September 10 – October 7, 2017 |
|
|
|
|
|
|
|
|
|
Employee Transactions |
|
| 1,550 |
|
| $ |
| 26.46 |
|
Repurchase Program |
|
| 296,472 |
|
| $ |
| 25.30 |
|
Total for Quarter ended October 7, 2017 |
|
|
|
|
|
|
|
|
|
Employee Transactions |
|
| 1,550 |
|
| $ |
| 26.46 |
|
Repurchase Program |
|
| 561,850 |
|
| $ |
| 26.03 |
|
|
|
|
|
| Average |
| ||
| Total Number |
|
| Price Paid |
| |||
Fiscal Period | of Shares Purchased |
|
| per Share |
| |||
December 30, 2019 - January 25, 2020 |
|
|
|
|
|
|
|
|
Employee Transactions |
| — |
|
| $ |
| — |
|
Repurchase Program |
| — |
|
| $ |
| — |
|
January 26 - February 22, 2020 |
|
|
|
|
|
|
|
|
Employee Transactions |
| — |
|
| $ |
| — |
|
Repurchase Program |
| — |
|
| $ |
| — |
|
February 23 - March 21, 2020 |
|
|
|
|
|
|
|
|
Employee Transactions |
| 87,897 |
|
| $ |
| 12.43 |
|
Repurchase Program |
| 704,723 |
|
| $ |
| 11.30 |
|
March 21 - April 18, 2020 |
|
|
|
|
|
|
|
|
Employee Transactions |
| 18,768 |
|
| $ |
| 13.85 |
|
Repurchase Program |
| 156,029 |
|
| $ |
| 13.04 |
|
Total for quarter ended April 18, 2020 |
|
|
|
|
|
|
|
|
Employee Transactions |
| 106,665 |
|
| $ |
| 12.68 |
|
Repurchase Program |
| 860,752 |
|
| $ |
| 11.62 |
|
3330
The following documents are filed as exhibits to this Quarterly Report on Form 10-Q:
Exhibit |
| Document |
|
|
|
|
| |
| ||
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 15, 2017. Incorporated herein by reference. |
|
|
|
3.2 |
| Bylaws of SpartanNash Company, as |
|
|
|
10.1 |
| |
|
|
|
10.2 |
| |
10.3 | ||
10.4 | ||
|
|
|
31.1 |
| |
|
|
|
31.2 |
| |
|
|
|
31.3 |
| |
|
|
|
32.1 |
| Certification pursuant to Section 906 of the Sarbanes-Oxley Act of |
|
|
|
101.INS |
| Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
|
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document |
|
|
|
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
104 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended April 18, 2020, has been formatted in Inline XBRL. | |
|
|
|
3431
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
| SPARTANNASH COMPANY (Registrant)
| ||
Date: |
| By |
| /s/ Mark E. Shamber |
|
|
|
| Mark E. Shamber Executive Vice President and Chief Financial Officer
|
3532